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0000930413-11-001273.txt : 20110225
0000930413-11-001273.hdr.sgml : 20110225
20110225172428
ACCESSION NUMBER: 0000930413-11-001273
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 23
CONFORMED PERIOD OF REPORT: 20101231
FILED AS OF DATE: 20110225
DATE AS OF CHANGE: 20110225
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FIRST HORIZON NATIONAL CORP
CENTRAL INDEX KEY: 0000036966
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 620803242
STATE OF INCORPORATION: TN
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-15185
FILM NUMBER: 11642296
BUSINESS ADDRESS:
STREET 1: 165 MADISON AVENUE
CITY: MEMPHIS
STATE: TN
ZIP: 38103
BUSINESS PHONE: 9018186232
MAIL ADDRESS:
STREET 1: 165 MADISON AVENUE
CITY: MEMPHIS
STATE: TN
ZIP: 38103
FORMER COMPANY:
FORMER CONFORMED NAME: FIRST TENNESSEE NATIONAL CORP
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: FIRST TENNESSEE BANKS INC
DATE OF NAME CHANGE: 19600201
10-K
1
c64260_10-k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
- - or - TRANSITION REPORT PURSUANT TO SECTION 13 or
15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from __________ to__________
Commission File Number 001-15185
FIRST HORIZON NATIONAL CORPORATION (Exact name of registrant as specified in its charter)
TENNESSEE
62-0803242
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification Number)
165 Madison Avenue, Memphis, Tennessee
38103
(Address of principal executive offices)
(Zip Code)
Registrants telephone number, including area
code: 901-523-4444
Securities registered pursuant to Section
12(b) of the Act:
Title of Each Class
Name of Exchange on which Registered
$0.625 Par Value Common Capital Stock
New York Stock Exchange, Inc.
Securities registered pursuant to Section
12(g) of the Act: None
Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. x
YES o NO
Indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. o
YES x NO
Indicate by
check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. x
YES o NO
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). x
YES o NO
Indicate by
check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. o
Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition
of large accelerated filer, accelerated filer, and smaller reporting
company in Rule 12b-2 of the Exchange Act. (Check one)
x Large Accelerated Filer o Accelerated Filer o
Non-Accelerated Filer o Smaller Reporting Company
(Do not check if smaller reporting company)
Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). o YES x NO
At June 30,
2010, the aggregate market value of the voting and non-voting common equity of
the registrant held by non-affiliates of the registrant was approximately $2.5
billion.
At January 31, 2011, the registrant had 263,329,590 shares of common stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE:
Portions of
the 2010 Annual Report to shareholders Parts I, II, and IV
Portions of
Proxy Statement to be furnished to shareholders in connection with Annual
Meeting of Shareholders scheduled for April 19, 2011 Part III
PART I
Note
on Page Number References
In
this report, references to specific pages in the Corporations 2010 Annual
Report to shareholders, or to specific pages of its consolidated financial
statements or the notes thereto, relate to page numbers appearing in Exhibit 13
to this report. The Exhibit 13 page numbers do not necessarily correspond to
page numbers appearing in the printed 2010 Annual Report to shareholders.
ITEM 1 BUSINESS
General
Overview.
First
Horizon National Corporation (the Corporation, we, or us) is a Tennessee
corporation headquartered in Memphis, Tennessee and incorporated in 1968. We
are registered as a bank holding company under the Bank Holding Company Act of
1956, as amended, and are a financial holding company under the provisions of
the Gramm-Leach-Bliley Act. At December 31, 2010, the Corporation had total
consolidated assets of $24.7 billion and ranked 1st in terms of
total assets among Tennessee-headquartered bank holding companies.
We
provide diversified financial services primarily through our principal
subsidiary, First Tennessee Bank National Association (the Bank), and its
subsidiaries. Financial results of operations are reported through segments
based on financial accounting and reporting principles rather than the legal
structure of the Bank and other subsidiaries. In first quarter 2010, we revised
our operating segments to better align with our strategic direction,
representing a renewed focus on our regional banking franchise and capital markets
business. Key changes include the addition of a non-strategic segment which
combines the former mortgage banking and national specialty lending segments,
the movement of our correspondent banking business from capital markets to
regional banking, and the shift of first lien mortgage production in the
Tennessee footprint to the regional banking segment. As a result, at year-end
2010 FHN has four business segments: regional banking, capital markets,
corporate, and non-strategic.
The
regional banking segment offers financial products and services, including
traditional lending and deposit taking, to retail and commercial customers in
Tennessee and surrounding markets. Regional banking provides investments,
insurance services, financial planning, trust services and asset management,
health savings accounts, credit card, cash management, check clearing services,
correspondent banking services, and mortgage originations within the
Tennessee-based footprint. Additionally, the regional banking segment includes
correspondent banking which provides credit, depository, and other banking
related services to other financial institutions.
Capital
markets provides financial services for the investment and banking communities
through the integration of traditional capital markets securities activities,
loan sales, portfolio advisory services, and derivative sales
The
corporate segment consists of unallocated corporate income/expenses including
gains and losses on the repurchase of debt, expense on subordinated debt
issuances and preferred stock, 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, low income housing investment activities, and certain charges
related to restructuring, repositioning, and efficiency initiatives.
The
non-strategic segment includes the former mortgage banking and national
specialty lending segments, exited businesses and loan portfolios, other
discontinued products and service lines, and certain charges related to
restructuring, repositioning, and efficiency initiatives.
The
approximate percentage of consolidated revenues (for this purpose, the sum of
net interest income and noninterest income) ascribed to each of our segments
for the past three years is set forth below.
REVENUE MIX ASSOCIATED WITH BUSINESS SEGMENTS
2010
2009
2008
Regional
Banking
52%
44%
38%
Capital
Markets
26%
32%
23%
Corporate
4%
3%
4%
Non-Strategic
18%
21%
35%
Financial
and other additional information concerning our segments including
information concerning assets, revenues, and financial results appears in the
response to Item 7
of Part II hereof and Note
21 to the Consolidated Financial Statements contained in our 2010 Annual
Report to Shareholders. During 2010 approximately 57% of our consolidated
revenues were provided by fee and other noninterest income and approximately
43% of revenues were provided by net interest income. As a financial holding
company, the Corporation coordinates the financial resources of the
consolidated enterprise and maintains systems of financial, operational and
administrative control intended to coordinate selected policies and activities,
including as described in Item
9A of Part II hereto.
The
Bank is a national banking association with principal offices in Memphis,
Tennessee. It received its charter in 1864. During 2010 through its various
business lines, including consolidated subsidiaries, the Bank generated gross
revenue (net interest income plus noninterest income) of approximately $1.7
billion and contributed the majority of our consolidated revenue from
continuing operations. At December 31, 2010, the Bank had $24.5 billion in
total assets, $15.5 billion in total deposits, and $16.1 billion in total net
loans. Among Tennessee headquartered banks, the Bank ranked 1st in
Tennessee deposit market share at June 30, 2010.
At
December 31, 2010, the Corporations subsidiaries had over 200 business
locations in 17 U.S. states, Hong Kong, and Tokyo, excluding off-premises ATMs.
Almost all of those locations were bank financial centers and FTN Financial
offices.
At
December 31, 2010, the Bank had 184 financial center bank branch locations in
three states: 174 branches in the five major metropolitan areas of Tennessee
discussed in the Competition section beginning on page 16 of this report; 2 branches in
northwestern Georgia; and 8 branches in northwestern Mississippi. The branches
in Georgia and Mississippi are Tennessee-based, being associated with the
Chattanooga and Memphis, Tennessee metropolitan market areas included within the
Banks regional footprint. In addition, the Bank had eight other financial
services offices open to customers in five states: one each in Kentucky and
Virginia; two in North Carolina; and four in Tennessee. Nearly all bank branch
locations, and some of the other offices, have on-premises ATMs. Nearly all
financial center bank branches provide a full range of banking services, and
all provide basic banking services. The Bank also has off-premises ATMs along
with support offices in its banking markets, and offices associated with its
headquarters in Memphis, Tennessee. At December 31, 2010, the Bank planned in
2011 to open one new branch and to consolidate or close five selected branches
as part of its ongoing efficiency initiatives. The planned closures were based
in part on a review of customer usage and are intended to be minimally
disruptive to customer service.
2
FTN
Financial products and services, at December 31, 2010, were offered through 18
offices in total, including 16 offices in 14 states plus an office in each of
Hong Kong and Tokyo.
At
December 31, 2010, we provided the following services through our subsidiaries:
general
banking services for consumers, businesses, financial institutions, and
governments
through FTN Financial
fixed income sales and trading; underwriting of bank-eligible securities and
other fixed-income securities eligible for underwriting by financial
subsidiaries; loan sales; advisory services; and derivative sales
discount brokerage and
full-service brokerage
correspondent banking
transaction processing
nationwide check clearing services and remittance processing
trust, fiduciary, and
agency services
credit card products
equipment finance
investment
and financial advisory services
mutual fund sales as agent
retail and commercial
insurance sales as agent
mortgage banking services
services related to health
savings accounts
Over
the past six years we have undergone substantial changes. Prior to 2008 our
principal businesses were in the areas of regional banking, capital markets,
and home mortgage. Our regional banking footprint was in the major
Tennessee-based market areas. Our capital markets business, which had primarily
institutional customers, was nationwide in scope. We had home mortgage offices
across the U.S. and were using those offices to expand our banking business. We
had opened over 30 bank branches more than 15% of our total branches at that
time in selected mortgage markets; we made home equity loans through our
mortgage offices; and we made commercial loans in many mortgage markets, mostly
to homebuilders. We refer to these mortgage-driven activities outside of our
regional banking markets as our national businesses.
Starting
in 2007 the economic environment began to worsen significantly, especially in
terms of residential real estate transactions and values. That environment
became a recession which continued into 2009 and in many respects continues to
impact the U.S. economy today. In 2007 we began to change our strategy
substantially. During this time we focused on enhancing our credit management
processes, improving our efficiency, redirecting resources to support and build
our regional banking and capital markets businesses, and eliminating through
sale or closure those business units which no longer fit our strategy, and
those efforts are continuing today. By the end of 2008 most of our national
businesses had been sold or closed, including our mortgage businesses outside
of Tennessee, our national lending businesses, and all of our national bank
branches. We raised significant amounts of equity capital twice in 2008, once
by selling common stock in the public markets and later by selling preferred
stock and a common stock warrant to the U.S. Treasury. In 2008 and 2009 our
loan loss expense climbed to very high levels. In 2010 we raised additional
common equity capital as well as senior debt capital while retiring the U.S.
Treasurys preferred stock. During these three years we have retired debt and
become less leveraged.
3
These
actions have changed our company in substantial ways. At the end of 2010 we are
a smaller company in terms of assets and liabilities than we were in 2005, with
a different business mix and strategic focus. We still hold a substantial
amount of legacy national assets, mostly in the form of retail and commercial
loans, and our efficiency and other re-focus efforts are continuing. The
following table provides selected data concerning our revenues, assets,
liabilities, and shareholders equity for the past six years.
SELECTED CONSOLIDATED REVENUE, ASSET, LIABILITY, AND EQUITY
DATA* (Dollars in millions; financial condition data shown
as of December 31)
2010
2009
2008
2007
2006
2005
Net
interest income
$
730.8
$
776.5
$
895.1
$
940.6
$
996.9
$
984.0
Provision
for loan losses
270.0
880.0
1,080.0
272.8
83.1
67.7
Noninterest
income
955.7
1,254.8
1,468.4
815.5
1,105.5
1,240.4
Total
assets
24,699.0
26,068.7
31,022.0
37,015.5
37,918.3
36,579.1
Total
deposits
15,208.2
14,867.2
14,241.8
17,032.3
20,213.2
23,317.6
Total
long term debt
3,228.1
2,891.1
4,767.7
6,828.4
5,836.4
3,437.6
Total
liabilities
22,020.9
22,766.2
27,447.3
34,584.6
35,160.6
33,936.2
Preferred
Stock Series CPP
798.7
782.7
Total
Shareholders Equity
2,678.0
3,302.5
3,574.6
2,430.9
2,757.7
2,642.8
*
Certain previously reported items have been reclassified to agree with current
presentation.
Other
General Information.
An
element of our business strategy is to consider acquisitions and divestitures
that would enhance long-term shareholder value. Acquisitions and divestitures
which closed during the past three years are described in Note 2 to the
Consolidated Financial Statements, which information is incorporated into this
Item 1 by this reference.
All
of the Corporations operating subsidiaries are listed in Exhibit 21. The Bank
has filed notice with the Comptroller of the Currency (Comptroller or OCC)
as a government securities broker/dealer. The FTN Financial Capital Markets
division of the Bank is registered with the Securities and Exchange Commission
(SEC) as a municipal securities dealer. The Bank is supervised and regulated
as described below. Highland Capital Management Corp., Martin and Company,
Inc., First Tennessee Advisory Services, Inc., and First Tennessee Brokerage,
Inc. are registered with the SEC as investment advisers. Hickory Venture
Capital Corporation is licensed as a Small Business Investment Company. First
Tennessee Brokerage, Inc., and FTN Financial Securities Corp. are registered as
broker-dealers with the SEC and all states where they conduct business for
which registration is required. First Tennessee Insurance Services, Inc. and
First Horizon Insurance Services, Inc. are licensed as insurance agencies in
all states where they do business for which licensing is required. FT
Reinsurance Company is licensed by the state of South Carolina as a captive
insurance company. First Horizon Insurance, Inc.s subsidiaries, First Horizon
Insurance Group, Inc. and First Horizon Insurance Agency, Inc., are licensed as
insurance agencies in all states where they do business for which licensing is
required. FTN Financial Securities Corp., First Horizon Insurance, Inc., First Horizon Insurance Services,
Inc., First Tennessee Insurance Services, Inc., First Horizon Insurance Group,
Inc., and First Horizon Insurance Agency, Inc. are financial subsidiaries under
the Gramm-Leach-Bliley Act. First Tennessee Brokerage, Inc. is licensed as an
insurance agency in the states where it does business for which licensing is
required for the sale of annuity products. FTN Financial Asia, Ltd. is a
subsidiary based in Hong Kong. FTN Financial Asia, Ltd. is registered to
carry on a Type 1 regulated activity (Dealing in Securities) with
the Securities and Futures Commission in Hong Kong, and its Tokyo, Japan office
is registered with the Kanto Local Finance Bureau as a Type-I Financial Instruments Business pursuant to the
Financial Instruments and Exchange Law of Japan. First Horizon Insurance Agency, Inc. has ceased doing business.
4
Expenditures
for research and development activities were not material in any of the last
three fiscal years ended December 31, 2010.
Neither
the Corporation nor any of its significant subsidiaries is dependent upon a
single customer or very few customers.
We
do not experience material seasonality. We do experience a degree of seasonal
variation in certain revenues and expenses. Historically, these variations have
somewhat increased certain expenses and somewhat diminished certain revenues
principally in the first quarter of each year for the Regional Banking and
Capital Markets segments.
At
December 31, 2010, the Corporation and its subsidiaries had 5,487 employees, or
5,435 full-time-equivalent employees, not including contract labor for certain
services.
For
additional information on the business of the Corporation, refer to the
Managements Discussion and Analysis of Results of Operations and Financial Condition, Glossary, and Acronyms
sections contained in pages 3 through 91 of the Corporations 2010 Annual Report to
Shareholders, which sections are incorporated herein by reference.
The
Corporations current internet address is www.fhnc.com. In the Investor
Relations SEC Filings section of its internet website, the Corporation makes
available free of charge its annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, proxy statements, and amendments
thereto as soon as reasonably practicable after the Corporation files such
material with, or furnishes such material to, the Securities and Exchange
Commission. Additional information regarding materials available on the
Corporations website is provided in Item 10 of this report beginning on page 42.
Supervision
and Regulation.
The
following summary sets forth certain of the material elements of the regulatory
framework applicable to bank holding companies and financial holding companies
and their subsidiaries and to companies engaged in securities and insurance
activities and provides certain specific information about the Corporation. The
bank regulatory framework is intended primarily for the protection of
depositors and the Federal Deposit Insurance Fund and not for the protection of
security holders. In addition, certain activities of the Corporation and its
subsidiaries are subject to various securities and insurance laws and are
regulated by the Securities and Exchange Commission and the state insurance
departments of the states in which they operate. To the extent that the
following information describes statutory and regulatory provisions, it is
qualified in its entirety by express reference to each of the particular
statutory and regulatory provisions. A change in applicable statutes,
regulations or regulatory policy may have a material effect on the business of
the Corporation.
General
The
Corporation is a bank holding company and financial holding company within the
meaning of the Bank Holding Company Act of 1956, as amended (the BHCA), and
is registered with the Board of Governors of the Federal Reserve System (the
Federal Reserve). The Corporation is subject to the regulation and
supervision of and examination by the Federal Reserve under the BHCA. The
Corporation is required to file with the Federal Reserve annual reports and
such additional information as the Federal Reserve may require pursuant to the
BHCA.
5
Under
the BHCA, prior to March 13, 2000, bank holding companies could not in general
directly or indirectly acquire the ownership or control of more than 5% of the
voting shares or substantially all of the assets of any company, including a
bank, without the prior approval of the Federal Reserve, and a bank holding
company and its subsidiaries were generally limited to engaging in banking and
activities found by the Federal Reserve to be so closely related to banking as
to be a proper incident thereto. Since March 13, 2000, eligible bank holding
companies that elect to become financial holding companies may affiliate with
securities firms and insurance companies and engage in activities that are
financial in nature generally without the prior approval of the Federal
Reserve. See Gramm-Leach-Bliley Act below.
In
addition, the BHCA permits the Federal Reserve to approve an application by a
bank holding company to acquire a bank located outside the acquirers principal
state of operations without regard to whether the transaction is prohibited
under state law. See Interstate Banking and Branching Legislation. The
Tennessee Bank Structure Act of 1974, among other things, prohibits (subject to
certain exceptions) a bank holding company from acquiring a bank for which the
home state is Tennessee (a Tennessee bank) if, upon consummation, the company
would directly or indirectly control 30% or more of the total deposits in
insured depository institutions in Tennessee. As of June 30, 2010, the
Corporation estimates that it held approximately 13% of such deposits. Subject
to certain exceptions, the Tennessee Bank Structure Act prohibits a bank
holding company from acquiring a bank in Tennessee which has been in operation
for less than three years. Tennessee law permits a Tennessee bank to establish
branches in any county in Tennessee. See also - Interstate Banking and
Branching Legislation below.
The
Bank is a national banking association subject to regulation, examination and
supervision by the Comptroller as its primary federal regulator. In addition,
the Bank is insured by, and subject to regulation by, the Federal Deposit
Insurance Corporation (the FDIC). The Bank is also subject to various
requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon and limitations on the types of investments that may be made,
activities that may be engaged in, and types of services that may be offered.
Various consumer laws and regulations also affect the operations of the Bank,
and a newly created federal Bureau of Consumer Financial Protection (the
Bureau) has substantial regulatory authority regarding consumer products and
practices. In addition to the impact of regulation, commercial banks are
affected significantly by the actions of the Federal Reserve as it attempts to
control the money supply and credit availability in order to influence the
economy. Also, the Bank and certain of its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with extensions of
credit, leases or sales of property, or furnishing products or services.
Payment of Dividends
The
Corporation is a legal entity separate and distinct from its banking and other
subsidiaries. The principal source of cash flow of the Corporation, including
cash flow to pay dividends on its stock or principal (premium, if any) and
interest on debt securities, is dividends from the Bank. There are statutory
and regulatory limitations on the payment of dividends by the Bank to the
Corporation, as well as by the Corporation to its shareholders.
As
a national bank, the Bank is required by federal law to obtain the prior
approval of the Comptroller for the payment of cash dividends if the total of
all dividends declared by the board of directors of the Bank in any year will
exceed the total of (i) its net profits (as defined and interpreted by
regulation) for that year plus (ii) the retained net profits (as defined and
interpreted by regulation) for the preceding two years, less any required
transfers to surplus. A national bank also can pay dividends only to the extent
that retained net profits (including the portion transferred to surplus) exceed
bad debts (as defined by regulation).
6
If,
in the opinion of the applicable federal bank regulatory authority, a
depository institution or a holding company is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the financial condition
of the depository institution or holding company, could include the payment of
dividends), such authority may require that such institution or holding company
cease and desist from such practice. The federal banking agencies have
indicated that paying dividends that deplete a depository institutions or
holding companys capital base to an inadequate level would be such an unsafe
and unsound banking practice. Moreover, the Federal Reserve, the Comptroller,
and the FDIC have issued policy statements which provide that bank holding
companies and insured depository institutions generally should pay
cash dividends only out of current operating earnings.
In
addition, under the Federal Deposit Insurance Act (FDIA), an FDIC-insured
depository institution may not make any capital distributions (including the
payment of dividends) or pay any management fees to its holding company or pay
any dividend if it is undercapitalized or if such payment would cause it to
become undercapitalized.
At
December 31, 2010 and at January 1, 2011, under dividend restrictions imposed
under applicable federal laws as outlined above, the Bank could not legally
declare cash dividends on the Banks common or preferred stock without obtaining
regulatory approval. The application of those restrictions to the Bank is
discussed in more detail under the heading Liquidity Management in the
Managements Discussion and Analysis section beginning on page 58 of the
Corporations 2010 Annual Report to Shareholders, which section is incorporated
herein by reference. As mentioned in that section, the Bank has applied for OCC
approval to declare dividends on the Banks outstanding preferred stock payable
in April 2011. The Bank has not requested approval to pay common dividends to
the Corporation, its sole common stockholder.
Under
Tennessee law, the Corporation is not permitted to pay cash dividends if, after
giving effect to such payment, it would not be able to pay its debts as they
become due in the usual course of business or the Corporations total assets
would be less than the sum of its total liabilities plus any amounts needed to
satisfy any preferential rights if the Corporation was dissolving. In addition,
in deciding whether or not to declare a dividend of any particular size, the
Corporations Board must consider the Corporations current and prospective
capital, liquidity, and other needs.
The
payment of cash dividends by the Corporation and the Bank also may be affected
or limited by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines and debt covenants. Furthermore, the
Federal Reserve and the OCC have issued policy statements generally requiring
insured banks and bank holding companies only to pay dividends out of current
operating earnings. The Federal Reserve has released a supervisory letter
advising bank holding companies, among other things, that as a general matter a
bank holding company should inform the Federal Reserve and should eliminate,
defer or significantly reduce its dividends if (i) the bank holding
companys net income available to shareholders for the past four quarters, net
of dividends previously paid during that period, is not sufficient to fully
fund the dividends; (ii) the bank holding companys prospective rate of
earnings is not consistent with the bank holding companys capital needs and
overall current and prospective financial condition; or (iii) the bank
holding company will not meet, or is in danger of not meeting, its minimum
regulatory capital adequacy ratios.
In
2008 the Corporation discontinued paying a quarterly cash dividend to its
common stockholders and began distributing a dividend payable in shares of
common stock. In 2010 the Corporation returned to profitability, but preferred
stock payments to the Treasury in connection with the TARP program
significantly exceeded those earnings. In January 2011 the Corporation, having
exited the TARP program, resumed a cash dividend at the rate of one cent per
share, substantially lower than the rate prior to 2008. For the reasons
mentioned above, the Corporations dividend rate may remain muted until its
earnings are stronger and less volatile.
7
Transactions
with Affiliates
There
are various legal restrictions on the extent to which the Corporation and its
nonbank subsidiaries (including for purposes of this paragraph, in certain
situations, subsidiaries of the Bank) can borrow or otherwise obtain credit
from the Bank. There are also legal restrictions on the Banks purchases of or
investments in the securities of and purchases of assets from the Corporation
and its nonbank subsidiaries, the Banks loans or extensions of credit to third
parties collateralized by the securities or obligations of the Corporation and
its nonbank subsidiaries, the issuance of guaranties, acceptances and letters
of credit on behalf of the Corporation and its nonbank subsidiaries, and
certain bank transactions with the Corporation and its nonbank subsidiaries, or
with respect to which the Corporation and its nonbank subsidiaries act as
agent, participate or have a financial interest. The Bank (including for
purposes of this paragraph all subsidiaries of the Bank) generally may not
extend credit to the Corporation or to any other affiliate (other than another
subsidiary bank and certain exempted affiliates) in an amount which exceeds 10%
of the Banks capital stock and surplus and may not extend credit in the
aggregate to all such affiliates in an amount which exceeds 20% of its capital
stock and surplus. Further, there are legal requirements as to the type, amount
and quality of collateral which must secure such extensions of credit by the
Bank to the Corporation or to such other affiliates. Extensions of credit and
other transactions between the Bank and the Corporation or such other
affiliates must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the Bank
as those prevailing at the time for comparable transactions with non-affiliated
companies.
Capital Adequacy
The
Federal Reserve has adopted risk-based capital guidelines for bank holding
companies. The minimum guideline for the ratio of total capital (Total
Capital) to risk-weighted assets (including certain off-balance-sheet items,
such as standby letters of credit) is 8%, and the minimum ratio of Tier 1
Capital (defined below) to risk-weighted assets is 4%. At least half of the
Total Capital must be composed of common stock, minority interests in the
equity accounts of consolidated subsidiaries, non-cumulative perpetual
preferred stock and a limited amount of cumulative perpetual preferred stock
and trust preferred securities, less any amounts of goodwill, other intangible
assets, and other items that are required to be deducted (Tier 1 Capital).
The remainder may consist of qualifying subordinated debt, certain types of
mandatory convertible securities and perpetual debt, other preferred stock and
a limited amount of loan loss reserves. At December 31, 2010, the Corporations
consolidated Total Capital and Tier 1 Capital ratios were 18.65% and 13.99%,
respectively.
The
Federal Reserve Board, the FDIC, and the OCC have adopted rules to incorporate
market and interest-rate risk components into their risk-based capital
standards and that explicitly identify concentration of credit risk and certain
risks arising from non-traditional activities, and the management of such
risks, as important factors to consider in assessing an institutions overall
capital adequacy. Under the market risk requirements, capital is allocated to
support the amount of market risk related to a financial institutions ongoing
trading activities for banks with relatively large trading activities.
Institutions are able to satisfy any related additional capital requirement, in
part, by issuing short-term subordinated debt that qualifies as Tier 3 capital.
Based on present practices and activity levels, the Corporation believes that
these trading-related market risk rules have no significant impact on the
Corporations ability to meet regulatory capital requirements.
During
2009, the U.S. Department of the Treasury, the Federal Reserve Board, the FDIC,
and the OCC initiated a capital assessment program. Under the program, the
capital needs of selected major U.S. banking institutions were evaluated for
resilience under economic stress. If that assessment indicated a need for
additional capital, the affected institution was allowed to seek a specific
amount of additional private
8
capital and, failing that,
could have been required to issue mandatory convertible preferred shares to a
government agency. In 2011 it appears likely that a second round of capital
assessment testing will be initiated for financial institutions larger than $50
billion in assets. It is possible that similar stress-assessment processes will
become an important methodology by which regulators judge the capital and
liquidity strength of banks and holding companies of all sizes, in addition to
the bright-line numerical tests mentioned in this Supervision and Regulation
section.
In
addition, the Federal Reserve has established minimum leverage ratio guidelines
for bank holding companies. These guidelines provide for a minimum ratio of
Tier 1 Capital to quarterly average assets, less goodwill and certain other
intangible assets (the Leverage Ratio), of 3% for bank holding companies that
meet certain specific criteria, including having the highest regulatory rating.
All other bank holding companies generally are required to maintain a Leverage
Ratio of at least 3%, plus an additional cushion of 100 to 200 basis points.
The Corporations Leverage Ratio at December 31, 2010, was 10.96%. The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the Federal Reserve has
indicated that it will consider a tangible Tier 1 Capital leverage ratio
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.
The
Bank is subject to risk-based and leverage capital requirements similar to
those described above adopted by the Comptroller. The Corporation believes that
the Bank was in compliance with applicable minimum capital requirements as of
December 31, 2010. Neither the Corporation nor the Bank has been advised by any
federal banking agency of any specific minimum Leverage Ratio requirement
applicable to it.
Failure to meet capital guidelines could subject
a bank to a variety of enforcement remedies, including the termination of deposit insurance by the FDIC, and to certain
restrictions on its business and in certain circumstances to the appointment of a conservator or receiver. See Prompt
Corrective Action beginning on page 10 of this report for additional information.
In
1999, the Basel Committee on Banking Supervision launched its efforts to
develop an improved international capital adequacy framework by issuing its
proposals to revise the 1988 Capital Accord, sometimes known as Basel I. In June
2004, the Basel Committee issued a new capital framework (Basel II) which
consisted of minimum capital requirements, a supervisory review process, and
the effective use of market discipline.
In
September 2006 the U.S. regulators published a revised Notice of Proposed
Rulemaking (NPR) for Basel II. The Final Rule on Advanced Capital Adequacy
Framework Basel II took effect in the U.S. in 2008. The Final Rule currently
applies only to certain core banks with total assets of $250 billion or more,
but allows non-core banks to opt-in. Under the Final Rules the Bank is
considered to be a non-core bank. For those non-core banks that do not opt in,
an NPR was issued in December 2006, known as Basel IA, which proposed certain
revisions to the Basel I capital rules. In July 2008 the agencies
issued a supplemental NPR. At year-end 2010, the 2006 and 2008 NPRs remain
unimplemented. If implemented, the net effect of these NPRs would allow
non-core banks the option of adopting the Standardized Approach of the Basel II
Framework or remaining under the Basel I framework.
In
2010 international banking industry regulators largely agreed upon significant
changes in the regulation of capital required to be held by banks and their
holding companies to support their businesses. The new international rules,
known as Basel III, generally increase the capital required to be held and
narrow the types of instruments which will qualify as providing appropriate
capital. Among other things, Basel III establishes these minimum ratios: common
equity to risk weighted assets of 4.5%; Tier 1 capital of
9
6%; and total
capital of 8%. Basel III additionally
requires banks to hold a 2.5% countercyclical buffer added to each of those
ordinary minimum ratios during certain periods determined by regulators from
time to time. The Basel III requirements are complex and will be phased in over
many years, generally from 2013 to 2018.
The
Basel III rules do not apply to U.S. banks or holding companies automatically.
Among other things, the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010 (DF Act) requires U.S. regulators to reform the system under
which the safety and soundness of banks and other financial institutions,
individually and systemically, are regulated. That reform effort will include
the regulation of capital. It is not known whether or to what extent the U.S.
regulators will incorporate elements of Basel III into the reformed U.S.
regulatory system, but it is expected that the U.S. reforms will include an
increase in capital requirements and a narrowing of what qualifies as appropriate
capital.
Holding
Company Structure and Support of Subsidiary Banks
Because
the Corporation is a holding company, its right to participate in the assets of
any subsidiary upon the latters liquidation or reorganization will be subject
to the prior claims of the subsidiarys creditors (including depositors in the
case of the Bank) except to the extent that the Corporation may itself be a
creditor with recognized claims against the subsidiary. In addition, depositors
of a bank, and the FDIC as their subrogee, would be entitled to priority over
the creditors in the event of liquidation of a bank subsidiary.
Under
Federal Reserve policy the Corporation is expected to act as a source of
financial strength to, and to commit resources to support, the Bank. This
support may be required at times when, absent such Federal Reserve policy, the
Corporation may not be inclined to provide it. In addition, any capital loans
by a bank holding company to any of its subsidiary banks are subordinate in
right of payment to deposits and to certain other indebtedness of such
subsidiary bank. In the event of a bank holding companys bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
Cross-Guarantee
Liability
Under
the FDIA, a depository institution insured by the FDIC can be held liable for
any loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution in danger of
default. Default is defined
generally as the appointment of a conservator or receiver and in danger of
default is defined generally as the existence of certain conditions indicating
that a default is likely to occur in the absence of regulatory assistance. The
FDICs claim for damages is superior to claims of shareholders of the insured
depository institution or its holding company but is subordinate to claims of
depositors, secured creditors and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The Bank
is currently the only depository institution owned by the Corporation. In the
event that the Corporation established or acquired another depository
institution, any loss suffered by the FDIC in respect of one subsidiary bank
would likely result in assertion of the cross-guarantee provisions, the
assessment of such estimated losses against the Corporations other subsidiary
bank(s), and a potential loss of the Corporations investment in such
subsidiary bank.
Prompt
Corrective Action
The
FDIA requires, among other things, the federal banking regulators to take
prompt corrective action in respect of FDIC-insured depository institutions
that do not meet minimum capital requirements. Under the FDIA, insured
depository institutions are divided into five capital tiers: well capitalized,
10
adequately
capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. Under
applicable regulations, an institution is defined to be well capitalized if it
maintains a Leverage Ratio of at least 5%, a Tier 1 Capital ratio of at least
6% and a Total Capital ratio of at least 10% and is not subject to a directive,
order, or written agreement to meet and maintain specific capital levels. An
institution is defined to be adequately capitalized if it meets all of its
minimum capital requirements as described above. An institution will be
considered undercapitalized if it fails to meet any minimum required measure;
significantly undercapitalized if it has a Total Risk-Based Capital ratio of
less than 6%, a Tier 1 Risk-Based Capital ratio of less than 3%, or a Leverage
Ratio of less than 3%; and critically undercapitalized if it fails to maintain
a level of tangible equity equal to at least 2% of total assets. An institution
may be deemed to be in a capitalization category that is lower than is
indicated by its actual capital position if it receives an unsatisfactory
examination rating.
The
FDIA generally prohibits an FDIC-insured depository institution from making any
capital distribution (including payment of dividends) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit capital restoration plans. An insured depository
institutions holding company must guarantee the capital plan, up to an amount
equal to the lesser of 5% of the depository institutions assets at the time it
becomes undercapitalized or the amount of the capital deficiency when the
institution fails to comply with the plan, for the plan to be accepted by the
applicable federal regulatory authority. The federal banking agencies may not
accept a capital plan without determining, among other things, that the plan is
based on realistic assumptions and is likely to succeed in restoring the
depository institutions capital. If a depository institution fails to submit
an acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly
undercapitalized depository institutions may be subject to a number of
requirements and restrictions, including orders to sell sufficient voting stock
to become adequately capitalized, requirements to reduce total assets and
cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions are subject to appointment of a
receiver or conservator, generally within 90 days of the date on which they
become critically undercapitalized.
At
December 31, 2010, the Bank had sufficient capital to qualify as well
capitalized under the regulatory capital requirements discussed above. As noted under the caption Capital
Adequacy beginning on page 8 of this report, it is expected that significant
changes to those requirements will be implemented in the future.
Interstate
Banking and Branching Legislation
Under
current federal law, a bank may merge with a bank in another state and continue
to operate the merged banks branches as interstate branches, unless a state
has opted out of allowing such transactions, which currently none do. States
may impose restrictions on such merger transactions, including minimum age
requirements (up to a maximum of five years), and state deposit concentration
limits. Many states have imposed such age requirements for a minimum period of
time that a bank must have been in existence before a merger is allowed.
Additionally, national and state deposit concentration limits apply to
interstate mergers.
Federal
law also allows a national bank to establish and operate a de novo branch or acquire an existing
branch in a state in which the bank is not headquartered and does not maintain
a branch if the OCC approves the branch or acquisition, and if the law of the
state in which the branch is located or to be located would permit the
establishment of the branch if the bank were chartered by that state.
11
Once
a bank has established branches in a state through an interstate merger
transaction or through de novo branching, the bank may then
establish and acquire additional branches within that state to the same extent
that a state chartered bank is allowed to establish or acquire branches within
the state.
Gramm-Leach-Bliley
Act
The
Gramm-Leach-Bliley Act of 1999 (GLB Act) repealed or modified a number of
significant provisions of then-current laws, including the Glass-Steagall Act
and the Bank Holding Company Act of 1956, which imposed restrictions on banking
organizations ability to engage in certain types of activities. The GLB Act
generally allows bank holding companies such as the Corporation broad authority
to engage in activities that are financial in nature or incidental to such a
financial activity, including insurance underwriting and brokerage; merchant
banking; securities underwriting, dealing and market-making; real estate
development; and such additional activities as the Federal Reserve in
consultation with the Secretary of the Treasury determines to be financial in
nature or incidental thereto. A bank holding company may engage in these
activities directly or through subsidiaries by qualifying as a financial
holding company. To qualify, a bank
holding company must file an initial declaration with the Federal Reserve,
certifying that all of its subsidiary depository institutions are well-managed
and well-capitalized. The GLB Act also permits national banks such as the Bank
to engage in certain of these activities through financial subsidiaries. To
control or hold an interest in a financial subsidiary, a national bank must
meet the following requirements:
(1)
the national
bank must receive approval from the Comptroller for the financial subsidiary
to engage in the activities;
(2)
the national
bank and its depository institution affiliates must each be well-capitalized
and well-managed;
(3)
the
aggregate consolidated total assets of all of the national banks financial
subsidiaries must not exceed 45% of the national banks consolidated total
assets or, if less, $50 billion;
(4)
the national
bank must have in place adequate policies and procedures to identify and
manage financial and operational risks and to preserve the separate
identities and limited liability of the national bank and the financial
subsidiary; and
(5)
if the
financial subsidiary will engage in principal transactions and the national
bank is one of the one hundred largest banks, the national bank must have
outstanding at least one issue of unsecured long-term debt that is currently
rated in one of the three highest investment grade rating categories (or if
in the second fifty largest banks, an alternative requirement is that the
national bank has a current long-term issuer credit rating within the three
highest investment grade rating categories). If this fifth requirement ceases
to be met after a national bank controls or holds an interest in a financial
subsidiary, the bank cannot invest additional capital in that subsidiary
until the requirement again is met.
No
new financial activity may be commenced under the GLB Act unless the national
bank and all of its depository institution affiliates have at least
satisfactory CRA ratings. Certain restrictions apply if the bank holding
company or the national bank fails to continue to meet one or more of the
requirements listed above. In addition, the GLB Act contains a number of other
provisions that may affect the Banks operations, including functional
regulation of the Banks securities operations by the SEC and the Banks
insurance operations by the states and limitations on the use and disclosure to
third parties of customer information. At December 31, 2010, the Corporation is
a financial holding company and the Bank has a number of financial
subsidiaries, as discussed in Other General Information beginning on page 4 of this report.
12
Dodd-Frank
Act
The
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (DF Act)
was enacted on July 21, 2010. The DF Act made a substantial number of
significant changes to how financial services companies are regulated. Most of
the most sweeping changes in the DF Act are not complete or specific but
instead authorize potentially expansive new regulations to be issued in the
future, possibly over several years. Overall, the Corporation expects that the
DF Act and its regulations are likely to increase the Corporations regulatory
compliance and certain other costs significantly, and they are likely to
constrain operations and revenues in some respects, perhaps significantly in
some areas.
Provisions
or topics of the DF Act and the regulatory regimes which will arise under it
that the Corporation anticipates will be key to the Corporation and the Bank
are:
●
A new
Financial Stability Oversight Council (Council) was created which oversees
financial industry regulators and regulation in certain areas, especially
relating to the areas of risk and stability. Those areas are so broad that
the Council conceivably could impact nearly every aspect of the Corporations
businesses.
●
The DF Act
requires capital requirements to be re-examined by regulators and made
counter-cyclical. It is likely that this effort, especially in combination
with a possible U.S. adoption of Basel III (discussed in the Capital
Adequacy section beginning on page 8 of this report), will result in new capital and
other standards for the Corporation and the Bank. In addition to requirements
affecting capital and leverage, those new standards could include
restrictions on the payment of cash dividends and on the repurchase of
shares.
●
The DF Act
excluded certain items, including trust preferred securities, from Tier 1
capital of financial institutions having assets of $15 billion or more. A
direct effect of this exclusion will be to remove $200 million of currently
outstanding long-term securities from the Corporations Tier 1 capital after
a phase-in period has passed.
●
The DF Act
established a new Bureau of Consumer Financial Protection (Bureau). The
Bureau has expansive regulatory authority over consumer products and
practices in the financial services industry, including the authority to
define deceptive practices and centralize consumer complaints.
●
Recently
proposed regulations under the DF Acts so-called Durbin Amendment would
severely cap the interchange fees which banks charge merchants for debit card
transactions. The proposed cap could substantially reduce the Banks revenues from interchange
fees and could disrupt that business, and is likely to cause the Bank and others in
the industry to revamp debit card practices and fee structures.
●
The DF Act
refocused regulator attention on the possible relationships of compensation
practices to risk management.
●
The DF Act
made permanent the $250,000 FDICs general deposit insurance limit, and
allows banks to pay interest on certain business checking accounts beginning
in 2011.
●
The DF Act
is likely to substantially increase deposit insurance costs. The assessment
rate is expected to increase, at least temporarily, and the base upon which
the assessment is made has been expanded from insured deposits to include all
consolidated assets less tangible capital.
●
The DF Act
created a new registration regime for municipal securities advisors, along
with new fiduciary duties.
●
The DF Act
authorized the regulatory imposition of fiduciary duties on retail securities
brokers and restrictions on such brokers from including arbitration clauses
in customer agreements.
13
●
The DF Act
imposed new duties on mortgage lenders, including a duty to determine the
borrowers ability to repay the loan, and imposed a requirement on mortgage
securitizers to retain a minimum level of economic interest in securitized
pools of certain mortgage types.
●
The DF Act
substantially restricted so-called proprietary trading and investments in
hedge funds or private equity funds.
The
list above is not exhaustive. It reflects the Corporations current assessment
of the DF Act provisions that are reasonably likely to have a substantial
impact in the future. It is possible that at least some other areas unexpectedly
will become significant to the Corporation or the Bank as the regulatory
processes unfold.
FDIC
Insurance Assessments; DIFA
The
Deposit Insurance Fund (DIF) was formed in March 2006 when the FDIC merged
the Bank Insurance Fund with the Savings Association Insurance Fund pursuant to
the the Federal
Deposit Insurance Reform Act of 2005 (2005 Reform Act). Prior to 2008, the
FDIC insurance premium charged on bank deposits insured by the DIF varied
depending on the institutions risk classification, based on capital and
supervisory risk factors. Beginning in 2008 new risk category and DIF premium
structures became effective. The new rate ranges were based on four new Risk
Categories that in turn were based on asset size as well as capital,
supervisory, credit, and other risk factors. Somewhat different factors were
used for institutions in different situations. Within the range for a given
Risk Category, the rate applicable to any particular institution is determined
by the FDIC according to formal guidelines. In 2008, rates for institutions
ranged from 5 to 43 basis points of U.S. deposits.
During
2008 and 2009, losses from bank failures significantly diminished the DIF. Late
in 2008 the FDIC announced a multi-year restoration plan for the DIF which
included an increase in deposit insurance premium rates of 7 basis points
across all rate categories, effective for the first quarter of 2009. In June
2009 the FDIC imposed an emergency 20-basis-point special assessment. In November
2009 the FDIC required banks to pre-pay three years of premiums in 2009. Early
in 2010 the FDIC announced an initiative to link deposit insurance premium
rates to the risks associated with a banks employee compensation structures.
In July 2010 the DF Act was passed, requiring the FDIC to further reform
funding for the DIF and mandating several changes, most notably that insurance
premiums be based on an institutions consolidated assets net of tangible
capital rather than on its insured deposit base. Early in 2011 the FDIC adopted a new assessment system beginning in April 2011 which will
create a new rate grid. In the grid, base rates will range from 5 to 35 basis points
annually, and fully adjusted rates will range from 2.5 to 45 basis points annually.
Key factors in the grid include: the institutions risk category (I to IV);
whether the institution is deemed large and highly complex; whether the
institution qualifies for an unsecured debt adjustment; and whether the
institution is burdened with a brokered deposit adjustment. Further rate
increases or other actions may be imposed in 2011 or later to restore or
maintain the DIF or to further other regulatory objectives.
The
Deposit Insurance Funds Act of 1996 (DIFA) provides for assessments to be
imposed on insured depository institutions with respect to deposits insured by
the DIF to pay for the cost of Financing Corporation (FICO) bonds. All banks
are assessed to pay the interest due on FICO bonds. The FICO assessment cost to
the Corporation on an annual basis is immaterial.
Under
the FDIA, insurance of deposits may be terminated by the FDIC upon a finding
that the institution has engaged in unsafe and unsound practices, is in an
unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by a federal bank
regulatory agency.
14
Depositor
Preference
Federal
law provides that deposits and certain claims for administrative expenses and
employee compensation against an insured depository institution would be
afforded a priority over other general unsecured claims against such an
institution, including federal funds and letters of credit, in the liquidation
or other resolution of such an institution by any receiver.
Securities
Regulation
Certain
of the Corporations subsidiaries are subject to various securities laws and
regulations and capital adequacy requirements promulgated by the regulatory and
exchange authorities of the jurisdictions in which they operate.
The
Corporations registered broker-dealer subsidiaries are subject to the SECs
net capital rule, Rule 15c3-1. That rule requires the maintenance of minimum
net capital and limits the ability of the broker-dealer to transfer large
amounts of capital to a parent company or affiliate. Compliance with the rule
could limit operations that require intensive use of capital, such as
underwriting and trading.
Certain
of the Corporations subsidiaries are registered investment advisers which are
regulated under the Investment Advisers Act of 1940. Advisory contracts with
clients automatically terminate under these laws upon an assignment of the
contract by the investment adviser unless appropriate consents are obtained.
Insurance
Activities
Subsidiaries
of the Corporation sell various types of insurance as agent in a number of the
states. Insurance activities are subject to regulation by the states in which
such business is transacted. Although most of such regulation focuses on
insurance companies and their insurance products, insurance agents and their
activities are also subject to regulation by the states, including, among other
things, licensing and marketing and sales practices.
Compensation
and Risk Management
In
2010 the Federal Reserve, OCC, and other agencies issued guidance to regulated
banks and holding companies intended to ensure that incentive compensation
arrangements at financial organizations take into account risk and are
consistent with safe and sound practices. The guidance is based on three key
principles calling for incentive compensation plans to: appropriately balance risks and rewards; be
compatible with effective controls and risk management; and be backed up by
strong corporate governance. The
guidance was followed by regulatory reviews of certain larger institutions, not
including the Corporation. In 2010 the Corporation formalized and enhanced a risk management
process for assessing risk in incentive compensation plans. That enhanced process was
implemented on a limited trial basis in 2010 and is expected to be more fully
implemented in 2011. Also, early in 2011 regulators proposed additional rules pertaining to
compensation practices and reporting. The Corporation is evaluating the effects of this proposal.
Effect of Governmental Policies.
The
Bank is affected by the policies of regulatory authorities, including the
Federal Reserve System and the Comptroller. An important function of the
Federal Reserve System is to regulate the national money supply.
Among
the instruments of monetary policy used by the Federal Reserve are: purchases and sales of U.S. Government
securities in the marketplace; changes in the discount rate, which is the rate
any depository
15
institution
must pay to borrow from the Federal Reserve; changes in the reserve
requirements of depository institutions; and, indirectly, changes in the
federal funds rate, which is the rate at which depository institutions lend
balances to each other overnight. These instruments are intended to influence
economic and monetary growth, interest rate levels, and inflation.
The
monetary policies of the Federal Reserve System and other governmental policies
have had a significant effect on the operating results of commercial banks in
the past and are expected to continue to do so in the future. Because of
changing conditions in the national and international economy and in the money
markets, as well as the result of actions by monetary and fiscal authorities,
it is not possible to predict with certainty future changes in interest rates,
deposit levels, loan demand, or the business and results of operations of the
Corporation and the Bank, or whether changing economic conditions will have
a positive or negative effect on operations and earnings.
Proposals.
Various
bills are from the time to time introduced in the United States Congress and
the Tennessee General Assembly and other state legislatures, and regulations
are proposed by the regulatory agencies which could affect the business of the
Corporation and its subsidiaries. An example of recent legislation calling for
substantial new regulatory measures is discussed under Dodd-Frank Act
beginning on page 13
of this report. It cannot be predicted whether or in what form any particular
proposals will be adopted or the extent to which the business of the
Corporation and its subsidiaries may be affected thereby.
Competition.
The
Corporation and its subsidiaries face substantial competition in all aspects of
the businesses in which they engage from national and state banks located in
our Tennessee markets and large out-of-state and non-U.S. banks as well as from
savings and loan associations, credit unions, other financial institutions,
consumer finance companies, trust companies, investment counseling firms, money
market and other mutual funds, insurance companies and agencies, securities
firms, mortgage banking companies, and others.
Our
traditional regional banking business primarily competes in five broad market
areas associated with Tennessee:
Mid-South around Memphis; Middle Tennessee around Nashville; Eastern Tennessee
around Knoxville; Southeastern Tennessee around Chattanooga; and Northeastern
Tennessee around the tri-cities area of Johnson City, Bristol, and Kingsport.
Our regional banking business serves both retail and commercial customers. Key
competitors in those markets include Regions Bank, SunTrust Bank, Bank of
America N.A., and Pinnacle National Bank, among many others.
Our
capital markets business serves institutional customers broadly segregated into
depositories (including banks, thrifts and credit unions) and non-depositories
(including money managers, insurance companies, public funds, pension funds and
hedge funds). Both customer segments are widely dispersed geographically,
and we have many competitors within both segments including major U.S. and
international securities firms as well as numerous regional and local firms.
Late
in 2008 certain financial companies or their affiliates that traditionally were
not banks were allowed to convert to bank status, and since then have been able
to compete more directly with the Bank for deposits and other traditional
banking services and products. Those companies include investment banks,
brokerage firms, insurance company affiliates, and the financing company
associated with an automobile manufacturer. For additional information on the
competitive position of the Corporation and the Bank, refer to the General
subsection above of this Item 1. Also, refer to the subsections entitled
Supervision and Regulation and Effect of Governmental Policies, both of
which are relevant to an analysis of the Corporations competitors. Due to the
intense competition in the financial services industry, the Corporation
16
makes no representation that
its competitive position has remained constant, nor can it predict whether its
position will change in the future.
Sources and Availability of Funds.
Specific
reference is made to the Managements Discussion and Analysis, Glossary, and Acronyms
sections, including the subsection entitled Liquidity Management, contained
in pages 3 through 91 (including pages 58 through 61) of the Corporations
2010 Annual Report to Shareholders, which sections are incorporated herein by
reference.
Non-U.S.
Operations.
Our
non-U.S. operations are not material.
Statistical
Information Required by Guide 3.
The
statistical information required to be displayed under Item I pursuant to Guide
3, Statistical Disclosure by Bank Holding Companies, of the Exchange Act
Industry Guides is incorporated herein by reference to the Consolidated
Financial Statements and the notes thereto and the Managements Discussion and
Analysis of Results of Operations and Financial Condition, Glossary, and Acronyms sections
set forth at pages 3 through 91 of the Corporations 2010 Annual Report to
Shareholders. Certain information not contained in the 2010 Annual Report to
Shareholders, but required by Guide 3, is contained in the tables immediately
following:
FIRST HORIZON NATIONAL CORPORATION
ADDITIONAL GUIDE 3 STATISTICAL INFORMATION
ON DECEMBER 31
(Unaudited)
Investment
Portfolio
(Dollars in thousands)
2010
2009
2008
Government agency issued mortgage-backed securities &
collateralized mortgage obligations
$
2,638,698
$
2,189,507
$
2,587,497
U.S. Treasuries
87,444
48,129
48,720
Other U.S. government agencies*
53,226
118,145
133,701
States and municipalities
26,015
44,400
65,360
Other
226,547
294,287
289,875
Total
$
3,031,930
$
2,694,468
$
3,125,153
* Includes
securities issued by government sponsored entities which are not backed by the
full faith and credit of the U.S. government.
17
Loan Portfolio (Dollars in thousands)
2010
2009
2008
2007
2006
Commercial:
Commercial, financial and industrial
$
7,338,155
$
7,149,784
$
7,819,455
$
7,120,118
$
7,161,464
Commercial real estate:
Income CRE
1,406,646
1,774,123
1,988,017
1,976,690
1,884,794
Residential CRE
263,878
639,826
1,288,435
2,091,676
2,044,619
Total Commercial
9,008,679
9,563,733
11,095,907
11,188,484
11,091,057
Retail:
Consumer real estate
5,617,618
6,931,435
7,749,368
8,047,492
8,092,834
Permanent mortgage
1,086,859
1,085,668
1,126,784
510,420
471,396
One-time close residential construction
19,276
229,487
980,798
2,008,289
2,085,133
Credit card and other
292,649
313,561
325,333
348,831
364,485
Restricted real estate loans*
757,491
N/A
N/A
N/A
N/A
Total
$
16,782,572
$
18,123,884
$
21,278,190
$
22,103,516
$
22,104,905
* Prior to
1Q10, amount was included in Commercial Real Estate.
Short-Term
Borrowings (Dollars in thousands)
2010
2009
2008
Federal funds purchased and securities sold under
agreements to repurchase
$
2,114,908
$
2,874,353
$
1,751,079
Commercial paper
-
-
3,130
Trading liabilities
361,920
293,387
359,502
Other short-term borrowings
180,735
761,758
4,276,559
Total
$
2,657,563
$
3,929,498
$
6,390,270
Maturities of Certificates of Deposit $100,000 and more on December 31,
2010
(Dollars in
thousands)
0-3
Months
3-6
Months
6-12
Months
Over 12
Months
Total
Certificates of deposit $100,000 and more
$
96,797
$
112,937
$
150,381
$
201,635
$
561,750
Contractual Maturities of Commercial Loans on December 31, 2010
(Dollars in
thousands)
Within 1 Year
After 1 Year
Within 5 Years
After 5 Years
Total
Commercial, financial and industrial
$
3,309,217
$
2,853,025
$
1,175,913
$
7,338,155
Commercial real estate
853,799
701,367
115,358
$
1,670,524
Total
$
4,163,016
$
3,554,392
$
1,291,271
$
9,008,679
For maturities over one year:
Interest rates - floating
$
2,505,936
$
634,018
$
3,139,954
Interest rates - fixed
1,048,456
657,253
1,705,709
Total
$
3,554,392
$
1,291,271
$
4,845,663
ITEM 1A RISK FACTORS
This
Item outlines specific risks that could affect the ability of our various
businesses to compete, change our risk profile, or materially impact our
financial results and condition. Our operating environment continues to evolve
and new risks continue to emerge. To address that challenge we have a risk
management governance structure that oversees processes for monitoring evolving
risks and oversees various initiatives designed to manage and control our
potential exposure.
18
The
following discussion highlights risks which could impact us in material ways by
causing our future results to differ materially from our past results, by
causing future results to differ materially from current expectations, or by
causing material changes in our financial condition. In this Item we have
outlined risks that we believe are important to us at the present time.
However, other risks may prove to be important in the future, and new risks may
emerge at any time. We cannot predict with certainty all potential developments
which could materially affect our financial performance or condition.
This
report, including materials incorporated into it, may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 with respect to our beliefs, plans, goals, expectations, and estimates.
Forward-looking statements are statements that are not a representation of
historical information but rather are related 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 our
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 and local economic and business conditions, including economic
recession or depression; the level and length of deterioration in the
residential housing and commercial real estate markets; potential requirements
for First Horizon to repurchase previously sold or securitized mortgages;
potential claims relating to the foreclosure process; expectations of and
actual timing and amount of interest rate movements, including the slope 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, 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 our hedging
practices; technology; demand for our product offerings; new products and
services in the industries in which we operate; 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 Office of the Comptroller of
the Currency (OCC), the Board of Governors of the Federal Reserve System
(Federal
19
Reserve), Financial Industry
Regulatory Authority (FINRA), Federal Deposit Insurance Corporation (FDIC), the
Bureau of Consumer Financial Protection (Bureau), the Financial Stability
Oversight Council (Council), and other regulators; regulatory, administrative,
and judicial proceedings and changes in laws and regulations applicable to us;
and our success in executing our 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.
We
assume no obligation to update or revise, whether as a result of new
information, future events, or otherwise, any forward-looking statements that
are made in this report or in any other statement, release, report, or filing
from time to time. Actual results could differ and expectations could change,
possibly materially, because of one or more factors, including those factors
listed above or presented below, in other sections of this report, or in
material incorporated by reference into this report. Readers of this report
should carefully consider the factors discussed in this Item below, among
others, in evaluating forward-looking statements and assessing our prospects.
Competition Risks
We
compete with other financial services companies for customers. Our primary
areas of competition include: retail and commercial deposits and bank loans,
wealth management, personal or consumer loans including home mortgages and
lines of credit, capital markets products and services, and other consumer and
business financial products and services. Our competitors in these areas
include national, state, and non-US banks, savings and loan associations,
credit unions, consumer finance companies, trust companies, investment
counseling firms, money market and other mutual funds, insurance companies and
agencies, securities firms, mortgage banking companies, hedge funds, and other
financial services companies that serve the markets which we serve. Some
competitors are banks, subject to the same regulatory regime as we are, while
others are not banks and in many cases experience a significantly different or
reduced degree of regulation. We expect that competition will continue to grow
more intense with respect to most of our products and services. Heightened
competition tends to put downward pressure on revenues from affected items,
upward pressure on marketing and other promotional costs, or both. For
additional information regarding competition for customers, refer to the
Competition heading of Part I, Item 1 beginning on page 16 of this report.
We
compete for financial capital. See Financing, Funding, and Liquidity Risks
beginning on page 31 of this report for additional information concerning those
risks.
We
also compete to acquire and retain the human capital we need to thrive. The
primary tools we use to attract and retain talent are: salaries; commission,
incentive, and retention compensation programs; retirement benefits; change in
control severance benefits; health and other welfare benefits; and our
corporate culture. To the extent we are unable to use these tools effectively,
we face the risk that, over time, our best talent will leave us and we will be
unable to replace those persons effectively.
Risk From Economic Downturns and Changes
Delinquencies
and credit losses generally increase during economic downturns due to an
increase in liquidity problems for customers and downward pressure on collateral
values. Likewise, demand for loans (at a given level of creditworthiness),
deposit and other products, and financial services may decline during an
economic downturn, and may be adversely affected by other national, regional,
or local economic factors that impact demand for loans and other financial
products and services. Such factors include, for example, changes in interest
rates, real estate prices, or expectations concerning rates or prices.
Accordingly, an economic downturn or other adverse economic change (local,
regional, national, or global) can hurt our
20
financial performance in the
form of higher loan losses, lower loan production levels, lower deposit levels,
and lower fees from transactions and services.
Since
2007, our operating results have been adversely affected by such a weakness in
the economy, especially in real estate markets and commercial lending. In 2010
we experienced overall credit quality improvement, but with volatility from
quarter to quarter in some portfolios. For example, at the end of 2010 our
income commercial real estate portfolio remains stressed and we continue to
expect industry conditions for income commercial real estate to remain
stressed. Although we expect those overall and specific trends to continue into
2011, that expectation depends upon a continued mild economic recovery, among
other things, which may not occur. If the strength of the U.S. economy in
general and the strength of the local economies in which we conduct operations
in particular decline, that could result in, among other things, a further
deterioration in credit quality, including a resultant adverse effect on our
loan portfolio and allowance for loan losses.
Growth and Disposition Risks
Every
organization faces risks associated with growth. Our growth from 2003 to 2007
resulted primarily from a combination of: our expansion strategy in banking
based on our mortgage operations; acquisition of customers from competitors
that have merged with each other; and targeted non-bank business acquisitions.
In 2007 and 2008 we modified our strategy in response to substantial and rapid
changes in business conditions. As a result, in 2008 we sold our national
mortgage platforms, closed our national specialty lending operations, and renewed
our emphasis on financial services in our traditional Tennessee-based markets.
Although
our strategy is expected to evolve as business conditions continue to change,
at present our strategys primary components are to invest capital and other resources
in our current Tennessee-based retail/commercial banking market footprints, and
in our capital markets business. Growth is expected to be
coordinated with a focus on stronger and more stable returns on capital. Our
growth in the past has been primarily organic rather than through substantial
acquisitions; in the future, that pattern may shift if appropriate
opportunities, within or outside of our current markets, present themselves. We
believe that the successful execution of our strategy depends upon a number of
key elements, including:
●
our ability to attract and
retain banking customers in our Tennessee-based regional banking market
areas;
●
in our capital markets
business, our ability to maintain or strengthen our existing customer
relationships while at the same time identifying and successfully executing upon
opportunities to provide new or existing products and services to new or existing customers in the US
and overseas;
●
our ability to develop and
retain profitable customer relationships while expanding or enhancing our
existing information processing, technology, and other operational
infrastructures effectively and efficiently;
●
our ability to manage the
liquidity and capital requirements associated with organic growth; and
●
our ability to manage any operational, cultural, liquidity or capital risks associated with growth through purchases.
We have in place strategies
designed to achieve those elements that are significant to us at present. Our
challenge is to execute those strategies and adjust them, or adopt new
strategies, as conditions change.
To
the extent we engage in bank or non-bank business acquisitions, we face various
risks associated with that practice, including:
21
●
our ability to identify, analyze, and correctly assess the execution, contingency, and other risks in the acquisition and to
price the transaction appropriately;
●
our ability to integrate
the acquired company into our operations quickly and cost-effectively;
●
our ability to integrate the franchise value of the acquired company with our own; and,
●
our ability to retain
customers and key employees of the acquired company.
At
times a company must consider exiting businesses or units that no longer fit
into managements plans for the future. We have made several exit moves in
recent years and could do so again as we continue to adapt to a changing
business and regulatory environment. Key risks associated with exiting a
business include:
●
our ability to price a
sale transaction appropriately and otherwise negotiate acceptable terms;
●
our ability to identify
and implement key customer, technology systems, and other transition actions
to avoid or minimize negative effects on retained businesses;
●
our ability to assess and
manage any loss of synergies that the exited business had with our retained
businesses; and
●
our ability to manage
capital, liquidity, and other challenges that may arise in the event of an
exit that results in significant cash expenditures or a financial loss.
Risks Related to Exited Businesses
In
2008 we sold or closed our national mortgage and national specialty lending
businesses. However, we retain as assets many of the loans that those businesses
created. Most of those loans are secured by residential or other real estate
situated across the U.S. We also retain a substantial portion of the mortgage
servicing rights that we previously serviced, we continue to maintain hedge
positions that we obtain to manage certain risks related to those retained
servicing rights, and we retain the risk of liability to parties with whom we
made contracts in the course of operating those businesses. These legacy assets
and positions continue to impose risks on us. Key risks include:
●
The retail and commercial
loans on our books from our former national specialty lending business have
experienced significantly higher default and loss rates compared to
pre-recession years. For example, due to declining home values, home loans
secured on a second-lien basis in a significant number of cases have little
or no collateral value to cover the loan if it defaults. Accordingly, a
default on such a loan today will result in a much higher loss severity than
would have resulted shortly after the loan was originated.
●
The incidence of parties
claiming that mortgage loans that we sold to them did not meet contractual
standards rose substantially in 2010, and we are defending a few claims
brought in 2010 that our disclosures concerning securitized loans were
deficient. Those trends may continue in 2011. Additional information
concerning this risk appears in Mortgage Repurchase and Related Risks
beginning on page 24 of this report.
●
The incidence of
counterparty loss on hedges, swaps, and other such instruments associated
with mortgage servicing rights may rise as those counterparties experience
financial stress or failure.
●
In 2008 we contracted with
the purchaser of our national mortgage business to subservice the mortgage
loans as to which we retained servicing rights and obligations. In 2011 that
contract will expire and we will have to obtain a new subservicer. We expect that our subservicing costs are likely to increase substantially under the terms of any
new agreement relative to the terms of our 2008 agreement.
22
Other trends adverse to us
may emerge from these legacy assets and positions as counterparties are
stressed by economic conditions, and of course some of these impacts apply to
continuing businesses. Over time those losses and risks related to legacy items
should diminish since those exited businesses will not generate new loans and
new contracts, but it is not possible to predict when that may occur.
Reputation Risks
Our
ability to conduct and grow our businesses, and to obtain and retain customers,
is highly dependent upon external perceptions of our business practices and our
financial stability. Our reputation is, therefore, a key asset for us. Our
reputation is affected principally by our own practices and how those practices
are perceived and understood by others. Adverse perceptions regarding the
practices of our competitors, or our industry as a whole, also may adversely
impact our reputation. In addition, negative perceptions relating to parties
with whom we have important relationships may adversely impact our reputation.
Senior management oversees processes for reputation risk monitoring,
assessment, and management.
Damage
to our reputation could hinder our ability to access the capital markets or
otherwise impact our liquidity, could hamper our ability to attract new
customers and retain existing ones, could impact the market value of our stock,
could create or aggravate regulatory difficulties, and could undermine our
ability to attract and retain talented employees, among other things. Adverse
impacts on our reputation, or the reputation of our industry, may also result
in greater regulatory and/or legislative scrutiny, which may lead to laws or
regulations that change or constrain our business or operations. Events that result
in damage to our reputation also may increase our litigation risk.
Credit Risks
We
face the risk that our customers may not repay their loans and that the
realizable value of collateral may be insufficient to avoid a loss. We also
face risks that other counterparties, in a wide range of situations, may fail
to honor their obligations to pay us. In our business some level of credit loss
is unavoidable and overall levels of credit loss can vary over time. Since 2007
our credit losses, especially related to lending, increased to historically
high levels. Although in recent quarters our credit losses have abated, in 2010
credit losses and reserves remained significantly elevated.
Our
ability to manage credit risks depends primarily upon our ability to assess the
creditworthiness of loan customers and other counterparties and the value of
any collateral, including real estate. We manage lending credit risk by
attempting to diversify our loan portfolio, by managing its granularity, and by
recording and managing an allowance for expected loan losses based on the
factors mentioned above and in accordance with applicable accounting rules. We
also record loan charge-offs in accordance with accounting and regulatory
guidelines and rules. These guidelines and rules could change and cause
charge-offs to increase for reasons related or unrelated to the underlying
performance of our portfolio. Moreover, the SEC could take accounting positions
applicable to our holding company that may be inconsistent with those taken by
the OCC or other regulators for the Bank. We manage other counterparty credit
risk in a variety of ways, some of which are discussed in other parts of this
Item 1A and all of which have as a primary goal the avoidance having too much
risk concentrated with any one counterparty.
A
significant challenge for us is to keep the credit and other models and
approaches we use to originate and manage loans updated to take into account
changes in the competitive environment, in real estate prices and other
collateral values, and in the economy, among other things, based on our
experience originating loans and servicing loan portfolios. In recent years we
have changed our models and approaches based on changes in circumstances, and we
will continue to do so as conditions change. At times those changes have had
significant impacts upon our reported financial results and condition. In
addition, we use
23
those models and approaches
to manage our loan portfolios and lending businesses. To the extent our models
and approaches are not consistent with underlying real-world conditions, our
management decisions could be adversely affected with substantial adverse
consequences to us. Additional information concerning credit risks and our management
of them is set forth under the captions Credit Risk Management beginning on
page 55 and Allowance for Loan Losses beginning on page 77 of the
Managements Discussion and Analysis of Results of Operations and Financial
Condition section of our 2010 Annual Report to Shareholders, which is part of
the material from that Report that has been incorporated by reference into Item
7 of Part II of this report.
Mortgage Repurchase and Related Risks
Like
many other financial institutions that originated and sold significant amounts
of mortgage loans, we have experienced elevated exposure to repurchase
obligations from investors. Prior to August 2008, we originated loans through
our legacy mortgage business, primarily first lien home loans, with the
intention of selling them. A substantial majority of such loans were sold
without recourse as to credit defaults by the borrowers. From 2005 through
2008, we originated and sold $69.5 billion original principal amount of first
lien mortgage loans to government-sponsored enterprises (GSEs) in so-called
whole-loan sales. Although additional GSE whole-loan sales occurred in earlier
years, a substantial majority of GSE repurchase requests (discussed below) have
come from that period. In addition, from 2000 through 2007, we securitized
$40.8 billion original principal amount of first lien mortgage loans and $2.5
billion original principal amount of HELOC loans without recourse in
proprietary transactions.
Whole-loan
purchasers have increased their efforts to seek to require loan sellers to
repurchase those loans or to reimburse purchasers for losses related to those
loans when losses are incurred due to actual or alleged failure to strictly
conform to the purchase contract representations or warranties. A substantial
majority of our whole loan sales were to GSEs. The representations and
warranties generally are broader for whole loans sold to the GSEs than they are
for the loans sold in proprietary securitizations. GSE representations and
warranties claims typically include claims that loans that had missing or
insufficient file documentation or that loans were obtained through fraud by
borrowers or other third parties such as appraisers. As a result, we face
increasing pressure from GSE and other whole-loan purchasers to repurchase
those loans or to make the purchaser whole, and we face increasing expenses to
administer and in some cases to defend against such claims. Although we have
been increasing our reserves for repurchase losses significantly over prior
quarters a risk remains that these reserves will not be adequate.
For
loans sold in proprietary securitizations we have exposure for investment
rescission or damages arising from legal claims that the offering documents
under which the loans were securitized were materially deficient. In 2010 we
became one of many defendants in three such lawsuits, and we have had
information subpoenaed in another matter which is not litigation against us at
present. There is also potential repurchase exposure and rescission risk
associated with the proprietary securitizations under the contracts through
which the securitizations were created. The repurchase process is more
difficult for securitization investors than it is for GSEs in whole loan sales,
and at year-end no such requests had been received. Additionally, the HELOC
securitizations are enhanced, or wrapped, by a monoline insurance company
that has certain contractual rights to pursue repurchase. Also, the monoline
insurer for three such securitizations has become insolvent. At December 31,
2010, based on applicable accounting guidance associated with pending
litigation and in light of the absence of any conventional repurchase requests,
we had no reserve for potential losses associated with private securitizations.
A
significant portion of the loans we sold to GSEs, and some of the loans in
proprietary securitizations, were required to have private mortgage insurance
(PMI). We have experienced a significant increase in the number of rescission
notices we have received from the insurers which wrote these policies, based on
claims of fraud or misrepresentations relating to the insured loans. To date a
majority of
24
PMI
cancellations have involved loans sold to GSEs. Although unresolved PMI
cancellation notices are not formal repurchase requests, we include these in
the active repurchase request pipeline when analyzing and estimating loss
content in relation to the loans sold to GSEs.
Our
ability to predict repurchase losses is adversely affected by both the absence
of significant historical precedent for repurchase requests of this scope and
our lack of visibility into current loan information for the majority of the
loans that we sold to GSEs. As a result of the sale of our national mortgage
banking business in the third quarter of 2008 and later sales of mortgage
servicing rights, we no longer service the majority of the loans that we sold
to GSEs and therefore no longer have visibility into current loan information.
Those facts increase the risk that our reserves may not reflect our actual
ultimate loss.
While
the vast majority of claims made to date relate to whole-loan sales to GSEs, we
could possibly see an increase in claims made with respect to other purchasers
and investors, which may increase over time. As a result, the number of
repurchase requests, PMI cancellation notices, or lawsuits may increase
materially over time. An increase in the volume of such claims beyond what we
are currently experiencing, or an increase in the loss rate we experience upon
resolution of these claims, could adversely affect our financial condition and
results of operations.
Additional
information concerning these risks and our management of them is set forth
under the captions Repurchase Obligations, Off-Balance Sheet Arrangements, and Other Contractual Obligations
beginning on page 61 and Repurchase and Foreclosure Liability beginning on page 80 of
the Managements Discussion and Analysis of Results of Operations and Financial
Condition section of our 2010 Annual Report to Shareholders, which is part of
the material from that Report that has been incorporated by reference into Item
7 of Part II of this report.
Operational Risks
Our
ability to conduct and grow our businesses is dependent in part upon our
ability to create and maintain an appropriate operational and organizational
infrastructure, manage expenses, and recruit and retain personnel with the
ability to manage a complex business. Operational risk can arise in many ways,
including: errors related to failed or inadequate physical, operational,
information technology, or other processes; faulty or disabled computer or
other technology systems; fraud, theft, physical security breaches, electronic
data and related security breaches, or other criminal conduct by employees or
third parties; and exposure to other external events. Inadequacies may present
themselves in a myriad of ways, and actions taken to manage one risk may be
ineffective against others. For example, information technology systems may be
insufficiently redundant to withstand a fire, incursion, or other major
casualty, and they may be insufficiently adaptable to new business conditions
or opportunities. Efforts to make such systems more robust may also make them
less adaptable, and vice-versa.
In
addition, we outsource some of our operational functions to third parties.
Those third parties may experience similar errors or disruptions that could
adversely impact us and over which we may have limited control and, in some
cases, limited ability to quickly obtain an alternate vendor. To the extent we
increase our reliance on third party vendors to perform or assist operational
functions, the challenge of managing the associated risks becomes more
difficult.
For
example, in 2008 we sold our national mortgage origination and servicing
platforms. We retained significant servicing right assets, however, and we
continue to originate mortgage products in our regional banking markets in and
around Tennessee. Of practical necessity, we outsourced our servicing functions
to the purchaser of our platforms, and since then we have outsourced many key
roles in the Tennessee-based mortgage origination process to a third party.
Managing the operational, compliance,
25
reputational,
liability, and other risks associated with this level of outsourcing in those
business areas is an ongoing challenge for us.
Failure
to build and maintain the necessary operational infrastructure, or failure of
our disaster preparedness plans if primary infrastructure components suffer
damage, can lead to risk of loss of service to customers, legal actions, and
noncompliance with applicable laws or regulatory standards. Operational risk is
specifically managed through internal monitoring, measurement, and assessment
by line management and oversight of processes by top management, and by
maintaining systems to adhere to regulatory guidance. Additional information
concerning operational risks and our management of them appears under the
caption Operational Risk Management beginning on page 54 of the Managements
Discussion and Analysis of Results of Operations and Financial Condition
section of our 2010 Annual Report to Shareholders, which is part of the
material from that Report that has been incorporated by reference into Item 7
of Part II of this report.
Service Risks
We
engage in a wide range of activities in which we provide services to customers.
These activities create risk of claims against us that the services were
provided in a manner that harmed the customer or a third party, or were
contrary to applicable laws or rules. These activities include fiduciary,
custodial, funds management, and advisory services, among others. We manage
these risks primarily through training programs, compliance programs, and
supervision processes.
Regulatory, Legislative, and Legal Risks
We
operate in a heavily regulated industry. The regulatory environment has been
changing more rapidly in recent years, and the regulatory burdens generally
have been increasing, as a result of recent events affecting traditional
banking, mortgage banking, and financial markets generally. Heightened levels
of regulatory change are likely to continue for at least the next several
years.
We
are subject to many banking, deposit, insurance, insurance brokerage,
securities brokerage and underwriting, and consumer lending regulations in
addition to the rules applicable to all companies publicly traded in the U.S.
securities markets and, in particular, on the New York Stock Exchange. Failure
to comply with applicable regulations could result in financial, structural,
and operational penalties. In addition, efforts to comply with applicable
regulations may increase our costs and/or limit our ability to pursue certain
business opportunities. See Supervision and Regulation in Item 1 of this
report, beginning on page 5, for additional information concerning financial
industry regulations. Federal and state regulations significantly limit the
types of activities in which we, as a financial institution, may engage. In
addition, we are subject to a wide array of other regulations that govern other
aspects of how we conduct our business, such as in the areas of employment and
intellectual property. Federal and state legislative and regulatory authorities
increasingly consider changing these regulations or adopting new ones. Such
actions could further limit the amount of interest or fees we can charge, could
further restrict our ability to collect loans or realize on collateral, could
affect the terms or profitability of the products and services we offer, or
could materially affect us in other ways. Additional federal and state consumer
protection regulations also could expand the privacy protections afforded to customers
of financial institutions, restricting our ability to share or receive customer
information and increasing our costs.
The
following paragraphs highlight certain specific important risk areas related to
legal matters currently. These paragraphs do not describe these risks
exhaustively, and they do not describe all legal risks that we face currently.
Moreover, the importance of specific risks will grow or diminish as
circumstances change.
26
Regulatory
and Other Pressures Related to Operating Results
The
Bank is required to maintain certain regulatory capital levels and ratios, as
discussed under the caption Capital Adequacy beginning on page 8 of this
report. If the Banks financial losses from recent years were to resume, or if
the regulatory requirements were to increase, then at some point the Banks
ability to meet those requirements could be adversely affected. Those effects
would be made worse if the regulatory requirements become more stringent, as is
expected.
Pressure
to maintain appropriate capital levels and address business needs in a weak
economy may lead to actions that could be adverse to our shareholders, at least
in the short term. Such actions that have occurred in the past three years
include the elimination of our common cash dividend (which was reinstated at
one cent per share in January 2011), two sales of our common stock and the
issuance of a common stock warrant at times when market prices were relatively
disadvantageous, and a contraction of our balance sheet (involving sales or
other dispositions of assets or businesses) at times when market values were
depressed. Further such actions could occur.
Recent
Legislation: Dodd-Frank Act
The
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (DF Act)
was enacted on July 21, 2010. The DF Act made a substantial number of
significant changes to how financial services companies are regulated.
Additional information concerning the DF Act is provided in the section
captioned Dodd-Frank Act beginning on page 13 of this report, which section
is incorporated by reference into this Item 1A.
Many
of the most sweeping changes in the DF Act are not complete or specific but
instead authorize potentially expansive new regulations to be issued in the
future. At this time it is not known how the DF Act and the regulations that
eventually will be adopted under it will affect the financial services industry
in general or our company in particular, and it could be several years before
all the impacts are known. Although it is not possible to summarize in any
detail the effects of this legislation, one likely overall impact upon us will
be to increase our regulatory compliance and certain other costs significantly.
In addition, it is possible that our operations and associated revenues will be
constrained in some respects, perhaps significantly in some areas. Areas
covered by the DF Act which presently appear likely to present the greatest
risks to us are mentioned below:
●
Due to the
scope of the new regulations authorized, it is likely that our compliance
costs will rise appreciably over the next several years, and a
substantial portion of that increase likely will be permanent.
●
Recently
proposed regulations under the DF Acts so-called Durbin Amendment would
severely cap the interchange fees which banks charge merchants for debit card
transactions. It has been reported that the proposed cap could reduce banking industry reveues from interchange fees by more than 70% on average. A
reduction of that scale could cost the Bank $30 million in revenues from interchange fees and could disrupt that business, and is
likely to cause the Bank and others in the industry to revamp debit card
practices and fee structures. The Bank may not be able to recover all of the
revenues lost in the revamping process.
●
There is a
risk that the burden of many of the increased compliance costs could be
uneven over the industry in terms of the impact to each institutions
efficiency ratio (the ratio of costs to revenues), leaving some institutions
disadvantaged relative to others. Uneven outcomes could arise because: larger
institutions may be able to bear some of the new costs more efficiently due
to economies of scale; some new burdens do not apply to smaller institutions
at all or are intended to impact community banks much less than regional,
national, or international banks; and, there is a risk of unintended impacts.
Uneven impact may be inevitable because in most cases each new
27
burden will
apply only to a narrow range of activities, institutions have differing mixes
of business activities, and the various burdens will be unequal from one
activity to the next.
●
A new
regulatory agency has been created: the Bureau of Consumer Financial
Protection, or Bureau. The Bureau has substantial authority over our
consumer finance products and services, and therefore is likely to have a
substantial impact on our retail financial services businesses. Although
presently unknown, the Bureaus rules could conflict with, and possibly
override, our Banks primary regulator in consumer matters. Since the
Bureaus mission is not focused upon the safety and soundness of our Bank,
conflicts of that sort could be significantly adverse to us. The Bureaus
rule-making authority is extensive, including such things as setting terms
and conditions on consumer products and services and defining deceptive
practices. The Bureaus rules could substantially reduce revenues, increase
costs and risks, and otherwise make our consumer products and services less
profitable or unprofitable.
●
The DF Acts
new municipal advisor registration regime could
adversely affect our capital markets and other activities with municipal customers.
●
The DF Act
allows banks to pay interest on certain business checking accounts beginning
in 2011. If the industry responds by competing for those deposits with
interest-bearing accounts, this provision would put some degree of downward
pressure upon our net interest margin when it becomes effective.
●
The DF Act
is likely to substantially increase our deposit insurance costs. The
assessment rate is expected to increase, at least temporarily, and the base
upon which the assessment is made has been expanded from insured deposits to
include all consolidated assets less tangible capital.
●
The DF Acts
new requirements on mortgage lenders and securitizers could adversely impact
our ability to conduct mortgage lending activities, and similarly could
impact banks which are customers of ours. Regarding that last matter, we
provide or facilitate working capital to support the mortgage lending
businesses of some of our bank customers; those activities of ours could be
harmed if our customers businesses are harmed.
●
Regulators,
including the Federal Reserve, the OCC, and the FDIC, have been given expansive
authority to regulate compensation and many other matters throughout our
company in connection with enhanced risk regulation functions. If new
regulations in this area are severe, they could adversely impact our ability
to attract or retain key employees and could make some business activities
impractical for banks and bank holding companies.
●
The DF Act
appears to weaken existing federal pre-emption of state laws which regulate
certain banking and financial activities, especially activities involving
consumer customers, and it may limit the ability of federal regulators to
pre-empt state laws in the future. In general, a weakening of federal
pre-emption tends to increase our compliance and operational costs and risks,
and can increase them substantially. Additional information on this topic is
provided in the section captioned Federal and State Regulatory
Jurisdiction beginning on page 29 of this report.
●
The DF Act
has excluded certain items, including trust preferred securities, from Tier 1
capital of financial institutions having assets of $15 billion or more. A
direct effect of this exclusion will be to remove $200 million of currently
outstanding securities from our Tier 1 capital after a phase-out period has
passed. Perhaps more importantly, this provision could adversely affect our
capital markets business in the future, which traditionally has helped other
financial institutions issue trust preferred securities.
Recent Legislation: Healthcare
In
2010 a sweeping healthcare reform law was enacted. Many of the most significant
provisions of this legislation depend upon substantial, and as yet unknown,
regulations and other rules, and the application of many provisions are to be
phased in over several years. Accordingly, the overall impact of the law upon
us will not be known for some time. However, at this early time it appears
likely that the new law will increase our costs and there is a significant risk
that the increases over time will be substantial.
28
Federal
and State Regulatory Jurisdiction
Some
state authorities from time to time have challenged, and on occasion continue
to challenge, the position of the OCC that it is the exclusive regulator of
various aspects of national banks or their operating subsidiaries. If one or
more of those challenges were successful, or if Congress or the OCC were to
change the applicable banking laws or regulations, we could be impacted
significantly, due, among other things, to possible increased regulatory
burdens, governmental (including state attorney general) and private party
actions alleging non-compliance with state law, and the expense of tracking and
complying with the different laws and regulations of those states in which we
do business.
In
its 2009 decision known as Cuomo v. Clearing
House Association L.L.C., the U.S. Supreme Court determined that the
OCC does not have the exclusive ability to enforce certain state and local laws
applicable to certain business activities of national banks which are not
pre-empted by federal law. The Cuomo
decision modified the position of the OCC and lower court decisions that had
affirmed the OCCs regulations regarding its visitorial power, and limited the
application of a 2007 Supreme Court decision known as Watters v. Wachovia Bank N.A. which had
been viewed as indirectly supportive of the OCCs position. Cuomo holds that the National Bank Act
allows states to enforce non-pre-empted laws through judicial proceedings
against national banks. As discussed in the immediately preceding section
captioned Recent Legislation Dodd-Frank Act, federal pre-emption of state
banking laws and regulations appears to have been weakened in 2010, though the
effect that legislation remains unclear. Most states and some communities have
in place various laws pertaining to lending and other business activities
conducted by banks, some of which may not be pre-empted by federal law. Dealing
with potential state and local enforcement activity relating to non-pre-empted
laws would, at a minimum, increase the compliance costs for national banks that
have multi-state operations.
Mortgage
Foreclosure Risks
State
and federal officials have announced and commenced inquiries and investigations
into the procedures followed by mortgage servicing companies and banks,
including us and our subservicer, in completing affidavits relating to
foreclosures and into the authority of the servicer to foreclose if assignments
of legal interests in the mortgage loans have not been properly recorded. We
have received letters of informal inquiry from a few state attorneys general
and are responding to and cooperating with those inquiries. Additional state or
federal inquiries or investigations may be commenced. We cannot predict at this
early stage the ultimate outcome of these inquiries and investigations or the
impact that they could have on our financial condition, results of operations or
business. Additional information concerning foreclosure-related risks and our
management of them is set forth under the captions Repurchase and Foreclosure Liability
beginning on page 71, Foreclosure Practices beginning on page 75, Subserviced Loan Modification Programs beginning
on page 76, and Repurchase and Foreclosure Liability beginning on page 80 of the
Managements Discussion and Analysis of Results of Operations and Financial
Condition section of our 2010 Annual Report to Shareholders, which is part of
the material from that Report that has been incorporated by reference into Item
7 of Part II of this report.
Litigation
Risks
We
face litigation risks from customers, employees, vendors, contractual parties,
and other persons, either singly or in class actions, and from federal or state
regulators. We manage those risks through internal controls, personnel
training, insurance, litigation management, our compliance and ethics
processes, and other means. However, the commencement, outcome, and magnitude
of litigation cannot be predicted or controlled with certainty.
Since
2008 the risks of certain types of litigation have increased. For us, the most
notable of those types are (i) lender liability claims, (ii) claims involving
other types of distressed counterparties, (iii) claims
29
based
on declines in our stock price, and (iv) a new type of lender tort claim. The
risk from the first two types has increased primarily because borrowers and
other contractual counterparties have experienced financial stress, in many
cases resulting in an attempt to obtain funds or relief from a solvent party
(us). We expect that this heightened risk level will not abate until after
economic conditions substantially improve. The elevated risk associated with
type (iii) largely is a result of our volatile stock price performance in 2007
and 2008, and eventually should fall back to ordinary levels if volatility in
our stock price remains relatively moderate.
Regarding
type (iv), some local governments or agencies have claimed that certain lenders
in their communities have created a public nuisance, engaged in predatory or
discriminatory lending, or otherwise are liable for the alleged consequences of
inappropriate consumer lending, especially home mortgage lending. Lender tort
claims of this sort, where alleged damages are measured on a statistical and/or
city-wide basis, create litigation costs immediately and create a risk of
significant litigation losses for those lenders which are named as defendants
in them. Moreover, claims of this sort adversely alter the business climate and
raise the costs and risks for all lenders, both in the communities involved and
in similar communities across the country.
Risks of Expense Control
Expenses
and other costs directly affect our earnings. Our ability to successfully
manage expenses is important to our long-term survival and prosperity. Many
factors can influence the amount of our expenses, as well as how quickly they
grow. As our businesses change, either by expansion or contraction, additional
expenses can arise from asset purchases, structural reorganization, evolving
business strategies, and changing regulations, among other things. We manage
expense growth and risk through a variety of means, including selectively
outsourcing or multi-sourcing various functions and procurement coordination
and processes, and through an expense management committee.
Geographic Risks
Our
capital markets business is national in scope, and our capital markets division
has a business presence in selected Asian markets. Also, we continue to hold
substantial assets across the U.S. originated under our now-discontinued
national lending businesses. However, our traditional banking business remains
grounded in, and depends upon, the major Tennessee markets. As a result,
although some of our business operations and assets are exposed to
geographically broad risks, to a significant degree our banking business is
exposed to economic, regulatory, natural disaster, and other risks that
primarily impact Tennessee and neighboring states where we do our traditional
banking business. In other words, if the Tennessee region experiences adversity
not shared by other parts of the country, we are likely to experience adversity
to a degree not shared by those competitors which have a broader footprint.
Non-U.S. Operations Risks
We
have two capital markets offices outside of the United States, in Hong Kong and
Tokyo. Opening and operating non-U.S. offices creates a number of risks.
Specific risks associated with any non-U.S. presence include: the risk that
taxes, licenses, fees, prohibitions, and other barriers and constraints may be
created or increased by the U.S. or other countries that would impact our
ability to operate overseas profitably or at all; the risk that our assets and
operations in a particular country could be nationalized in whole or part
without adequate compensation; the risk that currency exchange rates could move
unfavorably so as to diminish or destroy the U.S. dollar value of assets, or to
enlarge the U.S. dollar value of liabilities, denominated in those currencies;
the risk that legal recourse against foreign counterparties may be limited in
unexpected ways; risks and costs associated with U.S. banking and other
regulation of non-U.S. business activities; and the risk that political or
cultural preferences in a particular host country might become
30
antagonistic
to U.S. companies. Our ability to manage those and other risks will depend upon
a number of factors, including: our ability to recognize and anticipate
differences in cultural and other expectations applicable to customers,
employees, regulators, vendors, and other business partners and counterparties;
our ability to recognize and act upon opportunities and constraints peculiar to
the countries and cultures in which our offices operate; our ability to
recognize and manage any exchange rate risks to which we are exposed; and our
ability to anticipate the stability of or changes in the political, legal, and
monetary systems of the countries in which our offices operate.
Insurance
We
use insurance to manage a number of risks, including damage or destruction of
property, legal and other liability, and certain types of credit risks. Not all
such risks are insured, in any given insured situation our insurance may be
inadequate to cover all loss, and many risks we face are uninsurable. For those
risks that are insured, we also face the risks that the insurer may default on
its obligations or that the insurer may refuse to honor them. We treat the
former risk as a type of credit risk, which we manage by reviewing the insurers
that we use and by striving to use more than one insurer when practical. The
risk of refusal, whether due to honest disagreement or bad faith, is inherent
in any contractual situation.
A
portion of our retail loan portfolio involves mortgage default insurance. If a
default insurer were to experience a significant credit downgrade or were to
become insolvent, that could adversely affect the carrying value of loans
insured by that company, which could result in an immediate increase in our
loan loss provision or write-down of the carrying value of those loans on our
balance sheet and, in either case, a corresponding impact on our financial results.
If many default insurers were to experience downgrades or insolvency at the
same time, the risk of a financial impact would be amplified and the disruption
to the default insurance industry could curtail our ability to originate new
loans that need such insurance, which would result in a loss of business for
us.
Financing, Funding, and Liquidity Risks
Management
of liquidity and related risks is a key function for our business. Additional
information concerning liquidity risk management is set forth under the caption
Liquidity Management beginning on page 58 of the Managements Discussion and
Analysis of Results of Operations and Financial Condition section of our 2010
Annual Report to Shareholders, which is part of the material from that Report
that has been incorporated by reference into Item 7 of Part II of this report.
In
general, the costs of our funding directly impact our costs of doing business
and, therefore, can positively or negatively affect our financial results. Our
funding requirements in 2010 were met principally by deposits and by financing
from other financial institutions. Historically we also depended upon financing
from private institutional investors by means of the capital markets. In 2008
and 2009 we were not able to utilize the private markets economically, but late
in 2010 we issued and sold $500 million of senior notes in an underwritten
offering. The recent past illustrates, however, the risk that capital markets
may become unavailable for reasons beyond our control. Deposits traditionally
have provided our most affordable funds, and in 2010 our deposits were trending
upward despite the low-interest-rate environment. However, deposit trends can
shift with economic conditions; if the economy improves, deposit levels in our
Bank might fall as depositors become more comfortable with risk and seek higher
returns in other vehicles.
A
number of more general factors could make such funding more difficult, more
expensive, or unavailable on affordable terms, including, but not limited to,
our financial results, organizational or political changes, adverse impacts on
our reputation, changes in the activities of our business partners, disruptions
in the capital markets, specific events that adversely impact the financial
services industry, counterparty availability, changes affecting our loan
portfolio or other assets, changes affecting our corporate and
31
regulatory
structure, interest rate fluctuations, ratings agency actions, general economic
conditions, and the legal, regulatory, accounting, and tax environments
governing our funding transactions. In addition, our ability to raise funds is
strongly affected by the general state of the U.S. and world economies and
financial markets as well as the policies and capabilities of the U.S.
government and its agencies, and may become or remain increasingly difficult
due to economic and other factors beyond our control.
Events
affecting interest rates, markets, and other factors which adversely impact our
ability or desire to access the capital markets for funding likewise may
adversely affect the demand for our services in our capital markets business.
As a result, disruptions in those areas may adversely impact our earnings in
that business unit as well as in our regional banking unit. For instance,
disruptions in 2007 that were related to mortgages and mortgage-backed assets
significantly reduced the demand for certain of our capital markets products
and services and increased the costs and uncertainties associated with our
mortgage servicing portfolio.
Rating
agencies assign credit ratings to issuers and their debt. In that role,
agencies directly affect the availability and cost of our funding. The
Corporation and the Bank currently receive ratings from several rating entities
for unsecured borrowings. A rating below investment grade typically reduces
availability and increases the cost of market-based funding. A debt rating of
Baa3 or higher by Moodys Investors Service, or BBB- or higher by Standard
& Poors and Fitch Ratings, is considered investment grade for many
purposes. At December 31, 2010, all three rating agencies rated the unsecured
senior debt of the Corporation and the Bank as investment grade, although we
were at or near the lowest levels of that grade. To the extent that in the
future we depend on institutional borrowing and the capital markets for funding
and capital, we could experience reduced liquidity and increased cost of
funding if our debt ratings were lowered further, particularly if lowered below
investment grade. In addition, other actions by ratings agencies can create
uncertainty about our ratings in the future and thus can adversely affect the
cost and availability of funding, including placing us on negative outlook or
on watchlist. Please note that a credit rating is not a recommendation to buy,
sell, or hold securities, is subject to revision or withdrawal at any time, and
should be evaluated independently of any other rating.
In
addition to the direct liquidity risks noted above, reductions in our credit
ratings could allow counterparties to terminate and immediately force us to
settle certain derivatives agreements, and could force us to provide additional
collateral with respect to certain derivatives agreements. Additional
information concerning those matters is provided under the caption Derivative
Instruments within Note 25 to our financial statements, beginning on page
191 of our 2010 Annual Report to Shareholders, which is part of the material
from that Report that has been incorporated by reference into Item 15 of Part
IV of this report.
Certain
regulatory laws or rules establish minimum capital levels or define
risk-weighting for capital, regulate deposit insurance, and govern related
funding matters for banks. Those laws or rules could be changed in a manner
that could increase our overall cost of capital and thus reduce our earnings.
Significant changes are expected in the next year or two, as mentioned in the
next two paragraphs.
International
banking industry regulators have largely agreed upon significant changes in the
regulation of capital required to be held by banks and their holding companies
to support their businesses. The new international rules, known as Basel III,
generally increase the capital required to be held, narrow the types of
instruments which will qualify as providing appropriate capital, and tighten liquidity requirements. The Basel III
requirements are complex and will be phased in over many years.
The
Basel III rules do not apply to U.S. banks or holding companies automatically.
Among other things, the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010 (DF Act) requires U.S. regulators to reform the system under
which the safety and soundness of banks and other financial institutions,
individually and systemically, are regulated. That reform effort will include
the regulation of
32
capital. It is not known whether or to what extent the U.S.
regulators will incorporate elements of Basel III into the reformed U.S.
regulatory system, but it is expected that the U.S. reforms will include an
increase in capital requirements and a narrowing of what qualifies as
appropriate capital. One likely effect of a significant tightening of U.S.
capital requirements would be to increase our cost of capital, among other
things. Any permanent significant increase in our cost of capital could have
significant adverse impacts on the profitability of many of our products, the
types of products we could offer profitably, our overall profitability, and our
overall growth opportunities, among other things. Although most financial
institutions would be affected, these business impacts could be felt unevenly,
depending upon the business and product mix of each institution. Other
potential effects could include less ability to pay cash dividends and
repurchase our common shares, higher dilution of common shareholders, and a
higher risk that we might fall below regulatory capital thresholds in an
adverse economic cycle.
Interest Rate and Yield Curve Risks
A
significant portion of our business involves borrowing and lending money.
Accordingly, changes in interest rates directly impact our revenues and
expenses, and potentially could expand or compress our net interest margin. We
actively manage our balance sheet to control the risks of a reduction in net
interest margin brought about by ordinary fluctuations in rates. Additional
information concerning those risks and our management of them appears under the
caption Interest Rate Risk Management beginning on page 56 of the
Managements Discussion and Analysis of Results of Operations and Financial
Condition section of our 2010 Annual Report to Shareholders, which is part of
the material from that Report that has been incorporated by reference into Item
7 of Part II of this report.
Our
mortgage servicing rights (MSR) portfolio is affected by changes in interest
rates. Although we sold our mortgage servicing platform in 2008, at present we
still retain substantial MSR assets. The value of MSR assets declines when the
underlying loans are refinanced, otherwise paid early, or charged off.
Generally, when interest rates increase, the value of MSR generally increases,
and when rates decline the value of MSR tends to decline. However, those
general tendencies do not result in concrete outcomes in all circumstances; for
example, a decrease in interest rates does not always result in a predictable
increase in refinancings because other factors may blunt loan demand or curtail
credit availability. Additional information concerning those risks and our
management of them appears under the caption Mortgage Servicing Rights (MSR) and
Other Related Retained Interests beginning on page 77 of the Managements
Discussion and Analysis of Results of Operations and Financial Condition
section of our 2010 Annual Report to Shareholders, which is part of the
material from that Report that has been incorporated by reference into Item 7
of Part II of this report.
We
face the risks associated with movements in the yield curve. The yield curve
simply shows the interest rates applicable to short and long term debt. The
curve is steep when short-term rates are much lower than long-term rates; it is
flat when short-term rates are equal, or nearly equal, to long-term rates; and
it is inverted when short-term rates exceed long-term rates. Historically, the
yield curve normally is positively sloped. However, the yield curve can be
relatively flat or inverted for short or even protracted periods. A flat or
inverted yield curve tends to decrease net interest margin, which would
adversely impact our lending businesses, and it tends to reduce demand for
long-term debt securities, which would adversely impact the revenues of our
capital markets business. A prolonged inversion of the yield curve historically
is so uncommon that it is difficult to predict all the effects that such a
market condition is reasonably likely to create.
Expectations
by the market regarding the direction of future interest rate movements,
particularly long-term rates, can impact the demand for long-term debt which in
turn can impact the revenues of our capital markets business. That risk is most
apparent during times when strong expectations have not yet been reflected in
market rates, or when expectations are especially weak or uncertain.
33
Securities Inventories and Market Risks
Our
capital markets business buys and sells various types of securities for its
institutional customers. In the course of that business we hold inventory
positions and are exposed to certain risks of market fluctuations. In addition,
we are exposed to credit risk and interest rate risk associated with debt
securities. We manage the risks of holding inventories of securities through
certain policies and procedures, including hedging activities related to
certain interest rate risks. Additional information concerning those risks and
our management of them appears under the caption Market Risk Management
beginning on page 54 of the Managements Discussion and Analysis of Results of
Operations and Financial Condition section of our 2010 Annual Report to
Shareholders, which is part of the material from that Report that has been
incorporated by reference into Item 7 of Part II of this report, and in the
Credit Risks discussion beginning on page 23 of this report.
In
addition, we earn fees and other income related to our brokerage business and
our management of assets for customers. Declines, disruptions, or precipitous
changes in markets or market prices can adversely affect those revenue sources.
We
have exposure to risks related to securities markets in other respects as well.
We have a number of assets and obligations that are linked, directly or
indirectly, to major securities markets. Significant changes in market
performance can have a material impact upon our assets, liabilities, and
financial results.
A
major example of that linkage is our obligation to fund our pension plan so
that it may satisfy benefit claims in the future. Our pension funding
obligations generally depend upon actuarial estimates of benefits claims and
actuarial estimates of future plan asset values. To a substantial extent the
pension plan invests its assets in marketable securities. Our obligations to
fund the plan can diminish substantially if the plans investments perform
well, and can grow substantially if those investments perform poorly. Changes
in those obligations generally translate into positive or negative changes in
our pension expense, which in turn affects our financial performance. Although
our obligations and expenses relative to the plan can be affected by many other
things, including changes in our participating employee population and changes
to the plan itself, declines in market performance in recent years have tended
to increase our obligations to fund the pension plan, and that tendency is
likely to continue to be felt over the next several years. We announced in 2009
that we will implement a freeze of new benefits after 2012, and we changed the
asset allocation investment strategy; although we expect these changes to
moderate future volatility in this area, risk of some level of volatility is
unavoidable. That risk of volatility would be amplified if certain actuarial
assumptions change adversely, especially the discount rate used to estimate the
adequacy of assets to cover projected benefits, or if the accounting rules
regarding pension liability estimates change adversely.
Venture Capital Assets
Venture
capital investments are inherently volatile. The companies in which we have
invested are much less mature, smaller, and much more unproven than a typical
public company. Accordingly, those investments carry a substantial risk of loss
which can be realized suddenly. Venture capital investments also are inherently
illiquid. Although we have been winding down this business since 2008, the
wind-down process is likely to occur over an extended period. At December 31,
2010 our venture capital investments had a book value of $13 million.
Hedge Risks
In
the normal course of our businesses, including (among others) banking, capital
markets, and legacy mortgage servicing, we attempt to create partial or full
economic hedges of various, though not all,
34
financial
risks. Our hedging activities are discussed in more detail in various places
under the following captions of the Managements Discussion and Analysis of
Results of Operations and Financial Condition section of our 2010 Annual Report
to Shareholders, which is part of the material from that Report that has been
incorporated by reference into Item 7 of Part II of this report: Risk
Management, beginning on page 53; and, Critical Accounting Policies,
beginning on page 76. Hedging creates certain risks for us, including the risk
that the other party to the hedge transaction will fail to perform
(counterparty risk, which is a type of credit risk), and the risk that the
hedge will not fully protect us from loss as intended (hedge failure risk).
Unexpected counterparty failure or hedge failure could have a significant
adverse effect on our liquidity and earnings.
Accounting Risks
Uncertainties
in Estimates
The
preparation of our consolidated financial statements in conformity with U.S.
generally accepted accounting principles requires management to make
significant estimates that affect the financial statements. Three of our most
critical estimates are: the level of the allowance for credit losses; the level
of repurchase, make-whole, and foreclosure reserves; and the valuation of
mortgage servicing rights. However, other estimates occasionally become highly
significant, especially in volatile situations such as litigation and other
loss contingency matters. Estimates are made at specific points in time; as
actual events unfold, estimates are adjusted accordingly. Due to the inherent
nature of these estimates, it is possible that, at some time in the future, we
may significantly increase the allowance for credit losses and/or sustain
credit losses that are significantly higher than the provided allowance, or we
may recognize a significant provision for impairment of our goodwill or other assets, or we may recognize a significant decline in
the fair value of our mortgage servicing rights, or we may make some other
adjustment that will differ materially from the estimates that we make today.
For additional information concerning the sensitivity of these estimates, refer
to Critical Accounting Policies beginning on page 76 of the Managements
Discussion and Analysis of Results of Operations and Financial Condition
section of our 2010 Annual Report to Shareholders.
Changes
to Rules and Practices
In
addition, accounting rules and practices change over time. Changes in
accounting rules can significantly affect how we record and report assets,
liabilities, revenues, expenses, and earnings. Although such changes generally
affect all companies in a given industry, in practice changes sometimes have a
disparate impact due to differences in the circumstances or business operations
of companies within the same industry.
Risks of Holding our Common Stock
Holding
Company Dividends
Historically
the Corporation has depended upon common dividends from the Bank for cash to
fund common dividends paid to the Corporations shareholders. However, in part
because of the losses experienced by the Bank since 2007, regulatory
constraints generally will prevent the Bank from declaring and paying dividends
to the Corporation in 2011 without regulatory approval. Also, we are required
to provide financial support to the Bank. Additional information concerning
those regulatory restrictions on the Bank is discussed in more detail under the
heading Liquidity Management in the Managements Discussion and Analysis
section beginning on page 58 of our 2010 Annual Report to Shareholders, which
section is incorporated herein by reference.
35
Furthermore,
the Federal Reserve and the OCC have issued policy statements generally
requiring insured banks and bank holding companies only to pay dividends out of
current operating earnings. The Federal Reserve has released a supervisory
letter advising bank holding companies, among other things, that as a general
matter a bank holding company should inform the Federal Reserve and should
eliminate, defer or significantly reduce its dividends if (i) the bank holding
companys net income available to shareholders for the past four quarters, net
of dividends previously paid during that period, is not sufficient to fully
fund the dividends; (ii) the bank holding companys prospective rate of
earnings is not consistent with the bank holding companys capital needs and
overall current and prospective financial condition; or (iii) the bank holding
company will not meet, or is in danger of not meeting, its minimum regulatory
capital adequacy ratios.
In
2008 the Corporation discontinued paying a quarterly cash dividend to its
common stockholders and began distributing a dividend payable in shares of
common stock. In 2010 the Corporation returned to profitability, but preferred
stock dividends to the Treasury in connection with the TARP program
significantly exceeded those earnings. In January 2011 the Corporation, having
exited the TARP program, resumed a cash dividend at the rate of one cent per
share, substantially lower than the rate prior to 2008. For the reasons
mentioned above, our dividend rate may remain muted until our earnings are stronger
and less volatile.
Dilution
Potential
We
may decide to raise additional funds through public or private debt or equity
financings to fund our operations, to increase our capital, or to expand. If we
raise funds by issuing equity securities or instruments that are convertible
into equity securities, the percentage ownership of our current stockholders
will be reduced, the new equity securities may have rights and preferences
superior to those of the common stock, and additional issuances could be at
sales price which is dilutive to current stockholders. We may also issue equity
securities directly as consideration for acquisitions we may make that could be
dilutive to current stockholders.
Anti-takeover
Provisions
Provisions
of Tennessee law, and certain provisions of our charter and bylaws, could make
it more difficult for a third party to acquire control of us or could have the
effect of discouraging a third party from attempting to acquire control of us.
These provisions could make it more difficult for a third party to acquire us
even if an acquisition might be at a price attractive to many of our
stockholders.
ITEM 1B UNRESOLVED STAFF COMMENTS
None.
ITEM 2 PROPERTIES
The
Corporation has no properties that it considers materially important to its
financial statements.
36
ITEM 3 LEGAL PROCEEDINGS
The
Contingencies section from Note 18 to the Consolidated Financial
Statements appearing on pages 146-148 of the Corporations 2010 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 4
[Reserved]
SUPPLEMENTAL PART I INFORMATION
Executive Officers of the Registrant
The
following is a list of executive officers of the Corporation as of January 31,
2011. The executive officers generally are appointed at the April meeting of
the Corporations Board of Directors following the annual meeting of
shareholders for a term of one year and until their successors are elected and
qualified.
Name and Age
Current
(Year First Elected to Office) and Recent Offices and Positions
Charles G. Burkett
President
Banking of the Corporation and the Bank (2004)
Age: 60
Prior to November, 2005,
Mr. Burkett was President First Tennessee Financial Services and Executive
Vice President of the Corporation and the Bank. Prior to April 2004 Mr. Burkett
was President Retail Financial Services/Memphis Financial Services.
John M. Daniel
Age: 56
Chief Human
Resources Officer of the Corporation and the Bank (2006)
From January 2001 to
September 2006, Mr. Daniel was Executive Vice President in charge of Human
Resources for Regions Financial Corporation.
Gregory D. Jardine
Chief Credit
Officer of the Corporation and the Bank (2010)
Age: 55
From October 2009 until May
2010, Mr. Jardine was Executive Vice President of the Corporation and the Bank in charge of credit portfolio management.
Before joining the Corporation, from January to
September 2009, Mr. Jardine was a senior credit officer
with Wells Fargo & Company in the wealth, brokerage and retirement services division. Prior to 2009 Mr. Jardine was a senior
vice president with Wachovia Corporation with various
duties including senior credit officer and senior risk officer
for credit and counterparty risk in capital management and wealth management.
D. Bryan Jordan
Age: 49
President and
Chief Executive Officer of the Corporation and the Bank (2008); principal
executive officer
From May 2007 until
September 2008 Mr. Jordan was Executive Vice President and Chief Financial Officer of the Corporation and the Bank. From 2000
until 2002 Mr. Jordan was Comptroller, and from
2002 until April 2007 Mr. Jordan was Chief Financial
Officer, of Regions Financial Corp. During that time he was also an Executive Vice President and, from November 2006, a Senior
Executive Vice President of Regions.
37
James F. Keen
Age: 60
Executive Vice
President (2003) Chief Accounting Officer of the Corporation and the Bank
(2008); principal accounting officer
Mr. Keen was Corporate
Controller of the Corporation from 1988 until July 2008, and of the Bank from
2001 until July 2008. In that capacity Mr. Keen was the Corporations
principal accounting officer.
Michael E. Kisber
President FTN
Financial of the Corporation and the Bank (2011)
Age: 51
Mr. Kisber became President
of the Banks FTN Financial division on January 1, 2011. He joined FTN
Financial in 1993 as a sales representative. In 2006 he became Head of Sales
and an Executive Vice President. In 2008 he became Director of Fixed Income
for FTN.
William C. Losch III
Age: 40
Executive Vice
President Chief Financial Officer of the Corporation and the Bank (2009);
principal financial officer
From 1998 to January 2009,
Mr. Losch was with Wachovia Corporation. Most recently he served as Senior
Vice President and Chief Financial Officer of its Retail and Small Business
Banking unit from 2003 to 2005, and as Senior Vice President and Chief
Financial Officer of its General Bank unit from 2006 to January 2009.
Charles T. Tuggle,
Jr.
Age: 62
Executive Vice President
General Counsel of the Corporation and the Bank (2008)
From October 2003 to 2007
Mr. Tuggle was an Executive Vice President of the Banks FTN Financial division; during that time prior to 2007 Mr.
Tuggle served as Chief Risk Officer of FTN Financial. From
1998 to October 2003 Mr. Tuggle was Chairman and Chief
Executive Officer of the law firm Baker, Donelson, Bearman, Caldwell & Berkowitz, PC.
Yousef A. Valine
Chief Risk Officer
(2010) of the Corporation and the Bank
Age: 51
From June to December 2009,
Mr. Valine served as Executive Vice President Corporate Risk Management of
the Corporation and the Bank. From 1985 until June 2009, Mr. Valine was with
Wachovia Corporation, most recently serving as Executive Vice President and
Chief Operating Officer of its enterprise-wide risk management division from
2007 until June 2009, as the head of its Institutional Risk Group in 2006,
and as its chief Operational Risk officer in 2005.
Declaration of Covenant
Relating To The Banks Class A Non-Cumulative Perpetual Preferred Stock
On
March 23, 2005, the Bank issued 300,000 shares of Class A Non-Cumulative
Perpetual Preferred Stock (Bank Preferred Stock). That issuance was the
subject of the Corporations Current Report on Form 8-K filed March 24, 2005.
The Bank made a Declaration of Covenant dated as of July 20, 2005
(Declaration) in connection with the Bank Preferred Stock. The Declaration
was the subject of Item 8.01 of the Corporations Current Report on Form 8-K filed
July 22, 2005. Under the Declaration, the Bank has promised to redeem shares of
the Bank Preferred Stock only if and to the extent that the redemption price is
equal to or less than the New Equity Amount as of the date of redemption. New
Equity Amount means, on any date, the net proceeds to the Bank or subsidiaries
of the Bank received during the six months prior to such date from new
issuances of common stock of the Bank or of other securities or combinations of
securities that
(i)
qualify as
Tier 1 capital of the Bank, and
38
(ii)
as
reasonably determined in good faith by the Banks Board of Directors, (x) on
a liquidation or dissolution of the Bank rank pari passu with or junior to the Bank Preferred Stock (or,
if all of the Bank Preferred Stock has been redeemed, would have ranked pari passu with or junior to the Bank
Preferred Stock had it remained outstanding), (y) are perpetual, with no
prepayment obligation on the part of the issuer, whether at the election of
holders or otherwise (although such securities may be subject to early
redemption at the option of the issuer), and (z) dividends or other
distributions on which are non-cumulative;
provided, however, that the net proceeds of such
securities or combinations of securities (A) if issued to any affiliate of the
Bank other than the Corporation, shall not qualify as a New Equity Amount and
(B) if issued to the Corporation shall qualify as a New Equity Amount only if
such securities or combinations of securities have been purchased by the
Corporation with the net proceeds from new issuances of common stock of the
Corporation or of securities or combinations of securities by the Corporation
during such six-month period that
(i)
qualify as
Tier 1 capital of the Corporation and
(ii)
as
reasonably determined in good faith by the Corporations Board of Directors,
(x) on a liquidation or dissolution of the issuer rank junior to all
indebtedness for money borrowed and claims of other creditors of the issuer,
(y) are perpetual, with no prepayment obligation on the part of the issuer,
whether at the election of holders or otherwise (although such securities may
be subject to early redemption at the option of the issuer), and (z)
dividends or other distributions on which are non-cumulative.
The
covenants in the Declaration run in favor of persons that buy, hold, or sell
debt of the Bank during the period that such debt is Covered Debt. The Banks
5.05% Subordinated Bank Notes Due January 15, 2015 (2015 Notes) are the
initial Covered Debt. Other debt will replace the 2015 Notes as the Covered
Debt under the Declaration on the earlier to occur of (x) the date two years
prior to the 2015 Notes maturity, or (y) the date the Bank gives notice of a
redemption of the 2015 Notes such that, or the date 2015 Notes are repurchased
in such an amount that, the outstanding principal amount of 2015 Notes is or
will become less than $100 million.
The
Declaration is subject to various additional terms and conditions. The
Declaration may be terminated if the holders of at least 51% by principal
amount of the Covered Debt so agree, or if the Bank no longer has any long-term
indebtedness rated by a nationally recognized statistical rating organization.
The
summary description of the Declaration in this report is qualified in its
entirety by the full terms of the Declaration, which are controlling.
PART II
Note on Page Number References
In
this report, references to specific pages in the Corporations 2010 Annual
Report to shareholders, or to specific pages of its consolidated financial
statements or the notes thereto, relate to page numbers appearing in Exhibit 13
to this report. The Exhibit 13 page numbers do not necessarily correspond to
page numbers appearing in the printed 2010 Annual Report to shareholders.
39
ITEM 5 MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
(a)
Market for
the Corporations Common Stock:
The
Corporations common stock, $0.625 par value, is listed and trades on the New
York Stock Exchange, Inc. under the symbol FHN. As of December 31, 2010, there
were 7,097 shareholders of record of the Corporations common stock. Additional
information called for by this Item is incorporated herein by reference to:
(i)
the Summary
of Quarterly Financial Information Table (Table 37)(page 85), the Selected
Financial and Operating Data Table (page 2), and the Liquidity Management
subsection (beginning on page 58) of the Managements Discussion and Analysis
of Results of Operations and Financial Condition section contained in the
Corporations 2010 Annual Report to Shareholders,
(ii)
Note 18 to
the Consolidated Financial Statements beginning on page 146 of the 2010
Annual Report to Shareholders, and
(iii)
the Payment
of Dividends and Transactions with Affiliates subsections beginning on
pages 6 and 8, respectively, of Item 1 of Part I of this report on Form 10-K.
(b)
Sale of Unregistered
Equity Securities:
During 2010
the Corporation sold no equity securities without registration under the
Securities Act of 1933, as amended.
(c)
Issuer
Repurchases:
Repurchases
are made in the open market or through privately negotiated transactions and
are subject to market conditions, accumulation of excess equity, prudent
capital management, and regulatory restrictions. Pursuant to Board authority,
the Corporation may repurchase shares from time to time for its stock option and
other compensation plans, subject to market conditions, accumulation of excess
equity, prudent capital management, and legal and regulatory restrictions. The
Corporation will evaluate the level of capital and take action designed to
generate or use capital as appropriate for the interests of the shareholders.
During the time that the Corporation was a participant in the U.S. Treasurys
capital purchase program, which included most of 2010, all purchase
authorization was subject to substantial restrictions under that program.
Additional information concerning repurchase activity during the final three
months of 2010 is presented in Table 13, and the surrounding notes and other
text, of the Managements Discussion and Analysis of Results of Operations and
Financial Condition section appearing on page 30 of the Corporations
2010 Annual Report to shareholders, which information is incorporated herein by
this reference.
ITEM 6 SELECTED FINANCIAL DATA
The
information called for by this Item is incorporated herein by reference to the
Selected Financial and Operating Data table appearing on page 2 of the
Corporations 2010 Annual Report to shareholders.
40
ITEM 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The
information called for by this Item is incorporated herein by reference to the
Managements Discussion and Analysis of Results of Operations and Financial
Condition section, the Glossary and Acronyms sections, and the Consolidated Historical Statements
of Income and Consolidated Average Balance Sheets and Related Yields and Rates
tables appearing on pages 3-91 and 203-205 of the Corporations 2010 Annual
Report to Shareholders.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
information called for by this Item is incorporated herein by reference to the
Interest Rate Risk Management subsection of Note 25 to the Consolidated
Financial Statements, and to the Risk Management-Interest Rate Risk
Management subsection of the Managements Discussion and Analysis of Results
of Operations and Financial Condition section, both of which appear,
respectively, on pages 194-196 and on pages 56-58 of the Corporations 2010
Annual Report to Shareholders.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
information called for by this Item is incorporated herein by reference to the
Report of Management on Internal Control over Financial Reporting, the Reports
of Independent Registered Accounting Firm, the Consolidated Financial
Statements and the notes thereto, and Table 37, Summary of Quarterly Financial
Information, appearing, respectively, on pages 92-202 and on page 85
of the Corporations 2010 Annual Report to Shareholders.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures. The Corporations management, with
the participation of the Corporations Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the design and operation
of the Corporations disclosure controls and procedures (as defined in Exchange
Act Rule 13a-15(e)) as of the end of the period covered by the annual report.
Based on that evaluation, the Chief Executive Officer and the Chief Financial
Officer have concluded that the Corporations disclosure controls and
procedures are effective to ensure that material information relating to the
Corporation and the Corporations consolidated subsidiaries is made known to
such officers by others within these entities, particularly during the period
this annual report was prepared, in order to allow timely decisions regarding
required disclosure.
Managements
Report on Internal Control over Financial Reporting. The report of
management required by Item 308(a) of Regulation S-K, and the attestation
report required by Item 308(b) of Regulation S-K, appear at pages 92-93 of the
Corporations 2010 Annual Report to Shareholders and are incorporated herein by
this reference.
41
Changes
in Internal Control over Financial Reporting. There have not been any
changes in the Corporations internal control over financial reporting during
the Corporations fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Corporations internal control over
financial reporting.
ITEM 9B OTHER INFORMATION
There
is no information required to have been disclosed in a report on Form 8-K
during the fourth quarter of 2010 that has not been reported.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The
information called for by this Item as it relates to directors and nominees for
director of the Corporation, the Audit Committee of the Corporations Board of
Directors, members of the Audit Committee, and audit committee financial expert
is incorporated herein by reference to the Corporate Governance and Board
Matters section and the Vote Item No. 1Election of Directors section of the
Corporations 2011 Proxy Statement (excluding the Audit Committee Report, the
statements regarding the existence, availability, and location of the Audit
Committees charter, and the Compensation Committee Report). The information
required by this Item as it relates to executive officers of the Corporation is
incorporated herein by reference to the information provided under the heading
Executive Officers of the Registrant in the Supplemental Part I Information
following Item 4 of this Report. The information required by this Item as it
relates to compliance with Section 16(a) of the Securities Exchange Act of 1934
is incorporated herein by reference to the Section 16(a) Beneficial Ownership
Reporting Compliance section of the 2011 Proxy Statement.
In
2010 there were no material amendments to the procedures, described in the
Corporations 2011 Proxy Statement, by which security holders may recommend
nominees to the Corporations Board of Directors.
The
Corporations Board of Directors has adopted a Code of Ethics for Senior
Financial Officers that applies to the Chief Executive Officer, Chief Financial
Officer, and Chief Accounting Officer and also applies to all professionals
serving in the financial, accounting, or audit areas of the Corporation and its
subsidiaries. A copy of the Code has been filed or incorporated by reference as
Exhibit 14 to this report and is posted on the Corporations current internet
website (www.fhnc.com). (Click on Investor Relations, and then Corporate
Governance.) A paper copy of the Code is available without charge upon written
request addressed to the Corporate Secretary of the Corporation at its main
office, 165 Madison Avenue, Memphis, Tennessee 38103. The Corporation intends
to satisfy its disclosure obligations under Item 5.05 of Form 8-K related to
Code amendments or waivers by posting such information on the Corporations
internet website, the address for which is listed above.
42
ITEM 11 EXECUTIVE COMPENSATION
The
information called for by this Item is incorporated herein by reference to the
Compensation Committee Interlocks and Insider Participation, Executive
Compensation, and Director Compensation sections of the Corporations 2011
Proxy Statement.
The
Corporation has provided the information required by Item 407(e)(5) of
Regulation S-K in its 2011 Proxy Statement under the caption Compensation
Committee Report. That information is not filed with this report and is not
incorporated by reference herein.
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Securities Authorized for Issuance under Equity Compensation Plans
Equity
Compensation Plan Information
The
following table provides information as of December 31, 2010 with respect to
shares of Corporation common stock that may be issued under its existing equity
compensation plans, including the following plans:
1991, 1996,
and 2002 Bank Director and Advisory Board Member Deferral Plans (Advisory
Board Plans)
Of
the 11,588,747 compensatory options outstanding at December 31, 2010,
approximately 46% were issued in connection with employee and director cash
deferral elections. The Corporation received over many years a total of approximately $31.1 million in
employee cash deferrals and $2.3 million in non-employee director and advisory
board retainer and meeting fee deferrals related to those options. The
opportunity to defer portions of their compensation in exchange for options has
not been offered to employees, directors or advisory board members with respect
to compensation earned at any time since January 1, 2005.
The
following table includes information with respect to shares subject to
outstanding options granted under equity compensation plans that are no longer
in effect. Footnotes (2) and (5) to the table set forth the total number of
shares of Corporation common stock issuable upon the exercise of options under
the expired plans as of December 31, 2010. No additional options may be granted
under those expired plans.
The
numbers of shares covered by stock options, and the option prices, reported in
the following table have been adjusted proportionately to reflect the estimated
economic effects of dividends distributed in common stock effective October 1,
2008 through January 1, 2011. The cumulative compound adjustment factor related
to those dividends is 20.038%. For administrative reasons outstanding
options have not been formally adjusted at this time; however, administrative
action has been taken which in most cases will provide the same economic and
dilutive effect as an adjustment if and when affected options are exercised.
43
EQUITY COMPENSATION PLAN INFORMATION
A
B
C
Plan
Category
Number
of Securities to be Issued upon Exercise of Outstanding Options
Weighted Average Exercise Price of Outstanding Options
Number
of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Col. A)
Equity Compensation Plans
Approved by Shareowners
(1)
4,383,582
(2)
$
28.18
4,903,089
(3)
Equity Compensation Plans Not
Approved by Shareowners
(4)
7,205,165
(5)
$
26.06
Total
11,588,747
$
26.86
4,903,089
(1)
Consists of the Executive
Plan, Directors Plan, 1995 Directors Plan, 1995 Plan, 1990 Plan, and the
2003 Plan.
(2)
Includes 843,880
outstanding options issued in connection with employee and non-employee
director cash deferrals of approximately $6.2 million. Also includes
information for equity compensation plans that have expired. The Executive
Plan, the Directors Plan, the 1995 Directors Plan, the 1995 Plan and the
1990 Plan were approved by shareholders in 2000, 2000, 1995, 1995, and 1990,
respectively. The plans expired in 2010, 2007, 1999, 2005, and 2000,
respectively. As of December 31, 2010, a total of 1,009,803 shares of
Corporation common stock were issuable upon the exercise of outstanding
options under these expired plans. No additional options may be granted under
these expired plans.
(3)
As of December 31, 2010, an
aggregate of 3,953,627 shares were available for awards other than options
under the 2003 Plan.
(4)
Consists of the 1997 Plan
and the Advisory Board Plans.
(5)
Includes 4,456,409
outstanding options issued in connection with employee and advisory board cash
deferrals of approximately $25.0 million. All equity compensation plans reported in this note have expired or terminated. The 1997 Plan, the 1996 Bank
Director and Advisory Board Member Deferral Plan, and the 1991 Bank Director
and Advisory Board Member Deferral Plan expired in 1997, 2002, and 1997, respectively, and the 2002 Bank Director and Advisory Board Member
Deferral Plan was terminated in 2005. As of December 31, 2010, a total
of 7,205,165 shares of Corporation common stock were issuable upon the
exercise of outstanding options under these expired or terminated plans. No
additional options may be granted under these expired or terminated plans.
In
the table, column C shows the number of shares available for future award
grants under the plans indicated at December 31, 2010, assuming eventual full
exercise or issuance of all shares covered by awards outstanding on that date.
Shares covered by outstanding options are shown in column A. A total of
4,590,436 shares are covered by outstanding awards other than options,
including 4,380,114 under plans approved by shareowners and 210,322 under plans
not approved by shareowners.
44
Description
of Equity Compensation Plans Not Approved by Shareholders
The
1997 Plan
The
1997 Plan was adopted by the Board of Directors in 1996 and expired in 2007.
The 1997 Plan provided for granting of nonqualified stock options.
Options
were granted under the 1997 Plan prior to its expiration to substantially all
our then-current employees pursuant to the Corporations FirstShare and
management option programs. The FirstShare program was a broad-based employee
plan, where all employees (except management level employees) received a stock
option award annually. Grants were last made under the FirstShare program in
2006. Terms of the FirstShare options included vesting 100 percent after three
years and a term of 10 years. Management level employees received annual stock
option awards under the 1997 Plan pursuant to the management option program.
Terms of the management options included vesting 50 percent after 3 years and
50 percent after 4 years, unless a specified stock price is achieved within the
3 year period, and a term of 7 years. In addition to the above, prior to 2005
certain employees could elect to defer a portion of their annual compensation
into stock options under the 1997 Plan. These options vested after 6 months and
have a term of 20 years. The options vest on an accelerated basis in the event
of a change in control of First Horizon. All options granted under the 1997
Plan, except deferral options, had an exercise price equal to the fair market
value on the date of grant. Under our deferred compensation stock option
program, the option price per share was less than 100 percent of the fair
market value of the share at the time the option is granted if the employee had
entered into an agreement with the Corporation to receive a stock option grant
in lieu of compensation and the amount of compensation foregone when added to
the cash exercise price of the options was at least the fair market value of
the shares on the date of grant. The deferred compensation stock option program
has not been effective since January 2005.
As
of December 31, 2010, options covering 7,139,023 shares of Corporation common
stock were outstanding under the 1997 Plan, no shares remained available for
future option grants, and options covering 20,481,375 shares had been exercised
during the life of the plan. Of the options outstanding under the 1997 Plan,
approximately 61% were issued in connection with employee cash deferral
elections. The Corporation received approximately $31.2 million in cash
deferrals to offset a portion of the exercise price. The 1997 Plan was filed
as Exhibit 10.2(d) in the Corporations Form 10-Q for the quarter ended
June 30, 2009.
The Advisory
Board Plans
The
Advisory Board Plans were adopted by the Board of Directors in 2001, 1996, and
1991. The 2002 Advisory Board Plan was terminated in 2005, and the 1996 and
1991 plans expired in 2002 and 1997, respectively.
Options
granted under the Advisory Board Plans were granted only to regional and
advisory board members, or to directors of certain bank affiliates, in any case
who were not employees. The options were granted in lieu of the participants
receiving retainers or attendance fees for bank board and advisory board
meetings. The number of shares subject to grant equaled the amount of
fees/retainers earned divided by one half of the fair market value of one share
of common stock on the date of the option grant. The exercise price plus the
amount of fees foregone equaled the fair market value of the stock on the date
of the grant. The options were vested at the grant date. Those granted on or
prior to January 2, 2004 had a term of 20 years, while those granted on or
after July 1, 2004 had a term of 10 years.
As
of December 31, 2010, options covering 66,142 shares of Corporation common
stock were outstanding under the Advisory Board Plans, zero shares remained
available for future option grants, and options covering 205,755 shares had
been exercised during the life of the plan.
45
The
Advisory Board Plans were included as Exhibits 10.1(f), 10.1(g), and 10.1(h) to
the Corporations Form 10-Q for the quarter ended June 30, 2009.
Beneficial Ownership of Corporation Stock
The
information required by this Item pursuant to Item 403(a) and (b) of Regulation
S-K is incorporated herein by reference to the Stock Ownership Information section of the
Corporations 2011 Proxy Statement.
Change in Control Arrangements
The
Corporation is unaware of any arrangements which may result in a change in
control of the Corporation.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The
information called for by this Item is incorporated herein by reference to the Independence and Categorical
Standards and the Transactions
with Related Persons sections of the 2011 Proxy Statement, which
sections are incorporated herein by reference. The Corporations independent
directors and nominees are identified in the second paragraph of the Independence and Categorical Standards
section of the 2011 Proxy Statement.
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
In
2003 the Audit Committee of the Board of Directors adopted a policy providing
for pre-approval of all audit and non-audit services to be performed by our
registered public accounting firm that performs the audit of our consolidated
financial statements that are filed with the SEC. Services either may be
approved in advance by the Audit Committee specifically on a case-by-case basis
(specific pre-approval) or may be approved in advance (advance
pre-approval). Advance pre-approval requires the Committee to identify in
advance the specific types of service that may be provided and the fee limits
applicable to such types of service, which limits may be expressed as a limit
by type of service or by category of services. Unless the type of service to be
provided by the Corporations registered public accounting firm has received
advance pre-approval under the policy and the fee for such service is within
the limit pre-approved, the service will require specific pre-approval by the
Committee. The terms of and fee for the annual audit engagement must receive
the specific pre-approval of the Committee. Audit, Audit-related, Tax,
and All Other services, as those terms are defined in the policy, have the
advance pre-approval of the Committee, but only to the extent those services
have been specified by the Committee and only in amounts that do not exceed the
fee limits specified by the Committee. Such advance pre-approval is to be for a
term of 12 months following the date of pre-approval unless the Committee
specifically provides for a different term. Unless the Committee specifically
determines otherwise, the aggregate amount of the fees pre-approved for All
Other services for the fiscal year must not exceed seventy-five percent (75%)
of the aggregate amount of the fees pre-approved for the fiscal year for Audit
services, Audit-related services, and those types of Tax services that
represent tax compliance or tax return preparation. The policy delegates the
authority to pre-approve services to be provided by the Corporations
registered public accounting firm, other than the annual audit engagement and
any changes thereto, to the Chairperson of the Committee. The Chairperson may
not, however, make a determination that causes the 75% limit described above to
be exceeded. Any service pre-approved by the Chairperson will be reported to
the Committee at its next regularly scheduled meeting.
46
Information
regarding fees billed to the Corporation by KPMG LLP for the two most recent
fiscal years is incorporated herein by reference to the Vote Item No. 4 section
of the 2011 Proxy Statement. No services were approved by the Audit Committee
pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.
PART
IV
Note on Page Number References
In
this report, references to specific pages in the Corporations 2010 Annual
Report to shareholders, or to specific pages of its consolidated financial
statements or the notes thereto, relate to page numbers appearing in Exhibit 13
to this report. The Exhibit 13 page numbers do not necessarily correspond to
page numbers appearing in the printed 2010 Annual Report to shareholders.
ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following
documents are filed as a part of this Report:
Financial
Statements and related Reports:
Page 95*
1.
Consolidated
Statements of Condition as of December 31, 2010 and 2009.
Page 96*
2.
Consolidated
Statements of Income for the years ended December 31, 2010, 2009 and 2008.
Pages 97-98*
3.
Consolidated
Statements of Equity for the years ended December 31, 2010,
2009, and 2008.
Page 99*
4.
Consolidated
Statements of Cash Flows for the years ended December 31, 2010, 2009 and
2008.
Pages 100-202*
5.
Notes to Consolidated Financial Statements
Pages 92*
6.
Report of
Management on Internal Control over Financial Reporting
Pages 93-94*
7.
Reports of
Independent Registered Public Accounting Firm
*
The
consolidated financial statements of the Corporation, the notes thereto, and
the reports of independent public accountants, as listed above, are
incorporated herein by reference to the indicated pages of the Corporations
2010 Annual Report to Shareholders.
Financial
Statement Schedules: Not applicable.
Exhibits:
Exhibits
marked with an * represent a management contract or compensatory plan or
arrangement required to be identified and filed as an exhibit.
Exhibits
marked with a + are filed herewith.
47
The phrase
2010 named executive officers refers to those executive officers whose 2010
compensation is described in detail in the Corporations 2011 Proxy Statement.
In many
agreements filed as exhibits, each party makes representations and warranties
to other parties. Those representations and warranties are made only to and
for the benefit of those other parties in the context of a business contract.
Exceptions to such representations and warranties may be partially or fully
waived by such parties, or not enforced by such parties, in their discretion.
No such representation or warranty may be relied upon by any other person for
any purpose.
3.1
Restated Charter
of the Corporation, incorporated herein by reference to Exhibit 3.1 to the
Corporations Current Report on Form 8-K filed July 21, 2010.
3.2
Bylaws of
First Horizon National Corporation, as amended and restated February 23,
2011, incorporated herein by reference to Exhibit 3.1 to the Corporations
Current Report on Form 8-K dated February 23, 2011.
3.3
Warrant to
Purchase Common Stock dated November 14, 2008 issued in connection with sale
of preferred stock under the Troubled Asset Relief Program, incorporated
herein by reference to Exhibit 3.2 to the Corporations Current Report on
Form 8-K filed November 17, 2008.
4.1
The
Corporation and certain of its consolidated subsidiaries have outstanding
certain long-term debt. See Note 10 in the Corporations 2010 Annual Report to
Shareholders. At December 31, 2010, none of such debt exceeded 10% of the
total assets of the Corporation and its consolidated subsidiaries. Thus,
copies of constituent instruments defining the rights of holders of such debt
are not required to be included as exhibits. The Corporation agrees to
furnish copies of such instruments to the Securities and Exchange Commission
upon request.
4.2
Three
principal agreements related to a note program for First Tennessee Bank National
Association (the Bank): (i) form of Distribution Agreement dated February
18, 2005 among the registrant, the Bank, and the agents therein named; (ii)
form of Fiscal and Paying Agency Agreement dated as of February 18, 2005
between the Bank and JPMorgan Chase Bank, National Association; and (iii)
form of Interest Calculation Agreement dated as of February 18, 2005 between
the Bank and JPMorgan Chase Bank, National Association. All such agreements
are incorporated herein by reference to Exhibit 4(c) to the Corporations
Current Report on Form 8-K filed February 25, 2005.
*Deferral
Plans and Related Exhibits
*10.1(a1)
Directors
and Executives Deferred Compensation Plan, as amended and restated,
incorporated herein by reference to Exhibit 10(h) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended 6-30-03 and form of
individual agreement, incorporated herein by reference to Exhibit 10(h) to
the Corporations 1996 Annual report on Form 10-K.
*10.1(a2)
Form of
Amendment to Directors and Executives Deferred Compensation Plan,
incorporated herein by reference to Exhibit 10.1(a3) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
*10.1(a3)
Rate
Applicable to Directors and Executive Officers Under the Directors and
Executives Deferred Compensation Plan, incorporated herein by reference to
Exhibit 10.1(a2) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended September 30, 2010.
48
*10.1(b)
Director
Deferral Agreements with schedule, incorporated herein by reference to
Exhibit 10(k) to the Corporations 1992 Annual Report on Form 10-K and
Exhibit 10(j) to the Corporations 1995 Annual Report on Form 10-K.
*10.1(c)
Form of
First Horizon National Corporation Deferred Compensation Plan as Amended and
Restated, incorporated herein by reference to Exhibit 10.1(c) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended September
30, 2007.
*10.1(d)
[1995]
Non-Employee Directors Deferred Compensation Stock Option Plan, as restated
for amendments through December 15, 2008, incorporated herein by reference to
Exhibit 10.1(d) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009.
*10.1(e)
2000
Non-Employee Directors Deferred Compensation Stock Option Plan, as restated
for amendments through December 15, 2008, incorporated herein by reference to
Exhibit 10.1(e) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009.
*10.1(f)
[1991] Bank
Advisory Director Deferral Plan, as restated for amendments through December
15, 2008, incorporated herein by reference to Exhibit 10.1(f) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended June 30,
2009.
*10.1(g)
[1996] Bank
Director and Advisory Board Member Deferral Plan, as restated for amendments
through December 15, 2008, incorporated herein by reference to Exhibit
10.1(g) to the Corporations Quarterly Report on Form 10-Q for the quarter
ended June 30, 2009.
*10.1(h)
2002 Bank
Director and Advisory Board Member Deferral Plan, as restated for amendments
through December 15, 2008, incorporated herein by reference to Exhibit
10.1(h) to the Corporations Quarterly Report on Form 10-Q for the quarter
ended June 30, 2009.
*10.1(i)
Form of
First Horizon Deferred Compensation Plan as Amended and Restated,
incorporated herein by reference to Exhibit 10.1(i) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
*10.1(j)
Form of FTN
Financial Deferred Compensation Plan Amended and Restated Effective January
1, 2008, incorporated herein by reference to Exhibit 10.1(j) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended September
30, 2007.
*10.1(k)
Form of
Deferred Compensation Agreement used under the Corporations 2003 Equity
Compensation Plan and First Tennessee National Corporation Non-Qualified
Deferred Compensation Plan, along with form of Salary, Commission, and Annual
Bonus Deferral Programs Overview, form of Deferred Stock Option (DSO)
Program Summary, and description of share receipt deferral feature,
incorporated herein by reference to Exhibit 10(z) to the Corporations
Current Report on Form 8-K dated January 3, 2005.
*10.1(l)
Description
of April 19, 2005 amendments to the First Horizon National Corporation
Nonqualified Deferred Compensation Plan (formerly First Tennessee National
Corporation Nonqualified Deferred Compensation Plan), incorporated herein by
reference to Exhibit 10.1(l) to the Corporations Current Report on Form 8-K
dated April 19, 2005.
*10.1(m)
Description
of changes to options granted in January 2005 to certain employees in
connection with deferrals of salary earned in 2004, incorporated herein by
reference to Exhibit 10.1(m) to the Corporations Current Report on Form 8-K
dated October 19, 2005.
49
*Stock-Based Incentive Plans
*10.2(a)
1990 Stock Option Plan, as amended, and 1-21-97, 10-22-97,
and 10-18-00 amendments, incorporated herein by reference to Exhibit 10(f) to
the Corporations 1992, 1996, 1997 and 2000 Annual Reports on Form 10-K.
*10.2(b)
1992 Restricted Stock Incentive Plan, as restated for
amendments through December 15, 2008, incorporated herein by reference to
Exhibit 10.2(b) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009.
*10.2(c)
1995 Employee Stock Option Plan, as restated for
amendments through December 15, 2008, incorporated herein by reference to
Exhibit 10.2(c) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009.
*10.2(d)
1997 Employee Stock Option Plan, as restated for
amendments through December 15, 2008, incorporated herein by reference to
Exhibit 10.2(d) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009.
*10.2(e)
2000 Employee Stock Option Plan, as restated for
amendments through December 15, 2008, incorporated herein by reference to
Exhibit 10.2(e) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009.
*10.2(f)
2003 Equity Compensation Plan (as amended and restated
April 20, 2010 and as adjusted for all stock dividends through April 1,
2010), incorporated by reference to Appendix A to the Corporations Proxy
Statement for its annual meeting on April 20, 2010.
*TARSAP/PARSAP Restricted Stock Agreements and Related
Documents
*10.3(a)
Form of accelerated (performance based) Restricted Stock
Agreement under the 1992 Restricted Stock Incentive Plan, incorporated herein
by reference to Exhibit 10.3(a) to the Corporations 2004 Annual Report on
Form 10-K.
*10.3(b)
Form of accelerated (performance based) Restricted Stock
Agreement under the 2003 Equity Compensation Plan, incorporated herein by
reference to Exhibit 10.3(b) to the Corporations 2004 Annual Report on Form
10-K.
*10.3(c)
Description of performance criteria related to
TARSAP/PARSAP awards granted prior to 2005, incorporated herein by reference
to Exhibit 10.3(c) to the Corporations 2004 Annual Report on Form 10-K.
*10.3(d)
Form of 2005 PARSAP Agreement (for executive officers
other than the CEO), incorporated herein by reference to Exhibit 10.3(e) to
the Corporations Quarterly Report on Form 10-Q for the quarter ended March
31, 2005.
*10.3(e)
Description of performance criteria related to 2005 PARSAP
Agreement, incorporated herein by reference to Exhibit 10.3(f) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended March 31,
2005.
50
*Performance-Based Incentive Award Documents
*10.4(a1)
Form of Performance Restricted Stock award grant notice
under 2003 Equity Compensation Plan [2008], incorporated herein by reference
to Exhibit 10.5(s) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended March 31, 2008.
*10.4(a2)
Text of Notice Announcing Modification of Performance Goal
Calculation Method Related to 2008 Executive Awards of Performance Restricted
Stock, incorporated herein by reference to Exhibit 10.4(e2) to the
Corporations Annual Report on Form 10-K for the year ended December 31, 2008.
*10.4(b)
Form of Performance Stock Units Notice of Grant [2009],
incorporated herein by reference to Exhibit 10.4(f) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.
*10.4(c)
Form of Performance Stock Units Grant Notice [2010],
incorporated herein by reference to Exhibit 10.4(d) to the Corporations
Amendment No. 1 to Quarterly Report on Form 10-Q/A for the quarter ended
March 31, 2010.
*Other Stock-Based Incentive Plan Agreements and
Related Documents
*10.5(a)
Form of Restricted Stock Agreement for Non-Employee
Director used under the 2003 Equity Compensation Plan, incorporated herein by
reference to Exhibit 10(aa) to the Corporations Current Report on Form 8-K
dated January 18, 2005.
*10.5(b)
Form of Agreement To Defer Receipt Of Shares Following
Option Exercise, incorporated herein by reference to Exhibit 10.5(c) to the
Corporations 2004 Annual Report on Form 10-K.
*10.5(c)
Form of Agreement to Exchange Shares for RSUs and Defer
Receipt of Shares [relating to Restricted Stock], incorporated herein by
reference to Exhibit 10.5(d) to the Corporations 2004 Annual Report on Form
10-K.
*10.5(d)
Form of Stock Option Grant Notice, incorporated herein by
reference to Exhibit 10.5(e) to the Corporations 2004 Annual Report on Form
10-K.
*10.5(e)
Form of Stock Option Reload Grant Notification,
incorporated herein by reference to Exhibit 10.5(f) to the Corporations 2004
Annual Report on Form 10-K.
*10.5(f)
Form of Stock Option Grant Notice (used for executive
officers during 2005), incorporated herein by reference to Exhibit 10.5(g) to
the Corporations Quarterly Report on Form 10-Q for the quarter ended March
31, 2005.
*10.5(g)
Form of Restricted Stock Grant Notice (used during 2005),
incorporated herein by reference to Exhibit 10.5(h) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.
*10.5(h)
Form of Management Stock Option Grant Notice (used for
executive officers during 2006), incorporated herein by reference to Exhibit
10.5(j) to the Corporations Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006.
51
*10.5(i)
Form of Management Restricted Stock Grant Notice (used for
executive officers during 2006), incorporated herein by reference to Exhibit
10.5(k) to the Corporations Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006.
*10.5(j)
Sections of Director Policy pertaining to compensation,
incorporated herein by reference to Exhibit 10.5(j) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.
*10.5(k)
First Tennessee Stock Option Enhancement Program,
incorporated herein by reference to Exhibit 10.5(o) to the Corporations
Annual Report on Form 10-K for the year ended December 31, 2006.
*10.5(l)
Form of Management Stock Option Grant Notice [2007],
incorporated herein by reference to Exhibit 10.5(p) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
*10.5(m)
Form of stock option grant notice used for special grant
to Mr. Jordan in lieu of bonus, incorporated herein by reference to Exhibit
10.5(r) to the Corporations Current Report on Form 8-K filed February 29,
2008.
*10.5(n)
Form of Retention Restricted Stock award grant notice
under 2003 Equity Compensation Plan [2008], incorporated herein by reference
to Exhibit 10.5(t) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended March 31, 2008.
*10.5(o)
Form of Executive Restricted Stock Notice of Grant [2009],
incorporated herein by reference to Exhibit 10.5(o) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.
*10.5(p)
Form of Executive Special Restricted Stock Notice of Grant
[2009], incorporated herein by reference to Exhibit 10.5(p) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended March 31,
2009.
*10.5(q)
Form of Bonus Restricted Stock Notice of Grant (associated
with bonuses under the Capital Markets Incentive Compensation Plan) [2009],
incorporated herein by reference to Exhibit 10.5(q) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.
*10.5(r)
Form of Executive Restricted Stock Grant Notice [2010],
incorporated herein by reference to Exhibit 10.5(r) to the Corporations
Amendment No. 1 to Quarterly Report on Form 10-Q/A for the quarter ended
March 31, 2010.
*Management Cash Incentive Plan Documents
*10.6(a)
2002 Management Incentive Plan, as restated for amendments
through July 14, 2008, incorporated herein by reference to Exhibit 10.6(a) to
the Corporations Quarterly Report on Form 10-Q for the quarter ended June
30, 2009.
*10.6(b1)
Capital Markets Incentive Compensation Plan, incorporated
herein by reference to Exhibit 10.6(c) to the Corporations Quarterly Report
on Form 10-Q for the quarter ended September 30, 2006. Certain information in
this exhibit has been omitted pursuant to a request for confidential
treatment. The omitted information has been submitted separately to the
Securities and
52
Exchange Commission. In accordance with the Corporations
bylaws, the Corporations Board Compensation Committees charter, and action
of that Committee on July 18, 2006, the annual incentive bonus to the head of
the Capital Markets unit is subject to final review and approval by the Chief
Executive Officer and the Compensation Committee.
*10.6(b2)
Amendment to Capital Markets Incentive Compensation Plan,
incorporated herein by reference to Exhibit 10.6(c2) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
*10.6(c)
Firstpower Annual Bonus Plan, incorporated herein by
reference to Exhibit 10.1 to the Corporations Current Report on Form 8-K
filed August 21, 2008.
*Other Material Contract Exhibits relating to Employment,
Retirement, Severance, or Separation
*10.7(a1)
February 2007 form of change-in-control severance
agreement between the Corporation and its executive officers, incorporated
herein by reference to Exhibit 10.7(a2) to the Corporations Current Report
on Form 8-K dated February 20, 2007.
*10.7(a2)
Form of Amendment to February 2007 form of
change-in-control severance agreement between the Corporation and its
executive officers, incorporated herein by reference to Exhibit 10.7(a4) to
the Corporations Quarterly Report on Form 10-Q for the quarter ended
September 30, 2007.
*10.7(b)
October 2007 form of change-in-control severance agreement
between the Corporation and its executive officers, incorporated herein by
reference to Exhibit 10.7(a5) to the Corporations Quarterly Report on Form
10-Q for the quarter ended September 30, 2007.
*10.7(c)
Form of Change in Control Severance Agreement offered to
executive officers on or after November 14, 2008, incorporated herein by
reference to Exhibit 10.2 to the Corporations Current Report on Form 8-K
filed November 24, 2008.
*10.7(d1)
Form of Pension Restoration Plan (amended and restated as
of January 1, 2008), incorporated herein by reference to Exhibit 10.7(e) to
the Corporations Quarterly Report on Form 10-Q for the quarter ended
September 30, 2007.
*10.7(d2)
Form of Amendment to Pension Restoration Plan,
incorporated herein by reference to Exhibit 10.7(d2) to the Corporations
Annual Report on Form 10-K for the year ended December 31, 2009.
*10.7(e)
Conformed copy of offer letter concerning employment of
William C. Losch, III (principal financial officer), incorporated herein by
reference to Exhibit 10.1 to the Corporations Current Report on Form 8-K
filed November 24, 2008.
*10.7(f)
Conformed copy of Retention Agreement with Frank J. Gusmus
Jr. dated January 8, 2009, incorporated herein by reference to Exhibit
10.7(l) to the Corporations Annual Report on Form 10-K for the year ended
December 31, 2008.
*Other Material Contract Exhibits related to Management
or Directors
*10.8(a)
Survivor Benefits Plan, as amended and restated July 18,
2006, incorporated herein by reference to Exhibit 10.8 to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
53
*10.8(b)
Other Compensation and Benefit Arrangements for
Non-employee Directors, incorporated herein by reference to Exhibit 10.8(b)
to the Corporations Quarterly Report on Form 10-Q for the quarter ended
September 30, 2009.
*10.8(c)
Long-Term Disability Program, incorporated herein by
reference to Exhibit 10(v) to the Corporations 2003 Annual Report on Form
10-K.
*10.8(d1)
2004 Form of Indemnity Agreement between the Corporation
and its directors and executive officers, incorporated herein by reference to
Exhibit 10.13 to the Corporations 2004 Annual Report on Form 10-K.
*10.8(d2)
Form of amendment to 2004 form of Indemnity Agreement with
directors and executive officers, incorporated herein by reference to Exhibit
10.4 to the Corporations Current Report on Form 8-K filed April 28, 2008.
*10.8(e)
Form of Indemnity Agreement with directors and executive
officers (April 2008 revision), incorporated herein by reference to Exhibit
10.5 to the Corporations Current Report on Form 8-K filed April 28, 2008.
*10.8(f)+
Description of Certain Benefits Available to Executive
Officers.
*10.8(g)
Description of 2011 Salaries for Named Executive Officers,
incorporated herein by reference to Exhibit 10.1 to the Corporations Current
Report on Form 8-K filed January 20, 2011.
*10.8(h)+
Salary Stock Unit Program.
*10.8(i)
Form of letter agreement with executive officers related
to compensation, in conformity with the Troubled Asset Relief Program,
incorporated herein by reference to Exhibit 10.1 to the Corporations Current
Report on Form 8-K filed November 17, 2008.
*10.8(j)
Form of waiver required of initial senior executive
officers in connection with sale of preferred stock under the Troubled Asset
Relief Program, incorporated herein by reference to Exhibit 10.2 to the
Corporations Current Report on Form 8-K filed November 17, 2008.
Other Material Contract Exhibits
10.9
Conformed copy of Asset Purchase Agreement dated June 3,
2008 related to the sale of certain mortgage business operations and assets,
incorporated herein by reference to Exhibit 10.1 to the Corporations Current
Report on Form 8-K/A filed June 4, 2008.
10.10
Conformed copy of Mortgage Loan Subservicing Agreement
dated June 3, 2008 related to the subservicing of certain mortgage loans,
incorporated herein by reference to Exhibit 10.2 to the Corporations Current
Report on Form 8-K/A filed June 4, 2008.
10.11
Conformed copy of Servicing Rights Purchase and Sale
Agreement dated June 3, 2008 related to the sale of certain mortgage
servicing rights assets, incorporated herein by reference to Exhibit 10.3 to
the Corporations Current Report on Form 8-K/A filed June 4, 2008.
54
13+
Pages 2 through 205 of the First Horizon National
Corporation 2010 Annual Report to Shareholders, a copy of which is furnished
for the information of the Securities and Exchange Commission. Portions of
the Annual Report not incorporated herein by reference are deemed not to be
filed with the Commission.
14
Code of Ethics for Senior Financial Officers, incorporated
herein by reference to Exhibit 14 to the Corporations Annual Report on Form
10-K for the year ended December 31, 2008.
21+
Subsidiaries of the Corporation.
23+
Accountants Consents.
24+
Power of Attorney.
31(a)+
Rule 13a-14(a) Certifications of CEO (pursuant to Section
302 of Sarbanes-Oxley Act of 2002)
31(b)+
Rule 13a-14(a) Certifications of CFO (pursuant to Section
302 of Sarbanes-Oxley Act of 2002)
32(a)+
18 USC 1350 Certifications of CEO (pursuant to Section 906
of Sarbanes-Oxley Act of 2002)**
32(b)+
18 USC 1350 Certifications of CFO (pursuant to Section 906
of Sarbanes-Oxley Act of 2002)**
99.1+
Principal Executive Officers Certificate (pursuant to 31
CFR 30.15)
99.2+
Principal Financial Officers Certificate (pursuant to 31
CFR 30.15)
101+
The following financial information from First Horizon
National Corporations Annual Report on Form 10-K for the year ended December
31, 2010, formatted in XBRL: (i) Consolidated Statements of Condition at
December 31, 2010 and 2009; (ii) Consolidated Statements of Income for the
Years Ended December 31, 2010, 2009, and 2008; (iii) Consolidated Statements
of Shareholders Equity for the Years Ended December 31, 2010, 2009, and
2008; (iv) Consolidated Statements of Cash Flows for the Years Ended December
31, 2010, 2009, and 2008; (v) Notes to the Consolidated Financial Statements,
tagged as blocks of text.***
101.INS+
XBRL Instance Document***
101.SCH+
XBRL Taxonomy Extension Schema***
101.CAL+
XBRL Taxonomy Extension Calculation Linkbase***
101.LAB+
XBRL Taxonomy Extension Label Linkbase***
101.PRE+
XBRL Taxonomy Extension Presentation Linkbase***
101.DEF+
XBRL Taxonomy Extension Definition Linkbase***
**
Furnished pursuant to 18 U.S.C. Section 1350; not filed as
part of this Report or as a separate disclosure document.
***
In accordance with
Regulation S-T, the interactive data file information in Exhibit No. 101 to
the Annual Report on Form 10-K shall be deemed furnished and not filed.
55
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FIRST
HORIZON NATIONAL CORPORATION
Date:
February 25, 2011
By:
/s/ William
C. Losch III
William C.
Losch III, Executive Vice
President
and Chief Financial Officer
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature
Title
Date
D. Bryan
Jordan *
President,
Chief Executive Officer,
and Director (principal executive officer)
February 25, 2011
D. Bryan
Jordan
William C.
Losch III*
Executive
Vice President and Chief
Financial Officer (principal
financial officer)
February 25, 2011
William C.
Losch III
James F.
Keen*
Executive
Vice President and
Chief Accounting Officer (principal
accounting officer)
February 25, 2011
James F.
Keen
Michael D.
Rose*
Chairman of
the Board and Director
February 25, 2011
Michael D.
Rose
Robert B.
Carter*
Director
February 25, 2011
Robert B.
Carter
Director
John C. Compton
Mark A.
Emkes*
Director
February 25, 2011
Mark A.
Emkes
Vicky B.
Gregg*
Director
February 25, 2011
Vicky B.
Gregg
James A.
Haslam, III*
Director
February 25, 2011
James A.
Haslam, III
R. Brad
Martin*
Director
February 25, 2011
R. Brad
Martin
Vicki R.
Palmer *
Director
February 25, 2011
Vicki R.
Palmer
56
Colin V.
Reed*
Director
February 25, 2011
Colin V.
Reed
William B.
Sansom*
Director
February 25, 2011
William B.
Sansom
Luke Yancy
III*
Director
February 25, 2011
Luke Yancy
III
*By:
/s/
Clyde A. Billings, Jr.
February 25, 2011
Clyde A.
Billings, Jr.
As
Attorney-in-Fact
57
EXHIBIT INDEX
Exhibits
marked with an * represent a management contract or compensatory plan or
arrangement required to be identified and filed as an exhibit.
Exhibits
marked with a + are filed herewith.
The phrase
2010 named executive officers refers to those executive officers whose 2010
compensation is described in detail in the Corporations 2011 Proxy
Statement.
In many
agreements filed as exhibits, each party makes representations and warranties
to other parties. Those representations and warranties are made only to and
for the benefit of those other parties in the context of a business contract.
Exceptions to such representations and warranties may be partially or fully
waived by such parties, or not enforced by such parties, in their discretion.
No such representation or warranty may be relied upon by any other person for
any purpose.
3.1
Restated
Charter of the Corporation, incorporated herein by reference to Exhibit 3.1
to the Corporations Current Report on Form 8-K filed July 21, 2010.
3.2
Bylaws of
First Horizon National Corporation, as amended and restated February 23,
2011, incorporated herein by reference to Exhibit 3.1 to the Corporations
Current Report on Form 8-K dated February 23, 2011.
3.3
Warrant to
Purchase Common Stock dated November 14, 2008 issued in connection with sale
of preferred stock under the Troubled Asset Relief Program, incorporated
herein by reference to Exhibit 3.2 to the Corporations Current Report on
Form 8-K filed November 17, 2008.
4.1
The
Corporation and certain of its consolidated subsidiaries have outstanding
certain long-term debt. See Note 10 in the Corporations 2010 Annual Report
to Shareholders. At December 31, 2010, none of such debt exceeded 10% of the
total assets of the Corporation and its consolidated subsidiaries. Thus,
copies of constituent instruments defining the rights of holders of such debt
are not required to be included as exhibits. The Corporation agrees to
furnish copies of such instruments to the Securities and Exchange Commission
upon request.
4.2
Three
principal agreements related to a note program for First Tennessee Bank
National Association (the Bank): (i) form of Distribution Agreement dated
February 18, 2005 among the registrant, the Bank, and the agents therein
named; (ii) form of Fiscal and Paying Agency Agreement dated as of February
18, 2005 between the Bank and JPMorgan Chase Bank, National Association; and
(iii) form of Interest Calculation Agreement dated as of February 18, 2005 between
the Bank and JPMorgan Chase Bank, National Association. All such agreements
are incorporated herein by reference to Exhibit 4(c) to the Corporations
Current Report on Form 8-K filed February 25, 2005.
*Deferral
Plans and Related Exhibits
*10.1(a1)
Directors
and Executives Deferred Compensation Plan, as amended and restated,
incorporated herein by reference to Exhibit 10(h) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended 6-30-03 and form of
individual agreement, incorporated herein by reference to Exhibit 10(h) to
the Corporations 1996 Annual report on Form 10-K.
58
*10.1(a2)
Form of
Amendment to Directors and Executives Deferred Compensation Plan,
incorporated herein by reference to Exhibit 10.1(a3) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
*10.1(a3)
Rate
Applicable to Directors and Executive Officers Under the Directors and
Executives Deferred Compensation Plan, incorporated herein by reference to
Exhibit 10.1(a2) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended September 30, 2010.
*10.1(b)
Director
Deferral Agreements with schedule, incorporated herein by reference to
Exhibit 10(k) to the Corporations 1992 Annual Report on Form 10-K and
Exhibit 10(j) to the Corporations 1995 Annual Report on Form 10-K.
*10.1(c)
Form of
First Horizon National Corporation Deferred Compensation Plan as Amended and
Restated, incorporated herein by reference to Exhibit 10.1(c) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended September
30, 2007.
*10.1(d)
[1995]
Non-Employee Directors Deferred Compensation Stock Option Plan, as restated
for amendments through December 15, 2008, incorporated herein by reference to
Exhibit 10.1(d) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009.
*10.1(e)
2000
Non-Employee Directors Deferred Compensation Stock Option Plan, as restated
for amendments through December 15, 2008, incorporated herein by reference to
Exhibit 10.1(e) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended June 30, 2009.
*10.1(f)
[1991] Bank
Advisory Director Deferral Plan, as restated for amendments through December
15, 2008, incorporated herein by reference to Exhibit 10.1(f) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended June 30,
2009.
*10.1(g)
[1996] Bank
Director and Advisory Board Member Deferral Plan, as restated for amendments
through December 15, 2008, incorporated herein by reference to Exhibit
10.1(g) to the Corporations Quarterly Report on Form 10-Q for the quarter
ended June 30, 2009.
*10.1(h)
2002 Bank
Director and Advisory Board Member Deferral Plan, as restated for amendments
through December 15, 2008, incorporated herein by reference to Exhibit
10.1(h) to the Corporations Quarterly Report on Form 10-Q for the quarter
ended June 30, 2009.
*10.1(i)
Form of
First Horizon Deferred Compensation Plan as Amended and Restated,
incorporated herein by reference to Exhibit 10.1(i) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
*10.1(j)
Form of FTN
Financial Deferred Compensation Plan Amended and Restated Effective January
1, 2008, incorporated herein by reference to Exhibit 10.1(j) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended September
30, 2007.
*10.1(k)
Form of
Deferred Compensation Agreement used under the Corporations 2003 Equity
Compensation Plan and First Tennessee National Corporation Non-Qualified
Deferred Compensation Plan, along with form of Salary, Commission, and Annual
Bonus Deferral Programs Overview, form of Deferred Stock Option (DSO)
Program Summary, and description of share receipt deferral feature,
incorporated herein by reference to Exhibit 10(z) to the Corporations
Current Report on Form 8-K dated January 3, 2005.
59
*10.1(l)
Description
of April 19, 2005 amendments to the First Horizon National Corporation
Nonqualified Deferred Compensation Plan (formerly First Tennessee National
Corporation Nonqualified Deferred Compensation Plan), incorporated herein by
reference to Exhibit 10.1(l) to the Corporations Current Report on Form 8-K
dated April 19, 2005.
*10.1(m)
Description
of changes to options granted in January 2005 to certain employees in
connection with deferrals of salary earned in 2004, incorporated herein by
reference to Exhibit 10.1(m) to the Corporations Current Report on Form 8-K
dated October 19, 2005.
*Stock-Based
Incentive Plans
*10.2(a)
1990 Stock
Option Plan, as amended, and 1-21-97, 10-22-97, and 10-18-00 amendments,
incorporated herein by reference to Exhibit 10(f) to the Corporations 1992,
1996, 1997 and 2000 Annual Reports on Form 10-K.
*10.2(b)
1992
Restricted Stock Incentive Plan, as restated for amendments through December
15, 2008, incorporated herein by reference to Exhibit 10.2(b) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended June 30,
2009.
*10.2(c)
1995
Employee Stock Option Plan, as restated for amendments through December 15,
2008, incorporated herein by reference to Exhibit 10.2(c) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended June 30,
2009.
*10.2(d)
1997
Employee Stock Option Plan, as restated for amendments through December 15,
2008, incorporated herein by reference to Exhibit 10.2(d) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended June 30,
2009.
*10.2(e)
2000
Employee Stock Option Plan, as restated for amendments through December 15,
2008, incorporated herein by reference to Exhibit 10.2(e) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended June 30,
2009.
*10.2(f)
2003 Equity
Compensation Plan (as amended and restated April 20, 2010 and as adjusted for
all stock dividends through April 1, 2010), incorporated by reference to
Appendix A to the Corporations Proxy Statement for its annual meeting on
April 20, 2010.
*TARSAP/PARSAP
Restricted Stock Agreements and Related Documents
*10.3(a)
Form of accelerated
(performance based) Restricted Stock Agreement under the 1992 Restricted
Stock Incentive Plan, incorporated herein by reference to Exhibit 10.3(a) to
the Corporations 2004 Annual Report on Form 10-K.
*10.3(b)
Form of
accelerated (performance based) Restricted Stock Agreement under the 2003
Equity Compensation Plan, incorporated herein by reference to Exhibit 10.3(b)
to the Corporations 2004 Annual Report on Form 10-K.
*10.3(c)
Description
of performance criteria related to TARSAP/PARSAP awards granted prior to
2005, incorporated herein by reference to Exhibit 10.3(c) to the
Corporations 2004 Annual Report on Form 10-K.
60
*10.3(d)
Form of 2005
PARSAP Agreement (for executive officers other than the CEO), incorporated
herein by reference to Exhibit 10.3(e) to the Corporations Quarterly Report
on Form 10-Q for the quarter ended March 31, 2005.
*10.3(e)
Description
of performance criteria related to 2005 PARSAP Agreement, incorporated herein
by reference to Exhibit 10.3(f) to the Corporations Quarterly Report on Form
10-Q for the quarter ended March 31, 2005.
*Performance-Based
Incentive Award Documents
*10.4(a1)
Form of
Performance Restricted Stock award grant notice under 2003 Equity
Compensation Plan [2008], incorporated herein by reference to Exhibit 10.5(s)
to the Corporations Quarterly Report on Form 10-Q for the quarter ended
March 31, 2008.
*10.4(a2)
Text of
Notice Announcing Modification of Performance Goal Calculation Method Related
to 2008 Executive Awards of Performance Restricted Stock, incorporated herein
by reference to Exhibit 10.4(e2) to the Corporations Annual Report on Form
10-K for the year ended December 31, 2008.
*10.4(b)
Form of
Performance Stock Units Notice of Grant [2009], incorporated herein by
reference to Exhibit 10.4(f) to the Corporations Quarterly Report on Form
10-Q for the quarter ended March 31, 2009.
*10.4(c)
Form of
Performance Stock Units Grant Notice [2010], incorporated herein by reference
to Exhibit 10.4(d) to the Corporations Amendment No. 1 to Quarterly Report
on Form 10-Q/A for the quarter ended March 31, 2010.
*Other
Stock-Based Incentive Plan Agreements and Related Documents
*10.5(a)
Form of
Restricted Stock Agreement for Non-Employee Director used under the 2003
Equity Compensation Plan, incorporated herein by reference to Exhibit 10(aa)
to the Corporations Current Report on Form 8-K dated January 18, 2005.
*10.5(b)
Form of
Agreement To Defer Receipt Of Shares Following Option Exercise, incorporated
herein by reference to Exhibit 10.5(c) to the Corporations 2004 Annual
Report on Form 10-K.
*10.5(c)
Form of
Agreement to Exchange Shares for RSUs and Defer Receipt of Shares [relating
to Restricted Stock], incorporated herein by reference to Exhibit 10.5(d) to
the Corporations 2004 Annual Report on Form 10-K.
*10.5(d)
Form of
Stock Option Grant Notice, incorporated herein by reference to Exhibit
10.5(e) to the Corporations 2004 Annual Report on Form 10-K.
*10.5(e)
Form of
Stock Option Reload Grant Notification, incorporated herein by reference to
Exhibit 10.5(f) to the Corporations 2004 Annual Report on Form 10-K.
*10.5(f)
Form of
Stock Option Grant Notice (used for executive officers during 2005),
incorporated herein by reference to Exhibit 10.5(g) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.
61
*10.5(g)
Form of
Restricted Stock Grant Notice (used during 2005), incorporated herein by
reference to Exhibit 10.5(h) to the Corporations Quarterly Report on Form
10-Q for the quarter ended March 31, 2005.
*10.5(h)
Form of
Management Stock Option Grant Notice (used for executive officers during
2006), incorporated herein by reference to Exhibit 10.5(j) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended June 30,
2006.
*10.5(i)
Form of
Management Restricted Stock Grant Notice (used for executive officers during
2006), incorporated herein by reference to Exhibit 10.5(k) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended June 30,
2006.
*10.5(j)
Sections of
Director Policy pertaining to compensation, incorporated herein by reference
to Exhibit 10.5(j) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended September 30, 2010.
*10.5(k)
First
Tennessee Stock Option Enhancement Program, incorporated herein by reference
to Exhibit 10.5(o) to the Corporations Annual Report on Form 10-K for the
year ended December 31, 2006.
*10.5(l)
Form of
Management Stock Option Grant Notice [2007], incorporated herein by reference
to Exhibit 10.5(p) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended June 30, 2007.
*10.5(m)
Form of
stock option grant notice used for special grant to Mr. Jordan in lieu of
bonus, incorporated herein by reference to Exhibit 10.5(r) to the
Corporations Current Report on Form 8-K filed February 29, 2008.
*10.5(n)
Form of
Retention Restricted Stock award grant notice under 2003 Equity Compensation
Plan [2008], incorporated herein by reference to Exhibit 10.5(t) to the
Corporations Quarterly Report on Form 10-Q for the quarter ended March 31,
2008.
*10.5(o)
Form of
Executive Restricted Stock Notice of Grant [2009], incorporated herein by
reference to Exhibit 10.5(o) to the Corporations Quarterly Report on Form
10-Q for the quarter ended March 31, 2009.
*10.5(p)
Form of
Executive Special Restricted Stock Notice of Grant [2009], incorporated
herein by reference to Exhibit 10.5(p) to the Corporations Quarterly Report
on Form 10-Q for the quarter ended March 31, 2009.
*10.5(q)
Form of
Bonus Restricted Stock Notice of Grant (associated with bonuses under the
Capital Markets Incentive Compensation Plan) [2009], incorporated herein by
reference to Exhibit 10.5(q) to the Corporations Quarterly Report on Form
10-Q for the quarter ended March 31, 2009.
*10.5(r)
Form of
Executive Restricted Stock Grant Notice [2010], incorporated herein by
reference to Exhibit 10.5(r) to the Corporations Amendment No. 1 to
Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2010.
62
*Management
Cash Incentive Plan Documents
*10.6(a)
2002
Management Incentive Plan, as restated for amendments through July 14, 2008,
incorporated herein by reference to Exhibit 10.6(a) to the Corporations Quarterly
Report on Form 10-Q for the quarter ended June 30, 2009.
*10.6(b1)
Capital
Markets Incentive Compensation Plan, incorporated herein by reference to
Exhibit 10.6(c) to the Corporations Quarterly Report on Form 10-Q for the
quarter ended September 30, 2006. Certain information in this exhibit has
been omitted pursuant to a request for confidential treatment. The omitted
information has been submitted separately to the Securities and Exchange
Commission. In accordance with the Corporations bylaws, the Corporations
Board Compensation Committees charter, and action of that Committee on July
18, 2006, the annual incentive bonus to the head of the Capital Markets unit
is subject to final review and approval by the Chief Executive Officer and
the Compensation Committee.
*10.6(b2)
Amendment to
Capital Markets Incentive Compensation Plan, incorporated herein by reference
to Exhibit 10.6(c2) to the Corporations Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007.
*10.6(c)
Firstpower
Annual Bonus Plan, incorporated herein by reference to Exhibit 10.1 to the
Corporations Current Report on Form 8-K filed August 21, 2008.
*Other
Material Contract Exhibits relating to Employment, Retirement, Severance, or
Separation
*10.7(a1)
February
2007 form of change-in-control severance agreement between the Corporation
and its executive officers, incorporated herein by reference to Exhibit
10.7(a2) to the Corporations Current Report on Form 8-K dated February 20,
2007.
*10.7(a2)
Form of
Amendment to February 2007 form of change-in-control severance agreement
between the Corporation and its executive officers, incorporated herein by
reference to Exhibit 10.7(a4) to the Corporations Quarterly Report on Form
10-Q for the quarter ended September 30, 2007.
*10.7(b)
October 2007
form of change-in-control severance agreement between the Corporation and its
executive officers, incorporated herein by reference to Exhibit 10.7(a5) to
the Corporations Quarterly Report on Form 10-Q for the quarter ended
September 30, 2007.
*10.7(c)
Form of
Change in Control Severance Agreement offered to executive officers on or
after November 14, 2008, incorporated herein by reference to Exhibit 10.2 to
the Corporations Current Report on Form 8-K filed November 24, 2008.
*10.7(d1)
Form of
Pension Restoration Plan (amended and restated as of January 1, 2008),
incorporated herein by reference to Exhibit 10.7(e) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
*10.7(d2)
Form of
Amendment to Pension Restoration Plan, incorporated herein by reference to
Exhibit 10.7(d2) to the Corporations Annual Report on Form 10-K for the year
ended December 31, 2009.
*10.7(e)
Conformed
copy of offer letter concerning employment of William C. Losch, III
(principal financial officer), incorporated herein by reference to Exhibit
10.1 to the Corporations Current Report on Form 8-K filed November 24, 2008.
63
*10.7(f)
Conformed
copy of Retention Agreement with Frank J. Gusmus Jr. dated January 8, 2009,
incorporated herein by reference to Exhibit 10.7(l) to the Corporations
Annual Report on Form 10-K for the year ended December 31, 2008.
*Other
Material Contract Exhibits related to Management or Directors
*10.8(a)
Survivor
Benefits Plan, as amended and restated July 18, 2006, incorporated herein by
reference to Exhibit 10.8 to the Corporations Quarterly Report on Form 10-Q
for the quarter ended September 30, 2006.
*10.8(b)
Other
Compensation and Benefit Arrangements for Non-employee Directors,
incorporated herein by reference to Exhibit 10.8(b) to the Corporations
Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
*10.8(c)
Long-Term
Disability Program, incorporated herein by reference to Exhibit 10(v) to the
Corporations 2003 Annual Report on Form 10-K.
*10.8(d1)
2004 Form of
Indemnity Agreement between the Corporation and its directors and executive
officers, incorporated herein by reference to Exhibit 10.13 to the Corporations
2004 Annual Report on Form 10-K.
*10.8(d2)
Form of
amendment to 2004 form of Indemnity Agreement with directors and executive
officers, incorporated herein by reference to Exhibit 10.4 to the
Corporations Current Report on Form 8-K filed April 28, 2008.
*10.8(e)
Form of
Indemnity Agreement with directors and executive officers (April 2008
revision), incorporated herein by reference to Exhibit 10.5 to the
Corporations Current Report on Form 8- K filed April 28, 2008.
*10.8(f)+
Description
of Certain Benefits Available to Executive Officers.
*10.8(g)
Description
of 2011 Salaries for Named Executive Officers, incorporated herein by
reference to Exhibit 10.1 to the Corporations Current Report on Form 8-K
filed January 20, 2011.
*10.8(h)+
Salary Stock
Unit Program.
*10.8(i)
Form of
letter agreement with executive officers related to compensation, in
conformity with the Troubled Asset Relief Program, incorporated herein by
reference to Exhibit 10.1 to the Corporations Current Report on Form 8-K
filed November 17, 2008.
*10.8(j)
Form of
waiver required of initial senior executive officers in connection with sale
of preferred stock under the Troubled Asset Relief Program, incorporated
herein by reference to Exhibit 10.2 to the Corporations Current Report on
Form 8-K filed November 17, 2008.
Other
Material Contract Exhibits
10.9
Conformed
copy of Asset Purchase Agreement dated June 3, 2008 related to the sale of
certain mortgage business operations and assets, incorporated herein by
reference to Exhibit 10.1 to the Corporations Current Report on Form 8-K/A
filed June 4, 2008.
64
10.10
Conformed
copy of Mortgage Loan Subservicing Agreement dated June 3, 2008 related to
the subservicing of certain mortgage loans, incorporated herein by reference
to Exhibit 10.2 to the Corporations Current Report on Form 8-K/A filed June
4, 2008.
10.11
Conformed
copy of Servicing Rights Purchase and Sale Agreement dated June 3, 2008
related to the sale of certain mortgage servicing rights assets, incorporated
herein by reference to Exhibit 10.3 to the Corporations Current Report on
Form 8-K/A filed June 4, 2008.
13+
Pages 2
through 205 of the First Horizon National Corporation 2010 Annual Report to
Shareholders, a copy of which is furnished for the information of the
Securities and Exchange Commission. Portions of the Annual Report not
incorporated herein by reference are deemed not to be filed with the
Commission.
14
Code of
Ethics for Senior Financial Officers, incorporated herein by reference to
Exhibit 14 to the Corporations Annual Report on Form 10-K for the year ended
December 31, 2008.
21+
Subsidiaries
of the Corporation.
23+
Accountants
Consents.
24+
Power of
Attorney.
31(a)+
Rule
13a-14(a) Certifications of CEO (pursuant to Section 302 of Sarbanes-Oxley
Act of 2002)
31(b)+
Rule
13a-14(a) Certifications of CFO (pursuant to Section 302 of Sarbanes-Oxley
Act of 2002)
32(a)+
18 USC 1350
Certifications of CEO (pursuant to Section 906 of Sarbanes-Oxley Act of 2002)**
32(b)+
18 USC 1350
Certifications of CFO (pursuant to Section 906 of Sarbanes-Oxley Act of 2002)**
99.1+
Principal
Executive Officers Certificate (pursuant to 31 CFR 30.15)
99.2+
Principal
Financial Officers Certificate (pursuant to 31 CFR 30.15)
101+
The
following financial information from First Horizon National Corporations
Annual Report on Form 10-K for the year ended December 31, 2010, formatted in
XBRL: (i) Consolidated Statements of Condition at December 31, 2010 and 2009;
(ii) Consolidated Statements of Income for the Years Ended December 31, 2010,
2009, and 2008; (iii) Consolidated Statements of Shareholders Equity for the
Years Ended December 31, 2010, 2009, and 2008; (iv) Consolidated Statements
of Cash Flows for the Years Ended December 31, 2010, 2009, and 2008; (v)
Notes to the Consolidated Financial Statements, tagged as blocks of text.***
101.INS+
XBRL
Instance Document***
101.SCH+
XBRL
Taxonomy Extension Schema***
101.CAL+
XBRL
Taxonomy Extension Calculation Linkbase***
101.LAB+
XBRL
Taxonomy Extension Label Linkbase***
65
101.PRE+
XBRL
Taxonomy Extension Presentation Linkbase***
101.DEF+
XBRL
Taxonomy Extension Definition Linkbase***
**
Furnished pursuant to 18
U.S.C. Section 1350; not filed as part of this Report or as a separate
disclosure document.
***
In accordance with
Regulation S-T, the interactive data file information in Exhibit No. 101 to
the Annual Report on Form 10-K shall be deemed furnished and not
filed.
66
EX-10.8(F)
2
c64260_ex10-8f.htm
EXHIBIT
10.8(f)
LIST OF
CERTAIN BENEFITS
AVAILABLE TO CERTAIN EXECUTIVE OFFICERS
(As in effect February 1, 2011)
The following benefits are
available to some or all executive officers (among other persons), but not to
all full-time employees of the Corporation.
1)
If the Board has
authorized a stock repurchase program, an executive may request the
repurchase of shares of the Corporation at the days volume-weighted average
price with no payment of any fees or commissions if the repurchase of the
shares is otherwise permissible under the authorized program.
2)
The Corporations
disability insurance program generally is available to employees. Persons
above a certain grade level, including executive officers, receive an
additional benefit. Executive officers are paid an amount each year intended
to reimburse premiums associated with the additional benefit.
3)
The Corporation makes
available or pays for tax preparation, tax consulting, estate planning, and
financial counseling services for executive officers. Current limits on this
benefit applicable to executives are: $15,000 per year for the CEO ($22,500
in any year in which a new financial counseling firm is engaged); and $5,000
per year for other executives ($7,500 in any year in which a new financial
counseling firm is engaged).
4)
On occasion spouses of
certain employees, including executive officers, are asked by the
Corporation, for business reasons, to accompany the employee on a business
trip or function. In those cases the Corporation may pay the travel, accommodation,
and other expenses of the spouse incidental to the trip or function, some or
all of which can result in taxable income for the employee. Also, on occasion
the Corporation may provide or pay for a memento, gift, or other gratuity
that the employee or spouse receives in connection with the business trip or
function.
5)
The Corporation provides a
relocation benefit to a wide range of employees, including executive
officers, under varying circumstances and subject to certain constraints. The
benefit may be in the form of an allowance or a reimbursement of actual
expenses, and includes a tax gross up feature.
EX-10.8(H)
3
c64260_ex10-8h.htm
Exhibit 10.8(h)
Salary Stock Unit Program
(Last revised January 18, 2011)
1.
Purpose.
The purpose of the Program is to link more of each participants compensation
to the companys stock performance and facilitate retention of key
executives.
2.
Committee
Actions. From time to time the Compensation
Committee (CC) (a) will identify persons who are to receive a portion of
salary in the form of salary stock units (SSUs), and (b) will determine the
dollar amount of salary that each such person will receive in the form of
SSUs, sometimes called the SSU crediting rate. The portion of salary in the
form of SSUs may be in lieu of cash salary or supplemental to prior cash
salary rates. The crediting of SSUs to each such person will continue while
he or she is employed with FHN until the CC changes or ends the persons participation
or this SSU Program, unless the CC approves an automatic sunset date for
participation in this Program or unless the CC limits participation to a
specified year and fails to renew participation. It is expected that the CC
will reconsider these determinations at least once each year, and in doing so
the CC may make changes for a new year or period retroactive to the beginning
of that year or period. The CC may change or eliminate the dollar amount of
salary to be paid to a participant in the form of SSUs at any time; although
such action would not affect previously-credited SSUs, no participant has any
right to continue to receive new SSUs at any specific dollar level or at all.
In addition, the CC may accelerate settlement of SSUs globally or for any
participant based on the value of FHN stock at that time, and may change the
terms of SSUs or this Program at any time.
3.
SSU Terms
and Mechanics.
a.
For each
person designated to participate in the Program by CC action beginning in
2011, crediting of SSUs will occur quarterly in arrears commencing with the
quarter in which CC action occurs, unless otherwise provided by the CC.
Ideally, crediting dates will occur late in March, June, September, and
December. However, in all cases crediting dates are subject to adjustment or
delay for administrative reasons, and the CC may direct that a date be used
in a particular instance. This provision does not disturb SSUs credited prior
to January 1, 2011.
b.
When SSUs
are credited to a participant for a particular quarter, the number of SSUs
will equal the dollar amount of salary for that quarter to be paid in the
form of SSUs (net of any applicable withholding taxes, as provided in
paragraph f below) divided by the Ten-Day Average Value for that quarter. The
number of credited SSUs will be calculated as the administrator determines
but will not be rounded up. In any case where the pay period is less than a
full quarter, a similar calculation using an appropriate Ten-Day Average
Value will be performed for the shorter period as determined by the
administrator. If the period is less than ten trading days, the value used
will be the average closing price for all trading days within that period.
c.
For purposes
of this Program, the Ten-Day Average Value for any quarter or shorter
period is the average closing share price of FHN stock for any period of ten
consecutive trading days selected by the administrator and occurring within
that quarter or period. The administrator generally will favor the selection
of a ten-day period later in the quarter or other period rather than earlier,
but in each case may select the specific ten-day period based on administrative
convenience. In addition, if a dividend record date or ex-date might occur
within the valuation period the administrator may select the ten-day period
to avoid unfair or inappropriate enlargement or dilution of value.
d.
Settlement.
(i)
SSUs credited in 2010
General Rule. Each
SSU credited in 2010 entitles the participant to receive the cash value of one
share of FHN stock valued at the Ten-Day Average Value for the second quarter
of 2012.
1
Settlement
of SSUs will be made within 30 business days after the last day of the
ten-day period used for valuation. In converting SSUs to cash values when
settled, amounts will be calculated as the administrator determines but will
not be rounded up.
SEOs. For those
participants who, in 2010, were senior executive officers (SEOs) under the
Troubled Asset Relief Program (TARP) rules, the General Rule above applies
subject to the changes provided in this paragraph. For SEOs, SSUs credited in
the first two quarters of 2010 will be paid in March 2011, and SSUs credited
in the second two quarters of 2010 will be paid in September 2011. The administrator
will cause the SSUs to be paid early in each such month, subject to
administrative considerations. Each SSU payment to SEOs will be calculated
using the Ten-Day Average Value for February in respect of the March payment,
and using the Ten-Day Average Value for August in respect of the September
payment.
(ii)
SSUs Credited after 2010
Each SSU
entitles the participant to receive the cash value of one share of FHN stock.
SSUs credited in the first two quarters of any given year will be paid in
June or July, and SSUs credited in the second two quarters of that year will
be paid in December, of the year following the year of crediting. SSUs paid
in June or July will be valued using the Ten-Day Average Value for the second
quarter of the year of payment, and SSUs paid in December will be valued
using the Ten-Day Average Value for the fourth quarter of that year. In
converting SSUs to cash values when settled, dollar amounts will be
calculated and rounded down (not up) as the administrator determines.
e.
SSUs will
not be settled in actual shares of stock and will have no voting rights. An
SSU will not be represented by any certificate or document, but instead will
be credited on the books of FHN or its administrative agent. SSUs are a component
of or supplement to salary and are not associated with any plan of FHN.
f.
Taxes will
be withheld in connection with a crediting or settlement event (as
applicable) and remitted to government authorities as necessary or
appropriate. Taxes withheld in connection with crediting may be withheld from
salary paid in the form of cash or other contemporaneously paid compensation,
or may reduce the number of SSUs credited, or both, as the administrator
determines. Participants are not permitted to elect to be taxed on SSUs at
the time of crediting. The current administrative determinations of these
matters are: any FICA, medicare, and income taxes withheld in connection with
crediting SSUs will reduce the dollar amount of salary which is to be converted
into SSUs.
g.
SSUs will be
adjusted for stock dividends and splits that occur after crediting and prior
to settlement in order to prevent enlargement or dilution of value. In making
such adjustments, SSUs will be treated in a manner similar to ordinary shares
except that calculated numbers of SSUs are to be rounded down (not up) as the
administrator determines. The administrator will make appropriate adjustments
for SSUs credited or settled near dividend and split record dates to account
for the effects of ex-trading dates in the market prices of FHN shares, again
in order to prevent enlargement or dilution of value.
h.
If cash
dividends are declared on FHN shares during the time that a participant holds
SSUs, a cash amount will be credited to the participant equivalent to the
cash dividend that would have been paid on a like number of ordinary FHN
shares, calculated and rounded down (not up) as the administrator determines.
Credited cash dividend equivalent amounts will not be converted into SSUs,
will not accrue interest, and will be paid to the participant at the time
that the associated SSUs are paid. Notwithstanding the foregoing, the
administrator may prevent or omit the crediting of a cash dividend equivalent
in order to prevent a participant from benefiting twice from that
2
dividend
whenever the dividends record date or ex-date occurs near the time of the
ten-day period used for the Ten-Day Average Value.
i.
SSUs are not
transferable.
j.
Absent other
action by the CC, if FHN merges or consolidates and as a result FHN shares
cease to be publicly outstanding, then outstanding SSUs will be converted
into units denominated in shares of the surviving or resulting company based
on the transaction value. The conversion will be accomplished, to the extent
practicable, so as to prevent enlargement or dilution of value.
k.
SSUs are a
special form of deferred salary. When cash salary no longer is paid to a
participant, SSUs no longer will be credited. If cash salary previously paid
to a participant were subject to forfeiture or reclamation for any reason,
the associated SSUs similarly would be subject to forfeiture or reclamation.
However, SSU crediting rates and cash salary rates may be adjusted
independently of each other; a change in a participants cash salary rate
does not automatically result in any change in that persons SSU crediting
rate, and vice-versa.
l.
The timing,
pricing, and other administrative determinations associated with SSU
recipients who are subject to Form 4 reporting may differ from those of other
Program participants. Currently, no such differences have been approved by
the administrator.
4.
Termination
of Employment.
a.
Subject to
the exceptions set forth below, credited SSUs will be forfeited unless the
participant is continuously employed by FHN or a subsidiary through the
payment date of the SSUs.
b.
Notwithstanding
paragraph a., if a participant dies, his or her credited and unpaid SSUs will
not be forfeited as a result of death, and settlement of the SSUs will be
accelerated in an equitable and appropriate manner determined by the
administrator. The valuation date for any such settlement will be the first
trading day following the date of death.
c.
Notwithstanding
paragraph a., if a participants employment with FHN terminates as a result
of normal or early retirement or disability, then his or her credited and
unpaid SSUs will not be forfeited as a result of that termination, and settlement
of the SSUs will occur at the ordinary times set forth in this Program. For
this purpose, normal retirement and early retirement have the meanings
given in procedure 43 of the Equity Award Administration Procedures (revd
July 20, 2009), and disability means a disability that would qualify as a
total and permanent disability under the long-term disability plan then in
effect at FHN, or (if different) at the FHN subsidiary employing the
participant, at the onset of such total and permanent disability.
d.
Notwithstanding
paragraph c., a participant who has terminated employment but retained SSUs
due to retirement or disability shall forfeit all of those retained SSUs if,
at any time during the period prior to the latest payment date of any SSUs
credited to him or her at the time of termination, the participant engages in
any competitive activity. Each of the CC and the administrator has the
discretion to determine whether any particular activity is competitive with
FHN or any of its subsidiaries.
e.
Enforcement
of the vesting and forfeiture conditions above is subject to the U.S.
Department of the Treasury compensation rules applicable during the period as
to which FHN was subject to the TARP rules restricting compensation.
Currently it is uncertain whether the TARP rules prohibit FHN from imposing
vesting and forfeiture conditions upon SSUs credited to participants who are
SEOs at the time of crediting. As long as such uncertainty exists, this
Program will be interpreted to assume that the TARP rules prohibit the
imposition of a vesting condition on SEO participants. However, if the TARP
rules are later amended or interpreted so that the vesting condition is
permitted with respect to SEOs, FHN retains the right to impose the vesting
condition on SEOs to the maximum extent allowed, including retroactively to
any time when uncertainty existed.
3
5.
No Elective
Deferrals. Participants may not elect to defer the
settlement of SSUs beyond the mandatory deferral period provided in the
program above. SSUs are not eligible for elective deferral under any deferral
plan or program of FHN, even if those plans or programs generally allow
deferral of salary. Outstanding salary deferral elections shall not apply to
SSUs.
6.
Treatment of
SSUs as Base Salary. SSUs are, or are not, to be
treated as base salary under the plans and programs listed below. For any
plan or program not listed, SSUs shall not be treated as base salary unless
the administrator determines otherwise; any such determinations must be reported
to the CC at or before its next quarterly meeting.
SSUs,
measured at the crediting rate and date rather than the ultimate payment
amount and date, are treated as base salary for the following (subject to the
limitation in the next sentence):
a.
Retirement
and retirement restoration plans, including pension and savings plans.
b.
All life and
disability benefit and insurance programs.
c.
Other
programs treated as benefit programs by FHNs Human Resources division.
This provision does not include severance programs.
For each
such case, the amount of SSUs treated as base salary shall not exceed
$200,000 per person per calendar year.
SSUs are not
treated as base salary for the following:
d.
Change in
control severance agreements and any change in control severance plan or
program that may apply to a holder of SSUs.
e.
Any other
present or future severance plan, program, or agreement.
7.
Administration.
The Chief Human Resources Officer is the program administrator with authority
to oversee all administrative matters related to the SSU program. All
administrative actions must further the purposes of the program and be
compatible with legal requirements and appropriate tax and accounting
outcomes. The administrator may deviate from or modify the following program
provisions under this authority: any provision governing a crediting date or
a settlement date or a date as of which FHN stock is valued to convert cash
amounts into SSUs, or SSUs into cash, provided that such a provision may be
changed only out of demonstrable administrative necessity and must be
reported at the next quarterly CC meeting; for any calculation, any provision
governing a number of decimal places or a rounding convention; and, any
provision to the extent necessary to comply with legal requirements, to avoid
a legal penalty or forfeiture, or to obtain or preserve appropriate tax and
accounting outcomes, provided that in no case may actual shares of stock be
issued in settlement of SSUs.
4
EX-13
4
c64260_ex13.htm
3B2 EDGAR HTML -- c64424_preflight.htm
Income/(loss) from discontinued operations, net of tax
(6.9
)
(12.8
)
(3.6
)
2.5
212.0
21.7
Income/(loss) before cumulative effect of changes in accounting principle
61.6
(258.4
)
(178.0
)
(151.3
)
479.8
438.6
Cumulative effect of changes in accounting principle, net of tax
-
-
-
-
1.3
(3.1
)
Net income/(loss)
61.6
(258.4
)
(178.0
)
(151.3
)
481.1
435.5
Income/(loss) available to common shareholders
(57.8
)
(329.4
)
(199.4
)
(170.1
)
462.9
424.7
Common Stock Data (a)
Earnings/(loss) per common share from continuing operations
$
(0.22
)
$
(1.35
)
$
(0.95
)
$
(1.14
)
$
1.67
$
2.70
Earnings/(loss) per common share
(0.25
)
(1.41
)
(0.96
)
(1.13
)
3.10
2.82
Diluted earnings/(loss) per common share from continuing operations
(0.22
)
(1.35
)
(0.95
)
(1.14
)
1.62
2.61
Diluted earnings/(loss) per common share
(0.25
)
(1.41
)
(0.96
)
(1.13
)
3.01
2.73
Cash dividends declared per common share
-
-
0.33
1.50
1.50
1.45
Year-end book value per common share
9.05
9.35
10.63
14.08
16.43
15.49
Closing price of common stock per share:
High
14.83
13.68
18.42
37.60
35.62
37.11
Low
9.24
6.52
4.20
15.00
30.99
29.27
Year-end
11.78
12.60
9.24
15.12
34.81
32.02
Cash dividends per common share/year-end closing price
N/A
N/A
3.6
%
10.0
%
4.3
%
4.5
%
Cash dividends per common share/diluted earnings per common share
N/A
N/A
NM
NM
49.9
%
53.1
%
Compound stock dividend rate declared per share
6.3601
%
7.5320
%
4.9547
%
N/A
N/A
N/A
Price/earnings ratio
NM
NM
NM
NM
11.6
x
11.7
x
Market capitalization
$
3,102.5
$
2,974.5
$
2,169.8
$
2,293.5
$
5,216.9
$
4,852.0
Average shares (thousands)
235,699
234,431
206,681
151,060
149,391
150,618
Average diluted shares (thousands)
235,699
234,431
206,681
151,060
153,592
155,648
Period-end shares outstanding (thousands)
263,366
236,098
234,784
151,687
149,887
151,515
Volume of shares traded (thousands)
1,009,113
1,256,124
1,658,045
583,647
221,933
204,374
Selected Average Balances
Total assets
$
25,677.4
$
28,147.8
$
34,422.7
$
38,175.4
$
38,764.6
$
36,560.4
Total assets divestiture
-
-
182.3
123.1
-
-
Total loans, net of unearned income
17,131.8
19,579.3
21,660.7
22,106.7
21,504.2
18,334.7
Total loans held for sale divestiture
-
-
110.4
117.8
-
-
Investment securities
2,650.9
2,852.1
2,964.0
3,380.2
3,481.5
2,906.2
Earning assets
22,960.2
25,373.9
30,426.2
33,405.4
34,042.3
31,976.2
Deposits
15,204.3
14,556.2
14,920.9
20,313.8
22,751.7
23,015.8
Total deposits divestiture
-
-
48.8
95.3
-
-
Term borrowings
2,915.1
3,506.9
6,108.6
6,567.7
5,062.4
2,560.1
Common equity
2,211.6
2,365.6
2,534.1
2,423.5
2,423.0
2,177.0
Total equity
3,292.0
3,452.0
2,930.7
2,718.7
2,718.2
2,406.9
Selected Period-End Balances
Total assets
$
24,699.0
$
26,068.7
$
31,022.0
$
37,015.5
$
37,918.3
$
36,579.1
Total assets divestiture
-
-
-
305.7
-
-
Total loans, net of unearned income
16,782.6
18,123.9
21,278.2
22,103.5
22,104.9
20,612.0
Total loans held for sale divestiture
-
-
-
289.9
-
-
Investment securities
3,031.9
2,694.5
3,125.2
3,032.8
3,923.5
2,941.2
Earning assets
21,901.7
22,962.9
26,895.9
31,785.6
32,353.3
31,606.7
Deposits
15,208.2
14,867.2
14,241.8
17,032.3
20,213.2
23,317.6
Total deposits divestiture
-
-
-
230.4
-
-
Term borrowings
3,228.1
2,891.1
4,767.7
6,828.4
5,836.4
3,437.6
Common equity
2,382.8
2,208.6
2,496.8
2,135.6
2,462.4
2,347.5
Total equity
2,678.0
3,302.5
3,574.6
2,430.9
2,757.7
2,642.8
Selected Ratios
Return on average common equity (b)
(2.61
)%
(13.93
)%
(7.87
)%
(7.02
)%
19.10
%
19.51
%
Return on average assets (c)
0.24
(0.92
)
(0.52
)
(0.40
)
1.24
1.19
Net interest margin (d)
3.20
3.06
2.95
2.82
2.93
3.07
Allowance for loan and lease losses to loans
3.96
4.95
3.99
1.55
0.98
0.92
Net charge-offs to average loans
3.07
4.25
2.64
0.60
0.26
0.20
Total period-end equity to period-end assets
10.84
12.67
11.52
6.57
7.27
7.22
Tangible common equity to tangible assets (e)
8.93
7.75
7.34
5.13
5.65
5.49
NM - not meaningful See accompanying notes to consolidated financial statements. Certain previously reported amounts have been reclassified to agree with current presentation. (a) Shares restated for stock dividends distributed through January 1, 2011. (b) Calculated using net income/(loss) available to common shareholders divided by average common equity. (c) Calculated using net income divided by average assets. (d) Net interest margin is computed using total net interest income adjusted for fully taxable equivalent ("FTE"). (e) Represents a non-GAAP measure. Refer to Table 38 for the non-GAAP to GAAP reconciliation.
First Horizon National Corporation (FHN) began as a community bank chartered in 1864 and as of December 31, 2010, was one of the 30 largest bank holding companies in the United States in terms of asset size.
The corporations two major brandsFirst Tennessee and FTN Financial - provide customers with a broad range of products and services. First Tennessee provides retail and commercial banking services throughout Tennessee and is the largest bank headquartered in the state. FTN Financial (FTNF) is an industry
leader in fixed income sales, trading, and strategies for institutional clients in the U.S. and abroad.
In first quarter 2010, FHN revised its operating segments to better align with its strategic direction, representing a focus on its regional banking franchise and capital markets business. Key changes include the addition of the non-strategic segment that combines the former mortgage banking and national specialty
lending segments, the movement of correspondent banking from capital markets to regional banking, and the shift of first lien mortgage production in the regional banking footprint to the regional banking segment. Exited businesses were moved to the new non-strategic segment.
Consistent with the treatment of exited operations and product lines, FHN has also revised its presentation of historical charges incurred related to its restructuring, repositioning, and efficiency initiatives. Past charges that resulted from the reduction of national operations and termination of product and service
offerings have been included within the non-strategic segment. Additionally, past charges affecting multiple segments and initiatives that occurred within regional banking and capital markets have been included in the corporate segment to reflect the corporate-driven emphasis on execution of the repositioning
efforts.
FHN is composed of the following operating segments:
Regional banking offers financial products and services including traditional lending and deposit-taking to retail and commercial customers in Tennessee and surrounding markets. Additionally, regional banking provides investments, insurance services, financial planning, trust services and asset management,
health savings accounts, credit cards, cash management, check clearing services, correspondent banking services, and mortgage originations within the regional banking footprint.
Capital markets provides financial services for the investment and banking communities through the integration of traditional capital markets securities activities, loan sales, portfolio advisory services, and derivative sales.
Corporate consists of unallocated corporate income/expenses including gains and losses on repurchases of debt, expense on subordinated debt issuances and preferred stock, 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, low income housing investment activities, and certain charges related to restructuring, repositioning, and efficiency initiatives.
Non-strategic includes the former mortgage banking and national specialty lending segments, exited businesses and loan portfolios, other discontinued products and service lines, and certain charges related to restructuring, repositioning, and efficiency initiatives.
For the purpose of this managements 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 audited Consolidated Financial
Statements and notes.
FHN historically presented charges related to repurchase obligations for junior lien consumer mortgage loan sales in noninterest income while similar charges arising from first lien mortgage originations and sales through the legacy national mortgage banking business were reflected in noninterest expense. In order
to present such charges consistently, FHN determined that charges relating to repurchase obligations should be reflected in noninterest expense in the line item called Repurchase and foreclosure provision on the Consolidated Statements of Income.
FIRST HORIZON
NATIONAL CORPORATION
3
Consequently, FHN retroactively applied this change which resulted in a reclassification of charges related to junior lien mortgage loan sales from noninterest income into noninterest expense. All applicable tables and associated narrative have been revised to reflect this change. This reclassification did not impact
FHNs net income and all effects are included in the non-strategic segment.
Non-GAAP Measures
Certain capital-related non-GAAP measures are included in the narratives and tables in MD&A. FHNs management believes such measures are relevant to understanding the capital position and results of the company. The non-GAAP measures are noted in the document where presented. These measures are
reported to FHNs management and board of directors through various internal reports. Additionally, disclosure of the non-GAAP capital ratios provide a meaningful base for comparability to other financial institutions as these ratios have become important measures of the capital strength of banks as demonstrated
by their inclusion in the stress tests administered by the United States Treasury Department (UST) under the Capital Assistance Program. Non-GAAP measures are not formally defined by GAAP or codified in the federal banking regulations, and other entities may use calculation methods that differ from those
used by FHN. Tier 1 capital is a regulatory term and is 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. Also a regulatory term, risk-weighted assets includes
total assets adjusted for credit risk and is used to determine capital ratios. Refer to Table 38 for a reconciliation of non-GAAP to GAAP measures and presentation of the most comparable GAAP items.
This MD&A contains forward-looking statements with respect to FHNs beliefs, plans, goals, expectations, and estimates. Forward-looking statements are statements that are not a representation of historical information but rather are related 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 a companys 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 and local economic and business conditions, including economic recession or depression; the level and length of deterioration in the residential housing and commercial real estate markets; potential requirements for FHN to repurchase previously sold or
securitized mortgages; potential claims relating to the foreclosure process; expectations of and actual timing and amount of interest rate movements, including the slope 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, 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 FHNs hedging practices; technology; demand for FHNs product offerings; new products and services in the industries in which FHN operates; 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 Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), Financial Industry Regulatory Authority (FINRA), U.S. Department of the Treasury (Treasury), the Bureau of
Consumer Financial Protection (Bureau), the Financial Stability Oversight Council (Council), and other regulators and agencies; regulatory and judicial proceedings and changes in laws and regulations applicable to FHN; and FHNs 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 any forward-looking statements that are made from time to time. Actual results could differ because of several factors, including those
presented in this Forward-Looking Statements section, in other sections of this MD&A, in Item 1A of FHNs 2010 annual report on Form 10-K, and in other parts of that annual report.
In 2010, FHN reported a net loss available to common shareholders of $57.8 million, or $.25 diluted loss per share compared to a net loss of $329.4 million, or $1.41 diluted loss per share in 2009. The after-tax results of FTN Financials institutional equity research business, FTN Equity Capital Markets (FTN
ECM) which was exited in first quarter 2010, are reflected in the discontinued operations, net of tax line on the Consolidated Statements of Income for all periods presented. Reported earnings are directly and significantly affected by a number of factors including the economic environment, regulatory reform, and
strategic transactions occurring in both 2010 and 2009.
The strength of the national and global economies significantly affected the performance of FHN and the financial services industry as a whole. With little improvement in economic conditions from 2009, the challenging operating environment persisted into 2010. The slow economic recovery, weak housing market,
and elevated unemployment levels negatively impacted both FHN and its commercial and retail borrowers. Although consumers and commercial borrowers remain stressed, there was aggregate improvement in FHNs loan portfolio during 2010. While a majority of the improvement in 2010 relates to the reduction of
exposure to the higher-risk non-strategic construction portfolios, both the Commercial and Industrial (C&I) portfolio, which was primarily originated through the regional banking channel, and the Consumer Real Estate portfolios began to stabilize in 2010. FHN has benefitted from proactively managing problem assets
and reducing non-strategic portfolios, however, loan growth was difficult in 2010 due to competition in the market for a limited number of quality borrowers and weak loan demand.
The current interest rate environment has been directly affected by the intervention of the Federal Reserve as it assisted in the economic recovery. The target federal funds rate remained at 25 basis points during 2010. The impact of this historically low interest rate environment on FHN has been mixed. While the
low interest rates negatively affected yields of variable loans and the securities portfolio, the impact to FHNs cost of funds and hedging servicing assets (mortgage servicing rights (MSR) and other retained interests) was favorable. Despite the low interest rate environment pressuring yields, FHN expanded the net
interest margin in 2010 through active balance sheet management and a focus on disciplined loan and deposit pricing.
Government regulation continued to expand in 2010 as a result of the aftermath of the housing market collapse in 2007 as Congress acted to increase oversight of the financial services industry and strengthen consumer protection laws. In third quarter 2010, the new overdraft requirements of Regulation E (Reg
E) became effective requiring consumer account holders to elect (opt-in) to receive certain overdraft protection services that had routinely been provided to all retail customers. For FHN, this resulted in a reduction of deposit fee income in 2010. In addition, the passage of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 authorizing expansive new regulation in the future has created additional uncertainty in the industry.
During 2010, FHN endured this challenging operating environment and made significant progress on achieving its strategic initiatives. In late 2010, FHN completed a common stock offering which netted proceeds of $263.1 million and a $500 million senior debt offering which raised additional funds. These funds,
combined with liquidity provided internally, were utilized to repurchase the $866.5 million of preferred shares issued to the U.S. Treasury under the Troubled Asset Relief Program (TARP) in 2008. During 2010, net loss available to common shareholders included $108.0 million of preferred share dividends
including approximately $50 million accelerated amortization of the remaining discount on the preferred shares. Subsequent to the repayment of TARP, FHN maintained strong capital ratios with the tangible common equity to tangible assets ratio and the tier 1 common ratio remaining one of the highest in the
industry.
The net loss available to common shareholders decreased from 2009 despite overall lower revenues, increased repurchase-related expenses, and charges related to the repayment of TARP. The improvement in results was primarily the result of progress made on asset quality which resulted in a $610.0 million
decrease in the loan loss provision from 2009. Net interest income was lower in 2010 as the negative impact from the decrease in earning assets was partially mitigated by a reduction in average short and long-term borrowings, and improved loan and deposit pricing. Although net interest income declined, the net
interest margin expanded from 3.06 basis points in 2009 to 3.20 basis points during 2010.
FHN continued to review business practices company-wide in order to improve profitability with an increased focus in 2010 on efficiency. In 2010, net charges related to restructuring, repositioning, and efficiency initiatives totaled $17.2 million compared with $51.9 million in 2009. A majority of the charges in 2010
relate to the exit of the institutional equity research business and impairments of branches expected to close in early 2011. In 2009, charges reflected the sale and closure of the lockbox service in Louisville and the Atlanta insurance business as
FIRST HORIZON
NATIONAL CORPORATION
5
well as a charge to cancel an external services contract. Additionally, both noninterest income and noninterest expenses attributable to the divested and exited businesses were lower in 2010 when compared with 2009.
Noninterest income was $955.7 million in 2010 compared with $1.3 billion in 2009. A decline in capital markets, mortgage banking, and deposit transactions and cash management fee income contributed to the $299.2 million reduction in noninterest income. Capital markets income was $424.0 million in 2010
compared with $632.1 million in 2009, a record year in the capital markets business. The reduction in 2010 was driven by lower fixed income trading revenue due to normalizing market conditions. Mortgage banking income declined $68.1 million from 2009 primarily due to less favorable net hedging results for
servicing assets. The new overdraft requirements of Reg E contributed to an $18.9 million decline in deposit and cash management fee income. During fourth quarter 2010, FHN sold a portion of its Visa, Inc. class B shares resulting in a securities gain of $14.8 million.
Noninterest expense decreased $204.7 million to $1.4 billion from 2009 despite a $42.1 million increase in charges related to the repurchase and foreclosure reserve primarily related to first lien mortgage loans. Repurchase requests, primarily from government agencies, continued to increase during 2010.
Additionally, FHN observed a rise in cancellation notices from private mortgage insurers (PMI). As of December 31, 2010, unresolved repurchase requests combined with the unpaid principal balance (UPB) of loans for which FHN received notice of PMI cancellation resulted in an ending pipeline of $534.2
million compared to $255.7 million at the end of 2009. Repurchase obligations related to junior lien consumer loans have been substantially resolved and repurchase provision related to these loan sales was immaterial in 2010. In 2009, FHN recognized $21.3 million in charges to increase the repurchase reserve
for junior lien consumer loan sales.
Most expenses declined during 2010 except for the repurchase provision mentioned above. The reduction in expenses from 2009 is primarily attributable to lower variable compensation expenses consistent with the decline in capital markets fixed income sales revenue. As described above, charges related to
restructuring, repositioning, and efficiency initiatives declined $34.7 million in 2010. Expenses related to foreclosed assets decreased $41.3 million in 2010 as FHN recognized losses on sales of foreclosed assets and higher negative fair value adjustments in 2009. Noninterest expense in 2010 was also favorably
affected by the reduction of charges related to reinsurance obligations. By the end of 2010, FHN had settled all but one reinsurance obligation with the primary insurers and, as a result, charges to increase the reinsurance reserves due to estimated defaults on insured mortgages were negligible in 2010 compared
to $25.6 million during 2009. Visas ongoing litigation affected results in both 2010 and 2009 as $13.0 million of the contingent liability was reversed in 2010 compared with $7.0 million in 2009.
Return on average common equity and return on average assets for 2010 were negative 2.61 percent and positive .24 percent, respectively, compared to negative 13.93 percent and negative .92 percent in 2009. The tangible common equity to tangible assets ratio improved to 8.93 percent in 2010 from 7.75
percent in 2009. The tier 1 capital ratio was 13.99 percent as of December 31, 2010, compared to 16.39 percent as of December 31, 2009. Total assets were $24.7 billion and shareholders equity was $2.7 billion on December 31, 2010, compared to $26.1 billion and $3.3 billion, respectively, on December 31,
2009.
The regional banking segment had pre-tax income of $135.3 million during 2010 compared to a pre-tax loss of $94.3 million in 2009. The improvement in pretax results was due to a significant decline in loan loss provisioning. Total revenues were $869.8 million in 2010, a decline of $21.2 million from 2009. The
decline in revenue was primarily due to the decrease in deposit account-related fee income. Noninterest expense decreased $36.9 million to $642.2 million during 2010 largely due to the reduction of costs related to foreclosed assets.
Net interest income was slightly higher in 2010 at $560.3 million compared to $559.1 million in 2009 despite an $867.1 million decline in average earning assets. The net interest margin in regional banking improved to 5.11 percent during 2010 from 4.72 percent in 2009. The net interest margin and net interest
income both improved as a result of disciplined commercial loan pricing and reduction in balances of lower-yielding commercial loans. The regional bank focused on increasing deposits from customers of the wealth management group and there was also core deposit growth in the Middle Tennessee market,
primarily in metropolitan Nashville, all of which contributed to a 15 percent growth in average core deposit from 2009.
6
FIRST HORIZON NATIONAL CORPORATION
The provision for loan losses decreased to $92.3 million in 2010 from $306.2 million in 2009. In 2010, there was aggregate improvement in the commercial loan portfolio resulting in an increase in the amount of credit upgrades during 2010.
Noninterest income declined 7 percent, or $22.4 million, to $309.4 million in 2010. Deposit transactions and cash management fees declined $18.0 million to $143.9 million in 2010 primarily due the negative effect of the overdraft provisions of Reg E which became effective in third quarter 2010. The new
provisions require retail customers to elect to receive overdraft protection for debit card and ATM transactions. Mortgage banking income from origination activity was $16.9 million during 2010, a decrease of $7.7 million from 2009 due to higher levels of refinance volume during 2009 compared with 2010.
Additionally, the decline in origination activity can also be attributed to the reduction in size of the mortgage servicing portfolio which has reduced the pool of eligible borrowers likely to refinance with FHN. Insurance premium and commission income decreased $2.3 million as the market for property and casualty
insurance continues to be soft. An increase in ATM transaction volume in 2010 and higher interchange rates paid by vendors led to a rise in ATM interchange fees in 2010.
Noninterest expense decreased to $642.2 million in 2010 from $679.1 million in 2009. Foreclosure losses decreased $14.0 million in 2010, primarily due to lower negative valuation adjustments recognized in 2010 as the rate of decline in property values stabilized in certain markets. Improved borrower risk profiles
favorably impacted noninterest expense as the provision for unfunded commitments and credit losses on customer derivatives decreased from 2009. A decline in mortgage loan refinance activity resulted in lower operational costs consistent with the decrease in mortgage banking income. FDIC premium expenses
and other institutional items (e.g. realty and personalty taxes and bank exam fees) decreased from 2009 as the prior year included the impact of the FDIC special assessment, which more than offset increases for technology and credit-related costs in 2010.
Capital Markets
Pre-tax income in the capital markets segment decreased from $261.6 million in 2009 to $127.2 million in 2010 primarily due to a decline in fixed income sales revenue. Revenue from fixed income sales decreased to $390.1 million in 2010 from $598.6 million in 2009 with average daily revenue of $1.6 million in
2010 compared with $2.4 million in 2009. While still strong, the decrease in fixed income sales revenue from 2009 reflects normalizing market conditions. Revenue from other products, including fee income from activities such as loan sales, portfolio advisory, and derivative sales decreased slightly from $34.3
million in 2009 to $34.1 million in 2010. Noninterest expense was $318.5 million in 2010 compared with $386.3 million in 2009 which was primarily due to lower variable compensation expense consistent with the decrease in fixed income sales revenue. A portion of this decline was offset by higher legal and
professional fees in 2010.
Corporate
The corporate segments pre-tax loss was $5.6 million in 2010 compared to $21.0 million in 2009. Net interest income declined to $1.7 million in 2010 compared to $25.6 million in 2009 primarily due to a lower yielding, smaller investment portfolio and changing balance sheet mix. Noninterest income was $63.5
million in 2010 compared to $47.5 million in 2009. A majority of the increase is driven by net securities gains of $15.3 million including a gain of $14.8 million on the sale of a portion of FHNs Visa class B common shares. Additionally, the increase in noninterest income included a $6.2 million favorable impact
from death benefits received from bank-owned life insurance (BOLI). Deferred compensation income, which is primarily driven by changes in the market value of deferred compensation assets, declined $4.0 million in 2010. FHN recognized $17.1 million in 2010 for gains on the repurchase of bank debt compared
to $16.4 million in 2009.
Noninterest expense declined $23.2 million to $70.9 million during 2010. The decline was primarily driven by a $16.1 million reduction in restructuring, repositioning, and efficiency charges as FHN incurred a $13.4 million charge in 2009 to cancel an external services contract. Legal and professional fees declined
to $26.3 million from $36.2 million as a result of elevated costs related to various consulting projects within the organization during 2009. In 2010, FHN reversed $13.0 million of the contingent liability for certain Visa legal matters compared with a $7.0 million reversal during 2009. A $5.7 million decline in deferred
compensation expense is directionally consistent with the reduction in deferred compensation income described above.
Non-Strategic
The pre-tax loss for the non-strategic segment was $207.4 million in 2010 compared with $566.8 million in 2009. Net interest income declined $29.4 million to $147.3 million primarily because of declining balances as the wind-
FIRST HORIZON
NATIONAL CORPORATION
7
down of the national construction portfolios continued. This was partially mitigated by recognition of cash basis interest income from loans previously classified as nonaccrual. Net interest income was also negatively affected by the reduction of the servicing portfolio through loss of the associated custodial deposits.
Provision expense declined $396.2 million from 2009 to $177.7 million primarily due to reduced exposure from the non-strategic construction portfolios and improvement in the consumer portfolios.
Noninterest income decreased $84.1 million to $158.5 million in 2010 primarily due to a decline in mortgage banking income. Servicing income, which includes fees for servicing mortgage loans, change in the value of MSR, results from hedging MSR, and the negative impact of runoff (loan payments) on the value
of MSR, is the primary driver of mortgage banking income. Gross servicing fees were $92.1 million, a $28.3 million decline from 2009. This decline in servicing fees is consistent with the continued reduction in the size of the servicing portfolio as the UPB of the servicing portfolio declined nearly $13 billion from
the end of 2009 due to payments and bulk sales executed during 2010. While still positive, net hedging results declined $52.0 million to $93.9 million as wider spreads between mortgage and swap rates contributed to the larger positive net hedge results in 2009. The negative impact attributable to runoff was
$35.0 million compared to $59.2 million in 2009 which was primarily the result of a smaller servicing portfolio in 2010. Origination income, which is primarily comprised of fair value adjustments to the remaining mortgage warehouse, was a loss of $2.1 million in 2010 compared to positive $1.3 million in 2009.
Additionally, 2009 included a $3.4 million non-prime reserve reversal associated with the legacy mortgage origination business as the term of FHNs obligations ended.
Remittance processing and insurance premium revenues declined as 2009 included revenues from the Louisville Remittance Processing location and the Atlanta insurance business which were sold in fourth quarter 2009. Additionally, as a result of these divestitures, FHN recognized a $9.2 million loss during 2009.
Noninterest expense was $335.6 million during 2010 compared to $412.4 million during 2009, a decrease of 19 percent. With the exception of the repurchase and foreclosure provision, nearly all other expenses declined from 2009 as these non-strategic businesses continue to wind down. FHN continued to
receive elevated repurchase and make-whole requests from government-sponsored enterprises (GSEs) and PMI cancellation notices related to first lien mortgage loans originated and sold through the legacy mortgage banking business. Charges related to repurchase obligations for prior consumer junior lien loan
sales were minimal during 2010 with $21.3 million of repurchase provision recognized during 2009. See the Repurchase Obligations, Off-Balance Sheet Arrangements, and Other Contractual Obligations section of MD&A for further discussion regarding FHNs repurchase obligations related to first lien mortgage loans.
Expenses related to foreclosed assets declined $28.7 million from 2009 to $16.0 million in 2010 as FHN recognized a lower amount of negative fair value adjustments to foreclosed real estate and losses on bulk sales. In 2010 and 2009, FHN settled all but one of its reinsurance obligations with primary insurers
through termination of the related reinsurance agreements which contributed to a significant decline in charges related to reinsurance obligations. In 2010, charges were immaterial while FHN incurred $25.6 million of expenses to increase the reinsurance reserve in 2009. Personnel costs, miscellaneous loan costs,
and contract employment expenses all declined in 2010 reflecting the continued wind-down of businesses within the non-strategic segment. Charges related to restructuring, repositioning, and efficiency also declined in 2010 as 2009 included goodwill impairments related to the sale and closure of the Atlanta
insurance business and the agreement to the sell FTN ECM.
Total consolidated revenue decreased 17 percent to $1.7 billion from $2.0 billion in 2009 primarily due to decreases in capital markets and mortgage banking income.
NET INTEREST INCOME
Net interest income declined to $730.8 million in 2010 from $776.5 million in 2009 as average earning assets declined 10 percent to $23.0 billion and average interest-bearing liabilities declined 11 percent to $17.1 billion in 2010. See also the Consolidated Average Balance Sheet and Related Yields and Rates.
The decline in net interest income is primarily attributable to a decrease in the size of the loan portfolio and lower returns on the investment securities portfolio. This decline in net interest income from 2009 was partially mitigated by improved pricing on commercial loans and certain deposit products. 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.
8
FIRST HORIZON NATIONAL CORPORATION
The activity levels and related funding for FHNs capital markets activities affect the net interest margin. Capital markets activities tend to compress the margin, especially when there are elevated levels of trading inventory, because of the strategy to reduce market risk by economically hedging a portion of its
inventory on the balance sheet. Likewise, in periods prior to the divestiture of certain mortgage banking operations in August 2008, mortgage production and servicing activities also affected the margin. As a result, FHNs consolidated margin cannot be readily compared to that of other bank holding companies.
Table 1 details the computation of the net interest margin for FHN for the last three years.
The consolidated net interest margin improved to 3.20 percent in 2010 compared to 3.06 percent for 2009. The widening in the margin occurred as the net interest spread increased 18 basis points to 2.98 percent in 2010 from 2.80 percent in 2009 and the impact of free funding decreased to 22 basis points
from 26 basis points. The increase in the margin is primarily attributable to an overall decline in lower-rate earning assets, improved deposit pricing, and lower wholesale funding costs. The margin during 2010 was negatively impacted by excess balances held at the Federal Reserve and a lower yielding investment
portfolio.
Table 1 - Net Interest Margin
2010
2009
2008
Consolidated yields and rates:
Loans, net of unearned income
4.09
%
3.93
%
5.33
%
Loans held for sale
4.06
4.72
5.86
Investment securities
4.32
4.98
5.49
Capital markets securities inventory
3.82
3.79
4.57
Mortgage banking trading securities
9.75
12.47
12.98
Other earning assets
0.18
0.18
1.84
Yields on earning assets
3.85
3.92
5.29
Interest-bearing core deposits
0.77
1.20
2.25
Certificates of deposit $100,000 and more
2.25
2.02
3.79
Federal funds purchased and securities sold under agreements to repurchase
0.24
0.21
2.05
Capital markets trading liabilities
3.30
3.89
4.73
Other short-term borrowings and commercial paper
0.56
0.29
2.33
Term borrowings
1.10
1.43
3.56
Rates paid on interest-bearing liabilities
0.87
1.12
2.74
Net interest spread
2.98
2.80
2.55
Effect of interest-free sources
0.22
0.26
0.40
Net interest margin (a)
3.20
%
3.06
%
2.95
%
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Calculated using total net interest income adjusted for FTE. Refer to the Non-GAAP to GAAP reconciliation - Table 38.
FHNs net interest margin is expected to remain relatively stable in 2011 assuming the Federal Reserve holds interest rates at historically low levels and new loan growth moderates, as expected.
FIRST HORIZON
NATIONAL CORPORATION
9
Table 2 shows how the changes in yields or rates and average balances compared to the prior year affected net interest income.
Table 2 - Analysis of Changes in Net Interest Income
(Fully taxable equivalent) (Dollars in thousands)
2010 Compared to 2009 Increase / (Decrease) Due to (a)
2009 Compared to 2008 Increase / (Decrease) Due to (a)
Rate (b)
Volume (b)
Total
Rate (b)
Volume (b)
Total
Interest income FTE:
Loans
$
29,101
$
(99,151
)
$
(70,050
)
$
(280,052
)
$
(103,691
)
$
(383,743
)
Loans held for sale
(3,348
)
(3,696
)
(7,044
)
(24,592
)
(101,150
)
(125,742
)
Investment securities:
U.S. Treasury
(747
)
314
(433
)
(216
)
74
(142
)
U.S. government agencies
(18,079
)
(8,439
)
(26,518
)
(5,947
)
(9,584
)
(15,531
)
States and municipalities
(319
)
(192
)
(511
)
(1,305
)
534
(771
)
Other
1,491
(1,649
)
(158
)
(6,204
)
2,000
(4,204
)
Total investment securities
(18,055
)
(9,565
)
(27,620
)
(14,554
)
(6,094
)
(20,648
)
Capital markets securities inventory
255
5,067
5,322
(10,408
)
(22,134
)
(32,542
)
Mortgage banking trading securities
(2,996
)
(9,036
)
(12,032
)
(1,629
)
(27,441
)
(29,070
)
Other earning assets:
Federal funds sold and securities purchased under agreements to resell
(309
)
(106
)
(415
)
(15,138
)
(6,949
)
(22,087
)
Interest-bearing deposits with other financial institutions
74
853
927
(2,010
)
1,768
(242
)
Total other earning assets
9
503
512
(21,373
)
(956
)
(22,329
)
Total earning assets/total interest income - FTE
(17,800
)
(93,112
)
$
(110,912
)
(372,907
)
(241,167
)
$
(614,074
)
Interest expense:
Interest-bearing deposits:
Savings
$
(15,042
)
$
7,464
$
(7,578
)
$
(45,143
)
$
4,108
$
(41,035
)
Time deposits
(7,720
)
(14,535
)
(22,255
)
(26,491
)
(13,877
)
(40,368
)
Other interest-bearing deposits
877
2,956
3,833
(10,310
)
1,460
(8,850
)
Total interest-bearing core deposits
(41,956
)
15,956
(26,000
)
(91,596
)
1,343
$
(90,253
)
Certificates of deposit $100,000 and more
2,793
(17,495
)
(14,702
)
(28,794
)
(19,791
)
(48,585
)
Federal funds purchased and securities sold under agreements to repurchase
627
282
909
(49,530
)
(15,016
)
(64,546
)
Capital markets trading liabilities
(3,207
)
429
(2,778
)
(5,225
)
(7,101
)
(12,326
)
Other short-term borrowings and commercial paper
3,894
(10,324
)
(6,430
)
(72,287
)
(39,780
)
(112,067
)
Term borrowings
(10,374
)
(7,646
)
(18,020
)
(97,678
)
(69,717
)
(167,395
)
Total interest-bearing liabilities/total interest expense
(44,388
)
(22,633
)
$
(67,021
)
(343,513
)
(151,659
)
$
(495,172
)
Net interest income FTE
$
(43,891
)
$
(118,902
)
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
The changes in interest due to both rate and volume have been allocated to change due to rate and change due to volume in proportion to the absolute amounts of the changes in each.
(b)
Variances are computed on a line-by-line basis and are non-additive.
NONINTEREST INCOME
Noninterest income was 57 percent of total revenue in 2010 compared to 62 percent in 2009 as total noninterest income decreased by $299.2 million to $955.7 million in 2010. The decrease primarily resulted from a significant decline in capital markets income as this business produced record fixed income sales
revenue during 2009. FHNs noninterest income for the most recent 6 years is provided in Table 3. The following discussion provides additional information about various line items reported in the following table.
10
FIRST HORIZON NATIONAL CORPORATION
Table 3 - Noninterest Income
(Dollars in thousands)
2010
2009
2008
2007
2006
2005
Compound Annual Growth Rates (%)
10/09
10/05
Noninterest income:
Capital markets
$
424,034
$
632,093
$
483,526
$
284,236
$
320,004
$
286,150
32.9
-
8.2
+
Mortgage banking
167,364
235,450
518,034
69,454
370,613
479,618
28.9
-
19.0
-
Deposit transactions and cash management
144,838
163,761
179,034
175,271
168,599
156,190
11.6
-
1.5
-
Trust services and investment management
29,585
29,482
33,821
40,335
41,514
44,614
*
7.9
-
Brokerage management fees and commissions
24,602
26,934
32,234
37,830
37,182
30,865
8.7
-
4.4
-
Insurance commissions
17,944
25,248
29,104
31,739
46,632
54,091
28.9
-
19.8
-
Debt securities gains/(losses), net
374
-
761
6,292
(75,900
)
1
NM
NM
Equity securities gains/(losses), net
10,548
(1,178
)
65,349
(7,475
)
10,271
(579
)
NM
NM
Gains/(losses) on divestitures
-
(9,183
)
(19,019
)
15,695
-
7,029
NM
NM
All other income and commissions:
Bank-owned life insurance
25,898
19,744
25,143
25,172
19,064
16,335
31.2
+
9.7
+
Bankcard income (credit card)
19,761
20,161
22,081
24,874
26,105
27,136
2.0
-
6.1
-
Gains on repurchases of debt
17,060
16,412
33,845
-
-
-
3.9
+
NM
ATM interchange fees
14,169
11,335
9,224
8,472
7,091
5,995
25.0
+
18.8
+
Other service charges
10,442
11,647
12,631
14,296
14,560
14,330
10.3
-
6.1
-
Electronic banking fees
7,111
6,020
6,217
6,561
5,975
5,977
18.1
+
3.5
+
Letter of credit fees
6,493
5,989
5,657
6,738
7,271
7,883
8.4
+
3.8
-
Deferred compensation (a)
3,673
7,686
(22,901
)
7,727
14,647
7,721
52.2
-
13.8
-
Gains/(losses) from loans sales and securitizations
2,883
2,545
(8,625
)
23,881
51,675
47,575
13.3
+
42.9
-
Reinsurance fees
2,310
9,130
11,919
9,052
6,792
5,850
74.7
-
17.0
-
Remittance processing
2,008
11,765
12,953
13,451
14,737
15,411
82.9
-
33.5
-
Federal flood certifications
-
-
3,869
5,212
5,454
9,950
NM
NM
Other
24,595
29,802
33,533
16,713
13,234
18,257
17.5
-
6.1
+
Total all other income and commissions
136,403
152,236
145,546
162,149
186,605
182,420
10.4
-
5.6
-
Total noninterest income
$
955,692
$
1,254,843
$
1,468,390
$
815,526
$
1,105,520
$
1,240,399
23.8
-
5.1
-
NM not meaningful
* Amount is less than one percent.
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Deferred compensation market value adjustments are mirrored by changes in personnel expense.
Capital Markets Noninterest Income
The major component of capital markets income is generated from the purchase and sale of securities as both principal and agent. Other revenues consist of fees from loan sales, portfolio advisory, and derivative sales. Securities inventory positions are generally procured for distribution to customers by the sales
staff. Capital markets noninterest income decreased to $424.0 million in 2010 from $632.1 million in 2009. Although revenue was still strong, revenues from fixed income sales decreased $208.5 million to $390.1 million in 2010 reflecting normalizing market conditions in comparison to the very favorable conditions
in 2009. Revenues from other products were relatively flat at $33.9 million and continue to be a small component of capital markets income.
FIRST HORIZON
NATIONAL CORPORATION
11
Table 4 - Capital Markets Noninterest Income
(Dollars in thousands)
2010
2009
2008
Compound Annual Growth Rates (%)
10/09
10/08
Noninterest income:
Fixed income
$
390,133
$
598,604
$
493,836
34.8
-
11.1
-
Other product revenue
33,901
33,489
(10,310
)
1.2
+
NM
Total capital markets noninterest income
$
424,034
$
632,093
$
483,526
32.9
-
6.4
-
NM not meaningful
Mortgage Banking Noninterest Income
In third quarter 2008, FHN completed the sale of certain mortgage banking operations and servicing on loans with an outstanding principal balance of $19.1 billion. As a result of the 2008 divestiture, the mix of mortgage banking income shifted to being primarily driven by fees from mortgage servicing, changes in
the fair value of servicing assets net of hedge gains or losses, fair value adjustments to the remaining mortgage warehouse, and income from the origination of mortgage loans in the regional banking footprint. In periods prior to the divestiture, mortgage banking fee income also included origination income through
national channels and sales of mortgage loans into the secondary market. Mortgage banking income decreased to $167.4 million in 2010 from $235.5 million in 2009.
Servicing income, which includes fees for servicing mortgage loans, change in the value of servicing assets, results of hedging servicing assets, and the negative impact of runoff on the value of MSR, is the primary driver of mortgage banking income. Servicing fees were $92.1 million in 2010, a $28.2 million
decline from 2009. The decline in servicing fees is consistent with the continued reduction in the size of the servicing portfolio as the UPB of the servicing portfolio declined nearly $13 billion from the end of 2009 due to payments and bulk sales executed during 2010. While still positive, net hedging results
declined $52.0 million to $93.9 million in 2010 as wider spreads between mortgage and swap rates contributed to the larger positive net hedge results in 2009. The negative impact attributable to runoff was $35.0 million in 2010 compared to $59.2 million in 2009, which was primarily the result of a smaller
servicing portfolio in 2010. Origination income, which is comprised of fair value adjustments to the remaining mortgage warehouse and revenue from origination activities in and around Tennessee, was $14.8 million in 2010 compared to $24.3 million in 2009. Over half of this decline is attributable to reduction in
refinance activity within the regional banking footprint. Additionally, 2009 included a $3.4 million non-prime reserve reversal associated with the legacy mortgage origination business as the term of FHNs obligations ended.
12
FIRST HORIZON NATIONAL CORPORATION
Table 5 - Mortgage Banking Noninterest Income
2010
2009
2008
Compound Annual Growth Rates (%)
10/09
10/08
Noninterest income (thousands):
Origination income
$
14,793
$
24,334
$
223,596
39.2
-
74.3
-
Servicing income/(expense):
Servicing Fees
92,124
120,314
232,305
23.4
-
37.0
-
Change in MSR value - runoff
(34,966
)
(59,246
)
(104,775
)
41.0
-
42.2
-
Net hedging results
93,855
145,815
164,432
35.6
-
24.4
-
Total servicing income
151,013
206,883
291,962
27.0
-
28.1
-
Other
1,558
4,233
2,476
63.2
-
20.7
-
Total mortgage banking noninterest income
$
167,364
$
235,450
$
518,034
28.9
-
43.2
-
Mortgage banking statistics (millions):
Refinance originations
$
668.7
$
1,086.6
$
8,975.9
38.5
-
72.7
-
Home-purchase originations
180.6
192.3
8,465.9
6.1
-
85.4
-
Mortgage loan originations
$
849.3
$
1,278.9
$
17,441.8
33.6
-
77.9
-
Servicing portfolio - owned (primarily first lien mortgage loans) (a)
$
27,283.8
$
39,752.4
$
63,660.7
31.4
-
34.5
-
(a)
Excludes foreclosed real estate.
Deposit Transactions and Cash Management
Deposit transactions include services related to retail and commercial deposit products (such as service charges on checking accounts), cash management products and services such as electronic transaction processing (Automated Clearing House and Electronic Data Interchange), account reconciliation services,
cash vault services, lockbox processing, and information reporting to large corporate clients. Deposit transactions and cash management income declined $18.9 million to $144.8 million in 2010 primarily due to the negative impact on non-sufficient fund (NSF) fee income from the overdraft provisions of Reg E.
Trust Services and Investment Management
Trust services and investment management fees include investment management, personal trust, employee benefits, and custodial trust services and are primarily influenced by equity and fixed income market activity. Noninterest income from trust services and investment management was relatively flat at $29.6
million in 2010. A decline in trust services income was offset by an increase in investment management revenue which was driven by customer growth during 2010.
Brokerage Management Fees and Commissions
Brokerage management fees and commissions include fees for portfolio management, trade commissions, and annuity and mutual fund sales. In 2010, brokerage and management fees were $24.6 million compared to $26.9 million in 2009. The decline is partially due to overall market conditions and also a shift in
customer investment mix to lower-risk, less profitable, products. Additionally, FHN introduced a more fee-based approach to asset management which initially had a negative impact on income, but should result in greater long-term profitability.
Insurance Commissions
Insurance commissions are derived from the sale of insurance products, including acting as an independent agent to provide commercial and personal property and casualty, life, long-term care, and disability insurance. Noninterest income from insurance commissions decreased to $17.9 million in 2010 from $25.2
million in 2009 primarily due to a decline in revenue that was attributable to the Atlanta insurance business which was sold in late 2009. Additionally, lower sales volumes resulted from continued weak demand for property and casualty products and reduction in retail life sales as market conditions and the interest
rate environment contributed to a decline in product offerings.
FIRST HORIZON
NATIONAL CORPORATION
13
Gains/(Losses) on Divestitures
In 2009, losses from divestitures were $9.2 million and were related to the sales of FHNs Atlanta insurance business and the Louisville First Express Remittance Processing (lockbox service) location. There were no divestiture-related gains or losses during 2010. See the discussion of Restructuring, Repositioning,
and Efficiency Initiatives in MD&A and Note 2 Acquisitions and Divestitures for further details.
Securities Gains/(Losses)
Net securities gains in 2010 were $10.9 million compared with securities losses of $1.2 million in 2009. In fourth quarter 2010, FHN sold a portion of its Visa Inc. class B shares resulting in a gain of $14.8 million. FHN incurred securities losses of $4.6 million in 2010 related to fair value adjustments of venture
capital investments compared with $.6 million in 2009. In 2009, FHN recognized a $.5 million impairment of cost method investments.
All Other Noninterest Income and Commissions
All other income includes bankcard fees, revenue from bank-owned life insurance, remittance processing income, revenue related to deferred compensation plans (which are principally offset by a related item in noninterest expense), other service charges, gains from the repurchase of bank debt, gains/losses from
loan sales and securitizations, and various other fees.
All other income and commissions decreased to $136.4 million in 2010 from $152.2 million in 2009. Other income was positively affected by a $6.2 million increase in BOLI income as a result of death benefits received during 2010. ATM interchange fees increased $2.8 million due to increased transaction volume
in 2010 and higher interchange rates paid by FHNs vendor. Remittance processing income declined $9.8 million in 2010 as FHN sold the Louisville remittance processing business in fourth quarter 2009. Reinsurance fee income declined $6.8 million as revenues associated with reinsurance contracts that have
been settled by FHN during 2010 and 2009 are now assigned to the primary insurers. Deferred compensation income, which is primarily driven by changes in the market value of underlying investments, declined $4.0 million. All other income declined $5.2 million to $24.6 million from 2009. FHN recognized
$17.1 million of gains in 2010 on the repurchase of bank debt compared with $16.4 million in 2009.
NONINTEREST EXPENSE
Total noninterest expense for 2010 decreased 13 percent to $1.4 billion from $1.6 billion in 2009. Table 6 provides noninterest expense detail by category for the past six years with growth rates. Costs from restructuring, repositioning, and efficiency initiatives reflected in various categories of noninterest expense
declined $21.3 million to $6.4 million in 2010. Generally, all expenses decreased from 2009 with the exception of the repurchase and foreclosure provision.
Employee compensation, incentives, and benefits (personnel expense), the largest component of noninterest expense, decreased $88.8 million to $688.8 million in 2010. The decline in personnel expense is primarily the result of a reduction in variable compensation expense related to the decrease in capital
markets fixed income trading revenues in 2010. The decline was also affected by the ongoing reduction of legacy businesses during 2010. The net periodic benefit cost included in personnel expense for FHNs pension plan was $14.3 million in 2010 compared to $8.6 million in 2009.
Expenses related to foreclosed properties declined by $41.3 million to $24.9 million as the rate of decline in property values stabilized or improved in certain markets which resulted in lower negative fair value adjustments in 2010. Additionally, FHN recognized net gains on sales of foreclosed assets in 2010 while
recognizing losses in 2009. Various expenses (including contract employment, occupancy, equipment rental, maintenance, and depreciation, communication and courier, miscellaneous loan costs, and operations costs) declined primarily due to the continued wind-down of non-strategic businesses and the ongoing
focus on efficiencies throughout the organization. Deposit insurance premiums declined $9.1 million as 2009 included the impact of the FDIC special assessment. In 2009, FHN recognized a goodwill impairment of $2.3 million related to assets that were excluded from the sale of the Atlanta insurance business.
14
FIRST HORIZON NATIONAL CORPORATION
All other expenses decreased to $116.2 million in 2010 from $184.3 million in 2009. A portion of the decline is attributable to $25.6 million of charges recognized in 2009 related to reinsurance obligations. Because of settlements reached with primary insurers, charges related to reinsurance obligations were
immaterial in 2010. Restructuring, repositioning, and efficiency-related charges included in other expenses declined $15.2 million in 2010. The provision for unfunded commitments decreased $8.2 million as a result of improved risk profiles of FHNs borrowers. Variable operational costs related to the regional banks
mortgage origination business declined $5.7 million to $9.8 million consistent with the reduction in origination income in 2010 compared with 2009. Loan insurance expense declined $8.5 million in 2010 from $7.8 million in 2009 primarily due to the reduction in national mortgage origination business and also as a
result of the cancellation of a high loan-to-value (HLTV) insurance contract and return of $3.8 million of premium expense in early 2010. In 2010, FHN reversed $13.0 million of its contingent liability for certain Visa legal matters compared with $7.0 million in 2009.
The repurchase and foreclosure provision increased to $189.8 million in 2010 from $147.8 million in 2009 reflecting an increase in repurchase and make-whole requests and PMI cancellation notices related to loans that were previously sold or securitized primarily through FHNs legacy mortgage banking business.
Charges to increase the repurchase reserve for prior junior lien consumer mortgage loan sales were immaterial in 2010 compared with $21.3 million in 2009. Expenses related to computer software increased $3.7 million to $30.6 million in 2010 primarily as a result of FHNs continued focus on improving
technology in order to streamline processes and creating efficiencies.
Table 6 - Noninterest Expense
(Dollars in thousands)
2010
2009
2008
2007
2006
2005
Compound Annual Growth Rates (%)
10/09
10/05
Noninterest expense:
Employee compensation, incentives, and benefits
$
688,808
$
777,581
$
928,982
$
932,443
$
984,989
$
949,107
11.4
-
6.2
-
Repurchase and foreclosure provision
189,830
147,772
29,503
17,181
3,311
2,762
28.5
+
NM
Foreclosed real estate
24,944
66,197
21,471
7,581
2,743
1,171
62.3
-
84.4
+
Legal and professional fees
62,701
66,121
62,173
52,879
41,216
43,302
5.2
-
7.7
+
Occupancy
59,091
65,402
103,573
129,626
115,041
102,484
9.6
-
10.4
-
Operations services
59,768
62,485
72,602
69,460
65,685
68,664
4.3
-
2.7
-
Deposit insurance premiums
37,138
46,272
14,664
3,327
3,198
3,012
19.7
-
65.3
+
Contract employment
28,825
36,217
33,515
21,510
27,365
30,305
20.4
-
1.0
-
Equipment rentals, depreciation, and maintenance
28,906
34,305
56,744
72,402
73,249
73,835
15.7
-
17.1
-
Communications and courier
22,443
26,960
38,183
41,965
47,119
47,362
16.8
-
13.9
-
Computer software
30,627
26,883
30,318
53,860
34,255
28,503
13.9
+
1.4
+
Miscellaneous loan costs
12,367
23,050
38,221
12,783
12,095
7,969
46.3
-
9.2
+
Amortization of intangible assets
5,526
6,017
8,229
10,489
10,362
9,368
8.2
-
10.0
-
Goodwill impairment
-
2,294
-
84,084
-
-
NM
NM
All other expense:
Advertising and public relations
23,248
22,074
32,738
41,840
46,737
46,280
5.3
+
12.9
-
Low income housing expense
22,229
22,000
18,734
20,922
17,027
12,987
1.0
+
11.3
+
Other insurance and taxes
11,817
12,388
8,705
10,372
9,938
10,118
4.6
-
3.2
+
Travel and entertainment
10,224
9,547
15,137
23,295
29,026
28,342
7.1
+
18.4
-
Customer relations
7,079
7,819
8,872
9,775
8,643
9,841
9.5
-
6.4
-
Employee training and dues
4,821
5,327
6,198
6,569
6,750
6,103
9.5
-
4.6
-
Supplies
4,656
4,661
10,586
13,599
14,645
16,815
*
22.6
-
Bank examinations costs
4,578
4,884
4,144
4,504
4,367
3,958
6.3
-
3.0
+
Fed service fees
2,610
5,078
7,053
6,047
6,543
7,568
48.6
-
19.2
-
Complimentary check expense
2,405
3,529
4,776
5,058
5,371
4,621
31.8
-
12.2
-
Loan insurance expense (a)
(686
)
7,811
5,270
4,610
6,577
7,970
NM
NM
Other
23,178
79,171
51,923
120,895
90,046
35,159
70.7
-
8.0
-
Total all other expense
116,159
184,289
174,136
267,486
245,670
189,762
37.0
-
9.3
-
Total noninterest expense
$
1,367,133
$
1,571,845
$
1,612,314
$
1,777,076
$
1,666,298
$
1,557,606
13.0
-
2.6
-
*
Amount is less than one percent.
NM not meaningful
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
2010 includes the cancellation of an HLTV insurance contract and return of $3.8 million of premiums.
FIRST HORIZON
NATIONAL CORPORATION
15
PROVISION FOR LOAN LOSSES
The provision for loan losses is the charge to earnings that management determines to be necessary to maintain the allowance for loan and lease losses (ALLL) at a sufficient level reflecting managements estimate of probable incurred losses in the loan portfolio. Analytical models based on loss experience subject
to adjustment to reflect current events, trends, and conditions (including economic considerations and trends) are used by management to determine the amount of provision to be recognized and to assess the adequacy of the loan loss allowance. The provision for loan losses decreased 69 percent to $270.0
million in 2010 from $880.0 million in 2009. The provision expense decreased in 2010 primarily due to reduced exposure to the non-strategic construction portfolios. Additionally, FHN saw improvement within certain components of the C&I portfolio. See the Asset Quality section for more information.
INCOME TAXES
The effective tax rate for 2010 was not meaningful given the low levels of pre-tax income. Since pre-tax income is the most important component in determining the effective tax rate, the comparison of the tax rate from year to year, by itself, will not provide meaningful information unless pre-tax income is fairly
consistent from year to year. During 2010, there were several items which positively affected the effective tax rate. Tax credits reduced tax expense by $23.8 million and non-taxable gains resulting from the increase in the cash surrender value of life insurance reduced tax expense by $9.7 million.
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 December 31, 2010, FHNs net DTA was $200.6 million compared with $413.9 million at the end of 2009. Deferred taxes related to unrealized market adjustments on securities available for sale and to adjustments for pension and postretirement plans that are
recorded in cumulative other comprehensive income (OCI) are shown in Note 15. The deferred tax benefit associated with these adjustments increased OCI by $9.0 million during 2010. On January 1, 2010, the net DTA also increased by $11.2 million as a result of the adoption of the amendments to ASC 810.
In order to support the recognition of the DTA, FHNs management must conclude that the realization of the DTA is more likely than not. FHN evaluates the likelihood of realization of the remaining net DTA based on both positive and negative evidence available at the time. FHNs three-year cumulative loss position
at December 31, 2010, is significant negative evidence in determining whether the realizability of the DTA is more likely than not. However, FHN believes that the negative evidence of the three-year cumulative loss is overcome by sufficient positive evidence that the DTA will ultimately be realized. The positive
evidence includes several different factors. A significant amount of the cumulative losses occurred in businesses that FHN has exited or is in the process of exiting. Additionally, FHN has sufficient carryback positions reversing DTL, and potential tax planning strategies to fully realize its DTA. Also, FHN forecasts
substantially more taxable income in the carryforward period, exclusive of potential tax planning strategies. FHN believes that it will realize the net DTA within a significantly shorter period of time than the twenty-year carryforward period allowed under the tax rules. Based on current analysis, FHN believes that its
ability to realize the $200.6 million net DTA is more likely than not.
The total balance of unrecognized tax benefits on December 31, 2010, was $38.4 million compared with $30.0 million as of the end of 2009. On December 31, 2010 there were no tax positions included in the balance of unrecognized tax benefits for which the ultimate deductibility is highly certain but for which
there is uncertainty about the timing of such deductibility. To the extent such unrecognized tax benefits on December 31, 2010, are subsequently recognized, approximately $25.3 million would impact the effective tax rate.
FHNs ASC 740 policy is to recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. Interest accrued as of December 31, 2010 was approximately $7 million. The total amount of interest and penalties recognized in the Consolidated Statements of Income during
2010 was a benefit of $.5 million. See also Note 16Income Taxes for additional information.
FHN and its eligible subsidiaries are included in a consolidated federal income tax return. FHN files separate returns for subsidiaries that are not eligible to be included in a consolidated federal income tax return. Based on
16
FIRST HORIZON NATIONAL CORPORATION
the laws of the applicable state where it conducts business operations, FHN either files consolidated, combined, or separate returns. With few exceptions, FHN is no longer subject to U.S. federal or state and local tax examinations by tax authorities for years before 2006. The Internal Revenue Service (IRS) is
currently examining tax years 2006 through 2008. All proposed adjustments with respect to examinations of federal returns filed for 2005 and prior years have been settled.
DISCONTINUED OPERATIONS
The results of operations, net of tax, for FTN ECM are classified as discontinued operations on the Consolidated Statements of Income for all periods presented. In 2010, the loss from discontinued operations was $6.9 million compared with a $12.8 million loss in 2009. Discontinued operations in 2010 includes the
impact of exiting the institutional equity research business after it was determined the contracted sale would not close. The loss in 2009 includes a $14.3 million pre-tax ($9 million after-tax) goodwill impairment that was triggered by the definitive agreement reached in third quarter 2009 to sell FTN ECM.
RESTRUCTURING, REPOSITIONING, AND EFFICIENCY INITIATIVES
Since 2007, FHN has been conducting a company-wide review of business practices with the goal of improving its overall profitability and productivity. In order to redeploy capital to higher-return businesses, FHN implemented numerous actions including, but not limited to the following:
Sold 34 full-service First Horizon Bank branches in national banking markets.
Discontinued national homebuilder and commercial real estate lending through First Horizon Construction Lending.
Sold components of national mortgage banking business including origination pipeline, related hedges, certain fixed assets, servicing assets, and associated custodial deposits.
Exited the institutional equity research business.
Sold various other non-strategic businesses including Louisville remittance processing operations (FERP) and the Atlanta insurance business.
Net costs recognized by FHN during 2010 related to restructuring, repositioning, and efficiency activities were $17.2 million. Of this amount, $9.5 million represented exit costs that were accounted for in accordance with the FASB Accounting Standards Codification Topic for Exit or Disposal Activities Cost
Obligations (ASC 420). Significant expenses recognized during 2010 resulted from the following actions:
Severance and other employee costs of $5.6 million primarily related to the exit of the institutional equity research business and the 2009 sale of Louisville remittance processing operations.
Goodwill impairment of $3.3 million and lease abandonment expense of $2.3 million primarily related to the closure of the institutional equity research business.
Loss of $4.1 million of asset impairments primarily related to approved branch closures.
Net costs recognized by FHN during 2009 related to restructuring, repositioning, and efficiency activities were $51.9 million. Of this amount, $12.4 million represented exit costs that were accounted for in accordance with ASC 420. Significant expenses recognized during 2009 resulted from the following actions:
Severance and related employee costs of $5.6 million primarily related to the discontinuation of national lending operations and the sales and closures of FERP and the Atlanta insurance business.
Loss on divestitures of $9.2 million related to FERP and the Atlanta insurance business.
Loss of $13.4 million related to the cancellation of an external services contract.
Goodwill impairment of $14.3 million related to the agreement to sell FTN ECM and $2.3 million related to the sale/transfer of Atlanta insurance books of business.
FIRST HORIZON
NATIONAL CORPORATION
17
Net costs recognized by FHN during 2008 related to restructuring, repositioning, and efficiency activities were $91.4 million. Of this amount, $49.1 million represented exit costs accounted for in accordance with ASC 420. Significant expenses recognized in 2008 resulted from the following actions:
Expense of $49.1 million associated with organizational and compensation changes due to right-sizing operating segments, the divestiture of certain First Horizon Bank branches, the divestiture of certain mortgage banking operations, and consolidating functional areas.
Loss of $16.6 million on the divestiture of mortgage banking operations.
Loss of $2.4 million from the sales of certain First Horizon Bank branches.
Transaction costs of $12.7 million from the contracted sales of mortgage servicing rights.
Expense of $10.7 million for the write-down of certain premises and equipment, intangibles, and other assets resulting from FHNs divestiture of certain mortgage operations and from the change in FHNs national banking strategy.
The financial results of FTN ECM (the institutional equity research business) including goodwill impairment are reflected in the Loss from discontinued operations, net of tax line on the Consolidated Statements of Income for all periods presented. Losses from the divestitures of the Atlanta insurance business, FERP,
and certain mortgage banking operations are included in Losses on divestitures on the Consolidated Statements of Income. Transaction costs recognized in the periods presented from selling mortgage servicing rights are recorded as a reduction of Mortgage banking income in the noninterest income section of the
Consolidated Statements of Income. All other costs associated with the restructuring, repositioning, and efficiency initiatives implemented by management are included in the noninterest expense section of the Consolidated Statements of Income, including severance and other employee-related costs recognized in
relation to such initiatives which are recorded in Employee compensation, incentives, and benefits; facilities consolidation costs and related asset impairment costs are included in Occupancy; costs associated with the impairment of premises and equipment are included in Equipment rentals, depreciation, and
maintenance or All other expense; professional fees are included in Legal and professional fees; costs associated with intangible asset impairments are included in All other expense or goodwill impairments.
Settlement of the obligations arising from current initiatives will be funded from operating cash flows. The effect of suspending depreciation on assets held-for-sale (HFS) was immaterial to FHNs results of operations for all periods. As a result of actions taken that are described above, FHN has incurred charges to
impair certain intangible assets and components of goodwill. As a result of the change in FHNs national banking strategy, a write-down of other intangibles of $2.4 million was recognized in first quarter 2008 related to certain banking licenses. As part of the divestiture of certain mortgage banking operations, an
impairment of $1.7 million was recognized in second quarter 2008 related to noncompete agreements. Additionally, in 2009, FHN incurred charges of $.2 million to write off customer lists as a result of the sale and closure of the Atlanta insurance business, a $14.3 million goodwill impairment related to the
agreement to sell FTN ECM, and a $2.3 million goodwill impairment on assets excluded from the sale of the Atlanta insurance business. In first quarter 2010, FHN incurred a charge of $3.3 million to write off remaining goodwill associated with the closure of the institutional equity research business. The
impairment charges related to the exit of FTN ECM are reflected in Loss from discontinued operations, net of tax on the Consolidated Statements of Income and within the non-strategic segment. All other impairment losses related to such intangible assets were recorded within the non-strategic segment and are
included in All other expense on the Consolidated Statements of Income. The recognition of these impairment losses will have no effect on FHNs debt covenants. Due to the broad nature of the actions being taken, substantially all components of expense have benefitted from past efficiency initiatives and are
expected to benefit from the current efficiency initiatives.
Charges related to restructuring, repositioning, and efficiency initiatives for the years ended December 31, 2010, 2009, and 2008, are presented in the following table based on the income statement line item affected. See Note 26 Restructuring, Repositioning, and Efficiency Charges and Note 2 Acquisitions and
Divestitures for additional information.
18
FIRST HORIZON NATIONAL CORPORATION
Table 7 - Restructuring, Repositioning, and Efficiency Initiatives
(Dollars in thousands)
2010
2009
2008
Noninterest income:
Mortgage banking
$
(1,532
)
$
(548
)
$
(12,667
)
Loss on divestitures
-
(9,183
)
(19,019
)
All other income and commissions
(27
)
-
-
Total noninterest loss
(1,559
)
(9,731
)
(31,686
)
Noninterest expense:
Employee compensation, incentives, and benefits
3,150
5,432
23,974
Occupancy
946
1,985
8,141
Equipment rentals, depreciation, and maintenance
-
-
4,340
Legal and professional fees
120
702
4,342
Goodwill impairment
-
2,294
-
All other expense
2,161
17,312
18,516
Total noninterest expense
6,377
27,725
59,313
Loss before income taxes
(7,936
)
(37,456
)
(90,999
)
Loss from discontinued operations
(9,285
)
(14,470
)
(414
)
Net charges from restructuring, repositioning, and efficiency initiatives
$
(17,221
)
$
(51,926
)
$
(91,413
)
Certain previously reported amounts have been reclassified to agree with current presentation.
Activity in the restructuring and repositioning liability for the years ended December 31, 2010, 2009, and 2008 is presented in the following table:
Table 8 - Restructuring, Repositioning, and Efficiency Reserve
Total period-end assets were $24.7 billion at December 31, 2010, compared to $26.1 billion at the end of 2009. Average assets decreased to $25.7 billion in 2010 from $28.1 billion in 2009. The decline in both the period-end and average balance of total assets primarily reflects the reduction in size of the loan
portfolio.
EARNING ASSETS
Earning assets consist of loans, loans HFS, investment securities, trading securities, and other earning assets. Earning assets averaged $23.0 billion and $25.4 billion for 2010 and 2009, respectively. A more detailed discussion of the major line items follows.
FIRST HORIZON
NATIONAL CORPORATION
19
Loans
Average loans declined 13 percent in 2010 as a result of the continued wind-down of the non-strategic portfolios combined with weak loan demand. In first quarter 2010, FHN prospectively adopted amendments to ASC 810 which resulted in the consolidation of $245.2 million of loans, primarily home equity lines
of credit (HELOCs), that were included in securitizations which FHN retained servicing and additional significant interests subsequent to the securitization. These loans, along with HELOCs that were already recognized on FHNs balance sheet which collateralize borrowings of securitization trusts, are reflected as
Restricted Real Estate Loans. Additionally, these loans are presented parenthetically on the Consolidated Statements of Condition. Refer to the Loan Portfolio Composition section for a more detailed discussion about the loan portfolio.
Table 9 - Average Loans
(Dollars in millions)
2010
Percent of Total
2010 Growth Rate
2009
Percent of Total
2009 Growth Rate
2008
Percent of Total
2008 Growth Rate
Commercial:
Commercial, financial, and industrial
$
6,945.6
41
%
(4.9)%
$
7,302.0
37
%
(1.0)%
$
7,377.4
34
%
2.9
%
Commercial real estate:
Income CRE
1,586.1
9
(17.4)
1,920.0
10
(4.5)
2,010.6
9
6.8
Residential CRE
427.8
2
(57.1)
998.1
5
(41.6)
1,707.6
8
(22.3
)
Total commercial
8,959.5
52
(12.3)
10,220.1
52
(7.9)
11,095.6
51
(1.3
)
Retail:
Consumer real estate
5,942.6
35
(19.4)
7,370.7
38
(6.6)
7,893.1
36
(1.0
)
Permanent mortgage
1,019.3
6
(7.3)
1,099.5
6
31.2
838.1
4
86.7
One-time-close residential construction (OTC)
75.9
*
(86.8)
573.3
3
(61.8)
1,501.7
7
(28.4
)
Credit card & other
299.4
2
(5.2)
315.6
2
(5.0)
332.2
2
(3.9
)
Restricted real estate loans (a) (b)
835.1
5
N/A
N/A
N/A
N/A
N/A
Total retail
8,172.3
48
(12.7)
9,359.2
48
(11.4)
10,565.0
49
(2.7
)
Total loans, net of unearned
$
17,131.8
100
%
(12.5)%
$
19,579.3
100
%
(9.6)%
$
21,660.7
100
%
(2.0
)%
*
Amount less than one percent.
(a)
Prior to 2010, amount was reported in Consumer Real Estate.
(b)
2010 includes $769.9 million of Consumer Real Estate loans and $65.2 million of Permanent Mortgage loans.
C&I loans comprised 78 percent of total commercial loans in 2010 compared to 71 percent in 2009 and declined $356.5 million as loan demand continues to be soft. An increase in mortgage warehouse and asset-based lending during 2010 mitigated a portion of the decline in the C&I portfolio. Despite the decline in
the average balance, the C&I balance on December 31, 2010 was $7.3 billion reflecting a $.2 billion increase from December 31, 2009. The increase in the period-end balance was driven by loan growth within tax-free lending to government and municipalities and mortgage warehouse lending in 2010. Commercial
real estate loans declined $.9 billion in 2010 to $2.0 billion. A decrease in Residential CRE loans drove a majority of the decline as the component originated through national channels continues to run-off and active lending in and around Tennessee has been significantly reduced. Contractual maturity information
for commercial loans is provided in Table 10.
Total retail loans declined 13 percent, or $1.2 billion, to $8.2 billion in 2010. The Consumer Real Estate Portfolio (home equity lines and installment loans) contributed $1.4 billion of the decline in retail loans. Over half of these loans were originated through the national channel but account for over 90 percent of
the decline as these loans continue to slowly runoff. The Permanent Mortgage portfolio declined 7 percent during 2010 to $1.0 billion. In fourth quarter 2010, FHN exercised clean-up calls on 8 securitization trusts resulting in approximately $175 million of jumbo permanent mortgages being included in the
permanent mortgage portfolio. Loans consolidated due to the adoption of amendments to ASC 810 combined with approximately $600 million of restricted home equity lines
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FIRST HORIZON NATIONAL CORPORATION
that were included in the Consumer Real Estate Portfolio prior to 2010, are reflected within Restricted Real Estate Loans. The remaining balance of the One-Time-Close (OTC) portfolio was immaterial at the end of 2010.
Table 10 - Contractual Maturities of Commercial Loans on December 31, 2010
(Dollars in thousands)
Within 1 Year
After 1 Year Within 5 Years
After 5 Years
Total
Commercial, financial, and industrial
$
3,309,217
$
2,853,025
$
1,175,913
$
7,338,155
Commercial real estate (a)
853,799
701,367
115,358
1,670,524
Total commercial loans, net of unearned income
$
4,163,016
$
3,554,392
$
1,291,271
$
9,008,679
For maturities over one year:
Interest rates - floating
$
2,505,936
$
634,018
$
3,139,954
Interest rates - fixed
1,048,456
657,253
1,705,709
Total maturities over one year
$
3,554,392
$
1,291,271
$
4,845,663
(a)
Includes Income CRE and Residential CRE.
Because of various factors, the contractual maturities of consumer loans are not indicative of the actual lives of such loans. A significant component of FHNs loan portfolio consists of retail real estate loans - a majority of which are home equity lines of credit and home equity installment loans. Typical home equity
lines originated by FHN are variable rate 5/15 or 10/10 lines. In a 5/15 line, a borrower may draw on the loan for 5 years and pay interest only during that period (the draw period), and for the next 15 years the customer pays principal and interest and may no longer draw on that line. A 10/10 loan has a 10
year draw period followed by a 10-year principal-and-interest period. Therefore, the contractual maturity for 5/15 and 10/10 home equity lines is 20 years. Numerous factors can contribute to the actual life of a home equity line or installment loan as the prepayment rates for these portfolios typically do not trend
consistent with contractual maturities. In normalized market conditions, the average life of home equity line and installment portfolios is significantly less than the contractual period with historical trends indicating an average life approximating 60 months. Recently, indicators suggest that the average life of these
portfolios could be longer when compared to that observed in normalized market conditions. This could be attributed to the limited availability of new credit in the marketplace, poor performance of the housing market, and a historically low interest rate environment. However, the actual average life of home equity
lines and loans is difficult to predict and changes in any of these factors could result in changes in projections of average lives.
The remaining retail real estate loans consist primarily of permanent mortgages that were originated through the legacy national mortgage origination platform. While most first liens originated through this channel were subsequently sold, the remaining balances consist of loans that were unable to be delivered to the
secondary market and OTC loans that modified into permanent mortgages. Currently, FHN is only originating first lien permanent mortgages through its regional banking channel. Generally, such loans are classified as HFS and sold with servicing released within 30 days of closing.
Investment Securities
FHNs investment portfolio consists principally of debt securities including government agency issued mortgage-backed securities (MBS) and government agency issued collateralized mortgage obligations (CMO) which are used as a source of income, liquidity, and collateral for repurchase agreements or public
fund deposits. The investment portfolio is also used as a tool to manage risk from movements in interest rates. As of December 31, 2010 and 2009, all securities in the portfolio were classified as available-for-sale (AFS). Table 11 shows information pertaining to the composition, yields, and contractual maturities
of the investment securities portfolio. Investment securities averaged $2.7 billion in 2010 compared to $2.9 billion in 2009 and represented 12 percent of earning assets in 2010 compared to 11 percent in 2009. Average investment securities declined consistent with the overall contraction of the balance sheet and
also due to lack of investment opportunities at desirable yields given the historically low interest rate environment. During 2010, FHN purchased nearly $2 billion of debt investment securities which more than offset maturities during the year increasing the period-end balance of the securities portfolio to $3.0 billion
at the end of 2010 from $2.7 billion at the end of 2009.
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Government agency issued MBSs and CMOs, and other agencies averaged $2.3 billion in 2010 compared to $2.4 billion in 2009. Period-end balances of MBSs and CMOs were higher reflecting the purchases discussed above. U.S. Treasury securities and municipal bonds averaged $114.7 million in 2010
compared to $102.1 million in 2009. Investments in equity securities averaged $255.0 million in 2010 compared with $301.5 million in 2009. A majority of these balances include restricted investments in the Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock which averaged over $190
million during 2010. On December 31, 2010, total investment securities had $74.2 million of net unrealized gains that resulted in an increase in book equity of $45.4 million, net of $28.9 million of deferred income taxes. On December 31, 2009, AFS securities had $106.3 million of net unrealized gains that
resulted in an increase in book equity of $64.9 million, net of $41.1 million of deferred income taxes. See Note 3 Investment Securities for additional detail.
Table 11 - Contractual Maturities of Investment Securities on December 31, 2010 (Amortized Cost)
(Dollars in thousands)
Within 1 Year
After 1 Year Within 5 Years
After 5 Years Within 10 Years
Yield
After 10 Years
Amount
Yield
Amount
Yield
Amount
Amount
Yield
Securities available for sale (AFS):
Government agency issued MBS and CMO (a)
$
-
-
%
$
4,320
5.18
%
$
35,791
5.51
%
$
2,527,419
4.17
%
U.S. Treasuries
62,069
0.37
25,119
1.02
-
Other U.S. government agencies
-
-
50,426
5.11
-
States and municipalities (b)
-
-
-
-
2,795
1.62
23,220
0.98
Other
-
-
511
4.95
-
-
226,012
(c)
3.42
Total
$
62,069
0.37
%
$
80,376
3.84
%
$
38,586
5.23
%
$
2,776,651
4.08
%
(a)
Represents government agency-issued mortgage-backed securities and collateralized mortgage obligations which, when adjusted for early paydowns, have an estimated average life of 3.9 years.
(b)
Weighted average yields on tax-exempt obligations have been computed by adjusting allowable tax-exempt income to a fully taxable equivalent basis.
(c)
Represents equity securities with no stated maturity.
Loans Held-for-Sale
Loans HFS consists of the mortgage warehouse (includes repurchased loans), student, small business, and home equity loans. The average balance of loans HFS decreased $84.5 million in 2010 and averaged $462.3 million during 2010. The mortgage warehouse, which consists of mortgage loans remaining from
the legacy mortgage banking business, loans originated within the regional banking footprint awaiting transfer to the secondary market, and mortgage loans repurchased pursuant to requests from investors (primarily GSEs), averaged $333.7 million and comprised over 70 percent of loans HFS. The 2010 period-end
balance of loans HFS was $375.3 million compared to $452.5 million at the end of 2009, which reflects the third quarter 2010 sale of approximately $120 million of student loans.
Trading Securities/Other Earning Assets
Trading securities primarily include capital markets trading inventory and a smaller amount of mortgage trading securities which represent retained interests from prior securitization activities. Average trading securities increased $46.2 million to $1.2 billion in 2010 from $1.1 billion in 2009 primarily as a result of
increased levels of capital markets trading inventory during the year. This increase which was partially offset by FHNs reduction of retained interests from prior securitizations. At the end of 2010, capital markets trading inventory was $734.3 million compared with $633.8 million at the end of 2009. Generally, the
lower period-end balances of trading inventory reflect a cyclical slowdown in trading volume at the end of the year.
Average other earning assets, which includes securities purchased under agreements to resell, federal funds sold (FFS), and interest-bearing deposits with the FRB and other financial institutions, increased to $1.6 billion in 2010 from $1.3 billion in 2009. The increase is due to FHN holding excess deposits with
the FRB due to the
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FIRST HORIZON NATIONAL CORPORATION
limited availability of attractive investment opportunities and low loan demand. Average FFS decreased primarily due to reduced short-term lending to correspondent banks as a result of elevated levels of liquidity in the market in 2010 compared with 2009.
Core Deposits
During 2010, average core deposits increased 11 percent or $1.4 billion to $14.6 billion. The increase in core deposits reflects efforts to increase customer deposits within the wealth management group during 2010 and 2009, growth in middle Tennessee (Metropolitan Nashville) deposits, and an increase in insured
network deposits. Growth was positively affected by FHNs continued participation in the FDICs Transaction Account Guarantee (TAG) program and the historically low interest rate environment as deposit holders were unable to obtain higher rates on other comparable investment products.
Short-Term Funds
Short-term funds (certificates of deposit greater than $100,000, federal funds purchased (FFP), securities sold under agreements to repurchase, trading liabilities, other short-term borrowings and commercial paper, averaged $4.0 billion during 2010, a decline of 44 percent from $7.1 billion during 2009. On
December 31, 2010, short-term funds were $3.2 billion compared to $4.5 billion on December 31, 2009. FHNs contracting balance sheet and core deposit growth reduced reliance on higher-cost purchased short-term funds. The reduction in borrowings from the FRBs Term Auction Facility (TAF) contributed
$2.1 billion of the decline as balances were fully repaid in first quarter 2010. Average borrowings from the FHLB declined $.3 billion from 2009; all borrowings from the FHLB were also fully repaid in 2010. Purchased CDs (generally, CDs greater than $100,000) declined by $.8 billion to $.6 billion during 2010
reflecting FHNs focus on lower cost, more stable funding sources. Average FFP, which currently is entirely composed of funds from correspondent banks, and securities sold under repurchase agreements increased to $2.6 billion during 2010 from $2.5 billion during 2009 due to increased utilization of FFP as the
availability of overnight credit increased after tightening that began in 2008. FFP period-end balances fluctuate depending on the amount of excess funding of FHNs correspondent banking customers and also the impact of FHNs excess Fed deposits. Both average and period-end balances of securities sold under
agreements to repurchase declined given the low rates currently paid on these products combined with the ability to receive FDIC insurance coverage on business checking accounts. On average, short-term purchased funds accounted for 18 percent of FHNs funding (core deposits plus short-term purchased funds
and term borrowings) in 2010 compared to 30 percent in 2009. See Note 9 Short-Term Borrowings for additional information.
Term Borrowings
Term borrowings include senior and subordinated borrowings and advances with original maturities greater than one year. Average term borrowings decreased 17 percent, or $.6 billion, and averaged $2.9 billion in 2010. As of December 31, 2010, term borrowings increased to $3.2 billion from $2.9 billion as of the
end of 2009. The increase in the period-end balance reflects the $500 million senior debt offering which closed in fourth quarter 2010. Because the debt offering closed late in 2010, it had a minimal impact on the 2010 average balance. The decline in average term-borrowings relates to the reduction in long-term
bank notes with the remaining $.5 billion scheduled to mature in early 2011. See Note 10 Term Borrowings for additional information.
ADOPTION OF ACCOUNTING UPDATES 2010
Effective January 1, 2010, FHN adopted the provisions of Accounting Standards Update 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17). ASU 2009-17 amends ASC 810 to revise the criteria for determining the primary beneficiary of a variable
interest entity (VIE) by replacing the quantitative-based risks and rewards test previously required with a qualitative analysis. ASC 810 adds additional criteria which triggers a reassessment of an entitys status when an event occurs such that the holders of the equity investment at risk, as a group, lose the power
from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entitys economic performance. Additionally, the amendments to ASC 810 require continual reconsideration of conclusions regarding which interest holder is the VIEs primary beneficiary.
Under ASC 810, as amended, separate presentation is required on the face
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23
of the balance sheet of the assets of a consolidated VIE that can only be used to settle the VIEs obligations and the liabilities of a consolidated VIE for which creditors or beneficial interest holders have no recourse to the general credit of the primary beneficiary.
Upon adoption of the amendments to ASC 810, FHN re-evaluated all former qualified special purpose entities (QSPEs) and entities already subject to ASC 810 under the revised consolidation methodology. Based on such re-evaluation, consumer loans with an aggregate UPB of approximately $245.2 million were
prospectively consolidated as of January 1, 2010, along with secured borrowings of $236.3 million, as the retention of MSR and other retained interests, including residual interests and subordinated bonds, results in FHN being considered the related trusts primary beneficiary under the qualitative analysis required
by ASC 810, as amended. MSR and trading assets held in relation to the newly consolidated trusts were removed from the mortgage servicing rights and trading securities sections of the Consolidated Statements of Condition, respectively, upon adoption of the amendments to ASC 810. As the assets of FHNs
consolidated residential mortgage securitization trusts are pledged to settle the obligations due to the holders of the trusts securities and since the security holders have no recourse to FHN, the asset and liability balances have been parenthetically disclosed on the face of the Consolidated Statements of Condition
as restricted in accordance with the presentation requirements of ASC 810, as amended. Since FHN determined that calculation of carrying values was not practicable, the UPB measurement methodology was used upon adoption, with the allowance for loan losses (ALLL) related to the newly consolidated loans
determined using FHNs standard practices.
FHN recognized a reduction to the opening balance of undivided profits of approximately $10.6 million for the cumulative effect of adopting the amendments to ASC 810, including the effect of the recognition of an adjustment to the ALLL of approximately $24.6 million ($15.6 million net of tax) in relation to the
newly consolidated loans. Further, upon adoption of the amendments to ASC 810, the deconsolidation of certain small issuer trust preferred trusts for which FTBNA holds the majority of the mandatorily redeemable preferred capital securities (trust preferreds) issued but is not considered the primary beneficiary
under the qualitative analysis required by ASC 810, as amended, resulted in reduction of loans net of unearned income and term borrowings on the Consolidated Statements of Condition by $30.5 million.
ADOPTION OF ACCOUNTING UPDATES 2009
Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 805 and ASC 810. ASC 805, as amended, requires that an acquirer recognize the assets acquired and liabilities assumed in a business combination, as well as any noncontrolling interest in the acquiree, at their fair values as
of the acquisition date, with limited exceptions. Additionally, the updated provisions of ASC 805 provide that an acquirer cannot specify an effective date for a business combination that is separate from the acquisition date. ASC 805, as amended, also provides that acquisition-related costs which an acquirer incurs
should be expensed in the period in which the costs are incurred and the services are received. ASC 810, as amended, requires that acquired assets and liabilities be measured at full fair value without consideration to ownership percentage. Under the updated provisions of ASC 810, any noncontrolling interests in
an acquiree should be presented as a separate component of equity rather than on a mezzanine level. Additionally, ASC 810, as amended, provides that net income or loss should be reported in the consolidated income statement at its consolidated amount, with disclosure on the face of the consolidated income
statement of the amount of consolidated net income which is attributable to the parent and noncontrolling interests, respectively. The retrospective application of ASC 810s presentation and disclosure requirements resulted in an increase to consolidated net income of $14.0 million for 2008 and $18.8 million for
2007. FHN also recognized an increase of total shareholders equity of $295.2 million upon adoption of the amendments to ASC 810 as a result of reclassifying the noncontrolling interest previously recognized on the Consolidated Statements of Condition as Preferred stock of subsidiary as a separate component
of equity. Accordingly, all prior periods have been represented to reflect this adoption.
See Note 1 Summary of Significant Accounting Policies for a complete discussion of accounting updates adopted during 2010 and 2009.
Total consolidated revenue decreased 14 percent to $2.0 billion in 2009 from $2.4 billion in 2008 despite record capital markets income as mortgage banking income significantly decreased from 2008. The provision for loan losses decreased 19 percent to $.9 billion in 2009 from $1.1 billion in 2008. While most
portfolios were still affected by the weak real estate market and the poor economic conditions that existed in both 2009 and 2008, provision expense improved primarily due to the reduced exposure in the non-strategic construction portfolios. A more detailed discussion of the major line items follows:
NET INTEREST INCOME
Net interest income declined to $776.5 million in 2009 from $895.1 million in 2008 as average earning assets declined 17 percent to $25.4 billion and average interest-bearing liabilities declined 26 percent to $19.3 billion in 2009. The decline in average earning assets was primarily driven by a significant decline
in loans HFS due the divestiture of certain mortgage banking operations and the loan portfolio which is primarily due to the wind-down of the non-strategic portfolios. The decrease in average interest-bearing liabilities is primarily due to reduced borrowing needs consistent with the contraction of the balance sheet.
Net interest income declined $118.6 million primarily due to reduction in interest income from the loan portfolio, partially mitigated by improved funding costs. The consolidated net interest margin was 3.06 percent for 2009 compared to 2.95 percent for 2008. The widening in the margin occurred as the net
interest spread increased to 2.80 percent in 2009 from 2.55 percent in 2008 and the impact of free funding decreased to 26 basis points in 2009 from 40 basis points in 2008. The increase in the margin is attributable to a decline in higher-cost wholesale funding, lower effect from nonaccrual loans, improved
loan pricing relative to deposit pricing, and changing balance sheet mix.
NONINTEREST INCOME
Noninterest income contributed 62 percent to total revenue in 2009 and in 2008 while decreasing by $213.5 million to $1.3 billion in 2009. The decrease primarily resulted from a decline in mortgage banking income and net securities gains that were somewhat mitigated by a significant increase in capital markets
income. The following discussion provides additional information about various line items.
Capital Markets Noninterest Income
Capital markets noninterest income increased to $632.1 million in 2009 from $483.5 million in 2008. Revenues from fixed income sales increased $104.8 million to $598.6 million in 2009 due to favorable market conditions (especially in the first half of the year) combined with capital markets extensive distribution
network. While still strong, fixed income revenues decreased in the second half of the year as market conditions began to normalize. Revenues from other products represented only 5 percent of total capital markets income in 2009. These revenues increased $43.8 million primarily due to a $36.2 million lower of
cost or market (LOCOM) adjustment that was recognized on the trust preferred portfolio during 2008.
Mortgage Banking Noninterest Income
In third quarter 2008, FHN completed the sale of certain mortgage banking operations, including servicing operations, origination offices outside of Tennessee, and servicing on loans with an outstanding principal balance of $19.1 billion. As a result of this transaction and the execution of multiple bulk MSR sales
during 2009 and 2008, origination and servicing income are significantly lower when compared to 2008.
During 2009, noninterest income consisted primarily of fees from mortgage servicing, changes in the fair value of MSR net of hedge gains or losses, fair value adjustments to the remaining warehouse, and origination income through the regional banking footprint. In periods prior to the divestiture, mortgage banking
fee income also included origination through national channels and sales of mortgage loans into the secondary market. Noninterest income decreased to $235.5 million in 2009 compared to $518.0 million in 2008. A $199.3 million decline in
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origination income and $85.1 million decline in servicing income were the primary contributors to year over year reduction in mortgage banking noninterest income.
In 2009, origination income was $24.3 million compared with $223.6 million in 2008 reflecting the 2008 divestiture. Mortgage origination income through the regional banking footprint generated $24.3 million in revenues and negative fair value adjustments to the remaining mortgage warehouse were $6.4 million
during 2009. Origination income in 2008 was driven by considerably higher volumes given the national distribution channel and delivery of $19.9 billion of mortgage loans into the secondary market. Additionally, in 2008 FHN recognized a $15.5 million negative adjustment to gain on sale as a result of revised cash
flow expectations for mortgage origination activity. This revision of cash flow expectations resulted in the recognition of a liability for future payments of lender-paid private mortgage insurance associated with loans previously sold. In fourth quarter 2008, FHN contracted with a third party insurer to eliminate its
liability related to lender-paid mortgage insurance for the applicable loans.
Net servicing income declined $85.1 million to $206.9 million in 2009 reflecting a substantial decline in the UPB of the servicing portfolio and lower net hedging gains from 2008. The average UPB of mortgage loans serviced during 2009 declined to $45.1 billion from $86.0 billion during 2008. FHN sold servicing
rights on approximately $13 billion in UPB during 2009 and executed multiple MSR sales in 2008, including $19.1 billion sold in third quarter 2008 in conjunction with the sale of certain mortgage banking operations. The contracting servicing portfolio resulted in a $112.0 million decline in servicing fees to $120.3
million in 2009. A slowdown in runoff of the servicing portfolio positively affected servicing income in 2009 by $45.3 million which somewhat mitigated an $18.8 million decline in positive net hedging results.
In 2008, other income included FHNs share of earnings from nonconsolidated subsidiaries accounted for under the equity method, which provided ancillary activities to mortgage banking, and fees from retail construction lending. FHNs interests in these unconsolidated subsidiaries were sold in third quarter 2008.
In fourth quarter 2008, other mortgage banking income was negatively impacted by the recognition of a $6.5 million liability for minimum fee guarantees on prior servicing sales as the acquirer of certain servicing rights was experiencing net servicing fees below a specified threshold on loans having a UPB of
approximately $420 million due to the incurrence of higher-than-expected servicing-related costs. Upon identification of this issue, FHN contracted with a third party to mitigate its liability for this issue.
Other Fee Income
Noninterest income from deposit transactions and cash management fees decreased to $163.8 million in 2009 from $179.0 million in 2008, reflecting a $14.9 million decline in NSF fees on retail accounts. The decline in NSF fee income is attributable to overall lower consumer transaction volume during 2009
when compared with 2008. Fees from trust services and investment management were $29.5 million in 2009 compared to $33.8 million in 2008. The $4.3 million decrease is due to market-related declines in trust asset values that primarily occurred during the first half of 2009. In 2009, brokerage and
management fees were $26.9 million compared to $32.2 million in 2008. The decline is partially due to overall market conditions and also a shift in customer investment mix to lower-risk, less profitable, products. Additionally, in 2009, FHN rolled-out a more fee-based approach to asset management that negatively
affected fee income in 2009. Noninterest income from insurance commissions decreased to $25.2 million in 2009 from $29.1 million in 2008 primarily due to reduced sales volume because of low demand and a decline in mortgage-related insurance sales. In 2009, losses from divestitures were $9.2 million and
were related to the sales of FHNs Atlanta insurance business and the Louisville First Express Remittance Processing (lockbox service) location. Losses from divestitures in 2008 were $19.0 million and were related to the sale of mortgage banking operations and certain First Horizon Bank branches. Net securities
losses in 2009 were $1.2 million and primarily related to losses on venture capital investments and a $.5 million cost method investment impairment. Net securities gains in 2008 were $66.1 million and were primarily related to Visas redemption of its class B shares held by FHN in connection with Visa Inc.s IPO
that resulted in a gain of $65.9 million.
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FIRST HORIZON NATIONAL CORPORATION
All Other Income and Commissions
All other income and commissions increased to $152.2 million in 2009 from $145.5 million in 2008. Other income was positively affected by a $30.6 million increase in deferred compensation income (which is more than offset by a $39.2 million increase in deferred compensation expense). Gains from the
repurchase of bank debt decreased by $17.4 million and income from bank-owned life insurance declined by $5.4 million due to a lower earnings rate. ATM interchange fees were up slightly as a result of a promotion by FHNs ATM network provider. All other components decreased slightly.
NONINTEREST EXPENSE
Total noninterest expense in 2009 decreased 3 percent to $1,571.8 million during 2009. Costs from restructuring, repositioning, and efficiency initiatives reflected in various categories of noninterest expense declined $31.6 million to $27.7 million in 2009.
Employee compensation, incentives, and benefits (personnel expense), the largest component of noninterest expense, decreased $151.4 million in 2009 from $929.0 million in 2008. The significant decline in personnel expense primarily reflects the 2008 divestiture of certain mortgage banking operations. Severance
related to FHNs ongoing restructuring, repositioning, and efficiency initiatives also decreased from 2008. Personnel expense increased within capital markets as a result of higher fixed income sales revenue during 2009. The net periodic benefit cost for FHNs pension plan which is included in personnel expense
was $8.6 million in 2009 compared to $1.7 million in 2008.
The repurchase and foreclosure provision increased to $147.8 million in 2009 from $29.5 million in 2008 primarily reflecting an increase in repurchase requests on loans that were previously sold or securitized through FHNs legacy mortgage banking business. Charges related to repurchase obligations from prior
junior lien consumer loans sales were $21.3 million in 2009 compared with $18.0 million in 2008. Additionally, foreclosure losses and FDIC premiums, including the second quarter 2009 FDIC special assessment, increased $44.7 million and $31.6 million, respectively. Foreclosure losses reflected $39.9 million in
negative fair value adjustments in 2009. FHN incurred a $2.3 million goodwill impairment related to goodwill allocated to certain assets that were excluded from the sale of the Atlanta insurance business in 2009. There were no goodwill impairments in 2008. Generally, all other expense categories decreased
primarily from the divestiture of certain mortgage banking operations but also a result of efficiency initiatives and focus on core businesses.
Total other noninterest expense increased $10.2 million to $184.3 million in 2009 despite overall declines in most expense categories from the divestiture of certain mortgage banking operations and a company-wide focus on efficiencies. All other noninterest expense increased $27.2 million. Charges to increase the
reserve for reinsurance obligations due to increased estimated defaults on insured mortgages were $25.6 million in 2009 compared to $16.5 million in 2008. Both periods included net reversals of the contingent liability for certain Visa legal matters as FHN reversed only $7.0 million in 2009 compared with $30.0
million in 2008. Operations services to support FHNs regional banking mortgage businesses increased $15.4 million during 2009.
Total assets were $26.1 billion on December 31, 2009, compared to $31.0 billion on December 31, 2008. Average assets decreased to $28.1 billion in 2009 from $34.4 billion in 2008 due to continued efforts to reduce balance sheet risk.
EARNING ASSETS
Earning assets consist of loans, loans HFS, investment securities, trading securities and other earning assets. Earning assets averaged $25.4 billion and $30.4 billion in 2009 and 2008, respectively. A more detailed discussion of the major line items follows.
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Loans
Average loans decreased 10 percent to $19.6 billion from $21.7 billion in 2008 as the wind-down of the non-strategic construction portfolios continued and FHN experienced soft loan demand during 2009. The loan portfolio represented 77 percent of average earning assets in 2009 and 71 percent in 2008.
C&I loans comprised 72 percent of total commercial loans in 2009 compared to 66 percent in 2008. C&I loans were relatively flat from 2008 as loan demand was soft during 2009. Commercial real estate loans declined $.9 billion as result of continued efforts to wind down the non-strategic component of this portfolio
and also due to elevated charge-offs.
Total retail loans decreased $1.2 billion to $9.4 billion during 2009. Consumer real estate loans declined $.5 billion primarily driven by reduction in home equity installment loans originated through the national channel. Permanent mortgages increased $.3 billion to $1.1 billion as a result of transfers from loans HFS
to the loan portfolio that occurred during 2008 and modifications of construction loans to permanent mortgages. The OTC portfolio averaged $.6 billion during 2009 compared to $1.5 billion in 2008 as balances were affected by charge-offs, refinance by others, and movement to the permanent portfolio (if an
individual loan qualified for such a move), and continued efforts to wind down this portfolio. Credit card and other averaged $.3 billion in both periods and comprises only 3 percent of total retail loans.
Investment Securities
Investment securities averaged $2.9 billion in 2009 compared to $3.0 billion in 2008 and represented 11 percent of earning assets in 2009 compared to 10 percent in 2008. A majority of this decline is attributable to natural runoff of MBS securities. Additionally, as of the end of the year, FHN held over $190
million of restricted investments in FHLB and FRB stock. On December 31, 2009, the securities portfolio had $106.3 million of net unrealized gains that resulted in an increase in book equity of $64.9 million, net of $41.4 million of deferred income taxes. On December 31, 2008, AFS securities totaled $3.1 billion
and had $69.2 million of net unrealized gains that resulted in an increase in book equity of $42.8 million, net of $26.4 million of deferred income taxes.
Loans Held-for-Sale/Loans Held for Sale Divestiture
Loans HFS averaged $.5 billion, a decrease of 79 percent, or $2.0 billion from 2008 and represented only 2 percent of total earning assets in 2009 compared to 9 percent in 2008. This decline is due to a much smaller mortgage warehouse as the national mortgage origination platform was sold in third quarter
2008 and the remaining warehouse significantly contracted in 2009. During 2008, first and second lien mortgages and small issuer trust preferred loans were moved to the loan portfolio. On December 31, 2009 and 2008, FHN did not have any loans classified as HFS - divestiture. However, during 2008, HFS -
divestiture averaged $.1 billion as FHN completed the final First Horizon Bank branch sale in second quarter 2008.
Trading Securities/Other Earning Assets
Average trading securities decreased 41 percent to $1.1 billion in 2009 from $1.9 billion in 2008 primarily as a result of capital markets trading inventory management efforts and also FHNs reduction of retained interests from prior securitizations during 2009. Other earning assets decreased slightly, by 4 percent,
and averaged $1.3 billion in both periods. Interest-bearing cash increased $.4 billion as FHN allowed excess deposits to remain with the FRB as these deposits converted to interest-bearing accounts in the latter half of 2008. Average FFS decreased primarily due to reduced short-term lending to correspondent
banks and securities repurchase agreements declined consistent with the decline in capital markets trading portfolio.
Core Deposits
During 2009, core deposits increased 2 percent, or $.3 billion, and averaged $13.2 billion despite increased deposit competition. Noninterest-bearing core deposits increased $.2 billion, or 5 percent, and averaged $4.5 billion in 2009 reflecting FHNs ongoing efforts to grow core deposits. Interest-bearing core
deposits increased 1 percent to an average balance of $8.7 billion in 2009. In 2009 and 2008, the sales of MSR resulted in a decrease in custodial deposits as these core deposits were transferred when the related servicing rights were sold.
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FIRST HORIZON NATIONAL CORPORATION
Short-Term Funds/Term Borrowings
Short-term funds averaged $7.1 billion in 2009, down 37 percent from $11.3 billion in 2008. On December 31, 2009, short-term funds were $4.5 billion compared with $7.8 billion at the end of 2008. FHNs contracting balance sheet and core deposit growth reduced reliance on purchased short-term funds.
Average FFP decreased $.5 billion during 2009 to $1.6 billion as lending between financial institutions was reduced due to tightened credit markets and also because of the conversion of Fed deposits to interest-bearing accounts. However, as liquidity between financial institutions increased during 2009, FHN
increased its utilization of FFP resulting in a period-end balance increase of $1.1 billion from 2008. Additionally, the FDICs increased deposit coverage, combined with the low rate environment, resulted in a $.4 billion decline in average securities sold under repurchase agreements. During 2009, FHN continued to
utilize the FRBs TAF as these borrowings averaged $2.1 billion in both periods. On December 31, 2009, TAF borrowings declined to $.4 billion from $4.0 billion in 2008 in preparation for the expiration of this program in 2010. Purchased CDs declined by $.6 billion as FHN focused on lower cost, more stable
funding sources. Short-term purchased funds accounted for 30 percent of FHNs funding (core deposits plus purchased funds and term borrowings) in 2009, and 37 percent in 2008.
Average term borrowings decreased 43 percent, or $2.6 billion, to $3.5 billion in 2009. As of December 31, 2009, term borrowings were $2.9 billion, a decrease of 40 percent, or $1.9 billion from 2008 year-end. The decrease was the result of bank note maturities and repurchases as funding needs decreased due
to asset contraction. During 2009, FHN repurchased $.2 billion in bank notes and $1.6 billion matured.
Managements objectives are to provide capital sufficient to cover the risks inherent in FHNs businesses, to maintain excess capital to well-capitalized standards, and to assure ready access to the capital markets. In late 2010, FHN completed an equity offering which resulted in the issuance of 26.3 million
common shares and generated $263.1 million in net proceeds and also completed a senior debt offering which generated $496.3 million in net proceeds. Subsequent to these offerings, FHN redeemed all 866.5 million preferred shares issued to the UST under the Capital Purchase Program (CPP) in fourth
quarter 2010. The common stock warrant issued to the UST remains outstanding. During 2010, the Board maintained a quarterly stock dividend paid in lieu of a cash dividend at a rate determined quarterly. The last stock dividend was distributed on January 1, 2011, and the Board has since declared a cash
dividend of $.01 payable April 1, 2011. Total equity averaged $3.3 billion during 2010 compared with $3.5 billion during 2009. The decline in average equity was primarily the result of net losses recognized during 2009. Because the equity transactions described above closed late in 2010, the impact on average
equity in 2010 was minimal. Total equity was $2.7 billion on December 31, 2010, compared with $3.3 billion on December 31, 2009. The negative effect on equity as a result of the redemption of the CPP preferred shares and net losses recognized during 2010 more than offset the period-end increase in equity
as a result of the common stock offering. The following table provides pertinent capital ratios for the year-ended 2010, 2009, and 2008:
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Table 12 - Capital Ratios
2010
2009
2008
Total period-end equity to period-end assets
10.84
%
12.67
%
11.52
%
FHNs tier 1 risk-based capital
13.99
16.39
15.03
FHNs total risk-based capital
18.65
21.92
20.19
FHNs leverage
10.96
13.36
12.22
Tier 1 common to risk weighted assets *
11.53
9.88
9.56
Adjusted tangible common equity to risk weighted assets *
10.66
9.06
8.80
Tangible common equity to tangible assets *
8.93
7.75
7.34
*
Represents a non-GAAP measure. Refer to Table 38 for the non-GAAP to GAAP reconciliation.
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 institutions capital ratios decline below predetermined levels, it would become subject to a series of
increasingly restrictive regulatory actions. The system categorizes a depository institutions capital position into one of five categories ranging from well-capitalized to critically under-capitalized. For an institution to qualify as well-capitalized, Tier 1 Capital, Total Capital, and Leverage capital ratios must be at least 6
percent, 10 percent, and 5 percent, respectively. As of December 31, 2010, FHN and FTBNA had sufficient capital to qualify as well-capitalized institutions as shown in Note 13Regulatory Capital. In 2011, capital ratios are expected to remain strong and significantly above current well-capitalized standards despite
a difficult operating environment.
Pursuant to board authority, FHN may repurchase shares 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 constraints. The following table provides information related to
securities repurchased by FHN during fourth quarter 2010:
Table 13 - Issuer Purchases of Equity Securities
(Volume in thousands)
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Programs
Maximum Number of Shares that May Yet Be Purchased Under the Programs
2010
October 1 to October 31
*
$
10.10
*
42,641
November 1 to November 30
*
10.07
*
42,641
December 1 to December 31
-
N/A
-
33,824
Total
*
$
10.09
*
* Amount is less than 500 shares
N/A Not applicable
Compensation Plan Programs:
A consolidated compensation plan share purchase program was announced on August 6, 2004. This plan 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 originally authorized under this consolidated compensation plan share purchase program is 25.1 million shares. On April 24, 2006, an increase to the authority under this purchase program of 4.5 million shares was announced for a new total authorization of 29.6 million shares. The authority has been increased to reflect the stock dividends distributed through October 1,
2010. The shares may be purchased over the option exercise period of the various compensation plans on or before December 31, 2023. Stock options granted after January 2, 2004, must be exercised no later than the tenth anniversary of the grant date. On December 31, 2010, the maximum number of shares that may be purchased under the program was 33.8 million shares.
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.
Other Programs:
On October 16, 2007, the board of directors approved a 7.5 million share purchase authority which expired on December 31, 2010. No purchases were made under this authority during 2010.
FHN groups its loans into different portfolios 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 loans. Retail loans are composed of Consumer
Real Estate; Permanent Mortgage; Credit Card and Other; and Restricted Real Estate Loans. Key asset quality metrics for each of these portfolios can be found in Table 17Asset Quality by Portfolio.
Starting in 2007, FHNs underwriting and credit policies and guidelines evolved through a series of enhancements through which FHN has responded to dramatic changes in economic and real estate conditions in the U.S. As economic and real estate conditions develop, further enhancements to underwriting and
credit policies and guidelines may be necessary or desirable.
The following is a description of each portfolio:
COMMERCIAL LOAN PORTFOLIOS
FHNs commercial and real estate loan approval process grants lending authority based upon job description, experience, and performance. The lending authority is delegated to the business line (Market Managers, Departmental Managers, Regional Presidents, Relationship Managers (RM) and Portfolio Managers
(PM)) and to credit administration. While individual limits vary, the predominant amount of approval authority is vested with the Credit Risk Manager function. Portfolio concentration limits for the various portfolios are established by executive management and approved by the Executive and Risk Committee of the
Board.
C&I
The C&I portfolio was $7.3 billion on December 31, 2010. This portfolio is comprised of loans used for general business purposes, diversified by industry type, and primarily composed of relationship customers in Tennessee and certain neighboring states that are managed within the regional bank. 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 following table provides the composition of the C&I portfolio by industry as of December 31, 2010. 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 14 - C&I Loan Portfolio by Industry
(Dollars in thousands)
December 31, 2010
Percent
Industry:
Finance and insurance
$
1,450,663
20
%
Mortgage warehouse lending
816,201
11
%
Wholesale trade
569,419
8
%
Real estate rental and leasing (a)
545,085
7
%
Health care
507,785
7
%
Manufacturing
511,202
7
%
Construction-related (b)
344,688
5
%
Retail trade
357,784
5
%
Other (Transportation, Education, Arts, Entertainment, etc) (c)
2,235,329
30
%
Total C&I Loan Portfolio
$
7,338,156
100
%
(a)
Leasing, rental of real estate, equipment, and goods.
(b)
Infrastructure and construction related businesses.
(c)
Industries in this category comprise 4 percent or less.
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C&I loans are underwritten in accordance with a well-defined credit origination process. This process includes applying minimum underwriting standards as well as separation of origination and credit approval roles. Underwriting typically includes due diligence of the borrower and the applicable industry of the
borrower, analysis of the borrowers available financial information, identification and analysis of the various sources of repayment and identification of the primary risk attributes. Stress testing the borrowers financial capacity, adherence to loan documentation requirements, and assigning credit risk grades using
internally developed scorecards are also used to help quantify the risk when appropriate. Underwriting parameters also include loan-to-value ratios (LTVs) which vary depending on collateral type, use of guaranties, loan agreement requirements, and other recommended terms such as equity requirements,
amortization, and maturity. Approval decisions also consider various financial ratios and performance measures, such as cash flow and balance sheet leverage, liquidity, coverage of fixed charges, and working capital. Approval decisions also consider the capital structure of the borrower, sponsorship, and
quality/value of collateral. Generally, guideline and policy exceptions are identified and mitigated during the approval process. Pricing of C&I loans is based upon the determined credit risk specific to the individual borrower. These loans are typically based upon variable rates tied to the London Inter-Bank Offered Rate
(LIBOR) or the prime rate of interest plus or minus the appropriate margin.
C&I loan policies and guidelines are approved by several management risk committees that consist of business line managers and credit administration professionals to ensure that the resulting guidance addresses the attendant risks and establishes reasonable underwriting criteria that appropriately mitigate risk.
Policies and guidelines are reviewed, revised, and re-issued periodically at established review dates or earlier if changes in the economic environment, portfolio performance, the size of portfolio or industry concentrations, or regulatory guidance warrant an earlier review. During the past three years, policies and
guidelines have been enhanced with more specific guidance particularly for industries and portfolios that have concentrations or elevated credit risk. Underwriting metrics have been enhanced for mortgage warehouse and asset based lending, small business loans, leveraged finance, and loans to financial
institutions, to include more front-end due diligence, a reduction in tolerance for leverage, modification of advance rates based on collateral type, and financial performance.
In fourth quarter 2009, FHN enhanced the lending process by implementing a concept that incorporates a RM and PM for each commercial loan. The PM is responsible for assessing the credit quality of the borrower beginning with the initial underwriting and continuing through the servicing period while the RM is
primarily responsible for communications with the customer and maintaining the relationship. The RM/PM concept was then expanded to include other specialists who were organized into units called Deal Teams. Deal Teams are constructed with specific job attributes that should improve FHNs ability to identify,
mitigate, document, and manage ongoing risk. Portfolio managers and credit analysts provide enhanced analytical support during loan origination and servicing, including monitoring of the financial condition of the borrower and tracking compliance with loan agreements. Loan closing officers and the construction
loan management unit specialize in loan documentation and the management of the construction lending process. In addition to these changes, early identification of problem loan assets has been strengthened by training on problem loan identification, more comprehensive policies and guidelines, targeted portfolio
reviews, a greater emphasis on more frequent grading, as well as enhancements to the problem loan management process.
Significant 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. At December 31, 2010, no significant concentration existed in the C&I portfolio in
excess of 10 percent of total loans. Refer to Table 14 for detail of the C&I loan portfolio by industry. The two largest components are finance and insurance (includes trust preferred and bank-related loans) and mortgage warehouse lending. The trust preferred and bank-related component of C&I is discussed below.
Mortgage warehouse lending includes commercial lines of credit to qualified mortgage companies exclusively for the temporary warehousing of eligible mortgage loans prior to the borrowers sale of those mortgage loans to third party investors. Generally, mortgage warehouse lending increases when there is a decline
in mortgage rates resulting in increased borrower refinance volumes.
Trust Preferred & Bank-Related Loans
The finance and insurance subsection of this portfolio, which includes bank-related and trust preferred loans (TRUPs) (i.e., loans to bank and insurance-related businesses), has experienced stress due to the higher credit
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losses encountered throughout the financial services industry, limited availability of market liquidity, and the impact from economic conditions on these borrowers. On December 31, 2010, approximately 9 percent of the C&I portfolio, or 4 percent of total loans, was composed of bank-related loans and TRUPs.
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 and insurance institutions through FHNs capital markets operation. Accordingly, these loans were originally classified within loans HFS upon
funding. The underwriting criteria for trust preferred loans focused on current operating metrics, including liquidity, capital and financial performance ratios as well as borrowers observable credit spreads and debt ratings when available. In conjunction with the collapse of the collateralized debt obligation (CDO)
market in late 2007, origination of trust preferred loans ceased in early 2008 and existing loans were moved from loans HFS to FHNs C&I portfolio in second quarter 2008. Individual TRUPs are re-graded quarterly as part of FHNs commercial loan review process. Typically, the terms of these loans include a
prepayment option after a 5 year initial term (with possible triggers of early activation), have a scheduled 30 year balloon payoff, and include an option to defer interest for up to 20 consecutive quarters. Since the vast majority of trust preferred issuers to which FHN has extended credit have less than $15 billion in
total assets, the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is not expected to significantly affect future payoff rates for these loans. The risk of individual trust preferred loan default is somewhat mitigated by diversification within the trust preferred loan portfolio. The average
size of a trust preferred loan is approximately $9 million.
Underwriting of other loans to financial institutions has been enhanced. Changes incorporated into the underwriting analysis for other loans to financial institutions include increased levels of onsite due diligence, review of the customers policies and strategies, assessment of management, assessment of the relevant
markets, a comprehensive assessment of the loan portfolio, and a review of the ALLL. Additionally, the underwriting analysis includes a focus on the customers capital ratios, profitability, loan loss coverage ratios, and regulatory status.
As of December 31, 2010, the UPB of trust preferred loans totaled $465 million ($301 million of bank TRUPs and $164 million of insurance TRUPs) with the UPB of other bank-related loans totaling approximately $230 million. Inclusive of a remaining valuation allowance on TRUPs of $35.6 million, total reserves
(ALLL plus the valuation allowance) for TRUPs and other bank-related loans were approximately $115 million or 17 percent of outstanding UPB.
C&I Asset Quality Trends
During 2010, performance of the C&I portfolio began to improve as the aggregate risk profile of the portfolio improved late in 2010. The improvement came as commercial borrowers demonstrated the ability to adjust to the economic climate resulting in an increase in the amount of credit upgrades during 2010. The
ALLL declined $37.2 million to $239.5 million as of December 31, 2010. The allowance as a percentage of period-end loans declined to 3.26 percent from 3.87 percent at the end of 2009. As previously discussed, the finance and insurance portion of this portfolio has been the most significantly impacted by the
economic conditions. While this component of the C&I portfolio continues to be stressed, these loans began to stabilize during 2010. Net charge-offs as a percentage of average loans declined to 1.23 percent from 1.67 percent reflecting the aggregate improvement in this portfolio. Despite the reduction in allowance
and fewer charge-offs in 2010, nonperforming C&I loans increased $78.5 million to $214.0 million at the end of 2010. Additionally, the NPL ratio grew to 2.92 percent from 1.89 percent. Although the level of nonperforming loans increased in 2010 compared with 2009, the amount of nonperforming loans peaked in
third quarter and began improving late in the year. Approximately half of the increase in nonperforming loans during 2010 relates to bank-related and TRUPs loans while the remainder is attributable to an increase in the volume of smaller loans within various industries. Bank-related and TRUPs loans (included in
the Finance and Insurance industry component) have experienced stress due to the higher credit losses encountered throughout the financial services industry, limited availability of market liquidity, and the impact from economic conditions on these borrowers.
Commercial Real Estate
The Commercial Real Estate portfolio includes both financings for commercial construction and nonconstruction loans. This portfolio is segregated between Income Commercial Real Estate (CRE) loans which contain loans, lines, and letters of credit to commercial real estate developers for the construction and mini-
permanent financing of
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income-producing real estate, and Residential CRE loans. The Residential CRE portfolio includes loans to residential builders and developers for the purpose of constructing single-family detached homes, condominiums, and town homes.
Income CRE
The Income CRE portfolio was $1.4 billion on December 31, 2010. Subcategories of Income CRE consist of retail (24 percent), apartments (17 percent), office (15 percent), industrial (13 percent), land/land development (11 percent), hospitality (9 percent), and other (11 percent).
Income CRE loans are underwritten in accordance with credit policies and underwriting guidelines that are reviewed annually and changed as necessary based on market conditions. Income CRE loan policies and guidelines are approved by management risk committees that consist of business line managers and
credit administration professionals to ensure that the resulting guidance addresses the attendant risks and establishes reasonable underwriting criteria that appropriately mitigate risk. Loans are underwritten based upon project type, size, location, sponsorship, and other market-specific data. Generally, minimum
requirements for equity, debt service coverage ratios (DSCRs), and level of pre-leasing activity are established based on perceived risk in each subcategory. Loan-to-value (value is defined as the lower of cost or market) limits are set below regulatory prescribed ceilings and generally range between 50 and 80
percent depending on underlying product set. Term and amortization requirements are set based on prudent standards for interim real estate lending. Equity requirements are established based on the quantity, quality, and liquidity of the primary source of repayment. For example, more equity would be required for
a speculative construction project or land loan than for a property fully leased to a credit tenant or a roster of tenants. Typically, a borrower must have at least 10 percent of cost invested in a project before FHN will fund loan dollars. All income properties are required to achieve a DSCR greater than or equal to
120 percent at inception or stabilization of the project based on loan amortization and a minimum underwriting (interest) rate refreshed quarterly. Some product types require a higher DSCR ranging from 125 percent to 150 percent of the debt service requirement. Variability depends on credit versus non-credit
tenancy, lease structure, property type, and quality. A proprietary minimum underwriting interest rate is used to calculate compliance with underwriting standards. Generally, specific levels of pre-leasing must be met for construction loans on income properties. A global cash flow analysis is performed at the borrower
and guarantor level. The majority of the portfolio is on a floating rate basis tied to appropriate spreads over LIBOR.
The credit administration and ongoing monitoring consists of multiple internal control processes. Construction loans are closed and administered by a centralized control unit. Internal Audit tests for adherence to loan documentation requirements. Credit grades are assigned utilizing internally developed scorecards to
help quantify the level of risk in the transaction. Underwriters and credit approval personnel stress the borrowers/projects financial capacity utilizing numerous economic attributes such as interest rates, vacancy, and discount rates. Key Information is captured from the various portfolios and then stressed at the
aggregate level. Results are utilized to assist with the assessment of the adequacy of the ALLL and to steer portfolio management strategies. As discussed in the C&I portfolio section, Income CRE also employs the RM/PM model and the Deal Team concept.
Approximately 90 percent of the Income CRE portfolio was originated through and managed by the regional bank. Weak market conditions will likely continue to affect this portfolio through increased vacancies, slower stabilization rates, decreased rental rates, lack of readily available financing in the industry, and
declining property valuations; however, stressed performance could be somewhat mitigated by strong sponsors and cash flows. FHN proactively manages problem projects and maturities to regulatory standards.
Income CRE Asset Quality Trends
Performance of Income CRE loans was mixed as certain sectors stabilized during 2010 while others remained stressed. Allowance as a percentage of loans increased 20 basis points to 8.87 percent during 2010 driven by lower balances in 2010 as allowance levels declined $29.1 million from 2009. Net charge-offs
were $52.1 million in 2010 compared to $91.3 million in 2009 with the decline primarily attributable to the timing of loan maturities in 2009 combined with borrowers inability to refinance with other institutions given their deteriorated quality and tightened industry credit standards. The level of nonperforming loans
decreased $42.1 million to $141.5 million at the end of 2010 and remained over 10 percent of total Income CRE loans. The decline in nonperforming loans is primarily attributable to the wind-down of the non-strategic portion of the portfolio.
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Residential CRE
The Residential CRE portfolio was $.3 billion on December 31, 2010. FHN lends to finance vertical construction of these properties as well as the acquisition and development of the related land. Performance of this portfolio has been severely strained due to the stressed housing market.
Residential CRE loans are underwritten in accordance with credit policies and underwriting guidelines that are reviewed annually and changed as necessary based on market conditions. Loans are underwritten based on project-type, size, location, sponsorship, and other market-specific data that vary by product
type. Generally, minimum requirements for equity injections, speculative exposure, and project sales pace are established based on perceived risk in each subcategory. Loan-to-value limits are set below regulatory prescribed ceilings and generally range between 50 and 75 percent depending on underlying product
set. Term is limited to the typical construction or development period for the underlying property-type including appropriate absorption time as set by the appraisal. Maximum outside term limits are set to avoid stale project performance. Equity requirements are established based on the quantity, quality, and liquidity
of the primary source of repayment. For example, more equity would be required for a speculative construction project or land loan than for a construction loan on a pre-sold house. Generally, a borrower must have at least 10 percent of cost invested in a project before FHN will fund loan dollars.
In response to the collapse of the housing market and the deterioration in the quality of the Residential CRE portfolio, FHN made several changes to its credit policy including lowering advance rates for land, land development, and construction loans; establishing more restrictive guidelines for interest carry; lowering
maximum loan amounts; and increasing minimum release prices. In addition, portfolio strategy was modified to limit lending on speculative construction and land/land development. The construction loan administration process was also enhanced to ensure that all construction loans are administered by a centralized
loan administration unit.
Originations through national construction lending ceased in early 2008 and balances have steadily decreased since that time. Active lending in the regional banking footprint has been significantly reduced with new originations limited to tactical advances to facilitate workout strategies. When active lending was
occurring, the majority of the portfolio was on a floating rate basis tied to appropriate spreads over LIBOR or the prime rate.
Residential CRE Asset Quality Trends
FHN continues to wind down the non-strategic portion of this portfolio and is not actively lending this loan-type within the regional banking footprint which directly impacted the amount of net charge-offs and nonperforming loans and the level of the allowance. Net charge-offs declined $112.9 million from 2009 to
$62.2 million. The ALLL declined $21.6 million and nonperforming loans decreased $163.8 million during 2010. The lower net charge-offs, allowance, and nonperforming loans were the result of winding down this portfolio as the net charge-offs as a percentage of average loans remained elevated at 14.53 percent,
the ALLL ratio was 11.51 percent, and the nonperforming loans ratio was 42.04 percent. These metrics will remain skewed until the portfolio entirely winds down or FHN begins originating this product and balances increase.
RETAIL LOAN PORTFOLIOS
Consumer Real Estate
The Consumer Real Estate portfolio was $5.6 billion on December 31, 2010, and is primarily composed of home equity lines and installment loans. FHN also has home equity lines and installment loans that were consolidated on January 1, 2010 with the adoption of amendments to ASC 810. These loans are
discussed in the Restricted Real Estate Loans paragraph at the conclusion of the Loan Portfolio Composition section. The Consumer Real Estate portfolio is geographically diverse with strong borrower Fair Isaac Corporation (FICO) scores. The largest concentrations of December 31, 2010, balances are in
Tennessee (37 percent) and California (14 percent) with no other state representing greater than 4 percent of the portfolio. At origination, the weighted average FICO score of this portfolio was 736; refreshed FICO scores averaged 727 as of December 31, 2010. Deterioration is most acute in areas with significant
home price depreciation and is affected by poor economic conditions primarily unemployment. Approximately two-thirds of this portfolio was originated through national channels.
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Underwriting
To obtain a consumer real estate loan, among other loan approval requirements, the loan applicant(s) in most cases must first meet a minimum qualifying FICO score. Applicants must also have the financial capacity (or available income) to service the debt by not exceeding a calculated Debt-to-Income (DTI)
ratio. The amount of the loan is limited to a percentage of the lesser of the current value or sales price of the collateral.
In response to the downturn in the housing market, FHN completed a number of initiatives for the purpose of reducing risk and exposure to the Consumer Real Estate portfolio. In first quarter 2009, lending authority was redirected from more than 200 lenders in various markets, and for the majority of loans in this
portfolio underwriting decisions are now made through a centralized loan underwriting center. Minimum FICO score requirements are established by management for both loans secured by real estate as well as non-real estate secured loans. Management also establishes maximum loan amounts, loan-to-value ratios,
and debt-to-income ratios for each consumer real estate product. Identified guideline and policy exceptions require established mitigating factors that have been approved for use by Credit Risk Management. In conjunction with the sale of the national mortgage banking business, FHN significantly reduced lending in
markets outside of the regional banking footprint. Minimum loan qualifications were tightened along with other changes made to underwriting standards and lending authority for HELOCs and installment loans in the Consumer Real Estate portfolio.
Prior to the third quarter 2008, a borrower could qualify with a minimum FICO score of 620. Beginning in third quarter 2008 and continuing into 2009, FHN raised minimum qualifying FICO scores for all consumer real estate products. During this timeframe, the minimum allowable FICO score was increased to the
upper 600s and minimum FICO scores for reduced documentation and stated-income relationship loans (loans whereby FHN already maintained a customer relationship with the borrower) was also increased. Also in second quarter 2009, FHN reduced the maximum combined loan-to-value (CLTV) from 100
percent to 89.9 percent for most consumer real estate loans. The potential loan amount and CLTVs (maximum is 89.9 percent) varies with a borrowers FICO score. Maximum DTI was lowered to 45 percent in second quarter 2009 for almost all real estate loans. Prior to that time, some consumer real estate loan
products allowed a 50 percent DTI.
Although FICO score minimum guidelines were in the 600s throughout this time period, the origination statistics illustrate that much of the Consumer Real Estate portfolio was originated well above the minimum requirements. The average FICO score at origination was 718 in vintages prior to 2003. In vintage years
2004 through 2007, which comprise a majority of the outstanding loan balances, the average FICO scores ranged between 727 and 740. Additionally, the average CLTV ratios of loans originated during these periods was less than the revised allowable maximum of 89.9 percent.
HELOCs can pose risk of default when applicable interest rates changeparticularly in a rising interest rate environment potentially stressing borrower capacity to repay the loan at the higher interest rate. While FHN is unable to predict future interest rate movements, interest rates presently are quite low by historical
standards; therefore, at some point in the future, FHN believes that rates are much more likely to rise than to fall. In response to 2008 regulatory guidance, FHN implemented a change to its underwriting practice requiring HELOC borrowers to qualify based on a fully indexed, fully amortized payment methodology.
If the first mortgage loan is a non-traditional mortgage, the debt-to-income calculation is based on a fully amortizing first mortgage payment. Prior to this change, FHNs underwriting guidelines required borrowers to qualify at an interest rate that was 200 basis points above the note rate. This mitigated risk to FHN
in the event of a sharp rise in interest rates over a relatively short time horizon. FHN does not penalize borrowers (reset the rate) based on delinquency or any other factor during the life of the loan. HELOC interest rates are variable but only adjust in connection with movements to which the index rate is tied.
FHNs HELOC products typically have a 5 or 10 year draw period with repayment periods ranging between 10 and 20 years.
HELOC Portfolio Management
In 2008, an extensive review of HELOC accounts was conducted whereby these loans were analyzed using certain selection criteria focused on declines in collateral value as well as other characteristics. As a result of this analysis, and in accordance with FHNs interpretation of regulatory guidance, thousands of
accounts were frozen or line of credit limits were lowered. Also in 2008, the volume of HELOC originations was reduced due to the divestiture of the national mortgage origination and servicing platforms and cessation of national consumer lending operations.
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FIRST HORIZON NATIONAL CORPORATION
FHN also responded to the collapse of the housing market by strengthening and expanding its continuous HELOC account review processes in order to more proactively target and identify higher-risk home equity lines and initiate preventative and corrective actions. The reviews considered a number of account
activity patterns and characteristics such as reduction in available equity, significant declines in property value, the number of times delinquent within recent periods, changes in credit bureau score since origination, score degradation, and account utilization. In accordance with FHNs interpretation of regulatory
guidance, FHN blocked future draws on accounts and/or lowered account limits. Historically, the account review process was focused on the higher-risk loans within the non-strategic portfolio; however, beginning in 2009, management began including HELOCs originated through the regional bank in its reviews. In
2010, management assigned additional resources to this effort and enhancements were made to the process in order to further increase the volume of account reviews.
Whereas certain management actions and initiatives have reduced the amount of HELOC exposure in the non-strategic business segment, depressed real estate values and soft loan demand has also impacted HELOC origination volume within the regional banking footprint. Late in 2010, HELOC origination within the
regional banking footprint began to normalize as overall real estate values stabilized and loan demand improved.
Low or Reduced Documentation Origination
From time to time, FHN may originate consumer loans with low or reduced documentation. FHN generally defines low or reduced documentation loans, sometimes called "stated income" or "stated" loans, as any loan originated with anything less than pay stubs, personal financial statements, and tax returns from
potential borrowers.
Prior to 2008, FHN generally offered three types of stated-income consumer real estate loan products to customers: stated-income/stated-assets, stated-income/verified-assets and existing customer relationship based stated-income loans. A reduction in stated-income originations was primarily due to substantial
changes in the market for such loans followed by the exit from the national origination channel when substantially all of the mortgage banking operations were sold in third quarter 2008. Beginning in early 2008, FHN began tightening minimum loan qualification criteria for all stated-income consumer real estate
loan products and has since made numerous changes to product offerings and requirements. For example, in early second quarter 2008 FHN terminated the offering of the stated-income/stated-assets product to customers and lowered the maximum CLTV on the stated-income/verified-assets product from 95
percent to 89.9 percent. Continuing into the third and fourth quarters of 2008, the minimum FICO score for all real estate loans was raised and the maximum CLTV on the stated-income/verified-assets product was lowered again to 80 percent. FHN further tightened the stated-income product offering in first quarter
2009 as the stated-income/verified-assets product was eliminated and the relationship based product was modified and made available for non-purchase transactions only.
Currently, stated-income or low or reduced documentation loans are limited to existing customers of FHN who may have deposit accounts, other borrowings, or various other business relationships, and such loans are currently only available for qualified non-purchase transactions. Currently, full income
documentation would typically require (for example) copies of W-2s, pay stubs, and verification of employment. This exception is provided to loan applicants that are also existing deposit customers of the bank who have recurring consistent direct DDA deposit amounts from their employers; however, in accordance
with FHNs policies and procedures, certain restrictions apply. For example, self-employed customers are not eligible, deposits made directly by the borrower are not considered, direct deposits must indicate the employers name depositing the funds, and recurring deposits must be consistent per period and may
not vary by more than 10 percent. If these and other conditions are not met, full income documentation is required. In accordance with FHNs policies and procedures, a verbal verification of employment is required in either situation.
As of December 31, 2010, $1.8 billion, or 28 percent, of the consumer real estate portfolio consisted of home equity lines and installment loans originated using stated-income compared to $2.1 billion, or 30 percent, as of December 31, 2009. These stated-income loans were 11 percent of the total loan portfolio
as of December 31, 2010, and 2009. As of December 31, 2010, nearly three-fourths of the stated-income home equity loans in the portfolio were originated through legacy businesses that have been exited and these loan balances should continue to decline.
FIRST HORIZON
NATIONAL CORPORATION
37
Stated-income loans were 28 percent of the balance of the consumer real estate portfolio and accounted for nearly 37 percent of the net charge-offs for this portfolio during 2010. Net charge-offs of stated-income home equity lines and installment loans were $81.9 million during 2010 and $88.3 million during
2009. As of the end of 2010 and 2009, less than 1 percent of the stated income loans were nonperforming and 3 percent were more than 30 days delinquent.
Consumer Real Estate Asset Quality Trends
Performance of the home equity portfolio remained relatively stable in 2010 when compared with 2009. The ALLL declined $64.8 million to $150.3 million in 2010. The allowance as a percentage of loans decreased 43 basis points to 2.67 percent of loans. Delinquency rates and the net charge-offs ratio were
relatively flat compared to 2009. Delinquencies were approximately 2.30 percent of loans for both periods while the net charge-offs ratio increased 9 basis points to 2.92 percent of average loans. The stabilization is attributable to the strong borrower characteristics previously discussed as well as stabilization in the
national economy as performance of this portfolio is highly correlated with the economy and unemployment.
Permanent Mortgage
The permanent mortgage portfolio was $1.1 billion on December 31, 2010. This portfolio is primarily composed of jumbo mortgages and OTC completed construction loans. Inflows from OTC modifications have significantly declined and are expected to be immaterial going forward. While nonperforming loans
(NPLs) have increased, delinquencies and reserves were down as performance has begun to stabilize. The portfolio is somewhat geographically diverse; however 24 percent of loan balances are in California. Overall, performance has been affected by economic conditions, primarily depressed retail real estate
values and elevated unemployment. However, in late 2010, FHN exercised clean-up calls for prior proprietary securitizations resulting in the addition of approximately $175 million of first lien mortgage loans to this portfolio, substantially all of which were performing. Net charge-offs increased $4.0 million to $66.2
million during 2010. Overall improvement has stabilized given the aging of the portfolio and because the modification of the higher-risk OTC loans concluded in early 2010.
Credit Card and Other (Including OTC)
The Credit Card, and Other portfolios were $.3 billion on December 31, 2010, and primarily include credit card receivables, automobile loans, OTC construction loans, and other consumer related credits. Balances of OTC product have declined from $2.0 billion at the end of 2007 to $19.3 million as of December
31, 2010. Originations of OTC loans ceased in early 2008.
The OTC portfolio consisted of a permanent mortgage product which combined construction and permanent financing into a single loan which was originated by the legacy mortgage banking business. Upon completion of construction of the home and conversion of the construction financing for the home into
permanent financing, the legacy mortgage banking business anticipated that such permanent financing loans would be sold. OTC loan underwriting consisted of a three-step process in which a review of the builder (including experience and creditworthiness) and a review of the collateral (including analysis of
construction plans and verification of expected sales price) were performed by the Construction Lending Department. Credit underwriting of the borrower was performed only at the time of construction loan funding and was completed through the normal channels of the mortgage branch.
Prior to first quarter 2008, OTC loans eligible for automated underwriting qualified with a minimum FICO score of 660. Loans requiring manual underwriting procedures qualified with a score of 700 or greater. Stated-income loans could be underwritten with FICO scores greater than 700. For fully documented loans,
the CLTV was required to be less than 89.9 percent or 75 percent for stated-income loans with value determined based on the lesser of current appraised value or acquisition cost (construction). In first quarter 2008, originations of OTC loans ceased and construction lending through the legacy national mortgage
banking business was discontinued.
As of the end of 2010, only $19.3 million of OTC loans remained in the portfolio with 100 percent classified as nonperforming. In 2010, FHN charged-off $26.4 million compared with $155.2 million during 2009. The allowance declined $57.2 million to $4.4 million.
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FIRST HORIZON NATIONAL CORPORATION
Restricted Real Estate Loans
The Restricted Real Estate Loan portfolio includes HELOC that were previously securitized on balance sheet as well as HELOC and some first and second lien mortgages that were consolidated on January 1, 2010, in conjunction with the adoption of amendments to ASC 810. The adoption of these amendments
resulted in the consolidation of additional variable interest entities and this loan category was created to include all loans, primarily HELOC, that had previously been securitized but for which FHN retains servicing and other significant interests. As of December 31, 2010, this portfolio totaled $.8 billion and included
$701.8 million of HELOC and $55.7 million of first and second lien mortgage loans.
Payment-Option ARM Loans (Payment Choice Product)
Historically, FHN originated through its legacy mortgage banking business first lien adjustable rate mortgage loans with borrower payment options. Payment options provided the borrower with the option to pay a minimum payment (which in most cases increased principal balance), interest only, or varying amounts
of principal and interest. These loans were originated with the intent to sell. Originations of these loans were discontinued in third quarter 2007. While most of the loans were sold, a small amount remained unsold and were subsequently moved from loans HFS to the loan portfolio. Only $19.5 million of these loans
remain in the consumer portfolio as of December 31, 2010. Because only a small portion remains in the HTM portfolio, the impact on the ALLL and on other loan portfolio asset quality metrics is immaterial.
Sub-prime Lending
Sub-prime loans are broadly defined as all lending that would not qualify using traditional borrowing channels or underwriting practices. While sub-prime loans do not have a precise definition, they may be identified by a combination of characteristics of the borrower and structure of the loan. Sub-prime or non-
prime loans generally have characteristics of lower FICO scores than prime borrowers combined with various levels of reduced documentation and higher initial LTV ratios. Generally, under FHNs practices at that time for FHN-originated sub-prime loans, as FICO scores increased and the LTV ratio decreased, the
extent of loan documentation requirements decreased; similarly, loan documentation requirements generally would increase as FICO scores decreased or the LTV ratio increased.
Prior to first quarter 2007, FHN originated through its legacy mortgage banking business first lien mortgage and home equity loans with the intent to sell with servicing released, that were considered sub-prime. Origination of these loans was entirely discontinued in early 2007 with the last sale of these loans into the
secondary market occurring shortly thereafter. All sub-prime originations were initially classified as loans HFS on the consolidated balance sheet and were generally sold within 45 days of origination. At the time these originations discontinued, characteristics of sub-prime loans originated and sold by FHN would have
had FICO scores ranging between 580 and 680 with LTV ratios ranging between 80 and 100 percent.
Since FHN originated sub-prime loans with the intent to sell and because originations ceased more than 3 years ago, as of December 31, 2010, only $704.8 thousand of these loans remain within the consumer loan portfolio. Because a majority of these loans were classified as HFS and subsequently sold, only a
small portion remains in the HTM portfolio, the impact on the ALLL and on other loan portfolio asset quality metrics is immaterial.
FIRST HORIZON
NATIONAL CORPORATION
39
The following table reflects originations of retail real estate loans from 2006 through 2010:
Table 15 - Origination Detail Retail Real Estate
(Dollars in thousands)
2010
2009
2008
2007
2006
Permanent mortgage (first liens) - originations
Full documentation
$
847,096
$
1,278,570
$
16,417,603
$
21,784,104
$
17,201,118
Non full documentation
-
-
1,117,882
5,342,538
8,159,785
Payment choice (option ARM) (a)
-
-
-
63,270
774,044
Sub-prime
-
-
-
186,259
933,867
Total permanent mortgage (first liens) - originations (b)
$
847,096
$
1,278,570
$
17,535,485
$
27,376,171
$
27,068,814
R/E installment loans - originations
Full documentation
$
211,153
$
171,715
$
337,301
$
1,182,359
$
1,628,662
Non full documentation
12,747
7,907
33,513
434,580
780,699
Sub-prime
-
-
-
389,902
752,262
Total R/E installment loans - originations (b)
$
223,900
$
179,622
$
370,814
$
2,006,841
$
3,161,623
HELOC - originations
Full documentation
$
335,196
$
360,880
$
488,441
$
956,894
$
1,625,553
Non full documentation
48,179
36,079
170,984
516,489
942,527
Sub-prime
-
-
316
74,832
224,678
Total HELOC - originations
$
383,375
$
396,959
$
659,741
$
1,548,215
$
2,792,758
Total originations
Full documentation
$
1,393,445
$
1,811,165
$
17,243,345
$
23,923,357
$
20,455,333
Non full documentation
60,926
43,986
1,322,379
6,293,607
9,883,011
Payment choice (option ARM)
-
-
-
63,270
774,044
Sub-prime
-
-
316
650,993
1,910,807
Total originations (c)
$
1,454,371
$
1,855,151
$
18,566,040
$
30,931,227
$
33,023,195
(a)
Adjustable rate mortgage (ARM).
(b)
2008, 2007, and 2006 include originations of OTC construction loans.
(c)
2008, 2007, and 2006 include $.2 billion, $2.6 billion, and $3.1 billion of OTC construction loan originations, respectively.
There were no originations of OTC construction loans in 2010 or 2009.
40
FIRST HORIZON NATIONAL CORPORATION
The following tabular information provides additional detail surrounding period-end balances of consumer loans within the held to maturity (HTM) portfolio from 2006 through 2010:
Table 16 - HTM Loan Portfolio Detail - Consumer
(Dollars in thousands)
2010
2009
2008
2007
2006
Permanent mortgage (first liens) - HTM:
Full documentation
$
766,158
$
682,937
$
732,439
$
460,745
$
449,848
Non full documentation
356,150
383,645
373,502
20,394
18,979
Payment choice (Option ARM)
19,545
18,237
19,617
26,908
-
Sub-prime
705
848
1,226
2,373
2,569
Total permanent mortgage (first liens) - HTM (a)
$
1,142,558
$
1,085,667
$
1,126,784
$
510,420
$
471,396
R/E installment loans - HTM:
Full documentation
$
1,687,504
$
1,912,747
$
2,227,494
$
2,398,247
$
2,268,479
Non full documentation
548,865
721,101
1,006,450
1,186,966
1,021,881
Sub-prime
-
-
656
248
776
Total R/E installment loans - HTM (b)
$
2,236,304
$
2,633,848
$
3,234,600
$
3,585,461
$
3,291,136
HELOC - HTM:
Full documentation
$
2,818,823
$
2,908,790
$
3,011,524
$
3,026,204
$
3,417,994
Non full documentation
1,264,219
1,388,797
1,503,244
1,435,827
1,383,704
Total HELOC - HTM (c)
$
4,083,042
$
4,297,587
$
4,514,768
$
4,462,031
$
4,801,698
Pre-modification OTC - HTM
Full documentation
$
6,001
$
71,448
$
381,348
$
974,504
$
953,741
Non full documentation
12,728
151,531
586,720
1,013,875
1,124,391
Payment choice (Option ARM)
547
6,508
12,730
19,910
7,001
Total Pre-modification OTC - HTM
$
19,276
$
229,487
$
980,798
$
2,008,289
$
2,085,133
Total HTM:
Full documentation
$
5,278,486
$
5,575,922
$
6,352,805
$
6,859,700
$
7,090,062
Non full documentation
2,181,962
2,645,074
3,469,916
3,657,062
3,548,955
Payment choice (Option ARM)
20,092
24,745
32,347
46,818
7,001
Sub-prime
705
848
1,882
2,621
3,345
Total retail real estate
$
7,481,245
$
8,246,589
$
9,856,950
$
10,566,201
$
10,649,363
Other retail
$
100,211
$
121,526
$
135,779
$
144,019
$
161,178
Credit card receivables
$
192,437
$
192,036
$
189,554
$
204,812
$
203,307
Total consumer loans
$
7,773,893
$
8,560,151
$
10,182,283
$
10,915,032
$
11,013,848
(a)
2010 includes $55.7 million of restricted permanent mortgages.
(b)
Home equity installment loans are primarily second liens.
(c)
2010 includes $701.8 million of restricted HELOC.
Loan Portfolio Concentrations
FHN has a concentration of loans secured by residential real estate (46 percent of total loans), the majority of which is in the consumer real estate portfolio (33 percent of total loans). Permanent mortgages account for 6 percent. Restricted real estate loans, which are comprised primarily of HELOC but also include
permanent mortgages, are 5 percent of total loans. The remaining residential real estate loans are primarily in the Residential CRE and the OTC construction portfolios (2 percent of total loans) with national exposures being significantly reduced since 2008.
On December 31, 2010, FHN did not have any concentrations of C&I loans in any single industry of 10 percent or more of total loans.
FIRST HORIZON
NATIONAL CORPORATION
41
The following table provides additional asset quality data by loan portfolio:
Table 17 - Asset Quality by Portfolio
2010
2009
2008
C&I
Period-end loans ($ millions)
$
7,338
$
7,150
$
7,819
30+ Delinq. % (a)
0.36
%
0.96
%
0.52
%
NPL %
2.92
1.89
1.03
Charge-offs %
1.23
1.67
1.37
Allowance / Loans %
3.26
3.87
2.45
Allowance / Charge-offs
2.80x
2.27x
1.90x
Income CRE
Period-end loans ($ millions)
$
1,407
$
1,774
$
1,988
30+ Delinq. % (a)
1.20
%
3.13
%
2.42
%
NPL %
10.06
10.35
5.02
Charge-offs %
3.29
4.75
1.36
Allowance / Loans %
8.87
8.67
4.71
Allowance / Charge-offs
2.39x
1.68x
3.41x
Residential CRE
Period-end loans ($ millions)
$
264
$
640
$
1,288
30+ Delinq. % (a)
3.19
%
3.71
%
3.74
%
NPL %
42.04
42.94
30.71
Charge-offs %
14.53
17.54
9.59
Allowance / Loans %
11.51
8.12
8.25
Allowance / Charge-offs
0.49x
0.30x
0.65x
Consumer Real Estate
Period-end loans ($ millions)
$
5,618
$
6,931
$
7,749
30+ Delinq. % (a)
2.30
%
2.31
%
1.97
%
NPL %
0.58
0.26
0.07
Charge-offs %
2.92
2.83
1.48
Allowance / Loans %
2.67
3.10
2.35
Allowance / Charge-offs
0.87x
1.03x
1.56x
Permanent Mortgage
Period-end loans ($ millions)
$
1,087
$
1,086
$
1,127
30+ Delinq. % (a)
5.16
%
8.49
%
6.94
%
NPL %
11.27
9.02
3.73
Charge-offs %
6.49
5.66
0.76
Allowance / Loans %
5.49
11.41
4.76
Allowance / Charge-offs
0.90x
1.99x
8.42x
One-Time Close (OTC)
Period-end loans ($ millions)
$
19
$
229
$
981
30+ Delinq. % (a)
-
9.87
%
4.43
%
NPL %
100.00
%
82.73
43.03
Charge-offs %
34.85
27.07
9.41
Allowance / Loans %
22.80
26.85
20.44
Allowance / Charge-offs
0.17x
0.40x
1.42x
Credit Card and Other
Period-end loans ($ millions)
$
293
$
314
$
325
30+ Delinq. % (a)
1.53
%
2.06
%
2.57
%
Charge-offs %
4.64
5.68
4.82
Allowance / Loans %
2.90
4.45
6.60
Allowance / Charge-offs
0.61x
0.78x
1.34x
Restricted Real Estate Loans (b)
Period-end loans ($ millions) (c)
$
757
N/A
N/A
30+ Delinq. % (a)
3.44
%
N/A
N/A
NPL %
0.82
N/A
N/A
Charge-offs %
5.63
N/A
N/A
Allowance / Loans %
6.26
N/A
N/A
Allowance / Charge-offs
1.01x
N/A
N/A
Certain previously reported amounts have been reclassified to agree with current presentation.
Loans are expressed net of unearned income. All data is based on internal loan classification.
(a)
30+ Delinquency % includes all accounts delinquent more than one month and still accruing interest.
(b)
Prior to 2010, certain amounts were included in Consumer Real Estate.
(c)
Includes $701.8 million of consumer real estate loans and $55.7 million of permanent mortgage loans.
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FIRST HORIZON NATIONAL CORPORATION
Allowance for Loan Losses
Managements policy is to maintain the ALLL at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. See Note 1 Summary of Significant Accounting Policies for detailed discussion regarding FHNs policy for determining the ALLL. Also see Critical Accounting Policies for more detail.
The total allowance for loan losses decreased to $664.8 million on December 31, 2010, from $896.9 million on December 31, 2009. The overall balance decrease observed when comparing the year-over-year periods has been mostly impacted by the significant reduction of loan portfolios from exited businesses
(especially non-strategic construction lending). This portfolio shrinkage has had a direct impact on the composition of the loan portfolio from one balance sheet date to the next and thus, has had an impact on the levels of estimated probable incurred losses within the portfolio as of the end of the reporting periods.
As loans with higher levels of probable incurred loss content have been removed from the portfolio, this has influenced the allowance estimate resulting in lower required reserves. Although the total allowance for loan losses decreased 26 percent from 2009 because of reduction in higher-risk portfolios and
improvement in C&I, additional allowance was required during 2010 for the loans that were consolidated January 1, 2010, in conjunction with the adoption of amendments to ASC 810. The ratio of allowance for loan losses to total loans, net of unearned income, decreased to 3.96 percent on December 31, 2010,
from 4.95 percent on December 31, 2009. The allowance attributable to individually impaired loans was $115.4 million compared to $31.6 million on December 31, 2010 and 2009, respectively. This increase in reserves for individually impaired loans is primarily due to the growth in troubled debt restructurings
since 2009.
FIRST HORIZON
NATIONAL CORPORATION
43
See Note 4 Loans for a discussion of FHNs internal loan grading process as it relates to the commercial loan portfolio. The following table provides a breakdown of the ALLL allocation by major loan types and commercial loan grades on December 31, 2010 and 2009:
Table 18 - Commercial Loans by Internal Grade and Allowance
(Dollars in millions)
2010
2009
C&I and Other
Income CRE
Residential CRE
Total
% of Total
Allowance for Loan Losses
Total
% of Total
Allowance for Loan Losses
Internal grades:
1
$
86
$
-
$
-
$
86
*
$
-
$
74
*
$
-
2
87
4
-
91
1
%
-
40
*
-
3
143
16
-
159
1
1
81
*
1
4
199
8
-
207
1
2
220
1
%
1
5
360
24
1
385
2
5
444
2
4
6
754
53
-
807
5
6
572
3
5
7
1,069
96
5
1,170
7
11
1,181
7
14
8
1,384
151
5
1,540
9
18
1,433
8
24
9
603
145
3
752
4
15
919
5
20
10
475
82
3
561
3
11
527
3
12
11
493
113
3
609
4
20
696
4
26
12
248
30
7
285
2
12
419
2
27
13
698
167
14
879
5
51
1,150
6
102
14, 15, 16 (Classifieds)
525
375
122
1,022
6
164
1,299
7
225
7,125
1,264
164
8,553
51
316
9,055
50
462
Individually impaired loans
213
142
100
456
3
79
509
3
21
Total commercial loans
$
7,338
$
1,407
$
264
$
9,009
$
54
$
395
$
9,564
$
53
$
482
Consumer:
Consumer real estate (Home Equity Installment and HELOC) (a)
6,319
38
192
6,931
38
215
Permanent mortgage (b)
1,143
7
65
1,086
6
124
Credit card and other
293
2
8
314
2
14
OTC
19
-
4
229
1
62
Total consumer loans
7,774
47
270
8,560
47
415
Total loans
$
16,783
100
%
$
665
$
18,124
100
%
$
897
*
Amount is less than one percent.
Loans are expressed net of unearned income. All data is based on internal loan classifications.
Individual amounts may not add to total due to rounding.
(a)
2010 includes $42.1 million of reserves and $701.8 million of balances in restricted consumer real estate loans.
(b)
2010 includes $5.4 million of reserves and $55.7 million of balances in restricted permanent mortgage loans.
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 managements estimate of probable incurred losses in the loan portfolio. The provision for loan losses decreased 69 percent to $270.0 million in 2010 from $880.0
million in 2009.
Overall asset quality trends are expected to improve during 2011, although the amount of improvement will be less noticeable than that experienced in 2010 as components of the higher-risk non-strategic construction portfolios have already significantly declined. Assuming current portfolio performance trends
continue, the allowance for loan losses and total net charge-offs are expected to decrease when compared to 2010. The C&I portfolio is expected to continue to show positive trends as there has been recent aggregate improvement in the risk profile of commercial borrowers; however, volatility is possible in the short
term as TRUPs and bank-related loans could deteriorate further. The Income CRE portfolio is likely to remain stressed with an expectation that net charge-offs and the allowance will be flat in 2011 compared with 2010. The remaining non-strategic portfolios should continue to wind down and will have less of an
impact on overall credit metrics in the future. Continued improvement in performance of the home equity portfolio assumes an ongoing economic recovery as consumer delinquency and loss rates are highly correlated with unemployment trends.
44
FIRST HORIZON NATIONAL CORPORATION
The following table provides reserve rates and balances for the loan portfolio:
Table 19 - Reserve Rates
2010
2009
2008
2007
2006
ALLL/ Loans %
Period End Loans % of Total
ALLL/ Loans %
Period End Loans % of Total
ALLL/ Loans %
Period End Loans % of Total
ALLL/ Loans %
Period End Loans % of Total
ALLL/ Loans %
Period End Loans % of Total
Total commercial loans
4.38
%
54
%
5.04
%
53
%
3.53
%
52
%
2.00
%
51
%
1.43
%
50
%
Consumer real estate (Home Equity and HELOC) (a) (b)
3.10
38
3.10
38
2.35
36
0.56
36
0.46
39
Permanent mortgage (a)
5.49
6
11.41
6
4.76
5
0.20
2
N/A
N/A
OTC (Consumer Residential Construction Loans)
22.80
*
26.85
1
20.44
5
2.99
9
0.34
9
Credit card and other
2.90
2
4.45
2
6.60
2
3.44
2
3.02
2
*
Amount is less than one percent.
(a)
Prior to 2007, permanent mortgage balances were included in consumer real estate.
(b)
Includes restricted real estate loans.
Consolidated Net Charge-offs
Net charge-offs were $526.7 million in 2010 compared with $832.3 million in 2009. The ALLL was 1.26 times net charge-offs for 2010 compared with 1.08 times net charge-offs for 2009. The net charge-offs to average loans ratio decreased from 4.25 percent in 2009 to 3.07 percent in 2010 due to a 37 percent
decline in net charge-offs and a 13 percent decrease in average loans from 2009. The decrease in the level of net charge-offs in 2010 is primarily attributable to the continued reduction in problem assets within the non-strategic construction portfolios.
The decline in commercial loan net charge-offs contributed to over half of the decline in total consolidated net charge-offs. The reduction in Residential CRE net charge-offs was $112.9 million and caused a majority of the decline in commercial net charge-offs as FHN continues to wind down this portfolio. Improved
performance of C&I loans contributed to a $36.2 million reduction of commercial net charge-offs while the timing of Income CRE loan maturities in 2009 combined with borrowers inability to refinance with other institutions given their deteriorated quality and tightened industry credit standards contributed to a $39.2
million decline in commercial net charge-offs. Improvement of the retail portfolios contributed to a $117.2 million decline in consolidated net charge-offs. The improvement in retail net charge-offs was driven by a significant decline in net charge-offs within the OTC portfolio. In 2010, net charge-offs of OTC loans
were $26.4 million compared to $155.2 million in 2009. The home equity portfolio also contributed to the decline with a $35.2 million decrease in net charge-offs from 2009. Net charge-offs of Restricted real estate loans and the permanent mortgage portfolio increased in 2010 from 2009. The restricted real estate
loans that were consolidated at the beginning of 2010 in conjunction with the adoption of amendments to ASC 810, contributed an additional $46.5 million of net charge-offs in 2010.
The following table provides consolidated asset quality information for 2010, 2009 and 2008. When FHN began experiencing increased credit deterioration, reporting of credit metrics and methodologies for measuring and monitoring credit risk became more granular and internal classification of loans began to
slightly deviate in certain cases from the disclosure line items previously established. The ALLL rollforward below is based on FHNs portfolio segments defined in accordance with the adoptions of amendments to ASC 310. Consequently, asset quality metrics for certain historical periods are not available.
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NATIONAL CORPORATION
45
Table 20 - Analysis of Allowance for Loan Losses and Charge-offs
(Dollars in thousands)
2010
2009
2008
Allowance for loan losses:
Beginning balance
$
896,914
$
849,210
$
342,341
Adjustment due to amendments of ASC 810
24,578
-
-
Provision for loan losses
270,000
880,000
1,080,000
Acquisitions/(divestitures), net
-
-
(370
)
Charge-offs:
Commercial, financial, and industrial
97,271
129,283
105,621
Commercial Real Estate
127,323
277,461
193,518
Consumer Real Estate
188,694
224,853
124,102
Permanent Mortgages
67,829
63,004
6,913
OTC
30,609
161,730
143,541
Credit card and other
16,956
20,629
18,733
Restricted real estate loans(a)
47,859
N/A
N/A
Total charge-offs
576,541
876,960
592,429
Recoveries:
Commercial, financial, and industrial
11,630
7,594
4,495
Commercial Real Estate
13,030
10,790
2,386
Consumer Real Estate
15,464
16,244
7,269
Permanent Mortgages
1,658
797
546
OTC
4,162
6,529
2,253
Credit card and other
3,068
2,711
2,718
Restricted real estate loans (b)
836
N/A
N/A
Total recoveries
49,848
44,665
19,667
Net charge-offs
526,693
832,296
572,761
Ending balance
$
664,799
$
896,914
$
849,210
Reserve for unfunded commitments
$
14,253
$
19,685
$
18,752
Total of allowance for loan losses and reserve for unfunded commitments
679,052
916,599
867,962
Loans and commitments:
Period end loans, net of unearned
$
16,782,572
$
18,123,884
$
21,278,190
Insured retail residential and construction loans (c)
174,621
365,602
591,116
Loans excluding insured loans
$
16,607,951
$
17,758,282
$
20,687,074
Remaining unfunded commitments (millions)
$
7,904
$
8,371
$
9,601
Average loans, net of unearned
$
17,131,798
$
19,579,267
$
21,660,704
Allowance and net charge-off ratios (d):
Allowance to total loans
3.96
%
4.95
%
3.99
%
Allowance to total loans excluding insured loans
4.00
5.05
4.11
Allowance to net charge-offs
1.26
x
1.08
x
1.48
x
Net charge-offs to average loans
3.07
%
4.25
%
2.64
%
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Includes $44.6 million of consumer real estate and $3.3 million of permanent mortgage charge-offs.
(b)
Reflects recoveries of consumer real estate loans.
(c)
Whole-loan insurance has been obtained on certain retail residential and construction loans. Insuring these loans absorb credit risk and results in lower allowance for loan losses.
(d)
Loans net of unearned income. Net charge-off ratios are calculated based on average loans.
Table 9 provides information on the relative size of each loan portfolio.
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FIRST HORIZON NATIONAL CORPORATION
The following table provides consolidated asset quality information in the format previously presented for 2007 and 2006:
Table 21 - Analysis of Allowance for Loan Losses and Charge-offs
(Dollars in thousands)
2007
2006
Allowance for loan losses:
Beginning balance
$
216,285
$
189,705
Provision for loan losses
272,765
83,129
Loans transferred to held for sale
2,655
-
Acquisitions/(divestitures), net
(17,598
)
(1,470
)
Charge-offs:
Commercial:
Commercial, financial, and industrial
42,639
28,095
Real estate commercial
2,504
2,070
Real estate construction
26,272
115
Retail:
Consumer real estate (a)
37,345
23,405
OTC
23,806
1,962
Other retail
7,490
6,753
Credit card receivables
6,851
6,226
Total charge-offs
146,907
68,626
Recoveries:
Commercial:
Commercial, financial, and industrial
7,169
4,725
Real estate commercial
223
296
Real estate construction
2
-
Retail:
Consumer real estate (a)
4,256
4,307
OTC
280
-
Other retail
2,458
3,090
Credit card receivables
753
1,129
Total recoveries
15,141
13,547
Net charge-offs
131,766
55,079
Ending balance
$
342,341
$
216,285
Reserve for unfunded commitments
$
10,726
$
9,378
Total of allowance for loan losses and reserve for unfunded commitments
$
353,067
$
225,663
Loans and commitments:
Period end loans, net of unearned
$
22,103,516
$
22,104,905
Insured retail residential and construction loans (b)
913,164
729,842
Loans excluding insured loans
$
21,190,352
$
21,375,063
Remaining unfunded commitments (millions)
$
14,099
$
16,061
Average loans, net of unearned
$
22,106,682
$
21,504,175
Allowance and net charge off ratios (c):
Allowance to total loans
1.55
%
0.98
%
Allowance to total loans excluding insured loans
1.62
1.01
Allowance to net charge-offs
2.60
x
3.93
x
Net charge-offs to average loans
0.60
%
25.61
%
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Includes permanent mortgages. Historical information for this portfolio is not available.
(b)
Whole-loan insurance is obtained on certain retail residential and construction loans. Insuring these loans absorb credit risk and results in lower allowance for loan losses.
(c)
Loans net of unearned income. Net charge-off ratios are calculated based on average loans.
Nonperforming Assets
Nonperforming loans (NPLs) consist of impaired, other nonaccrual, and restructured loans. These, along with foreclosed real estate, excluding foreclosed real estate from government insured mortgages, represent
FIRST HORIZON
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47
nonperforming assets (NPAs). Impaired loans are those loans for which it is probable that all amounts due, according to the contractual terms of the loan agreement, will not be collected and for which recognition of interest income has been discontinued. Other nonaccrual loans are residential and other retail
loans on which recognition of interest income has been discontinued. Foreclosed assets are recognized at fair value less estimated costs of disposal at foreclosure. See Note 1 Summary of Significant Accounting Policies for additional detail regarding FHNs policies for nonaccrual loans.
Nonperforming assets decreased to $836.5 million on December 31, 2010, from $1.1 billion on December 31, 2009. The nonperforming assets ratio (nonperforming assets to period-end loans and foreclosed real estate) decreased to 4.48 percent in 2010 from 5.56 percent in 2009 due to a significant decline of
troubled assets from the non-strategic construction portfolios. Nonperforming loans in the loan portfolio were $646.9 million on December 31, 2010, compared to $899.4 million on December 31, 2009. The $252.5 million decline from 2009 primarily resulted from the decrease in NPLs within the non-strategic
construction portfolios which was partially offset by less significant increases in nonperforming loans in the C&I, home equity, permanent mortgage, and restricted real estate loan portfolios.
C&I nonperforming loans increased to $214.0 million in 2010 from $135.5 million in 2009 with approximately half of the increase in nonperforming loans during 2010 relating to bank-related and TRUPs loans while the remainder is attributable to an increase in the volume of smaller loans within various industries.
Nonperforming permanent mortgages increased $24.6 million from 2009 to $122.5 million. A substantial portion of these loans are jumbo product or mortgages that converted from OTC construction loans upon completion. Consumer real estate nonperforming loans increased $14.6 million to $32.5 million primarily
due to a rise in TDRs during 2010 as FHN continues to work with troubled borrowers by modifying the terms of home equity and installment loans. Nonperforming HFS loans, which were $79.1 million on December 31, 2010, are written down to lower of cost or market and have risen since 2009 because of
increased repurchase activity from prior loan sales or securitizations.
Generally, when a loan is placed on nonaccrual status, FHN applies the entire amount of any subsequent payments (including interest) to the outstanding principal balance. Consequently, a substantial portion of the interest received related to nonaccrual loans has been applied to principal. Under the original terms
of the loans, interest income would have been approximately $34 million, $50 million, and $56 million for nonaccrual and impaired loans during 2010, 2009, and 2008, respectively.
The balance of foreclosed real estate, exclusive of inventory from government insured mortgages, decreased to $110.5 million as of December 31, 2010, from $113.7 million in 2009. Table 22 below provides an activity rollforward of foreclosed real estate balances for the years ended December 31, 2010 and 2009.
Inflows of assets into foreclosure status and the amount disposed declined in 2010 when compared with 2009. The decline in inflow is primarily due to FHNs efforts to prevent foreclosures by restructuring loans and working with borrowers and also due to overall improvement in the risk profile of the loan portfolio.
Stabilization of collateral values in certain markets resulted in less negative valuation adjustments to existing foreclosed real estate inventory as property values were experiencing more deterioration during 2009. FHN also utilized bulk sales and auctions more in 2009 in order to liquidate older asset inventory.
Table 22 - Rollforward of Foreclosed Real Estate
(Dollars in thousands)
2010
2009
Balance on January 1 (a)
$
113,709
$
104,309
Valuation adjustments
(18,097
)
(39,879
)
New foreclosed property
180,506
217,720
Capitalized expenses
4,278
5,442
Disposals:
Single transactions
(166,309
)
(143,587
)
Bulk sales
(3,551
)
(16,609
)
Auctions
-
(13,687
)
Balance on December 31 (a)
$
110,536
$
113,709
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Excludes foreclosed real estate related to government insured mortgages.
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FIRST HORIZON NATIONAL CORPORATION
Nonperforming asset levels could fluctuate somewhat in the future as the mix of NPAs shifts from being driven by non-strategic construction loans to relationship-oriented C&I loans.
Past Due Loans and Potential Problem Assets
Past due loans are loans contractually past due 90 days or more as to interest or principal payments, but which have not yet been put on nonaccrual status. Loans in the portfolio 90 days or more past due decreased to $79.2 million on December 31, 2010, from $137.8 million on December 31, 2009, primarily
led by reductions in permanent mortgages and consumer real estate loans. Loans 30 to 89 days past due decreased $102.5 million to $188.5 million on December 31, 2010 with the decrease primarily driven by the commercial portfolio.
Potential problem assets represent those assets where information about possible credit problems of borrowers has caused management to have serious doubts about the borrowers ability to comply with present repayment terms. This definition is believed to be substantially consistent with the standards established
by the Office of the Comptroller of the Currency (OCC) for loans classified substandard. Potential problem assets in the loan portfolio, which includes loans past due 90 days or more but excludes nonperforming assets, decreased to $1.1 billion, or 7 percent of total loans, on December 31, 2010, from $1.4 billion
on December 31, 2009. The current expectation of losses from potential problem assets has been included in managements analysis for assessing the adequacy of the allowance for loan losses.
Table 23 - Nonperforming Assets and Delinquencies on December 31
(Dollars in thousands)
2010
2009
2008
2007
2006
Total nonperforming loans (a)
$
725,966
$
937,684
$
1,053,649
$
307,086
$
93,631
Total foreclosed real estate & other assets (b)
110,536
113,709
104,308
85,341
45,397
Total nonperforming assets
$
836,502
$
1,051,393
$
1,157,957
$
392,427
$
139,028
Total loans, net of unearned income
$
16,782,572
$
18,123,884
$
21,278,190
$
22,103,516
$
22,104,905
Foreclosed real estate from GNMA loans
14,865
11,481
21,230
18,642
18,121
Potential problem assets (c)
1,144,185
1,382,698
1,180,942
222,471
161,727
Loans 30 to 89 days past due
188,478
291,022
360,735
287,949
131,211
Loans 30 to 89 days past due guaranteed portion (d)
3,801
76
94
92
161
Loans 90 days past due
79,244
137,823
85,364
56,755
35,248
Loans 90 days past due guaranteed portion (d)
264
239
228
178
242
Loans held for sale 30 to 89 days past due
17,291
35,047
45,307
57,317
31,264
Loans held for sale 30 to 89 days past due guaranteed portion (d)
6,980
35,047
45,296
57,317
24,586
Loans held for sale 90 days past due
49,409
44,520
47,704
194,754
131,944
Loans held for sale 90 days past due guaranteed portion (d)
39,620
40,013
42,250
190,721
128,627
Ratios:
Allowance to nonperforming loans in the loan portfolio
1.03
x
1.00
x
0.81
x
1.21
x
2.61
x
NPL % (e)
3.85
%
4.96
%
4.91
%
1.28
%
0.37
%
NPA % (f)
4.48
%
5.56
%
5.38
%
1.59
%
0.54
%
(a)
2010, 2009, and 2008 include $79.1 million, $38.3 million, and $8.5 million, respectively, of loans held-for-sale.
(b)
Excludes foreclosed assets acquired through GNMAs repurchase program.
(c)
Includes past due loans.
(d)
Guaranteed loans include FHA, VA, student, and GNMA loans repurchased through the GNMA repurchase program.
(e)
Nonperforming loans in the loan portfolio to total period end loans.
(f)
Nonperforming assets related to the loan portfolio to total loans plus foreclosed real estate and other assets.
Troubled Debt Restructuring and Loan Modifications
As part of FHNs ongoing risk management practices, FHN attempts to work with borrowers when necessary, 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
FIRST HORIZON
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49
Troubled Debt Restructuring (TDR). FHN considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. As such, qualification criteria and payment terms consider the borrowers current and prospective ability to comply with the modified terms of the loan.
Additionally, FHN structures loan modifications to amortize the debt within a reasonable period of time.
As part of FHNs credit risk management governance processes, the Loan Rehab and Recovery Department (LRRD) is responsible for managing most commercial and commercial real estate relationships with borrowers whose financial condition has deteriorated to such an extent that the credits are being
considered for impairment, classified as substandard or worse, placed on nonaccrual status, foreclosed or in process of foreclosure, or in active or contemplated litigation. LRRD has the authority and responsibility to enter into workout and/or rehabilitation agreements with troubled commercial borrowers in order to
mitigate and/or minimize the amount of credit losses recognized from these problem assets. In accordance with ASC 310-40-15, no single characteristic or factor, taken alone, determines whether a modification is a TDR and each commercial workout situation is unique and is evaluated on a case-by-case basis.
During 2009, continued housing value declines and economic stress impacted the commercial portfolios which experienced higher levels of losses. Broad-based economic pressures, including further reductions in spending by consumers and businesses, also continued to impact other commercial credit quality
indicators. The volume of commercial workout strategies utilized by LRRD to mitigate the likelihood of loan losses has increased commensurate with the commercial credit quality deterioration experienced during this recent economic downturn and housing crisis. While every circumstance is different, LRRD will
generally use forbearance agreements for commercial loan workouts. Other workout strategies utilized by LRRD include principal paydowns/payoffs, obtaining additional collateral, modification of interest payments or entering into short sale agreements. Each commercial workout situation is unique and evaluated on a
case-by-case basis.
Senior credit management tracks loans classified as Watch or worse (internally assigned probability of default grades 12 through 16) and performs periodic reviews of such assets to understand FHNs interest in the borrower, the most recent financial results of the borrower, and the associated loss mitigation
approaches and/or exit plans that the loan relationship and/or loan workout/rehab officer has developed for those relationships. After initial identification, relationship managers prepare regular updates for review and discussion by more senior business line and credit officers.
The ultimate effectiveness of rehab and workout efforts is reflected by the collection of all outstanding principal and interest amounts contractually due. Also, proper upgrading of a credits internal inherent risk rating over time could also be reflective of success of loss mitigation efforts.
The individual impairment assessments completed on commercial loans in accordance with the Accounting Standards Codification Topic related to Troubled Debt Restructurings (ASC 310-40) include loans classified as TDRs as well as loans that may have been modified yet not classified as TDRs by
management. For example, a modification of loan terms that management would generally not consider to be a TDR could be a temporary extension of maturity to allow a borrower to complete an asset sale whereby the proceeds of such transaction are to be paid to satisfy the outstanding debt. Additionally, a
modification that extends the term of a loan, but does not involve reduction of principal or accrued interest, in which the interest rate is adjusted to reflect current market rates for similarly situated borrowers is not considered a TDR. Nevertheless, each assessment will take into account any modified terms and will
be comprehensive to ensure appropriate impairment assessment. If individual impairment is identified, management will either hold specific reserves on the amount of impairment, or if the loan is collateral dependent, write down the carrying amount of the asset to the net realizable value of the collateral.
FHN considers whether a borrower is experiencing financial difficulties, as well as whether a concession has been granted to a borrower determined to be troubled, when determining whether a modification meets the criteria of being a TDR under ASC 310-40. For such purposes, evidence which may indicate that a
borrower is troubled includes, among other factors, the borrowers default on debt, the borrowers declaration of bankruptcy or preparation for the declaration of bankruptcy, the borrowers forecast that entity-specific cash flows will be insufficient to service the related debt, or the borrowers inability to obtain funds
from sources other than existing creditors at an effective interest rate equal to the current market interest rate for similar debt for a nontroubled debtor. If a borrower is determined to be troubled based on such factors or similar evidence, a concession will be deemed to have been granted if a modification of the
terms of the debt occurred that FHN would not otherwise consider. Such concessions may include, among other modifications, a reduction of the stated interest for the
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FIRST HORIZON NATIONAL CORPORATION
remaining original life of the debt, an extension of the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk, a reduction of accrued interest, or a reduction of the face amount or maturity amount of the debt.
Following a TDR, modified loans within the consumer portfolio which were previously evaluated for impairment on a collective basis determined by their smaller balances and homogenous nature become subject to the impairment guidance in ASC 310-10-35 which requires individual evaluation of the debt for
impairment. However, as allowed in ASC 310-10-35, FHN may aggregate certain smaller-balance homogeneous TDRs and use historical statistics, such as average recovery period and average amount recovered, along with a composite effective interest rate to measure impairment when such impaired loans have
risk characteristics in common.
Loans which have been formally restructured and are reasonably assured of repayment and of performance according to their modified terms are generally classified as nonaccrual upon modification and subsequently returned to accrual status by FHN provided that the restructuring and any charge-off taken on the
loan are supported by a current, well documented credit evaluation of the borrowers financial condition and prospects for repayment under the revised terms. Otherwise, FHN will continue to classify restructured loans as nonaccrual. FHNs evaluation supporting the decision to return a modified loan to accrual
status includes consideration of the borrowers sustained historical repayment performance for a reasonable period prior to the date on which the loan is returned to accrual status, which is generally a minimum of six months. In determining whether to place a loan on nonaccrual status upon modification, FHN may
also consider a borrowers sustained historical repayment performance for a reasonable time prior to the restructuring in assessing whether the borrower can meet the restructured terms, as the restructured terms may reflect the level of debt service a borrower has already been making.
On December 31, 2010 and 2009, FHN had $282.8 million and $72.8 million, respectively, of portfolio loans that have been restructured in accordance with regulatory guidelines. Additionally, FHN had restructured $56.0 million of loans HFS as of December 31, 2010. For restructured loans in the portfolio, FHN
had loan loss reserves of $54.9 million, or 19 percent, as of December 31, 2010. The rise in TDRs from 2009 resulted from increased loan modifications of troubled borrowers in an attempt to prevent foreclosure and to mitigate losses to FHN.
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The following table provides a summary of TDRs for the periods ended December 31, 2010 and 2009:
As of December 31, 2010, excludes $56.0 million restructured loans classified as loans held-for-sale.
Although FHN does not currently participate in any of the loan modification programs sponsored by the U.S. government, the proprietary programs were designed using parameters of Home Affordable Modification Programs (HAMPS).
The program available for first lien permanent mortgage loans was designed with and adheres to the OCCs guidance. The program is for loans where the collateral is the primary residence of the borrower. Modifications are
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FIRST HORIZON NATIONAL CORPORATION
made to achieve a target housing debt to income ratio of 35 percent and a target total debt to income ratio of 80 percent. Interest rates are reduced in increments of 25 basis points to reach the target housing debt ratio and contractual maturities may be extended up to 40 years on first liens and up to 20 years
on second liens.
For consumer real estate installment loans, FHN offers a reduction of fixed payments for borrowers with financial hardship. Concessions include a reduction in the fixed interest rate in increments of 25 basis points to a minimum of 1 percent and a possible maturity date extension. For installment loans without
balloon payments at maturity, the maturity date may be extended in increments of 12 months up to a maximum of 10 years beyond the original maturity date with the goal of obtaining an affordable housing to income (HTI) ratio of approximately 35 percent. For installment loans with balloon payments at
maturity, the maturity date is not extended; however, changes to the payment can be made by adjusting the amortization period in order to meet an affordable target payment.
For HELOCs, FHN also provides a fixed payment reduction option for borrowers with financial hardship. Concessions include a fixed interest rate reduction in increments of 25 basis points to a minimum of 1 percent with a possible term extension of up to five years. Upon entering into the modification agreement,
borrowers are unable to draw additional funds on the HELOCs. All loans return to their original terms and rate upon expiration of the modification terms.
RISK MANAGEMENT
FHN derives revenue from providing services and, in many cases, assuming and managing risk for profit which exposes the Company to business strategy and reputational, interest rate, liquidity, market, capital adequacy, operational, compliance, and credit risks that require ongoing oversight and management.
FHN has an enterprise-wide approach to risk governance, measurement, management, and reporting including an economic capital allocation process that is tied to risk profiles used to measure risk-adjusted returns. Through an enterprise-wide risk governance structure and a statement of risk tolerance approved
by the Board, management continually evaluates the balance of risk/return and earnings volatility with shareholder value.
FHNs enterprise-wide risk governance structure begins with the Board. The Board, working with the Executive & Risk Committee of the Board, establishes the Companys risk tolerance by approving policies and limits that provide standards for the nature and the level of risk the Company is willing to assume. The
Board regularly receives reports on managements performance against the Companys risk tolerance primarily through the Boards Executive & Risk and Audit Committees. Additionally, as was required by TARP, in the first and third quarters of 2010 management and the Compensation Committee reviewed and
assessed key business risks and the relation of those risks to compensation plans across the company. Those reviews were conducted with senior officers in the areas of legal, risk, human resources, and credit.
To further support the risk governance provided by the Board, FHN has established accountabilities, control processes, procedures, and a management governance structure designed to align risk management with risk-taking throughout the Company. The control procedures are aligned with FHNs four components
of risk governance: (1) Specific Risk Committees; (2) The Risk Management Organization; (3) Business Unit Risk Management; and (4) Independent Assurance Functions.
1.
Specific Risk Committees: The Board has delegated authority to the Chief Executive Officer (CEO) to manage Business Strategy and Reputation Risk, and the general business affairs of the Company under the Boards oversight. The CEO utilizes the executive management team and the Executive Risk
Management Committee to carry out these duties and to analyze existing and emerging strategic and reputation risks and determines the appropriate course of action. The Executive Risk Management Committee is comprised of the CEO and certain officers designated by the CEO. The Executive Risk
Management Committee is supported by a set of specific risk committees focused on unique risk types (e.g. liquidity, credit, operational, etc). These risk committees provide a mechanism that assembles the necessary expertise and perspectives of the management team to discuss emerging risk issues,
monitor the Companys risk taking activities, and evaluate specific transactions and exposures. These committees also monitor the direction and trend of risks relative to business strategies and market conditions and direct management to respond to risk issues.
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53
2.
The Risk Management Organization: The Companys risk management organization, led by the Chief Risk Officer and Chief Credit Officer, provides objective oversight of risk-taking activities. The risk management organization translates FHNs overall risk tolerance into approved limits and formal policies and
is supported by corporate staff functions, including the Corporate Secretary, Legal, Finance, Human Resources, and Technology. Risk management also works with business units and functional experts to establish appropriate operating standards and monitor business practices in relation to those standards.
Additionally, risk management proactively works with business units and senior management to focus management on key risks in the Company and emerging trends that may change FHNs risk profile. The Chief Risk Officer has overall responsibility and accountability for enterprise risk management and
aggregate risk reporting.
3.
Business Unit Risk Management: The Companys business units are responsible for identifying, acknowledging, quantifying, mitigating, and managing all risks arising within their respective units. They determine and execute their business strategies, which puts them closest to the changing nature of risks
and they are best able to take the needed actions to manage and mitigate those risks. The business units are supported by the risk management organization that helps identify and consider risks when making business decisions. Management processes, structure, and policies are designed to help ensure
compliance with laws and regulations as well as provide organizational clarity for authority, decision-making, and accountability. The risk governance structure supports and promotes the escalation of material items to executive management and the Board.
4.
Independent Assurance Functions: Internal Audit, Credit Risk Assurance, and Model Validation provide an independent and objective assessment of the design and execution of the Companys internal control system, including management systems, risk governance, and policies and procedures. These
groups activities are designed to provide reasonable assurance that risks are appropriately identified and communicated; resources are safeguarded; significant financial, managerial, and operating information is complete, accurate, and reliable; and employee actions are in compliance with the Companys
policies and applicable laws and regulations. Internal Audit and Model Validation report to the Audit Committee of the Board while Credit Risk Assurance reports to the Executive & Risk Committee of the Board.
MARKET RISK MANAGEMENT
Capital markets buys and sells various types of securities for its customers. When these securities settle on a delayed basis, they are considered forward contracts. Securities inventory positions are generally procured for distribution to customers by the sales staff, and the Asset Liability Committee (ALCO) policies
and guidelines have been established with the objective of limiting the risk in managing this inventory.
CAPITAL MANAGEMENT AND ADEQUACY
The capital management objectives of FHN are to provide capital sufficient to cover the risks inherent in FHNs businesses, to maintain excess capital to well-capitalized standards and to assure ready access to the capital markets. The Capital Management Committee, chaired by the Executive Vice President of
Funds Management and Corporate Treasurer, reports to ALCO and is responsible for capital management oversight and provides a forum for addressing management issues related to capital adequacy. This committee reviews sources and uses of capital, key capital ratios, segment economic capital allocation
methodologies, and other factors in monitoring and managing current capital levels, as well as potential future sources and uses of capital. The Capital Management Committee also recommends capital management policies, which are submitted for approval to ALCO and the Executive & Risk Committee and the
Board as necessary.
OPERATIONAL RISK MANAGEMENT
Operational risk is the risk of loss from inadequate or failed internal processes, people, and systems or from external events. This risk is inherent in all businesses. Operational risk is divided into the following risk areas, which have been established at the corporate level to address these risks across the entire
organization:
Business Continuity Planning/Records Management
Compliance/Legal
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FIRST HORIZON NATIONAL CORPORATION
Program Governance
Fiduciary
Security/Internal and External Fraud
Financial (including disclosure)
Information Technology
Vendor
Management, measurement, and reporting of operational risk are overseen by the Operational Risk, Fiduciary, and Financial Governance Committees. Key representatives from the business segments, operating units, and supporting units are represented on these committees as appropriate. These governance
committees manage the individual operational risk types across the company by setting standards, monitoring activity, initiating actions, and reporting exposures and results. Summary reports of these Committees activities and decisions are provided to the Executive Risk Management Committee. Emphasis is
dedicated to refinement of processes and tools to aid in measuring and managing material operational risks and providing for a culture of awareness and accountability.
COMPLIANCE RISK MANAGEMENT
Compliance risk is the risk of legal or regulatory sanctions, material financial loss, or loss to reputation as a result of failure to comply with laws, regulations, rules, related self-regulatory organization standards, and codes of conduct applicable to FHNs activities. Management, measurement, and reporting of
compliance risk are overseen by the Compliance Risk Committee. Key executives from the business segments, legal, risk management, and service functions are represented on the committee. Summary reports of Committee activities and decisions are provided to the appropriate governance committees. Reports
include the status of regulatory activities, internal compliance program initiatives, and evaluation of emerging compliance risk areas.
CREDIT RISK MANAGEMENT
Credit risk is the risk of loss due to adverse changes in a borrowers or counterpartys ability to meet its financial obligations under agreed upon terms. FHN is subject to credit risk in lending, trading, investing, liquidity/funding, and asset management activities. The nature and amount of credit risk depends on the
types of transactions, the structure of those transactions and the parties involved. In general, credit risk is incidental to trading, liquidity/funding, and asset management activities, while it is central to the profit strategy in lending. As a result, the majority of credit risk is associated with lending activities.
FHN assesses and manages credit risk through a series of policies, processes, measurement systems, and controls. The Credit Risk Management Committee (CRMC) is responsible for overseeing the management of existing and emerging credit risks in the company within the broad risk tolerances established by
the Board. The Credit Risk Management function, led by the Chief Credit Officer, provides strategic and tactical credit leadership by maintaining policies, overseeing credit approval and servicing, and managing portfolio composition and performance.
The CRMC oversees the accuracy of credit risk grading and the adequacy of commercial credit servicing through a series of regularly scheduled portfolio reviews. In addition, the CRMC oversees the management of emerging potential problem commercial assets through a series of watch list reviews. The Credit Risk
Management function assesses the portfolio trends and the results of these processes and utilizes this information to inform management regarding the current state of credit quality and as a factor of the estimation process for determining the allowance for loan losses.
All of the above activities are subject to independent review by FHNs Credit Risk Assurance Group. The Executive Vice President of Credit Risk Assurance is appointed by and reports to the Executive & Risk Committee of the Board. Credit Risk Assurance is charged with providing the Board and executive
management with independent, objective, and timely assessments of FHNs portfolio quality, credit policies, and credit risk management processes.
Management strives to identify potential problem loans and nonperforming loans early enough to correct the deficiencies and prevent further credit deterioration. It is managements objective that both charge-offs and asset
FIRST HORIZON
NATIONAL CORPORATION
55
write-downs are recorded promptly, based on managements assessments of the borrowers ability to repay and current collateral values.
INTEREST RATE RISK MANAGEMENT
Interest rate risk is the risk that changes in prevailing interest rates will adversely affect assets, liabilities, capital, income, and/or expense at different times or in different amounts. ALCO, a committee consisting of senior management that meets regularly, is responsible for coordinating the financial management of
interest rate risk. FHN primarily manages interest rate risk by structuring the balance sheet to attempt to maintain the desired level of associated earnings while operating within prudent risk limits and thereby preserving the value of FHNs capital.
Net interest income and the financial condition of FHN are affected by changes in the level of market interest rates as the repricing characteristics of loans and other assets do not necessarily match those of deposits, other borrowings, and capital. When earning assets reprice more quickly than liabilities (when the
balance sheet is asset-sensitive), net interest income will benefit in a rising interest rate environment and will be negatively impacted when interest rates decline. In the case of floating rate assets and liabilities with similar repricing frequencies, FHN may also be exposed to basis risk which results from changing
spreads between earning and borrowing rates.
Net Interest Income Simulation Analysis
Management uses interest rate exposure models to formulate strategies to improve balance sheet positioning, earnings, or both, within FHNs interest rate risk, liquidity, and capital guidelines. The information provided in this section, including the discussion regarding simulation analysis and rate shock analysis, is
forward-looking. Actual results 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. FHN uses simulation analysis as its primary tool to evaluate interest rate risk
exposure. This type of analysis computes net interest income at risk under a variety of market interest rate scenarios to dynamically identify interest rate risk exposures exclusive of the potential impact on fee income. This simulation, which considers forecasted balance sheet changes, prepayment speeds, deposit
mix, pricing impacts, and other changes in the net interest spread, provides an estimate of the annual net interest income at risk for given changes in interest rates. The results help FHN develop strategies for managing exposure to interest rate risk. Like any forecasting technique, interest rate simulation modeling
is based on a number of assumptions and judgments. In this case, the assumptions relate primarily to loan and deposit growth, asset and liability prepayments, interest rates, and on- and off-balance sheet hedging strategies. Management believes the assumptions used in its simulations are reasonable.
Nevertheless, simulation modeling provides only a sophisticated estimate, not a precise calculation of exposure to changes in interest rates.
The simulation models used to analyze net interest income create various at-risk scenarios looking at increases and/or decreases in interest rates from an instantaneous movement or a staggered movement over a certain time period. In addition, the risk of changes in the yield curve is estimated by flattening and
steepening the yield curve to historical levels. These hypothetical rate moves are used to simulate net interest income exposure to historically extreme movements in interest rates. Management reviews these different scenarios to determine alternative strategies and executes based on that evaluation. The models are
regularly updated to incorporate management action. Any scenarios that indicate a change in net interest income of three percent or more from a base net interest income are presented to the Board quarterly. At December 31, 2010, the interest rate environment was at an unprecedented low level. Under these
market conditions, traditional scenarios forecasting declining rates are no longer meaningful. Accordingly, declining rate shock scenarios (including minus 25 basis points and minus 200 basis points) that had been modeled in prior periods were not performed.
The remaining scenarios performed attempt to capture risk to net interest income from rising rates and changes in the shape of the yield curve. Based on the rate sensitivity position on December 31, 2010, net interest income exposure over the next 12 months to a rate shock of plus 200 basis points is estimated
to be a favorable variance of approximately 8 percent of base net interest income. A flattening yield curve scenario where short-term rates increase and long-term rates are static, results in a favorable variance in net interest income of approximately 3 percent. These hypothetical scenarios are used as one estimate
of risk, and do not necessarily represent managements current view of future interest rates or market developments.
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FIRST HORIZON NATIONAL CORPORATION
Fair Value Shock Analysis
Interest rate risk and the slope of the yield curve also affects the fair value of MSR and capital markets trading inventory that are reflected in mortgage banking and capital markets noninterest income, respectively. Low or declining interest rates typically lead to lower servicing-related income due to the impact of
higher loan prepayments on the value of MSR while high or rising interest rates typically increase servicing-related income. To determine the amount of interest rate risk and exposure to changes in fair value of MSR, FHN uses a multiple scenario rate shock analysis, including the magnitude and direction of interest
rate changes, prepayment speeds, and other factors that could affect mortgage banking income.
Generally, low or declining interest rates with a positively sloped yield curve tends to increase capital markets income through higher demand for fixed income products. Additionally, the fair value of capital markets trading inventory can fluctuate as a result of differences between current interest rates when
compared to the interest rates of fixed-income securities in the trading inventory.
Derivatives
FHN utilizes derivatives to protect against unfavorable fair value changes resulting from changes in interest rates of MSR and other retained assets. Derivative instruments are also used to protect against the risk of loss arising from adverse changes in the fair value of a portion of capital markets securities inventory
due to changes in interest rates. Derivative financial instruments are used to aid in managing the exposure of the balance sheet and related net interest income and noninterest income to changes in interest rates. Interest rate contracts (potentially including swaps, swaptions, and mortgage forward purchase
contracts) are utilized to protect against MSR prepayment risk that generally accompanies declining interest rates. Net interest income earned on swaps and similar derivative instruments, used to protect the value of MSR, increases when the yield curve steepens and decreases when the yield curve flattens or
inverts. Capital markets enters into futures contracts to economically hedge interest rate risk associated with changes in fair value currently recognized in capital markets noninterest income.
Other than the impact related to the immediate change in market value of the balance sheet, such as MSR, these simulation models and related hedging strategies exclude the dynamics related to how fee income and noninterest expense may be affected by actual changes in interest rates or expectations of
changes. See Note 25Derivatives and Off-Balance Sheet Arrangements for additional discussion of these instruments.
Table 25 details the interest rate sensitivity profile on December 31, 2010, on capital markets trading securities based on projected cash flows categorized by anticipated settlement date and mortgage banking trading securities categorized by expected maturity dates. Additionally, this table provides the average rates
earned on these trading securities and both the notional and fair values of derivative financial instruments held for trading.
FIRST HORIZON
NATIONAL CORPORATION
57
Table 25 - Risk Sensitivity Analysis
Held for Trading (Dollars in millions)
2011
2012
2013
2014
2015
2016+
Total
Fair Value
Assets:
Trading securities
$
734
-
-
-
-
$
36
$
770
$
770
Average interest rate
3.59
%
-
-
-
-
10.07
%
4.14
%
Interest Rate Derivatives (notional value):
Capital Markets:
Forward contracts:
Commitments to buy
$
1,610
-
-
-
-
-
$
1,610
$
(2
)
Weighted average settlement price
100.79
%
-
-
-
-
-
100.79
%
Commitments to sell
$
1,815
-
-
-
-
-
$
1,815
$
(1
)
Weighted average settlement price
101.05
%
-
-
-
-
-
101.05
%
Caps purchased
$
50
-
-
$
20
$
20
$
9
$
99
*
Weighted average strike price
2.24
%
-
-
5.76
%
4.00
%
6.71
%
3.73
%
Caps written
$
(50
)
-
-
$
(20
)
$
(20
)
$
(9
)
$
(99
)
*
Weighted average strike price
2.24
%
-
-
5.76
%
4.00
%
6.71
%
3.73
%
Floors purchased
$
100
$
12
-
-
-
$
2
$
114
$
1
Weighted average strike price
6.00
%
4.90
%
-
-
-
1.35
%
5.82
%
Floors written
$
(100
)
$
(12
)
-
-
-
$
(2
)
$
(114
)
$
(1
)
Weighted average strike price
6.00
%
4.90
%
-
-
-
1.35
%
5.82
%
Swap contracts purchased
$
260
$
314
$
216
$
92
$
97
$
630
$
1,609
$
(83
)
Average pay rate (fixed)
5.75
%
4.93
%
5.31
%
5.83
%
4.97
%
6.07
%
5.62
%
Average receive rate (floating)
2.04
%
.99
%
1.80
%
3.08
%
2.38
%
2.45
%
2.04
%
Swap contracts purchased
$
55
-
-
-
-
-
$
55
$
1
Average pay rate (floating)
3.12
%
-
-
-
-
-
3.12
%
Average receive rate (fixed)
6.17
%
-
-
-
-
-
6.17
%
Swap contracts sold
$
(260
)
$
(160
)
$
(166
)
$
(92
)
$
(97
)
$
(623
)
$
(1,398
)
$
65
Average pay rate (floating)
2.04
%
1.67
%
2.22
%
3.08
%
2.38
%
2.47
%
2.30
%
Average receive rate (fixed)
5.75
%
4.85
%
5.57
%
5.83
%
4.97
%
6.13
%
5.75
%
Swap contracts sold
$
(55
)
-
-
-
-
-
$
(55
)
$
(1
)
Average pay rate (fixed)
6.17
%
-
-
-
-
-
6.17
%
Average receive rate (floating)
3.12
%
-
-
-
-
-
3.12
%
Futures contracts:
Commitments to sell
$
24
$
14
$
4
-
-
-
$
42
*
Weighted average settlement price
99.48
%
98.84
%
97.52
%
-
-
-
99.08
%
*
Amount is less than $500,000
LIQUIDITY MANAGEMENT
ALCO focuses on liquidity management: the funding of assets with liabilities of the appropriate duration, while mitigating the risk of unexpected cash needs. A key objective of liquidity management is to ensure the continuous availability of funds to meet the demands of depositors, other creditors, and borrowers,
and the requirements of ongoing operations. This objective is met by maintaining liquid assets in the form of trading securities and securities available for sale, growing core deposits, and the repayment of loans. ALCO is responsible for managing these needs by taking into account the marketability of assets; the
sources, stability, and availability of funding; and the level of unfunded commitments. Subject to market conditions and compliance with applicable regulatory requirements, from time to time, funds are available from a number of sources, including core deposits, the securities available for sale portfolio, the Federal
Reserve Banks, access to Federal Reserve Bank programs, the Federal Home Loan Bank (FHLB), access to the overnight and term Federal Funds markets, and dealer and commercial customer repurchase agreements.
Over the past three years, FHN has significantly reduced its reliance on unsecured, wholesale borrowings. Currently the largest concentration of unsecured borrowings is federal funds purchased from small bank correspondent 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 banking services between FHN and these correspondent banks. The remainder of FHNs wholesale short-term borrowings are repurchase agreement transactions accounted for as secured borrowings with the banks
business customers or Capital Markets broker dealer counterparties.
ALCO manages FHNs exposure to liquidity risk through a dynamic, real time forecasting methodology. Base liquidity forecasts are reviewed in ALCO monthly 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
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FIRST HORIZON NATIONAL CORPORATION
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. As a general rule, FHN strives to maintain excess liquidity equivalent to fifteen percent or more of total assets.
Core deposits are a significant source of funding and have been a stable source of liquidity for banks. Generally, core deposits represent funding from a financial institutions 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. Total loans, excluding loans HFS and restricted real estate loans, to core deposits ratio improved to 109 percent in 2010 from 122 percent in 2009. This ratio has improved due to a contraction of the loan portfolio combined with
growth in core deposits.
Both FHN and FTBNA 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 fourth quarter 2010, FHN completed the issuance of $500 million of non-callable
fixed rate senior notes due in 2015. In 2005, FTBNA established a bank note program which provided liquidity of $5.0 billion. On December 31, 2010, $.5 billion was outstanding through the bank note program with the remaining scheduled to mature in 2011. It is not expected that FTBNA will utilize this
borrowing facility with its current amount of excess liquidity. FTBNA has not issued any bank notes under the program in the past three years and has suspended it in order to save certain costs. If FTBNA were to reactivate the program, certain program terms might have to be renegotiated with the note agents to
reflect current market practices. FHN had issued $300 million of capital securities representing guaranteed preferred beneficial interests in $309 million of FHNs junior subordinated debentures through two Delaware business trusts, wholly owned by FHN, which were eligible for inclusion in tier 1 capital. In January
2011, FHN redeemed $103 million of the subordinated debentures issued to First Tennessee Capital Trust I which was announced in December 2010. Although outstanding on December 31, 2010, upon announcement of redemption the capital securities became ineligible for tier 1 capital treatment. FHN does
maintain $.8 billion of borrowings which are secured by retail residential real estate loans. A portion of these borrowings relate to trusts that were consolidated in January 1, 2010 in conjunction with the adoption of amendments to ASC 810. Holders of the trusts securities do not have recourse to any assets of FHN
other than those specifically pledged to settle the trusts obligations. See Note 10 Term Borrowings and Note 11 Guaranteed Preferred Beneficial Interests in First Horizons Junior Subordinated Debentures for additional information regarding FHNs borrowings.
Both FHN and FTBNA have the ability to generate liquidity by issuing preferred or common equity subject to market conditions and compliance with applicable regulatory requirements. In 2010, FHN completed a common equity offering which generated $263.1 million in net proceeds. After the closing of the equity
and debt offering, FHN redeemed all $866.5 million of the preferred shares issued in 2008 under the CPP and announced the redemption of $103 million of subordinated debentures. As of December 31, 2010, FTBNA and subsidiaries had outstanding preferred shares of $.3 billion and are reflected as
noncontrolling interest on the Consolidated Statements of Condition. See Note 12 Preferred Stock and Other Capital for additional information.
FHN also evaluates alternative sources of funding, including loan sales, syndications, and FHLB borrowings in its management of liquidity.
Parent company liquidity is maintained by cash flows stemming from dividends and interest payments collected from subsidiaries along with net proceeds from stock sales through employee plans, which represent the primary sources of funds to pay cash dividends to shareholders and interest to debt holders. The
amount paid to the parent company through FTBNA common dividends is managed as part of FHNs overall cash management process, subject to applicable regulatory restrictions.
Certain regulatory restrictions exist regarding the ability of FTBNA 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 FTBNA to declare preferred or common dividends without prior regulatory approval in
an amount equal to FTBNAs retained net income for the two most recent completed years plus the current year to date. For any period, FTBNAs retained net income generally is equal to FTBNAs regulatory net income reduced by the preferred and common dividends declared by FTBNA. Excess dividends in
either of the two most recent completed years may be offset with available retained net income in the two years immediately preceding it. Applying the applicable rules, FTBNAs total amount available for dividends was negative $542.8 million as of December 31, 2010 and negative $468.0 million as of January 1,
2011. Consequently, FTBNA cannot pay common dividends to its sole common stockholder, FHN, without prior regulatory approval.
FTBNA applied for and received approval to pay a dividend to the parent company in the amount of $300 million in the fourth quarter 2010. The parent company utilized liquidity provided by this dividend, funds from the debt
FIRST HORIZON
NATIONAL CORPORATION
59
and equity offerings, and excess liquidity to redeem the TARP preferred shares and the $103 million of subordinated debentures. FTBNA has requested approval from the OCC to declare and pay dividends on its preferred stock outstanding payable in April 2011. Payment of a dividend to common shareholders of
FHN is dependent on several factors which are all considered by the Board. These factors include FHNs current and prospective capital, liquidity, and other needs, applicable regulatory restrictions, and also availability of funds to FHN through a dividend from FTBNA. Additionally, the Federal Reserve and the OCC
have issued policy statements generally requiring 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. Beginning in
fourth quarter 2008 and continuing throughout 2010, the Board declared dividends payable in shares of common stock in an effort to conserve capital. The most recent stock dividend was distributed on January 1, 2011 to shareholders of record on December 10, 2010. On January 19, 2011, the Board approved a
cash dividend of $.01 per share which will be paid on April 1, 2011 to shareholders of record on March 11, 2011.
Credit Ratings
Maintaining adequate credit ratings on debt issues and preferred stock is critical to liquidity because it affects the ability of FHN to attract funds, such as brokered deposits or wholesale borrowings, from various sources on a cost-competitive basis. On December 31, 2010 and 2009, FHN had $1.8 billion and $1.7
billion, respectively, from these funding sources. The credit ratings are detailed in Table 28. The availability and cost of funds other than core deposits is also dependent upon marketplace perceptions of the financial soundness of FHN, which include such issues as capital levels, asset quality, and reputation. The
availability of core deposit funding is stabilized by federal deposit insurance, which can be removed only in extraordinary circumstances, but may also be influenced to some extent by the same factors that affect other funding sources.
A rating is not a recommendation to buy, sell, or hold securities and is subject to revision or withdrawal at any time and should be evaluated independently of any other rating.
(a)
Last change in rating was on April 23, 2009.
(b)
Last change in rating was on February 17, 2010.
(c)
Last change in rating was on December 3, 2008. Outlook revised to Stable and ratings affirmed October 8, 2010.
(d)
Guaranteed preferred beneficial interests in First Horizons junior subordinated debentures issued through a wholly-owned unconsolidated business trust.
(e)
Other funding includes senior bank notes.
Cash Flows
The Consolidated Statements of Cash Flows provide information on cash flows from operating, investing, and financing activities for the years end December 31, 2010, 2009, and 2008. The level of cash and cash equivalents decreased $149.8 million during 2010 from $918.6 million on December 31, 2009. Net
cash provided by operating and investing activities was more than offset by cash used by financing activities.
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FIRST HORIZON NATIONAL CORPORATION
Cash flows provided by operating activities were $768.1 million, a slight decrease from $784.3 million during 2009. Cash flows from operating activities were primarily driven by the increased level of net income in 2010 which was partially offset by changes in operating assets and liabilities that negatively affected
cash flows in 2010. Net cash provided by investing activities was $622.2 million during 2010 compared with $2.4 billion in 2009. Cash flows were primarily driven by a reduction in the size of the loan portfolio resulting in $993.7 million of positive cash flow during 2010. The favorable impact from the decline in
the loan portfolio was partially offset by negative cash flows related to the securities portfolio as purchases more than offset sales and maturities. In 2009, the reduction in the loan portfolio contributed $2.3 billion of positive cash flows. Both periods reflect the continued wind-down of the non-strategic portfolios. Net
cash used by financing activities was $1.5 billion in 2010 compared with $3.6 billion in 2009. A significant decline in short-term borrowings contributed to negative cash flows in both periods. In 2010, cash used from short-term borrowings was $1.3 billion compared to $2.4 billion in 2009. The decrease in funds
from short-term borrowings was driven by lower period-end usage of FFP, and the repayment of funds borrowed under TAF and from the FHLB. In 2010, cash provided by term borrowings was $128.8 million. Cash flows from term borrowings includes cash provided as a result of the senior debt offering in fourth
quarter 2010 which is partially offset by maturities and the repurchase of bank notes. Net cash used from financing activities was favorably affected by the common equity offering which resulted in net proceeds of $263.1 million in 2010. Liquidity provided by the common stock and debt offerings was more than
offset by $866.5 million of cash used for the repurchase of preferred shares issued through the CPP.
In 2009, liquidity was predominantly provided by a contracting balance sheet and through cash-related operating activities. Net cash provided by investing activities was the primary contributor of liquidity during 2009. Net cash provided by investing activities was $2.4 billion and was primarily the result of a
reduction in the loan portfolio. FHN has actively reduced its national construction and home equity portfolios, however, with soft loan demand during 2009, cash outflows to fund new loans was nominal. Additionally, a net $.5 billion decline of AFS securities due to the natural run-off of underlying assets also
positively contributed to cash flows from investing activities. Cash flows from investing activities during 2008 were much less significant as the loan portfolio did not considerably decline until 2009.
Operating cash flows were primarily the result of positive cash-related operating income items as a significant component of the net loss during 2009 was the provision for loan losses, a decrease in the fair value of derivatives, and provision for foreclosure and repurchase obligations, which are all non-cash expense
items. In 2008, cash flows from operating activities were $4.2 billion and were driven by a $2.9 billion decline in the size of the mortgage warehouse. Negative cash flows provided by financing activities were $3.6 billion during 2009. Cash flows from short-term borrowings declined $2.4 billion primarily due to a
reduction in borrowings from the Federal Reserve TAF in 2009. Additionally, funding from term borrowings declined by $1.8 billion during 2009 as a significant amount of FHNs bank notes matured during 2009 and $.2 billion were repurchased. The need for cash flows from financing activities has decreased
during 2009 consistent with the $5.0 billion decline in period-end total assets and also due to a $.6 billion increase in deposits. During 2008, negative cash flows from financing activities were $5.4 billion as cash providing by deposits, short-term borrowings, and term borrowings declined. FHNs common stock
offering and preferred shares issued through the CPP generated a combined $1.5 billion in cash proceeds during 2008.
REPURCHASE OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS, AND OTHER CONTRACTUAL OBLIGATIONS
Prior to 2009, as a means to provide liquidity for its legacy mortgage banking business, FHN originated loans through its legacy 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 and federally insured single-family residential mortgage loans were sold predominately to GSEs. Many mortgage loan originations, especially those that did not meet criteria for whole loan sales to GSEs (nonconforming mortgage loans) were sold to investors
predominantly through proprietary securitizations but also, to a lesser extent, through whole loan sales to private non-GSE purchasers. In addition, through its legacy mortgage business FHN originated with the intent to sell and sold HELOC and second lien mortgages through whole loan sales to private purchasers.
FIRST HORIZON
NATIONAL CORPORATION
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Regarding these past loan-sale activities, FHN has exposure to potential loss primarily through two avenues. First, investors/purchasers of these mortgage loans may request that FHN repurchase loans or make the investor whole for economic losses incurred if it is determined that FHN violated certain contractual
representations and warranties made at the time of these sales. Contractual representations and warranties differ based on deal structure and counterparty. Second, investors in securitizations may attempt to achieve rescission of their investments or damages through litigation by claiming that the applicable offering
documents were materially deficient.
Origination Data
From 2005 through 2008, FHN originated and sold $69.5 billion of first lien mortgage loans to GSEs. GSE loans originated in 2005 through 2008 account for 94 percent of all repurchase requests/make-whole claims received between the third quarter 2008 mortgage business divestiture and December 31, 2010.
Accordingly, GSE repurchase data in the following discussion is limited to that period. In addition, from 2000 through 2007, FHN securitized $47.1 billion of such first lien loans without recourse. Of the amount originally securitized, $37.1 billion relates to securitization trusts that are still active as approximately 30
securitization trusts have become inactive due to clean-up calls exercised by FHN. The exercise of cleanup calls resulted in termination of the Pooling and Servicing Agreements and reacquisition of the related mortgage loans. This represents the entire period of FHNs first lien securitization activities.
Loans Sold to GSEs
Substantially all of the conforming mortgage loans were sold to GSE such as Government National Mortgage Association (GNMA or Ginnie Mae) for federally insured loans and Federal National Mortgage Association (FNMA or Fannie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie
Mac) for conventional loans. Each GSE has specific guidelines and criteria for sellers and servicers of loans backing their respective securities, and the risk of credit loss with regard to the principal amount of the loans sold was generally transferred to investors upon sale to the secondary market.
Generally these loans were sold without recourse. However, if it is determined that the loans sold were in breach of representations or warranties required by the GSE and made by FHN at the time of sale, FHN has obligations to either repurchase the loan for the UPB or make the purchaser whole for the economic
benefits of a loan. Such representations and warranties required by the GSEs typically include those made regarding the existence and sufficiency of file documentation and the absence of fraud by borrowers or other third parties such as appraisers in connection with obtaining the loan.
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The following graph provides GSE origination data regarding original principal balances by vintage:
At the time of sale, FHN generally retained servicing rights to these mortgage loans sold. However, FHN has since sold (through the 2008 divestiture and various bulk sales) servicing rights on a significant amount of the loans that were sold to GSEs. As of December 31, 2010, FHN services only $10.9 billion of
loans sold to GSEs (primarily Fannie Mae and Freddie Mac). A substantial amount of FHNs existing repurchase obligations from outstanding requests relate to conforming conventional mortgage loans that were sold to GSEs. Since the divestiture of the national mortgage banking business in third quarter 2008
through December 31, 2010, GSEs (primarily Fannie Mae and Freddie Mac, but also includes some Ginnie Mae) have accounted for the vast majority of repurchase/make-whole claims received.
Proprietary First Lien Securitizations
FHN originated and sold certain non-agency, nonconforming mortgage loans, primarily Jumbo and Alternative-A (Alt A) first lien mortgage loans, to private investors through over 140 proprietary securitization trusts. Over 110 of these proprietary securitization trusts were active as of the end of 2010. Investors
purchased interests in the trusts, called certificates, which were tiered into different risk classes, or tranches. Subordinated tranches were exposed to trust losses first; senior tranches generally were exposed only after subordinated tranches were exhausted, subject to certain exceptions. The certificates were sold to
a variety of investors, including GSEs in some cases, through securities offerings under a prospectus or other offering documents. Unlike servicing on loans sold to GSEs, FHN still services substantially all of the loans sold through proprietary securitizations.
The first lien proprietary securitizations consisting of Jumbo and Alt-A loans were not insured by a monoline insurer; however, in five of the active proprietary securitizations a senior retail class of securities was insured and sold to retail investors. The aggregate insured certificates totaled $128.4 million of original
certificate balance. FHNs exercise of cleanup calls described above contained some of these insured certificates; therefore the original certificate balance of insured certificates related to active securitization trusts was $103.4 million as of the end of 2010. The trustee statement dated December 25, 2010, has
reported to FHN that the remaining outstanding certificate balance for these classes was $98.8 million. FHN understands that some monoline insurers have commenced lawsuits against others in the industry seeking to cancel policies of this sort due to alleged misrepresentations as to the quality of the loan portfolio
insured. FHN has not received notice of a lawsuit from the monoline insurers of the senior retail classes.
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The following table summarizes the loan composition of the private securitizations of FHN from 2000 through 2007:
Table 28 - Composition of Off-Balance Sheet Proprietary Securitizations
(Dollars in thousands)
Original UPB for All Securitizations (a)
Original UPB for Active Securitizations (a)
UPB as of December 31, 2010
Loan type:
Jumbo (b)
$
27,062,825
$
17,183,367
$
6,197,887
Alt A
19,946,023
19,946,023
8,375,598
Total proprietary securitizations
$
47,008,848
$
37,129,390
$
14,573,485
Proprietary securitizations were originated during vintage years 2000 through 2007. Does not include amounts related to consolidated securitization trusts.
(a)
Original principal balances obtained from trustee statements.
(b)
UPB as of December 31, 2010 was adjusted to reflect clean-up calls exercised by FHN in Q4 2010 which resulted in approximately $175 million of Jumbo mortgage loans included in FHNs HTM loan portfolio. Consequently, these loans are no longer subject to repurchase risk.
The remaining jumbo mortgage loans originated and sold by FHN had weighted average FICO scores of approximately 730 and weighted average CLTV ratios of approximately 75 percent at origination. Alt-A loans consisted of a variety of non-conforming products that typically have greater credit risk due to various
issues such as higher CLTV or DTI ratios, reduced documentation, or other factors. As of December 31, 2010, 10.50 percent of the jumbo mortgage loans were 90 days or more delinquent and 22.11 percent of the Alt-A loans were 90 days or more delinquent as of December 31, 2010.
Unlike loans sold to GSEs, contractual representations and warranties for proprietary securitizations do not include general representations regarding the absence of fraud or negligence in the underwriting or origination of the mortgage loans. Securitization documents typically provide the investors with a right to
request that the trustee investigate and initiate repurchase of a mortgage loan if FHN breached certain representations and warranties made at the time the securitization closed and such breach materially and adversely affects the interests of the investors in such mortgage loan. However, the securitization
documents do not require the trustee to make an investigation into the facts or matters stated in any request or notice unless requested in writing to do so by the holders of certificates evidencing not less than 25 percent of the voting rights allocated to each class of certificates. The certificate holders may also be
required to indemnify the trustee for its costs related to investigations made in connection with repurchase actions. GSEs were among the purchasers of certificates in securitizations. As such, they are entitled to the benefits of the same representations and warranties as other investors. However, the GSEs, acting
through their conservator under federal law, are permitted to undertake, independently of other investors, reviews of FHNs mortgage loan origination and servicing files. Such reviews are commenced using a subpoena process. If, because of such reviews, the GSEs determine there has been a breach of a
representation or warranty that has had a material and adverse affect on the interests of the investors in any mortgage loan, the GSEs may seek to cause the Trustee to enforce a repurchase obligation against FHN.
At December 31, 2010, the repurchase request pipeline contained no repurchase requests related to the first lien securitized loans based on claims related to breaches of representations and warranties.
Also unlike loans sold to GSEs, interests in securitized loans were sold as securities under prospectuses or other offering documents subject to the disclosure requirements of applicable federal and state securities laws. As an alternative to pursuing a claim for breach of representations and warranties through the
trustee as mentioned above, investors could pursue a claim alleging that the disclosure documents were deficient by containing materially false or misleading information or by omitting material information. Claims for such disclosure deficiencies typically could be brought under applicable federal or state securities
statutes, and the statutory remedies typically could include rescission of the investment or monetary damages measured in relation to the original investment made. If a plaintiff properly made and proved its allegations, the plaintiff might attempt to claim that damages could include loss of market value on the
investment even if there were little or no credit loss in the underlying loans. Claims based on alleged disclosure deficiencies also could be brought as traditional fraud or negligence claims with a wider scope of damages possible. Each investor could bring such a claim individually,
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without acting through the trustee to pursue a claim for breach of representations and warranties, and investors could attempt joint claims or attempt to pursue claims on a class-action basis. Claims of this sort are likely to be resolved in a litigation context in most cases, unlike most of the GSE repurchase
requests. The analysis of loss content and establishment of appropriate reserves in those cases would follow principles and practices associated with litigation matters, including an analysis of available procedural and substantive defenses in each particular case and an estimation of the probability of ultimate loss, if
any. FHN expects most litigation claims to take much longer to resolve than repurchase requests typically have taken.
FHN, among others, has been subpoenaed by the FHFA, Conservator for Fannie Mae and Freddie Mac, related to investments made by the two GSEs in six proprietary securitizations issued in 2005 and early 2006. The subpoenas relate to an ongoing inquiry which may result in claims against FHN. The original
and current (as of the December 25, 2010, trust statements) combined certificate balances related to Fannie Mae investments were $443.2 million and $189.4 million, respectively. The original and current (as of the December 25, 2010, trust statements) combined certificate balances related to Freddie Mac
investments were $842.0 million and $391.8 million, respectively. Since the inquiry at this time is neither a repurchase claim nor litigation, the associated loans are not considered part of the repurchase pipeline. As of December 31, 2010 and at the time this report was filed, FHN is unable to determine a probable
loss or estimate a range of possible loss due to the uncertainty related to these matters. No reserve has been established.
At the time this report is filed, FHN is one of many defendants in lawsuits by three securitization investors which claim that the offering documents under which certificates were sold to them were materially deficient. Although these suits are in very early stages, FHN intends to defend itself vigorously. These lawsuit
matters have been analyzed and treated as litigation matters under applicable accounting standards. As of December 31, 2010, and at the time this report was filed, FHN is unable to determine a probable loss or estimate a range of possible loss due to the uncertainty related to these matters. No reserve has been
established. Similar claims may be pursued by other investors.
At December 31, 2010, FHN had not reserved for exposure for repurchase of loans arising from claims that FHN breached its representations and warranties made in securitizations at closing, nor for exposure for investment rescission or damages arising from claims by investors that the offering documents under
which the loans were securitized were materially deficient.
Other Proprietary Securitizations
FHN also originated and sold seven second lien proprietary securitization trusts, including six HELOC securitizations and a closed-end second lien securitization. The trusts issued notes backed by the loans and publicly offered the asset-backed notes to investors pursuant to a prospectus. FHN services all of the
loans backing the notes issued in these proprietary securitizations pursuant to the terms of the sale and servicing agreements. The trust statement dated December 25, 2010, reported that the cumulative original and current outstanding note balances of the securitizations are $2.5 billion and $.7 billion, respectively.
The original and current outstanding balance of the closed-end second lien securitization was $236.3 million and $29.7 million, respectively.
These securitization trusts have been consolidated; consequently, these loans and the associated credit risk are reflected in FHNs consolidated financial statements. As of December 31, 2010, the loans and associated ALLL are reflected as restricted on the Consolidated Statements of Condition. See the Asset
Quality section for further discussion of Restricted Real Estate Loans.
The asset-backed notes issued in the HELOC securitizations were wrapped by monoline insurers. FHN understands that some monoline insurers have commenced lawsuits against other originators of asset-backed securities seeking to cancel policies of this sort due to alleged misrepresentations as to the quality of
the loan portfolio insured. FHN has not received notice from a monoline insurer of any such lawsuit. The monoline insurers also have certain contractual rights to pursue repurchase and indemnification. On January 4, 2011, the monoline insurer of two of FHNs HELOC securitizations demanded to review the
performance of these HELOC securitizations and, with respect to charged off loans, to review loan origination and servicing files, underwriting guidelines and payment histories. The demands were made pursuant to the terms of the applicable insurance and indemnity and sale and servicing agreements. No
repurchase or indemnification claims related to the HELOCs have been made as
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of the date of this report. Advances made by monoline insurers for the benefit of security holders have been recognized within restricted term borrowings in the Consolidated Statements of Condition.
Private Mortgage Insurance (PMI)
PMI was required by GSE rules for certain of the loans sold to GSEs and also was provided for certain of the loans that were securitized. PMI generally was provided for first lien loans having a loan-to-value ratio at origination of greater than 80 percent that were sold to GSEs or securitized. Although unresolved PMI
cancellation notices are not formal repurchase requests, FHN includes these in the active repurchase request pipeline when analyzing and estimating loss content in relation to the loans sold to GSEs. For purposes of estimating loss content, FHN also considers reviewed PMI cancellation notices where coverage has
been cancelled for all loan sales and securitizations. In determining adequacy of the repurchase reserve, FHN considered $124.3 million in UPB of loans sold where PMI coverage was cancelled for all loan sales and securitizations. To date, a majority of PMI cancellation notices have involved loans sold to GSEs. At
December 31, 2010, all estimated loss content arising from PMI cancellation matters is related to loans sold to GSEs.
First Lien, HELOC and Second Lien Non-GSE Whole Loan Sales
FHN originated through its former national retail and wholesale channels and subsequently sold HELOC and second lien mortgages through whole loan sales. These loans were underwritten to the guidelines of that channel as either combination transactions with first lien mortgages or stand alone transactions. The
whole loan sales were generally done on a servicing retained basis and contained representations and warranties customary to such loan sales and servicing agreements in the industry with specific reference to sellers underwriting and servicing guidelines. Loans were subject to repurchase in the event of early
payment defaults and for breaches of representations and warranties. In 2009, FHN settled a substantial portion of its repurchase obligations for these loans through an agreement with the primary purchaser of HELOC and second lien loans. This settlement included the transfer of retained servicing rights
associated with the applicable second lien and HELOC loan sales. FHN does not guarantee the receipt of the scheduled principal and interest payments on the underlying loans but does have an obligation to repurchase the loans excluded from the above settlement for which there is a breach of representations
and warranties provided to the buyers. The remaining repurchase reserve for these loans is minimal reflecting the settlement discussed above.
FHN has also sold first lien mortgages without recourse through whole loan sales to non-GSE purchasers. As of December 31, 2010, seven percent of repurchase/make-whole requests were claims from private whole loan sales. These claims are included in FHNs liability methodology and the assessment of the
adequacy of the repurchase and foreclosure liability.
Loan Repurchase Requests Related to Branch Sales
FHN also sold loans as part of branch sales that were executed during 2007 as part of a strategic decision to exit businesses in markets FHN considered non-strategic. Unlike the loans sold to GSEs or sold privately as discussed above, these loans were originated to be held to maturity as part of the loan portfolio.
FHN has received repurchase requests related to HELOC from one of the purchasers of these branches. The original UPB of the loans subject to the repurchase request was $45.5 million. At December 31, 2010 there were charged-off loans of $8.9 million for the HELOCs at issue, and an unpaid principal balance
of $26.8 million. These amounts are not included in the repurchase pipeline. Those unresolved repurchase requests are the subject of an arbitration proceeding. Based on an analysis of the circumstances FHN has established an immaterial reserve at December 31, 2010, based on its interpretation of the sale
agreement. Because of the uncertainty of the potential outcome of the arbitration proceedings, and also due to uncertainties regarding potential remedies that are within the discretion of the arbitration panel, FHN cannot determine probable loss or estimate a range of possible loss at this time that may result from
these arbitration proceedings. FHN expects to re-assess the reserve each quarter as the arbitration progresses.
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Repurchase Accrual Methodology
The estimated probable incurred losses that result from these obligations are derived from loss severities that are reflective of default and delinquency trends in residential real estate loans and lower housing prices, which result in fair value marks below par for repurchased loans when the loans are recorded on
FHNs balance sheet within loans HFS upon repurchase. In estimation of the accrued liability for loan repurchases and make-whole obligations, FHN estimates probable incurred losses in the population of all loans sold based on trends in claims requests and actual loss severities observed by management. The
liability includes accruals for probable losses beyond what is observable in the ending pipeline of repurchase/make-whole requests and active PMI cancellations at any given balance sheet date. The estimation process begins with internally developed proprietary models that are used to assist in developing a baseline
in evaluating inherent repurchase-related loss content. These models are designed to capture historical loss content from actual repurchase activity experienced. The baseline for the repurchase reserve uses historical loss factors that are applied to the loan pools originated in 2001 through 2008 and sold in years
2001 through 2009. Loss factors, tracked by year of loss, are calculated using actual losses incurred on repurchases or make-whole arrangements. The historical loss factors experienced are accumulated for each sale vintage and are applied to more recent sale vintages to estimate probable incurred losses not yet
realized. Due to the lagging nature of this model and relatively short period available in which actual loss trends have been observed, management applies qualitative adjustments to this initial baseline estimate.
In order to incorporate more current events, such as the level of repurchase requests or PMI cancellation notices, FHN then overlays management judgment within its estimation process for establishing appropriate reserve levels. For repurchase requests (the active pipeline) related to breach of representations
and warranties, the active pipeline is segregated into various components (e.g., requestor, repurchase, or make-whole) and current rescission (successful resolutions) and loss severity rates are applied to calculate estimated losses attributable to the current pipeline. When assessing the adequacy of the repurchase
reserve, management also considers trends in the amounts and composition of new inflows into the pipeline. FHN has observed loss severities (actual losses incurred as a percentage of the UPB) ranging between 50 percent and 60 percent of the principal balance of the repurchased loans and average rescission
rates between 40 percent and 50 percent of the repurchase and make-whole requests. FHN then compares the estimated losses inherent within the pipeline with current reserve levels. On December 31, 2010, the active pipeline was $534 million with over 90 percent of all unresolved repurchase and make-whole
claims relating to loans sold to GSEs.
For purposes of estimating loss content, FHN also considers reviewed PMI cancellation notices where coverage has been cancelled. Beginning in late 2009, FHN began to observe noticeable increases in notifications by private mortgage insurers asserting grounds for insurance cancellation. When assessing loss
content related to loans where PMI has been cancelled, FHN first reviews the amount of unresolved PMI cancellations that are in the active pipeline and adjusts for any known facts or trends observed by management. Similar to the methodology for actual repurchase/make-whole requests, FHN applies loss factors
(including probability and loss severity ratios) that were derived from actual incurred losses in past vintages to the amount of unresolved PMI pipeline for loans that were sold to GSEs. For GSE PMI cancellation notices, the methodology for determining the accrued liability contemplates a higher probability of loss
compared with that applied to GSE repurchase/make-whole requests as FHN has been less successful in favorably resolving mortgage insurance cancellation notifications with PMI companies. Loss severity rates applied to GSE PMI cancellation notifications are consistent with those applied to actual GSE claims. For
GSE PMI cancellation notifications where coverage has been ultimately cancelled and are no longer included in the active pipeline, FHN applies a 100 percent repurchase rate in anticipation that such loans ultimately will result in repurchase/make-whole requests from the GSEs since PMI coverage for certain loans
is a GSE requirement. In determining adequacy of the repurchase reserve, FHN considered $124.3 million in UPB of loans sold where PMI coverage was cancelled for all loan sales and securitizations.
Active Pipeline
The following table provides a rollforward of the active repurchase request pipeline, including related unresolved PMI cancellation notices, and information regarding the number of repurchase requests resolved during 2010, 2009, and a portion of 2008. Prior to the third quarter 2008, certain granular information
was not maintained as the ending pipeline was not material and the significant increase in repurchase requests did not begin until third quarter 2008. Additionally, activity within the pipeline was not maintained at a product level, and as noted in the rollforward, is unavailable. During 2008 notices of PMI
cancellations were immaterial.
Total ending active pipeline - December 31, 2010 (b)
2,314
$
515,108
357
$
18,025
12
$
1,022
2,683
$
534,155
(a)
Generally, adjustments reflect reclassifications between repurchase requests and PMI cancellation notices and/or updates to UPB.
(b)
Active pipeline excludes repurchase requests related to HELOC and installment loans originated through channels other than legacy mortgage banking.
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The following graph depicts inflows into the active pipeline by claimant type by quarter during 2009 and 2010:
GSEs account for 92 percent of all actual repurchase/make-whole requests in the pipeline as of December 31, 2010 and 81 percent of the active pipeline, inclusive of PMI cancellation notices and all other claims. The pipeline includes loans associated with unresolved PMI cancellation notices. Additionally, GSE
loans account for approximately 53 percent of loans for which FHN has received a PMI notification requesting cancellation that is included in the active pipeline. Consistent with originations, a majority of GSE claims have been from Fannie Mae and 2007 represents the vintage with the highest volume of claims.
However, in late 2010, the mix of repurchase/make-whole requests began to shift towards the 2008 origination vintages as the amount of new requests between the 2007 and 2008 vintages were about equal in the fourth quarter.
Contractual agreements with Fannie Mae and Freddie Mac state a response should be completed within 30 days of receiving a repurchase request. Working arrangements with both agencies include regular communications to review the current pipeline as well as address any concerns requiring immediate attention.
Given the accumulation of GSE repurchase requests at FHN and backlog at the GSEs, FHN has been able to take additional time as needed to complete repurchase request reviews. At this point, FHN has not suffered any penalties from responses occurring after the 30-day contractual period. The volume of new
claims, slow responses from GSEs and PMI companies, and an iterative resolution process have contributed to the overall growth in the active pipeline.
The most common reasons for GSE repurchase demands are claimed misrepresentations related to missing documents in the loan file, issues related to employment and income (such as misrepresented stated-income or falsified employment documents and/or verifications), and undisclosed borrower debt. Since the
divestiture of the national origination platform in August 2008, less than full documentation loans accounted for approximately 25 percent of GSE repurchase and make-whole claims while approximately 75 percent of the claims have resulted from loans originated as full documentation loans. Additionally, total
repurchase and make-whole claims related to private whole loan sales of sub-prime and option adjustable-rate mortgages have accounted for less than 5 percent of all claims since the divestiture in 2008.
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The following graph shows the composition of repurchase and make-whole claims by loan documentation type:
The following table provides information regarding resolutions (outflows) of the active pipeline during 2010 and 2009:
Table 32 - Active Pipeline Resolutions and Other Outflows
(Dollars in thousands)
December 31, 2010
December 31, 2009
Number
UPB (a)
Number
UPB (a)
Repurchase, make-whole, settlement resolutions
961
$
191,317
466
$
88,613
Rescissions or denials
682
144,664
302
55,297
Other, PMI, information requests
698
140,583
371
57,742
Total resolutions
2,341
$
476,564
1,139
$
201,652
(a)
When available, FHN uses current UPB in all cases. If current UPB is unavailable, the original loan amount is substituted for current UPB. When neither is available, the claim amount is used as an estimate of current UPB.
Total resolutions disclosed in Table 32 Active Pipeline Resolutions and Other Outflows include both favorable and unfavorable resolutions and are reflected as decreases in the Rollforward of the Active Pipeline in Table 29. Generally, the UPB (see footnote (a) of Table 32 for definition of UPB) of a loan subject to
a repurchase/make-whole claim or with open PMI issues remains in the active pipeline throughout the appeals process with a GSE or PMI company until parties agree on the ultimate outcome. The UPB of actual repurchases, make-whole, settlement resolutions, which was $191.3 million during 2010, represents
the UPB loans for which FHN has incurred a loss on the actual repurchase of a loan, or where FHN has reimbursed a claimant for economic losses incurred. When estimating the accrued liability, using loss factors based on actual historical experience, FHN has observed average loss severities ranging between 50
and 60 percent of the UPB of the repurchased loan or make-whole claim. When loans are repurchased or make-whole payments have been made, the associated loss content on the repurchase, make-whole, or settlement resolution is reflected as a net realized loss in Table 33 Reserves for Repurchase and
Foreclosure Losses.
Rescissions or denials, which were $144.7 million in 2010, represent the amount of repurchase requests and make-whole claims where FHN was able to resolve without incurring losses. FHN has been successful in favorably resolving 40 to 50 percent of all actual repurchase/make-whole claims since third quarter
2008. Other, PMI, information requests, which was $140.6 million during 2010, includes providing information to claimant, issues related to PMI coverage, and other items. Resolutions in this category include both favorable and unfavorable
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outcomes with PMI companies, including situations where PMI was ultimately cancelled. While FHN has assessed the loans with PMI issues for loss content in estimating the repurchase liability, FHN will not realize loss (a decrease of the repurchase and foreclosure liability) unless a repurchase/make-whole claim is
submitted and such request is unfavorably resolved. Consistent with the composition of the active repurchase and make-whole claims pipeline, 95 percent of the resolutions experienced during 2010 have been attributable to loans sold to GSEs, primarily Fannie Mae.
Repurchase and Foreclosure Liability
Management considered the level and trends of repurchase requests as well as PMI cancellation notices when determining the adequacy of the repurchase and foreclosure liability. Although the pipeline of requests has been increasing, FHN also considered that a majority of these sales ceased in third quarter 2008
when FHN sold its national mortgage origination business. In 2010, FHN has received the greatest amount of repurchase or make-whole claims, and associated losses, related to loans that were sold on a whole loan basis during 2006 and 2007. FHN compares the estimated probable incurred losses within the
pipeline and the estimated losses resulting from the baseline model with current reserve levels. Changes in the estimated required liability levels are recorded as necessary. Generally, net realized losses related to first liens have averaged between 50 and 60 percent of the UPB of the loans repurchased or remitted
make-whole payments. There are certain second liens and HELOCs subject to repurchase claims that are not included in the active pipeline as these loans were originated and sold through different channels. Liability estimation for potential repurchase obligations related to these second liens and HELOCs loans was
determined outside of the methodology for loans originated and sold through the national legacy mortgage origination platform.
The following table provides a rollforward of the repurchase liability by loan product type during 2010 and 2009:
Table 33 - Reserves for Repurchase and Foreclosure Losses
(Dollars in thousands)
2010
2009
First Liens
Balance on January 1
$
104,464
$
34,771
Provision for repurchase and foreclosure losses
184,304
128,597
Net realized losses
(112,485
)
(58,904
)
Balance on December 31
$
176,283
$
104,464
Second Liens
Balance on January 1
$
1,268
$
6,997
Provision for repurchase and foreclosure losses
5,303
21,040
Net realized losses
-
(26,769
)
Balance on December 31
$
6,571
$
1,268
HELOC
Balance on January 1
$
2,781
$
5,557
Provision for repurchase and foreclosure losses
-
(1,929
)
Net realized losses
(192
)
(847
)
Balance on December 31
$
2,589
$
2,781
Total Reserves for Repurchase and Foreclosure Losses
Balance on January 1
$
108,513
$
47,325
Provision for repurchase and foreclosure losses
189,607
147,708
Net realized losses
(112,677
)
(86,520
)
Balance on December 31
$
185,443
$
108,513
Certain previously reported amounts have been reclassified to agree with current presentation.
Generally, repurchased loans are included in loans HFS and recognized at fair value at the time of repurchase, which contemplates the loans performance status and estimated liquidation value. The UPB of loans that were repurchased during 2010 was $76.1 million compared with $22.3 million during 2009. As of
December 31, 2010,
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the UPB of repurchased loans in HFS was $62.6 million with an associated fair value of $36.9 million. FHN has elected to continue recognition of these loans at fair value in periods subsequent to reacquisition. After the loan repurchase is completed, classification (performing versus nonperforming) of the
repurchased loans is determined based on an additional assessment of the credit characteristics of the loan in accordance with FHNs internal credit policies and guidelines consistent with other loans FHN retains on the balance sheet. Refer to the discussion of repurchase and foreclosure reserves under Critical
Accounting Policies and also Note 18 Restrictions, Contingencies, and Other Disclosures for additional information regarding FHNs repurchase obligations.
In 2010, FHN recognized expense of $189.6 million to increase the repurchase and foreclosure liability compared with $147.7 million in 2009. The increase reflects a rise in repurchase/make-whole requests and PMI cancellation notices during 2010. Generally, since the divestiture of the legacy mortgage banking
business in 2008, the amount of inflow into the active pipeline increased each quarter. As reflected in Table 30 - Pipeline Inflow by Source, each category of inflow generally increased consistent with the overall rise in the inflow. However, in late 2009 and early 2010, the amount of PMI cancellation notices
received noticeably increased. Although PMI cancellation notices are not formal repurchase/make-whole request, the repurchase and foreclosure provision considers PMI cancellations notices. In both 2010 and 2009, success rates on putbacks and the loss severity rates applied to the pipeline inflow was generally
consistent in both years. Consequently, the repurchase and foreclosure provision was primarily driven by the increase in amount of pipeline inflow during 2010 compared with 2009.
Net realized losses for the repurchase of loans or make-whole payments increased to $112.7 million during 2010 compared with $86.5 million during 2009. The first lien net realized losses reflected in Table 33 reflect net losses on $191.3 million of repurchase, make-whole, and settlement resolutions reflected in
Table 32. In 2010, the net realized losses incurred were approximately 60 percent of the UPB of repurchase/make-whole requests resolved in 2010. In 2009, first lien net realized losses were $58.9 million and approximated 65 percent of the UPB of repurchase/make-whole requests. In third quarter 2009, net
realized losses on these second liens and HELOCs include a settlement of a substantial portion of its repurchase obligations for these loans through an agreement with the primary purchaser of HELOC and second lien loans. This settlement included the transfer of retained servicing rights associated with the
applicable second lien and HELOC loan sales.
Industry Repurchase Trends
FHN, like many other financial institutions that originated and sold significant amounts of mortgage loans, has experienced elevated exposure to repurchase obligations from investors. Based on review of other companies filings and recent news releases in various media outlets, it appears that FHNs overall trends
in repurchase/make-whole requests are generally consistent with others in the industry. However, there are several reasons that could cause FHNs exposure and associated losses to differ from the experience of others within the industry or to diverge from FHNs recent experience.
While FHN was an originator and servicer of residential mortgage loans and HELOCs during the years preceding the collapse of the housing market, substantially all of its mortgage banking operations was sold in third quarter 2008. Therefore, all originations ceased through this national channel while industry peers
continued to originate loans beyond this date. As a result, FHN has a finite amount of loans that are subject to repurchase obligations. It is unclear whether or how this affects FHNs settlement opportunities with GSEs, for whom FHN no longer originates loans, in connection with the repurchase notification and
during the appeals process.
Other reasons FHNs experience could deviate from industry peers or otherwise change include: (1) FHN has limited insight into industry peers estimation methodologies; (2) other companies may have better access to the current status of the loans they sold due to their retention of servicing for those loans; and
(3) the current environment, where purchasers of loans are under significant pressure to reduce losses, has no recent historical precedent and therefore is inherently unpredictable. With the sale of national mortgage banking operations and strategic decision to focus on core banking businesses, FHN executed
numerous bulk sales of its servicing portfolio to various buyers. Prior to the sale, the UPB of the loans in the servicing portfolio was approximately $98 billion compared with approximately $29 billion as of December 31, 2010. At this time, FHN continues to service substantially all of the loans sold through
proprietary securitizations, but now services only $10.9 billion of loans that were sold to GSEs. For loans originated and sold but no longer serviced, FHN does not have visibility into
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current loan information such as principal payoffs, refinance activity, delinquency trends, and loan modification activity that may reduce repurchase exposure.
Additionally, variations in product mix of loan originations and investors (i.e., GSE versus proprietary) during those periods could also create disparities in the ultimate exposure to repurchase obligations between FHN and others within the industry. FHN transferred jumbo mortgage loans and Alt-A first lien mortgage
loans in proprietary securitizations whereas others within the industry could have a mix that includes larger amounts of sub-prime loans which could result in varying amounts of repurchase exposure. Recently, some industry participants have announced that they have reached settlements with GSEs in order to
reduce future repurchase requests from GSEs and mitigate losses for the financial institution for the repurchase of loans. FHN continues to examine potential courses of action, including settlement, in order to limit future exposure.
Reinsurance Obligations
A wholly-owned subsidiary of FHN entered into agreements with several providers of private mortgage insurance whereby the subsidiary has agreed to accept insurance risk for specified loss corridors for pools of loans originated in each contract year in exchange for a portion of the private mortgage insurance
premiums paid by borrowers (i.e., reinsurance arrangements). The loss corridors vary for each primary insurer for each contract year. The estimation of FHNs exposure to losses under these arrangements involves the determination of FHNs maximum loss exposure by applying the low and high ends of the loss
corridor range to a fixed amount that is specified in each contract. FHN then performs an estimation of total loss content within each insured pool of loans to determine the degree to which its loss corridor has been penetrated. Management obtains the assistance of a third-party actuarial firm in developing its
estimation of loss content. This process includes consideration of factors such as delinquency trends, default rates, and housing prices which are used to estimate both the frequency and severity of losses. By the end of 2009, substantially all of FHNs reinsurance corridors had been fully reflected within its
reinsurance reserve for the 2005 through 2008 loan vintages. No new reinsurance arrangements were initiated after 2008.
In 2009 and 2010, FHN agreed to settle certain of its reinsurance obligations with primary insurers through termination of the related reinsurance agreement, which resulted in a decrease in the reserve balance totaling $48.7 million and a transfer of the associated trust assets. As of December 31, 2010, FHN has
reserved $11.2 million for its estimated liability under the remaining reinsurance arrangement. In accordance with the terms of the contracts with the primary insurers, as of December 31, 2010, FHN has placed $5.5 million of prior premium collections in trust for payment of claims arising under the reinsurance
arrangement.
The following table provides a rollforward of the reinsurance reserve for the years ended December 31, 2010 and 2009:
Table 34 - Reserves for Reinsurance Losses
(Dollars in thousands)
Twelve Months Ended December 31
2010
2009
Beginning balance
$
29,321
$
38,531
Expense recognized
1,564
27,732
Payments to primary insurers
(7,758
)
(1,828
)
Reduction of liability from settlements
(13,589
)
(35,114
)
Other
1,649
-
Ending balance
$
11,187
$
29,321
Other Contractual Obligations
Pension obligations are funded by FHN to provide current and future benefit to participants in FHNs noncontributory, defined benefit pension plan. On December 31, 2010, the annual measurement date, pension
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obligations, including obligations of the unfunded plans, were $589.7 million with $549.6 million of assets in the trust to fund those obligations. As of December 31, 2010, pension plan assets exceeded the obligations of the qualified pension plan. FHN made a $50.0 million contribution to the qualified pension plan
during 2009 and it was determined a contribution was not needed during 2010. Any future contributions will be based upon pension funding requirements under the Pension Protection Act, the maximum deductible under the Internal Revenue Code, and the actual performance of plan assets. Currently, FHN does
not anticipate making additional contributions to the pension plan during 2011. The nonqualified pension plans and other postretirement benefit plans are unfunded. FHN contributed $4.5 million in 2010 to the unfunded plans to cover all benefits paid under the nonqualified plans and anticipates the 2011
contribution to be $5.1 million. The discount rate for 2010 of 5.70 percent for the qualified pension plan and 5.10 percent for the nonqualified supplemental executive retirement plan was determined by using a hypothetical AA yield curve represented by a series of annualized individual discount rates from one-half
to thirty years. The discount rates for the pension and nonqualified supplemental executive retirement plans are selected based on data specific to FHNs plans and employee population. Beginning in 2013, FHN will no longer accrue service expense for future benefits in the qualified pension plan. Benefits accrued
through December 31, 2012, for current participants will not be reduced or affected. Instead, FHN will commence a new program for service beyond 2013 through an increased match to the Savings Plan. See Note 19 Savings, Pension, and Other Employee Benefits for additional information.
FHN has various other financial obligations, which may require future cash payments. Table 35 sets forth contractual obligations representing required and potential cash outflows as of December 31, 2010. Purchase obligations represent obligations under agreements to purchase goods or services that are
enforceable and legally binding on FHN and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. In addition, FHN enters into commitments to extend credit to borrowers, including loan
commitments, standby letters of credit, and commercial letters of credit. These commitments do not necessarily represent future cash requirements, in that these commitments often expire without being drawn upon.
Table 35 - Contractual Obligations
(Dollars in thousands)
Payments due by period (a)
Less than 1 year
1 year - < 3 years
3 years - < 5 years
After 5 years
Total
Contractual obligations:
Time deposit maturities (b)
$
1,140,985
$
449,945
$
288,497
$
73,318
$
1,952,745
Term borrowings (c)
549,104
350,308
804,308
1,414,141
3,117,861
Annual rental commitments under noncancelable leases (d)
23,108
29,498
17,564
38,456
108,626
Purchase obligations
72,023
53,521
16,107
3,650
145,301
Total contractual obligations
$
1,785,220
$
883,272
$
1,126,476
$
1,529,565
$
5,324,533
(a)
Excludes a $38.4 million liability for unrecognized tax benefits as the timing of payment cannot be reasonably estimated.
(b)
See Note 8 - Time Deposit Maturities for further details.
(c)
See Note 10 - Term Borrowings for further details.
(d)
See Note 5 - Premises, Equipment, and Leases for further details.
Existing uncertainties surrounding the housing market, the national economy, and the regulatory environment will continue to present challenges for FHN. Despite the significant reduction of legacy national lending operations, the ongoing economic stress could continue to affect borrower defaults resulting in elevated
repurchase losses and loan loss provision (especially within the commercial real estate portfolio and bank-related loans). Additionally, a slow or uneven economic recovery could continue to suppress loan demand from borrowers resulting in continued pressure on net interest income. Further deterioration of general
economic conditions could result in increased credit costs depending on the length and depth of this market cycle. See the Repurchase and Related Obligations from Loans Originated for Sale section and Critical Accounting Policies for additional discussion regarding FHNs repurchase obligations.
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Regulatory Matters
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Reform Law) mandates significant change across the industry and authorizes expansive new regulations to be issued in the future. It is uncertain at this time exactly how the Reform Law and associated regulations will affect FHN and the
industry. It is likely, however, that in the foreseeable future, the Reform Law will result in increased compliance costs and risk while also reducing revenues and margins of certain products. Because the full impact of the Reform Law may not be known for some time, FHN will continue to assess the effect of the
legislation on the Company as the associated regulations are adopted.
The proposed Durbin Amendment to the Reform Law would empower the Federal Reserve to set prices for debit interchange services that banks provide. Although not final, the initial Fed proposal could cost the industry $12 billion and First Horizon $30 million in annual revenue. Such a loss will likely force FHN
to increase or implement new fees and eliminate certain accounts and products that become unprofitable without the interchange revenue.
International banking industry regulators have largely agreed upon significant changes in the regulation of capital required to be held by banks and their holding companies to support their businesses. The new international rules, known as Basel III, generally increase the capital required to be held and narrow the
types of instruments which will qualify as providing appropriate capital. The Basel III requirements are complex and will be phased in over many years. The Basel III rules do not apply to U.S. banks or holding companies automatically. Among other things, the Reform Law requires U.S. regulators to reform the
system under which the safety and soundness of banks and other financial institutions, individually and systemically, are regulated. That reform effort will include the regulation of capital. It is not known whether or to what extent the U.S. regulators will incorporate elements of Basel III into the reformed U.S.
regulatory system, but it is expected that the U.S. reforms will include an increase in capital requirements and a narrowing of what qualifies as appropriate capital.
Foreclosure Practices
The current focus on foreclosure practices of financial institutions nationwide could impact FHN through increased operational and legal costs and could have compliance and reputational impacts. FHN owns and services residential loans. In addition, FHNs national mortgage and servicing platforms were sold in
August 2008 and the related servicing activities, including foreclosure proceedings, of the still-owned portion of FHNs mortgage servicing portfolio is outsourced through a subservicing arrangement with the platform buyer. FHN has reviewed its processes relating to foreclosure on loans it owns and services, and
instructed its subservicer to undertake a similar review, with specific emphasis on the 23 states where judicial foreclosures are required and in which ministerial, affidavit, or proper notarization issues or other issues have been raised in relation to the industry (judicial foreclosure states).
Regarding FHNs residential loan portfolio and related servicing, FHNs review of its foreclosure processes has been completed and no material issues were identified. As of December 31, 2010, FHN had 90 foreclosures pending in judicial foreclosure states and FHN had completed 21 foreclosures in those states
during 2010. FHN intends to continue to monitor these processes with the goal of continuing to adapt them to changing circumstances as appropriate.
Regarding the subserviced loan portfolio, the subservicer reported that it had completed an internal review of its foreclosure processes in the fourth quarter and identified certain states in which foreclosure practices are in the process of being modified. Under the terms of the subservicing agreement, the subservicer
is required to service the loans covered in accordance with: applicable law, including regulatory requirements; applicable servicing requirements as set forth in sale, securitization, agency guide, insurer, investor agreements; the mortgage loan documents; and accepted servicing practices of a prudent mortgage
lending servicer including evolving interpretations of applicable servicing requirements including new requirements as defined in the subservicing agreement. The subservicing agreement also contains a provision allowing the subservicer to follow FHNs practices as they existed for the 180 days prior to August 2008
if they are followed in all material respects utilizing personnel of equivalent experience and existing systems and processes unless and until the subservicer becomes aware that the servicing practices do not comply with applicable servicing requirements. The subservicer would be required to indemnify FHN for the
breach of the terms of the subservicing agreement or for continuing a practice with knowledge that it violated accepted servicing requirements.
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The subservicer has advised FHN that it completed over 1,000 foreclosures in the fourth quarter of 2010 and approximately 5,500 for the year. In the fourth quarter 2010, FHN asked the subservicer to undertake a review of its foreclosure processes. The subservicer has advised FHN of modifications in its
foreclosure processes in certain judicial foreclosure states that have been implemented or are pending further review by subservicers legal counsel. The pending modifications of foreclosure practices have affected approximately 300 foreclosures, which includes both FHN subserviced loans and all other loans
serviced by the subservicer. FHN will continue to work with the subservicer to stay abreast of evolving judicial and procedural requirements relating to foreclosures.
The attorneys general of all 50 states have begun to investigate foreclosure practices across the industry. FHN, working with its subservicer, has responded to inquiries requesting information from state attorneys general in the states of Texas and Arizona. No additional inquires have been received by FHN, although
informational letters were received from the attorneys general for the states of Washington and New York. It remains unclear what actions will be taken by individual states through attorneys general, by federal regulators, or other third parties, including borrowers, related to foreclosure practices in the industry or
specific actions by FHN or by its subservicer. FHN cannot predict the amount of operating costs, costs for foreclosure delays (including costs connected with servicing advances), legal expenses, or other costs (including title company indemnification) that may be incurred as a result of the internal reviews or
external actions. Accordingly, FHN is unable to determine a probable loss or estimate a range of loss due to uncertainty related to these matters. No reserve has been established.
More recently, there have been both favorable and unfavorable rulings by courts in various states involving the requirements for proof of ownership of securitized mortgage loans. The ultimate impact of these decisions on the procedures and documentation required to foreclose securitized mortgage loans is not yet
fully developed but could be unfavorable. FHN continues to work with its subservicer and foreclosure counsel with the goal of ensuring that appropriate proof of ownership and documentation is presented at the time of each foreclosure proceeding.
Subserviced Loan Modification Programs
The significant increase in the volume of delinquencies and defaults in residential mortgage loans coupled with the complexities of various loan modification programs has resulted in increased subservicing costs, expanded regulatory supervision, and increased exposure to borrower and investor complaints and
litigation.
Since 2008, residential mortgage loan servicers have implemented numerous loan modification and foreclosure relief programs according to evolving investor requirements, applicable laws and accepted servicing practices. Approximately 150,000 residential mortgage loans are subserviced for FHN as of December
31, 2010. This loan population consists primarily of GSE loans and loans in proprietary securitizations, which account for approximately 90 percent of the subserviced population as of December 31, 2010. Loss mitigation programs are available to eligible borrowers with GSE and securitization loans. The programs
implemented by the GSEs are based largely on the HAMP and other programs developed by federal agencies. The loans in proprietary securitizations are subject to proprietary modification guidelines developed by FHN in compliance with the terms of the securitization agreements. To conform to evolving industry
practices and their effect on the specific requirements of securitized loans, FHN amended its subservicing agreement to incorporate the terms and requirements of FHNs proprietary modification program.
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
FHNs accounting policies are fundamental to understanding managements discussion and analysis of results of operations and financial condition. The Consolidated Financial Statements of FHN are prepared in conformity with accounting principles generally accepted in the United States of America and follow
general practices within the industries in which it operates. The preparation of the financial statements requires management to make certain judgments and assumptions in determining accounting estimates. Accounting estimates are considered critical if (1) the estimate requires management to make assumptions
about matters that were highly uncertain at the time the accounting estimate was made and (2) different estimates reasonably could have been used in the current period, or changes in the accounting estimate are reasonably likely to occur from period to period, that would have
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a material impact on the presentation of FHNs financial condition, changes in financial condition or results of operations.
It is managements practice to discuss critical accounting policies with the Board of Directors Audit Committee including the development, selection, and disclosure of the critical accounting estimates. Management believes the following critical accounting policies are both important to the portrayal of the companys
financial condition and results of operations and require subjective or complex judgments. These judgments about critical accounting estimates are based on information available as of the date of the financial statements.
ALLOWANCE FOR LOAN LOSSES
Managements policy is to maintain the ALLL at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. See Note 1 Summary of Significant Accounting Policies for detail regarding FHNs processes, models, and methodology for determining the ALLL. Management performs periodic and
systematic detailed reviews of its loan portfolio to identify trends and to assess the overall collectibility of the loan portfolio. Accounting standards require that loan losses be recorded when management determines it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.
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, and (3) it requires management to distinguish
between losses incurred as of a balance sheet date and losses expected to be incurred in the future. Accordingly, this is a highly subjective process and requires significant judgment since it is often difficult to determine when specific loss events may actually occur. 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, and Credit performs a quarterly review of the assumptions used and FHNs ALLL analytical models, qualitative assessments of the loan portfolio, and determines if qualitative adjustments should be recommended to the modeled
results. On a quarterly basis, management reviews the level of the ALLL with the Executive and Risk Committee of FHNs Board of Directors.
FHN believes that the critical assumptions underlying the accounting estimate 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) known significant loss events that have occurred were considered by management at the time of assessing the
adequacy of the ALLL; (5) the adjustments for economic conditions utilized in the allowance for loan losses estimate are used as a measure of actual incurred losses; (6) the period of history used for historical loss factors is indicative of the current environment; and (7) the reserve rates, as well as other adjustments
estimated by management for current events, trends, and conditions, utilized in the process reflect an estimate of losses that have been incurred 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 or, if required by regulators, based upon information at the time of
their examinations. 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.
MORTGAGE SERVICING RIGHTS (MSR) AND OTHER RELATED RETAINED INTERESTS
When FHN sold mortgage loans in the secondary market to investors, it generally retained the right to service the loans sold in exchange for a servicing fee that is collected over the life of the loan as the payments are received from the borrower. An amount was capitalized as MSR on the Consolidated Statements
of Condition at current fair value. The changes in fair value of MSR are included as a component of Mortgage banking noninterest income on the Consolidated Statements of Income.
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MSR Estimated Fair Value
FHN has elected fair value accounting for all classes of mortgage servicing rights. The fair value of MSR typically rises as market interest rates increase and declines as market interest rates decrease; however, the extent to which this occurs depends in part on (1) the magnitude of changes in market interest rates
and (2) the differential between the then current market interest rates for mortgage loans and the mortgage interest rates included in the mortgage-servicing portfolio.
Since sales of MSR tend to occur in private transactions and the precise terms and conditions of the sales are typically not readily available, there is a limited market to refer to in determining the fair value of MSR. As such, FHN relies primarily on a discounted cash flow model to estimate the fair value of its MSR.
This model calculates estimated fair value of the MSR using predominant risk characteristics of MSR, such as interest rates, type of product (fixed vs. variable), age (new, seasoned, or moderate), agency type, and other factors. FHN uses assumptions in the model that it believes are comparable to those used by
other participants in the mortgage banking business and reviews estimated fair values and assumptions with third-party brokers and other service providers on a quarterly basis. FHN also compares its estimates of fair value and assumptions to recent market activity and against its own experience.
Estimating the cash flow components of net servicing income from the loan and the resultant fair value of the MSR requires FHN to make several critical assumptions based upon current market and loan production data.
Prepayment Speeds: Generally, when market interest rates decline and other factors favorable to prepayments occur, there is a corresponding increase in prepayments as customers refinance existing mortgages under more favorable interest rate terms. When a mortgage loan is prepaid the anticipated
cash flows associated with servicing that loan are terminated, resulting in a reduction of the fair value of the capitalized MSR. To the extent that actual borrower prepayments do not react as anticipated by the prepayment model (i.e., the historical data observed in the model does not correspond to actual market
activity), it is possible that the prepayment model could fail to accurately predict mortgage prepayments and could result in significant earnings volatility. To estimate prepayment speeds, FHN utilizes a third-party prepayment model, which is based upon statistically derived data linked to certain key principal
indicators involving historical borrower prepayment activity associated with mortgage loans in the secondary market, current market interest rates, and other factors. For purposes of model valuation, estimates are made for each product type within the MSR portfolio on a monthly basis.
* Estimated prepayment speeds represent monthly average prepayment speed estimates for each of the years presented.
Discount Rate: Represents the rate at which expected cash flows are discounted to arrive at the net present value of servicing income. Discount rates will change with market conditions (i.e., supply vs. demand) and be reflective of the yields expected to be earned by market participants investing in
MSR.
Cost to Service: Expected costs to service are estimated based upon the incremental costs that a market participant would use in evaluating the potential acquisition of MSR.
Float Income: Estimated float income is driven by expected float balances (principal, interest, and escrow payments that are held pending remittance to the investor or other third-party) and current market interest rates, including the thirty-day LIBOR and five-year swap interest rates, which are updated
on a monthly basis for purposes of estimating the fair value of MSR. FHN engages in a process referred to as price discovery on a quarterly basis to assess the reasonableness of the estimated fair value of MSR. Price discovery is conducted through a process of obtaining the following information: (1) quarterly
informal (and an annual formal) valuation of the servicing portfolio by prominent independent mortgage-servicing brokers and (2) a collection of surveys and benchmarking data made available by independent third parties that include peer participants in the mortgage banking business.
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Although there is no single source of market information that can be relied upon to assess the fair value of MSR, FHN reviews all information obtained during price discovery to determine whether the estimated fair value of MSR is reasonable when compared to market information. On December 31, 2010 and
2009, FHN determined that its MSR valuations and assumptions were reasonable based on the price discovery process.
The MSR Hedging Committee reviews the overall assessment of the estimated fair value of MSR monthly and is responsible for approving the critical assumptions used by management to determine the estimated fair value of FHNs MSR. In addition, this committee reviews the source of significant changes to the
MSR carrying value each quarter and is responsible for current hedges and approving hedging strategies.
Hedging the Fair Value of MSR
FHN enters into financial agreements to hedge MSR in order to minimize the effects of loss in value of MSR associated with increased prepayment activity that generally results from declining interest rates. In a rising interest rate environment, the value of the MSR generally will increase while the value of the hedge
instruments will decline. Specifically, FHN enters into interest rate contracts (including swaps, swaptions, and mortgage forward purchase contracts) to hedge against the effects of changes in fair value of its MSR. Substantially all capitalized MSR are hedged. The hedges are economic hedges only, and are
terminated and reestablished as needed to respond to changes in market conditions. Changes in the value of the hedges are recognized as a component of net servicing income in Mortgage banking noninterest income. Successful economic hedging will help minimize earnings volatility that may result from carrying
MSR at fair value. FHN determines the fair value of the derivatives used to hedge MSR (and excess interests as discussed below) using quoted prices for identical instruments in valuing forwards and using inputs observed in active markets for similar instruments with typical inputs including the LIBOR curve, option
volatility, and option skew in valuing swaps and swaptions.
FHN does not specifically hedge the change in fair value of MSR attributed to other risks, including unanticipated prepayments (representing the difference between actual prepayment experience and estimated prepayments derived from the model, as described above), discount rates, cost to service, and other
factors. To the extent that these other factors result in changes to the fair value of MSR, FHN experiences volatility in current earnings due to the fact that these risks are not currently hedged.
Excess Interest (Interest-Only Strips) Fair Value Residential Mortgage Loans
In certain cases, when FHN sold mortgage loans in the secondary market, it retained an interest in the mortgage loans sold primarily through excess interest. These financial assets represent rights to receive earnings from serviced assets that exceed contractually specified servicing fees and are legally separable
from the base servicing rights. Consistent with MSR, the fair value of excess interest typically rises as market interest rates increase and declines as market interest rates decrease. Additionally, similar to MSR, the market for excess interest is limited, and the precise terms of transactions involving excess interest are
typically not readily available. Accordingly, FHN relies primarily on a discounted cash flow model to estimate the fair value of its excess interest.
Estimating the cash flow components and the resultant fair value of the excess interest requires FHN to make certain critical assumptions based upon current market and loan production data. The primary critical assumptions used by FHN to estimate the fair value of excess interest include prepayment speeds and
discount rates, as discussed above. FHNs excess interest is included as a component of trading securities on the Consolidated Statements of Condition, with realized and unrealized gains and losses included in current earnings as a component of Mortgage banking income on the Consolidated Statements of
Income.
Hedging the Fair Value of Excess Interest
FHN utilizes derivatives (including swaps, swaptions, and mortgage forward purchase contracts) that change in value inversely to the movement of interest rates to protect the value of its excess interest as an economic hedge. Realized and unrealized gains and losses associated with the change in fair value of
derivatives used in the economic hedge of excess interest are included in current earnings in Mortgage banking noninterest income as a component of servicing income. Excess interest is included in trading securities with changes in fair value recognized currently in earnings in Mortgage banking noninterest
income as a component of servicing income.
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The extent to which the change in fair value of excess interest is offset by the change in fair value of the derivatives used to hedge this asset depends primarily on the hedge coverage ratio maintained by FHN. As previously noted, to the extent that actual borrower prepayments do not react as anticipated by the
prepayment model (i.e., the historical data observed in the model does not correspond to actual market activity), it is possible that the prepayment model could fail to accurately predict mortgage prepayments, which could significantly impact FHNs ability to effectively hedge certain components of the change in fair
value of excess interest and could result in significant earnings volatility.
REPURCHASE AND FORECLOSURE LIABILITY
Prior to 2009, as a means to provide liquidity for its legacy mortgage banking business, FHN originated loans through its legacy 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 and federally insured single-family residential mortgage loans were sold predominately to GSEs. Many mortgage loan originations, especially those that did not meet criteria for whole loan sales to GSEs (nonconforming mortgage loans) were sold to investors
predominantly through proprietary securitizations but also, to an extent, through whole loan sales to private non-GSE purchasers. In addition, through its legacy mortgage business FHN originated with the intent to sell and sold HELOC and second lien mortgages through whole loan sales to private purchasers.
Regarding these past loan-sale activities, FHN has exposure to potential loss primarily through two avenues. First, investors/purchasers of these mortgage loans may request that FHN repurchase loans or make the investor whole for economic losses incurred if it is determined that FHN violated certain contractual
representations and warranties made at the time of these sales. Contractual representations and warranties are different based on deal structure and counterparty. Second, investors in securitizations may attempt to achieve rescission of their investments or damages through litigation by claiming that the applicable
offering documents were materially deficient.
From 2005 through 2008, FHN originated and sold $69.5 billion of such loans to GSEs. Although additional GSE sales occurred in earlier years, a substantial majority of GSE repurchase requests have come from that period. In addition, from 2000 through 2007, FHN securitized $47.1 billion of such loans without
recourse in proprietary transactions. Of the amount originally securitized, $37.1 billion relates to securitization trusts that are still active as approximately 30 securitization trusts have become inactive due to clean-up calls exercised by FHN. The exercise of cleanup calls resulted in termination of the Pooling and
Servicing Agreements and reacquisition of the related mortgage loans.
For loans sold or securitized without recourse, FHN has obligations to either repurchase the loan for the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations or warranties made by FHN
upon closing of the sale. Contractual representations and warranties vary significantly depending upon the transaction to transfer interests in the loans. Typical whole loan sales include relatively broad representations and warranties, while proprietary securitizations include more limited representations and warranties.
Refer to the Repurchase and Related Obligations from Loans Originated for Sale for a discussion of representation and warranties for loans sold or securitized.
Repurchase Accrual Methodology
The estimated probable incurred losses that result from these obligations are derived from loss severities that are reflective of default and delinquency trends in residential real estate loans and lower housing prices, which result in fair value marks below par for repurchased loans when the loans are recorded on
FHNs balance sheet within loans HFS upon repurchase. In estimation of the accrued liability for loan repurchases and make-whole obligations, FHN estimates probable incurred losses in the population of all loans sold based on trends in claims requests and actual loss severities observed by management. The
liability includes accruals for probable losses beyond what is observable in the ending pipeline of repurchase/make-whole requests and active GSE PMI cancellations at any given balance sheet date. The estimation process begins with internally developed proprietary models that are used to assist in developing a
baseline in evaluating inherent repurchase-related loss content. These models are
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FIRST HORIZON NATIONAL CORPORATION
designed to capture historical loss content from actual repurchase activity experienced. The baseline for the repurchase reserve uses historical loss factors that are applied to the loan pools originated in 2001 through 2008 and sold in years 2001 through 2009. Loss factors, tracked by year of loss, are calculated
using actual losses incurred on repurchases or make-whole arrangements. The historical loss factors experienced are accumulated for each sale vintage and are applied to more recent sale vintages to estimate probable incurred losses but not yet realized. Due to the lagging nature of this model and relatively short
period available in which actual loss trends were observed, management then applies qualitative adjustments to this initial baseline estimate.
In order to incorporate more current events, such as the level of repurchase requests or PMI cancellation notices, FHN then overlays management judgment within its estimation process for establishing appropriate reserve levels. For repurchase requests (the active pipeline) related to breach of representations
and warranties, the active pipeline is segregated into various components (e.g., requestor, repurchase, or make-whole) and current rescission (successful resolutions) and loss severity rates are applied to calculate estimated losses attributable to the current pipeline. When assessing the adequacy of the repurchase
reserve, management also considers trends in the amounts and composition of new inflows into the pipeline. FHN has observed loss severities (actual losses incurred as a percentage of the UPB) ranging between 50 percent and 60 percent of the principal balance of the repurchased loans and average rescission
rates between 40 percent and 50 percent of the repurchase and make-whole requests. FHN then compares the estimated losses inherent within the pipeline with current reserve levels. On December 31, 2010, the active pipeline was $534 million with over 90 percent of all unresolved repurchase and make-whole
claims relating to loans sold to GSEs. For purposes of estimating loss content, FHN also considers reviewed PMI cancellation notices where coverage has been cancelled. Beginning in late 2009, FHN began to observe noticeable increases in notifications by primary mortgage insurers asserting grounds for insurance
cancellation. When assessing loss content related to loans where PMI has been cancelled, FHN first reviews the amount of unresolved PMI cancellations that are in the active pipeline and adjusts for any known facts or trends observed by management. Similar to the methodology for actual repurchase/make-whole
requests, FHN applies loss factors (including probability and loss severity ratios) that were derived from actual incurred losses in past vintages to the amount of unresolved PMI pipeline for loans sold to GSEs. For GSE PMI cancellation notices, the methodology for determining the accrued liability contemplates a
higher probability of loss compared with that applied to GSE repurchase/make-whole requests as FHN has been less successful in favorably resolving mortgage insurance cancellation notifications with PMI companies. Loss severity rates applied to GSE PMI cancellation notifications are consistent with those applied
to actual GSE claims. For PMI cancellation notifications where coverage has been ultimately cancelled and are no longer included in the active pipeline, FHN applies a 100 percent repurchase rate in anticipation that such loans ultimately will result in repurchase/make-whole requests from the GSEs since PMI
coverage for certain loans is a GSE requirement.
Active Pipeline
FHN has received a majority of the repurchase requests from loans that were sold to GSEs through whole loan sales with a smaller amount from investors in private whole loan sales. Generally, loan delinquency prompts a GSEs initial review of a loan file for violations of contractual representations and warranties.
Currently, FHN services only $10.9 billion of the loans sold to GSEs which limits visibility into the current status (i.e. current UPB, delinquency, refinance activity, etc.) of the loans that were sold. This presents uncertainty in estimating future repurchase claims from GSEs without knowing the current performing
status of loans sold potentially subject to contractual representations and warranties. Uncertainty also exists in estimating repurchase obligations due to incomplete knowledge regarding the status of investors reviews.
A sizeable percentage of the active pipeline is related to notices of private mortgage insurance cancellations. PMI was required for many but not all loans sold to GSEs. Although unresolved PMI cancellation notices are not formal repurchase requests, FHN includes these in the active repurchase request pipeline
when analyzing and estimating loss content. For purposes of estimating loss content, FHN also considers reviewed PMI cancellation notices where coverage has been or cancelled for all loan sales and securitizations. In determining adequacy of the repurchase reserve, FHN considered $124.3 million in UPB of
loans sold where PMI coverage was lost which inherently presents additional uncertainty when estimating probable incurred losses as it is difficult to predict the amount of PMI cancellations that will ultimately materialize into formal repurchase requests. PMI generally was required for first lien loans having a loan-to-
value ratio at origination of greater than 80 percent that were securitized. To date, a majority of PMI cancellation notices have involved loans sold to GSEs, and no repurchase requests have yet
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arisen from PMI cancellations involving securitized loans. At December 31, 2010, all estimated loss content arising from PMI cancellation matters related to loans sold to GSEs.
Loans Sold With Full or Limited Recourse
In addition, certain mortgage loans were sold to investors with limited or full recourse in the event of mortgage foreclosure.
FHN has sold certain agency mortgage loans with full recourse under agreements to repurchase the loans upon default. Loans sold with full recourse generally include mortgage loans sold to investors in the secondary market which are uninsurable under government guaranteed mortgage loan programs due to
issues associated with underwriting activities, documentation, or other concerns. For mortgage insured single-family residential loans, in the event of borrower nonperformance, FHN would assume losses to the extent they exceed the value of the collateral and private mortgage insurance, FHA insurance, or VA
guaranty. On December 31, 2010 and 2009, the current UPB of single-family residential loans that were sold on a full recourse basis with servicing retained was $58.4 million and $71.9 million, respectively.
Loans sold with limited recourse include loans sold under government guaranteed mortgage loan programs including the Federal Housing Administration (FHA) and Veterans Administration (VA). FHN continues to absorb losses due to uncollected interest and foreclosure costs and/or limited risk of credit losses
in the event of foreclosure of the mortgage loan sold. Generally, the amount of recourse liability in the event of foreclosure is determined based upon the respective government program and/or the sale or disposal of the foreclosed property collateralizing the mortgage loan. Another instance of limited recourse is the
VA/No bid. In this case, the VA guarantee is limited and FHN may be required to fund any deficiency in excess of the VA guarantee if the loan goes to foreclosure. On December 31, 2010 and 2009, the outstanding principal balance of loans sold with limited recourse arrangements where some portion of the
principal is at risk and serviced by FHN was $3.2 billion and $3.3 billion, respectively. Additionally, on December 31, 2010 and 2009, $.8 billion and $1.0 billion, respectively, of mortgage loans were outstanding which were sold under limited recourse arrangements where the risk is limited to interest and servicing
advances.
Repurchase and Foreclosure Liability
FHN has evaluated its exposure under all of these obligations, including a smaller amount related to equity-lending junior lien loan sales, and accordingly, has reserved for losses of $185.4 million and $108.5 million as of December 31, 2010 and 2009 respectively. At December 31, 2010, FHN had not reserved for
exposure for repurchase of loans related to proprietary securitizations arising from claims that FHN breached its representations and warranties made at closing, nor for exposure for investment rescission or damages arising from claims by investors that offering documents under which the loans were securitized
were materially deficient. Reserves for FHNs estimate of these obligations are reflected in Other liabilities on the Consolidated Statements of Condition while expense is included within Repurchase and foreclosure provision on the Consolidated Statements of Income. See Note 18 Restrictions, Contingencies, and
Other Disclosure and the Repurchase and Related Obligations from Loans Originated for Sale section in this MD&A for additional information regarding FHNs repurchase and make-whole obligations.
GOODWILL AND ASSESSMENT OF IMPAIRMENT
FHNs policy is to assess goodwill for impairment at the reporting unit level on an annual basis or between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Impairment is the condition that exists when
the carrying amount of goodwill exceeds its implied fair value. FHN also allocates goodwill to the disposal of portions of reporting units in accordance with applicable accounting standards. FHN performs impairment analysis when these disposal actions indicate that an impairment of goodwill may exist.
In third quarter 2009, FHN agreed to sell FTN Financials institutional equity research group, FTN ECM. In conjunction with this agreement, FHN recognized a $14.3 million impairment of associated goodwill which is reflected in the discontinued operations, net of tax line on the Consolidated Statements of Income.
During first
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FIRST HORIZON NATIONAL CORPORATION
quarter 2010, the contracted sale of FTN ECM failed to close and FHN exited this business which resulted in an additional goodwill impairment of $3.3 million. Additionally, in fourth quarter 2009, FHN recognized a $2.3 million goodwill impairment associated with the disposal of the remaining Atlanta insurance
business that was excluded from the sale. Goodwill of $10.3 million was included in the calculation of loss on divestiture for the sales of the Atlanta insurance business and FERP.
Accounting standards require management to estimate the fair value of each reporting unit in assessing impairment at least annually. As such, FHN engages an independent valuation to assist in the computation of the fair value estimates of each reporting unit as part of its annual assessment. The 2010
assessment for the regional banking reporting unit utilized three separate methodologies: a discounted cash flow model, a comparison to similar public companys trading values and a comparison to recent acquisition values. A weighted average calculation was performed to determine the estimated fair value of the
regional banking reporting unit. A discounted cash flow methodology was utilized in determining the fair value of the capital markets reporting unit. The valuations as of October 1, 2010 indicated no goodwill impairment in any of the reporting units. As of the measurement date, the fair value of regional banking and
capital markets exceeded their carrying values by 33 percent and 245 percent, respectively.
Management believes the accounting estimates associated with determining fair value as part of the goodwill impairment test is a "critical accounting estimate" because estimates and assumptions are made about FHNs future performance and cash flows, as well as other prevailing market factors (interest rates,
economic trends, etc.). FHNs policy allows management to make the determination of fair value using appropriate valuation methodologies and inputs, including utilization of market observable data and internal cash flow models. Independent third parties may be engaged to assist in the valuation process. If a
charge to operations for impairment results, this amount would be reported separately as a component of noninterest expense. This critical accounting estimate applies to the regional banking and capital markets business segments. The non-strategic and corporate segments have no associated goodwill. Reporting
units have been defined as the same level as the operating business segments.
The impairment testing process conducted by FHN begins by assigning net assets and goodwill to each reporting unit. FHN then completes step one of the impairment test by comparing the fair value of each reporting unit with the recorded book value (or carrying amount) of its net assets, with goodwill
included in the computation of the carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of that reporting unit is not considered impaired, and step two of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its fair value, step two of the
impairment test is performed to determine the amount of impairment. Step two of the impairment test compares the carrying amount of the reporting units goodwill to the implied fair value of that goodwill. The implied fair value of goodwill is computed by assuming all assets and liabilities of the reporting unit
would be adjusted to the current fair value, with the offset as an adjustment to goodwill. This adjusted goodwill balance is the implied fair value used in step two. An impairment charge is recognized for the amount by which the carrying amount of goodwill exceeds its implied fair value.
In connection with obtaining the independent valuation, management provided certain data and information that was utilized in the estimation of fair value. This information included budgeted and forecasted earnings of FHN at the reporting unit level. Management believes that this information is a critical
assumption underlying the estimate of fair value. Other assumptions critical to the process were also made, including discount rates, asset and liability growth rates, and other income and expense estimates.
While management uses the best information available to estimate future performance for each reporting unit, future adjustments to managements projections may be necessary if conditions differ substantially from the assumptions used in making the estimates.
INCOME TAXES
FHN is subject to the income tax laws of the U.S. and the states and jurisdictions in which it operates. FHN accounts for income taxes in accordance with ASC 740, Income Taxes.
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Income tax expense consists of both current and deferred taxes. Current income tax expense is an estimate of taxes to be paid or refunded for the current period and includes income tax expense related to uncertain tax positions. The balance sheet method is used to determine deferred taxes. Under this method,
the net DTA or DTL is based on the tax consequences of differences between the book and tax bases of assets and liabilities, which are determined by applying enacted statutory rates applicable to future years to these temporary differences. Deferred taxes can be affected by changes in tax rates applicable to
future years, either as a result of statutory changes or business changes that may change the jurisdictions in which taxes are paid. Additionally, deferred tax assets are subject to a more likely than not test. If the more likely than not test is not met a valuation allowance must be established against the deferred
tax asset. On December 31, 2010, FHNs net DTA was $200.6 million with no related valuation allowance. FHN evaluates the likelihood of realization of the net DTA based on both positive and negative evidence available at the time. FHNs three-year cumulative loss position at December 31, 2010, is significant
negative evidence in determining whether the realizability of the DTA is more likely than not. However, FHN believes that the negative evidence of the three-year cumulative loss is overcome by sufficient positive evidence that the DTA will ultimately be realized. The positive evidence includes several different factors.
First, a significant amount of the cumulative losses occurred in businesses that FHN has exited or is in the process of exiting. Secondly, FHN forecasts substantially more taxable income in the carryforward period, exclusive of potential tax planning strategies, even under conservative assumptions. Additionally, FHN
has sufficient carryback positions, reversing DTL, and potential tax planning strategies to fully realize its DTA. FHN believes that it will realize the net DTA within a significantly shorter period of time than the twenty year carryforward period allowed under the tax rules. Based on current analysis, FHN believes that its
ability to realize the recognized $200.6 million net DTA is more likely than not.
The income tax laws of the jurisdictions in which FHN operate are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. In establishing a provision for income tax expense, FHN must make judgments and interpretations about the application of these
inherently complex tax laws. Interpretations may be subjected to review during examination by taxing authorities and disputes may arise over the respective tax positions. FHN attempts to resolve disputes that may arise during the tax examination and audit process. However, certain disputes may ultimately have to
be resolved through the federal and state court systems.
FHN monitors relevant tax authorities and revises estimates of accrued income taxes on a quarterly basis. Changes in estimates may occur due to changes in income tax laws and their interpretation by the courts and regulatory authorities. Revisions of estimates may also result from income tax planning and from
the resolution of income tax controversies. Such revisions in estimates may be material to operating results for any given period.
CONTINGENT LIABILITIES
A liability is contingent if the amount or outcome is not presently known, but may become known in the future as a result of the occurrence of some uncertain future event. FHN estimates its contingent liabilities based on managements estimates about the probability of outcomes and their ability to estimate the
range of exposure. Accounting standards require that a liability be recorded if management determines that it is probable that a loss has occurred and the loss can be reasonably estimated. In addition, it must be probable that the loss will be confirmed by some future event. As part of the estimation process,
management is required to make assumptions about matters that are by their nature highly uncertain.
The assessment of contingent liabilities, including legal contingencies, involves the use of critical estimates, assumptions, and judgments. Managements estimates are based on their belief that future events will validate the current assumptions regarding the ultimate outcome of these exposures. However, there can
be no assurance that future events, such as court decisions or decisions of arbitrators, will not differ from managements assessments. Whenever practicable, management consults with third-party experts (attorneys, accountants, claims administrators, etc.) to assist with the gathering and evaluation of information
related to contingent liabilities. Based on internally and/or externally prepared evaluations, management makes a determination whether the potential exposure requires accrual in the financial statements.
Adjusted tangible common equity to risk weighted assets (TCE/RWA) Common equity excluding intangible assets and unrealized gains/losses on available for sale securities and cash flow hedges divided by risk weighted assets.
Allowance for Loan Losses (ALLL) Valuation reserve representing the amount considered by management to be adequate to cover estimated probable incurred losses in the loan portfolio.
Basis Point The equivalent of one-hundredth of one percent. One hundred basis points equals one percent. This unit is generally used to measure spreads and movements in interest yields and rates and in measures based on interest yields and rates.
Book Value Per Common Share A ratio determined by dividing common equity at the end of a period by the number of common shares outstanding at the end of that period.
Commercial Paper A short-term unsecured debt obligation of the parent company with maturities typically of less than 90 days.
Commercial and Standby Letters of Credit Commercial letters of credit are issued or confirmed by an entity to ensure the payment of its customers payables and receivables. Standby letters of credit are issued by an entity to ensure its customers performance in dealing with others.
Commitment to Extend Credit Agreements to make or acquire a loan or lease as long as agreed-upon terms (e.g., expiration date, covenants, or notice) are met. Generally these commitments have fixed expiration dates or other termination clauses and may require payment of a fee.
Core Deposits Core deposits consist of all interest-bearing and noninterest-bearing deposits, except certificates of deposit over $100,000. They include checking interest deposits, money market deposit accounts, time and other savings, plus demand deposits.
Derivative Financial Instrument A contract or agreement whose value is derived from changes in interest rates, foreign exchange rates, prices of securities or commodities, or financial or commodity indices.
Diluted Earnings/(Loss) Per Common Share (Diluted EPS) Net income/(loss) available to common shareholders, divided by weighted average shares outstanding plus the effect of common stock equivalents that have the potential to be converted into common shares.
Earning Assets Assets that generate interest or dividend income or yield-related fee income, such as loans and investment securities.
Earnings/(Loss) Per Common Share (EPS) Net income/(loss) available to common shareholders, divided by the weighted average number of common shares outstanding.
Excess Interest-Only Strip Financial asset representing the right to receive earnings from serviced assets that exceeds contractually specified servicing fees and are legally separable from the base servicing rights.
Fully Taxable Equivalent (FTE) Reflects the amount of tax-exempt income adjusted to a level that would yield the same after-tax income had that income been subject to taxation.
Individually Impaired Loans Generally, commercial loans over $1 million that are not expected to pay all contractually due principal and interest, and consumer loans that have experienced a troubled debt restructuring and are individually evaluated for impairment. These loans are generally written
down to an estimate of collateral value less cost to sell.
Interest-Only Strip Mortgage security consisting of the interest rate portion of a stripped mortgage backed security.
Interest Rate Caps and Floors Contracts with notional principal amounts that require the seller, in exchange for a fee, to make payments to the purchaser if a specified market interest rate exceeds a fixed upper capped level or falls below a fixed lower floor level on specified future dates.
Interest Rate Forward Contracts Contracts representing commitments either to purchase or sell at a specified future date a specified security or financial instrument at a specified price, and may be settled in cash or through delivery.
Interest Rate Option A contract that grants the holder (purchaser), for a fee, the right to either purchase or sell a financial instrument at a specified price within a specified period of time or on a specified date from or to the writer (seller) of the option.
Interest Rate Swap An agreement in which two entities agree to exchange, at specified intervals, interest payment streams calculated on an agreed-upon notional principal amount with at least one stream based on a floating rate index.
Interest Rate Swaptions Options on interest rate swaps that give the purchaser the right, but not the obligation, to enter into an interest rate swap agreement during a specified period of time.
Leverage Ratio Ratio consisting of Tier 1 capital divided by quarterly average assets adjusted for certain unrealized gains/(losses) on available for sale securities, goodwill, certain other intangible assets, the disallowable portion of mortgage servicing rights and other disallowed assets.
Lower of Cost or Market (LOCOM) A method of accounting for certain assets by recording them at the lower of their historical cost or their current market value.
Market Capitalization Market value of a company is computed by multiplying the number of shares outstanding by the current stock price.
Mortgage Backed Securities Investment securities backed by a pool of mortgages or trust deeds. Principal and interest payments on the underlying mortgages are used to pay principal and interest on the securities.
Mortgage Warehouse Mortgage loans that have been closed and funded and are awaiting sale and delivery into the secondary market. Also includes loans that management does not have the intent and ability to hold for the foreseeable future.
Mortgage Servicing Rights (MSR) The right to service mortgage loans, generally owned by someone else, for a fee. Loan servicing includes collecting payments; remitting funds to investors, insurance companies, and taxing authorities; collecting delinquent payments; and foreclosing on properties when
necessary.
Net Interest Margin (NIM) Expressed as a percentage, net interest margin is a ratio computed by dividing a day-weighted fully taxable equivalent net interest income by average earning assets.
Net Interest Spread The difference between the average yield earned on earning assets on a fully taxable equivalent basis and the average rate paid for interest-bearing liabilities.
Nonaccrual Loans Loans on which interest accruals have been discontinued due to the borrowers financial difficulties. Interest income on these loans is reported on a cash basis as it is collected after recovery of principal.
Non-GAAP Certain measures contained within MD&A are not formally defined by GAAP or codified in the federal banking regulations. A reconciliation of these Non-GAAP measures may be found in table 26 of MD&A.
Nonperforming Assets (NPAs) Interest-earning assets on which interest income is not being accrued, real estate properties acquired through foreclosure and other assets obtained through the foreclosure process.
Origination Fees A fee charged to the borrower by the lender to originate a loan. Usually stated as a percentage of the face value of the loan.
Provision for Loan Losses The periodic charge to earnings for inherent losses in the loan portfolio.
Purchase Obligation An agreement to purchase goods or services that is enforceable and legally binding and that specifies all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
Purchased Funds The combination of certificates of deposit greater than $100,000, federal funds purchased, securities sold under agreement to repurchase, commercial paper, and other short-term borrowings.
Repurchase Agreement A method of short-term financing where one party agrees to buy back, at a future date (generally overnight) and an agreed-upon price, a security it sells to another party.
Residual-Interest Certificates Financial assets which represent rights to receive earnings to the extent of excess income generated by the underlying loan collateral of certain mortgage-backed securities, which is not needed to meet contractual obligations of senior security holders.
Return on Average Assets (ROA) A measure of profitability that is calculated by dividing net income by total average assets.
Return on Average Common Shareholders Equity (ROE) A measure of profitability that indicates what an institution earned on its shareholders investment. ROE is calculated by dividing net income available to common shareholders by total average common equity.
Risk-Adjusted Assets A regulatory risk-based calculation that takes into account the broad differences in risks among a banking organizations assets and off-balance sheet financial instruments.
Tangible Book Value per Common Share Ratio consisting of tangible common equity (TCE) over period-end common shares outstanding.
Tangible Common Equity to Tangible Assets (TCE/TA) A ratio which may be used to evaluate a companys capital position. TCE/TA includes common equity less goodwill and other intangible assets over tangible assets. Tangible assets includes a companys total assets less goodwill and other intangible
assets.
Tier 1 Capital Ratio Ratio consisting of shareholders equity adjusted for certain unrealized gains/(losses) on available for sale securities, reduced by goodwill, certain other intangible assets, the disallowable portion of mortgage servicing rights and other disallowed assets divided by risk-adjusted assets.
Tier 1 Common A measure of a companys capital position, which includes Tier 1 capital less preferred stock amounts.
Total Capital Ratio Ratio consisting of Tier 1 capital plus the allowable portion of the allowance for loan losses and qualifying subordinated debt divided by risk-adjusted assets.
Transaction Account Guarantee (TAG) Program Established in 2008, the TAG program guarantees non-interest bearing accounts beyond the $250,000 coverage available under the FDICs general deposit insurance rules. Participating financial institutions are subject to certain fees based upon the FDICs
risk-based premium system. FHN voluntarily participated in the TAG program until it expired on January 1, 2011.
Troubled Debt Restructuring (TDR) A loan is identified and reported as a TDR when FHN has granted an economic concession to a borrower experiencing financial difficulty.
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ACRONYMS
AFS
Available-for-sale
ALCO
Asset/Liability Committee
ALLL
Allowance for loan and lease losses
ALR
Average Loss Rate Model
ASC
FASB Accounting Standards Codification
C&I
Commercial, Industrial, and Other loan portfolio
CDOs
Collateralized debt obligations
CEO
Chief Executive Officer
CMO
Collateralized mortgage obligations
CPP
U.S. Treasury Capital Purchase Program
CRMC
Credit Risk Management Committee
DSCRs
Debt Service Coverage Ratios
DTA
Deferred tax asset
DTI
Debt-to-income
DTL
Deferred tax liability
ENEC
Employee Non-voluntary Elective Contribution
EPS
Earnings per share
ESOP
Employee stock ownership plan
FASB
Financial Accounting Standards Board
FDIC
Federal Deposit Insurance Corporation
FERP
First Express Remittance Processing
FFS
Federal funds sold
FHA
Federal Housing Administration
FHLB
Federal Home Loan Bank
FHLMC
Federal Home Loan Mortgage Corporation or Freddie Mac
FHN
First Horizon National Corporation
FICO
Fair Isaac Corporation
FINRA
Financial Industry Regulatory Authority
FNMA
Federal National Mortgage Association or Fannie Mae
FRB
Federal Reserve Bank or the Fed
FTBNA
First Tennessee Bank National Association
FTE
Fully taxable equivalent
FTHC
First Tennessee Housing Corporation
FTN ECM
FTN Equity Capital Markets
FTNF
FTN Financial
FTNFS
FTN Financial Securities Corp.
FTRESC
FT Real Estate Securities Company, Inc.
GAAP
Generally Accepted Accounting Principles
GNMA
Government National Mortgage Association or Ginnie Mae
GSE
Government sponsored enterprises
HAMP
Home Affordable Modification Program
HELOCs
Home equity lines of credit
HFS
Held-for-sale
HLTV
High loan-to-value
HTI
Housing to income
Income CRE
Income-Producing Commercial Real Estate loan portfolio
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FIRST HORIZON NATIONAL CORPORATION
ACRONYMS (continued)
IPO
Initial public offering
IRS
Internal Revenue Service
LIBOR
London Inter-Bank Offered Rate
LIHTC
Low Income Housing Tax Credit
LOCOM
Lower of cost or market
LRRD
Loan Rehab and Recovery Department
LTV
Loan-to-value
MBS
Mortgage-backed securities
MD&A
Managements Discussion and Analysis of Results of Operations and Financial Condition
MI
Mortgage insurance
MSR
Mortgage servicing rights
NII
Net interest income
NIM
Net interest margin
NPAs
Nonperforming assets
NPLs
Nonperforming loans
NRV
Net realizable value
NSF
Non-sufficient funds
OCC
Office of the Comptroller of the Currency
OTC
One-time Close
P&I
Principal and interest
PD
Probability of default
PM
Portfolio Managers
PMI
Primary mortgage insurance
QSPE
Qualifying special purposes entities
REIT
Real estate investment trust
Res CRE
Residential Commercial Real Estate Construction loan portfolio or Residential CRE
Management of First Horizon National Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. First Horizon National Corporations internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Even effective internal controls, no matter how well designed, have inherent limitations such as the possibility of human error or of circumvention or overriding of controls, and consideration of cost in relation to benefit of a control. Moreover, effectiveness must necessarily be considered according to the existing state
of the art of internal control. Further, because of changes in conditions, the effectiveness of internal controls may diminish over time.
Management assessed the effectiveness of First Horizon National Corporations internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework.
Based on our assessment and those criteria, management believes that First Horizon National Corporation maintained effective internal control over financial reporting as of December 31, 2010.
First Horizon National Corporations independent auditors have issued an attestation report on First Horizon National Corporations internal control over financial reporting. That report appears on the following page.
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FIRST HORIZON NATIONAL CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders First Horizon National Corporation:
We have audited First Horizon National Corporations (the Company) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, First Horizon National Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of condition of First Horizon National Corporation as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders
equity and cash flows for each of the years in the three-year period ended December 31, 2010, and our report dated February 25, 2011 expressed an unqualified opinion on those consolidated financial statements.
Memphis, Tennessee
February 25, 2011
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NATIONAL CORPORATION
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders First Horizon National Corporation:
We have audited the accompanying consolidated statements of condition of First Horizon National Corporation and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders equity and cash flows for each of the years in the three-year period
ended December 31, 2010. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Horizon National Corporation and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.
As discussed in notes 1 and 24 to the consolidated financial statements, effective January 1, 2010, the Company adopted the provisions of FASB Accounting Standards Update 2009-16, Accounting for Transfers of Financial Assets, and 2009-17, Improvements to Financial Reporting by Enterprises Involved with
Variable Interest Entities.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 25, 2011 expressed an unqualified opinion on the effectiveness of the Companys internal control over financial reporting.
Federal funds purchased and securities sold under agreements to repurchase (Note 9)
2,114,908
2,874,353
Trading liabilities (Note 9)
361,920
293,387
Other short-term borrowings and commercial paper (Note 9)
180,735
761,758
Term borrowings (Restricted $.8 billion) (a)
3,228,070
2,190,544
Other collateralized borrowings
-
700,589
Total term borrowings (Restricted $.8 billion) (Note 10) (a)
3,228,070
2,891,133
Capital markets payables
65,506
292,975
Other liabilities (Restricted $.1 million) (a)
861,577
785,389
Total liabilities (Restricted $.8 billion) (a)
22,020,947
22,766,210
Equity:
First Horizon National Corporation Shareholders Equity:
Preferred stock no par value (shares authorized 5,000,000; shares issued series CPP 866,540 on December 31, 2009) (Note 12)
-
798,685
Common stock $.625 par value (shares authorized 400,000,000; shares issued 263,366,429 on December 31, 2010 and 236,098,434 on December 31, 2009) (b)
164,604
138,738
Capital surplus
1,630,210
1,208,649
Capital surplus common stock warrant CPP (Note 12)
83,860
83,860
Undivided profits
631,712
891,580
Accumulated other comprehensive loss, net (Note 15)
(127,546
)
(114,209
)
Total First Horizon National Corporation Shareholders Equity
2,382,840
3,007,303
Noncontrolling interest (Note 12)
295,165
295,165
Total equity
2,678,005
3,302,468
Total liabilities and equity
$
24,698,952
$
26,068,678
See accompanying notes to consolidated financial statements.
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) Restricted balances parenthetically presented are as of December 31, 2010.
(b) Outstanding shares have been restated to reflect stock dividends distributed through January 1, 2011.
Note 1 q Summary of Significant Accounting Policies
Basis of Accounting. The consolidated financial statements of First Horizon National Corporation (FHN), including its subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which it operates.
This preparation requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions are based on information available as of the date of the financial statements and could differ from actual results.
Principles of Consolidation and Basis of Presentation. The consolidated financial statements include the accounts of FHN and other entities in which it has a controlling financial interest. Variable Interest Entities (VIE) for which FHN or a subsidiary has been determined to be the primary beneficiary are also
consolidated. Following adoption of the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2009-17 on January 1, 2010, the assets and liabilities of FHNs consolidated residential mortgage securitization trusts have been parenthetically disclosed on the face of the
Consolidated Statements of Condition as restricted in accordance with the presentation requirements of ASC 810, as amended, due to the assets being pledged to settle the trusts obligations and the trusts security holders having no recourse to FHN. Affiliates for which FHN is not considered the primary
beneficiary and that FHN does not have a controlling financial interest in are accounted for by the equity method. These investments are included in other assets, and FHNs proportionate share of income or loss is included in noninterest income. All significant intercompany transactions and balances have been
eliminated. For purposes of comparability, certain prior period amounts have been reclassified to conform to current year presentation. Business combinations accounted for as purchases are included in the financial statements from the respective dates of acquisition.
Revenue Recognition. FHN derives a significant portion of its revenues from fee-based services. Noninterest income from transaction-based fees is generally recognized when the transactions are completed. Noninterest income from service-based fees is generally recognized over the period in which FHN provides the
service.
Deposit Transactions and Cash Management. Deposit transactions include services related to retail and commercial deposit products (such as service charges on checking accounts), cash management products and services such as electronic transaction processing (Automated Clearing House and Electronic Data
Interchange), account reconciliation services, cash vault services, lockbox processing, and information reporting to large corporate clients.
Insurance Commissions. Insurance commissions are derived from the sale of insurance products, including acting as an independent agent to provide commercial and personal property and casualty, life, long-term care, and disability insurance.
Trust Services and Investment Management. Trust services and investment management fees include investment management, personal trust, employee benefits, and custodial trust services.
Brokerage Management Fees and Commissions. Brokerage management fees and commissions include fees for portfolio management, trade commissions, and annuity and mutual fund sales.
Statements of Cash Flows. For purposes of these statements, cash and due from banks, federal funds sold, and securities purchased under agreements to resell are considered cash and cash equivalents. Federal funds are usually sold for one-day periods, and securities purchased under agreements to resell are
short-term, highly liquid investments.
Trading Activities. Securities purchased in connection with underwriting or dealer activities (long positions) are carried at market value as trading securities. Gains and losses, both realized and unrealized, on these securities are reflected in capital markets noninterest income. Trading liabilities include securities that
FHN has sold to other parties but does not own (short positions). FHN is obligated to purchase securities at a future date to cover the short positions. Assets and liabilities for unsettled trades are recorded on the Consolidated Statements of Condition
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Note 1 q Summary of Significant Accounting Policies (continued)
as Capital markets receivables or Capital markets payables. Retained interests, in the form of excess interest, interest-only and principal-only strips from sales and securitizations of first lien mortgages are recognized at fair value as trading securities with gains and losses, both realized and unrealized, recognized
in mortgage banking income. Similarly, prior to the adoption of the provisions of FASB ASU 2009-17 on January 1, 2010, subordinated securities from sales and securitizations of first lien mortgages were recognized at fair value as trading securities with gains and losses, both realized and unrealized, recognized in
mortgage banking income. Additionally, prior to the adoption of the provisions of FASB ASU 2009-17, retained interests, in the form of certificated residual interests from the securitization of second lien mortgages and home equity lines of credit (HELOC) were recognized at fair value as trading securities with
gains and losses, both realized and unrealized, recognized in other income on the Consolidated Statements of Income. Following adoption of the provisions of ASU 2009-17 the trading securities recognized in relation to the subordinated securities and certificated residual interests were removed from the
Consolidated Statements of Condition as the related trusts were newly consolidated based on amendments to ASC 810s consolidation methodology.
Investment Securities. Investment securities are reviewed quarterly for possible other-than-temporary impairment (OTTI). The review includes an analysis of the facts and circumstances of each individual investment such as the degree of loss, the length of time the fair value has been below cost, the expectation
for that securitys performance, the creditworthiness of the issuer and FHNs intent and ability to hold the security. Securities that may be sold prior to maturity and equity securities are classified as securities available for sale and are carried at fair value. The unrealized gains and losses on securities available for
sale, including debt securities for which no credit impairment exists, are excluded from earnings and are reported, net of tax, as a component of other comprehensive income within shareholders equity. Venture capital investments are classified as securities available for sale and are carried at fair value with
unrealized gains and losses recognized in noninterest income.
Upon adoption of the provisions of the FASB Codification update to ASC 320-10-35 for the quarter ended March 31, 2009, the intent and ability to hold to recovery indicator was replaced for debt securities with a requirement that an entitys management assess whether it intends to sell a security or if it is more-
likely-than-not that it will be required to sell the security prior to recovery for the debt security when determining other-than-temporary impairment. Realized gains and losses for investment securities are determined by the specific identification method and reported in noninterest income. Declines in value judged to
be other-than-temporary based on FHNs analysis of the facts and circumstances related to an individual investment, including securities that FHN has the intent to sell, are also determined by the specific identification method, and reported in noninterest income. After adoption of the amendments to ASC 320-10-
35, for impaired debt securities that FHN does not intend to sell and will not be required to sell prior to recovery but for which credit losses exist, the other-than-temporary impairment recognized has been separated between the total impairment related to credit losses which is reported in noninterest income, and
the impairment related to all other factors which is excluded from earnings and reported, net of tax, as a component of other comprehensive income within shareholders equity. Currently, FHN does not have other-than-temporarily impaired debt securities for which credit losses exist.
Securities Purchased under Resale Agreements and Securities Sold under Repurchase Agreements. FHN enters into short-term purchases of securities under agreements to resell which are accounted for as collateralized financings except where FHN does not have an agreement to sell the same or substantially the
same securities before maturity at a fixed or determinable price. As of December 31, 2010 and 2009, and for the three years ended December 31, 2010, all of FHNs securities purchased under agreements to resell were recognized as collateralized financings. Securities delivered under these transactions are
delivered to either the dealer custody account at the Federal Reserve Bank (FRB) or to the applicable counterparty. Securities sold under agreements to repurchase are offered to cash management customers as an automated, collateralized investment account. Securities sold are also used by the
retail/commercial bank to obtain favorable borrowing rates on its purchased funds.
Collateral is valued daily and FHN may require counterparties to deposit additional securities or cash as collateral, or FHN may return cash or securities previously pledged by counterparties, or FHN may be required to post additional securities or cash as collateral, based on the contractual requirements for these
transactions. As of both December 31, 2010 and 2009, FHN had pledged $1.5 billion of available for sale securities as collateral for these arrangements.
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Note 1 q Summary of Significant Accounting Policies (continued)
FHNs capital markets business utilizes securities borrowing arrangements as part of its trading operations. Securities borrowing transactions generally require FHN to deposit cash with the securities lender. The amount of cash advanced is recorded within Federal funds sold and securities purchased under
agreements to resell in the Consolidated Statements of Condition. These transactions are not considered purchases and the securities borrowed are not recognized by FHN. FHN does not conduct securities lending transactions.
Loans Held for Sale and Securitization and Residual Interests. Prior to fourth quarter 2008, FHN originated first lien mortgage loans (the warehouse) for the purpose of selling them in the secondary market, through sales to agencies for securitization, proprietary securitizations, and to a lesser extent through other
whole loan sales. In addition, FHN evaluated its liquidity position in conjunction with determining its ability and intent to hold loans for the foreseeable future and sold certain of the second lien mortgages and home equity lines of credit (HELOC) it produced in the secondary market through securitizations and
whole loan sales through third quarter 2007. For periods ending prior to January 1, 2010, loan securitizations involved the transfer of the loans to qualifying special purpose entities (QSPE) that were not subject to consolidation in accordance with ASC 860, Transfers and Servicing. Upon the effective date of the
provisions of FASB ASU 2009-16 and FASB ASU 2009-17 on January 1, 2010, the concept of a QSPE was removed from Generally Accepted Accounting Principles (GAAP) and the criteria in ASC 810, Consolidation, for determining the primary beneficiary of a VIE were amended, resulting in the re-evaluation
of all securitization trusts to which FHN had previously transferred loans for consolidation under ASC 810s revised consolidation criteria. Following the re-evaluation of the trusts for consolidation upon adoption of the amendments to ASC 810, the majority of the mortgage securitization trusts to which FHN
transferred loans remains unconsolidated as FHN is deemed not to be the primary beneficiary based on the interests it retained in the trusts. Under ASC 810, as amended, continual reconsideration of conclusions reached regarding which interest holder is the primary beneficiary of a trust is required. See Note 24
Variable Interest Entities for additional information regarding FHNs consolidated and nonconsolidated mortgage securitization trusts. With FHNs current focus on origination of mortgages within its regional banking footprint and the sale of its national mortgage origination offices in third quarter 2008, loan sale and
securitization activity has significantly decreased. Generally, FHN no longer retains financial interests in loans it transfers to third parties.
Loans originated or purchased for resale, together with mortgage loans previously sold which may be unilaterally called by FHN, are included in loans held for sale in the Consolidated Statements of Condition. Effective January 1, 2008, upon adoption of the provisions of the FASB Codification update to ASC 825,
Financial Instruments, FHN elected the fair value option on a prospective basis for almost all types of mortgage loans originated for sale purposes. Such loans are carried at fair value, with changes in the fair value of these loans recognized in the mortgage banking noninterest income section of the Consolidated
Statements of Income. For mortgage loans originated for sale for which the fair value option is elected, loan origination fees are recorded by FHN when earned and related direct loan origination costs are recognized when incurred. Interests retained from the sale or securitization of such loans are included as a
component of trading securities on the Consolidated Statements of Condition, with related cash receipts and payments classified prospectively in investing activities on the Consolidated Statements of Cash Flows based on the purpose for which such financial assets were retained. See Note 22 Fair Value of Assets
and Liabilities for additional information.
After adoption of the provisions of the Codification update to ASC 825, FHN continued to account for all mortgage loans held for sale which were originated prior to 2008 and for mortgage loans held for sale for which fair value accounting was not elected at the lower of cost or market value. For such loans, net
origination fees and costs were deferred and included in the basis of the loans in calculating gains and losses upon sale. The value accreted during the time that the loan was a locked commitment was also included in the basis of first lien mortgage loans. The cost basis of loans qualifying for fair value hedge
accounting under ASC 815, Derivatives and Hedging, was adjusted to reflect changes in fair value. Gains and losses realized from the sale of these assets were included in noninterest income. Interests retained from the sale of such loans are included as a component of trading securities on the Consolidated
Statements of Condition.
In conjunction with the adoption of the provisions of the FASB Codification update to ASC 820-10 for the quarter ended March 31, 2009, FHN revised its methodology for determining the fair value of certain loans within its mortgage warehouse. FHN now determines the fair value of the applicable loans using a
discounted cash flow model using observable inputs, including current mortgage rates for similar products, with adjustments for
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Note 1 q Summary of Significant Accounting Policies (continued)
differences in loan characteristics reflected in the models discount rates. This change in methodology had a minimal effect on the valuation of the applicable loans. Previously, fair values of these loans were determined through reference to recent security trade prices for similar products, published third party bids,
or observable whole loan sale prices with adjustments for differences in loan characteristics.
Mortgage loans insured by the Federal Housing Administration (FHA) and mortgage loans guaranteed by the Veterans Administration (VA) are generally securitized through the Government National Mortgage Association (GNMA). Generally, conforming conventional loans are securitized through government-
sponsored enterprises (GSE) such as the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). In addition, FHN has completed proprietary securitizations of nonconforming first lien and second lien mortgages and HELOC, which do not conform to the
requirements for sale or securitization through government agencies or GSE. Most of these securitizations are accounted for as sales; those that do not qualify for sale treatment are accounted for as financing arrangements.
Interests retained from loan sales, including agency securitizations, include MSR and excess interest. Interests retained from proprietary securitizations include MSR and various financial assets. MSR are initially valued at fair value, and the remaining retained interests are initially valued by allocating the remaining
cost basis of the loan between the security or loan sold and the remaining retained interests based on their relative fair values at the time of securitization or sale. All retained interests, including MSR, are carried at fair value.
Financial assets retained in a proprietary or agency securitization may include certificated residual interests, excess interest (structured as interest-only strips), interest-only strips, principal-only strips, or subordinated bonds. Residual interests represent rights to receive earnings to the extent of excess income
generated by the underlying loans. Excess interest represents rights to receive interest from serviced assets that exceed contractually specified rates. Principal-only strips are principal cash flow tranches, and interest-only strips are interest cash flow tranches. Subordinated bonds are bonds with junior priority. All
financial assets retained from a securitization are recognized on the Consolidated Statements of Condition in trading securities at fair value with realized and unrealized gains and losses included in current earnings as a component of noninterest income on the Consolidated Statements of Income.
The fair values of the certificated residual interests and the excess interest are determined using market prices from closely comparable assets such as MSR that are tested against prices determined using a valuation model that calculates the present value of estimated future cash flows. The fair value of these
retained interests typically changes based on changes in the discount rate and differences between modeled prepayment speeds and credit losses and actual experience. In some instances, FHN retains interests in the loans it securitized by retaining certificated principal-only strips or subordinated bonds. FHN uses
observable inputs such as trades of similar instruments, yield curves, credit spreads, and consensus prepayment speeds to determine the fair value of principal-only strips. The fair value of subordinated bonds is determined using the best available market information, which may include trades of comparable
securities, independently provided spreads to other marketable securities, and published market research. Where no market information is available, the company utilizes an internal valuation model. As of December 31, 2009, no market information was available, and the subordinated bonds were valued using an
internal model which includes assumptions about timing, frequency and severity of loss, prepayment speeds of the underlying collateral, and the yield that a market participant would require. As of December 31, 2010, no valuation was necessary due to the adoption of the provisions of ASU 2009-17 on January 1,
2010, which resulted in the removal of subordinated bonds from the Consolidated Statements of Condition as the related trust was newly consolidated based on amendments to ASC 810s consolidation methodology.
FHN recognizes all its classes of MSR at fair value. Classes of MSR are determined in accordance with FHNs risk management practices and market inputs used in determining the fair value of the servicing asset. Since sales of MSR tend to occur in private transactions and the precise terms and conditions of the
sales are typically not readily available, there is a limited market to refer to in determining the fair value of MSR. As such, FHN relies primarily on a discounted cash flow model to estimate the fair value of its MSR. This model calculates estimated fair value of the MSR using predominant risk characteristics of MSR
such as interest rates, type of product (fixed vs. variable), age (new, seasoned, or moderate), agency type and other factors. FHN uses assumptions in the
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Note 1 q Summary of Significant Accounting Policies (continued)
model that it believes are comparable to those used by brokers and other service providers. FHN also periodically compares its estimates of fair value and assumptions with brokers, service providers, and recent market activity and against its own experience.
Loans. Loans are stated at principal amounts outstanding, net of unearned income.
For purposes of the disclosures required pursuant to the adoption of amendments to ASC 310 effective December 31, 2010, the loan portfolio was disaggregated into segments and then further disaggregated into classes for certain disclosures. A portfolio segment is defined as the level at which an entity develops
and documents a systematic method for determining its allowance for credit losses. A class is generally determined based on the initial measurement attribute (i.e. amortized cost or purchased credit impaired), risk characteristics of the loan, and an entitys method for monitoring and assessing credit risk.
Commercial loan portfolio segments include commercial, financial and industrial (C&I) and commercial real estate (CRE). Commercial classes within C&I include general C&I, mortgage warehouse lending and the TRUPs portfolio. Commercial classes within commercial real estate include income CRE and residential
CRE. Retail loan portfolio segments include consumer real estate, permanent mortgage, and the combined credit card and other portfolios. Retail classes include HELOC and real estate installment loans within the consumer real estate segment, permanent mortgage (which is both a segment and a class), credit
card and other. Due to the winding down nature and decreasing size of the One time close residential construction portfolio, in most cases the remaining balances and activity of this portfolio has been combined with and included within the other retail class.
Interest on loans is recognized on an accrual basis at the applicable interest rate on the principal amount outstanding. Loan origination fees and direct costs as well as premiums and discounts are amortized as level yield adjustments over the respective loan terms. Unamortized net fees or costs are recognized
upon early repayment of the loans. Loan commitment fees are generally deferred and amortized on a straight-line basis over the commitment period.
Impaired loans are generally carried on a nonaccrual status. For commercial loans within each portfolio segment and class placed on nonaccrual status, accrued but uncollected interest is reversed and charged against interest income when the loan is placed on nonaccrual status. For retail loans within each
portfolio segment and class, accrued but uncollected interest is reversed when the loan is fully or partially charged off. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to recover the principal balance and accrued interest. For all portfolio
segments and classes, interest payments received on nonaccrual and impaired loans are normally applied to principal. Once all principal has been received, additional interest payments are recognized on a cash basis as interest income.
Commercial loans within each portfolio segment and class that have been placed on nonaccrual status can be returned to accrual status if all principal and interest is current and FHN expects full repayment of the remaining contractual principal and interest, or the asset becomes well-secured and is in the process
of collection. Also, loans for which all contractual amounts can reasonably be expected to be repaid (including arrearages) within a prudent period, and repayment has been in accordance with the contractual terms for a sustained period can also be returned to accrual status. Larger commercial loan balances
(outstanding balances greater than $1 million) that are being returned to accrual status are subject to review by the Credit Risk Assurance Department.
Individually impaired loans are measured using either a discounted cash flow methodology or the estimated fair value of the underlying collateral less costs to sell, if the loan is considered collateral-dependent. In accordance with accounting standards, the discounted cash flow analysis utilizes the loans effective
interest rate for discounting expected cash flow amounts. For loans measured using the estimated fair value of collateral less costs to sell, fair value is estimated using appraisals of the collateral. Collateral values are monitored and additional write-downs are recognized if it is determined that the estimated collateral
values have declined further. Estimated costs to sell are based on current amounts of disposal costs for similar assets. Generally, FHN does not carry loan loss reserves for collateral dependent individually impaired loans.
Allowance for Loan Losses. The allowance for loan losses is maintained at a level that management determines is sufficient to absorb estimated probable incurred losses in the loan portfolio. The allowance for loan losses is
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Note 1 q Summary of Significant Accounting Policies (continued)
increased by the provision for loan losses and loan recoveries and is decreased by charged-off loans. Reserves are determined in accordance with the ASC Contingencies Topic (ASC 450-20) and are composed of reserves for commercial loans evaluated based on pools of credit graded loans and reserves for
pools of smaller-balance homogeneous retail and commercial loans. The reserve factors applied to these pools are an estimate of probable incurred losses based on managements evaluation of historical net losses from loans with similar characteristics. Additionally, the ALLL includes reserves for loans determined
by management to be individually impaired. Reserves for individually impaired loans are established in accordance with the ASC Receivables Topic (ASC 310-10). Management uses analytical models based on loss experience subject to adjustment to reflect current events, trends, and conditions (including
economic considerations and trends) to assess the adequacy of the ALLL as of the end of each reporting period. The nature of the process by which FHN determines the appropriate ALLL requires the exercise of considerable judgment.
Key components of the estimation process are as follows: (1) commercial loans determined by management to be individually impaired loans are evaluated individually and specific reserves are determined based on the difference between the outstanding loan amount and the estimated net realizable value of the
collateral (if collateral dependent) or the present value of expected future cash flows; (2) individual commercial loans not considered to be individually impaired are segmented based on similar credit risk characteristics and evaluated on a pool basis; (3) reserve rates for the commercial segment are calculated
based on historical net charge-offs and are subject to adjustment by management to reflect current events, trends, and conditions (including economic considerations and trends); (4) managements estimate of probable incurred losses reflects the reserve rate applied against the balance of loans in the commercial
segment of the loan portfolio; (5) retail loans are segmented based on loan type; (6) reserve amounts for each retail portfolio segment are calculated using analytical models based on net loss experience and are subject to adjustment by management to reflect current events, trends, and conditions (including
economic considerations and trends); and (7) the reserve amount for each retail portfolio segment reflects managements estimate of probable incurred losses in the retail segment of the loan portfolio.
In 2009, management developed and began utilizing an Average Loss Rate Model (ALR) for establishment of commercial portfolio reserve rates. ALR is a grade migration based approach that allows for robust segmentation and dynamic time period consideration. In comparison with the prior commercial reserve
rate establishment, ALR is more sensitive to current portfolio conditions and provides management with additional detailed analysis into historical portfolio net loss experience. Consistent with the preceding approach, these reserve rates are then subject to management adjustment to reflect current events, trends and
conditions (including economic considerations and trends) that affect the asset quality of the commercial loan portfolio. While the change to the ALR model improved visibility into the impact of current portfolio conditions, the result of the model change, after consideration of management adjustments used in both
processes, was immaterial.
For commercial loans, reserves are established using historical net loss factors by grade level, loan product, and business segment. Relationship managers risk rate each loan using grades that reflect both the probability of default and estimated loss severity in the event of default. Portfolio reviews are conducted to
provide independent oversight of risk grading decisions for larger credits. Loans with emerging weaknesses receive increased oversight through the Watch List process. For new Watch List loans, senior credit management reviews risk grade appropriateness and action plans. After initial identification, relationship
managers prepare regular updates for review and discussion by more senior business line and credit officers. This oversight is intended to bring consistent grading and allow timely identification of loans that need to be further downgraded or placed on nonaccrual status. When a loan becomes classified, the asset
generally transfers to the specialists in the Loan Rehab and Recovery group where the accounts receive more detailed monitoring; at this time, new appraisals are typically ordered for real estate collateral dependent credits. Typically, loans are placed on nonaccrual if it becomes evident that full collection of
principal and interest is at risk or if the loans become 90 days or more past due. This is applicable for all portfolio segments and classes of commercial loans.
Generally, classified commercial non-accrual loans over $1 million are deemed to be individually impaired and are assessed for impairment measurement. Individually impaired loans are measured based on the present value of expected future payments discounted at the loans effective interest rate (the DCF
method), observable market prices, or for loans that are solely dependent on the collateral for repayment, the estimated fair value of the collateral less estimated costs to sell (net realizable value). For loans measured using the DCF method or by
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Note 1 q Summary of Significant Accounting Policies (continued)
observable market prices, if the recorded investment in the impaired loan exceeds this amount, a specific allowance is established as a component of the allowance for loan and lease losses; however, for impaired collateral-dependent loans FHN generally charges off the full difference between the book value and
the estimated net realizable value. This is applicable for all portfolio segments and classes of commercial loans.
The initial method used for measuring impairment is the DCF method. For all loans assessed under the DCF method, it is necessary to project the timing and amount of the best estimate of future cash flows from the borrowers net rents received from the property, guarantor contributions, receiver or court ordered
payments, refinances, etc. Once the amount and timing of the cash flow stream has been estimated, the net present value using the loans effective interest rate is then calculated in order to determine the amount of impairment.
Where guarantor contributions are determined to be a source of repayment, an assessment of the guarantee is made. This guarantee assessment would include but not be limited to factors such as type and feature of the guarantee, consideration for the guarantee, key provisions of the guarantee agreement, and
ability of the guarantor to be a viable secondary source of repayment.
Reliance on the guarantee as a viable secondary source of repayment is a function of an analysis proving capability to pay factoring in, among other things, liquidity, and direct/indirect debt cash flows. Therefore, a proper evaluation of each guarantor is critical. FHN establishes a guarantors ability (financial
wherewithal) to support a credit based on an analysis of recent information on the guarantors financial condition. This would generally include income and asset information from sources such as recent tax returns, credit reports, and personal financial statements. In analyzing this information FHN seeks to assess a
combination of liquidity, global cash flow, cash burn rate, and contingent liabilities to demonstrate the guarantors capacity to sustain support for the credit and fulfill the obligation. FHN also considers the volume and amount of guarantees provided for all global indebtedness and the likelihood of realization.
Guarantor financial information is periodically updated throughout the life of the loan.
FHN presumes a guarantors willingness to perform until financial support becomes necessary or if there is any current or prior indication or future expectation that the guarantor may not willingly and voluntarily perform under the terms of the guarantee.
In FHNs risk grading approach, it is deemed that financial support becomes necessary generally at a point when the loan would otherwise be graded substandard, reflecting a well-defined weakness. At that point, provided willingness is appropriately demonstrated, a strong, legally enforceable guarantee can mitigate
the risk of default or loss, justify a less severe rating, and consequently reduce the level of allowance or charge-off that might otherwise be deemed appropriate.
FHN establishes guarantor willingness to support the credit through documented evidence of previous and ongoing support of the credit. Previous performance under a guarantors obligation to pay is not considered if the performance was involuntary.
For impaired assets viewed as collateral dependent, fair value estimates are obtained from a recently received and reviewed appraisal. Appraised values are adjusted down for costs associated with asset disposal and for the estimates of any further deterioration in values since the most recent appraisal. Upon the
determination of impairment for collateral-dependent loans, FHN charges off the full difference between book value and the best estimate of the assets net realizable value. As of December 31, 2010, the total amount of individually impaired commercial loans is $455.5 million; $207.6 million of these loans are
carried at the fair value of collateral less estimated costs to sell and do not carry reserves.
For retail consumer loans, reserve levels are established through the use of segmented roll-rate models. Loans are classified as substandard at 90 days delinquent. Consumer loan charge-offs follow regulatory guidance prescribed by the Federal Financial Institutions Examination Council (FFIEC). For consumer
loans secured by real estate, a collateral position is assessed prior to the asset becoming 180 days delinquent. If the value does not support foreclosure, balances are charged-off and other avenues of recovery are pursued. If the value supports foreclosure,
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the loan is charged-down to net realizable value and is placed on nonaccrual status. When collateral is taken to OREO, the asset is assessed for further write-down relative to appraised value.
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 or, if required by regulators, based upon information at the time of their examinations. 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.
For all commercial loan portfolio segments and retail loan portfolio segments, all losses of principal are charged to the allowance for loan losses in the period in which the loan is deemed to be uncollectible. Additions are made to the allowance through periodic provisions charged to current operations and recovery
of principal on loans previously charged off.
Premises and Equipment. Premises and equipment are carried at cost less accumulated depreciation and amortization and include additions that materially extend the useful lives of existing premises and equipment. All other maintenance and repair expenditures are expensed as incurred. Gains and losses on
dispositions are reflected in noninterest income and expense.
Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the assets and are recorded as noninterest expense. Leasehold improvements are amortized over the lesser of the lease periods or the estimated useful lives using the straight-line method. Useful lives utilized
in determining depreciation for furniture, fixtures and equipment and buildings are three to fifteen and seven to forty-five years, respectively.
Real Estate Acquired by Foreclosure. Properties acquired by foreclosure in compliance with HUD servicing guidelines are included in Real estate acquired by foreclosure and are carried at the estimated amount of the underlying government insurance or guarantee. On December 31, 2010, FHN had $14.9 million
in these foreclosed properties. All other real estate acquired by foreclosure consists of properties that have been acquired in satisfaction of debt. These properties are carried at the lower of the outstanding loan amount or estimated fair value less estimated costs to sell the real estate. Losses arising at foreclosure
are charged to the appropriate reserve.
Required developmental costs associated with foreclosed property under construction are capitalized and included in determining the estimated net realizable value of the property, which is reviewed periodically, and any write-downs are charged against current earnings.
Intangible Assets. Intangible assets consist of Other intangible assets and Goodwill. The Other intangible assets represents identified intangible assets, including customer lists, acquired contracts, covenants not to compete and premium on purchased deposits, which are amortized over their estimated useful
lives, except for those assets related to deposit bases that are primarily amortized over 10 years. Management evaluates whether events or circumstances have occurred that indicate the remaining useful life or carrying value of amortizing intangibles should be revised. Goodwill represents the excess of cost over net
assets of acquired subsidiaries less identifiable intangible assets. On an annual basis, FHN tests goodwill for impairment. While impairment of Goodwill recognized was immaterial to FHN for the year ended December 31, 2008, impairments of other intangible assets of $4.0 million were recognized during 2008 in
relation to FHNs divestiture of certain mortgage banking operations and from the change in FHNs national banking strategy. For the year ended December 31, 2009, goodwill impairments of $16.6 million and an impairment of other intangible assets of $.2 million were recognized as a result of impairment
assessments completed in relation to an agreement to sell FTN Equity Capital Markets (FTN ECM) and in relation to the disposal of the First Horizon Insurance business in the Atlanta area. For the year ended December 31, 2010, an additional goodwill impairment of $3.3 million was recognized when the
contracted sale of FTN ECM failed to close and FHN exited the business through a cessation of operations, while the impairment of other intangible assets during 2010 was immaterial to FHN. See Note 26 Restructuring, Repositioning, and Efficiency Initiatives for additional information regarding the impairments of
other intangible assets during 2008 and 2009 and the impairments of goodwill during 2009 and 2010.
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Derivative Financial Instruments. FHN accounts for derivative financial instruments in accordance with ASC 815 which requires recognition of all derivative instruments on the balance sheet as either an asset or liability measured at fair value through adjustments to either accumulated other comprehensive income
within shareholders equity or current earnings. Fair value is defined as the price that would be received to sell a derivative asset or paid to transfer a derivative liability in an orderly transaction between market participants on the transaction date. Fair value is determined using available market information and
appropriate valuation methodologies.
FHN prepares written hedge documentation, identifying the risk management objective and designating the derivative instrument as a fair value hedge, cash flow hedge or free-standing derivative instrument entered into as an economic hedge or to meet customers needs. All transactions designated as ASC 815
hedges must be assessed at inception and on an ongoing basis as to the effectiveness of the derivative instrument in offsetting changes in fair value or cash flows of the hedged item. For a fair value hedge, changes in the fair value of the derivative instrument and changes in the fair value of the hedged asset or
liability are recognized currently in earnings. For a cash flow hedge, changes in the fair value of the derivative instrument, to the extent that it is effective, are recorded in accumulated other comprehensive income and subsequently reclassified to earnings as the hedged transaction impacts net income. Any
ineffective portion of a cash flow hedge is recognized currently in earnings. For free-standing derivative instruments, changes in fair values are recognized currently in earnings. See Note 25 Derivatives and Off-Balance Sheet Arrangements for additional information.
Cash flows from derivative contracts are reported as operating activities on the Consolidated Statements of Cash Flows.
Advertising and Public Relations. Advertising and public relations costs are generally expensed as incurred.
Income Taxes. FHN accounts for income taxes using the liability method pursuant to ASC 740, Income Taxes. Under this method, FHNs deferred tax assets and liabilities are determined by applying the applicable federal and state income tax rates to its cumulative temporary differences. These temporary
differences represent differences between financial statement carrying amounts and the corresponding tax bases of certain assets and liabilities. Deferred taxes are provided as a result of such temporary differences.
FHN and its eligible subsidiaries are included in a consolidated federal income tax return. FHN files separate returns for subsidiaries that are not eligible to be included in a consolidated federal income tax return. Based on the laws of the applicable state where it conducts business operations, FHN either files
consolidated, combined, or separate returns. With few exceptions, FHN is no longer subject to U.S. federal or state and local tax examinations by tax authorities for years before 2006. The Internal Revenue Service (IRS) is currently examining tax years 2006 - 2008. All proposed adjustments with respect to
examinations of federal returns filed for 2005 and prior years have been settled.
The total balance of unrecognized tax benefits at December 31, 2010 and December 31, 2009, respectively, were $38.4 million and $30.0 million. FHN does not expect that unrecognized tax benefits will significantly increase or decrease within the next twelve months. FHN recognizes accrued interest and penalties
related to unrecognized tax benefits as a component of tax expense. FHN had approximately $7 million and $8 million accrued for the payment of interest at December 31, 2010 and December 31, 2009, respectively.
Earnings per Share. Earnings per share is computed by dividing net income or loss available to common shareholders by the weighted average number of common shares outstanding for each period. Diluted earnings per share in net income periods is computed by dividing net income available to common
shareholders by the weighted average number of common shares adjusted to include the number of additional common shares that would have been outstanding if the potential dilutive common shares resulting from options granted under FHNs stock option plans and deferred compensation arrangements had
been issued. FHN utilizes the treasury stock method in this calculation. Diluted earnings per share does not reflect an adjustment for potentially dilutive shares in periods in which a net loss available to common shareholders exists. As a result of the stock dividends declared in 2008, 2009, and 2010, weighted
average basic and diluted shares were restated to reflect the effect of the stock dividends.
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Equity Compensation. FHN accounts for its employee stock-based compensation plans using the grant date fair value of an award to determine the expense to be recognized over the life of the award. For awards with service vesting criteria, expense is recognized using the straight-line method over the requisite
service period (generally the vesting period) and is adjusted for anticipated forfeitures. For awards vesting based on a performance measure, anticipated performance is projected to determine the number of awards expected to vest, and the corresponding aggregate expense is adjusted to reflect the elapsed portion
of the performance period. The fair value of equity awards with cash payout requirements, as well as awards for which fair value cannot be estimated at grant date, is remeasured each reporting period through vesting date. Awards are amortized using the nonsubstantive vesting methodology which requires that
expense associated with awards having only service vesting criteria that continue vesting after retirement be recognized over a period ending no later than an employees retirement eligibility date.
Repurchase and Foreclosure Provision. FHN historically presented charges related to repurchase obligations for junior lien consumer mortgage loan sales in noninterest income while similar charges arising from first lien mortgage originations and sales through the legacy national mortgage banking business were
reflected in noninterest expense. In order to present such charges consistently, FHN determined in third quarter 2010 that charges relating to repurchase obligations should be reflected in noninterest expense in the line item called Repurchase and foreclosure provision on the Consolidated Statements of Income.
Consequently, FHN retroactively applied this change which resulted in a reclassification of charges related to junior lien mortgage loan sales from noninterest income into noninterest expense. All applicable tables and associated narrative have been revised to reflect this change. This reclassification did not impact
FHNs net income and all effects are included in the non-strategic segment.
Accounting Changes. Effective December 31, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU 2010-20), with the exception of certain disclosures about activity that occurs
during a reporting period for which the requirements are effective for periods beginning after December 15, 2010. Additionally, in January 2011, FASB Accounting Standards Update 2011-01, Deferral of the Effective Date of Disclosures About Troubled Debt Restructurings in Update No. 2010-20, was issued
which temporarily delays the disclosure requirements related to modifications to be effective concurrent with the effective date of the proposed Accounting Standards Update, Receivables (Topic 310): Clarifications to Accounting for Troubled Debt Restructurings by Creditors. ASU 2010-20 provides enhanced
disclosures related to the credit quality of financing receivables and the allowance for credit losses, and provides that new and existing disclosures should be disaggregated based on how an entity develops its allowance for credit losses and how it manages credit exposures. Under the provisions of ASU 2010-20,
additional disclosures required for financing receivables include information regarding the aging of past due receivables, credit quality indicators, and modifications of financing receivables. Comparative disclosures are required only for periods ending subsequent to initial adoption. Upon adoption of the provisions of
ASU 2010-20 related to disclosures as of the end of a reporting period, and the amendments to the rollforward of the allowance for credit losses, on December 31, 2010, FHN revised its disclosures accordingly.
Effective September 30, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-11, Scope Exception Related to Embedded Credit Derivatives (ASU 2010-11). ASU 2010-11 amends ASC 815 to provide clarifying language regarding when embedded credit derivative features are not
considered embedded derivatives subject to potential bifurcation and separate accounting. Upon adoption of the provisions of ASU 2010-11, re-evaluation of certain preexisting contracts is required to determine whether the accounting for such contracts is consistent with the amended guidance in ASC 815. If the
fair value option is elected for an instrument upon adoption of the amendments to ASC 815, re-evaluation of such preexisting contracts is not required. As FHN does not have any preexisting contracts which require re-evaluation, the adoption of the Codification update to ASC 815 had no effect on FHNs statement
of condition, results of operations, or cash flows.
Effective upon its issuance in February 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-09, Subsequent Events Amendments to Certain Recognition and Disclosure Requirements (ASU 2010-09). ASU 2010-09 amends ASC 855 to clarify that an entity must disclose the date
through which subsequent events have been evaluated in both originally issued and restated financial statements unless the entity has a regulatory requirement to review subsequent events up through the filing or furnishing of financial statements with
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the Securities and Exchange Commission. Upon adoption of the provisions of ASU 2010-09, FHN revised its disclosures accordingly.
Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06), with the exception of the requirement to provide the activity of purchases, sales, issuances, and settlements related to recurring Level 3
measurements on a gross basis in the Level 3 reconciliation which is effective for quarters beginning after December 15, 2010. ASU 2010-06 updates ASC 820 to require disclosure of significant transfers into and out of Level 1 and Level 2 of the fair value hierarchy, as well as disclosure of an entitys policy for
determining when transfers between all levels of the hierarchy are recognized. The updated provisions of ASC 820 also require that fair value measurement disclosures be provided by each class of assets and liabilities, and that disclosures providing a description of the valuation techniques and inputs used to
measure fair value be included for both recurring and nonrecurring fair value measurements classified as either Level 2 or Level 3. Under ASC 820, as amended, separate disclosure is required in the Level 3 reconciliation of total gains and losses recognized in other comprehensive income. Comparative disclosures
are required only for periods ending subsequent to initial adoption. Upon adoption of the amendments to ASC 820, FHN revised its disclosures accordingly.
Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2009-16, Accounting for Transfers of Financial Assets (ASU 2009-16). ASU 2009-16 updates ASC 860 to provide for the removal of the QSPE concept from GAAP, resulting in the evaluation of all former QSPEs for
consolidation in accordance with ASC 810 on and after the effective date of the amendments. The amendments to ASC 860 modify the criteria for achieving sale accounting for transfers of financial assets and define the term participating interest to establish specific conditions for reporting a transfer of a portion of
a financial asset as a sale. The updated provisions of ASC 860 also provide that a transferor should recognize and initially measure at fair value all assets obtained (including a transferors beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. ASC 860, as
amended, requires enhanced disclosures which are generally consistent with, and supersede, the disclosures previously required by the Codification update to ASC 810 and ASC 860 which was effective for periods ending after December 15, 2008. Upon adoption of the amendments to ASC 860, FHN applied the
amended disclosure requirements to transfers that occurred both before and after the effective date of the Codification update, with comparative disclosures included only for periods subsequent to initial adoption for those disclosures not previously required. The adoption of the Codification update to ASC 860 had
no material effect on FHNs statement of condition, results of operations, or cash flows.
Effective January 1, 2010, FHN adopted the provisions of Accounting Standards Update 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17). ASU 2009-17 amends ASC 810 to revise the criteria for determining the primary beneficiary of a VIE by
replacing the quantitative-based risks and rewards test previously required with a qualitative analysis. While ASC 810, as amended, retains the previous guidance in ASC 810 which requires a reassessment of whether an entity is a VIE only when certain triggering events occur, it adds an additional criterion which
triggers a reassessment of an entitys status when an event occurs such that the holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entitys economic performance.
Additionally, the amendments to ASC 810 require continual reconsideration of conclusions regarding which interest holder is the VIEs primary beneficiary. Under ASC 810, as amended, separate presentation is required on the face of the balance sheet of the assets of a consolidated VIE that can only be used to
settle the VIEs obligations and the liabilities of a consolidated VIE for which creditors or beneficial interest holders have no recourse to the general credit of the primary beneficiary. ASC 810, as amended, also requires enhanced disclosures which are generally consistent with, and supersede, the disclosures
previously required by the Codification update to ASC 810 and ASC 860 which was effective for periods ending after December 15, 2008. Comparative disclosures are required only for periods subsequent to initial adoption for those disclosures not required under such previous guidance.
Upon adoption of the amendments to ASC 810, FHN re-evaluated all former QSPEs and entities already subject to ASC 810 under the revised consolidation methodology. Based on such re-evaluation, consumer loans with an aggregate unpaid principal balance of $245.2 million were prospectively consolidated as of
January 1, 2010, along with secured borrowings of $236.3 million, as the retention of mortgage servicing rights (MSR) and other retained
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interests, including residual interests and subordinated bonds, resulted in FHN being considered the related trusts primary beneficiary under the qualitative analysis required by ASC 810, as amended. MSR and trading assets held in relation to the newly consolidated trusts were removed from the mortgage servicing
rights and trading securities sections of the Consolidated Statements of Condition, respectively, upon adoption of the amendments to ASC 810. As the assets of FHNs consolidated residential mortgage securitization trusts are pledged to settle the obligations due to the holders of the trusts securities and since the
security holders have no recourse to FHN, the asset and liability balances have been parenthetically disclosed on the face of the Consolidated Statements of Condition as restricted in accordance with the presentation requirements of ASC 810, as amended. Since FHN determined that calculation of carrying values
was not practicable, the unpaid principal balance measurement methodology was used upon adoption, with the allowance for loan losses (ALLL) related to the newly consolidated loans determined using FHNs standard practices. FHN recognized a reduction to the opening balance of undivided profits of
approximately $10.6 million for the cumulative effect of adopting the amendments to ASC 810, including the effect of the recognition of an adjustment to the ALLL of approximately $24.6 million ($15.6 million net of tax) in relation to the newly consolidated loans. Further, upon adoption of the amendments to ASC
810, the deconsolidation of certain small issuer trust preferred trusts for which First Tennessee Bank National Association (FTBNA) holds the majority of the mandatorily redeemable preferred capital securities (trust preferreds) issued but is not considered the primary beneficiary under the qualitative analysis
required by ASC 810, as amended, resulted in reduction of loans net of unearned income and term borrowings on the Consolidated Statements of Condition by $30.5 million.
Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-10, Amendments for Certain Investment Funds (ASU 2010-10). ASU 2010-10 delays the application of ASU 2009-17 for a reporting entitys interest in an entity that has the attributes of an investment company
or for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies. For entities that do not qualify for the deferral, ASU 2010-10 clarifies that related parties should be considered when evaluating whether each of the
criteria related to permitted levels of decision maker or service provider fees in ASC 810 are met. Additionally, ASU 2010-10 amends ASC 810 to provide that when evaluating whether a fee is a variable interest in situations in which a decision maker or servicer provider holds another interest in the related VIE, a
quantitative calculation may be used but should not be the sole basis for evaluating whether the other variable interest is more than insignificant. The adoption of the Codification update to ASC 810 had no effect on FHNs statement of condition, results of operations, or cash flows.
Effective December 31, 2009, FHN adopted the provisions of the FASB Codification Update to ASC 715 which provides detailed disclosure requirements to enhance the disclosures about an employers postretirement benefit plan assets currently required by ASC 715-20-50. Upon adoption of the amendments to
ASC 715, FHN revised its disclosures accordingly.
Effective December 31, 2009, FHN adopted the provisions of FASB Accounting Standards Update 2010-02, Accounting and Reporting for Decreases in Ownership of a Subsidiary a Scope Clarification (ASU 2010-02). ASU 2010-02 clarifies the scope of the decrease in ownership guidance in ASC 810-10 and
expands the disclosures required upon deconsolidation of a subsidiary under ASC 810-10-50-1B. The adoption of the Codification update to ASC 810-10 had no effect on FHNs statement of condition, results of operations, or cash flows.
Effective December 31, 2009, FHN adopted the provisions of FASB Accounting Standards Update 2009-05, Measuring Liabilities at Fair Value (ASU 2009-05). ASU 2009-05 updates ASC 820 to clarify that a quoted price for the identical liability, when traded as an asset in an active market, is a Level 1
measurement for that liability when no adjustment to the quoted price is required. ASU 2009-05 further amends ASC 820 to provide that if a quoted price for an identical liability does not exist in an active market, the fair value of the liability should be measured using an approach that maximizes the use of
relevant observable inputs and minimizes the use of unobservable inputs. Under the updated provisions of ASC 820, for such liabilities fair value will be measured using either a valuation technique that uses the quoted price of the identical liability when traded as an asset, a valuation technique that uses the
quoted price for similar liabilities or similar liabilities when traded as an asset, or another valuation technique that is consistent with the principles of ASC 820. The adoption of the Codification update to ASC 820 had no material effect on FHNs statement of condition, results of operations, or cash flows.
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Effective September 30, 2009, FHN adopted the provisions of FASB Accounting Standards Update 2009-01 which creates ASC 105, Generally Accepted Accounting Principles. ASC 105 establishes the FASB Accounting Standards Codification (the Codification) as the single source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP, other than guidance issued by the SEC. Under ASC 105, all guidance contained in the FASB Accounting Standards Codification carries an equal level of authority, with
ASC 105 superseding all non-SEC accounting and reporting standards which existed as of its effective date. The effect of adopting the provisions of ASC 105 was immaterial to FHN. In accordance with ASC 105, all references to authoritative accounting standards have been revised to reflect their Codification
citation.
Effective June 30, 2009, FHN adopted the provisions of the FASB Codification update to ASC 825-10-50, which requires disclosures about fair value of financial instruments in interim financial statements. ASC 825-10-50, as amended, requires that disclosures be included in both interim and annual financial
statements of the methods and significant assumptions used to estimate the fair value of financial instruments. Comparative disclosures are required only for periods ending subsequent to initial adoption. Upon adoption of the amendments to ASC 825-10-50, FHN revised its disclosures accordingly.
In April 2009, the FASB issued a Codification update to ASC 320-10-35 which replaces the intent and ability to hold to recovery indicator of other-than-temporary impairment in ASC 320-10-35 for debt securities. The updated provisions of ASC 320-10-35 specify that a debt security is considered other-than-
temporarily impaired when an entitys management intends to sell the security or that it is more-likely-than-not that the entity will be required to sell the security prior to recovery of its cost basis. ASC 320-10-35, as amended, requires that for impaired held-to-maturity and available-for-sale debt securities that an
entity does not intend to sell and will not be required to sell prior to recovery but for which credit losses exist, the other-than-temporary impairment should be separated between the total impairment related to credit losses, which should be recognized in current earnings, and the amount of impairment related to all
other factors, which should be recognized in other comprehensive income. ASC 320-10-35, as amended, discusses the proper interaction of its guidance with SEC Staff Accounting BulletinTopic 5M, which provides additional factors that must be considered in an other-than-temporary impairment analysis. ASC 320-
10-35, as amended, also provides that in periods in which other-than-temporary impairments are recognized, the total impairment must be presented in the investors income statement with an offset for the amount of total impairment that is recognized in other comprehensive income. ASC 320-10-35 requires
additional disclosures including a rollforward of amounts recognized in earnings for debt securities for which an other-than-temporary impairment has been recognized and the noncredit portion of the other-than-temporary impairment that has been recognized in other comprehensive income. FHN initially applied the
guidance provided in the Codification update to ASC 320-10-35 when assessing debt securities for other-than-temporary impairment as of March 31, 2009 and the effects of adoption were not material.
In April 2009, the FASB issued a Codification update to ASC 820-10 which provides factors that an entity should consider when determining whether a market for an asset is not active. If after evaluating the relevant factors, the evidence indicates that a market is not active, ASC 820-10 provides an additional list of
factors that an entity must consider when determining whether events and circumstances indicate that a transaction which occurred in such inactive market is orderly. ASC 820-10, as amended, requires that entities place more weight on observable transactions determined to be orderly and less weight on
transactions for which there is insufficient information to determine whether the transaction is orderly when determining the fair value of an asset or liability. The Codification update to ASC 820-10 requires enhanced disclosures, including disclosure of a change in valuation technique which results from its
application and disclosure of fair value measurements for debt and equity securities by major security types. FHN initially applied the guidance provided in the Codification update to ASC 820-10 in its fair value measurements as of March 31, 2009 and the effects of adoption were not significant.
Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 820 for existing fair value measurement requirements related to non-financial assets and liabilities which are recognized at fair value on a non-recurring basis. The effective date for the application of ASC 820s measurement
framework to such non-financial assets and liabilities was previously delayed under transitional guidance issued by the FASB. ASC 820, as amended, establishes a hierarchy to be used in performing measurements of fair value. Additionally, the updated provisions of ASC 820 emphasize that fair value should be
determined from the perspective of a market participant
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while also indicating that valuation methodologies should first reference available market data before using internally developed assumptions. ASC 820, as amended, also provides expanded disclosure requirements regarding the effects of fair value measurements on the financial statements. The effect of adopting
the updated provisions of ASC 820 for non-financial assets and liabilities which are recognized at fair value on a non-recurring basis on January 1, 2009, was not significant to FHN. Effective January 1, 2008, FHN adopted ASC 820s Codification update for existing fair value measurement requirements related to
financial assets and liabilities as well as to non-financial assets and liabilities which are remeasured at least annually. Upon the adoption of the updated provisions of ASC 820 for financial assets and liabilities as well as non-financial assets and liabilities remeasured at least annually on January 1, 2008, a negative
after-tax cumulative-effect adjustment of $12.5 million was made to the opening balance of undivided profits for interest rate lock commitments which FHN previously measured under the guidance of ASC 815-10-45. The effect of the change in accounting for these interest rate lock commitments produced a
positive effect of $19.4 million on 2008 pre-tax earnings as existing commitments were delivered as loans and additional commitments that would have been deferred under the guidance of ASC 815-10-45 were made. Substantially all commitments existing at August 31, 2008 were sold.
Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 805 and ASC 810. ASC 805, as amended, requires that an acquirer recognize the assets acquired and liabilities assumed in a business combination, as well as any noncontrolling interest in the acquiree, at their fair values as
of the acquisition date, with limited exceptions. Additionally, the updated provisions of ASC 805 provide that an acquirer cannot specify an effective date for a business combination that is separate from the acquisition date. ASC 805, as amended, also provides that acquisition-related costs which an acquirer incurs
should be expensed in the period in which the costs are incurred and the services are received. ASC 810, as amended, requires that acquired assets and liabilities be measured at full fair value without consideration to ownership percentage. Under the updated provisions of ASC 810, any noncontrolling interests in
an acquiree should be presented as a separate component of equity rather than on a mezzanine level. Additionally, ASC 810, as amended, provides that net income or loss should be reported in the consolidated income statement at its consolidated amount, with disclosure on the face of the consolidated income
statement of the amount of consolidated net income which is attributable to the parent and noncontrolling interests, respectively. The retrospective application of ASC 810s presentation and disclosure requirements resulted in an increase to consolidated net income of $14.0 million for 2008. FHN also recognized an
increase of total shareholders equity of $295.2 million upon adoption of the amendments to ASC 810 as a result of reclassifying the noncontrolling interest previously recognized on the Consolidated Statements of Condition as Preferred stock of subsidiary as a separate component of equity.
Effective January 1, 2009, FHN adopted the provisions of an additional Codification update to ASC 805 which requires that an acquirer recognize at fair value as of the acquisition date an asset acquired or liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of
the asset or liability can be determined during the measurement period. ASC 805, as amended, provides that if the acquisition-date fair value of an asset acquired or liability assumed in a business combination that arises from a contingency cannot be determined during the measurement period, the asset or
liability should be recognized at the acquisition date if information available before the end of the measurement period indicates that it is probable that an asset existed or a liability had been incurred at the acquisition date and the amount of the asset or liability can be reasonably estimated. Additionally, ASC 805,
as amended, requires enhanced disclosures regarding assets and liabilities arising from contingencies which are recognized at the acquisition date of a business combination, including the nature of the contingencies, the amounts recognized at the acquisition date and the measurement basis applied. The adoption
of the Codification update to ASC 805 had no effect on FHNs statement of condition, results of operations, or cash flows.
Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 815-10-50 which provides amendments that enhance disclosures related to derivatives accounted for in accordance with ASC 815 and reconsiders existing disclosure requirements for such derivatives and any related hedging
items. The additional disclosures provided in ASC 815-10-50, as amended, are required for both interim and annual reporting periods. Upon adoption of the Codification update to ASC 815-10-50, FHN revised its disclosures accordingly.
FHN also adopted the provisions of the Codification update to ASC 860-10 as of January 1, 2009, for initial transfers of financial assets executed after such date. The Codification update amends ASC 860-10 to permit a
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transferor and transferee to separately account for an initial transfer of a financial asset and a related repurchase financing that are entered into contemporaneously with, or in contemplation of, one another if certain specified conditions are met at the inception of the transaction. ASC 860-10, as amended, requires
that the two transactions have a valid and distinct business or economic purpose for being entered into separately and that the repurchase financing not result in the initial transferor regaining control over the previously transferred financial asset. The effect of adopting the Codification update to ASC 860-10 was
immaterial to FHN.
Effective December 31, 2008, FHN adopted the provisions of the Codification update to ASC 325 which aligns its impairment model for beneficial interests in securitized financial assets with the impairment model in ASC 320, resulting in a consistent determination of whether other-than-temporary impairments of
available for sale or held to maturity debt securities have occurred. Since FHN recognizes all retained interests from securitization transactions at fair value as trading securities and as all of its beneficial interests classified as available for sale securities are outside the scope of ASC 325, the effect of adopting the
Codification update to ASC 325 was immaterial to FHN.
Effective December 31, 2008, FHN adopted the provisions of the Codification update to ASC 815-10-50 which requires sellers of credit derivatives and similar guarantee contracts to make disclosures regarding the nature, term, fair value, potential losses, and recourse provisions for those contracts. Since FHN is not
a seller of credit derivatives or similar financial guarantees, the effect of adopting the Codification update to ASC 815-10-50 was immaterial to FHN.
Effective January 1, 2008, FHN adopted the provisions of the Codification update to ASC 825 which allows an irrevocable election to measure certain financial assets and liabilities at fair value on an instrument-by-instrument basis, with unrealized gains and losses recognized currently in earnings. Under ASC 825,
the fair value option may only be elected at the time of initial recognition of a financial asset or liability or upon the occurrence of certain specified events. Additionally, ASC 825 provides that application of the fair value option must be based on the fair value of an entire financial asset or liability and not selected
risks inherent in those assets or liabilities. ASC 825 requires that assets and liabilities which are measured at fair value pursuant to the fair value option be reported in the financial statements in a manner that separates those fair values from the carrying amounts of similar assets and liabilities which are measured
using another measurement attribute. ASC 825 also provides expanded disclosure requirements regarding the effects of electing the fair value option on the financial statements. Upon adoption of the updated provisions of ASC 825, FHN elected the fair value option on a prospective basis for almost all types of
mortgage loans originated for sale purposes. Additionally, in accordance with ASC 825s amendment of ASC 320, FHN began prospectively classifying cash flows associated with its retained interests in securitizations recognized as trading securities within investing activities in the Consolidated Statements of Cash
Flows.
Effective January 1, 2008, FHN adopted SEC Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at Fair Value Through Earnings (SAB No. 109) prospectively for derivative loan commitments issued or modified after that date. SAB No. 109 rescinds SAB No. 105s prohibition on inclusion of
expected net future cash flows related to loan servicing activities in the fair value measurement of a written loan commitment. SAB No. 109 also applies to any loan commitments for which fair value accounting is elected under ASC 825. FHN did not elect fair value accounting for any other loan commitments
under ASC 825. The prospective application of SAB No. 109 and the prospective election to recognize substantially all new mortgage loan originations at fair value under ASC 825 resulted in a positive net impact of $1.0 million on 2008 pre-tax earnings.
Effective January 1, 2008, FHN adopted the provisions of the Codification update which amended ASC 820 to exclude ASC 840, Leases, from its scope. The adoption of the Codification update to ASC 820 had no effect on FHNs statement of condition, results of operations, or cash flows.
Effective January 1, 2008, FHN adopted the provisions of the Codification update to ASC 715 which requires that a liability be recognized for contracts written to employees which provide future postretirement benefits that are covered by endorsement split-dollar life insurance arrangements because such obligations
are not considered to be effectively settled upon entering into the related insurance arrangements. FHN recognized a decrease to undivided profits of $8.5 million, net of tax, upon adoption of the amendments to ASC 715.
114
FIRST HORIZON NATIONAL CORPORATION
Note 1 q Summary of Significant Accounting Policies (continued)
Effective January 1, 2008, FHN adopted the provisions of the Codification update to ASC 815 which permits the offsetting of fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts recognized for derivative instruments executed with
the same counterparty under the same master netting arrangement. Upon adoption of the amendments to ASC 815, entities were permitted to change their previous accounting policy election to offset or not offset fair value amounts recognized for derivative instruments under master netting arrangements. ASC 815,
as amended, requires additional disclosures for derivatives and collateral associated with master netting arrangements, including the separate disclosure of amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under master netting arrangements as of the end of each
reporting period for entities that made an accounting policy decision to not offset fair value amounts. FHN retained its previous accounting policy election to not offset fair value amounts recognized for derivative instruments under master netting arrangements upon adoption of the updated provisions of ASC 815,
and has revised its disclosures accordingly.
FHN also adopted the provisions of the Codification update to ASC 815-20-25 as of January 1, 2008, for hedging relationships designated on or after such date. The updated provisions of ASC 815-20-25 explicitly permit use of the shortcut method for hedging relationships in which an interest rate swap has a
nonzero fair value at inception of the hedging relationship which is attributable solely to the existence of a bid-ask spread in the entitys principal market under ASC 820. Additionally, ASC 815-20-25, as amended, allows an entity to apply the shortcut method to a qualifying fair value hedge when the hedged item
has a trade date that differs from its settlement date because of generally established conventions in the marketplace in which the transaction to acquire or issue the hedged item is executed. Preexisting shortcut hedging relationships were analyzed as of the adoption date of the amendments to ASC 815-20-25 to
determine whether they complied with the revised shortcut criteria at their inception or should be dedesignated prospectively. The adoption of the updated provisions of ASC 815-20-25 had no effect on FHNs financial position, results of operations, or cash flows as all of FHNs preexisting hedging relationships met
the requirements of ASC 815-20-25, as amended, at their inception.
Note 2 q Acquisitions and Divestitures
In first quarter 2010, FHN exited its institutional research business, FTN Equity Capital Markets (FTN ECM), and incurred a pre-tax goodwill impairment of $3.3 million (approximately $2 million after taxes). FHN exited this business through an immediate cessation of operations on February 1, 2010. Additional
charges, primarily representing severance and contract terminations, of $6.1 million are included within the Loss from discontinued operations, net of tax line on the Consolidated Statements of Income in 2010 and relate to the effects of closing FTN ECM. These charges are included with the amounts described in
Note 26 Restructuring, Repositioning, and Efficiency. FHN had initially reached an agreement for the sale of this business which resulted in a pre-tax goodwill impairment of $14.3 million (approximately $9 million after taxes) in 2009; however, the contracted sale failed to close and was terminated in early 2010.
The financial results of this business, including the goodwill impairments, are reflected in the Loss from discontinued operations, net of tax line on the Consolidated Statements of Income for all periods presented.
In 2009, FHN continued its efforts to refocus on core businesses and executed the sale and closure of FHNs Atlanta insurance business and Louisville First Express Remittance Processing location (FERP). FHN recognized a loss of $7.5 million on the sale of the Atlanta insurance business and a $1.7 million loss
on the FERP divestiture. These losses are reflected on the Consolidated Statements of Income as a Loss on divestiture within noninterest income. The losses on divestitures primarily reflect goodwill write-offs associated with the sales. Additionally, FHN recognized a goodwill impairment associated with certain assets
excluded from the sale of the Atlanta insurance business. The loss is reflected as a goodwill impairment within noninterest expense on the Consolidated Statements of Income. See Note 7 Intangible Assets for further discussion. FHN continues to have an insurance business within its Tennessee banking footprint
and continues to operate other remittance processing locations.
During 2008, FHN sold more than 230 retail and wholesale mortgage origination offices nationwide, the loan origination and servicing platform, substantially all of FHNs mortgage origination pipeline and related hedges, certain fixed assets, and other associated assets. The purchaser did not acquire any portion of
FHNs mortgage
FIRST HORIZON
NATIONAL CORPORATION
115
Note 2 q Acquisitions/Divestitures (continued)
loan warehouse. FHN retained its mortgage operations in and around Tennessee, continuing to originate home loans for customers in its regional banking market footprint. FHN also sold servicing assets and related hedges on $19.1 billion of first lien mortgage loans and associated custodial deposits. Additionally,
FHN entered into a subservicing agreement for the remainder of FHNs servicing portfolio. Generally, book value was paid for the assets and liabilities acquired, less a purchase price reduction. FHN recognized a loss on divestiture of $16.6 million in 2008. Gains and losses related to this transaction were included
in the noninterest income section of the Consolidated Statements of Income as Losses on divestitures. See Note 6 Mortgage Servicing Rights for divestitures of servicing rights.
In addition to the divestitures mentioned above, FHN acquires or divests assets from time to time in transactions that are considered business combinations or divestitures but are not material to FHN individually or in the aggregate.
116
FIRST HORIZON NATIONAL CORPORATION
Note 3 q Investment Securities
The following tables summarize FHNs available for sale securities on December 31, 2010 and 2009:
(Dollars in thousands)
On December 31, 2010
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Securities available for sale:
U.S. Treasuries
$
87,188
$
256
$
-
$
87,444
Government agency issued MBS (a)
1,430,923
46,916
(7,881
)
1,469,958
Government agency issued CMO (a)
1,136,607
32,133
-
1,168,740
Other U.S. government agencies (a)
50,426
2,800
-
53,226
States and municipalities
26,015
-
-
26,015
Equity (b)
226,012
-
(9
)
226,003
Other
511
33
-
544
Total securities available for sale (c)
$
2,957,682
$
82,138
$
(7,890
)
$
3,031,930
(a)
Includes securities issued by government sponsored entities.
(b)
Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of $66.2 million. The remainder is money market, venture capital, and cost method investments. Additionally, $5.4 million is restricted pursuant to a reinsurance contract agreement.
(c)
Includes $2.7 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes. As of December 31, 2010, FHN had pledged $1.5 billion of the $2.7 billion pledged available for sale securities as collateral for securities sold under repurchase agreements.
(Dollars in thousands)
On December 31, 2009
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Securities available for sale:
U.S. Treasuries
$
47,983
$
146
$
-
$
48,129
Government agency issued MBS (a)
941,392
58,685
-
1,000,077
Government agency issued CMO (a)
1,148,599
42,919
(2,088
)
1,189,430
Other U.S. government agencies (a)
111,849
6,296
-
118,145
States and municipalities
44,400
-
-
44,400
Equity (b)
293,318
450
(177
)
293,591
Other
667
29
-
696
Total securities available for sale (c)
$
2,588,208
$
108,525
$
(2,265
)
$
2,694,468
(a)
Includes securities issued by government sponsored entities.
(b)
Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of $66.3 million. The remainder is money market, venture capital, and cost method investments. Additionally, $44.0 million is restricted pursuant to reinsurance contract agreements.
(c)
Includes $2.3 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes. As of December 31, 2009, FHN had pledged $1.5 bilion of the $2.3 billion pledged available for sale securities as collateral for securities sold under repurchase agreements.
National banks chartered by the federal government are, by law, members of the Federal Reserve System. Each member bank is required to own stock in its regional FRB. Given this requirement, Federal Reserve stock may not be sold, traded, or pledged as collateral for loans. Membership in the Federal Home
Loan Bank (FHLB) network requires ownership of capital stock. Member banks are entitled to borrow funds from the FHLB and are required to pledge mortgage loans as collateral. Investments in the FHLB are non-transferable and, generally, membership is maintained primarily to provide a source of liquidity as
needed.
FIRST HORIZON
NATIONAL CORPORATION
117
Note 3 q Investment Securities (continued)
The amortized cost and fair value by contractual maturity for the available for sale securities portfolio on December 31, 2010 are provided below:
(Dollars in thousands)
Available for Sale
Amortized Cost
Fair Value
Within 1 year
$
62,069
$
62,112
After 1 year; within 5 years
75,545
78,558
After 5 years; within 10 years
2,795
2,795
After 10 years
23,220
23,220
Subtotal
163,629
166,685
Government agency issued MBS and CMO
2,567,530
2,638,698
Equity and other securities
226,523
226,547
Total
$
2,957,682
$
3,031,930
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 realized gross gains and realized gross losses resulting from sales of the available for sale portfolio for the twelve months ended December 31:
(Dollars in thousands)
Available for Sale
Debt
Equity
Total
December 31, 2010
Gross gains on sales
$
375
$
354
$
729
Gross losses on sales
(1
)
-
(1
)
December 31, 2009
Gross gains on sales
$
-
$
2,032
$
2,032
Gross losses on sales
-
(381
)
(381
)
December 31, 2008
Gross gains on sales
$
-
$
1,314
$
1,314
Gross losses on sales
-
-
-
Certain previously reported amounts have been reclassified to agree with current presentation.
Proceeds from the sale of AFS securities associated with the gains and losses reflected in the table above for the years 2010, 2009, and 2008, were $515.4 million, $4.4 million, and $44.6 million, respectively. Total net securities gains/losses recognized on the Consolidated Statements of Income were $10.9 million
in 2010. However, this amount also includes gains/losses related to the sale and/or impairments of cost method investments (such as Visa Inc.) and unrealized losses recognized through earnings for venture capital investments. Accordingly, these amounts have been excluded from the table above. In 2010, FHN
recognized a gain of $14.8 million that relates to the sale of a portion of FHNs Visa Inc. class B shares. Additionally, in 2010, FHN recognized losses of $4.6 million for write-downs of venture capital investments. In 2008, FHN recognized a gain of $65.9 million in connection with Visa Inc.s initial public offering
(IPO). As the investment in Visa is not classified as an AFS security, the 2010 and 2008 gains were excluded from the table above. See Note 18 Restrictions, Contingencies, and Other Disclosures for additional discussion regarding FHNs investment in Visa Inc. class B shares. See Note 22 Fair Value for
additional discussion related to FHNs venture capital investments.
Losses totaling $.2 million, $.5 million, and $1.5 million for the years 2010, 2009, and 2008, respectively, were recognized for securities that, in the opinion of management have been other-than-temporarily impaired. In 2010, the OTTI relates to a marketable equity security while the OTTI recognized in 2009 and
2008 relates to cost method investment securities.
118
FIRST HORIZON NATIONAL CORPORATION
Note 3 q Investment Securities (continued)
The following tables provide information on investments within the available for sale portfolio that have unrealized losses on December 31, 2010 and 2009:
(Dollars in thousands)
On December 31, 2010
Less than 12 months
12 months or longer
Total
Fair Value
Unrealized Losses
Fair Value
Unrealized Losses
Fair Value
Unrealized Losses
Government agency issued MBS
$
563,813
$
(7,881
)
$
-
$
-
$
563,813
$
(7,881
)
Total debt securities
563,813
(7,881
)
-
-
563,813
(7,881
)
Equity
34
(9
)
-
-
34
(9
)
Total temporarily impaired securities
$
563,847
$
(7,890
)
$
-
$
-
$
563,847
$
(7,890
)
(Dollars in thousands)
On December 31, 2009
Less than 12 months
12 months or longer
Total
Fair Value
Unrealized Losses
Fair Value
Unrealized Losses
Fair Value
Unrealized Losses
Government agency issued CMO
$
142,430
$
(2,088
)
$
-
$
-
$
142,430
$
(2,088
)
Total debt securities
142,430
(2,088
)
-
-
142,430
(2,088
)
Equity
-
-
55
(177
)
55
(177
)
Total temporarily impaired securities
$
142,430
$
(2,088
)
$
55
$
(177
)
$
142,485
$
(2,265
)
FHN has reviewed investment securities that are in unrealized loss positions in accordance with its accounting policy for other-than-temporary impairment and does not consider them other-than-temporarily impaired. FHN does not intend to sell the debt securities and it is more-likely-than-not that FHN will not be
required to sell the securities prior to recovery. The decline in value is primarily attributable to interest rates and not credit losses. For equity securities, FHN has both the ability and intent to hold these securities for the time necessary to recover the amortized cost.
FIRST HORIZON
NATIONAL CORPORATION
119
Note 4 q Loans
The following table provides the balance of loans by portfolio on December 31, 2010 and 2009:
(Dollars in thousands)
2010
2009
Commercial:
Commercial, financial, and industrial
$
7,338,155
$
7,149,784
Commercial real estate
Income CRE
1,406,646
1,774,123
Residential CRE
263,878
639,826
Retail:
Consumer real estate
5,617,619
6,931,434
Permanent mortgage
1,086,859
1,085,668
One time close residential construction
19,276
229,487
Credit card & other
292,648
313,562
Restricted real estate loans (a)(b)
757,491
-
Loans, net of unearned income
$
16,782,572
$
18,123,884
Allowance for loan losses
664,799
896,914
Total net loans
$
16,117,773
$
17,226,970
(a)
Prior to 2010, a portion of the amount was included in consumer real estate.
(b)
2010 includes $701.8 million of consumer real estate loans and $55.7 million of permanent mortgage loans.
On December 31, 2010, $4.2 billion of commercial loans were pledged to secure potential discount window borrowings from the Federal Reserve Bank. Additionally, $6.4 billion of consumer real estate loans and permanent mortgages were pledged to secure potential borrowings from the Federal Home Loan Bank.
FHN has a concentration of loans secured by residential real estate (46 percent of total loans), the majority of which is in the consumer real estate portfolio (33 percent of total loans). Permanent mortgages account for 6 percent of total loans. Restricted real estate loans, which is comprised primarily of HELOC but
also includes permanent mortgages, is 5 percent of total loans. The remaining residential real estate loans are primarily in the residential CRE and one time close residential construction portfolios (2 percent of total loans) with national exposures being significantly reduced since 2008. Additionally, on December 31,
2010, FHN had bank-related and trust preferred loans (TRUPs) (i.e., loans to bank and insurance-related businesses), totaling $.7 billion (9 percent of the C&I portfolio, or 4 percent of total loans). This component of the C&I portfolio has experienced stress due to the higher credit losses encountered throughout the
financial services industry, limited availability of market liquidity, and the impact from economic conditions on these borrowers.
Components of the Loan Portfolio
For purposes of the disclosures required pursuant to the adoption of amendments to ASC 310, the loan portfolio was disaggregated into segments and then further disaggregated into classes for certain disclosures. A portfolio segment is defined as the level at which an entity develops and documents a systematic
method for determining its allowance for credit losses. A class is generally determined based on the initial measurement attribute (i.e. amortized cost or purchased credit impaired), risk characteristics of the loan, and an entitys method for monitoring and assessing credit risk. Commercial loan portfolio segments
include commercial, financial and industrial (C&I) and commercial real estate (CRE). Commercial classes within C&I include general C&I, mortgage warehouse lending and the TRUPs portfolios. Mortgage warehouse lending includes commercial lines of credit to qualified mortgage companies exclusively for the
temporary warehousing of eligible mortgage loans prior to the borrowers sale of those mortgage loans to third party investors. Commercial classes within commercial real estate include income CRE and residential CRE. Retail loan portfolio segments include consumer real estate, permanent mortgage, and the
combined credit card and other portfolios. Retail classes include HELOC and real estate (R/E) installment loans within the consumer real estate segment, permanent mortgage (which is both a segment and a class), and credit card and other. Restricted real estate loans include HELOCs that were previously
securitized on
120
FIRST HORIZON NATIONAL CORPORATION
Note 4 q Loans (continued)
balance sheet as well as HELOC and some permanent mortgages that were consolidated on January, 1, 2010, in conjunction with the adoption of amendments to ASC 810. See Note 1 for additional discussion of this accounting standard adoption. Due to the winding down nature and decreasing size of the One-
time close (OTC) residential construction portfolio, in most cases the remaining balances and activity of this portfolio has been combined with and included within the other retail class.
Allowance for Loan Losses
As previously discussed in Note 1, the Allowance for loan losses includes the following components: reserves for commercial loans evaluated based on pools of credit graded loans and reserves for pools of smaller-balance homogeneous retail loans, both determined in accordance with the ASC Topic related to
Contingencies (ASC 450-20-50). The reserve factors applied to these pools are an estimate of probable incurred losses based on managements evaluation of historical net losses from loans with similar characteristics and are subject to adjustment by management to reflect current events, trends, and conditions
(including economic considerations and trends.) The slow economic recovery, weak housing market and elevated unemployment levels are examples of additional factors considered by management in determining the allowance for loan losses. Also included are reserves, determined in accordance with the
Receivables Topic (ASC 310-10-45), for loans determined by management to be individually impaired. See additional discussion under Impaired Loans.
To assess the quality of individual commercial loans, commercial loans are internally assigned a credit grade ranging from 1 to 16. This credit grading system is intended to identify and measure the credit quality of the loan portfolio by analyzing the migration of loans between grading categories. It is also integral to
the estimation methodology utilized in determining the allowance for loan losses since an allowance is established for pools of commercial loans based on the credit grade assigned. The appropriate relationship manager performs the process of categorizing commercial loans into the appropriate credit grades, initially
as a component of the approval of the loan, and subsequently throughout the life of the loan as part of our servicing regimen. The proper loan grade for larger exposures is confirmed by a senior credit officer in the approval process. To determine the most appropriate credit grade for each loan, FHN utilizes a
credit risk grading system that employs scorecards for particular categories of loans. The scorecards consist of a number of objective and subjective measures that are weighted in a manner that produces a rank ordering of risk within pass-graded credits. Loan grades are frequently reviewed by Credit Risk
Assurance to determine if the process continues to result in accurate loan grading across the portfolio.
The ALLL for smaller-balance homogenous retail loans is determined based on pools of similar loan types that have similar credit risk characteristics. FHN manages retail loan credit risk on a class basis. Reserves by portfolio are determined using analytical models that incorporate various factors including, historical
delinquency trends, experienced loss frequencies, and experienced loss severities. Generally, reserves for retail loans reflect probable incurred losses in the portfolio that are expected to be recognized over the following twelve months.
FIRST HORIZON
NATIONAL CORPORATION
121
Note 4 q Loans (continued)
The following table provides a rollforward of the allowance for loan losses by portfolio segment for 2010, 2009, and 2008:
(Dollars in thousands)
C&I
Commercial Real Estate
Consumer Real Estate (a)
Permanent Mortgage (b)
Credit Card and Other (c)
Total
Balance as of January 1, 2008
$
93,322
$
130,447
$
45,001
$
993
$
72,578
$
342,341
Divestitures
-
(370
)
-
-
-
(370
)
Charge-offs
(105,621
)
(193,518
)
(124,102
)
(6,913
)
(162,275
)
(592,429
)
Recoveries
4,495
2,386
7,269
546
4,972
19,668
Provision
199,697
260,980
253,650
58,959
306,714
1,080,000
Balance as of December 31, 2008
191,893
199,925
181,818
53,585
221,989
849,210
Allowance individually evaluated for impairment
6,556
5,747
-
-
-
12,303
Allowance collectively evaluated for impairment
185,337
194,178
181,818
53,585
221,989
836,907
Loans, net of unearned as of December 31, 2008:
Individually evaluated for impairment
43,918
430,172
1,361
1,939
7,389
484,779
Collectively evaluated for impairment
7,775,537
2,846,279
7,748,008
1,124,845
1,298,742
20,793,411
Total loans, net of unearned
7,819,455
3,276,451
7,749,369
1,126,784
1,306,131
21,278,190
Balance as of January 1, 2009
191,893
199,925
181,818
53,585
221,989
849,210
Charge offs
(129,283
)
(277,461
)
(224,853
)
(63,004
)
(182,360
)
(876,961
)
Recoveries
7,594
10,790
16,244
797
9,240
44,665
Provision
206,444
272,471
241,879
132,518
26,688
880,000
Balance as of December 31, 2009
276,648
205,725
215,088
123,896
75,557
896,914
Allowance individually evaluated for impairment
18,048
2,746
5,997
3,996
857
31,644
Allowance collectively evaluated for impairment
258,600
202,979
209,091
119,900
74,700
865,270
Loans, net of unearned as of December 31, 2009:
Individually evaluated for impairment
103,616
405,458
25,766
26,229
3,098
564,167
Collectively evaluated for impairment
7,046,168
2,008,492
6,905,668
1,059,439
539,950
17,559,717
Total loans, net of unearned
7,149,784
2,413,950
6,931,434
1,085,668
543,048
18,123,884
Balance as of January 1, 2010
276,648
205,725
215,088
123,896
75,557
896,914
Adjustment due to amendments of ASC 810
-
-
16,106
8,472
-
24,578
Charge-offs
(97,272
)
(127,323
)
(233,269
)
(71,113
)
(47,564
)
(576,541
)
Recoveries
11,630
13,030
16,300
1,658
7,230
49,848
Provision
48,463
63,653
178,125
2,096
(22,337
)
270,000
Balance as of December 31, 2010
239,469
155,085
192,350
65,009
12,886
664,799
Allowance individually evaluated for impairment
61,327
17,395
19,691
16,678
267
115,358
Allowance collectively evaluated for impairment
178,142
137,690
172,659
48,331
12,619
549,441
Loans, net of unearned as of December 31, 2010:
Individually evaluated for impairment
213,405
242,143
69,775
96,765
764
622,852
Collectively evaluated for impairment
7,124,750
1,428,381
6,249,637
1,045,792
311,160
16,159,720
Total loans, net of unearned
$
7,338,155
$
1,670,524
$
6,319,412
$
1,142,557
$
311,924
$
16,782,572
(a)
2010 includes $42.1 million of reserves and $701.8 million of balances in restricted consumer real estate loans.
(b)
2010 includes $5.4 million of reserves and $55.7 million of balances in restricted permanent mortgage loans.
(c)
Includes OTC.
122
FIRST HORIZON NATIONAL CORPORATION
Note 4 q Loans (continued)
Impaired Loans
Generally, classified nonaccrual commercial loans over $1 million are deemed to be impaired and are assessed for impairment measurement in accordance with ASC 310-10. Under ASC 310-10, individually impaired loans are measured based on the present value of expected future payments discounted at the
loans effective interest rate (the DCF method), observable market prices, or for loans that are solely dependent on the collateral for repayment, the estimated fair value of the collateral less estimated costs to sell (net realizable value). For loans measured using the DCF method or by observable market prices, if
the recorded investment in the impaired loan exceeds this amount, a specific allowance is established as a component of the allowance for loan and lease losses; however, for impaired collateral-dependent loans, FHN will, a majority of the time, charge off the full difference between the book value and the best
estimate of net realizable value. Also, all commercial and retail consumer loans classified as troubled debt restructurings are deemed to be impaired and are assessed for impairment measurement in accordance with ASC 310-10.
The average balance of impaired loans was $593.5 million for 2010, $532.2 million for 2009, and $328.3 million for 2008. The tables below provide loan classes with the amount of recorded investment in impaired loans for which there is a related allowance for loan loss, the amount of recorded investment in
impaired loans where there is no related allowance for loan loss, and the total unpaid principle balance of impaired loans as of December 31, 2010 and 2009.
(Dollars in thousands)
2010
Recorded Investment
Unpaid Principal Balance
Related Allowance
Impaired loans with no related allowance recorded:
Commercial:
General C&I
$
44,459
$
65,929
$
-
TRUPs
25,406
28,000
-
Income CRE
107,888
176,650
-
Residential CRE
59,402
127,126
-
Total
$
237,155
$
397,705
$
-
Impaired loans with related allowance recorded:
Commercial:
General C&I
$
116,275
$
117,644
$
34,061
TRUPs
27,266
30,000
27,266
Income CRE
34,540
36,974
8,821
Residential CRE
40,313
44,091
8,574
Total
$
218,394
$
228,709
$
78,722
Retail:
HELOC
$
25,375
$
25,375
$
7,161
R/E Installment Loan
44,399
44,399
12,530
Permanent Mortgage
96,765
96,765
16,679
Credit Card & Other
764
764
266
Total
$
167,303
$
167,303
$
36,636
Total commercial
$
455,549
$
626,414
$
78,722
Total retail
$
167,303
$
167,303
$
36,636
Total impaired loans
$
622,852
$
793,717
$
115,358
FIRST HORIZON
NATIONAL CORPORATION
123
Note 4 q Loans (continued)
(Dollars in thousands)
2009
Recorded Investment
Unpaid Principal Balance
Related Allowance
Impaired loans with no related allowance recorded:
Commercial:
General C&I
$
33,123
$
103,726
$
-
TRUPs
10,549
12,700
-
Income CRE
148,359
224,830
-
Residential CRE
222,676
365,273
-
Total
$
414,707
$
706,529
$
-
Impaired loans with related allowance recorded:
Commercial:
General C&I
$
32,757
$
34,334
$
7,220
TRUPs
27,186
30,000
10,828
Income CRE
21,259
24,904
1,898
Residential CRE
13,165
16,402
847
Total
$
94,367
$
105,640
$
20,793
Retail:
HELOC
$
6,931
$
6,931
$
1,613
R/E Installment Loan
18,835
18,835
4,384
Permanent Mortgage
26,229
26,229
3,997
OTC
3,098
3,098
857
Total
$
55,093
$
55,093
$
10,851
Total commercial
$
509,074
$
812,169
$
20,793
Total retail
$
55,093
$
55,093
$
10,851
Total impaired loans
$
564,167
$
867,262
$
31,644
Asset Quality Indicators
As previously discussed, FHN employs a dual-grade commercial risk grading methodology to assign a probability of default (PD) estimate and loss given default for each commercial loan. The methodology utilizes multiple scorecards that have been developed using a combination of objective and subjective factors
specific to various portfolio segments that result in a rank ordering of risk and the assignment of grades PD 1 to PD 16. Each grade corresponds to an estimated one-year default probability percentage; a PD 1 has the lowest expected default probability, and probabilities increase as grades progress down the scale.
PD 1 through PD 11 are pass grades. PD 12 is referred to as the pass-watch grade and is assigned when a credit is judged to need additional attention. PD 13-16 corresponds to the regulatory-defined categories of special mention (13), substandard (14), doubtful (15), and loss (16). FHN utilizes these grades
to measure, monitor and asses credit risk with the commercial loan portfolio. Loans are categorized into the appropriate grade, initially as a component of the approval of the loan, and subsequently throughout the life of the loan. Pass loan grades are required to be re-assessed annually or whenever there has been
a material change in the financial condition of the borrower or structure of the relationship. Loans graded 13 or worse are re-assessed on a quarterly basis.
124
FIRST HORIZON NATIONAL CORPORATION
Note 4 q Loans (continued)
The following tables provide the period end balances of commercial loan portfolio classes, disaggregated by PD grade for 2010 and 2009:
(Dollars in millions)
2010
General C&I
Mortgage Warehouse Lending
TRUPS (a)
Income CRE
Residential CRE
Total
PD Grade:
1
$
86
$
-
$
-
$
-
$
-
$
86
2
87
-
-
4
-
91
3
143
-
-
16
-
159
4
199
-
-
8
-
207
5
360
-
-
24
1
385
6
666
88
-
53
-
807
7
855
214
-
96
5
1,170
8
997
387
-
151
5
1,540
9
491
112
-
146
3
752
10
463
12
-
82
4
561
11
493
-
-
113
3
609
12
246
2
-
30
7
285
13
422
-
276
167
14
879
14,15,16
423
2
101
375
121
1,022
Total loans collectively evaluated for impairment
5,931
817
377
1,265
163
8,553
Total loans individually evaluated for impairment
161
-
53
142
100
456
Total commercial loans
$
6,092
$
817
$
430
$
1,407
$
264
$
9,009
(a)
Presented net of $35.6 million LOCOM valuation allowance. Based on the underlying structure of the notes, the highest possible internal grade is 13. Portfolio reserve estimate considers recent financial performance of individual borrowers and other factors.
FIRST HORIZON
NATIONAL CORPORATION
125
Note 4 q Loans (continued)
(Dollars in millions)
2009
General C&I
Mortgage Warehouse Lending
TRUPS (a)
Income CRE
Residential CRE
Total
PD Grade:
1
$
74
$
-
$
-
$
-
$
-
$
74
2
36
-
-
4
-
40
3
73
-
-
8
-
81
4
207
-
-
13
-
220
5
412
-
-
31
1
444
6
460
35
-
77
-
572
7
962
101
-
114
4
1,181
8
890
317
-
213
13
1,433
9
519
216
-
178
6
919
10
427
36
-
61
3
527
11
536
-
-
149
11
696
12
314
-
-
97
8
419
13
535
-
299
271
45
1,150
14,15,16
503
2
93
388
313
1,299
Total loans collectively evaluated for impairment
5,948
707
392
1,604
404
9,055
Total loans individually evaluated for impairment
66
-
38
169
236
509
Total commercial loans
$
6,014
$
707
$
430
$
1,773
$
640
$
9,564
(a)
Presented net of $35.6 million LOCOM valuation allowance.
The retail portfolio is comprised primarily of smaller balance loans which are very similar in nature in that most are standard products and are backed by residential real estate. Because of the similarities of retail loan-types, FHN is able to utilize the Fair Isaacs (FICO) score, among other attributes, to assess the
quality of consumer borrowers. FICO scores are refreshed on a quarterly basis and attempt to reflect the recent risk profile of the borrowers. Origination documentation type and accruing delinquency amounts are also other indicators of retail portfolio asset quality.
126
FIRST HORIZON NATIONAL CORPORATION
Note 4 q Loans (continued)
The following tables reflect balances and various asset quality attributes by origination vintage for both the HELOC and real estate installment classes of loans in the Consumer Real Estate loan segment as of December 31, 2010:
HELOC
Period End Balance (a)
Origination Characteristics
Avg Refreshed FICO
Avg orig CLTV
Avg orig FICO
% Broker
% TN
% 1st Lien
Origination Vintage
pre-2003
$
230.3
75.5
%
724
14.2
%
42.3
%
22.7
%
723
2003
321.3
76.3
%
733
24.4
%
25.7
%
15.4
%
730
2004
690.1
79.5
%
729
31.8
%
17.3
%
18.8
%
722
2005
855.3
79.5
%
735
16.5
%
17.0
%
11.7
%
722
2006
629.6
76.8
%
742
7.0
%
24.4
%
13.6
%
730
2007
629.6
77.5
%
746
13.8
%
28.9
%
14.3
%
734
2008
323.1
74.1
%
755
8.8
%
69.7
%
36.8
%
753
2009
204.5
71.8
%
756
0.0
%
86.6
%
45.3
%
759
2010
199.3
73.0
%
758
0.0
%
94.9
%
46.5
%
757
Total
$
4,083.1
77.2
%
740
15.4
%
33.6
%
19.9
%
732
(a)
Includes $701.8 million of restricted loan balances.
R/E Installment Loans
Period End Balance
Origination Characteristics
Avg Refreshed FICO
Avg orig CLTV
Avg orig FICO
% Broker
% TN
% 1st Lien
Origination Vintage
pre-2003
$
82.9
77.2
%
697
17.7
%
62.3
%
67.2
%
727
2003
222.2
72.4
%
726
3.1
%
44.4
%
77.5
%
731
2004
128.1
73.6
%
714
7.2
%
51.4
%
71.5
%
724
2005
343.2
82.5
%
722
25.7
%
21.7
%
27.8
%
721
2006
378.2
78.3
%
723
4.7
%
25.5
%
25.6
%
728
2007
519.9
81.1
%
732
15.7
%
24.2
%
24.3
%
734
2008
210.9
76.8
%
740
5.6
%
78.7
%
78.3
%
751
2009
133.9
71.1
%
753
0.0
%
89.6
%
82.6
%
760
2010
217.1
82.1
%
748
0.0
%
89.2
%
96.5
%
751
Total
$
2,236.4
78.3
%
729
10.3
%
44.4
%
50.2
%
732
FIRST HORIZON
NATIONAL CORPORATION
127
Note 4 q Loans (continued)
The following tables reflect balances and various asset quality attributes by origination vintage for both the HELOC and real estate installment classes of loans in the Consumer Real Estate loan segment as of December 31, 2009:
HELOC
Period End Balance
Origination Characteristics
Avg Refreshed FICO
Avg orig CLTV
Avg orig FICO
% Broker
% TN
% 1st Lien
Origination Vintage
pre-2003
$
274.9
76.0
%
724
14.3
%
42.9
%
22.5
%
722
2003
338.6
75.9
%
735
22.5
%
27.3
%
14.6
%
732
2004
693.1
78.4
%
731
27.7
%
19.6
%
19.2
%
726
2005
1,000.7
79.4
%
735
16.6
%
18.2
%
11.5
%
723
2006
707.6
76.9
%
742
7.2
%
24.2
%
12.7
%
726
2007
701.9
77.7
%
746
14.8
%
27.6
%
13.4
%
733
2008
360.6
74.4
%
756
9.0
%
68.9
%
36.1
%
752
2009
220.2
71.7
%
756
0.0
%
86.0
%
46.2
%
754
Total
$
4,297.6
77.2
%
740
15.4
%
31.0
%
18.1
%
730
R/E Installment Loans
Period End Balance
Origination Characteristics
Avg Refreshed FICO
Avg orig CLTV
Avg orig FICO
% Broker
% TN
% 1st Lien
Origination Vintage
pre-2003
$
113.5
77.0
%
698
19.3
%
61.2
%
67.1
%
695
2003
292.8
72.5
%
727
3.0
%
44.6
%
77.0
%
737
2004
166.5
72.9
%
716
5.5
%
53.7
%
73.1
%
719
2005
454.0
82.1
%
723
25.2
%
23.4
%
28.5
%
719
2006
472.6
77.5
%
725
3.3
%
26.9
%
26.6
%
711
2007
642.8
80.5
%
734
14.4
%
26.2
%
24.5
%
721
2008
309.1
77.4
%
741
10.1
%
72.2
%
71.3
%
737
2009
182.5
72.5
%
753
3.8
%
80.4
%
75.0
%
747
Total
$
2,633.8
77.8
%
730
11.4
%
40.3
%
45.3
%
723
128
FIRST HORIZON NATIONAL CORPORATION
Note 4 q Loans (continued)
The following tables reflect origination documentation type for the permanent mortgage class and remaining OTC loans and accruing delinquency amounts for the smaller credit card and other portfolio classes. Full documentation reflects those loans whereby the borrower provided all necessary financial information
in accordance with underwriting policy prior to origination of the loan. Currently, full documentation would typically require (for example) copies of W-2s, pay stubs and verification of employment. Non full documentation reflects those loans that were originated with anything less than pay stubs, personal financial
statements, and tax returns from potential borrowers. Except for subsequent refinancing or approved modification events, classification of documentation type is determined at origination and is constant throughout the life of the loan.
(Dollars in millions)
Permanent Mortgage (a)
One Time Close
2010
2009
2010
2009
Documentation type:
Full documentation
$
766.2
$
682.9
$
6.0
$
71.4
Non full documentation
356.2
383.6
12.7
151.5
Payment choice (Option ARM)
19.5
18.2
0.5
6.5
Sub-prime
0.7
0.8
-
-
Total
$
1,142.6
$
1,085.5
$
19.2
$
229.4
(a)
2010 includes $55.7 million of restricted loan balances.
(Dollars in millions)
Credit Card
Other Retail
2010
2009
2010
2009
Accruing delinquent balances:
30-89 days past due
$
1.9
$
2.7
$
0.8
$
0.9
90+ days past due
1.6
2.8
0.2
0.1
Total
$
3.5
$
5.5
$
1.0
$
1.0
Nonaccrual and Past Due Loans
Loans are placed on nonaccrual status 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 or if the terms of a loan have been modified through troubled debt restructuring efforts. When a loan is placed on nonaccrual
status, FHN applies the entire amount of any subsequent payments (including interest) to the outstanding principal balance.
FIRST HORIZON
NATIONAL CORPORATION
129
Note 4 q Loans (continued)
The following table reflects accruing and non-accruing loans by class on December 31, 2010:
(Dollars in thousands)
Accruing
Non-Accruing
Total Loans
Current
30-89 Days Past Due
90 + Days Past Due
Total Accruing
Current
30-89 Days Past Due
90 + Days Past Due
Total Non- Accruing
Commercial (C&I):
General C&I
$
5,905,087
$
26,508
$
182
$
5,931,777
$
89,307
$
18,154
$
52,263
$
159,724
$
6,091,501
Mortgage warehouse lending
815,529
-
-
815,529
-
-
1,597
1,597
817,126
TRUPS (a)
376,856
-
-
376,856
-
-
52,672
52,672
429,528
Total commercial (C&I)
7,097,472
26,508
182
7,124,162
89,307
18,154
106,532
213,993
7,338,155
Commercial real estate:
Income CRE
1,248,209
16,915
-
1,265,124
32,248
3,516
105,758
141,522
1,406,646
Residential CRE
144,524
8,409
-
152,933
26,095
3,283
81,567
110,945
263,878
Total commercial real estate
1,392,733
25,324
-
1,418,057
58,343
6,799
187,325
252,467
1,670,524
Consumer real estate:
HELOC (b)
3,972,068
63,884
32,717
4,068,669
8,461
563
5,349
14,373
4,083,042
R/E installment loan
2,158,062
42,010
15,220
2,215,292
13,631
1,287
6,160
21,078
2,236,370
Total consumer real estate
6,130,130
105,894
47,937
6,283,961
22,092
1,850
11,509
35,451
6,319,412
Permanent mortgage (b)
959,431
28,041
29,367
1,016,839
15,088
9,814
100,816
125,718
1,142,557
Credit card & other:
Credit card
188,921
1,912
1,604
192,437
-
-
-
-
192,437
Other (c)
99,259
798
154
100,211
-
-
19,276
19,276
119,487
Total credit card & other
288,180
2,710
1,758
292,648
-
-
19,276
19,276
311,924
Total loans, net of unearned
$
15,867,946
$
188,477
$
79,244
$
16,135,667
$
184,830
$
36,617
$
425,458
$
646,905
$
16,782,572
(a)
Includes LOCOM valuation allowance $35.6 million.
(b)
Includes restricted loans.
(c)
Includes OTC. All nonaccruing balances reflect OTC.
130
FIRST HORIZON NATIONAL CORPORATION
Note 4 q Loans (continued)
The following table reflects accruing and non-accruing loans by class on December 31, 2009:
(Dollars in thousands)
Accruing
Non-Accruing
Total Loans
Current
30-89 Days Past Due
90 + Days Past Due
Total Accruing
Current
30-89 Days Past Due
90 + Days Past Due
Total Non- Accruing
Commercial (C&I):
General C&I
$
5,849,780
$
65,487
$
2,856
$
5,918,123
$
47,700
$
3,533
$
44,269
$
95,502
$
6,013,625
Mortgage warehouse lending
704,458
-
-
704,458
-
-
2,227
2,227
706,685
TRUPS (a)
391,739
-
-
391,739
-
-
37,735
37,735
429,474
Total commercial (C&I)
6,945,977
65,487
2,856
7,014,320
47,700
3,533
84,231
135,464
7,149,784
Commercial real estate:
Income CRE
1,534,984
51,267
4,303
1,590,554
18,374
12,769
152,427
183,570
1,774,124
Residential CRE
341,348
23,737
-
365,085
5,852
2,450
266,439
274,741
639,826
Total commercial real estate
1,876,332
75,004
4,303
1,955,639
24,226
15,219
418,866
458,311
2,413,950
Consumer real estate:
HELOC
4,192,231
55,120
41,273
4,288,624
1,960
874
6,128
8,962
4,297,586
R/E installment loan
2,561,442
38,667
24,801
2,624,910
3,607
756
4,575
8,938
2,633,848
Total consumer real estate
6,753,673
93,787
66,074
6,913,534
5,567
1,630
10,703
17,900
6,931,434
Permanent mortgage
895,553
32,220
59,986
987,759
11,358
1,682
84,869
97,909
1,085,668
Credit card & other:
Credit card
186,563
2,657
2,816
192,036
-
-
-
-
192,036
Other (b)
137,512
21,866
1,788
161,166
-
4,572
185,274
189,846
351,012
Total credit card & other
324,075
24,523
4,604
353,202
-
4,572
185,274
189,846
543,048
Total loans, net of unearned
$
16,795,610
$
291,021
$
137,823
$
17,224,454
$
88,851
$
26,636
$
783,943
$
899,430
$
18,123,884
(a)
Includes LOCOM valuation allowance $35.6 million.
(b)
Includes OTC. All nonaccruing balances reflect OTC.
On December 31, 2010 and 2009, FHN had loans classified as troubled debt restructurings of $282.8 million and $72.8 million, respectively. Additionally, FHN had restructured $56.0 million of loans held for sale as of December 31, 2010. For restructured loans in the portfolio, FHN had loan loss reserves of
$54.9 million, or 19 percent, as of December 31, 2010. On December 31, 2010 and 2009, there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured.
Amounts due from customers on acceptances and bank acceptances outstanding of $3.5 million, $2.9 million, and $2.0 million on December 31, 2010, 2009, and 2008, respectively, are included in Other assets and in Other liabilities on the Consolidated Statements of Condition. OTC loans provided construction
and permanent mortgage financing to individuals for the purpose of constructing a home. Upon completion of construction, the permanent mortgage had historically been classified as held for sale and sold. Due to the market disruptions experienced in 2008, demand in the secondary market for many of these
permanent mortgages decreased significantly. FHN currently transfers the loans to held for sale or retains them in the loan portfolio based upon managements ability and intent at the time of conversion to permanent financing. FHN transferred $.2 billion and $.1 billion of OTC loans from the loan portfolio to held-
for-sale in 2009 and 2008, respectively. There were no transfers in 2010. Additionally, FHN transferred $4.4 billion and $.6 billion of consumer real estate loans from held for sale into the loan portfolio in 2009, and 2008, respectively. There were no transfers in 2010.
FIRST HORIZON
NATIONAL CORPORATION
131
Note 5 q Premises, Equipment and Leases
Premises and equipment on December 31 are summarized below:
(Dollars in thousands)
2010
2009
Land
$
66,914
$
67,047
Buildings
338,060
333,450
Leasehold improvements
44,880
43,156
Furniture, fixtures, and equipment
213,289
190,289
Premises and equipment, at cost
663,143
633,942
Less accumulated depreciation and amortization
340,824
320,118
Premises and equipment, net
$
322,319
$
313,824
FHN is obligated under a number of noncancelable operating leases for premises and equipment with terms up to 30 years, which may include the payment of taxes, insurance and maintenance costs.
Minimum future lease payments for noncancelable operating leases on premises and equipment on December 31, 2010, are shown below:
(Dollars in thousands)
2011
$
23,108
2012
17,329
2013
12,169
2014
9,843
2015
7,721
2016 and after
38,456
Total minimum lease payments
$
108,626
Payments required under capital leases are not material.
Aggregate minimum income under sublease agreements for these periods is $2.5 million.
Rent expense incurred under all operating lease obligations for the years ended December 31 is as follows:
(Dollars in thousands)
2010
2009
2008
Rent expense, gross
$
32,673
$
38,070
$
61,496
Sublease income
(4,275
)
(4,368
)
(4,043
)
Rent expense, net
$
28,398
$
33,702
$
57,453
Note 6 q Mortgage Servicing Rights
FHN recognizes all classes of mortgage servicing rights at fair value. Classes of MSR are established based on market inputs used to determine the fair value of the servicing asset and FHNs risk management practices. See Note 22 Fair Value, the Determination of Fair Value section for a discussion of FHNs
MSR valuation methodology and Note 25 Derivatives and Off-Balance Sheet Arrangements for a discussion of how FHN hedges the fair value of MSR. The balance of MSR included on the Consolidated Statements of Condition represents the rights to service approximately $28.8 billion and $42.2 billion of mortgage
loans on December 31, 2010, and 2009, respectively, for which a servicing right has been capitalized.
In first quarter 2010, FHN adopted the amendments to ASC 810 which resulted in the consolidation of loans FHN previously sold through proprietary securitizations but retained MSR and significant subordinated interests subsequent to the transfer. In conjunction with the consolidation of these loans, FHN
derecognized the associated servicing assets which are reflected in the rollfoward below.
132
FIRST HORIZON NATIONAL CORPORATION
Note 6 q Mortgage Servicing Rights (continued)
In third quarter 2009, FHN reviewed the allocation of fair value between MSR and excess interest from prior first lien loan sales and securitizations and as a result, there was a net $11.1 million reclassification from trading securities to MSR. The reclassification had no effect on FHNs Consolidated Statements of
Income as excess interest and MSR are highly correlated in valuation and both are recognized at fair value with changes in fair value being included within mortgage banking income. Following is a summary of changes in capitalized MSR as of December 31, 2010 and 2009:
(Dollars in thousands)
First Liens
Second Liens
HELOC
Total
Fair value on January 1, 2009
$
354,394
$
13,558
$
8,892
$
376,844
Addition of mortgage servicing rights
189
-
11
200
Reductions due to loan payments
(58,455
)
(4,777
)
(2,818
)
(66,050
)
Reductions due to sale
(77,591
)
(8,134
)
(1,548
)
(87,273
)
Reclassification from trading securities
11,077
-
-
11,077
Changes in fair value due to:
Changes in valuation model inputs or assumptions
67,940
45
-
67,985
Other changes in fair value
(1,439
)
482
785
(172
)
Fair value on December 31, 2009
$
296,115
$
1,174
$
5,322
$
302,611
Adjustment due to adoption of amendments to ASC 810
(197
)
(928
)
(1,168
)
$
(2,293
)
Reductions due to loan payments
(34,943
)
(41
)
(1,201
)
(36,185
)
Reductions due to sale
(24,558
)
-
-
(24,558
)
Reductions due to exercise of cleanup calls
(1,110
)
-
-
(1,110
)
Changes in fair value due to:
Changes in valuation model inputs or assumptions
(31,296
)
-
-
(31,296
)
Other changes in fair value
(199
)
57
292
150
Fair value on December 31, 2010
$
203,812
$
262
$
3,245
$
207,319
Servicing, late, and other ancillary fees recognized within mortgage banking income were $92.1 million, $120.4 million, and $232.6 million for the years ended December 31, 2010, 2009, and 2008, respectively. Servicing, late, and other ancillary fees recognized within all other income and commissions were $3.8
million, $12.4 million, and $16.8 million for the years ended December 31, 2010, 2009, and 2008, respectively.
The total value of MSR declined $95.3 million during 2010. In 2010, FHN sold the rights to service $5.4 billion of loans, which resulted in a $24.6 million reduction in MSR attributable to loan sales. The balance decreased an additional $36.2 million due to loan payments. A decrease in mortgage rates during the
year led to higher assumed prepayment speeds and resulted in a decrease in value of $31.1 million. In the fourth quarter of 2010, FHN exercised cleanup calls from proprietary securitization trusts that had previously been securitized with servicing retained. As these loans are now included on the Consolidated
Statements of Condition, FHN derecognized $1.1 million of associated servicing assets.
In 2009, FHN sold the rights to service $14.2 billion of loans, which resulted in an $87.3 million reduction in MSR attributable to loan sales. The balance decreased an additional $66.1 million due to loan payments. An increase in mortgage rates during the year led to a decline in assumed prepayment speeds and
resulted in an increase in value of $67.8 million.
FHN services a portfolio of mortgage loans related to transfers performed by other parties utilizing securitization trusts. The servicing assets represent FHNs sole interest in these transactions. The total MSR recognized by FHN related to these transactions was $4.2 million and $7.0 million at December 31, 2010
and 2009, respectively. The aggregate principal balance serviced by FHN for these transactions was $.7 billion and $.9 billion at December 31, 2010 and 2009, respectively. FHN has no obligation to provide financial support and has not provided any form of support to the related trusts. The MSR recognized by
FHN has been included in the first lien mortgage loans column within the rollforward of MSR.
FIRST HORIZON
NATIONAL CORPORATION
133
Note 6 q Mortgage Servicing Rights (continued)
In prior periods FHN transferred MSR to third parties in transactions that did not qualify for sales treatment due to certain recourse provisions that were included within the sale agreements. FHN had $27.3 million and $39.7 million of MSR related to these transactions, respectively for the years ended December
31, 2010 and 2009, respectively. These MSR are included within the first liens mortgage loans column within the rollforward of MSR. The proceeds from these transfers have been recognized within other short term borrowings and commercial paper in the Consolidated Statements of Condition as of December 31,
2010 and 2009.
Note 7 q Intangible Assets
The following is a summary of intangible assets, net of accumulated amortization, included in the Consolidated Statements of Condition:
(Dollars in thousands)
Goodwill
Other Intangible Assets (a)
December 31, 2007
$
192,408
$
56,907
Amortization expense
-
(8,229
)
Impairment (b) (c)
-
(4,034
)
Divestitures (c)
-
(32
)
Additions
-
470
December 31, 2008
$
192,408
$
45,082
Amortization expense
-
(6,017
)
Impairment (b) (c)
(16,591
)
(341
)
Divestitures (c)
(10,289
)
(815
)
Additions
-
347
December 31, 2009
$
165,528
$
38,256
Amortization expense
-
(5,526
)
Impairment (b) (c)
(3,348
)
-
Additions
-
151
December 31, 2010
$
162,180
$
32,881
(a)
Represents customer lists, acquired contracts, premium on purchased deposits, and covenants not to compete.
(b)
See Note 26 Restructuring, Repositioning, and Efficiency for further details related to goodwill impairments.
(c)
See Note 2 Acquisitions and Divestitures for further details regarding goodwill related to divestitures.
The gross carrying amount of other intangible assets subject to amortization is $125.8 million on December 31, 2010, net of $92.9 million of accumulated amortization. Estimated aggregate amortization expense is expected to be $5.3 million, $4.3 million, $3.9 million, $3.6 million, and $3.4 million for the twelve-
month periods of 2011, 2012, 2013, 2014, and 2015, respectively.
In 2010, FHN recognized $3.3 million of goodwill impairments relating to the exit of FTN ECM operations. FHN also recognized an addition of other intangible assets of $.2 million related to the purchase of a book of business.
In 2009, FHNs non-strategic segment incurred pre-tax goodwill impairments of $14.3 million related to the initial agreement to sell FTN ECM. In connection with the divestiture of the Atlanta insurance business and FERP, FHN recognized goodwill write-offs of $8.0 million and $2.3 million, respectively, which are
included in Losses on divestitures on the Consolidated Statements of Income. As a result of the closure of the remaining Atlanta insurance business that was excluded from the sale, there was an additional goodwill impairment of $2.3 million. FHN also recognized $.3 million of other intangible impairments related
to customer lists, $.8 million of write-offs related to disposals, and additions of $.3 million.
In 2008, FHN recognized $4.0 million of intangible impairments. The impairments were related to noncompete agreements associated with the divestiture of certain mortgage banking operations and the write-off of state banking licenses due to FHNs focus on the Tennessee-based regional banking market.
134
FIRST HORIZON NATIONAL CORPORATION
Note 7 q Intangible Assets (continued)
The following is a summary of gross goodwill and accumulated impairment losses and write-offs detailed by reportable segments included in the Consolidated Statements of Condition through December 31, 2010. Gross goodwill, accumulated impairments, and accumulated divestiture-related write-offs were determined beginning on January 1, 2002, when a change in accounting requirements resulted in goodwill being assessed
for impairment rather being amortized.
(Dollars in thousands)
Non-Strategic
Regional Banking
Capital Markets
Total
Gross goodwill
$
171,474
$
64,759
$
97,421
$
333,654
Accumulated impairments
(84,084
)
-
-
(84,084
)
Accumulated divestiture related write-offs
(57,162
)
-
-
(57,162
)
Net goodwill balance as of December 31, 2007
$
30,228
$
64,759
$
97,421
$
192,408
Additions
-
-
-
-
Impairments
-
-
-
-
Divestitures
-
-
-
-
Net change in goodwill during 2008
$
-
$
-
$
-
$
-
Gross goodwill
$
171,474
$
64,759
$
97,421
$
333,654
Accumulated impairments
(84,084
)
-
-
(84,084
)
Accumulated divestiture related write-offs
(57,162
)
-
-
(57,162
)
Net goodwill balance as of December 31, 2008
$
30,228
$
64,759
$
97,421
$
192,408
Additions
-
-
-
-
Impairments
(16,591
)
-
-
(16,591
)
Divestitures
(10,289
)
-
-
(10,289
)
Net change in goodwill during 2009
(26,880
)
-
-
(26,880
)
Gross goodwill
$
171,474
$
64,759
$
97,421
$
333,654
Accumulated impairments
(100,675
)
-
-
(100,675
)
Accumulated divestiture related write-offs
(67,451
)
-
-
(67,451
)
Net goodwill balance as of December 31, 2009
$
3,348
$
64,759
$
97,421
$
165,528
Additions
-
-
-
-
Impairments
(3,348
)
-
-
(3,348
)
Divestitures
-
-
-
-
Net change in goodwill during 2010
(3,348
)
-
-
(3,348
)
Gross goodwill
$
171,474
$
64,759
$
97,421
$
333,654
Accumulated impairments
(104,023
)
-
-
(104,023
)
Accumulated divestiture related write-offs
(67,451
)
-
-
(67,451
)
December 31, 2010
$
-
$
64,759
$
97,421
$
162,180
Note 8 q Time Deposit Maturities
Following is a table of maturities for time deposits outstanding on December 31, 2010, which include Certificates of deposit under $100,000 and, Other time, and Certificates of deposit $100,000 and more. Certificates of deposit $100,000 and more totaled $.6 billion on December 31, 2010. Time deposits are
included in Interest-bearing deposits on the Consolidated Statements of Condition.
(Dollars in thousands)
2011
$
1,140,985
2012
280,227
2013
169,718
2014
211,199
2015
77,298
2016 and after
73,318
Total
$
1,952,745
FIRST HORIZON
NATIONAL CORPORATION
135
Note 9 q Short-Term Borrowings
Short-term borrowings include federal funds purchased and securities sold under agreements to repurchase, commercial paper, trading liabilities, and other borrowed funds.
Federal funds purchased and securities sold under agreements to repurchase and commercial paper generally have maturities of less than 90 days. Trading liabilities, which represent short positions in securities, are generally held for less than 90 days. Other short-term borrowings have original maturities of one
year or less. On December 31, 2010, capital markets trading securities with a fair value of $5.7 million were pledged to secure other short-term borrowings.
The detail of these borrowings for the years 2010, 2009, and 2008 is presented in the following table:
(Dollars in thousands)
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
Commercial Paper
Trading Liabilities
Other Short-term Borrowings
2010
Average balance
$
2,615,536
$
-
$
547,377
$
227,772
Year-end balance
2,114,908
-
361,920
180,735
Maximum month-end outstanding
3,046,201
-
654,748
693,512
Average rate for the year
.24
%
-
3.30
%
.56
%
Average rate at year-end
.22
-
3.01
.18
2009
Average balance
$
2,486,296
$
159
$
536,161
$
2,662,830
Year-end balance
2,874,353
-
293,387
761,758
Maximum month-end outstanding
2,874,353
310
565,858
4,734,408
Average rate for the year
.21
%
1.57
%
3.89
%
.29
%
Average rate at year-end
.17
-
4.13
.17
2008
Average balance
$
3,409,496
$
2,325
$
702,407
$
5,136,144
Year-end balance
1,751,079
3,130
359,502
4,276,559
Maximum month-end outstanding
6,433,001
3,355
1,503,348
6,461,018
Average rate for the year
2.04
%
2.79
%
4.73
%
2.33
%
Average rate at year-end
.25
.51
4.82
.79
136
FIRST HORIZON NATIONAL CORPORATION
Note 10 q Term Borrowings
The following table presents information pertaining to Term Borrowings reported on FHNs Consolidated Statements of Condition on December 31:
(Dollars in thousands)
2010
2009
First Tennessee Bank National Association:
Subordinated notes (a)
Matures on January 15, 2015 5.05%
$
338,786
$
432,003
Matures on May 15, 2013 4.625%
273,590
272,120
Matures on April 1, 2016 5.65%
287,357
277,214
Bank notes (b)
548,950
697,453
Other collateralized borrowings Matures on December 22, 2037 0.60% on December 31, 2010 and 0.55% on December 31, 2009 (c)
51,241
50,147
Federal Home Loan Bank borrowings (d)
2,870
3,022
Trust preferred debt (e)
-
30,500
First Horizon National Corporation:
Subordinated capital notes (a)
Matures on May 15, 2013 4.50%
109,447
108,875
Senior capital notes (a)
Matures on December 15, 2015 5.375%
500,492
-
Subordinated notes (f)
Matures on January 6, 2027 8.07%
109,308
109,697
Matures on April 15, 2034 6.30%
205,883
214,102
FT Real Estate Securities Company, Inc.:
Cumulative preferred stock (a)
Matures on March 31, 2031 9.50%
45,625
45,557
First Horizon ABS Trust:
Other collateralized borrowings (g)
Matures on October 25, 2034 0.42% on December 31, 2010 and 0.39% on December 31, 2009
144,811
165,107
Matures on October 26, 2026 0.39% on December 31, 2010 and 0.36% on December 31, 2009
203,203
236,226
Matures on September 25, 2029 0.39% on December 31, 2010 and 0.36% on December 31, 2009
220,836
249,110
Matures on January 25, 2024 0.67% on December 31, 2010
17,854
-
Matures on February 25, 2034 0.47% on December 31, 2010
23,109
-
Matures on October 25, 2034 0.54% on December 31, 2010
93,651
-
Matures December 2019 5.00% on December 31, 2010
29,741
-
Matures on September 1, 2032 6.41% on December 31, 2010
21,316
-
Total
$
3,228,070
$
2,891,133
(a)
Qualifies for total capital under the risk-based capital guidelines.
(b)
The bank notes were issued with variable interest rates and have remaining terms of less than 1 year. These bank notes had weighted average interest rates of 0.43 percent and 0.45 percent on December 31, 2010 and 2009, respectively.
(c)
Secured by $51.2 million of trust preferred loans.
(d)
The Federal Home Loan Bank borrowings were issued with fixed interest rates and have remaining terms of 1 to 19 years. These borrowings had weighted average interest rates of 2.40 percent and 2.39 percent on December 31, 2010 and 2009, respectively.
(e)
Trust preferred notes had a weighted average interest rate of 6.04 percent as of December 31, 2009.
(f)
See Note 11 Guaranteed Preferred Beneficial Interests in First Horizons Junior Subordinated Debentures for further details.
(g)
Secured by $757.5 million of retail real estate residential loans. See Note 23 - Loan Sales and Securitizations for further details.
FIRST HORIZON
NATIONAL CORPORATION
137
Note 10 q Term Borrowings (continued)
Annual principal repayment requirements as of December 31, 2010 are as follows:
(Dollars in thousands)
2011
$
549,104
2012
154
2013
350,154
2014
154
2015
804,154
2016 and after
1,414,141
All subordinated notes are unsecured and are subordinate to other present and future senior indebtedness. FTBNAs subordinated notes and FHNs subordinated capital notes qualify as Tier 2 capital under the risk-based capital guidelines. In February 2005, FTBNA established a bank note program providing
additional liquidity of $5.0 billion. This bank note program provided FTBNA with a facility under which it could continuously issue and offer short- and medium-term unsecured notes. FTBNA has not issued any bank notes under the program in the past three years and has suspended it in order to save certain
costs. If FTBNA were to reactivate the program, certain program terms might have to be renegotiated with the note agents to reflect current market practices.
Note 11 q Guaranteed Preferred Beneficial Interests in First Horizons Junior Subordinated Debentures
On December 30, 1996, FHN, through its underwriter, sold $100 million of capital securities. First Tennessee Capital I (Capital I), a Delaware business trust wholly owned by FHN, issued $100 million of Capital Securities, Series A at 8.07 percent. The proceeds were loaned to FHN as junior subordinated debt.
FHN has, through various contractual arrangements, fully and unconditionally guaranteed all of Capital Is obligations with respect to the capital securities. The sole asset of Capital I was $103 million of junior subordinated debentures issued by FHN. These junior subordinated debentures also carried an interest rate
of 8.07 percent. Both the capital securities of Capital I and the junior subordinated debentures of FHN have a scheduled maturity of January 6, 2027; however, FHN redeemed the subordinated debentures and the Capital Securities in whole on January 14, 2011, for a redemption price equal to the liquidation
amount plus accrued and unpaid interest. Prior to notification of redemption in December 2010, the capital securities qualified as Tier 1 capital. The junior subordinated debentures are included in the Consolidated Statements of Condition in Term borrowings (see Note 10 Term Borrowings).
On March 29, 2004, FHN, through its underwriter, sold $200 million of capital securities. First Tennessee Capital II (Capital II), a Delaware business trust wholly owned by FHN, issued $200 million of Capital Securities, Series B at 6.30 percent. The proceeds were loaned to FHN as junior subordinated debt. FHN
has, through various contractual arrangements, fully and unconditionally guaranteed all of Capital IIs obligations with respect to the capital securities. The sole asset of Capital II is $206 million of junior subordinated debentures issued by FHN. These junior subordinated debentures also carry an interest rate of 6.30
percent. Both the capital securities of Capital II and the junior subordinated debentures of FHN will mature on April 15, 2034; however, FHN has the option to redeem both prior to maturity. Currently, the capital securities qualify as Tier 1 capital. Beginning in 2013 Tier 1 capital treatment for these securities will
begin phasing out. The junior subordinated debentures are included in the Consolidated Statements of Condition in Term borrowings (see Note 10 Term Borrowings).
Note 12 q Preferred Stock and Other Capital
FHN Preferred Stock and Warrant
On November 14, 2008, FHN issued and sold 866,540 preferred shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series CPP, along with a Warrant to purchase common stock. The issuance occurred in connection with, and is governed by, the Treasury Capital Purchase Program (Capital Purchase
Program) administered by the U.S. Treasury (UST) under the Troubled Asset Relief Program (TARP). In connection with
138
FIRST HORIZON NATIONAL CORPORATION
Note 12 q Preferred Stock and Other Capital (continued)
the issuance of the Preferred Shares, FHN also issued a Warrant, to purchase 12,743,235 common shares with an exercise price of $10.20 per share. The warrant is immediately exercisable and expires ten years after issuance. As a result of the stock dividends distributed through January 1, 2011, the Warrant
was adjusted to cover 14,842,321 common shares at a purchase price of $8.757 per share. On December 22, 2010, FHN repurchased all of the preferred shares and remitted the accrued and unpaid dividends subsequent to offerings of common equity and debt which raised more than $750 million. As of
December 31, 2010, the Warrant remained outstanding and continues to be held by the UST. The Warrant is presented in permanent equity on the Consolidated Statements of Condition in the amount of $83.9 million. Upon issuance of the preferred shares and common stock warrant, the proceeds received were
allocated between the common stock warrant and preferred shares based on their relative fair values. The fair value of the preferred shares was determined by calculating the present value of expected cash flows using a 9.40 percent discount rate. The discount was being amortized over the initial five-year period
using the constant yield method. Upon redemption of the preferred shares, FHN accelerated the amortization of the remaining discount which is included in preferred stock dividends on the Consolidated Statements of Income. The fair value of the Warrant, which was determined using the Black Scholes Options
Pricing Model, assumed redemption prior to the increase in dividend rate on the five year anniversary. The warrant provides a mechanism for the parties to explore a possible repurchase by the issuer, and FHN is considering its options. Any such repurchase would be subject to agreement by both parties as well
as regulatory assent. If no repurchase ultimately occurs, UST has indicated its current intention to dispose of the warrant by other means pursuant to its terms rather than hold the warrant indefinitely.
Subsidiary Preferred Stock
On September 14, 2000, FT Real Estate Securities Company, Inc. (FTRESC), an indirect subsidiary of FHN, issued 50 shares of 9.50 percent Cumulative Preferred Stock, Class B (Class B Preferred Shares), with a liquidation preference of $1.0 million per share. An aggregate total of 47 Class B Preferred
Shares have been sold privately to nonaffiliates. These securities qualify as Tier 2 capital and are presented in the Consolidated Statements of Condition as Term borrowings. FTRESC is a real estate investment trust (REIT) established for the purpose of acquiring, holding, and managing real estate mortgage
assets. Dividends on the Class B Preferred Shares are cumulative and are payable semi-annually.
The Class B Preferred Shares are mandatorily redeemable on March 31, 2031, and redeemable at the discretion of FTRESC in the event that the Class B Preferred Shares cannot be accounted for as Tier 2 regulatory capital or there is more than an insubstantial risk that dividends paid with respect to the Class B
Preferred Shares will not be fully deductible for tax purposes. They are not subject to any sinking fund and are not convertible into any other securities of FTRESC, FHN or any of its subsidiaries. The shares are, however, automatically exchanged at the direction of the Office of the Comptroller of the Currency for
preferred stock of FTBNA, having substantially the same terms as the Class B Preferred Shares in the event FTBNA becomes undercapitalized, insolvent or in danger of becoming undercapitalized.
First Horizon Preferred Funding, LLC and First Horizon Preferred Funding II, LLC have each issued $1.0 million of Class B Preferred Shares. On December 31, 2010, 2009, and 2008, the amount of Class B Preferred Shares that are perpetual in nature that was recognized as Noncontrolling interest on the
Consolidated Statements of Condition was $.3 million for all periods. The remaining balance has been eliminated in consolidation.
On March 23, 2005, FTBNA issued 300,000 shares of Class A Non-Cumulative Perpetual Preferred Stock (Class A Preferred Stock) with a liquidation preference of $1,000 per share. These securities qualify as Tier 1 capital. On December 31, 2010, 2009, and 2008, $294.8 million of Class A Preferred Stock was
recognized as Noncontrolling interest on the Consolidated Statements of Condition for all periods.
Due to the nature of the subsidiary preferred stock issued by First Horizon Preferred Funding, LLC, First Horizon Preferred Funding II, LLC, and FTBNA, all components of other comprehensive income/(loss) included in the Consolidated Statements of Equity and income/(loss) from discontinued operations, net of tax
included in the Consolidated Statements of Income have been attributed solely to FHN as the controlling interest holder. The component of income/(loss) from continuing operations attributable to FHN as the controlling interest holder is $57.1 million, $(257.0) million, and $(188.5) million during 2010, 2009, and
2008, respectively.
FIRST HORIZON
NATIONAL CORPORATION
139
Note 13 q Regulatory Capital
FHN is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on FHNs financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of assets, liabilities, and certain derivatives as calculated under regulatory accounting practices must be met. Capital amounts and classification are
also subject to qualitative judgment by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require FHN to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to
average assets (Leverage). Management believes, as of December 31, 2010, that FHN met all capital adequacy requirements to which it was subject.
The actual capital amounts and ratios of FHN and FTBNA are presented in the table below. In addition, FTBNA must also calculate its capital ratios after excluding financial subsidiaries as defined by the Gramm-Leach-Bliley Act of 1999. Based on this calculation, FTBNAs Total Capital, Tier 1 Capital, and Leverage
ratios were 18.69 percent, 15.03 percent, and 11.95 percent, respectively, on December 31, 2010, and were 19.64 percent, 15.16 percent, and 12.56 percent, respectively, on December 31, 2009.
(Dollars in thousands)
First Horizon National Corporation
First Tennessee Bank National Association
Amount
Ratio
Amount
Ratio
On December 31, 2010:
Actual:
Total Capital
$
3,749,586
18.65
%
$
4,032,289
20.26
%
Tier 1 Capital
2,812,471
13.99
3,137,624
15.76
Leverage
2,812,471
10.96
3,137,624
12.33
For Capital Adequacy Purposes:
Total Capital
1,608,222
≥
8.00
1,592,416
≥
8.00
Tier 1 Capital
804,111
≥
4.00
796,208
≥
4.00
Leverage
1,026,597
≥
4.00
1,018,136
≥
4.00
To Be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital
1,990,520
≥
10.00
Tier 1 Capital
1,194,312
≥
6.00
Leverage
1,272,670
≥
5.00
On December 31, 2009:
Actual:
Total Capital
$
4,691,010
21.92
%
$
4,481,786
21.16
%
Tier 1 Capital
3,507,782
16.39
3,361,373
15.87
Leverage
3,507,782
13.36
3,361,373
12.91
For Capital Adequacy Purposes:
Total Capital
1,712,033
≥
8.00
1,694,688
≥
8.00
Tier 1 Capital
856,016
≥
4.00
847,344
≥
4.00
Leverage
1,050,104
≥
4.00
1,041,090
≥
4.00
To Be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital
2,118,360
≥
10.00
Tier 1 Capital
1,271,016
≥
6.00
Leverage
1,301,362
≥
5.00
140
FIRST HORIZON NATIONAL CORPORATION
Note 14 q Other Income and Other Expense
Following is detail of All other income and commissions and All other expense as presented in the Consolidated Statements of Income:
(Dollars in thousands)
2010
2009
2008
All other income and commissions:
Bank-owned life insurance
$
25,898
$
19,744
$
25,143
Bankcard income
19,761
20,161
22,081
Gains on repurchases of debt
17,060
16,412
33,845
ATM interchange fees
14,169
11,335
9,224
Other service charges
10,442
11,647
12,631
Electronic banking fees
7,111
6,020
6,217
Letter of credit fees
6,493
5,989
5,657
Deferred compensation (a)
3,673
7,686
(22,901
)
Gains/(losses) from loan sales and securitizations
2,883
2,545
(8,625
)
Reinsurance fees
2,310
9,130
11,919
Remittance processing
2,008
11,765
12,953
Federal flood certifications
-
-
3,869
Other
24,595
29,802
33,533
Total
$
136,403
$
152,236
$
145,546
All other expense:
Advertising and public relations
$
23,248
$
22,074
$
32,738
Low income housing expense
22,229
22,000
18,734
Other insurance and taxes
11,817
12,388
8,705
Travel and entertainment
10,224
9,547
15,137
Customer relations
7,079
7,819
8,872
Employee training and dues
4,821
5,327
6,198
Supplies
4,656
4,661
10,586
Bank examinations costs
4,578
4,884
4,144
Fed service fees
2,610
5,078
7,053
Complimentary check expense
2,405
3,529
4,776
Loan insurance expense (b)
(686
)
7,811
5,270
Other (c)(d)
23,178
79,171
51,923
Total
$
116,159
$
184,289
$
174,136
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Deferred compensation market value adjustments are mirrored by adjustments to employee compensation, incentives, and benefits expense.
(b)
2010 includes cancellation of an HLTV insurance contract and return of $3.8 million of premiums.
(c)
Includes a portion of net charges for restructuring, repositioning, and efficiency initiatives (Note 26).
(d)
Includes net expense reversals related to Visa litigation matters of $13.0 million, $7.0 million, and $30.0 million in 2010, 2009, and 2008, respectively.
FIRST HORIZON
NATIONAL CORPORATION
141
Note 15 q Components of Other Comprehensive Income/(loss)
Following is detail of Accumulated other comprehensive income/(loss) as presented in the Consolidated Statements of Condition:
(Dollars in thousands)
Before-Tax Amount
Tax Benefit/ (Expense)
Accumulated Other Comprehensive Income/(Loss)
December 31, 2007
$
25,675
$
(9,638
)
$
(48,101
)
Other comprehensive income:
Unrealized market adjustments on cash flow hedge
(10
)
4
(6
)
Unrealized market adjustments on securities available for sale
35,863
(13,882
)
21,981
Adjustment for net gains/(losses) included in net income
(210
)
81
(129
)
Pension and postretirement plans:
Prior service cost arising during period
(59
)
22
(37
)
Net actuarial gain/(loss) arising during period
(208,158
)
80,198
(127,960
)
Amortization of prior service cost, transition asset/obligation, and net actuarial gain/(loss) included in net periodic benefit cost
3,913
(1,492
)
2,421
December 31, 2008
(168,661
)
64,931
(151,831
)
Other comprehensive income:
Unrealized market adjustments on securities available for sale
34,759
(12,145
)
22,614
Pension and postretirement plans:
Prior service cost arising during period
17,088
(6,259
)
10,829
Net actuarial gain/(loss) arising during period (a)
6,024
(2,483
)
3,541
Amortization of prior service cost, transition asset/obligation, and net actuarial gain/(loss) included in net periodic benefit cost
1,007
(369
)
638
December 31, 2009
58,878
(21,256
)
(114,209
)
Other comprehensive income:
Unrealized market adjustments on securities available for sale
(32,727
)
12,731
(19,996
)
Adjustment for net gains/(losses) included in net income
715
(278
)
437
Pension and postretirement plans:
Net actuarial gain/(loss) arising during period
(5,439
)
2,014
(3,425
)
Amortization of prior service cost, transition asset/obligation, and net actuarial gain/(loss) included in net periodic benefit cost
15,121
(5,474
)
9,647
December 31, 2010
$
(22,330
)
$
8,993
$
(127,546
)
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Includes a positive, after-tax effect of $18.3 million due to a curtailment. See Note 19 - Savings, Pension, and Other Employee Benefits.
142
FIRST HORIZON NATIONAL CORPORATION
Note 16 q Income Taxes
The components of income tax expense/(benefit) are as follows:
(Dollars in thousands)
2010
2009
2008
Current:
Federal
$
(218,898
)
$
(7,593
)
$
240,273
State
(33,698
)
6,548
16,752
Deferred:
Federal
206,962
(153,902
)
(373,335
)
State
26,551
(19,998
)
(38,095
)
Total
$
(19,083
)
$
(174,945
)
$
(154,405
)
The effective tax rates for 2010, 2009, and 2008 were 38.63 percent, 41.60 percent, and 46.95 percent, respectively. Income tax expense differed from the amounts computed by applying the statutory federal income tax rate to income/(loss) before income taxes because of the following:
(Dollars in thousands)
2010
2009
2008
Federal income tax rate
35%
35%
35%
Tax computed at statutory rate
$
17,289
$
(147,187
)
$
(115,095
)
Increase/(decrease) resulting from:
State income taxes
(5,585
)
(8,743
)
(13,864
)
BOLI - cash surrender value
(9,671
)
(2,533
)
(5,381
)
Tax credits
(23,788
)
(22,312
)
(19,064
)
Goodwill
-
3,205
-
Other
2,672
2,625
(1,001
)
Total
$
(19,083
)
$
(174,945
)
$
(154,405
)
Certain previously reported amounts have been reclassified to agree with current presentation.
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. In order to support the recognition of the DTA, FHNs management must believe that the realization of the DTA is more likely than not.
FHN evaluates the likelihood of realization of the $200.6 million net DTA based on both positive and negative evidence available at the time. FHNs three-year cumulative loss position at December 31, 2010, is significant negative evidence in determining whether the realizability of the DTA is more likely than not.
However, FHN believes that the negative evidence of the three-year cumulative loss is overcome by sufficient positive evidence that the DTA will ultimately be realized. The positive evidence includes several different factors. A significant amount of the cumulative losses occurred in businesses that FHN has exited or
is in the process of exiting. FHN has sufficient carryback position, reversing DTL and potential tax planning strategies to fully recognize the DTA. In addition, FHN forecasts substantially more taxable income in the carryforward period, exclusive of tax planning strategies. Additionally, FHN believes that it will realize
the net DTA within a significantly shorter period of time than the twenty year carryforward period allowed under the tax rules. Based on current analysis, FHN believes that its ability to realize the recognized $200.6 million net DTA is more likely than not.
FIRST HORIZON
NATIONAL CORPORATION
143
Note 16 q Income Taxes (continued)
Temporary differences which gave rise to deferred tax assets and deferred tax liabilities on December 31, 2010 and 2009, were as follows:
(Dollars in thousands)
2010
2009
Deferred tax assets:
Loss reserves
$
163,746
$
410,972
Employee benefits
91,864
95,061
Investment in partnerships
28,317
23,149
Accrued expenses
11,107
22,060
Other
38,769
30,784
Gross deferred tax assets
333,803
582,026
Valuation allowance
-
-
Deferred tax assets after valuation allowances
$
333,803
$
582,026
Deferred tax liabilities:
Capitalized mortgage servicing rights
$
39,312
$
58,597
Depreciation and amortization
17,511
15,892
Federal Home Loan Bank stock
17,285
17,094
Investment in debt securities (ASC 320)
28,882
41,335
Other intangible assets
18,585
19,671
Other
11,616
15,515
Gross deferred tax liabilities
133,191
168,104
Net deferred tax asset
$
200,612
$
413,922
Certain previously reported amounts have been reclassified to agree with current presentation.
The total balance of unrecognized tax benefits at December 31, 2010, was $38.4 million. The rollforward of unrecognized tax benefits follows:
(Dollars in thousands)
Balance at December 31, 2008
$
31,108
Increases related to prior year tax positions
2,086
Increases related to current year tax positions
500
Lapse of statute
(3,690
)
Balance at December 31, 2009
$
30,004
Increases related to prior year tax positions
13,725
Settlements
(291
)
Lapse of statute
(5,040
)
Balance at December 31, 2010
$
38,398
144
FIRST HORIZON NATIONAL CORPORATION
Note 17 q Earnings per Share
The following tables provide a reconciliation of the numerators used in calculating earnings/(loss) per share attributable to common shareholders:
(In thousands)
2010
2009
2008
Income/(loss) from continuing operations
$
68,480
$
(245,589
)
$
(174,437
)
Loss from discontinued operations, net of tax
(6,877
)
(12,846
)
(3,534
)
Net income/(loss)
$
61,603
$
(258,435
)
$
(177,971
)
Net income attributable to noncontrolling interest
11,402
11,402
14,016
Net income/(loss) attributable to controlling interest
$
50,201
$
(269,837
)
$
(191,987
)
Preferred stock dividends
107,970
59,585
7,413
Net loss available to common shareholders
$
(57,769
)
$
(329,422
)
$
(199,400
)
Income/(loss) from continuing operations
$
68,480
$
(245,589
)
$
(174,437
)
Net income attributable to noncontrolling interest
11,402
11,402
14,016
Preferred stock dividends
107,970
59,585
7,413
Net loss from continuing operations available to common shareholders
$
(50,892
)
$
(316,576
)
$
(195,866
)
The following table provides a reconciliation of weighted average common shares to diluted average common shares:
(In thousands, except per share data)
2010
2009
2008
Weighted average common shares outstanding - basic (a)
235,699
234,431
206,681
Effect of dilutive securities
-
-
-
Weighted average common shares outstanding - diluted (a)
235,699
234,431
206,681
(a)
All share data has been restated to reflect stock dividends distributed through January 1, 2011.
Earnings/(loss) per common share:
2010
2009
2008
Loss per share from continuing operations available to common shareholders
$
(0.22
)
$
(1.35
)
$
(0.95
)
Loss per share from discontinued operations, net of tax
(.03
)
(.06
)
(.01
)
Net loss per share available to common shareholders
$
(0.25
)
$
(1.41
)
$
(0.96
)
Diluted earnings/(loss) per common share:
Diluted loss per share from continuing operations available to common shareholders
$
(0.22
)
$
(1.35
)
$
(0.95
)
Diluted loss per share from discontinued operations, net of tax
(.03
)
(.06
)
(.01
)
Net diluted loss per share available to common shareholders
$
(0.25
)
$
(1.41
)
$
(0.96
)
Due to the net loss attributable to common shareholders for the twelve months ended December 31, 2010, 2009, and 2008, no potentially dilutive shares were included in the loss per share calculations as including such shares would have been antidilutive. Stock options of 12.3 million, 15.6 million, and 20.0
million with weighted average exercise prices of $27.04, $27.48, and $28.15 per share for the twelve months ended December 31, 2010, 2009, and 2008, respectively, were not included in the computation of diluted loss per common share because such shares would have had an antidilutive effect on earnings
per common share. Other equity awards of 3.3 million, 2.8 million, and .9 million for the twelve months ended December 31, 2010, 2009, and 2008, respectively, and 14.8 million potentially dilutive shares related to the CPP common stock Warrant were excluded from the computation of diluted loss per common
share because such shares would have had an antidilutive effect on loss per common share. As of December 31, 2010, the underwriter of FHNs fourth quarter equity issuance had an option to purchase 1.1 million shares at a discounted exercise price of $10.03. The dilutive impact of this option would have been
immaterial. The option expired on January 12, 2011 without being exercised.
FIRST HORIZON
NATIONAL CORPORATION
145
Note 18 q Restrictions, Contingencies, and Other Disclosures
Restrictions on cash and due from banks. Under the Federal Reserve Act and Regulation D, FHNs commercial banking subsidiary is required to maintain a certain amount of cash reserves. On December 31, 2010 and December 31, 2009, FHNs required reserves were $215.0 million and $200.0 million,
respectively. At the end of 2010 and 2009, this requirement was met with $139.8 million and $142.8 million in vault cash, respectively, and also with Federal Reserve Bank deposits. Vault cash is reflected in Cash and due from banks on the Consolidated Statements of Condition and Federal Reserve Bank
deposits are reflected as Interest-bearing cash.
Restrictions on dividends. Cash dividends are paid by FHN from its assets, which are mainly provided by dividends from its subsidiaries. Certain regulatory restrictions exist regarding the ability of FTBNA to transfer funds to FHN in the form of cash, dividends, loans, or advances. As of December 31, 2010, FTBNA
had undivided profits of $1.1 billion, none of which was available for distribution to FHN as dividends without prior regulatory approval. At any given time, the pertinent portions of those regulatory restrictions allow FTBNA to declare preferred or common dividends without prior regulatory approval in an amount equal
to FTBNAs retained net income for the two most recent completed years plus the current year to date. For any period, FTBNAs retained net income generally is equal to FTBNAs regulatory net income reduced by the preferred and common dividends declared by FTBNA. Excess dividends in either of the two
most recent completed years may be offset with available retained net income in the two years immediately preceding it. Applying the applicable rules, FTBNAs total amount available for dividends was negative $542.8 million at December 31, 2010 and negative $468.0 million at January 1, 2011. FHN applied for
and received approval to pay a dividend to the parent company in the amount of $300 million in fourth quarter 2010. The parent company utilized liquidity provided by this dividend, funds from the debt and equity offerings, and excess liquidity to redeem the TARP preferred shares in December 2010 and $103
million of subordinated debentures in January 2011. FTBNA has requested approval from the OCC to declare and pay dividends on its preferred stock outstanding payable in April 2011.
The payment of cash dividends by FHN and FTBNA may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines and debt covenants. Furthermore, the Federal Reserve and the OCC have issued policy statements generally requiring insured
banks and bank holding companies only to pay dividends 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.
In 2008, FHN issued and sold preferred stock and a common stock warrant under the U.S. Treasurys CPP. In fourth quarter 2010, FHN redeemed all preferred shares that were issued under the U.S. Treasurys CPP. While the shares were outstanding, FHN was not permitted to increase its cash common
dividend without permission of the Treasury. Prior to the issuance, FHN paid a stock dividend in lieu of cash dividends.
Restrictions on intercompany transactions. Under Federal banking law, banking subsidiaries may not extend credit to the parent company in excess of 10 percent of the banks capital stock and surplus, as defined, or $422.8 million, on December 31, 2010. The parent company had covered transactions of $3.5
million from FTBNA on December 31, 2010. In addition, the aggregate amount of covered transactions with all affiliates, as defined, is limited to 20 percent of the banks capital stock and surplus, or $845.5 million, on December 31, 2010. FTBNAs total covered transactions with all affiliates including the parent
company on December 31, 2010 were $447.1 million.
Contingencies. Contingent liabilities arise in the ordinary course of business, including those related to lawsuits, arbitration, mediation, and other forms of litigation. Various claims and lawsuits are pending against FHN and its subsidiaries. In view of the inherent difficulty of predicting the outcome of legal matters,
particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories or involve a large number of parties, FHN cannot reasonably determine what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters
may be, or what the eventual loss or impact related to each pending matter may be. FHN establishes loss contingency reserves for litigation matters when estimated loss is both probable and reasonably estimable as prescribed by applicable financial accounting guidance. A reserve is not established when a loss
contingency either is not probable or its amount is not reasonably estimable. If loss for a matter is probable and a range of possible loss outcomes is the best estimate available, accounting guidance generally requires a reserve to be established at the low end of the range. Based on current knowledge,
146
FIRST HORIZON NATIONAL CORPORATION
Note 18 q Restrictions, Contingencies, and Other Disclosures (continued)
and after consultation with counsel, management is of the opinion that loss contingencies related to pending matters should not have a material adverse effect on the consolidated financial condition of FHN, but may be material to FHNs operating results for any particular reporting period depending, in part, on the
results from that period.
At December 31, 2010, based on the foregoing, there were no pending or threatened litigation matters as to which FHN had determined that material loss was probable or had established a material loss reserve.
Set out below is a discussion of pending or threatened litigation matters as to which FHN has determined, under applicable financial accounting guidance, that although material loss is not probable there is more than a slight chance of a material loss outcome for FHN. Because of the uncertainty of the potential
outcomes of the legal proceedings associated with these matters, and also due to significant uncertainties regarding amounts claimed (in cases as to which claims are noted as unspecified), potential remedies that might be available or awarded (in all cases), the value of assets FHN may be required to repurchase
(for those cases involving asset repurchase demands), and the status of the discovery process (for those cases where discovery is not substantially complete), FHN cannot determine probable loss or estimate a range of possible losses at this time that may result from these matters. In all such matters that involve
claims in active litigation, and in those matters not in litigation where possible allegations can be anticipated, FHN believes it has meritorious defenses and intends to pursue those defenses vigorously. FHN expects to reassess the reserve for these matters each quarter as they progress.
Manufacturers & Traders Trust Company (M&T) has filed an arbitration claim against FTBNA. The claim arises out of FTBNAs sale of multiple branch assets to M&T in 2007. The original demand for arbitration claims that FTBNA violated its obligations to repurchase home equity lines of credit (HELOCs) that
it sold to M&T as part of the asset sale agreement. M&T alleges that the loans either are not in conformity with FTBNAs representations about them or are not insured as FTBNA warranted, or both. At this time the claim has become a demand that FTBNA repurchase certain HELOCs having an original
principal balance of $45.5 million. At December 31, 2010, there were charged-off loans of $8.9 million for the HELOCs at issue, and an unpaid principal balance of $26.8 million.
FTN Financial Securities Corp. (FTN) and FTBNA, along with a former executive officer, Frank J. Gusmus, Jr., and two former employees, have received written Wells notices from the Staff of the United States Securities and Exchange Commission (the SEC) stating that the Staff intends to recommend
that the SEC bring enforcement actions for allegedly aiding and abetting a former FTN customer, Sentinel Management Group, Inc. (Sentinel), in violations of the federal securities laws. The subject of the Wells notices is a 2006 year-end securities repurchase transaction entered into by FTN with Sentinel. A
Wells notice by the SEC Staff is neither a formal allegation of wrongdoing nor a determination by the SEC that there has been wrongdoing. A Wells notice generally provides the recipient with an opportunity to provide his, her, or its perspective to address the Staffs concerns prior to enforcement action being
taken by the SEC. FHN believes that its subsidiaries and employees complied with all applicable laws and regulations regarding the transaction. FHN intends to work within the Wells process to try to resolve this matter. If enforcement actions are brought nonetheless, FHN believes they have meritorious
defenses and they intend to advance those defenses vigorously.
The Chapter 11 Liquidation Trustee (the Trustee) of Sentinel has filed two complaints in the U.S. District Court for the Northern District of Illinois, Eastern Division (Case Nos. 1:08-cv-06587 and 1:09-cv-02258) against FTN and two former FTN employees. The Trustees claims relate to Sentinels purchases
of Preferred Term Securities Limited (PreTSL) products and other securities from FTN and/or the FTN Financial Capital Markets division of FTBNA from March 2005 to August 2007. Collectively, the claims alleged in the complaints are: aiding and abetting breach of fiduciary duty; commercial bribery;
federal securities fraud; negligent misrepresentation; violation of the Illinois Blue Sky Law and the Illinois Consumer Fraud Act; negligence; unjust enrichment; and avoidance and recovery of fraudulent transfers. The Trustee seeks, among other things: compensatory damages of approximately $126 million;
unspecified punitive damages; disgorgement of profits, fees and commissions; rescission of securities purchases; avoidance of allegedly fraudulent transfers; and unspecified interest, costs, and attorneys fees.
FIRST HORIZON
NATIONAL CORPORATION
147
Note 18 q Restrictions, Contingencies, and Other Disclosures (continued)
As indicated above, the foregoing matters are those as to which FHN has determined, under applicable financial accounting guidance, that material loss is not probable.
The following are pending litigation matters as to which directors or senior executives of FHN are named as defendants in connection with the performance of their duties on behalf of FHN.
A shareholder, Cranston Reid, has filed a putative derivative lawsuit in the U.S. District Court for the Western District of Tennessee, Western Division (Case No. 2:10cv02413-STA-cgc) against various former and current officers and directors of FHN. FHN is named as a nominal defendant, though no relief is
sought against it. The complaint alleges the following causes of action: breach of fiduciary duty, abuse of control, gross mismanagement, and unjust enrichment. The claimed breach of fiduciary duty and other causes of action stem from a number of alleged events, including: certain litigation matters, both
pending and previously disposed, unrelated to this plaintiff; certain matters that allegedly could become litigation matters, unrelated to this plaintiff; a matter that previously had been investigated and concluded, unrelated to this plaintiff; and an alleged general use of allegedly unlawful and high-risk banking
practices. FHN believes the defendants have meritorious defenses to this complaintincluding that the complaint fails to state any legally cognizable claimand intends to advance those defenses vigorously.
A shareholder, Troy Sims, has filed a putative class action lawsuit in the U.S. District Court for the Western District of Tennessee, Western Division (Case No. 2:08-cv-02293-STA-cgc) against FHN and various former and current officers and directors of FHN. The complaint alleges causes of action under the
Employee Retirement Income Security Act of 1974, as amended (ERISA), related to FHNs Savings Plan, which is a 401(k) savings plan offered to eligible employees. Specifically, the complaint alleges that defendants breached fiduciary duties owed to Plan participants by: (i) failure to prudently and loyally
manage the Plans investment in First Horizon stock and certain proprietary mutual funds; (ii) failure to provide accurate information to participants and beneficiaries; (iii) failure to monitor other Plan fiduciaries; and (iv) breach of co-fiduciary obligations. For these alleged violations, plaintiffs seek to require
defendants to pay Plan participants unspecified damages resulting from the decline in value of First Horizon stock between January 2006 and July 14, 2008 and associated with participants investment in proprietary mutual funds offered by the Plan between May 2002 and January 2006. FHN believes the
defendants have meritorious defenses to this complaint and intends to advance those defenses vigorously.
Visa Matters. FHN is a member of the Visa USA network. On October 3, 2007, the Visa organization of affiliated entities completed a series of global restructuring transactions to combine its affiliated operating companies, including Visa USA, under a single holding company, Visa Inc. (Visa). Upon completion of
the reorganization, the members of the Visa USA network remained contingently liable for certain Visa litigation matters. Based on its proportionate membership share of Visa USA, FHN recognized a contingent liability of $55.7 million within noninterest expense in fourth quarter 2007 related to this contingent
obligation.
In March 2008, Visa completed its initial public offering (IPO). Visa funded an escrow account from its IPO proceeds to be used to make payments related to the Visa litigation matters. Upon funding of the escrow, FHN reversed $30.0 million of the contingent liability previously recognized with a corresponding
credit to noninterest expense for its proportionate share of the escrow account. A portion of FHNs class B shares of Visa were redeemed as part of the IPO resulting in $65.9 million of equity securities gains in first quarter 2008.
In October 2008, Visa announced that it had agreed to settle litigation with Discover Financial Services for $1.9 billion. Of this settlement amount, $1.7 billion was funded from the escrow account established as part of Visas IPO. In connection with this settlement, FHN recognized additional expense of $11.0
million within noninterest expense in third quarter 2008. In December 2008, Visa deposited additional funds into the escrow account and FHN recognized a corresponding credit to noninterest expense of $11.0 million for its proportionate share of the amount funded.
In July 2009, Visa deposited an additional $700 million into the escrow account. Accordingly, FHN reduced its contingent liability by $7.0 million through a credit to noninterest expense.
148
FIRST HORIZON NATIONAL CORPORATION
Note 18 q Restrictions, Contingencies, and Other Disclosures (continued)
In May 2010, Visa deposited an additional $500 million into the escrow account and FHN recognized a corresponding reduction of its contingent liability and a credit to noninterest expense of $5.0 million for its proportionate share of the amount funded. Visa deposited an additional $800 million into the escrow
account during October 2010 and FHN reduced its contingent liability by $8.0 million through an additional credit to noninterest expense. After the partial share redemption in conjunction with the IPO, FHN held approximately 2.4 million class B shares of Visa. In December 2010, FHN sold 440,000 of its shares,
reducing its holdings to approximately 2.0 million shares. FHNs Visa shares are included in the Consolidated Statements of Condition at their historical cost of $0. Conversion of these shares into class A shares of Visa and, with limited exceptions, transfer of these shares is restricted until the later of the third
anniversary of the IPO or the final resolution of the covered litigation. The final conversion ratio will fluctuate based on the ultimate settlement of the Visa litigation matters for which FHN has a proportionate contingent obligation. Future funding of the escrow will dilute this exchange rate by an amount that is yet to
be determined.
In conjunction with the sale of a portion of its Visa class B shares in December 2010, FHN and the purchaser entered into a derivative transaction whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa class B shares into Visa class A shares is adjusted. At the time of the
sale the current conversion ratio of Visa class B shares to Visa class A shares was approximately 51 percent. FHN determined that the initial fair value of the derivative was equal to a pro rata portion of the previously accrued contingent liability for Visa litigation matters attributable to the 440,000 Visa class B
shares sold. This amount was determined to be a liability of $1.0 million.
Other Disclosures Company Owned Life Insurance. FHN has purchased life insurance on certain of its employees and is the beneficiary on these policies. On December 31, 2010, the cash surrender value of these policies, which is included in Other assets on the Consolidated Statements of Condition, was $639.6
million. There are restrictions on $36.2 million of the proceeds from these benefits which relate to certain compensation plans. FHN has not borrowed against the cash surrender value of these policies.
Other Disclosures Indemnification Agreements and Guarantees. In the ordinary course of business, FHN enters into indemnification agreements for legal proceedings against its directors and officers and standard representations and warranties for underwriting agreements, merger and acquisition agreements, loan
sales, contractual commitments, and various other business transactions or arrangements. The extent of FHNs obligations under these agreements depends upon the occurrence of future events; therefore, it is not possible to estimate a maximum potential amount of payouts that could be required with such
agreements.
FHN is subject to potential liabilities and losses in relation to loans that it services, and in relation to loans that it originated and sold. FHN evaluates those potential liabilities and maintains reserves for potential losses. In addition, FHN has agreements with the purchaser of its national home loan origination and
servicing platforms that create obligations and potential liabilities.
Servicing. FHN services a predominately first lien mortgage loan portfolio which was $28.8 billion as of December 31, 2010. A substantial portion of the servicing portfolio is serviced through a subservicer. A significant portion of which is held by Fannie Mae (FNMA) and private security holders, with less
significant portions held by Ginnie Mae (GNMA) and Freddie Mac (FHLMC). In connection with its servicing activities, FHN collects and remits the principal and interest payments on the underlying loans for the account of the appropriate investor. In the event of delinquency or non-payment on a loan in a
private or agency securitization: (1) the terms of the private securities agreements require FHN, as servicer, to continue to make monthly advances of principal and interest (P&I) to the trustee for the benefit of the investors; and (2) the terms of the majority of the agency agreements may require the servicer to
make advances of P&I, or to repurchase the delinquent or defaulted loan out of the trust pool. For servicer advances of P&I under the terms of private and GSE securitizations, FHN can utilize payments of P&I received from other prepaid loans within a particular loan pool in order to advance P&I to the trustee for the
benefit of the investors. In the event payments are ultimately made by FHN to satisfy this obligation, P&I advances and servicer advances are recoverable from: (1) the liquidation proceeds of the property securing the loan, in the case of private securitizations and (2) the proceeds of the foreclosure sale by the
government agency, in the case of government agency-owned loans. As of December 31, 2010, FHN has recognized servicing
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Note 18 q Restrictions, Contingencies, and Other Disclosures (continued)
advances of $262.5 million. Servicing advances are included in Other assets on the Consolidated Statements of Condition.
FHN is also subject to losses in its loan servicing portfolio due to loan foreclosures. Foreclosure exposure arises from certain government agency agreements which limit the agencys repayment guarantees on foreclosed loans, resulting in certain foreclosure costs being borne by servicers. Foreclosure exposure also
includes real estate costs, marketing costs, and costs to maintain properties, especially during protracted resale periods in geographic areas of the country negatively impacted by declining home values.
FHN is also subject to losses due to unreimbursed servicing expenditures made in connection with the administration of current loss mitigation and loan modification programs. Additionally, FHN is required to repurchase GNMA loans prior to modification in connection with its modification program.
Other Disclosures Home Loans Originated and Sold. Prior to 2009, as a means to provide liquidity for its legacy mortgage banking business, FHN originated loans through its legacy 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. Sometimes the loans were sold with full or limited recourse, but much more often the loans were sold without recourse. For loans sold with recourse, FHN has indemnity and repurchase exposure if the loans default. For loans sold without
recourse, FHN has exposure for repurchase of loans arising from claims that FHN breached its representations and warranties made to the purchasers at closing, and exposure for investment rescission or damages arising from claims that the offering documents under which the loans were securitized were
materially deficient. From 2005 through 2008, FHN originated and sold $69.5 billion of such loans without recourse to GSEs. Although additional GSE sales occurred in earlier years, a substantial majority of GSE repurchase requests have come from that period. In addition, from 2000 through 2007, FHN securitized
$47.1 billion of such loans without recourse in proprietary transactions. Of the amount originally securitized, $37.1 billion relates to securitization trusts that are still active as approximately 30 securitization trusts have become inactive due to clean-up calls exercised by FHN. The exercise of cleanup calls resulted in
termination of the Pooling and Servicing Agreements and reacquisition of the related mortgage loans.
Loans Sold With Full or Limited Recourse. FHN has sold certain agency mortgage loans with full recourse under agreements to repurchase the loans upon default. Loans sold with full recourse generally include mortgage loans sold to investors in the secondary market which are uninsurable under government
guaranteed mortgage loan programs due to issues associated with underwriting activities, documentation, or other concerns. For mortgage insured single-family residential loans, in the event of borrower nonperformance, FHN would assume losses to the extent they exceed the value of the collateral and private
mortgage insurance, Federal Housing Administration (FHA) insurance, or The Veterans Administration (VA) guaranty. On December 31, 2010 and 2009, the current UPB of single-family residential loans that were sold on a full recourse basis with servicing retained was $58.4 million and $71.9 million,
respectively.
Loans sold with limited recourse include loans sold under government guaranteed mortgage loan programs including the Federal Housing Administration and Veterans Administration. FHN continues to absorb losses due to uncollected interest and foreclosure costs and/or limited risk of credit losses in the event of
foreclosure of the mortgage loan sold. Generally, the amount of recourse liability in the event of foreclosure is determined based upon the respective government program and/or the sale or disposal of the foreclosed property collateralizing the mortgage loan. Another instance of limited recourse is the VA/No bid. In
this case, the VA guarantee is limited and FHN may be required to fund any deficiency in excess of the VA guarantee if the loan goes to foreclosure. On December 31, 2010 and 2009, the outstanding principal balance of loans sold with limited recourse arrangements where some portion of the principal is at risk
and serviced by FHN was $3.2 billion and $3.3 billion, respectively. Additionally, on December 31, 2010 and 2009, $.8 billion and $1.0 billion, respectively, of mortgage loans were outstanding which were sold under limited recourse arrangements where the risk is limited to interest and servicing advances.
The reserve for foreclosure losses for loans sold with full or limited recourse is based upon a historical progression model using a rolling 12-month average, which predicts the frequency of a mortgage loan entering foreclosure. In addition, other factors are considered, including qualitative and quantitative factors
(e.g., current economic
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conditions, past collection experience, risk characteristics of the current portfolio, and other factors), which are not defined by historical loss trends or severity of losses.
Loans Sold Without Recourse GSE Whole Loan Sales. For loans sold without recourse to GSEs, FHN generally has obligations to either repurchase the loan for the unpaid principal balance or make the purchaser whole for the economic loss incurred by the purchaser of a loan if it is determined that the loans
sold were in violation of representations or warranties made by FHN at closing.
The estimated probable incurred losses that result from these obligations are derived from loss severities that are reflective of default and delinquency trends in residential real estate loans and lower housing prices, which result in fair value marks below par for repurchased loans when the loans are recorded on
FHNs balance sheet within loans held for sale upon repurchase. FHN utilizes multiple techniques in assessing the adequacy of its repurchase and foreclosure reserve for loans sold without recourse for which it has continuing obligations under representations and warranties. FHN tracks actual repurchase or make-
whole losses by GSE, loan pool, and vintage (year loan was sold), and this historical data is applied to more recent sale vintages to estimate probable incurred loss content observed within its vintages of loan sales. Due to the historical nature of this calculation, as well as the increasing volume of requests from
GSEs, FHN performs additional analyses of repurchase and make-whole obligations. Management then applies qualitative adjustments to the initial baseline to incorporate known current trends in repurchase and make-whole requests, loss severity trends, alternative resolutions, private mortgage insurance (PMI)
cancellation notices, and rescission rates (successful resolutions) in the determination of the appropriate reserve level. Currently, FHN services only $10.9 billion in UPB of the loans sold to GSEs which limits visibility into the current status (i.e. current UPB, delinquency, refinance activity, etc.) of the loans that were
sold. This presents an additional level of uncertainty in estimating probable incurred loss content because it is difficult to predict future repurchase requests from GSEs.
Loans Sold Without Recourse Proprietary Securitizations. Securitized loans generally were sold indirectly to investors as interests, commonly known as certificates, in trusts or other vehicles. In most cases, the certificates were tiered into different risk classes, with subordinated classes exposed to trust losses first
and senior classes exposed only after subordinated classes were exhausted. Representations and warranties were made to the trustees for the benefit of investors. The certificates were sold to a variety of investors, including GSEs in some cases, through securities offerings under a prospectus or other offering
documents. Unlike servicing on loans sold to GSEs, FHN still services substantially all of the loans sold through proprietary securitizations. As of the end of 2010, the remaining UPB balance in active proprietary securitizations was $14.6 billion.
Unlike loans sold to GSEs, contractual representations and warranties for proprietary securitizations do not include general representations regarding the absence of fraud or negligence in the underwriting or origination of the mortgage loans. Securitization documents typically provide the investors with a right to
request that the trustee investigate and initiate repurchase of a mortgage loan if FHN breached certain representations and warranties made at the time the securitization closed and such breach materially and adversely affects the interests of the investors in such mortgage loan. However, the securitization
documents do not require the trustee to make an investigation into the facts or matters stated in any request or notice unless requested in writing to do so by the holders of certificates evidencing not less than 25 percent of the voting rights allocated to each class of certificates. The certificate holders may also be
required to indemnify the trustee for its costs related to investigations made in connection with repurchase actions. GSEs were among the purchasers of certificates in securitizations. As such, they are entitled to the benefits of the same representations and warranties as other investors. However, the GSEs, acting
through their conservator under federal law, are permitted to undertake, independently of other investors, reviews of FHNs mortgage loan origination and servicing files. Such reviews are commenced using a subpoena process. If, because of such reviews, the GSEs determine there has been a breach of a
representation or warranty that has had a material and adverse affect on the interests of the investors in any mortgage loan, the GSEs may seek to cause the Trustee to enforce a repurchase obligation against FHN.
Also unlike loans sold to GSEs, interests in securitized loans were sold as securities under prospectuses or other offering documents subject to the disclosure requirements of applicable federal and state securities laws. As an alternative to pursuing a claim for breach of representations and warranties through the
trustee as mentioned above, investors could pursue a claim alleging that the prospectus or other disclosure documents were deficient by
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containing materially false or misleading information or by omitting material information. Claims for such disclosure deficiencies typically could be brought under applicable federal or state securities statutes, and the statutory remedies typically could include rescission of the investment or monetary damages
measured in relation to the original investment made. If a plaintiff properly made and proved its allegations, the plaintiff might attempt to claim that damages could include loss of market value on the investment even if there were little or no credit loss in the underlying loans. Claims based on alleged disclosure
deficiencies also could be brought as traditional fraud or negligence claims with a wider scope of damages possible. Each investor could bring such a claim individually, without acting through the trustee to pursue a claim for breach of representations and warranties, and investors could attempt joint claims or
attempt to pursue claims on a class-action basis. Claims of this sort are likely to be resolved in a litigation context in most cases, unlike most of the GSE repurchase requests. The analysis of loss content and establishment of appropriate reserves in those cases would follow principles and practices associated with
litigation matters, including an analysis of available procedural and substantive defenses in each particular case and an estimation of the probability of ultimate loss, if any. FHN expects most litigation claims to take much longer to resolve than repurchase requests typically have taken.
For loans sold in proprietary securitizations, FHN has exposure for repurchase of loans arising from claims that FHN breached its representations and warranties made at closing, and exposure for investment rescission or damages arising from claims by investors that the offering documents under which the loans
were securitized were materially deficient. As of December 31, 2010, the repurchase request pipeline contained no repurchase requests related to securitized loans based on representations and warranties.
None of FHNs proprietary first lien securitizations involved the use of monoline insurance for the benefit of all classes of security holders. Monoline insurance is a form of credit enhancement provided to a securitization by a third party insurer. Subject to the terms and conditions of the policy, the insurer guarantees
payments of accrued interest and principal due to the investors. In certain limited situations, insurance was provided for a specific senior retail class of holders within individual securitizations. The aggregate insured certificates totaled $128.4 million of original certificate balance. FHNs exercise of cleanup calls
described above contained some of these insured certificates; therefore, the original certificate balance of insured certificates related to active securitization trusts was $103.4 million as of the end of 2010. The trustee statement dated December 25, 2010, reported to FHN that the remaining outstanding certificate
balance for these classes was $98.8 million. FHN understands that some monoline insurers have commenced lawsuits against others in the industry seeking to rescind policies of this sort due to alleged misrepresentations as to the quality of the loan portfolio insured. FHN has not received notice of a lawsuit from
the monoline insurers of the senior retail level classes.
FHN, among others, has been subpoenaed by the FHFA, Conservator for Fannie Mae and Freddie Mac, related to investments made by the two GSEs in six proprietary securitizations issued in 2005 and early 2006. The subpoenas relate to ongoing reviews which may result in claims against FHN. The original and
current (as of the December 25, 2010, trust statements) combined certificate balances related to Fannie Mae investments were $443.2 million and $189.4 million, respectively. The original and current (as of the December 25, 2010, trust statements) combined certificate balances related to Freddie Mac
investments were $842.0 million and $391.8 million, respectively. Since the reviews at this time are neither repurchase claims nor litigation, the associated loans are not considered part of the repurchase pipeline. As of December 31, 2010 and at the time this report was filed, FHN is unable to determine a
probable loss or estimate a range of possible loss due to the uncertainty related to these matters. No reserve has been established.
At the time this report is filed, FHN is one of many defendants in lawsuits by three investors in securitizations which claim that the offering documents under which certificates were sold to them were materially deficient. Although these suits are in very early stages, FHN intends to defend itself vigorously. These
lawsuit matters have been analyzed and treated as litigation matters under applicable accounting standards. As of December 31, 2010, and at the time this report was filed, FHN is unable to determine a probable loss or estimate a range of loss due to the uncertainty related to these matters. No reserve has been
established. Similar claims may be pursued by other investors.
At December 31, 2010, FHN had not reserved for exposure for repurchase of loans arising from claims that FHN breached its representations and warranties made in securitizations at closing, nor for exposure for investment
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rescission or damages arising from claims by investors that the offering documents under which the loans were securitized were materially deficient.
Other Proprietary Securitizations. FHN also originated and sold seven second lien proprietary securitization trusts, including six HELOC securitizations and a closed-end second lien securitization. The trusts issued notes backed by the loans and publicly offered the asset-backed notes to investors pursuant to a
prospectus. FHN services all of the loans backing the notes in these proprietary securitizations pursuant to the terms of the sale and servicing agreements. The trust statement dated December 25, 2010, reported that the cumulative original and current outstanding note balances of the HELOC securitizations are
$2.5 billion and $.7 billion, respectively. The original and current outstanding balance of the closed-end second lien securitization was $236.3 million and $29.7 million, respectively.
These securitization trusts have been consolidated; consequently, these loans and the associated credit risk are reflected in FHNs consolidated financial statements. As of December 31, 2010, the loans and associated ALLL are reflected as restricted on the Consolidated Statements of Condition.
The asset-backed notes issued in the HELOC securitizations were wrapped by monoline insurers. FHN understands that some monoline insurers have commenced lawsuits against other originators of asset-backed securities seeking to cancel policies of this sort due to alleged misrepresentations as to the quality of
the loan portfolio insured. FHN has not received notice from a monoline insurer of any such lawsuit. The monoline insurers also have certain contractual rights to pursue repurchase and indemnification. On January 4, 2011, the monoline insurer of two of FHNs HELOC securitizations demanded to review the
performance of these HELOC securitizations and, with respect to charged off loans, to review loan origination and servicing files, underwriting guidelines and payment histories. The demands were made pursuant to the terms of the applicable insurance and indemnity and sale and servicing agreements. No
repurchase or indemnification claims related to the HELOCs have been made as of the date of this report. Advances made by monoline insurers for the benefit of security holders have been recognized within restricted term borrowings in the Consolidated Statements of Condition.
Loans Sold Without Recourse Other Whole Loan Sales. FHN originated through its former national retail and wholesale channels and subsequently sold HELOC and second lien mortgages through whole loan sales. These loans were underwritten to the guidelines of that channel as either combination transactions
with first lien mortgages or stand alone transactions. The whole loan sales were generally done on a servicing retained basis and contained representations and warranties customary to such loan sales and servicing agreements in the industry with specific reference to sellers underwriting and servicing guidelines.
Loans were subject to repurchase in the event of early payment defaults and for breaches of representations and warranties. In 2009, FHN settled a substantial portion of its repurchase obligations for these loans through an agreement with the primary purchaser of HELOC and second lien loans. This settlement
included the transfer of retained servicing rights associated with the applicable second lien and HELOC loan sales. FHN does not guarantee the receipt of the scheduled principal and interest payments on the underlying loans but does have an obligation to repurchase the loans excluded from the above settlement
for which there is a breach of representations and warranties provided to the buyers. The remaining repurchase reserve for these loans is minimal, reflecting the settlement discussed above.
FHN has also sold first lien mortgages without recourse through whole loan sales to non-GSE purchasers. As of December 31, 2010, seven percent of repurchase/make-whole claims relate to private whole loan sales. These claims are included in FHNs liability methodology and the assessment of the adequacy of
the repurchase and foreclosure liability.
Private Mortgage Insurance. PMI was required by GSE rules for certain of the loans sold to GSEs and was also provided for certain of the loans that were securitized. PMI generally was provided for the first lien loans having a loan-to-value ratio at origination of greater than 80 percent that were sold to GSEs or
securitized. Although unresolved PMI cancellation notices are not formal repurchase requests, FHN includes these in the active repurchase request pipeline when analyzing and estimating loss content in relation to the loans sold to GSEs. For purposes of estimating loss content, FHN also considers reviewed PMI
cancellation notices where coverage has been cancelled for all loan sales and securitizations. In determining adequacy of the repurchase reserve, FHN considered $124.3 million in UPB of loans sold where PMI coverage was cancelled for all loan sales and
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Note 18 q Restrictions, Contingencies, and Other Disclosures (continued)
securitizations. To date, a majority of PMI cancellation notices have involved loans sold to GSEs. At December 31, 2010, all estimated loss content arising from PMI cancellation matters related to loans sold to GSEs.
Repurchase Obligations Related to Branch Sale. FHN also sold loans as part of branch sales that were executed during 2007 as part of a strategic decision to exit businesses in markets FHN considered non-strategic. Unlike the loans sold to GSEs or sold privately as discussed above, these loans were originated
to be held to maturity as part of the loan portfolio. FHN has received repurchase requests related to HELOC from one of the purchasers of these branches. These HELOC are not included in the repurchase pipeline. Additional information concerning this matter is presented in this Note above under the caption
Contingencies.
Repurchase and Foreclosure Liability. Based on its experience to date, FHN has evaluated its loan repurchase exposure as mentioned above and has accrued for losses of $185.4 million and $108.5 million as of December 31, 2010 and 2009, respectively. A vast majority of this liability relates to obligations
associated with the sale of first lien mortgages to GSEs through the legacy mortgage banking business. Accrued liabilities for FHNs estimate of these obligations are reflected in Other liabilities on the Consolidated Statements of Condition. Charges to increase the repurchase and foreclosure liability are included
within Repurchase and foreclosure provision on the Consolidated Statements of Income.
Other Disclosures Foreclosure Practices. The current focus on foreclosure practices of financial institutions nationwide could impact FHN through increased operational and legal costs and could have compliance and reputational impacts. FHN owns and services residential loans. In addition, FHNs national
mortgage and servicing platforms were sold in August 2008 and the related servicing activities, including foreclosure proceedings, of the still-owned portion of FHNs mortgage servicing portfolio is outsourced through a subservicing arrangement with the platform buyer. FHN has reviewed its processes relating to
foreclosure on loans it owns and services, and has instructed its subservicer to undertake a similar review. FHNs review of its foreclosure processes has been completed and no material issues were identified. The subservicer reported that it had completed an internal review of its foreclosure processes in the fourth
quarter and identified certain states in which foreclosure practices are in the process of being modified or are pending further review by subservicers legal counsel. If compliance issues are discovered with respect to the subservicer, under the subservicing agreement FHN may be financially responsible in some
cases, and the subservicer may be in others. FHN cannot predict the amount of operating costs, costs for foreclosure delays (including costs connected with servicing advances), legal expenses, or other costs (including title company indemnification) that may be incurred as a result of the internal reviews or
external actions. Accordingly, FHN is unable to determine a probable loss or estimate a range of possible loss due to uncertainty related to these matters. No reserve has been established.
Other Disclosures Reinsurance Arrangements. A wholly-owned subsidiary of FHN entered into agreements with several providers of private mortgage insurance whereby the subsidiary agreed to accept insurance risk for specified loss corridors for pools of loans originated in each contract year in exchange for a
portion of the private mortgage insurance premiums paid by borrowers (i.e., reinsurance arrangements). The loss corridors vary for each primary insurer for each contract year. The estimation of FHNs exposure to losses under these arrangements involves the determination of FHNs maximum loss exposure by
applying the low and high ends of the loss corridor range to a fixed amount that is specified in each contract. FHN then performs an estimation of total loss content within each insured pool of loans to determine the degree to which its loss corridor has been penetrated. Management obtains the assistance of a
third party actuarial firm in developing its estimation of loss content. This process includes consideration of factors such as delinquency trends, default rates, and housing prices which are used to estimate both the frequency and severity of losses. By the end of second quarter 2009, substantially all of FHNs
reinsurance corridors had been fully reflected within its reinsurance reserve for the 2005 through 2008 loan vintages. No new reinsurance arrangements have been initiated after 2008.
In 2009 and 2010, FHN agreed to settle certain of its reinsurance obligations with primary insurers through termination of the related reinsurance agreement, which resulted in a decrease in the reserve balance totaling $48.7 million and the transfer of the associated trust assets. As of December 31, 2010, FHN
has accrued $11.2 million for its estimated liability under the remaining reinsurance arrangement. The accrued liability is reflected in Other liabilities on the Consolidated Statements of Condition. In accordance with the terms of the contracts with
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the primary insurers, as of December 31, 2010, FHN has placed $5.5 million of prior premium collections in trust for payment of claims arising under the reinsurance arrangement.
Other Disclosures 2008 Sale of National Origination and Servicing Platforms. In conjunction with the sale of its servicing platform in August 2008, FHN entered into a three year subservicing arrangement with the purchaser for the unsold portion of FHNs servicing portfolio. As part of the subservicing agreement,
FHN has agreed to a make-whole arrangement whereby if the number of loans subserviced by the purchaser falls below specified levels and the direct servicing cost per loan is greater than a specified amount (determined using loans serviced on behalf of both FHN and the purchaser), FHN will make a payment
according to a contractually specified formula. The make-whole payment is subject to a cap, which is $15.0 million if triggered during the eight quarters following the first anniversary of the divestiture. As part of the 2008 transaction, FHN recognized a contingent liability of $1.2 million representing the estimated
fair value of its performance obligation under the make-whole arrangement.
Note 19 q Pension, Savings, and Other Employee Benefits
Pension plan. FHN sponsors a noncontributory, qualified defined benefit pension plan to employees hired or re-hired on or before September 1, 2007, excluding certain employees of FHNs insurance subsidiaries. Pension benefits are based on years of service, average compensation near retirement, and estimated
social security benefits at age 65. The contributions are based upon actuarially determined amounts necessary to fund the total benefit obligation. FHN did not make any contributions to the qualified pension plan in 2010. Future decisions will be based upon pension funding requirements under the Pension
Protection Act, the maximum deductible under the Internal Revenue Code, and the actual performance of plan assets. At this time, FHN does not expect to make a contribution to the qualified pension plan in 2011.
FHN also maintains non-qualified plans including a supplemental retirement plan that covers certain employees whose benefits under the pension plan have been limited. These other non-qualified pension plans are unfunded, and contributions to these plans cover all benefits paid under the non-qualified plans.
Contributions to non-qualified plans were $4.5 million for 2010 and $6.7 million for 2009. FHN anticipates making a $5.1 million contribution in 2011.
In 2009, FHNs Board of Directors determined that the accrual of benefits under the qualified pension plan and the supplemental retirement plan would cease as of December 31, 2012. After that date, employees currently in the pension plan, and those currently in the Employee Non-voluntary Elective Contribution
(ENEC) program, will be able to participate in the FHN savings plan with a profit sharing feature and an increased company match rate. After that time, pension status will not affect a persons ability to participate in any savings plan feature.
Savings plan. FHN has a qualified defined contribution plan that covers substantially all employees. Under this plan, employees can invest their money in any of the available investment funds and receive a company match of $.50 for each $1.00 invested up to 6 percent of pre-tax contributions made by the
employee, subject to Code limitations. The company match contribution initially is invested in company stock. The savings plan also allows employees to invest in a non-leveraged employee stock ownership plan (ESOP). Cash dividends on shares held by the ESOP are charged to retained earnings and the shares
are considered outstanding in computing earnings per share. The number of allocated shares held by the ESOP totaled 11,538,466 on December 31, 2010.
FHN also provides flexible dollars to assist employees with the cost of annual benefits and/or allows the employee to contribute to his or her qualified savings plan. These flexible dollars are pre-tax contributions and are based upon the employees years of service and qualified compensation. Contributions made
by FHN through the flexible benefits plan and the company matches were $18.3 million for 2010, $18.3 million for 2009, and $27.2 million for 2008.
Effective January 1, 2008, the ENEC program was added under the FHN savings plan and is provided only to employees who are not eligible for the pension plan. With the ENEC program, FHN will generally make contributions to eligible employees savings plan accounts based upon company performance.
Contribution amounts will be a percentage of each employees base salary (as defined in the savings plan) earned the prior
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Note 19 q Pension, Savings, and Other Employee Benefits (continued)
year. FHN contributed $1.2 million for the plan in 2010 related to the 2009 plan year, and FHN expects to contribute $1.3 million for the plan in 2011 related to the 2010 plan year.
Other employee benefits. FHN provides postretirement life insurance benefits to certain employees and also provides postretirement medical insurance to retirement-eligible employees. The postretirement medical plan is contributory with retiree contributions adjusted annually and is based on criteria that are a
combination of the employees age and years of service. For any employee retiring on or after January 1, 1995, FHN contributes a fixed amount based on years of service and age at the time of retirement. FHNs postretirement benefits include prescription drug benefits. The Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (the Act) introduced a prescription drug benefit under Medicare Part D as well as a federal subsidy to sponsors of retiree health care that provide a benefit that is actuarially equivalent to Medicare Part D. FHN currently anticipates receiving a prescription drug subsidy
under the Act through 2015.
Actuarial assumptions. FHNs process for developing the long-term expected rate of return of pension plan assets is based on two primary sources of investment portfolio returns: capital market exposure and active management benefit. Capital market exposure refers to the Plans broad allocation of its assets to
asset classes, such as Large Cap Equity and Fixed Income. Active management refers to hiring investment managers to select individual securities that are expected to outperform the market. Active management provides only a small measure of the plans overall return. FHN also considers expectations for inflation,
real interest rates, and various risk premiums based primarily on the historical risk premium for each asset class. The expected return is based upon a twenty year time horizon. Consequently, FHN selected an 8.00 percent assumption for 2011 for the defined benefit pension plan and 5.20 percent assumption for
postretirement medical plan assets dedicated to employees who retired prior to January 1, 1993. Given the long term nature of these investments, current market conditions do not significantly affect the expected return.
The discount rates for the three years ended 2010 for pension and other benefits were determined by using a hypothetical AA yield curve represented by a series of annualized individual discount rates from one-half to thirty years. The discount rates are selected based upon data specific to FHNs plan and
employee population. The bonds used to create the hypothetical yield curve were subjected to several requirements to ensure that the resulting rates were representative of the bonds that would be selected by management to fulfill the companys funding obligations. In addition to the AA rating, only non-callable
bonds were included. Each bond issue was required to have at least $150 million par outstanding so that each issue was sufficiently marketable. Finally, bonds more than two standard deviations from the average yield were removed. When selecting the discount rate, FHN matches the duration of high quality
bonds with the duration of the obligations of the plan as of the measurement date. High quality corporate bonds experienced declining yields in 2010 resulting in a discount rate lower than 2009 and therefore, higher pension plan liabilities. For all years presented, the measurement date of the benefit obligations
and net periodic benefit costs was December 31.
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Note 19 q Pension, Savings, and Other Employee Benefits (continued)
The actuarial assumptions used in the defined benefit pension plan and the other employee benefit plans were as follows:
Benefit Obligations
Net Periodic Benefit Cost
2010
2009
2008
2010
2009
2008
Discount rate
Qualified pension
5.70
%
6.05
%
6.85
%
6.05
%
6.85
%
7.00
%
Nonqualified pension
5.10
%
5.55
%
6.90
%
5.55
%
6.90
%
6.70
%
Other nonqualified pension
4.75
%
5.35
%
6.95
%
5.35
%
6.95
%
6.83
%
Postretirement benefit
5.25
%
5.65
%
6.90
%
5.65
%
6.90
%
6.60
%
Expected long-term rate of return
Qualified pension/postretirement benefits
8.00
%
8.05
%
8.42
%
8.05
%
8.42
%
8.87
%
Postretirement benefit (retirees prior to January 1, 1993)
5.20
%
5.23
%
5.47
%
5.23
%
5.47
%
5.77
%
Rate of compensation increase
4.10
%
4.10
%
4.10
%
4.10
%
4.10
%
4.10
%
The assumed health care cost trend rates used in the other employee benefit plan was as follows:
2010
2009
Assumed health care cost trend rates on December 31
Participants under age 65
Participants 65 years and older
Participants under age 65
Participants 65 years and older
Health care cost trend rate assumed for next year
8.50
%
8.50
%
7.00
%
9.00
%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
5.00
5.00
5.00
5.00
Year that the rate reaches the ultimate trend rate
2017
2017
2014
2018
The health care cost trend rate assumption has a significant effect on the amounts reported. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
(Dollars in thousands)
1% Increase
1% Decrease
Adjusted total service and interest cost components
$
1,160
$
1,096
Adjusted postretirement benefit obligation at end of plan year
15,721
14,612
The components of net periodic benefit cost for the plan years 2010, 2009, and 2008 are as follows:
(Dollars in thousands)
Total Pension Benefits
Other Benefits
2010
2009
2008
2010
2009
2008
Components of net periodic benefit cost
Service cost
$
15,225
$
14,167
$
15,809
$
515
$
971
$
276
Interest cost
31,441
31,766
29,516
2,277
3,194
2,339
Expected return on plan assets
(47,534
)
(46,327
)
(46,938
)
(1,161
)
(1,133
)
(1,749
)
Amortization of unrecognized:
Transition (asset)/obligation
-
-
-
987
987
988
Prior service cost/(credit)
419
758
864
(8
)
1,437
(176
)
Actuarial (gain)/loss
14,771
8,262
2,417
(1,048
)
(836
)
(368
)
Net periodic benefit cost
$
14,322
$
8,626
$
1,668
$
1,562
$
4,620
$
1,310
ASC 715 curtailment/settlement expense (a)
-
2,867
1,269
-
-
-
Total ASC 715 expense
$
14,322
$
11,493
$
2,937
$
1,562
$
4,620
$
1,310
(a)
2009 includes curtailment expense reflecting managements decision to cease benefit accruals as of December 31, 2012.
FIRST HORIZON
NATIONAL CORPORATION
157
Note 19 q Pension, Savings, and Other Employee Benefits (continued)
The long-term expected rate of return is applied to the market-related value of plan assets in determining the expected return on plan assets. FHN determines the market-related value of plan assets using a calculated value that recognizes changes in the fair value of plan assets over five years, as permitted by
GAAP.
FHN utilizes the minimum amortization method in determining the amount of actuarial gains or losses to include in plan expense. Under this approach, the net deferred actuarial gain or loss that exceeds a threshold is amortized over the average remaining service period of active plan participants. The threshold is
measured as the greater of: 10 percent of a plans projected benefit obligation as of the beginning of the year or 10 percent of the market-related value of plan assets as of the beginning of the year.
In 2008, lump sum payments from a non-qualified plan triggered settlement accounting. In accordance with its practice, FHN performed a remeasurement of the plan in conjunction with the settlement and recognized the ASC 715 settlement expense reflected above.
The following tables set forth the plans benefit obligations and plan assets for 2010 and 2009:
(Dollars in thousands)
Total Pension Benefits
Other Benefits
2010
2009
2010
2009
Change in Benefit Obligation
Benefit obligation, beginning of year
$
533,475
$
472,074
$
41,726
$
35,762
Benefit obligation, adjustment
-
-
-
23,133
Service cost
15,225
14,167
515
971
Interest cost
31,441
31,766
2,277
3,194
Plan amendments
-
-
-
(17,088
)
Actuarial (gain)/loss
30,576
64,032
(1,716
)
(2,082
)
Actual benefits paid
(21,002
)
(19,778
)
(1,868
)
(2,532
)
Liability (gain)/loss due to curtailment
-
(28,844
)
-
-
Expected Medicare Part D reimbursement
-
-
340
368
Special termination benefits
-
58
-
-
Benefit obligation, end of year
$
589,715
$
533,475
$
41,274
$
41,726
Change in Plan Assets
Fair value of plan assets, beginning of year
$
496,330
$
378,519
$
15,923
$
14,605
Actual return on plan assets
70,172
83,272
1,820
3,240
Employer contributions
4,116
54,317
398
610
Actual benefits paid settlement payments
-
(18,387
)
(1,868
)
(2,532
)
Actual benefits paid other payments
(21,002
)
(1,391
)
-
-
Fair value of plan assets, end of year
$
549,616
$
496,330
$
16,273
$
15,923
Funded status of the plan (a)
$
(40,099
)
$
(37,145
)
$
(25,001
)
$
(25,803
)
Additional Amounts Recognized in the Statements of Financial Condition
Other assets
$
12,247
$
14,525
$
1,136
$
-
Other liabilities
(52,346
)
(51,670
)
(26,137
)
(25,803
)
Net asset/(liability) at end of year
$
(40,099
)
$
(37,145
)
$
(25,001
)
$
(25,803
)
(a)
The qualified pension plan is over funded by $12.2 million, which is offset by non-qualifed pension plan liabilities of $52.3 million.
In 2009, FHN determined that a previously existing retiree life insurance benefit met the requirements for reporting under ASC 715. A liability for these benefits was not previously recorded as the premiums were expensed over the insurance period. A $10.7 million adjustment to recognize the cumulative impact of
establishing the employee benefit liability is not included in the 2009 net periodic benefit cost. The recognition of this liability of $23.1 million is presented as an adjustment in the reconciliation of the benefit obligation for other benefits in 2009. In third quarter 2009, FHN modified post-retirement benefits payable
to active employees under this plan. As a result of this change, FHN recognized a reduction in its benefit liability of $17.1 million with an offset, net of tax, to
158
FIRST HORIZON NATIONAL CORPORATION
Note 19 q Pension, Savings, and Other Employee Benefits (continued)
accumulated other comprehensive income. This change is reflected as a plan amendment in the reconciliation of the benefit obligation for other benefits in 2009.
ASC 715-60 requires that a liability be recognized for contracts written to employees which provide future postretirement benefits that are covered by endorsement split-dollar life insurance arrangements because such obligations are not considered to be effectively settled upon entering into the related insurance
arrangements. FHN recognized a decrease to undivided profits of $8.5 million, net of tax, upon adoption of ASC 715-60.
The accumulated benefit obligation for the pension plan was $575.2 million as of December 31, 2010, and $509.8 million as of December 31, 2009. At December 31, 2010, both the projected benefit obligation and the accumulated benefit obligation for the qualified pension plan was less than the fair market
value of plan assets.
Unrecognized transition assets and obligations, unrecognized actuarial gains and losses, and unrecognized prior service costs and credits are recognized as a component of accumulated other comprehensive income. Balances reflected in accumulated other comprehensive income on a pre-tax basis for the years
ended December 31, 2010 and 2009 consist of:
(Dollars in thousands)
Total Pension Benefits
Other Benefits
2010
2009
2010
2009
Amounts Recognized in Accumulated Other Comprehensive Income
Net transition (asset)/obligation
$
-
$
-
$
1,725
$
2,714
Prior service cost/(credit)
2,095
1,484
621
613
Net actuarial (gain)/loss
289,016
296,879
(13,111
)
(11,786
)
Total
$
291,111
$
298,363
$
(10,765
)
$
(8,459
)
The amounts recognized in other comprehensive income during 2010 and 2009 were as follows:
(Dollars in thousands)
Total Pension Benefits
Other Benefits
2010
2009
2010
2009
Changes in plan assets and benefit obligation recognized in other comprehensive income
Net actuarial (gain)/loss arising during measurement period (a)
$
7,814
$
(1,812
)
$
(2,375
)
$
(3,934
)
Prior service cost arising during measurement period
-
-
-
(17,088
)
Items amortized during the measurement period:
Net transition (asset)/obligation
-
-
(987
)
(987
)
Prior service (credit)/cost
(419
)
(3,567
)
8
18,549
Net actuarial (gain)/loss
(14,771
)
(8,262
)
1,048
(7,018
)
Total recognized in other comprehensive income
$
(7,376
)
$
(13,641
)
$
(2,306
)
$
(10,478
)
(a)
2009 includes a positive, after-tax effect of $18.3 million due to a curtailment.
The estimated net actuarial (gain)/loss, prior service cost/(credit), and transition (asset)/obligation for the plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2010 and 2009 are as follows:
(Dollars in thousands)
Total Pension Benefits
Other Benefits
2010
2009
2010
2009
Net transition obligation
$
-
$
-
$
986
$
987
Prior service cost/(credit)
417
267
(9
)
(8
)
Net actuarial (gain)/loss
20,107
15,086
(1,039
)
(862
)
FHN does not expect any defined benefit pension plans and other employee benefit plans assets to be returned to FHN in 2011.
FIRST HORIZON
NATIONAL CORPORATION
159
Note 19 q Pension, Savings, and Other Employee Benefits (continued)
The following table provides detail on expected benefit payments, which reflect expected future service, as appropriate, and projected Medicare reimbursements:
(Dollars in thousands)
Pension Benefits
Other Benefits
Medicare Reimbursements
2011
$
22,464
$
2,225
$
388
2012
24,791
2,330
436
2013
27,279
2,428
478
2014
29,176
2,519
527
2015
31,375
2,608
570
2016 2020
189,196
14,170
-
Plan assets. FHNs overall investment goal is to create, over the life of the pension plan and retiree medical plan, respectively, an adequate pool of sufficiently liquid assets to support the pension benefit obligations to participants, retirees, and beneficiaries, as well as to partially support the medical obligations to
retirees and beneficiaries. Thus, the pension plan and retiree medical plan seek to achieve a high level of investment return consistent with a prudent level of portfolio risk.
During 2010, FHN adopted a dynamic investment strategy for the management of its pension assets. The strategy will lead to a reduction in equities and an increase in long duration fixed income allocations over time with the intention of reducing volatility of funded status and pension costs. At December 31,
2010, the target allocation to equities was 57.5 percent and the target allocation to fixed income and cash equivalents was 42.5 percent. Equity securities, some of which are included in common and collective funds, primarily include investments in large capital and small capital companies located in the U.S., as
well as international equity securities in developed and emerging markets. Fixed income securities include U.S. Treasuries, corporate bonds of companies from diversified industries, mortgage backed securities, and foreign bonds. Fixed income investments generally have long durations consistent with the pension
liabilities of FHN. Retiree medical funds are kept in short-term investments, primarily money market funds. On December 31, 2010, FHN did not have any significant concentrations of risk within the plan assets related to the pension plan or the retiree medical plan.
The fair value of FHNs pension plan assets at December 31, 2010, by asset category classified using the Fair Value measurement hierarchy is shown in the table below. See Note 22 Fair Value of Assets and Liabilities for more details about Fair Value measurements.
(Dollars in thousands)
December 31, 2010
Level 1
Level 2
Level 3
Total
Cash equivalents and money market funds
$
6,064
$
-
$
-
$
6,064
Equity securities:
U.S. small capital
94,885
-
-
94,885
Mutual funds (a)
1,226
-
-
1,226
Fixed income securities:
-
U.S. Treasuries
-
656
-
656
Corporate and foreign bonds
111,879
-
-
111,879
Common and collective funds:
Corporate and foreign bonds
-
119,315
-
119,315
U.S. large capital
-
139,455
-
139,455
International
-
76,137
-
76,137
Total
$
214,054
$
335,563
$
-
$
549,617
(a)
Primarily includes investments in small-cap equity securities.
Any shortfall of investment performance compared to investment objectives should be explainable in terms of general economic and capital market conditions. The Retirement Investment Committee, comprised of senior managers within the organization, meets monthly to review asset performance and the need for
rebalancing. At a minimum, rebalancing occurs annually for the purpose of remaining within the established target asset allocation
160
FIRST HORIZON NATIONAL CORPORATION
Note 19 q Pension, Savings, and Other Employee Benefits (continued)
ranges and to maintain liquidity for benefit payments. Risk management is also reviewed and evaluated based upon the organizations ability to assume investment risk.
The fair value of FHNs retiree medical plan assets at December 31, 2010, by asset category are as follows:
(Dollars in thousands)
December 31, 2010
Level 1
Level 2
Level 3
Total
Cash equivalents and money market funds
$
288
$
-
$
-
$
288
Equity securities:
U.S. large capital
5,930
-
-
5,930
U.S. small capital
4,479
-
-
4,479
Mutual funds (a)
4,764
-
-
4,764
Fixed income securities:
U.S. Treasuries
-
267
-
267
Corporate and foreign bonds
-
545
-
545
Total
$
15,461
$
812
$
-
$
16,273
(a)
Primarily includes investments in fixed income corporate and foreign bonds.
The number of shares of FHN common stock held by the plan was 778,500 for 2010 and 780,917 for 2009.
FHN has authorized the issuance of its common stock for awards to executive and other management employees who have a significant impact on the profitability of FHN. All unvested awards either have a service and/or a performance condition which must be met in order for the shares to ultimately vest. On
December 31, 2010, there were 4,903,089 shares available for grants, of this amount, 3,953,627 are available to be granted as restricted shares.
Performance condition grants. Under the long-term incentive and corporate performance programs, performance stock or units vest only if predetermined performance measures are met. The awards are forfeited if performance goals are not achieved within the specified performance periods. In 2010 and 2009,
executives were awarded performance stock units subject to certain performance criteria being met under this program. Additionally, in 2010 FHN granted restricted stock with employee-specific performance conditions to a new senior manager in addition to the customary annual management grants. In 2008,
executives were awarded performance restricted stock with 50% vesting in 2011 and 50% vesting in 2012 subject to certain performance criteria being met. As of December 31, 2010, performance conditions related to the 2009 performance stock unit grant and the 2007 performance restricted stock grant have
been met. Accordingly, 50% of the units granted in 2009 will vest in 2012 and 50% will vest in 2013 provided continued employment with FHN. Half of the performance restricted stock granted in 2007 will vest in 2010 with the remainder vesting in 2011. The performance conditions related to the 2010
performance stock units, the 2010 performance stock granted to a senior manager, and the 2008 performance restricted stock grants have not yet been achieved.
Service condition grants. In 2010 and 2009, executives and management were awarded restricted stock with service conditions only. Half of the 2009 awards are scheduled to vest in 2012 and the remainder is scheduled to vest in 2013. Half of the 2010 awards will vest in 2013 and the remainder in 2014.
Further, from time to time awards of restricted stock may be awarded to new executive-level employees upon hiring or as retention grants to existing executives. Additionally, retention restricted stock units were awarded to selected employees with the units expected to vest in 2013. Restricted stock and stock units
granted in 2010 are included in the table below.
Director grants. FHNs active stock plan allows stock awards to be granted to non-employee directors upon approval by the board of directors. Prior to 2007 the board granted 8,930 shares of restricted stock to each new non-employee director upon election to the board, with restrictions lapsing at a rate of ten
percent per year. That program was discontinued in 2007, although legacy awards remain outstanding. Prior to 2011, each non-employee director who no longer had legacy awards, and each new director, received an annual award of restricted stock units (RSUs) valued at $45,000. For a new director, that
amount is pro-rated consistent with the start date. Each RSU award is scheduled to vest the following year and is paid in common stock (including any stock earned as a result of stock dividends) plus any accrued cash dividends. Prior to 2011, non-employee directors whose service pre-dated 2007 also
participated in the RSU program, but participation was phased in as the legacy restricted stock awards vested. In 2009, five non-employee directors received an RSU award and the remainder had old restricted stock vest. No shares or RSUs were immediately vested or forfeited due to director retirements or
resignations.
The summary of restricted and performance stock and unit activity during the year ended December 31, 2010, is presented below:
Shares/ Units (a)
Weighted average grant date fair value (a)
Nonvested on January 1, 2010
3,796,049
$
12.42
Shares/units granted
1,513,963
12.04
Shares/units vested
(754,597
)
15.69
Shares/units canceled
(457,183
)
14.44
Nonvested on December 31, 2010
4,098,232
$
11.53
(a)
Share and per share data has been restated to reflect stock dividends distributed through January 1, 2011.
On December 31, 2010, there was $24.4 million of unrecognized compensation cost related to nonvested restricted stock plans. That cost is expected to be recognized over a weighted-average period of 2.41 years. The total grant date fair value of shares vested during 2010, 2009 and 2008, was $7.1 million, $3.2
million and $7.7 million, respectively.
The compensation cost that has been included in income from continuing operations pertaining to both stock option and restricted stock plans was $12.0 million, $9.0 million and $9.0 million for 2010, 2009, and 2008, respectively. The corresponding total income tax benefits recognized in the income statements
were $4.6 million, $3.4 million and $3.5 million for 2010, 2009, and 2008, respectively.
Consistent with Tennessee state law, only new or authorized, but unissued, stock may be utilized in connection with any issuance of FHN common stock which may be required as a result of stock based compensation awards. FHN historically obtains authorization from the Board of Directors to repurchase any
stock that may be issued at the time a plan is approved or amended. These authorizations are automatically adjusted for stock splits and stock dividends. Repurchases are authorized to be made in the open market or through privately negotiated transactions and will be subject to market conditions, accumulation
of excess equity, legal and regulatory requirements, and prudent capital management. FHN does not currently expect to repurchase a material number of shares related to the plans during the next annual period.
Stock option plans. Prior to 2009, FHN issued non-qualified stock options to employees under various plans, which provided for the issuance of FHN common stock at a price equal to the higher of the closing price or its fair market value at the date of grant. All options vest within 3 to 4 years and expire 7 years
or 10 years from the date of grant. A deferral program, which was discontinued in 2005, allowed for foregone compensation plus the exercise price to equal the fair market value of the stock on the date of grant if the grantee agreed to receive the options in lieu of compensation. Options that were part of
compensation deferral prior to January 2, 2004, expire 20 years from the date of grant. Stock options granted after January 2, 2004, which are part of the compensation deferral, expire 10 years from the date of grant. While there were no stock options granted during 2010, FHN has resumed granting stock
options in 2011.
The stock option plans include various antidilutive provisions in the event the value of awards become diminished from several factors. In 2008, FHN began paying quarterly stock dividends in lieu of quarterly cash dividends. Stock dividends increase the number of shares outstanding, thereby decreasing the
compensation value of the equity award. Consequently, the stock and option prices reported in the following tables have been proportionately adjusted to reflect the estimated economic effect of all dividends distributed in common stock effective through January 1, 2011. The Black Scholes Fair Value of the stock
options and compensation expense are not affected.
The summary of stock option plans activity for the year ended December 31, 2010, is shown below:
Options Outstanding
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term (years)
Aggregate Intrinsic Value (thousands)
January 1, 2010
14,193,157
$
26.90
Options exercised
(8,281
)
11.19
Options forfeited
(164,524
)
25.52
Options expired
(2,431,605
)
29.54
December 31, 2010
11,588,747
26.86
4.35
$
235
Options exercisable
10,273,547
26.97
4.46
216
Options expected to vest
1,287,145
21.89
3.53
19
The total intrinsic value of options exercised during 2010 and 2009 was immaterial, however, the total intrinsic value of options exercised during 2008 was $.3 million. On December 31, 2010, there was $.4 million of
unrecognized compensation cost related to nonvested stock options. That cost is expected to be recognized over a weighted-average period of less than 1 year.
In 2008, FHN granted 940,993 stock options (as restated to reflect stock dividend distributed through January 1, 2011) with a weighted average fair value of $1.44 per option at grant date. The majority of the stock options have since been canceled. No stock options were granted in 2010 or 2009.
FHN used the Black-Scholes Option Pricing Model to estimate the fair value of stock options granted in 2008, with the following assumptions:
2008
Expected dividend yield
5.97%
Expected weighted-average lives of options granted
5.07 years
Expected weighted-average volatility
25.89%
Expected volatility range
24.10% 42.60%
Risk-free interest rates range
2.80% 3.32%
Expected lives of options granted were determined based on the vesting period, historical exercise patterns and contractual term of the options. Expected volatility is estimated using average of daily high and low stock prices. Expected volatility assumptions were determined over the period of the expected lives of
the options.
Dividend reinvestment plan. The Dividend Reinvestment and Stock Purchase Plan authorizes the sale of FHNs common stock from stock acquired on the open market to shareholders who choose to invest all or a portion of their cash dividends or make optional cash payments of $25 to $10,000 per quarter without
paying commissions. The price of stock purchased on the open market is the average price paid.
164
FIRST HORIZON NATIONAL CORPORATION
Note 21 q Business Segment Information
Periodically, FHN adapts its segments to reflect managerial or strategic changes. FHN may also modify its methodology of allocating expenses among segments which could change historical segment results. In first quarter 2010, FHN revised its operating segments to better align with the chief operating decision
makers assessment of segment results and allocation of resources and with its strategic direction, representing a focus on its regional banking franchise and capital markets business. Key changes include the addition of the non-strategic segment which combines the former mortgage banking and national specialty
lending segments, the movement of correspondent banking from capital markets to regional banking, and the shift of first lien mortgage production in the Tennessee footprint to the regional banking segment. For comparability, previously reported items have been revised to reflect these changes.
FHN has four business segments: regional banking, capital markets, corporate, and non-strategic. The regional banking segment offers financial products and services, including traditional lending and deposit taking, to retail and commercial customers in Tennessee and surrounding markets. Regional banking
provides investments, insurance services, financial planning, trust services and asset management, health savings accounts, credit card, cash management, and first lien mortgage originations within the Tennessee footprint. Additionally, the regional banking segment includes correspondent banking which provides
credit, depository, and other banking related services to other financial institutions. The capital markets segment consists of fixed income sales, trading, and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio advisory and derivative sales. The corporate segment consists of gains
on the repurchase of debt, unallocated corporate expenses, expense on subordinated debt issuances and preferred stock, 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, low income housing investment activities, and various charges related to restructuring, repositioning, and efficiency. The non-strategic segment consists of the wind-down consumer and construction lending activities, legacy mortgage banking elements including servicing fees, 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 along with the associated restructuring, repositioning, and efficiency charges.
Total revenue, expense, and asset levels reflect those which are specifically identifiable or which are allocated based on an internal allocation method. Because the allocations are based on internally developed assignments and allocations, they are to an extent subjective. This assignment and allocation has been
consistently applied for all periods presented. The following table reflects the amounts of consolidated revenue, expense, tax, and assets for each segment for the years ended December 31:
(Dollars in thousands)
2010
2009
2008
Consolidated
Net interest income
$
730,838
$
776,468
$
895,082
Provision for loan losses
270,000
880,000
1,080,000
Noninterest income
955,692
1,254,843
1,468,390
Noninterest expense
1,367,133
1,571,845
1,612,314
Income/(loss) before income taxes
49,397
(420,534
)
(328,842
)
Benefit for income taxes
(19,083
)
(174,945
)
(154,405
)
Income/(loss) from continuing operations
68,480
(245,589
)
(174,437
)
Loss from discontinued operations, net of tax
$
(6,877
)
(12,846
)
(3,534
)
Net income/(loss)
$
61,603
$
(258,435
)
$
(177,971
)
Average assets
$
25,677,371
$
28,147,808
$
34,422,678
Depreciation and amortization
$
83,182
$
81,465
$
97,111
Expenditures for long-lived assets
42,631
21,180
23,666
Certain previously reported amounts have been reclassified to agree with current presentation.
FIRST HORIZON
NATIONAL CORPORATION
165
Note 21 q Business Segment Information (continued)
(Dollars in thousands)
2010
2009
2008
Regional
Net interest income
$
560,316
$
559,129
$
560,305
Banking
Provision for loan losses
92,335
306,185
385,647
Noninterest income
309,431
331,809
336,158
Noninterest expense
642,160
679,074
598,501
Income/(loss) before income taxes
135,252
(94,321
)
(87,685
)
Provision/(benefit) for income taxes
48,625
(36,108
)
(33,543
)
Net income/(loss)
$
86,627
$
(58,213
)
$
(54,142
)
Average assets
$
11,414,957
$
12,220,565
$
13,081,118
Depreciation and amortization
$
46,151
$
42,541
$
42,382
Expenditures for long-lived assets
30,721
16,091
14,693
Capital Markets
Net interest income
$
21,452
$
14,966
$
12,770
Noninterest income
424,225
632,871
521,300
Noninterest expense
318,495
386,252
342,986
Income before income taxes
127,182
261,585
191,084
Provision for income taxes
47,640
98,350
71,637
Net income
$
79,542
$
163,235
$
119,447
Average assets
$
2,121,862
$
2,073,593
$
2,920,185
Depreciation and amortization
$
10,336
$
10,084
$
10,775
Expenditures for long-lived assets
4,906
1,289
1,988
Corporate
Net interest income
$
1,722
$
25,612
$
1,669
Provision for loan losses
(1
)
Noninterest income
63,539
47,529
100,725
Noninterest expense
70,863
94,112
21,470
Income/(loss) before income taxes
(5,602
)
(20,971
)
80,925
Provision/(benefit) for income taxes
(37,187
)
(23,607
)
862
Net income
$
31,585
$
2,636
$
80,063
Average assets
$
4,989,685
$
4,769,187
$
4,149,993
Depreciation and amortization
$
12,913
$
2,477
$
2,501
Expenditures for long-lived assets
5,905
2,174
5,183
Non-Strategic
Net interest income
$
147,348
$
176,761
$
320,338
Provision for loan losses
177,665
573,815
694,354
Noninterest income
158,497
242,634
510,207
Noninterest expense
335,615
412,407
649,357
Loss before income taxes
(207,435
)
(566,827
)
(513,166
)
Benefit for income taxes
(78,161
)
(213,580
)
(193,361
)
Loss from continuing operations
(129,274
)
(353,247
)
(319,805
)
Loss from discontinued operations, net of tax
(6,877
)
(12,846
)
(3,534
)
Net loss
$
(136,151
)
$
(366,093
)
$
(323,339
)
Average assets
$
7,150,867
$
9,084,463
$
14,271,382
Depreciation and amortization
$
13,782
$
26,363
$
41,453
Expenditures for long-lived assets
1,099
1,626
1,802
Certain previously reported amounts have been reclassified to agree with current presentation.
166
FIRST HORIZON NATIONAL CORPORATION
Note 22 q Fair Value of Assets & Liabilities
FHN groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. This hierarchy requires FHN to maximize the use of observable market data, when available, and to
minimize the use of unobservable inputs when determining fair value. Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:
Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect managements estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of
option pricing models, discounted cash flow models, and similar techniques.
Transfers between fair value levels are recognized at the end of the fiscal quarter in which the associated change in inputs occurs.
FIRST HORIZON
NATIONAL CORPORATION
167
Note 22 q Fair Value of Assets & Liabilities (continued)
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis as of December 31, 2010:
(Dollars in thousands)
December 31, 2010
Level 1
Level 2
Level 3
Total
Trading securities capital markets:
U.S. Treasuries
$
-
$
45,078
$
-
$
45,078
Government agency issued MBS
-
267,086
-
267,086
Government agency issued CMO
-
62,061
-
62,061
Other U.S. government agencies
-
82,022
-
82,022
States and municipalities
-
13,965
-
13,965
Corporate and other debt
-
263,968
34
264,002
Equity, mutual funds, and other
-
100
-
100
Total trading securities capital markets
-
734,280
34
734,314
Trading securities mortgage banking
Principal only
-
8,992
-
8,992
Interest only
-
-
26,444
26,444
Total trading securities mortgage banking
-
8,992
26,444
35,436
Loans held for sale
-
40,323
207,632
247,955
Securities available for sale:
U.S. Treasuries
-
87,444
-
87,444
Government agency issued MBS
-
1,469,957
-
1,469,957
Government agency issued CMO
-
1,168,740
-
1,168,740
Other U.S. government agencies
-
15,335
37,891
53,226
States and municipalities
-
24,515
1,500
26,015
Corporate and other debt
545
-
-
545
Venture capital
-
-
13,179
13,179
Equity, mutual funds, and other
9,248
5,351
-
14,599
Total securities available for sale
9,793
2,771,342
52,570
2,833,705
Mortgage servicing rights
-
-
207,319
207,319
Other assets:
Deferred compensation assets
25,121
-
-
25,121
Derivatives, forwards and futures
13,152
-
-
13,152
Derivatives, interest rate contracts
-
290,509
-
290,509
Total other assets
38,273
290,509
-
328,782
Total assets
$
48,066
$
3,845,446
$
493,999
$
4,387,511
Trading liabilities capital markets:
U.S. Treasuries
$
-
$
195,390
$
-
$
195,390
Government agency issued MBS
-
1,804
-
1,804
Other U.S. government agencies
-
18,121
-
18,121
Corporate and other debt
-
146,605
-
146,605
Total trading liabilities capital markets
-
361,920
-
361,920
Other short-term borrowings and commercial paper
-
-
27,309
27,309
Other liabilities:
Derivatives, forwards and futures
18,600
-
-
18,600
Derivatives, interest rate contracts
-
195,621
-
195,621
Derivatives, other
-
-
1,000
1,000
Total other liabilities
18,600
195,621
1,000
215,221
Total liabilities
$
18,600
$
557,541
$
28,309
$
604,450
168
FIRST HORIZON NATIONAL CORPORATION
Note 22 q Fair Value of Assets & Liabilities (continued)
The following table presents the balance of assets and liabilities measured at fair value on a recurring basis at December 31, 2009:
(Dollars in thousands)
December 31, 2009
Level 1
Level 2
Level 3
Total
Trading securities capital markets:
U.S. Treasuries
$
-
$
92,387
$
-
$
92,387
Government agency issued MBS
-
175,698
-
175,698
Government agency issued CMO
-
35,074
-
35,074
Other U.S. government agencies
-
92,842
-
92,842
States and municipalities
-
18,961
-
18,961
Corporate and other debt
-
217,016
34
217,050
Equity, mutual funds, and other
-
1,778
12
1,790
Total trading securities capital markets
-
633,756
46
633,802
Trading securities mortgage banking
-
10,013
56,086
66,099
Loans held for sale
-
23,919
206,227
230,146
Securities available for sale:
U.S. Treasuries
-
48,129
-
48,129
Government agency issued MBS
-
1,000,077
-
1,000,077
Government agency issued CMO
-
1,189,430
-
1,189,430
Other U.S. government agencies
-
20,472
97,673
118,145
States and municipalities
-
42,900
1,500
44,400
Corporate and other debt
696
-
-
696
Equity, mutual funds, and other
35,361
44,016
15,743
95,120
Total securities available for sale
36,057
2,345,024
114,916
2,495,997
Mortgage servicing rights
-
-
302,611
302,611
Other assets
25,337
248,628
-
273,965
Total assets
$
61,394
$
3,261,340
$
679,886
$
4,002,620
Trading liabilities capital markets:
U.S. Treasuries
$
-
$
104,087
$
-
$
104,087
Government agency issued MBS
-
1,952
-
1,952
Government agency issued CMO
-
8
-
8
Corporate and other debt
-
187,340
-
187,340
Total trading liabilities capital markets
-
293,387
-
293,387
Other short-term borrowings and commercial paper
-
-
39,662
39,662
Other liabilities
4,929
174,493
-
179,422
Total liabilities
$
4,929
$
467,880
$
39,662
$
512,471
Changes in Recurring Level 3 Fair Value Measurements
In third quarter 2009, FHN reviewed the allocation of fair value between MSR and excess interest from prior first lien loan sales and securitizations. As a result, a net amount of $11.1 million was reclassified from trading securities to MSR within Level 3 assets measured at fair value on a recurring basis. The
reclassification had no effect on FHNs Consolidated Statements of Income as excess interest and MSR are highly correlated in valuation and as both excess interest and MSR are recognized at elected fair value with changes in fair value being included within mortgage banking income.
In first quarter 2009, FHN changed the fair value methodology for certain loans held for sale. The methodology change had a minimal effect on the valuation of the applicable loans. Consistent with this change, the applicable amount is presented as a transfer into Level 3 loans held for sale in the following
rollforward for the twelve months ended December 31, 2009.
FIRST HORIZON
NATIONAL CORPORATION
169
Note 22 q Fair Value of Assets & Liabilities (continued)
In third quarter 2008, FHN revised its methodology for valuing hedges of MSR and excess interest that were retained from prior securitizations. Consistent with this change, the applicable amounts are presented as a transfer out of net derivative assets and liabilities in the following rollforward for the twelve months
ended December 31, 2008. See Determination of Fair Value for a detailed discussion of the changes in valuation methodology.
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:
(Dollars in thousands)
Twelve Months Ended December 31, 2010
Trading securities (a)
Loans held for sale
Securities available for sale
Mortgage servicing rights, net
Net derivative assets and liabilities
Other short-term borrowings and commercial paper
Investment portfolio (b)
Venture Capital
Balance on January 1, 2010
$
56,132
$
206,227
$
99,173
$
15,743
$
302,611
$
-
$
39,662
Adjustment due to adoption of amendments to ASC 810
(4,776
)
-
-
-
(2,293
)
-
Total net gains/(losses) included in:
Net income
8,627
(17,991
)
-
(2,962
)
(31,146
)
-
(12,353
)
Other comprehensive income
-
-
(2,302
)
-
-
-
-
Purchases, sales, issuances, and settlements, net
(33,505
)
19,396
(57,480
)
398
(61,853
)
(1,000
)
-
Balance on December 31, 2010
$
26,478
$
207,632
$
39,391
$
13,179
$
207,319
$
(1,000
)
$
27,309
Net unrealized gains/(losses) included in net income
$
5,467
(c)
$
(17,991
)(c)
$
-
$
(2,962
)(d)
$
(27,153
)(c)
$
(1,000
)
$
(12,353
)(c)
170
FIRST HORIZON NATIONAL CORPORATION
Note 22 q Fair Value of Assets & Liabilities (continued)
(Dollars in thousands)
Twelve Months Ended December 31, 2009
Trading securities (a)
Loans held for sale
Securities available for sale
Mortgage servicing rights, net
Net derivative assets and liabilities
Other short-term borrowings and commercial paper
Investment portfolio (b)
Venture Capital
Balance on January 1, 2009
$
153,542
$
11,330
$
111,840
$
25,307
$
376,844
$
233
$
27,957
Total net gains/(losses) included in:
Net income
55,342
(10,384
)
-
(2,252
)
67,817
-
11,705
Other comprehensive income
-
-
3,812
-
-
-
-
Purchases, sales, issuances, and settlements, net
(141,675
)
(36,265
)
(16,479
)
(7,312
)
(153,127
)
(233
)
-
Net transfers into/(out of) Level 3
(11,077
)
241,546
-
-
11,077
-
-
Balance on December 31, 2009
$
56,132
$
206,227
$
99,173
$
15,743
$
302,611
$
-
$
39,662
Net unrealized gains/(losses) included in net income
$
14,408
(e)
$(10,384
)(c)
$
-
$(2,252
)(d)
$
69,412
(f)
$
-
$
11,705
(c)
(Dollars in thousands)
Twelve Months Ended December 31, 2008
Trading securities
Loans held for sale
Securities available for sale
Mortgage servicing rights, net
Net derivative assets and liabilities
Other short-term borrowings and commercial paper
Balance on January 1, 2008
$
476,404
$
-
$
159,301
$
1,159,820
$
81,517
$
-
Total net gains/(losses) included in:
Net income
(109,232
)
(2,551
)
303
(429,854
)
146,737
(34,978
)
Other comprehensive income
-
-
(3,641
)
-
-
-
Purchases, sales, issuances, and settlements, net
(235,569
)
(2,711
)
(18,816
)
(353,122
)
(119,926
)
62,935
Net transfers into/(out of) Level 3
21,939
16,592
-
-
(108,095
)
-
Balance on December 31, 2008
$
153,542
$
11,330
$
137,147
$
376,844
$
233
$
27,957
Net unrealized gains/(losses) included in net income
$(172,366
)(g)
$(10,742
)(c)
$
303
(d)
$(328,112
)(h)
$
72
(c)
$
(19,974
)(c)
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Primarily represents certificated interest only strips and excess interest mortgage banking trading securities. Capital markets Level 3 trading securities are not significant.
(b)
Primarily represents other U.S. government agencies. States and municipalities are not significant.
(c)
Primarily included in mortgage banking income.
(d)
Represents recognized gains and losses attributable to venture capital investments classified within securities available for sale that are included in securities gains/(losses) in noninterest income.
(e)
Represents recognized gains/(losses) of $(2.2) million included in capital markets noninterest income, $20.5 million included in mortgage banking noninterest income, and $(3.9) million included in other income and commissions.
(f)
Represents recognized gains/(losses) of $71.6 million included in mortgage banking noninterest income and $(2.2) million included in other income and commissions.
(g)
Includes $(23.8) million included in capital markets noninterest income, $(138.5) million included in mortgage banking noninterest income, and $(10.1) million included in other income and commissions.
(h)
Includes $(312.9) million included in mortgage banking noninterest income and $(15.2) million included in other income and commissions.
FIRST HORIZON
NATIONAL CORPORATION
171
Note 22 q Fair Value of Assets & Liabilities (continued)
Nonrecurring Fair Value Measurements
From time to time, FHN may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of LOCOM accounting or write-downs of individual assets. For assets measured at fair value on a
nonrecurring basis which were still held on the balance sheet at December 31, 2010, 2009, and 2008, respectively, the following tables provide the level of valuation assumptions used to determine each adjustment, the related carrying value, and the fair value adjustments recorded during the respective periods.
(Dollars in thousands)
Carrying Value at December 31, 2010
Twelve Months Ended December 31, 2010
Level 1
Level 2
Level 3
Total
Net gains/(losses)
Loans held for sale SBAs
$
-
$
10,456
$
-
$
10,456
$
60
Loans held for sale first mortgages
-
-
15,289
15,289
(7,249
)
Loans, net of unearned income (a)
-
-
213,974
213,974
(156,572
)
Real estate acquired by foreclosure (b)
-
-
110,536
110,536
(18,097
)
Other assets (c)
-
-
87,667
87,667
(11,145
)
$
(193,003
)
(Dollars in thousands)
Carrying Value at December 31, 2009
Twelve Months Ended December 31, 2009
Level 1
Level 2
Level 3
Total
Net gains/(losses)
Loans held for sale
$
-
$
15,753
$
21,829
$
37,582
$
1,716
Securities available for sale (d)
-
-
-
-
(516
)
Loans, net of unearned income (a)
-
-
402,007
402,007
(287,866
)
Real estate acquired by foreclosure (b)
-
-
113,722
113,722
(39,879
)
Other assets (c)
-
-
108,247
108,247
(8,970
)
$
(335,515
)
(Dollars in thousands)
Carrying Value at December 31, 2008
Twelve Months Ended December 31, 2008
Level 1
Level 2
Level 3
Total
Net gains/(losses)
Loans held for sale
$
-
$
78,739
$
38,153
$
116,892
$
(27,503
)
Securities available for sale (d)
-
1,117
-
1,117
(1,897
)
Loans, net of unearned income (a)
-
-
414,902
414,902
(198,485
)
Other assets (c)
-
-
113,832
113,832
(9,229
)
$
(237,114
)
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Represents carrying value of loans for which adjustments are based on the appraised value of the collateral. Write-downs on these loans are recognized as part of provision.
(b)
Represents the fair value and related losses of foreclosed properties that were measured subsequent to their initial classification as foreclosed assets. Balance excludes foreclosed real estate related to government insured mortgages.
(c)
Represents low income housing investments.
(d)
Represents recognition of other than temporary impairment for cost method investments classified within securities available for sale.
In fourth quarter 2010, FHN exercised clean up calls on eight first lien mortgage proprietary securitization trusts. In accordance with accounting requirements, FHN initially recognized the associated loans at fair value. Fair value was primarily determined through reference to observable inputs, including current
market prices for similar loans. Since these loans were from the 2002 and 2003 vintages, adjustments were made for the higher yields and lower credit risk associated with the loans in comparison to more currently originated loans being sold. This resulted in recognition of a small premium for the called loans.
In 2009, FHN recognized goodwill impairment of $14.3 million related to the disposition of FTN ECM. In accordance with accounting requirements, FHN allocated a portion of the goodwill from the applicable reporting
172
FIRST HORIZON NATIONAL CORPORATION
Note 22 q Fair Value of Assets & Liabilities (continued)
unit to the asset group held for disposal in determining the carrying value of the disposal group. In determining the amount of impairment, FHN compared the carrying value of the disposal group to the estimated value of the contracted sale price, which primarily included observable inputs in the form of financial
asset values but which also included certain non-observable inputs related to the estimated values of post-transaction contingencies. Thus, this measurement was considered a Level 3 valuation. Impairment of goodwill was recognized for the excess of the carrying amount over the fair value of the disposal group.
During first quarter 2010, the sale failed to close and FHN exited this business through an immediate cessation of operations resulting in an additional goodwill impairment of $3.3 million, which represented all remaining goodwill attributable to FTN ECM.
In first quarter 2008, FHN recognized a lower of cost or market reduction in value of $36.2 million on its warehouse of trust preferred loans, which was classified within level 3 for loans held for sale at March 31, 2008. The determination of estimated market value for the warehouse was based on a hypothetical
securitization transaction for the warehouse as a whole. FHN used observable data related to prior securitization transactions as well as changes in credit spreads in the collateralized debt obligation (CDO) market since the most recent transaction. FHN also incorporated significant internally developed assumptions
within its valuation of the warehouse, including estimated prepayments and estimated defaults. In accordance with ASC 820, FHN excluded transaction costs related to the hypothetical securitization in determining fair value.
In second quarter 2008, FHN designated its trust preferred warehouse as held to maturity. Accordingly, these loans were excluded from loans held for sale in the nonrecurring measurements table as of December 31, 2008. In conjunction with the transfer of these loans to held to maturity status, FHN performed a
lower of cost or market analysis on the date of transfer. This analysis was based on the pricing of market transactions involving securities similar to those held in the trust preferred warehouse with consideration given, as applicable, to any differences in characteristics of the market transactions, including issuer
credit quality, call features and term. As a result of the lower of cost or market analysis, FHN determined that its existing valuation of the trust preferred warehouse was appropriate.
In 2008, FHN recognized a lower of cost or market reduction in value of $26.8 million relating to mortgage warehouse loans. Approximately $19 million was attributable to increased repurchases, delinquencies, or aging of loans. The market values for these loans were estimated using historical sales prices for these
type loans, adjusted for incremental price concessions that a third party investor was assumed to require due to tightening credit markets and deteriorating housing prices. These assumptions were based on published information about actual and projected deteriorations in the housing market as well as changes in
credit spreads. The remaining reduction was primarily attributable to lower investor prices, due primarily to credit spread widening. This reduction was calculated by comparing the total fair value of loans (using the same methodology that is used for fair value option loans) to carrying value for the aggregate
population of loans that were not delinquent or aged.
Fair Value Option
FHN elected the fair value option on a prospective basis for almost all types of mortgage loans originated for sale purposes under the Financial Instruments Topic (ASC 825). FHN determined that the election reduced certain timing differences and better matched changes in the value of such loans with changes
in the value of derivatives used as economic hedges for these assets at the time of election. After the 2008 divestiture of certain mortgage banking operations and the significant decline of mortgage loans originated for sale, FHN discontinued hedging the mortgage warehouse.
Repurchased loans are recognized within loans held-for-sale at fair value at the time of repurchase, which includes consideration of the credit status of the loans and the estimated liquidation value. FHN has elected to continue recognition of these loans at fair value in periods subsequent to reacquisition. Due to
the credit-distressed nature of the vast majority of repurchased loans and the related loss severities experienced upon repurchase, FHN believes that the fair value election provides a more timely recognition of changes in value for these loans that occur subsequent to repurchase. Absent the fair value election,
these loans would be subject to valuation at the lower of cost or market value, which would prevent subsequent values from exceeding the initial fair value determined at the time of repurchase but would require recognition of subsequent declines in value. Thus, the fair
FIRST HORIZON
NATIONAL CORPORATION
173
Note 22 q Fair Value of Assets & Liabilities (continued)
value election provides for a more timely recognition of any potential future recoveries in asset values while not affecting the requirement to recognize subsequent declines in value.
Prior to 2010, FHN transferred certain servicing assets in transactions that did not qualify for sale treatment due to certain recourse provisions. The associated proceeds are recognized within other short-term borrowings and commercial paper in the Consolidated Statements of Condition as of December 31, 2010
and 2009. Since the servicing assets are recognized at fair value and changes in the fair value of the related financing liabilities will exactly mirror the change in fair value of the associated servicing assets, management elected to account for the financing liabilities at fair value. Since the servicing assets have
already been delivered to the buyer, the fair value of the financing liabilities associated with the transaction does not reflect any instrument-specific credit risk.
The following table reflects the differences between the fair value carrying amount of mortgages held for sale measured at fair value in accordance with managements election and the aggregate unpaid principal amount FHN is contractually entitled to receive at maturity.
(Dollars in thousands)
December 31, 2010
Fair value carrying amount
Aggregate unpaid principal
Fair value carrying amount less aggregate unpaid principal
Loans held for sale reported at fair value:
Total loans
$
247,955
$
313,199
$
(65,244
)
Nonaccrual loans
36,768
74,285
(37,517
)
Loans 90 days or more past due and still accruing
10,372
26,372
(16,000
)
(Dollars in thousands)
December 31, 2009
Fair value carrying amount
Aggregate unpaid principal
Fair value carrying amount less aggregate unpaid principal
Loans held for sale reported at fair value:
Total loans
$
230,146
$
277,400
$
(47,254
)
Nonaccrual loans
15,988
34,469
(18,481
)
Loans 90 days or more past due and still accruing
8,026
16,765
(8,739
)
Assets and liabilities accounted for under the fair value election are initially measured at fair value with subsequent changes in fair value recognized in earnings. Such changes in the fair value of assets and liabilities for which FHN elected the fair value option are included in current period earnings with
classification in the income statement line item reflected in the following table:
(Dollars in thousands)
Twelve Months Ended December 31
2010
2009
2008
Changes in fair value included in net income:
Mortgage banking noninterest income
Loans held for sale
$
(17,991
)
$
(8,236
)
$
(21,870
)
Other short-term borrowings and commercial paper
(12,353
)
11,705
(19,974
)
Estimated changes in fair value due to credit risk (loans held for sale)
(19,517
)
(19,771
)
(21,865
)
Certain previously reported amounts have been reclassified to agree with current presentaion.
For the twelve month period ended December 31, 2009 and 2008, the amounts for loans held for sale include $13.7 million, and $21.9 million, respectively, of losses included in pretax earnings that are attributable to changes in instrument-specific credit risk. During 2010, this amount was immaterial. The portion
of the fair value
174
FIRST HORIZON NATIONAL CORPORATION
Note 22 q Fair Value of Assets & Liabilities (continued)
adjustments related to credit risk was determined based on both a quality adjustment for delinquencies and the full credit spread on the non-conforming loans.
Interest income on mortgage loans held for sale measured at fair value is calculated based on the note rate of the loan and is recorded in the interest income section of the Consolidated Statements of Income as interest on loans held for sale.
Determination of Fair Value
In accordance with ASC 820-10-35, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following describes the assumptions and methodologies used to estimate the fair value of
financial instruments and MSR recorded at fair value in the Consolidated Statements of Condition and for estimating the fair value of financial instruments for which fair value is disclosed under ASC 825-10-50.
Short-term financial assets. Federal funds sold, securities purchased under agreements to resell, and interest bearing deposits with other financial institutions are carried at historical cost. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the
instrument and its expected realization.
Trading securities and trading liabilities. Trading securities and trading liabilities are recognized at fair value through current earnings. Trading inventory held for broker-dealer operations is included in trading securities and trading liabilities. Broker-dealer long positions are valued at bid price in the bid-ask spread.
Short positions are valued at the ask price. Inventory positions are valued using observable inputs including current market transactions, LIBOR and U.S. treasury curves, credit spreads, and consensus prepayment speeds.
Trading securities also include retained interests in prior securitizations that qualify as financial assets, which may include certificated residual interests, excess interest (structured as interest-only strips), principal-only strips, or subordinated bonds. Residual interests represent rights to receive earnings to the extent of
excess income generated by the underlying loans. Excess interest represents rights to receive interest from serviced assets that exceed contractually specified rates. Principal-only strips are principal cash flow tranches, and interest-only strips are interest cash flow tranches. Subordinated bonds are bonds with junior
priority. All financial assets retained from a securitization are recognized on the Consolidated Statements of Condition in trading securities at fair value with realized and unrealized gains and losses included in current earnings as a component of noninterest income on the Consolidated Statements of Income.
The fair value of excess interest is determined using prices from closely comparable assets such as MSR that are tested against prices determined using a valuation model that calculates the present value of estimated future cash flows. Inputs utilized in valuing excess interest are consistent with those used to value
the related MSR. The fair value of excess interest typically changes based on changes in the discount rate and differences between modeled prepayment speeds and credit losses and actual experience. FHN uses assumptions in the model that it believes are comparable to those used by brokers and other service
providers. FHN also periodically compares its estimates of fair value and assumptions with brokers, service providers, recent market activity, and against its own experience.
The fair value of certificated residual interests was determined using a valuation model that calculates the present value of estimated future cash flows. Inputs utilized in valuing residual interests are generally consistent with those used to value the related MSR. However, due to the lack of market information for
residual interests, at December 31, 2009, FHN applied an internally-developed assumption about the yield that a market participant would require in determining the discount rate for its residual interests. The fair value of residual interests typically changes based on changes in the discount rate and differences
between modeled prepayment speeds and credit losses and actual experience. All residual interests were removed from the balance sheet upon adoption of ASU 2009-17 on January 1, 2010.
FIRST HORIZON
NATIONAL CORPORATION
175
Note 22 q Fair Value of Assets & Liabilities (continued)
In some instances, FHN retained interests in the loans it securitized by retaining certificated principal only strips or subordinated bonds. Subsequent to the August 2008 reduction of mortgage banking operations, FHN uses observable inputs such as trades of similar instruments, yield curves, credit spreads, and
consensus prepayment speeds to determine the fair value of principal only strips. Previously, FHN used the market prices from comparable assets such as publicly traded FNMA trust principal only strips that were adjusted to reflect the relative risk difference between readily marketable securities and privately
issued securities in valuing the principal only strips. The fair value of subordinated bonds was determined using the best available market information, which included trades of comparable securities, independently provided spreads to other marketable securities, and published market research. Where no market
information was available, the company utilized an internal valuation model. As of December 31, 2009, no market information was available, and the subordinated bonds were valued using an internal discounted cash flow model, which included assumptions about timing, frequency and severity of loss, prepayment
speeds of the underlying collateral, and the yield that a market participant would require. All subordinated bonds were removed from the balance sheet upon adoption of ASU 2009-17 on January 1, 2010.
Securities available for sale. Securities available for sale includes the investment portfolio accounted for as available for sale under ASC 320-10-25, federal bank stock holdings, short-term investments in mutual funds, and venture capital investments. Valuations of available-for-sale securities are performed using
observable inputs obtained from market transactions in similar securities. Typical inputs include LIBOR and U.S. treasury curves, consensus prepayment estimates, and credit spreads. When available, broker quotes are used to support these valuations. Certain government agency debt obligations with limited trading
activity are valued using a discounted cash flow model that incorporates a combination of observable and unobservable inputs. Primary observable inputs include contractual cash flows and the treasury curve. Significant unobservable inputs include estimated trading spreads and estimated prepayment speeds.
Stock held in the Federal Reserve Bank and Federal Home Loan Banks are recognized at historical cost in the Consolidated Statements of Condition which is considered to approximate fair value. Short-term investments in mutual funds are measured at the funds reported closing net asset values. Venture capital
investments are typically measured using significant internally generated inputs including adjustments to referenced transaction values and discounted cash flows analysis.
Loans held for sale. In conjunction with the adoption of the provisions of the FASB codification update to ASC 820-10 in second quarter 2009, FHN revised its methodology for determining the fair value of certain loans within its mortgage warehouse. FHN now determines the fair value of the applicable loans using
a discounted cash flow model using observable inputs, including current mortgage rates for similar products, with adjustments for differences in loan characteristics reflected in the models discount rates. For all other loans held in the warehouse (and in prior periods for the loans converted to the discounted cash
flow methodology), the fair value of loans whose principal market is the securitization market is based on recent security trade prices for similar products with a similar delivery date, with necessary pricing adjustments to convert the security price to a loan price. Loans whose principal market is the whole loan
market are priced based on recent observable whole loan trade prices or published third party bid prices for similar product, with necessary pricing adjustments to reflect differences in loan characteristics. Typical adjustments to security prices being valued for whole loan prices include adding the value of MSR to
the security price or to the whole loan price if FHNs mortgage loan is servicing retained, adjusting for interest in excess of (or less than) the required coupon or note rate, adjustments to reflect differences in the characteristics of the loans being valued as compared to the collateral of the security or the loan
characteristics in the benchmark whole loan trade, adding interest carry, reflecting the recourse obligation that will remain after sale, and adjusting for changes in market liquidity or interest rates if the benchmark security or loan price is not current. Additionally, loans that are delinquent or otherwise significantly
aged are discounted to reflect the less marketable nature of these loans.
Loans held for sale also includes loans made by the Small Business Administration (SBA). The fair value of SBA loans is determined using an expected cash flow model that utilizes observable inputs such as the spread between LIBOR and prime rates, consensus prepayment speeds, and the treasury curve. The
fair value of other non-mortgage loans held for sale is approximated by their carrying values based on current transaction values.
176
FIRST HORIZON NATIONAL CORPORATION
Note 22 q Fair Value of Assets & Liabilities (continued)
Loans, net of unearned income. Loans, net of unearned income are recognized at the amount of funds advanced, less charge-offs and an estimation of credit risk represented by the allowance for loan losses. The fair value estimates for disclosure purposes differentiate loans based on their financial characteristics,
such as product classification, loan category, pricing features, and remaining maturity.
The fair value of floating rate loans is estimated through comparison to recent market activity in loans of similar product types, with adjustments made for differences in loan characteristics. In situations where market pricing inputs are not available, fair value is considered to approximate book value due to the
monthly repricing for commercial and consumer loans, with the exception of floating rate 1-4 family residential mortgage loans which reprice annually and will lag movements in market rates. The fair value for floating rate 1-4 family mortgage loans is calculated by discounting future cash flows to their present value.
Future cash flows are discounted to their present value by using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same time period.
Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans have been applied to the floating rate 1-4 family residential mortgage portfolio.
The fair value of fixed rate loans is estimated through comparison to recent market activity in loans of similar product types, with adjustments made for differences in loan characteristics. In situations where market pricing inputs are not available, fair value is estimated by discounting future cash flows to their
present value. Future cash flows are discounted to their present value by using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans have
been applied to the fixed rate mortgage and installment loan portfolios.
Individually impaired commercial loans are measured using either a discounted cash flow methodology or the estimated fair value of the underlying collateral less costs to sell, if the loan is considered collateral-dependent. In accordance with accounting standards, the discounted cash flow analysis utilizes the loans
effective interest rate for discounting expected cash flow amounts. Thus, this analysis is not considered a fair value measurement in accordance with ASC 820. However, the results of this methodology are considered to approximate fair value for the applicable loans. Expected cash flows are derived from internally-
developed inputs primarily reflecting expected default rates on contractual cash flows.
For loans measured using the estimated fair value of collateral less costs to sell, fair value is estimated using appraisals of the collateral. Collateral values are monitored and additional write-downs are recognized if it is determined that the estimated collateral values have declined further. Estimated costs to sell are
based on current amounts of disposal costs for similar assets. Carrying value is considered to reflect fair value for these loans.
Mortgage servicing rights. FHN recognizes all classes of MSR at fair value. Since sales of MSR tend to occur in private transactions and the precise terms and conditions of the sales are typically not readily available, there is a limited market to refer to in determining the fair value of MSR. As such, FHN primarily
relies on a discounted cash flow model to estimate the fair value of its MSR. This model calculates estimated fair value of the MSR using predominant risk characteristics of MSR such as interest rates, type of product (fixed vs. variable), age (new, seasoned, or moderate), agency type and other factors. FHN uses
assumptions in the model that it believes are comparable to those used by brokers and other service providers. FHN also periodically compares its estimates of fair value and assumptions with brokers, service providers, recent market activity, and against its own experience.
Derivative assets and liabilities. For forwards and futures contracts used to hedge the value of servicing assets currently hedged and the mortgage warehouse which was hedged prior to the 2008 divestiture, fair values are based on current transactions involving identical securities. These contracts are exchange-
traded and thus have no credit risk factor assigned as the risk of non-performance is limited to the clearinghouse used.
Valuations of other derivatives (primarily interest rate related swaps, swaptions, caps, and collars) are based on inputs observed in active markets for similar instruments. Typical inputs include the LIBOR curve, option volatility, and option skew. Credit risk is mitigated for these instruments through the use of mutual
margining and master
FIRST HORIZON
NATIONAL CORPORATION
177
Note 22 q Fair Value of Assets & Liabilities (continued)
netting agreements as well as collateral posting requirements. Any remaining credit risk related to interest rate derivatives is considered in determining fair value through evaluation of additional factors such as customer loan grades and debt ratings.
In conjunction with the sale of a portion of its Visa Class B shares in December 2010, FHN and the purchaser entered into a derivative transaction whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The fair value of this
derivative has been determined using a discounted cash flow methodology for estimated future cash flows determined through use of probability weighted scenarios for multiple estimates of Visas aggregate exposure to covered litigation matters, which include consideration of amounts funded by Visa into its escrow
account for the covered litigation matters. Since this estimation process required application of judgment in developing significant unobservable inputs used to determine the possible outcomes and the probability weighting assigned to each scenario, this derivative has been classified within Level 3 in fair value
measurements disclosures.
Real estate acquired by foreclosure. Real estate acquired by foreclosure primarily consists of properties that have been acquired in satisfaction of debt. These properties are carried at the lower of the outstanding loan amount or estimated fair value less estimated costs to sell the real estate. Estimated fair value is
determined using appraised values with subsequent adjustments for deterioration in values that are not reflected in the most recent appraisal. Real estate acquired by foreclosure also includes properties acquired in compliance with HUD servicing guidelines which are carried at the estimated amount of the
underlying government assurance or guarantee.
Nonearning assets. For disclosure purposes, nonearning assets include cash and due from banks, accrued interest receivable, and capital markets receivables. Due to the short-term nature of cash and due from banks, accrued interest receivable, and capital markets receivables, the fair value is approximated by the
book value.
Other assets. For disclosure purposes, other assets consist of investments in low income housing partnerships and deferred compensation assets that are considered financial assets. Investments in low income housing partnerships are written down to estimated fair value quarterly based on the estimated value of
the associated tax credits. Deferred compensation assets are recognized at fair value, which is based on quoted prices in active markets.
Defined maturity deposits. The fair value is estimated by discounting future cash flows to their present value. Future cash flows are discounted by using the current market rates of similar instruments applicable to the remaining maturity. For disclosure purposes, defined maturity deposits include all certificates of
deposit and other time deposits.
Undefined maturity deposits. In accordance with ASC 825, the fair value is approximated by the book value. For disclosure purposes, undefined maturity deposits include demand deposits, checking interest accounts, savings accounts, and money market accounts.
Short-term financial liabilities. The fair value of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings and commercial paper are approximated by the book value. The carrying amount is a reasonable estimate of fair value because of the relatively short time
between the origination of the instrument and its expected realization. Other short-term borrowings and commercial paper includes a liability associated with transfers of mortgage servicing rights that did not qualify for sale accounting. This liability is accounted for at elected fair value, which is measured consistent
with the related MSR, as previously described.
Term borrowings. The fair value is based on quoted market prices or dealer quotes for the identical liability when traded as an asset. When pricing information for the identical liability is not available, relevant prices for similar debt instruments are used with adjustments being made to the prices obtained for
differences in characteristics of the debt instruments. If no relevant pricing information is available, the fair value is approximated by the present value of the contractual cash flows discounted by the investors yield which considers FHNs and FTBNAs debt ratings.
178
FIRST HORIZON NATIONAL CORPORATION
Note 22 q Fair Value of Assets & Liabilities (continued)
Other noninterest-bearing liabilities. For disclosure purposes, other noninterest-bearing liabilities include accrued interest payable and capital markets payables. Due to the short-term nature of these liabilities, the book value is considered to approximate fair value.
Loan commitments. Fair values are based on fees charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties credit standing.
Other commitments. Fair values are based on fees charged to enter into similar agreements.
The following fair value estimates are determined as of a specific point in time utilizing various assumptions and estimates. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value
disclosures between financial institutions. Due to market illiquidity, the fair values for loans, net of unearned income, loans held for sale, and long-term debt as of December 31, 2010 and 2009, involve the use of significant internally-developed pricing assumptions for certain components of these line items. These
assumptions are considered to reflect inputs that market participants would use in transactions involving these instruments as of the measurement date. Assets and liabilities that are not financial instruments (including MSR) have not been included in the following table such as the value of long-term relationships
with deposit and trust customers, premises and equipment, goodwill and other intangibles, deferred taxes, and certain other assets and other liabilities. Accordingly, the total of the fair value amounts does not represent, and should not be construed to represent, the underlying value of the company.
The following table summarizes the book value and estimated fair value of financial instruments recorded in the Consolidated Statements of Condition as well as unfunded commitments as of December 31, 2010 and 2009.
(Dollars in thousands)
December 31, 2010
December 31, 2009
Book Value
Fair Value
Book Value
Fair Value
Assets:
Loans, net of unearned income and allowance for loan losses
$
16,117,773
$
15,196,341
$
17,226,970
$
16,070,150
Short-term financial assets
942,129
942,129
992,183
992,183
Trading securities
769,750
769,750
699,900
699,900
Loans held for sale
375,289
375,289
452,501
452,501
Securities available for sale
3,031,930
3,031,930
2,694,468
2,694,468
Derivative assets
303,660
303,660
248,628
248,628
Other assets
112,788
112,788
133,583
133,583
Nonearning assets
574,710
574,710
892,927
892,927
Liabilities:
Deposits:
Defined maturity
$
1,952,745
$
2,007,147
$
2,455,936
$
2,522,334
Undefined maturity
13,255,486
13,255,486
12,411,279
12,411,279
Total deposits
15,208,231
15,262,633
14,867,215
14,933,613
Trading liabilities
361,920
361,920
293,387
293,387
Short-term financial liabilities
2,295,643
2,295,643
3,636,111
3,636,111
Term borrowings
3,228,070
2,893,938
2,891,133
2,385,949
Derivative liabilities
215,220
215,220
179,422
179,422
Other noninterest-bearing liabilities
103,951
103,951
338,161
338,161
Contractual Amount
Fair Value
Contractual Amount
Fair Value
Unfunded Commitments:
Loan commitments
$
7,903,537
$
1,060
$
8,370,960
$
1,172
Standby and other commitments
487,578
6,021
540,858
5,612
FIRST HORIZON
NATIONAL CORPORATION
179
Note 23 q Loan Sales and Securitizations
Historically, FHN utilized loan sales and securitizations as a significant source of liquidity for its mortgage banking operations. With FHNs shift to originations of mortgages within its regional banking footprint following the sale of national mortgage origination offices, loan sale and securitization activity has significantly
decreased. Generally, FHN no longer retains financial interests in any loans it transfers to third parties. During 2010, FHN transferred $.8 billion of single-family residential mortgage loans in whole loan sales resulting in $7.2 million of net pre-tax gains. In 2009 and 2008, FHN transferred $1.3 billion and $19.5
billion, respectively, of residential mortgage loans and HELOC in whole loan sales or proprietary securitizations resulting in net pre-tax gains of $16.1 million and $237.1 million, respectively.
Retained Interests
Interests retained from prior loan sales, including GSE securitizations, typically included MSR and excess interest. Interests retained from proprietary securitizations included MSR and various financial assets (see discussion below). MSR were initially valued at fair value and the remaining retained interests were
initially valued by allocating the remaining cost basis of the loan between the security or loan sold and the remaining retained interests based on their relative fair values at the time of sale or securitization.
In certain cases, FHN continues to service and receive servicing fees related to the transferred loans. Generally, FHN received annual servicing fees approximating .29 percent in 2010, .28 percent in 2009, and .27 percent in 2008, of the outstanding balance of underlying single-family residential mortgage loans.
FHN received annual servicing fees approximating .50 percent in 2010, 2009, and 2008, of the outstanding balance of underlying loans for HELOC and home equity loans transferred. MSR related to loans transferred and serviced by FHN, as well as MSR related to loans serviced by FHN and transferred by others,
are discussed further in Note 6Mortgage Servicing Rights. There were no significant additions to MSR in 2010 or 2009.
Other financial assets retained in proprietary or GSE securitizations may include certificated residual interests, excess interest (structured as interest-only strips), interest-only strips, principal-only strips, or subordinated bonds. Residual interests represent rights to receive earnings to the extent of excess income
generated by the underlying loans. Excess interest represents rights to receive interest from serviced assets that exceed contractually specified rates. Principal-only strips are principal cash flow tranches and interest-only strips are interest cash flow tranches. Subordinated bonds are bonds with junior priority. All
financial assets retained from off balance sheet securitizations are recognized on the Consolidated Statements of Condition in trading securities at fair value with realized and unrealized gains and losses included in current earnings as a component of noninterest income on the Consolidated Statements of Income. In
first quarter 2010, in conjunction with the adoption of amendments to ASC 810, FHN consolidated certain proprietary securitization trusts for which residual interests and subordinated bonds were held. Accordingly, these amounts were removed from the Consolidated Statements of Condition as of January 1, 2010.
Additionally, in fourth quarter 2009, FHN sold $49.0 million of excess interest.
180
FIRST HORIZON NATIONAL CORPORATION
Note 23 q Loan Sales and Securitizations (continued)
The sensitivity of the fair value of all retained or purchased MSR to immediate 10 percent and 20 percent adverse changes in assumptions on December 31, 2010 and 2009 are as follows:
(Dollars in thousands except for annual cost to service)
December 31, 2010
December 31, 2009
First Liens
Second Liens
HELOC
First Liens
Second Liens
HELOC
Fair value of retained interests
$
203,812
$
262
$
3,245
$
296,115
$
1,174
$
5,322
Weighted average life (in years)
4.3
2.8
2.5
4.4
2.2
2.4
Annual prepayment rate
20.1
%
27.0
%
31.2
%
18.7
%
34.5
%
30.6
%
Impact on fair value of 10% adverse change
$
(10,139
)
$
(31
)
$
(249
)
$
(15,326
)
$
(40
)
$
(163
)
Impact on fair value of 20% adverse change
(19,420
)
(59
)
(476
)
(29,346
)
(81
)
(326
)
Annual discount rate on servicing cash flows
11.6
%
14.0
%
18.0
%
11.7
%
16.0
%
18.0
%
Impact on fair value of 10% adverse change
$
(5,756
)
$
(14
)
$
(96
)
$
(8,678
)
$
(19
)
$
(96
)
Impact on fair value of 20% adverse change
(11,149
)
(28
)
(185
)
(16,800
)
(38
)
(192
)
Annual cost to service (per loan)
$
121
$
50
$
50
$
119
$
50
$
50
Impact on fair value of 10% adverse change
(5,003
)
(16
)
(52
)
(7,223
)
(59
)
(266
)
Impact on fair value of 20% adverse change
(9,978
)
(32
)
(104
)
(14,410
)
(117
)
(532
)
Annual earnings on escrow
1.4
%
-
-
2.5
%
3.5
%
3.5
%
Impact on fair value of 10% adverse change
$
(2,102
)
-
-
$
(4,488
)
$
(1
)
$
(28
)
Impact on fair value of 20% adverse change
(4,204
)
-
-
(8,982
)
(3
)
(56
)
The sensitivity of the fair value of other retained interests to immediate 10 percent and 20 percent adverse changes in assumptions on December 31, 2010 and 2009 are as follows:
(Dollars in thousands except for annual cost to service)
Excess Interest IO
Certificated PO
IO
Subordinated Bonds
Residual Interest Certificates 2nd Liens
Residual Interest Certificates HELOC
December 31, 2010
Fair value of retained interests
$
26,237
$
8,992
NM
N/A
N/A
N/A
Weighted average life (in years)
4.5
5.0
NM
N/A
N/A
N/A
Annual prepayment rate
17.2
%
23.4
%
NM
N/A
N/A
N/A
Impact on fair value of 10% adverse change
$
(1,159
)
$
(471
)
NM
N/A
N/A
N/A
Impact on fair value of 20% adverse change
(2,241
)
(934
)
NM
N/A
N/A
N/A
Annual discount rate on residual cash flows
13.0
%
22.5
%
NM
N/A
N/A
N/A
Impact on fair value of 10% adverse change
$
(1,084
)
$
(373
)
NM
N/A
N/A
N/A
Impact on fair value of 20% adverse change
(2,076
)
(716
)
NM
N/A
N/A
N/A
December 31, 2009
Fair value of retained interests
$
51,035
$
10,013
$
265
$
1,130
$
2,291
$
1,269
Weighted average life (in years)
4.8
5.3
7.8
3.1
2.7
2.4
Annual prepayment rate
15.6
%
22.6
%
10.3
%
7.5
%
26.3
%
28.0
%
Impact on fair value of 10% adverse change
$
(2,398
)
$
(394
)
$
(8
)
$
(23
)
$
(32
)
$
(182
)
Impact on fair value of 20% adverse change
(4,650
)
(782
)
(21
)
(46
)
(59
)
(301
)
Annual discount rate on residual cash flows (a)
10.3
%
23.8
%
34.6
%
225.6
%
34.9
%
32.9
%
Impact on fair value of 10% adverse change
$
(2,199
)
$
(515
)
$
(17
)
$
(77
)
$
(109
)
$
(207
)
Impact on fair value of 20% adverse change
(4,204
)
(1,050
)
(33
)
(147
)
(206
)
(373
)
NM - Amount is not meaningful.
(a)
For subordinated bonds, rate used is the actual bond yield.
These sensitivities are hypothetical and should not be considered predictive of future performance. As the figures indicate, changes in fair value based on a 10 percent variation in assumptions cannot necessarily be extrapolated because the relationship between the change in assumption and the change in fair
value may not be linear. Also, the effect on the fair value of the retained interest caused by a particular assumption variation is calculated independently from all other assumption changes. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.
Furthermore, the estimated fair values, as disclosed, should not be considered indicative of future earnings on these assets.
FIRST HORIZON
NATIONAL CORPORATION
181
Note 23 q Loan Sales and Securitizations (continued)
For the years ended December 31, 2010, 2009, and 2008, cash flows received and paid related to loan sales and securitizations were as follows:
(Dollars in thousands)
2010
2009
2008
Proceeds from initial sales and securitizations
$
837,905
$
1,320,538
$
19,543,829
Servicing fees retained (a)
95,902
132,799
249,122
Purchases of GNMA guaranteed mortgages
76,678
18,225
103,436
Purchases of previously transferred financial assets (b) (c)
458,337
302,043
9,152
Other cash flows received on retained interests
10,783
63,994
47,306
Certain previously reported amounts have been reclassified to agree with current presentation.
(a)
Includes servicing fees on MSR associated with loan sales and purchased MSR.
(b)
Includes repurchases of both delinquent and performing loans, foreclosed assets, and make-whole payments for economic losses incurred by purchaser.
(c)
2010 includes $175 million related to clean-up calls exercised by FHN in fourth quarter.
As of December 31, 2010, the principal amount of loans transferred through loan sales and securitizations and other loans managed with them, the principal amount of delinquent loans, and the net credit losses during 2010 are as follows:
(Dollars in thousands)
Total Principal Amount of Loans
Principal Amount of Delinquent Loans (a)
Net Credit Losses (b)
On December 31, 2010
For the year ended December 31, 2010
Type of loan:
Real estate residential
$
22,373,312
$
1,076,908
$
570,682
Total loans managed or transferred (c)
$
22,373,312
$
1,076,908
$
570,682
Loans sold
(14,578,430
)
Loans held for sale
(332,913
)
Loans held in portfolio
$
7,461,969
(a)
Loans 90 days or more past due include $39.9 million of GNMA guaranteed mortgages.
(b)
Principal amount of loans securitized and sold includes $10.9 billion of loans securitized through GNMA, FNMA, or FHLMC. FHN retains interests other than servicing rights on a portion of these securitized loans. No delinquency or net credit loss data is included for the loans securitized through FNMA or FHMLC because these agencies retain credit risk. The remainder of loans
securitized and sold were securitized through proprietary trusts, where FHN retained interests other than servicing rights. See Note 18 - Restrictions, Contingencies, and Other Disclosure for discussion related to repurchase obligations for loans transferred to GSEs and private investors.
(c)
Other than loans transferred to GSE, loans are real estate residential loans in which FHN has a retained interest other than servicing rights.
As of December 31, 2009, the principal amount of loans transferred through loan sales and securitizations and other loans managed with them, the principal amount of delinquent loans, and the net credit losses during 2009 are as follows:
(Dollars in thousands)
Total Principal Amount of Loans
Principal Amount of Delinquent Loans (a)
Net Credit Losses (b)
On December 31, 2009
For the year ended December 31, 2009
Type of loan:
Real estate residential
$
32,821,231
$
960,307
$
504,225
Total loans managed or transferred (c)
$
32,821,231
$
960,307
$
504,225
Loans sold
(24,472,150
)
Loans held for sale
(331,979
)
Loans held in portfolio
$
8,017,102
(a)
Loans 90 days or more past due include $40.0 million of GNMA guaranteed mortgages.
(b)
Principal amount of loans securitized and sold includes $19.5 billion of loans securitized through GNMA, FNMA or FHLMC. FHN retains interests other than servicing rights on a portion of these securitized loans. No delinquency or net credit loss data is included for the loans securitized through FNMA or FHMLC because these agencies retain credit risk. The remainder of loans securitized
and sold were securitized through proprietary trusts, where FHN retained interests other than servicing rights. See Note 18 - Restrictions, Contingencies, and Other Disclosure for discussion related to repurchase obligations for loans transferred to GSEs and private investors.
(c)
Other than loans transferred to GSE, loans are real estate residential loans in which FHN has a retained interest other than servicing rights.
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FIRST HORIZON NATIONAL CORPORATION
Note 23 q Loan Sales and Securitizations (continued)
Secured Borrowings. FTBNA executed several securitizations of retail real estate residential loans for the purpose of engaging in secondary market financing. Since the related trusts did not qualify as QSPE under the applicable accounting rules at that time and since the cash flows on the loans are pledged to the
holders of the trusts securities, FTBNA recognized the proceeds as secured borrowings in accordance with ASCs Transfers and Servicing Topic (ASC 860-10-50). With the prospective adoption of ASU 2009-17 in first quarter 2010, all amounts related to consolidated proprietary securitization trusts have been
included in restricted balances on the Consolidated Statements of Condition. On December 31, 2009, FTBNA recognized $654.6 million of loans net of unearned income and $650.4 million of other collateralized borrowings on the Consolidated Statements of Condition related to consolidated proprietary
securitizations of retail real estate residential loans.
In 2007, FTBNA executed a securitization of certain small issuer trust preferred for which the underlying trust did not qualify as a sale under ASC 860. Therefore, FTNBA has accounted for the funds received through the securitization as a secured borrowing. On December 31, 2010, FTBNA had $112.5 million of
loans net of unearned income, $1.7 million of trading securities, and $51.2 million of term borrowings on the Consolidated Statements of Condition related to this transaction. On December 31, 2009, FTBNA had $112.5 million of loans net of unearned income, $1.7 million of trading securities, and $50.1 million of
other collateralized borrowings on the Consolidated Statements of Condition related to this transaction. See Note 24 Variable Interest Entities for additional information.
FIRST HORIZON
NATIONAL CORPORATION
183
Note 24 q Variable Interest Entities
Effective January 1, 2010, FHN adopted the provisions of ASU 2009-16 and ASU 2009-17. The provisions of ASU 2009-16 updates ASC 860, Transfers and Servicing, to provide for the removal of the qualifying special purpose entity (QSPE) concept from GAAP, resulting in these entities being considered
variable interest entities (VIE) which must be evaluated for consolidation on and after its effective date. The provisions of ASU 2009-17 amends ASC 810, Consolidation, to revise the criteria for determining the primary beneficiary of a VIE by replacing the quantitative-based risks and rewards test previously
required with a qualitative analysis. The updated provisions of ASC 810 clarify that a VIE exists when the equity investors, as a group, lack either (1) the power through voting rights, or similar rights, to direct the activities of an entity that most significantly impact the entitys economic performance, (2) the obligation
to absorb the expected losses of the entity, (3) the right to receive the expected residual returns of the entity, or (4) when the equity investors, as a group, do not have sufficient equity at risk for the entity to finance its activities by itself. A variable interest is a contractual ownership, or other interest, that fluctuates
with changes in the fair value of the VIEs net assets exclusive of variable interests. Under ASC 810, as amended, FHN is deemed to be the primary beneficiary and required to consolidate a VIE if it has a variable interest in the VIE that provides it with a controlling financial interest. For such purposes, the
determination of whether a controlling financial interest exists is based on whether a single party has both the power to direct the activities of the VIE that most significantly impact the VIEs economic performance and the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could
potentially be significant. As amended, ASC 810, requires continual reconsideration of conclusions reached regarding which interest holder is a VIEs primary beneficiary. The consolidation methodology provided in this footnote for the year ended December 31, 2010, has been prepared in accordance with ASC 810
as amended by ASU 2009-17.
Prior to the adoption of the provisions of the Codification update to ASC 810 in first quarter 2010, FHN was deemed to be the primary beneficiary and required to consolidate a VIE if it had a variable interest that would absorb the majority of the VIEs expected losses, receive the majority of expected residual
returns, or both. A VIE existed when equity investors did not have the characteristics of a controlling financial interest or did not have sufficient equity at risk for the entity to finance its activities by itself. Expected losses and expected residual returns were measures of variability in the expected cash flow of a VIE.
Reconsideration of conclusions reached regarding which interest holder was a VIEs primary beneficiary was required only upon the occurrence of certain specified events. The consolidation methodology provided in this footnote for the year ended December 31, 2009, has been prepared in accordance with the
provisions of ASC 810 prior to its amendment by ASU 2009-17.
Year Ended December 31, 2010
Consolidated Variable Interest Entities. FHN holds variable interests in proprietary residential mortgage securitization trusts it established prior to 2008 as a source of liquidity for its mortgage banking and consumer lending operations. Except for recourse due to breaches of standard representations and warranties
made by FHN in connection with the sale of the loans to the trusts, the creditors of the trusts hold no recourse to the assets of FHN. Additionally, FHN has no contractual requirements to provide financial support to the trusts. Based on their restrictive nature, the trusts are considered VIE as the holders of equity
at risk do not have the power through voting rights or similar rights to direct the activities that most significantly impact the trusts economic performance. In situations where the retention of MSR and other retained interests, including residual interests and subordinated bonds, results in FHN potentially absorbing
losses or receiving benefits that are significant to the trusts, FHN is considered the primary beneficiary, as it is also assumed to have the power as servicer to most significantly impact the activities of such VIE. Consolidation of the trusts results in the recognition of the trusts proceeds as restricted borrowings since
the cash flows on the securitized loans can only be used to settle the obligations due to the holders of the trusts securities.
FHN has established certain rabbi trusts related to deferred compensation plans offered to its employees. FHN contributes employee cash compensation deferrals to the trusts and directs the underlying investments made by the trusts. The assets of these trusts are available to FHNs creditors only in the event that
FHN becomes insolvent. These trusts are considered VIE because either there is no equity at risk in the trusts or because FHN provided the equity interest to its employees in exchange for services rendered. FHN is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities that
most significantly impact the economic performance of the rabbi trusts through its ability to direct the underlying investments made by the
184
FIRST HORIZON NATIONAL CORPORATION
Note 24 q Variable Interest Entities (continued)
trusts. Additionally, FHN could potentially receive benefits or absorb losses that are significant to the trusts due to its right to receive any asset values in excess of liability payoffs and its obligation to fund any liabilities to employees that are in excess of a rabbi trusts assets. Under the rules applicable in 2009,
these were considered VIE and required consolidation.
The following table summarizes VIE consolidated by FHN as of December 31, 2010:
On-Balance Sheet Consumer Loan Securitizations
Rabbi Trusts Used for Deferred Compensation Plans
(Dollars in thousands)
Carrying Value
Carrying Value
Assets:
Cash and due from banks
$
3,143
N/A
Loans, net of unearned income
757,491
N/A
Less: Allowance for loan losses
47,452
N/A
Total net loans
710,039
N/A
Other assets
19,658
$
61,323
Total assets
$
732,840
$
61,323
Noninterest-bearing deposits
$
1,203
N/A
Term borrowings
754,521
N/A
Other liabilities
101
$
57,218
Total liabilities
$
755,825
$
57,218
Nonconsolidated Variable Interest Entities. Since 1997, First Tennessee Housing Corporation (FTHC), a wholly-owned subsidiary, has made equity investments as a limited partner in various partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to
Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital and to support FHNs community reinvestment initiatives. The activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to
qualifying residential tenants generally within FHNs primary geographic region. LIHTC partnerships are considered VIE because FTHC, as the holder of the equity investment at risk, does not have the ability to direct the activities that most significantly affect the success of the entity through voting rights or similar
rights. While FTHC could absorb losses that are significant to the LIHTC partnerships as it has a risk of loss for its initial capital contributions and funding commitments to each partnership, it is not considered the primary beneficiary of the LIHTC partnerships. The general partners are considered the primary
beneficiaries because managerial functions give them the power to direct the activities that most significantly impact the partnerships economic performance and the general partners are exposed to all losses beyond FTHCs initial capital contributions and funding commitments. Under the rules applicable in 2009,
investments in LIHTC partnerships were also considered VIE and did not meet requirements for consolidation.
FTBNA holds variable interests in trusts which have issued mandatorily redeemable preferred capital securities (trust preferreds) for smaller banking and insurance enterprises. FTBNA has no voting rights for the trusts activities. The trusts only assets are junior subordinated debentures of the issuing enterprises.
The creditors of the trusts hold no recourse to the assets of FTBNA. These trusts meet the definition of a VIE because the holders of the equity investment at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the trusts economic performance.
Based on the nature of the trusts activities and the size of FTBNAs holdings, FTBNA could potentially receive benefits or absorb losses that are significant to the trusts regardless of whether a majority of a trusts securities are held by FTBNA. However, since FTBNA is solely a holder of the trusts securities, it has
no rights which would give it the power to direct the activities that most significantly impact the trusts economic performance and thus it cannot be considered the primary beneficiary of the trusts. FTBNA has no contractual requirements to provide financial support to the trusts. Under the rules applicable in 2009,
these trusts were determined to be VIEs and in certain cases, certain trusts met the requirements for consolidation. See additional discussion regarding these trusts in the 2009 section of this footnote.
FIRST HORIZON
NATIONAL CORPORATION
185
Note 24 q Variable Interest Entities (continued)
In 2007, FTBNA executed a securitization of certain small issuer trust preferreds for which the underlying trust meets the definition of a VIE because the holders of the equity investment at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the
entitys economic performance. FTBNA could potentially receive benefits or absorb losses that are significant to the trust based on the size and priority of the interests it retained in the securities issued by the trust. However, since FTBNA did not retain servicing or other decision making rights, it has determined
that it is not the primary beneficiary as it does not have the power to direct the activities that most significantly impact the trusts economic performance. Accordingly, FTBNA has accounted for the funds received through the securitization as a term borrowing in its Consolidated Statements of Condition as of
December 31, 2010. FTBNA has no contractual requirement to provide financial support to the trust. Under the rules applicable in 2009, the trust was considered a VIE and did not meet the requirement for consolidation.
FHN has previously issued junior subordinated debt totaling $309.3 million to First Tennessee Capital I (Capital I) and First Tennessee Capital II (Capital II). In first quarter 2011, FHN redeemed all of the subordinated debentures issued to Capital I. As of the end of 2010, both Capital I and Capital II are
considered VIE because FHNs capital contributions to these trusts are not considered at risk in evaluating whether the holders of the equity investments at risk in the trusts have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entities economic
performance. FHN cannot be the trusts primary beneficiary because FHNs capital contributions to the trusts are not considered variable interests as they are not at risk. Consequently, Capital I and Capital II are not consolidated by FHN.
FHN holds variable interests in proprietary residential mortgage securitization trusts it established prior to 2008 as a source of liquidity for its mortgage banking operations. Except for recourse due to breaches of standard representations and warranties made by FHN in connection with the sale of the loans to the
trusts, the creditors of the trusts hold no recourse to the assets of FHN. Additionally, FHN has no contractual requirements to provide financial support to the trusts. Based on their restrictive nature, the trusts are considered VIE as the holders of equity at risk do not have the power through voting rights, or similar
rights, to direct the activities that most significantly impact the trusts economic performance. While FHN is assumed to have the power as servicer to most significantly impact the activities of such VIE, in situations where FHN does not potentially participate in significant portions of a securitization trusts cash flows,
it is not considered the primary beneficiary of the trust. Thus, such trusts are not consolidated by FHN.
Prior to third quarter 2008, FHN transferred first lien mortgages to government agencies, or GSE, for securitization and retained MSR and other various interests in certain situations. Except for recourse due to breaches of standard representations and warranties made by FHN in connection with the sale of the
loans to the trusts, the creditors of the trusts hold no recourse to the assets of FHN. Additionally, FHN has no contractual requirements to provide financial support to the trusts. The Agencies status as Master Servicer and the rights they hold consistent with their guarantees on the securities issued provide them
with the power to direct the activities that most significantly impact the trusts economic performance. Thus, such trusts are not consolidated by FHN as it is not considered the primary beneficiary even in situations where it could potentially receive benefits or absorb losses that are significant to the trusts.
In relation to certain agency securitizations, FHN purchased the servicing rights on the securitized loans from the loan originator and holds other retained interests. Based on their restrictive nature, the trusts meet the definition of a VIE since the holders of the equity investments at risk do not have the power
through voting rights, or similar rights, to direct the activities that most significantly impact the trusts economic performance. As the Agencies serve as Master Servicer for the securitized loans and hold rights consistent with their guarantees on the securities issued, they have the power to direct the activities that
most significantly impact the trusts economic performance. Thus, FHN is not considered the primary beneficiary even in situations where it could potentially receive benefits or absorb losses that are significant to the trusts. FHN has no contractual requirements to provide financial support to the trusts.
FHN holds securities issued by various agency securitization trusts. Based on their restrictive nature, the trusts meet the definition of a VIE since the holders of the equity investments at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entities
economic
186
FIRST HORIZON NATIONAL CORPORATION
Note 24 q Variable Interest Entities (continued)
performance. FHN could potentially receive benefits or absorb losses that are significant to the trusts based on the nature of the trusts activities and the size of FHNs holdings. However, FHN is solely a holder of the trusts securities and does not have the power to direct the activities that most significantly impact
the trusts economic performance, and is not considered the primary beneficiary of the trusts. FHN has no contractual requirements to provide financial support to the trusts.
FHN holds collateralized debt obligations (CDOs) issued by various trusts. FHN has no voting rights for the trusts activities. The trusts only assets are trust preferreds of the issuing banks trusts. The trusts associated with the CDOs acquired by FHN meet the definition of a VIE as there are no holders of an
equity investment at risk with adequate power to direct the trusts activities that most significantly impact the trusts economic performance. While FHN could potentially receive benefits or absorb losses that are significant to the trusts, as FHN does not have decision making rights over whether interest deferral is
elected by the issuing banks on the junior subordinated debentures that underlie the small issuer trust preferreds, it does not have the power to direct the activities that most significantly impact the trusts economic performance. Accordingly, FHN has determined that it is not the primary beneficiary of the
associated trusts. FHN has no contractual requirements to provide financial support to the trusts.
For certain troubled commercial loans, FTBNA restructures the terms of the borrowers debt in an effort to increase the probability of receipt of amounts contractually due. Following a troubled debt restructuring, the borrower entity typically meets the definition of a VIE as the initial determination of whether the
entity is a VIE must be reconsidered and economic events have proven that the entitys equity is not sufficient to permit it to finance its activities without additional subordinated financial support or a restructuring of the terms of its financing. As FTBNA does not have the power to direct the activities that most
significantly impact such troubled commercial borrowers operations, it is not considered the primary beneficiary even in situations where, based on the size of the financing provided, FTBNA is exposed to potentially significant benefits and losses of the borrowing entity. FTBNA has no contractual requirements to
provide financial support to the borrowing entities beyond certain funding commitments established upon restructuring of the terms of the debt that allows for preparation of the underlying collateral for sale.
FHN serves as manager over certain discretionary trusts, for which it makes investment decisions on behalf of the trusts beneficiaries in return for a reasonable management fee. The trusts meet the definition of a VIE since the holders of the equity investments at risk do not have the power, through voting rights or
similar rights, to direct the activities that most significantly impact the entities economic performance. The management fees FHN receives are not considered variable interests in the trusts as all of the requirements related to permitted levels of decision maker fees are met. Therefore, the VIE are not consolidated
by FHN because it cannot be the trusts primary beneficiary. FHN has no contractual requirements to provide financial support to the trusts.
FIRST HORIZON
NATIONAL CORPORATION
187
Note 24 q Variable Interest Entities (continued)
The following table summarizes VIE that are not consolidated by FHN as of December 31, 2010:
Maximum loss exposure represents $87.7 million of current investments and $1.3 million of contractual funding commitments.
Only the current investment amount is included in Other assets.
(b)
A liability is not recognized because investments are written down over the life of the related tax credit.
(c)
Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts securities.
(d)
$112.5 million classified as Loans, net of unearned income, and $1.7 million classified as Trading securities which are offset by $51.2 million classified as Term borrowings.
(e)
No exposure to loss due to the nature of FHNs involvement.
(f)
Includes $100.9 million and $75.2 million classified as MSR and $14.0 million and $21.4 million classified as Trading securities related to proprietary and agency residential mortgage securitizations, respectively. Aggregate servicing advances of $262.5 million are classified as Other assets and is offset by aggregate custodial balances of $69.8 million classified as Noninterest-bearing
deposits.
(g)
Includes $329.1 million classified as Trading securities and $2.6 billion classified as Securities available for sale.
(h)
Maximum loss exposure represents $115.5 million of current receivables and $3.8 million of contractual funding commitments on loans related to commercial borrowers involved in a troubled debt restructuring.
(i)
A liability is not recognized as the loans are the only variable interests held in the troubled commercial borrowers operations.
See Other disclosuresIndemnification agreements and guarantees section of Note 18Restrictions, Contingencies and Other Disclosures for information regarding FHNs repurchase exposure for claims that FHN breached its standard representations and warranties made in connection with the sale of loans to
proprietary and agency residential mortgage securitization trusts.
Year Ended December 31, 2009
Consolidated Variable Interest Entities. In 2007 and 2006, FTBNA established several Delaware statutory trusts (Trusts), for the purpose of engaging in secondary market financing. Except for recourse due to breaches of standard representations and warranties made by FTBNA in connection with the sale of the
retail real estate residential loans by FTBNA to the Trusts, the creditors of the Trusts hold no recourse to the assets of FTBNA. Additionally, FTBNA has no contractual requirements to provide financial support to the Trusts. Since the Trusts did not qualify as QSPE, FTBNA treated the proceeds as secured
borrowings in accordance with ASC 860. FTBNA determined that the Trusts were VIE because the holders of the equity investment at risk did not have adequate decision making ability over the trusts activities. Thus, FTBNA assessed whether it was the primary beneficiary of the associated trusts. Since there was
an overcollateralization of the Trusts, any excess of cash flows received on the transferred loans above the amounts passed through to the security holders would revert to FTBNA. Accordingly, FTBNA determined that it was the primary beneficiary of the Trusts because it absorbed a majority of the expected losses
of the Trusts.
The rabbi trusts related to deferred compensation plans are considered VIE because either there is no equity at risk in the trusts or because FHN provided the equity interest to its employees in exchange for services rendered. Given that the trusts were created in exchange for the employees services, FHN is
considered the primary
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FIRST HORIZON NATIONAL CORPORATION
Note 24 q Variable Interest Entities (continued)
beneficiary of the rabbi trusts because it is most closely related to their purpose and design. FHN has the obligation to fund any liabilities to employees that are in excess of a rabbi trusts assets.
FTBNA holds interests in trusts that issued trust preferreds for smaller banking and insurance enterprises which met the definition of a VIE because the holders of the equity investment at risk do not have adequate decision making ability over the trusts activities. FTBNA has no voting rights for the trusts activities.
The trusts only assets are junior subordinated debentures of the issuing enterprises. The creditors of the trusts hold no recourse to the assets of FTBNA. In situations where FTBNA holds a majority of the trust preferreds issued by a trust, it was considered the primary beneficiary of that trust because FTBNA will
absorb a majority of the trusts expected losses. FTBNA has no contractual requirements to provide financial support to the trusts. In situations where FTBNA holds a majority, but less than all, of the trust preferreds for a trust, consolidation of the trust resulted in recognition of amounts received from other parties
as debt.
The following table summarizes VIE consolidated by FHN as of December 31, 2009:
(Dollars in thousands)
Assets
Liabilities
Type
Carrying Value
Classification
Carrying Value
Classification
On balance sheet consumer loan securitizations
$
654,644
Loans, net of unearned income
$
650,442
Other collateralized borrowings
Small issuer trust preferred holdings
452,850
Loans, net of unearned income
30,500
Term borrowings
Rabbi trusts used for deferred compensation plans
90,391
Other assets
57,720
Other liabilities
Nonconsolidated Variable Interest Entities. Under rules applicable in 2009, LIHTC partnerships were considered VIE because FTHC, as the holder of the equity investment at risk, does not have the ability to significantly affect the success of the entity through voting rights. FTHC was not considered the primary
beneficiary of the LIHTC partnerships because an agent relationship existed between FTHC and the general partners, whereby the general partners cannot sell, transfer or otherwise encumber their ownership interest without the approval of FTHC. Because this resulted in a de facto agent relationship between the
partners, the general partners were considered the primary beneficiaries because their operations were most closely associated with the LIHTC partnerships operations. FTHC has no contractual requirements to provide financial support to the LIHTC partnerships beyond its initial funding commitments.
Under rules applicable in 2009, trusts that issued trust preferreds for smaller banking and insurance enterprises met the definition of a VIE because the holders of the equity investment at risk do not have adequate decision making ability over the trusts activities. In situations where FTBNA did not hold a majority
of the trust preferreds issued by a trust, it was not considered the primary beneficiary of that trust because FTBNA does not absorb a majority of the expected losses of the trust. FTBNA has no contractual requirements to provide financial support to the trusts.
In 2007, FTBNA executed a securitization of certain small issuer trust preferreds for which the underlying trust did not qualify as a QSPE under ASC 860. This trust was determined to be a VIE because the holders of the equity investment at risk do not have adequate decision making ability over the trusts
activities. FTBNA determined that it was not the primary beneficiary of the trust due to the size and priority of the interests it retained in the securities issued by the trust. Accordingly, FTBNA accounted for the funds received through the securitization as a collateralized borrowing in its Consolidated Statements of
Condition. FTBNA has no contractual requirement to provide financial support to the trust.
Both Capital I and Capital II were considered VIE because FHNs capital contributions to these trusts are not considered at risk in evaluating whether the equity investments at risk in the trusts have adequate decision making ability over the trusts activities. Capital I and Capital II were not consolidated by FHN
because the holders of the securities issued by the trusts absorb a majority of expected losses and residual returns.
FIRST HORIZON
NATIONAL CORPORATION
189
Note 24 q Variable Interest Entities (continued)
The following table summarizes VIE that are not consolidated by FHN as of December 31, 2009:
(Dollars in thousands)
Maximum Loss Exposure
Liability Recognized
Classification
Type
Low Income Housing Partnerships (a) (b)
$
110,017
$
-
Other assets
Small Issuer Trust Preferred Holdings
43,000
-
Loans, net of unearned income
On Balance Sheet Trust Preferred Securitization
64,027
50,147
(c)
Proprietary Trust Preferred Issuances
N/A
309,279
Term borrowings
(a)
Maximum loss exposure represents $108.2 million of current investments and $1.8 million of contractual funding commitments.
Only the current investment amount is included in Other Assets.
(b)
A liability is not recognized because investments are written down over the life of the related tax credit.
(c)
$112.5 million was classified as Loans, net of unearned income and $1.7 million was classified as Trading securities which are offset by $50.1 million classified as Other collateralized borrowings.
190
FIRST HORIZON NATIONAL CORPORATION
Note 25 q Derivatives and Off-Balance Sheet Arrangements
In the normal course of business, FHN utilizes various financial instruments (including derivative contracts and credit-related agreements) through its legacy mortgage servicing operations, capital markets, and risk management operations, as part of its risk management strategy and as a means to meet customers
needs. These instruments are subject to credit and market risks in excess of the amount recorded on the balance sheet as required by GAAP. The contractual or notional amounts of these financial instruments do not necessarily represent credit or market risk. However, they can be used to measure the extent of involvement in various types of financial instruments. Controls and monitoring procedures for these instruments have been established and are
routinely re-evaluated. The Asset/Liability Committee (ALCO) monitors the usage and effectiveness of these financial instruments.
Credit risk represents the potential loss that may occur because a party to a transaction fails to perform according to the terms of the contract. The measure of credit exposure is the replacement cost of contracts with a positive fair value. FHN manages credit risk by entering into financial instrument transactions
through national exchanges, primary dealers or approved counterparties, and using mutual margining and master netting agreements whenever possible to limit potential exposure. FHN also maintains collateral posting requirements with its counterparties to limit credit risk. With exchange-traded contracts, the credit
risk is limited to the clearinghouse used. For non-exchange traded instruments, credit risk may occur when there is a gain in the fair value of the financial instrument and the counterparty fails to perform according to the terms of the contract and/or when the collateral proves to be of insufficient value. Market risk
represents the potential loss due to the decrease in the value of a financial instrument caused primarily by changes in interest rates, mortgage loan prepayment speeds, or the prices of debt instruments. FHN manages market risk by establishing and monitoring limits on the types and degree of risk that may be
undertaken. FHN continually measures this risk through the use of models that measure value-at-risk and earnings-at-risk.
Derivative Instruments. FHN enters into various derivative contracts both in a dealer capacity, to facilitate customer transactions, and also as a risk management tool. Where contracts have been created for customers, FHN enters into transactions with dealers to offset its risk exposure. Derivatives are also used as a
risk management tool to hedge FHNs exposure to changes in interest rates or other defined market risks.
Derivative instruments are recorded on the Consolidated Statements of Condition as Other assets or Other liabilities measured at fair value. Fair value is defined as the price that would be received to sell a derivative asset or paid to transfer a derivative liability in an orderly transaction between market participants on
the transaction date. Fair value is determined using available market information and appropriate valuation methodologies. For a fair value hedge, changes in the fair value of the derivative instrument and changes in the fair value of the hedged asset or liability are recognized currently in earnings. For a cash flow
hedge, changes in the fair value of the derivative instrument, to the extent that it is effective, are recorded in accumulated other comprehensive income and subsequently reclassified to earnings as the hedged transaction impacts net income. Any ineffective portion of a cash flow hedge is recognized currently in
earnings. For freestanding derivative instruments, changes in fair value are recognized currently in earnings. Cash flows from derivative contracts are reported as Operating activities on the Consolidated Statements of Cash Flows.
Interest rate forward contracts are over-the-counter contracts where two parties agree to purchase and sell a specific quantity of a financial instrument at a specified price, with delivery or settlement at a specified date. Futures contracts are exchange-traded contracts where two parties agree to purchase and sell a
specific quantity of a financial instrument at a specified price, with delivery or settlement at a specified date. Interest rate option contracts give the purchaser the right, but not the obligation, to buy or sell a specified quantity of a financial instrument, at a specified price, during a specified period of time. Caps and
floors are options that are linked to a notional principal amount and an underlying indexed interest rate. Interest rate swaps involve the exchange of interest payments at specified intervals between two parties without the exchange of any underlying principal. Swaptions are options on interest rate swaps that give the
purchaser the right, but not the obligation, to enter into an interest rate swap agreement during a specified period of time.
On December 31, 2010 and 2009, respectively, FHN had approximately $160.8 million and $108.2 million of cash receivables and $111.4 million and $81.0 million of cash payables related to collateral posting under master netting arrangements, inclusive of collateral posted related to contracts with adjustable
collateral posting thresholds, with derivative counterparties. Certain of FHNs agreements with derivative counterparties contain provisions that
FIRST HORIZON
NATIONAL CORPORATION
191
Note 25 q Derivatives and Off-Balance Sheet Arrangements (continued)
require that FTBNAs debt maintain minimum credit ratings from specified credit rating agencies. If FTBNAs debt were to fall below these minimums, these provisions would be triggered, and the counterparties could terminate the agreements and request immediate settlement of all derivative contracts under the
agreements. The net fair value, determined by individual counterparty, of all derivative instruments with credit-risk-related contingent accelerated termination provisions was $2.1 million of assets and $23.7 million of liabilities on December 31, 2010 and $4.4 million of assets and $10.9 million of liabilities on
December 31, 2009. FHN had posted collateral of $25.1 million as of December 31, 2010 in the normal course of business related to these contracts. As of December 31, 2009, FHN had posted collateral of $10.3 million in the normal course of business related to these contracts.
Additionally, certain of FHNs derivative agreements contain provisions whereby the collateral posting thresholds under the agreements adjust based on the credit ratings of both counterparties. If the credit rating of FHN and/or FTBNA is lowered, FHN would be required to post additional collateral with the
counterparties. The net fair value, determined by individual counterparty, of all derivative instruments with adjustable collateral posting thresholds was $137.8 million of assets and $161.2 million of liabilities on December 31, 2010 and was $110.8 million of assets and $81.1 million of liabilities on December 31,
2009. As of December 31, 2010 and 2009, FHN had received collateral of $111.4 million and $79.4 million and posted collateral of $158.7 million and $77.0 million, respectively, in the normal course of business related to these agreements.
Legacy Mortgage Banking Operations
Retained Interests
FHN revalues MSR to current fair value each month with changes in fair value included in servicing income in Mortgage banking noninterest income on the Consolidated Statements of Income. FHN hedges the MSR to minimize the effects of loss in value of MSR associated with increased prepayment activity that
generally results from declining interest rates. In a rising interest rate environment, the value of the MSR generally will increase while the value of the hedge instruments will decline. FHN enters into interest rate contracts (potentially including swaps, swaptions, and mortgage forward purchase contracts) to hedge
against the effects of changes in fair value of its MSR. Substantially all capitalized MSR are hedged for economic purposes.
FHN utilizes derivatives as an economic hedge (potentially including swaps, swaptions, and mortgage forward purchase contracts) to protect the value of its interest-only securities that change in value inversely to the movement of interest rates. Interest-only securities are included in Trading securities on the
Consolidated Statements of Condition. Changes in the fair value of these derivatives and the hedged interest-only securities are recognized currently in earnings in Mortgage banking noninterest income as a component of servicing income on the Consolidated Statements of Income.
The following table summarizes FHNs derivatives associated with legacy mortgage servicing activities for the year ended December 31, 2010:
(Dollars in thousands) Description
Notional
Assets
Liabilities
Gains/(Losses)
2010
Retained Interests Hedging
Hedging Instruments:
Forwards and Futures (a) (b)
$
3,243,000
$
5,801
$
9,090
$
32,158
Interest Rate Swaps and Swaptions (a) (b)
$
5,678,000
$
36,693
$
18,234
$
74,804
Hedged Items:
Mortgage Servicing Rights (c) (b)
N/A
$
203,412
N/A
$
(18,913
)
Other Retained Interests (d) (b)
N/A
$
35,436
N/A
$
5,806
(a)
Assets included in the Other assets section of the Consolidated Statements of Condition. Liabilities included in the Other liabilities section of the Consolidated Statements of Condition.
(b)
Gains/losses included in the Mortgage banking income section of the Consolidated Statements of Income.
(c)
Assets included in the Mortgage servicing rights section of the Consolidated Statements of Condition.
(d)
Assets included in the Trading securities section of the Consolidated Statements of Condition.
192
FIRST HORIZON NATIONAL CORPORATION
Note 25 q Derivatives and Off-Balance Sheet Arrangements (continued)
The following table summarizes FHNs derivatives associated with legacy mortgage servicing activities for the year ended December 31, 2009:
(Dollars in thousands) Description
Notional
Assets
Liabilities
Gains/(Losses)
2009
Retained Interests Hedging
Hedging Instruments:
Forwards and Futures (a) (b)
$
3,275,000
$
4,262
$
13,100
$
26,714
Interest Rate Swaps and Swaptions (a) (b)
$
2,126,000
$
21,688
$
3,654
$
9,492
Hedged Items:
Mortgage Servicing Rights (c) (b)
N/A
$
296,260
N/A
$
61,850
Other Retained Interests (d) (b)
N/A
$
64,830
N/A
$
47,758
(a)
Assets included in the Other assets section of the Consolidated Statements of Condition. Liabilities included in the Other liabilities section of the Consolidated Statements of Condition.
(b)
Gains/losses included in the Mortgage banking income section of the Consolidated Statements of Income.
(c)
Assets included in the Mortgage servicing rights section of the Consolidated Statements of Condition.
(d)
Assets included in the Trading securities section of the Consolidated Statements of Condition.
Mortgage Warehouse and Pipeline
Prior to the 2008 divestiture, FHNs warehouse (mortgage loans held for sale) was subject to changes in fair value due to fluctuations in interest rates from the loan closing date through the date of sale of the loan into the secondary market. Typically, the fair value of the warehouse declined in value when interest
rates increased and rose in value when interest rates decreased. To mitigate this risk, FHN entered into forward sales and futures contracts that provided an economic hedge against those changes in fair value on a significant portion of the warehouse. These derivatives were recorded at fair value with changes in
fair value recorded in current earnings as a component of the gain or loss on the sale of loans in mortgage banking noninterest income. Upon adoption of the Financial Instruments Topic (ASC 825-10-50), FHN elected to prospectively account for substantially all of its mortgage loan warehouse products at fair
value upon origination and correspondingly discontinued the application of ASC 815-10-45 hedging relationships for all subsequent originations.
Mortgage banking interest rate lock commitments are short-term commitments to fund mortgage loan applications in process (the pipeline) for a fixed term at a fixed price. During the term of an interest rate lock commitment, FHN had the risk that interest rates could change from the rate quoted to the borrower.
FHN entered into forward sales contracts with respect to fixed rate loan commitments and futures contracts with respect to adjustable rate loan commitments as economic hedges designed to protect the value of the interest rate lock commitments from changes in value due to changes in interest rates. Interest rate
lock commitments qualify as derivative financial instruments and as such do not qualify for hedge accounting treatment. As a result, the interest rate lock commitments were recorded at fair value with changes in fair value recorded in current earnings as gain or loss on the sale of loans in mortgage banking
noninterest income. Changes in the fair value of the derivatives that served as economic hedges of interest rate lock commitments were also included in current earnings as a component of gain or loss on the sale of loans in mortgage banking noninterest income.
Capital Markets
Capital markets trades U.S. Treasury, U.S. Agency, mortgage-backed, corporate and municipal fixed income securities, and other securities principally for distribution to customers. When these securities settle on a delayed basis, they are considered forward contracts. Capital markets also enters into interest rate
contracts, including options, caps, swaps, and floors for its customers. In addition, capital markets enters into futures contracts to economically hedge interest rate risk associated with a portion of its securities inventory. These transactions are measured at fair value, with changes in fair value recognized currently in
capital markets noninterest income. Related assets and liabilities are recorded on the Consolidated Statements of Condition as Other assets and Other liabilities. The FTN Financial Risk and the Credit Risk Management Committees collaborate to mitigate credit risk related to these transactions. Credit risk is
controlled through credit approvals, risk control limits, and ongoing monitoring procedures. Total trading revenues were $390.1 million and $598.6 million for the years ended
FIRST HORIZON
NATIONAL CORPORATION
193
Note 25 q Derivatives and Off-Balance Sheet Arrangements (continued)
December 31, 2010 and 2009, respectively. Total revenues are inclusive of both derivative and non-derivative financial instruments. Trading revenues are included in Capital markets noninterest income.
The following table summarizes FHNs derivatives associated with capital markets trading activities as of December 31, 2010:
(Dollars in thousands) Description
2010
Notional
Assets
Liabilities
Customer Interest Rate Contracts
$
1,666,711
$
67,729
$
4,400
Offsetting Upstream Interest Rate Contracts
1,666,711
4,400
67,729
Forwards and Futures Purchased
1,609,665
2,598
4,130
Forwards and Futures Sold
1,856,839
4,753
5,380
The following table summarizes FHNs derivatives associated with capital markets trading activities as of December 31, 2009:
(Dollars in thousands) Description
2009
Notional
Assets
Liabilities
Customer Interest Rate Contracts
$
1,514,517
$
40,128
$
15,246
Offsetting Upstream Interest Rate Contracts
1,514,517
15,250
40,135
Forwards and Futures Purchased
2,659,054
8,736
1,180
Forwards and Futures Sold
2,836,643
1,051
11,990
Interest Rate Risk Management
FHNs ALCO focuses on managing market risk by controlling and limiting earnings volatility attributable to changes in interest rates. Interest rate risk exists to the extent that interest-earning assets and liabilities have different maturity or repricing characteristics. FHN uses derivatives, including swaps, caps, options,
and collars, that are designed to moderate the impact on earnings as interest rates change. FHNs interest rate risk management policy is to use derivatives to hedge interest rate risk or market value of assets or liabilities, not to speculate. In addition, FHN has entered into certain interest rate swaps and caps as a
part of a product offering to commercial customers with customer derivatives paired with offsetting market instruments that, when completed, are designed to mitigate interest rate risk. These contracts do not qualify for hedge accounting and are measured at fair value with gains or losses included in current earnings in Noninterest expense on the Consolidated Statements of Income.
FHN has entered into pay floating, receive fixed interest rate swaps to hedge the interest rate risk of certain long-term debt obligations totaling $1.0 billion and $1.1 billion on December 31, 2010 and 2009, respectively. These swaps have been accounted for as fair value hedges under the shortcut method. The
balance sheet impact of these swaps was $105.7 million and $90.9 million in Other assets on December 31, 2010 and 2009, respectively. Interest paid or received for these swaps was recognized as an adjustment of the interest expense of the liabilities whose risk is being managed. In first quarter 2010, FHN
repurchased $96.0 million of debt that was being hedged in these arrangements and terminated the related interest rate swap and hedging relationship.
FHN has designated a derivative transaction in a hedging strategy to manage interest rate risk on its $.5 billion noncallable senior debt maturing in December 2015. This derivative qualifies for hedge accounting under ASC 815-20 using the long-haul method. FHN entered into a pay floating, receive fixed interest
rate swap to hedge the interest rate risk on this debt. The balance sheet impact of this swap was $4.1 million in Other assets on December 31, 2010. There was no ineffectiveness related to this hedge. Interest paid or received for this swap was recognized as an adjustment of the interest expense of the liability
whose risk is being managed.
FHN designates derivative transactions in hedging strategies to manage interest rate risk on subordinated debt related to its trust preferred securities. These qualify for hedge accounting under ASC 815-20 using the long-haul
194
FIRST HORIZON NATIONAL CORPORATION
Note 25 q Derivatives and Off-Balance Sheet Arrangements (continued)
method. FHN entered into pay floating, receive fixed interest rate swaps to hedge the interest rate risk of certain subordinated debt totaling $200 million on both December 31, 2010 and 2009. The balance sheet impact of these swaps $12.6 million and $4.8 million in Other liabilities as of December 31, 2010 and
2009, respectively. There was no ineffectiveness related to these hedges. Interest paid or received for these swaps was recognized as an adjustment of the interest expense of the liabilities whose risk is being managed. In 2010, FHNs counterparty called the swap associated with the $200 million of subordinated
debt. Accordingly, hedge accounting was discontinued on the date of the settlement and the cumulative basis adjustments to the associated subordinated debt are being prospectively amortized as an adjustment to interest expense over its remaining term. FHN subsequently re-hedged the subordinated debt with a
new interest rate swap using the long-haul method of effectiveness assessment. In first quarter 2009, FHNs counterparty called the swap associated with $100 millionof subordinated debt. Accordingly, hedge accounting was discontinued on the date of settlement and the cumulative basis adjustments to the
associated subordinated debt are being prospectively amortized as an adjustment to interest expense over its remaining term.
The following table summarizes FHNs derivatives associated with interest rate risk management activities for the year ended December 31, 2010:
(Dollars in thousands) Description
Notional
Assets
Liabilities
Gains/(Losses)
2010
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer Interest Rate Contracts (a)
$
1,051,220
$
71,289
$
535
$
5,812
Offsetting Upstream Interest Rate Contracts (a)
$
1,051,220
$
535
$
74,889
$
(5,913
)
Debt Hedging
Hedging Instruments:
Interest Rate Swaps (b)
$
1,604,000
$
109,863
$
12,636
$
20,241
Hedged Items:
Term Borrowings (b)
N/A
N/A
$
1,604,000
(c)
$
(20,241
)(d)
(a)
Gains/losses included in the Other expense section of the Consolidated Statements of Income.
(b)
Gains/losses included in the All other income and commissions section of the Consolidated Statements of Income.
(c)
Represents par value of term borrowings being hedged.
(d)
Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships.
The following table summarizes FHNs derivatives associated with interest rate risk management activities for the year ended December 31, 2009:
(Dollars in thousands) Description
Notional
Assets
Liabilities
Gains/(Losses)
2009
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer Interest Rate Contracts (a)
$
1,157,540
$
65,760
$
818
$
(58,136
)
Offsetting Upstream Interest Rate Contracts (a)
$
1,157,540
$
818
$
69,259
$
50,946
Debt Hedging
Hedging Instruments:
Interest Rate Swaps (b)
$
1,200,000
$
90,936
$
4,818
$
(59,844
)
Hedged Items:
Term Borrowings (b)
N/A
N/A
$
1,200,000
(c)
$
59,844
(d)
(a)
Gains/losses included in the Other expense section of the Consolidated Statements of Income.
(b)
Gains/losses included in the All other income and commissions section of the Consolidated Statements of Income.
(c)
Represents par value of term borrowings being hedged.
(d)
Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships.
FIRST HORIZON
NATIONAL CORPORATION
195
Note 25 q Derivatives and Off-Balance Sheet Arrangements (continued)
FHN hedges held-to-maturity trust preferred loans with a principal balance of $211.6 million and $233.1 million as of December 31, 2010 and 2009, respectively, which have an initial fixed rate term of five years before conversion to a floating rate. FHN has entered into pay fixed, receive floating interest rate swaps
to hedge the interest rate risk associated with this initial five year term. These hedge relationships qualify as fair value hedges under ASC 815-20. The impact of those swaps was $17.2 million and $19.2 million in Other liabilities on the Consolidated Statements of Income as of December 31, 2010 and 2009,
respectively. Interest paid or received for these swaps was recognized as an adjustment of the interest income of the assets whose risk is being hedged. Gain/(loss) is included in Other income and commissions on the Consolidated Statements of Income.
The following table summarizes FHNs derivative activities associated with these loans for the year ended December 31, 2010:
(Dollars in thousands) Description
Notional
Assets
Liabilities
Gains/(Losses)
2010
Loan Portfolio Hedging
Hedging Instruments:
Interest Rate Swaps
$
211,583
N/A
$
17,198
$
2,023
Hedged Items:
Trust Preferred Loans (a)
N/A
$
211,583
(b)
N/A
$
(1,999
)(c)
(a)
Assets included in Loans, net of unearned income section of the Consolidated Statements of Condition.
(b)
Represents principal balance being hedged.
(c)
Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships.
The following table summarizes FHNs derivative activities associated with these loans for the year ended December 31, 2009:
(Dollars in thousands) Description
Notional
Assets
Liabilities
Gains/(Losses)
2009
Loan Portfolio Hedging
Hedging Instruments:
Interest Rate Swaps
$
233,083
N/A
$
19,221
$
6,640
Hedged Items:
Trust Preferred Loans (a)
N/A
$
233,083
(b)
N/A
$
(6,754
)(c)
(a)
Assets included in Loans, net of unearned income section of the Consolidated Statements of Condition.
(b)
Represents principal balance being hedged.
(c)
Represents gains and losses attributable to changes in fair value due to interest rate risk as designated in ASC 815-20 hedging relationships.
Visa Derivative
In conjunction with the sale of a portion of its Visa Class B shares in December 2010, FHN and the purchaser entered into a derivative transaction whereby FHN will make, or receive, cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. At the time of the
sale the current conversion ratio of Visa Class B shares to Visa Class A shares was approximately 51 percent. FHN determined that the initial fair value of the derivative was equal to a pro rata portion of the previously accrued contingent liability for Visa litigation matters attributable to the 440,000 Visa Class B
shares sold. This amount was determined to be a liability of $1.0 million.
196
FIRST HORIZON NATIONAL CORPORATION
Note 25 q Derivatives and Off-Balance Sheet Arrangements (continued)
Off-Balance Sheet Arrangements
Credit-Related Commitments. FHN enters into fixed and variable interest rate loan commitments with customers. When these commitments have contract rate adjustments that lag changes in market rates, the financial instruments have characteristics similar to option contracts. FHN follows the same credit policies
and underwriting practices in making commitments as it does for on-balance sheet instruments. Each counterpartys creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if any, is based on managements credit evaluation of the counterparty.
Commitments to extend credit are contractual obligations to lend to a customer as long as all established contractual conditions are met. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The majority of FHNs loan commitments have
maturities less than one year and reflect the prevailing market rates at the time of the commitment. Since commitments may expire without being fully drawn upon, total contractual amounts do not necessarily represent future credit exposure or liquidity requirements.
Other commitments include standby and commercial letters of credit and other credit enhancements. Standby and commercial letters of credit and other credit enhancements are conditional commitments issued by FHN to guarantee the performance and/or payment of a customer to a third party in connection with
specified transactions. The credit risk involved in issuing these commitments is essentially the same as that involved in extending loan facilities to customers, as performance under any of these facilities would result in a loan being funded to the customer. See Note 22 Fair Value of Assets and Liabilities for the
book value and fair value of FHNs unfunded commitments.
FHN services loans for others, and in some cases, provides guarantees or recourse on the serviced loans. See Note 18 Restrictions, Contingencies, and Other Disclosures for additional information.
FIRST HORIZON
NATIONAL CORPORATION
197
Note 26 q Restructuring, Repositioning, and Efficiency
Beginning in 2007, FHN conducted a company-wide review of business practices with the goal of improving its overall profitability and productivity. In order to redeploy capital to higher-return businesses, FHN sold 34 full-service First Horizon Bank branches in its national banking markets, discontinued national
homebuilder and commercial real estate lending through its First Horizon Construction Lending offices, and executed various MSR sales. In 2008, FHN sold its national mortgage origination and servicing platform including substantially all of its mortgage pipeline, related hedges, servicing assets, certain fixed assets,
and other associated assets.
In 2009, FHN contracted to sell its institutional equity research business, a division of FTN Financial. During first quarter 2010, the sale failed to close and FHN incurred an additional goodwill impairment, severance and contract terminations costs, and asset write-offs when exiting the business. Additionally, in late
2009 FHN sold and closed its Louisville remittance processing operations and the Atlanta insurance business and also cancelled a large services/consulting contract.
Net costs recognized by FHN in the year ended December 31, 2010, related to restructuring, repositioning, and efficiency activities were $17.2 million. Of this amount, $9.5 million represented exit costs that were accounted for in accordance with the Exit or Disposal Cost Obligations Topic of the FASB Accounting
Standards Codification (ASC 420).
Significant expenses recognized in 2010 resulted from the following actions:
Severance and other employee costs of $5.6 million primarily related to the exit of the institutional equity research business and the 2009 sale of Louisville remittance processing operations.
Goodwill impairment of $3.3 million and lease abandonment expense of $2.3 million primarily related to the closure of the institutional equity research business.
Loss of $4.1 million related to asset impairments.
Net costs recognized by FHN in the year ended December 31, 2009, related to restructuring, repositioning, and efficiency activities were $51.9 million. Of this amount, $12.4 million represented exit costs that were accounted for in accordance with ASC 420.
Significant expenses recognized in 2009 resulted from the following actions:
Severance and related employee costs of $5.6 million related to discontinuation of national lending operations and the sales and closures of FERP and the Atlanta insurance business.
Loss on divestitures of $9.2 million related to the FERP and Atlanta insurance transactions.
Loss of $13.4 million related to cancellation of a contract on external services.
Goodwill impairment of $14.3 million related to agreement to sell FTN ECM and $2.3 million related to the closure of the remaining Atlanta insurance business.
Net costs recognized by FHN in the year ended December 31, 2008, related to restructuring, repositioning, and efficiency activities were $91.4 million. Of this amount, $49.1 million represented exit costs that were accounted for in accordance with ASC 420.
Significant expenses recognized in 2008 resulted from the following actions:
Expense of $49.1 million associated with organizational and compensation changes due to right-sizing operating segments, the divestiture of certain First Horizon Bank branches and certain mortgage banking operations, and consolidating functional areas.
Loss of $16.6 million on the divestiture of mortgage banking operations.
Loss of $2.4 million from the sales of certain First Horizon Bank branches.
Transaction costs of $12.7 million from the contracted sales of mortgage servicing rights.
Expense of $10.7 million for the write-down of certain premises and equipment, intangibles, and other assets resulting from FHNs divestiture of certain mortgage operations and from the change in FHNs national banking strategy.
198
FIRST HORIZON NATIONAL CORPORATION
Note 26 q Restructuring, Repositioning, and Efficiency (continued)
The financial results of FTN ECM (the institutional equity research business) including goodwill impairment are reflected in the Loss from discontinued operations, net of tax line on the Consolidated Statements of Income for all periods presented. Losses from the divestitures of the Atlanta insurance business, FERP,
and certain mortgage banking operations are included in Losses on divestitures on the Consolidated Statements of Income. Transaction costs recognized in the periods presented from selling mortgage servicing rights are recorded as a reduction of Mortgage banking income in the noninterest income section of the
Consolidated Statements of Income. All other costs associated with the restructuring, repositioning, and efficiency initiatives implemented by management are included in the noninterest expense section of the Consolidated Statements of Income, including severance and other employee-related costs recognized in
relation to such initiatives which are recorded in Employee compensation, incentives, and benefits; facilities consolidation costs and related asset impairment costs are included in Occupancy; costs associated with the impairment of premises and equipment are included in Equipment rentals, depreciation, and
maintenance or All other expense; professional fees are included in Legal and professional fees; costs associated with intangible asset impairments are included in All other expense and goodwill impairments.
Activity in the restructuring and repositioning liability for the years ended December 31, 2010, 2009, and 2008 is presented in the following table, along with other restructuring and repositioning expenses recognized. For repositioning actions initiated prior to 2010, costs associated with the reduction of national
operations and termination of product and service offerings are included within the non-strategic segment while costs associated with efficiency initiatives affecting multiple segments and initiatives that occurred within regional banking and capital markets are included in the corporate segment. For repositioning
actions initiated in 2010, the related costs are included in the segment that has decision-making responsibility.
(Dollars in thousands)
2010
2009
2008
Expense
Liability
Expense
Liability
Expense
Liability
Beginning Balance
$
-
$
15,903
$
-
$
24,167
$
-
$
19,675
Severance and other employee related costs
5,638
5,638
5,612
5,612
24,400
24,400
Facility consolidation costs
2,348
2,348
6,511
6,511
16,751
16,751
Other exit costs, professional fees, and other
1,468
1,468
322
322
7,902
7,902
Total Accrued
9,454
25,357
12,445
36,612
49,053
68,728
Payments related to:
Severance and other employee related costs
8,440
9,840
16,235
Facility consolidation costs
3,939
8,868
14,223
Other exit costs, professional fees, and other
1,394
874
7,558
Accrual reversals
2,476
1,127
6,545
Restructuring and Repositioning Reserve Balance (a)
$
9,108
$
15,903
$
24,167
Other Restructuring and Repositioning Expense:
Mortgage banking expense on servicing sales
1,532
548
12,667
All other income and commissions
27
-
-
Loss on divestitures
-
9,183
19,020
Impairment of premises and equipment
4,086
2,873
5,650
Impairment of intangible assets
3,348
16,753
4,030
Impairment of other assets
267
10,124
993
Other
(1,493
)
-
-
Total Other Restructuring and Repositioning Expense
7,767
39,481
42,360
Total Restructuring and Repositioning
$
17,221
$
51,926
$
91,413
(a)
Includes $1.2 million of deferred severance-related payments that will be paid after 2010.
FIRST HORIZON
NATIONAL CORPORATION
199
Note 26 q Restructuring, Repositioning, and Efficiency (continued)
FHN began initiatives related to restructuring in second quarter 2007. Consequently, the following table presents cumulative amounts incurred to date as of December 31, 2010, for costs associated with FHNs restructuring, repositioning, and efficiency initiatives:
(Dollars in thousands)
Charged to Expense
Severance and other employee related costs (a)
$
61,182
Facility consolidation costs
38,741
Other exit costs, professional fees, and other
18,946
Other restructuring and repositioning (income) and expense:
Loan portfolio divestiture
7,672
Mortgage banking expense on servicing sales
21,175
Net loss on divestitures
12,535
Impairment of premises and equipment
21,897
Impairment of intangible assets
38,131
Impairment of other assets
40,492
Other
(1,493
)
Total Restructuring and Repositioning Charges Incurred to Date as of December 31, 2010
$
259,278
(a)
Includes $1.2 million of deferred severance-related payments that will be paid after 2010.
200
FIRST HORIZON NATIONAL CORPORATION
Note 27 q Parent Company Financial Information
Following are condensed statements of the parent company:
Statements of Condition
Year Ended December 31
(Dollars in thousands)
2010
2009
Assets:
Cash
$
219,287
$
-
Securities purchased from subsidiary bank under agreements to resell
-
17,827
Total cash and cash equivalents
219,287
17,827
Interest-bearing cash
112,896
160,999
Securities available for sale
6,901
7,160
Notes receivable
3,700
3,700
Allowance for loan losses
(823
)
(823
)
Investments in subsidiaries:
Bank
3,203,991
3,455,474
Non-bank
20,042
20,631
Other assets
187,247
208,181
Total assets
$
3,753,241
$
3,873,149
Liabilities and equity:
Other short-term borrowings and commercial paper
$
4,800
$
3,800
Accrued employee benefits and other liabilities
141,605
130,507
Term borrowings
928,831
436,374
Total liabilities
1,075,236
570,681
Total equity
2,678,005
3,302,468
Total liabilities and equity
$
3,753,241
$
3,873,149
Statements of Income
Year Ended December 31
(Dollars in thousands)
2010
2009
2008
Dividend income:
Bank
$
300,000
$
-
$
-
Non-bank
1,531
1,261
3,852
Total dividend income
301,531
1,261
3,852
Interest income
340
570
4,035
Other income
1,761
1,494
(1,724
)
Total income
303,632
3,325
6,163
Provision for loan losses
-
823
-
Interest expense:
Short-term debt
290
298
285
Term borrowings
11,713
12,166
18,940
Total interest expense
12,003
12,464
19,225
Compensation, employee benefits and other expense
33,476
33,398
49,290
Total expense
45,479
46,685
68,515
Income/(loss) before income taxes
258,153
(43,360
)
(62,352
)
Income tax benefit
(13,078
)
(20,514
)
(20,884
)
Income/(loss) before equity in undistributed net income of subsidiaries
271,231
(22,846
)
(41,468
)
Equity in undistributed net income/(loss) of subsidiaries:
Bank
(220,800
)
(247,205
)
(148,315
)
Non-bank
(230
)
214
(2,204
)
Net income/(loss) attributable to the controlling interest
$
50,201
$
(269,837
)
$
(191,987
)
FIRST HORIZON
NATIONAL CORPORATION
201
Note 27 q Parent Company Financial Information (continued)
Statements of Cash Flows
Year Ended December 31
(Dollars in thousands)
2010
2009
2008
Operating activities:
Net income/(loss)
$
50,201
$
(269,837
)
$
(191,987
)
Less undistributed net loss of subsidiaries
(221,030
)
(246,991
)
(150,519
)
Income/(loss) before undistributed net income of subsidiaries
271,231
(22,846
)
(41,468
)
Adjustments to reconcile income to net cash provided by operating activities:
Deferred income tax provision/(benefit)
-
764
(1,160
)
Depreciation, amortization, and other
4,201
5,131
3,060
Stock-based compensation expense
6,797
5,821
2,930
Net (increase)/decrease in interest receivable and other assets
26,439
(2,962
)
94,931
Net decrease in interest payable and other liabilities
155
(507
)
(110,378
)
Total adjustments
37,592
8,247
(10,617
)
Net cash provided/(used) by operating activities
308,823
(14,599
)
(52,085
)
Investing activities:
Securities:
Sales and prepayments
20
-
2,714
Purchases
(410
)
(3,000
)
(1,528
)
Decrease/(increase) in interest-bearing cash
48,103
79,963
(34,909
)
Return on investment in subsidiary
49
700
2,918
Cash investments in subsidiaries
-
-
(1,346,169
)
Net cash provided/(used) by investing activities
47,762
77,663
(1,376,974
)
Financing activities:
Preferred stock:
Proceeds from issuance of preferred stock and common stock warrant - CPP
-
-
866,540
Repayment of preferred equity CPP
(866,540
)
-
-
Cash dividends
(47,780
)
(43,447
)
-
Common stock:
Exercise of stock options
93
3
511
Proceeds from issuance of common stock
263,103
-
659,656
Cash dividends
-
-
(120,575
)
Repurchase of shares
(1,345
)
(392
)
(303
)
Term borrowings:
Proceeds from issuance of term borrowings
496,345
-
-
(Decrease)/increase in short-term borrowings
1,000
(13,030
)
14,754
Other
(1
)
80
-
Net cash (used)/provided by financing activities
(155,125
)
(56,786
)
1,420,583
Net increase/(decrease) in cash and cash equivalents
201,460
6,278
(8,476
)
Cash and cash equivalents at beginning of year
17,827
11,549
20,025
Cash and cash equivalents at end of year
$
219,287
$
17,827
$
11,549
Total interest paid
$
10,966
$
12,246
$
19,014
Total income taxes paid
1,713
99,090
332,600
Note 28 q Other Events
In first quarter 2011, FHN recognized a gain of $5.8 million related to the redemption of $103 million of subordinated debentures issued to First Tennessee Capital Trust I. Prior to 2010, FHN hedged the subordinated debentures utilizing the long-haul method. In first quarter 2009, FHNs counterparty called the
swap associated with the subordinated debt. Accordingly, hedge accounting was discontinued on the date of settlement and the cumulative basis adjustment to the associated subordinated debt was being amortized as an adjustment to yield over the remaining term. As a result of the redemption of the debt, the
remaining basis adjustment was derecognized resulting in a $5.8 million gain.
Federal funds sold and securities purchased under agreements to resell
592.6
.5
.09
675.1
1.0
.14
12.2
-
Interest-bearing cash
970.3
2.3
.24
614.4
1.4
.23
57.9
+
Total other earning assets
1,562.9
2.8
.18
1,289.5
2.4
.18
21.2
+
Total earning assets
22,960.2
883.1
3.85
25,373.8
994.0
3.92
9.5
-
Allowance for loan losses
(805.5
)
(955.6
)
15.7
+
Cash and due from banks
371.2
436.7
15.0
-
Capital markets receivables
153.1
202.9
24.5
-
Premises and equipment, net
312.3
325.2
4.0
-
Other assets
2,686.1
2,764.8
2.8
-
Total assets/Interest income
$
25,677.4
$
883.1
$
28,147.8
$
994.0
8.8
-
Liabilities and shareholders equity:
Interest-bearing liabilities:
Interest-bearing deposits
Savings
$
5,507.4
$
31.3
.57
%
$
4,507.8
$
38.9
.86
%
22.2
+
Time deposits
1,594.6
38.6
2.42
2,163.1
60.9
2.81
26.3
-
Other interest bearing deposits
3,099.9
8.8
.29
2,030.9
5.0
.25
52.6
+
Total interest-bearing core deposits
10,201.9
78.7
.77
8,701.8
104.8
1.20
17.2
+
Certificates of deposit $100,000 and more
578.4
13.0
2.25
1,369.2
27.7
2.02
57.8
-
Federal funds purchased and securities sold under agreements to repurchase
2,615.5
6.2
.24
2,486.3
5.2
.21
5.2
+
Capital markets trading liabilities
547.4
18.1
3.30
536.2
20.9
3.89
2.1
+
Other short-term borrowings and commercial paper
227.8
1.3
.56
2,663.0
7.6
.29
91.4
-
Term borrowings
2,915.1
32.2
1.10
3,506.9
50.2
1.43
16.9
-
Total interest-bearing liabilities
17,086.1
149.5
.87
19,263.4
216.4
1.12
11.3
-
Noninterest-bearing deposits
4,424.0
4,485.0
1.4
-
Capital markets payables
103.2
139.9
26.2
-
Other liabilities
772.1
807.4
4.4
-
Total liabilities
22,385.4
24,695.7
9.4
-
Shareholders equity
2,996.8
3,156.9
5.1
-
Noncontrolling interest (Note 12)
295.2
295.2
NM
Total equity
3,292.0
3,452.1
4.6
-
Total liabilities and equity/Interest expense
$
25,677.4
$
149.5
$
28,147.8
$
216.4
8.8
-
Net interest income-tax equivalent basis/Yield
$
733.6
3.20
%
$
777.6
3.06
%
Fully taxable equivalent adjustment
(2.8
)
(1.1
)
Net interest income
$
730.8
$
776.5
Net interest spread
2.98
%
2.80
%
Effect of interest-free sources used to fund earning assets
.22
.26
Net interest margin
3.20
%
3.06
%
Certain previously reported amounts have been reclassified to agree with current presentation.
Yields and corresponding income amounts are adjusted to a fully taxable equivalent. Earning assets yields are expressed net of unearned income.
Rates are expressed net of unamortized debenture cost for long-term debt. Net interest margin is computed using total net interest income.
204
FIRST HORIZON NATIONAL CORPORATION
2008
2007
2006
2005
Average Balance Growth(%)
Average Balance
Interest Income/ Expense
Average Yields/ Rates
Average Balance
Interest Income/ Expense
Average Yields/ Rates
Average Balance
Interest Income/ Expense
Average Yields/ Rates
Average Balance
Interest Income/ Expense
Average Yields/ Rates
10/05 (b)
$
21,660.7
$
1,154.1
5.33
%
$
22,106.7
$
1,622.3
7.34
%
$
21,504.2
$
1,591.4
7.40
%
$
18,334.7
$
1,133.9
6.18
%
1.3
-
2,588.0
151.6
5.86
3,876.2
253.6
6.54
4,336.6
288.2
6.64
5,980.1
377.9
6.32
40.1
-
46.7
1.1
2.30
99.0
4.8
4.83
56.8
2.7
4.72
41.7
1.1
2.57
11.9
+
2,618.9
146.0
5.57
3,033.2
172.0
5.67
3,161.5
173.3
5.48
2,635.3
115.1
4.37
2.8
-
37.8
1.8
4.92
1.8
-
.90
1.9
-
1.26
4.7
.2
5.01
54.6
+
260.6
13.9
5.32
246.2
12.0
4.89
261.3
12.8
4.90
224.5
9.4
4.21
2.6
+
2,964.0
162.8
5.49
3,380.2
188.8
5.59
3,481.5
188.8
5.42
2,906.2
125.8
4.33
1.8
-
1,519.3
69.5
4.57
2,172.9
115.0
5.29
2,394.0
127.5
5.33
2,155.6
101.4
4.70
12.5
-
350.5
45.5
12.98
483.9
59.4
12.28
403.0
43.7
10.84
303.5
37.2
12.27
31.6
-
1,175.7
23.0
1.96
1,355.0
65.7
4.85
1,892.5
89.2
4.71
2,288.0
64.8
2.83
23.7
-
168.0
1.6
.98
30.5
1.8
5.97
30.5
1.5
1.47
8.1
.3
.32
NM
1,343.7
24.6
1.84
1,385.5
67.5
4.88
1,923.0
90.7
4.54
2,296.1
65.1
2.74
7.4
-
30,426.2
1,608.1
5.29
33,405.4
2,306.6
6.91
34,042.3
2,330.3
6.83
31,976.2
1,841.3
5.74
6.4
-
(563.1
)
(234.1
)
(204.7
)
(175.3
)
35.7
-
653.9
821.5
787.4
726.0
12.6
-
294.7
156.8
173.1
574.0
*
359.4
433.7
432.3
394.2
4.6
-
3,251.6
3,592.1
3,534.2
3,065.3
2.6
-
$
34,422.7
$
1,608.1
$
38,175.4
$
2,306.6
$
38,764.6
$
2,330.3
$
36,560.4
$
1,841.3
6.8
-
$
4,274.9
$
79.9
1.87
%
$
3,567.6
$
115.9
3.24
%
$
3,191.4
$
88.5
2.77
%
$
2,843.1
$
44.4
1.56
%
14.1
+
2,549.7
101.2
3.97
2,909.0
136.6
4.69
2,795.3
120.3
4.30
2,242.8
79.0
3.52
6.6
-
1,816.8
13.9
.73
1,845.6
25.9
1.40
1,848.1
24.5
1.32
1,770.5
15.5
.87
11.9
+
8,641.4
195.0
2.25
8,322.2
278.4
3.34
7,834.8
233.3
2.98
6,856.4
138.9
2.03
8.3
+
2,012.0
76.3
3.79
6,892.3
369.3
5.36
9,747.7
493.2
5.06
10,896.3
364.1
3.34
44.4
-
3,414.3
69.8
2.05
4,853.6
229.1
4.73
4,562.9
208.9
4.58
4,582.2
136.6
2.98
10.6
-
702.4
33.2
4.73
950.6
51.5
5.42
1,338.9
76.1
5.68
1,519.3
80.2
5.28
18.5
-
5,138.5
119.7
2.33
1,345.7
65.0
4.81
795.0
40.0
5.04
994.8
35.3
3.55
25.5
-
6,108.6
217.6
3.56
6,567.7
372.0
5.66
5,062.4
280.7
5.54
2,560.1
101.1
3.95
2.6
+
26,017.2
711.6
2.74
28,932.1
1,365.3
4.72
29,341.7
1,332.2
4.54
27,409.1
856.2
3.12
9.0
-
4,267.5
5,099.3
5,169.2
5,263.1
3.4
-
269.5
179.3
231.8
404.0
23.9
-
937.9
1,245.9
1,303.6
1,077.3
6.4
-
31,492.1
35,456.6
36,046.3
34,153.5
8.1
-
2,635.4
2,423.5
2,423.0
2,177.0
6.6
+
295.2
295.3
295.3
229.9
5.1
+
2,930.6
2,718.8
2,718.3
2,406.9
6.5
+
$
34,422.7
$
711.6
$
38,175.4
$
1,365.3
$
38,764.6
$
1,332.2
$
36,560.4
$
856.2
6.8
-
$
896.5
2.95
%
$
941.3
2.82
%
$
998.1
2.93
%
$
985.1
3.07
%
(1.4
)
(.7
)
(1.2
)
(1.1
)
$
895.1
$
940.6
$
996.9
$
984.0
2.55
%
2.19
%
2.29
%
2.62
%
.40
.63
.64
.45
2.95
%
2.82
%
2.93
%
3.07
%
*
Amount less than one percent.
(a)
Includes loans on nonaccrual status.
(b)
Compound annual growth rate.
NM not meaningful
FIRST HORIZON
NATIONAL CORPORATION
205
EX-21
5
c64260_ex21.htm
Exhibit 21
SUBSIDIARIES
The
following are lists of consolidated subsidiaries of First Horizon National
Corporation (FHNC) and of First Tennessee Bank National Association
(FTBNA), and information concerning certain unconsolidated entities, all at
December 31, 2010. Each consolidated entity is 100% owned by its immediate
parent, except as described below in note (1) to the FHNC table and notes (1)
and (2) to the FTBNA table, and all are included in the Consolidated Financial
Statements. Consolidated entities not listed include certain trusts not
controlled by FHNC (FHNC owns non-voting preferred interests but no voting
interests) which are not significant subsidiaries of FHNC.
Direct Consolidated Entities of FHNC:
Entity
Type of
Ownership
by FHNC
Jurisdiction
of
Incorporation/
Organization
First
Tennessee Bank National Association (1)
Direct
United
States
Hickory
Capital Corporation
Direct
Tennessee
Highland
Capital Management Corp.
Direct
Tennessee
Martin &
Company, Inc.
Direct
Tennessee
(1)
At December
31, 2010, 300,000 shares of non-voting preferred stock issued by this subsidiary
are outstanding and are not owned by FHNC. That preferred stock has an
aggregate liquidation preference amount of $300,000,000 and is not participating
with the common stock in the event of liquidation. At December 31, 2010,
divisions of this subsidiary did business in certain jurisdictions under the
following names: First Express, First Horizon, First Horizon Bank, First
Horizon Home Loans, First Horizon Equity Lending, First Tennessee Home Loans,
and FTN Financial Capital Markets.
Consolidated Subsidiaries of FTBNA:
Subsidiary
of FTBNA
Type of
Ownership
by FTBNA
Jurisdiction
of
Incorporation/
Organization
First
Express Remittance Processing, Inc.
Direct
Tennessee
First
Horizon ABS Mortgage Trust 2004 HE1 (1)
Direct
Delaware
First
Horizon ABS Mortgage Trust 2004 HE2 (1)
Direct
Delaware
First
Horizon ABS Mortgage Trust 2004 HE3 (1)
Direct
Delaware
First
Horizon ABS Trust 2004 HE4 (1)
Direct
Delaware
First
Horizon Asset Mortgage Pass-Through Trust 2004-5 (1)
Direct
Delaware
First
Horizon ABS Trust 2006 HE1 (1)
Direct
Delaware
First
Horizon ABS Trust 2006 HE2 (1)
Direct
Delaware
First
Horizon ABS Trust 2007 HE1 (1)
Direct
Delaware
First
Horizon Asset Securities, Inc.
Direct
Delaware
First
Horizon Msaver, Inc.
Direct
Tennessee
First
Horizon Insurance Services, Inc.
Direct
Tennessee
First
Horizon Insurance, Inc.
Direct
Delaware
First Horizon Insurance Group, Inc. (2)
Indirect
Tennessee
First Horizon Insurance Agency, Inc.*
Indirect
Georgia
SFSR, Inc.*
Indirect
Tennessee
1
First
Tennessee Insurance Services, Inc.
Direct
Tennessee
FT
Reinsurance Company
Direct
South
Carolina
Hickory
Venture Capital Corporation
Direct
Alabama
JPO, Inc.
Direct
Tennessee
FTRE
Holding, LLC
Direct
Delaware
FTRE Holding II, LLC
Indirect
Delaware
First Horizon Preferred Funding II, Inc.
Indirect
Delaware
FT Real Estate Securities Company, Inc.
Indirect
Arkansas
First Horizon Preferred Funding, Inc.
Indirect
Delaware
First
Tennessee Advisory Services, Inc.
Direct
Tennessee
First
Tennessee ABS, Inc.*
Direct
Delaware
First Tennessee
Brokerage, Inc.
Direct
Tennessee
First
Tennessee Housing Corporation
Direct
Tennessee
CC Community Development Holdings, Inc.
Indirect
Tennessee
First
Tennessee Merchant Equipment, Inc.*
Direct
Tennessee
FT Building,
LLC
Direct
Tennessee
FTN
Financial Capital Assets Corporation
Direct
Tennessee
FTN
Financial Securities Corp.
Direct
Tennessee
FTN
Financial Investment Corp.
Direct
Delaware
FTN Financial Asia Limited
Indirect
Hong Kong
*
Inactive at
December 31, 2010.
(1)
The
following consolidated subsidiaries are not wholly-owned directly or
indirectly by FHNC:
First
Horizon ABS Mortgage Trust 2004 HE1, First Horizon ABS Mortgage Trust 2004
HE2, First Horizon ABS Mortgage Trust 2004 HE3, First Horizon ABS Trust
2004 HE4, First Horizon Asset Mortgage Pass-Through Trust 2004-5, First Horizon
ABS Trust 2006 HE1, First Horizon ABS Trust 2006 HE2, and First Horizon
ABS Trust 2007 HE1 are trusts to which FTBNA transferred certain assets.
Those trusts issued debt securities secured by those assets. FTBNA retains certain
rights as transferor.
(2)
This
subsidiary did business in certain jurisdictions under the following names:
First Horizon Insurance Agency of Tennessee and Tennessee First Horizon
Insurance Agency.
Selected Unconsolidated Entities:
FHNC owns 100%
of the common securities of the following unconsolidated entities:
First
Tennessee Capital I, a Delaware business trust
First
Tennessee Capital II, a Delaware business trust
2
EX-23
6
c64260_ex23.htm
Exhibit 23
Consent of Independent Registered Public
Accounting Firm
The Board of
Directors
First Horizon National Corporation:
We consent to
the incorporation by reference into the previously filed registration
statements Nos. 33-9846, 33-40398, 33-44142, 33-57241, 33-64471, 333-16225,
333-16227, 333-17457, 333-17457-01, 333-17457-02, 333-17457-03, 333-17457-04,
333-70075, 333-91137, 333-92145, 333-92147, 333-56052, 333-73440, 333-73442,
333-106015, 333-108738, 333-108750, 333-109862, 333-110845, 333-123404,
333-124297, 333-124299, 333-133635, 333-147409, 333-150448, 333-156614, and
333-166818 of First Horizon National Corporation (the Company) of our reports
dated February 25, 2011, with respect to the Companys consolidated statements
of condition as of December 31, 2010 and 2009, and the related consolidated
statements of income, shareholders equity, and cash flows for each of the
years in the three-year period ended December 31, 2010, and the effectiveness
of internal control over financial reporting as of December 31, 2010, which
reports are incorporated by reference into the Companys 2010 Annual Report on
Form 10-K.
As discussed in notes 1 and 24 to the consolidated financial statements, effective January 1, 2010, the
Company adopted the provisions of FASB Accounting Standards Update 2009-16, Accounting for Transfers of Financial
Assets, and 2009-17, Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities.
/s/ KPMG LLP
Memphis, Tennessee
February 25, 2011
EX-24
7
c64260_ex24.htm
EXHIBIT 24
POWER OF ATTORNEY
KNOW
ALL MEN BY THESE PRESENTS, that each person whose signature appears below does
hereby constitute and appoint WILLIAM C.
LOSCH III, JAMES F. KEEN, CLYDE A. BILLINGS, JR., and THOMAS C. ADAMS,
JR., jointly and each of them severally, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to execute and sign the Annual Report on Form 10-K for the fiscal
year ended December 31, 2010 to be filed with the Securities and Exchange
Commission (the SEC) pursuant to the provisions of the Securities Exchange
Act of 1934 by First Horizon National Corporation and, further, to execute and
sign any and all amendments thereto and to file the same, with all exhibits
thereto and other documents in connection therewith, with the SEC, granting
unto said attorneys-in-fact and agents, and each of them, or their or his or
her substitute or substitutes, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all the acts that said
attorneys-in-fact and agents, or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature
Title
Date
/s/ D. Bryan
Jordan
President and Chief Executive Officer
February 25,
2011
D. Bryan Jordan
and Director (principal executive
officer)
/s/ William C. Losch III
Executive Vice President and Chief
February 25,
2011
William C. Losch III
Financial Officer (principal financial
officer)
/s/ James F.
Keen
Executive Vice President and Chief
February 25,
2011
James F.
Keen
Accounting Officer (principal
accounting officer)
/s/ Michael
D. Rose
Chairman of the Board and Director
February 25,
2011
Michael D.
Rose
/s/ Robert
B. Carter
Director
February 25,
2011
Robert B.
Carter
/s/ Mark A.
Emkes
Director
February 25,
2011
Mark A.
Emkes
1 of 2
Signature
Title
Date
/s/ Vicky B.
Gregg
Director
February 25,
2011
Vicky B.
Gregg
/s/ James A.
Haslam, III
Director
February 25,
2011
James A.
Haslam, III
/s/ R. Brad
Martin
Director
February 25,
2011
R. Brad
Martin
/s/ Vicki R.
Palmer
Director
February 25,
2011
Vicki R.
Palmer
/s/ Colin V.
Reed
Director
February 25,
2011
Colin V.
Reed
/s/ William
B. Sansom
Director
February 25,
2011
William B.
Sansom
/s/ Luke
Yancy III
Director
February 25,
2011
Luke Yancy
III
2
EX-31.(A)
8
c64260_ex31-a.htm
Exhibit 31(a)
FIRST HORIZON NATIONAL CORPORATION
RULE 13a 14(a) CERTIFICATIONS OF CEO
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(ANNUAL REPORT)
CERTIFICATIONS
I, D. Bryan
Jordan, certify that:
1.
I have reviewed
this annual report on Form 10-K of First Horizon National Corporation;
2.
Based on my
knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my
knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The registrants
other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a)
Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such
internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c)
Evaluated the
effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d)
Disclosed in this
report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting; and
5.
The registrants
other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or
persons performing the equivalent functions):
a)
All significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report
financial information; and
b)
Any fraud, whether
or not material, that involves management or other employees who have a
significant role in the registrants internal control over financial
reporting.
Date: February
25, 2011
/s/
D. Bryan Jordan
D. Bryan Jordan
President and
Chief Executive Officer
EX-31.(B)
9
c64260_ex31-b.htm
Exhibit 31(b)
FIRST HORIZON NATIONAL CORPORATION
RULE 13a 14(a) CERTIFICATIONS OF CFO
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(ANNUAL REPORT)
CERTIFICATIONS
I, William C.
Losch III, certify that:
1.
I have reviewed
this annual report on Form 10-K of First Horizon National Corporation;
2.
Based on my
knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my
knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The registrants
other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a)
Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such
internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c)
Evaluated the
effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d)
Disclosed in this
report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting; and
5.
The registrants
other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or
persons performing the equivalent functions):
a)
All significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report
financial information; and
b)
Any fraud, whether
or not material, that involves management or other employees who have a
significant role in the registrants internal control over financial
reporting.
Date: February
25, 2011
/s/
William C. Losch
III
William C. Losch
III
Executive Vice
President and Chief Financial Officer
1
EX-32.(A)
10
c64260_ex32-a.htm
Exhibit 32(a)
CERTIFICATION OF
PERIODIC REPORT 18
USC 1350 CERTIFICATIONS OF CEO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002,
As Codified at 18 U.S.C. Section 1350
I, the undersigned D. Bryan Jordan,
President and Chief Executive Officer of First Horizon National Corporation
(Corporation), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350, as follows:
1.
The Corporations Annual Report on Form 10-K for the year
ended December 31, 2010, (the Report) fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
2.
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations
of the Corporation.
Dated: February 25, 2011
/s/ D. Bryan Jordan
D. Bryan Jordan
President and Chief Executive Officer
EX-32.(B)
11
c64260_ex32-b.htm
Exhibit 32(b)
CERTIFICATION OF PERIODIC REPORT
18 USC 1350 CERTIFICATIONS OF CFO
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
As Codified at 18 U.S.C. Section 1350
I, the undersigned William C. Losch
III, Executive Vice President and Chief Financial Officer of First Horizon
National Corporation (Corporation), hereby certify, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, as follows:
1.
The Corporations Annual Report on Form 10-K for the year
ended December 31, 2010, (the Report) fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
2.
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations
of the Corporation.
Dated: February 25, 2011
/s/ William C. Losch III
William C. Losch III
Executive Vice President and Chief Financial Officer
EX-99.1
12
c64260_ex99-1.htm
FIRST
HORIZON NATIONAL CORPORATION
PRINCIPAL EXECUTIVE OFFICERS CERTIFICATE
Provided
Pursuant to 31 CFR 30.15
This Certificate is provided
pursuant to 31 CFR 30.15 in relation to the participation of First Horizon
National Corporation (the Company) in the Capital Purchase Program (CPP) of
the U.S. Department of the Treasury (the Treasury) pursuant to the Letter
Agreement of the Company with the Treasury dated as of November 14, 2008. Under
the CPP, the Treasury purchased 866,540 shares of the Companys Preferred Stock,
Series CPP (the CPP Shares), along with a common stock warrant (collectively,
the Securities). The Company repurchased all outstanding CPP Shares on
December 22, 2010. This Certificate is provided to the Company for inclusion as
an exhibit to the Companys Annual Report on Form 10-K for the year ended
December 31, 2010.
* * * * *
I, D. Bryan Jordan, certify,
based on my knowledge, that:
(i) The
compensation committee of the Company has discussed, reviewed, and evaluated
with senior risk officers at least every six months during any part of the most
recently completed fiscal year that was a TARP period, senior executive officer
(SEO) compensation plans and employee compensation plans and the risks these
plans pose to the Company;
(ii) The
compensation committee of the Company has identified and limited during any
part of the most recently completed fiscal year that was a TARP period any
features of the SEO compensation plans that could lead SEOs to take unnecessary
and excessive risks that could threaten the value of the Company and has
identified any features of the employee compensation plans that pose risks to
the Company and has limited those features to ensure that the Company is not
unnecessarily exposed to risks;
(iii) The
compensation committee has reviewed, at least every six months during any part
of the most recently completed fiscal year that was a TARP period, the terms of
each employee compensation plan and identified any features of the plan that
could encourage the manipulation of reported earnings of the Company to enhance
the compensation of an employee, and has limited any such features;
(iv) The
compensation committee of the Company will certify to the reviews of the SEO compensation
plans and employee compensation plans required under (i) and (iii) above;
(v) The
compensation committee of the Company will provide a narrative description of
how it limited during any part of the most recently completed fiscal year that
was a TARP period the features in
(A)
SEO compensation plans
that could lead SEOs to take unnecessary and excessive risks that could
threaten the value of the Company;
(B)
Employee compensation
plans that unnecessarily expose the Company to risks; and
(C)
Employee compensation
plans that could encourage the manipulation of reported earnings of the
Company to enhance the compensation of an employee;
(vi) The
Company has required that bonus payments to SEOs or any of the next twenty most
highly compensated employees, as defined in the regulations and guidance
established under section 111 of EESA (bonus payments), be subject to a
recovery or clawback provision during any part of the most recently completed
fiscal year that was a TARP period if the bonus payments were based on
materially inaccurate financial statements or any other materially inaccurate
performance metric criteria;
1
(vii) The
Company has prohibited any golden parachute payment, as defined in the
regulations and guidance established under section 111 of EESA, to a SEO or any
of the next five most highly compensated employees during any part of the most
recently completed fiscal year that was a TARP period;
(viii) The
Company has limited bonus payments to its applicable employees in accordance
with section 111 of EESA and the regulations and guidance established
thereunder during any part of the most recently completed fiscal year that was
a TARP period;
(ix) The
Company and its employees have complied with the excessive or luxury
expenditures policy, as defined in the regulations and guidance established
under section 111 of EESA, during any part of the most recently completed
fiscal year that was a TARP period; and any expenses that, pursuant to the
policy, required approval of the board of directors, a committee of the board
of directors, an SEO, or an executive officer with a similar level of
responsibility were properly approved;
(x) The
Company will permit a non-binding shareholder resolution in compliance with any
applicable Federal securities rules and regulations on the disclosures provided
under the Federal securities laws related to SEO compensation paid or accrued
during any part of the most recently completed fiscal year that was a TARP
period;
(xi) The
Company will disclose the amount, nature, and justification for the offering,
during any part of the most recently completed fiscal year that was a TARP period,
of any perquisites, as defined in the regulations and guidance established
under section 111 of EESA, whose total value exceeds $25,000 for any employee
who is subject to the bonus payment limitations identified in paragraph (viii);
(xii) The
Company will disclose whether the Company, the board of directors of the
Company, or the compensation committee of the Company has engaged during any
part of the most recently completed fiscal year that was a TARP period a
compensation consultant; and the services the compensation consultant or any
affiliate of the compensation consultant provided during this period;
(xiii) The
Company has prohibited the payment of any gross-ups, as defined in the
regulations and guidance established under section 111 of EESA, to the SEOs and
the next twenty most highly compensated employees during any part of the most
recently completed fiscal year that was a TARP period;
(xiv) The
Company has substantially complied with all other requirements related to employee
compensation that are provided in the agreement between the Company and
Treasury, including any amendments;
(xv) The
Company has submitted to Treasury a complete and accurate list of the SEOs and
the twenty next most highly compensated employees for the current fiscal year,
with the non-SEOs ranked in descending order of level of annual compensation,
and with the name, title, and employer of each SEO and most highly compensated
employee identified; and
(xvi) I
understand that a knowing and willful false or fraudulent statement made in
connection with this certification may be punished by fine, imprisonment, or
both. (See, for example 18 U.S.C.
1001.)
IN WITNESS WHEREOF, the
undersigned has executed this Certificate as of February 23, 2011.
FIRST HORIZON NATIONAL
CORPORATION
By:
/s/ D. Bryan Jordan
Name: D. Bryan Jordan
Title: President and Chief
Executive Officer
2
EX-99.2
13
c64260_ex99-2.htm
FIRST
HORIZON NATIONAL CORPORATION
PRINCIPAL FINANCIAL OFFICERS CERTIFICATE
Provided
Pursuant to 31 CFR 30.15
This Certificate is provided
pursuant to 31 CFR 30.15 in relation to the participation of First Horizon
National Corporation (the Company) in the Capital Purchase Program (CPP) of
the U.S. Department of the Treasury (the Treasury) pursuant to the Letter
Agreement of the Company with the Treasury dated as of November 14, 2008. Under
the CPP, the Treasury purchased 866,540 shares of the Companys Preferred
Stock, Series CPP (the CPP Shares), along with a common stock warrant (collectively,
the Securities). The Company repurchased all outstanding CPP Shares on
December 22, 2010. This Certificate is provided to the Company for inclusion as
an exhibit to the Companys Annual Report on Form 10-K for the year ended
December 31, 2010.
* * * * *
I, William C. Losch III,
certify, based on my knowledge, that:
(i) The
compensation committee of the Company has discussed, reviewed, and evaluated
with senior risk officers at least every six months during any part of the most
recently completed fiscal year that was a TARP period, senior executive officer
(SEO) compensation plans and employee compensation plans and the risks these
plans pose to the Company;
(ii) The
compensation committee of the Company has identified and limited during any
part of the most recently completed fiscal year that was a TARP period any
features of the SEO compensation plans that could lead SEOs to take unnecessary
and excessive risks that could threaten the value of the Company and has
identified any features of the employee compensation plans that pose risks to
the Company and has limited those features to ensure that the Company is not
unnecessarily exposed to risks;
(iii) The
compensation committee has reviewed, at least every six months during any part
of the most recently completed fiscal year that was a TARP period, the terms of
each employee compensation plan and identified any features of the plan that
could encourage the manipulation of reported earnings of the Company to enhance
the compensation of an employee, and has limited any such features;
(iv) The
compensation committee of the Company will certify to the reviews of the SEO
compensation plans and employee compensation plans required under (i) and (iii)
above;
(v) The
compensation committee of the Company will provide a narrative description of
how it limited during any part of the most recently completed fiscal year that was
a TARP period the features in
(A)
SEO compensation plans
that could lead SEOs to take unnecessary and excessive risks that could
threaten the value of the Company;
(B)
Employee compensation
plans that unnecessarily expose the Company to risks; and
(C)
Employee compensation
plans that could encourage the manipulation of reported earnings of the
Company to enhance the compensation of an employee;
(vi) The
Company has required that bonus payments to SEOs or any of the next twenty most
highly compensated employees, as defined in the regulations and guidance
established under section 111 of EESA (bonus payments), be subject to a
recovery or clawback provision during any part of the most recently completed
fiscal year that was a TARP period if the bonus payments were based on materially
inaccurate financial statements or any other materially inaccurate performance
metric criteria;
1
(vii) The
Company has prohibited any golden parachute payment, as defined in the
regulations and guidance established under section 111 of EESA, to a SEO or any
of the next five most highly compensated employees during any part of the most
recently completed fiscal year that was a TARP period;
(viii) The
Company has limited bonus payments to its applicable employees in accordance
with section 111 of EESA and the regulations and guidance established
thereunder during any part of the most recently completed fiscal year that was
a TARP period;
(ix) The
Company and its employees have complied with the excessive or luxury
expenditures policy, as defined in the regulations and guidance established
under section 111 of EESA, during any part of the most recently completed
fiscal year that was a TARP period; and any expenses that, pursuant to the
policy, required approval of the board of directors, a committee of the board
of directors, an SEO, or an executive officer with a similar level of
responsibility were properly approved;
(x) The
Company will permit a non-binding shareholder resolution in compliance with any
applicable Federal securities rules and regulations on the disclosures provided
under the Federal securities laws related to SEO compensation paid or accrued
during any part of the most recently completed fiscal year that was a TARP
period;
(xi) The
Company will disclose the amount, nature, and justification for the offering,
during any part of the most recently completed fiscal year that was a TARP
period, of any perquisites, as defined in the regulations and guidance
established under section 111 of EESA, whose total value exceeds $25,000 for
any employee who is subject to the bonus payment limitations identified in
paragraph (viii);
(xii) The
Company will disclose whether the Company, the board of directors of the
Company, or the compensation committee of the Company has engaged during any
part of the most recently completed fiscal year that was a TARP period a
compensation consultant; and the services the compensation consultant or any
affiliate of the compensation consultant provided during this period;
(xiii) The
Company has prohibited the payment of any gross-ups, as defined in the
regulations and guidance established under section 111 of EESA, to the SEOs and
the next twenty most highly compensated employees during any part of the most
recently completed fiscal year that was a TARP period;
(xiv) The
Company has substantially complied with all other requirements related to
employee compensation that are provided in the agreement between the Company
and Treasury, including any amendments;
(xv) The
Company has submitted to Treasury a complete and accurate list of the SEOs and
the twenty next most highly compensated employees for the current fiscal year,
with the non-SEOs ranked in descending order of level of annual compensation,
and with the name, title, and employer of each SEO and most highly compensated
employee identified; and
(xvi) I
understand that a knowing and willful false or fraudulent statement made in
connection with this certification may be punished by fine, imprisonment, or
both. (See, for example 18 U.S.C.
1001.)
IN WITNESS WHEREOF, the
undersigned has executed this Certificate as of February 23, 2011.
FIRST HORIZON NATIONAL
CORPORATION
By:
/s/ William C. Losch III
Name:
William C. Losch III
Title:
Executive Vice President and Chief Financial Officer
2
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 1 — Summary of Significant Accounting Policies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Basis of Accounting. </i></b>The consolidated financial statements of First Horizon National
Corporation (“FHN”), including its subsidiaries, have been prepared in conformity with accounting
principles generally accepted in the United States of America and follow general practices within
the industries in which it operates. This preparation requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes.
These estimates and assumptions are based on information available as of the date of the financial
statements and could differ from actual results.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Principles of Consolidation and Basis of Presentation. </i></b>The consolidated financial statements
include the accounts of FHN and other entities in which it has a controlling financial interest.
Variable Interest Entities (“VIE”) for which FHN or a subsidiary has been determined to be the
primary beneficiary are also consolidated. Following adoption of the provisions of Financial
Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2009-17 on January 1, 2010,
the assets and liabilities of FHN’s consolidated residential mortgage securitization trusts have
been parenthetically disclosed on the face of the Consolidated Statements of Condition as
restricted in accordance with the presentation requirements of ASC 810, as amended, due to the
assets being pledged to settle the trusts’ obligations and the trusts’ security holders having no
recourse to FHN. Affiliates for which FHN is not considered the primary beneficiary and that FHN
does not have a controlling financial interest in are accounted for by the equity method. These
investments are included in other assets, and FHN’s proportionate share of income or loss is
included in noninterest income. All significant intercompany transactions and balances have been
eliminated. For purposes of comparability, certain prior period amounts have been reclassified to
conform to current year presentation. Business combinations accounted for as purchases are
included in the financial statements from the respective dates of acquisition.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Revenue Recognition</i></b><b>. </b>FHN derives a significant portion of its revenues from fee-based services.
Noninterest income from transaction-based fees is generally recognized when the transactions are
completed. Noninterest income from service-based fees is generally recognized over the period in
which FHN provides the service.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Deposit Transactions and Cash Management. </i></b>Deposit transactions include services related to
retail and commercial deposit products (such as service charges on checking accounts), cash
management products and services such as electronic transaction processing (Automated Clearing
House and Electronic Data Interchange), account reconciliation services, cash vault services,
lockbox processing, and information reporting to large corporate clients.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Insurance Commissions. </i></b>Insurance commissions are derived from the sale of insurance
products, including acting as an independent agent to provide commercial and personal property and
casualty, life, long-term care, and disability insurance.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Trust Services and Investment Management. </i></b>Trust services and investment management fees
include investment management, personal trust, employee benefits, and custodial trust services.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Brokerage Management Fees and Commissions. </i></b>Brokerage management fees and commissions include fees
for portfolio management, trade commissions, and annuity and mutual fund sales.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Statements of Cash Flows</i></b><b>. </b>For purposes of these statements, cash and due from banks, federal funds
sold, and securities purchased under agreements to resell are considered cash and cash equivalents.
Federal funds are usually sold for one-day periods, and securities purchased under agreements to
resell are short-term, highly liquid investments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Trading Activities. </i></b>Securities purchased in connection with underwriting or dealer activities
(long positions) are carried at market value as trading securities. Gains and losses, both realized
and unrealized, on these securities are reflected in capital markets noninterest income. Trading
liabilities include securities that FHN has sold to other parties but does not own (short
positions). FHN is obligated to purchase securities at a future date to cover the short positions.
Assets and liabilities for unsettled trades are recorded on the Consolidated Statements of
Condition as “Capital markets receivables” or “Capital markets payables.” Retained interests, in
the form of excess interest, interest-only and principal-only strips from sales and securitizations
of first lien mortgages are recognized at fair value as trading securities with gains and losses,
both realized and unrealized, recognized in mortgage banking income. Similarly, prior to the
adoption of the provisions of FASB ASU 2009-17 on January 1, 2010, subordinated securities from
sales and securitizations of first lien mortgages
were recognized at fair value as trading
securities with gains and losses, both realized and unrealized, recognized in mortgage banking
income.
Additionally, prior to the adoption of the provisions of FASB ASU 2009-17, retained interests, in
the form of certificated residual interests from the securitization of second lien mortgages and
home equity lines of credit (“HELOC”) were recognized at fair value as trading securities with
gains and losses, both realized and unrealized, recognized in other income on the Consolidated
Statements of Income. Following adoption of the provisions of ASU 2009-17 the trading securities
recognized in relation to the subordinated securities and certificated residual interests
were
removed from the Consolidated Statements of Condition as the related trusts were newly consolidated
based on amendments to ASC 810’s consolidation methodology.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Investment Securities. </i></b>Investment securities are reviewed quarterly for possible
other-than-temporary impairment (“OTTI”). The review includes an analysis of the facts and
circumstances of each individual investment such as the degree of loss, the length of time the fair
value has been below cost, the expectation for that security’s performance, the creditworthiness of
the issuer and FHN’s intent and ability to hold the security. Securities that may be sold prior to
maturity and equity securities are classified as securities available for sale and are carried at
fair value. The unrealized gains and losses on securities available for sale, including debt
securities for which no credit impairment exists, are excluded from earnings and are reported, net
of tax, as a component of other comprehensive income within shareholders’ equity. Venture capital
investments are classified as securities available for sale and are carried at fair value with
unrealized gains and losses recognized in noninterest income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Upon adoption of the provisions of the FASB Codification update to ASC 320-10-35 for the quarter
ended March 31, 2009, the “intent and ability to hold to recovery” indicator was replaced for debt
securities with a requirement that an entity’s management assess whether it intends to sell a
security or if it is more-likely-than-not that it will be required to sell the security prior to
recovery for the debt security when determining other-than-temporary impairment. Realized gains
and losses for investment securities are determined by the specific identification method and
reported in noninterest income. Declines in value judged to be other-than-temporary based on FHN’s
analysis of the facts and circumstances related to an individual investment, including securities
that FHN has the intent to sell, are also determined by the specific identification method, and
reported in noninterest income. After adoption of the amendments to ASC 320-10-35, for impaired
debt securities that FHN does not intend to sell and will not be required to sell prior to recovery
but for which credit losses exist, the other-than-temporary impairment recognized has been
separated between the total impairment related to credit losses which is reported in noninterest
income, and the impairment related to all other factors which is excluded from earnings and
reported, net of tax, as a component of other comprehensive income within shareholders’ equity.
Currently, FHN does not have other-than-temporarily impaired debt securities for which credit
losses exist.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Securities Purchased under Resale Agreements and Securities Sold under Repurchase Agreements. </i></b>FHN
enters into short-term purchases of securities under agreements to resell which are accounted for
as collateralized financings except where FHN does not have an agreement to sell the same or
substantially the same securities before maturity at a fixed or determinable price. As of December
31, 2010 and 2009, and for the three years ended December 31, 2010, all of FHN’s securities
purchased under agreements to resell were recognized as collateralized financings. Securities
delivered under these transactions are delivered to either the dealer custody account at the
Federal Reserve Bank (“FRB”) or to the applicable counterparty. Securities sold under agreements
to repurchase are offered to cash management customers as an automated, collateralized investment
account. Securities sold are also used by the retail/commercial bank to obtain favorable borrowing
rates on its purchased funds.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Collateral is valued daily and FHN may require counterparties to deposit additional securities or
cash as collateral, or FHN may return cash or securities previously pledged by counterparties, or
FHN may be required to post additional securities or cash as collateral, based on the contractual
requirements for these transactions. As of both December 31, 2010 and 2009, FHN had pledged $1.5
billion of available for sale securities as collateral for these arrangements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN’s capital markets business utilizes securities borrowing arrangements as part of its trading
operations. Securities borrowing transactions generally require FHN to deposit cash with the
securities lender. The amount of cash advanced is recorded within Federal funds sold and
securities purchased under agreements to resell in the Consolidated Statements of Condition. These
transactions are not considered purchases and the securities borrowed are not recognized by FHN.
FHN does not conduct securities lending transactions.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loans Held for Sale and Securitization and Residual Interests</i></b><b>. </b>Prior to fourth quarter 2008, FHN
originated first lien mortgage loans (“the warehouse”) for the purpose of selling them in the
secondary market, through sales to agencies for securitization, proprietary securitizations, and to
a lesser extent through other whole loan sales. In addition, FHN evaluated its liquidity position
in conjunction with determining its ability and intent to hold loans for the foreseeable future and
sold certain of the second lien mortgages and home equity lines of credit (“HELOC”) it produced in
the secondary market through securitizations and whole loan sales through third quarter 2007. For
periods ending prior to January 1, 2010, loan securitizations involved the transfer of the loans to
qualifying special purpose entities (“QSPE”) that were not subject to consolidation in accordance
with ASC 860, “Transfers and Servicing”. Upon the effective date of the provisions of FASB ASU
2009-16 and FASB ASU 2009-17 on January 1, 2010, the concept of a QSPE was removed from Generally
Accepted Accounting Principles (“GAAP”) and the criteria in ASC 810, “Consolidation”, for
determining the primary beneficiary of a VIE were amended, resulting in the re-evaluation of all
securitization trusts to which FHN had previously transferred loans for consolidation under ASC
810’s revised consolidation criteria. Following the re-evaluation of the trusts for consolidation
upon adoption of the amendments to ASC 810, the majority
of the mortgage securitization trusts to
which FHN transferred loans remains unconsolidated as FHN is deemed not to be the primary
beneficiary based on the interests it retained in the trusts. Under ASC 810, as amended, continual
reconsideration of conclusions reached regarding which interest holder is the primary beneficiary
of a trust is required. See Note 24 — Variable Interest Entities for additional information
regarding FHN’s consolidated and nonconsolidated mortgage securitization trusts. With FHN’s
current focus on origination of mortgages within its regional banking footprint and the sale of its
national mortgage origination offices in third quarter 2008, loan sale and securitization activity
has significantly decreased. Generally, FHN no longer retains financial interests in loans it
transfers to third parties.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Loans originated or purchased for resale, together with mortgage loans previously sold which may be
unilaterally called by FHN, are included in loans held for sale in the Consolidated Statements of
Condition. Effective January 1, 2008, upon adoption of the provisions of the FASB Codification
update to ASC 825, “Financial Instruments,” FHN elected the fair value option on a prospective
basis for almost all types of mortgage loans originated for sale purposes. Such loans are carried
at fair value, with changes in the fair value of these loans recognized in the mortgage banking
noninterest income section of the Consolidated Statements of Income. For mortgage loans originated
for sale for which the fair value option is elected, loan origination fees are recorded by FHN when
earned and related direct loan origination costs are recognized when incurred. Interests retained
from the sale or securitization of such loans are included as a component of trading securities on
the Consolidated Statements of Condition, with related cash receipts and payments classified
prospectively in investing activities on the Consolidated Statements of Cash Flows based on the
purpose for which such financial assets were retained. See Note 22 — Fair Value of Assets and
Liabilities for additional information.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">After adoption of the provisions of the Codification update to ASC 825, FHN continued to account
for all mortgage loans held for sale which were originated prior to 2008 and for mortgage loans
held for sale for which fair value accounting was not elected at the lower of cost or market value.
For such loans, net origination fees and costs were deferred and included in the basis of the
loans in calculating gains and losses upon sale. The value accreted during the time that the loan
was a locked commitment was also included in the basis of first lien mortgage loans. The cost
basis of loans qualifying for fair value hedge accounting under ASC 815, “Derivatives and Hedging”,
was adjusted to reflect changes in fair value. Gains and losses realized from the sale of these
assets were included in noninterest income. Interests retained from the sale of such loans are
included as a component of trading securities on the Consolidated Statements of Condition.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In conjunction with the adoption of the provisions of the FASB Codification update to ASC 820-10
for the quarter ended March 31, 2009, FHN revised its methodology for determining the fair value of
certain loans within its mortgage warehouse. FHN now determines the fair value of the applicable
loans using a discounted cash flow model using observable inputs, including current mortgage rates
for similar products, with adjustments for differences in loan characteristics reflected in the
model’s discount rates. This change in methodology had a minimal effect on the valuation of the
applicable loans. Previously, fair values of these loans were determined through reference to
recent security trade prices for similar products, published third party bids, or observable whole
loan sale prices with adjustments for differences in loan characteristics.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Mortgage loans insured by the Federal Housing Administration (“FHA”) and mortgage loans guaranteed
by the Veterans Administration (“VA”) are generally securitized through the Government National
Mortgage Association (“GNMA”). Generally, conforming conventional loans are securitized through
government-sponsored enterprises (“GSE”) such as the Federal National Mortgage Association (“FNMA”)
and the Federal Home Loan Mortgage Corporation (“FHLMC”). In addition, FHN has completed
proprietary securitizations of nonconforming first lien and second lien mortgages and HELOC, which
do not conform to the requirements for sale or securitization through government agencies or GSE.
Most of these securitizations are accounted for as sales; those that do not qualify for sale
treatment are accounted for as financing arrangements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interests retained from loan sales, including agency securitizations, include MSR and excess
interest. Interests retained from proprietary securitizations include MSR and various financial
assets. MSR are initially valued at fair value, and the remaining retained interests are
initially valued by allocating the remaining cost basis of the loan between the security or loan
sold and the remaining retained interests based on their relative fair values at the time of
securitization or sale. All retained interests, including MSR, are carried at fair value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Financial assets retained in a proprietary or agency securitization may include certificated
residual interests, excess interest (structured as interest-only strips), interest-only strips,
principal-only strips, or subordinated bonds. Residual interests represent rights to receive
earnings to the extent of excess income generated by the underlying loans. Excess interest
represents rights to receive interest from serviced assets that exceed contractually specified
rates. Principal-only strips are principal cash flow tranches, and interest-only strips are
interest cash flow tranches. Subordinated bonds are bonds with junior priority. All financial
assets retained from a securitization are recognized on the Consolidated Statements of Condition in
trading securities at fair value with realized and unrealized gains and losses included in current
earnings as a component of noninterest income on the Consolidated Statements of Income.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair values of the certificated residual interests and the excess interest are determined using
market prices from closely comparable assets such as MSR that are tested against prices determined
using a valuation model that calculates the present value of estimated future cash flows. The fair
value of these retained interests typically changes based on changes in the discount rate and
differences between modeled prepayment speeds and credit losses and actual experience. In some
instances, FHN retains interests in the loans it securitized by retaining certificated
principal-only strips or subordinated bonds. FHN uses observable inputs such as trades of similar
instruments, yield curves, credit spreads, and consensus prepayment speeds to determine the fair
value of principal-only strips. The fair value of subordinated bonds is determined using the best
available market information, which may include trades of comparable securities, independently
provided spreads to other marketable securities, and published market research. Where no market
information is available, the company utilizes an internal valuation model. As of December 31,
2009, no market information was available, and the subordinated bonds were valued using an internal
model which includes assumptions about timing, frequency and severity of loss, prepayment speeds of
the underlying collateral, and the yield that a market participant would require. As of December
31, 2010, no valuation was necessary due to the adoption of the provisions of ASU 2009-17 on
January 1, 2010, which resulted in the removal of subordinated bonds from the Consolidated
Statements of Condition as the related trust was newly consolidated based on amendments to ASC
810’s consolidation methodology.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN recognizes all its classes of MSR at fair value. Classes of MSR are determined in accordance
with FHN’s risk management practices and market inputs used in determining the fair value of the
servicing asset. Since sales of MSR tend to occur in private transactions and the precise terms
and conditions of the sales are typically not readily available, there is a limited market to refer
to in determining the fair value of MSR. As such, FHN relies primarily on a discounted cash flow
model to estimate the fair value of its MSR. This model calculates estimated fair value of the MSR
using predominant risk characteristics of MSR such as interest rates, type of product (fixed vs.
variable), age (new, seasoned, or moderate), agency type and other factors. FHN uses assumptions in
the model that it believes are comparable to those used by brokers and other service providers. FHN
also periodically compares its estimates of fair value and assumptions with brokers, service
providers, and recent market activity and against its own experience.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loans. </i></b>Loans are stated at principal amounts outstanding, net of unearned income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For purposes of the disclosures required pursuant to the adoption of amendments to ASC 310
effective December 31, 2010, the loan portfolio was disaggregated into segments and then further
disaggregated into classes for certain disclosures. A portfolio segment is defined as the level at
which an entity develops and documents a systematic method for determining its allowance for credit
losses. A class is generally determined based on the initial measurement attribute (i.e. amortized
cost or purchased credit impaired), risk characteristics of the loan, and an entity’s method for
monitoring and assessing credit risk. Commercial loan portfolio segments include commercial,
financial and industrial (“C&I”) and commercial real estate (“CRE”). Commercial classes within C&I
include general C&I, mortgage warehouse lending and the TRUPs portfolio. Commercial classes within
commercial real estate include income CRE and residential CRE. Retail loan portfolio segments
include consumer real estate, permanent mortgage, and the combined credit card and other
portfolios. Retail classes include HELOC and real estate installment loans within the consumer
real estate segment, permanent mortgage (which is both a segment and a class), credit card and
other. Due to the winding down nature and decreasing size of the One time close residential
construction portfolio, in most cases the remaining balances and activity of this portfolio has
been combined with and included within the other retail class.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interest on loans is recognized on an accrual basis at the applicable interest rate on the
principal amount outstanding. Loan origination fees and direct costs as well as premiums and
discounts are amortized as level yield adjustments over the respective loan terms.
Unamortized net fees or costs are recognized upon early repayment of the loans. Loan commitment
fees are generally deferred and amortized on a straight-line basis over the commitment period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Impaired loans are generally carried on a nonaccrual status. For commercial loans within each
portfolio segment and class placed on nonaccrual status, accrued but uncollected interest is
reversed and charged against interest income when the loan is placed on nonaccrual status. For
retail loans within each portfolio segment and class, accrued but uncollected interest is reversed
when the loan is fully or partially charged off. Management may elect to continue the accrual of
interest when the estimated net realizable value of collateral is sufficient to recover the
principal balance and accrued interest. For all portfolio segments and classes, interest payments
received on nonaccrual and impaired loans are normally applied to principal. Once all principal
has been received, additional interest payments are recognized on a cash basis as interest income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Commercial loans within each portfolio segment and class that have been placed on nonaccrual status
can be returned to accrual status if all principal and interest is current and FHN expects
full repayment of the remaining contractual principal and interest, or the asset becomes
well-secured and is in the process of collection. Also, loans for which all contractual
amounts can reasonably be expected to be repaid (including arrearages) within a prudent
period, and repayment has been in accordance with the contractual terms for a sustained period
can
also be returned to accrual status. Larger commercial loan balances (outstanding balances
greater than $1 million) that are being returned to accrual status are subject to review by
the Credit Risk Assurance Department.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Individually impaired loans are measured using either a discounted cash flow methodology or the
estimated fair value of the underlying collateral less costs to sell, if the loan is considered
collateral-dependent. In accordance with accounting standards, the discounted cash flow analysis
utilizes the loan’s effective interest rate for discounting expected cash flow amounts. For loans
measured using the estimated fair value of collateral less costs to sell, fair value is estimated
using appraisals of the collateral. Collateral values are monitored and additional write-downs are
recognized if it is determined that the estimated collateral values have declined further.
Estimated costs to sell are based on current amounts of disposal costs for similar assets.
Generally, FHN does not carry loan loss reserves for collateral dependent individually impaired
loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Allowance for Loan Losses</i></b><b>. </b>The allowance for loan losses is maintained at a level that management
determines is sufficient to absorb estimated probable incurred losses in the loan portfolio. The
allowance for loan losses is increased by the provision for loan losses and loan recoveries and is
decreased by charged-off loans. Reserves are determined in accordance with the ASC Contingencies
Topic (“ASC 450-20”) and are composed of reserves for commercial loans evaluated based on pools of
credit graded loans and reserves for pools of smaller-balance homogeneous retail and commercial
loans. 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.
Additionally, the ALLL includes reserves for loans determined by management to be individually
impaired. Reserves for individually impaired loans are established in accordance with the ASC
Receivables Topic (“ASC 310-10”). Management uses analytical models based on loss experience
subject to adjustment to reflect current events, trends, and conditions (including economic
considerations and trends) to assess the adequacy of the ALLL as of the end of each reporting
period. The nature of the process by which FHN determines the appropriate ALLL requires the
exercise of considerable judgment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Key components of the estimation process are as follows: (1) commercial loans determined by
management to be individually impaired loans are evaluated individually and specific reserves are
determined based on the difference between the outstanding loan amount and the estimated net
realizable value of the collateral (if collateral dependent) or the present value of expected
future cash flows; (2) individual commercial loans not considered to be individually impaired are
segmented based on similar credit risk characteristics and evaluated on a pool basis; (3) reserve
rates for the commercial segment are calculated based on historical net charge-offs and are subject
to adjustment by management to reflect current events, trends, and conditions (including economic
considerations and trends); (4) management’s estimate of probable incurred losses reflects the
reserve rate applied against the balance of loans in the commercial segment of the loan portfolio;
(5) retail loans are segmented based on loan type; (6) reserve amounts for each retail portfolio
segment are calculated using analytical models based on net loss experience and are subject to
adjustment by management to reflect current events, trends, and conditions (including economic
considerations and trends); and (7) the reserve amount for each retail portfolio segment reflects
management’s estimate of probable incurred losses in the retail segment of the loan portfolio.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, management developed and began utilizing an Average Loss Rate Model (“ALR”) for
establishment of commercial portfolio reserve rates. ALR is a grade migration based approach that
allows for robust segmentation and dynamic time period consideration. In comparison with the prior
commercial reserve rate establishment, ALR is more sensitive to current portfolio conditions and
provides
management with additional detailed analysis into historical portfolio net loss experience.
Consistent with the preceding approach, these reserve rates are then subject to management
adjustment to reflect current events, trends and conditions (including economic considerations and
trends) that affect the asset quality of the commercial loan portfolio. While the change to the ALR
model improved visibility into the impact of current portfolio conditions, the result of the model
change, after consideration of management adjustments used in both processes, was immaterial.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For commercial loans, reserves are established using historical net loss factors by grade level,
loan product, and business segment. Relationship managers risk rate each loan using grades that
reflect both the probability of default and estimated loss severity in the event of default.
Portfolio reviews are conducted to provide independent oversight of risk grading decisions for
larger credits. Loans with emerging weaknesses receive increased oversight through the “Watch
List” process. For new “Watch List” loans, senior credit management reviews risk grade
appropriateness and action plans. After initial identification, relationship managers prepare
regular updates for review and discussion by more senior business line and credit officers. This
oversight is intended to bring consistent grading and allow timely identification of loans that
need to be further downgraded or placed on nonaccrual status. When a loan becomes classified, the
asset generally transfers to the specialists in the Loan Rehab and Recovery group where the
accounts receive more detailed monitoring; at this time, new appraisals are typically ordered for
real estate collateral dependent credits. Typically, loans are placed on nonaccrual if it becomes
evident that full collection of principal and interest is at risk or if the loans become 90 days or
more past due. This is applicable for all portfolio segments and classes of commercial loans.
</div>
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<div align="left" style="font-size: 10pt; margin-top: 6pt">Generally, classified commercial non-accrual loans over $1 million are deemed to be individually
impaired and are assessed for impairment measurement. Individually impaired loans are measured
based on the present value of expected future payments discounted at the loan’s effective interest
rate (“the DCF method”), observable market prices, or for loans that are solely dependent on the
collateral for repayment, the estimated fair value of the collateral less estimated costs to sell
(net realizable value). For loans measured using the DCF method or by observable market prices, if
the recorded investment in the impaired loan exceeds this amount, a specific allowance is
established as a component of the allowance for loan and lease losses; however, for impaired
collateral-dependent loans FHN generally charges off the full difference between the book value and
the estimated net realizable value. This is applicable for all portfolio segments and classes of
commercial loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The initial method used for measuring impairment is the DCF method. For all loans assessed under
the DCF method, it is necessary to project the timing and amount of the best estimate of future
cash flows from the borrower’s net rents received from the property, guarantor contributions,
receiver or court ordered payments, refinances, etc. Once the amount and timing of the cash flow
stream has been estimated, the net present value using the loan’s effective interest rate is then
calculated in order to determine the amount of impairment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Where guarantor contributions are determined to be a source of repayment, an assessment of the
guarantee is made. This guarantee assessment would include but not be limited to factors such as
type and feature of the guarantee, consideration for the guarantee, key provisions of the guarantee
agreement, and ability of the guarantor to be a viable secondary source of repayment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Reliance on the guarantee as a viable secondary source of repayment is a function of an analysis
proving capability to pay factoring in, among other things, liquidity, and direct/indirect debt
cash flows. Therefore, a proper evaluation of each guarantor is critical. FHN establishes a
guarantor’s ability (financial wherewithal) to support a credit based on an analysis of recent
information on the guarantor’s financial condition. This would generally include income and asset
information from sources such as recent tax returns, credit reports, and personal financial
statements. In analyzing this information FHN seeks to assess a combination of liquidity, global
cash flow, cash burn rate, and contingent liabilities to demonstrate the guarantor’s capacity to
sustain support for the credit and fulfill the obligation. FHN also considers the volume and amount
of guarantees provided for all global indebtedness and the likelihood of realization. Guarantor
financial information is periodically updated throughout the life of the loan.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN presumes a guarantor’s willingness to perform until financial support becomes necessary or if
there is any current or prior indication or future expectation that the guarantor may not willingly
and voluntarily perform under the terms of the guarantee.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In FHN’s risk grading approach, it is deemed that financial support becomes necessary generally at
a point when the loan would otherwise be graded substandard, reflecting a well-defined weakness.
At that point, provided willingness is appropriately demonstrated, a strong, legally enforceable
guarantee can mitigate the risk of default or loss, justify a less severe rating, and consequently
reduce the level of allowance or charge-off that might otherwise be deemed appropriate.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN establishes guarantor willingness to support the credit through documented evidence of previous
and ongoing support of the credit. Previous performance under a guarantor’s obligation to pay is
not considered if the performance was involuntary.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For impaired assets viewed as collateral dependent, fair value estimates are obtained from a
recently received and reviewed appraisal. Appraised values are adjusted down for costs associated
with asset disposal and for the estimates of any further deterioration in values since the most
recent appraisal. Upon the determination of impairment for collateral-dependent loans, FHN charges
off the full difference between book value and the best estimate of the asset’s net realizable
value. As of December 31, 2010, the total amount of individually impaired commercial loans is
$455.5 million; $207.6 million of these loans are carried at the fair value of collateral less
estimated costs to sell and do not carry reserves.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For retail consumer loans, reserve levels are established through the use of segmented roll-rate
models. Loans are classified as substandard at 90 days delinquent. Consumer loan charge-offs
follow regulatory guidance prescribed by the Federal Financial Institutions Examination Council
(“FFIEC”). For consumer loans secured by real estate, a collateral position is assessed prior to
the asset becoming 180 days delinquent. If the value does not support foreclosure, balances are
charged-off and other avenues of recovery are pursued. If the value supports foreclosure, the loan
is charged-down to net realizable value and is placed on nonaccrual status. When collateral is
taken to OREO, the asset is assessed for further write-down relative to appraised value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">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 or, if required by
regulators, based upon information at the time of their examinations. 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.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">For all commercial loan portfolio segments and retail loan portfolio segments, all losses of
principal are charged to the allowance for loan losses in the period in which the loan is deemed to
be uncollectible. Additions are made to the allowance through periodic provisions charged to
current operations and recovery of principal on loans previously charged off.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Premises and Equipment. </i></b>Premises and equipment are carried at cost less accumulated depreciation
and amortization and include additions that materially extend the useful lives of existing premises
and equipment. All other maintenance and repair expenditures are expensed as incurred. Gains and
losses on dispositions are reflected in noninterest income and expense.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation and amortization are computed on the straight-line method over the estimated useful
lives of the assets and are recorded as noninterest expense. Leasehold improvements are amortized
over the lesser of the lease periods or the estimated useful lives using the straight-line method.
Useful lives utilized in determining depreciation for furniture, fixtures and equipment and
buildings are three to fifteen and seven to forty-five years, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Real Estate Acquired by Foreclosure. </i></b>Properties acquired by foreclosure in compliance with HUD
servicing guidelines are included in “Real estate acquired by foreclosure” and are carried at the
estimated amount of the underlying government insurance or guarantee. On December 31, 2010, FHN
had $14.9 million in these foreclosed properties. All other real estate acquired by foreclosure
consists of properties that have been acquired in satisfaction of debt. These properties are
carried at the lower of the outstanding loan amount or estimated fair value less estimated costs to
sell the real estate. Losses arising at foreclosure are charged to the appropriate reserve.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Required developmental costs associated with foreclosed property under construction are capitalized
and included in determining the estimated net realizable value of the property, which is reviewed
periodically, and any write-downs are charged against current earnings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Intangible Assets. </i></b>Intangible assets consist of “Other intangible assets” and “Goodwill.” The
“Other intangible assets” represents identified intangible assets, including customer lists,
acquired contracts, covenants not to compete and premium on purchased deposits, which are amortized
over their estimated useful lives, except for those assets related to deposit bases that are
primarily amortized over 10 years. Management evaluates whether events or circumstances have
occurred that indicate the remaining useful life or carrying value of amortizing
intangibles should be revised. Goodwill represents the excess of cost over net assets of acquired
subsidiaries less identifiable intangible assets. On an annual basis, FHN tests goodwill for
impairment. While impairment of “Goodwill” recognized was immaterial to FHN for the year ended
December 31, 2008, impairments of other intangible assets of $4.0 million were recognized during
2008 in relation to FHN’s divestiture of certain mortgage banking operations and from the change in
FHN’s national banking strategy. For the year ended December
31, 2009, goodwill impairments of $16.6 million and an impairment of other intangible assets of $.2
million were recognized as a result of impairment assessments completed in relation to an agreement
to sell FTN Equity Capital Markets (“FTN ECM”) and in relation to the disposal of the First Horizon
Insurance business in the Atlanta area. For the year ended December 31, 2010, an additional
goodwill impairment of $3.3 million was recognized when the contracted sale of FTN ECM failed to
close and FHN exited the business through a cessation of operations, while the impairment of other
intangible assets during 2010 was immaterial to FHN. See Note 26 — Restructuring, Repositioning,
and Efficiency Initiatives for additional information regarding the impairments of other intangible
assets during 2008 and 2009 and the impairments of goodwill during 2009 and 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Derivative Financial Instruments. </i></b>FHN accounts for derivative financial instruments in accordance
with ASC 815 which requires recognition of all derivative instruments on the balance sheet as
either an asset or liability measured at fair value through adjustments to either accumulated other
comprehensive income within shareholders’ equity or current earnings. Fair value is defined as the
price that would be received to sell a derivative asset or paid to transfer a derivative liability
in an orderly transaction between market participants on the transaction date. Fair value is
determined using available market information and appropriate valuation methodologies.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN prepares written hedge documentation, identifying the risk management objective and designating
the derivative instrument as a fair value hedge, cash flow hedge or free-standing derivative
instrument entered into as an economic hedge or to meet customers’ needs. All transactions
designated as ASC 815 hedges must be assessed at inception and on an ongoing basis as to the
effectiveness of the derivative instrument in offsetting changes in fair value or cash flows of the
hedged item. For a fair value hedge, changes in the fair value of the derivative instrument and
changes in the fair value of the hedged asset or liability are recognized currently in earnings.
For a cash flow hedge, changes in the fair value of the derivative instrument, to the extent that
it is effective, are recorded in accumulated other comprehensive income and subsequently
reclassified to earnings as the hedged transaction impacts net income. Any ineffective portion of
a cash flow hedge is recognized currently in earnings. For free-standing derivative instruments,
changes in fair values are recognized currently in earnings. See Note 25 — Derivatives and
Off-Balance Sheet Arrangements for additional information.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">Cash flows from derivative contracts are reported as operating activities on the Consolidated
Statements of Cash Flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Advertising and Public Relations. </i></b>Advertising and public relations costs are generally expensed as
incurred.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Income Taxes. </i></b>FHN accounts for income taxes using the liability method pursuant to ASC 740,
“Income Taxes.” Under this method, FHN’s deferred tax assets and liabilities are determined by
applying the applicable federal and state income tax rates to its cumulative temporary differences.
These temporary differences represent differences between financial statement carrying amounts and
the corresponding tax bases of certain assets and liabilities. Deferred taxes are provided as a
result of such temporary differences.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN and its eligible subsidiaries are included in a consolidated federal income tax return. FHN
files separate returns for subsidiaries that are not eligible to be included in a consolidated
federal income tax return. Based on the laws of the applicable state where it conducts business
operations, FHN either files consolidated, combined, or separate returns. With few exceptions, FHN
is no longer subject to U.S. federal or state and local tax examinations by tax authorities for
years before 2006. The Internal Revenue Service (“IRS”) is currently examining tax years 2006 -
2008. All proposed adjustments with respect to examinations of federal returns filed for 2005 and
prior years have been settled.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The total balance of unrecognized tax benefits at December 31, 2010 and December 31, 2009,
respectively, were $38.4 million and $30.0 million. FHN does not expect that unrecognized tax
benefits will significantly increase or decrease within the next twelve months. FHN recognizes
accrued interest and penalties related to unrecognized tax benefits as a component of tax expense.
FHN had approximately $7 million and $8 million accrued for the payment of interest at December 31,
2010 and December 31, 2009, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Earnings per Share. </i></b>Earnings per share is computed by dividing net income or loss available to
common shareholders by the weighted average number of common shares outstanding for each period.
Diluted earnings per share in net income periods is computed by dividing net income available to
common shareholders by the weighted average number of common shares adjusted to include the number
of additional common shares that would have been outstanding if the potential dilutive common
shares resulting from options granted under
FHN’s stock option plans and deferred compensation arrangements had been issued. FHN utilizes the
treasury stock method in this calculation. Diluted earnings per share does not reflect an
adjustment for potentially dilutive shares in periods in which a net loss available to common
shareholders exists. As a result of the stock dividends declared in 2008, 2009, and 2010, weighted
average basic and diluted shares were restated to reflect the effect of the stock dividends.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Equity Compensation. </i></b>FHN accounts for its employee stock-based compensation plans using the grant
date fair value of an award to determine the expense to be recognized over the life of the award.
For awards with service vesting criteria, expense is recognized using the straight-line method over
the requisite service period (generally the vesting period) and is adjusted for anticipated
forfeitures. For awards vesting based on a performance measure, anticipated performance is
projected to determine the number of awards expected to vest, and the corresponding aggregate
expense is adjusted to reflect the elapsed portion of the performance period. The fair value of
equity awards with cash payout requirements, as well as awards for which fair value cannot be
estimated at grant date, is remeasured each reporting period through vesting date. Awards are
amortized using the nonsubstantive vesting methodology which requires that expense associated with
awards having only service vesting criteria that continue vesting after retirement be recognized
over a period ending no later than an employee’s retirement eligibility date.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Repurchase and Foreclosure Provision. </i></b>FHN historically presented charges related to repurchase
obligations for junior lien consumer mortgage loan sales in noninterest income while similar
charges arising from first lien mortgage originations and sales through the legacy national
mortgage banking business were reflected in noninterest expense. In order to present such charges
consistently, FHN determined in third quarter 2010 that charges relating to repurchase obligations
should be reflected in noninterest expense in the line item called Repurchase and foreclosure
provision on the Consolidated Statements of Income. Consequently, FHN retroactively applied this
change which resulted in a reclassification of charges related to junior lien mortgage loan sales
from noninterest income into noninterest expense. All applicable tables and associated narrative
have been revised to reflect this change. This reclassification did not impact FHN’s net income
and all effects are included in the non-strategic segment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Accounting Changes. </i></b>Effective December 31, 2010, FHN adopted the provisions of FASB Accounting
Standards Update 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses” (“ASU 2010-20”), with the exception of certain disclosures about
activity that occurs during a reporting period for which the requirements are effective for periods
beginning after December 15, 2010. Additionally, in January 2011, FASB Accounting Standards Update
2011-01, “Deferral of the Effective Date of Disclosures About Troubled Debt Restructurings in
Update No. 2010-20”, was issued which temporarily delays the disclosure requirements related to
modifications to be effective concurrent with the effective date of the proposed Accounting
Standards Update, “Receivables (Topic 310): Clarifications to Accounting for Troubled Debt
Restructurings by Creditors”. ASU 2010-20 provides enhanced disclosures related to
the credit
quality of financing receivables and the allowance for credit losses, and provides that new and
existing disclosures should be disaggregated based on how an entity develops its allowance for
credit losses and how it manages credit exposures. Under the provisions of ASU 2010-20, additional
disclosures required for financing receivables include information regarding the aging of past due
receivables, credit quality indicators, and modifications of financing receivables. Comparative
disclosures are required only for periods ending subsequent to initial adoption. Upon adoption of
the provisions of ASU 2010-20 related to disclosures as of the end of a reporting period, and the
amendments to the rollforward of the allowance for credit losses, on December 31, 2010, FHN revised
its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective September 30, 2010, FHN adopted the provisions of FASB Accounting Standards Update
2010-11, “Scope Exception Related to Embedded Credit Derivatives” (“ASU 2010-11”). ASU 2010-11
amends ASC 815 to provide clarifying language regarding when embedded credit derivative features
are not considered embedded derivatives subject to potential bifurcation and separate accounting.
Upon adoption of the provisions of ASU 2010-11, re-evaluation of certain preexisting contracts is
required to determine whether the accounting for such contracts is consistent with the amended
guidance in ASC 815. If the fair value option is elected for an instrument upon adoption of the
amendments to ASC 815, re-evaluation of such preexisting contracts is not required. As FHN does
not have any preexisting contracts which require re-evaluation, the adoption of the Codification
update to ASC 815 had no effect on FHN’s statement of condition, results of operations, or cash
flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective upon its issuance in February 2010, FHN adopted the provisions of FASB Accounting
Standards Update 2010-09, “Subsequent Events — Amendments to Certain Recognition and Disclosure
Requirements” (“ASU 2010-09”). ASU 2010-09 amends ASC 855 to clarify that an entity must disclose
the date through which subsequent events have been evaluated in both originally issued and restated
financial statements unless the entity has a regulatory requirement to review subsequent events up
through the filing or furnishing of financial statements with the Securities and Exchange
Commission. Upon adoption of the provisions of ASU 2010-09, FHN revised its disclosures
accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-06,
“Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”), with the exception of the
requirement to provide the activity of purchases, sales, issuances, and
settlements related to recurring Level 3 measurements on a gross basis in the Level 3
reconciliation which is effective for quarters beginning after December 15, 2010. ASU 2010-06
updates ASC 820 to require disclosure of significant transfers into and out of Level 1 and Level 2
of the fair value hierarchy, as well as disclosure of an entity’s policy for determining when
transfers between all levels of the hierarchy are recognized. The updated provisions of ASC 820
also require that fair value measurement disclosures be provided by each “class” of assets and
liabilities, and that disclosures providing a description of the valuation techniques and inputs
used to measure fair value be included for both recurring and nonrecurring fair value measurements
classified as either Level 2 or Level 3. Under ASC 820, as amended, separate disclosure is
required in the Level 3 reconciliation of total gains and losses recognized in other comprehensive
income. Comparative
disclosures are required only for periods ending subsequent to initial adoption. Upon adoption of
the amendments to ASC 820, FHN revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2009-16,
“Accounting for Transfers of Financial Assets” (“ASU 2009-16”). ASU 2009-16 updates ASC 860 to
provide for the removal of the QSPE concept from GAAP, resulting in the evaluation of all former
QSPEs for consolidation in accordance with ASC 810 on and after the effective date of the
amendments. The amendments to ASC 860 modify the criteria for achieving sale accounting for
transfers of financial assets and define the term participating interest to establish specific
conditions for reporting a transfer of a portion of a financial asset as a sale. The updated
provisions of ASC 860 also provide that a transferor should recognize and initially measure at fair
value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred
as a result of a transfer of financial assets accounted for as a sale. ASC 860, as amended,
requires enhanced disclosures which are generally consistent with, and supersede, the disclosures
previously required by the Codification update to ASC 810 and ASC 860 which was effective for
periods ending after December 15, 2008. Upon adoption of the amendments to ASC 860, FHN applied
the amended disclosure requirements to transfers that occurred both before and after the effective
date of the Codification update, with comparative disclosures included only for periods subsequent
to initial adoption for those disclosures not previously required. The adoption of the
Codification update to ASC 860 had no material effect on FHN’s statement of condition, results of
operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of Accounting Standards Update 2009-17,
“Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (“ASU
2009-17”). ASU 2009-17 amends ASC 810 to revise the criteria for determining the primary
beneficiary of a VIE by replacing the quantitative-based risks and rewards test previously required
with a qualitative analysis. While ASC 810, as amended, retains the previous guidance in ASC 810
which requires a reassessment of whether an entity is a VIE only when certain triggering events
occur, it adds an additional criterion which triggers a reassessment of an entity’s status when an
event occurs such that the holders of the equity investment at risk, as a group, lose the power
from voting rights or similar rights of those investments to
direct the activities of the entity
that most significantly impact the entity’s economic performance. Additionally, the amendments to
ASC 810 require continual reconsideration of conclusions regarding which interest holder is the
VIE’s primary beneficiary. Under ASC 810, as amended, separate presentation is required on the
face of the balance sheet of the assets of a consolidated VIE that can only be used to settle the
VIE’s obligations and the liabilities of a consolidated VIE for which creditors or beneficial
interest holders have no recourse to the general credit of the primary beneficiary. ASC 810, as
amended, also requires enhanced disclosures which are generally consistent with, and supersede, the
disclosures previously required by the Codification update to ASC 810 and ASC 860 which was
effective for periods ending after December 15, 2008. Comparative disclosures are required only
for periods subsequent to initial adoption for those disclosures not required under such previous
guidance.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Upon adoption of the amendments to ASC 810, FHN re-evaluated all former QSPEs and entities already
subject to ASC 810 under the revised consolidation methodology. Based on such re-evaluation,
consumer loans with an aggregate unpaid principal balance of $245.2 million were prospectively
consolidated as of January 1, 2010, along with secured borrowings of $236.3 million, as the
retention of mortgage servicing rights (“MSR”) and other retained interests, including residual
interests and subordinated bonds, resulted in FHN being considered the related trusts’ primary
beneficiary under the qualitative analysis required by ASC 810, as amended. MSR and trading assets
held in relation to the newly consolidated trusts were removed from the mortgage servicing rights
and trading securities sections of the Consolidated Statements of Condition, respectively, upon
adoption of the amendments to ASC 810. As the assets of FHN’s consolidated residential mortgage
securitization trusts are pledged to settle the obligations due to the holders of the trusts’
securities and since the security holders have no recourse to FHN, the asset and liability balances
have been parenthetically disclosed on the face of the Consolidated Statements of Condition as
restricted in accordance with the presentation requirements of ASC 810, as amended. Since FHN
determined that calculation of carrying values was not practicable, the unpaid principal balance
measurement methodology was used upon adoption, with the allowance for loan losses (“ALLL”) related
to the newly consolidated loans determined using FHN’s standard practices. FHN recognized a
reduction to the opening balance of undivided profits of approximately $10.6 million for the
cumulative effect
of adopting the amendments to ASC 810, including the effect of the recognition of an adjustment to
the ALLL of approximately $24.6 million ($15.6 million net of tax) in relation to the newly
consolidated loans. Further, upon adoption of the amendments to ASC 810, the deconsolidation of
certain small issuer trust preferred trusts for which First Tennessee Bank National Association
(“FTBNA”) holds the majority of the mandatorily redeemable preferred capital securities (trust
preferreds) issued but is not considered the primary beneficiary under the qualitative analysis
required by ASC 810, as amended, resulted in reduction of loans net of unearned income and term
borrowings on the Consolidated Statements of Condition by $30.5 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-10,
“Amendments for Certain Investment Funds” (“ASU 2010-10”). ASU 2010-10 delays the application of
ASU 2009-17 for a reporting entity’s interest in an entity that has the attributes of an investment
company or for which it is industry practice to apply measurement principles for financial
reporting purposes that are consistent with those followed by investment companies. For entities
that do not qualify for the deferral, ASU 2010-10 clarifies that related parties should be
considered when evaluating whether each of the criteria related to permitted levels of decision
maker or service provider fees in ASC 810 are met. Additionally, ASU 2010-10 amends ASC 810 to
provide that when evaluating whether a fee is a variable interest in situations in which a decision
maker or servicer provider holds another interest in the related VIE, a quantitative calculation
may be used but should not be the sole basis for evaluating whether the other variable interest is
more than insignificant. The adoption of the Codification update to ASC 810 had no effect on FHN’s
statement of condition, results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2009, FHN adopted the provisions of the FASB Codification Update to ASC 715
which provides detailed disclosure requirements to enhance the disclosures about an employer’s
postretirement benefit plan assets currently required by ASC 715-20-50. Upon adoption of the
amendments to ASC 715, FHN revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2009, FHN adopted the provisions of FASB Accounting Standards Update
2010-02, “Accounting and Reporting for Decreases in Ownership of a Subsidiary — a Scope
Clarification” (ASU 2010-02). ASU 2010-02 clarifies the scope of the decrease in ownership
guidance in ASC 810-10 and expands the disclosures required upon deconsolidation of a subsidiary
under ASC 810-10-50-1B. The adoption of the Codification update to ASC 810-10 had no effect on
FHN’s statement of condition, results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2009, FHN adopted the provisions of FASB Accounting Standards Update
2009-05, “Measuring Liabilities at Fair Value” (ASU 2009-05). ASU 2009-05 updates ASC 820 to
clarify that a quoted price for the identical liability, when traded as an asset in an active
market, is a Level 1 measurement for that liability when no adjustment to the quoted price is
required. ASU 2009-05 further amends ASC 820 to provide that if a quoted price for an identical
liability does not exist in an active market, the fair value of the liability should be measured
using an approach that maximizes the use of relevant observable inputs and minimizes the use of
unobservable inputs. Under the updated provisions of ASC 820, for such liabilities fair value will
be measured using either a valuation technique that uses the quoted price of the identical
liability when traded as an asset, a valuation technique that uses the quoted price for similar
liabilities or similar liabilities when
traded as an asset, or another valuation technique that is
consistent with the principles of ASC 820. The adoption of the Codification update to ASC 820 had
no material effect on FHN’s statement of condition, results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective September 30, 2009, FHN adopted the provisions of FASB Accounting Standards Update
2009-01 which creates ASC 105, “Generally Accepted Accounting Principles.” ASC 105 establishes the
FASB Accounting Standards Codification (the “Codification”) as the single source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP, other than guidance issued by the SEC.
Under ASC 105, all guidance contained in the FASB Accounting Standards Codification carries an
equal level of authority, with ASC 105 superseding all non-SEC accounting and reporting standards
which existed as of its effective date. The effect of adopting the provisions of ASC 105 was
immaterial to FHN. In accordance with ASC 105, all references to authoritative accounting
standards have been revised to reflect their Codification citation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective June 30, 2009, FHN adopted the provisions of the FASB Codification update to ASC
825-10-50, which requires disclosures about fair value of financial instruments in interim
financial statements. ASC 825-10-50, as amended, requires that disclosures be included in both
interim and annual financial statements of the methods and significant assumptions used to estimate
the fair value of financial instruments.
Comparative disclosures are required only for periods ending subsequent to initial adoption. Upon
adoption of the amendments to ASC 825-10-50, FHN revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the FASB issued a Codification update to ASC 320-10-35 which replaces the “intent
and ability to hold to recovery” indicator of other-than-temporary impairment in ASC 320-10-35 for
debt securities. The updated provisions of ASC 320-10-35 specify that a debt
security is considered other-than-temporarily impaired when an entity’s management intends to sell
the security or that it is more-likely-than- not that the entity will be required to sell
the security prior to recovery of its cost basis. ASC 320-10-35, as amended, requires that for
impaired held-to-maturity and available-for-sale debt securities that an entity does not intend to
sell and will not be required to sell prior to recovery but for which credit losses exist, the
other-than-temporary impairment should be separated between the total impairment related to credit
losses, which should be recognized in current earnings, and the amount of impairment related to all
other factors, which should be recognized in other comprehensive income. ASC 320-10-35, as
amended, discusses the proper interaction of its guidance with SEC Staff Accounting BulletinTopic
5M, which provides additional factors that must be considered in an other-than-temporary impairment
analysis. ASC 320-10-35, as amended, also provides that in periods in which other-than-temporary
impairments are recognized, the total impairment must be presented in the investor’s income
statement with an offset for the amount of total impairment that is recognized in other
comprehensive income. ASC 320-10-35 requires additional disclosures including a rollforward of
amounts recognized in earnings for debt securities for which an other-than-temporary impairment has
been recognized and the noncredit portion of the other-than-temporary impairment that has been
recognized in other comprehensive income. FHN initially applied the guidance provided in the
Codification update to ASC 320-10-35 when assessing debt securities for other-than-temporary
impairment as of March 31, 2009 and the effects of adoption were not material.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the FASB issued a Codification update to ASC 820-10 which provides factors that an
entity should consider when determining whether a market for an asset is not active. If after
evaluating the relevant factors, the evidence indicates that a market is not active, ASC 820-10
provides an additional list of factors that an entity must consider when determining whether events
and circumstances indicate that a transaction which occurred in such inactive market is orderly.
ASC 820-10, as amended, requires that entities place more weight on observable transactions
determined to be orderly and less weight on transactions for which there is insufficient
information to determine whether the transaction is orderly when determining the fair value of an
asset or liability. The Codification update to ASC 820-10 requires enhanced disclosures, including
disclosure of a change in valuation technique which results from its application and disclosure of
fair value measurements for debt and equity securities by major security types. FHN initially
applied the guidance provided in the Codification update to ASC 820-10 in its fair value
measurements as of March 31, 2009 and the effects of adoption were not significant.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 820 for
existing fair value measurement requirements related to non-financial assets and liabilities which
are recognized at fair value on a non-recurring basis. The effective date for the application of
ASC 820’s measurement framework to such non-financial assets and liabilities was previously delayed
under transitional guidance issued by the FASB. ASC 820, as amended, establishes a hierarchy to be
used in performing measurements of fair value. Additionally, the updated provisions of ASC 820
emphasize that fair value should be determined from the perspective of a market participant while
also indicating that valuation methodologies should first reference available market data before
using internally developed assumptions. ASC 820, as amended, also provides expanded disclosure
requirements regarding the effects of fair value measurements on the financial statements. The
effect of adopting the updated provisions of ASC 820 for non-financial assets and liabilities which
are recognized at fair value on a non-recurring basis on January 1, 2009, was not significant to
FHN. Effective January 1, 2008, FHN adopted
ASC 820’s Codification update for existing fair value measurement requirements related to financial
assets and liabilities as well as to non-financial assets and liabilities which are remeasured at
least annually. Upon the adoption of the updated provisions of ASC 820 for financial
assets and
liabilities as well as non-financial assets and liabilities remeasured at least annually on January
1, 2008, a negative after-tax cumulative-effect adjustment of $12.5 million was made to the opening
balance of undivided profits for interest rate lock commitments which
FHN previously measured under the guidance of ASC 815-10-45. The effect of the change in
accounting for these interest rate lock commitments produced a positive effect of $19.4 million on
2008 pre-tax earnings as existing commitments were delivered as loans and
additional commitments that would have been deferred under the guidance of ASC 815-10-45 were made.
Substantially all commitments existing at August 31, 2008 were sold.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 805 and ASC
810. ASC 805, as amended, requires that an acquirer recognize the assets acquired and liabilities
assumed in a business combination, as well as any noncontrolling interest in the acquiree, at their
fair values as of the acquisition date, with limited exceptions. Additionally, the updated
provisions of ASC 805 provide that an acquirer cannot specify an effective date for a business
combination that is separate from the acquisition date. ASC 805, as amended, also provides that
acquisition-related costs which an acquirer incurs should be expensed in the period in which the
costs are incurred and the services are received. ASC 810, as amended, requires that acquired
assets and liabilities be measured at full fair value without consideration to ownership
percentage. Under the updated provisions of ASC 810, any noncontrolling interests in an acquiree
should be presented as a separate component of equity rather than on a mezzanine level.
Additionally, ASC 810, as amended, provides that net income or loss should be reported in the
consolidated income statement at its consolidated amount, with disclosure on the
face of the consolidated income statement of the amount of consolidated net income which is
attributable to the parent and noncontrolling interests, respectively. The retrospective
application of ASC 810’s presentation and disclosure requirements resulted in an increase to
consolidated net income of $14.0 million for 2008. FHN also recognized an increase of total
shareholders’ equity of $295.2 million upon adoption of the amendments to ASC 810 as a result of
reclassifying the noncontrolling interest previously recognized on the Consolidated Statements of
Condition as “Preferred stock of subsidiary” as a separate component of equity.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, FHN adopted the provisions of an additional Codification update to ASC
805 which requires that an acquirer recognize at fair value as of the acquisition date an asset
acquired or liability assumed in a business combination that arises from a contingency if the
acquisition-date fair value of the asset or liability can be determined during the measurement
period. ASC 805, as amended, provides that if the acquisition-date fair value of an asset acquired
or liability assumed in a business combination that arises from a contingency cannot be determined
during the measurement period, the asset or liability should be recognized at the acquisition date
if information available before the end of the measurement period indicates that it is probable
that an asset existed or a liability had been incurred at the acquisition date and the amount of
the asset or liability can be reasonably estimated. Additionally, ASC 805, as amended, requires
enhanced disclosures regarding assets and liabilities arising from contingencies which are
recognized at the acquisition date of a business combination, including the nature of the
contingencies, the amounts recognized at the acquisition date and the measurement basis applied.
The adoption of the Codification update to ASC 805 had no effect on FHN’s statement of condition,
results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 815-10-50
which provides amendments that enhance disclosures related to derivatives accounted for in
accordance with ASC 815 and reconsiders existing disclosure requirements for such derivatives and
any related hedging items. The additional disclosures provided in ASC 815-10-50, as amended, are
required for both interim and annual reporting periods. Upon adoption of the Codification update
to ASC 815-10-50, FHN revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">
FHN also adopted the provisions of the Codification update to ASC 860-10 as of January 1, 2009, for
initial transfers of financial assets executed after such date. The Codification update amends ASC
860-10 to permit a transferor and transferee to separately account for an initial transfer of a
financial asset and a related repurchase financing that are entered into contemporaneously with, or
in contemplation of, one another if certain specified conditions are met at the inception of the
transaction. ASC 860-10, as amended, requires that the two transactions have a valid and distinct
business or economic purpose for being entered into separately and that the repurchase financing
not result in the initial transferor regaining control over the previously transferred financial
asset. The effect of adopting the Codification update to ASC 860-10 was immaterial to FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2008, FHN adopted the provisions of the Codification update to ASC 325 which
aligns its impairment model for beneficial interests in securitized financial assets with the
impairment model in ASC 320, resulting in a consistent determination of whether
other-than-temporary impairments of available for sale or held to maturity debt securities have
occurred. Since FHN recognizes all retained interests from securitization transactions at fair
value as trading securities and as all of its beneficial interests classified as available for sale
securities are outside the scope of ASC 325, the effect of adopting the Codification update to ASC
325 was immaterial to FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2008, FHN adopted the provisions of the Codification update to ASC 815-10-50
which requires sellers of credit derivatives and similar guarantee contracts to make disclosures
regarding the nature, term, fair value, potential losses, and recourse
provisions for those
contracts. Since FHN is not a seller of credit derivatives or similar financial guarantees, the
effect of adopting the Codification update to ASC 815-10-50 was immaterial to FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted the provisions of the Codification update to ASC 825 which
allows an irrevocable election to measure certain financial assets and liabilities at fair value on
an instrument-by-instrument basis, with unrealized gains and losses recognized currently in
earnings. Under ASC 825, the fair value option may only be elected at the time of initial
recognition of a financial asset or liability or upon the occurrence of certain specified events.
Additionally, ASC 825 provides that application of the fair value option must be based on the fair
value of an entire financial asset or liability and not selected risks inherent in those assets or
liabilities. ASC 825 requires that assets and liabilities which are measured at fair value
pursuant to the fair value option be reported in the financial statements in a manner that
separates those fair values from the carrying amounts of similar assets and liabilities which are
measured using another measurement attribute. ASC 825 also provides expanded disclosure
requirements regarding the effects of electing the fair value option on the financial statements.
Upon adoption of the updated provisions of ASC 825, FHN elected the fair value option on a
prospective basis for almost all types of mortgage loans originated for sale purposes.
Additionally, in accordance with ASC 825’s amendment of ASC 320, FHN
began prospectively classifying cash flows associated with its retained interests in
securitizations recognized as trading securities within investing activities in the Consolidated
Statements of Cash Flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted SEC Staff Accounting Bulletin No. 109, “Written Loan
Commitments Recorded at Fair Value Through Earnings” (SAB No. 109) prospectively for derivative
loan commitments issued or modified after that date. SAB No. 109 rescinds SAB No. 105’s
prohibition on inclusion of expected net future cash flows related to loan servicing activities in
the fair value measurement of a written loan commitment. SAB No. 109 also applies to any loan
commitments for which fair value accounting is elected under ASC 825. FHN did not elect fair value
accounting for any other loan commitments under ASC 825. The prospective application of SAB No.
109 and the prospective election to recognize substantially all new mortgage loan originations at
fair value under ASC 825 resulted in a positive net impact of $1.0 million on 2008 pre-tax
earnings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted the provisions of the Codification update which amended ASC
820 to exclude ASC 840, “Leases,” from its scope. The adoption of the Codification update to ASC
820 had no effect on FHN’s statement of condition, results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted the provisions of the Codification update to ASC 715 which
requires that a liability be recognized for contracts written to employees which provide future
postretirement benefits that are covered by endorsement split-dollar life insurance arrangements
because such obligations are not considered to be effectively settled upon entering into the
related insurance arrangements. FHN recognized a decrease to undivided profits of $8.5 million,
net of tax, upon adoption of the amendments to ASC 715.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted the provisions of the Codification update to ASC 815 which
permits the offsetting of fair value amounts recognized for the right to reclaim cash collateral or
the obligation to return cash collateral against fair value amounts recognized for derivative
instruments executed with the same counterparty under the same master netting arrangement. Upon
adoption of the amendments to ASC 815, entities were permitted to change their previous accounting
policy election to offset or not offset fair value amounts recognized for derivative instruments
under master netting arrangements. ASC 815, as amended, requires additional disclosures for
derivatives and collateral associated with master netting arrangements, including the separate
disclosure of amounts recognized for the right to reclaim cash collateral or the obligation to
return cash collateral under master netting arrangements as of the end of each reporting period for
entities that made an accounting policy decision to not offset fair value amounts. FHN retained
its previous accounting policy election to not offset fair value amounts recognized for derivative
instruments under master netting arrangements upon adoption of the updated provisions of ASC 815,
and has revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN also adopted the provisions of the Codification update to ASC 815-20-25 as of January 1, 2008,
for hedging relationships designated on or after such date. The updated provisions of ASC
815-20-25 explicitly permit use of the shortcut method for hedging relationships in which an
interest rate swap has a nonzero fair value at inception of the hedging relationship which is
attributable solely to the existence of a bid-ask spread in the entity’s principal market under ASC
820. Additionally, ASC 815-20-25, as amended, allows an entity to apply the shortcut method to a
qualifying fair value hedge when the hedged item has a trade date that differs from its settlement
date because of generally established conventions in the marketplace in which the transaction to
acquire or issue the hedged item is executed. Preexisting shortcut hedging relationships were
analyzed as of the adoption date of the amendments to ASC 815-20-25 to determine whether they
complied with
the revised shortcut criteria at their inception or should be dedesignated prospectively. The
adoption of the updated provisions of ASC 815-20-25 had no effect on FHN’s financial position,
results of operations, or cash flows as all of FHN’s preexisting hedging relationships met the
requirements of ASC 815-20-25, as amended, at their inception.
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 2 — Acquisitions and Divestitures</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2010, FHN exited its institutional research business, FTN Equity Capital Markets
(“FTN ECM”), and incurred a pre-tax goodwill impairment of $3.3 million (approximately $2 million
after taxes). FHN exited this business through an immediate cessation of operations on February 1,
2010. Additional charges, primarily representing severance and contract terminations, of $6.1
million are included within the Loss from discontinued operations, net of tax line on the
Consolidated Statements of Income in 2010 and relate to the effects of closing FTN ECM. These
charges are included with the amounts described in Note 26 — Restructuring, Repositioning, and
Efficiency. FHN had initially reached an agreement for the sale of this business which resulted in
a pre-tax goodwill impairment of $14.3 million (approximately $9 million after taxes) in 2009;
however, the contracted sale failed to close and was terminated in early 2010. The financial
results of this business, including the goodwill impairments, are reflected in the Loss from
discontinued operations, net of tax line on the Consolidated Statements of Income for all periods
presented.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN continued its efforts to refocus on core businesses and executed the sale and closure
of FHN’s Atlanta insurance business and Louisville First Express Remittance Processing location
(“FERP”). FHN recognized a loss of $7.5 million on the sale of the Atlanta insurance business and
a $1.7 million loss on the FERP divestiture. These losses are reflected on the Consolidated
Statements of Income as a Loss on divestiture within noninterest income. The losses on
divestitures primarily reflect goodwill write-offs associated with the sales. Additionally, FHN
recognized a goodwill impairment associated with certain assets excluded from the sale of the
Atlanta insurance business. The loss is reflected as a goodwill impairment within noninterest
expense on the Consolidated Statements of Income. See Note 7 — Intangible Assets for further
discussion. FHN continues to have an insurance business within its Tennessee banking footprint and
continues to operate other remittance processing locations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During 2008, FHN sold more than 230 retail and wholesale mortgage origination offices nationwide,
the loan origination and servicing platform, substantially all of FHN’s mortgage origination
pipeline and related hedges, certain fixed assets, and other associated assets. The purchaser did
not acquire any portion of FHN’s mortgage loan warehouse. FHN retained its mortgage operations in
and around Tennessee, continuing to originate home loans for customers in its regional banking
market footprint. FHN also sold servicing assets and related hedges on $19.1 billion of first lien
mortgage loans and associated custodial deposits. Additionally, FHN entered into a subservicing
agreement for the remainder of FHN’s servicing portfolio. Generally, book value was paid for the
assets and liabilities acquired, less a purchase price reduction. FHN recognized a loss on
divestiture of $16.6 million in 2008. Gains and losses related to this transaction were included in
the noninterest income section of the Consolidated Statements of Income as Losses on divestitures.
See Note 6 — Mortgage Servicing Rights for divestitures of servicing rights.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In addition to the divestitures mentioned above, FHN acquires or divests assets from time to time
in transactions that are considered business combinations or divestitures but are not material to
FHN individually or in the aggregate.
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 3 — Investment Securities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables summarize FHN’s available for sale securities on December 31, 2010 and 2009:
</div>
<div align="center">
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<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000"><b>On December 31, 2010</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gross</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gross</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amortized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Cost</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gains</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Securities available for sale:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">87,188</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">256</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">87,444</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued MBS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">1,430,923</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">46,916</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,469,958</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued CMO <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">1,136,607</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,133</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,168,740</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other U.S. government agencies <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">50,426</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,800</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,226</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">26,015</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,015</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity<sup style="font-size: 85%; vertical-align: text-top"> (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">226,012</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">226,003</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">511</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">544</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total securities available for sale <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,957,682</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>82,138</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(7,890</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,031,930</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes securities issued by government sponsored entities.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of
$66.2 million. The remainder is money market,
venture capital, and cost method investments. Additionally, $5.4 million is restricted pursuant to
a reinsurance contract agreement.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Includes $2.7 billion of securities pledged to secure public deposits, securities sold under
agreements to repurchase, and for other purposes. As of
December 31, 2010, FHN had pledged $1.5 billion of the $2.7 billion pledged available for sale
securities as collateral for securities sold under
repurchase agreements.</td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">On December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gross</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gross</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amortized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Cost</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gains</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Securities available for sale:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">47,983</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">146</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">48,129</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued MBS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">941,392</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58,685</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000,077</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued CMO <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">1,148,599</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,919</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,189,430</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other U.S. government agencies <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">111,849</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,296</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">118,145</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">44,400</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,400</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">293,318</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">450</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(177</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">293,591</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">667</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">696</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total securities available for sale <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,588,208</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>108,525</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(2,265</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,694,468</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes securities issued by government sponsored entities.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of
$66.3 million. The remainder is money market,
venture capital, and cost method investments. Additionally, $44.0 million is restricted pursuant to
reinsurance contract agreements.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Includes $2.3 billion of securities pledged to secure public deposits, securities sold under
agreements to repurchase, and for other purposes. As of
December 31, 2009, FHN had pledged $1.5 bilion of the $2.3 billion pledged available for sale
securities as collateral for securities sold under
repurchase agreements.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">National banks chartered by the federal government are, by law, members of the Federal Reserve
System. Each member bank is required to own stock in its regional FRB. Given this requirement,
Federal Reserve stock may not be sold, traded, or pledged as collateral for loans. Membership in
the Federal Home Loan Bank (“FHLB”) network requires ownership of capital stock. Member banks are
entitled to borrow funds from the FHLB and are required to pledge mortgage loans as collateral.
Investments in the FHLB are non-transferable and, generally, membership is maintained primarily to
provide a source of liquidity as needed.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The amortized cost and fair value by contractual maturity for the available for sale securities
portfolio on December 31, 2010 are provided below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Available for Sale</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amortized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Cost</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Within 1 year
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">62,069</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">62,112</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">After 1 year; within 5 years
</div></td>
<td> </td>
<td> </td>
<td align="right">75,545</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">78,558</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">After 5 years; within 10 years
</div></td>
<td> </td>
<td> </td>
<td align="right">2,795</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,795</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">After 10 years
</div></td>
<td> </td>
<td> </td>
<td align="right">23,220</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,220</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Subtotal
</div></td>
<td> </td>
<td> </td>
<td align="right">163,629</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">166,685</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued MBS and CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">2,567,530</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,638,698</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity and other securities
</div></td>
<td> </td>
<td> </td>
<td align="right">226,523</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">226,547</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,957,682</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,031,930</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The table below provides information on realized gross gains and realized gross losses resulting
from sales of the available for sale portfolio for the twelve months ended December 31:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Available for Sale</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Debt</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Equity</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross gains on sales
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">375</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">354</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">729</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross losses on sales
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross gains on sales
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,032</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,032</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross losses on sales
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(381</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(381</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2008
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross gains on sales
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,314</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,314</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross losses on sales
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Proceeds from the sale of AFS securities associated with the gains and losses reflected in the
table above for the years 2010, 2009, and 2008, were $515.4 million, $4.4 million, and $44.6
million, respectively. Total net securities gains/losses recognized on the Consolidated Statements
of Income were $10.9 million in 2010. However, this amount also includes gains/losses related to
the sale and/or impairments of cost method investments (such as Visa Inc.) and unrealized losses
recognized through earnings for venture capital investments. Accordingly, these amounts have been
excluded from the table above. In 2010, FHN recognized a gain of $14.8 million that relates to the
sale of a portion of FHN’s Visa Inc. class B shares. Additionally, in 2010, FHN recognized losses
of $4.6 million for write-downs of venture capital investments. In 2008, FHN recognized a gain of
$65.9 million in connection with Visa Inc.’s initial public offering (“IPO”). As the investment in
Visa is not classified as an AFS security, the 2010 and 2008 gains were excluded from the table
above. See Note 18 — Restrictions, Contingencies, and Other Disclosures for additional discussion
regarding FHN’s investment in Visa Inc. class B shares. See Note 22 — Fair Value for additional
discussion related to FHN’s venture capital investments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Losses totaling $.2 million, $.5 million, and $1.5 million for the years 2010, 2009, and 2008,
respectively, were recognized for securities that, in the opinion of management have been
other-than-temporarily impaired. In 2010, the OTTI relates to a marketable equity security while
the OTTI recognized in 2009 and 2008 relates to cost method investment securities.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables provide information on investments within the available for sale portfolio
that have unrealized losses on December 31, 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000"><b>On December 31, 2010</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Less than 12 months</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">12 months or longer</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">563,813</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">563,813</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total debt securities
</div></td>
<td> </td>
<td> </td>
<td align="right">563,813</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">563,813</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity
</div></td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total temporarily impaired securities
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>563,847</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(7,890</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>563,847</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(7,890</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000">On December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Less than 12 months</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">12 months or longer</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total debt securities
</div></td>
<td> </td>
<td> </td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">55</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(177</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">55</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(177</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total temporarily impaired securities
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">55</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(177</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">142,485</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,265</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has reviewed investment securities that are in unrealized loss positions in accordance with its
accounting policy for other-than-temporary impairment and does not consider them
other-than-temporarily impaired. FHN does not intend to sell the debt securities and it is
more-likely-than-not that FHN will not be required to sell the securities prior to recovery. The
decline in value is primarily attributable to interest rates and not credit losses. For equity
securities, FHN has both the ability and intent to hold these securities for the time necessary to
recover the amortized cost.
</div>
<!-- Folio -->
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - us-gaap:LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 4 — Loans</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides the balance of loans by portfolio on December 31, 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Commercial, financial, and industrial
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,338,155</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">7,149,784</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Commercial real estate
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,406,646</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,774,123</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>263,878</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">639,826</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Retail:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Consumer real estate
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5,617,619</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,931,434</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Permanent mortgage
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,086,859</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,085,668</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">One time close residential construction
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>19,276</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">229,487</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Credit card & other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>292,648</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">313,562</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Restricted real estate loans <sup style="font-size: 85%; vertical-align: text-top">(a)(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>757,491</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Loans, net of unearned income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,782,572</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">18,123,884</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>664,799</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">896,914</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total net loans
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,117,773</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">17,226,970</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Prior to 2010, a portion of the amount was included in consumer real estate.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>2010 includes $701.8 million of consumer real estate loans and $55.7 million of permanent
mortgage loans.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 31, 2010, $4.2 billion of commercial loans were pledged to secure potential discount
window borrowings from the Federal Reserve Bank. Additionally, $6.4 billion of consumer real estate
loans and permanent mortgages were pledged to secure potential borrowings from the Federal Home Loan Bank.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has a concentration of loans secured by residential real estate (46 percent of total loans),
the majority of which is in the consumer real estate portfolio (33 percent of total loans).
Permanent mortgages account for 6 percent of total loans. Restricted real estate loans, which is comprised
primarily of HELOC but also includes permanent mortgages, is 5 percent of total loans. The
remaining residential real estate loans are primarily in the residential CRE and one time close
residential construction portfolios (2 percent of total loans) with national exposures being
significantly reduced since 2008. Additionally, on December 31, 2010, FHN had bank-related and
trust preferred loans (“TRUPs”) (i.e., loans to bank and insurance-related businesses), totaling
$.7 billion (9 percent of the C&I portfolio, or
4 percent of total loans). This component of the C&I portfolio
has experienced stress due to the higher
credit losses encountered throughout the financial services industry, limited availability of
market liquidity, and the impact from economic conditions on these
borrowers.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Components of the Loan Portfolio</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For purposes of the disclosures required pursuant to the adoption of amendments to ASC 310,
the loan portfolio was disaggregated into segments and then further disaggregated into classes for
certain disclosures. A portfolio segment is defined as the level at which an entity develops and
documents a systematic method for determining its allowance for credit losses. A class is
generally determined based on the initial measurement attribute (i.e. amortized cost or purchased
credit impaired), risk characteristics of the loan, and an entity’s method for monitoring and
assessing credit risk. Commercial loan portfolio segments include commercial, financial and
industrial (“C&I”) and commercial real estate (“CRE”). Commercial classes within C&I include
general C&I, mortgage warehouse lending and the TRUPs portfolios. Mortgage warehouse lending
includes commercial lines of credit to qualified mortgage companies exclusively for the temporary
warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to
third party investors. Commercial classes within commercial real estate include income CRE and
residential CRE. Retail loan portfolio segments include consumer real estate, permanent mortgage,
and the combined credit card and other portfolios. Retail classes include HELOC and real estate
(“R/E”) installment loans within the consumer real estate segment, permanent mortgage (which is both a
segment and a class), and credit card and other. Restricted real estate loans include HELOCs that were
previously securitized on balance sheet as well as HELOC and some permanent mortgages that were
consolidated on January, 1, 2010, in conjunction with the adoption of amendments to ASC 810. See
Note 1 for additional discussion of this accounting standard adoption. Due to the winding down
nature and decreasing size of the
One-time
close (“OTC”) residential construction portfolio, in most cases
the remaining balances and activity of this portfolio has been combined with and included within
the other retail class.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Allowance for Loan Losses</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As previously discussed in Note 1, the Allowance for loan losses includes the following
components: reserves for commercial loans evaluated based on pools of credit graded loans and
reserves for pools of smaller-balance homogeneous retail loans, both determined in accordance with
the ASC Topic related to Contingencies (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 adjustment by management to
reflect current events, trends, and conditions (including economic considerations and trends.) The
slow economic recovery, weak housing market and elevated unemployment levels are examples of
additional factors considered by management in determining the allowance for loan losses. Also
included are reserves, determined in accordance with the Receivables Topic (ASC 310-10-45), for
loans determined by management to be individually impaired. See
additional discussion under “Impaired Loans.”
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">To assess the quality of individual commercial loans, commercial loans are internally assigned a
credit grade ranging from 1 to 16. This credit
grading system is intended to identify and measure the credit quality of the loan portfolio by
analyzing the migration of loans between grading categories. It is also integral to the estimation
methodology utilized in determining the allowance for loan losses since an allowance is established
for pools of commercial loans based on the credit grade assigned. The appropriate relationship
manager performs the process of categorizing commercial loans into the appropriate credit grades,
initially as a component of the approval of the loan, and subsequently throughout the life of the
loan as part of our servicing regimen. The proper loan grade for larger exposures is confirmed by
a senior credit officer in the approval process. To determine the most appropriate credit grade
for each loan, FHN utilizes a credit risk grading system that employs scorecards for particular
categories of loans. The scorecards consist of a number of objective and subjective measures that
are weighted in a manner that produces a rank ordering of risk within pass-graded credits. Loan
grades are frequently reviewed by Credit Risk Assurance to determine if the process continues to
result in accurate loan grading across the portfolio.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The ALLL for smaller-balance homogenous retail loans is determined based on pools of similar loan
types that have similar credit risk characteristics. FHN manages retail loan credit risk on a
class basis. Reserves by portfolio are determined using analytical models that incorporate various
factors including, historical delinquency trends, experienced loss frequencies, and experienced
loss severities. Generally, reserves for retail loans reflect
probable incurred losses in the portfolio
that are expected to be recognized over the following twelve months.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides a rollforward of the allowance for loan losses by portfolio segment
for 2010, 2009, and 2008:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Commercial</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Consumer</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Permanent</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Credit Card</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>C&I</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Real Estate</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Real Estate</b><sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Mortgage</b><sup style="font-size: 85%; vertical-align: text-top"><b>(b)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>and Other</b><sup style="font-size: 85%; vertical-align: text-top"><b>(c)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of January 1, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">93,322</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">130,447</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">45,001</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">993</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">72,578</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">342,341</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Divestitures
</div></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(370</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(370</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Charge-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(105,621</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(193,518</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(124,102</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(6,913</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(162,275</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(592,429</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Recoveries
</div></td>
<td> </td>
<td> </td>
<td align="right">4,495</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,386</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,269</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">546</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,972</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,668</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision
</div></td>
<td> </td>
<td> </td>
<td align="right">199,697</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">260,980</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">253,650</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58,959</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">306,714</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,080,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2008
</div></td>
<td> </td>
<td> </td>
<td align="right">191,893</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">199,925</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">181,818</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">221,989</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">849,210</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance — individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">6,556</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,747</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,303</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance — collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">185,337</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">194,178</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">181,818</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,586</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">221,989</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">836,907</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned as of December 31, 2008:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">43,918</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">430,172</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,361</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,939</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,389</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">484,779</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">7,775,537</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,846,279</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,748,008</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,124,845</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,298,742</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,793,411</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans, net of unearned
</div></td>
<td> </td>
<td> </td>
<td align="right">7,819,455</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,276,451</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,749,369</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,126,784</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,306,131</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,278,190</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of January 1, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">191,893</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">199,925</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">181,818</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">221,989</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">849,210</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Charge offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(129,283</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(277,461</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(224,853</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(63,004</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(182,360</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(876,961</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Recoveries
</div></td>
<td> </td>
<td> </td>
<td align="right">7,594</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,790</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,244</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">797</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,240</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,665</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision
</div></td>
<td> </td>
<td> </td>
<td align="right">206,444</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">272,471</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">241,879</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">132,518</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,688</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">880,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">276,648</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">205,725</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">215,088</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">123,896</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">75,557</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">896,914</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance — individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">18,048</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,746</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,997</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,997</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">857</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31,644</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance — collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">258,600</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">202,979</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">209,091</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">119,900</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74,700</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">865,270</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned as of December 31, 2009:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">103,616</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">405,458</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,766</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,229</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,098</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">564,167</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">7,046,168</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,008,492</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,905,668</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,059,439</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">539,950</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,559,717</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans, net of unearned
</div></td>
<td> </td>
<td> </td>
<td align="right">7,149,784</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,413,950</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,931,434</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,085,668</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">543,048</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,123,884</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance as of January 1, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>276,648</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>205,725</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>215,088</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>123,896</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>75,557</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>896,914</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Adjustment due to amendments of ASC 810</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,106</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,472</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>24,578</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Charge-offs</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(97,272</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(127,323</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(233,269</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(71,113</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(47,564</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(576,541</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Recoveries</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,630</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>13,030</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,300</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,658</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,230</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>49,848</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Provision</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>48,463</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>63,653</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>178,125</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,096</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(22,337</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>270,000</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance as of December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>239,469</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>155,085</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,350</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>65,009</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>12,886</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>664,799</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Allowance — individually evaluated for impairment</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>61,327</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>17,395</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>19,691</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,678</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>267</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>115,358</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Allowance — collectively evaluated for impairment</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>178,142</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>137,690</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>172,659</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>48,331</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>12,619</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>549,441</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Loans, net of unearned as of December 31, 2010:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Individually evaluated for impairment</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>213,405</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>242,143</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>69,775</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>96,765</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>764</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>622,852</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Collectively evaluated for impairment</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,124,750</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,428,381</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,249,637</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,045,792</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>311,160</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,159,720</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total loans, net of unearned</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,338,155</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,670,524</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>6,319,412</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,142,557</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>311,924</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,782,572</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>2010 includes $42.1 million of reserv es and $701.8 million of
balances in restricted consumer real estate loans.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>2010 includes $5.4 million of reserv es and $55.7 million of balances in
restricted permanent mortgage loans.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Includes OTC.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Impaired Loans</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Generally, classified nonaccrual commercial loans over $1 million are deemed to be impaired and
are assessed for impairment measurement in accordance with ASC 310-10. Under ASC 310-10,
individually impaired loans are measured based on the present value of expected future payments
discounted at the loan’s effective interest rate (“the DCF method”), observable market prices, or
for loans that are solely dependent on the collateral for repayment, the estimated fair value of
the collateral less estimated costs to sell (net realizable value). For loans measured using the
DCF method or by observable market prices, if the recorded investment in the impaired loan exceeds
this amount, a specific allowance is established as a component of the allowance for loan and lease
losses; however, for impaired collateral-dependent loans, FHN will, a majority of the time, charge
off the full difference between the book value and the best estimate of net realizable value.
Also, all commercial and retail consumer loans classified as troubled debt restructurings are
deemed to be impaired and are assessed for impairment measurement in accordance with ASC 310-10.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The
average balance of impaired loans was $593.5 million for 2010, $532.2
million for 2009, and $328.3 million for 2008.
The tables below provide loan classes with the amount of recorded investment in impaired loans for
which there is a related allowance for loan loss, the amount of recorded investment in impaired
loans where there is no related allowance for loan loss, and the total unpaid principle balance of
impaired loans as of December 31, 2010 and 2009.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2010</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Unpaid</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recorded</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Principal</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Related</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Investment</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Allowance</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Impaired loans with no related allowance recorded:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">44,459</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">65,929</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">TRUPs
</div></td>
<td> </td>
<td> </td>
<td align="right">25,406</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">107,888</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">176,650</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">59,402</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">127,126</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">237,155</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">397,705</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Impaired loans with related allowance recorded:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">116,275</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">117,644</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">34,061</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">TRUPs
</div></td>
<td> </td>
<td> </td>
<td align="right">27,266</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,266</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">34,540</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36,974</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,821</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">40,313</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,091</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,574</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">218,394</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">228,709</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">78,722</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Retail:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">HELOC
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">25,375</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25,375</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">7,161</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">R/E Installment Loan
</div></td>
<td> </td>
<td> </td>
<td align="right">44,399</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,399</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,530</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Permanent Mortgage
</div></td>
<td> </td>
<td> </td>
<td align="right">96,765</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">96,765</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,679</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Credit Card & Other
</div></td>
<td> </td>
<td> </td>
<td align="right">764</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">764</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">266</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">167,303</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">167,303</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">36,636</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total commercial
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">455,549</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">626,414</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">78,722</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total retail
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">167,303</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">167,303</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">36,636</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total impaired loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">622,852</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">793,717</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">115,358</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2009</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Unpaid</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recorded</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Principal</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Related</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Investment</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Allowance</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Impaired loans with no related allowance recorded:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">33,123</td>
<td> </td>
<td> </td>
<td>$</td>
<td align="right">103,726</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">TRUPs
</div></td>
<td> </td>
<td> </td>
<td align="right">10,549</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,700</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">148,359</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">224,830</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">222,676</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">365,273</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">414,707</td>
<td> </td>
<td> </td>
<td>$</td>
<td align="right">706,529</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Impaired loans with related allowance recorded:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">32,757</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">34,334</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">7,220</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">TRUPs
</div></td>
<td> </td>
<td> </td>
<td align="right">27,186</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,828</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">21,259</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,904</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,898</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">13,165</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,402</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">847</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">94,367</td>
<td> </td>
<td> </td>
<td>$</td>
<td align="right">105,640</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">20,793</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Retail:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">HELOC
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">6,931</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">6,931</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,613</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">R/E Installment Loan
</div></td>
<td> </td>
<td> </td>
<td align="right">18,835</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,835</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,384</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Permanent Mortgage
</div></td>
<td> </td>
<td> </td>
<td align="right">26,229</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,229</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,997</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">OTC
</div></td>
<td> </td>
<td> </td>
<td align="right">3,098</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,098</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">857</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">55,093</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">55,093</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,851</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total commercial
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">509,074</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">812,169</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">20,793</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total retail
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">55,093</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">55,093</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,851</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total impaired loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">564,167</td>
<td> </td>
<td> </td>
<td>$</td>
<td align="right">867,262</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">31,644</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Asset Quality Indicators</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As previously discussed, FHN employs a dual-grade commercial risk grading methodology to assign a
probability of default (“PD”) estimate and loss given default for each commercial loan. The
methodology utilizes multiple scorecards that have been developed using a combination of objective
and subjective factors specific to various portfolio segments that result in a rank ordering of
risk and the assignment of grades PD 1 to PD 16. Each grade corresponds to an estimated one-year
default probability percentage; a PD 1 has the lowest expected default probability, and
probabilities increase as grades progress down the scale. PD 1 through PD 11 are “pass” grades.
PD 12 is referred to as the “pass-watch” grade and is assigned when a credit is judged to need
additional attention. PD 13-16 corresponds to the regulatory-defined categories of special mention
(13), substandard (14), doubtful (15), and loss (16). FHN utilizes these grades to measure,
monitor and asses credit risk with the commercial loan portfolio. Loans are categorized into the
appropriate grade, initially as a component of the approval of the loan, and subsequently
throughout the life of the loan. Pass loan grades are required to be re-assessed annually or
whenever there has been a material change in the financial condition of the borrower or structure
of the relationship. Loans graded 13 or worse are re-assessed on a quarterly basis.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables provide the period end balances of commercial loan portfolio classes,
disaggregated by PD grade for 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000">2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">General</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Warehouse</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Income</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Residential</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">C&I</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Lending</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TRUPS<sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CRE</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CRE</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">PD Grade:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">1
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">86</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">86</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2
</div></td>
<td> </td>
<td> </td>
<td align="right">87</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">91</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">3
</div></td>
<td> </td>
<td> </td>
<td align="right">143</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">159</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">4
</div></td>
<td> </td>
<td> </td>
<td align="right">199</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">207</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">5
</div></td>
<td> </td>
<td> </td>
<td align="right">360</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">385</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">6
</div></td>
<td> </td>
<td> </td>
<td align="right">666</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">88</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">807</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">7
</div></td>
<td> </td>
<td> </td>
<td align="right">855</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">214</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">96</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,170</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">8
</div></td>
<td> </td>
<td> </td>
<td align="right">997</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">387</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,540</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">9
</div></td>
<td> </td>
<td> </td>
<td align="right">491</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">112</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">146</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">752</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">10
</div></td>
<td> </td>
<td> </td>
<td align="right">463</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">82</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">561</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">11
</div></td>
<td> </td>
<td> </td>
<td align="right">493</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">609</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">12
</div></td>
<td> </td>
<td> </td>
<td align="right">246</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">285</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">13
</div></td>
<td> </td>
<td> </td>
<td align="right">422</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">276</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">167</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">879</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">14,15,16
</div></td>
<td> </td>
<td> </td>
<td align="right">423</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">101</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">375</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">121</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,022</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans
collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">5,931</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">817</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">377</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,265</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">163</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,553</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">161</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">142</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">456</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total commercial loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">6,092</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">817</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">430</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,407</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">264</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,009</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Presented net of $35.6 million LOCOM valuation allowance. Based on the underlying
structure of the notes, the highest possible internal grade is “13”. Portfolio reserve
estimate considers recent financial performance of individual borrowers and other
factors.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000">2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">General</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Warehouse</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Income</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Residential</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">C&I</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Lending</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TRUPS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CRE</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CRE</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">PD Grade:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">1
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">74</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">74</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2
</div></td>
<td> </td>
<td> </td>
<td align="right">36</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">3
</div></td>
<td> </td>
<td> </td>
<td align="right">73</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">4
</div></td>
<td> </td>
<td> </td>
<td align="right">207</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">220</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">5
</div></td>
<td> </td>
<td> </td>
<td align="right">412</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">444</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">6
</div></td>
<td> </td>
<td> </td>
<td align="right">460</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">77</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">572</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">7
</div></td>
<td> </td>
<td> </td>
<td align="right">962</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">101</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">114</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,181</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">8
</div></td>
<td> </td>
<td> </td>
<td align="right">890</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">317</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,433</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">9
</div></td>
<td> </td>
<td> </td>
<td align="right">519</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">216</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">178</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">919</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">10
</div></td>
<td> </td>
<td> </td>
<td align="right">427</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">61</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">527</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">11
</div></td>
<td> </td>
<td> </td>
<td align="right">536</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">149</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">696</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">12
</div></td>
<td> </td>
<td> </td>
<td align="right">314</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">97</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">419</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">13
</div></td>
<td> </td>
<td> </td>
<td align="right">535</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">299</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">271</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,150</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">14,15,16
</div></td>
<td> </td>
<td> </td>
<td align="right">503</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">93</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">388</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">313</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,299</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans
collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">5,948</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">707</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">392</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,604</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">404</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,055</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">66</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">169</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">236</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">509</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total commercial loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">6,014</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">707</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">430</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,773</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">640</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,564</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Presented net of $35.6 million LOCOM valuation allowance.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The retail portfolio is comprised primarily of smaller balance loans which are very similar in
nature in that most are standard products and are backed by residential real estate. Because of the
similarities of retail loan-types, FHN is able to utilize the Fair Isaac’s (“FICO”) score, among
other attributes, to assess the quality of consumer borrowers. FICO scores are refreshed on a
quarterly basis and attempt to reflect the recent risk profile of the borrowers. Origination
documentation type and accruing delinquency amounts are also other indicators of retail portfolio
asset quality.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables reflect balances and various asset quality attributes by
origination vintage for both the HELOC and real estate installment classes of loans in the Consumer
Real Estate loan segment as of December 31, 2010:
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>HELOC</b></u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="19" style="border-bottom: 1px solid #000000"><b>Origination Characteristics</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Avg</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Origination</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Period End</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Refreshed</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Vintage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b><sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CLTV</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">FICO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Broker</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TN</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1st Lien</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>FICO</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">pre-2003
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>230.3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">75.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">724</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">42.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">22.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>723</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2003
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>321.3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">733</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>730</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2004
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>690.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">79.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">729</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">31.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">17.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>722</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2005
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>855.3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">79.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">735</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">16.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">17.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">11.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>722</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2006
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>629.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">742</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">13.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>730</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2007
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>629.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">746</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">13.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">28.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>734</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>323.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">74.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">755</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">69.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">36.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>753</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>204.5</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">756</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">86.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">45.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>759</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2010
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>199.3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">73.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">758</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">94.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">46.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>757</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>4,083.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">740</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">33.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">19.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>732</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes $701.8 million of restricted loan balances.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>R/E Installment Loans</b></u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="19" style="border-bottom: 1px solid #000000"><b>Origination Characteristics</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Avg</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Origination</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Period End</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Refreshed</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Vintage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CLTV</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">FICO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Broker</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TN</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1st Lien</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>FICO</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">pre-2003
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>82.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">697</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">17.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">62.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">67.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>727</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2003
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>222.2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">726</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">44.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>731</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2004
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>128.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">73.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">714</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">51.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>724</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2005
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>343.2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">82.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">722</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">21.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">27.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>721</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2006
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>378.2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">723</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>728</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2007
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>519.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">81.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">732</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>734</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>210.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">740</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>751</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>133.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">753</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">89.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">82.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>760</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2010
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>217.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">82.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">748</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">89.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">96.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>751</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,236.4</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">729</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">10.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">44.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">50.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>732</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables reflect balances and various asset quality attributes by
origination vintage for both the HELOC and real estate installment classes of loans in the Consumer
Real Estate loan segment as of December 31, 2009:
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>HELOC</b></u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="19" style="border-bottom: 1px solid #000000"><b>Origination Characteristics</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Avg</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Origination</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Period End</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Refreshed</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Vintage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CLTV</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">FICO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Broker</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TN</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1st Lien</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>FICO</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">pre-2003
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>274.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">724</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">42.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">22.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>722</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2003
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>338.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">75.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">735</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">22.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">27.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>732</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2004
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>693.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">731</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">27.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">19.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">19.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>726</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2005
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,000.7</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">79.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">735</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">16.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">11.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>723</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2006
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>707.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">742</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">12.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>726</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2007
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>701.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">746</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">27.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">13.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>733</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>360.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">74.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">756</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">9.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">68.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">36.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>752</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>220.2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">756</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">86.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">46.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>754</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>4,297.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">740</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">31.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>730</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>R/E Installment Loans</b></u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="19" style="border-bottom: 1px solid #000000"><b>Origination Characteristics</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Avg</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Origination</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Period End</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Refreshed</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Vintage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CLTV</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">FICO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Broker</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TN</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1st Lien</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>FICO</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">pre-2003
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>113.5</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">698</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">19.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">61.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">67.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>695</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2003
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>292.8</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">727</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">44.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>737</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2004
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>166.5</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">716</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">53.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">73.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>719</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2005
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>454.0</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">82.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">723</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">23.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">28.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>719</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2006
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>472.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">725</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">26.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">26.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>711</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2007
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>642.8</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">80.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">734</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">26.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>721</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>309.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">741</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">10.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>737</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>182.5</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">753</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">80.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">75.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>747</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,633.8</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">730</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">11.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">40.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">45.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>723</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables reflect origination documentation type for the permanent mortgage class and
remaining OTC loans and accruing delinquency amounts for the smaller credit card and other
portfolio classes. Full documentation reflects those loans whereby the borrower provided all
necessary financial information in accordance with underwriting policy prior to origination of the
loan. Currently, full documentation would typically require (for example) copies of W-2s, pay stubs
and verification of employment. Non full documentation reflects those loans that were originated
with anything less than pay stubs, personal financial statements, and tax returns from potential
borrowers. Except for subsequent refinancing or approved modification events, classification of
documentation type is determined at origination and is constant throughout the life of the loan.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Permanent Mortgage<sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">One Time Close</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Documentation type:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Full documentation
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>766.2</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">682.9</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>6.0</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">71.4</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Non full documentation
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>356.2</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">383.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>12.7</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151.5</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Payment choice (Option ARM)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>19.5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18.2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>0.5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6.5</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Sub-prime
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>0.7</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,142.6</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,085.5</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>19.2</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">229.4</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>2010 includes $55.7 million of restricted loan balances.</td>
</tr>
</table>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Credit Card</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Retail</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accruing delinquent balances:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">30-89 days past due
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1.9</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2.7</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>0.8</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">0.9</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">90+ days past due
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1.6</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>0.2</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.1</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3.5</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5.5</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1.0</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1.0</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Nonaccrual and Past Due Loans</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Loans are placed on nonaccrual status 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 or
if the terms of a loan have been modified through troubled debt restructuring efforts. When a loan
is placed on nonaccrual status, FHN applies the entire amount of any subsequent payments (including
interest) to the outstanding principal balance.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table reflects accruing and non-accruing loans by class on December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="19%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Non-Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">30-89 Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">90 + Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">30-89 Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">90 + Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total Non-</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total Loans</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Commercial (C&I) :</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">5,905,087</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26,508</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">182</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>5,931,777</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">89,307</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">18,154</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">52,263</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>159,724</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>6,091,501</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage warehouse lending
</div></td>
<td> </td>
<td> </td>
<td align="right">815,529</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>815,529</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,597</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,597</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>817,126</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">TRUPS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">376,856</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>376,856</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">52,672</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>52,672</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>429,528</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total commercial (C&I)
</div></td>
<td> </td>
<td> </td>
<td align="right">7,097,472</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,508</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">182</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,124,162</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">89,307</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,154</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">106,532</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>213,993</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,338,155</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Commercial real estate:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">1,248,209</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,915</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,265,124</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,248</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,516</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">105,758</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>141,522</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,406,646</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">144,524</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,409</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>152,933</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,095</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,283</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81,567</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>110,945</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>263,878</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total commercial real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">1,392,733</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,324</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,418,057</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58,343</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,799</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">187,325</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>252,467</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,670,524</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Consumer
real estate:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">HELOC <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">3,972,068</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">63,884</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,717</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,068,669</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,461</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">563</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,349</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>14,373</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,083,042</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">R/E installment loan
</div></td>
<td> </td>
<td> </td>
<td align="right">2,158,062</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,010</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,220</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,215,292</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,631</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,287</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,160</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>21,078</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,236,370</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
consumer real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">6,130,130</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">105,894</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47,937</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,283,961</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,092</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,850</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,509</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>35,451</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,319,412</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Permanent mortgage </b>(b)
</div></td>
<td> </td>
<td> </td>
<td align="right">959,431</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,041</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,367</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,016,839</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,088</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,814</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100,816</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>125,718</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,142,557</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Credit
card & other:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Credit card
</div></td>
<td> </td>
<td> </td>
<td align="right">188,921</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,912</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,604</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,437</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,437</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">99,259</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">798</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">154</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>100,211</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,276</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>19,276</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>119,487</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total credit card & other
</div></td>
<td> </td>
<td> </td>
<td align="right">288,180</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,710</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,758</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>292,648</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,276</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>19,276</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>311,924</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total loans, net of unearned </b>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">15,867,946</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">188,477</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">79,244</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,135,667</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">184,830</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">36,617</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">425,458</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>646,905</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,782,572</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes LOCOM valuation allowance $35.6 million.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes restricted loans.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Includes OTC. All non-accruing balances reflect
OTC.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table reflects accruing and non-accruing loans by class on December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="19%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Non-Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">30-89 Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">90 + Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">30-89 Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">90 + Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total Non-</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total Loans</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Commercial (C&I) :</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">5,849,780</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">65,487</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,856</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>5,918,123</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">47,700</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,533</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">44,269</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>95,502</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>6,013,625</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage warehouse lending
</div></td>
<td> </td>
<td> </td>
<td align="right">704,458</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>704,458</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,227</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,227</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>706,685</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">TRUPS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">391,739</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>391,739</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37,735</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>37,735</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>429,474</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total commercial (C&I)
</div></td>
<td> </td>
<td> </td>
<td align="right">6,945,977</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">65,487</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,856</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,014,320</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47,700</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,533</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">84,231</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>135,464</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,149,784</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Commercial real estate:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">1,534,984</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">51,267</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,303</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,590,554</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,374</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,769</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">152,427</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>183,570</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,774,124</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">341,348</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,737</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>365,085</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,852</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,450</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">266,439</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>274,741</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>639,826</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total commercial real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">1,876,332</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">75,004</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,303</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,955,639</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,226</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,219</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">418,866</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>458,311</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,413,950</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Consumer
real estate:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">HELOC
</div></td>
<td> </td>
<td> </td>
<td align="right">4,192,231</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">55,120</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">41,273</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,288,624</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,960</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">874</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,128</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,962</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,297,586</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">R/E installment loan
</div></td>
<td> </td>
<td> </td>
<td align="right">2,561,442</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38,667</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,801</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,624,910</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,607</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">756</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,575</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,938</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,633,848</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
consumer real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">6,753,673</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">93,787</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">66,074</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,913,534</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,567</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,630</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,703</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>17,900</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,931,434</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Permanent mortgage</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">895,553</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,220</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">59,986</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>987,759</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,358</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,682</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">84,869</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>97,909</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,085,668</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Credit
card & other:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Credit card
</div></td>
<td> </td>
<td> </td>
<td align="right">186,563</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,657</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,816</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,036</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,036</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">137,512</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,866</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,788</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>161,166</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,572</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">185,274</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>189,846</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>351,012</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total credit card & other
</div></td>
<td> </td>
<td> </td>
<td align="right">324,075</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,523</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,604</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>353,202</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,572</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">185,274</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>189,846</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>543,048</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total loans, net of unearned </b>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">16,795,610</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">291,021</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">137,823</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>17,224,454</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">88,851</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26,636</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">783,943</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>899,430</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>18,123,884</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes LOCOM valuation allowance $35.6 million.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes OTC. All non-accruing balances reflect OTC.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 31, 2010 and 2009, FHN had loans classified as troubled debt restructurings of
$282.8 million and $72.8 million, respectively. Additionally, FHN had restructured $56.0 million of
loans held for sale as of December 31, 2010. For restructured loans in the portfolio, FHN had loan
loss reserves of $54.9 million, or 19 percent, as of December 31, 2010. On December 31, 2010 and
2009, there were no significant outstanding commitments to advance additional funds to customers
whose loans had been restructured.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Amounts due from customers on acceptances and bank acceptances outstanding of $3.5 million, $2.9
million, and $2.0 million on December 31, 2010, 2009, and 2008, respectively, are included in
Other assets and in Other liabilities on the Consolidated Statements
of Condition. OTC loans provided construction and
permanent mortgage financing to individuals for the purpose of constructing a home. Upon completion
of construction, the permanent mortgage had historically been classified as held for sale and sold.
Due to the market disruptions experienced in 2008, demand in the secondary market for many of these
permanent mortgages decreased significantly. FHN currently transfers the loans to held for sale or
retains them in the loan portfolio based upon management’s ability and intent at the time of
conversion to permanent financing. FHN transferred $.2 billion and $.1 billion of OTC loans from
the loan portfolio to held-for-sale in 2009 and 2008, respectively.
There were no transfers in
2010. Additionally, FHN transferred $4.4 billion and
$.6 billion of consumer real estate loans
from held for sale into the loan portfolio in 2009, and 2008,
respectively. There were no
transfers in 2010.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 5 — Premises, Equipment and Leases</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Premises and equipment on December 31 are summarized below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Land
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>66,914</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">67,047</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Buildings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>338,060</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">333,450</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leasehold improvements
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>44,880</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">43,156</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Furniture, fixtures, and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>213,289</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">190,289</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Premises and equipment, at cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>663,143</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">633,942</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less accumulated depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>340,824</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">320,118</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Premises and equipment, net
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>322,319</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">313,824</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN is obligated under a number of noncancelable operating leases for premises and equipment with
terms up to 30 years, which may include the payment of taxes, insurance and maintenance costs.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Minimum future lease payments for noncancelable operating leases on premises and equipment on
December 31, 2010, are shown below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">23,108</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">17,329</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">12,169</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">9,843</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">7,721</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2016 and after
</div></td>
<td> </td>
<td> </td>
<td align="right">38,456</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total minimum lease payments
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">108,626</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Payments required under capital leases are not material.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Aggregate minimum income under sublease agreements for these periods is $2.5 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Rent expense incurred under all operating lease obligations for the years ended December 31 is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Rent expense, gross
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>32,673</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">38,070</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">61,496</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Sublease income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(4,275</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,368</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,043</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Rent expense, net
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>28,398</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">33,702</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">57,453</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - fhn:MortgageServicingRightsTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 6 — Mortgage Servicing Rights</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN recognizes all classes of mortgage servicing rights at fair value. Classes of MSR are
established based on market inputs used to determine the fair value of the servicing asset and
FHN’s risk management practices. See Note 22 — Fair Value, the “Determination of Fair Value”
section for a discussion of FHN’s MSR valuation methodology and Note 25 — Derivatives and
Off-Balance Sheet Arrangements for a discussion of how FHN hedges the fair value of MSR. The
balance of MSR included on the Consolidated Statements of Condition represents the rights to
service approximately $28.8 billion and $42.2 billion of mortgage loans on December 31, 2010, and
2009, respectively, for which a servicing right has been capitalized.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2010, FHN adopted the amendments to ASC 810 which resulted in the consolidation of
loans FHN previously sold through proprietary securitizations but retained MSR and significant
subordinated interests subsequent to the transfer. In conjunction with the consolidation of these
loans, FHN derecognized the associated servicing assets which are reflected in the rollfoward
below.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In third quarter 2009, FHN reviewed the allocation of fair value between MSR and excess interest
from prior first lien loan sales and securitizations and as a result, there was a net $11.1 million
reclassification from trading securities to MSR. The reclassification had no effect on FHN’s
Consolidated Statements of Income as excess interest and MSR are highly correlated in valuation and
both are recognized at fair value with changes in fair value being included within mortgage banking
income. Following is a summary of changes in capitalized MSR as of December 31, 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">First</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Second</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">HELOC</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value on January 1, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">354,394</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">13,558</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">8,892</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">376,844</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Addition of mortgage servicing rights
</div></td>
<td> </td>
<td> </td>
<td align="right">189</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">200</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to loan payments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(58,455</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,777</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,818</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(66,050</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(77,591</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,134</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,548</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(87,273</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reclassification from trading securities
</div></td>
<td> </td>
<td> </td>
<td align="right">11,077</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,077</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Changes in fair value due to:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Changes in valuation model inputs or assumptions
</div></td>
<td> </td>
<td> </td>
<td align="right">67,940</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">67,985</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other changes in fair value
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,439</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">482</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">785</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(172</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Fair value on December 31, 2009</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>296,115</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,174</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>5,322</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>302,611</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustment due to adoption of amendments to ASC 810
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(197</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(928</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,168</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,293</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to loan payments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(34,943</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(41</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,201</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(36,185</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(24,558</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(24,558</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to exercise of cleanup calls
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,110</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,110</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Changes in fair value due to:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Changes in valuation model inputs or assumptions
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(31,296</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(31,296</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other changes in fair value
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(199</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">57</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">292</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">150</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Fair value on December 31, 2010</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>203,812</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>262</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,245</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>207,319</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Servicing, late, and other ancillary fees recognized within mortgage banking income were $92.1
million, $120.4 million, and $232.6 million for the years ended December 31, 2010, 2009, and 2008,
respectively. Servicing, late, and other ancillary fees recognized within all other income and
commissions were $3.8 million, $12.4 million, and $16.8 million for the years ended December 31,
2010, 2009, and 2008, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The total value of MSR declined $95.3 million during 2010. In 2010, FHN sold the rights to
service $5.4 billion of loans, which resulted in a $24.6 million reduction in MSR attributable to
loan sales. The balance decreased an additional $36.2 million due to loan payments. A decrease
in mortgage rates during the year led to higher assumed prepayment speeds and resulted in a
decrease in value of $31.1 million. In the fourth quarter of 2010, FHN exercised cleanup calls
from proprietary securitization trusts that had previously been securitized with servicing
retained. As these loans are now included on the Consolidated Statements of Condition, FHN
derecognized $1.1 million of associated servicing assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN sold the rights to service $14.2 billion of loans, which resulted in an $87.3 million
reduction in MSR attributable to loan sales. The balance decreased an additional $66.1 million
due to loan payments. An increase in mortgage rates during the year led to a decline in assumed
prepayment speeds and resulted in an increase in value of $67.8 million.
</div>
<!-- Folio -->
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN services a portfolio of mortgage loans related to transfers performed by other parties
utilizing securitization trusts. The servicing assets represent FHN’s sole interest in these
transactions. The total MSR recognized by FHN related to these transactions was $4.2 million and
$7.0 million at December 31, 2010 and 2009, respectively. The aggregate principal balance serviced
by FHN for these transactions was $<b>.</b>7 billion and $.9 billion at December 31, 2010 and 2009,
respectively. FHN has no obligation to provide financial support and has not provided any form of
support to the related trusts. The MSR recognized by FHN has been included in the first lien
mortgage loans column within the rollforward of MSR.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In prior periods FHN transferred MSR to third parties in transactions that did not qualify for
sales treatment due to certain recourse provisions that were included within the sale agreements.
FHN had $27.3 million and $39.7 million of MSR related to these transactions, respectively for the
years ended December 31, 2010 and 2009, respectively. These MSR are included within the first liens mortgage
loans column within the rollforward of MSR. The proceeds from these transfers have been recognized
within other short term borrowings and commercial paper in the Consolidated Statements of Condition
as of December 31, 2010 and 2009.
</div>
<!-- Folio -->
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 7 - us-gaap:GoodwillAndIntangibleAssetsDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 7 — Intangible Assets</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of intangible assets, net of accumulated amortization, included in
the Consolidated Statements of Condition:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Intangible</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Goodwill</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Assets <sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2007
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">192,408</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">56,907</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization expense
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,229</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment <sup style="font-size: 85%; vertical-align: text-top">(b) (c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,034</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Divestitures <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(32</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">470</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">192,408</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">45,082</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization expense
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(6,017</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment <sup style="font-size: 85%; vertical-align: text-top">(b) (c)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,591</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(341</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Divestitures <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,289</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(815</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">347</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">165,528</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">38,256</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization expense
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(5,526</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment <sup style="font-size: 85%; vertical-align: text-top">(b) (c)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>162,180</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>32,881</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Represents customer lists, acquired contracts, premium on purchased deposits, and covenants not to compete.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>See Note 26 — Restructuring, Repositioning, and Efficiency for further details related to goodwill impairments.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>See Note 2 — Acquisitions and Divestitures for further details regarding goodwill related to divestitures.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The gross carrying amount of other intangible assets subject to amortization is $125.8 million on
December 31, 2010, net of $92.9 million of accumulated amortization. Estimated aggregate
amortization expense is expected to be $5.3 million, $4.3 million, $3.9 million, $3.6 million, and
$3.4 million for the twelve-month periods of 2011, 2012, 2013, 2014, and 2015, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2010, FHN recognized $3.3 million of goodwill impairments relating to the exit of FTN ECM
operations. FHN also recognized an addition of other intangible assets of $.2 million related to
the purchase of a book of business.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN’s non-strategic segment incurred pre-tax goodwill impairments of $14.3 million related
to the initial agreement to sell FTN ECM. In connection with the divestiture of the Atlanta insurance
business and FERP, FHN recognized goodwill write-offs of $8.0 million and $2.3 million,
respectively, which are included in Losses on divestitures on the Consolidated Statements of
Income. As a result of the closure of the remaining Atlanta insurance business that was excluded
from the sale, there was an additional goodwill impairment of $2.3 million. FHN also recognized
$.3 million of other intangible impairments related to customer lists, $.8 million of write-offs
related to disposals, and additions of $.3 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, FHN recognized $4.0 million of intangible impairments. The impairments were related to
noncompete agreements associated with the divestiture of certain mortgage banking operations and
the write-off of state banking licenses due to FHN’s focus on the Tennessee-based regional banking
market.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of gross goodwill and accumulated impairment losses and write-offs
detailed by reportable segments included in the Consolidated Statements of Condition through
December 31, 2010. Gross goodwill, accumulated impairments, and accumulated divestiture-related write-offs
were determined beginning on January 1, 2002, when a change in accounting requirements resulted in
goodwill being assessed for impairment rather being amortized.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Regional</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Capital</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Non-Strategic</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Banking</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Markets</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross goodwill
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">171,474</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">333,654</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(84,084</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(84,084</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated divestiture related write-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,162</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,162</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net goodwill balance as of December 31, 2007
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">30,228</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">192,408</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Impairments
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Divestitures
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net change in goodwill during 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross goodwill
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">171,474</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">333,654</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(84,084</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(84,084</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated divestiture related write-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,162</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,162</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net goodwill balance as of December 31, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">30,228</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">192,408</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,591</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,591</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Divestitures
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,289</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,289</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net change in goodwill during 2009
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(26,880</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(26,880</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross goodwill
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">171,474</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">333,654</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(100,675</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(100,675</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated divestiture related write-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(67,451</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(67,451</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net goodwill balance as of December 31, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,348</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">165,528</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Divestitures
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net change in goodwill during 2010
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross goodwill
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">171,474</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">333,654</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(104,023</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(104,023</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated divestiture related write-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(67,451</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(67,451</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>64,759</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>97,421</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>162,180</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:DepositLiabilitiesDisclosuresTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 8 — Time Deposit Maturities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Following is a table of maturities for time deposits outstanding on December 31, 2010, which
include Certificates of deposit under $100,000 and, Other time, and Certificates of deposit
$100,000 and more. Certificates of deposit $100,000 and more totaled $.6 billion on December 31,
2010. Time deposits are included in Interest-bearing deposits on the Consolidated Statements of
Condition.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,140,985</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">280,227</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">169,718</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">211,199</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">77,298</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2016 and after
</div></td>
<td> </td>
<td> </td>
<td align="right">73,318</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,952,745</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:ShortTermDebtTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 9 — Short-Term Borrowings</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Short-term borrowings include federal funds purchased and securities sold under agreements to
repurchase, commercial paper, trading liabilities, and other borrowed funds.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Federal funds purchased and securities sold under agreements to repurchase and commercial paper
generally have maturities of less than 90 days. Trading liabilities, which represent short
positions in securities, are generally held for less than 90 days. Other short-term borrowings
have original maturities of one year or less. On December 31, 2010, capital markets trading
securities with a fair value of $5.7 million were pledged to secure other short-term borrowings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The detail of these borrowings for the years 2010, 2009, and 2008 is presented in the following
table:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Federal Funds</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Purchased and</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Securities Sold</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Under Agreements</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Commercial</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Trading</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Short-term</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">to Repurchase</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Paper</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liabilities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Borrowings</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>2010</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average balance
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,615,536</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>547,377</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>227,772</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Year-end balance
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,114,908</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>361,920</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>180,735</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Maximum month-end outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,046,201</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>654,748</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>693,512</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate for the year
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>.24</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>3.30</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>.56</b></td>
<td nowrap="nowrap"><b>%</b></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate at year-end
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>.22</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3.01</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>.18</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average balance
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">2,486,296</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">159</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">536,161</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,662,830</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Year-end balance
</div></td>
<td> </td>
<td> </td>
<td align="right">2,874,353</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">761,758</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Maximum month-end outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">2,874,353</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">310</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">565,858</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,734,408</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate for the year
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">.21</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">1.57</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.89</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">.29</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate at year-end
</div></td>
<td> </td>
<td> </td>
<td align="right">.17</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">.17</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average balance
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,409,496</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,325</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">702,407</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,136,144</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Year-end balance
</div></td>
<td> </td>
<td> </td>
<td align="right">1,751,079</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,130</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">359,502</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,276,559</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Maximum month-end outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">6,433,001</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,355</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,503,348</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,461,018</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate for the year
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.04</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.79</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.73</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.33</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate at year-end
</div></td>
<td> </td>
<td> </td>
<td align="right">.25</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">.51</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.82</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">.79</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 10 - us-gaap:LongTermDebtTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 10 — Term Borrowings</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents information pertaining to Term Borrowings reported on FHN’s
Consolidated Statements of Condition on December 31:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>First Tennessee Bank National Association:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Subordinated notes <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on January 15, 2015 — 5.05%
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>338,786</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">432,003</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on May 15, 2013 — 4.625%
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>273,590</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">272,120</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on April 1, 2016 — 5.65%
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>287,357</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">277,214</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank notes <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>548,950</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">697,453</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other collateralized borrowings — Matures on December 22, 2037
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">0.60% on December 31, 2010 and 0.55% on December 31, 2009 <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>51,241</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">50,147</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal Home Loan Bank borrowings <sup style="font-size: 85%; vertical-align: text-top">(d)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,870</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,022</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trust preferred debt <sup style="font-size: 85%; vertical-align: text-top">(e)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,500</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>First Horizon National Corporation:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Subordinated capital notes <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on May 15, 2013 — 4.50%
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>109,447</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">108,875</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Senior capital notes <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on December 15, 2015 — 5.375%
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>500,492</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Subordinated notes <sup style="font-size: 85%; vertical-align: text-top">(f)</sup>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on January 6, 2027 — 8.07%
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>109,308</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">109,697</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on April 15, 2034 — 6.30%
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>205,883</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">214,102</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>FT Real Estate Securities Company, Inc.:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cumulative preferred stock <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on March 31, 2031 — 9.50%
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>45,625</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45,557</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>First Horizon ABS Trust:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other collateralized borrowings <sup style="font-size: 85%; vertical-align: text-top">(g)</sup>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on October 25, 2034
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">0.42% on December 31, 2010 and 0.39% on December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>144,811</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">165,107</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on October 26, 2026
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">0.39% on December 31, 2010 and 0.36% on December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>203,203</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">236,226</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on September 25, 2029
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">0.39% on December 31, 2010 and 0.36% on December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>220,836</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">249,110</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on January 25, 2024
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">0.67% on December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>17,854</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on February 25, 2034
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">0.47% on December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>23,109</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on October 25, 2034
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">0.54% on December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>93,651</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures December 2019
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">5.00% on December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>29,741</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Matures on September 1, 2032
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">6.41% on December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>21,316</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,228,070</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,891,133</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Qualifies for total capital under the risk-based capital guidelines.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>The bank notes were issued with variable interest rates and have remaining terms of less than 1
year. These bank notes had weighted average interest rates of 0.43 percent and 0.45 percent on
December 31, 2010 and 2009, respectively.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Secured by $51.2 million of trust preferred loans.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>The Federal Home Loan Bank borrowings were issued with fixed interest rates and have remaining
terms of 1 to 19 years. These borrowings had weighted average interest rates of 2.40 percent and
2.39 percent on December 31, 2010 and 2009, respectively.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(e)</td>
<td> </td>
<td>Trust preferred notes had a weighted average interest rate of 6.04 percent as of December 31,
2009.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(f)</td>
<td> </td>
<td>See Note 11 — Guaranteed Preferred Beneficial Interests in First Horizon’s Junior Subordinated
Debentures for further details.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(g)</td>
<td> </td>
<td>Secured by $757.5 million of retail real estate residential loans. See Note 23 — Loan Sales
and Securitizations for further details.</td>
</tr>
</table>
</div>
<!-- Folio -->
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Annual principal repayment requirements as of December 31, 2010 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">549,104</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">154</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">350,154</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">154</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">804,154</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2016 and after
</div></td>
<td> </td>
<td> </td>
<td align="right">1,414,141</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">All subordinated notes are unsecured and are subordinate to other present and future senior
indebtedness. FTBNA’s subordinated notes and FHN’s subordinated capital notes qualify as Tier 2
capital under the risk-based capital guidelines. In February 2005, FTBNA established a bank note
program providing additional liquidity of $5.0 billion. This bank note program provided FTBNA with
a facility under which it could continuously issue and offer short- and medium-term unsecured
notes. FTBNA has not issued any bank notes under the program in the past three years and has
suspended it in order to save certain costs. If FTBNA were to reactivate the program, certain
program terms might have to be renegotiated with the note agents to reflect current market
practices.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 11 - fhn:GuaranteedPreferredBeneficialInterestsInCompanyJuniorSubordinatedDebenturesTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 11 — Guaranteed Preferred Beneficial Interests in First Horizon’s Junior Subordinated
Debentures</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 30, 1996, FHN, through its underwriter, sold $100 million of capital securities. First
Tennessee Capital I (“Capital I”), a Delaware business trust wholly owned by FHN, issued $100
million of Capital Securities, Series A at 8.07 percent. The proceeds were loaned to FHN as junior
subordinated debt. FHN has, through various contractual arrangements, fully and unconditionally
guaranteed all of Capital I’s obligations with respect to the capital securities. The sole asset
of Capital I was $103 million of junior subordinated debentures issued by FHN. These junior
subordinated debentures also carried an interest rate of 8.07 percent. Both the capital securities
of Capital I and the junior subordinated debentures of FHN have a scheduled maturity of January 6,
2027; however, FHN redeemed the subordinated debentures and the Capital Securities in whole on
January 14, 2011, for a redemption price equal to the liquidation amount plus accrued and unpaid
interest. Prior to notification of redemption in December 2010, the capital securities qualified as
Tier 1 capital. The junior subordinated debentures are included in the Consolidated Statements of
Condition in Term borrowings (see Note 10 — Term Borrowings).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On March 29, 2004, FHN, through its underwriter, sold $200 million of capital securities. First
Tennessee Capital II (“Capital II”), a Delaware business trust wholly owned by FHN, issued $200
million of Capital Securities, Series B at 6.30 percent. The proceeds were loaned to FHN as junior
subordinated debt. FHN has, through various contractual arrangements, fully and unconditionally
guaranteed all of Capital II’s obligations with respect to the capital securities. The sole asset
of Capital II is $206 million of junior subordinated debentures issued by FHN. These junior
subordinated debentures also carry an interest rate of 6.30 percent. Both the capital securities
of Capital II and the junior subordinated debentures of FHN will mature on April 15, 2034; however,
FHN has the option to redeem both prior to maturity. Currently, the capital securities qualify as
Tier 1 capital. Beginning in 2013 Tier 1 capital treatment for these securities will begin phasing
out. The junior subordinated debentures are included in the Consolidated Statements of Condition
in Term borrowings (see Note 10 — Term Borrowings).
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 12 - fhn:PreferredStockAndOtherCapitalTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 12 — Preferred Stock and Other Capital</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>FHN Preferred Stock and Warrant</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On November 14, 2008, FHN issued and sold 866,540 preferred shares of Fixed Rate Cumulative
Perpetual Preferred Stock, Series CPP, along with a Warrant to purchase common stock. The issuance
occurred in connection with, and is governed by, the Treasury Capital Purchase Program (“Capital
Purchase Program”) administered by the U.S. Treasury (“UST”) under the Troubled Asset Relief
Program (“TARP”). In connection with the issuance of the Preferred Shares, FHN also issued a
Warrant, to purchase 12,743,235 common shares with an exercise price of $10.20 per share. The
warrant is immediately exercisable and expires ten years after issuance. As a result of the stock
dividends distributed through January 1, 2011, the Warrant was adjusted to cover 14,842,321 common
shares at a purchase price of $8.757 per share. On December 22, 2010, FHN repurchased all of the
preferred shares and remitted the accrued and unpaid dividends subsequent to offerings of common
equity and debt which raised more than $750 million. As of December 31, 2010, the Warrant remained
outstanding and continues to be held by the UST. The Warrant is presented in permanent equity on
the Consolidated Statements of Condition in the amount of $83.9 million. Upon issuance of the
preferred shares and common stock warrant, the proceeds received were allocated between the common
stock warrant and preferred shares based on their relative fair values. The fair value of the
preferred shares was determined by calculating the present value of expected cash flows using a
9.40 percent discount rate. The discount was being amortized over the initial five-year period
using the constant yield method. Upon redemption of the preferred shares, FHN accelerated the
amortization of the remaining discount which is included in preferred stock dividends on the
Consolidated Statements of Income. The fair value of the Warrant, which was determined using the
Black Scholes Options Pricing Model, assumed redemption prior to the increase in dividend rate on
the five year anniversary. The warrant provides a mechanism for the parties to explore a possible
repurchase by the issuer, and FHN is considering its options. Any such repurchase would be subject
to agreement by both parties as well as regulatory assent. If no repurchase ultimately occurs, UST
has indicated its current intention to dispose of the warrant by other means pursuant to its terms
rather than hold the warrant indefinitely.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Subsidiary Preferred Stock</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On September 14, 2000, FT Real Estate Securities Company, Inc. (“FTRESC”), an indirect
subsidiary of FHN, issued 50 shares of 9.50 percent Cumulative Preferred Stock, Class B (“Class B
Preferred Shares”), with a liquidation preference of $1.0 million per share. An aggregate total of
47 Class B Preferred Shares have been sold privately to nonaffiliates. These securities qualify as
Tier 2 capital and are presented in the Consolidated Statements of Condition as Term borrowings.
FTRESC is a real estate investment trust (“REIT”) established for the purpose of acquiring,
holding, and managing real estate mortgage assets. Dividends on the Class B Preferred Shares are
cumulative and are payable semi-annually.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Class B Preferred Shares are mandatorily redeemable on March 31, 2031, and redeemable at the
discretion of FTRESC in the event that the Class B Preferred Shares cannot be accounted for as Tier
2 regulatory capital or there is more than an insubstantial risk that dividends paid with respect
to the Class B Preferred Shares will not be fully deductible for tax purposes. They are not
subject to any sinking fund and are not convertible into any other securities of FTRESC, FHN or any
of its subsidiaries. The shares are, however, automatically exchanged at the direction of the
Office of the Comptroller of the Currency for preferred stock of FTBNA, having substantially the
same terms as the Class B Preferred Shares in the event FTBNA becomes undercapitalized, insolvent
or in danger of becoming undercapitalized.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">First Horizon Preferred Funding, LLC and First Horizon Preferred Funding II, LLC have each issued
$1.0 million of Class B Preferred Shares. On December 31, 2010, 2009, and 2008, the amount of
Class B Preferred Shares that are perpetual in nature that was recognized as Noncontrolling
interest on the Consolidated Statements of Condition was $.3 million for all periods. The
remaining balance has been eliminated in consolidation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On March 23, 2005, FTBNA issued 300,000 shares of Class A Non-Cumulative Perpetual Preferred Stock
(“Class A Preferred Stock”) with a liquidation preference of $1,000 per share. These securities
qualify as Tier 1 capital. On December 31, 2010, 2009, and 2008, $294.8 million of Class A
Preferred Stock was recognized as Noncontrolling interest on the Consolidated Statements of
Condition for all periods.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Due to the nature of the subsidiary preferred stock issued by First Horizon Preferred Funding, LLC,
First Horizon Preferred Funding II, LLC, and FTBNA, all components of other comprehensive
income/(loss) included in the Consolidated Statements of Equity and income/(loss) from
discontinued operations, net of tax included in the Consolidated Statements of Income have been
attributed solely to FHN as the controlling interest holder. The component of income/(loss) from
continuing operations attributable to FHN as the controlling interest holder is $57.1 million,
$(257.0) million, and $(188.5) million during 2010, 2009, and 2008, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 13 - us-gaap:RegulatoryCapitalRequirementsUnderBankingRegulationsTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 13 </b>— <b>Regulatory Capital</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN is subject to various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators that, if undertaken, could have a direct
material effect on FHN’s financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain derivatives as calculated under
regulatory accounting practices must be met. Capital amounts and classification are also subject
to qualitative judgment by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require FHN to maintain
minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1
capital to average assets (Leverage). Management believes, as of December 31, 2010, that FHN met
all capital adequacy requirements to which it was subject.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The actual capital amounts and ratios of FHN and FTBNA are presented in the table below. In
addition, FTBNA must also calculate its capital ratios after excluding financial subsidiaries as
defined by the Gramm-Leach-Bliley Act of 1999. Based on this calculation, FTBNA’s Total Capital,
Tier 1 Capital, and Leverage ratios were 18.69 percent, 15.03 percent, and 11.95 percent,
respectively, on December 31, 2010, and were 19.64 percent, 15.16 percent, and 12.56 percent,
respectively, on December 31, 2009.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7">First Horizon</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7">First Tennessee Bank</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">National Corporation</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">National Association</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Ratio</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Ratio</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>On December 31, 2010:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,749,586</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.65</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td align="right">$</td>
<td align="right">4,032,289</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">20.26</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">2,812,471</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13.99</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,137,624</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15.76</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td align="right">2,812,471</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10.96</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,137,624</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12.33</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">For Capital Adequacy Purposes:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">1,608,222</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">8.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,592,416</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">8.00</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">804,111</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">796,208</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td align="right">1,026,597</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,018,136</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">To Be Well Capitalized Under Prompt Corrective Action Provisions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,990,520</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">10.00</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,194,312</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">6.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,272,670</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">5.00</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>On December 31, 2009:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">4,691,010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">21.92</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td align="right">$</td>
<td align="right">4,481,786</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">21.16</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">3,507,782</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16.39</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,361,373</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15.87</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td align="right">3,507,782</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13.36</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,361,373</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12.91</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">For Capital Adequacy Purposes:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">1,712,033</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">8.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,694,688</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">8.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">856,016</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">847,344</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td align="right">1,050,104</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,041,090</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">To Be Well Capitalized Under Prompt Corrective Action Provisions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,118,360</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">10.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,271,016</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">6.00</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,301,362</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">5.00</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 14 - us-gaap:OtherIncomeAndOtherExpenseDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 14 — Other Income and Other Expense</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Following
is detail of “All other income and commissions” and
“All other expense” as presented in
the Consolidated Statements of Income:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>All other income and commissions:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank-owned life insurance
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>25,898</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19,744</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25,143</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Bankcard income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>19,761</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,161</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,081</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gains on repurchases of debt
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>17,060</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,412</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,845</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">ATM interchange fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>14,169</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,335</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,224</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other service charges
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>10,442</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,647</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,631</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Electronic banking fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,111</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,020</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,217</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Letter of credit fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>6,493</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,989</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,657</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred compensation <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,673</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,686</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(22,901</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gains/(losses) from loan sales and securitizations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,883</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,545</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,625</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reinsurance fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,310</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,130</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,919</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Remittance processing
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,008</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,765</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,953</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal flood certifications
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,869</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>24,595</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,802</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,533</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>136,403</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">152,236</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">145,546</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>All other expense:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Advertising and public relations
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>23,248</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">22,074</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">32,738</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Low income housing expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>22,229</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,734</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other insurance and taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,817</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,388</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,705</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Travel and entertainment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>10,224</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,547</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,137</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer relations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,079</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,819</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,872</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Employee training and dues
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,821</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,327</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,198</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Supplies
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,656</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,661</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,586</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank examinations costs
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,578</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,884</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,144</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fed service fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,610</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,078</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,053</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Complimentary check expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,405</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,529</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,776</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loan insurance expense <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(686</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">7,811</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,270</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other <sup style="font-size: 85%; vertical-align: text-top">(c)(d)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>23,178</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">79,171</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">51,923</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>116,159</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">184,289</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">174,136</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr style="font-size: 10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(a)</td>
<td width="1%"> </td>
<td>Deferred compensation market value adjustments are mirrored by adjustments to employee compensation, incentives, and benefits expense.
</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(b)</td>
<td width="1%"> </td>
<td>2010 includes cancellation of an HLTV insurance contract and return of $3.8 million of premiums.
</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(c)</td>
<td width="1%"> </td>
<td>Includes a portion of net charges for restructuring, repositioning, and efficiency initiatives (Note 26).
</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(d)</td>
<td width="1%"> </td>
<td>Includes net expense reversals related to Visa litigation matters of $13.0 million, $7.0 million, and $30.0 million in 2010, 2009, and 2008, respectively.
</td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 15 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 15 — Components of Other Comprehensive Income/(loss)</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Following is detail of Accumulated other comprehensive income/(loss) as presented in the
Consolidated Statements of Condition:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Accumulated</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Other</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Before-Tax</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Tax Benefit/</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Comprehensive</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">(Expense)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Income/(Loss)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2007
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">25,675</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(9,638</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(48,101</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized market adjustments on cash flow hedge
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized market adjustments on securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">35,863</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(13,882</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">21,981</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Adjustment for net gains/(losses) included in net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(210</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">81</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(129</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Pension and postretirement plans:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Prior service cost arising during period
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(59</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">22</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(37</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Net actuarial gain/(loss) arising during period
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(208,158</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">80,198</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(127,960</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of prior service cost, transition asset/obligation,
and net actuarial gain/(loss) included in net periodic benefit cost
</div></td>
<td> </td>
<td> </td>
<td align="right">3,913</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,492</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2,421</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">   </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2008
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(168,661</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">64,931</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(151,831</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized market adjustments on securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">34,759</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(12,145</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">22,614</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Pension and postretirement plans:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Prior service cost arising during period
</div></td>
<td> </td>
<td> </td>
<td align="right">17,088</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6,259</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">10,829</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Net actuarial gain/(loss) arising during period <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">6,024</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,483</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">3,541</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of prior service cost, transition asset/obligation,
and net actuarial gain/(loss) included in net periodic benefit cost
</div></td>
<td> </td>
<td> </td>
<td align="right">1,007</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(369</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">638</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">58,878</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(21,256</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(114,209</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized market adjustments on securities available for sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(32,727</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">12,731</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(19,996</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Adjustment for net gains/(losses) included in net income
</div></td>
<td> </td>
<td> </td>
<td align="right">715</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(278</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">437</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Pension and postretirement plans:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Net actuarial gain/(loss) arising during period
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,439</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2,014</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,425</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of prior service cost, transition asset/obligation,
and net actuarial gain/(loss) included in net periodic benefit cost
</div></td>
<td> </td>
<td> </td>
<td align="right">15,121</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,474</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">9,647</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(22,330</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>8,993</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(127,546</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr style="font-size: 10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(a)</td>
<td width="1%"> </td>
<td>Includes a positive, after-tax effect of $18.3 million due to a curtailment. See Note 19 — Savings, Pension, and Other Employee Benefits.
</td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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<!-- Begin Block Tagged Note 16 - us-gaap:IncomeTaxDisclosureTextBlock-->
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 16 — Income Taxes</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The components of income tax expense/(benefit) are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Federal
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(218,898</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(7,593</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">240,273</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">State
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(33,698</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">6,548</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,752</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Federal
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>206,962</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(153,902</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(373,335</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">State
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>26,551</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,998</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(38,095</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(19,083</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(174,945</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(154,405</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The effective tax rates for 2010, 2009, and 2008 were 38.63 percent, 41.60 percent, and 46.95
percent, respectively. Income tax expense differed from the amounts computed by applying the
statutory federal income tax rate to income/(loss) before income taxes because of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal income tax rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">35</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">35</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">35</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax computed at statutory rate
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>17,289</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(147,187</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(115,095</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Increase/(decrease) resulting from:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">State income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(5,585</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,743</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(13,864</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">BOLI — cash surrender value
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(9,671</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,533</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(5,381</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Tax credits
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(23,788</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(22,312</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,064</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Goodwill
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,205</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,672</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,625</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,001</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(19,083</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(174,945</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(154,405</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">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. In order to
support the recognition of the DTA, FHN’s management must believe that the realization of the DTA
is more likely than not.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN evaluates the likelihood of realization of the $200.6 million net DTA based on both positive
and negative evidence available at the time. FHN’s three-year cumulative loss position at December
31, 2010, is significant negative evidence in determining whether the realizability of the DTA is
more likely than not. However, FHN believes that the negative evidence of the three-year cumulative
loss is overcome by sufficient positive evidence that the DTA will ultimately be realized. The
positive evidence includes several different factors. A significant amount of the cumulative
losses occurred in businesses that FHN has exited or is in the process of exiting. FHN has
sufficient carryback position, reversing DTL and potential tax planning strategies to fully
recognize the DTA. In addition, FHN forecasts substantially more taxable income in the
carryforward period, exclusive of tax planning strategies. Additionally, FHN believes that it will
realize the net DTA within a significantly shorter period of time than the twenty year carryforward
period allowed under the tax rules. Based on current analysis, FHN believes that its ability to
realize the recognized $200.6 million net DTA is more likely than not.
</div>
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Temporary differences which gave rise to deferred tax assets and deferred tax liabilities on
December 31, 2010 and 2009, were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Deferred tax assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss reserves
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>163,746</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">410,972</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Employee benefits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>91,864</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">95,061</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Investment in partnerships
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>28,317</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,149</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued expenses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,107</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,060</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>38,769</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,784</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross deferred tax assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>333,803</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">582,026</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Valuation allowance
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred tax assets after valuation allowances
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>333,803</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">582,026</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Deferred tax liabilities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Capitalized mortgage servicing rights
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>39,312</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">58,597</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>17,511</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,892</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal Home Loan Bank stock
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>17,285</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,094</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Investment in debt securities (ASC 320)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>28,882</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">41,335</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other intangible assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>18,585</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,671</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,616</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,515</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Gross deferred tax liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>133,191</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">168,104</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net deferred tax asset
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>200,612</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">413,922</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The total balance of unrecognized tax benefits at December 31, 2010, was $38.4 million. The
rollforward of unrecognized tax benefits follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">31,108</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Increases related to prior year tax positions
</div></td>
<td> </td>
<td> </td>
<td align="right">2,086</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Increases related to current year tax positions
</div></td>
<td> </td>
<td> </td>
<td align="right">500</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Lapse of statute
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,690</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">30,004</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Increases related to prior year tax positions</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>13,725</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Settlements</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(291</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Lapse of statute</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(5,040</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance at December 31, 2010</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>38,398</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 17 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 17 — Earnings per Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables provide a reconciliation of the numerators used in calculating
earnings/(loss) per share attributable to common shareholders:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) from continuing operations
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>68,480</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(245,589</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(174,437</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from discontinued operations, net of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(6,877</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(12,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,534</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net income/(loss)</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>61,603</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(258,435</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(177,971</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to noncontrolling interest
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,402</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,402</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,016</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income/(loss) attributable to controlling interest
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50,201</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(269,837</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(191,987</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred stock dividends
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>107,970</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">59,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,413</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net loss available to common shareholders</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(57,769</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(329,422</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(199,400</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) from continuing operations
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>68,480</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(245,589</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(174,437</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to noncontrolling interest
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,402</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,402</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,016</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred stock dividends
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>107,970</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">59,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,413</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net loss from continuing operations available to common shareholders</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(50,892</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(316,576</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(195,866</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides a reconciliation of weighted average common shares to diluted average
common shares:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands, except per share data)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding — basic <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>235,699</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">234,431</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">206,681</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of dilutive securities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding — diluted <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>235,699</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">234,431</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">206,681</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr style="font-size: 10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%">(a)</td>
<td width="1%"> </td>
<td>
All share data has been restated to reflect stock dividends distributed through January 1,
2011.
</td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Earnings/(loss) per common share:</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss per share from continuing operations available to common shareholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(0.22</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1.35</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(0.95</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss per share from discontinued operations, net of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(.03</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(.06</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(.01</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net loss per share available to common shareholders</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(0.25</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1.41</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(0.96</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Diluted earnings/(loss) per common share:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted loss per share from continuing operations available to common shareholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(0.22</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1.35</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(0.95</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted loss per share from discontinued operations, net of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(.03</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(.06</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(.01</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net diluted loss per share available to common shareholders</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(0.25</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1.41</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(0.96</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Due to the net loss attributable to common shareholders for the twelve months ended December
31, 2010, 2009, and 2008, no potentially dilutive shares were included in the loss per share
calculations as including such shares would have been antidilutive. Stock options of 12.3 million,
15.6 million, and 20.0 million with weighted average exercise prices of $27.04, $27.48, and $28.15
per share for the twelve months ended December 31, 2010, 2009, and 2008, respectively, were not
included in the computation of diluted loss per common share because such shares would have had an
antidilutive effect on earnings per common share. Other equity awards of 3.3 million, 2.8 million,
and .9 million for the twelve months ended December 31, 2010, 2009, and 2008, respectively, and
14.8 million potentially dilutive shares related to the CPP common stock Warrant were excluded from
the computation of diluted loss per common share because such shares would have had an antidilutive
effect on loss per common share. As of December 31, 2010, the underwriter of FHN’s fourth quarter
equity issuance had an option to purchase 1.1 million shares at a discounted exercise price of
$10.03. The dilutive impact of this option would have been immaterial. The option expired on
January 12, 2011 without being exercised.
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 18 — Restrictions, Contingencies, and Other Disclosures</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Restrictions on cash and due from banks. </i></b>Under the Federal Reserve Act and Regulation D,
FHN’s commercial banking subsidiary is required to maintain a certain amount of cash reserves. On
December 31, 2010 and December 31, 2009, FHN’s required reserves were $215.0 million and $200.0
million, respectively. At the end of 2010 and 2009, this requirement was met with $139.8 million
and $142.8 million in vault cash, respectively, and also with Federal Reserve Bank deposits. Vault
cash is reflected in “Cash and due from banks” on the Consolidated Statements of Condition and
Federal Reserve Bank deposits are reflected as “Interest-bearing cash”.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Restrictions on dividends</i></b><b>. </b>Cash dividends are paid by FHN from its assets, which are mainly
provided by dividends from its subsidiaries. Certain regulatory restrictions exist regarding the
ability of FTBNA to transfer funds to FHN in the form of cash, dividends, loans, or advances. As
of December 31, 2010, FTBNA had undivided profits of $1.1 billion, none of which was available for
distribution to FHN as dividends without prior regulatory approval. At any given time, the
pertinent portions of those regulatory restrictions allow FTBNA to declare preferred or common
dividends without prior regulatory approval in an amount equal to FTBNA’s retained net income for
the two most recent completed years plus the current year to date. For any period, FTBNA’s
‘retained net income’ generally is equal to FTBNA’s regulatory net income reduced by the preferred
and common dividends declared by FTBNA. Excess dividends in either of the two most recent
completed years may be offset with available retained net income in the two years immediately
preceding it. Applying the applicable rules, FTBNA’s total amount available for dividends was
negative $542.8 million at December 31, 2010 and negative $468.0 million at January 1, 2011. FHN
applied for and received approval to pay a dividend to the parent company in the amount of $300
million in fourth quarter 2010. The parent company utilized liquidity provided by this dividend,
funds from the debt and equity offerings, and excess liquidity to redeem the TARP preferred shares
in December 2010 and $103 million of subordinated debentures in January 2011. FTBNA has requested
approval from the OCC to declare and pay dividends on its preferred stock outstanding payable in
April 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The payment of cash dividends by FHN and FTBNA may also be affected or limited by other factors,
such as the requirement to maintain adequate capital above regulatory guidelines and debt
covenants. Furthermore, the Federal Reserve and the OCC have issued policy statements generally
requiring insured banks and bank holding companies only to pay dividends 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, FHN issued and sold preferred stock and a common stock warrant under the U.S. Treasury’s
CPP. In fourth quarter 2010, FHN redeemed all preferred shares that were issued under the U.S.
Treasury’s CPP. While the shares were outstanding, FHN was not permitted to increase its
cash common dividend without permission of the Treasury. Prior to the issuance, FHN paid a stock
dividend in lieu of cash dividends.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Restrictions on intercompany transactions. </i></b>Under Federal banking law, banking subsidiaries may not
extend credit to the parent company in excess of 10 percent of the bank’s capital stock and
surplus, as defined, or $422.8 million, on December 31, 2010. The parent company had covered
transactions of $3.5 million from FTBNA on December 31, 2010. In addition, the aggregate amount of
covered transactions with all affiliates, as defined, is limited to 20 percent of the bank’s
capital stock and surplus, or $845.5 million, on December 31, 2010. FTBNA’s total covered
transactions with all affiliates including the parent company on December 31, 2010 were $447.1
million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Contingencies. </i></b>Contingent liabilities arise in the ordinary course of business, including
those related to lawsuits, arbitration, mediation, and other forms of litigation. Various claims
and lawsuits are pending against FHN and its subsidiaries. In view of the inherent difficulty of
predicting the outcome of legal matters, particularly where the claimants seek very large or
indeterminate damages, or where the cases present novel legal theories or involve a large number of
parties, FHN cannot reasonably determine what the eventual outcome of the pending matters will be,
what the timing of the ultimate resolution of these matters may be, or what the eventual loss or
impact related to each pending matter may be. FHN establishes loss contingency reserves for
litigation matters when estimated loss is both probable and reasonably estimable as prescribed by
applicable financial accounting guidance. A reserve is not established when a loss
contingency either is not probable or its amount is not reasonably estimable. If loss for a matter
is probable and a range of possible loss outcomes is the best estimate available, accounting
guidance generally requires a reserve to be established at the low end of the range. Based on
current knowledge, and after consultation with counsel, management is of the opinion that loss
contingencies related to pending matters should not have a material adverse effect on the
consolidated financial condition of FHN, but may be material to FHN’s operating results for any
particular reporting period depending, in part, on the results from that period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At December 31, 2010, based on the foregoing, there were no pending or threatened litigation
matters as to which FHN had determined that material loss was probable or had established a
material loss reserve.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Set out below is a discussion of pending or threatened litigation matters as to which FHN has
determined, under applicable financial accounting guidance, that
although material loss is not probable there is more than a slight chance
of a material loss outcome for FHN. Because of the uncertainty of the potential outcomes of the
legal proceedings associated with these matters, and also due to significant uncertainties
regarding amounts claimed (in cases as to which claims are noted as unspecified), potential
remedies that might be available or awarded (in all cases), the value of assets FHN may be required
to repurchase (for those cases involving asset repurchase demands), and the status of the discovery
process (for those cases where discovery is not substantially complete), FHN cannot determine
probable loss or estimate a range of possible losses at this time that may result from these
matters. In all such matters that involve claims in active litigation, and in those matters not in
litigation where possible allegations can be anticipated, FHN believes it has meritorious defenses
and intends to pursue those defenses vigorously. FHN expects to
reassess the reserve for these matters each quarter as they progress.
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="1%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Manufacturers & Traders Trust Company (“M&T”) has filed an arbitration claim against FTBNA.
The claim arises out of FTBNA’s sale of multiple branch assets to M&T in 2007. The original
demand for arbitration claims that FTBNA violated its obligations to repurchase home equity
lines of credit (“HELOCs”) that it sold to M&T as part of the asset sale agreement. M&T
alleges that the loans either are not in conformity with FTBNA’s representations about them or
are not insured as FTBNA warranted, or both. At this time the claim has become a demand that
FTBNA repurchase certain HELOCs having an original principal balance of $45.5 million. At
December 31, 2010, there were charged-off loans of $8.9 million
for the HELOCs at issue and an unpaid principal balance of $26.8
million.</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="1%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>FTN Financial Securities Corp. (“FTN”) and FTBNA, along with a former executive officer,
Frank J. Gusmus, Jr., and two former employees, have received written “Wells” notices from the
Staff of the United States Securities and Exchange Commission (the “SEC”) stating that the
Staff intends to recommend that the SEC bring enforcement actions for allegedly aiding
and abetting a former FTN customer, Sentinel Management Group, Inc. (“Sentinel”), in violations
of the federal securities laws. The subject of the Wells notices is a 2006 year-end securities
repurchase transaction entered into by FTN with Sentinel. A Wells notice by the SEC Staff is
neither a formal allegation of wrongdoing nor a determination by the SEC that there has been
wrongdoing. A Wells notice generally provides the recipient with an opportunity to provide his,
her, or its perspective to address the Staff’s concerns prior to enforcement action being taken
by the SEC. FHN believes that its subsidiaries and employees complied with all applicable laws
and regulations regarding the transaction. FHN intends to work within the Wells process to try
to resolve this matter. If enforcement actions are brought nonetheless, FHN believes they have
meritorious defenses and they intend to advance those defenses vigorously.</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="1%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>The Chapter 11 Liquidation Trustee (the “Trustee”) of Sentinel has filed two complaints in
the U.S. District Court for the Northern District of Illinois, Eastern Division (Case Nos.
1:08-cv-06587 and 1:09-cv-02258) against FTN and two former FTN employees. The Trustee’s
claims relate to Sentinel’s purchases of Preferred Term Securities Limited (“PreTSL”) products
and other securities from FTN and/or the FTN Financial Capital Markets division of FTBNA from
March 2005 to August 2007. Collectively, the claims alleged in the complaints are: aiding
and abetting breach of fiduciary duty; commercial bribery; federal securities fraud; negligent
misrepresentation; violation of the Illinois Blue Sky Law and the Illinois Consumer Fraud Act;
negligence; unjust enrichment; and avoidance and recovery of
fraudulent transfers. The Trustee seeks, among other things:
compensatory damages of approximately $126
million; unspecified punitive damages; disgorgement of profits, fees and commissions; rescission of securities
purchases; avoidance of allegedly fraudulent transfers; and unspecified interest, costs, and attorney’s fees.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As indicated above, the foregoing matters are those as to
which FHN has determined, under applicable financial accounting guidance, that material loss is
not probable.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following are pending litigation matters as to which directors or senior
executives of FHN are named as defendants in connection with the performance of their duties on behalf of FHN.
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="1%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>A shareholder, Cranston Reid, has filed a putative derivative lawsuit in the U.S. District
Court for the Western District of Tennessee, Western Division (Case No. 2:10cv02413-STA-cgc)
against various former and current officers and directors of FHN. FHN is named as a nominal
defendant, though no relief is sought against it. The complaint alleges the following causes
of action: breach of fiduciary duty, abuse of control, gross mismanagement, and unjust
enrichment. The claimed breach of fiduciary duty and other causes of action stem from a number
of alleged events, including: certain litigation matters, both pending and previously
disposed, unrelated to this plaintiff; certain matters that allegedly could become litigation
matters, unrelated to this plaintiff; a matter that previously had been investigated and
concluded, unrelated to this plaintiff; and an alleged general use of allegedly unlawful and
high-risk banking practices. FHN believes the defendants have meritorious defenses to this
complaint — including that the complaint fails to state any legally cognizable claim — and
intends to advance those defenses vigorously.</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="1%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>A shareholder, Troy Sims, has filed a putative class action lawsuit in the U.S. District Court for the
Western District of Tennessee, Western Division (Case No. 2:08-cv-02293-STA-cgc) against FHN and
various former and current officers and directors of FHN. The complaint alleges causes of action under
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), related to FHN’s
Savings Plan, which is a 401(k) savings plan offered to eligible employees. Specifically, the complaint
alleges that defendants breached fiduciary duties owed to Plan participants by: (i) failure to prudently
and loyally manage the Plan’s investment in First Horizon stock and certain proprietary mutual funds;
(ii) failure to provide accurate information to participants and beneficiaries; (iii) failure to monitor other
Plan fiduciaries; and (iv) breach of co-fiduciary obligations. For these alleged violations, plaintiffs seek
to require defendants to pay Plan participants unspecified damages resulting from the decline in value of
First Horizon stock between January 2006 and July 14, 2008 and associated with participants’
investment in proprietary mutual funds offered by the Plan between May 2002 and January 2006. FHN
believes the defendants have meritorious defenses to this complaint and intends to advance those
defenses vigorously.
</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Visa Matters. </i></b>FHN is a member of the Visa USA network. On October 3, 2007, the Visa organization
of affiliated entities completed a series of global restructuring transactions to combine its
affiliated operating companies, including Visa USA, under a single holding company, Visa Inc.
(“Visa”). Upon completion of the reorganization, the members of the Visa USA network remained
contingently liable for certain Visa litigation matters. Based on its proportionate membership
share of Visa USA, FHN recognized a contingent liability of $55.7 million within noninterest
expense in fourth quarter 2007 related to this contingent obligation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In March 2008, Visa completed its initial public offering (“IPO”). Visa funded an escrow account
from its IPO proceeds to be used to make payments related to the Visa litigation matters. Upon
funding of the escrow, FHN reversed $30.0 million of the contingent liability previously recognized
with a corresponding credit to noninterest expense for its proportionate share of the escrow
account. A portion of FHN’s class B shares of Visa were redeemed as part of the IPO resulting in
$65.9 million of equity securities gains in first quarter 2008.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In October 2008, Visa announced that it had agreed to settle litigation with Discover Financial
Services for $1.9 billion. Of this settlement amount, $1.7 billion was funded from the escrow
account established as part of Visa’s IPO. In connection with this settlement, FHN recognized
additional expense of $11.0 million within noninterest expense in third quarter 2008. In December
2008, Visa deposited additional funds into the escrow account and FHN recognized a corresponding
credit to noninterest expense of $11.0 million for its proportionate share of the amount funded.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In July 2009, Visa deposited an additional $700 million into the escrow account. Accordingly, FHN
reduced its contingent liability by $7.0 million through a credit to noninterest expense.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In May 2010, Visa deposited an additional $500 million into the escrow account and FHN recognized a
corresponding reduction of its contingent liability and a credit to noninterest expense of $5.0
million for its proportionate share of the amount funded. Visa deposited an additional $800
million into the escrow account during October 2010 and FHN reduced its contingent liability by
$8.0 million through an additional credit to noninterest expense. After the partial share
redemption in conjunction with the IPO, FHN held approximately 2.4 million class B shares of Visa.
In December 2010, FHN sold 440,000 of its shares, reducing its holdings to approximately 2.0
million shares. FHN’s Visa shares are included in the Consolidated Statements of Condition at their
historical cost of $0. Conversion of these shares into class A shares of Visa and, with limited
exceptions, transfer of these shares is restricted until the later of the third anniversary of the
IPO or the final resolution of the covered litigation. The final conversion ratio will
fluctuate based on the ultimate settlement of the Visa litigation matters for which FHN has a
proportionate contingent obligation. Future funding of the escrow will dilute this exchange rate
by an amount that is yet to be determined.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In conjunction with the sale of a portion of its Visa class B shares in December 2010, FHN and
the purchaser entered into a derivative transaction whereby FHN will make, or receive, cash
payments whenever the conversion ratio of the Visa class B shares into Visa class A shares is
adjusted. At the time of the sale the current conversion ratio of Visa class B shares to Visa
class A shares was approximately 51
percent. FHN determined that the initial fair value of the
derivative was equal to a pro rata portion of the previously accrued contingent
liability for Visa litigation matters attributable to the 440,000 Visa class B shares sold. This
amount was determined to be a liability of $1.0 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other Disclosures — Company Owned Life Insurance</i></b><b>. </b>FHN has purchased life insurance on certain of
its employees and is the beneficiary on these policies. On December 31, 2010, the cash surrender
value of these policies, which is included in “Other assets” on the Consolidated Statements of
Condition, was $639.6 million. There are restrictions on $36.2 million of the proceeds from these
benefits which relate to certain compensation plans. FHN has not borrowed against the cash
surrender value of these policies.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other Disclosures — Indemnification Agreements and Guarantees. </i></b>In the ordinary course of
business, FHN enters into indemnification agreements for legal proceedings against its directors
and officers and standard representations and warranties for underwriting agreements, merger and
acquisition agreements, loan sales, contractual commitments, and various other business
transactions or arrangements. The extent of FHN’s obligations under these agreements depends upon
the occurrence of future events; therefore, it is not possible to estimate a maximum potential
amount of payouts that could be required with such agreements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN is subject to potential liabilities and losses in relation to loans that it services, and in
relation to loans that it originated and sold. FHN evaluates those potential liabilities and
maintains reserves for potential losses. In addition, FHN has agreements with the purchaser of its
national home loan origination and servicing platforms that create obligations and potential
liabilities.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Servicing. </i>FHN services a predominately first lien mortgage loan portfolio which was $28.8
billion as of December 31, 2010. A substantial portion of the servicing portfolio is serviced through a subservicer. A significant portion of which is held by Fannie Mae (“FNMA”) and private security
holders with less significant portions held by Ginnie Mae (“GNMA”) and Freddie Mac (“FHLMC”). In connection
with its servicing activities, FHN collects and remits the principal and interest payments on the
underlying loans for the account of the appropriate investor. In the event of delinquency or
non-payment on a loan in a private or agency securitization: (1) the terms of the private
securities agreements require FHN, as servicer, to continue to make monthly advances of principal
and interest (“P&I”) to the trustee for the benefit of the investors; and (2) the terms of the
majority of the agency agreements may require the servicer to make advances of P&I, or to
repurchase the delinquent or defaulted loan out of the trust pool. For servicer advances of P&I
under the terms of private and GSE securitizations, FHN can utilize payments of P&I received from
other prepaid loans within a particular loan pool in order to advance P&I to the trustee for the
benefit of the investors. In the event payments are ultimately made by FHN to satisfy this
obligation, P&I advances and servicer advances are recoverable from: (1) the liquidation proceeds
of the property securing the loan, in the case of private securitizations and (2) the proceeds of
the foreclosure sale by the government agency, in the case of government agency-owned loans. As of
December 31, 2010, FHN has recognized servicing advances of $262.5 million. Servicing advances are
included in Other assets on the Consolidated Statements of Condition.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN is also subject to losses in its loan servicing portfolio due to loan foreclosures.
Foreclosure exposure arises from certain government agency agreements which limit the agency’s
repayment guarantees on foreclosed loans, resulting in certain foreclosure costs being borne by
servicers. Foreclosure exposure also includes real estate costs, marketing costs, and costs to
maintain properties, especially during protracted resale periods in geographic areas of the country
negatively impacted by declining home values.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN is also subject to losses due to unreimbursed servicing expenditures made in connection with
the administration of current loss mitigation and loan modification programs. Additionally, FHN is
required to repurchase GNMA loans prior to modification in connection with its modification
program.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other Disclosures — Home Loans Originated and Sold. </i></b>Prior to 2009, as a means to provide
liquidity for its legacy mortgage banking business, FHN originated loans through its legacy
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. Sometimes the loans were sold with full or limited recourse, but much more often
the loans were sold without recourse. For loans sold with recourse, FHN has indemnity and
repurchase exposure if the loans default. For loans sold without recourse, FHN has exposure for
repurchase of loans arising from claims that FHN breached its representations and warranties made
to the purchasers at closing, and exposure for investment rescission or damages arising from claims
that the offering documents under which the loans were securitized were materially deficient.
From 2005 through 2008, FHN originated and sold $69.5 billion of such loans without recourse
to GSEs. Although additional GSE sales occurred in earlier years, a substantial majority of GSE
repurchase requests have come from that period. In addition, from 2000 through 2007, FHN
securitized $47.1 billion of such loans without recourse in proprietary transactions.
Of the amount originally securitized, $37.1 billion relates to securitization trusts that are still
active as approximately 30 securitization trusts have become inactive due
to clean-up calls
exercised by FHN. The exercise of cleanup calls resulted in termination of the Pooling and
Servicing Agreements and reacquisition of the related mortgage loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Loans Sold With Full or Limited Recourse</i>. FHN has sold certain agency mortgage loans with full
recourse under agreements to repurchase the loans upon default. Loans sold with full recourse
generally include mortgage loans sold to investors in the secondary market which are uninsurable
under government guaranteed mortgage loan programs due to issues associated with
underwriting activities, documentation, or other concerns. For mortgage insured single-family
residential loans, in the event of borrower nonperformance, FHN would assume losses to the extent
they exceed the value of the collateral and private mortgage
insurance, Federal Housing Administration (“FHA”)
insurance, or The Veteran’s Administration (“VA”) guaranty. On December 31, 2010 and 2009, the current UPB of single-family residential loans that
were sold on a full recourse basis with servicing retained was $58.4 million and $71.9 million,
respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Loans sold with limited recourse include loans sold under government guaranteed mortgage loan
programs including the Federal Housing Administration and Veterans Administration. FHN continues
to absorb losses due to uncollected interest and foreclosure costs and/or limited risk of credit
losses in the event of foreclosure of the mortgage loan sold. Generally, the amount of recourse
liability in the event of foreclosure is determined based upon the respective government program
and/or the sale or disposal of the foreclosed property collateralizing the mortgage loan. Another
instance of limited recourse is the VA/No bid. In this case, the VA guarantee is limited and FHN
may be required to fund any deficiency in excess of the VA guarantee if the loan goes to
foreclosure. On December 31, 2010 and 2009, the outstanding principal balance of loans sold with
limited recourse arrangements where some portion of the principal is at risk and serviced by FHN
was $3.2 billion and $3.3 billion, respectively. Additionally, on December 31, 2010 and 2009, $.8
billion and $1.0 billion, respectively, of mortgage loans were outstanding which were sold under
limited recourse arrangements where the risk is limited to interest and servicing advances.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The reserve for foreclosure losses for loans sold with full or limited recourse is based upon a
historical progression model using a rolling 12-month average, which predicts the frequency of a
mortgage loan entering foreclosure. In addition, other factors are considered, including
qualitative and quantitative factors (e.g., current economic conditions, past collection
experience, risk characteristics of the current portfolio, and other factors), which are not
defined by historical loss trends or severity of losses.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Loans Sold Without Recourse — GSE Whole Loan Sales. </i>For loans sold without recourse to GSEs, FHN
generally has obligations to either repurchase the loan for the unpaid principal balance or make
the purchaser whole for the economic loss incurred by the purchaser of a loan if it is determined that the loans sold
were in violation of representations or warranties made by FHN at closing.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The estimated probable incurred losses that result from these obligations are derived from loss
severities that are reflective of default and delinquency trends in residential real estate loans
and lower housing prices, which result in fair value marks below par for repurchased loans when the
loans are recorded on FHN’s balance sheet within loans held for sale upon repurchase.
FHN utilizes multiple techniques in assessing the adequacy of its repurchase and foreclosure
reserve for loans sold without recourse for which it has continuing obligations under
representations and warranties. FHN tracks actual repurchase or make-whole losses by GSE, loan
pool, and vintage (year loan was sold), and this historical data is applied to more recent sale
vintages to estimate probable incurred loss content observed within
its vintages of loan
sales. Due to the historical nature of this calculation, as well as the increasing volume of
requests from GSEs, FHN performs additional analyses of repurchase and make-whole obligations.
Management then applies qualitative adjustments to the initial baseline to incorporate known
current trends in repurchase and make-whole requests, loss severity trends, alternative
resolutions, private mortgage insurance (“PMI”) cancellation notices, and rescission rates
(successful resolutions) in the determination of the appropriate reserve level. Currently, FHN
services only $10.9 billion in UPB of the loans sold to GSEs which limits visibility into the
current status (i.e. current UPB, delinquency, refinance activity, etc.) of the loans that were
sold. This presents an additional level of uncertainty in estimating probable incurred loss content
because it is difficult to predict future repurchase requests from GSEs.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Loans Sold Without Recourse — Proprietary Securitizations. </i>Securitized loans generally were sold
indirectly to investors as interests, commonly known as certificates, in trusts or other vehicles.
In most cases, the certificates were tiered into different risk classes, with subordinated classes
exposed to trust losses first and senior classes exposed only after subordinated classes were
exhausted.
Representations and warranties were made to the trustees for the benefit of investors. The
certificates were sold to a variety of investors, including GSEs in some cases, through securities
offerings under a prospectus or other offering documents. Unlike servicing on loans sold to GSEs,
FHN still services substantially all of the loans sold through proprietary securitizations. As of
the end of 2010, the remaining UPB balance in active proprietary securitizations was $14.6 billion.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">Unlike loans sold to GSEs, contractual representations and warranties for proprietary
securitizations do not include general representations regarding the absence of fraud or negligence
in the underwriting or origination of the mortgage loans. Securitization documents typically
provide the investors with a right to request that the trustee investigate and initiate repurchase
of a mortgage loan if FHN breached certain representations and warranties made at the time the
securitization closed and such breach materially and adversely affects the interests of the
investors in such mortgage loan. However, the securitization documents do not require the trustee
to make an investigation into the facts or matters stated in any request or notice unless requested
in writing to do so by the holders of certificates evidencing not less than 25 percent of the
voting rights allocated to each class of certificates. The certificate holders may also be
required to indemnify the trustee for its costs related to investigations made in connection with
repurchase actions. GSEs were among the purchasers of certificates in securitizations. As such,
they are entitled to the benefits of the same representations and warranties as other investors.
However, the GSEs, acting through their conservator under federal law, are permitted to undertake,
independently of other investors, reviews of FHN’s mortgage loan origination and servicing files.
Such reviews are commenced using a subpoena process. If, because of such reviews, the GSEs
determine there has been a breach of a representation or warranty that has had a material and
adverse affect on the interests of the investors in any mortgage loan, the GSEs may seek to cause
the Trustee to enforce a repurchase obligation against FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Also unlike loans sold to GSEs, interests in securitized loans were sold as securities under
prospectuses or other offering documents subject to the disclosure requirements of applicable
federal and state securities laws. As an alternative to pursuing a claim for breach of
representations and warranties through the trustee as mentioned above, investors could pursue a
claim alleging that the prospectus or other disclosure documents were deficient by containing
materially false or misleading information or by omitting material information. Claims for such
disclosure deficiencies typically could be brought under applicable federal or state securities
statutes, and the statutory remedies typically could include rescission of the investment or
monetary damages measured in relation to the original investment made. If a plaintiff properly made
and proved its allegations, the plaintiff might attempt to claim that damages could include loss of
market value on the investment even if there were little or no credit loss in the underlying loans.
Claims based on alleged disclosure deficiencies also could be brought as traditional fraud or
negligence claims with a wider scope of damages possible. Each investor could bring such a claim
individually, without acting through the trustee to pursue a claim for breach of representations
and warranties, and investors could attempt joint claims or attempt to pursue claims on a
class-action basis. Claims of this sort are likely to be resolved in a litigation context in most
cases, unlike most of the GSE repurchase requests. The analysis of loss content and establishment
of appropriate reserves in those cases would follow principles and practices associated with
litigation matters, including an analysis of available procedural and substantive defenses in each
particular case and an estimation of the probability of ultimate loss, if any. FHN expects most
litigation claims to take much longer to resolve than repurchase requests typically have taken.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For loans sold in proprietary securitizations, FHN has exposure for repurchase of loans arising
from claims that FHN breached its representations and warranties made at closing, and exposure for
investment rescission or damages arising from claims by investors that the offering documents under
which the loans were securitized were materially deficient. As of December 31, 2010, the repurchase
request pipeline contained no repurchase requests related to securitized loans based on
representations and warranties.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">None of FHN’s proprietary first lien securitizations involved the use of monoline insurance for the
benefit of all classes of security holders. Monoline insurance is a form of credit enhancement
provided to a securitization by a third party insurer. Subject to the terms and conditions of the
policy, the insurer guarantees payments of accrued interest and principal due to the investors. In
certain limited situations, insurance was provided for a specific senior retail class of holders
within individual securitizations. The aggregate insured certificates totaled $128.4 million of
original certificate balance. FHN’s exercise of cleanup calls described above contained some of
these insured certificates; therefore, the original certificate balance of insured certificates
related to active securitization trusts was $103.4 million as of the end of 2010. The trustee
statement dated December 25, 2010, reported to FHN that the remaining outstanding certificate
balance for these classes was $98.8 million. FHN understands that some monoline insurers have
commenced lawsuits against others in the industry seeking to rescind policies of this sort due to
alleged misrepresentations as to the quality of the loan portfolio insured. FHN has not received
notice of a lawsuit from the monoline insurers of the senior retail level classes.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN, among others, has been subpoenaed by the FHFA, Conservator for Fannie Mae and Freddie
Mac, related to investments made by the two GSEs in six proprietary securitizations issued in 2005
and early 2006. The subpoenas relate to ongoing reviews which may result in claims against FHN.
The original and current (as of the December 25, 2010, trust statements) combined certificate
balances related to Fannie Mae investments were $443.2 million and $189.4 million, respectively.
The original and current (as of the December 25, 2010, trust statements) combined certificate
balances related to Freddie Mac investments were $842.0 million and $391.8 million, respectively.
Since the reviews at this time are neither repurchase claims nor litigation, the associated loans
are not considered part of the repurchase pipeline. As of December 31, 2010 and at the time this
report was filed, FHN is unable to determine a probable loss or estimate a range of possible loss
due to the uncertainty related to these matters. No reserve has been established.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">At the time this report is filed, FHN is one of many defendants in lawsuits by three investors in
securitizations which claim that the offering documents under which certificates were sold to them
were materially deficient. Although these suits are in very early stages, FHN intends to defend
itself vigorously. These lawsuit matters have been analyzed and treated as litigation matters under
applicable accounting standards. As of December 31, 2010, and at the time this report was filed,
FHN is unable to determine a probable loss or estimate a range of loss due to the uncertainty
related to these matters. No reserve has been established. Similar claims may be
pursued by other investors.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At December 31, 2010, FHN had not reserved for exposure for repurchase of loans arising from claims
that FHN breached its representations and warranties made in securitizations at closing, nor for
exposure for investment rescission or damages arising from claims by investors that the offering
documents under which the loans were securitized were materially deficient.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Other Proprietary Securitizations. </i>FHN also originated and sold seven second lien proprietary
securitization trusts, including six HELOC securitizations and a closed-end second lien
securitization. The trusts issued notes backed by the loans and publicly offered the asset-backed
notes to investors pursuant to a prospectus. FHN services all of the
loans backing the notes in these
proprietary securitizations pursuant to the terms of the sale and servicing agreements. The trust
statement dated December 25, 2010, reported that the cumulative original and current outstanding
note balances of the HELOC securitizations are $2.5 billion and $.7 billion, respectively. The
original and current outstanding balance of the closed-end second lien securitization was $236.3
million and $29.7 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">These securitization trusts have been consolidated; consequently, these loans and the associated
credit risk are reflected in FHN’s consolidated financial statements. As of December 31, 2010, the
loans and associated ALLL are reflected as “restricted” on the Consolidated Statements of
Condition.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The asset-backed notes issued in the HELOC securitizations were “wrapped” by monoline insurers. FHN
understands that some monoline insurers have commenced lawsuits against other originators of
asset-backed securities seeking to cancel policies of this sort due to alleged misrepresentations
as to the quality of the loan portfolio insured. FHN has not received notice from a monoline
insurer of any such lawsuit. The monoline insurers also have certain contractual rights to pursue
repurchase and indemnification. On January 4, 2011, the monoline insurer of two of FHN’s HELOC
securitizations demanded to review the performance of these HELOC securitizations and, with respect
to charged off loans, to review loan origination and servicing files, underwriting guidelines and
payment histories. The demands were made pursuant to the terms of the applicable insurance and
indemnity and sale and servicing agreements. No repurchase or indemnification claims related to the
HELOCs have been made as of the date of this report. Advances made by monoline insurers for the
benefit of security holders have been recognized within restricted term borrowings in the
Consolidated Statements of Condition.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Loans Sold Without Recourse — Other Whole Loan Sales</i>. FHN originated through its former national
retail and wholesale channels and subsequently sold HELOC and second lien mortgages through whole
loan sales. These loans were underwritten to the guidelines of that channel as either combination
transactions with first lien mortgages or stand alone transactions. The whole loan sales were
generally done on a servicing retained basis and contained representations and warranties customary
to such loan sales and servicing agreements in the industry with specific reference to seller’s
underwriting and servicing guidelines. Loans were subject to repurchase in the event of early
payment defaults and for breaches of representations and warranties. In 2009, FHN settled a
substantial portion of its repurchase obligations for these loans through an agreement with the
primary purchaser of HELOC and second lien loans. This settlement included the transfer of retained
servicing rights associated with the applicable second lien and HELOC loan sales. FHN does not
guarantee the receipt of the scheduled principal and interest payments on the underlying loans but
does have an obligation to repurchase the loans excluded from the above settlement for which there
is a breach of representations and warranties provided to the buyers. The remaining repurchase
reserve for these loans is minimal, reflecting the settlement discussed above.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has also sold first lien mortgages without recourse through whole loan sales to non-GSE
purchasers. As of December 31, 2010, seven percent of repurchase/make-whole claims relate to private
whole loan sales. These claims are included in FHN’s liability methodology and the assessment of
the adequacy of the repurchase and foreclosure liability.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Private Mortgage Insurance. </i>PMI was required by GSE rules for certain of the loans sold to GSEs
and was also provided for certain of the loans that were securitized. PMI generally was provided
for the first lien loans having a loan-to-value ratio at origination of greater than 80 percent
that were sold to GSEs or securitized. Although unresolved PMI cancellation notices are not formal
repurchase requests, FHN includes these in the active repurchase request pipeline when analyzing
and estimating loss content in relation to the loans sold to GSEs. For purposes of estimating loss
content, FHN also considers reviewed PMI cancellation notices where coverage has been cancelled for
all
loan sales and securitizations. In determining adequacy of the repurchase reserve, FHN
considered $124.3 million in UPB of loans sold
where PMI coverage was cancelled for all loan sales and securitizations. To date, a majority of
PMI cancellation notices have involved loans sold to GSEs. At December 31, 2010, all estimated
loss content arising from PMI cancellation matters related to loans sold to GSEs.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Repurchase Obligations Related to Branch Sale</i>. FHN also sold loans as part of branch sales
that were executed during 2007 as part of a strategic decision to exit businesses in markets FHN
considered non-strategic. Unlike the loans sold to GSEs or sold privately as discussed above, these
loans were originated to be held to maturity as part of the loan portfolio. FHN has received
repurchase requests related to HELOC from one of the purchasers of these branches. These HELOC are
not included in the repurchase pipeline. Additional information concerning this matter is presented
in this Note above under the caption “Contingencies.”
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Repurchase and Foreclosure Liability</i>. Based on its experience to date, FHN has evaluated its loan
repurchase exposure as mentioned above and has accrued for losses of $185.4 million and $108.5
million as of December 31, 2010 and 2009, respectively. A vast majority of this liability relates
to obligations associated with the sale of first lien mortgages to GSEs through the legacy mortgage
banking business. Accrued liabilities for FHN’s estimate of these obligations are reflected in
Other liabilities on the Consolidated Statements of Condition. Charges to increase the repurchase
and foreclosure liability are included within Repurchase and foreclosure provision on the
Consolidated Statements of Income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other Disclosures — Foreclosure Practices. </i></b>The current focus on foreclosure practices of financial
institutions nationwide could impact FHN through increased operational and legal costs and could
have compliance and reputational impacts. FHN owns and services residential loans. In addition,
FHN’s national mortgage and servicing platforms were sold in August 2008 and the related servicing
activities, including foreclosure proceedings, of the still-owned portion of FHN’s mortgage
servicing portfolio is outsourced through a subservicing arrangement with the platform buyer. FHN
has reviewed its processes relating to foreclosure on loans it owns and services, and has
instructed its subservicer to undertake a similar review. FHN’s review of its foreclosure processes
has been completed and no material issues were identified. The subservicer reported that it had
completed an internal review of its foreclosure processes in the fourth quarter and identified
certain states in which foreclosure practices are in the process of being modified or are pending
further review by subservicer’s legal counsel. If compliance issues are discovered with respect to
the subservicer, under the subservicing agreement FHN may be financially responsible in some cases,
and the subservicer may be in others. FHN cannot predict the amount of operating costs, costs for
foreclosure delays (including costs connected with servicing advances), legal expenses, or other
costs (including title company indemnification) that may be incurred as a result of the internal
reviews or external actions. Accordingly, FHN is unable to determine a probable loss or estimate a
range of possible loss due to uncertainty related to these matters. No reserve has been
established.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other Disclosures — Reinsurance Arrangements. </i></b>A wholly-owned subsidiary of FHN entered into
agreements with several providers of private mortgage insurance whereby the subsidiary agreed to
accept insurance risk for specified loss corridors for pools of loans originated in each contract
year in exchange for a portion of the private mortgage insurance premiums paid by borrowers (i.e.,
reinsurance arrangements). The loss corridors vary for each primary insurer for each contract
year. The estimation of FHN’s exposure to losses under these arrangements involves the
determination of FHN’s maximum loss exposure by applying the low and high ends of the loss corridor
range to a fixed amount that is specified in each contract. FHN then performs an estimation of
total loss content within each insured pool of loans to determine the degree to which its loss
corridor has been penetrated. Management obtains the assistance of a third party actuarial firm in
developing its estimation of loss content. This process includes consideration of factors such as
delinquency trends, default rates, and housing prices which are used to estimate both the frequency
and severity of losses. By the end of second quarter 2009, substantially all of FHN’s reinsurance
corridors had been fully reflected within its reinsurance reserve for the 2005 through 2008 loan
vintages. No new reinsurance arrangements have been initiated after 2008.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009 and 2010, FHN agreed to settle certain of its reinsurance obligations with primary insurers
through termination of the related reinsurance agreement, which resulted in a decrease in the
reserve balance totaling $48.7 million and the transfer of the associated trust assets. As of
December 31, 2010, FHN has accrued $11.2 million for its estimated liability under the remaining
reinsurance arrangement. The accrued liability is reflected in Other liabilities on the
Consolidated Statements of Condition. In accordance with the terms of the contracts with the
primary insurers, as of December 31, 2010, FHN has placed $5.5 million of prior premium collections
in trust for payment of claims arising under the reinsurance arrangement.
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<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other Disclosures — 2008 Sale of National Origination and Servicing Platforms. </i></b>In conjunction
with the sale of its servicing platform in August 2008, FHN entered into a three year subservicing
arrangement with the purchaser for the unsold portion of FHN’s servicing portfolio. As part of the
subservicing agreement, FHN has agreed to a make-whole arrangement whereby if the number of loans
subserviced by the purchaser falls below specified levels and the direct servicing cost per loan is
greater than a specified amount (determined using loans serviced on behalf of both FHN and the
purchaser), FHN will make a payment according to a contractually specified formula. The make-whole
payment is subject to a cap, which is $15.0 million if triggered during the eight quarters
following the first anniversary of the divestiture. As part of the 2008 transaction, FHN
recognized a contingent liability of $1.2 million representing the estimated fair value of its
performance obligation under the make-whole arrangement.
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 19 — Pension, Savings, and Other Employee Benefits</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Pension plan. </i></b>FHN sponsors a noncontributory, qualified defined benefit pension plan to
employees hired or re-hired on or before September 1, 2007, excluding certain employees of FHN’s
insurance subsidiaries. Pension benefits are based on years of service, average compensation near
retirement, and estimated social security benefits at age 65. The contributions are based upon
actuarially determined amounts necessary to fund the total benefit obligation. FHN did not make
any contributions to the qualified pension plan in 2010. Future decisions will be based upon
pension funding requirements under the Pension Protection Act, the maximum deductible under the
Internal Revenue Code, and the actual performance of plan assets. At this time, FHN
does not expect to make a contribution to the qualified pension plan in 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN also maintains non-qualified plans including a supplemental retirement plan that covers certain
employees whose benefits under the pension plan have been limited. These other non-qualified
pension plans are unfunded, and contributions to these plans cover all benefits paid under the
non-qualified plans. Contributions to non-qualified plans were $4.5 million for 2010 and $6.7
million for 2009. FHN anticipates making a $5.1 million contribution in 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN’s Board of Directors determined that the accrual of benefits under the qualified
pension plan and the supplemental retirement plan would cease as of December 31, 2012. After that
date, employees currently in the pension plan, and those currently in the Employee Non-voluntary
Elective Contribution (“ENEC”) program, will be able to participate in the FHN savings plan with a
profit sharing feature and an increased company match rate. After that time, pension status will
not affect a person’s ability to participate in any savings plan feature.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Savings plan. </i></b>FHN has a qualified defined contribution plan that covers substantially all
employees. Under this plan, employees can invest their money in any of the available investment
funds and receive a company match of $.50 for each $1.00 invested up to 6 percent of pre-tax
contributions made by the employee, subject to Code limitations. The company match contribution
initially is invested in company stock. The savings plan also allows employees to invest in a
non-leveraged employee stock ownership plan (“ESOP”). Cash dividends on shares held by the ESOP
are charged to retained earnings and the shares are considered outstanding in computing earnings
per share. The number of allocated shares held by the ESOP totaled 11,538,466 on December 31,
2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN also provides “flexible dollars” to assist employees with the cost of annual benefits and/or
allows the employee to contribute to his or her qualified savings plan. These “flexible dollars”
are pre-tax contributions and are based upon the employees’ years of service and qualified
compensation. Contributions made by FHN through the flexible benefits plan and the company matches
were $18.3 million for 2010, $18.3 million for 2009, and $27.2 million for 2008.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, the ENEC program was added under the FHN savings plan and is provided
only to employees who are not eligible for the pension plan. With the ENEC program, FHN will
generally make contributions to eligible employees’ savings plan accounts based upon company
performance. Contribution amounts will be a percentage of each employee’s base salary (as defined
in the savings plan) earned the prior year. FHN contributed $1.2 million for the plan in 2010
related to the 2009 plan year, and FHN expects to contribute $1.3 million for the plan in 2011
related to the 2010 plan year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other employee benefits. </i></b>FHN provides postretirement life insurance benefits to certain employees
and also provides postretirement medical insurance to retirement-eligible employees. The
postretirement medical plan is contributory with retiree contributions adjusted annually and is
based on criteria that are a combination of the employee’s age and years of service. For any
employee retiring on or after January 1, 1995, FHN contributes a fixed amount based on years of
service and age at the time of retirement. FHN’s postretirement benefits include prescription drug
benefits. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“the Act”)
introduced a prescription drug benefit under Medicare Part D as well as a federal subsidy to
sponsors of retiree health care that provide a benefit that is actuarially equivalent to Medicare
Part D. FHN currently anticipates receiving a prescription drug subsidy under the Act through
2015.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Actuarial assumptions. </i></b>FHN’s process for developing the long-term expected rate of return of
pension plan assets is based on two primary sources of investment portfolio returns: capital
market exposure and active management benefit. Capital market exposure refers to the Plan’s broad
allocation of its assets to asset classes, such as Large Cap Equity and Fixed Income. Active
management refers to hiring investment managers to select individual securities that are expected
to outperform the market. Active management provides only a small measure of the plan’s overall
return. FHN also considers expectations for inflation, real interest rates, and various risk
premiums based primarily on the historical risk premium for each asset class. The expected return
is based upon a twenty year time horizon. Consequently, FHN selected an 8.00 percent assumption for 2011 for the defined benefit pension
plan and 5.20 percent assumption for postretirement medical plan assets dedicated to employees who
retired prior to January 1, 1993. Given the long term nature of these investments, current market
conditions do not significantly affect the expected return.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The discount rates for the three years ended 2010 for pension and other benefits were determined by
using a hypothetical AA yield curve represented by a series of annualized individual discount rates
from one-half to thirty years. The discount rates are selected based upon data specific to FHN’s
plan and employee population. The bonds used to create the hypothetical yield curve were subjected
to several requirements to ensure that the resulting rates were representative of the bonds that
would be selected by management to fulfill the company’s funding obligations. In addition to the
AA rating, only non-callable bonds were included. Each bond issue was required to have at least
$150 million par outstanding so that each issue was sufficiently marketable. Finally, bonds more
than two standard deviations from the average yield were removed. When selecting the discount
rate, FHN matches the duration of high quality bonds with the duration of the obligations of the
plan as of the measurement date. High quality corporate bonds experienced declining yields in 2010
resulting in a discount rate lower than 2009 and therefore, higher pension plan liabilities. For
all years presented, the measurement date of the benefit obligations and net periodic benefit costs
was December 31.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The actuarial assumptions used in the defined benefit pension plan and the other employee benefit
plans were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Benefit Obligations</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Net Periodic Benefit Cost</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Discount rate</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Qualified pension
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.70</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.05</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.85</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>6.05</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.85</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.00</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Nonqualified pension
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.10</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.55</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.90</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.55</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.90</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.70</td>
<td nowrap="nowrap"></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other nonqualified pension
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>4.75</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.35</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.95</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.35</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.95</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.83</td>
<td nowrap="nowrap"></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Postretirement benefit
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.25</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.65</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.90</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.65</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.90</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.60</td>
<td nowrap="nowrap"></td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Expected long-term rate of return</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Qualified
pension/postretirement
benefits
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>8.00</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.05</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.42</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>8.05</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.42</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.87</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Postretirement benefit
(retirees prior to
January 1, 1993)
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.20</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.23</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.47</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.23</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.47</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.77</td>
<td nowrap="nowrap"></td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Rate of compensation increase</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>4.10</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.10</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.10</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>4.10</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.10</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.10</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The assumed health care cost trend rates used in the other employee benefit plan was as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Assumed health care cost trend rates</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Participants</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Participants 65</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Participants</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Participants 65</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>on December 31</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>under age 65</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>years and older</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">under age 65</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">years and older</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="15" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Health care cost trend rate assumed for next year
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>8.50</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>8.50</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.00</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">9.00</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Rate to which the cost trend rate is assumed to decline
(the ultimate trend rate)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5.00</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>5.00</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Year that the rate reaches the ultimate trend rate
</div></td>
<td> </td>
<td> </td>
<td align="right">2017</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2017</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2014</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2018</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The health care cost trend rate assumption has a significant effect on the amounts reported.
A one-percentage-point change in assumed health care cost trend rates would have the following
effects:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1% Increase</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1% Decrease</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjusted total service and interest cost components
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,160</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,096</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjusted postretirement benefit obligation at end of plan year
</div></td>
<td> </td>
<td> </td>
<td align="right">15,721</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,612</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The components of net periodic benefit cost for the plan years 2010, 2009, and 2008 are as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Components of net periodic benefit cost</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Service cost
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>15,225</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,167</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,809</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>515</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">971</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">276</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>31,441</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31,766</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,516</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,277</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,194</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,339</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected return on plan assets
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(47,534</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(46,327</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(46,938</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,161</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,133</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,749</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of unrecognized:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Transition (asset)/obligation
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>987</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">987</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">988</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Prior service cost/(credit)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>419</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">758</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">864</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(8</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">1,437</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(176</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Actuarial (gain)/loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>14,771</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,262</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,417</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,048</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(836</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(368</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net periodic benefit cost</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>14,322</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">8,626</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,668</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,562</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,620</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,310</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px" ><b>ASC 715 curtailment/settlement expense </b><sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,867</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,269</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total ASC 715 expense</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>14,322</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">11,493</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,937</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,562</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,620</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,310</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr style="font-size:6pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>2009 includes curtailment expense reflecting management’s decision to cease benefit accruals as
of December 31, 2012.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The long-term expected rate of return is applied to the market-related value of plan assets in
determining the expected return on plan assets. FHN determines the market-related value of plan
assets using a calculated value that recognizes changes in the fair value of plan assets over five
years, as permitted by GAAP.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN utilizes the minimum amortization method in determining the amount of actuarial gains or losses
to include in plan expense. Under this approach, the net deferred actuarial gain or loss that
exceeds a threshold is amortized over the average remaining service period of active plan
participants. The threshold is measured as the greater of: 10 percent of a plan’s projected
benefit obligation as of the beginning of the year or 10 percent of the market-related value of
plan assets as of the beginning of the year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, lump sum payments from a non-qualified plan triggered settlement accounting. In
accordance with its practice, FHN performed a remeasurement of the plan in conjunction with the
settlement and recognized the ASC 715 settlement expense reflected above.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables set forth the plans’ benefit obligations and plan assets for 2010 and
2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Change in Benefit Obligation</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Benefit obligation, beginning of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>533,475</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">472,074</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>41,726</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">35,762</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Benefit obligation, adjustment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,133</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Service cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>15,225</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,167</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>515</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">971</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>31,441</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31,766</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,277</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,194</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Plan amendments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(17,088</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Actuarial (gain)/loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>30,576</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">64,032</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,716</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,082</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual benefits paid
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(21,002</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,778</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,868</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,532</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Liability (gain)/loss due to curtailment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(28,844</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected Medicare Part D reimbursement
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>340</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">368</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Special termination benefits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Benefit obligation, end of year</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>589,715</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">533,475</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>41,274</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">41,726</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Change in Plan Assets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of plan assets, beginning of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>496,330</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">378,519</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>15,923</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,605</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual return on plan assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>70,172</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">83,272</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,820</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,240</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Employer contributions
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,116</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">54,317</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>398</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">610</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual benefits paid — settlement payments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(18,387</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,868</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,532</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual benefits paid — other payments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(21,002</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,391</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Fair value of plan assets, end of year</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>549,616</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">496,330</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,273</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,923</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Funded status of the plan </b><sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(40,099</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(37,145</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(25,001</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(25,803</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Additional Amounts Recognized in the
Statements of Financial Condition</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>12,247</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,525</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,136</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(52,346</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(51,670</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(26,137</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(25,803</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net asset/(liability) at end of year</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(40,099</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(37,145</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(25,001</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(25,803</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr style="font-size:6pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>The qualified pension plan is over funded by $12.2 million, which is offset by non-qualifed
pension plan liabilities of $52.3 million.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN determined that a previously existing retiree life insurance benefit met the
requirements for reporting under ASC 715. A liability for these benefits was not previously
recorded as the premiums were expensed over the insurance period. A $10.7 million adjustment to
recognize the cumulative impact of establishing the employee benefit liability is not included in
the 2009 net periodic benefit cost. The recognition of this liability of $23.1 million is
presented as an adjustment in the reconciliation of the benefit obligation for other benefits in
2009. In third quarter 2009, FHN modified post-retirement benefits payable to active employees
under this plan. As a result of this change, FHN recognized a reduction in its benefit liability
of $17.1 million with an offset, net of tax, to accumulated other comprehensive income. This
change is reflected as a plan amendment in the reconciliation of the benefit obligation for other
benefits in 2009.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">ASC 715-60 requires that a liability be recognized for contracts written to employees which
provide future postretirement benefits that are covered by endorsement split-dollar life insurance
arrangements because such obligations are not considered to be effectively settled
upon entering into the related insurance arrangements. FHN recognized a decrease to undivided
profits of $8.5 million, net of tax, upon adoption of ASC 715-60.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The accumulated benefit obligation for the pension plan was $575.2 million as of December 31, 2010,
and $509.8 million as of December 31, 2009. At December 31, 2010, both the projected benefit
obligation and the accumulated benefit obligation for the qualified pension plan was less than the
fair market value of plan assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Unrecognized transition assets and obligations, unrecognized actuarial gains and losses, and
unrecognized prior service costs and credits are recognized as a component of accumulated other
comprehensive income. Balances reflected in accumulated other comprehensive income on a pre-tax
basis for the years ended December 31, 2010 and 2009 consist of:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td style="border-bottom:0px solid #000000"> </td>
<td style="border-bottom:0px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Amounts Recognized in Accumulated Other
Comprehensive Income</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net transition (asset)/obligation
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,725</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,714</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Prior service cost/(credit)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,095</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,484</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>621</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">613</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net actuarial (gain)/loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>289,016</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">296,879</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(13,111</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(11,786</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>291,111</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">298,363</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(10,765</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(8,459</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The amounts recognized in other comprehensive income during 2010 and 2009 were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Changes in plan assets and benefit obligation
recognized in other comprehensive income</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net actuarial (gain)/loss arising during measurement period <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,814</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1,812</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(2,375</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(3,934</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Prior service cost arising during measurement period
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(17,088</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Items amortized during the measurement period:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net transition (asset)/obligation
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(987</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(987</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Prior service (credit)/cost
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(419</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,567</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>8</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,549</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net actuarial (gain)/loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(14,771</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,262</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>1,048</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,018</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total recognized in other comprehensive income</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(7,376</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(13,641</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(2,306</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(10,478</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr style="font-size:6pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>2009 includes a positive, after-tax effect of $18.3 million due to a curtailment.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The estimated net actuarial (gain)/loss, prior service cost/(credit), and transition
(asset)/obligation for the plan that will be amortized from accumulated other comprehensive income
into net periodic benefit cost during 2010 and 2009 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net transition obligation
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>986</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">987</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Prior service cost/(credit)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>417</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(9</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net actuarial (gain)/loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>20,107</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,086</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,039</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(862</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN does not expect any defined benefit pension plan’s and other employee benefit plan’s assets to
be returned to FHN in 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides detail on expected benefit payments, which reflect expected future
service, as appropriate, and projected Medicare reimbursements:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Pension</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Medicare</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Reimbursements</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">22,464</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,225</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">388</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">24,791</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,330</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">436</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">27,279</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,428</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">478</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">29,176</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,519</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">527</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">31,375</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,608</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">570</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2016 – 2020
</div></td>
<td> </td>
<td> </td>
<td align="right">189,196</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,170</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Plan assets. </i></b>FHN’s overall investment goal is to create, over the life of the pension plan and
retiree medical plan, respectively, an adequate pool of sufficiently liquid assets to support the
pension benefit obligations to participants, retirees, and beneficiaries, as well as to partially
support the medical obligations to retirees and beneficiaries. Thus, the pension plan and retiree
medical plan seek to achieve a high level of investment return consistent with a prudent level of
portfolio risk.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During 2010, FHN adopted a dynamic investment strategy for the management of its pension assets.
The strategy will lead to a reduction in equities and an increase in long duration fixed income
allocations over time with the intention of reducing volatility of funded status and pension costs.
At December 31, 2010, the target allocation to equities was 57.5 percent and the target allocation
to fixed income and cash equivalents was 42.5 percent. Equity securities, some of which are
included in common and collective funds, primarily include investments in large capital and small
capital companies located in the U.S., as well as international equity securities in developed and
emerging markets. Fixed income securities include U.S. Treasuries, corporate bonds of companies
from diversified industries, mortgage backed securities, and foreign bonds. Fixed income
investments generally have long durations consistent with the pension liabilities of FHN. Retiree
medical funds are kept in short-term investments, primarily money market funds. On December 31,
2010, FHN did not have any significant concentrations of risk within the plan assets related to the
pension plan or the retiree medical plan.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of FHN’s pension plan assets at December 31, 2010, by asset category classified
using the Fair Value measurement hierarchy is shown in the table below. See Note 22 — Fair Value
of Assets and Liabilities for more details about Fair Value measurements.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 1</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 2</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 3</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash equivalents and money market funds
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">6,064</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">6,064</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. small capital
</div></td>
<td> </td>
<td> </td>
<td align="right">94,885</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">94,885</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Mutual funds <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">1,226</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,226</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fixed income securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">656</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">656</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and foreign bonds
</div></td>
<td> </td>
<td> </td>
<td align="right">111,879</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">111,879</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Common and collective funds:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and foreign bonds
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">119,315</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">119,315</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. large capital
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">139,455</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">139,455</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">International
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">76,137</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">76,137</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">214,054</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">335,563</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">549,617</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Primarily includes investments in small-cap equity securities.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Any shortfall of investment performance compared to investment objectives should be
explainable in terms of general economic and capital market conditions. The Retirement Investment
Committee, comprised of senior managers within the organization, meets monthly to review asset
performance and the need for rebalancing. At a minimum, rebalancing occurs annually for the
purpose of remaining within the established target asset allocation ranges and to maintain
liquidity for benefit payments. Risk management is also reviewed and evaluated based upon the
organization’s ability to assume investment risk.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of FHN’s retiree medical plan assets at December 31, 2010, by asset category are as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 1</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 2</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 3</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash equivalents and money market funds
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">288</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">288</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. large capital
</div></td>
<td> </td>
<td> </td>
<td align="right">5,930</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,930</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. small capital
</div></td>
<td> </td>
<td> </td>
<td align="right">4,479</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,479</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mutual funds <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">4,764</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,764</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fixed income securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and foreign bonds
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">545</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">545</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">15,461</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">812</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">16,273</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Primarily includes investments in fixed income corporate and foreign bonds.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The number of shares of FHN common stock held by the plan was 778,500 for 2010 and 780,917 for
2009.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 20 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 20 — Stock Option, Restricted Stock Incentive, and Dividend Reinvestment Plans</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Restricted stock plans</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has authorized the issuance of its common stock for awards to executive and other management
employees who have a significant impact on the profitability of FHN. All unvested awards either
have a service and/or a performance condition which must be met in order for the shares to
ultimately vest. On December 31, 2010, there were 4,903,089 shares available for grants, of this
amount, 3,953,627 are available to be granted as restricted shares.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Performance condition grants. </i></b>Under the long-term incentive and corporate performance programs,
performance stock or units vest only if predetermined performance measures are met. The awards are
forfeited if performance goals are not achieved within the specified performance periods. In 2010
and 2009, executives were awarded performance stock units subject to certain performance criteria
being met under this program. Additionally, in 2010 FHN granted restricted stock with
employee-specific performance conditions to a new senior manager in addition to the customary
annual management grants. In 2008, executives were awarded performance restricted stock with 50%
vesting in 2011 and 50% vesting in 2012 subject to certain performance criteria being met. As of
December 31, 2010, performance conditions related to the 2009 performance stock unit grant and the
2007 performance restricted stock grant have been met. Accordingly, 50% of the units granted in
2009 will vest in 2012 and 50% will vest in 2013 provided continued employment with FHN. Half of
the performance restricted stock granted in 2007 will vest in 2010 with the remainder vesting in
2011. The performance conditions related to the 2010 performance stock units, the 2010 performance
stock granted to a senior manager, and the 2008 performance restricted stock grants have not yet
been achieved.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Service condition grants</i></b><i>. </i>In 2010 and 2009, executives and management were awarded restricted
stock with service conditions only. Half of the 2009 awards are scheduled to vest in 2012 and the
remainder is scheduled to vest in 2013. Half of the 2010 awards will vest in 2013 and the remainder
in 2014. Further, from time to time awards of restricted stock may be awarded to new
executive-level employees upon hiring or as retention grants to existing executives. Additionally,
retention restricted stock units were awarded to selected employees with the units expected to vest
in 2013. Restricted stock and stock units granted in 2010 are included in the table below.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Director grants</i></b>. FHN’s active stock plan allows stock awards to be granted to non-employee
directors upon approval by the board of directors. Prior to 2007 the board granted 8,930 shares of
restricted stock to each new non-employee director upon election to the board, with restrictions
lapsing at a rate of ten percent per year. That program was discontinued in 2007, although legacy
awards remain outstanding. Prior to 2011, each non-employee director who no longer had legacy
awards, and each new director, received an annual award of restricted stock units (“RSUs”) valued
at $45,000. For a new director, that amount is pro-rated consistent with the start date. Each RSU
award is scheduled to vest the following year and is paid in common stock (including any stock
earned as a result of stock dividends) plus any accrued cash dividends. Prior to 2011, non-employee
directors whose service pre-dated 2007 also participated in the RSU program, but participation was
phased in as the legacy restricted stock awards vested. In 2009, five non-employee directors
received an RSU award and the remainder had old restricted stock vest. No shares or RSUs were
immediately vested or forfeited due to director retirements or resignations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The summary of restricted and performance stock and unit activity during the year ended December
31, 2010, is presented below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Weighted</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">average</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Shares/</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">grant date</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Units <sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">fair value<sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Nonvested on January 1, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">3,796,049</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12.42</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares/units granted
</div></td>
<td> </td>
<td> </td>
<td align="right">1,513,963</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12.04</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares/units vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(754,597</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">15.69</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares/units canceled
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(457,183</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">14.44</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Nonvested on December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,098,232</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>11.53</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Share and per share
data has been restated to
reflect stock dividends
distributed through January
1, 2011.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 31, 2010, there was $24.4 million of unrecognized compensation cost related to
nonvested restricted stock plans. That cost is expected to be recognized over a weighted-average
period of 2.41 years. The total grant date fair value of shares vested during 2010, 2009 and 2008,
was $7.1 million, $3.2 million and $7.7 million, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The compensation cost that has been included in income from continuing operations pertaining
to both stock option and restricted stock plans was $12.0 million, $9.0 million and $9.0 million
for 2010, 2009, and 2008, respectively. The corresponding total income tax benefits recognized in
the income statements were $4.6 million, $3.4 million and $3.5 million for 2010, 2009, and 2008,
respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Consistent with Tennessee state law, only new or authorized, but unissued, stock may be utilized in
connection with any issuance of FHN common stock which may be required as a result of stock based
compensation awards. FHN historically obtains authorization from the Board of Directors to
repurchase any stock that may be issued at the time a plan is approved or amended. These
authorizations are automatically adjusted for stock splits and stock dividends. Repurchases are
authorized to be made in the open market or through privately negotiated transactions and will be
subject to market conditions, accumulation of excess equity, legal and regulatory requirements, and
prudent capital management. FHN does not currently expect to repurchase a material number of
shares related to the plans during the next annual period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Stock option plans. </i></b>Prior to 2009, FHN issued non-qualified stock options to employees under
various plans, which provided for the issuance of FHN common stock at a price equal to the higher
of the closing price or its fair market value at the date of grant. All options vest within 3 to 4
years and expire 7 years or 10 years from the date of grant. A deferral program, which was
discontinued in 2005, allowed for foregone compensation plus the exercise price to equal the fair
market value of the stock on the date of grant if the grantee agreed to receive the options in lieu
of compensation. Options that were part of compensation deferral prior to January 2, 2004, expire
20 years from the date of grant. Stock options granted after January 2, 2004, which are part of
the compensation deferral, expire 10 years from the date of grant. While there were no stock
options granted during 2010, FHN has resumed granting stock options in 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The stock option plans include various antidilutive provisions in the event the value of awards
become diminished from several factors. In 2008, FHN began paying quarterly stock dividends in
lieu of quarterly cash dividends. Stock dividends increase the number of shares outstanding,
thereby decreasing the compensation value of the equity award. Consequently, the stock and option
prices reported in the following tables have been proportionately adjusted to reflect the estimated
economic effect of all dividends distributed in common stock effective through January 1, 2011.
The Black Scholes Fair Value of the stock options and compensation expense are not affected.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The summary of stock option plans activity for the year ended December 31, 2010, is shown below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Weighted</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Average</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Weighted</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Remaining</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Aggregate</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Options</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Average</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Contractual Term</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Intrinsic Value</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Outstanding</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Exercise Price</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><i>(years)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><i>(thousands)</i></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">January 1, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">14,193,157</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26.90</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Options exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,281</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">11.19</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Options forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(164,524</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">25.52</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Options expired
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,431,605</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">29.54</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,588,747</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>26.86</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4.35</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>235</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Options exercisable
</div></td>
<td> </td>
<td> </td>
<td align="right">10,273,547</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26.97</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.46</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">216</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Options expected to vest
</div></td>
<td> </td>
<td> </td>
<td align="right">1,287,145</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21.89</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The total intrinsic value of options exercised during 2010 and 2009 was immaterial, however, the
total intrinsic value of options exercised during 2008 was $.3 million. On December 31, 2010,
there was $.4 million of unrecognized compensation cost related to nonvested stock options. That
cost is expected to be recognized over a weighted-average period of less than 1 year.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, FHN granted 940,993 stock options (as restated to reflect stock dividend distributed
through January 1, 2011) with a weighted average fair value of $1.44 per option at grant date. The
majority of the stock options have since been canceled. No stock options were granted in 2010 or
2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN used the Black-Scholes Option Pricing Model to estimate the fair value of stock options granted
in 2008, with the following assumptions:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="7%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected dividend yield
</div></td>
<td> </td>
<td align="center" valign="top">5.97%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected weighted-average lives of options granted
</div></td>
<td> </td>
<td align="center" valign="top">5.07 years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected weighted-average volatility
</div></td>
<td> </td>
<td align="center" valign="top">25.89%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected volatility range
</div></td>
<td> </td>
<td align="center" valign="top"><font style="white-space: nowrap">24.10% - 42.60%</font></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Risk-free interest rates range
</div></td>
<td> </td>
<td align="center" valign="top">2.80% - 3.32%</td>
</tr>
<tr style="font-size: 1px">
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Expected lives of options granted were determined based on the vesting period, historical exercise
patterns and contractual term of the options. Expected volatility is estimated using average of
daily high and low stock prices. Expected volatility assumptions were determined over the period
of the expected lives of the options.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Dividend reinvestment plan. </i></b>The Dividend Reinvestment and Stock Purchase Plan authorizes the sale
of FHN’s common stock from stock acquired on the open market to shareholders who choose to invest
all or a portion of their cash dividends or make optional cash payments of $25 to $10,000 per
quarter without paying commissions. The price of stock purchased on the open market is the average
price paid.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 21 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 21 — Business Segment Information</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Periodically, FHN adapts its segments to reflect managerial or strategic changes. FHN may also
modify its methodology of allocating expenses among segments which could change historical segment
results. In first quarter 2010, FHN revised its operating segments to better align with the chief
operating decision maker’s assessment of segment results and allocation of resources and with its
strategic direction, representing a focus on its regional banking franchise and capital markets
business. Key changes include the addition of the non-strategic segment which combines the former
mortgage banking and national specialty lending segments, the movement of correspondent banking
from capital markets to regional banking, and the shift of first lien mortgage production in the
Tennessee footprint to the regional banking segment. For comparability, previously reported items
have been revised to reflect these changes.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has four business segments: regional banking, capital markets, corporate, and non-strategic.
The regional banking segment offers financial products and services, including traditional lending
and deposit taking, to retail and commercial customers in Tennessee and surrounding markets.
Regional banking provides investments, insurance services, financial planning, trust services and
asset management, health savings accounts, credit card, cash management, and first lien mortgage
originations within the Tennessee footprint. Additionally, the regional banking segment includes
correspondent banking which provides credit, depository, and other banking related services to
other financial institutions. The capital markets segment consists of fixed income sales, trading,
and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio
advisory and derivative sales. The corporate segment consists of gains on the repurchase of debt,
unallocated corporate expenses, expense on subordinated debt issuances and preferred stock,
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, low income housing investment activities, and various charges related to restructuring,
repositioning, and efficiency. The non-strategic segment consists of the wind-down consumer and
construction lending activities, legacy mortgage banking elements including servicing fees, 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 along with the associated
restructuring, repositioning, and efficiency charges.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Total revenue, expense, and asset levels reflect those which are specifically identifiable or which
are allocated based on an internal allocation method. Because the allocations are based on
internally developed assignments and allocations, they are to an extent subjective. This assignment
and allocation has been consistently applied for all periods presented. The following table
reflects the amounts of consolidated revenue, expense, tax, and assets for each segment for the
years ended December 31:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Consolidated</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>730,838</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">776,468</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">895,082</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>270,000</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">880,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,080,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>955,692</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,254,843</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,468,390</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,367,133</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,571,845</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,612,314</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>49,397</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(420,534</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(328,842</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Benefit for income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(19,083</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(174,945</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(154,405</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) from continuing operations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>68,480</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(245,589</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(174,437</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from discontinued operations, net
of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(6,877</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(12,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,534</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income/(loss)
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>61,603</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(258,435</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(177,971</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>25,677,371</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">28,147,808</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">34,422,678</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>83,182</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">81,465</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,111</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>42,631</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,180</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,666</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Regional Banking</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>560,316</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">559,129</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">560,305</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>92,335</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">306,185</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">385,647</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>309,431</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">331,809</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">336,158</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>642,160</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">679,074</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">598,501</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>135,252</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(94,321</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(87,685</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision/(benefit) for income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>48,625</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(36,108</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(33,543</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income/(loss)
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>86,627</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(58,213</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(54,142</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>11,414,957</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12,220,565</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">13,081,118</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>46,151</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">42,541</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">42,382</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>30,721</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,091</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,693</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Capital Markets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>21,452</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,966</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12,770</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>424,225</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">632,871</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">521,300</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>318,495</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">386,252</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">342,986</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income before income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>127,182</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">261,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">191,084</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>47,640</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">98,350</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">71,637</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>79,542</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">163,235</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">119,447</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,121,862</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,073,593</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,920,185</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>10,336</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,084</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,775</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,906</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,289</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,988</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Corporate</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,722</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25,612</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,669</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>63,539</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47,529</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100,725</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>70,863</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">94,112</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,470</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(5,602</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(20,971</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">80,925</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision/(benefit) for income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(37,187</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(23,607</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">862</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>31,585</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,636</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">80,063</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>4,989,685</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,769,187</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,149,993</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>12,913</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,477</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,501</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5,905</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,174</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,183</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Non-Strategic</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>147,348</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">176,761</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">320,338</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>177,665</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">573,815</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">694,354</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>158,497</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">242,634</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">510,207</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>335,615</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">412,407</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">649,357</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss before income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(207,435</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(566,827</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(513,166</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Benefit for income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(78,161</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(213,580</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(193,361</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from continuing operations
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(129,274</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(353,247</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(319,805</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from discontinued operations,
net of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(6,877</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(12,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,534</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(136,151</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(366,093</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(323,339</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,150,867</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,084,463</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,271,382</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>13,782</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26,363</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">41,453</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,099</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,626</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,802</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 22 - us-gaap:FairValueMeasurementInputsDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 22 — Fair Value of Assets & Liabilities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN groups its assets and liabilities measured at fair value in three levels, based on the
markets in which the assets and liabilities are traded and the reliability of the assumptions used
to determine fair value. This hierarchy requires FHN to maximize the use of observable market
data, when available, and to minimize the use of unobservable inputs when determining fair value.
Each fair value measurement is placed into the proper level based on the lowest level of
significant input. These levels are:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Level 1 — Valuation is based upon quoted prices for identical instruments traded in
active markets.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Level 2 — Valuation is based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not active,
and model-based valuation techniques for which all significant assumptions are observable
in the market.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Level 3 — Valuation is generated from model-based techniques that use significant
assumptions not observable in the market. These unobservable assumptions reflect
management’s estimates of assumptions that market participants would use in pricing the
asset or liability. Valuation techniques include use of option pricing models, discounted
cash flow models, and similar techniques.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Transfers between fair value levels are recognized at the end of the fiscal quarter in which the
associated change in inputs occurs.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents the balance of assets and liabilities measured at fair value on a
recurring basis as of December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 1</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 2</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 3</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities — capital markets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">45,078</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">45,078</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267,086</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267,086</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">62,061</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">62,061</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">82,022</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">82,022</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,965</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,965</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">263,968</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">264,002</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Equity, mutual funds, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading securities — capital markets
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">734,280</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">734,314</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities — mortgage banking
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Principal only
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,992</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,992</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest only
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,444</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,444</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading securities — mortgage banking
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,992</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,444</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,436</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40,323</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">207,632</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">247,955</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">87,444</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">87,444</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,469,957</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,469,957</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,168,740</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,168,740</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,335</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37,891</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,226</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,515</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,500</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,015</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">545</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">545</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Venture capital
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,179</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,179</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Equity, mutual funds, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">9,248</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,351</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,599</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">9,793</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,771,342</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">52,570</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,833,705</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage servicing rights
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">207,319</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">207,319</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred compensation assets
</div></td>
<td> </td>
<td> </td>
<td align="right">25,121</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,121</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, forwards and futures
</div></td>
<td> </td>
<td> </td>
<td align="right">13,152</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,152</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, interest rate contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">290,509</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">290,509</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">38,273</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">290,509</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">328,782</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">48,066</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,845,446</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">493,999</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,387,511</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading liabilities — capital markets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">195,390</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">195,390</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,804</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,804</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,121</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,121</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">146,605</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">146,605</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading liabilities — capital markets
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">361,920</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">361,920</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other short-term borrowings and commercial paper
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,309</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,309</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, forwards and futures
</div></td>
<td> </td>
<td> </td>
<td align="right">18,600</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,600</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, interest rate contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">195,621</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">195,621</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, other
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">18,600</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">195,621</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">215,221</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">18,600</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">557,541</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">28,309</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">604,450</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents the balance of assets and liabilities measured at fair value on a
recurring basis at December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 1</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 2</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 3</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities — capital markets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">92,387</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">92,387</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">175,698</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">175,698</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,074</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,074</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">92,842</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">92,842</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,961</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,961</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">217,016</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">217,050</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Equity, mutual funds, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,778</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,790</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading securities — capital markets
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">633,756</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">46</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">633,802</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities — mortgage banking
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,013</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">56,086</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">66,099</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,919</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">206,227</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">230,146</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">48,129</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">48,129</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000,077</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000,077</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,189,430</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,189,430</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,472</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">97,673</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">118,145</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,900</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,500</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,400</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">696</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">696</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Equity, mutual funds, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">35,361</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,016</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,743</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">95,120</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">36,057</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,345,024</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">114,916</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,495,997</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage servicing rights
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">302,611</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">302,611</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">25,337</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">248,628</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">273,965</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">61,394</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,261,340</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">679,886</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,002,620</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading liabilities — capital markets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">104,087</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">104,087</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,952</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,952</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">187,340</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">187,340</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading liabilities — capital markets
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other short-term borrowings and commercial paper
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,662</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,662</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">4,929</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">174,493</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">179,422</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">4,929</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">467,880</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">39,662</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">512,471</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Changes in Recurring Level 3 Fair Value Measurements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In third quarter 2009, FHN reviewed the allocation of fair value between MSR and excess interest
from prior first lien loan sales and securitizations. As a result, a net amount of $11.1 million
was reclassified from trading securities to MSR within Level 3 assets measured at fair value on a
recurring basis. The reclassification had no effect on FHN’s Consolidated Statements of Income as
excess interest and MSR are highly correlated in valuation and as both excess interest and MSR are
recognized at elected fair value with changes in fair value being included within mortgage banking
income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2009, FHN changed the fair value methodology for certain loans held for sale. The
methodology change had a minimal effect on the valuation of the applicable loans. Consistent with
this change, the applicable amount is presented as a transfer into Level 3 loans held for sale in
the following rollforward for the twelve months ended December 31, 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In third quarter 2008, FHN revised its methodology for valuing hedges of MSR and excess interest
that were retained from prior securitizations. Consistent with this change, the applicable amounts
are presented as a transfer out of net derivative assets and liabilities in the following
rollforward for the twelve months ended December 31, 2008. See Determination of Fair Value for a
detailed discussion of the changes in valuation methodology.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are
summarized as follows:
</div>
<div align="center">
<table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="27" style="border-bottom: 1px solid #000000">Twelve Months Ended December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Securities available for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Net derivative</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other short-term</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Trading</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Loans held</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Investment</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Venture</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">servicing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">assets and</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">borrowings and</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">securities(a)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">portfolio(b)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Capital</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">rights, net</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">liabilities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">commercial paper</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on January 1, 2010
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">56,132</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">206,227</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">99,173</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,743</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">302,611</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">39,662</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustment due to adoption of amendments to ASC 810
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,776</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,293</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total net gains/(losses) included in:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td> </td>
<td align="right">8,627</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(17,991</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,962</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(31,146</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(12,353</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Other comprehensive income
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,302</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Purchases, sales, issuances, and settlements, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(33,505</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">19,396</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,480</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">398</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(61,853</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on December 31, 2010
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">26,478</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">207,632</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">39,391</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">13,179</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">207,319</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">27,309</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net unrealized gains/(losses) included in net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">5,467 </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(17,991) </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,962) </td>
<td nowrap="nowrap">(d)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(27,153) </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(12,353) </td>
<td nowrap="nowrap">(c)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="27" style="border-bottom: 1px solid #000000">Twelve Months Ended December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Securities available for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Net derivative</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other short-term</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Trading</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Loans held</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Investment</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Venture</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">servicing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">assets and</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">borrowings and</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">securities(a)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">portfolio(b)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Capital</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">rights, net</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">liabilities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">commercial paper</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on January 1, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">153,542</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">11,330</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">111,840</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25,307</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">376,844</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">233</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">27,957</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total net gains/(losses) included in:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td> </td>
<td align="right">55,342</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,384</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,252</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">67,817</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,705</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Other comprehensive income
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,812</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Purchases, sales, issuances, and
settlements, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(141,675</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(36,265</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,479</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,312</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(153,127</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(233</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net transfers into/(out of) Level 3
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(11,077</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">241,546</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,077</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on December 31, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">56,132</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">206,227</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">99,173</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,743</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">302,611</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">39,662</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net unrealized gains/(losses) included
in net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">14,408 </td>
<td nowrap="nowrap">(e)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(10,384) </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,252) </td>
<td nowrap="nowrap">(d)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">69,412 </td>
<td nowrap="nowrap">(f)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">11,705 </td>
<td nowrap="nowrap">(c)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000">Twelve Months Ended December 31, 2008</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Securities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Net derivative</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other short-term</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Trading</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Loans held</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">available</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">servicing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">assets and</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">borrowings and</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">securities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">rights, net</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">liabilities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">commercial paper</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on January 1, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">476,404</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">159,301</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,159,820</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">81,517</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total net gains/(losses) included in:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(109,232</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,551</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">303</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(429,854</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">146,737</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(34,978</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Other comprehensive income
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,641</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Purchases, sales, issuances, and
settlements, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(235,569</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,711</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(18,816</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(353,122</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(119,926</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">62,935</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net transfers into/(out of) Level 3
</div></td>
<td> </td>
<td> </td>
<td align="right">21,939</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,592</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(108,095</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on December 31, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">153,542</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">11,330</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">137,147</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">376,844</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">233</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">27,957</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net unrealized gains/(losses) included
in net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(172,366) </td>
<td nowrap="nowrap">(g)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(10,742) </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">303 </td>
<td nowrap="nowrap">(d)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(328,112) </td>
<td nowrap="nowrap">(h)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">72 </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(19,974) </td>
<td nowrap="nowrap">(c)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div style="margin-top: 3pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Primarily represents certificated interest only strips and excess interest mortgage banking
trading securities. Capital markets Level 3 trading securities are not significant.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Primarily represents other U.S. government agencies. States and municipalities are not
significant.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Primarily included in mortgage banking income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Represents recognized gains and losses attributable to venture capital investments classified
within securities available for sale that are included in securities gains/(losses) in noninterest
income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(e)</td>
<td> </td>
<td>Represents recognized gains/(losses) of $(2.2) million included in capital markets noninterest
income, $20.5 million included in mortgage banking noninterest income, and $(3.9) million included
in other income
and commissions.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(f)</td>
<td> </td>
<td>Represents recognized gains/(losses) of $71.6 million included in mortgage banking noninterest
income and $(2.2) million included in other income and commissions.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(g)</td>
<td> </td>
<td>Includes $(23.8) million included in capital markets noninterest income, $(138.5) million
included in mortgage banking noninterest income, and $(10.1) million included in other income and
commissions.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(h)</td>
<td> </td>
<td>Includes $(312.9) million included in mortgage banking noninterest income and $(15.2) million
included in other income and commissions.</td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Nonrecurring Fair Value Measurements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">From time to time, FHN may be required to measure certain other financial assets at fair value on a
nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the
application of LOCOM accounting or write-downs of individual assets. For assets measured at fair
value on a nonrecurring basis which were still held on the balance sheet at December 31, 2010,
2009, and 2008, respectively, the following tables provide the level of valuation assumptions used
to determine each adjustment, the related carrying value, and the fair value adjustments recorded
during the respective periods.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Twelve Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Carrying value at December 31, 2010</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2010</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net gains/(losses)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale — SBAs
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">10,456</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">10,456</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">60</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale — first mortgages
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,289</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,289</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,249</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213,974</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213,974</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(156,572</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate acquired by foreclosure <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">110,536</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">110,536</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(18,097</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets<sup style="font-size: 85%; vertical-align: text-top"> (c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">87,667</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">87,667</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11,145</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">       </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(193,003</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Twelve Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Carrying value at December 31, 2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2009</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net gains/(losses)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">         </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,753</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">21,829</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">37,582</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,716</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale <sup style="font-size: 85%; vertical-align: text-top">(d)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(516</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">402,007</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">402,007</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(287,866</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate acquired by foreclosure <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113,722</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113,722</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(39,879</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">108,247</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">108,247</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,970</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">       </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(335,515</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Twelve Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Carrying value at December 31, 2008</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2008</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net gains/(losses)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">         </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">78,739</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">38,153</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">116,892</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(27,503</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale <sup style="font-size: 85%; vertical-align: text-top">(d)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,117</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,117</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,897</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">414,902</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">414,902</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(198,485</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets<sup style="font-size: 85%; vertical-align: text-top"> (c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113,832</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113,832</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9,229</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">       </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(237,114</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td colspan="3">Certain previously reported amounts have been reclassified to agree with current presentation.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Represents carrying value of loans for which adjustments are based on the appraised value of
the collateral. Write-downs on these loans are
recognized as part of provision.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Represents the fair value and related losses of foreclosed properties that were measured
subsequent to their initial classification as foreclosed
assets. Balance excludes foreclosed real estate related to government insured mortgages.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents low income housing investments.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Represents recognition of other than temporary impairment for cost method investments
classified within securities available for sale.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In fourth quarter 2010, FHN exercised clean up calls on eight first lien mortgage proprietary
securitization trusts. In accordance with accounting requirements, FHN initially recognized the
associated loans at fair value. Fair value was primarily determined through reference to
observable inputs, including current market prices for similar loans. Since these loans were from
the 2002 and 2003 vintages, adjustments were made for the higher yields and lower credit risk
associated with the loans in comparison to more currently originated loans being sold. This
resulted in recognition of a small premium for the called loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN recognized goodwill impairment of $14.3 million related to the disposition of FTN ECM.
In accordance with accounting requirements, FHN allocated a portion of the goodwill from the
applicable reporting unit to the asset group held for disposal in determining the carrying value of
the disposal group. In determining the amount of impairment, FHN compared the carrying value of
the disposal group to the estimated value of the contracted sale price, which primarily included
observable inputs in the form of financial asset values but which also included certain
non-observable inputs related to the estimated values of post-transaction contingencies. Thus,
this measurement was considered a Level 3 valuation. Impairment of goodwill was recognized for the
excess of the carrying amount over the fair value of the disposal group. During first quarter
2010, the sale failed to close and FHN exited this business through an immediate cessation of
operations resulting in an additional goodwill impairment of $3.3 million, which represented all
remaining goodwill attributable to FTN ECM.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2008, FHN recognized a lower of cost or market reduction in value of $36.2 million
on its warehouse of trust preferred loans, which was classified within level 3 for loans held for
sale at March 31, 2008. The determination of estimated market value for the warehouse was based on
a hypothetical securitization transaction for the warehouse as a whole. FHN used observable data
related to prior securitization transactions as well as changes in credit spreads in the
collateralized debt obligation (CDO) market since the most recent
transaction. FHN also incorporated significant internally developed assumptions within its
valuation of the warehouse, including estimated prepayments and estimated defaults. In accordance
with ASC 820, FHN excluded transaction costs related to the hypothetical securitization in
determining fair value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In second quarter 2008, FHN designated its trust preferred warehouse as held to maturity.
Accordingly, these loans were excluded from loans held for sale in the nonrecurring measurements
table as of December 31, 2008. In conjunction with the transfer of these loans to held
to maturity status, FHN performed a lower of cost or market analysis on the date of transfer. This
analysis was based on the pricing of market transactions involving securities similar to those held
in the trust preferred warehouse with consideration given, as applicable, to any
differences in characteristics of the market transactions, including issuer credit quality, call
features and term. As a result of the lower of cost
or market analysis, FHN determined that its existing valuation of the trust preferred warehouse was
appropriate.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, FHN recognized a lower of cost or market reduction in value of $26.8 million relating
to mortgage warehouse loans. Approximately $19 million was attributable to increased repurchases,
delinquencies, or aging of loans. The market values for these loans were estimated using
historical sales prices for these type loans, adjusted for incremental price concessions that a
third party investor was assumed to require due to tightening credit markets and deteriorating
housing prices. These assumptions were based on published information about actual and projected
deteriorations in the housing market as well as changes in credit spreads. The remaining reduction
was primarily attributable to lower investor prices, due primarily to credit spread widening. This
reduction was calculated by comparing the total fair value of loans (using the same methodology
that is used for fair value option loans) to carrying value for the aggregate population of loans
that were not delinquent or aged.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Fair Value Option</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN elected the fair value option on a prospective basis for almost all types of mortgage loans
originated for sale purposes under the Financial Instruments Topic (“ASC 825”). FHN determined
that the election reduced certain timing differences and better matched changes in the value of
such loans with changes in the value of derivatives used as economic hedges for these assets at the
time of election. After the 2008 divestiture of certain mortgage banking operations and the
significant decline of mortgage loans originated for sale, FHN discontinued hedging the mortgage
warehouse.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Repurchased loans are recognized within loans held-for-sale at fair value at the time of
repurchase, which includes consideration of the credit status of the loans and the estimated
liquidation value. FHN has elected to continue recognition of these loans at fair value in periods
subsequent to reacquisition. Due to the credit-distressed nature of the vast majority of
repurchased loans and the related loss severities experienced upon repurchase, FHN believes that
the fair value election provides a more timely recognition of changes in value for these loans that
occur subsequent to repurchase. Absent the fair value election, these loans would be subject to
valuation at the lower of cost or market value, which would prevent subsequent values from
exceeding the initial fair value determined at the time of repurchase but would require recognition
of subsequent declines in value. Thus, the fair value election provides for a more timely
recognition of any potential future recoveries in asset values while not affecting the requirement
to recognize subsequent declines in value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to 2010, FHN transferred certain servicing assets in transactions that did not qualify for
sale treatment due to certain recourse provisions. The associated proceeds are recognized within
other short-term borrowings and commercial paper in the Consolidated Statements of Condition as of
December 31, 2010 and 2009. Since the servicing assets are recognized at fair value and changes in
the fair value of the related financing liabilities will exactly mirror the change in fair value of
the associated servicing assets, management elected to account for the financing liabilities at
fair value. Since the servicing assets have already been delivered to the buyer, the fair value of
the financing liabilities associated with the transaction does not reflect any instrument-specific
credit risk.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table reflects the differences between the fair value carrying amount of mortgages
held for sale measured at fair value in accordance with management’s election and the aggregate
unpaid principal amount FHN is contractually entitled to receive at maturity.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair value carrying</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Aggregate unpaid</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">amount less aggregate</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">carrying amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">principal</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">unpaid principal</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale reported at fair value:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">247,955</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">313,199</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(65,244</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Nonaccrual loans
</div></td>
<td> </td>
<td> </td>
<td align="right">36,768</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74,285</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(37,517</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Loans 90 days or more past due and still accruing
</div></td>
<td> </td>
<td> </td>
<td align="right">10,372</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,372</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair value carrying</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Aggregate</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">amount less aggregate</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">carrying amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">unpaid principal</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">unpaid principal</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale reported at fair value:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">230,146</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">277,400</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(47,254</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Nonaccrual loans
</div></td>
<td> </td>
<td> </td>
<td align="right">15,988</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34,469</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(18,481</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Loans 90 days or more past due and still accruing
</div></td>
<td> </td>
<td> </td>
<td align="right">8,026</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,765</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,739</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Assets and liabilities accounted for under the fair value election are initially measured at fair
value with subsequent changes in fair value recognized in earnings. Such changes in the fair value
of assets and liabilities for which FHN elected the fair value option are included in current
period earnings with classification in the income statement line item reflected in the following
table:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11">Twelve Months Ended</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Changes in fair value included in net income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage banking noninterest income
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(17,991</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(8,236</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(21,870</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Other short-term borrowings and commercial paper
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(12,353</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">11,705</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,974</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Estimated changes in fair value due to credit risk (loans held for sale)
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(19,517</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,771</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(21,865</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentaion.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For the twelve month period ended December 31, 2009 and 2008, the amounts for loans held for sale
include $13.7 million, and $21.9 million, respectively, of losses included in pretax earnings that
are attributable to changes in instrument-specific credit risk. During 2010, this amount was
immaterial. The portion of the fair value adjustments related to credit risk was determined based
on both a quality adjustment for delinquencies and the full credit spread on the non-conforming
loans.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interest income on mortgage loans held for sale measured at fair value is calculated based on
the note rate of the loan and is recorded in the interest income section of the
Consolidated Statements of Income as interest on loans held for sale.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Determination of Fair Value</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with ASC 820-10-35, fair values are based on the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. The following describes the assumptions and methodologies
used to estimate the fair value of financial instruments and MSR recorded at fair value in the
Consolidated Statements of Condition and for estimating the fair value of financial instruments for
which fair value is disclosed under ASC 825-10-50.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Short-term financial assets. </i></b>Federal funds sold, securities purchased under agreements to resell,
and interest bearing deposits with other financial institutions are carried at historical cost.
The carrying amount is a reasonable estimate of fair value because of the relatively short time
between the origination of the instrument and its expected realization.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Trading securities and trading liabilities. </i></b>Trading securities and trading liabilities are
recognized at fair value through current earnings. Trading inventory held for broker-dealer
operations is included in trading securities and trading liabilities. Broker-dealer long positions
are valued at bid price in the bid-ask spread. Short positions are valued at the ask price.
Inventory positions are valued using observable inputs including current market transactions, LIBOR
and U.S. treasury curves, credit spreads, and consensus prepayment speeds.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Trading securities also include retained interests in prior securitizations that qualify as
financial assets, which may include certificated residual interests, excess interest (structured as
interest-only strips), principal-only strips, or subordinated bonds. Residual interests represent
rights to receive earnings to the extent of excess income generated by the underlying loans. Excess
interest represents rights to receive interest from serviced assets that exceed contractually
specified rates. Principal-only strips are principal cash flow tranches, and interest-only strips
are interest cash flow tranches. Subordinated bonds are bonds with junior priority. All financial
assets retained from a securitization are recognized on the Consolidated Statements of Condition in
trading securities at fair value with realized and unrealized gains and losses included in current
earnings as a component of noninterest income on the Consolidated Statements of Income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of excess interest is determined using prices from closely comparable assets such as
MSR that are tested against prices determined using a valuation model that calculates the present
value of estimated future cash flows. Inputs utilized in valuing excess interest are consistent
with those used to value the related MSR. The fair value of excess interest typically changes
based on changes in the discount rate and differences between modeled prepayment speeds and credit
losses and actual experience. FHN uses assumptions in the model that it believes are comparable to
those used by brokers and other service providers. FHN also periodically compares its estimates of
fair value and assumptions with brokers, service providers, recent market activity, and against its
own experience.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of certificated residual interests was determined using a valuation model that
calculates the present value of estimated future cash flows. Inputs utilized in valuing residual
interests are generally consistent with those used to value the related MSR. However, due to the
lack of market information for residual interests, at December 31, 2009, FHN applied an
internally-developed assumption about the yield that a market participant would require in
determining the discount rate for its residual interests. The fair value of residual interests
typically changes based on changes in the discount rate and differences between modeled prepayment
speeds and credit losses and actual experience. All residual interests were removed from the
balance sheet upon adoption of ASU 2009-17 on January 1, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In some instances, FHN retained interests in the loans it securitized by retaining certificated
principal only strips or subordinated bonds. Subsequent to the August 2008 reduction of mortgage
banking operations, FHN uses observable inputs such as trades of similar instruments, yield curves,
credit spreads, and consensus prepayment speeds to determine the fair value of principal only
strips. Previously, FHN used the market prices from comparable assets such as publicly traded FNMA
trust principal only strips that were adjusted to reflect the relative risk difference between
readily marketable securities and privately issued securities in valuing the principal only strips.
The fair value of subordinated bonds was determined using the best available market information,
which included trades of comparable securities, independently provided spreads to other marketable
securities, and published market research. Where no market information was available, the company
utilized an internal valuation model. As of December 31, 2009, no market information was
available, and the subordinated bonds were valued using an internal discounted cash flow model,
which included assumptions about timing, frequency and severity of loss, prepayment speeds of the
underlying collateral, and the yield that a market participant would require. All subordinated
bonds were removed from the balance sheet upon adoption of ASU 2009-17 on January 1, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Securities available for sale. </i></b>Securities available for sale includes the investment portfolio
accounted for as available for sale under ASC 320-10-25, federal bank stock holdings, short-term
investments in mutual funds, and venture capital investments. Valuations of available-for-sale
securities are performed using observable inputs obtained from market transactions in similar
securities. Typical inputs include LIBOR and U.S. treasury curves, consensus prepayment estimates,
and credit spreads. When available, broker quotes are used to support these valuations. Certain
government agency debt obligations with limited trading activity are valued using a discounted cash
flow model that incorporates a combination of observable and unobservable inputs. Primary
observable inputs include contractual cash flows and the treasury curve. Significant unobservable
inputs include estimated trading spreads and estimated prepayment speeds.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Stock held in the Federal Reserve Bank and Federal Home Loan Banks are recognized at historical
cost in the Consolidated Statements of Condition which is considered to approximate fair value.
Short-term investments in mutual funds are measured at the funds’ reported closing net asset
values. Venture capital investments are typically measured using significant internally generated
inputs including adjustments to referenced transaction values and discounted cash flows analysis.
</div>
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<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loans held for sale. </i></b>In conjunction with the adoption of the provisions of the FASB
codification update to ASC 820-10 in second quarter 2009, FHN revised its methodology for
determining the fair value of certain loans within its mortgage warehouse. FHN now determines the
fair value of the applicable loans using a discounted cash flow model using observable inputs,
including current mortgage rates for similar products, with adjustments for differences in loan
characteristics reflected in the model’s discount rates. For all other loans held in the warehouse
(and in prior periods for the loans converted to the discounted cash flow methodology), the fair
value of loans whose principal market is the securitization market is based on recent security
trade prices for similar products with a similar delivery date, with necessary pricing adjustments
to convert the security price to a loan price. Loans whose principal market is the whole loan
market are priced based on recent observable whole loan trade prices or published third party bid
prices for similar product, with necessary pricing adjustments to reflect differences in loan
characteristics. Typical adjustments to security prices being valued for whole loan prices include
adding the value of MSR to the security price or to the whole loan price if FHN’s mortgage loan is
servicing retained, adjusting for interest in excess of (or less than) the required coupon or note
rate, adjustments to reflect differences in the characteristics of the loans being valued as
compared to the collateral of the security or the loan characteristics in the benchmark whole loan
trade, adding interest carry, reflecting the recourse obligation that will remain after sale, and
adjusting for changes in market liquidity or interest rates if the benchmark security or loan price
is not current. Additionally, loans that are delinquent or otherwise significantly aged are
discounted to reflect the less marketable nature of these loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Loans held for sale also includes loans made by the Small Business Administration (“SBA”). The
fair value of SBA loans is determined using an expected cash flow model that utilizes observable
inputs such as the spread between LIBOR and prime rates, consensus prepayment speeds, and the
treasury curve. The fair value of other non-mortgage loans held for sale is approximated by their
carrying values based on current transaction values.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loans, net of unearned income. </i></b>Loans, net of unearned income are recognized at the amount of funds
advanced, less charge-offs and an estimation of credit risk represented by the allowance for loan
losses. The fair value estimates for disclosure purposes differentiate loans based on their
financial characteristics, such as product classification, loan category, pricing features, and
remaining maturity.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of floating rate loans is estimated through comparison to recent market activity in
loans of similar product types, with adjustments made for differences in loan characteristics. In
situations where market pricing inputs are not available, fair value is considered to approximate
book value due to the monthly repricing for commercial and consumer loans, with the exception of
floating rate 1-4 family residential mortgage loans which reprice annually and will lag movements
in market rates. The fair value for floating rate 1-4 family mortgage loans is calculated by
discounting future cash flows to their present value. Future cash flows are discounted to their
present value by using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same time period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans
have been applied to the floating rate 1-4 family residential mortgage portfolio.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of fixed rate loans is estimated through comparison to recent market activity in
loans of similar product types, with adjustments made for differences in loan characteristics. In
situations where market pricing inputs are not available, fair value is estimated by discounting
future cash flows to their present value. Future cash flows are discounted to their present value
by using the current rates at which similar loans would be made to borrowers with similar credit
ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds
and industry speeds for similar loans have been applied to the fixed rate mortgage and installment
loan portfolios.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Individually impaired commercial loans are measured using either a discounted cash flow methodology
or the estimated fair value of the underlying collateral less costs to sell, if the loan is
considered collateral-dependent. In accordance with accounting standards, the discounted cash flow
analysis utilizes the loan’s effective interest rate for discounting expected cash flow amounts.
Thus, this analysis is not considered a fair value measurement in accordance with ASC 820.
However, the results of this methodology are considered to approximate fair value for the
applicable loans. Expected cash flows are derived from internally-developed inputs primarily
reflecting expected default rates on contractual cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For loans measured using the estimated fair value of collateral less costs to sell, fair value is
estimated using appraisals of the collateral. Collateral values are monitored and additional
write-downs are recognized if it is determined that the estimated collateral values have declined
further. Estimated costs to sell are based on current amounts of disposal costs for similar
assets. Carrying value is considered to reflect fair value for these loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Mortgage servicing rights. </i></b>FHN recognizes all classes of MSR at fair value. Since sales of MSR
tend to occur in private transactions and the precise terms and conditions of the sales are
typically not readily available, there is a limited market to refer to in determining the fair
value of MSR. As such, FHN primarily relies on a discounted cash flow model to estimate the fair
value of its MSR. This model calculates estimated fair value of the MSR using predominant risk
characteristics of MSR such as interest rates, type of product (fixed vs. variable), age (new,
seasoned, or moderate), agency type and other factors. FHN uses assumptions in the model that it
believes are comparable to those used by brokers and other service providers. FHN also periodically
compares its estimates of fair value and assumptions with brokers, service providers, recent market
activity, and against its own experience.
</div>
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<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Derivative assets and liabilities</i></b>. For forwards and futures contracts used to hedge the value
of servicing assets currently hedged and the mortgage warehouse which was hedged prior to the 2008
divestiture, fair values are based on current transactions involving identical securities. These
contracts are exchange-traded and thus have no credit risk factor assigned as the risk of
non-performance is limited to the clearinghouse used.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Valuations of other derivatives (primarily interest rate related swaps, swaptions, caps, and
collars) are based on inputs observed in active markets for similar instruments. Typical inputs
include the LIBOR curve, option volatility, and option skew. Credit risk is mitigated for these
instruments through the use of mutual margining and master netting agreements as well as collateral
posting requirements. Any remaining
credit risk related to interest rate derivatives is considered in determining fair value through
evaluation of additional factors such as customer loan grades and debt ratings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In conjunction with the sale of a portion of its Visa Class B shares in December 2010, FHN and the
purchaser entered into a derivative transaction whereby FHN will make, or receive, cash payments
whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The
fair value of this derivative has been determined using a discounted cash flow methodology for
estimated future cash flows determined through use of probability weighted scenarios for multiple
estimates of Visa’s aggregate exposure to covered litigation matters, which include consideration
of amounts funded by Visa into its escrow account for the covered litigation matters. Since this
estimation process required application of judgment in developing significant unobservable inputs
used to determine the possible outcomes and the probability weighting assigned to each scenario,
this derivative has been classified within Level 3 in fair value measurements disclosures.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Real estate acquired by foreclosure. </i></b>Real estate acquired by foreclosure primarily consists of
properties that have been acquired in satisfaction of debt. These properties are carried at the
lower of the outstanding loan amount or estimated fair value less estimated costs to sell the real
estate. Estimated fair value is determined using appraised values with subsequent adjustments for
deterioration in values that are not reflected in the most recent appraisal. Real estate acquired
by foreclosure also includes properties acquired in compliance with HUD servicing guidelines which
are carried at the estimated amount of the underlying government assurance or guarantee.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Nonearning assets. </i></b>For disclosure purposes, nonearning assets include cash and due from banks,
accrued interest receivable, and capital markets receivables. Due to the short-term nature of
cash and due from banks, accrued interest receivable, and capital markets receivables, the fair
value is approximated by the book value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other assets. </i></b>For disclosure purposes, other assets consist of investments in low income housing
partnerships and deferred compensation assets that are considered financial assets. Investments in
low income housing partnerships are written down to estimated fair value
quarterly based on the estimated value of the associated tax credits. Deferred compensation assets
are recognized at fair value, which is based on quoted prices in active markets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Defined maturity deposits. </i></b>The fair value is estimated by discounting future cash flows to their
present value. Future cash flows are discounted by using the current market rates of similar
instruments applicable to the remaining maturity. For disclosure purposes, defined maturity
deposits include all certificates of deposit and other time deposits.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Undefined maturity deposits. </i></b>In accordance with ASC 825, the fair value is approximated by the
book value. For disclosure purposes, undefined maturity deposits include demand deposits, checking
interest accounts, savings accounts, and money market accounts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Short-term financial liabilities. </i></b>The fair value of federal funds purchased, securities sold under
agreements to repurchase and other short-term borrowings and commercial paper are approximated by
the book value. The carrying amount is a reasonable estimate of fair value because of the
relatively short time between the origination of the instrument and its expected realization.
Other short-term borrowings and commercial paper includes a liability associated with transfers of
mortgage servicing rights that did not qualify for sale accounting. This liability is accounted
for at elected fair value, which is measured consistent with the related MSR, as previously
described.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Term borrowings. </i></b>The fair value is based on quoted market prices or dealer quotes for the
identical liability when traded as an asset. When pricing information for the identical liability
is not available, relevant prices for similar debt instruments are used with adjustments being made
to the prices obtained for differences in characteristics of the debt instruments. If no relevant
pricing information is available, the fair value is approximated by the present value of the
contractual cash flows discounted by the investor’s yield which considers FHN’s and FTBNA’s debt
ratings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other noninterest-bearing liabilities. </i></b>For disclosure purposes, other noninterest-bearing
liabilities include accrued interest payable and capital markets payables. Due to the short-term
nature of these liabilities, the book value is considered to approximate fair value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loan commitments. </i></b>Fair values are based on fees charged to enter into similar agreements taking
into account the remaining terms of the agreements and the counterparties’ credit standing.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other commitments. </i></b>Fair values are based on fees charged to enter into similar agreements.
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following fair value estimates are determined as of a specific point in time utilizing
various assumptions and estimates. The use of assumptions and various valuation techniques, as well
as the absence of secondary markets for certain financial instruments, will likely reduce the
comparability of fair value disclosures between financial institutions. Due to market illiquidity,
the fair values for loans, net of unearned income, loans held for sale, and long-term debt as of
December 31, 2010 and 2009, involve the use of significant internally-developed pricing assumptions
for certain components of these line items. These assumptions are considered to reflect inputs that
market participants would use in transactions involving these instruments as of the measurement
date. Assets and liabilities that are not financial instruments (including MSR) have not been
included in the following table such as the value of long-term relationships with deposit and trust
customers, premises and equipment, goodwill and other intangibles, deferred taxes, and certain
other assets and other liabilities. Accordingly, the total of the fair value amounts does not
represent, and should not be construed to represent, the underlying value of the company.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the book value and estimated fair value of financial instruments
recorded in the Consolidated Statements of Condition as well as unfunded commitments as of December
31, 2010 and 2009.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Book</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Fair</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Book</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income and allowance for loan losses
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,117,773</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>15,196,341</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">17,226,970</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">16,070,150</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Short-term financial assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>942,129</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>942,129</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">992,183</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">992,183</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>769,750</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>769,750</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">699,900</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">699,900</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>375,289</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>375,289</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">452,501</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">452,501</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,031,930</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3,031,930</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,694,468</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,694,468</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Derivative assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>303,660</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>303,660</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">248,628</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">248,628</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>112,788</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>112,788</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">133,583</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">133,583</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Nonearning assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>574,710</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>574,710</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">892,927</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">892,927</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deposits:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Defined maturity
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,952,745</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,007,147</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,455,936</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,522,334</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Undefined maturity
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>13,255,486</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>13,255,486</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,411,279</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,411,279</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total deposits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>15,208,231</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>15,262,633</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,867,215</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,933,613</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>361,920</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>361,920</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Short-term financial liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,295,643</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,295,643</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,636,111</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,636,111</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,228,070</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,893,938</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,891,133</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,385,949</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Derivative liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>215,220</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>215,220</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">179,422</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">179,422</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other noninterest-bearing liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>103,951</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>103,951</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">338,161</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">338,161</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Contractual</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Fair</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Contractual</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Amount</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Unfunded Commitments:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loan commitments
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,903,537</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,060</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">8,370,960</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,172</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Standby and other commitments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>487,578</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,021</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">540,858</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,612</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 23 - us-gaap:TransfersAndServicingOfFinancialAssetsTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 23 — Loan Sales and Securitizations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Historically, FHN utilized loan sales and securitizations as a significant source of liquidity
for its mortgage banking operations. With FHN’s shift to originations of mortgages within its
regional banking footprint following the sale of national mortgage origination offices, loan sale
and securitization activity has significantly decreased. Generally, FHN no longer retains
financial interests in any loans it transfers to third parties. During 2010, FHN transferred $.8
billion of single-family residential mortgage loans in whole loan sales resulting in $7.2 million
of net pre-tax gains. In 2009 and 2008, FHN transferred $1.3 billion and $19.5 billion,
respectively, of residential mortgage loans and HELOC in whole loan sales or proprietary
securitizations resulting in net pre-tax gains of $16.1 million and $237.1 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Retained Interests</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interests retained from prior loan sales, including GSE securitizations, typically included MSR and
excess interest. Interests retained from proprietary securitizations included MSR and various
financial assets (see discussion below). MSR were initially valued at fair value and the remaining
retained interests were initially valued by allocating the remaining cost basis of the loan between
the security or loan sold and the remaining retained interests based on their relative fair values
at the time of sale or securitization.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In certain cases, FHN continues to service and receive servicing fees related to the transferred
loans. Generally, FHN received annual servicing fees approximating .29 percent in 2010, .28
percent in 2009, and .27 percent in 2008, of the outstanding balance of underlying single-family
residential mortgage loans. FHN received annual servicing fees approximating .50 percent in 2010,
2009, and 2008, of the outstanding balance of underlying loans for HELOC and home equity loans
transferred. MSR related to loans transferred and serviced by FHN, as well as MSR related to loans
serviced by FHN and transferred by others, are discussed further in Note 6 — Mortgage Servicing
Rights. There were no significant additions to MSR in 2010 or 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Other financial assets retained in proprietary or GSE securitizations may include certificated
residual interests, excess interest (structured as interest-only strips), interest-only strips,
principal-only strips, or subordinated bonds. Residual interests represent rights to receive
earnings to the extent of excess income generated by the underlying loans. Excess interest
represents rights to receive interest from serviced assets that exceed contractually specified
rates. Principal-only strips are principal cash flow tranches and interest-only strips are interest
cash flow tranches. Subordinated bonds are bonds with junior priority. All financial assets
retained from off balance sheet securitizations are recognized on the Consolidated Statements of
Condition in trading securities at fair value with realized and unrealized gains and losses
included in current earnings as a component of noninterest income on the Consolidated Statements of
Income. In first quarter 2010, in conjunction with the adoption of amendments to ASC 810, FHN
consolidated certain proprietary securitization trusts for which residual interests and
subordinated bonds were held. Accordingly, these amounts were removed from the Consolidated
Statements of Condition as of January 1, 2010. Additionally, in fourth quarter 2009, FHN sold
$49.0 million of excess interest.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The sensitivity of the fair value of all retained or purchased MSR to immediate 10 percent and
20 percent adverse changes in assumptions on December 31, 2010 and 2009 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
<td style="border-bottom:1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>First</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Second</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">First</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Second</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>except for annual cost to service)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liens</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liens</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>HELOC</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">HELOC</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of retained interests
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>203,812</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>262</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,245</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">296,115</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,174</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,322</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average life (in years)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4.3</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2.8</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2.5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.4</td>
<td> </td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual prepayment rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>20.1</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>27.0</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>31.2</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">34.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">30.6</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(10,139</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(31</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(249</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(15,326</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(40</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(163</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(19,420</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(59</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(476</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(29,346</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(81</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(326</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual discount rate on servicing
cash flows
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>11.6</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>14.0</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>18.0</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">11.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">16.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(5,756</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(14</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(96</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(8,678</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(19</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(96</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(11,149</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(28</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(185</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,800</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(38</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(192</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual cost to service (per loan)
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>121</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">119</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">50</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">50</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(5,003</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(16</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(52</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,223</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(59</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(266</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(9,978</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(32</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(104</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(14,410</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(117</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(532</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual earnings on escrow
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>1.4</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.5</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(2,102</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(4,488</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(28</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(4,204</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,982</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(56</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The sensitivity of the fair value of other retained interests to immediate 10 percent and 20
percent adverse changes in assumptions on December 31, 2010 and 2009 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Residual</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Residual</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Excess</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Interest</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Interest</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Interest</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Certificated</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Subordinated</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Certificates</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Certificates</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>except for annual cost to service)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">IO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">PO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">IO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Bonds</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2nd Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">HELOC</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of retained interests
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>26,237</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>8,992</b></td>
<td> </td>
<td> </td>
<td colspan="3" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average life (in years)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4.5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>5.0</b></td>
<td> </td>
<td> </td>
<td colspan="3" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual prepayment rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>17.2</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>23.4</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(1,159</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(471</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(2,241</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(934</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual discount rate on residual cash flows
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>13.0</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>22.5</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(1,084</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(373</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(2,076</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(716</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of retained interests
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">51,035</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,013</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">265</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,130</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,291</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,269</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average life (in years)
</div></td>
<td> </td>
<td> </td>
<td align="right">4.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.4</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual prepayment rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">22.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">10.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">26.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">28.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,398</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(394</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(23</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(32</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(182</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,650</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(782</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(21</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(46</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(59</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(301</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual discount rate on residual cash
flows <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">10.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">23.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">34.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">225.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">34.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">32.9</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,199</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(515</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(17</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(77</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(109</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(207</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,204</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,050</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(147</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(206</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(373</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td colspan="3">NM — Amount is not meaningful.    </td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="1%" nowrap="nowrap" align="left">(a)</td>
<td width="1%"> </td>
<td>For subordinated bonds, rate used is the actual bond yield.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">These sensitivities are hypothetical and should not be considered predictive of future
performance. As the figures indicate, changes in fair value based on a 10 percent variation in
assumptions cannot necessarily be extrapolated because the relationship between the change in
assumption and the change in fair value may not be linear. Also, the effect on the fair value of
the retained interest caused by a particular assumption variation is calculated independently from
all other assumption changes. In reality, changes in one factor may result in changes in another,
which might magnify or counteract the sensitivities. Furthermore, the estimated fair values, as
disclosed, should not be considered indicative of future earnings on these assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For the years ended December 31, 2010, 2009, and 2008, cash flows received and paid related to loan
sales and securitizations were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Proceeds from initial sales and securitizations
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"><b>$</b></td>
<td align="right" valign="top"><b>837,905</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,320,538</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">19,543,829</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Servicing fees retained <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"><b>95,902</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">132,799</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">249,122</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Purchases of GNMA guaranteed mortgages
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"><b>76,678</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">18,225</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">103,436</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Purchases of previously transferred financial assets<sup style="font-size: 85%; vertical-align: text-top">(b)(c)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"><b>458,337</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">302,043</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">9,152</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Other cash flows received on retained interests
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"><b>10,783</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">63,994</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">47,306</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes servicing fees on MSR associated with loan sales and purchased MSR.</td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes repurchases of both delinquent and performing loans, foreclosed assets, and make-whole
payments for economic losses incurred by purchaser.</td>
</tr>
<tr>
<td style="font-size: 3pt"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>2010 includes $175 million related to clean-up calls exercised by FHN in fourth quarter.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of December 31, 2010, the principal amount of loans transferred through loan sales and
securitizations and other loans managed with them, the principal amount of delinquent loans, and
the net credit losses during 2010 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total Principal</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Principal Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net Credit</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(Dollars in thousands)</i></td>
<td style="border-bottom:1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount of Loans</td>
<td style="border-bottom:1px solid #000000"> </td>
<td style="border-bottom:1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">of Delinquent Loans<sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td style="border-bottom:1px solid #000000"> </td>
<td style="border-bottom:1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses <sup style="font-size: 85%; vertical-align: text-top">(b)</sup></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>For the year ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>On December 31, 2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Type of loan:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Real estate residential
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>22,373,312</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,076,908</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>570,682</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top: 1px solid #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans managed or transferred (c)
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>22,373,312</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,076,908</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>570,682</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans sold
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(14,578,430</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(332,913</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top:1px solid #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top:1px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Loans held in portfolio
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>7,461,969</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top:3px double #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top:3px double #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Loans 90 days or more past due include $39.9 million of GNMA guaranteed mortgages.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Principal amount of loans securitized and sold includes $10.9 billion of loans securitized
through GNMA, FNMA, or FHLMC. FHN retains
interests other than servicing rights on a portion of these securitized loans. No delinquency
or net credit loss data is included for the loans securitized
through FNMA or FHMLC because these agencies retain credit risk. The remainder of loans
securitized and sold were securitized through
proprietary trusts, where FHN retained interests other than servicing rights. See Note 18 -
Restrictions, Contingencies, and Other Disclosure
for discussion related to repurchase obligations for loans transferred to GSEs and private
investors.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Other than loans transferred to GSE, loans are real estate residential loans in which FHN has a
retained interest other than servicing rights.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of December 31, 2009, the principal amount of loans transferred through loan sales and
securitizations and other loans managed with them, the principal amount of delinquent loans, and
the net credit losses during 2009 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total Principal</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Principal Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net Credit</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(Dollars in thousands)</i></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount of Loans</td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">of Delinquent Loans <sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses <sup style="font-size: 85%; vertical-align: text-top">(b)</sup></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">For the year ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">On December 31, 2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Type of loan:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Real estate residential
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">32,821,231</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">960,307</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">504,225</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top: 1px solid #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td style="border-top: 0px solid #000000"> </td>
<td style="border-top: 0px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td style="border-top: 0px solid #000000"> </td>
<td style="border-top: 0px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans managed or transferred (c)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">32,821,231</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">960,307</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">504,225</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans sold
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(24,472,150</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(331,979</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top: 1px solid #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Loans held in portfolio
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">8,017,102</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top: 3px double #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Loans 90 days or more past due include $40.0 million of GNMA guaranteed mortgages.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Principal amount of loans securitized and sold includes $19.5 billion of loans securitized
through GNMA, FNMA or FHLMC. FHN retains
interests other than servicing rights on a portion of these securitized loans. No delinquency
or net credit loss data is included for the loans securitized
through FNMA or FHMLC because these agencies retain credit risk. The remainder of loans
securitized and sold were securitized through
proprietary trusts, where FHN retained interests other than servicing rights. See Note 18 -
Restrictions, Contingencies, and Other Disclosure
for discussion related to repurchase obligations for loans transferred to GSEs and private
investors.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Other than loans transferred to GSE, loans are real estate residential loans in which FHN has a
retained interest other than servicing rights.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Secured Borrowings</i></b>. FTBNA executed several securitizations of retail real estate
residential loans for the purpose of engaging in secondary market financing. Since the related
trusts did not qualify as QSPE under the applicable accounting rules at that time and since the
cash flows on the loans are pledged to the holders of the trusts’ securities, FTBNA recognized the
proceeds as secured borrowings in accordance with ASC’s Transfers and Servicing Topic (“ASC
860-10-50”). With the prospective adoption of ASU 2009-17 in first quarter 2010, all amounts
related to consolidated proprietary securitization trusts have been included in restricted balances
on the Consolidated Statements of Condition. On December 31, 2009, FTBNA recognized $654.6 million
of loans net of unearned income and $650.4 million of other collateralized borrowings on the
Consolidated Statements of Condition related to consolidated proprietary securitizations of retail
real estate residential loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2007, FTBNA executed a securitization of certain small issuer trust preferred for which the
underlying trust did not qualify as a sale under ASC 860. Therefore, FTNBA has accounted for the
funds received through the securitization as a secured borrowing. On December 31, 2010, FTBNA had
$112.5 million of loans net of unearned income, $1.7 million of trading securities, and $51.2
million of term borrowings on the Consolidated Statements of Condition related to this transaction.
On December 31, 2009, FTBNA had $112.5 million of loans net of unearned income, $1.7 million of
trading securities, and $50.1 million of other collateralized borrowings on the Consolidated
Statements of Condition related to this transaction. See Note 24 — Variable Interest Entities for
additional information.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 24 - us-gaap:ScheduleOfVariableInterestEntitiesTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 24 — Variable Interest Entities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of ASU 2009-16 and ASU 2009-17. The
provisions of ASU 2009-16 updates ASC 860, “Transfers and Servicing,” to provide for the removal of
the qualifying special purpose entity (“QSPE”) concept from GAAP, resulting in these entities being
considered variable interest entities (“VIE”) which must be evaluated for consolidation on and
after its effective date. The provisions of ASU 2009-17 amends ASC 810, “Consolidation,” to revise
the criteria for determining the primary beneficiary of a VIE by replacing the quantitative-based
risks and rewards test previously required with a qualitative analysis. The updated provisions of
ASC 810 clarify that a VIE exists when the equity investors, as a group, lack either (1) the power
through voting rights, or similar rights, to direct the activities of an entity that most
significantly impact the entity’s economic performance, (2) the obligation to absorb the expected
losses of the entity, (3) the right to receive the expected residual returns of the entity, or (4)
when the equity investors, as a group, do not have sufficient equity at risk for the entity to
finance its activities by itself. A variable interest is a contractual ownership, or other
interest, that fluctuates with changes in the fair value of the VIE’s net assets exclusive of
variable interests. Under ASC 810, as amended, FHN is deemed to be the primary beneficiary and
required to consolidate a VIE if it has a variable interest in the VIE that provides it with a
controlling financial interest. For such purposes, the determination of whether a controlling
financial interest exists is based on whether a single party has both the power to direct the
activities of the VIE that most significantly impact the VIE’s economic performance and the
obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could
potentially be significant. As amended, ASC 810, requires continual reconsideration of conclusions
reached regarding which interest holder is a VIE’s primary beneficiary. The consolidation
methodology provided in this footnote for the year ended December 31, 2010, has been prepared in
accordance with ASC 810 as amended by ASU 2009-17.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to the adoption of the provisions of the Codification update to ASC 810 in first quarter
2010, FHN was deemed to be the primary beneficiary and required to consolidate a VIE if it had a
variable interest that would absorb the majority of the VIE’s expected losses, receive the majority
of expected residual returns, or both. A VIE existed when equity investors did not have the
characteristics of a controlling financial interest or did not have sufficient equity at risk for
the entity to finance its activities by itself. Expected losses and expected residual returns were
measures of variability in the expected cash flow of a VIE. Reconsideration of conclusions reached
regarding which interest holder was a VIE’s primary beneficiary was required only upon the
occurrence of certain specified events. The consolidation methodology provided in this footnote
for the year ended December 31, 2009, has been prepared in accordance with the provisions of ASC
810 prior to its amendment by ASU 2009-17.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>Year Ended December 31, 2010</b></u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Consolidated Variable Interest Entities. </i></b>FHN holds variable interests in proprietary residential
mortgage securitization trusts it established prior to 2008 as a source of liquidity for its
mortgage banking and consumer lending operations. Except for recourse due to breaches of standard
representations and warranties made by FHN in connection with the sale of the loans to the trusts,
the creditors of the trusts hold no recourse to the assets of FHN. Additionally, FHN has no
contractual requirements to provide financial support to the trusts. Based on their restrictive
nature, the trusts are considered VIE as the holders of equity at risk do not have the power
through voting rights or similar rights to direct the activities that most significantly impact the
trusts’ economic performance. In situations where the retention of MSR and other retained
interests, including residual interests and subordinated bonds, results in FHN potentially
absorbing losses or receiving benefits that are significant to the trusts, FHN is considered the
primary beneficiary, as it is also assumed to have the power as servicer to most significantly
impact the activities of such VIE. Consolidation of the trusts results in the recognition of the
trusts’ proceeds as restricted borrowings since the cash flows on the securitized loans can only be
used to settle the obligations due to the holders of the trusts’ securities.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has established certain rabbi trusts related to deferred compensation plans offered to its
employees. FHN contributes employee cash compensation deferrals to the trusts and directs the
underlying investments made by the trusts. The assets of these trusts are available to FHN’s
creditors only in the event that FHN becomes insolvent. These trusts are considered VIE because
either there is no equity at risk in the trusts or because FHN provided the equity interest to its
employees in exchange for services rendered. FHN is considered the primary beneficiary of the rabbi
trusts as it has the power to direct the activities that most significantly impact the economic
performance of the rabbi trusts through its ability to direct the underlying investments made by
the trusts. Additionally, FHN could potentially receive benefits or absorb losses that are
significant to the trusts due to its right to receive any asset values in excess of liability
payoffs and its obligation to fund any liabilities to employees that are in excess of a rabbi
trust’s assets. Under the rules applicable in 2009, these were considered VIE and required
consolidation.
</div>
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes VIE consolidated by FHN as of December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>On-Balance Sheet</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Rabbi Trusts Used for Deferred</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Consumer Loan Securitizations</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Compensation Plans</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Carrying Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Carrying Value</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and due from banks
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,143</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income
</div></td>
<td> </td>
<td> </td>
<td align="right">757,491</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Less: Allowance for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right">47,452</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total net loans
</div></td>
<td> </td>
<td> </td>
<td align="right">710,039</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">19,658</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">61,323</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total assets</b>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">732,840</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">61,323</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest-bearing deposits
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,203</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right">754,521</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">101</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">57,218</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total liabilities</b>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">755,825</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">57,218</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Nonconsolidated Variable Interest Entities. </i></b>Since 1997, First Tennessee Housing Corporation
(“FTHC”), a wholly-owned subsidiary, has made equity investments as a limited partner in various
partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit
(“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is
to achieve a satisfactory return on capital and to support FHN’s community reinvestment
initiatives. The activities of the limited partnerships include the identification, development,
and operation of multi-family housing that is leased to qualifying residential tenants generally
within FHN’s primary geographic region. LIHTC partnerships are considered VIE because FTHC, as the
holder of the equity investment at risk, does not have the ability to direct the activities that
most significantly affect the success of the entity through voting rights or similar rights. While
FTHC could absorb losses that are significant to the LIHTC partnerships as it has a risk of loss
for its initial capital contributions and funding commitments to each partnership, it is not
considered the primary beneficiary of the LIHTC partnerships. The general partners are considered
the primary beneficiaries because managerial functions give them the power to direct the activities
that most significantly impact the partnerships’ economic performance and the general partners are
exposed to all losses beyond FTHC’s initial capital contributions and funding commitments. Under
the rules applicable in 2009, investments in LIHTC partnerships were also considered VIE and did
not meet requirements for consolidation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FTBNA holds variable interests in trusts which have issued mandatorily redeemable preferred capital
securities (“trust preferreds”) for smaller banking and insurance enterprises. FTBNA has no voting
rights for the trusts’ activities. The trusts’ only assets are junior subordinated debentures of
the issuing enterprises. The creditors of the trusts hold no recourse to the assets of FTBNA.
These trusts meet the definition of a VIE because the holders of the equity investment at risk do
not have the power through voting rights, or similar rights, to direct the activities that most
significantly impact the trusts’ economic performance. Based on the nature of the trusts’
activities and the size of FTBNA’s holdings, FTBNA could potentially receive benefits or absorb
losses that are significant to the trusts regardless of whether a majority of a trust’s securities
are held by FTBNA. However, since FTBNA is solely a holder of the trusts’ securities, it has no
rights which would give it the power to direct the activities that most significantly impact the
trusts’ economic performance and thus it cannot be considered the primary beneficiary of the
trusts. FTBNA has no contractual requirements to provide financial support to the trusts. Under
the rules applicable in 2009, these trusts were determined to be VIEs and in certain cases, certain
trusts met the requirements for consolidation. See additional discussion regarding these trusts in
the 2009 section of this footnote.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2007, FTBNA executed a securitization of certain small issuer trust preferreds for which the
underlying trust meets the definition of a VIE because the holders of the equity investment at risk
do not have the power through voting rights, or similar rights, to direct the activities that most
significantly impact the entity’s economic performance. FTBNA could potentially receive benefits
or absorb losses that are significant to the trust based on the size and priority of the interests
it retained in the securities issued by the trust. However, since FTBNA did not retain servicing
or other decision making rights, it has determined that it is not the primary beneficiary as it
does not have the power to direct the activities that most significantly impact the trust’s
economic performance. Accordingly, FTBNA has accounted for the funds received through the
securitization as a term borrowing in its Consolidated Statements of Condition as of December 31,
2010. FTBNA has no contractual requirement to provide financial support to the trust. Under the
rules applicable in 2009, the trust was considered a VIE and did not meet the requirement for
consolidation.
</div>
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has
previously issued junior subordinated debt totaling $309.3 million to First Tennessee
Capital I (“Capital I”) and First Tennessee Capital II (“Capital II”). In first quarter 2011, FHN
redeemed all of the subordinated debentures issued to Capital I. As of the end of 2010, both
Capital I and Capital II are considered VIE because FHN’s capital contributions to these trusts are
not considered “at risk” in evaluating whether the holders of the equity investments at risk in the
trusts have the power through voting rights, or similar rights, to direct the activities that most
significantly impact the entities’ economic performance. FHN cannot be the trusts’ primary
beneficiary because FHN’s capital contributions to the trusts are not considered variable interests
as they are not “at risk”. Consequently, Capital I and Capital II are not consolidated by FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN holds variable interests in proprietary residential mortgage securitization trusts it
established prior to 2008 as a source of liquidity for its mortgage banking operations. Except for
recourse due to breaches of standard representations and warranties made by FHN in connection with
the sale of the loans to the trusts, the creditors of the trusts hold no recourse to the assets of
FHN. Additionally, FHN has no contractual requirements to provide financial support to the trusts.
Based on their restrictive nature, the trusts are considered VIE as the holders of
equity at risk do not have the power through voting rights, or similar rights, to direct the
activities that most significantly impact the trusts’ economic performance. While FHN is assumed
to have the power as servicer to most significantly impact the activities of such VIE, in
situations where FHN does not potentially participate in significant portions of a securitization
trust’s cash flows, it is not considered the primary beneficiary of the trust. Thus, such trusts
are not consolidated by FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to third quarter 2008, FHN transferred first lien mortgages to government agencies, or GSE,
for securitization and retained MSR and other various interests in certain situations. Except for
recourse due to breaches of standard representations and warranties made by FHN in connection with
the sale of the loans to the trusts, the creditors of the trusts hold no recourse to the assets of
FHN. Additionally, FHN has no contractual requirements to provide financial support to the trusts.
The Agencies’ status as Master Servicer and the rights they hold consistent with their guarantees
on the securities issued provide them with the power to direct the activities that most
significantly impact the trusts’ economic performance. Thus, such trusts are not consolidated by
FHN as it is not considered the primary beneficiary even in situations where it could potentially
receive benefits or absorb losses that are significant to the trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In relation to certain agency securitizations, FHN purchased the servicing rights on the
securitized loans from the loan originator and holds other retained interests. Based on their
restrictive nature, the trusts meet the definition of a VIE since the holders of the equity
investments at risk do not have the power through voting rights, or similar rights, to direct the
activities that most significantly impact the trusts’ economic performance. As the Agencies serve
as Master Servicer for the securitized loans and hold rights consistent with their guarantees on
the securities issued, they have the power to direct the activities that most significantly impact
the trusts’ economic performance. Thus, FHN is not considered the primary beneficiary even in
situations where it could potentially receive benefits or absorb losses that are significant to the
trusts. FHN has no contractual requirements to provide financial support to the trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN holds securities issued by various agency securitization trusts. Based on their restrictive
nature, the trusts meet the definition of a VIE since the holders of the equity investments at risk
do not have the power through voting rights, or similar rights, to direct the activities that most
significantly impact the entities’ economic performance. FHN could potentially receive benefits or
absorb losses that are significant to the trusts based on the nature of the trusts’ activities and
the size of FHN’s holdings. However, FHN is solely a holder of the trusts’ securities and does not
have the power to direct the activities that most significantly impact the trusts’ economic
performance, and is not considered the primary beneficiary of the trusts. FHN has no contractual
requirements to provide financial support to the trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN holds collateralized debt obligations (“CDOs”) issued by various trusts. FHN has no voting
rights for the trusts’ activities. The trusts’ only assets are trust preferreds of the issuing
banks’ trusts. The trusts associated with the CDOs acquired by FHN meet the definition of a VIE as
there are no holders of an equity investment at risk with adequate power to direct the trusts’
activities that most significantly impact the trusts’ economic performance. While FHN could
potentially receive benefits or absorb losses that are significant to the trusts, as FHN does not
have decision making rights over whether interest deferral is elected by the issuing banks on the
junior subordinated debentures that underlie the small issuer trust preferreds, it does not have
the power to direct the activities that most significantly impact the trusts’ economic performance.
Accordingly, FHN has determined that it is not the primary beneficiary of the associated trusts.
FHN has no contractual requirements to provide financial support to the trusts.
</div>
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For certain troubled commercial loans, FTBNA restructures the terms of the borrower’s debt in
an effort to increase the probability of receipt of amounts contractually due. Following a
troubled debt restructuring, the borrower entity typically meets the definition of a VIE as the
initial determination of whether the entity is a VIE must be reconsidered and economic events have
proven that the entity’s equity is not sufficient to permit it to finance its activities
without additional subordinated financial support or a restructuring of the terms of its
financing. As FTBNA does not have the power to direct the activities that most significantly
impact such troubled commercial borrowers’ operations, it is not considered the primary beneficiary
even in situations where, based on the size of the financing provided, FTBNA is exposed to
potentially significant benefits and losses of the borrowing entity. FTBNA has no contractual
requirements to provide financial support to the borrowing entities beyond certain funding
commitments established upon restructuring of the terms of the debt that allows for preparation of
the underlying collateral for sale.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN serves as manager over certain discretionary trusts, for which it makes investment decisions on
behalf of the trusts’ beneficiaries in return for a reasonable management fee. The trusts meet the
definition of a VIE since the holders of the equity investments at risk do not have the power,
through voting rights or similar rights, to direct the activities that most significantly impact
the entities’ economic performance. The management fees FHN receives are not considered variable
interests in the trusts as all of the requirements related to permitted levels of decision maker
fees are met. Therefore, the VIE are not consolidated by FHN because it cannot be the trusts’
primary beneficiary. FHN has no contractual requirements to provide financial support to the
trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes VIE that are not consolidated by FHN as of December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="54%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="17%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Maximum</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liability</b></td>
<td> </td>
<td nowrap="nowrap" align="center"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Type</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Loss Exposure</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recognized</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Classification</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="11" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Low Income Housing Partnerships <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">88,923</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top">Other assets</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Small Issuer Trust Preferred Holdings <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">465,157</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><font style="white-space: nowrap">Loans, net of unearned income </font></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">On-Balance Sheet Trust Preferred Securitization
</div></td>
<td> </td>
<td> </td>
<td align="right">62,920</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">51,241</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><sup style="font-size: 85%; vertical-align: text-top">(d)</sup></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Proprietary Trust Preferred Issuances<sup style="font-size: 85%; vertical-align: text-top"> (e)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">309,279</td>
<td> </td>
<td> </td>
<td align="center" valign="top">Term borrowings</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Proprietary & Agency Residential Mortgage Securitizations
</div></td>
<td> </td>
<td> </td>
<td align="right">404,282</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><sup style="font-size: 85%; vertical-align: text-top">(f)</sup></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Holdings of Agency Mortgage-Backed Securities<sup style="font-size: 85%; vertical-align: text-top"> (c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">2,967,845</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><sup style="font-size: 85%; vertical-align: text-top">(g)</sup></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Short Positions in Agency Mortgage-Backed Securities<sup style="font-size: 85%; vertical-align: text-top"> (e)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,804</td>
<td> </td>
<td> </td>
<td align="center" valign="top">Trading liabilities</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Pooled Trust Preferred Securities <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top">Trading securities</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial Loan Troubled Debt Restructurings<sup style="font-size: 85%; vertical-align: text-top"> (h) (i)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">119,353</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><font style="white-space: nowrap">Loans, net of unearned income</font></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Managed Discretionary Trusts<sup style="font-size: 85%; vertical-align: text-top"> (e)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="center" valign="top">N/A</td>
</tr>
<tr style="font-size: 1px">
<td colspan="11" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Maximum loss exposure represents $87.7 million of current investments and $1.3 million of
contractual funding commitments.
Only the current investment amount is included in Other assets.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>A liability is not recognized because investments are written down over the life of the related
tax credit.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Maximum loss exposure represents the value of current investments. A liability is not
recognized as FHN is solely a holder of the trusts’
securities.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>$112.5 million classified as Loans, net of unearned income, and $1.7 million classified as
Trading securities which are offset by
$51.2 million classified as Term borrowings.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(e)</td>
<td> </td>
<td>No exposure to loss due to the nature of FHN’s involvement.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(f)</td>
<td> </td>
<td>Includes $100.9 million and $75.2 million classified as MSR and $14.0 million and $21.4
million classified as Trading securities related to proprietary and
agency residential mortgage securitizations, respectively. Aggregate servicing advances of
$262.5 million are classified as Other assets
and is offset by aggregate custodial balances of $69.8 million classified as
Noninterest-bearing deposits.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(g)</td>
<td> </td>
<td>Includes $329.1 million classified as Trading securities and $2.6 billion classified as
Securities available for sale.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(h)</td>
<td> </td>
<td>Maximum loss exposure represents $115.5 million of current receivables and $3.8 million of
contractual funding commitments on loans
related to commercial borrowers involved in a troubled debt restructuring.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(i)</td>
<td> </td>
<td>A liability is not recognized as the loans are the only variable interests held in the
troubled commercial borrowers’ operations.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">See Other disclosures — Indemnification agreements and guarantees section of Note 18 —
Restrictions, Contingencies and Other Disclosures for information regarding FHN’s repurchase
exposure for claims that FHN breached its standard representations and warranties made in
connection with the sale of loans to proprietary and agency residential mortgage securitization
trusts.
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>Year Ended December 31, 2009</b></u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Consolidated Variable Interest Entities. </i></b>In 2007 and 2006, FTBNA established several Delaware
statutory trusts (“Trusts”), for the purpose of engaging in secondary market financing. Except for
recourse due to breaches of standard representations and warranties made by FTBNA in connection
with the sale of the retail real estate residential loans by FTBNA to the Trusts, the creditors of
the Trusts hold no recourse to the assets of FTBNA. Additionally, FTBNA has no contractual
requirements to provide financial support to the Trusts. Since the Trusts did not qualify as QSPE,
FTBNA treated the proceeds as secured borrowings in accordance with ASC 860. FTBNA determined that
the Trusts were VIE because the holders of the equity investment at risk did not have adequate
decision making ability over the trusts’ activities. Thus, FTBNA assessed whether it was the
primary beneficiary of the associated trusts. Since there was an overcollateralization of the
Trusts, any excess of cash flows received on the transferred loans above the amounts passed through
to the security holders would revert to FTBNA. Accordingly, FTBNA determined that it was the
primary beneficiary of the Trusts because it absorbed a majority of the expected losses of the
Trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The rabbi trusts related to deferred compensation plans are considered VIE because either there is
no equity at risk in the trusts or because FHN provided the equity interest to its employees in
exchange for services rendered. Given that the trusts were created in exchange for the employees’
services, FHN is considered the primary beneficiary of the rabbi trusts because it is most closely
related to their purpose and design. FHN has the obligation to fund any liabilities to employees
that are in excess of a rabbi trust’s assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FTBNA holds interests in trusts that issued trust preferreds for smaller banking and insurance
enterprises which met the definition of a VIE because the holders of the equity investment at risk do not
have adequate decision making ability over the trusts’ activities. FTBNA has no voting rights for
the trusts’ activities. The trusts’ only assets are junior subordinated debentures of the issuing
enterprises. The creditors of the trusts hold no recourse to the assets of FTBNA. In situations
where FTBNA holds a majority of the trust preferreds issued by a trust, it was considered the
primary beneficiary of that trust because FTBNA will absorb a majority of the trust’s expected
losses. FTBNA has no contractual requirements to provide financial support to the trusts. In
situations where FTBNA holds a majority, but less than all, of the trust preferreds for a trust,
consolidation of the trust resulted in recognition of amounts received from other parties as debt.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes VIE consolidated by FHN as of December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="38%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="20%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="24%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="5" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="5" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Type</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Carrying Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Classification</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Carrying Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Classification</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">On balance sheet consumer loan securitizations
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">654,644</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Loans, net of unearned income
</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">650,442</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Other collateralized borrowings</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Small issuer trust preferred holdings
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">452,850</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top" nowrap="nowrap">Loans, net of unearned income
</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">30,500</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Term borrowings</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Rabbi trusts used for deferred compensation
plans
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">90,391</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Other assets
</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">57,720</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Other liabilities</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Nonconsolidated Variable Interest Entities. </i></b>Under rules applicable in 2009, LIHTC partnerships
were considered VIE because FTHC, as the holder of the equity investment at risk, does not have the
ability to significantly affect the success of the entity through voting rights. FTHC was not
considered the primary beneficiary of the LIHTC partnerships because an agent relationship existed
between FTHC and the general partners, whereby the general partners cannot sell, transfer or
otherwise encumber their ownership interest without the approval of FTHC. Because this resulted in
a de facto agent relationship between the partners, the general partners were considered the
primary beneficiaries because their operations were most closely associated with the LIHTC
partnerships’ operations. FTHC has no contractual requirements to provide financial support to the
LIHTC partnerships beyond its initial funding commitments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Under rules applicable in 2009, trusts that issued trust preferreds for smaller banking and
insurance enterprises met the definition of a VIE because the holders of the equity investment at
risk do not have adequate decision making ability over the trusts’ activities. In situations where
FTBNA did not hold a majority of the trust preferreds issued by a trust, it was not considered the
primary beneficiary of that trust because FTBNA does not absorb a majority of the expected losses
of the trust. FTBNA has no contractual requirements to provide financial support to the trusts.
</div>
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2007, FTBNA executed a securitization of certain small issuer trust preferreds for which
the underlying trust did not qualify as a QSPE under ASC 860. This trust was determined to be a
VIE because the holders of the equity investment at risk do not have adequate decision making
ability over the trust’s activities. FTBNA determined that it was not the primary beneficiary of
the trust due to the size and
priority of the interests it retained in the securities issued by the trust. Accordingly, FTBNA
accounted for the funds received through the securitization as a collateralized borrowing in its
Consolidated Statements of Condition. FTBNA has no contractual requirement to provide financial
support to the trust.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Both Capital I and Capital II were considered VIE because FHN’s capital contributions to these
trusts are not considered “at risk” in evaluating whether the equity investments at risk in the
trusts have adequate decision making ability over the trusts’ activities. Capital I and Capital II
were not consolidated by FHN because the holders of the securities issued by the trusts absorb a
majority of expected losses and residual returns.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes VIE that are not consolidated by FHN as of December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Maximum</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liability</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Type</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Loss Exposure</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recognized</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Classification</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="1" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Low Income Housing Partnerships <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">110,017</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">Other assets</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Small Issuer Trust Preferred Holdings
</div></td>
<td> </td>
<td> </td>
<td align="right">43,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td colspan="3" align="center" nowrap="nowrap">Loans, net of unearned income</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">On Balance Sheet Trust Preferred Securitization
</div></td>
<td> </td>
<td> </td>
<td align="right">64,027</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">50,147</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Proprietary Trust Preferred Issuances
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">309,279</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">Term borrowings</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Maximum loss exposure represents $108.2 million of current investments and $1.8 million of
contractual funding commitments.
Only the current investment amount is included in Other Assets.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>A liability is not recognized because investments are written down over the life of the related
tax credit.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>$112.5 million was classified as Loans, net of unearned income and $1.7 million was classified
as Trading securities which are offset by
$50.1 million classified as Other collateralized borrowings.</td>
</tr>
</table>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 25 – Derivatives and Off-Balance Sheet Arrangements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the normal course of business, FHN utilizes various financial instruments (including
derivative contracts and credit-related agreements) through its legacy mortgage servicing
operations, capital markets, and risk management operations, as part of its risk management
strategy and as a means to meet customers’ needs. These instruments are subject to credit and
market risks in excess of the amount recorded on the balance sheet as required by GAAP. The
contractual or notional amounts of these financial instruments do not necessarily represent credit
or market risk. However, they can be used to measure the extent of involvement in various types of
financial instruments. Controls and monitoring procedures for these instruments have been
established and are routinely re-evaluated. The Asset/Liability Committee (“ALCO”) monitors the
usage and effectiveness of these financial instruments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Credit risk represents the potential loss that may occur because a party to a transaction fails to
perform according to the terms of the contract. The measure of credit exposure is the replacement
cost of contracts with a positive fair value. FHN manages credit risk by entering into financial
instrument transactions through national exchanges, primary dealers or approved counterparties, and
using mutual margining and master netting agreements whenever possible to limit potential exposure.
FHN also maintains collateral posting requirements with its counterparties to limit credit risk.
With exchange-traded contracts, the credit risk is limited to the clearinghouse used. For
non-exchange traded instruments, credit risk may occur when there is a gain in the fair value of
the financial instrument and the counterparty fails to perform according to the terms of the
contract and/or when the collateral proves to be of insufficient value. Market risk represents the
potential loss due to the decrease in the value of a financial instrument caused primarily by
changes in interest rates, mortgage loan prepayment speeds, or the prices of debt instruments. FHN
manages market risk by establishing and monitoring limits on the types and degree of risk that may
be undertaken. FHN continually measures this risk through the use of models that measure
value-at-risk and earnings-at-risk.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Derivative Instruments. </i></b>FHN enters into various derivative contracts both in a dealer capacity, to
facilitate customer transactions, and also as a risk management tool. Where contracts have been
created for customers, FHN enters into transactions with dealers to offset its risk exposure.
Derivatives are also used as a risk management tool to hedge FHN’s exposure to changes in interest
rates or other defined market risks.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Derivative instruments are recorded on the Consolidated Statements of Condition as Other assets or
Other liabilities measured at fair value. Fair value is defined as the price that would be
received to sell a derivative asset or paid to transfer a derivative liability in an orderly
transaction between market participants on the transaction date. Fair value is determined using
available market information and appropriate valuation methodologies. For a fair value hedge,
changes in the fair value of the derivative instrument and changes in the fair value of the hedged
asset or liability are recognized currently in earnings. For a cash flow hedge, changes in the
fair value of the derivative instrument, to the extent that it is effective, are recorded in
accumulated other comprehensive income and subsequently reclassified to earnings as the hedged
transaction impacts net income. Any ineffective portion of a cash flow hedge is recognized
currently in earnings. For freestanding derivative instruments, changes in fair value are
recognized currently in earnings. Cash flows from derivative contracts are reported as Operating
activities on the Consolidated Statements of Cash Flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interest rate forward contracts are over-the-counter contracts where two parties agree to purchase
and sell a specific quantity of a financial instrument at a specified price, with delivery or
settlement at a specified date. Futures contracts are exchange-traded contracts where two parties
agree to purchase and sell a specific quantity of a financial instrument at a specified price, with
delivery or settlement at a specified date. Interest rate option contracts give the purchaser the
right, but not the obligation, to buy or sell a specified quantity of a financial instrument, at a
specified price, during a specified period of time. Caps and floors are options that are linked to
a notional principal amount and an underlying indexed interest rate. Interest rate swaps involve
the exchange of interest payments at specified intervals between two parties without the exchange
of any underlying principal. Swaptions are options on interest rate swaps that give the purchaser
the right, but not the obligation, to enter into an interest rate swap agreement during a specified
period of time.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 31, 2010 and 2009, respectively, FHN had approximately $160.8 million and $108.2
million of cash receivables and $111.4 million and $81.0 million of cash payables related to
collateral posting under master netting arrangements, inclusive of collateral posted related to
contracts with adjustable collateral posting thresholds, with derivative counterparties. Certain
of FHN’s agreements with derivative counterparties contain provisions that require that FTBNA’s
debt maintain minimum credit ratings from specified credit rating agencies. If FTBNA’s debt were
to fall below these minimums, these provisions would be triggered, and the counterparties could
terminate the agreements and request immediate settlement of all derivative contracts under the
agreements. The net fair value, determined by individual counterparty, of all derivative
instruments with credit-risk-related contingent accelerated termination provisions was $2.1 million
of assets and $23.7 million of liabilities on December 31, 2010 and $4.4 million of assets and
$10.9 million of liabilities on December 31, 2009. FHN had posted collateral of $25.1 million as
of December 31, 2010 in the normal course of business related to these contracts. As of December
31, 2009, FHN had posted collateral of $10.3 million in the normal course of business related to
these contracts.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Additionally, certain of FHN’s derivative agreements contain provisions whereby the collateral
posting thresholds under the agreements adjust based on the credit ratings of both counterparties.
If the credit rating of FHN and/or FTBNA is lowered, FHN would be required to post additional
collateral with the counterparties. The net fair value, determined by individual counterparty, of
all derivative instruments with adjustable collateral posting thresholds was $137.8 million of
assets and $161.2 million of liabilities on December 31, 2010 and was $110.8 million of assets and
$81.1 million of liabilities on December 31, 2009. As of December 31, 2010 and 2009, FHN had
received collateral of $111.4 million and $79.4 million and posted collateral of $158.7 million and
$77.0 million, respectively, in the normal course of business related to these agreements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Legacy Mortgage Banking Operations</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Retained Interests</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN revalues MSR to current fair value each month with changes in fair value included in servicing
income in Mortgage banking noninterest income on the Consolidated Statements of Income. FHN hedges
the MSR to minimize the effects of loss in value of MSR associated with increased prepayment
activity that generally results from declining interest rates. In a rising interest rate
environment, the value of the MSR generally will increase while the value of the hedge instruments
will decline. FHN enters into interest rate contracts (potentially including swaps, swaptions, and
mortgage forward purchase contracts) to hedge against the effects of changes in fair value of its
MSR. Substantially all capitalized MSR are hedged for economic purposes.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN utilizes derivatives as an economic hedge (potentially including swaps, swaptions, and mortgage
forward purchase contracts) to protect the value of its interest-only securities that change in
value inversely to the movement of interest rates. Interest-only securities            are included
in Trading securities on the Consolidated Statements of Condition. Changes in the fair value of
these derivatives and the hedged interest-only securities are recognized currently in earnings in
Mortgage banking noninterest income as a component of servicing income on the Consolidated
Statements of Income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with legacy mortgage servicing
activities for the year ended December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="1" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Retained Interests Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Forwards and Futures <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,243,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,801</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,090</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">32,158</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps and Swaptions <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">5,678,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">36,693</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">18,234</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">74,804</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage Servicing Rights <sup style="font-size: 85%; vertical-align: text-top">(c) (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">203,412</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(18,913</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other Retained Interests <sup style="font-size: 85%; vertical-align: text-top">(d) (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">35,436</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,806</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Assets included in the Other assets section of the Consolidated Statements of Condition.
Liabilities included in the Other liabilities section of the Consolidated Statements
of Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Gains/losses included in the Mortgage banking income section of the Consolidated Statements of
Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Assets included in the Mortgage servicing rights section of the Consolidated Statements of
Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Assets included in the Trading securities section of the Consolidated Statements of Condition.</td>
</tr>
</table>
<div style="margin-top: 0pt">
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div style="margin-top: 0pt">
</div>
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with legacy mortgage servicing
activities for the year ended December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="1" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Retained Interests Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Forwards and Futures <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,275,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,262</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">13,100</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26,714</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps and Swaptions <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">2,126,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">21,688</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,654</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,492</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage Servicing Rights <sup style="font-size: 85%; vertical-align: text-top">(c) (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">296,260</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">61,850</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other Retained Interests <sup style="font-size: 85%; vertical-align: text-top">(d) (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,830</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">47,758</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Assets included in the Other assets section of the Consolidated Statements of Condition.
Liabilities included in the Other liabilities section of the
Consolidated Statements of Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Gains/losses included in the Mortgage banking income section of the Consolidated Statements of
Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Assets included in the Mortgage servicing rights section of the Consolidated Statements of
Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Assets included in the Trading securities section of the Consolidated Statements of Condition.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Mortgage Warehouse and Pipeline</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to the 2008 divestiture, FHN’s warehouse (mortgage loans held for sale) was subject to
changes in fair value due to fluctuations in interest rates from the loan closing date through the
date of sale of the loan into the secondary market. Typically, the fair value of the warehouse
declined in value when interest rates increased and rose in value when interest rates decreased. To
mitigate this risk, FHN entered into forward sales and futures contracts that provided an economic
hedge against those changes in fair value on a significant portion of the warehouse. These
derivatives were recorded at fair value with changes in fair value recorded in current earnings as
a component of the gain or loss on the sale of loans in mortgage banking noninterest income. Upon
adoption of the Financial Instruments Topic (ASC 825-10-50), FHN elected to prospectively account
for substantially all of its mortgage loan warehouse products at fair value upon origination and
correspondingly discontinued the application of ASC 815-10-45 hedging relationships for all
subsequent originations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Mortgage banking interest rate lock commitments are short-term commitments to fund mortgage loan
applications in process (“the pipeline”) for a fixed term at a fixed price. During the term of an
interest rate lock commitment, FHN had the risk that interest rates could change from the rate
quoted to the borrower. FHN entered into forward sales contracts with respect to fixed rate loan
commitments and futures contracts with respect to adjustable rate loan commitments as economic
hedges designed to protect the value of the interest rate lock commitments from changes in value
due to changes in interest rates. Interest rate lock commitments qualify as derivative financial
instruments and as such do not qualify for hedge accounting treatment. As a result, the interest
rate lock commitments were recorded at fair value with changes in fair value recorded in current
earnings as gain or loss on the sale of loans in mortgage banking noninterest income. Changes in
the fair value of the derivatives that served as economic hedges of interest rate lock commitments
were also included in current earnings as a component of gain or loss on the sale of loans in
mortgage banking noninterest income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Capital Markets</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Capital markets trades U.S. Treasury, U.S. Agency, mortgage-backed, corporate and municipal fixed
income securities, and other securities principally for distribution to customers. When these
securities settle on a delayed basis, they are considered forward contracts. Capital markets also
enters into interest rate contracts, including options, caps, swaps, and floors for its customers.
In addition, capital markets enters into futures contracts to economically hedge interest rate risk
associated with a portion of its securities inventory. These transactions are measured at fair
value, with changes in fair value recognized currently in capital markets noninterest income.
Related assets and liabilities are recorded on the Consolidated Statements of Condition as Other
assets and Other liabilities. The FTN Financial Risk and the Credit Risk Management Committees
collaborate to mitigate credit risk related to these transactions. Credit risk is controlled
through credit approvals, risk control limits, and ongoing monitoring procedures. Total trading
revenues were $390.1 million and $598.6 million for the years ended December 31, 2010 and 2009,
respectively. Total revenues are inclusive of both derivative and non-derivative financial
instruments. Trading revenues are included in Capital markets noninterest income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with capital markets trading activities
as of December 31, 2010:
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2010</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer Interest Rate Contracts
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,666,711</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">67,729</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,400</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Offsetting Upstream Interest Rate Contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">1,666,711</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,400</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">67,729</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Forwards and Futures Purchased
</div></td>
<td> </td>
<td> </td>
<td align="right">1,609,665</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,598</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,130</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forwards and Futures Sold
</div></td>
<td> </td>
<td> </td>
<td align="right">1,856,839</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,753</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,380</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with capital markets trading activities
as of December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2009</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer Interest Rate Contracts
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,514,517</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">40,128</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,246</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Offsetting Upstream Interest Rate Contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">1,514,517</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,250</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40,135</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Forwards and Futures Purchased
</div></td>
<td> </td>
<td> </td>
<td align="right">2,659,054</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,736</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,180</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forwards and Futures Sold
</div></td>
<td> </td>
<td> </td>
<td align="right">2,836,643</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,051</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,990</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Interest Rate Risk Management</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN’s ALCO focuses on managing market risk by controlling and limiting earnings volatility
attributable to changes in interest rates. Interest rate risk exists to the extent that
interest-earning assets and liabilities have different maturity or repricing characteristics. FHN
uses derivatives, including swaps, caps, options, and collars, that are designed to moderate the
impact on earnings as interest rates change. FHN’s interest rate risk management policy is to use derivatives to hedge interest rate risk or
market value of assets or liabilities, not to speculate. In addition, FHN has entered into certain
interest rate swaps and caps as a part of a product offering to commercial customers with customer
derivatives paired with offsetting market instruments that, when completed, are designed to
mitigate interest rate risk. These contracts do not qualify for hedge accounting and are measured
at fair value with gains or losses included in current earnings in Noninterest expense on the
Consolidated Statements of Income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has entered into pay floating, receive fixed interest rate swaps to hedge the interest rate
risk of certain long-term debt obligations totaling $1.0 billion and $1.1 billion on December 31,
2010 and 2009, respectively. These swaps have been accounted for as fair value hedges under the
shortcut method. The balance sheet impact of these swaps was $105.7 million and $90.9 million in
Other assets on December 31, 2010 and 2009, respectively. Interest paid or received for these
swaps was recognized as an adjustment of the interest expense of the liabilities whose risk is
being managed. In first quarter 2010, FHN repurchased $96.0 million of debt that was being hedged
in these arrangements and terminated the related interest rate swap and hedging relationship.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has designated a derivative transaction in a hedging strategy to manage interest rate risk on
its $.5 billion noncallable senior debt maturing in December 2015. This derivative qualifies for
hedge accounting under ASC 815-20 using the long-haul method. FHN entered into a pay floating,
receive fixed interest rate swap to hedge the interest rate risk on this debt. The balance sheet
impact of this swap was $4.1 million in Other assets on December 31, 2010. There was no
ineffectiveness related to this hedge. Interest paid or received for this swap was recognized as an
adjustment of the interest expense of the liability whose risk is being managed.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN designates derivative transactions in hedging strategies to manage interest rate risk on
subordinated debt related to its trust preferred securities. These qualify for hedge accounting
under ASC 815-20 using the long-haul method. FHN entered into pay floating, receive fixed interest
rate swaps to hedge the interest rate risk of certain subordinated debt totaling $200 million on
both December 31, 2010 and 2009. The balance sheet impact of these swaps $12.6 million and $4.8
million in Other liabilities as of December 31, 2010 and 2009, respectively. There was no
ineffectiveness related to these hedges. Interest paid or received for these swaps was recognized
as an adjustment of the interest expense of the liabilities whose risk is being managed. In 2010,
FHN’s counterparty called the swap associated with the $200 million of subordinated debt.
Accordingly, hedge accounting was discontinued on the date of the settlement and the cumulative
basis adjustments to the associated subordinated debt are being prospectively amortized as an
adjustment to interest expense over its remaining term. FHN subsequently re-hedged the
subordinated debt with a new interest rate swap using the long-haul method of effectiveness
assessment. In first quarter 2009, FHN’s counterparty called the swap associated with $100
million of subordinated debt. Accordingly, hedge accounting was discontinued on the date of
settlement and the cumulative basis adjustments to the associated subordinated debt are being
prospectively amortized as an adjustment to interest expense over its remaining term.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with interest rate risk management
activities for the year ended December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
</tr>
<tr style="font-size: 1pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Customer Interest Rate Contracts Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments and Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Customer Interest Rate Contracts <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,051,220</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">71,289</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">535</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,812</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Offsetting Upstream Interest Rate Contracts <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,051,220</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">535</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">74,889</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(5,913</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Debt Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,604,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">109,863</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12,636</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">20,241</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Term
Borrowings <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">1,604,000</td>
<td nowrap="nowrap"> <sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(20,241</td>
<td nowrap="nowrap">) <sup style="font-size: 85%; vertical-align: text-top">(d)</sup></td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Gains/losses included in the Other expense section of the Consolidated Statements of
Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Gains/losses included in the All other income and commissions section of the Consolidated
Statements of Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents par value of term borrowings being hedged.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Represents gains and losses attributable to changes in fair value due to interest rate risk as
designated in ASC 815-20 hedging relationships.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with interest rate risk management
activities for the year ended December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td>
</tr>
<tr style="font-size: 1pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:15px; text-indent:-15px"><b>Customer Interest Rate Contracts Hedging</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"><i>Hedging Instruments and Hedged Items:</i>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:30px; text-indent:-15px">Customer Interest Rate Contracts <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,157,540</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">65,760</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">818</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">(58,136</td>
<td nowrap="nowrap" valign="top">)</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:30px; text-indent:-15px">Offsetting Upstream Interest Rate Contracts <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,157,540</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">818</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">69,259</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">50,946</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"><b>Debt Hedging</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,200,000</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">90,936</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">4,818</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">(59,844</td>
<td nowrap="nowrap" valign="top">)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:30px; text-indent:-15px">Term
Borrowings <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">N/A</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">N/A</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,200,000</td>
<td nowrap="nowrap" valign="top"> <sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">59,844</td>
<td nowrap="nowrap" valign="top"> <sup style="font-size: 85%; vertical-align: text-top">(d)</sup></td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Gains/losses included in the Other expense section of the Consolidated Statements of
Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Gains/losses included in the All other income and commissions section of the Consolidated
Statements of Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents par value of term borrowings being hedged.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Represents gains and losses attributable to changes in fair value due to interest rate risk as
designated in ASC 815-20 hedging relationships.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN hedges held-to-maturity trust preferred loans with a principal balance of $211.6 million
and $233.1 million as of December 31, 2010 and 2009, respectively, which have an initial fixed rate
term of five years before conversion to a floating rate. FHN has entered into pay fixed, receive
floating interest rate swaps to hedge the interest rate risk associated with this initial five year
term. These hedge relationships qualify as fair value hedges under ASC 815-20. The impact of
those swaps was $17.2 million and $19.2 million in Other liabilities on the Consolidated Statements
of Income as of December 31, 2010 and 2009, respectively. Interest paid or received for these
swaps was recognized as an adjustment of the interest income of the assets whose risk is being
hedged. Gain/(loss) is included in Other income and commissions on the Consolidated Statements of
Income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivative activities associated with these loans for the year
ended December 31, 2010:
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Loan Portfolio Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">211,583</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">17,198</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,023</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Trust Preferred Loans <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">211,583</td>
<td align="right" nowrap="nowrap"> <sup style="font-size: 85%; vertical-align: text-top">(b)</sup></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1,999</td>
<td nowrap="nowrap">) <sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Assets included in Loans, net of unearned income section of the Consolidated Statements of
Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Represents principal balance being hedged.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents gains and losses attributable to changes in fair value due to interest rate risk as
designated in ASC 815-20 hedging relationships.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivative activities associated with these loans for the
year ended December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Loan Portfolio Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">233,083</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19,221</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">6,640</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Trust Preferred Loans (a)
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">233,083</td>
<td align="right" nowrap="nowrap"> <sup style="font-size: 85%; vertical-align: text-top">(b)</sup></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(6,754</td>
<td nowrap="nowrap">) <sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Assets included in Loans, net of unearned income section of the Consolidated Statements of
Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Represents principal balance being hedged.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents gains and losses attributable to changes in fair value due to interest rate risk as
designated in ASC 815-20 hedging relationships.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><u>Visa Derivative</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In conjunction with the sale of a portion of its Visa Class B shares in December 2010, FHN and the
purchaser entered into a derivative transaction whereby FHN will make, or receive, cash payments
whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. At
the time of the sale the current conversion ratio of Visa Class B shares to Visa Class A shares was
approximately 51 percent. FHN determined that the initial fair value of the derivative was equal
to a pro rata portion of the previously accrued contingent liability for Visa litigation matters
attributable to the 440,000 Visa Class B shares sold. This amount was determined to be a liability
of $1.0 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Off-Balance Sheet Arrangements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Credit-Related Commitments. </i></b>FHN enters into fixed and variable interest rate loan commitments with
customers. When these commitments have contract rate adjustments that lag changes in market rates,
the financial instruments have characteristics similar to option contracts. FHN follows the same
credit policies and underwriting practices in making commitments as it does for on-balance sheet
instruments. Each counterparty’s creditworthiness is evaluated on a case-by-case basis. The
amount of collateral obtained, if any, is based on management’s credit evaluation of the
counterparty.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Commitments to extend credit are contractual obligations to lend to a customer as long as all
established contractual conditions are met. These commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. The majority of FHN’s loan
commitments have maturities less than one year and reflect the prevailing market rates at the time
of the commitment. Since commitments may expire without being fully drawn upon, total contractual
amounts do not necessarily represent future credit exposure or liquidity requirements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Other commitments include standby and commercial letters of credit and other credit enhancements.
Standby and commercial letters of credit and other credit enhancements are conditional commitments
issued by FHN to guarantee the performance and/or payment of a customer to a third party in
connection with specified transactions. The credit risk involved in issuing these commitments is
essentially the
same as that involved in extending loan facilities to customers, as performance
under any of these facilities would result in a loan being funded to the customer. See Note 22 —
Fair Value of Assets and Liabilities for the book value and fair value of FHN’s unfunded
commitments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN services loans for others, and in some cases, provides guarantees or recourse on the serviced
loans. See Note 18 — Restrictions, Contingencies, and Other Disclosures for additional
information.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 26 - fhn:RestructuringRepositioningAndEfficiencyTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 26 — Restructuring, Repositioning, and Efficiency</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Beginning in 2007, FHN conducted a company-wide review of business practices with the goal of
improving its overall profitability and productivity. In order to redeploy capital to higher-return
businesses, FHN sold 34 full-service First Horizon Bank branches in its national banking markets,
discontinued national homebuilder and commercial real estate lending through its First Horizon
Construction Lending offices, and executed various MSR sales. In 2008, FHN sold its national
mortgage origination and servicing platform including substantially all of its mortgage pipeline,
related hedges, servicing assets, certain fixed assets, and other associated assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN contracted to sell its institutional equity research business, a division of FTN
Financial. During first quarter 2010, the sale failed to close and FHN incurred an additional
goodwill impairment, severance and contract terminations costs, and asset write-offs when exiting
the business. Additionally, in late 2009 FHN sold and closed its Louisville remittance processing
operations and the Atlanta insurance business and also cancelled a large services/consulting
contract.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Net costs recognized by FHN in the year ended December 31, 2010, related to restructuring,
repositioning, and efficiency activities were $17.2 million. Of this amount, $9.5 million
represented exit costs that were accounted for in accordance with the Exit or Disposal Cost
Obligations Topic of the FASB Accounting Standards Codification (“ASC 420”).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Significant expenses recognized in 2010 resulted from the following actions:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Severance and other employee costs of $5.6 million primarily related to the exit of the
institutional equity research business and the 2009 sale of Louisville remittance
processing operations.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Goodwill impairment of $3.3 million and lease abandonment expense of $2.3 million
primarily related to the closure of the institutional equity research business.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss of $4.1 million related to asset impairments.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Net costs recognized by FHN in the year ended December 31, 2009, related to restructuring,
repositioning, and efficiency activities were $51.9 million. Of this amount, $12.4 million
represented exit costs that were accounted for in accordance with ASC 420.
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td>Significant expenses recognized in 2009 resulted from the following actions:</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Severance and related employee costs of $5.6 million related to discontinuation of
national lending operations and the sales and closures of FERP and the Atlanta insurance
business.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss on divestitures of $9.2 million related to the FERP and Atlanta insurance
transactions.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss of $13.4 million related to cancellation of a contract on external services.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Goodwill impairment of $14.3 million related to agreement to sell FTN ECM and $2.3
million related to the closure of the remaining Atlanta insurance business.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Net costs recognized by FHN in the year ended December 31, 2008, related to restructuring,
repositioning, and efficiency activities were $91.4 million. Of this amount, $49.1 million
represented exit costs that were accounted for in accordance with ASC 420.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Significant expenses recognized in 2008 resulted from the following actions:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Expense of $49.1 million associated with organizational and compensation changes due to
right-sizing operating segments, the divestiture of certain First Horizon Bank branches and
certain mortgage banking operations, and consolidating functional areas.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss of $16.6 million on the divestiture of mortgage banking operations.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss of $2.4 million from the sales of certain First Horizon Bank branches.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Transaction costs of $12.7 million from the contracted sales of mortgage servicing
rights.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Expense of $10.7 million for the write-down of certain premises and equipment,
intangibles, and other assets resulting from FHN’s divestiture of certain mortgage
operations and from the change in FHN’s national banking strategy.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The financial results of FTN ECM (the institutional equity research business) including goodwill
impairment are reflected in the Loss from discontinued operations, net of tax line on the
Consolidated Statements of Income for all periods presented. Losses from the divestitures of the
Atlanta insurance business, FERP, and certain mortgage banking operations are included in Losses on
divestitures on the Consolidated Statements of Income. Transaction costs recognized in the periods
presented from selling mortgage servicing rights are recorded as a reduction of Mortgage banking
income in the noninterest income section of the Consolidated Statements of Income. All other costs
associated with the restructuring, repositioning, and efficiency initiatives implemented by
management are included in the noninterest
expense section of the Consolidated Statements of Income, including severance and other
employee-related costs recognized in relation to such initiatives which are recorded in Employee
compensation, incentives, and benefits; facilities consolidation costs and related asset impairment
costs are included in Occupancy; costs associated with the impairment of premises and equipment are
included in Equipment rentals, depreciation, and maintenance or All other expense; professional
fees are included in Legal and professional fees; costs associated with intangible asset
impairments are included in All other expense and goodwill impairments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Activity in the restructuring and repositioning liability for the years ended December 31, 2010,
2009, and 2008 is presented in the following table, along with other restructuring and
repositioning expenses recognized. For repositioning actions initiated prior to 2010, costs
associated with the reduction of national operations and termination of product and service
offerings are included within the non-strategic segment while costs associated with efficiency
initiatives affecting multiple segments and initiatives that occurred within regional banking and
capital markets are included in the corporate segment. For repositioning actions initiated in
2010, the related costs are included in the segment that has decision-making responsibility.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(Dollars in thousands)</i></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2009</td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Expense</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liability</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Expense</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liability</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Expense</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liability</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Beginning Balance
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>15,903</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">24,167</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19,675</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Severance and other employee related costs
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5,638</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>5,638</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,400</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,400</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Facility consolidation costs
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,348</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,348</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,511</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,511</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,751</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,751</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other exit costs, professional fees, and other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,468</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,468</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">322</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">322</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,902</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,902</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Accrued
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>9,454</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>25,357</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,445</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">49,053</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">68,728</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Payments related to:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Severance and other employee related costs
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,440</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,840</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,235</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Facility consolidation costs
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3,939</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,868</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,223</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other exit costs, professional fees, and other
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,394</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">874</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,558</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrual reversals
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,476</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,127</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,545</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Restructuring and Repositioning Reserve Balance <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>9,108</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,903</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">24,167</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other Restructuring and Repositioning Expense:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage banking expense on servicing sales
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,532</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">548</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,667</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">All other income and commissions
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>27</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Loss on divestitures
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,183</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,020</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of premises and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,086</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,873</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,650</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of intangible assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,348</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,753</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,030</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>267</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,124</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">993</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,493</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total Other Restructuring and Repositioning Expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,767</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,481</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,360</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Restructuring and Repositioning
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>17,221</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">51,926</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">91,413</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes $1.2 million of deferred severance-related payments that will be paid after 2010.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN began initiatives related to restructuring in second quarter 2007. Consequently, the
following table presents cumulative amounts incurred to date as of December 31, 2010, for costs
associated with FHN’s restructuring, repositioning, and efficiency initiatives:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Charged to</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 0px solid #000000"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000">Expense</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Severance and other employee related costs <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">61,182</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Facility consolidation costs
</div></td>
<td> </td>
<td> </td>
<td align="right">38,741</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other exit costs, professional fees, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">18,946</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other restructuring and repositioning (income) and expense:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Loan portfolio divestiture
</div></td>
<td> </td>
<td> </td>
<td align="right">7,672</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage banking expense on servicing sales
</div></td>
<td> </td>
<td> </td>
<td align="right">21,175</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net loss on divestitures
</div></td>
<td> </td>
<td> </td>
<td align="right">12,535</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of premises and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">21,897</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of intangible assets
</div></td>
<td> </td>
<td> </td>
<td align="right">38,131</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">40,492</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,493</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Restructuring and Repositioning Charges Incurred to Date as of December 31, 2010
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">259,278</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes $1.2 million of deferred severance-related payments that will be paid after 2010.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 27 - us-gaap:CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 27 — Parent Company Financial Information</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Following are condensed statements of the parent company:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Statements of Condition</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Year Ended December 31</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>219,287</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities purchased from subsidiary bank under agreements to resell
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,827</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total cash and cash equivalents
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>219,287</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,827</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest-bearing cash
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>112,896</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">160,999</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>6,901</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,160</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Notes receivable
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,700</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,700</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance for loan losses
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(823</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(823</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Investments in subsidiaries:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Bank
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,203,991</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,455,474</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-bank
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>20,042</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,631</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>187,247</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">208,181</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total assets</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,753,241</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,873,149</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities and equity:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other short-term borrowings and commercial paper
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>4,800</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,800</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued employee benefits and other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>141,605</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">130,507</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term
borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>928,831</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">436,374</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,075,236</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">570,681</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total equity
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,678,005</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,302,468</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total liabilities and equity</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,753,241</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,873,149</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Statements of Income</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Year Ended December 31</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Dividend income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Bank
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>300,000</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-bank
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,531</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,261</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,852</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total dividend income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>301,531</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,261</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,852</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>340</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">570</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,035</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,761</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,494</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,724</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>303,632</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,325</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,163</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">823</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest expense:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Short-term debt
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>290</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">298</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">285</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Term
borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,713</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,166</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,940</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total interest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>12,003</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,464</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,225</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Compensation, employee benefits and other expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>33,476</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,398</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">49,290</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>45,479</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">46,685</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">68,515</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>258,153</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(43,360</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(62,352</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income tax benefit
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(13,078</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(20,514</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(20,884</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before equity in undistributed net income of subsidiaries
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>271,231</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(22,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(41,468</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity in undistributed net income/(loss) of subsidiaries:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Bank
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(220,800</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(247,205</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(148,315</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-bank
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(230</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">214</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,204</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net
income/(loss) attributable to the controlling interest</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50,201</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(269,837</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(191,987</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Statements of Cash Flows</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>Year Ended December 31</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Operating activities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income/(loss)
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50,201</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(269,837</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(191,987</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less undistributed net loss of subsidiaries
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(221,030</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(246,991</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(150,519</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before undistributed net income of subsidiaries
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>271,231</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(22,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(41,468</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustments to reconcile income to net cash provided by operating activities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred income tax provision/(benefit)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">764</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,160</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Depreciation,
amortization, and other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,201</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,131</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,060</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Stock-based compensation expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>6,797</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,821</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,930</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net (increase)/decrease in interest receivable and other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>26,439</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,962</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">94,931</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net decrease in interest payable and other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>155</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(507</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(110,378</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total adjustments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>37,592</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,247</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,617</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net cash provided/(used) by operating activities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>308,823</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(14,599</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(52,085</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Investing activities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Sales and prepayments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>20</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,714</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Purchases
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(410</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,528</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Decrease/(increase) in interest-bearing cash
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>48,103</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">79,963</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(34,909</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Return on investment in subsidiary
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>49</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">700</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,918</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash investments in subsidiaries
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,346,169</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net cash provided/(used) by investing activities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>47,762</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">77,663</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,376,974</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Financing activities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred stock:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Proceeds from issuance of preferred stock and common stock warrant — CPP
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">866,540</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Repayment of preferred equity — CPP
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(866,540</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cash dividends
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(47,780</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(43,447</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Common stock:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercise of stock options
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>93</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">511</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Proceeds from issuance of common stock
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>263,103</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">659,656</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cash dividends
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(120,575</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Repurchase of shares
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,345</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(392</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(303</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term
borrowings
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Proceeds
from issuance of term borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>496,345</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">(Decrease)/increase in short-term borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,000</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(13,030</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">14,754</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>(1</b></td>
<td><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">80</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net cash (used)/provided by financing activities
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(155,125</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(56,786</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,420,583</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net increase/(decrease) in cash and cash equivalents
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>201,460</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,278</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,476</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of year
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>17,827</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,549</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,025</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>219,287</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">17,827</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">11,549</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total interest paid
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>10,966</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12,246</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19,014</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total income taxes paid
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,713</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">99,090</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">332,600</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 28 - us-gaap:ScheduleOfSubsequentEventsTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 28 — Other Events</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2011, FHN recognized a gain of $5.8 million related to the redemption of $103
million of subordinated debentures issued to First Tennessee Capital Trust I. Prior to 2010, FHN
hedged the subordinated debentures utilizing the long-haul method. In first quarter 2009, FHN’s
counterparty called the swap associated with the subordinated debt. Accordingly, hedge accounting
was discontinued on the date of settlement and the cumulative basis adjustment to the associated
subordinated debt was being amortized as an adjustment to yield over the remaining term. As a
result of the redemption of the debt, the remaining basis adjustment was derecognized resulting in
a $5.8 million gain.
</div>
</div>
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includes transferred loans for Q3 and Q4. Loan transfers for Q1 and Q2 are not available.Restricted balances parenthetically presented are as of December 31, 2010. Outstanding shares have been restated to reflect stock dividends distributed through January 1, 2011.Includes a positive, after-tax effect of $18.3 million due to a curtailment.Includes amortization related to discount of preferred stock - CPP.EX-101.SCH
19
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IDEA: Preferred Stock and Other Capital
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<!-- Begin Block Tagged Note 12 - fhn:PreferredStockAndOtherCapitalTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 12 — Preferred Stock and Other Capital</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>FHN Preferred Stock and Warrant</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On November 14, 2008, FHN issued and sold 866,540 preferred shares of Fixed Rate Cumulative
Perpetual Preferred Stock, Series CPP, along with a Warrant to purchase common stock. The issuance
occurred in connection with, and is governed by, the Treasury Capital Purchase Program (“Capital
Purchase Program”) administered by the U.S. Treasury (“UST”) under the Troubled Asset Relief
Program (“TARP”). In connection with the issuance of the Preferred Shares, FHN also issued a
Warrant, to purchase 12,743,235 common shares with an exercise price of $10.20 per share. The
warrant is immediately exercisable and expires ten years after issuance. As a result of the stock
dividends distributed through January 1, 2011, the Warrant was adjusted to cover 14,842,321 common
shares at a purchase price of $8.757 per share. On December 22, 2010, FHN repurchased all of the
preferred shares and remitted the accrued and unpaid dividends subsequent to offerings of common
equity and debt which raised more than $750 million. As of December 31, 2010, the Warrant remained
outstanding and continues to be held by the UST. The Warrant is presented in permanent equity on
the Consolidated Statements of Condition in the amount of $83.9 million. Upon issuance of the
preferred shares and common stock warrant, the proceeds received were allocated between the common
stock warrant and preferred shares based on their relative fair values. The fair value of the
preferred shares was determined by calculating the present value of expected cash flows using a
9.40 percent discount rate. The discount was being amortized over the initial five-year period
using the constant yield method. Upon redemption of the preferred shares, FHN accelerated the
amortization of the remaining discount which is included in preferred stock dividends on the
Consolidated Statements of Income. The fair value of the Warrant, which was determined using the
Black Scholes Options Pricing Model, assumed redemption prior to the increase in dividend rate on
the five year anniversary. The warrant provides a mechanism for the parties to explore a possible
repurchase by the issuer, and FHN is considering its options. Any such repurchase would be subject
to agreement by both parties as well as regulatory assent. If no repurchase ultimately occurs, UST
has indicated its current intention to dispose of the warrant by other means pursuant to its terms
rather than hold the warrant indefinitely.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Subsidiary Preferred Stock</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On September 14, 2000, FT Real Estate Securities Company, Inc. (“FTRESC”), an indirect
subsidiary of FHN, issued 50 shares of 9.50 percent Cumulative Preferred Stock, Class B (“Class B
Preferred Shares”), with a liquidation preference of $1.0 million per share. An aggregate total of
47 Class B Preferred Shares have been sold privately to nonaffiliates. These securities qualify as
Tier 2 capital and are presented in the Consolidated Statements of Condition as Term borrowings.
FTRESC is a real estate investment trust (“REIT”) established for the purpose of acquiring,
holding, and managing real estate mortgage assets. Dividends on the Class B Preferred Shares are
cumulative and are payable semi-annually.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Class B Preferred Shares are mandatorily redeemable on March 31, 2031, and redeemable at the
discretion of FTRESC in the event that the Class B Preferred Shares cannot be accounted for as Tier
2 regulatory capital or there is more than an insubstantial risk that dividends paid with respect
to the Class B Preferred Shares will not be fully deductible for tax purposes. They are not
subject to any sinking fund and are not convertible into any other securities of FTRESC, FHN or any
of its subsidiaries. The shares are, however, automatically exchanged at the direction of the
Office of the Comptroller of the Currency for preferred stock of FTBNA, having substantially the
same terms as the Class B Preferred Shares in the event FTBNA becomes undercapitalized, insolvent
or in danger of becoming undercapitalized.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">First Horizon Preferred Funding, LLC and First Horizon Preferred Funding II, LLC have each issued
$1.0 million of Class B Preferred Shares. On December 31, 2010, 2009, and 2008, the amount of
Class B Preferred Shares that are perpetual in nature that was recognized as Noncontrolling
interest on the Consolidated Statements of Condition was $.3 million for all periods. The
remaining balance has been eliminated in consolidation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On March 23, 2005, FTBNA issued 300,000 shares of Class A Non-Cumulative Perpetual Preferred Stock
(“Class A Preferred Stock”) with a liquidation preference of $1,000 per share. These securities
qualify as Tier 1 capital. On December 31, 2010, 2009, and 2008, $294.8 million of Class A
Preferred Stock was recognized as Noncontrolling interest on the Consolidated Statements of
Condition for all periods.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Due to the nature of the subsidiary preferred stock issued by First Horizon Preferred Funding, LLC,
First Horizon Preferred Funding II, LLC, and FTBNA, all components of other comprehensive
income/(loss) included in the Consolidated Statements of Equity and income/(loss) from
discontinued operations, net of tax included in the Consolidated Statements of Income have been
attributed solely to FHN as the controlling interest holder. The component of income/(loss) from
continuing operations attributable to FHN as the controlling interest holder is $57.1 million,
$(257.0) million, and $(188.5) million during 2010, 2009, and 2008, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringPreferred Stock And Other capital.No authoritative reference available.falsefalse12Preferred Stock and Other CapitalUnKnownUnKnownUnKnown
PerShareRoundingLevel>UnKnownfalsetrueXML
26
R35.xml
IDEA: Other Events
2.2.0.25falsefalse0228 - Disclosure - Other Eventstruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0fhn_OtherEventsAbstractfhnfalsenadurationOther events.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringOther events.falsefalse3false0us-gaap_ScheduleOfSubsequentEventsTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1
falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 28 - us-gaap:ScheduleOfSubsequentEventsTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 28 — Other Events</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2011, FHN recognized a gain of $5.8 million related to the redemption of $103
million of subordinated debentures issued to First Tennessee Capital Trust I. Prior to 2010, FHN
hedged the subordinated debentures utilizing the long-haul method. In first quarter 2009, FHN’s
counterparty called the swap associated with the subordinated debt. Accordingly, hedge accounting
was discontinued on the date of settlement and the cumulative basis adjustment to the associated
subordinated debt was being amortized as an adjustment to yield over the remaining term. As a
result of the redemption of the debt, the remaining basis adjustment was derecognized resulting in
a $5.8 million gain.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDescribes disclosed significant events or transactions that occurred after the balance sheet date, but before the issuance of the financial statements. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, losses resulting from fire or flood, losses on receivables, significant realized and unrealized gains and losses that result from changes in quoted market prices of securities, declines in market prices of inventory, changes in authorized or issued debt (SE
C), significant foreign exchange rate changes, substantial loans to insiders or affiliates, significant long-term investments, and substantial dividends not in the ordinary course of business.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 5
-Paragraph 11
falsefalse12Other EventsUnKnownUnKnownUnKnownUnKnownfalsetrueXML
27
R29.xml
IDEA: Fair Value of Assets and Liabilities
2.2.0.25falsefalse0222 - Disclosure - Fair Value of Assets and Liabilitiestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0fhn_FairValueOfAssetsAndLiabilitiesAbstractfhnfalsenadurationFair Value of Assets and Liabilities.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringFair Value of Assets and Liabilities.falsefalse3false0us-gaap_FairValueMeasurementInputsDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse
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<!-- Begin Block Tagged Note 22 - us-gaap:FairValueMeasurementInputsDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 22 — Fair Value of Assets & Liabilities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN groups its assets and liabilities measured at fair value in three levels, based on the
markets in which the assets and liabilities are traded and the reliability of the assumptions used
to determine fair value. This hierarchy requires FHN to maximize the use of observable market
data, when available, and to minimize the use of unobservable inputs when determining fair value.
Each fair value measurement is placed into the proper level based on the lowest level of
significant input. These levels are:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Level 1 — Valuation is based upon quoted prices for identical instruments traded in
active markets.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Level 2 — Valuation is based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not active,
and model-based valuation techniques for which all significant assumptions are observable
in the market.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Level 3 — Valuation is generated from model-based techniques that use significant
assumptions not observable in the market. These unobservable assumptions reflect
management’s estimates of assumptions that market participants would use in pricing the
asset or liability. Valuation techniques include use of option pricing models, discounted
cash flow models, and similar techniques.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Transfers between fair value levels are recognized at the end of the fiscal quarter in which the
associated change in inputs occurs.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents the balance of assets and liabilities measured at fair value on a
recurring basis as of December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 1</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 2</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 3</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities — capital markets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">45,078</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">45,078</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267,086</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267,086</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">62,061</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">62,061</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">82,022</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">82,022</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,965</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,965</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">263,968</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">264,002</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Equity, mutual funds, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading securities — capital markets
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">734,280</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">734,314</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities — mortgage banking
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Principal only
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,992</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,992</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest only
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,444</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,444</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading securities — mortgage banking
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,992</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,444</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,436</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40,323</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">207,632</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">247,955</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">87,444</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">87,444</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,469,957</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,469,957</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,168,740</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,168,740</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,335</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37,891</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,226</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,515</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,500</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,015</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">545</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">545</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Venture capital
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,179</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,179</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Equity, mutual funds, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">9,248</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,351</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,599</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">9,793</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,771,342</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">52,570</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,833,705</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage servicing rights
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">207,319</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">207,319</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred compensation assets
</div></td>
<td> </td>
<td> </td>
<td align="right">25,121</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,121</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, forwards and futures
</div></td>
<td> </td>
<td> </td>
<td align="right">13,152</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,152</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, interest rate contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">290,509</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">290,509</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">38,273</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">290,509</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">328,782</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">48,066</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,845,446</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">493,999</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,387,511</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading liabilities — capital markets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">195,390</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">195,390</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,804</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,804</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,121</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,121</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">146,605</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">146,605</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading liabilities — capital markets
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">361,920</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">361,920</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other short-term borrowings and commercial paper
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,309</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,309</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, forwards and futures
</div></td>
<td> </td>
<td> </td>
<td align="right">18,600</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,600</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, interest rate contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">195,621</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">195,621</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivatives, other
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">18,600</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">195,621</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">215,221</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">18,600</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">557,541</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">28,309</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">604,450</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents the balance of assets and liabilities measured at fair value on a
recurring basis at December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 1</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 2</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 3</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities — capital markets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">92,387</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">92,387</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">175,698</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">175,698</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,074</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,074</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">92,842</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">92,842</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,961</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,961</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">217,016</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">217,050</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Equity, mutual funds, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,778</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,790</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading securities — capital markets
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">633,756</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">46</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">633,802</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities — mortgage banking
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,013</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">56,086</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">66,099</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,919</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">206,227</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">230,146</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">48,129</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">48,129</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000,077</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000,077</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,189,430</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,189,430</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other U.S. government agencies
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,472</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">97,673</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">118,145</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,900</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,500</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,400</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">696</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">696</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Equity, mutual funds, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">35,361</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,016</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,743</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">95,120</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">36,057</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,345,024</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">114,916</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,495,997</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage servicing rights
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">302,611</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">302,611</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">25,337</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">248,628</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">273,965</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">61,394</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,261,340</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">679,886</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,002,620</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading liabilities — capital markets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">104,087</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">104,087</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,952</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,952</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and other debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">187,340</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">187,340</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total trading liabilities — capital markets
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other short-term borrowings and commercial paper
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,662</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,662</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">4,929</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">174,493</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">179,422</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">4,929</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">467,880</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">39,662</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">512,471</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Changes in Recurring Level 3 Fair Value Measurements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In third quarter 2009, FHN reviewed the allocation of fair value between MSR and excess interest
from prior first lien loan sales and securitizations. As a result, a net amount of $11.1 million
was reclassified from trading securities to MSR within Level 3 assets measured at fair value on a
recurring basis. The reclassification had no effect on FHN’s Consolidated Statements of Income as
excess interest and MSR are highly correlated in valuation and as both excess interest and MSR are
recognized at elected fair value with changes in fair value being included within mortgage banking
income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2009, FHN changed the fair value methodology for certain loans held for sale. The
methodology change had a minimal effect on the valuation of the applicable loans. Consistent with
this change, the applicable amount is presented as a transfer into Level 3 loans held for sale in
the following rollforward for the twelve months ended December 31, 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In third quarter 2008, FHN revised its methodology for valuing hedges of MSR and excess interest
that were retained from prior securitizations. Consistent with this change, the applicable amounts
are presented as a transfer out of net derivative assets and liabilities in the following
rollforward for the twelve months ended December 31, 2008. See Determination of Fair Value for a
detailed discussion of the changes in valuation methodology.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are
summarized as follows:
</div>
<div align="center">
<table style="font-size: 9pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="27" style="border-bottom: 1px solid #000000">Twelve Months Ended December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Securities available for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Net derivative</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other short-term</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Trading</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Loans held</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Investment</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Venture</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">servicing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">assets and</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">borrowings and</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">securities(a)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">portfolio(b)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Capital</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">rights, net</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">liabilities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">commercial paper</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on January 1, 2010
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">56,132</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">206,227</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">99,173</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,743</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">302,611</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">39,662</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustment due to adoption of amendments to ASC 810
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,776</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,293</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total net gains/(losses) included in:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td> </td>
<td align="right">8,627</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(17,991</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,962</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(31,146</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(12,353</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Other comprehensive income
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,302</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Purchases, sales, issuances, and settlements, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(33,505</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">19,396</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,480</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">398</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(61,853</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on December 31, 2010
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">26,478</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">207,632</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">39,391</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">13,179</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">207,319</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">27,309</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net unrealized gains/(losses) included in net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">5,467 </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(17,991) </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,962) </td>
<td nowrap="nowrap">(d)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(27,153) </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(12,353) </td>
<td nowrap="nowrap">(c)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="27" style="border-bottom: 1px solid #000000">Twelve Months Ended December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Securities available for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Net derivative</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other short-term</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Trading</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Loans held</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Investment</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Venture</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">servicing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">assets and</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">borrowings and</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">securities(a)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">portfolio(b)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Capital</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">rights, net</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">liabilities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">commercial paper</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on January 1, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">153,542</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">11,330</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">111,840</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25,307</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">376,844</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">233</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">27,957</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total net gains/(losses) included in:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td> </td>
<td align="right">55,342</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,384</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,252</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">67,817</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,705</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Other comprehensive income
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,812</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Purchases, sales, issuances, and
settlements, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(141,675</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(36,265</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,479</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,312</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(153,127</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(233</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net transfers into/(out of) Level 3
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(11,077</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">241,546</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,077</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on December 31, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">56,132</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">206,227</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">99,173</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,743</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">302,611</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">39,662</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net unrealized gains/(losses) included
in net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">14,408 </td>
<td nowrap="nowrap">(e)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(10,384) </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,252) </td>
<td nowrap="nowrap">(d)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">69,412 </td>
<td nowrap="nowrap">(f)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">11,705 </td>
<td nowrap="nowrap">(c)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000">Twelve Months Ended December 31, 2008</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Securities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Net derivative</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other short-term</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Trading</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Loans held</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">available</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">servicing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">assets and</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">borrowings and</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">securities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">for sale</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">rights, net</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">liabilities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">commercial paper</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on January 1, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">476,404</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">159,301</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,159,820</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">81,517</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total net gains/(losses) included in:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(109,232</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,551</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">303</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(429,854</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">146,737</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(34,978</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Other comprehensive income
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,641</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Purchases, sales, issuances, and
settlements, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(235,569</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,711</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(18,816</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(353,122</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(119,926</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">62,935</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net transfers into/(out of) Level 3
</div></td>
<td> </td>
<td> </td>
<td align="right">21,939</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,592</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(108,095</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance on December 31, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">153,542</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">11,330</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">137,147</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">376,844</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">233</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">27,957</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net unrealized gains/(losses) included
in net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(172,366) </td>
<td nowrap="nowrap">(g)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(10,742) </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">303 </td>
<td nowrap="nowrap">(d)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(328,112) </td>
<td nowrap="nowrap">(h)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">72 </td>
<td nowrap="nowrap">(c)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(19,974) </td>
<td nowrap="nowrap">(c)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div style="margin-top: 3pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Primarily represents certificated interest only strips and excess interest mortgage banking
trading securities. Capital markets Level 3 trading securities are not significant.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Primarily represents other U.S. government agencies. States and municipalities are not
significant.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Primarily included in mortgage banking income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Represents recognized gains and losses attributable to venture capital investments classified
within securities available for sale that are included in securities gains/(losses) in noninterest
income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(e)</td>
<td> </td>
<td>Represents recognized gains/(losses) of $(2.2) million included in capital markets noninterest
income, $20.5 million included in mortgage banking noninterest income, and $(3.9) million included
in other income
and commissions.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(f)</td>
<td> </td>
<td>Represents recognized gains/(losses) of $71.6 million included in mortgage banking noninterest
income and $(2.2) million included in other income and commissions.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(g)</td>
<td> </td>
<td>Includes $(23.8) million included in capital markets noninterest income, $(138.5) million
included in mortgage banking noninterest income, and $(10.1) million included in other income and
commissions.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(h)</td>
<td> </td>
<td>Includes $(312.9) million included in mortgage banking noninterest income and $(15.2) million
included in other income and commissions.</td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Nonrecurring Fair Value Measurements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">From time to time, FHN may be required to measure certain other financial assets at fair value on a
nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the
application of LOCOM accounting or write-downs of individual assets. For assets measured at fair
value on a nonrecurring basis which were still held on the balance sheet at December 31, 2010,
2009, and 2008, respectively, the following tables provide the level of valuation assumptions used
to determine each adjustment, the related carrying value, and the fair value adjustments recorded
during the respective periods.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Twelve Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Carrying value at December 31, 2010</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2010</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net gains/(losses)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale — SBAs
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">10,456</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">10,456</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">60</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale — first mortgages
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,289</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,289</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,249</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213,974</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213,974</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(156,572</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate acquired by foreclosure <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">110,536</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">110,536</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(18,097</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets<sup style="font-size: 85%; vertical-align: text-top"> (c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">87,667</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">87,667</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11,145</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">       </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(193,003</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Twelve Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Carrying value at December 31, 2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2009</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net gains/(losses)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">         </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,753</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">21,829</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">37,582</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,716</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale <sup style="font-size: 85%; vertical-align: text-top">(d)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(516</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">402,007</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">402,007</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(287,866</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate acquired by foreclosure <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113,722</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113,722</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(39,879</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">108,247</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">108,247</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,970</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">       </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(335,515</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Twelve Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Carrying value at December 31, 2008</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2008</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net gains/(losses)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">         </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">78,739</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">38,153</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">116,892</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(27,503</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale <sup style="font-size: 85%; vertical-align: text-top">(d)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,117</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,117</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,897</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">414,902</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">414,902</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(198,485</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets<sup style="font-size: 85%; vertical-align: text-top"> (c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113,832</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113,832</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9,229</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000">       </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(237,114</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td colspan="3">Certain previously reported amounts have been reclassified to agree with current presentation.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Represents carrying value of loans for which adjustments are based on the appraised value of
the collateral. Write-downs on these loans are
recognized as part of provision.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Represents the fair value and related losses of foreclosed properties that were measured
subsequent to their initial classification as foreclosed
assets. Balance excludes foreclosed real estate related to government insured mortgages.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents low income housing investments.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Represents recognition of other than temporary impairment for cost method investments
classified within securities available for sale.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In fourth quarter 2010, FHN exercised clean up calls on eight first lien mortgage proprietary
securitization trusts. In accordance with accounting requirements, FHN initially recognized the
associated loans at fair value. Fair value was primarily determined through reference to
observable inputs, including current market prices for similar loans. Since these loans were from
the 2002 and 2003 vintages, adjustments were made for the higher yields and lower credit risk
associated with the loans in comparison to more currently originated loans being sold. This
resulted in recognition of a small premium for the called loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN recognized goodwill impairment of $14.3 million related to the disposition of FTN ECM.
In accordance with accounting requirements, FHN allocated a portion of the goodwill from the
applicable reporting unit to the asset group held for disposal in determining the carrying value of
the disposal group. In determining the amount of impairment, FHN compared the carrying value of
the disposal group to the estimated value of the contracted sale price, which primarily included
observable inputs in the form of financial asset values but which also included certain
non-observable inputs related to the estimated values of post-transaction contingencies. Thus,
this measurement was considered a Level 3 valuation. Impairment of goodwill was recognized for the
excess of the carrying amount over the fair value of the disposal group. During first quarter
2010, the sale failed to close and FHN exited this business through an immediate cessation of
operations resulting in an additional goodwill impairment of $3.3 million, which represented all
remaining goodwill attributable to FTN ECM.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2008, FHN recognized a lower of cost or market reduction in value of $36.2 million
on its warehouse of trust preferred loans, which was classified within level 3 for loans held for
sale at March 31, 2008. The determination of estimated market value for the warehouse was based on
a hypothetical securitization transaction for the warehouse as a whole. FHN used observable data
related to prior securitization transactions as well as changes in credit spreads in the
collateralized debt obligation (CDO) market since the most recent
transaction. FHN also incorporated significant internally developed assumptions within its
valuation of the warehouse, including estimated prepayments and estimated defaults. In accordance
with ASC 820, FHN excluded transaction costs related to the hypothetical securitization in
determining fair value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In second quarter 2008, FHN designated its trust preferred warehouse as held to maturity.
Accordingly, these loans were excluded from loans held for sale in the nonrecurring measurements
table as of December 31, 2008. In conjunction with the transfer of these loans to held
to maturity status, FHN performed a lower of cost or market analysis on the date of transfer. This
analysis was based on the pricing of market transactions involving securities similar to those held
in the trust preferred warehouse with consideration given, as applicable, to any
differences in characteristics of the market transactions, including issuer credit quality, call
features and term. As a result of the lower of cost
or market analysis, FHN determined that its existing valuation of the trust preferred warehouse was
appropriate.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, FHN recognized a lower of cost or market reduction in value of $26.8 million relating
to mortgage warehouse loans. Approximately $19 million was attributable to increased repurchases,
delinquencies, or aging of loans. The market values for these loans were estimated using
historical sales prices for these type loans, adjusted for incremental price concessions that a
third party investor was assumed to require due to tightening credit markets and deteriorating
housing prices. These assumptions were based on published information about actual and projected
deteriorations in the housing market as well as changes in credit spreads. The remaining reduction
was primarily attributable to lower investor prices, due primarily to credit spread widening. This
reduction was calculated by comparing the total fair value of loans (using the same methodology
that is used for fair value option loans) to carrying value for the aggregate population of loans
that were not delinquent or aged.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Fair Value Option</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN elected the fair value option on a prospective basis for almost all types of mortgage loans
originated for sale purposes under the Financial Instruments Topic (“ASC 825”). FHN determined
that the election reduced certain timing differences and better matched changes in the value of
such loans with changes in the value of derivatives used as economic hedges for these assets at the
time of election. After the 2008 divestiture of certain mortgage banking operations and the
significant decline of mortgage loans originated for sale, FHN discontinued hedging the mortgage
warehouse.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Repurchased loans are recognized within loans held-for-sale at fair value at the time of
repurchase, which includes consideration of the credit status of the loans and the estimated
liquidation value. FHN has elected to continue recognition of these loans at fair value in periods
subsequent to reacquisition. Due to the credit-distressed nature of the vast majority of
repurchased loans and the related loss severities experienced upon repurchase, FHN believes that
the fair value election provides a more timely recognition of changes in value for these loans that
occur subsequent to repurchase. Absent the fair value election, these loans would be subject to
valuation at the lower of cost or market value, which would prevent subsequent values from
exceeding the initial fair value determined at the time of repurchase but would require recognition
of subsequent declines in value. Thus, the fair value election provides for a more timely
recognition of any potential future recoveries in asset values while not affecting the requirement
to recognize subsequent declines in value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to 2010, FHN transferred certain servicing assets in transactions that did not qualify for
sale treatment due to certain recourse provisions. The associated proceeds are recognized within
other short-term borrowings and commercial paper in the Consolidated Statements of Condition as of
December 31, 2010 and 2009. Since the servicing assets are recognized at fair value and changes in
the fair value of the related financing liabilities will exactly mirror the change in fair value of
the associated servicing assets, management elected to account for the financing liabilities at
fair value. Since the servicing assets have already been delivered to the buyer, the fair value of
the financing liabilities associated with the transaction does not reflect any instrument-specific
credit risk.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table reflects the differences between the fair value carrying amount of mortgages
held for sale measured at fair value in accordance with management’s election and the aggregate
unpaid principal amount FHN is contractually entitled to receive at maturity.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair value carrying</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Aggregate unpaid</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">amount less aggregate</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">carrying amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">principal</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">unpaid principal</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale reported at fair value:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">247,955</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">313,199</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(65,244</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Nonaccrual loans
</div></td>
<td> </td>
<td> </td>
<td align="right">36,768</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74,285</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(37,517</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Loans 90 days or more past due and still accruing
</div></td>
<td> </td>
<td> </td>
<td align="right">10,372</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,372</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair value carrying</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Aggregate</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">amount less aggregate</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">carrying amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">unpaid principal</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">unpaid principal</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale reported at fair value:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">230,146</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">277,400</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(47,254</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Nonaccrual loans
</div></td>
<td> </td>
<td> </td>
<td align="right">15,988</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34,469</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(18,481</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Loans 90 days or more past due and still accruing
</div></td>
<td> </td>
<td> </td>
<td align="right">8,026</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,765</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,739</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Assets and liabilities accounted for under the fair value election are initially measured at fair
value with subsequent changes in fair value recognized in earnings. Such changes in the fair value
of assets and liabilities for which FHN elected the fair value option are included in current
period earnings with classification in the income statement line item reflected in the following
table:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11">Twelve Months Ended</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Changes in fair value included in net income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage banking noninterest income
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(17,991</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(8,236</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(21,870</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Other short-term borrowings and commercial paper
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(12,353</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">11,705</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,974</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Estimated changes in fair value due to credit risk (loans held for sale)
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(19,517</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,771</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(21,865</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentaion.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For the twelve month period ended December 31, 2009 and 2008, the amounts for loans held for sale
include $13.7 million, and $21.9 million, respectively, of losses included in pretax earnings that
are attributable to changes in instrument-specific credit risk. During 2010, this amount was
immaterial. The portion of the fair value adjustments related to credit risk was determined based
on both a quality adjustment for delinquencies and the full credit spread on the non-conforming
loans.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interest income on mortgage loans held for sale measured at fair value is calculated based on
the note rate of the loan and is recorded in the interest income section of the
Consolidated Statements of Income as interest on loans held for sale.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Determination of Fair Value</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with ASC 820-10-35, fair values are based on the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. The following describes the assumptions and methodologies
used to estimate the fair value of financial instruments and MSR recorded at fair value in the
Consolidated Statements of Condition and for estimating the fair value of financial instruments for
which fair value is disclosed under ASC 825-10-50.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Short-term financial assets. </i></b>Federal funds sold, securities purchased under agreements to resell,
and interest bearing deposits with other financial institutions are carried at historical cost.
The carrying amount is a reasonable estimate of fair value because of the relatively short time
between the origination of the instrument and its expected realization.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Trading securities and trading liabilities. </i></b>Trading securities and trading liabilities are
recognized at fair value through current earnings. Trading inventory held for broker-dealer
operations is included in trading securities and trading liabilities. Broker-dealer long positions
are valued at bid price in the bid-ask spread. Short positions are valued at the ask price.
Inventory positions are valued using observable inputs including current market transactions, LIBOR
and U.S. treasury curves, credit spreads, and consensus prepayment speeds.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Trading securities also include retained interests in prior securitizations that qualify as
financial assets, which may include certificated residual interests, excess interest (structured as
interest-only strips), principal-only strips, or subordinated bonds. Residual interests represent
rights to receive earnings to the extent of excess income generated by the underlying loans. Excess
interest represents rights to receive interest from serviced assets that exceed contractually
specified rates. Principal-only strips are principal cash flow tranches, and interest-only strips
are interest cash flow tranches. Subordinated bonds are bonds with junior priority. All financial
assets retained from a securitization are recognized on the Consolidated Statements of Condition in
trading securities at fair value with realized and unrealized gains and losses included in current
earnings as a component of noninterest income on the Consolidated Statements of Income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of excess interest is determined using prices from closely comparable assets such as
MSR that are tested against prices determined using a valuation model that calculates the present
value of estimated future cash flows. Inputs utilized in valuing excess interest are consistent
with those used to value the related MSR. The fair value of excess interest typically changes
based on changes in the discount rate and differences between modeled prepayment speeds and credit
losses and actual experience. FHN uses assumptions in the model that it believes are comparable to
those used by brokers and other service providers. FHN also periodically compares its estimates of
fair value and assumptions with brokers, service providers, recent market activity, and against its
own experience.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of certificated residual interests was determined using a valuation model that
calculates the present value of estimated future cash flows. Inputs utilized in valuing residual
interests are generally consistent with those used to value the related MSR. However, due to the
lack of market information for residual interests, at December 31, 2009, FHN applied an
internally-developed assumption about the yield that a market participant would require in
determining the discount rate for its residual interests. The fair value of residual interests
typically changes based on changes in the discount rate and differences between modeled prepayment
speeds and credit losses and actual experience. All residual interests were removed from the
balance sheet upon adoption of ASU 2009-17 on January 1, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In some instances, FHN retained interests in the loans it securitized by retaining certificated
principal only strips or subordinated bonds. Subsequent to the August 2008 reduction of mortgage
banking operations, FHN uses observable inputs such as trades of similar instruments, yield curves,
credit spreads, and consensus prepayment speeds to determine the fair value of principal only
strips. Previously, FHN used the market prices from comparable assets such as publicly traded FNMA
trust principal only strips that were adjusted to reflect the relative risk difference between
readily marketable securities and privately issued securities in valuing the principal only strips.
The fair value of subordinated bonds was determined using the best available market information,
which included trades of comparable securities, independently provided spreads to other marketable
securities, and published market research. Where no market information was available, the company
utilized an internal valuation model. As of December 31, 2009, no market information was
available, and the subordinated bonds were valued using an internal discounted cash flow model,
which included assumptions about timing, frequency and severity of loss, prepayment speeds of the
underlying collateral, and the yield that a market participant would require. All subordinated
bonds were removed from the balance sheet upon adoption of ASU 2009-17 on January 1, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Securities available for sale. </i></b>Securities available for sale includes the investment portfolio
accounted for as available for sale under ASC 320-10-25, federal bank stock holdings, short-term
investments in mutual funds, and venture capital investments. Valuations of available-for-sale
securities are performed using observable inputs obtained from market transactions in similar
securities. Typical inputs include LIBOR and U.S. treasury curves, consensus prepayment estimates,
and credit spreads. When available, broker quotes are used to support these valuations. Certain
government agency debt obligations with limited trading activity are valued using a discounted cash
flow model that incorporates a combination of observable and unobservable inputs. Primary
observable inputs include contractual cash flows and the treasury curve. Significant unobservable
inputs include estimated trading spreads and estimated prepayment speeds.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Stock held in the Federal Reserve Bank and Federal Home Loan Banks are recognized at historical
cost in the Consolidated Statements of Condition which is considered to approximate fair value.
Short-term investments in mutual funds are measured at the funds’ reported closing net asset
values. Venture capital investments are typically measured using significant internally generated
inputs including adjustments to referenced transaction values and discounted cash flows analysis.
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loans held for sale. </i></b>In conjunction with the adoption of the provisions of the FASB
codification update to ASC 820-10 in second quarter 2009, FHN revised its methodology for
determining the fair value of certain loans within its mortgage warehouse. FHN now determines the
fair value of the applicable loans using a discounted cash flow model using observable inputs,
including current mortgage rates for similar products, with adjustments for differences in loan
characteristics reflected in the model’s discount rates. For all other loans held in the warehouse
(and in prior periods for the loans converted to the discounted cash flow methodology), the fair
value of loans whose principal market is the securitization market is based on recent security
trade prices for similar products with a similar delivery date, with necessary pricing adjustments
to convert the security price to a loan price. Loans whose principal market is the whole loan
market are priced based on recent observable whole loan trade prices or published third party bid
prices for similar product, with necessary pricing adjustments to reflect differences in loan
characteristics. Typical adjustments to security prices being valued for whole loan prices include
adding the value of MSR to the security price or to the whole loan price if FHN’s mortgage loan is
servicing retained, adjusting for interest in excess of (or less than) the required coupon or note
rate, adjustments to reflect differences in the characteristics of the loans being valued as
compared to the collateral of the security or the loan characteristics in the benchmark whole loan
trade, adding interest carry, reflecting the recourse obligation that will remain after sale, and
adjusting for changes in market liquidity or interest rates if the benchmark security or loan price
is not current. Additionally, loans that are delinquent or otherwise significantly aged are
discounted to reflect the less marketable nature of these loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Loans held for sale also includes loans made by the Small Business Administration (“SBA”). The
fair value of SBA loans is determined using an expected cash flow model that utilizes observable
inputs such as the spread between LIBOR and prime rates, consensus prepayment speeds, and the
treasury curve. The fair value of other non-mortgage loans held for sale is approximated by their
carrying values based on current transaction values.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loans, net of unearned income. </i></b>Loans, net of unearned income are recognized at the amount of funds
advanced, less charge-offs and an estimation of credit risk represented by the allowance for loan
losses. The fair value estimates for disclosure purposes differentiate loans based on their
financial characteristics, such as product classification, loan category, pricing features, and
remaining maturity.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of floating rate loans is estimated through comparison to recent market activity in
loans of similar product types, with adjustments made for differences in loan characteristics. In
situations where market pricing inputs are not available, fair value is considered to approximate
book value due to the monthly repricing for commercial and consumer loans, with the exception of
floating rate 1-4 family residential mortgage loans which reprice annually and will lag movements
in market rates. The fair value for floating rate 1-4 family mortgage loans is calculated by
discounting future cash flows to their present value. Future cash flows are discounted to their
present value by using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same time period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prepayment assumptions based on historical prepayment speeds and industry speeds for similar loans
have been applied to the floating rate 1-4 family residential mortgage portfolio.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of fixed rate loans is estimated through comparison to recent market activity in
loans of similar product types, with adjustments made for differences in loan characteristics. In
situations where market pricing inputs are not available, fair value is estimated by discounting
future cash flows to their present value. Future cash flows are discounted to their present value
by using the current rates at which similar loans would be made to borrowers with similar credit
ratings and for the same time period. Prepayment assumptions based on historical prepayment speeds
and industry speeds for similar loans have been applied to the fixed rate mortgage and installment
loan portfolios.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Individually impaired commercial loans are measured using either a discounted cash flow methodology
or the estimated fair value of the underlying collateral less costs to sell, if the loan is
considered collateral-dependent. In accordance with accounting standards, the discounted cash flow
analysis utilizes the loan’s effective interest rate for discounting expected cash flow amounts.
Thus, this analysis is not considered a fair value measurement in accordance with ASC 820.
However, the results of this methodology are considered to approximate fair value for the
applicable loans. Expected cash flows are derived from internally-developed inputs primarily
reflecting expected default rates on contractual cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For loans measured using the estimated fair value of collateral less costs to sell, fair value is
estimated using appraisals of the collateral. Collateral values are monitored and additional
write-downs are recognized if it is determined that the estimated collateral values have declined
further. Estimated costs to sell are based on current amounts of disposal costs for similar
assets. Carrying value is considered to reflect fair value for these loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Mortgage servicing rights. </i></b>FHN recognizes all classes of MSR at fair value. Since sales of MSR
tend to occur in private transactions and the precise terms and conditions of the sales are
typically not readily available, there is a limited market to refer to in determining the fair
value of MSR. As such, FHN primarily relies on a discounted cash flow model to estimate the fair
value of its MSR. This model calculates estimated fair value of the MSR using predominant risk
characteristics of MSR such as interest rates, type of product (fixed vs. variable), age (new,
seasoned, or moderate), agency type and other factors. FHN uses assumptions in the model that it
believes are comparable to those used by brokers and other service providers. FHN also periodically
compares its estimates of fair value and assumptions with brokers, service providers, recent market
activity, and against its own experience.
</div>
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<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Derivative assets and liabilities</i></b>. For forwards and futures contracts used to hedge the value
of servicing assets currently hedged and the mortgage warehouse which was hedged prior to the 2008
divestiture, fair values are based on current transactions involving identical securities. These
contracts are exchange-traded and thus have no credit risk factor assigned as the risk of
non-performance is limited to the clearinghouse used.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Valuations of other derivatives (primarily interest rate related swaps, swaptions, caps, and
collars) are based on inputs observed in active markets for similar instruments. Typical inputs
include the LIBOR curve, option volatility, and option skew. Credit risk is mitigated for these
instruments through the use of mutual margining and master netting agreements as well as collateral
posting requirements. Any remaining
credit risk related to interest rate derivatives is considered in determining fair value through
evaluation of additional factors such as customer loan grades and debt ratings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In conjunction with the sale of a portion of its Visa Class B shares in December 2010, FHN and the
purchaser entered into a derivative transaction whereby FHN will make, or receive, cash payments
whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The
fair value of this derivative has been determined using a discounted cash flow methodology for
estimated future cash flows determined through use of probability weighted scenarios for multiple
estimates of Visa’s aggregate exposure to covered litigation matters, which include consideration
of amounts funded by Visa into its escrow account for the covered litigation matters. Since this
estimation process required application of judgment in developing significant unobservable inputs
used to determine the possible outcomes and the probability weighting assigned to each scenario,
this derivative has been classified within Level 3 in fair value measurements disclosures.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Real estate acquired by foreclosure. </i></b>Real estate acquired by foreclosure primarily consists of
properties that have been acquired in satisfaction of debt. These properties are carried at the
lower of the outstanding loan amount or estimated fair value less estimated costs to sell the real
estate. Estimated fair value is determined using appraised values with subsequent adjustments for
deterioration in values that are not reflected in the most recent appraisal. Real estate acquired
by foreclosure also includes properties acquired in compliance with HUD servicing guidelines which
are carried at the estimated amount of the underlying government assurance or guarantee.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Nonearning assets. </i></b>For disclosure purposes, nonearning assets include cash and due from banks,
accrued interest receivable, and capital markets receivables. Due to the short-term nature of
cash and due from banks, accrued interest receivable, and capital markets receivables, the fair
value is approximated by the book value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other assets. </i></b>For disclosure purposes, other assets consist of investments in low income housing
partnerships and deferred compensation assets that are considered financial assets. Investments in
low income housing partnerships are written down to estimated fair value
quarterly based on the estimated value of the associated tax credits. Deferred compensation assets
are recognized at fair value, which is based on quoted prices in active markets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Defined maturity deposits. </i></b>The fair value is estimated by discounting future cash flows to their
present value. Future cash flows are discounted by using the current market rates of similar
instruments applicable to the remaining maturity. For disclosure purposes, defined maturity
deposits include all certificates of deposit and other time deposits.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Undefined maturity deposits. </i></b>In accordance with ASC 825, the fair value is approximated by the
book value. For disclosure purposes, undefined maturity deposits include demand deposits, checking
interest accounts, savings accounts, and money market accounts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Short-term financial liabilities. </i></b>The fair value of federal funds purchased, securities sold under
agreements to repurchase and other short-term borrowings and commercial paper are approximated by
the book value. The carrying amount is a reasonable estimate of fair value because of the
relatively short time between the origination of the instrument and its expected realization.
Other short-term borrowings and commercial paper includes a liability associated with transfers of
mortgage servicing rights that did not qualify for sale accounting. This liability is accounted
for at elected fair value, which is measured consistent with the related MSR, as previously
described.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Term borrowings. </i></b>The fair value is based on quoted market prices or dealer quotes for the
identical liability when traded as an asset. When pricing information for the identical liability
is not available, relevant prices for similar debt instruments are used with adjustments being made
to the prices obtained for differences in characteristics of the debt instruments. If no relevant
pricing information is available, the fair value is approximated by the present value of the
contractual cash flows discounted by the investor’s yield which considers FHN’s and FTBNA’s debt
ratings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other noninterest-bearing liabilities. </i></b>For disclosure purposes, other noninterest-bearing
liabilities include accrued interest payable and capital markets payables. Due to the short-term
nature of these liabilities, the book value is considered to approximate fair value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loan commitments. </i></b>Fair values are based on fees charged to enter into similar agreements taking
into account the remaining terms of the agreements and the counterparties’ credit standing.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other commitments. </i></b>Fair values are based on fees charged to enter into similar agreements.
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following fair value estimates are determined as of a specific point in time utilizing
various assumptions and estimates. The use of assumptions and various valuation techniques, as well
as the absence of secondary markets for certain financial instruments, will likely reduce the
comparability of fair value disclosures between financial institutions. Due to market illiquidity,
the fair values for loans, net of unearned income, loans held for sale, and long-term debt as of
December 31, 2010 and 2009, involve the use of significant internally-developed pricing assumptions
for certain components of these line items. These assumptions are considered to reflect inputs that
market participants would use in transactions involving these instruments as of the measurement
date. Assets and liabilities that are not financial instruments (including MSR) have not been
included in the following table such as the value of long-term relationships with deposit and trust
customers, premises and equipment, goodwill and other intangibles, deferred taxes, and certain
other assets and other liabilities. Accordingly, the total of the fair value amounts does not
represent, and should not be construed to represent, the underlying value of the company.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the book value and estimated fair value of financial instruments
recorded in the Consolidated Statements of Condition as well as unfunded commitments as of December
31, 2010 and 2009.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Book</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Fair</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Book</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income and allowance for loan losses
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,117,773</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>15,196,341</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">17,226,970</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">16,070,150</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Short-term financial assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>942,129</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>942,129</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">992,183</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">992,183</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading securities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>769,750</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>769,750</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">699,900</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">699,900</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>375,289</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>375,289</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">452,501</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">452,501</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,031,930</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3,031,930</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,694,468</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,694,468</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Derivative assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>303,660</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>303,660</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">248,628</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">248,628</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>112,788</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>112,788</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">133,583</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">133,583</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Nonearning assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>574,710</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>574,710</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">892,927</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">892,927</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deposits:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Defined maturity
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,952,745</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,007,147</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,455,936</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,522,334</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Undefined maturity
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>13,255,486</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>13,255,486</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,411,279</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,411,279</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total deposits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>15,208,231</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>15,262,633</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,867,215</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,933,613</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trading liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>361,920</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>361,920</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Short-term financial liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,295,643</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,295,643</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,636,111</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,636,111</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,228,070</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,893,938</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,891,133</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,385,949</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Derivative liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>215,220</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>215,220</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">179,422</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">179,422</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other noninterest-bearing liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>103,951</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>103,951</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">338,161</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">338,161</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Contractual</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Fair</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Contractual</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Amount</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Unfunded Commitments:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loan commitments
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,903,537</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,060</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">8,370,960</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,172</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Standby and other commitments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>487,578</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,021</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">540,858</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,612</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element represents the disclosure related to the fair value measurement of assets and liabilities which includes [financial] instruments measured at fair value that are classified in stockholders' equity. Such assets and liabilities may be measured on a recurring or nonrecurring basis. The disclosures which may be required or desired include: (1) for assets and liabilities measured on a recurring basis, disclosure may include: (a) the fair value measurements at the reporting date; (b) the level within
the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3); (c) for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (ii) purchases, sales, issuances, and settlements (net); (iii) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs); (d) the amoun
t of the total gains or losses for the period in subparagraph (c) (i) above included in earnings (or changes in net assets) that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income (or activities); (e) the valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques, if any, during the period and (2) for assets and liabilities that are measured at fair value on a nonrecurring basis (for example, impaired assets) disclosure may include, in addition to (a) above: (a) the reasons for the fair value measurements recorded; (b) the same as (b) above; (c) for fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs; and (d) the valuation technique(s) used to measure fair value and a discussion of changes,
if any, in the valuation technique(s) used to measure similar assets and/or liabilities in prior periods.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 33
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 6
-Footnote 4
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12Fair Value of Assets and LiabilitiesUnKnownUnKnownUnKnownUnKnownfalsetrueXML
28
R11.xml
IDEA: Loans
2.2.0.25falsefalse0204 - Disclosure - Loanstruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_AccountsNotesLoansAndFinancingReceivableGrossAllowanceAndNetAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:st
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<!-- Begin Block Tagged Note 4 - us-gaap:LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 4 — Loans</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides the balance of loans by portfolio on December 31, 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Commercial, financial, and industrial
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,338,155</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">7,149,784</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Commercial real estate
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,406,646</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,774,123</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>263,878</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">639,826</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Retail:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Consumer real estate
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5,617,619</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,931,434</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Permanent mortgage
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,086,859</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,085,668</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">One time close residential construction
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>19,276</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">229,487</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Credit card & other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>292,648</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">313,562</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Restricted real estate loans <sup style="font-size: 85%; vertical-align: text-top">(a)(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>757,491</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Loans, net of unearned income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,782,572</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">18,123,884</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>664,799</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">896,914</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total net loans
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,117,773</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">17,226,970</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Prior to 2010, a portion of the amount was included in consumer real estate.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>2010 includes $701.8 million of consumer real estate loans and $55.7 million of permanent
mortgage loans.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 31, 2010, $4.2 billion of commercial loans were pledged to secure potential discount
window borrowings from the Federal Reserve Bank. Additionally, $6.4 billion of consumer real estate
loans and permanent mortgages were pledged to secure potential borrowings from the Federal Home Loan Bank.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has a concentration of loans secured by residential real estate (46 percent of total loans),
the majority of which is in the consumer real estate portfolio (33 percent of total loans).
Permanent mortgages account for 6 percent of total loans. Restricted real estate loans, which is comprised
primarily of HELOC but also includes permanent mortgages, is 5 percent of total loans. The
remaining residential real estate loans are primarily in the residential CRE and one time close
residential construction portfolios (2 percent of total loans) with national exposures being
significantly reduced since 2008. Additionally, on December 31, 2010, FHN had bank-related and
trust preferred loans (“TRUPs”) (i.e., loans to bank and insurance-related businesses), totaling
$.7 billion (9 percent of the C&I portfolio, or
4 percent of total loans). This component of the C&I portfolio
has experienced stress due to the higher
credit losses encountered throughout the financial services industry, limited availability of
market liquidity, and the impact from economic conditions on these
borrowers.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Components of the Loan Portfolio</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For purposes of the disclosures required pursuant to the adoption of amendments to ASC 310,
the loan portfolio was disaggregated into segments and then further disaggregated into classes for
certain disclosures. A portfolio segment is defined as the level at which an entity develops and
documents a systematic method for determining its allowance for credit losses. A class is
generally determined based on the initial measurement attribute (i.e. amortized cost or purchased
credit impaired), risk characteristics of the loan, and an entity’s method for monitoring and
assessing credit risk. Commercial loan portfolio segments include commercial, financial and
industrial (“C&I”) and commercial real estate (“CRE”). Commercial classes within C&I include
general C&I, mortgage warehouse lending and the TRUPs portfolios. Mortgage warehouse lending
includes commercial lines of credit to qualified mortgage companies exclusively for the temporary
warehousing of eligible mortgage loans prior to the borrower’s sale of those mortgage loans to
third party investors. Commercial classes within commercial real estate include income CRE and
residential CRE. Retail loan portfolio segments include consumer real estate, permanent mortgage,
and the combined credit card and other portfolios. Retail classes include HELOC and real estate
(“R/E”) installment loans within the consumer real estate segment, permanent mortgage (which is both a
segment and a class), and credit card and other. Restricted real estate loans include HELOCs that were
previously securitized on balance sheet as well as HELOC and some permanent mortgages that were
consolidated on January, 1, 2010, in conjunction with the adoption of amendments to ASC 810. See
Note 1 for additional discussion of this accounting standard adoption. Due to the winding down
nature and decreasing size of the
One-time
close (“OTC”) residential construction portfolio, in most cases
the remaining balances and activity of this portfolio has been combined with and included within
the other retail class.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Allowance for Loan Losses</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As previously discussed in Note 1, the Allowance for loan losses includes the following
components: reserves for commercial loans evaluated based on pools of credit graded loans and
reserves for pools of smaller-balance homogeneous retail loans, both determined in accordance with
the ASC Topic related to Contingencies (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 adjustment by management to
reflect current events, trends, and conditions (including economic considerations and trends.) The
slow economic recovery, weak housing market and elevated unemployment levels are examples of
additional factors considered by management in determining the allowance for loan losses. Also
included are reserves, determined in accordance with the Receivables Topic (ASC 310-10-45), for
loans determined by management to be individually impaired. See
additional discussion under “Impaired Loans.”
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">To assess the quality of individual commercial loans, commercial loans are internally assigned a
credit grade ranging from 1 to 16. This credit
grading system is intended to identify and measure the credit quality of the loan portfolio by
analyzing the migration of loans between grading categories. It is also integral to the estimation
methodology utilized in determining the allowance for loan losses since an allowance is established
for pools of commercial loans based on the credit grade assigned. The appropriate relationship
manager performs the process of categorizing commercial loans into the appropriate credit grades,
initially as a component of the approval of the loan, and subsequently throughout the life of the
loan as part of our servicing regimen. The proper loan grade for larger exposures is confirmed by
a senior credit officer in the approval process. To determine the most appropriate credit grade
for each loan, FHN utilizes a credit risk grading system that employs scorecards for particular
categories of loans. The scorecards consist of a number of objective and subjective measures that
are weighted in a manner that produces a rank ordering of risk within pass-graded credits. Loan
grades are frequently reviewed by Credit Risk Assurance to determine if the process continues to
result in accurate loan grading across the portfolio.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The ALLL for smaller-balance homogenous retail loans is determined based on pools of similar loan
types that have similar credit risk characteristics. FHN manages retail loan credit risk on a
class basis. Reserves by portfolio are determined using analytical models that incorporate various
factors including, historical delinquency trends, experienced loss frequencies, and experienced
loss severities. Generally, reserves for retail loans reflect
probable incurred losses in the portfolio
that are expected to be recognized over the following twelve months.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides a rollforward of the allowance for loan losses by portfolio segment
for 2010, 2009, and 2008:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Commercial</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Consumer</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Permanent</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Credit Card</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>C&I</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Real Estate</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Real Estate</b><sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Mortgage</b><sup style="font-size: 85%; vertical-align: text-top"><b>(b)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>and Other</b><sup style="font-size: 85%; vertical-align: text-top"><b>(c)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of January 1, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">93,322</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">130,447</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">45,001</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">993</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">72,578</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">342,341</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Divestitures
</div></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(370</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(370</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Charge-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(105,621</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(193,518</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(124,102</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(6,913</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(162,275</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(592,429</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Recoveries
</div></td>
<td> </td>
<td> </td>
<td align="right">4,495</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,386</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,269</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">546</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,972</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,668</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision
</div></td>
<td> </td>
<td> </td>
<td align="right">199,697</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">260,980</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">253,650</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58,959</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">306,714</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,080,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2008
</div></td>
<td> </td>
<td> </td>
<td align="right">191,893</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">199,925</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">181,818</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">221,989</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">849,210</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance — individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">6,556</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,747</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,303</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance — collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">185,337</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">194,178</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">181,818</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,586</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">221,989</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">836,907</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned as of December 31, 2008:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">43,918</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">430,172</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,361</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,939</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,389</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">484,779</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">7,775,537</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,846,279</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,748,008</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,124,845</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,298,742</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,793,411</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans, net of unearned
</div></td>
<td> </td>
<td> </td>
<td align="right">7,819,455</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,276,451</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,749,369</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,126,784</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,306,131</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,278,190</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of January 1, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">191,893</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">199,925</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">181,818</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">221,989</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">849,210</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Charge offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(129,283</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(277,461</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(224,853</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(63,004</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(182,360</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(876,961</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Recoveries
</div></td>
<td> </td>
<td> </td>
<td align="right">7,594</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,790</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,244</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">797</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,240</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,665</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision
</div></td>
<td> </td>
<td> </td>
<td align="right">206,444</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">272,471</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">241,879</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">132,518</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,688</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">880,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">276,648</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">205,725</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">215,088</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">123,896</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">75,557</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">896,914</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance — individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">18,048</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,746</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,997</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,997</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">857</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31,644</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance — collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">258,600</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">202,979</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">209,091</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">119,900</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74,700</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">865,270</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned as of December 31, 2009:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">103,616</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">405,458</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,766</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,229</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,098</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">564,167</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">7,046,168</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,008,492</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,905,668</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,059,439</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">539,950</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,559,717</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans, net of unearned
</div></td>
<td> </td>
<td> </td>
<td align="right">7,149,784</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,413,950</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,931,434</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,085,668</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">543,048</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,123,884</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance as of January 1, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>276,648</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>205,725</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>215,088</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>123,896</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>75,557</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>896,914</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Adjustment due to amendments of ASC 810</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,106</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,472</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>24,578</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Charge-offs</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(97,272</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(127,323</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(233,269</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(71,113</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(47,564</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(576,541</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Recoveries</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,630</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>13,030</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,300</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,658</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,230</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>49,848</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Provision</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>48,463</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>63,653</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>178,125</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,096</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(22,337</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>270,000</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance as of December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>239,469</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>155,085</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,350</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>65,009</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>12,886</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>664,799</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Allowance — individually evaluated for impairment</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>61,327</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>17,395</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>19,691</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,678</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>267</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>115,358</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Allowance — collectively evaluated for impairment</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>178,142</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>137,690</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>172,659</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>48,331</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>12,619</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>549,441</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Loans, net of unearned as of December 31, 2010:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Individually evaluated for impairment</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>213,405</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>242,143</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>69,775</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>96,765</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>764</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>622,852</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Collectively evaluated for impairment</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,124,750</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,428,381</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,249,637</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,045,792</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>311,160</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,159,720</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total loans, net of unearned</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,338,155</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,670,524</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>6,319,412</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,142,557</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>311,924</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,782,572</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>2010 includes $42.1 million of reserv es and $701.8 million of
balances in restricted consumer real estate loans.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>2010 includes $5.4 million of reserv es and $55.7 million of balances in
restricted permanent mortgage loans.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Includes OTC.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Impaired Loans</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Generally, classified nonaccrual commercial loans over $1 million are deemed to be impaired and
are assessed for impairment measurement in accordance with ASC 310-10. Under ASC 310-10,
individually impaired loans are measured based on the present value of expected future payments
discounted at the loan’s effective interest rate (“the DCF method”), observable market prices, or
for loans that are solely dependent on the collateral for repayment, the estimated fair value of
the collateral less estimated costs to sell (net realizable value). For loans measured using the
DCF method or by observable market prices, if the recorded investment in the impaired loan exceeds
this amount, a specific allowance is established as a component of the allowance for loan and lease
losses; however, for impaired collateral-dependent loans, FHN will, a majority of the time, charge
off the full difference between the book value and the best estimate of net realizable value.
Also, all commercial and retail consumer loans classified as troubled debt restructurings are
deemed to be impaired and are assessed for impairment measurement in accordance with ASC 310-10.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The
average balance of impaired loans was $593.5 million for 2010, $532.2
million for 2009, and $328.3 million for 2008.
The tables below provide loan classes with the amount of recorded investment in impaired loans for
which there is a related allowance for loan loss, the amount of recorded investment in impaired
loans where there is no related allowance for loan loss, and the total unpaid principle balance of
impaired loans as of December 31, 2010 and 2009.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2010</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Unpaid</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recorded</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Principal</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Related</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Investment</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Allowance</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Impaired loans with no related allowance recorded:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">44,459</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">65,929</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">TRUPs
</div></td>
<td> </td>
<td> </td>
<td align="right">25,406</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">107,888</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">176,650</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">59,402</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">127,126</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">237,155</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">397,705</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Impaired loans with related allowance recorded:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">116,275</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">117,644</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">34,061</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">TRUPs
</div></td>
<td> </td>
<td> </td>
<td align="right">27,266</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,266</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">34,540</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36,974</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,821</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">40,313</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,091</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,574</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">218,394</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">228,709</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">78,722</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Retail:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">HELOC
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">25,375</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25,375</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">7,161</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">R/E Installment Loan
</div></td>
<td> </td>
<td> </td>
<td align="right">44,399</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,399</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,530</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Permanent Mortgage
</div></td>
<td> </td>
<td> </td>
<td align="right">96,765</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">96,765</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,679</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Credit Card & Other
</div></td>
<td> </td>
<td> </td>
<td align="right">764</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">764</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">266</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">167,303</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">167,303</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">36,636</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total commercial
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">455,549</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">626,414</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">78,722</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total retail
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">167,303</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">167,303</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">36,636</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total impaired loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">622,852</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">793,717</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">115,358</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2009</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Unpaid</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recorded</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Principal</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Related</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Investment</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Allowance</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Impaired loans with no related allowance recorded:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">33,123</td>
<td> </td>
<td> </td>
<td>$</td>
<td align="right">103,726</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">TRUPs
</div></td>
<td> </td>
<td> </td>
<td align="right">10,549</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,700</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">148,359</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">224,830</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">222,676</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">365,273</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">414,707</td>
<td> </td>
<td> </td>
<td>$</td>
<td align="right">706,529</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Impaired loans with related allowance recorded:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">32,757</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">34,334</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">7,220</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">TRUPs
</div></td>
<td> </td>
<td> </td>
<td align="right">27,186</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,828</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">21,259</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,904</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,898</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">13,165</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,402</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">847</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">94,367</td>
<td> </td>
<td> </td>
<td>$</td>
<td align="right">105,640</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">20,793</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Retail:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">HELOC
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">6,931</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">6,931</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,613</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">R/E Installment Loan
</div></td>
<td> </td>
<td> </td>
<td align="right">18,835</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,835</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,384</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Permanent Mortgage
</div></td>
<td> </td>
<td> </td>
<td align="right">26,229</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,229</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,997</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">OTC
</div></td>
<td> </td>
<td> </td>
<td align="right">3,098</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,098</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">857</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">55,093</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">55,093</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,851</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total commercial
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">509,074</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">812,169</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">20,793</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total retail
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">55,093</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">55,093</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,851</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total impaired loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">564,167</td>
<td> </td>
<td> </td>
<td>$</td>
<td align="right">867,262</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">31,644</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Asset Quality Indicators</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As previously discussed, FHN employs a dual-grade commercial risk grading methodology to assign a
probability of default (“PD”) estimate and loss given default for each commercial loan. The
methodology utilizes multiple scorecards that have been developed using a combination of objective
and subjective factors specific to various portfolio segments that result in a rank ordering of
risk and the assignment of grades PD 1 to PD 16. Each grade corresponds to an estimated one-year
default probability percentage; a PD 1 has the lowest expected default probability, and
probabilities increase as grades progress down the scale. PD 1 through PD 11 are “pass” grades.
PD 12 is referred to as the “pass-watch” grade and is assigned when a credit is judged to need
additional attention. PD 13-16 corresponds to the regulatory-defined categories of special mention
(13), substandard (14), doubtful (15), and loss (16). FHN utilizes these grades to measure,
monitor and asses credit risk with the commercial loan portfolio. Loans are categorized into the
appropriate grade, initially as a component of the approval of the loan, and subsequently
throughout the life of the loan. Pass loan grades are required to be re-assessed annually or
whenever there has been a material change in the financial condition of the borrower or structure
of the relationship. Loans graded 13 or worse are re-assessed on a quarterly basis.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables provide the period end balances of commercial loan portfolio classes,
disaggregated by PD grade for 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000">2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">General</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Warehouse</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Income</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Residential</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">C&I</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Lending</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TRUPS<sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CRE</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CRE</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">PD Grade:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">1
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">86</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">86</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2
</div></td>
<td> </td>
<td> </td>
<td align="right">87</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">91</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">3
</div></td>
<td> </td>
<td> </td>
<td align="right">143</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">159</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">4
</div></td>
<td> </td>
<td> </td>
<td align="right">199</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">207</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">5
</div></td>
<td> </td>
<td> </td>
<td align="right">360</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">385</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">6
</div></td>
<td> </td>
<td> </td>
<td align="right">666</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">88</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">807</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">7
</div></td>
<td> </td>
<td> </td>
<td align="right">855</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">214</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">96</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,170</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">8
</div></td>
<td> </td>
<td> </td>
<td align="right">997</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">387</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,540</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">9
</div></td>
<td> </td>
<td> </td>
<td align="right">491</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">112</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">146</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">752</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">10
</div></td>
<td> </td>
<td> </td>
<td align="right">463</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">82</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">561</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">11
</div></td>
<td> </td>
<td> </td>
<td align="right">493</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">609</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">12
</div></td>
<td> </td>
<td> </td>
<td align="right">246</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">285</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">13
</div></td>
<td> </td>
<td> </td>
<td align="right">422</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">276</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">167</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">879</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">14,15,16
</div></td>
<td> </td>
<td> </td>
<td align="right">423</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">101</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">375</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">121</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,022</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans
collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">5,931</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">817</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">377</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,265</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">163</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,553</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">161</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">142</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">456</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total commercial loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">6,092</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">817</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">430</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,407</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">264</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,009</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Presented net of $35.6 million LOCOM valuation allowance. Based on the underlying
structure of the notes, the highest possible internal grade is “13”. Portfolio reserve
estimate considers recent financial performance of individual borrowers and other
factors.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000">2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Mortgage</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">General</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Warehouse</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Income</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Residential</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">C&I</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Lending</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TRUPS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CRE</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CRE</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">PD Grade:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">1
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">74</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">74</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2
</div></td>
<td> </td>
<td> </td>
<td align="right">36</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">3
</div></td>
<td> </td>
<td> </td>
<td align="right">73</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">4
</div></td>
<td> </td>
<td> </td>
<td align="right">207</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">220</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">5
</div></td>
<td> </td>
<td> </td>
<td align="right">412</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">444</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">6
</div></td>
<td> </td>
<td> </td>
<td align="right">460</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">77</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">572</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">7
</div></td>
<td> </td>
<td> </td>
<td align="right">962</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">101</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">114</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,181</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">8
</div></td>
<td> </td>
<td> </td>
<td align="right">890</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">317</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,433</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">9
</div></td>
<td> </td>
<td> </td>
<td align="right">519</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">216</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">178</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">919</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">10
</div></td>
<td> </td>
<td> </td>
<td align="right">427</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">61</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">527</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">11
</div></td>
<td> </td>
<td> </td>
<td align="right">536</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">149</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">696</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">12
</div></td>
<td> </td>
<td> </td>
<td align="right">314</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">97</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">419</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">13
</div></td>
<td> </td>
<td> </td>
<td align="right">535</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">299</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">271</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,150</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">14,15,16
</div></td>
<td> </td>
<td> </td>
<td align="right">503</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">93</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">388</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">313</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,299</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans
collectively evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">5,948</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">707</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">392</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,604</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">404</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,055</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans individually evaluated for impairment
</div></td>
<td> </td>
<td> </td>
<td align="right">66</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">169</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">236</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">509</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total commercial loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">6,014</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">707</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">430</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,773</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">640</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,564</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Presented net of $35.6 million LOCOM valuation allowance.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The retail portfolio is comprised primarily of smaller balance loans which are very similar in
nature in that most are standard products and are backed by residential real estate. Because of the
similarities of retail loan-types, FHN is able to utilize the Fair Isaac’s (“FICO”) score, among
other attributes, to assess the quality of consumer borrowers. FICO scores are refreshed on a
quarterly basis and attempt to reflect the recent risk profile of the borrowers. Origination
documentation type and accruing delinquency amounts are also other indicators of retail portfolio
asset quality.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables reflect balances and various asset quality attributes by
origination vintage for both the HELOC and real estate installment classes of loans in the Consumer
Real Estate loan segment as of December 31, 2010:
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>HELOC</b></u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="19" style="border-bottom: 1px solid #000000"><b>Origination Characteristics</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Avg</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Origination</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Period End</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Refreshed</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Vintage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b><sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CLTV</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">FICO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Broker</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TN</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1st Lien</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>FICO</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">pre-2003
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>230.3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">75.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">724</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">42.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">22.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>723</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2003
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>321.3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">733</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>730</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2004
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>690.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">79.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">729</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">31.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">17.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>722</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2005
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>855.3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">79.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">735</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">16.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">17.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">11.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>722</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2006
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>629.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">742</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">13.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>730</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2007
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>629.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">746</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">13.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">28.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>734</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>323.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">74.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">755</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">69.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">36.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>753</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>204.5</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">756</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">86.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">45.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>759</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2010
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>199.3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">73.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">758</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">94.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">46.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>757</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>4,083.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">740</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">33.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">19.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>732</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes $701.8 million of restricted loan balances.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>R/E Installment Loans</b></u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="19" style="border-bottom: 1px solid #000000"><b>Origination Characteristics</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Avg</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Origination</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Period End</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Refreshed</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Vintage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CLTV</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">FICO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Broker</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TN</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1st Lien</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>FICO</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">pre-2003
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>82.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">697</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">17.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">62.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">67.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>727</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2003
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>222.2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">726</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">44.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>731</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2004
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>128.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">73.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">714</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">51.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>724</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2005
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>343.2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">82.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">722</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">21.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">27.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>721</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2006
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>378.2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">723</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>728</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2007
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>519.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">81.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">732</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>734</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>210.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">740</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>751</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>133.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">753</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">89.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">82.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>760</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2010
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>217.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">82.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">748</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">89.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">96.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>751</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,236.4</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">729</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">10.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">44.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">50.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>732</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables reflect balances and various asset quality attributes by
origination vintage for both the HELOC and real estate installment classes of loans in the Consumer
Real Estate loan segment as of December 31, 2009:
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>HELOC</b></u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="19" style="border-bottom: 1px solid #000000"><b>Origination Characteristics</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Avg</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Origination</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Period End</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Refreshed</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Vintage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CLTV</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">FICO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Broker</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TN</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1st Lien</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>FICO</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">pre-2003
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>274.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">724</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">42.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">22.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>722</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2003
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>338.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">75.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">735</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">22.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">27.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>732</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2004
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>693.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">78.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">731</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">27.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">19.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">19.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>726</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2005
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,000.7</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">79.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">735</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">16.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">11.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>723</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2006
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>707.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">76.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">742</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">12.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>726</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2007
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>701.9</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">746</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">27.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">13.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>733</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>360.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">74.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">756</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">9.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">68.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">36.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>752</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>220.2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">756</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">0.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">86.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">46.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>754</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>4,297.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">740</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">31.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>730</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><u><b>R/E Installment Loans</b></u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="19" style="border-bottom: 1px solid #000000"><b>Origination Characteristics</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Avg</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Origination</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Period End</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Avg orig</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">%</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Refreshed</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left">Vintage</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Balance</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">CLTV</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">FICO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Broker</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">TN</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1st Lien</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>FICO</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">pre-2003
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>113.5</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">698</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">19.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">61.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">67.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>695</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2003
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>292.8</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">727</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">44.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>737</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2004
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>166.5</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">716</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">53.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">73.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>719</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2005
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>454.0</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">82.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">723</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">25.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">23.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">28.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>719</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2006
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>472.6</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">725</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">26.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">26.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>711</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2007
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>642.8</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">80.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">734</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">14.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">26.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">24.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>721</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>309.1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">741</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">10.1</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.2</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">71.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>737</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>182.5</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">72.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">753</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">80.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">75.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>747</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,633.8</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">77.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right">730</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">11.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">40.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">45.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td> </td>
<td align="right"><b>723</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="29" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables reflect origination documentation type for the permanent mortgage class and
remaining OTC loans and accruing delinquency amounts for the smaller credit card and other
portfolio classes. Full documentation reflects those loans whereby the borrower provided all
necessary financial information in accordance with underwriting policy prior to origination of the
loan. Currently, full documentation would typically require (for example) copies of W-2s, pay stubs
and verification of employment. Non full documentation reflects those loans that were originated
with anything less than pay stubs, personal financial statements, and tax returns from potential
borrowers. Except for subsequent refinancing or approved modification events, classification of
documentation type is determined at origination and is constant throughout the life of the loan.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Permanent Mortgage<sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">One Time Close</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Documentation type:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Full documentation
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>766.2</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">682.9</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>6.0</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">71.4</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Non full documentation
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>356.2</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">383.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>12.7</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151.5</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Payment choice (Option ARM)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>19.5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18.2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>0.5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6.5</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Sub-prime
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>0.7</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,142.6</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,085.5</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>19.2</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">229.4</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>2010 includes $55.7 million of restricted loan balances.</td>
</tr>
</table>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Credit Card</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Retail</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accruing delinquent balances:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">30-89 days past due
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1.9</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2.7</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>0.8</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">0.9</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">90+ days past due
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1.6</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>0.2</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.1</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3.5</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5.5</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1.0</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1.0</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Nonaccrual and Past Due Loans</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Loans are placed on nonaccrual status 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 or
if the terms of a loan have been modified through troubled debt restructuring efforts. When a loan
is placed on nonaccrual status, FHN applies the entire amount of any subsequent payments (including
interest) to the outstanding principal balance.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table reflects accruing and non-accruing loans by class on December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="19%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Non-Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">30-89 Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">90 + Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">30-89 Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">90 + Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total Non-</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total Loans</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Commercial (C&I) :</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">5,905,087</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26,508</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">182</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>5,931,777</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">89,307</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">18,154</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">52,263</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>159,724</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>6,091,501</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage warehouse lending
</div></td>
<td> </td>
<td> </td>
<td align="right">815,529</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>815,529</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,597</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,597</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>817,126</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">TRUPS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">376,856</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>376,856</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">52,672</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>52,672</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>429,528</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total commercial (C&I)
</div></td>
<td> </td>
<td> </td>
<td align="right">7,097,472</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,508</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">182</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,124,162</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">89,307</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,154</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">106,532</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>213,993</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,338,155</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Commercial real estate:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">1,248,209</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,915</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,265,124</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,248</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,516</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">105,758</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>141,522</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,406,646</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">144,524</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,409</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>152,933</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,095</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,283</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81,567</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>110,945</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>263,878</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total commercial real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">1,392,733</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,324</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,418,057</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58,343</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,799</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">187,325</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>252,467</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,670,524</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Consumer
real estate:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">HELOC <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">3,972,068</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">63,884</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,717</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,068,669</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,461</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">563</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,349</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>14,373</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,083,042</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">R/E installment loan
</div></td>
<td> </td>
<td> </td>
<td align="right">2,158,062</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,010</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,220</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,215,292</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,631</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,287</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,160</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>21,078</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,236,370</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
consumer real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">6,130,130</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">105,894</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47,937</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,283,961</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,092</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,850</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,509</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>35,451</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,319,412</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Permanent mortgage </b>(b)
</div></td>
<td> </td>
<td> </td>
<td align="right">959,431</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,041</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,367</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,016,839</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,088</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,814</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100,816</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>125,718</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,142,557</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Credit
card & other:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Credit card
</div></td>
<td> </td>
<td> </td>
<td align="right">188,921</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,912</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,604</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,437</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,437</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">99,259</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">798</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">154</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>100,211</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,276</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>19,276</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>119,487</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total credit card & other
</div></td>
<td> </td>
<td> </td>
<td align="right">288,180</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,710</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,758</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>292,648</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,276</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>19,276</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>311,924</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total loans, net of unearned </b>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">15,867,946</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">188,477</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">79,244</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,135,667</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">184,830</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">36,617</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">425,458</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>646,905</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,782,572</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes LOCOM valuation allowance $35.6 million.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes restricted loans.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Includes OTC. All non-accruing balances reflect
OTC.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table reflects accruing and non-accruing loans by class on December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="19%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">Non-Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">30-89 Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">90 + Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">30-89 Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">90 + Days</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total Non-</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Current</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Past Due</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Accruing</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total Loans</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Commercial (C&I) :</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">General C&I
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">5,849,780</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">65,487</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,856</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>5,918,123</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">47,700</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,533</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">44,269</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>95,502</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>6,013,625</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mortgage warehouse lending
</div></td>
<td> </td>
<td> </td>
<td align="right">704,458</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>704,458</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,227</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,227</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>706,685</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">TRUPS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">391,739</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>391,739</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37,735</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>37,735</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>429,474</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total commercial (C&I)
</div></td>
<td> </td>
<td> </td>
<td align="right">6,945,977</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">65,487</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,856</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,014,320</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47,700</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,533</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">84,231</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>135,464</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,149,784</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Commercial real estate:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">1,534,984</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">51,267</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,303</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,590,554</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,374</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,769</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">152,427</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>183,570</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,774,124</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Residential CRE
</div></td>
<td> </td>
<td> </td>
<td align="right">341,348</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,737</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>365,085</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,852</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,450</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">266,439</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>274,741</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>639,826</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total commercial real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">1,876,332</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">75,004</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,303</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,955,639</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,226</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,219</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">418,866</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>458,311</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,413,950</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Consumer
real estate:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">HELOC
</div></td>
<td> </td>
<td> </td>
<td align="right">4,192,231</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">55,120</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">41,273</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,288,624</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,960</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">874</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,128</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,962</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,297,586</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">R/E installment loan
</div></td>
<td> </td>
<td> </td>
<td align="right">2,561,442</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38,667</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,801</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,624,910</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,607</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">756</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,575</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,938</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,633,848</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
consumer real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">6,753,673</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">93,787</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">66,074</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,913,534</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,567</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,630</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,703</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>17,900</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,931,434</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Permanent mortgage</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">895,553</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,220</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">59,986</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>987,759</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,358</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,682</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">84,869</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>97,909</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,085,668</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Credit
card & other:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Credit card
</div></td>
<td> </td>
<td> </td>
<td align="right">186,563</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,657</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,816</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,036</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>192,036</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">137,512</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,866</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,788</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>161,166</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,572</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">185,274</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>189,846</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>351,012</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total credit card & other
</div></td>
<td> </td>
<td> </td>
<td align="right">324,075</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,523</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,604</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>353,202</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,572</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">185,274</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>189,846</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>543,048</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total loans, net of unearned </b>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">16,795,610</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">291,021</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">137,823</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>17,224,454</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">88,851</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26,636</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">783,943</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>899,430</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>18,123,884</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="37" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes LOCOM valuation allowance $35.6 million.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes OTC. All non-accruing balances reflect OTC.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 31, 2010 and 2009, FHN had loans classified as troubled debt restructurings of
$282.8 million and $72.8 million, respectively. Additionally, FHN had restructured $56.0 million of
loans held for sale as of December 31, 2010. For restructured loans in the portfolio, FHN had loan
loss reserves of $54.9 million, or 19 percent, as of December 31, 2010. On December 31, 2010 and
2009, there were no significant outstanding commitments to advance additional funds to customers
whose loans had been restructured.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Amounts due from customers on acceptances and bank acceptances outstanding of $3.5 million, $2.9
million, and $2.0 million on December 31, 2010, 2009, and 2008, respectively, are included in
Other assets and in Other liabilities on the Consolidated Statements
of Condition. OTC loans provided construction and
permanent mortgage financing to individuals for the purpose of constructing a home. Upon completion
of construction, the permanent mortgage had historically been classified as held for sale and sold.
Due to the market disruptions experienced in 2008, demand in the secondary market for many of these
permanent mortgages decreased significantly. FHN currently transfers the loans to held for sale or
retains them in the loan portfolio based upon management’s ability and intent at the time of
conversion to permanent financing. FHN transferred $.2 billion and $.1 billion of OTC loans from
the loan portfolio to held-for-sale in 2009 and 2008, respectively.
There were no transfers in
2010. Additionally, FHN transferred $4.4 billion and
$.6 billion of consumer real estate loans
from held for sale into the loan portfolio in 2009, and 2008,
respectively. There were no
transfers in 2010.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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-Name Regulation S-X (SX)
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29
R10.xml
IDEA: Investment Securities
2.2.0.25falsefalse0203 - Disclosure - Investment Securitiestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_MarketableSecuritiesAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_AvailableForSaleSecuritiesTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:AvailableForSaleSecuritiesTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 3 — Investment Securities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables summarize FHN’s available for sale securities on December 31, 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000"><b>On December 31, 2010</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gross</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gross</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amortized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Cost</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gains</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Securities available for sale:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">87,188</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">256</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">87,444</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued MBS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">1,430,923</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">46,916</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,469,958</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued CMO <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">1,136,607</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,133</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,168,740</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other U.S. government agencies <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">50,426</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,800</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,226</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">26,015</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,015</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity<sup style="font-size: 85%; vertical-align: text-top"> (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">226,012</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">226,003</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">511</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">544</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total securities available for sale <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,957,682</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>82,138</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(7,890</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,031,930</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes securities issued by government sponsored entities.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of
$66.2 million. The remainder is money market,
venture capital, and cost method investments. Additionally, $5.4 million is restricted pursuant to
a reinsurance contract agreement.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Includes $2.7 billion of securities pledged to secure public deposits, securities sold under
agreements to repurchase, and for other purposes. As of
December 31, 2010, FHN had pledged $1.5 billion of the $2.7 billion pledged available for sale
securities as collateral for securities sold under
repurchase agreements.</td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">On December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gross</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gross</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amortized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Cost</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Gains</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Securities available for sale:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">47,983</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">146</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">48,129</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued MBS <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">941,392</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58,685</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,000,077</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued CMO <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">1,148,599</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,919</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,189,430</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other U.S. government agencies <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">111,849</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,296</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">118,145</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">States and municipalities
</div></td>
<td> </td>
<td> </td>
<td align="right">44,400</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,400</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">293,318</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">450</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(177</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">293,591</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">667</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">696</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total securities available for sale <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,588,208</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>108,525</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(2,265</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,694,468</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes securities issued by government sponsored entities.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of
$66.3 million. The remainder is money market,
venture capital, and cost method investments. Additionally, $44.0 million is restricted pursuant to
reinsurance contract agreements.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Includes $2.3 billion of securities pledged to secure public deposits, securities sold under
agreements to repurchase, and for other purposes. As of
December 31, 2009, FHN had pledged $1.5 bilion of the $2.3 billion pledged available for sale
securities as collateral for securities sold under
repurchase agreements.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">National banks chartered by the federal government are, by law, members of the Federal Reserve
System. Each member bank is required to own stock in its regional FRB. Given this requirement,
Federal Reserve stock may not be sold, traded, or pledged as collateral for loans. Membership in
the Federal Home Loan Bank (“FHLB”) network requires ownership of capital stock. Member banks are
entitled to borrow funds from the FHLB and are required to pledge mortgage loans as collateral.
Investments in the FHLB are non-transferable and, generally, membership is maintained primarily to
provide a source of liquidity as needed.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The amortized cost and fair value by contractual maturity for the available for sale securities
portfolio on December 31, 2010 are provided below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Available for Sale</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amortized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Cost</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Within 1 year
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">62,069</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">62,112</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">After 1 year; within 5 years
</div></td>
<td> </td>
<td> </td>
<td align="right">75,545</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">78,558</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">After 5 years; within 10 years
</div></td>
<td> </td>
<td> </td>
<td align="right">2,795</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,795</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">After 10 years
</div></td>
<td> </td>
<td> </td>
<td align="right">23,220</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,220</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Subtotal
</div></td>
<td> </td>
<td> </td>
<td align="right">163,629</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">166,685</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued MBS and CMO
</div></td>
<td> </td>
<td> </td>
<td align="right">2,567,530</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,638,698</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity and other securities
</div></td>
<td> </td>
<td> </td>
<td align="right">226,523</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">226,547</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,957,682</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,031,930</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The table below provides information on realized gross gains and realized gross losses resulting
from sales of the available for sale portfolio for the twelve months ended December 31:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Available for Sale</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Debt</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Equity</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross gains on sales
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">375</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">354</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">729</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross losses on sales
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross gains on sales
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,032</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,032</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross losses on sales
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(381</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(381</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2008
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross gains on sales
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,314</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,314</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross losses on sales
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Proceeds from the sale of AFS securities associated with the gains and losses reflected in the
table above for the years 2010, 2009, and 2008, were $515.4 million, $4.4 million, and $44.6
million, respectively. Total net securities gains/losses recognized on the Consolidated Statements
of Income were $10.9 million in 2010. However, this amount also includes gains/losses related to
the sale and/or impairments of cost method investments (such as Visa Inc.) and unrealized losses
recognized through earnings for venture capital investments. Accordingly, these amounts have been
excluded from the table above. In 2010, FHN recognized a gain of $14.8 million that relates to the
sale of a portion of FHN’s Visa Inc. class B shares. Additionally, in 2010, FHN recognized losses
of $4.6 million for write-downs of venture capital investments. In 2008, FHN recognized a gain of
$65.9 million in connection with Visa Inc.’s initial public offering (“IPO”). As the investment in
Visa is not classified as an AFS security, the 2010 and 2008 gains were excluded from the table
above. See Note 18 — Restrictions, Contingencies, and Other Disclosures for additional discussion
regarding FHN’s investment in Visa Inc. class B shares. See Note 22 — Fair Value for additional
discussion related to FHN’s venture capital investments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Losses totaling $.2 million, $.5 million, and $1.5 million for the years 2010, 2009, and 2008,
respectively, were recognized for securities that, in the opinion of management have been
other-than-temporarily impaired. In 2010, the OTTI relates to a marketable equity security while
the OTTI recognized in 2009 and 2008 relates to cost method investment securities.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables provide information on investments within the available for sale portfolio
that have unrealized losses on December 31, 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000"><b>On December 31, 2010</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Less than 12 months</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">12 months or longer</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued MBS
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">563,813</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">563,813</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total debt securities
</div></td>
<td> </td>
<td> </td>
<td align="right">563,813</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">563,813</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,881</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity
</div></td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total temporarily impaired securities
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>563,847</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(7,890</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>563,847</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(7,890</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000">On December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Less than 12 months</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">12 months or longer</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Fair</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Unrealized</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Losses</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Government agency issued CMO
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total debt securities
</div></td>
<td> </td>
<td> </td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">55</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(177</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">55</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(177</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total temporarily impaired securities
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">142,430</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,088</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">55</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(177</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">142,485</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,265</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has reviewed investment securities that are in unrealized loss positions in accordance with its
accounting policy for other-than-temporary impairment and does not consider them
other-than-temporarily impaired. FHN does not intend to sell the debt securities and it is
more-likely-than-not that FHN will not be required to sell the securities prior to recovery. The
decline in value is primarily attributable to interest rates and not credit losses. For equity
securities, FHN has both the ability and intent to hold these securities for the time necessary to
recover the amortized cost.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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y represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities which are categorized as Available-for-sale.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Emerging Issues Task Force (EITF)
-Number 03-1
-Paragraph 21
-Subparagraph a, b
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Staff Position (FSP)
-Number FAS115-1/124-1
-Paragraph 17
-Subparagraph a, b
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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-Paragraph 19, 20, 21
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IDEA: Loan Sales and Securitizations
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 23 — Loan Sales and Securitizations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Historically, FHN utilized loan sales and securitizations as a significant source of liquidity
for its mortgage banking operations. With FHN’s shift to originations of mortgages within its
regional banking footprint following the sale of national mortgage origination offices, loan sale
and securitization activity has significantly decreased. Generally, FHN no longer retains
financial interests in any loans it transfers to third parties. During 2010, FHN transferred $.8
billion of single-family residential mortgage loans in whole loan sales resulting in $7.2 million
of net pre-tax gains. In 2009 and 2008, FHN transferred $1.3 billion and $19.5 billion,
respectively, of residential mortgage loans and HELOC in whole loan sales or proprietary
securitizations resulting in net pre-tax gains of $16.1 million and $237.1 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Retained Interests</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interests retained from prior loan sales, including GSE securitizations, typically included MSR and
excess interest. Interests retained from proprietary securitizations included MSR and various
financial assets (see discussion below). MSR were initially valued at fair value and the remaining
retained interests were initially valued by allocating the remaining cost basis of the loan between
the security or loan sold and the remaining retained interests based on their relative fair values
at the time of sale or securitization.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In certain cases, FHN continues to service and receive servicing fees related to the transferred
loans. Generally, FHN received annual servicing fees approximating .29 percent in 2010, .28
percent in 2009, and .27 percent in 2008, of the outstanding balance of underlying single-family
residential mortgage loans. FHN received annual servicing fees approximating .50 percent in 2010,
2009, and 2008, of the outstanding balance of underlying loans for HELOC and home equity loans
transferred. MSR related to loans transferred and serviced by FHN, as well as MSR related to loans
serviced by FHN and transferred by others, are discussed further in Note 6 — Mortgage Servicing
Rights. There were no significant additions to MSR in 2010 or 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Other financial assets retained in proprietary or GSE securitizations may include certificated
residual interests, excess interest (structured as interest-only strips), interest-only strips,
principal-only strips, or subordinated bonds. Residual interests represent rights to receive
earnings to the extent of excess income generated by the underlying loans. Excess interest
represents rights to receive interest from serviced assets that exceed contractually specified
rates. Principal-only strips are principal cash flow tranches and interest-only strips are interest
cash flow tranches. Subordinated bonds are bonds with junior priority. All financial assets
retained from off balance sheet securitizations are recognized on the Consolidated Statements of
Condition in trading securities at fair value with realized and unrealized gains and losses
included in current earnings as a component of noninterest income on the Consolidated Statements of
Income. In first quarter 2010, in conjunction with the adoption of amendments to ASC 810, FHN
consolidated certain proprietary securitization trusts for which residual interests and
subordinated bonds were held. Accordingly, these amounts were removed from the Consolidated
Statements of Condition as of January 1, 2010. Additionally, in fourth quarter 2009, FHN sold
$49.0 million of excess interest.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The sensitivity of the fair value of all retained or purchased MSR to immediate 10 percent and
20 percent adverse changes in assumptions on December 31, 2010 and 2009 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
<td style="border-bottom:1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>First</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Second</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">First</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Second</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>except for annual cost to service)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liens</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liens</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>HELOC</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">HELOC</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of retained interests
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>203,812</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>262</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,245</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">296,115</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,174</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,322</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average life (in years)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4.3</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2.8</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2.5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.4</td>
<td> </td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual prepayment rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>20.1</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>27.0</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>31.2</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">34.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">30.6</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(10,139</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(31</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(249</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(15,326</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(40</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(163</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(19,420</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(59</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(476</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(29,346</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(81</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(326</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual discount rate on servicing
cash flows
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>11.6</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>14.0</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>18.0</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">11.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">16.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(5,756</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(14</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(96</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(8,678</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(19</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(96</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(11,149</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(28</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(185</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,800</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(38</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(192</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual cost to service (per loan)
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>121</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">119</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">50</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">50</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(5,003</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(16</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(52</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,223</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(59</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(266</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(9,978</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(32</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(104</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(14,410</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(117</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(532</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual earnings on escrow
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>1.4</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.5</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(2,102</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(4,488</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(28</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20%
adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(4,204</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,982</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(56</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The sensitivity of the fair value of other retained interests to immediate 10 percent and 20
percent adverse changes in assumptions on December 31, 2010 and 2009 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Residual</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Residual</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Excess</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Interest</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Interest</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Interest</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Certificated</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Subordinated</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Certificates</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Certificates</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>except for annual cost to service)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">IO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">PO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">IO</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Bonds</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2nd Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">HELOC</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of retained interests
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>26,237</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>8,992</b></td>
<td> </td>
<td> </td>
<td colspan="3" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average life (in years)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4.5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>5.0</b></td>
<td> </td>
<td> </td>
<td colspan="3" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual prepayment rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>17.2</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>23.4</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(1,159</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(471</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(2,241</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(934</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual discount rate on residual cash flows
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>13.0</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>22.5</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(1,084</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(373</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(2,076</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(716</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center"><b>NM</b></td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>N/A</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of retained interests
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">51,035</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,013</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">265</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,130</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,291</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,269</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average life (in years)
</div></td>
<td> </td>
<td> </td>
<td align="right">4.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.4</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual prepayment rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">15.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">22.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">10.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">26.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">28.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,398</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(394</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(23</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(32</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(182</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,650</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(782</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(21</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(46</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(59</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(301</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Annual discount rate on residual cash
flows <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">10.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">23.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">34.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">225.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">34.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">32.9</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 10% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,199</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(515</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(17</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(77</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(109</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(207</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impact on fair value of 20% adverse change
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,204</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,050</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(147</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(206</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(373</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td colspan="3">NM — Amount is not meaningful.    </td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="1%" nowrap="nowrap" align="left">(a)</td>
<td width="1%"> </td>
<td>For subordinated bonds, rate used is the actual bond yield.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">These sensitivities are hypothetical and should not be considered predictive of future
performance. As the figures indicate, changes in fair value based on a 10 percent variation in
assumptions cannot necessarily be extrapolated because the relationship between the change in
assumption and the change in fair value may not be linear. Also, the effect on the fair value of
the retained interest caused by a particular assumption variation is calculated independently from
all other assumption changes. In reality, changes in one factor may result in changes in another,
which might magnify or counteract the sensitivities. Furthermore, the estimated fair values, as
disclosed, should not be considered indicative of future earnings on these assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For the years ended December 31, 2010, 2009, and 2008, cash flows received and paid related to loan
sales and securitizations were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Proceeds from initial sales and securitizations
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"><b>$</b></td>
<td align="right" valign="top"><b>837,905</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,320,538</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">19,543,829</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Servicing fees retained <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"><b>95,902</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">132,799</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">249,122</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Purchases of GNMA guaranteed mortgages
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"><b>76,678</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">18,225</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">103,436</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Purchases of previously transferred financial assets<sup style="font-size: 85%; vertical-align: text-top">(b)(c)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"><b>458,337</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">302,043</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">9,152</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Other cash flows received on retained interests
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"><b>10,783</b></td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">63,994</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">47,306</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes servicing fees on MSR associated with loan sales and purchased MSR.</td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Includes repurchases of both delinquent and performing loans, foreclosed assets, and make-whole
payments for economic losses incurred by purchaser.</td>
</tr>
<tr>
<td style="font-size: 3pt"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>2010 includes $175 million related to clean-up calls exercised by FHN in fourth quarter.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of December 31, 2010, the principal amount of loans transferred through loan sales and
securitizations and other loans managed with them, the principal amount of delinquent loans, and
the net credit losses during 2010 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total Principal</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Principal Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net Credit</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(Dollars in thousands)</i></td>
<td style="border-bottom:1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount of Loans</td>
<td style="border-bottom:1px solid #000000"> </td>
<td style="border-bottom:1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">of Delinquent Loans<sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td style="border-bottom:1px solid #000000"> </td>
<td style="border-bottom:1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses <sup style="font-size: 85%; vertical-align: text-top">(b)</sup></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>For the year ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>On December 31, 2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Type of loan:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Real estate residential
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>22,373,312</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,076,908</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>570,682</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top: 1px solid #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans managed or transferred (c)
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>22,373,312</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,076,908</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>570,682</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans sold
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(14,578,430</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(332,913</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top:1px solid #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top:1px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Loans held in portfolio
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>7,461,969</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top:3px double #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top:3px double #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Loans 90 days or more past due include $39.9 million of GNMA guaranteed mortgages.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Principal amount of loans securitized and sold includes $10.9 billion of loans securitized
through GNMA, FNMA, or FHLMC. FHN retains
interests other than servicing rights on a portion of these securitized loans. No delinquency
or net credit loss data is included for the loans securitized
through FNMA or FHMLC because these agencies retain credit risk. The remainder of loans
securitized and sold were securitized through
proprietary trusts, where FHN retained interests other than servicing rights. See Note 18 -
Restrictions, Contingencies, and Other Disclosure
for discussion related to repurchase obligations for loans transferred to GSEs and private
investors.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Other than loans transferred to GSE, loans are real estate residential loans in which FHN has a
retained interest other than servicing rights.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of December 31, 2009, the principal amount of loans transferred through loan sales and
securitizations and other loans managed with them, the principal amount of delinquent loans, and
the net credit losses during 2009 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total Principal</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Principal Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Net Credit</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(Dollars in thousands)</i></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount of Loans</td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">of Delinquent Loans <sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses <sup style="font-size: 85%; vertical-align: text-top">(b)</sup></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">For the year ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">On December 31, 2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Type of loan:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Real estate residential
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">32,821,231</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">960,307</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">504,225</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top: 1px solid #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td style="border-top: 0px solid #000000"> </td>
<td style="border-top: 0px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td style="border-top: 0px solid #000000"> </td>
<td style="border-top: 0px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total loans managed or transferred (c)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">32,821,231</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">960,307</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">504,225</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans sold
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(24,472,150</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans held for sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(331,979</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top: 1px solid #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top: 1px solid #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Loans held in portfolio
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">8,017,102</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td style="border-top: 3px double #000000">
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td style="border-top: 3px double #000000"> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Loans 90 days or more past due include $40.0 million of GNMA guaranteed mortgages.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Principal amount of loans securitized and sold includes $19.5 billion of loans securitized
through GNMA, FNMA or FHLMC. FHN retains
interests other than servicing rights on a portion of these securitized loans. No delinquency
or net credit loss data is included for the loans securitized
through FNMA or FHMLC because these agencies retain credit risk. The remainder of loans
securitized and sold were securitized through
proprietary trusts, where FHN retained interests other than servicing rights. See Note 18 -
Restrictions, Contingencies, and Other Disclosure
for discussion related to repurchase obligations for loans transferred to GSEs and private
investors.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Other than loans transferred to GSE, loans are real estate residential loans in which FHN has a
retained interest other than servicing rights.</td>
</tr>
</table>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Secured Borrowings</i></b>. FTBNA executed several securitizations of retail real estate
residential loans for the purpose of engaging in secondary market financing. Since the related
trusts did not qualify as QSPE under the applicable accounting rules at that time and since the
cash flows on the loans are pledged to the holders of the trusts’ securities, FTBNA recognized the
proceeds as secured borrowings in accordance with ASC’s Transfers and Servicing Topic (“ASC
860-10-50”). With the prospective adoption of ASU 2009-17 in first quarter 2010, all amounts
related to consolidated proprietary securitization trusts have been included in restricted balances
on the Consolidated Statements of Condition. On December 31, 2009, FTBNA recognized $654.6 million
of loans net of unearned income and $650.4 million of other collateralized borrowings on the
Consolidated Statements of Condition related to consolidated proprietary securitizations of retail
real estate residential loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2007, FTBNA executed a securitization of certain small issuer trust preferred for which the
underlying trust did not qualify as a sale under ASC 860. Therefore, FTNBA has accounted for the
funds received through the securitization as a secured borrowing. On December 31, 2010, FTBNA had
$112.5 million of loans net of unearned income, $1.7 million of trading securities, and $51.2
million of term borrowings on the Consolidated Statements of Condition related to this transaction.
On December 31, 2009, FTBNA had $112.5 million of loans net of unearned income, $1.7 million of
trading securities, and $50.1 million of other collateralized borrowings on the Consolidated
Statements of Condition related to this transaction. See Note 24 — Variable Interest Entities for
additional information.
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringProvides the disclosures pertaining to a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted fo
r as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 140
-Paragraph 17
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Staff Position (FSP)
-Number FAS140-4 and FIN46(R)-8
-Paragraph 6
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Staff Position (FSP)
-Number FAS140-4 and FIN46(R)-8
-Paragraph B1-B12
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IDEA: Summary of Significant Accounting Policies
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<div align="left" style="font-family: Helvetica,Arial,sans-serif">
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div align="left" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 1 — Summary of Significant Accounting Policies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Basis of Accounting. </i></b>The consolidated financial statements of First Horizon National
Corporation (“FHN”), including its subsidiaries, have been prepared in conformity with accounting
principles generally accepted in the United States of America and follow general practices within
the industries in which it operates. This preparation requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes.
These estimates and assumptions are based on information available as of the date of the financial
statements and could differ from actual results.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Principles of Consolidation and Basis of Presentation. </i></b>The consolidated financial statements
include the accounts of FHN and other entities in which it has a controlling financial interest.
Variable Interest Entities (“VIE”) for which FHN or a subsidiary has been determined to be the
primary beneficiary are also consolidated. Following adoption of the provisions of Financial
Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2009-17 on January 1, 2010,
the assets and liabilities of FHN’s consolidated residential mortgage securitization trusts have
been parenthetically disclosed on the face of the Consolidated Statements of Condition as
restricted in accordance with the presentation requirements of ASC 810, as amended, due to the
assets being pledged to settle the trusts’ obligations and the trusts’ security holders having no
recourse to FHN. Affiliates for which FHN is not considered the primary beneficiary and that FHN
does not have a controlling financial interest in are accounted for by the equity method. These
investments are included in other assets, and FHN’s proportionate share of income or loss is
included in noninterest income. All significant intercompany transactions and balances have been
eliminated. For purposes of comparability, certain prior period amounts have been reclassified to
conform to current year presentation. Business combinations accounted for as purchases are
included in the financial statements from the respective dates of acquisition.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Revenue Recognition</i></b><b>. </b>FHN derives a significant portion of its revenues from fee-based services.
Noninterest income from transaction-based fees is generally recognized when the transactions are
completed. Noninterest income from service-based fees is generally recognized over the period in
which FHN provides the service.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Deposit Transactions and Cash Management. </i></b>Deposit transactions include services related to
retail and commercial deposit products (such as service charges on checking accounts), cash
management products and services such as electronic transaction processing (Automated Clearing
House and Electronic Data Interchange), account reconciliation services, cash vault services,
lockbox processing, and information reporting to large corporate clients.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Insurance Commissions. </i></b>Insurance commissions are derived from the sale of insurance
products, including acting as an independent agent to provide commercial and personal property and
casualty, life, long-term care, and disability insurance.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Trust Services and Investment Management. </i></b>Trust services and investment management fees
include investment management, personal trust, employee benefits, and custodial trust services.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Brokerage Management Fees and Commissions. </i></b>Brokerage management fees and commissions include fees
for portfolio management, trade commissions, and annuity and mutual fund sales.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Statements of Cash Flows</i></b><b>. </b>For purposes of these statements, cash and due from banks, federal funds
sold, and securities purchased under agreements to resell are considered cash and cash equivalents.
Federal funds are usually sold for one-day periods, and securities purchased under agreements to
resell are short-term, highly liquid investments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Trading Activities. </i></b>Securities purchased in connection with underwriting or dealer activities
(long positions) are carried at market value as trading securities. Gains and losses, both realized
and unrealized, on these securities are reflected in capital markets noninterest income. Trading
liabilities include securities that FHN has sold to other parties but does not own (short
positions). FHN is obligated to purchase securities at a future date to cover the short positions.
Assets and liabilities for unsettled trades are recorded on the Consolidated Statements of
Condition as “Capital markets receivables” or “Capital markets payables.” Retained interests, in
the form of excess interest, interest-only and principal-only strips from sales and securitizations
of first lien mortgages are recognized at fair value as trading securities with gains and losses,
both realized and unrealized, recognized in mortgage banking income. Similarly, prior to the
adoption of the provisions of FASB ASU 2009-17 on January 1, 2010, subordinated securities from
sales and securitizations of first lien mortgages
were recognized at fair value as trading
securities with gains and losses, both realized and unrealized, recognized in mortgage banking
income.
Additionally, prior to the adoption of the provisions of FASB ASU 2009-17, retained interests, in
the form of certificated residual interests from the securitization of second lien mortgages and
home equity lines of credit (“HELOC”) were recognized at fair value as trading securities with
gains and losses, both realized and unrealized, recognized in other income on the Consolidated
Statements of Income. Following adoption of the provisions of ASU 2009-17 the trading securities
recognized in relation to the subordinated securities and certificated residual interests
were
removed from the Consolidated Statements of Condition as the related trusts were newly consolidated
based on amendments to ASC 810’s consolidation methodology.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Investment Securities. </i></b>Investment securities are reviewed quarterly for possible
other-than-temporary impairment (“OTTI”). The review includes an analysis of the facts and
circumstances of each individual investment such as the degree of loss, the length of time the fair
value has been below cost, the expectation for that security’s performance, the creditworthiness of
the issuer and FHN’s intent and ability to hold the security. Securities that may be sold prior to
maturity and equity securities are classified as securities available for sale and are carried at
fair value. The unrealized gains and losses on securities available for sale, including debt
securities for which no credit impairment exists, are excluded from earnings and are reported, net
of tax, as a component of other comprehensive income within shareholders’ equity. Venture capital
investments are classified as securities available for sale and are carried at fair value with
unrealized gains and losses recognized in noninterest income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Upon adoption of the provisions of the FASB Codification update to ASC 320-10-35 for the quarter
ended March 31, 2009, the “intent and ability to hold to recovery” indicator was replaced for debt
securities with a requirement that an entity’s management assess whether it intends to sell a
security or if it is more-likely-than-not that it will be required to sell the security prior to
recovery for the debt security when determining other-than-temporary impairment. Realized gains
and losses for investment securities are determined by the specific identification method and
reported in noninterest income. Declines in value judged to be other-than-temporary based on FHN’s
analysis of the facts and circumstances related to an individual investment, including securities
that FHN has the intent to sell, are also determined by the specific identification method, and
reported in noninterest income. After adoption of the amendments to ASC 320-10-35, for impaired
debt securities that FHN does not intend to sell and will not be required to sell prior to recovery
but for which credit losses exist, the other-than-temporary impairment recognized has been
separated between the total impairment related to credit losses which is reported in noninterest
income, and the impairment related to all other factors which is excluded from earnings and
reported, net of tax, as a component of other comprehensive income within shareholders’ equity.
Currently, FHN does not have other-than-temporarily impaired debt securities for which credit
losses exist.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Securities Purchased under Resale Agreements and Securities Sold under Repurchase Agreements. </i></b>FHN
enters into short-term purchases of securities under agreements to resell which are accounted for
as collateralized financings except where FHN does not have an agreement to sell the same or
substantially the same securities before maturity at a fixed or determinable price. As of December
31, 2010 and 2009, and for the three years ended December 31, 2010, all of FHN’s securities
purchased under agreements to resell were recognized as collateralized financings. Securities
delivered under these transactions are delivered to either the dealer custody account at the
Federal Reserve Bank (“FRB”) or to the applicable counterparty. Securities sold under agreements
to repurchase are offered to cash management customers as an automated, collateralized investment
account. Securities sold are also used by the retail/commercial bank to obtain favorable borrowing
rates on its purchased funds.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Collateral is valued daily and FHN may require counterparties to deposit additional securities or
cash as collateral, or FHN may return cash or securities previously pledged by counterparties, or
FHN may be required to post additional securities or cash as collateral, based on the contractual
requirements for these transactions. As of both December 31, 2010 and 2009, FHN had pledged $1.5
billion of available for sale securities as collateral for these arrangements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN’s capital markets business utilizes securities borrowing arrangements as part of its trading
operations. Securities borrowing transactions generally require FHN to deposit cash with the
securities lender. The amount of cash advanced is recorded within Federal funds sold and
securities purchased under agreements to resell in the Consolidated Statements of Condition. These
transactions are not considered purchases and the securities borrowed are not recognized by FHN.
FHN does not conduct securities lending transactions.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loans Held for Sale and Securitization and Residual Interests</i></b><b>. </b>Prior to fourth quarter 2008, FHN
originated first lien mortgage loans (“the warehouse”) for the purpose of selling them in the
secondary market, through sales to agencies for securitization, proprietary securitizations, and to
a lesser extent through other whole loan sales. In addition, FHN evaluated its liquidity position
in conjunction with determining its ability and intent to hold loans for the foreseeable future and
sold certain of the second lien mortgages and home equity lines of credit (“HELOC”) it produced in
the secondary market through securitizations and whole loan sales through third quarter 2007. For
periods ending prior to January 1, 2010, loan securitizations involved the transfer of the loans to
qualifying special purpose entities (“QSPE”) that were not subject to consolidation in accordance
with ASC 860, “Transfers and Servicing”. Upon the effective date of the provisions of FASB ASU
2009-16 and FASB ASU 2009-17 on January 1, 2010, the concept of a QSPE was removed from Generally
Accepted Accounting Principles (“GAAP”) and the criteria in ASC 810, “Consolidation”, for
determining the primary beneficiary of a VIE were amended, resulting in the re-evaluation of all
securitization trusts to which FHN had previously transferred loans for consolidation under ASC
810’s revised consolidation criteria. Following the re-evaluation of the trusts for consolidation
upon adoption of the amendments to ASC 810, the majority
of the mortgage securitization trusts to
which FHN transferred loans remains unconsolidated as FHN is deemed not to be the primary
beneficiary based on the interests it retained in the trusts. Under ASC 810, as amended, continual
reconsideration of conclusions reached regarding which interest holder is the primary beneficiary
of a trust is required. See Note 24 — Variable Interest Entities for additional information
regarding FHN’s consolidated and nonconsolidated mortgage securitization trusts. With FHN’s
current focus on origination of mortgages within its regional banking footprint and the sale of its
national mortgage origination offices in third quarter 2008, loan sale and securitization activity
has significantly decreased. Generally, FHN no longer retains financial interests in loans it
transfers to third parties.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Loans originated or purchased for resale, together with mortgage loans previously sold which may be
unilaterally called by FHN, are included in loans held for sale in the Consolidated Statements of
Condition. Effective January 1, 2008, upon adoption of the provisions of the FASB Codification
update to ASC 825, “Financial Instruments,” FHN elected the fair value option on a prospective
basis for almost all types of mortgage loans originated for sale purposes. Such loans are carried
at fair value, with changes in the fair value of these loans recognized in the mortgage banking
noninterest income section of the Consolidated Statements of Income. For mortgage loans originated
for sale for which the fair value option is elected, loan origination fees are recorded by FHN when
earned and related direct loan origination costs are recognized when incurred. Interests retained
from the sale or securitization of such loans are included as a component of trading securities on
the Consolidated Statements of Condition, with related cash receipts and payments classified
prospectively in investing activities on the Consolidated Statements of Cash Flows based on the
purpose for which such financial assets were retained. See Note 22 — Fair Value of Assets and
Liabilities for additional information.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">After adoption of the provisions of the Codification update to ASC 825, FHN continued to account
for all mortgage loans held for sale which were originated prior to 2008 and for mortgage loans
held for sale for which fair value accounting was not elected at the lower of cost or market value.
For such loans, net origination fees and costs were deferred and included in the basis of the
loans in calculating gains and losses upon sale. The value accreted during the time that the loan
was a locked commitment was also included in the basis of first lien mortgage loans. The cost
basis of loans qualifying for fair value hedge accounting under ASC 815, “Derivatives and Hedging”,
was adjusted to reflect changes in fair value. Gains and losses realized from the sale of these
assets were included in noninterest income. Interests retained from the sale of such loans are
included as a component of trading securities on the Consolidated Statements of Condition.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In conjunction with the adoption of the provisions of the FASB Codification update to ASC 820-10
for the quarter ended March 31, 2009, FHN revised its methodology for determining the fair value of
certain loans within its mortgage warehouse. FHN now determines the fair value of the applicable
loans using a discounted cash flow model using observable inputs, including current mortgage rates
for similar products, with adjustments for differences in loan characteristics reflected in the
model’s discount rates. This change in methodology had a minimal effect on the valuation of the
applicable loans. Previously, fair values of these loans were determined through reference to
recent security trade prices for similar products, published third party bids, or observable whole
loan sale prices with adjustments for differences in loan characteristics.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Mortgage loans insured by the Federal Housing Administration (“FHA”) and mortgage loans guaranteed
by the Veterans Administration (“VA”) are generally securitized through the Government National
Mortgage Association (“GNMA”). Generally, conforming conventional loans are securitized through
government-sponsored enterprises (“GSE”) such as the Federal National Mortgage Association (“FNMA”)
and the Federal Home Loan Mortgage Corporation (“FHLMC”). In addition, FHN has completed
proprietary securitizations of nonconforming first lien and second lien mortgages and HELOC, which
do not conform to the requirements for sale or securitization through government agencies or GSE.
Most of these securitizations are accounted for as sales; those that do not qualify for sale
treatment are accounted for as financing arrangements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interests retained from loan sales, including agency securitizations, include MSR and excess
interest. Interests retained from proprietary securitizations include MSR and various financial
assets. MSR are initially valued at fair value, and the remaining retained interests are
initially valued by allocating the remaining cost basis of the loan between the security or loan
sold and the remaining retained interests based on their relative fair values at the time of
securitization or sale. All retained interests, including MSR, are carried at fair value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Financial assets retained in a proprietary or agency securitization may include certificated
residual interests, excess interest (structured as interest-only strips), interest-only strips,
principal-only strips, or subordinated bonds. Residual interests represent rights to receive
earnings to the extent of excess income generated by the underlying loans. Excess interest
represents rights to receive interest from serviced assets that exceed contractually specified
rates. Principal-only strips are principal cash flow tranches, and interest-only strips are
interest cash flow tranches. Subordinated bonds are bonds with junior priority. All financial
assets retained from a securitization are recognized on the Consolidated Statements of Condition in
trading securities at fair value with realized and unrealized gains and losses included in current
earnings as a component of noninterest income on the Consolidated Statements of Income.
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair values of the certificated residual interests and the excess interest are determined using
market prices from closely comparable assets such as MSR that are tested against prices determined
using a valuation model that calculates the present value of estimated future cash flows. The fair
value of these retained interests typically changes based on changes in the discount rate and
differences between modeled prepayment speeds and credit losses and actual experience. In some
instances, FHN retains interests in the loans it securitized by retaining certificated
principal-only strips or subordinated bonds. FHN uses observable inputs such as trades of similar
instruments, yield curves, credit spreads, and consensus prepayment speeds to determine the fair
value of principal-only strips. The fair value of subordinated bonds is determined using the best
available market information, which may include trades of comparable securities, independently
provided spreads to other marketable securities, and published market research. Where no market
information is available, the company utilizes an internal valuation model. As of December 31,
2009, no market information was available, and the subordinated bonds were valued using an internal
model which includes assumptions about timing, frequency and severity of loss, prepayment speeds of
the underlying collateral, and the yield that a market participant would require. As of December
31, 2010, no valuation was necessary due to the adoption of the provisions of ASU 2009-17 on
January 1, 2010, which resulted in the removal of subordinated bonds from the Consolidated
Statements of Condition as the related trust was newly consolidated based on amendments to ASC
810’s consolidation methodology.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN recognizes all its classes of MSR at fair value. Classes of MSR are determined in accordance
with FHN’s risk management practices and market inputs used in determining the fair value of the
servicing asset. Since sales of MSR tend to occur in private transactions and the precise terms
and conditions of the sales are typically not readily available, there is a limited market to refer
to in determining the fair value of MSR. As such, FHN relies primarily on a discounted cash flow
model to estimate the fair value of its MSR. This model calculates estimated fair value of the MSR
using predominant risk characteristics of MSR such as interest rates, type of product (fixed vs.
variable), age (new, seasoned, or moderate), agency type and other factors. FHN uses assumptions in
the model that it believes are comparable to those used by brokers and other service providers. FHN
also periodically compares its estimates of fair value and assumptions with brokers, service
providers, and recent market activity and against its own experience.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Loans. </i></b>Loans are stated at principal amounts outstanding, net of unearned income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For purposes of the disclosures required pursuant to the adoption of amendments to ASC 310
effective December 31, 2010, the loan portfolio was disaggregated into segments and then further
disaggregated into classes for certain disclosures. A portfolio segment is defined as the level at
which an entity develops and documents a systematic method for determining its allowance for credit
losses. A class is generally determined based on the initial measurement attribute (i.e. amortized
cost or purchased credit impaired), risk characteristics of the loan, and an entity’s method for
monitoring and assessing credit risk. Commercial loan portfolio segments include commercial,
financial and industrial (“C&I”) and commercial real estate (“CRE”). Commercial classes within C&I
include general C&I, mortgage warehouse lending and the TRUPs portfolio. Commercial classes within
commercial real estate include income CRE and residential CRE. Retail loan portfolio segments
include consumer real estate, permanent mortgage, and the combined credit card and other
portfolios. Retail classes include HELOC and real estate installment loans within the consumer
real estate segment, permanent mortgage (which is both a segment and a class), credit card and
other. Due to the winding down nature and decreasing size of the One time close residential
construction portfolio, in most cases the remaining balances and activity of this portfolio has
been combined with and included within the other retail class.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interest on loans is recognized on an accrual basis at the applicable interest rate on the
principal amount outstanding. Loan origination fees and direct costs as well as premiums and
discounts are amortized as level yield adjustments over the respective loan terms.
Unamortized net fees or costs are recognized upon early repayment of the loans. Loan commitment
fees are generally deferred and amortized on a straight-line basis over the commitment period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Impaired loans are generally carried on a nonaccrual status. For commercial loans within each
portfolio segment and class placed on nonaccrual status, accrued but uncollected interest is
reversed and charged against interest income when the loan is placed on nonaccrual status. For
retail loans within each portfolio segment and class, accrued but uncollected interest is reversed
when the loan is fully or partially charged off. Management may elect to continue the accrual of
interest when the estimated net realizable value of collateral is sufficient to recover the
principal balance and accrued interest. For all portfolio segments and classes, interest payments
received on nonaccrual and impaired loans are normally applied to principal. Once all principal
has been received, additional interest payments are recognized on a cash basis as interest income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Commercial loans within each portfolio segment and class that have been placed on nonaccrual status
can be returned to accrual status if all principal and interest is current and FHN expects
full repayment of the remaining contractual principal and interest, or the asset becomes
well-secured and is in the process of collection. Also, loans for which all contractual
amounts can reasonably be expected to be repaid (including arrearages) within a prudent
period, and repayment has been in accordance with the contractual terms for a sustained period
can
also be returned to accrual status. Larger commercial loan balances (outstanding balances
greater than $1 million) that are being returned to accrual status are subject to review by
the Credit Risk Assurance Department.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Individually impaired loans are measured using either a discounted cash flow methodology or the
estimated fair value of the underlying collateral less costs to sell, if the loan is considered
collateral-dependent. In accordance with accounting standards, the discounted cash flow analysis
utilizes the loan’s effective interest rate for discounting expected cash flow amounts. For loans
measured using the estimated fair value of collateral less costs to sell, fair value is estimated
using appraisals of the collateral. Collateral values are monitored and additional write-downs are
recognized if it is determined that the estimated collateral values have declined further.
Estimated costs to sell are based on current amounts of disposal costs for similar assets.
Generally, FHN does not carry loan loss reserves for collateral dependent individually impaired
loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Allowance for Loan Losses</i></b><b>. </b>The allowance for loan losses is maintained at a level that management
determines is sufficient to absorb estimated probable incurred losses in the loan portfolio. The
allowance for loan losses is increased by the provision for loan losses and loan recoveries and is
decreased by charged-off loans. Reserves are determined in accordance with the ASC Contingencies
Topic (“ASC 450-20”) and are composed of reserves for commercial loans evaluated based on pools of
credit graded loans and reserves for pools of smaller-balance homogeneous retail and commercial
loans. 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.
Additionally, the ALLL includes reserves for loans determined by management to be individually
impaired. Reserves for individually impaired loans are established in accordance with the ASC
Receivables Topic (“ASC 310-10”). Management uses analytical models based on loss experience
subject to adjustment to reflect current events, trends, and conditions (including economic
considerations and trends) to assess the adequacy of the ALLL as of the end of each reporting
period. The nature of the process by which FHN determines the appropriate ALLL requires the
exercise of considerable judgment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Key components of the estimation process are as follows: (1) commercial loans determined by
management to be individually impaired loans are evaluated individually and specific reserves are
determined based on the difference between the outstanding loan amount and the estimated net
realizable value of the collateral (if collateral dependent) or the present value of expected
future cash flows; (2) individual commercial loans not considered to be individually impaired are
segmented based on similar credit risk characteristics and evaluated on a pool basis; (3) reserve
rates for the commercial segment are calculated based on historical net charge-offs and are subject
to adjustment by management to reflect current events, trends, and conditions (including economic
considerations and trends); (4) management’s estimate of probable incurred losses reflects the
reserve rate applied against the balance of loans in the commercial segment of the loan portfolio;
(5) retail loans are segmented based on loan type; (6) reserve amounts for each retail portfolio
segment are calculated using analytical models based on net loss experience and are subject to
adjustment by management to reflect current events, trends, and conditions (including economic
considerations and trends); and (7) the reserve amount for each retail portfolio segment reflects
management’s estimate of probable incurred losses in the retail segment of the loan portfolio.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, management developed and began utilizing an Average Loss Rate Model (“ALR”) for
establishment of commercial portfolio reserve rates. ALR is a grade migration based approach that
allows for robust segmentation and dynamic time period consideration. In comparison with the prior
commercial reserve rate establishment, ALR is more sensitive to current portfolio conditions and
provides
management with additional detailed analysis into historical portfolio net loss experience.
Consistent with the preceding approach, these reserve rates are then subject to management
adjustment to reflect current events, trends and conditions (including economic considerations and
trends) that affect the asset quality of the commercial loan portfolio. While the change to the ALR
model improved visibility into the impact of current portfolio conditions, the result of the model
change, after consideration of management adjustments used in both processes, was immaterial.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For commercial loans, reserves are established using historical net loss factors by grade level,
loan product, and business segment. Relationship managers risk rate each loan using grades that
reflect both the probability of default and estimated loss severity in the event of default.
Portfolio reviews are conducted to provide independent oversight of risk grading decisions for
larger credits. Loans with emerging weaknesses receive increased oversight through the “Watch
List” process. For new “Watch List” loans, senior credit management reviews risk grade
appropriateness and action plans. After initial identification, relationship managers prepare
regular updates for review and discussion by more senior business line and credit officers. This
oversight is intended to bring consistent grading and allow timely identification of loans that
need to be further downgraded or placed on nonaccrual status. When a loan becomes classified, the
asset generally transfers to the specialists in the Loan Rehab and Recovery group where the
accounts receive more detailed monitoring; at this time, new appraisals are typically ordered for
real estate collateral dependent credits. Typically, loans are placed on nonaccrual if it becomes
evident that full collection of principal and interest is at risk or if the loans become 90 days or
more past due. This is applicable for all portfolio segments and classes of commercial loans.
</div>
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<div align="left" style="font-size: 10pt; margin-top: 6pt">Generally, classified commercial non-accrual loans over $1 million are deemed to be individually
impaired and are assessed for impairment measurement. Individually impaired loans are measured
based on the present value of expected future payments discounted at the loan’s effective interest
rate (“the DCF method”), observable market prices, or for loans that are solely dependent on the
collateral for repayment, the estimated fair value of the collateral less estimated costs to sell
(net realizable value). For loans measured using the DCF method or by observable market prices, if
the recorded investment in the impaired loan exceeds this amount, a specific allowance is
established as a component of the allowance for loan and lease losses; however, for impaired
collateral-dependent loans FHN generally charges off the full difference between the book value and
the estimated net realizable value. This is applicable for all portfolio segments and classes of
commercial loans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The initial method used for measuring impairment is the DCF method. For all loans assessed under
the DCF method, it is necessary to project the timing and amount of the best estimate of future
cash flows from the borrower’s net rents received from the property, guarantor contributions,
receiver or court ordered payments, refinances, etc. Once the amount and timing of the cash flow
stream has been estimated, the net present value using the loan’s effective interest rate is then
calculated in order to determine the amount of impairment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Where guarantor contributions are determined to be a source of repayment, an assessment of the
guarantee is made. This guarantee assessment would include but not be limited to factors such as
type and feature of the guarantee, consideration for the guarantee, key provisions of the guarantee
agreement, and ability of the guarantor to be a viable secondary source of repayment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Reliance on the guarantee as a viable secondary source of repayment is a function of an analysis
proving capability to pay factoring in, among other things, liquidity, and direct/indirect debt
cash flows. Therefore, a proper evaluation of each guarantor is critical. FHN establishes a
guarantor’s ability (financial wherewithal) to support a credit based on an analysis of recent
information on the guarantor’s financial condition. This would generally include income and asset
information from sources such as recent tax returns, credit reports, and personal financial
statements. In analyzing this information FHN seeks to assess a combination of liquidity, global
cash flow, cash burn rate, and contingent liabilities to demonstrate the guarantor’s capacity to
sustain support for the credit and fulfill the obligation. FHN also considers the volume and amount
of guarantees provided for all global indebtedness and the likelihood of realization. Guarantor
financial information is periodically updated throughout the life of the loan.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN presumes a guarantor’s willingness to perform until financial support becomes necessary or if
there is any current or prior indication or future expectation that the guarantor may not willingly
and voluntarily perform under the terms of the guarantee.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In FHN’s risk grading approach, it is deemed that financial support becomes necessary generally at
a point when the loan would otherwise be graded substandard, reflecting a well-defined weakness.
At that point, provided willingness is appropriately demonstrated, a strong, legally enforceable
guarantee can mitigate the risk of default or loss, justify a less severe rating, and consequently
reduce the level of allowance or charge-off that might otherwise be deemed appropriate.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN establishes guarantor willingness to support the credit through documented evidence of previous
and ongoing support of the credit. Previous performance under a guarantor’s obligation to pay is
not considered if the performance was involuntary.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For impaired assets viewed as collateral dependent, fair value estimates are obtained from a
recently received and reviewed appraisal. Appraised values are adjusted down for costs associated
with asset disposal and for the estimates of any further deterioration in values since the most
recent appraisal. Upon the determination of impairment for collateral-dependent loans, FHN charges
off the full difference between book value and the best estimate of the asset’s net realizable
value. As of December 31, 2010, the total amount of individually impaired commercial loans is
$455.5 million; $207.6 million of these loans are carried at the fair value of collateral less
estimated costs to sell and do not carry reserves.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For retail consumer loans, reserve levels are established through the use of segmented roll-rate
models. Loans are classified as substandard at 90 days delinquent. Consumer loan charge-offs
follow regulatory guidance prescribed by the Federal Financial Institutions Examination Council
(“FFIEC”). For consumer loans secured by real estate, a collateral position is assessed prior to
the asset becoming 180 days delinquent. If the value does not support foreclosure, balances are
charged-off and other avenues of recovery are pursued. If the value supports foreclosure, the loan
is charged-down to net realizable value and is placed on nonaccrual status. When collateral is
taken to OREO, the asset is assessed for further write-down relative to appraised value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">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 or, if required by
regulators, based upon information at the time of their examinations. 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.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">For all commercial loan portfolio segments and retail loan portfolio segments, all losses of
principal are charged to the allowance for loan losses in the period in which the loan is deemed to
be uncollectible. Additions are made to the allowance through periodic provisions charged to
current operations and recovery of principal on loans previously charged off.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Premises and Equipment. </i></b>Premises and equipment are carried at cost less accumulated depreciation
and amortization and include additions that materially extend the useful lives of existing premises
and equipment. All other maintenance and repair expenditures are expensed as incurred. Gains and
losses on dispositions are reflected in noninterest income and expense.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation and amortization are computed on the straight-line method over the estimated useful
lives of the assets and are recorded as noninterest expense. Leasehold improvements are amortized
over the lesser of the lease periods or the estimated useful lives using the straight-line method.
Useful lives utilized in determining depreciation for furniture, fixtures and equipment and
buildings are three to fifteen and seven to forty-five years, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Real Estate Acquired by Foreclosure. </i></b>Properties acquired by foreclosure in compliance with HUD
servicing guidelines are included in “Real estate acquired by foreclosure” and are carried at the
estimated amount of the underlying government insurance or guarantee. On December 31, 2010, FHN
had $14.9 million in these foreclosed properties. All other real estate acquired by foreclosure
consists of properties that have been acquired in satisfaction of debt. These properties are
carried at the lower of the outstanding loan amount or estimated fair value less estimated costs to
sell the real estate. Losses arising at foreclosure are charged to the appropriate reserve.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Required developmental costs associated with foreclosed property under construction are capitalized
and included in determining the estimated net realizable value of the property, which is reviewed
periodically, and any write-downs are charged against current earnings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Intangible Assets. </i></b>Intangible assets consist of “Other intangible assets” and “Goodwill.” The
“Other intangible assets” represents identified intangible assets, including customer lists,
acquired contracts, covenants not to compete and premium on purchased deposits, which are amortized
over their estimated useful lives, except for those assets related to deposit bases that are
primarily amortized over 10 years. Management evaluates whether events or circumstances have
occurred that indicate the remaining useful life or carrying value of amortizing
intangibles should be revised. Goodwill represents the excess of cost over net assets of acquired
subsidiaries less identifiable intangible assets. On an annual basis, FHN tests goodwill for
impairment. While impairment of “Goodwill” recognized was immaterial to FHN for the year ended
December 31, 2008, impairments of other intangible assets of $4.0 million were recognized during
2008 in relation to FHN’s divestiture of certain mortgage banking operations and from the change in
FHN’s national banking strategy. For the year ended December
31, 2009, goodwill impairments of $16.6 million and an impairment of other intangible assets of $.2
million were recognized as a result of impairment assessments completed in relation to an agreement
to sell FTN Equity Capital Markets (“FTN ECM”) and in relation to the disposal of the First Horizon
Insurance business in the Atlanta area. For the year ended December 31, 2010, an additional
goodwill impairment of $3.3 million was recognized when the contracted sale of FTN ECM failed to
close and FHN exited the business through a cessation of operations, while the impairment of other
intangible assets during 2010 was immaterial to FHN. See Note 26 — Restructuring, Repositioning,
and Efficiency Initiatives for additional information regarding the impairments of other intangible
assets during 2008 and 2009 and the impairments of goodwill during 2009 and 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Derivative Financial Instruments. </i></b>FHN accounts for derivative financial instruments in accordance
with ASC 815 which requires recognition of all derivative instruments on the balance sheet as
either an asset or liability measured at fair value through adjustments to either accumulated other
comprehensive income within shareholders’ equity or current earnings. Fair value is defined as the
price that would be received to sell a derivative asset or paid to transfer a derivative liability
in an orderly transaction between market participants on the transaction date. Fair value is
determined using available market information and appropriate valuation methodologies.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN prepares written hedge documentation, identifying the risk management objective and designating
the derivative instrument as a fair value hedge, cash flow hedge or free-standing derivative
instrument entered into as an economic hedge or to meet customers’ needs. All transactions
designated as ASC 815 hedges must be assessed at inception and on an ongoing basis as to the
effectiveness of the derivative instrument in offsetting changes in fair value or cash flows of the
hedged item. For a fair value hedge, changes in the fair value of the derivative instrument and
changes in the fair value of the hedged asset or liability are recognized currently in earnings.
For a cash flow hedge, changes in the fair value of the derivative instrument, to the extent that
it is effective, are recorded in accumulated other comprehensive income and subsequently
reclassified to earnings as the hedged transaction impacts net income. Any ineffective portion of
a cash flow hedge is recognized currently in earnings. For free-standing derivative instruments,
changes in fair values are recognized currently in earnings. See Note 25 — Derivatives and
Off-Balance Sheet Arrangements for additional information.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">Cash flows from derivative contracts are reported as operating activities on the Consolidated
Statements of Cash Flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Advertising and Public Relations. </i></b>Advertising and public relations costs are generally expensed as
incurred.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Income Taxes. </i></b>FHN accounts for income taxes using the liability method pursuant to ASC 740,
“Income Taxes.” Under this method, FHN’s deferred tax assets and liabilities are determined by
applying the applicable federal and state income tax rates to its cumulative temporary differences.
These temporary differences represent differences between financial statement carrying amounts and
the corresponding tax bases of certain assets and liabilities. Deferred taxes are provided as a
result of such temporary differences.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN and its eligible subsidiaries are included in a consolidated federal income tax return. FHN
files separate returns for subsidiaries that are not eligible to be included in a consolidated
federal income tax return. Based on the laws of the applicable state where it conducts business
operations, FHN either files consolidated, combined, or separate returns. With few exceptions, FHN
is no longer subject to U.S. federal or state and local tax examinations by tax authorities for
years before 2006. The Internal Revenue Service (“IRS”) is currently examining tax years 2006 -
2008. All proposed adjustments with respect to examinations of federal returns filed for 2005 and
prior years have been settled.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The total balance of unrecognized tax benefits at December 31, 2010 and December 31, 2009,
respectively, were $38.4 million and $30.0 million. FHN does not expect that unrecognized tax
benefits will significantly increase or decrease within the next twelve months. FHN recognizes
accrued interest and penalties related to unrecognized tax benefits as a component of tax expense.
FHN had approximately $7 million and $8 million accrued for the payment of interest at December 31,
2010 and December 31, 2009, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Earnings per Share. </i></b>Earnings per share is computed by dividing net income or loss available to
common shareholders by the weighted average number of common shares outstanding for each period.
Diluted earnings per share in net income periods is computed by dividing net income available to
common shareholders by the weighted average number of common shares adjusted to include the number
of additional common shares that would have been outstanding if the potential dilutive common
shares resulting from options granted under
FHN’s stock option plans and deferred compensation arrangements had been issued. FHN utilizes the
treasury stock method in this calculation. Diluted earnings per share does not reflect an
adjustment for potentially dilutive shares in periods in which a net loss available to common
shareholders exists. As a result of the stock dividends declared in 2008, 2009, and 2010, weighted
average basic and diluted shares were restated to reflect the effect of the stock dividends.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Equity Compensation. </i></b>FHN accounts for its employee stock-based compensation plans using the grant
date fair value of an award to determine the expense to be recognized over the life of the award.
For awards with service vesting criteria, expense is recognized using the straight-line method over
the requisite service period (generally the vesting period) and is adjusted for anticipated
forfeitures. For awards vesting based on a performance measure, anticipated performance is
projected to determine the number of awards expected to vest, and the corresponding aggregate
expense is adjusted to reflect the elapsed portion of the performance period. The fair value of
equity awards with cash payout requirements, as well as awards for which fair value cannot be
estimated at grant date, is remeasured each reporting period through vesting date. Awards are
amortized using the nonsubstantive vesting methodology which requires that expense associated with
awards having only service vesting criteria that continue vesting after retirement be recognized
over a period ending no later than an employee’s retirement eligibility date.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Repurchase and Foreclosure Provision. </i></b>FHN historically presented charges related to repurchase
obligations for junior lien consumer mortgage loan sales in noninterest income while similar
charges arising from first lien mortgage originations and sales through the legacy national
mortgage banking business were reflected in noninterest expense. In order to present such charges
consistently, FHN determined in third quarter 2010 that charges relating to repurchase obligations
should be reflected in noninterest expense in the line item called Repurchase and foreclosure
provision on the Consolidated Statements of Income. Consequently, FHN retroactively applied this
change which resulted in a reclassification of charges related to junior lien mortgage loan sales
from noninterest income into noninterest expense. All applicable tables and associated narrative
have been revised to reflect this change. This reclassification did not impact FHN’s net income
and all effects are included in the non-strategic segment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Accounting Changes. </i></b>Effective December 31, 2010, FHN adopted the provisions of FASB Accounting
Standards Update 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses” (“ASU 2010-20”), with the exception of certain disclosures about
activity that occurs during a reporting period for which the requirements are effective for periods
beginning after December 15, 2010. Additionally, in January 2011, FASB Accounting Standards Update
2011-01, “Deferral of the Effective Date of Disclosures About Troubled Debt Restructurings in
Update No. 2010-20”, was issued which temporarily delays the disclosure requirements related to
modifications to be effective concurrent with the effective date of the proposed Accounting
Standards Update, “Receivables (Topic 310): Clarifications to Accounting for Troubled Debt
Restructurings by Creditors”. ASU 2010-20 provides enhanced disclosures related to
the credit
quality of financing receivables and the allowance for credit losses, and provides that new and
existing disclosures should be disaggregated based on how an entity develops its allowance for
credit losses and how it manages credit exposures. Under the provisions of ASU 2010-20, additional
disclosures required for financing receivables include information regarding the aging of past due
receivables, credit quality indicators, and modifications of financing receivables. Comparative
disclosures are required only for periods ending subsequent to initial adoption. Upon adoption of
the provisions of ASU 2010-20 related to disclosures as of the end of a reporting period, and the
amendments to the rollforward of the allowance for credit losses, on December 31, 2010, FHN revised
its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective September 30, 2010, FHN adopted the provisions of FASB Accounting Standards Update
2010-11, “Scope Exception Related to Embedded Credit Derivatives” (“ASU 2010-11”). ASU 2010-11
amends ASC 815 to provide clarifying language regarding when embedded credit derivative features
are not considered embedded derivatives subject to potential bifurcation and separate accounting.
Upon adoption of the provisions of ASU 2010-11, re-evaluation of certain preexisting contracts is
required to determine whether the accounting for such contracts is consistent with the amended
guidance in ASC 815. If the fair value option is elected for an instrument upon adoption of the
amendments to ASC 815, re-evaluation of such preexisting contracts is not required. As FHN does
not have any preexisting contracts which require re-evaluation, the adoption of the Codification
update to ASC 815 had no effect on FHN’s statement of condition, results of operations, or cash
flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective upon its issuance in February 2010, FHN adopted the provisions of FASB Accounting
Standards Update 2010-09, “Subsequent Events — Amendments to Certain Recognition and Disclosure
Requirements” (“ASU 2010-09”). ASU 2010-09 amends ASC 855 to clarify that an entity must disclose
the date through which subsequent events have been evaluated in both originally issued and restated
financial statements unless the entity has a regulatory requirement to review subsequent events up
through the filing or furnishing of financial statements with the Securities and Exchange
Commission. Upon adoption of the provisions of ASU 2010-09, FHN revised its disclosures
accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-06,
“Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”), with the exception of the
requirement to provide the activity of purchases, sales, issuances, and
settlements related to recurring Level 3 measurements on a gross basis in the Level 3
reconciliation which is effective for quarters beginning after December 15, 2010. ASU 2010-06
updates ASC 820 to require disclosure of significant transfers into and out of Level 1 and Level 2
of the fair value hierarchy, as well as disclosure of an entity’s policy for determining when
transfers between all levels of the hierarchy are recognized. The updated provisions of ASC 820
also require that fair value measurement disclosures be provided by each “class” of assets and
liabilities, and that disclosures providing a description of the valuation techniques and inputs
used to measure fair value be included for both recurring and nonrecurring fair value measurements
classified as either Level 2 or Level 3. Under ASC 820, as amended, separate disclosure is
required in the Level 3 reconciliation of total gains and losses recognized in other comprehensive
income. Comparative
disclosures are required only for periods ending subsequent to initial adoption. Upon adoption of
the amendments to ASC 820, FHN revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2009-16,
“Accounting for Transfers of Financial Assets” (“ASU 2009-16”). ASU 2009-16 updates ASC 860 to
provide for the removal of the QSPE concept from GAAP, resulting in the evaluation of all former
QSPEs for consolidation in accordance with ASC 810 on and after the effective date of the
amendments. The amendments to ASC 860 modify the criteria for achieving sale accounting for
transfers of financial assets and define the term participating interest to establish specific
conditions for reporting a transfer of a portion of a financial asset as a sale. The updated
provisions of ASC 860 also provide that a transferor should recognize and initially measure at fair
value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred
as a result of a transfer of financial assets accounted for as a sale. ASC 860, as amended,
requires enhanced disclosures which are generally consistent with, and supersede, the disclosures
previously required by the Codification update to ASC 810 and ASC 860 which was effective for
periods ending after December 15, 2008. Upon adoption of the amendments to ASC 860, FHN applied
the amended disclosure requirements to transfers that occurred both before and after the effective
date of the Codification update, with comparative disclosures included only for periods subsequent
to initial adoption for those disclosures not previously required. The adoption of the
Codification update to ASC 860 had no material effect on FHN’s statement of condition, results of
operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of Accounting Standards Update 2009-17,
“Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (“ASU
2009-17”). ASU 2009-17 amends ASC 810 to revise the criteria for determining the primary
beneficiary of a VIE by replacing the quantitative-based risks and rewards test previously required
with a qualitative analysis. While ASC 810, as amended, retains the previous guidance in ASC 810
which requires a reassessment of whether an entity is a VIE only when certain triggering events
occur, it adds an additional criterion which triggers a reassessment of an entity’s status when an
event occurs such that the holders of the equity investment at risk, as a group, lose the power
from voting rights or similar rights of those investments to
direct the activities of the entity
that most significantly impact the entity’s economic performance. Additionally, the amendments to
ASC 810 require continual reconsideration of conclusions regarding which interest holder is the
VIE’s primary beneficiary. Under ASC 810, as amended, separate presentation is required on the
face of the balance sheet of the assets of a consolidated VIE that can only be used to settle the
VIE’s obligations and the liabilities of a consolidated VIE for which creditors or beneficial
interest holders have no recourse to the general credit of the primary beneficiary. ASC 810, as
amended, also requires enhanced disclosures which are generally consistent with, and supersede, the
disclosures previously required by the Codification update to ASC 810 and ASC 860 which was
effective for periods ending after December 15, 2008. Comparative disclosures are required only
for periods subsequent to initial adoption for those disclosures not required under such previous
guidance.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Upon adoption of the amendments to ASC 810, FHN re-evaluated all former QSPEs and entities already
subject to ASC 810 under the revised consolidation methodology. Based on such re-evaluation,
consumer loans with an aggregate unpaid principal balance of $245.2 million were prospectively
consolidated as of January 1, 2010, along with secured borrowings of $236.3 million, as the
retention of mortgage servicing rights (“MSR”) and other retained interests, including residual
interests and subordinated bonds, resulted in FHN being considered the related trusts’ primary
beneficiary under the qualitative analysis required by ASC 810, as amended. MSR and trading assets
held in relation to the newly consolidated trusts were removed from the mortgage servicing rights
and trading securities sections of the Consolidated Statements of Condition, respectively, upon
adoption of the amendments to ASC 810. As the assets of FHN’s consolidated residential mortgage
securitization trusts are pledged to settle the obligations due to the holders of the trusts’
securities and since the security holders have no recourse to FHN, the asset and liability balances
have been parenthetically disclosed on the face of the Consolidated Statements of Condition as
restricted in accordance with the presentation requirements of ASC 810, as amended. Since FHN
determined that calculation of carrying values was not practicable, the unpaid principal balance
measurement methodology was used upon adoption, with the allowance for loan losses (“ALLL”) related
to the newly consolidated loans determined using FHN’s standard practices. FHN recognized a
reduction to the opening balance of undivided profits of approximately $10.6 million for the
cumulative effect
of adopting the amendments to ASC 810, including the effect of the recognition of an adjustment to
the ALLL of approximately $24.6 million ($15.6 million net of tax) in relation to the newly
consolidated loans. Further, upon adoption of the amendments to ASC 810, the deconsolidation of
certain small issuer trust preferred trusts for which First Tennessee Bank National Association
(“FTBNA”) holds the majority of the mandatorily redeemable preferred capital securities (trust
preferreds) issued but is not considered the primary beneficiary under the qualitative analysis
required by ASC 810, as amended, resulted in reduction of loans net of unearned income and term
borrowings on the Consolidated Statements of Condition by $30.5 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-10,
“Amendments for Certain Investment Funds” (“ASU 2010-10”). ASU 2010-10 delays the application of
ASU 2009-17 for a reporting entity’s interest in an entity that has the attributes of an investment
company or for which it is industry practice to apply measurement principles for financial
reporting purposes that are consistent with those followed by investment companies. For entities
that do not qualify for the deferral, ASU 2010-10 clarifies that related parties should be
considered when evaluating whether each of the criteria related to permitted levels of decision
maker or service provider fees in ASC 810 are met. Additionally, ASU 2010-10 amends ASC 810 to
provide that when evaluating whether a fee is a variable interest in situations in which a decision
maker or servicer provider holds another interest in the related VIE, a quantitative calculation
may be used but should not be the sole basis for evaluating whether the other variable interest is
more than insignificant. The adoption of the Codification update to ASC 810 had no effect on FHN’s
statement of condition, results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2009, FHN adopted the provisions of the FASB Codification Update to ASC 715
which provides detailed disclosure requirements to enhance the disclosures about an employer’s
postretirement benefit plan assets currently required by ASC 715-20-50. Upon adoption of the
amendments to ASC 715, FHN revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2009, FHN adopted the provisions of FASB Accounting Standards Update
2010-02, “Accounting and Reporting for Decreases in Ownership of a Subsidiary — a Scope
Clarification” (ASU 2010-02). ASU 2010-02 clarifies the scope of the decrease in ownership
guidance in ASC 810-10 and expands the disclosures required upon deconsolidation of a subsidiary
under ASC 810-10-50-1B. The adoption of the Codification update to ASC 810-10 had no effect on
FHN’s statement of condition, results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2009, FHN adopted the provisions of FASB Accounting Standards Update
2009-05, “Measuring Liabilities at Fair Value” (ASU 2009-05). ASU 2009-05 updates ASC 820 to
clarify that a quoted price for the identical liability, when traded as an asset in an active
market, is a Level 1 measurement for that liability when no adjustment to the quoted price is
required. ASU 2009-05 further amends ASC 820 to provide that if a quoted price for an identical
liability does not exist in an active market, the fair value of the liability should be measured
using an approach that maximizes the use of relevant observable inputs and minimizes the use of
unobservable inputs. Under the updated provisions of ASC 820, for such liabilities fair value will
be measured using either a valuation technique that uses the quoted price of the identical
liability when traded as an asset, a valuation technique that uses the quoted price for similar
liabilities or similar liabilities when
traded as an asset, or another valuation technique that is
consistent with the principles of ASC 820. The adoption of the Codification update to ASC 820 had
no material effect on FHN’s statement of condition, results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective September 30, 2009, FHN adopted the provisions of FASB Accounting Standards Update
2009-01 which creates ASC 105, “Generally Accepted Accounting Principles.” ASC 105 establishes the
FASB Accounting Standards Codification (the “Codification”) as the single source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP, other than guidance issued by the SEC.
Under ASC 105, all guidance contained in the FASB Accounting Standards Codification carries an
equal level of authority, with ASC 105 superseding all non-SEC accounting and reporting standards
which existed as of its effective date. The effect of adopting the provisions of ASC 105 was
immaterial to FHN. In accordance with ASC 105, all references to authoritative accounting
standards have been revised to reflect their Codification citation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective June 30, 2009, FHN adopted the provisions of the FASB Codification update to ASC
825-10-50, which requires disclosures about fair value of financial instruments in interim
financial statements. ASC 825-10-50, as amended, requires that disclosures be included in both
interim and annual financial statements of the methods and significant assumptions used to estimate
the fair value of financial instruments.
Comparative disclosures are required only for periods ending subsequent to initial adoption. Upon
adoption of the amendments to ASC 825-10-50, FHN revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the FASB issued a Codification update to ASC 320-10-35 which replaces the “intent
and ability to hold to recovery” indicator of other-than-temporary impairment in ASC 320-10-35 for
debt securities. The updated provisions of ASC 320-10-35 specify that a debt
security is considered other-than-temporarily impaired when an entity’s management intends to sell
the security or that it is more-likely-than- not that the entity will be required to sell
the security prior to recovery of its cost basis. ASC 320-10-35, as amended, requires that for
impaired held-to-maturity and available-for-sale debt securities that an entity does not intend to
sell and will not be required to sell prior to recovery but for which credit losses exist, the
other-than-temporary impairment should be separated between the total impairment related to credit
losses, which should be recognized in current earnings, and the amount of impairment related to all
other factors, which should be recognized in other comprehensive income. ASC 320-10-35, as
amended, discusses the proper interaction of its guidance with SEC Staff Accounting BulletinTopic
5M, which provides additional factors that must be considered in an other-than-temporary impairment
analysis. ASC 320-10-35, as amended, also provides that in periods in which other-than-temporary
impairments are recognized, the total impairment must be presented in the investor’s income
statement with an offset for the amount of total impairment that is recognized in other
comprehensive income. ASC 320-10-35 requires additional disclosures including a rollforward of
amounts recognized in earnings for debt securities for which an other-than-temporary impairment has
been recognized and the noncredit portion of the other-than-temporary impairment that has been
recognized in other comprehensive income. FHN initially applied the guidance provided in the
Codification update to ASC 320-10-35 when assessing debt securities for other-than-temporary
impairment as of March 31, 2009 and the effects of adoption were not material.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the FASB issued a Codification update to ASC 820-10 which provides factors that an
entity should consider when determining whether a market for an asset is not active. If after
evaluating the relevant factors, the evidence indicates that a market is not active, ASC 820-10
provides an additional list of factors that an entity must consider when determining whether events
and circumstances indicate that a transaction which occurred in such inactive market is orderly.
ASC 820-10, as amended, requires that entities place more weight on observable transactions
determined to be orderly and less weight on transactions for which there is insufficient
information to determine whether the transaction is orderly when determining the fair value of an
asset or liability. The Codification update to ASC 820-10 requires enhanced disclosures, including
disclosure of a change in valuation technique which results from its application and disclosure of
fair value measurements for debt and equity securities by major security types. FHN initially
applied the guidance provided in the Codification update to ASC 820-10 in its fair value
measurements as of March 31, 2009 and the effects of adoption were not significant.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 820 for
existing fair value measurement requirements related to non-financial assets and liabilities which
are recognized at fair value on a non-recurring basis. The effective date for the application of
ASC 820’s measurement framework to such non-financial assets and liabilities was previously delayed
under transitional guidance issued by the FASB. ASC 820, as amended, establishes a hierarchy to be
used in performing measurements of fair value. Additionally, the updated provisions of ASC 820
emphasize that fair value should be determined from the perspective of a market participant while
also indicating that valuation methodologies should first reference available market data before
using internally developed assumptions. ASC 820, as amended, also provides expanded disclosure
requirements regarding the effects of fair value measurements on the financial statements. The
effect of adopting the updated provisions of ASC 820 for non-financial assets and liabilities which
are recognized at fair value on a non-recurring basis on January 1, 2009, was not significant to
FHN. Effective January 1, 2008, FHN adopted
ASC 820’s Codification update for existing fair value measurement requirements related to financial
assets and liabilities as well as to non-financial assets and liabilities which are remeasured at
least annually. Upon the adoption of the updated provisions of ASC 820 for financial
assets and
liabilities as well as non-financial assets and liabilities remeasured at least annually on January
1, 2008, a negative after-tax cumulative-effect adjustment of $12.5 million was made to the opening
balance of undivided profits for interest rate lock commitments which
FHN previously measured under the guidance of ASC 815-10-45. The effect of the change in
accounting for these interest rate lock commitments produced a positive effect of $19.4 million on
2008 pre-tax earnings as existing commitments were delivered as loans and
additional commitments that would have been deferred under the guidance of ASC 815-10-45 were made.
Substantially all commitments existing at August 31, 2008 were sold.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 805 and ASC
810. ASC 805, as amended, requires that an acquirer recognize the assets acquired and liabilities
assumed in a business combination, as well as any noncontrolling interest in the acquiree, at their
fair values as of the acquisition date, with limited exceptions. Additionally, the updated
provisions of ASC 805 provide that an acquirer cannot specify an effective date for a business
combination that is separate from the acquisition date. ASC 805, as amended, also provides that
acquisition-related costs which an acquirer incurs should be expensed in the period in which the
costs are incurred and the services are received. ASC 810, as amended, requires that acquired
assets and liabilities be measured at full fair value without consideration to ownership
percentage. Under the updated provisions of ASC 810, any noncontrolling interests in an acquiree
should be presented as a separate component of equity rather than on a mezzanine level.
Additionally, ASC 810, as amended, provides that net income or loss should be reported in the
consolidated income statement at its consolidated amount, with disclosure on the
face of the consolidated income statement of the amount of consolidated net income which is
attributable to the parent and noncontrolling interests, respectively. The retrospective
application of ASC 810’s presentation and disclosure requirements resulted in an increase to
consolidated net income of $14.0 million for 2008. FHN also recognized an increase of total
shareholders’ equity of $295.2 million upon adoption of the amendments to ASC 810 as a result of
reclassifying the noncontrolling interest previously recognized on the Consolidated Statements of
Condition as “Preferred stock of subsidiary” as a separate component of equity.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, FHN adopted the provisions of an additional Codification update to ASC
805 which requires that an acquirer recognize at fair value as of the acquisition date an asset
acquired or liability assumed in a business combination that arises from a contingency if the
acquisition-date fair value of the asset or liability can be determined during the measurement
period. ASC 805, as amended, provides that if the acquisition-date fair value of an asset acquired
or liability assumed in a business combination that arises from a contingency cannot be determined
during the measurement period, the asset or liability should be recognized at the acquisition date
if information available before the end of the measurement period indicates that it is probable
that an asset existed or a liability had been incurred at the acquisition date and the amount of
the asset or liability can be reasonably estimated. Additionally, ASC 805, as amended, requires
enhanced disclosures regarding assets and liabilities arising from contingencies which are
recognized at the acquisition date of a business combination, including the nature of the
contingencies, the amounts recognized at the acquisition date and the measurement basis applied.
The adoption of the Codification update to ASC 805 had no effect on FHN’s statement of condition,
results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2009, FHN adopted the provisions of the Codification update to ASC 815-10-50
which provides amendments that enhance disclosures related to derivatives accounted for in
accordance with ASC 815 and reconsiders existing disclosure requirements for such derivatives and
any related hedging items. The additional disclosures provided in ASC 815-10-50, as amended, are
required for both interim and annual reporting periods. Upon adoption of the Codification update
to ASC 815-10-50, FHN revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">
FHN also adopted the provisions of the Codification update to ASC 860-10 as of January 1, 2009, for
initial transfers of financial assets executed after such date. The Codification update amends ASC
860-10 to permit a transferor and transferee to separately account for an initial transfer of a
financial asset and a related repurchase financing that are entered into contemporaneously with, or
in contemplation of, one another if certain specified conditions are met at the inception of the
transaction. ASC 860-10, as amended, requires that the two transactions have a valid and distinct
business or economic purpose for being entered into separately and that the repurchase financing
not result in the initial transferor regaining control over the previously transferred financial
asset. The effect of adopting the Codification update to ASC 860-10 was immaterial to FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2008, FHN adopted the provisions of the Codification update to ASC 325 which
aligns its impairment model for beneficial interests in securitized financial assets with the
impairment model in ASC 320, resulting in a consistent determination of whether
other-than-temporary impairments of available for sale or held to maturity debt securities have
occurred. Since FHN recognizes all retained interests from securitization transactions at fair
value as trading securities and as all of its beneficial interests classified as available for sale
securities are outside the scope of ASC 325, the effect of adopting the Codification update to ASC
325 was immaterial to FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective December 31, 2008, FHN adopted the provisions of the Codification update to ASC 815-10-50
which requires sellers of credit derivatives and similar guarantee contracts to make disclosures
regarding the nature, term, fair value, potential losses, and recourse
provisions for those
contracts. Since FHN is not a seller of credit derivatives or similar financial guarantees, the
effect of adopting the Codification update to ASC 815-10-50 was immaterial to FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted the provisions of the Codification update to ASC 825 which
allows an irrevocable election to measure certain financial assets and liabilities at fair value on
an instrument-by-instrument basis, with unrealized gains and losses recognized currently in
earnings. Under ASC 825, the fair value option may only be elected at the time of initial
recognition of a financial asset or liability or upon the occurrence of certain specified events.
Additionally, ASC 825 provides that application of the fair value option must be based on the fair
value of an entire financial asset or liability and not selected risks inherent in those assets or
liabilities. ASC 825 requires that assets and liabilities which are measured at fair value
pursuant to the fair value option be reported in the financial statements in a manner that
separates those fair values from the carrying amounts of similar assets and liabilities which are
measured using another measurement attribute. ASC 825 also provides expanded disclosure
requirements regarding the effects of electing the fair value option on the financial statements.
Upon adoption of the updated provisions of ASC 825, FHN elected the fair value option on a
prospective basis for almost all types of mortgage loans originated for sale purposes.
Additionally, in accordance with ASC 825’s amendment of ASC 320, FHN
began prospectively classifying cash flows associated with its retained interests in
securitizations recognized as trading securities within investing activities in the Consolidated
Statements of Cash Flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted SEC Staff Accounting Bulletin No. 109, “Written Loan
Commitments Recorded at Fair Value Through Earnings” (SAB No. 109) prospectively for derivative
loan commitments issued or modified after that date. SAB No. 109 rescinds SAB No. 105’s
prohibition on inclusion of expected net future cash flows related to loan servicing activities in
the fair value measurement of a written loan commitment. SAB No. 109 also applies to any loan
commitments for which fair value accounting is elected under ASC 825. FHN did not elect fair value
accounting for any other loan commitments under ASC 825. The prospective application of SAB No.
109 and the prospective election to recognize substantially all new mortgage loan originations at
fair value under ASC 825 resulted in a positive net impact of $1.0 million on 2008 pre-tax
earnings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted the provisions of the Codification update which amended ASC
820 to exclude ASC 840, “Leases,” from its scope. The adoption of the Codification update to ASC
820 had no effect on FHN’s statement of condition, results of operations, or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted the provisions of the Codification update to ASC 715 which
requires that a liability be recognized for contracts written to employees which provide future
postretirement benefits that are covered by endorsement split-dollar life insurance arrangements
because such obligations are not considered to be effectively settled upon entering into the
related insurance arrangements. FHN recognized a decrease to undivided profits of $8.5 million,
net of tax, upon adoption of the amendments to ASC 715.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, FHN adopted the provisions of the Codification update to ASC 815 which
permits the offsetting of fair value amounts recognized for the right to reclaim cash collateral or
the obligation to return cash collateral against fair value amounts recognized for derivative
instruments executed with the same counterparty under the same master netting arrangement. Upon
adoption of the amendments to ASC 815, entities were permitted to change their previous accounting
policy election to offset or not offset fair value amounts recognized for derivative instruments
under master netting arrangements. ASC 815, as amended, requires additional disclosures for
derivatives and collateral associated with master netting arrangements, including the separate
disclosure of amounts recognized for the right to reclaim cash collateral or the obligation to
return cash collateral under master netting arrangements as of the end of each reporting period for
entities that made an accounting policy decision to not offset fair value amounts. FHN retained
its previous accounting policy election to not offset fair value amounts recognized for derivative
instruments under master netting arrangements upon adoption of the updated provisions of ASC 815,
and has revised its disclosures accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN also adopted the provisions of the Codification update to ASC 815-20-25 as of January 1, 2008,
for hedging relationships designated on or after such date. The updated provisions of ASC
815-20-25 explicitly permit use of the shortcut method for hedging relationships in which an
interest rate swap has a nonzero fair value at inception of the hedging relationship which is
attributable solely to the existence of a bid-ask spread in the entity’s principal market under ASC
820. Additionally, ASC 815-20-25, as amended, allows an entity to apply the shortcut method to a
qualifying fair value hedge when the hedged item has a trade date that differs from its settlement
date because of generally established conventions in the marketplace in which the transaction to
acquire or issue the hedged item is executed. Preexisting shortcut hedging relationships were
analyzed as of the adoption date of the amendments to ASC 815-20-25 to determine whether they
complied with
the revised shortcut criteria at their inception or should be dedesignated prospectively. The
adoption of the updated provisions of ASC 815-20-25 had no effect on FHN’s financial position,
results of operations, or cash flows as all of FHN’s preexisting hedging relationships met the
requirements of ASC 815-20-25, as amended, at their inception.
</div>
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IDEA: Components of Other Comprehensive Income/(Loss)
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 15 — Components of Other Comprehensive Income/(loss)</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Following is detail of Accumulated other comprehensive income/(loss) as presented in the
Consolidated Statements of Condition:
</div>
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<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Accumulated</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Other</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Before-Tax</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Tax Benefit/</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Comprehensive</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">(Expense)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Income/(Loss)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2007
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">25,675</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(9,638</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(48,101</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized market adjustments on cash flow hedge
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized market adjustments on securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">35,863</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(13,882</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">21,981</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Adjustment for net gains/(losses) included in net income
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(210</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">81</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(129</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Pension and postretirement plans:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Prior service cost arising during period
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(59</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">22</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(37</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Net actuarial gain/(loss) arising during period
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(208,158</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">80,198</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(127,960</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of prior service cost, transition asset/obligation,
and net actuarial gain/(loss) included in net periodic benefit cost
</div></td>
<td> </td>
<td> </td>
<td align="right">3,913</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,492</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2,421</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000">   </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2008
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(168,661</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">64,931</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(151,831</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized market adjustments on securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">34,759</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(12,145</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">22,614</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Pension and postretirement plans:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Prior service cost arising during period
</div></td>
<td> </td>
<td> </td>
<td align="right">17,088</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6,259</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">10,829</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Net actuarial gain/(loss) arising during period <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">6,024</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,483</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">3,541</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of prior service cost, transition asset/obligation,
and net actuarial gain/(loss) included in net periodic benefit cost
</div></td>
<td> </td>
<td> </td>
<td align="right">1,007</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(369</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">638</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">58,878</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(21,256</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(114,209</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized market adjustments on securities available for sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(32,727</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">12,731</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(19,996</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Adjustment for net gains/(losses) included in net income
</div></td>
<td> </td>
<td> </td>
<td align="right">715</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(278</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">437</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Pension and postretirement plans:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Net actuarial gain/(loss) arising during period
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,439</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2,014</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,425</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Amortization of prior service cost, transition asset/obligation,
and net actuarial gain/(loss) included in net periodic benefit cost
</div></td>
<td> </td>
<td> </td>
<td align="right">15,121</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,474</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">9,647</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(22,330</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>8,993</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(127,546</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr style="font-size: 10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(a)</td>
<td width="1%"> </td>
<td>Includes a positive, after-tax effect of $18.3 million due to a curtailment. See Note 19 — Savings, Pension, and Other Employee Benefits.
</td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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esignated as, and are effective as, economic hedges of a net investment in a foreign entity; (3) gains and losses on intercompany foreign currency transactions that are of a long-term-investment nature, when the entities to the transaction are consolidated, combined, or accounted for by the equity method in the reporting enterprise's financial statements; (4) change in the market value of a futures contract that qualifies as a hedge of an asset reported at fair value; (5) unrealized holding gains and losses on available-for-sale securities and that resulting from transfers of debt securities from the held-to-maturity category to the available-for-sale category; (6) a net loss recognized as an additional pension liability not yet recognized as net periodic pension cost; and (7) the net gain or loss and net prior service cost or credit for pension plans and other postretirement benefit plans.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 24 — Variable Interest Entities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2010, FHN adopted the provisions of ASU 2009-16 and ASU 2009-17. The
provisions of ASU 2009-16 updates ASC 860, “Transfers and Servicing,” to provide for the removal of
the qualifying special purpose entity (“QSPE”) concept from GAAP, resulting in these entities being
considered variable interest entities (“VIE”) which must be evaluated for consolidation on and
after its effective date. The provisions of ASU 2009-17 amends ASC 810, “Consolidation,” to revise
the criteria for determining the primary beneficiary of a VIE by replacing the quantitative-based
risks and rewards test previously required with a qualitative analysis. The updated provisions of
ASC 810 clarify that a VIE exists when the equity investors, as a group, lack either (1) the power
through voting rights, or similar rights, to direct the activities of an entity that most
significantly impact the entity’s economic performance, (2) the obligation to absorb the expected
losses of the entity, (3) the right to receive the expected residual returns of the entity, or (4)
when the equity investors, as a group, do not have sufficient equity at risk for the entity to
finance its activities by itself. A variable interest is a contractual ownership, or other
interest, that fluctuates with changes in the fair value of the VIE’s net assets exclusive of
variable interests. Under ASC 810, as amended, FHN is deemed to be the primary beneficiary and
required to consolidate a VIE if it has a variable interest in the VIE that provides it with a
controlling financial interest. For such purposes, the determination of whether a controlling
financial interest exists is based on whether a single party has both the power to direct the
activities of the VIE that most significantly impact the VIE’s economic performance and the
obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could
potentially be significant. As amended, ASC 810, requires continual reconsideration of conclusions
reached regarding which interest holder is a VIE’s primary beneficiary. The consolidation
methodology provided in this footnote for the year ended December 31, 2010, has been prepared in
accordance with ASC 810 as amended by ASU 2009-17.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to the adoption of the provisions of the Codification update to ASC 810 in first quarter
2010, FHN was deemed to be the primary beneficiary and required to consolidate a VIE if it had a
variable interest that would absorb the majority of the VIE’s expected losses, receive the majority
of expected residual returns, or both. A VIE existed when equity investors did not have the
characteristics of a controlling financial interest or did not have sufficient equity at risk for
the entity to finance its activities by itself. Expected losses and expected residual returns were
measures of variability in the expected cash flow of a VIE. Reconsideration of conclusions reached
regarding which interest holder was a VIE’s primary beneficiary was required only upon the
occurrence of certain specified events. The consolidation methodology provided in this footnote
for the year ended December 31, 2009, has been prepared in accordance with the provisions of ASC
810 prior to its amendment by ASU 2009-17.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>Year Ended December 31, 2010</b></u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Consolidated Variable Interest Entities. </i></b>FHN holds variable interests in proprietary residential
mortgage securitization trusts it established prior to 2008 as a source of liquidity for its
mortgage banking and consumer lending operations. Except for recourse due to breaches of standard
representations and warranties made by FHN in connection with the sale of the loans to the trusts,
the creditors of the trusts hold no recourse to the assets of FHN. Additionally, FHN has no
contractual requirements to provide financial support to the trusts. Based on their restrictive
nature, the trusts are considered VIE as the holders of equity at risk do not have the power
through voting rights or similar rights to direct the activities that most significantly impact the
trusts’ economic performance. In situations where the retention of MSR and other retained
interests, including residual interests and subordinated bonds, results in FHN potentially
absorbing losses or receiving benefits that are significant to the trusts, FHN is considered the
primary beneficiary, as it is also assumed to have the power as servicer to most significantly
impact the activities of such VIE. Consolidation of the trusts results in the recognition of the
trusts’ proceeds as restricted borrowings since the cash flows on the securitized loans can only be
used to settle the obligations due to the holders of the trusts’ securities.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has established certain rabbi trusts related to deferred compensation plans offered to its
employees. FHN contributes employee cash compensation deferrals to the trusts and directs the
underlying investments made by the trusts. The assets of these trusts are available to FHN’s
creditors only in the event that FHN becomes insolvent. These trusts are considered VIE because
either there is no equity at risk in the trusts or because FHN provided the equity interest to its
employees in exchange for services rendered. FHN is considered the primary beneficiary of the rabbi
trusts as it has the power to direct the activities that most significantly impact the economic
performance of the rabbi trusts through its ability to direct the underlying investments made by
the trusts. Additionally, FHN could potentially receive benefits or absorb losses that are
significant to the trusts due to its right to receive any asset values in excess of liability
payoffs and its obligation to fund any liabilities to employees that are in excess of a rabbi
trust’s assets. Under the rules applicable in 2009, these were considered VIE and required
consolidation.
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes VIE consolidated by FHN as of December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>On-Balance Sheet</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Rabbi Trusts Used for Deferred</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Consumer Loan Securitizations</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Compensation Plans</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Carrying Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Carrying Value</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and due from banks
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,143</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loans, net of unearned income
</div></td>
<td> </td>
<td> </td>
<td align="right">757,491</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Less: Allowance for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right">47,452</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total net loans
</div></td>
<td> </td>
<td> </td>
<td align="right">710,039</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">19,658</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">61,323</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total assets</b>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">732,840</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">61,323</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest-bearing deposits
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,203</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right">754,521</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">101</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">57,218</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total liabilities</b>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">755,825</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">57,218</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Nonconsolidated Variable Interest Entities. </i></b>Since 1997, First Tennessee Housing Corporation
(“FTHC”), a wholly-owned subsidiary, has made equity investments as a limited partner in various
partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit
(“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is
to achieve a satisfactory return on capital and to support FHN’s community reinvestment
initiatives. The activities of the limited partnerships include the identification, development,
and operation of multi-family housing that is leased to qualifying residential tenants generally
within FHN’s primary geographic region. LIHTC partnerships are considered VIE because FTHC, as the
holder of the equity investment at risk, does not have the ability to direct the activities that
most significantly affect the success of the entity through voting rights or similar rights. While
FTHC could absorb losses that are significant to the LIHTC partnerships as it has a risk of loss
for its initial capital contributions and funding commitments to each partnership, it is not
considered the primary beneficiary of the LIHTC partnerships. The general partners are considered
the primary beneficiaries because managerial functions give them the power to direct the activities
that most significantly impact the partnerships’ economic performance and the general partners are
exposed to all losses beyond FTHC’s initial capital contributions and funding commitments. Under
the rules applicable in 2009, investments in LIHTC partnerships were also considered VIE and did
not meet requirements for consolidation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FTBNA holds variable interests in trusts which have issued mandatorily redeemable preferred capital
securities (“trust preferreds”) for smaller banking and insurance enterprises. FTBNA has no voting
rights for the trusts’ activities. The trusts’ only assets are junior subordinated debentures of
the issuing enterprises. The creditors of the trusts hold no recourse to the assets of FTBNA.
These trusts meet the definition of a VIE because the holders of the equity investment at risk do
not have the power through voting rights, or similar rights, to direct the activities that most
significantly impact the trusts’ economic performance. Based on the nature of the trusts’
activities and the size of FTBNA’s holdings, FTBNA could potentially receive benefits or absorb
losses that are significant to the trusts regardless of whether a majority of a trust’s securities
are held by FTBNA. However, since FTBNA is solely a holder of the trusts’ securities, it has no
rights which would give it the power to direct the activities that most significantly impact the
trusts’ economic performance and thus it cannot be considered the primary beneficiary of the
trusts. FTBNA has no contractual requirements to provide financial support to the trusts. Under
the rules applicable in 2009, these trusts were determined to be VIEs and in certain cases, certain
trusts met the requirements for consolidation. See additional discussion regarding these trusts in
the 2009 section of this footnote.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2007, FTBNA executed a securitization of certain small issuer trust preferreds for which the
underlying trust meets the definition of a VIE because the holders of the equity investment at risk
do not have the power through voting rights, or similar rights, to direct the activities that most
significantly impact the entity’s economic performance. FTBNA could potentially receive benefits
or absorb losses that are significant to the trust based on the size and priority of the interests
it retained in the securities issued by the trust. However, since FTBNA did not retain servicing
or other decision making rights, it has determined that it is not the primary beneficiary as it
does not have the power to direct the activities that most significantly impact the trust’s
economic performance. Accordingly, FTBNA has accounted for the funds received through the
securitization as a term borrowing in its Consolidated Statements of Condition as of December 31,
2010. FTBNA has no contractual requirement to provide financial support to the trust. Under the
rules applicable in 2009, the trust was considered a VIE and did not meet the requirement for
consolidation.
</div>
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has
previously issued junior subordinated debt totaling $309.3 million to First Tennessee
Capital I (“Capital I”) and First Tennessee Capital II (“Capital II”). In first quarter 2011, FHN
redeemed all of the subordinated debentures issued to Capital I. As of the end of 2010, both
Capital I and Capital II are considered VIE because FHN’s capital contributions to these trusts are
not considered “at risk” in evaluating whether the holders of the equity investments at risk in the
trusts have the power through voting rights, or similar rights, to direct the activities that most
significantly impact the entities’ economic performance. FHN cannot be the trusts’ primary
beneficiary because FHN’s capital contributions to the trusts are not considered variable interests
as they are not “at risk”. Consequently, Capital I and Capital II are not consolidated by FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN holds variable interests in proprietary residential mortgage securitization trusts it
established prior to 2008 as a source of liquidity for its mortgage banking operations. Except for
recourse due to breaches of standard representations and warranties made by FHN in connection with
the sale of the loans to the trusts, the creditors of the trusts hold no recourse to the assets of
FHN. Additionally, FHN has no contractual requirements to provide financial support to the trusts.
Based on their restrictive nature, the trusts are considered VIE as the holders of
equity at risk do not have the power through voting rights, or similar rights, to direct the
activities that most significantly impact the trusts’ economic performance. While FHN is assumed
to have the power as servicer to most significantly impact the activities of such VIE, in
situations where FHN does not potentially participate in significant portions of a securitization
trust’s cash flows, it is not considered the primary beneficiary of the trust. Thus, such trusts
are not consolidated by FHN.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to third quarter 2008, FHN transferred first lien mortgages to government agencies, or GSE,
for securitization and retained MSR and other various interests in certain situations. Except for
recourse due to breaches of standard representations and warranties made by FHN in connection with
the sale of the loans to the trusts, the creditors of the trusts hold no recourse to the assets of
FHN. Additionally, FHN has no contractual requirements to provide financial support to the trusts.
The Agencies’ status as Master Servicer and the rights they hold consistent with their guarantees
on the securities issued provide them with the power to direct the activities that most
significantly impact the trusts’ economic performance. Thus, such trusts are not consolidated by
FHN as it is not considered the primary beneficiary even in situations where it could potentially
receive benefits or absorb losses that are significant to the trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In relation to certain agency securitizations, FHN purchased the servicing rights on the
securitized loans from the loan originator and holds other retained interests. Based on their
restrictive nature, the trusts meet the definition of a VIE since the holders of the equity
investments at risk do not have the power through voting rights, or similar rights, to direct the
activities that most significantly impact the trusts’ economic performance. As the Agencies serve
as Master Servicer for the securitized loans and hold rights consistent with their guarantees on
the securities issued, they have the power to direct the activities that most significantly impact
the trusts’ economic performance. Thus, FHN is not considered the primary beneficiary even in
situations where it could potentially receive benefits or absorb losses that are significant to the
trusts. FHN has no contractual requirements to provide financial support to the trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN holds securities issued by various agency securitization trusts. Based on their restrictive
nature, the trusts meet the definition of a VIE since the holders of the equity investments at risk
do not have the power through voting rights, or similar rights, to direct the activities that most
significantly impact the entities’ economic performance. FHN could potentially receive benefits or
absorb losses that are significant to the trusts based on the nature of the trusts’ activities and
the size of FHN’s holdings. However, FHN is solely a holder of the trusts’ securities and does not
have the power to direct the activities that most significantly impact the trusts’ economic
performance, and is not considered the primary beneficiary of the trusts. FHN has no contractual
requirements to provide financial support to the trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN holds collateralized debt obligations (“CDOs”) issued by various trusts. FHN has no voting
rights for the trusts’ activities. The trusts’ only assets are trust preferreds of the issuing
banks’ trusts. The trusts associated with the CDOs acquired by FHN meet the definition of a VIE as
there are no holders of an equity investment at risk with adequate power to direct the trusts’
activities that most significantly impact the trusts’ economic performance. While FHN could
potentially receive benefits or absorb losses that are significant to the trusts, as FHN does not
have decision making rights over whether interest deferral is elected by the issuing banks on the
junior subordinated debentures that underlie the small issuer trust preferreds, it does not have
the power to direct the activities that most significantly impact the trusts’ economic performance.
Accordingly, FHN has determined that it is not the primary beneficiary of the associated trusts.
FHN has no contractual requirements to provide financial support to the trusts.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For certain troubled commercial loans, FTBNA restructures the terms of the borrower’s debt in
an effort to increase the probability of receipt of amounts contractually due. Following a
troubled debt restructuring, the borrower entity typically meets the definition of a VIE as the
initial determination of whether the entity is a VIE must be reconsidered and economic events have
proven that the entity’s equity is not sufficient to permit it to finance its activities
without additional subordinated financial support or a restructuring of the terms of its
financing. As FTBNA does not have the power to direct the activities that most significantly
impact such troubled commercial borrowers’ operations, it is not considered the primary beneficiary
even in situations where, based on the size of the financing provided, FTBNA is exposed to
potentially significant benefits and losses of the borrowing entity. FTBNA has no contractual
requirements to provide financial support to the borrowing entities beyond certain funding
commitments established upon restructuring of the terms of the debt that allows for preparation of
the underlying collateral for sale.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN serves as manager over certain discretionary trusts, for which it makes investment decisions on
behalf of the trusts’ beneficiaries in return for a reasonable management fee. The trusts meet the
definition of a VIE since the holders of the equity investments at risk do not have the power,
through voting rights or similar rights, to direct the activities that most significantly impact
the entities’ economic performance. The management fees FHN receives are not considered variable
interests in the trusts as all of the requirements related to permitted levels of decision maker
fees are met. Therefore, the VIE are not consolidated by FHN because it cannot be the trusts’
primary beneficiary. FHN has no contractual requirements to provide financial support to the
trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes VIE that are not consolidated by FHN as of December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="54%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="17%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Maximum</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liability</b></td>
<td> </td>
<td nowrap="nowrap" align="center"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Type</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Loss Exposure</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recognized</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Classification</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="11" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Low Income Housing Partnerships <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">88,923</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top">Other assets</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Small Issuer Trust Preferred Holdings <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">465,157</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><font style="white-space: nowrap">Loans, net of unearned income </font></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">On-Balance Sheet Trust Preferred Securitization
</div></td>
<td> </td>
<td> </td>
<td align="right">62,920</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">51,241</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><sup style="font-size: 85%; vertical-align: text-top">(d)</sup></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Proprietary Trust Preferred Issuances<sup style="font-size: 85%; vertical-align: text-top"> (e)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">309,279</td>
<td> </td>
<td> </td>
<td align="center" valign="top">Term borrowings</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Proprietary & Agency Residential Mortgage Securitizations
</div></td>
<td> </td>
<td> </td>
<td align="right">404,282</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><sup style="font-size: 85%; vertical-align: text-top">(f)</sup></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Holdings of Agency Mortgage-Backed Securities<sup style="font-size: 85%; vertical-align: text-top"> (c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">2,967,845</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><sup style="font-size: 85%; vertical-align: text-top">(g)</sup></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Short Positions in Agency Mortgage-Backed Securities<sup style="font-size: 85%; vertical-align: text-top"> (e)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,804</td>
<td> </td>
<td> </td>
<td align="center" valign="top">Trading liabilities</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Pooled Trust Preferred Securities <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top">Trading securities</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial Loan Troubled Debt Restructurings<sup style="font-size: 85%; vertical-align: text-top"> (h) (i)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">119,353</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="center" valign="top"><font style="white-space: nowrap">Loans, net of unearned income</font></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Managed Discretionary Trusts<sup style="font-size: 85%; vertical-align: text-top"> (e)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="center" valign="top">N/A</td>
</tr>
<tr style="font-size: 1px">
<td colspan="11" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Maximum loss exposure represents $87.7 million of current investments and $1.3 million of
contractual funding commitments.
Only the current investment amount is included in Other assets.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>A liability is not recognized because investments are written down over the life of the related
tax credit.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Maximum loss exposure represents the value of current investments. A liability is not
recognized as FHN is solely a holder of the trusts’
securities.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>$112.5 million classified as Loans, net of unearned income, and $1.7 million classified as
Trading securities which are offset by
$51.2 million classified as Term borrowings.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(e)</td>
<td> </td>
<td>No exposure to loss due to the nature of FHN’s involvement.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(f)</td>
<td> </td>
<td>Includes $100.9 million and $75.2 million classified as MSR and $14.0 million and $21.4
million classified as Trading securities related to proprietary and
agency residential mortgage securitizations, respectively. Aggregate servicing advances of
$262.5 million are classified as Other assets
and is offset by aggregate custodial balances of $69.8 million classified as
Noninterest-bearing deposits.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(g)</td>
<td> </td>
<td>Includes $329.1 million classified as Trading securities and $2.6 billion classified as
Securities available for sale.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(h)</td>
<td> </td>
<td>Maximum loss exposure represents $115.5 million of current receivables and $3.8 million of
contractual funding commitments on loans
related to commercial borrowers involved in a troubled debt restructuring.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(i)</td>
<td> </td>
<td>A liability is not recognized as the loans are the only variable interests held in the
troubled commercial borrowers’ operations.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">See Other disclosures — Indemnification agreements and guarantees section of Note 18 —
Restrictions, Contingencies and Other Disclosures for information regarding FHN’s repurchase
exposure for claims that FHN breached its standard representations and warranties made in
connection with the sale of loans to proprietary and agency residential mortgage securitization
trusts.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>Year Ended December 31, 2009</b></u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Consolidated Variable Interest Entities. </i></b>In 2007 and 2006, FTBNA established several Delaware
statutory trusts (“Trusts”), for the purpose of engaging in secondary market financing. Except for
recourse due to breaches of standard representations and warranties made by FTBNA in connection
with the sale of the retail real estate residential loans by FTBNA to the Trusts, the creditors of
the Trusts hold no recourse to the assets of FTBNA. Additionally, FTBNA has no contractual
requirements to provide financial support to the Trusts. Since the Trusts did not qualify as QSPE,
FTBNA treated the proceeds as secured borrowings in accordance with ASC 860. FTBNA determined that
the Trusts were VIE because the holders of the equity investment at risk did not have adequate
decision making ability over the trusts’ activities. Thus, FTBNA assessed whether it was the
primary beneficiary of the associated trusts. Since there was an overcollateralization of the
Trusts, any excess of cash flows received on the transferred loans above the amounts passed through
to the security holders would revert to FTBNA. Accordingly, FTBNA determined that it was the
primary beneficiary of the Trusts because it absorbed a majority of the expected losses of the
Trusts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The rabbi trusts related to deferred compensation plans are considered VIE because either there is
no equity at risk in the trusts or because FHN provided the equity interest to its employees in
exchange for services rendered. Given that the trusts were created in exchange for the employees’
services, FHN is considered the primary beneficiary of the rabbi trusts because it is most closely
related to their purpose and design. FHN has the obligation to fund any liabilities to employees
that are in excess of a rabbi trust’s assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FTBNA holds interests in trusts that issued trust preferreds for smaller banking and insurance
enterprises which met the definition of a VIE because the holders of the equity investment at risk do not
have adequate decision making ability over the trusts’ activities. FTBNA has no voting rights for
the trusts’ activities. The trusts’ only assets are junior subordinated debentures of the issuing
enterprises. The creditors of the trusts hold no recourse to the assets of FTBNA. In situations
where FTBNA holds a majority of the trust preferreds issued by a trust, it was considered the
primary beneficiary of that trust because FTBNA will absorb a majority of the trust’s expected
losses. FTBNA has no contractual requirements to provide financial support to the trusts. In
situations where FTBNA holds a majority, but less than all, of the trust preferreds for a trust,
consolidation of the trust resulted in recognition of amounts received from other parties as debt.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes VIE consolidated by FHN as of December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="38%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="20%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="2%"> </td>
<td width="24%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="5" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="5" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Type</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Carrying Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Classification</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Carrying Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Classification</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">On balance sheet consumer loan securitizations
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">654,644</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Loans, net of unearned income
</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">650,442</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Other collateralized borrowings</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Small issuer trust preferred holdings
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">452,850</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top" nowrap="nowrap">Loans, net of unearned income
</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">30,500</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Term borrowings</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Rabbi trusts used for deferred compensation
plans
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">90,391</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Other assets
</td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">57,720</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td align="left" valign="top">Other liabilities</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Nonconsolidated Variable Interest Entities. </i></b>Under rules applicable in 2009, LIHTC partnerships
were considered VIE because FTHC, as the holder of the equity investment at risk, does not have the
ability to significantly affect the success of the entity through voting rights. FTHC was not
considered the primary beneficiary of the LIHTC partnerships because an agent relationship existed
between FTHC and the general partners, whereby the general partners cannot sell, transfer or
otherwise encumber their ownership interest without the approval of FTHC. Because this resulted in
a de facto agent relationship between the partners, the general partners were considered the
primary beneficiaries because their operations were most closely associated with the LIHTC
partnerships’ operations. FTHC has no contractual requirements to provide financial support to the
LIHTC partnerships beyond its initial funding commitments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Under rules applicable in 2009, trusts that issued trust preferreds for smaller banking and
insurance enterprises met the definition of a VIE because the holders of the equity investment at
risk do not have adequate decision making ability over the trusts’ activities. In situations where
FTBNA did not hold a majority of the trust preferreds issued by a trust, it was not considered the
primary beneficiary of that trust because FTBNA does not absorb a majority of the expected losses
of the trust. FTBNA has no contractual requirements to provide financial support to the trusts.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2007, FTBNA executed a securitization of certain small issuer trust preferreds for which
the underlying trust did not qualify as a QSPE under ASC 860. This trust was determined to be a
VIE because the holders of the equity investment at risk do not have adequate decision making
ability over the trust’s activities. FTBNA determined that it was not the primary beneficiary of
the trust due to the size and
priority of the interests it retained in the securities issued by the trust. Accordingly, FTBNA
accounted for the funds received through the securitization as a collateralized borrowing in its
Consolidated Statements of Condition. FTBNA has no contractual requirement to provide financial
support to the trust.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Both Capital I and Capital II were considered VIE because FHN’s capital contributions to these
trusts are not considered “at risk” in evaluating whether the equity investments at risk in the
trusts have adequate decision making ability over the trusts’ activities. Capital I and Capital II
were not consolidated by FHN because the holders of the securities issued by the trusts absorb a
majority of expected losses and residual returns.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes VIE that are not consolidated by FHN as of December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Maximum</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liability</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Type</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Loss Exposure</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recognized</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Classification</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="1" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Low Income Housing Partnerships <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">110,017</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">Other assets</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Small Issuer Trust Preferred Holdings
</div></td>
<td> </td>
<td> </td>
<td align="right">43,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td colspan="3" align="center" nowrap="nowrap">Loans, net of unearned income</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">On Balance Sheet Trust Preferred Securitization
</div></td>
<td> </td>
<td> </td>
<td align="right">64,027</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">50,147</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Proprietary Trust Preferred Issuances
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">309,279</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">Term borrowings</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Maximum loss exposure represents $108.2 million of current investments and $1.8 million of
contractual funding commitments.
Only the current investment amount is included in Other Assets.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>A liability is not recognized because investments are written down over the life of the related
tax credit.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>$112.5 million was classified as Loans, net of unearned income and $1.7 million was classified
as Trading securities which are offset by
$50.1 million classified as Other collateralized borrowings.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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<!-- Begin Block Tagged Note 11 - fhn:GuaranteedPreferredBeneficialInterestsInCompanyJuniorSubordinatedDebenturesTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 11 — Guaranteed Preferred Beneficial Interests in First Horizon’s Junior Subordinated
Debentures</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 30, 1996, FHN, through its underwriter, sold $100 million of capital securities. First
Tennessee Capital I (“Capital I”), a Delaware business trust wholly owned by FHN, issued $100
million of Capital Securities, Series A at 8.07 percent. The proceeds were loaned to FHN as junior
subordinated debt. FHN has, through various contractual arrangements, fully and unconditionally
guaranteed all of Capital I’s obligations with respect to the capital securities. The sole asset
of Capital I was $103 million of junior subordinated debentures issued by FHN. These junior
subordinated debentures also carried an interest rate of 8.07 percent. Both the capital securities
of Capital I and the junior subordinated debentures of FHN have a scheduled maturity of January 6,
2027; however, FHN redeemed the subordinated debentures and the Capital Securities in whole on
January 14, 2011, for a redemption price equal to the liquidation amount plus accrued and unpaid
interest. Prior to notification of redemption in December 2010, the capital securities qualified as
Tier 1 capital. The junior subordinated debentures are included in the Consolidated Statements of
Condition in Term borrowings (see Note 10 — Term Borrowings).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On March 29, 2004, FHN, through its underwriter, sold $200 million of capital securities. First
Tennessee Capital II (“Capital II”), a Delaware business trust wholly owned by FHN, issued $200
million of Capital Securities, Series B at 6.30 percent. The proceeds were loaned to FHN as junior
subordinated debt. FHN has, through various contractual arrangements, fully and unconditionally
guaranteed all of Capital II’s obligations with respect to the capital securities. The sole asset
of Capital II is $206 million of junior subordinated debentures issued by FHN. These junior
subordinated debentures also carry an interest rate of 6.30 percent. Both the capital securities
of Capital II and the junior subordinated debentures of FHN will mature on April 15, 2034; however,
FHN has the option to redeem both prior to maturity. Currently, the capital securities qualify as
Tier 1 capital. Beginning in 2013 Tier 1 capital treatment for these securities will begin phasing
out. The junior subordinated debentures are included in the Consolidated Statements of Condition
in Term borrowings (see Note 10 — Term Borrowings).
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
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35
R32.xml
IDEA: Derivatives and Off-Balance Sheet Arrangements
2.2.0.25falsefalse0225 - Disclosure - Derivatives and Off-Balance Sheet Arrangementstruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_DerivativeInstrumentsAndHedgesAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 25 - us-gaap:DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 25 – Derivatives and Off-Balance Sheet Arrangements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the normal course of business, FHN utilizes various financial instruments (including
derivative contracts and credit-related agreements) through its legacy mortgage servicing
operations, capital markets, and risk management operations, as part of its risk management
strategy and as a means to meet customers’ needs. These instruments are subject to credit and
market risks in excess of the amount recorded on the balance sheet as required by GAAP. The
contractual or notional amounts of these financial instruments do not necessarily represent credit
or market risk. However, they can be used to measure the extent of involvement in various types of
financial instruments. Controls and monitoring procedures for these instruments have been
established and are routinely re-evaluated. The Asset/Liability Committee (“ALCO”) monitors the
usage and effectiveness of these financial instruments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Credit risk represents the potential loss that may occur because a party to a transaction fails to
perform according to the terms of the contract. The measure of credit exposure is the replacement
cost of contracts with a positive fair value. FHN manages credit risk by entering into financial
instrument transactions through national exchanges, primary dealers or approved counterparties, and
using mutual margining and master netting agreements whenever possible to limit potential exposure.
FHN also maintains collateral posting requirements with its counterparties to limit credit risk.
With exchange-traded contracts, the credit risk is limited to the clearinghouse used. For
non-exchange traded instruments, credit risk may occur when there is a gain in the fair value of
the financial instrument and the counterparty fails to perform according to the terms of the
contract and/or when the collateral proves to be of insufficient value. Market risk represents the
potential loss due to the decrease in the value of a financial instrument caused primarily by
changes in interest rates, mortgage loan prepayment speeds, or the prices of debt instruments. FHN
manages market risk by establishing and monitoring limits on the types and degree of risk that may
be undertaken. FHN continually measures this risk through the use of models that measure
value-at-risk and earnings-at-risk.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Derivative Instruments. </i></b>FHN enters into various derivative contracts both in a dealer capacity, to
facilitate customer transactions, and also as a risk management tool. Where contracts have been
created for customers, FHN enters into transactions with dealers to offset its risk exposure.
Derivatives are also used as a risk management tool to hedge FHN’s exposure to changes in interest
rates or other defined market risks.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Derivative instruments are recorded on the Consolidated Statements of Condition as Other assets or
Other liabilities measured at fair value. Fair value is defined as the price that would be
received to sell a derivative asset or paid to transfer a derivative liability in an orderly
transaction between market participants on the transaction date. Fair value is determined using
available market information and appropriate valuation methodologies. For a fair value hedge,
changes in the fair value of the derivative instrument and changes in the fair value of the hedged
asset or liability are recognized currently in earnings. For a cash flow hedge, changes in the
fair value of the derivative instrument, to the extent that it is effective, are recorded in
accumulated other comprehensive income and subsequently reclassified to earnings as the hedged
transaction impacts net income. Any ineffective portion of a cash flow hedge is recognized
currently in earnings. For freestanding derivative instruments, changes in fair value are
recognized currently in earnings. Cash flows from derivative contracts are reported as Operating
activities on the Consolidated Statements of Cash Flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Interest rate forward contracts are over-the-counter contracts where two parties agree to purchase
and sell a specific quantity of a financial instrument at a specified price, with delivery or
settlement at a specified date. Futures contracts are exchange-traded contracts where two parties
agree to purchase and sell a specific quantity of a financial instrument at a specified price, with
delivery or settlement at a specified date. Interest rate option contracts give the purchaser the
right, but not the obligation, to buy or sell a specified quantity of a financial instrument, at a
specified price, during a specified period of time. Caps and floors are options that are linked to
a notional principal amount and an underlying indexed interest rate. Interest rate swaps involve
the exchange of interest payments at specified intervals between two parties without the exchange
of any underlying principal. Swaptions are options on interest rate swaps that give the purchaser
the right, but not the obligation, to enter into an interest rate swap agreement during a specified
period of time.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 31, 2010 and 2009, respectively, FHN had approximately $160.8 million and $108.2
million of cash receivables and $111.4 million and $81.0 million of cash payables related to
collateral posting under master netting arrangements, inclusive of collateral posted related to
contracts with adjustable collateral posting thresholds, with derivative counterparties. Certain
of FHN’s agreements with derivative counterparties contain provisions that require that FTBNA’s
debt maintain minimum credit ratings from specified credit rating agencies. If FTBNA’s debt were
to fall below these minimums, these provisions would be triggered, and the counterparties could
terminate the agreements and request immediate settlement of all derivative contracts under the
agreements. The net fair value, determined by individual counterparty, of all derivative
instruments with credit-risk-related contingent accelerated termination provisions was $2.1 million
of assets and $23.7 million of liabilities on December 31, 2010 and $4.4 million of assets and
$10.9 million of liabilities on December 31, 2009. FHN had posted collateral of $25.1 million as
of December 31, 2010 in the normal course of business related to these contracts. As of December
31, 2009, FHN had posted collateral of $10.3 million in the normal course of business related to
these contracts.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Additionally, certain of FHN’s derivative agreements contain provisions whereby the collateral
posting thresholds under the agreements adjust based on the credit ratings of both counterparties.
If the credit rating of FHN and/or FTBNA is lowered, FHN would be required to post additional
collateral with the counterparties. The net fair value, determined by individual counterparty, of
all derivative instruments with adjustable collateral posting thresholds was $137.8 million of
assets and $161.2 million of liabilities on December 31, 2010 and was $110.8 million of assets and
$81.1 million of liabilities on December 31, 2009. As of December 31, 2010 and 2009, FHN had
received collateral of $111.4 million and $79.4 million and posted collateral of $158.7 million and
$77.0 million, respectively, in the normal course of business related to these agreements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Legacy Mortgage Banking Operations</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Retained Interests</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN revalues MSR to current fair value each month with changes in fair value included in servicing
income in Mortgage banking noninterest income on the Consolidated Statements of Income. FHN hedges
the MSR to minimize the effects of loss in value of MSR associated with increased prepayment
activity that generally results from declining interest rates. In a rising interest rate
environment, the value of the MSR generally will increase while the value of the hedge instruments
will decline. FHN enters into interest rate contracts (potentially including swaps, swaptions, and
mortgage forward purchase contracts) to hedge against the effects of changes in fair value of its
MSR. Substantially all capitalized MSR are hedged for economic purposes.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN utilizes derivatives as an economic hedge (potentially including swaps, swaptions, and mortgage
forward purchase contracts) to protect the value of its interest-only securities that change in
value inversely to the movement of interest rates. Interest-only securities            are included
in Trading securities on the Consolidated Statements of Condition. Changes in the fair value of
these derivatives and the hedged interest-only securities are recognized currently in earnings in
Mortgage banking noninterest income as a component of servicing income on the Consolidated
Statements of Income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with legacy mortgage servicing
activities for the year ended December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="1" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Retained Interests Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Forwards and Futures <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,243,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,801</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,090</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">32,158</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps and Swaptions <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">5,678,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">36,693</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">18,234</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">74,804</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage Servicing Rights <sup style="font-size: 85%; vertical-align: text-top">(c) (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">203,412</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(18,913</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other Retained Interests <sup style="font-size: 85%; vertical-align: text-top">(d) (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">35,436</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,806</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Assets included in the Other assets section of the Consolidated Statements of Condition.
Liabilities included in the Other liabilities section of the Consolidated Statements
of Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Gains/losses included in the Mortgage banking income section of the Consolidated Statements of
Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Assets included in the Mortgage servicing rights section of the Consolidated Statements of
Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Assets included in the Trading securities section of the Consolidated Statements of Condition.</td>
</tr>
</table>
<div style="margin-top: 0pt">
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div style="margin-top: 0pt">
</div>
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with legacy mortgage servicing
activities for the year ended December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="1" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td colspan="1" align="left" style="border-top: 0px solid #000000"> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Retained Interests Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Forwards and Futures <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,275,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,262</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">13,100</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26,714</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps and Swaptions <sup style="font-size: 85%; vertical-align: text-top">(a) (b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">2,126,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">21,688</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,654</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,492</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage Servicing Rights <sup style="font-size: 85%; vertical-align: text-top">(c) (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">296,260</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">61,850</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other Retained Interests <sup style="font-size: 85%; vertical-align: text-top">(d) (b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,830</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">47,758</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Assets included in the Other assets section of the Consolidated Statements of Condition.
Liabilities included in the Other liabilities section of the
Consolidated Statements of Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Gains/losses included in the Mortgage banking income section of the Consolidated Statements of
Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Assets included in the Mortgage servicing rights section of the Consolidated Statements of
Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Assets included in the Trading securities section of the Consolidated Statements of Condition.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Mortgage Warehouse and Pipeline</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to the 2008 divestiture, FHN’s warehouse (mortgage loans held for sale) was subject to
changes in fair value due to fluctuations in interest rates from the loan closing date through the
date of sale of the loan into the secondary market. Typically, the fair value of the warehouse
declined in value when interest rates increased and rose in value when interest rates decreased. To
mitigate this risk, FHN entered into forward sales and futures contracts that provided an economic
hedge against those changes in fair value on a significant portion of the warehouse. These
derivatives were recorded at fair value with changes in fair value recorded in current earnings as
a component of the gain or loss on the sale of loans in mortgage banking noninterest income. Upon
adoption of the Financial Instruments Topic (ASC 825-10-50), FHN elected to prospectively account
for substantially all of its mortgage loan warehouse products at fair value upon origination and
correspondingly discontinued the application of ASC 815-10-45 hedging relationships for all
subsequent originations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Mortgage banking interest rate lock commitments are short-term commitments to fund mortgage loan
applications in process (“the pipeline”) for a fixed term at a fixed price. During the term of an
interest rate lock commitment, FHN had the risk that interest rates could change from the rate
quoted to the borrower. FHN entered into forward sales contracts with respect to fixed rate loan
commitments and futures contracts with respect to adjustable rate loan commitments as economic
hedges designed to protect the value of the interest rate lock commitments from changes in value
due to changes in interest rates. Interest rate lock commitments qualify as derivative financial
instruments and as such do not qualify for hedge accounting treatment. As a result, the interest
rate lock commitments were recorded at fair value with changes in fair value recorded in current
earnings as gain or loss on the sale of loans in mortgage banking noninterest income. Changes in
the fair value of the derivatives that served as economic hedges of interest rate lock commitments
were also included in current earnings as a component of gain or loss on the sale of loans in
mortgage banking noninterest income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Capital Markets</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Capital markets trades U.S. Treasury, U.S. Agency, mortgage-backed, corporate and municipal fixed
income securities, and other securities principally for distribution to customers. When these
securities settle on a delayed basis, they are considered forward contracts. Capital markets also
enters into interest rate contracts, including options, caps, swaps, and floors for its customers.
In addition, capital markets enters into futures contracts to economically hedge interest rate risk
associated with a portion of its securities inventory. These transactions are measured at fair
value, with changes in fair value recognized currently in capital markets noninterest income.
Related assets and liabilities are recorded on the Consolidated Statements of Condition as Other
assets and Other liabilities. The FTN Financial Risk and the Credit Risk Management Committees
collaborate to mitigate credit risk related to these transactions. Credit risk is controlled
through credit approvals, risk control limits, and ongoing monitoring procedures. Total trading
revenues were $390.1 million and $598.6 million for the years ended December 31, 2010 and 2009,
respectively. Total revenues are inclusive of both derivative and non-derivative financial
instruments. Trading revenues are included in Capital markets noninterest income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with capital markets trading activities
as of December 31, 2010:
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2010</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer Interest Rate Contracts
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,666,711</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">67,729</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,400</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Offsetting Upstream Interest Rate Contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">1,666,711</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,400</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">67,729</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Forwards and Futures Purchased
</div></td>
<td> </td>
<td> </td>
<td align="right">1,609,665</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,598</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,130</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forwards and Futures Sold
</div></td>
<td> </td>
<td> </td>
<td align="right">1,856,839</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,753</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,380</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with capital markets trading activities
as of December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>2009</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer Interest Rate Contracts
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,514,517</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">40,128</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,246</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Offsetting Upstream Interest Rate Contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">1,514,517</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,250</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40,135</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Forwards and Futures Purchased
</div></td>
<td> </td>
<td> </td>
<td align="right">2,659,054</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,736</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,180</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forwards and Futures Sold
</div></td>
<td> </td>
<td> </td>
<td align="right">2,836,643</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,051</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,990</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Interest Rate Risk Management</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN’s ALCO focuses on managing market risk by controlling and limiting earnings volatility
attributable to changes in interest rates. Interest rate risk exists to the extent that
interest-earning assets and liabilities have different maturity or repricing characteristics. FHN
uses derivatives, including swaps, caps, options, and collars, that are designed to moderate the
impact on earnings as interest rates change. FHN’s interest rate risk management policy is to use derivatives to hedge interest rate risk or
market value of assets or liabilities, not to speculate. In addition, FHN has entered into certain
interest rate swaps and caps as a part of a product offering to commercial customers with customer
derivatives paired with offsetting market instruments that, when completed, are designed to
mitigate interest rate risk. These contracts do not qualify for hedge accounting and are measured
at fair value with gains or losses included in current earnings in Noninterest expense on the
Consolidated Statements of Income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has entered into pay floating, receive fixed interest rate swaps to hedge the interest rate
risk of certain long-term debt obligations totaling $1.0 billion and $1.1 billion on December 31,
2010 and 2009, respectively. These swaps have been accounted for as fair value hedges under the
shortcut method. The balance sheet impact of these swaps was $105.7 million and $90.9 million in
Other assets on December 31, 2010 and 2009, respectively. Interest paid or received for these
swaps was recognized as an adjustment of the interest expense of the liabilities whose risk is
being managed. In first quarter 2010, FHN repurchased $96.0 million of debt that was being hedged
in these arrangements and terminated the related interest rate swap and hedging relationship.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has designated a derivative transaction in a hedging strategy to manage interest rate risk on
its $.5 billion noncallable senior debt maturing in December 2015. This derivative qualifies for
hedge accounting under ASC 815-20 using the long-haul method. FHN entered into a pay floating,
receive fixed interest rate swap to hedge the interest rate risk on this debt. The balance sheet
impact of this swap was $4.1 million in Other assets on December 31, 2010. There was no
ineffectiveness related to this hedge. Interest paid or received for this swap was recognized as an
adjustment of the interest expense of the liability whose risk is being managed.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN designates derivative transactions in hedging strategies to manage interest rate risk on
subordinated debt related to its trust preferred securities. These qualify for hedge accounting
under ASC 815-20 using the long-haul method. FHN entered into pay floating, receive fixed interest
rate swaps to hedge the interest rate risk of certain subordinated debt totaling $200 million on
both December 31, 2010 and 2009. The balance sheet impact of these swaps $12.6 million and $4.8
million in Other liabilities as of December 31, 2010 and 2009, respectively. There was no
ineffectiveness related to these hedges. Interest paid or received for these swaps was recognized
as an adjustment of the interest expense of the liabilities whose risk is being managed. In 2010,
FHN’s counterparty called the swap associated with the $200 million of subordinated debt.
Accordingly, hedge accounting was discontinued on the date of the settlement and the cumulative
basis adjustments to the associated subordinated debt are being prospectively amortized as an
adjustment to interest expense over its remaining term. FHN subsequently re-hedged the
subordinated debt with a new interest rate swap using the long-haul method of effectiveness
assessment. In first quarter 2009, FHN’s counterparty called the swap associated with $100
million of subordinated debt. Accordingly, hedge accounting was discontinued on the date of
settlement and the cumulative basis adjustments to the associated subordinated debt are being
prospectively amortized as an adjustment to interest expense over its remaining term.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with interest rate risk management
activities for the year ended December 31, 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
</tr>
<tr style="font-size: 1pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Customer Interest Rate Contracts Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments and Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Customer Interest Rate Contracts <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,051,220</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">71,289</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">535</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,812</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Offsetting Upstream Interest Rate Contracts <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,051,220</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">535</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">74,889</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(5,913</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Debt Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,604,000</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">109,863</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12,636</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">20,241</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Term
Borrowings <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">1,604,000</td>
<td nowrap="nowrap"> <sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(20,241</td>
<td nowrap="nowrap">) <sup style="font-size: 85%; vertical-align: text-top">(d)</sup></td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Gains/losses included in the Other expense section of the Consolidated Statements of
Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Gains/losses included in the All other income and commissions section of the Consolidated
Statements of Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents par value of term borrowings being hedged.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Represents gains and losses attributable to changes in fair value due to interest rate risk as
designated in ASC 815-20 hedging relationships.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivatives associated with interest rate risk management
activities for the year ended December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td>
</tr>
<tr style="font-size: 1pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 0px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:15px; text-indent:-15px"><b>Customer Interest Rate Contracts Hedging</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"><i>Hedging Instruments and Hedged Items:</i>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:30px; text-indent:-15px">Customer Interest Rate Contracts <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,157,540</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">65,760</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">818</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">(58,136</td>
<td nowrap="nowrap" valign="top">)</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:30px; text-indent:-15px">Offsetting Upstream Interest Rate Contracts <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,157,540</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">818</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">69,259</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">50,946</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"><b>Debt Hedging</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,200,000</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">90,936</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">4,818</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">(59,844</td>
<td nowrap="nowrap" valign="top">)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top"> </td>
<td valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:30px; text-indent:-15px">Term
Borrowings <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">N/A</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top"> </td>
<td align="right" valign="top">N/A</td>
<td nowrap="nowrap" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">1,200,000</td>
<td nowrap="nowrap" valign="top"> <sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
<td> </td>
<td nowrap="nowrap" align="right" valign="top">$</td>
<td align="right" valign="top">59,844</td>
<td nowrap="nowrap" valign="top"> <sup style="font-size: 85%; vertical-align: text-top">(d)</sup></td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" valign="top" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Gains/losses included in the Other expense section of the Consolidated Statements of
Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Gains/losses included in the All other income and commissions section of the Consolidated
Statements of Income.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents par value of term borrowings being hedged.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>Represents gains and losses attributable to changes in fair value due to interest rate risk as
designated in ASC 815-20 hedging relationships.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN hedges held-to-maturity trust preferred loans with a principal balance of $211.6 million
and $233.1 million as of December 31, 2010 and 2009, respectively, which have an initial fixed rate
term of five years before conversion to a floating rate. FHN has entered into pay fixed, receive
floating interest rate swaps to hedge the interest rate risk associated with this initial five year
term. These hedge relationships qualify as fair value hedges under ASC 815-20. The impact of
those swaps was $17.2 million and $19.2 million in Other liabilities on the Consolidated Statements
of Income as of December 31, 2010 and 2009, respectively. Interest paid or received for these
swaps was recognized as an adjustment of the interest income of the assets whose risk is being
hedged. Gain/(loss) is included in Other income and commissions on the Consolidated Statements of
Income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivative activities associated with these loans for the year
ended December 31, 2010:
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Loan Portfolio Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">211,583</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">17,198</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,023</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Trust Preferred Loans <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">211,583</td>
<td align="right" nowrap="nowrap"> <sup style="font-size: 85%; vertical-align: text-top">(b)</sup></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1,999</td>
<td nowrap="nowrap">) <sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Assets included in Loans, net of unearned income section of the Consolidated Statements of
Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Represents principal balance being hedged.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents gains and losses attributable to changes in fair value due to interest rate risk as
designated in ASC 815-20 hedging relationships.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes FHN’s derivative activities associated with these loans for the
year ended December 31, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Gains/(Losses)</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Notional</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Liabilities</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Loan Portfolio Hedging</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedging Instruments:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest Rate Swaps
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">233,083</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19,221</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">6,640</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><i>Hedged Items:</i>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Trust Preferred Loans (a)
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">233,083</td>
<td align="right" nowrap="nowrap"> <sup style="font-size: 85%; vertical-align: text-top">(b)</sup></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(6,754</td>
<td nowrap="nowrap">) <sup style="font-size: 85%; vertical-align: text-top">(c)</sup></td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Assets included in Loans, net of unearned income section of the Consolidated Statements of
Condition.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>Represents principal balance being hedged.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Represents gains and losses attributable to changes in fair value due to interest rate risk as
designated in ASC 815-20 hedging relationships.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><u>Visa Derivative</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In conjunction with the sale of a portion of its Visa Class B shares in December 2010, FHN and the
purchaser entered into a derivative transaction whereby FHN will make, or receive, cash payments
whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. At
the time of the sale the current conversion ratio of Visa Class B shares to Visa Class A shares was
approximately 51 percent. FHN determined that the initial fair value of the derivative was equal
to a pro rata portion of the previously accrued contingent liability for Visa litigation matters
attributable to the 440,000 Visa Class B shares sold. This amount was determined to be a liability
of $1.0 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Off-Balance Sheet Arrangements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Credit-Related Commitments. </i></b>FHN enters into fixed and variable interest rate loan commitments with
customers. When these commitments have contract rate adjustments that lag changes in market rates,
the financial instruments have characteristics similar to option contracts. FHN follows the same
credit policies and underwriting practices in making commitments as it does for on-balance sheet
instruments. Each counterparty’s creditworthiness is evaluated on a case-by-case basis. The
amount of collateral obtained, if any, is based on management’s credit evaluation of the
counterparty.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Commitments to extend credit are contractual obligations to lend to a customer as long as all
established contractual conditions are met. These commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. The majority of FHN’s loan
commitments have maturities less than one year and reflect the prevailing market rates at the time
of the commitment. Since commitments may expire without being fully drawn upon, total contractual
amounts do not necessarily represent future credit exposure or liquidity requirements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Other commitments include standby and commercial letters of credit and other credit enhancements.
Standby and commercial letters of credit and other credit enhancements are conditional commitments
issued by FHN to guarantee the performance and/or payment of a customer to a third party in
connection with specified transactions. The credit risk involved in issuing these commitments is
essentially the
same as that involved in extending loan facilities to customers, as performance
under any of these facilities would result in a loan being funded to the customer. See Note 22 —
Fair Value of Assets and Liabilities for the book value and fair value of FHN’s unfunded
commitments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN services loans for others, and in some cases, provides guarantees or recourse on the serviced
loans. See Note 18 — Restrictions, Contingencies, and Other Disclosures for additional
information.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element can be used to disclose the entity's entire derivative instruments and hedging activities disclosure as a single block of text. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising there from, and the amounts of and methodologies and assumptions used in determining the amounts of such items.Reference 1: http://www.xbrl.
org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 45
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44
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36
R12.xml
IDEA: Premises, Equipment and Leases
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<!-- Begin Block Tagged Note 5 - us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 5 — Premises, Equipment and Leases</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Premises and equipment on December 31 are summarized below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Land
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>66,914</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">67,047</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Buildings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>338,060</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">333,450</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leasehold improvements
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>44,880</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">43,156</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Furniture, fixtures, and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>213,289</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">190,289</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Premises and equipment, at cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>663,143</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">633,942</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less accumulated depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>340,824</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">320,118</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Premises and equipment, net
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>322,319</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">313,824</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN is obligated under a number of noncancelable operating leases for premises and equipment with
terms up to 30 years, which may include the payment of taxes, insurance and maintenance costs.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Minimum future lease payments for noncancelable operating leases on premises and equipment on
December 31, 2010, are shown below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">23,108</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">17,329</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">12,169</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">9,843</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">7,721</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2016 and after
</div></td>
<td> </td>
<td> </td>
<td align="right">38,456</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total minimum lease payments
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">108,626</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Payments required under capital leases are not material.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Aggregate minimum income under sublease agreements for these periods is $2.5 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Rent expense incurred under all operating lease obligations for the years ended December 31 is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Rent expense, gross
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>32,673</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">38,070</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">61,496</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Sublease income
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(4,275</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,368</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,043</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Rent expense, net
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>28,398</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">33,702</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">57,453</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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IDEA: Intangible Assets
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 7 — Intangible Assets</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of intangible assets, net of accumulated amortization, included in
the Consolidated Statements of Condition:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Intangible</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Goodwill</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Assets <sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2007
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">192,408</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">56,907</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization expense
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,229</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment <sup style="font-size: 85%; vertical-align: text-top">(b) (c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,034</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Divestitures <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(32</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">470</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">192,408</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">45,082</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization expense
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(6,017</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment <sup style="font-size: 85%; vertical-align: text-top">(b) (c)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,591</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(341</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Divestitures <sup style="font-size: 85%; vertical-align: text-top">(c)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,289</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(815</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">347</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">December 31, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">165,528</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">38,256</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization expense
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(5,526</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment <sup style="font-size: 85%; vertical-align: text-top">(b) (c)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>162,180</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>32,881</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Represents customer lists, acquired contracts, premium on purchased deposits, and covenants not to compete.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>See Note 26 — Restructuring, Repositioning, and Efficiency for further details related to goodwill impairments.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>See Note 2 — Acquisitions and Divestitures for further details regarding goodwill related to divestitures.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The gross carrying amount of other intangible assets subject to amortization is $125.8 million on
December 31, 2010, net of $92.9 million of accumulated amortization. Estimated aggregate
amortization expense is expected to be $5.3 million, $4.3 million, $3.9 million, $3.6 million, and
$3.4 million for the twelve-month periods of 2011, 2012, 2013, 2014, and 2015, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2010, FHN recognized $3.3 million of goodwill impairments relating to the exit of FTN ECM
operations. FHN also recognized an addition of other intangible assets of $.2 million related to
the purchase of a book of business.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN’s non-strategic segment incurred pre-tax goodwill impairments of $14.3 million related
to the initial agreement to sell FTN ECM. In connection with the divestiture of the Atlanta insurance
business and FERP, FHN recognized goodwill write-offs of $8.0 million and $2.3 million,
respectively, which are included in Losses on divestitures on the Consolidated Statements of
Income. As a result of the closure of the remaining Atlanta insurance business that was excluded
from the sale, there was an additional goodwill impairment of $2.3 million. FHN also recognized
$.3 million of other intangible impairments related to customer lists, $.8 million of write-offs
related to disposals, and additions of $.3 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, FHN recognized $4.0 million of intangible impairments. The impairments were related to
noncompete agreements associated with the divestiture of certain mortgage banking operations and
the write-off of state banking licenses due to FHN’s focus on the Tennessee-based regional banking
market.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of gross goodwill and accumulated impairment losses and write-offs
detailed by reportable segments included in the Consolidated Statements of Condition through
December 31, 2010. Gross goodwill, accumulated impairments, and accumulated divestiture-related write-offs
were determined beginning on January 1, 2002, when a change in accounting requirements resulted in
goodwill being assessed for impairment rather being amortized.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Regional</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Capital</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Non-Strategic</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Banking</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Markets</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross goodwill
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">171,474</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">333,654</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(84,084</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(84,084</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated divestiture related write-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,162</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,162</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net goodwill balance as of December 31, 2007
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">30,228</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">192,408</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Impairments
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Divestitures
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net change in goodwill during 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross goodwill
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">171,474</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">333,654</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(84,084</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(84,084</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated divestiture related write-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,162</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(57,162</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net goodwill balance as of December 31, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">30,228</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">192,408</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,591</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16,591</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Divestitures
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,289</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,289</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net change in goodwill during 2009
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(26,880</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(26,880</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross goodwill
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">171,474</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">333,654</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(100,675</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(100,675</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated divestiture related write-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(67,451</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(67,451</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net goodwill balance as of December 31, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,348</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">165,528</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Additions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Divestitures
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net change in goodwill during 2010
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,348</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="0" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
<td colspan="3" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross goodwill
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">171,474</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">64,759</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,421</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">333,654</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(104,023</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(104,023</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated divestiture related write-offs
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(67,451</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(67,451</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>64,759</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>97,421</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>162,180</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDiscloses the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and writte
n off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain or loss on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. Fo
r each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. This element may be used as a single block of text to incl
ude the entire intangible asset disclosure including data and tables.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 42, 43, 44, 45, 46, 47
falsefalse12Intangible AssetsUnKnownUnKnownUnKnownUnKnownfalsetrueXML
39
R15.xml
IDEA: Time Deposit Maturities
2.2.0.25falsefalse0208 - Disclosure - Time Deposit Maturitiestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_MaturitiesOfTimeDepositsAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_DepositLiabilitiesDisclosuresTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:DepositLiabilitiesDisclosuresTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 8 — Time Deposit Maturities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Following is a table of maturities for time deposits outstanding on December 31, 2010, which
include Certificates of deposit under $100,000 and, Other time, and Certificates of deposit
$100,000 and more. Certificates of deposit $100,000 and more totaled $.6 billion on December 31,
2010. Time deposits are included in Interest-bearing deposits on the Consolidated Statements of
Condition.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,140,985</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">280,227</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">169,718</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">211,199</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">77,298</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2016 and after
</div></td>
<td> </td>
<td> </td>
<td align="right">73,318</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,952,745</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used as a single block of text to encapsulate the entire disclosure for deposit liabilities including data and tables. It may include a description of the entity's deposit liabilities, the aggregate amount of time deposits (including certificates of deposit) in denominations of $100,000 or more at the balance sheet date; the aggregate amount of any demand deposits that have been reclassified as loan balances, such as overdrafts, at the balance sheet date; deposits that are received on te
rms other than those in the normal course of business, the amount of accrued interest on deposit liabilities; securities, mortgage loans or other financial instruments that serve as collateral for deposits; for time deposits having a remaining term of more than one year, the aggregate amount of maturities for each of the five years following the balance sheet date; and the weighted average interest rate for all deposit liabilities held by the entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 01-6
-Paragraph 14
-Subparagraph e
falsefalse12Time Deposit MaturitiesUnKnownUnKnownUnKnownUnKnownfalsetrueXML
40
R24.xml
IDEA: Earnings per Share
2.2.0.25falsefalse0217 - Disclosure - Earnings per Sharetruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_EarningsPerShareAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_EarningsPerShareTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 17 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 17 — Earnings per Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables provide a reconciliation of the numerators used in calculating
earnings/(loss) per share attributable to common shareholders:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) from continuing operations
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>68,480</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(245,589</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(174,437</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from discontinued operations, net of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(6,877</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(12,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,534</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net income/(loss)</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>61,603</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(258,435</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(177,971</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to noncontrolling interest
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,402</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,402</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,016</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income/(loss) attributable to controlling interest
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50,201</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(269,837</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(191,987</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred stock dividends
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>107,970</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">59,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,413</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net loss available to common shareholders</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(57,769</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(329,422</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(199,400</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) from continuing operations
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>68,480</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(245,589</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(174,437</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to noncontrolling interest
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,402</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,402</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,016</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred stock dividends
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>107,970</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">59,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,413</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net loss from continuing operations available to common shareholders</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(50,892</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(316,576</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(195,866</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides a reconciliation of weighted average common shares to diluted average
common shares:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands, except per share data)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding — basic <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>235,699</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">234,431</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">206,681</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of dilutive securities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding — diluted <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>235,699</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">234,431</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">206,681</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr style="font-size: 10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%">(a)</td>
<td width="1%"> </td>
<td>
All share data has been restated to reflect stock dividends distributed through January 1,
2011.
</td>
</tr>
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Earnings/(loss) per common share:</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss per share from continuing operations available to common shareholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(0.22</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1.35</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(0.95</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss per share from discontinued operations, net of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(.03</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(.06</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(.01</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net loss per share available to common shareholders</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(0.25</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1.41</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(0.96</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Diluted earnings/(loss) per common share:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted loss per share from continuing operations available to common shareholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(0.22</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1.35</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(0.95</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted loss per share from discontinued operations, net of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(.03</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(.06</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(.01</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net diluted loss per share available to common shareholders</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(0.25</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1.41</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(0.96</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Due to the net loss attributable to common shareholders for the twelve months ended December
31, 2010, 2009, and 2008, no potentially dilutive shares were included in the loss per share
calculations as including such shares would have been antidilutive. Stock options of 12.3 million,
15.6 million, and 20.0 million with weighted average exercise prices of $27.04, $27.48, and $28.15
per share for the twelve months ended December 31, 2010, 2009, and 2008, respectively, were not
included in the computation of diluted loss per common share because such shares would have had an
antidilutive effect on earnings per common share. Other equity awards of 3.3 million, 2.8 million,
and .9 million for the twelve months ended December 31, 2010, 2009, and 2008, respectively, and
14.8 million potentially dilutive shares related to the CPP common stock Warrant were excluded from
the computation of diluted loss per common share because such shares would have had an antidilutive
effect on loss per common share. As of December 31, 2010, the underwriter of FHN’s fourth quarter
equity issuance had an option to purchase 1.1 million shares at a discounted exercise price of
$10.03. The dilutive impact of this option would have been immaterial. The option expired on
January 12, 2011 without being exercised.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to capture the complete disclosure pertaining to an entity's earnings per share.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 128
-Paragraph 40
falsefalse12Earnings per ShareUnKnownUnKnownUnKnownUnKnownfalsetrueXML
41
R20.xml
IDEA: Regulatory Capital
2.2.0.25falsefalse0213 - Disclosure - Regulatory Capitaltruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0fhn_RegulatoryCapitalAbstractfhnfalsenadurationRegulatory Capital.falsefalsefal
sefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringRegulatory Capital.falsefalse3false0us-gaap_RegulatoryCapitalRequirementsUnderBankingRegulationsTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 13 - us-gaap:RegulatoryCapitalRequirementsUnderBankingRegulationsTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 13 </b>— <b>Regulatory Capital</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN is subject to various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators that, if undertaken, could have a direct
material effect on FHN’s financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain derivatives as calculated under
regulatory accounting practices must be met. Capital amounts and classification are also subject
to qualitative judgment by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require FHN to maintain
minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets, and of Tier 1
capital to average assets (Leverage). Management believes, as of December 31, 2010, that FHN met
all capital adequacy requirements to which it was subject.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The actual capital amounts and ratios of FHN and FTBNA are presented in the table below. In
addition, FTBNA must also calculate its capital ratios after excluding financial subsidiaries as
defined by the Gramm-Leach-Bliley Act of 1999. Based on this calculation, FTBNA’s Total Capital,
Tier 1 Capital, and Leverage ratios were 18.69 percent, 15.03 percent, and 11.95 percent,
respectively, on December 31, 2010, and were 19.64 percent, 15.16 percent, and 12.56 percent,
respectively, on December 31, 2009.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7">First Horizon</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7">First Tennessee Bank</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">National Corporation</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">National Association</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Ratio</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Amount</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Ratio</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>On December 31, 2010:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,749,586</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">18.65</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td align="right">$</td>
<td align="right">4,032,289</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">20.26</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">2,812,471</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13.99</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,137,624</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15.76</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td align="right">2,812,471</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10.96</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,137,624</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12.33</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">For Capital Adequacy Purposes:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">1,608,222</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">8.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,592,416</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">8.00</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">804,111</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">796,208</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td align="right">1,026,597</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,018,136</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">To Be Well Capitalized Under Prompt Corrective Action Provisions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,990,520</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">10.00</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,194,312</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">6.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,272,670</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">5.00</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>On December 31, 2009:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">4,691,010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">21.92</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td align="right">$</td>
<td align="right">4,481,786</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">21.16</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">3,507,782</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16.39</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,361,373</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15.87</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td align="right">3,507,782</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13.36</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,361,373</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12.91</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">For Capital Adequacy Purposes:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">1,712,033</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">8.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,694,688</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">8.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td align="right">856,016</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">847,344</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td align="right">1,050,104</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,041,090</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">4.00</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">To Be Well Capitalized Under Prompt Corrective Action Provisions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Capital
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,118,360</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">10.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tier 1 Capital
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,271,016</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">6.00</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Leverage
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,301,362</td>
<td align="right">≥</td>
<td> </td>
<td> </td>
<td align="right">5.00</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
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</div>
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<div style="font-family: Helvetica,Arial,sans-serif">
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<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to capture the complete disclosure for banks, savings institutions, and credit unions, for regulatory capital requirements imposed by the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) or for any state imposed capital requirements, as applicable. The disclosure may include (1) a description of regulatory capital requirements (a) for capital adequacy purposes and (b) established by the prompt corrective action p
rovisions of Section 38 of the Federal Depository Insurance Act; (2) the actual or possible material effects of noncompliance with such requirements; (3) whether the entity is in compliance with the regulatory capital requirements including (a) required and actual ratios and amounts of Tier 1 leverage, Tier 1 risk-based, and total risk-based capital, tangible capital (for savings institutions), and Tier 3 capital for market risk (for certain banks and bank holding companies), (b) factors that may significantly affect capital adequacy; (4) the prompt corrective action category in which the entity was classified as of its most recent notification; (5) whether management believes any conditions or events since notification have changed the entity's category. Also may include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time.Reference 1: http://www.xb
rl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-DEP
-Chapter 17
-Paragraph 15, 16, 17
-IssueDate 2006-05-01
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IDEA: Consolidated Statements of Income
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USD ($)
USD ($) / shares
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emTypestringNo definition available.falsefalse4false0us-gaap_InterestAndFeeIncomeLoansAndLeasesHeldInPortfolious-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsever
boselabel1truefalsefalse697934000697934falsetruefalsefalsefalse2truefalsefalse769748000769748falsetruefalsefalsefalse3truefalsefalse11535460001153546falsetruefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryInterest and fee income generated by loans the Entity intends and has the ability to hold for the foreseeable future, or until maturity or payoff, including commercial and consumer loans, whether domestic or foreign, which may consist of: (1) indust
rial and agricultural; (2) real estate; and (3) real estate construction loans; (4) trade financing; (5) lease financing; (6) home equity lines-of-credit; (7) automobile and other vehicle loans; and (8) credit card and other revolving-type loans. Also includes interest income for leases held by the Entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Name Statement of Financial Accounting Standard (FAS)
-Number 115
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-Name Statement of Financial Accounting Standard (FAS)
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-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
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falsefalse7false0us-gaap_InterestAndDividendIncomeSecuritiesTradingOrMeasuredAtFairValueus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse4638400046384falsefalsefalsefalsefalse2truefalsefalse5316200053162falsefalsefalsefalsefalse3truefalsefalse114625000114625falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryInterest and dividend income on securities that are bought and held principally for the purpose of selling them in the near term ("trading securities") and on securities measured at fair value.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 12
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-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 2, 3
-Article 9
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false28760002876falsefalsefalsefalsefalse2truefalsefalse23650002365falsefalsefalsefalsefalse3truefalsefalse2469400024694falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryIncludes all other interest income, net of discount accretion and premium amortization, and dividend income. It may include dividend income from equity securities that do not have readily determinable fair values that are reportable in Other Assets, and interest income on interest-only strips receivable (not in the form of a security) that are included in Other Assets.
Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
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nces, commercial paper, or certificates of deposit; (6) dividend income; or (7) other investments not otherwise specified herein.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-BRD
-Chapter 4
-Paragraph 9, 51, 54
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-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 1, 2 , 3, 4, 5
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No definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse3130800031308falsefalsefalsefalsefalse2truefalsefalse3888600038886falsefalsefalsefalsefalse3truefalsefalse7992100079921falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryInterest expense incurred on all savings account deposits.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 6
-Subsection II
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 6
-Article 9
falsefalse13false0us-gaap_InterestExpenseTimeDepositsus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse3860000038600falsefalsefalsefalsefalse2truefalsefalse6085700060857falsefalsefalsefalsefalse3truefalsefalse101225000101225falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate interest expense incurred on time deposits, including certificates of deposits, in domestic offices.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 6
-Subsection II
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 6
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falsefalse14false0us-gaap_InterestExpenseOtherDomesticDepositsus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse88460008846falsefalsefalsefalsefalse2truefalsefalse50120005012falsefalsefalsefalsefalse3truefal
sefalse1386300013863falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryInterest expense incurred on other deposits in domestic offices.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 6
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Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 6
-Article 9
falsefalse15false0us-gaap_InterestExpenseTimeDeposits100000OrMoreus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse1300600013006falsefalsefalsefalsefalse2truefalsefalse2770900027709falsefalsefalsefalsefalse3tru
efalsefalse7629300076293falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryInterest expense incurred on time deposits, including certificates of deposits, of $100,000 or more in domestic offices.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 6
-Subsection II
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-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 6
-Article 9
falsefalse16false0us-gaap_InterestExpenseTradingLiabilitiesus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse1809000018090falsefalsefalsefalsefalse2truefalsefalse2086900020869falsefalsefalsefalsefalse3truefalsefalse3319500033195falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryInterest expense incurred on short positions arising from sales of securities and other assets, which the entity does not own, to other parties. Trading liabilities includes the fair value of derivative contracts held for trading that are in loss positions.Reference 1: http://www.xbrl.org/2003/role/presentation
Ref
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 7
-Article 9
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-Name Audit and Accounting Guide (AAG)
-Number AAG-BRD
-Chapter 4
-Paragraph 55
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-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 7
falsefalse17false0us-gaap_InterestExpenseShortTermBorrowingsus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse74350007435falsefalsefalsefalsefalse2truefalsefalse1295500012955falsefalsefalsefalsefalse3truefalsefalse189568000189568falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate interest expense incurred on short-term borrowings including commercial paper and Federal funds purchased and securities sold under agreements to repurchase.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 7
-Article 9
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 7
-Subsection II
falsefalse18false0us-gaap_InterestExpenseLongTermDebtus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalse
false3216300032163falsefalsefalsefalsefalse2truefalsefalse5018300050183falsefalsefalsefalsefalse3truefalsefalse217578000217578falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAggregate amount of interest paid or due on all long-term debt.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 8
-Article 9
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-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 8
-Subsection I
truefalse19false0us-gaap_InterestExpenseus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse149448000149448falsefalsefalsefalsefalse2truefalsefalse216471000216471falsefalsefalsefalsefalse3truefalse
false711643000711643falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe cost of borrowed funds accounted for as interest that was charged against earnings during the period.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 34
-Paragraph 21
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 9
-Subsection II
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 9
-Article 9
truefalse20false0us-gaap_InterestIncomeExpenseNetus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse730838000730838falsefalsefalsefalsefalse2truefalsefalse776468000776468falsefalsefalsefalsefalse3truefalsefalse895082000895082falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAmount of net interest income or expense derived from banking operations.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 10
-Article 9
falsefalse21false0us-gaap_ProvisionForLoanLeaseAndOtherLossesus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse270000000270000falsefalsefalsefalsefalse2truefalsefalse880000000880000falsefalsefalsefalsefalse3true<
IsRatio>falsefalse10800000001080000falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe sum of the periodic provision charged to earnings, based on an assessment of uncollectibility from the counterparty on account of loan, lease or other credit losses, to reduce these accounts to the amount that approximates their net realizable value.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 95
-Paragraph 28
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-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-DEP
-Chapter 5
-Paragraph 168, 169, 170
-IssueDate 2006-05-01
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 11
-Article 9
truefalse22false0us-gaap_InterestIncomeExpenseAfterProvisionForLoanLossus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse460838000460838falsefalsefalsefalsefalse2truefalsefalse-103532000-103532falsefalsefalsefalsefalse3truefalsefalse-184918000-184918falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryNet interest and dividend income or expense, including any amortization and accretion (as applicable) of discounts and premiums, including consideration of the provisions for loan, lease, credit, and other related losses, if any.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 12
-Article 9
truefalse23true0us-gaap_NoninterestIncomeAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsefalsefalse2falsefalsefalse00falsefalsefalsefalsefalse3falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse24false0fhn_CapitalMarketsfhnfalsecreditdura
tionThe major component of revenue in this line item is generated from the purchase and sale of securities as both principal and...falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse424034000424034falsefalsefalsefalsefalse2truefalsefalse632093000632093falsefalsefalsefalsefalse3truefalsefalse483526000483526false
falsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe major component of revenue in this line item is generated from the purchase and sale of securities as both principal and agent, and from other fee sources including loan sales, portfolio advisory, and derivative sales.No authoritative reference available.falsefalse25false0fhn_MortgageBankingfhnfalsecreditdurationThe noninterest income derived from mortgage banking activities including fees earned from servicing third party assets,...falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse167364000167364falsefalsefalsefalsefalse2truefalsefalse235450000235450falsefalsefalsefalsefalse3truefalsefalse518034000518034fal
sefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe noninterest income derived from mortgage banking activities including fees earned from servicing third party assets, changes in the fair value of servicing assets (net of hedging results), and origination income.No authoritative reference available.falsefalse26false0fhn_DepositTransactionsAndCashManagementfhnfalsecreditdurationIncludes amounts charged depositors for: (1) maintenance of their accounts (maintenance charges); (2) failure to maintain...falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse144838000144838fal
sefalsefalsefalsefalse2truefalsefalse163761000163761falsefalsefalsefalsefalse3truefalsefalse179034000179034falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryIncludes amounts charged depositors for: (1) maintenance of their accounts (maintenance charges); (2) failure to maintain specified minimum balances on account; (3) exceeding the number of checks or transactions allowed to be processed in a given period; (4) checks drawn on no minimum balance deposit accounts; (5) withdrawals from nontransaction deposit accounts; (6) closing savings accounts before a specified minimum period of time has elapsed; (7) accounts which have remained inactive for extended periods of time or which have become dormant; (8) use of automated teller machines or remote service units; (9) checks draw
n against insufficient funds that the bank assesses regardless of whether it decides to pay, return or hold the check; (10) issuing stop payment orders; (11) certifying checks; and (12) accumulating or disbursing funds deposited in IRAs or Keogh Plan accounts when not handled by the bank's trust department. This item does not include penalties assessed on the early withdrawal of time deposits. Also includes fees received from cash and treasury management products for business and corporate customers. Also includes service revenue earned by a depository institution that holds the account balances of other financial institutions and provides services thereto. Such services include check collection and item processing.No authoritative reference available.falsefalse27false0us-gaap_FeesAndCommissionsFiduciaryAndTrustActivitiesus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse2958500029585falsefalsefalsefalsefalse2truefalsefalse2948200029482falsefalsefalsefalsefalse3truefalsefalse3382100033821falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryIncome from services rendered by trust departments or by any consolidated subsidiaries acting in a fiduciary capacity, including fees earned for (1) acting as an agent for fiduciary placement and loans and (2) custody or investment advisory services when such fees are not separately billed to the customer. This item excludes commissions and fees received for the accumulation or disbursement of funds deposited to Individual Retirement or Keogh plan accounts when such are not handled by the reporting entity's trust department.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 13
-Article 9
falsefalse28false0fhn_BrokerageManagementFeesAndCommissionsfhnfalsecreditdurationActing as an agent, a broker-dealer may buy and sell securities on behalf of its customers. In return for such services, the...falsefalsefalsefalsefalsefalsefalsefalsefalsefalse
verboselabel1truefalsefalse2460200024602falsefalsefalsefalsefalse2truefalsefalse2693400026934falsefalsefalsefalsefalse3truefalsefalse3223400032234falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryActing as an agent, a broker-dealer may buy and sell securities on behalf of its customers. In return for such services, the broker-dealer charges a commission. Each time a customer enters into a buy or sell transaction, a commission is earned by the
broker-dealer for its selling and administrative efforts. For securities purchased, the commission is recorded as a receivable from customers; for securities sold, it is recorded as reductions in the payable to customers. Commissions earned are usually related to the broker-dealer's customers' trading volume and the dollar amounts of the trades. In general, commissions are for smaller trades of exchange-listed stocks and bonds made by retail customers. Revenue recognized in the period for (1) performance (incentive) fees based on the investment results achieved for management of certain institutional accounts and hedge funds, (2) schedule-based fees earned for management of mutual funds and closed-end funds, based either on average daily net assets or on a combination of the average daily net assets and gross income, and (3) other investment management and advisory fees.No authoritative reference available.falsefal
se29false0us-gaap_InsuranceCommissionsAndFeesus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse1794400017944falsefalsefalsefalsefalse2truefalsefalse2524800025248falsefalsefalsefalsefalse3truefalsefalse2910400029104falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryIncome from agency and brokerage operations (includes sales of annuities and supplemental contracts); service charges, commissions, and fees from the sale of insurance and related services; and management fees from separate accounts, deferred annuities, and universal life products. May also include an entity's proportionate share of the income or loss before extraordinary items and other adjustments from its investme
nts in: unconsolidated subsidiaries, associated companies, and corporate joint ventures, unincorporated joint ventures, general partnerships, and limited partnerships over which the entity exercises significant influence that are principally engaged in insurance underwriting, reinsurance, or insurance sales activities.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 13
-Subparagraph c, d
-Article 9
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 4
-Article 7
falsefalse30false0fhn_GainLossOnDebtSecuritiesNetfhnfalsecreditdurationGain loss on Debt securities net.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse374000374falsefalsefalsefalsefalse2falsefalsefalse00falsefalsefalsefalsefalse3truefalsefalse761000761falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryGain loss on Debt securities net.No authoritative reference available.falsefalse31false0fhn_EquitySecuritiesGainsLossesNetfhn<
/ElementPrefix>falsecreditdurationThe difference between the carrying value and the sale price of equity securities. This element includes investments in which...falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1truefalsefalse1054800010548falsefalsefalsefalsefalse2truefalsefalse-1178000-1178falsefalsefalsefalsefalse3truefalsefalse6534900065349falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe difference between the carrying value and the sale price of equity securities. This element includes investments in which the entity holds a small ownership stake (generally, less than 20% of the shares outstanding) and cannot exert significant influence. May also include other-than-temporary impairments of cost method investments or changes in the fair value of venture capital investments.No authoritative reference available.falsefalse32false0us-gaap_DisposalGroupNotDiscontinuedOperationGainLossOnDisposalus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsefalsefalse2truefalsefalse-9183000-9183falsefalsefalsefalsefalse3truefalsefalse-19019000-19019falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe gain (loss) resulting from the sale of a disposal group that is not a discontinued operation. It is included in income from continuing operations before income taxes in the income statement.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 144
-Paragraph 47
-Subparagraph b
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 144
-Paragraph 37, 45
falsefalse33false0us-gaap_NoninterestIncomeOtherOperatingIncomeus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalse
false136403000136403falsefalsefalsefalsefalse2truefalsefalse152236000152236falsefalsefalsefalsefalse3truefalsefalse145546000145546falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryRepresents other forms of revenue earned, excluding interest, which is not otherwise specified in the taxonomy.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 13
-Article 9
truefalse34false0us-gaap_NoninterestIncomeus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalse<
/IsRatio>false955692000955692falsefalsefalsefalsefalse2truefalsefalse12548430001254843falsefalsefalsefalsefalse3truefalsefalse14683900001468390falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe total amount of noninterest income which may be derived from: (1) fees and commissions; (2) premiums earned; (3) insurance policy charges; (4) the sale or disposal of assets; and (5) other sources not otherwise specified.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 13
-Subsection II
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 13
-Article 9
truefalse35false0us-gaap_Revenuesus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse14165300001416530falsefalsefalsefalsefalse2truefalsefalse11513110001151311falsefalsefalsefalsefalse3truefalsefalse12834720001283472falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAggregate revenue recognized during the period (derived from goods sold, services rendered, insurance premiums, or other activities that constitute an entity's earning process). For financial services companies, also includes investment and interest income, and sales and trading gains.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 1
-Article 5
truefalse36true0us-gaap_NoninterestExpenseAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsefalsefalse2falsefalsefalse00falsefalsefalsefalsefalse3falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse37false0us-gaap_LaborAndRelatedExpenseus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse688808000688808falsefalsefalsefalsefalse2truefalsefalse777581000777581falsefalsefalsefalsefalse3truefalsefalse928982000928982falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate amount of expenditures for salaries, wages, profit sharing and incentive compensation, and other employee benefits, including share-based compensation, and pension and other postretirement benefit expense.No authoritative reference available.falsefalse38false0fhn_RepurchaseAndForeclosureProvisionfhnfalsedebitdurationThe ch
arge taken to recognize estimated inherent losses to repurchase loans previously sold or securitized. For loans sold...falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1truefalsefalse189830000189830falsefalsefalsefalsefalse2truefalsefalse147772000147772falsefalsefalsefalsefalse3truefalsefalse2950300029503falsefa
lsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe charge taken to recognize estimated inherent losses to repurchase loans previously sold or securitized. For loans sold without recourse, reflects obligations to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations or warranties made at the time of sale. For loans sold with recourse, reflects indemnity and repurchase exposure if the loans default.No authoritative reference available.falsefalse39false0us-gaap_ForeclosedRealEstateExpenseus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse2494400024944falsefalsefalsefalsefalse2truefalsefalse6619700066197falsefalsefalsefalsefalse3truefalsefalse2147100021471falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAmount of expense recognized during the period for the foreclosure on real estate assets.No authoritative reference available.falsefalse40false0us-gaap_ProfessionalFeesus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse6270100062701falsefalsefalsefalsefalse2truefalsefalse6612100066121falsefalsefalsefalsefalse3truefalsefalse6217300062173falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryA fee charged for services from professionals such as doctors, lawyers and accountants. The term is often expanded to include other professions, for example, pharmacists charging to maintain a medicinal profile of a client or customer.No authoritative reference available.falsefalse41false0us-gaap_OccupancyNetus-gaaptruedebitduration<
ShortDefinition>No definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse5909100059091falsefalsefalsefalse
hasSegments>false2truefalsefalse6540200065402falsefalsefalsefalsefalse3truefalsefalse103573000103573falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAmount of net occupancy expense that may include items, such as depreciation of facilities and equipment, lease expenses, property taxes and property and casualty insurance expense.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-BRD
-Chapter 4
-Paragraph 62
-IssueDate 2006-05-01
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 13
-Paragraph 16
-Subparagraph b
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 13
-Paragraph 16
-Subparagraph d
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 13
-Paragraph 15
Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 13
-Paragraph 16
-Subparagraph c
falsefalse42false0us-gaap_InformationTechnologyAndDataProcessingus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalse<
DisplayZeroAsNone>false5976800059768falsefalsefalsefalsefalse2truefalsefalse6248500062485falsefalsefalsefalsefalse3truef
alsefalse7260200072602falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe amount of expenses incurred in the period for information technology and data processing products and services.No authoritative reference available.falsefalse43false
0us-gaap_FederalDepositInsuranceCorporationPremiumExpenseus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse3713800037138falsefalsefalsefalsefalse2truefalsefalse4627200046272falsefalsefalsefalsefalse3truefalsefalse1466400014664<
NonNumericTextHeader />falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe premium paid to the Federal Deposit Insurance Corporation for deposit insurance which is included in noninterest expense.No authoritative reference available.falsefalse44false0fhn_ContractEmploymentfhnfalsedebitdurationCosts incurred related to payments for services rendered by non-employee temporary staff.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse2882500028825falsefalsefalsefalsefalse2truefalsefalse3621700036217falsefalsefalsefalsefalse3truefalsefalse3351500033515falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryCosts incurred related to payments for services rendered by non-employee temporary staff.No authoritative reference available.falsefalse45false0us-gaap_EquipmentExpenseus-gaaptruedebitdurationNo definition available.falsefalse<
/IsSegmentTitle>falsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse2890600028906falsefalsefalsefalsefalse2truefalsefalse3430500034305falsefalsefalsefalsefalse3truefalsefalse5674400056744falsefalsefalsefalsefalseM
onetaryxbrli:monetaryItemTypemonetaryThis element represents equipment expense including depreciation, repairs, rentals, and service contract costs. This item also includes equipment purchases which do not qualify for capitalization in accordance with the entity's accounting policy. This item may also include furniture expenses.No authoritative reference available.falsefalse46false0us-gaap_Communicationus-gaaptruedebitdurationNo definition available.falsef
alsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse2244300022443falsefalsefalsefalsefalse2truefalse<
/IsRatio>false2696000026960falsefalsefalsefalsefalse3truefalsefalse3818300038183falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe amount of expense incurred in the period for communication, which is the exchange of information by several methods.No authoritative reference available.falsefalse47false0fhn_ComputerSoftwarefhnfalsedebitdurationCosts incurred to purchase computer software, including maintenance contracts associated with the purchased software and also...falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse3062700030627falsefalsefalsefalsefalse2truefalsefalse2688300026883falsefalsefalsefalsefalse3truefalsefalse3031800030318falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryCosts incurred to purchase computer software, including maintenance contracts associated with the purchased software and also amortization expense associated with internally developed software.No authoritative reference available.falsefalse48false0fhn_MiscellaneousLoanCostsfhnfalsedebitdurationMiscellaneous costs related to loans such as appraisals, inspections and other expenses that are not classified as closing...falsefalsefalsefalsefalse
falsefalsefalsefalsefalseverboselabel1truefalsefalse1236700012367falsefalsefalsefalsefalse2truefalsefalse2305000023050falsefalsefalsefalsefalse3truefalsefalse3822100038221falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryMiscellaneous costs related to loans such as appraisals, inspections and other expenses that are not classified as closing costs.No authoritative reference available.falsefalse49false0us-gaap_AmortizationOfIntangibleAssetsus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse55260005526falsefalsefalsefalsefalse2truefalsefalse60170006017falsefalsefalsefalsefalse3truefalsefalse82290008229falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate expense charged against earnings to allocate the cost of intangible assets (nonphysical assets not used in production) in a systematic
and rational manner to the periods expected to benefit from such assets. As a noncash expense, this element is added back to net income when calculating cash provided by (used in) operations using the indirect method.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 45
-Subparagraph a(2)
falsefalse50false0us-gaap_GoodwillImpairmentLossus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalse
IsRatio>false00falsefalsefalsefalsefalse2truefalsefalse22940002294falsefalsefalsefalsefalse3falsefals
efalse00falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryLoss recognized during the period that results from the write-down of goodwill after comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. Goodwill is assessed at least annually for impairment.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 45
-Subparagraph e(2)
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 43
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 47
-Subparagraph b
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 20
falsefalse51false0us-gaap_OtherNoninterestExpenseus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse116159000116159falsefalsefalsefalsefalse2truefalsefalse184289000184289falsefalsefalsefalsefalse3truefals
efalse174136000174136falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryOther noninterest expenses that are not separately presented in any other noninterest expense category.No authoritative reference available.truefalse52false0us-gaap_NoninterestExpenseus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse13671330001367133falsefalsefalsefalsefalse2truefalsefalse15718450001571845falsefalsefalsefalsefalse3truefalsefalse16123140001612314falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTotal aggregate amount of all noninterest expense.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 14
-Subsection II
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 14
-Article 9
truefalse53false0us-gaap_IncomeLossFromContinuingOperationsBeforeIncomeTaxesMinorityInterestAndIncomeLossFromEquityMethodInvestmentsus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse4939700049397falsefalsefalsefalsefalse2truefalsefalse-420534000-420534falsefalsefalsefalsefalse3truefalsefalse-328842000-328842falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetarySum of operating profit and nonoperating income (expense) before income (loss) from equity method investments, income taxes, extraordinary items, cumulative effects of changes in accounting principles, and noncontrolling interest.Reference 1: htt
p://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Subparagraph 1(i)
-Article 4
falsefalse54false0us-gaap_IncomeTaxExpenseBenefitus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse-19083000-19083falsefalsefalsefalsefalse2truefalsefalse-174945000-174945falsefalsefalsefalsefalse3truefalsefalse-154405000-154405falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to continuing operations.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 45
-Subparagraph a, b
truefalse55false0us-gaap_IncomeLossFromContinuingOperationsIncludingPortionAttributableToNoncontrollingInterestus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse6848000068480falsefalsefalsefalsefalse2truefalsefalse-245589000-245589falsefalsefalsefalsefal
se3truefalsefalse-174437000-174437falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThis element represents the income or loss from continuing operations attributable to the economic entity which may also be defined as revenue less expenses and taxes from ongoing operations before extraordinary items, cumulative effects of changes in accounting principles, and noncontrolling int
erest.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 95
-Paragraph 28
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 29
falsefalse56false0us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTaxus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1true<
/IsNumeric>falsefalse-6877000-6877falsefalsefalsefalsefalse2truefalsefalse-12846000-12846falsefalsefalsefalsefalse3truefalsefalse-3534000-3534falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThis element represents the overall income (loss) from a disposal group that is classified as a component of the entity, net of income tax, reported as a separate component of income before extraordinary items and the cumulative effect of accounting changes before deduction or consideration of the amount which may be allocable to noncontr
olling interests, if any. Includes the following (net of tax): income (loss) from operations during the phase-out period, gain (loss) on disposal, provision (or any reversals of earlier provisions) for loss on disposal, and adjustments of a prior period gain (loss) on disposal.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 13
-Article 7
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 15
-Article 5
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 29
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 144
-Paragraph 43
Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 144
-Paragraph 47
-Subparagraph c
truefalse57false0us-gaap_ProfitLossus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse6160300061603falsefalsefalsefalsefalse2truefalsefalse-258435000-258435falsefalsefalsefalsefalse3truefalsefalse-177971000-177971falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph A1, A4, A5
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 5
-Subparagraph b
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 29
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 38
-Subparagraph a
Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 38
-Subparagraph c(1)
truefalse58false0us-gaap_NetIncomeLossAttributableToNoncontrollingInterestus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1true
falsefalse1140200011402falsefalsefalsefalsefalse2truefalsefalse1140200011402falsefalsefalsefalsefalse3truefalsefalse1401600014016falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe portion of net income (loss) attributable to the noncontrolling interest (if any) deducted in order to derive the portion attributable to the parent.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 38
-Subparagraph a
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 38
-Subparagraph c(1)
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph A1, A4, A5
truefalse59false0us-gaap_NetIncomeLossus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefa
lsefalse5020100050201falsefalsefalsefalsefalse2truefalsefalse-269837000-269837falsefalsefalsefalsefalse3truefalsefalse-191987000-191987falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe portion of consolidated profit or loss for the period, net of income taxes, which is attributable to the parent. If the entity does not present consolidated financial statements, the amount of profit or loss for the period, net of income taxes.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 19
-Article 5
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 38
-Subparagraph d
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph A7
-Appendix A
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 38
-Subparagraph a
Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 20
-Article 9
Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 130
-Paragraph 10, 15
Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Emerging Issues Task Force (EITF)
-Number 87-21
Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 95
-Paragraph 28, 29, 30
truefalse60false0us-gaap_PreferredStockDividendsus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse107970000107970[1]falsefalsefalsefalsefalse2truefalsefalse5958500059585[1]falsefalsefalsefalsefalse3truefalsefalse74130007413[1]falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe amount of dividends declared or paid in the period to preferred shareholders, or the amount for which the obligation to pay them dividends arose in the period.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 6
-Section B
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 12
-Paragraph 10
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Article 3
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 128
-Paragraph 40
-Subparagraph b
truefalse61false0us-gaap_NetIncomeLossAvailableToCommonStockholdersBasicus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse-57769000-57769falsetruefalsefalsefalse2truefalsefalse-329422000-329422falsetruefalsefalsefalse3truefalsefalse-199400000-199400falsetruefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryNet income after adjustments for dividends on preferred stock (declared in the period) and/or cumulative preferred stock (accumulated for the period).Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 128
-Paragraph 9
truefalse62false0us-gaap_IncomeLossFromContinuingOperationsPerBasicShareus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1true
IsNumeric>falsefalse-0.22-0.22falsetruefalsefalsefalse2truefalsefalse-1.35-1.35falsetruefalsefalsefalse3truefalsefalse-0.95-0.95falsetruefalsefalsefalseEPSus-types:perShareItemTypedecimalThe amount of income (loss) from continuing operations per each share of common stock outstanding during the reporting period.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 21
-Article 9
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 128
-Paragraph 36, 37, 38
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 20
-Article 5
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 18
-Article 7
truetrue63false0us-gaap_IncomeLossFromContinuingOperationsPerDilutedShareus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse-0.22-0.22falsetruefalsefalsefalse2truefalsefalse-1.35-1.35falsetruefalsefalsefalse3truefalsefalse-0.95-0.95falsetruefalsefalsefalseEPSus-types:perShareItemTypedecimalThe amount of income (loss) from continuing operations available to each share of common stock outstanding during the reporting period and each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 21
-Article 9
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 128
-Paragraph 11, 12, 36, 37, 38
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 128
-Paragraph 40
-Subparagraph a
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 20
-Article 5
Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 18
-Article 7
truetrue64false0us-gaap_EarningsPerShareBasicus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse-0.25-0.25falsetruefalsefalsefalse2truefalsefalse-1.41-1.41falsetruefalsefalsefalse3t
ruefalsefalse-0.96-0.96falsetruefalsefalsefalseEPSus-types:perShareItemTypedecimalThe amount of net income or loss for the period per each share of common stock outstanding during the reporting period.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph 21
-Article 9
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 128
-Paragraph 36, 37, 38
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 20
-Article 5
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
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IDEA: Stock Option, Restricted Stock Incentive, and Dividend Reinvestment Plans
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 20 — Stock Option, Restricted Stock Incentive, and Dividend Reinvestment Plans</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Restricted stock plans</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has authorized the issuance of its common stock for awards to executive and other management
employees who have a significant impact on the profitability of FHN. All unvested awards either
have a service and/or a performance condition which must be met in order for the shares to
ultimately vest. On December 31, 2010, there were 4,903,089 shares available for grants, of this
amount, 3,953,627 are available to be granted as restricted shares.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Performance condition grants. </i></b>Under the long-term incentive and corporate performance programs,
performance stock or units vest only if predetermined performance measures are met. The awards are
forfeited if performance goals are not achieved within the specified performance periods. In 2010
and 2009, executives were awarded performance stock units subject to certain performance criteria
being met under this program. Additionally, in 2010 FHN granted restricted stock with
employee-specific performance conditions to a new senior manager in addition to the customary
annual management grants. In 2008, executives were awarded performance restricted stock with 50%
vesting in 2011 and 50% vesting in 2012 subject to certain performance criteria being met. As of
December 31, 2010, performance conditions related to the 2009 performance stock unit grant and the
2007 performance restricted stock grant have been met. Accordingly, 50% of the units granted in
2009 will vest in 2012 and 50% will vest in 2013 provided continued employment with FHN. Half of
the performance restricted stock granted in 2007 will vest in 2010 with the remainder vesting in
2011. The performance conditions related to the 2010 performance stock units, the 2010 performance
stock granted to a senior manager, and the 2008 performance restricted stock grants have not yet
been achieved.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Service condition grants</i></b><i>. </i>In 2010 and 2009, executives and management were awarded restricted
stock with service conditions only. Half of the 2009 awards are scheduled to vest in 2012 and the
remainder is scheduled to vest in 2013. Half of the 2010 awards will vest in 2013 and the remainder
in 2014. Further, from time to time awards of restricted stock may be awarded to new
executive-level employees upon hiring or as retention grants to existing executives. Additionally,
retention restricted stock units were awarded to selected employees with the units expected to vest
in 2013. Restricted stock and stock units granted in 2010 are included in the table below.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Director grants</i></b>. FHN’s active stock plan allows stock awards to be granted to non-employee
directors upon approval by the board of directors. Prior to 2007 the board granted 8,930 shares of
restricted stock to each new non-employee director upon election to the board, with restrictions
lapsing at a rate of ten percent per year. That program was discontinued in 2007, although legacy
awards remain outstanding. Prior to 2011, each non-employee director who no longer had legacy
awards, and each new director, received an annual award of restricted stock units (“RSUs”) valued
at $45,000. For a new director, that amount is pro-rated consistent with the start date. Each RSU
award is scheduled to vest the following year and is paid in common stock (including any stock
earned as a result of stock dividends) plus any accrued cash dividends. Prior to 2011, non-employee
directors whose service pre-dated 2007 also participated in the RSU program, but participation was
phased in as the legacy restricted stock awards vested. In 2009, five non-employee directors
received an RSU award and the remainder had old restricted stock vest. No shares or RSUs were
immediately vested or forfeited due to director retirements or resignations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The summary of restricted and performance stock and unit activity during the year ended December
31, 2010, is presented below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Weighted</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">average</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Shares/</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">grant date</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Units <sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">fair value<sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Nonvested on January 1, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">3,796,049</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12.42</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares/units granted
</div></td>
<td> </td>
<td> </td>
<td align="right">1,513,963</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12.04</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares/units vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(754,597</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">15.69</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares/units canceled
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(457,183</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">14.44</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Nonvested on December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,098,232</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>11.53</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Share and per share
data has been restated to
reflect stock dividends
distributed through January
1, 2011.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 31, 2010, there was $24.4 million of unrecognized compensation cost related to
nonvested restricted stock plans. That cost is expected to be recognized over a weighted-average
period of 2.41 years. The total grant date fair value of shares vested during 2010, 2009 and 2008,
was $7.1 million, $3.2 million and $7.7 million, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The compensation cost that has been included in income from continuing operations pertaining
to both stock option and restricted stock plans was $12.0 million, $9.0 million and $9.0 million
for 2010, 2009, and 2008, respectively. The corresponding total income tax benefits recognized in
the income statements were $4.6 million, $3.4 million and $3.5 million for 2010, 2009, and 2008,
respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Consistent with Tennessee state law, only new or authorized, but unissued, stock may be utilized in
connection with any issuance of FHN common stock which may be required as a result of stock based
compensation awards. FHN historically obtains authorization from the Board of Directors to
repurchase any stock that may be issued at the time a plan is approved or amended. These
authorizations are automatically adjusted for stock splits and stock dividends. Repurchases are
authorized to be made in the open market or through privately negotiated transactions and will be
subject to market conditions, accumulation of excess equity, legal and regulatory requirements, and
prudent capital management. FHN does not currently expect to repurchase a material number of
shares related to the plans during the next annual period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Stock option plans. </i></b>Prior to 2009, FHN issued non-qualified stock options to employees under
various plans, which provided for the issuance of FHN common stock at a price equal to the higher
of the closing price or its fair market value at the date of grant. All options vest within 3 to 4
years and expire 7 years or 10 years from the date of grant. A deferral program, which was
discontinued in 2005, allowed for foregone compensation plus the exercise price to equal the fair
market value of the stock on the date of grant if the grantee agreed to receive the options in lieu
of compensation. Options that were part of compensation deferral prior to January 2, 2004, expire
20 years from the date of grant. Stock options granted after January 2, 2004, which are part of
the compensation deferral, expire 10 years from the date of grant. While there were no stock
options granted during 2010, FHN has resumed granting stock options in 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The stock option plans include various antidilutive provisions in the event the value of awards
become diminished from several factors. In 2008, FHN began paying quarterly stock dividends in
lieu of quarterly cash dividends. Stock dividends increase the number of shares outstanding,
thereby decreasing the compensation value of the equity award. Consequently, the stock and option
prices reported in the following tables have been proportionately adjusted to reflect the estimated
economic effect of all dividends distributed in common stock effective through January 1, 2011.
The Black Scholes Fair Value of the stock options and compensation expense are not affected.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The summary of stock option plans activity for the year ended December 31, 2010, is shown below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Weighted</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Average</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Weighted</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Remaining</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Aggregate</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Options</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Average</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Contractual Term</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Intrinsic Value</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Outstanding</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Exercise Price</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><i>(years)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><i>(thousands)</i></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">January 1, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">14,193,157</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26.90</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Options exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,281</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">11.19</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Options forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(164,524</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">25.52</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Options expired
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,431,605</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">29.54</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,588,747</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>26.86</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4.35</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>235</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Options exercisable
</div></td>
<td> </td>
<td> </td>
<td align="right">10,273,547</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26.97</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.46</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">216</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Options expected to vest
</div></td>
<td> </td>
<td> </td>
<td align="right">1,287,145</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21.89</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The total intrinsic value of options exercised during 2010 and 2009 was immaterial, however, the
total intrinsic value of options exercised during 2008 was $.3 million. On December 31, 2010,
there was $.4 million of unrecognized compensation cost related to nonvested stock options. That
cost is expected to be recognized over a weighted-average period of less than 1 year.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, FHN granted 940,993 stock options (as restated to reflect stock dividend distributed
through January 1, 2011) with a weighted average fair value of $1.44 per option at grant date. The
majority of the stock options have since been canceled. No stock options were granted in 2010 or
2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN used the Black-Scholes Option Pricing Model to estimate the fair value of stock options granted
in 2008, with the following assumptions:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="7%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected dividend yield
</div></td>
<td> </td>
<td align="center" valign="top">5.97%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected weighted-average lives of options granted
</div></td>
<td> </td>
<td align="center" valign="top">5.07 years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected weighted-average volatility
</div></td>
<td> </td>
<td align="center" valign="top">25.89%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected volatility range
</div></td>
<td> </td>
<td align="center" valign="top"><font style="white-space: nowrap">24.10% - 42.60%</font></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Risk-free interest rates range
</div></td>
<td> </td>
<td align="center" valign="top">2.80% - 3.32%</td>
</tr>
<tr style="font-size: 1px">
<td colspan="3" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Expected lives of options granted were determined based on the vesting period, historical exercise
patterns and contractual term of the options. Expected volatility is estimated using average of
daily high and low stock prices. Expected volatility assumptions were determined over the period
of the expected lives of the options.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Dividend reinvestment plan. </i></b>The Dividend Reinvestment and Stock Purchase Plan authorizes the sale
of FHN’s common stock from stock acquired on the open market to shareholders who choose to invest
all or a portion of their cash dividends or make optional cash payments of $25 to $10,000 per
quarter without paying commissions. The price of stock purchased on the open market is the average
price paid.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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-Name Statement of Financial Accounting Standard (FAS)
-Number 123R
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-Name Statement of Position (SOP)
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 26 — Restructuring, Repositioning, and Efficiency</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Beginning in 2007, FHN conducted a company-wide review of business practices with the goal of
improving its overall profitability and productivity. In order to redeploy capital to higher-return
businesses, FHN sold 34 full-service First Horizon Bank branches in its national banking markets,
discontinued national homebuilder and commercial real estate lending through its First Horizon
Construction Lending offices, and executed various MSR sales. In 2008, FHN sold its national
mortgage origination and servicing platform including substantially all of its mortgage pipeline,
related hedges, servicing assets, certain fixed assets, and other associated assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN contracted to sell its institutional equity research business, a division of FTN
Financial. During first quarter 2010, the sale failed to close and FHN incurred an additional
goodwill impairment, severance and contract terminations costs, and asset write-offs when exiting
the business. Additionally, in late 2009 FHN sold and closed its Louisville remittance processing
operations and the Atlanta insurance business and also cancelled a large services/consulting
contract.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Net costs recognized by FHN in the year ended December 31, 2010, related to restructuring,
repositioning, and efficiency activities were $17.2 million. Of this amount, $9.5 million
represented exit costs that were accounted for in accordance with the Exit or Disposal Cost
Obligations Topic of the FASB Accounting Standards Codification (“ASC 420”).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Significant expenses recognized in 2010 resulted from the following actions:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Severance and other employee costs of $5.6 million primarily related to the exit of the
institutional equity research business and the 2009 sale of Louisville remittance
processing operations.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Goodwill impairment of $3.3 million and lease abandonment expense of $2.3 million
primarily related to the closure of the institutional equity research business.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss of $4.1 million related to asset impairments.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Net costs recognized by FHN in the year ended December 31, 2009, related to restructuring,
repositioning, and efficiency activities were $51.9 million. Of this amount, $12.4 million
represented exit costs that were accounted for in accordance with ASC 420.
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td>Significant expenses recognized in 2009 resulted from the following actions:</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Severance and related employee costs of $5.6 million related to discontinuation of
national lending operations and the sales and closures of FERP and the Atlanta insurance
business.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss on divestitures of $9.2 million related to the FERP and Atlanta insurance
transactions.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss of $13.4 million related to cancellation of a contract on external services.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Goodwill impairment of $14.3 million related to agreement to sell FTN ECM and $2.3
million related to the closure of the remaining Atlanta insurance business.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Net costs recognized by FHN in the year ended December 31, 2008, related to restructuring,
repositioning, and efficiency activities were $91.4 million. Of this amount, $49.1 million
represented exit costs that were accounted for in accordance with ASC 420.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Significant expenses recognized in 2008 resulted from the following actions:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Expense of $49.1 million associated with organizational and compensation changes due to
right-sizing operating segments, the divestiture of certain First Horizon Bank branches and
certain mortgage banking operations, and consolidating functional areas.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss of $16.6 million on the divestiture of mortgage banking operations.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Loss of $2.4 million from the sales of certain First Horizon Bank branches.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Transaction costs of $12.7 million from the contracted sales of mortgage servicing
rights.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Expense of $10.7 million for the write-down of certain premises and equipment,
intangibles, and other assets resulting from FHN’s divestiture of certain mortgage
operations and from the change in FHN’s national banking strategy.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The financial results of FTN ECM (the institutional equity research business) including goodwill
impairment are reflected in the Loss from discontinued operations, net of tax line on the
Consolidated Statements of Income for all periods presented. Losses from the divestitures of the
Atlanta insurance business, FERP, and certain mortgage banking operations are included in Losses on
divestitures on the Consolidated Statements of Income. Transaction costs recognized in the periods
presented from selling mortgage servicing rights are recorded as a reduction of Mortgage banking
income in the noninterest income section of the Consolidated Statements of Income. All other costs
associated with the restructuring, repositioning, and efficiency initiatives implemented by
management are included in the noninterest
expense section of the Consolidated Statements of Income, including severance and other
employee-related costs recognized in relation to such initiatives which are recorded in Employee
compensation, incentives, and benefits; facilities consolidation costs and related asset impairment
costs are included in Occupancy; costs associated with the impairment of premises and equipment are
included in Equipment rentals, depreciation, and maintenance or All other expense; professional
fees are included in Legal and professional fees; costs associated with intangible asset
impairments are included in All other expense and goodwill impairments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Activity in the restructuring and repositioning liability for the years ended December 31, 2010,
2009, and 2008 is presented in the following table, along with other restructuring and
repositioning expenses recognized. For repositioning actions initiated prior to 2010, costs
associated with the reduction of national operations and termination of product and service
offerings are included within the non-strategic segment while costs associated with efficiency
initiatives affecting multiple segments and initiatives that occurred within regional banking and
capital markets are included in the corporate segment. For repositioning actions initiated in
2010, the related costs are included in the segment that has decision-making responsibility.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(Dollars in thousands)</i></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2009</td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Expense</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Liability</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Expense</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liability</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Expense</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liability</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Beginning Balance
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>15,903</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">24,167</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19,675</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Severance and other employee related costs
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5,638</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>5,638</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,400</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,400</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Facility consolidation costs
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,348</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,348</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,511</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,511</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,751</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,751</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other exit costs, professional fees, and other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,468</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,468</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">322</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">322</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,902</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,902</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Accrued
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>9,454</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>25,357</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,445</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">49,053</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">68,728</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Payments related to:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Severance and other employee related costs
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,440</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,840</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,235</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Facility consolidation costs
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3,939</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,868</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,223</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other exit costs, professional fees, and other
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,394</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">874</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,558</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrual reversals
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,476</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,127</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,545</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Restructuring and Repositioning Reserve Balance <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>9,108</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,903</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">24,167</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other Restructuring and Repositioning Expense:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage banking expense on servicing sales
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,532</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">548</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,667</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">All other income and commissions
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>27</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Loss on divestitures
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,183</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,020</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of premises and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,086</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,873</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,650</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of intangible assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,348</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,753</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,030</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>267</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,124</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">993</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,493</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total Other Restructuring and Repositioning Expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,767</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,481</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,360</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Restructuring and Repositioning
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>17,221</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">51,926</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">91,413</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes $1.2 million of deferred severance-related payments that will be paid after 2010.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN began initiatives related to restructuring in second quarter 2007. Consequently, the
following table presents cumulative amounts incurred to date as of December 31, 2010, for costs
associated with FHN’s restructuring, repositioning, and efficiency initiatives:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Charged to</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 0px solid #000000"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000">Expense</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Severance and other employee related costs <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">61,182</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Facility consolidation costs
</div></td>
<td> </td>
<td> </td>
<td align="right">38,741</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other exit costs, professional fees, and other
</div></td>
<td> </td>
<td> </td>
<td align="right">18,946</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other restructuring and repositioning (income) and expense:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Loan portfolio divestiture
</div></td>
<td> </td>
<td> </td>
<td align="right">7,672</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Mortgage banking expense on servicing sales
</div></td>
<td> </td>
<td> </td>
<td align="right">21,175</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net loss on divestitures
</div></td>
<td> </td>
<td> </td>
<td align="right">12,535</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of premises and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">21,897</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of intangible assets
</div></td>
<td> </td>
<td> </td>
<td align="right">38,131</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Impairment of other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">40,492</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,493</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Restructuring and Repositioning Charges Incurred to Date as of December 31, 2010
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">259,278</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Includes $1.2 million of deferred severance-related payments that will be paid after 2010.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDisclosure includes a description and timeline of activities implemented by management and net charges incurred to reposition and right-size the organization. Also includes information related to restructuring activities as defined by GAAP including exit and disposal activities, which should include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, a
nd the periods over which the remaining accrual will be settled.No authoritative reference available.falsefalse12Restructuring, Repositioning, and EfficiencyUnKnownUnKnownUnKnownUnKnownfalsetrueXML
45
R16.xml
IDEA: Short -Term Borrowings
2.2.0.25falsefalse0209 - Disclosure - Short -Term Borrowingstruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_ShortTermBorrowingsAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_ShortTermDebtTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel<
Cells>1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:ShortTermDebtTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 9 — Short-Term Borrowings</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Short-term borrowings include federal funds purchased and securities sold under agreements to
repurchase, commercial paper, trading liabilities, and other borrowed funds.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Federal funds purchased and securities sold under agreements to repurchase and commercial paper
generally have maturities of less than 90 days. Trading liabilities, which represent short
positions in securities, are generally held for less than 90 days. Other short-term borrowings
have original maturities of one year or less. On December 31, 2010, capital markets trading
securities with a fair value of $5.7 million were pledged to secure other short-term borrowings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The detail of these borrowings for the years 2010, 2009, and 2008 is presented in the following
table:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Federal Funds</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Purchased and</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Securities Sold</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Under Agreements</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Commercial</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Trading</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Short-term</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">to Repurchase</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Paper</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liabilities</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Borrowings</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>2010</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average balance
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,615,536</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>547,377</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>227,772</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Year-end balance
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,114,908</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>361,920</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>180,735</b></td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Maximum month-end outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,046,201</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>654,748</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>693,512</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate for the year
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>.24</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>3.30</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>.56</b></td>
<td nowrap="nowrap"><b>%</b></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate at year-end
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>.22</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3.01</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>.18</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2009
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average balance
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">2,486,296</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">159</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">536,161</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,662,830</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Year-end balance
</div></td>
<td> </td>
<td> </td>
<td align="right">2,874,353</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">293,387</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">761,758</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Maximum month-end outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">2,874,353</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">310</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">565,858</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,734,408</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate for the year
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">.21</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">1.57</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">3.89</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">.29</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate at year-end
</div></td>
<td> </td>
<td> </td>
<td align="right">.17</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">.17</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2008
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average balance
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,409,496</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,325</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">702,407</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,136,144</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Year-end balance
</div></td>
<td> </td>
<td> </td>
<td align="right">1,751,079</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,130</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">359,502</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,276,559</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Maximum month-end outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">6,433,001</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,355</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,503,348</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,461,018</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate for the year
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.04</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.79</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.73</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">2.33</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average rate at year-end
</div></td>
<td> </td>
<td> </td>
<td align="right">.25</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">.51</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.82</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">.79</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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-Name Regulation S-X (SX)
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R28.xml
IDEA: Business Segment Information
2.2.0.25falsefalse0221 - Disclosure - Business Segment Informationtruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
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<!-- Begin Block Tagged Note 21 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 21 — Business Segment Information</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Periodically, FHN adapts its segments to reflect managerial or strategic changes. FHN may also
modify its methodology of allocating expenses among segments which could change historical segment
results. In first quarter 2010, FHN revised its operating segments to better align with the chief
operating decision maker’s assessment of segment results and allocation of resources and with its
strategic direction, representing a focus on its regional banking franchise and capital markets
business. Key changes include the addition of the non-strategic segment which combines the former
mortgage banking and national specialty lending segments, the movement of correspondent banking
from capital markets to regional banking, and the shift of first lien mortgage production in the
Tennessee footprint to the regional banking segment. For comparability, previously reported items
have been revised to reflect these changes.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN has four business segments: regional banking, capital markets, corporate, and non-strategic.
The regional banking segment offers financial products and services, including traditional lending
and deposit taking, to retail and commercial customers in Tennessee and surrounding markets.
Regional banking provides investments, insurance services, financial planning, trust services and
asset management, health savings accounts, credit card, cash management, and first lien mortgage
originations within the Tennessee footprint. Additionally, the regional banking segment includes
correspondent banking which provides credit, depository, and other banking related services to
other financial institutions. The capital markets segment consists of fixed income sales, trading,
and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio
advisory and derivative sales. The corporate segment consists of gains on the repurchase of debt,
unallocated corporate expenses, expense on subordinated debt issuances and preferred stock,
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, low income housing investment activities, and various charges related to restructuring,
repositioning, and efficiency. The non-strategic segment consists of the wind-down consumer and
construction lending activities, legacy mortgage banking elements including servicing fees, 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 along with the associated
restructuring, repositioning, and efficiency charges.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Total revenue, expense, and asset levels reflect those which are specifically identifiable or which
are allocated based on an internal allocation method. Because the allocations are based on
internally developed assignments and allocations, they are to an extent subjective. This assignment
and allocation has been consistently applied for all periods presented. The following table
reflects the amounts of consolidated revenue, expense, tax, and assets for each segment for the
years ended December 31:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Consolidated</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>730,838</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">776,468</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">895,082</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>270,000</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">880,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,080,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>955,692</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,254,843</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,468,390</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,367,133</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,571,845</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,612,314</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>49,397</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(420,534</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(328,842</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Benefit for income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(19,083</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(174,945</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(154,405</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) from continuing operations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>68,480</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(245,589</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(174,437</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from discontinued operations, net
of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(6,877</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(12,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,534</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income/(loss)
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>61,603</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(258,435</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(177,971</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>25,677,371</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">28,147,808</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">34,422,678</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>83,182</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">81,465</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">97,111</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>42,631</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,180</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,666</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Regional Banking</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>560,316</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">559,129</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">560,305</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>92,335</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">306,185</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">385,647</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>309,431</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">331,809</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">336,158</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>642,160</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">679,074</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">598,501</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>135,252</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(94,321</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(87,685</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision/(benefit) for income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>48,625</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(36,108</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(33,543</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income/(loss)
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>86,627</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(58,213</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(54,142</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>11,414,957</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12,220,565</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">13,081,118</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>46,151</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">42,541</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">42,382</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>30,721</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,091</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,693</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Capital Markets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>21,452</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,966</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12,770</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>424,225</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">632,871</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">521,300</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>318,495</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">386,252</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">342,986</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income before income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>127,182</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">261,585</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">191,084</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>47,640</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">98,350</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">71,637</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>79,542</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">163,235</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">119,447</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>2,121,862</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,073,593</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,920,185</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>10,336</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,084</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">10,775</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,906</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,289</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,988</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Corporate</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,722</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25,612</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,669</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>63,539</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47,529</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100,725</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>70,863</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">94,112</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,470</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(5,602</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(20,971</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">80,925</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision/(benefit) for income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(37,187</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(23,607</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">862</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>31,585</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,636</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">80,063</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>4,989,685</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,769,187</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,149,993</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>12,913</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,477</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,501</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5,905</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,174</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,183</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Non-Strategic</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net interest income
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>147,348</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">176,761</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">320,338</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>177,665</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">573,815</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">694,354</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>158,497</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">242,634</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">510,207</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noninterest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>335,615</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">412,407</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">649,357</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss before income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(207,435</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(566,827</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(513,166</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Benefit for income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(78,161</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(213,580</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(193,361</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from continuing operations
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(129,274</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(353,247</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(319,805</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from discontinued operations,
net of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(6,877</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(12,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,534</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(136,151</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(366,093</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(323,339</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,150,867</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">9,084,463</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,271,382</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>13,782</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26,363</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">41,453</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expenditures for long-lived assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,099</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,626</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,802</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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ined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Number 131
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 2 — Acquisitions and Divestitures</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2010, FHN exited its institutional research business, FTN Equity Capital Markets
(“FTN ECM”), and incurred a pre-tax goodwill impairment of $3.3 million (approximately $2 million
after taxes). FHN exited this business through an immediate cessation of operations on February 1,
2010. Additional charges, primarily representing severance and contract terminations, of $6.1
million are included within the Loss from discontinued operations, net of tax line on the
Consolidated Statements of Income in 2010 and relate to the effects of closing FTN ECM. These
charges are included with the amounts described in Note 26 — Restructuring, Repositioning, and
Efficiency. FHN had initially reached an agreement for the sale of this business which resulted in
a pre-tax goodwill impairment of $14.3 million (approximately $9 million after taxes) in 2009;
however, the contracted sale failed to close and was terminated in early 2010. The financial
results of this business, including the goodwill impairments, are reflected in the Loss from
discontinued operations, net of tax line on the Consolidated Statements of Income for all periods
presented.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN continued its efforts to refocus on core businesses and executed the sale and closure
of FHN’s Atlanta insurance business and Louisville First Express Remittance Processing location
(“FERP”). FHN recognized a loss of $7.5 million on the sale of the Atlanta insurance business and
a $1.7 million loss on the FERP divestiture. These losses are reflected on the Consolidated
Statements of Income as a Loss on divestiture within noninterest income. The losses on
divestitures primarily reflect goodwill write-offs associated with the sales. Additionally, FHN
recognized a goodwill impairment associated with certain assets excluded from the sale of the
Atlanta insurance business. The loss is reflected as a goodwill impairment within noninterest
expense on the Consolidated Statements of Income. See Note 7 — Intangible Assets for further
discussion. FHN continues to have an insurance business within its Tennessee banking footprint and
continues to operate other remittance processing locations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During 2008, FHN sold more than 230 retail and wholesale mortgage origination offices nationwide,
the loan origination and servicing platform, substantially all of FHN’s mortgage origination
pipeline and related hedges, certain fixed assets, and other associated assets. The purchaser did
not acquire any portion of FHN’s mortgage loan warehouse. FHN retained its mortgage operations in
and around Tennessee, continuing to originate home loans for customers in its regional banking
market footprint. FHN also sold servicing assets and related hedges on $19.1 billion of first lien
mortgage loans and associated custodial deposits. Additionally, FHN entered into a subservicing
agreement for the remainder of FHN’s servicing portfolio. Generally, book value was paid for the
assets and liabilities acquired, less a purchase price reduction. FHN recognized a loss on
divestiture of $16.6 million in 2008. Gains and losses related to this transaction were included in
the noninterest income section of the Consolidated Statements of Income as Losses on divestitures.
See Note 6 — Mortgage Servicing Rights for divestitures of servicing rights.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In addition to the divestitures mentioned above, FHN acquires or divests assets from time to time
in transactions that are considered business combinations or divestitures but are not material to
FHN individually or in the aggregate.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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Id>falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsetruefalse8falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse38false0us-gaap_OtherComprehensiveIncomeDefinedBenefitPlanNetPriorServiceCostsCreditArisingDuringPeriodNetOfTaxus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsetruenegated1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6truefalsefalse1082900010829falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsetruefalse8truefalsefalse1082900010829false<
ShowCurrencySymbol>falsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe cost of benefit improvement resulting from a plan amendment that occurred during the period, after tax. The cost has not been recognized in net periodic benefit cost pursuant to FAS 87 and 106. A plan amendment includes provisions that grant increased benefits based on services rendered in prior periods.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 158
-Paragraph 7
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-Name Statement of Financial Accounting Standard (FAS)
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-Paragraph 25
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se7falsefalsefalse00falsefalsefalsetruefalse8truefalsefalse35410003541[1]falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe accumulated change in the value of either the projected benefit obligation or the plans assets resulting from experience different from that assumed or from a change in an actuarial assumption that has not been recognized in net periodic benefit cost pursuant to FAS 87 and 106, after tax.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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l1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6truefalsefalse638000638falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsetruefalse8truefalsefalse638000638falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe adjustment out of other comprehensive income for prior service costs recognized as a component of net period benefit cost during the period, after tax.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
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etotallabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5truefalsefalse-269837000-269837falsefalsefalsetruefalse6truefalsefalse3762200037622falsefalsefals
etruefalse7truefalsefalse1140200011402falsefalsefalsetruefalse8truefalsefalse-220813000-220813falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources which are attributable to the economic entity, including both controlling (parent) and noncontrolling interests. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, including any and all transactions which are directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Research Bulletin (ARB)
-Number 51
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Reference 2: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Research Bulletin (ARB)
-Number 51
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sefalsefalse00falsefalsefalsetruefalse8truefalsefalse1600500016005falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAccretion of discount on preferred stock issued to the U.S. Treasury.No authoritative reference available.falsefalse43false0us-gaap_DividendsPreferredStockCashus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5truefalsefalse-59543000-59543falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsetruefalse8truefalsefalse-59543000-59543<
CurrencySymbol />falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryPreferred stock cash dividend declared by an entity during the period. This element includes paid and unpaid dividends declared during the period.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Article 3
Reference 2: http://www.xbrl.org/2003/role/presentationRef
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-Number 01-6
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falsefalsefalse00falsefalsefalsetruefalse8falsefalsefalse00falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryValue of stock issued to shareholders as a dividend during the period.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Article 3
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-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 29, 30, 31
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sefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsetruefalse8falsefalsefalse00falsefalsefalsefalsefalseSharesxbrli:sharesItemTypesharesNumber of shares issued during the period as a stock dividend.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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efalse00falsefalsefalsetruefalse8truefalsefalse-392000-392falsefalsefalsefalsefalseMonetary
xbrli:monetaryItemTypemonetaryThis element represents the value of stock that has been repurchased during the period and has not been retired and is not held in treasury. Some state laws may mandate the circumstances under which an entity may acquire its own stock and prescribe the accounting treatment therefore. This element is used when state law does not recognize treasury stock.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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i:sharesItemTypesharesNumber of shares that have been repurchased during the period and have not been retired and are not held in treasury. Some state laws may govern the circumstances under which an entity may acquire its own stock and prescribe the accounting treatment therefore. This element is used when state law does not recognize treasury stock.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
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-Paragraph 29, 30
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ingItemTypestringNo definition available.falsefalse49false0us-gaap_StockIssuedDuringPeriodValueShareBasedCompensationus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse750000750falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3truefalsefalse-249000-249falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalse<
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-Name Regulation S-X (SX)
-Number 210
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sefalsefalse00falsefalsefalsetruefalse8falsefalsefalse00falsefalsefalsefalsefalseSharesxbrli:sharesItemTypesharesNumber of shares issued during the period as a result of any share-based compensation plan other than an employee stock ownership plan (ESOP).Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
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falsefalse51false0us-gaap_AdjustmentsToAdditionalPaidInCapitalTaxEffectFromShareBasedCompensationus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3truefalsefalse-5701000-5701falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsetruefalse8truefalsefalse-5701000-5701falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTax benefit associated with any share-based compensation plan other than an employee stock ownership plan (ESOP). The tax benefit results from the deduction by the entity on its tax return for an award of stock that exceeds the cumulative compensation cost for common stock or preferred stock recognized for financial reporting. Includes any resulting tax benefit that exceeds the previously recognized deferred tax asset (excess tax benefits).Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Number 123R
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falsefalse52false0us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValueus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3truefalsefalse89690008969falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsetruefalse8truefalsefalse89690008969falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThis element represents the amount of recognized share-based compensation during the period, that is, the amount recognized as expense in the income statement (or as asset if compensation is capitalized).Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 123R
-Paragraph 39
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-Number 123R
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-Number 123R
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falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7true<
/IsNumeric>falsefalse-11402000-11402falsefalsefalsetruefalse8truefalsefalse-11402000-11402falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryDecrease in noncontrolling interest balance from payment of dividends or other distributions to noncontrolling interest holders.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 38
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falsefalse54false0us-gaap_StockholdersEquityOtherus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3fal
sefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5truefalsefalse212000212falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsetruefalse8truefalsefalse212000212falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThis element represents movements included in the statement of changes in stockholders' equity which are not separately disclosed or provided for elsewhere in the taxonomy.No authoritative reference available.truefalse55false0us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestus-gaaptruecreditinstantNo definition available.falsefalsefalsetrue
falsefalsefalsefalsetruefalseperiodendlabelinstant2009-12-31T00:00:000001-01-01T00:00:001truefalsefalse138738000138738falsefalsefalsetruefalse2truefalsefalse798685000798685falsefalsefalsetruefalse3truefalsefalse12086490001208649falsefalsefalsetruefalse<
/hasScenarios>4truefalsefalse8386000083860falsefalsefalsetruefalse5truefalsefalse891580000891580falsefalsefalsetruefalse6truefalsefalse-114209000-114209falsefalsefalsetruefalse7truefalsefalse295165000295165falsefalsefalsetrue
false8truefalsefalse33024680003302468falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTotal of Stockholders' Equity (deficit) items, net of receivables from officers, directors owners, and affiliates of the entity including portions attributable to both the parent and noncontrolling interests (previously referred to as minority interest), if any. The
entity including portions attributable to the parent and noncontrolling interests is sometimes referred to as the economic entity. This excludes temporary equity and is sometimes called permanent equity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Number 51
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-Number 51
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-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph A3
-Appendix A
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1-01T00:00:001truefalsefalse221980000221980falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetrue<
/hasSegments>false7falsefalsefalse00falsefalsefalsetruefalse8falsefalsefalse00falsefalsefalsefalsefalseSharesxbrli:sharesItemTypesharesNumber of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.No authoritative reference available.falsefalse57false0fhn_BeginingBalanceAsAdjustedfhnfalsecreditinstantBegining balance as adjustedfalsefalsefalsetruefalsefalsefalsetruefalsefalseperiodstartlabelinstant2010-01-01T00:00:000001-01-01T00:00:001truefalsefalse138738000138738falsefalsefalsetrue
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falsefalsefalsetruefalse7truefalsefalse1140200011402falsefalsefalsetruefalse8truefalsefalse6160300061603falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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falsefalsefalse00falsefalsefalsetruefalse8falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringOther comprehensive income unrealized fair value adjustments, net of tax.falsefalse61false0us-gaap_OtherComprehensiveIncomeAvailableForSaleSecuritiesAdjustmentNetOfTaxPeriodIncreaseDecreaseus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00<
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-Name Statement of Financial Accounting Standard (FAS)
-Number 130
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-Number 51
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-Number 51
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sefalsefalse00falsefalsefalsetruefalse8falsefalsefalse00falsefalsefalsefalsefalseSharesxbrli:sharesItemTypesharesNumber of shares issued during the period as a result of any share-based compensation plan other than an employee stock ownership plan (ESOP).Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Number 123R
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falsefalse79false0us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValueus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3truefalsefalse1198700011987falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsetruefalse8truefalsefalse1198700011987falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThis element represents the amount of recognized share-based compensation during the period, that is, the amount recognized as expense in the income statement (or as asset if compensation is capitalized).Reference 1: http://www.xbrl.org/2003/role/presentationRef
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/IsNumeric>falsefalse-11402000-11402falsefalsefalsetruefalse8truefalsefalse-11402000-11402falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryDecrease in noncontrolling interest balance from payment of dividends or other distributions to noncontrolling interest holders.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Number 51
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IsNumeric>falsefalse00falsefalsefalsetruefalse8truefalsefalse-4793000-4793falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThis element represents movements included in the statement of changes in stockholders' equity which are not separately disclosed or provided for elsewhere in the taxonomy.No authoritative reference available.truefalse82false0us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestus-gaaptruecreditinstantNo definition available.falsefalsefalsetruefalsefalsefalsefalsetruefalseperiodendlabelinstant2010-12-31T00:00:000001-01-01T00:00:001truefalsefalse164604000164604falsetruefalsetruefalse2truefalsefalse00falsetruefalsetruefalse3truefalsefalse16302100001630210falsetruefalsetruefalse4truefalsefalse8386000083860falsetruefalsetruefalse5truefalsefalse631712000631712falsetruefalsetruef
alse6truefalsefalse-127546000-127546falsetruefalsetruefalse7truefalsefalse295165000295165falsetruefalsetruefalse8truefalsefalse26780050002678005falsetruefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTotal of Stockholders' Equity (deficit) items, net of receivables from officers, directors owners, and affiliates of the entity including portions attributable to both the parent and noncontrolling interests (previously referred to as minority interest), if any. The entity inclu
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-Name Accounting Research Bulletin (ARB)
-Number 51
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R23.xml
IDEA: Income Taxes
2.2.0.25falsefalse0216 - Disclosure - Income Taxestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
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<!-- Begin Block Tagged Note 16 - us-gaap:IncomeTaxDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 16 — Income Taxes</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The components of income tax expense/(benefit) are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Federal
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(218,898</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(7,593</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">240,273</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">State
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(33,698</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">6,548</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,752</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Federal
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>206,962</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(153,902</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(373,335</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">State
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>26,551</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,998</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(38,095</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(19,083</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(174,945</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(154,405</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The effective tax rates for 2010, 2009, and 2008 were 38.63 percent, 41.60 percent, and 46.95
percent, respectively. Income tax expense differed from the amounts computed by applying the
statutory federal income tax rate to income/(loss) before income taxes because of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal income tax rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">35</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">35</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">35</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax computed at statutory rate
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>17,289</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(147,187</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(115,095</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Increase/(decrease) resulting from:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">State income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(5,585</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,743</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(13,864</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">BOLI — cash surrender value
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(9,671</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,533</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(5,381</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Tax credits
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(23,788</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(22,312</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,064</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Goodwill
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,205</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,672</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,625</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,001</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(19,083</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(174,945</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(154,405</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">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. In order to
support the recognition of the DTA, FHN’s management must believe that the realization of the DTA
is more likely than not.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN evaluates the likelihood of realization of the $200.6 million net DTA based on both positive
and negative evidence available at the time. FHN’s three-year cumulative loss position at December
31, 2010, is significant negative evidence in determining whether the realizability of the DTA is
more likely than not. However, FHN believes that the negative evidence of the three-year cumulative
loss is overcome by sufficient positive evidence that the DTA will ultimately be realized. The
positive evidence includes several different factors. A significant amount of the cumulative
losses occurred in businesses that FHN has exited or is in the process of exiting. FHN has
sufficient carryback position, reversing DTL and potential tax planning strategies to fully
recognize the DTA. In addition, FHN forecasts substantially more taxable income in the
carryforward period, exclusive of tax planning strategies. Additionally, FHN believes that it will
realize the net DTA within a significantly shorter period of time than the twenty year carryforward
period allowed under the tax rules. Based on current analysis, FHN believes that its ability to
realize the recognized $200.6 million net DTA is more likely than not.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Temporary differences which gave rise to deferred tax assets and deferred tax liabilities on
December 31, 2010 and 2009, were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Deferred tax assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss reserves
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>163,746</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">410,972</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Employee benefits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>91,864</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">95,061</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Investment in partnerships
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>28,317</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,149</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued expenses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,107</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,060</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>38,769</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,784</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gross deferred tax assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>333,803</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">582,026</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Valuation allowance
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred tax assets after valuation allowances
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>333,803</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">582,026</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Deferred tax liabilities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Capitalized mortgage servicing rights
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>39,312</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">58,597</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>17,511</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,892</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal Home Loan Bank stock
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>17,285</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,094</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Investment in debt securities (ASC 320)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>28,882</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">41,335</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other intangible assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>18,585</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,671</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,616</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,515</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Gross deferred tax liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>133,191</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">168,104</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net deferred tax asset
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>200,612</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">413,922</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The total balance of unrecognized tax benefits at December 31, 2010, was $38.4 million. The
rollforward of unrecognized tax benefits follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2008
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">31,108</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Increases related to prior year tax positions
</div></td>
<td> </td>
<td> </td>
<td align="right">2,086</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Increases related to current year tax positions
</div></td>
<td> </td>
<td> </td>
<td align="right">500</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Lapse of statute
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,690</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">30,004</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Increases related to prior year tax positions</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>13,725</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Settlements</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(291</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Lapse of statute</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(5,040</b></td>
<td nowrap="nowrap"><b>)</b></td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance at December 31, 2010</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>38,398</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDescription containing the entire income tax disclosure. Examples include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. This element may be used as a single blo
ck of text to encapsulate the entire disclosure including data and tables.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 136, 172
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 43, 44, 45, 46, 47, 48, 49
falsefalse12Income TaxesUnKnownUnKnownUnKnownUnKnownfalsetrueXML
51
defnref.xml
IDEA: XBRL DOCUMENT
No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Cumulative Effect Of Initial Adoption Of New Accounting Principle For Asc 810No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Begining balance as adjustedNo authoritative reference available.The aggregate amount of loans receivable that will be sold to other entities. Includes mortgage and all other loans not classified as held for investment. A substantial portion of mortgage loans held for sale are reflected at elected fair value with the remainder stated at lower of cost or market.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Costs incurred related to payments for services rendered by non-employee temporary staff.No authoritative reference available.The net change during the reporting period in payables that result from buying and selling securities for the firm's own account or from acting as an agent or intermediary in the sale of securities.No authoritative reference available.Payment for Repurchase of preferred stock of subsidiary.No authoritative reference available.No authoritative reference available.No authoritative reference available.The charge taken to recognize estimated inherent losses to repurchase loans previously sold or securitized. For loans sold without recourse, reflects obligations to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations or warranties made at the time of sale. For loans sold with recourse, reflects indemnity and repurchase exposure if the loans default.No authoritative reference available.Other liabilities of consolidated variable interest entities related to the VIEs creditors which do not have recourse to assets of FHN other than to those assets specifically identified as restricted.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.The major component of revenue in this line item is generated from the purchase and sale of securities as both principal and agent, and from other fee sources including loan sales, portfolio advisory, and derivative sales.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.The noninterest income derived from mortgage banking activities including fees earned from servicing third party assets, changes in the fair value of servicing assets (net of hedging results), and origination income.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Preferred Stock And Other capital.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.The change in the estimated fair value of foreclosed real estate. Real estate acquired by foreclosure is carried at the lower of the outstanding loan amount or estimated fair value less estimated costs to sell the real estate. Estimated fair value is determined using appraised values with subsequent adjustments for deterioration in values that are not reflected in the most recent appraisal.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Total liabilities of consolidated variable interest entities related to the VIEs creditors which do not have recourse to assets of FHN other than to those assets specifically identified as restricted.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.The net change during the reporting period in receivables that result from buying and selling securities for the firm's own account or from acting as an agent or intermediary in the sale of securities.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Total assets of consolidated variable interest entities that can only be used to settle the liabilities of those VIEs.No authoritative reference available.Begining balance as adjusted shares.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Acting as an agent, a broker-dealer may buy and sell securities on behalf of its customers. In return for such services, the broker-dealer charges a commission. Each time a customer enters into a buy or sell transaction, a commission is earned by the broker-dealer for its selling and administrative efforts. For securities purchased, the commission is recorded as a receivable from customers; for securities sold, it is recorded as reductions in the payable to customers. Commissions earned are usually related to the broker-dealer's customers' trading volume and the dollar amounts of the trades. In general, commissions are for smaller trades of exchange-listed stocks and bonds made by retail customers. Revenue recognized in the period for (1) performance (incentive) fees based on the investment results achieved for management of certain institutional accounts and hedge funds, (2) schedule-based fees earned for management of mutual funds and closed-end funds, based either on average daily net asse
ts or on a combination of the average daily net assets and gross income, and (3) other investment management and advisory fees.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Includes amounts charged depositors for: (1) maintenance of their accounts (maintenance charges); (2) failure to maintain specified minimum balances on account; (3) exceeding the number of checks or transactions allowed to be processed in a given period; (4) checks drawn on no minimum balance deposit accounts; (5) withdrawals from nontransaction deposit accounts; (6) closing savings accounts before a specified minimum period of time has elapsed; (7) accounts which have remained inactive for extended periods of time or which have become dormant; (8) use of automated teller machines or remote service units; (9) checks drawn against insufficient funds that the bank assesses regardless of whether it decides to pay, return or hold the check; (10) issuing stop payment orders; (11) certifying checks; and (12) accumulating or disbursing funds deposited in IRAs or Keogh Plan accounts when not handled by the bank's trust department. This item does not include penalties assessed on the early withdrawal
of time deposits. Also includes fees received from cash and treasury management products for business and corporate customers. Also includes service revenue earned by a depository institution that holds the account balances of other financial institutions and provides services thereto. Such services include check collection and item processing.No authoritative reference available.No authoritative reference available.No authoritative reference available.Disclosure items related to Mortgage Servicing Rights (MSR) retained from prior loan sales or securitizations.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Increase Decrease In Mortgage Service Right Due To Sale.No authoritative reference available.No authoritative reference available.No authoritative reference available.Proceeds from Issuance of preferred equity and common stock warrant.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Cash flows related to retained interests from securitizations that are classified as trading securities on the balance sheet.No authoritative reference available.No authoritative reference available.No authoritative reference available.Common stock, offering costs per share.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Restricted cash and due from banks.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Restricted net loans.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Costs incurred to purchase computer software, including maintenance contracts associated with the purchased software and also amortization expense associated with internally developed software.No authoritative reference available.Long-term debt of consolidated variable interest entities related to the VIEs creditors which do not have recourse to assets of FHN other than to those assets specifically identified as restricted.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Cumulative Effect Of Initial Adoption Of New Accounting Principle For Asc 715No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Acquisitions Divestitures.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Miscellaneous costs related to loans such as appraisals, inspections and other expenses that are not classified as closing costs.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Loans of consolidated variable interest entities that can only be used to settle the liabilities of those VIEs.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Disclosure includes a description and timeline of activities implemented by management and net charges incurred to reposition and right-size the organization. Also includes information related to restructuring activities as defined by GAAP including exit and disposal activities, which should include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.No authoritative reference available.Total deposits of consolidated variable interest entities related to the VIEs creditors which do not have recourse to assets of FHN other than to those assets specifically identified as restricted.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Accretion of discount on preferred stock issued to the U.S. Treasury.No authoritative reference available.No authoritative reference available.No authoritative reference available.All other interest-bearing deposit liabilities excluding savings and time deposits.No authoritative reference available.No authoritative reference available.No authoritative reference available.Other assets of consolidated variable interest entities that can only be used to settle the liabilities of those VIEs.No authoritative reference available.No authoritative reference available.No authoritative reference available.Cumulative Effect Of Intial Adoption Of New Accounting Principle For Asc 820No authoritative reference available.No authoritative reference available.No authoritative reference available.Deposits of consolidated variable interest entities related to the VIEs creditors which do not have recourse to assets of FHN other than to those assets specifically identified as restricted.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.The difference between the carrying value and the sale price of equity securities. This element includes investments in which the entity holds a small ownership stake (generally, less than 20% of the shares outstanding) and cannot exert significant influence. May also include other-than-temporary impairments of cost method investments or changes in the fair value of venture capital investments.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Cash paid for early repurchase of bank debt.No authoritative reference available.Prior to the adoption of amendments to ASC 810, other collateralized borrowings include long term debt secured by loans. A majority of these borrowings are secured by residential real estate loans. Subsequent to the adoption of amendments to ASC 810 on January 1, 2010, these balances are now reflected parenthetically as "restricted".No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Allowance for losses related to loans of consolidated variable interest entities that can only be used to settle the liabilities of those VIEs.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Transfer from loans to other real estate owned.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Guaranteed Preferred Beneficial Interests in First Horizon's Junior Subordinated Debentures.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.No authoritative reference available.Goodwill impairment loss including amount attributable to discontinued oerations.No authoritative reference available.Gain loss on Debt securities net.No authoritative reference available.No authoritative reference available.No authoritative reference available.XML
52
R21.xml
IDEA: Other Income and Other Expense
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label1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 14 - us-gaap:OtherIncomeAndOtherExpenseDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 14 — Other Income and Other Expense</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Following
is detail of “All other income and commissions” and
“All other expense” as presented in
the Consolidated Statements of Income:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>All other income and commissions:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank-owned life insurance
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>25,898</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19,744</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25,143</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Bankcard income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>19,761</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,161</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,081</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gains on repurchases of debt
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>17,060</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,412</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,845</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">ATM interchange fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>14,169</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,335</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,224</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other service charges
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>10,442</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,647</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,631</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Electronic banking fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,111</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,020</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,217</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Letter of credit fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>6,493</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,989</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,657</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred compensation <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,673</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,686</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(22,901</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gains/(losses) from loan sales and securitizations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,883</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,545</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,625</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reinsurance fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,310</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,130</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,919</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Remittance processing
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,008</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,765</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,953</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal flood certifications
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,869</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>24,595</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,802</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,533</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>136,403</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">152,236</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">145,546</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>All other expense:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Advertising and public relations
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>23,248</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">22,074</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">32,738</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Low income housing expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>22,229</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,734</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other insurance and taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,817</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,388</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,705</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Travel and entertainment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>10,224</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,547</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,137</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer relations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,079</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,819</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,872</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Employee training and dues
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,821</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,327</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,198</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Supplies
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,656</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,661</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,586</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank examinations costs
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,578</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,884</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,144</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fed service fees
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,610</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,078</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,053</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Complimentary check expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,405</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,529</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,776</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loan insurance expense <sup style="font-size: 85%; vertical-align: text-top">(b)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(686</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">7,811</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,270</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other <sup style="font-size: 85%; vertical-align: text-top">(c)(d)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>23,178</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">79,171</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">51,923</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>116,159</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">184,289</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">174,136</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Certain previously reported amounts have been reclassified to agree with current presentation.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr style="font-size: 10pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(a)</td>
<td width="1%"> </td>
<td>Deferred compensation market value adjustments are mirrored by adjustments to employee compensation, incentives, and benefits expense.
</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(b)</td>
<td width="1%"> </td>
<td>2010 includes cancellation of an HLTV insurance contract and return of $3.8 million of premiums.
</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(c)</td>
<td width="1%"> </td>
<td>Includes a portion of net charges for restructuring, repositioning, and efficiency initiatives (Note 26).
</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="bottom">
<td width="3%" valign="top">(d)</td>
<td width="1%"> </td>
<td>Includes net expense reversals related to Visa litigation matters of $13.0 million, $7.0 million, and $30.0 million in 2010, 2009, and 2008, respectively.
</td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDiscloses other income or other expense items (both operating and nonoperating). Sources of nonoperating income or nonoperating expense that should be disclosed in this note, or in the income statement, include amounts earned from dividends, interest on securities, profits (losses) on securities, net and miscellaneous other income or income deductions.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 3, 6, 7, 9
-Article 5
falsefalse12Other Income and Other ExpenseUnKnownUnKnownUnKnownUnKnownfalsetrueXML
53
R13.xml
IDEA: Mortgage Servicing Rights
2.2.0.25falsefalse0206 - Disclosure - Mortgage Servicing Rightstruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
USD ($)
USD ($) / shares
$Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000036966duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0fhn_MortgageServicingRightsAbstractfhnfalsenadurationMortgage Servicing Rights.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringMortgage Servicing Rights.falsefalse3false0fhn_MortgageServicingRightsTextBlockfhnfalsenadurationDisclosure items related to Mortgage Servicing Rights (MSR) retained from prior loan sales or securitizations.falsefalsefalsefalsefalsefalsefalsefalsefalse
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<!-- Begin Block Tagged Note 6 - fhn:MortgageServicingRightsTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 6 — Mortgage Servicing Rights</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN recognizes all classes of mortgage servicing rights at fair value. Classes of MSR are
established based on market inputs used to determine the fair value of the servicing asset and
FHN’s risk management practices. See Note 22 — Fair Value, the “Determination of Fair Value”
section for a discussion of FHN’s MSR valuation methodology and Note 25 — Derivatives and
Off-Balance Sheet Arrangements for a discussion of how FHN hedges the fair value of MSR. The
balance of MSR included on the Consolidated Statements of Condition represents the rights to
service approximately $28.8 billion and $42.2 billion of mortgage loans on December 31, 2010, and
2009, respectively, for which a servicing right has been capitalized.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In first quarter 2010, FHN adopted the amendments to ASC 810 which resulted in the consolidation of
loans FHN previously sold through proprietary securitizations but retained MSR and significant
subordinated interests subsequent to the transfer. In conjunction with the consolidation of these
loans, FHN derecognized the associated servicing assets which are reflected in the rollfoward
below.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In third quarter 2009, FHN reviewed the allocation of fair value between MSR and excess interest
from prior first lien loan sales and securitizations and as a result, there was a net $11.1 million
reclassification from trading securities to MSR. The reclassification had no effect on FHN’s
Consolidated Statements of Income as excess interest and MSR are highly correlated in valuation and
both are recognized at fair value with changes in fair value being included within mortgage banking
income. Following is a summary of changes in capitalized MSR as of December 31, 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">First</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Second</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Liens</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">HELOC</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value on January 1, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">354,394</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">13,558</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">8,892</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">376,844</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Addition of mortgage servicing rights
</div></td>
<td> </td>
<td> </td>
<td align="right">189</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">200</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to loan payments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(58,455</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4,777</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,818</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(66,050</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(77,591</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,134</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,548</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(87,273</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reclassification from trading securities
</div></td>
<td> </td>
<td> </td>
<td align="right">11,077</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,077</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Changes in fair value due to:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Changes in valuation model inputs or assumptions
</div></td>
<td> </td>
<td> </td>
<td align="right">67,940</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">67,985</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other changes in fair value
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,439</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">482</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">785</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(172</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Fair value on December 31, 2009</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>296,115</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,174</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>5,322</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>302,611</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustment due to adoption of amendments to ASC 810
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(197</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(928</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,168</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,293</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to loan payments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(34,943</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(41</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,201</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(36,185</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(24,558</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(24,558</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to exercise of cleanup calls
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,110</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,110</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Changes in fair value due to:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Changes in valuation model inputs or assumptions
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(31,296</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(31,296</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other changes in fair value
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(199</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">57</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">292</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">150</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Fair value on December 31, 2010</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>203,812</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>262</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,245</b></td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>207,319</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Servicing, late, and other ancillary fees recognized within mortgage banking income were $92.1
million, $120.4 million, and $232.6 million for the years ended December 31, 2010, 2009, and 2008,
respectively. Servicing, late, and other ancillary fees recognized within all other income and
commissions were $3.8 million, $12.4 million, and $16.8 million for the years ended December 31,
2010, 2009, and 2008, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The total value of MSR declined $95.3 million during 2010. In 2010, FHN sold the rights to
service $5.4 billion of loans, which resulted in a $24.6 million reduction in MSR attributable to
loan sales. The balance decreased an additional $36.2 million due to loan payments. A decrease
in mortgage rates during the year led to higher assumed prepayment speeds and resulted in a
decrease in value of $31.1 million. In the fourth quarter of 2010, FHN exercised cleanup calls
from proprietary securitization trusts that had previously been securitized with servicing
retained. As these loans are now included on the Consolidated Statements of Condition, FHN
derecognized $1.1 million of associated servicing assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN sold the rights to service $14.2 billion of loans, which resulted in an $87.3 million
reduction in MSR attributable to loan sales. The balance decreased an additional $66.1 million
due to loan payments. An increase in mortgage rates during the year led to a decline in assumed
prepayment speeds and resulted in an increase in value of $67.8 million.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN services a portfolio of mortgage loans related to transfers performed by other parties
utilizing securitization trusts. The servicing assets represent FHN’s sole interest in these
transactions. The total MSR recognized by FHN related to these transactions was $4.2 million and
$7.0 million at December 31, 2010 and 2009, respectively. The aggregate principal balance serviced
by FHN for these transactions was $<b>.</b>7 billion and $.9 billion at December 31, 2010 and 2009,
respectively. FHN has no obligation to provide financial support and has not provided any form of
support to the related trusts. The MSR recognized by FHN has been included in the first lien
mortgage loans column within the rollforward of MSR.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In prior periods FHN transferred MSR to third parties in transactions that did not qualify for
sales treatment due to certain recourse provisions that were included within the sale agreements.
FHN had $27.3 million and $39.7 million of MSR related to these transactions, respectively for the
years ended December 31, 2010 and 2009, respectively. These MSR are included within the first liens mortgage
loans column within the rollforward of MSR. The proceeds from these transfers have been recognized
within other short term borrowings and commercial paper in the Consolidated Statements of Condition
as of December 31, 2010 and 2009.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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IDEA: Parent Company Financial Information
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<!-- Begin Block Tagged Note 27 - us-gaap:CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 27 — Parent Company Financial Information</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Following are condensed statements of the parent company:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Statements of Condition</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Year Ended December 31</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>219,287</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities purchased from subsidiary bank under agreements to resell
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,827</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total cash and cash equivalents
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>219,287</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,827</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest-bearing cash
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>112,896</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">160,999</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities available for sale
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>6,901</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,160</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Notes receivable
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,700</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,700</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance for loan losses
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(823</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(823</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Investments in subsidiaries:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Bank
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,203,991</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,455,474</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-bank
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>20,042</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,631</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>187,247</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">208,181</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total assets</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,753,241</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,873,149</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities and equity:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other short-term borrowings and commercial paper
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>4,800</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,800</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued employee benefits and other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>141,605</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">130,507</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term
borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>928,831</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">436,374</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,075,236</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">570,681</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total equity
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,678,005</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,302,468</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total liabilities and equity</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>3,753,241</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,873,149</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Statements of Income</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Year Ended December 31</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Dividend income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Bank
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>300,000</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-bank
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,531</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,261</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,852</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total dividend income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>301,531</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,261</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,852</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>340</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">570</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,035</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,761</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,494</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,724</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>303,632</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,325</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,163</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for loan losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">823</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest expense:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Short-term debt
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>290</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">298</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">285</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Term
borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>11,713</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,166</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,940</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total interest expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>12,003</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,464</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,225</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Compensation, employee benefits and other expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>33,476</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,398</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">49,290</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>45,479</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">46,685</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">68,515</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>258,153</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(43,360</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(62,352</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income tax benefit
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(13,078</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(20,514</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(20,884</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before equity in undistributed net income of subsidiaries
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>271,231</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(22,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(41,468</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity in undistributed net income/(loss) of subsidiaries:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Bank
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(220,800</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(247,205</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(148,315</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-bank
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(230</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">214</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,204</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net
income/(loss) attributable to the controlling interest</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50,201</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(269,837</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(191,987</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Statements of Cash Flows</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000"><b>Year Ended December 31</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Operating activities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income/(loss)
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>50,201</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(269,837</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(191,987</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less undistributed net loss of subsidiaries
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(221,030</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(246,991</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(150,519</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income/(loss) before undistributed net income of subsidiaries
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>271,231</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(22,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(41,468</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustments to reconcile income to net cash provided by operating activities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred income tax provision/(benefit)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">764</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,160</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Depreciation,
amortization, and other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,201</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,131</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,060</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Stock-based compensation expense
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>6,797</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,821</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,930</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net (increase)/decrease in interest receivable and other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>26,439</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,962</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">94,931</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net decrease in interest payable and other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>155</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(507</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(110,378</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total adjustments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>37,592</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,247</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10,617</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net cash provided/(used) by operating activities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>308,823</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(14,599</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(52,085</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Investing activities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Sales and prepayments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>20</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,714</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Purchases
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(410</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,528</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Decrease/(increase) in interest-bearing cash
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>48,103</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">79,963</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(34,909</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Return on investment in subsidiary
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>49</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">700</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,918</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash investments in subsidiaries
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,346,169</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net cash provided/(used) by investing activities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>47,762</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">77,663</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,376,974</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Financing activities:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred stock:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Proceeds from issuance of preferred stock and common stock warrant — CPP
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">866,540</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Repayment of preferred equity — CPP
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(866,540</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cash dividends
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(47,780</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(43,447</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Common stock:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercise of stock options
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>93</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">511</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Proceeds from issuance of common stock
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>263,103</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">659,656</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cash dividends
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(120,575</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Repurchase of shares
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,345</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(392</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(303</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term
borrowings
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Proceeds
from issuance of term borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>496,345</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">(Decrease)/increase in short-term borrowings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,000</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(13,030</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">14,754</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>(1</b></td>
<td><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">80</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net cash (used)/provided by financing activities
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(155,125</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(56,786</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,420,583</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net increase/(decrease) in cash and cash equivalents
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>201,460</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,278</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,476</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of year
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>17,827</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,549</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,025</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>219,287</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">17,827</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">11,549</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total interest paid
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>10,966</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12,246</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">19,014</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total income taxes paid
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,713</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">99,090</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">332,600</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph c
-Article 5
Reference 2: http://www.xbrl.org/2003/role/presentationRef
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-Name Regulation S-X (SX)
-Number 210
-Section 05
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
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-Article 12
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55
R26.xml
IDEA: Pension, Savings, and Other Employee Benefits
2.2.0.25falsefalse0219 - Disclosure - Pension, Savings, and Other Employee Benefitstruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 19 — Pension, Savings, and Other Employee Benefits</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Pension plan. </i></b>FHN sponsors a noncontributory, qualified defined benefit pension plan to
employees hired or re-hired on or before September 1, 2007, excluding certain employees of FHN’s
insurance subsidiaries. Pension benefits are based on years of service, average compensation near
retirement, and estimated social security benefits at age 65. The contributions are based upon
actuarially determined amounts necessary to fund the total benefit obligation. FHN did not make
any contributions to the qualified pension plan in 2010. Future decisions will be based upon
pension funding requirements under the Pension Protection Act, the maximum deductible under the
Internal Revenue Code, and the actual performance of plan assets. At this time, FHN
does not expect to make a contribution to the qualified pension plan in 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN also maintains non-qualified plans including a supplemental retirement plan that covers certain
employees whose benefits under the pension plan have been limited. These other non-qualified
pension plans are unfunded, and contributions to these plans cover all benefits paid under the
non-qualified plans. Contributions to non-qualified plans were $4.5 million for 2010 and $6.7
million for 2009. FHN anticipates making a $5.1 million contribution in 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN’s Board of Directors determined that the accrual of benefits under the qualified
pension plan and the supplemental retirement plan would cease as of December 31, 2012. After that
date, employees currently in the pension plan, and those currently in the Employee Non-voluntary
Elective Contribution (“ENEC”) program, will be able to participate in the FHN savings plan with a
profit sharing feature and an increased company match rate. After that time, pension status will
not affect a person’s ability to participate in any savings plan feature.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Savings plan. </i></b>FHN has a qualified defined contribution plan that covers substantially all
employees. Under this plan, employees can invest their money in any of the available investment
funds and receive a company match of $.50 for each $1.00 invested up to 6 percent of pre-tax
contributions made by the employee, subject to Code limitations. The company match contribution
initially is invested in company stock. The savings plan also allows employees to invest in a
non-leveraged employee stock ownership plan (“ESOP”). Cash dividends on shares held by the ESOP
are charged to retained earnings and the shares are considered outstanding in computing earnings
per share. The number of allocated shares held by the ESOP totaled 11,538,466 on December 31,
2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN also provides “flexible dollars” to assist employees with the cost of annual benefits and/or
allows the employee to contribute to his or her qualified savings plan. These “flexible dollars”
are pre-tax contributions and are based upon the employees’ years of service and qualified
compensation. Contributions made by FHN through the flexible benefits plan and the company matches
were $18.3 million for 2010, $18.3 million for 2009, and $27.2 million for 2008.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2008, the ENEC program was added under the FHN savings plan and is provided
only to employees who are not eligible for the pension plan. With the ENEC program, FHN will
generally make contributions to eligible employees’ savings plan accounts based upon company
performance. Contribution amounts will be a percentage of each employee’s base salary (as defined
in the savings plan) earned the prior year. FHN contributed $1.2 million for the plan in 2010
related to the 2009 plan year, and FHN expects to contribute $1.3 million for the plan in 2011
related to the 2010 plan year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Other employee benefits. </i></b>FHN provides postretirement life insurance benefits to certain employees
and also provides postretirement medical insurance to retirement-eligible employees. The
postretirement medical plan is contributory with retiree contributions adjusted annually and is
based on criteria that are a combination of the employee’s age and years of service. For any
employee retiring on or after January 1, 1995, FHN contributes a fixed amount based on years of
service and age at the time of retirement. FHN’s postretirement benefits include prescription drug
benefits. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“the Act”)
introduced a prescription drug benefit under Medicare Part D as well as a federal subsidy to
sponsors of retiree health care that provide a benefit that is actuarially equivalent to Medicare
Part D. FHN currently anticipates receiving a prescription drug subsidy under the Act through
2015.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Actuarial assumptions. </i></b>FHN’s process for developing the long-term expected rate of return of
pension plan assets is based on two primary sources of investment portfolio returns: capital
market exposure and active management benefit. Capital market exposure refers to the Plan’s broad
allocation of its assets to asset classes, such as Large Cap Equity and Fixed Income. Active
management refers to hiring investment managers to select individual securities that are expected
to outperform the market. Active management provides only a small measure of the plan’s overall
return. FHN also considers expectations for inflation, real interest rates, and various risk
premiums based primarily on the historical risk premium for each asset class. The expected return
is based upon a twenty year time horizon. Consequently, FHN selected an 8.00 percent assumption for 2011 for the defined benefit pension
plan and 5.20 percent assumption for postretirement medical plan assets dedicated to employees who
retired prior to January 1, 1993. Given the long term nature of these investments, current market
conditions do not significantly affect the expected return.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The discount rates for the three years ended 2010 for pension and other benefits were determined by
using a hypothetical AA yield curve represented by a series of annualized individual discount rates
from one-half to thirty years. The discount rates are selected based upon data specific to FHN’s
plan and employee population. The bonds used to create the hypothetical yield curve were subjected
to several requirements to ensure that the resulting rates were representative of the bonds that
would be selected by management to fulfill the company’s funding obligations. In addition to the
AA rating, only non-callable bonds were included. Each bond issue was required to have at least
$150 million par outstanding so that each issue was sufficiently marketable. Finally, bonds more
than two standard deviations from the average yield were removed. When selecting the discount
rate, FHN matches the duration of high quality bonds with the duration of the obligations of the
plan as of the measurement date. High quality corporate bonds experienced declining yields in 2010
resulting in a discount rate lower than 2009 and therefore, higher pension plan liabilities. For
all years presented, the measurement date of the benefit obligations and net periodic benefit costs
was December 31.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The actuarial assumptions used in the defined benefit pension plan and the other employee benefit
plans were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Benefit Obligations</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Net Periodic Benefit Cost</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Discount rate</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Qualified pension
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.70</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.05</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.85</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>6.05</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.85</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.00</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Nonqualified pension
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.10</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.55</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.90</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.55</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.90</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.70</td>
<td nowrap="nowrap"></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other nonqualified pension
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>4.75</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.35</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.95</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.35</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.95</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.83</td>
<td nowrap="nowrap"></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Postretirement benefit
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.25</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.65</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.90</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.65</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.90</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">6.60</td>
<td nowrap="nowrap"></td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Expected long-term rate of return</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Qualified
pension/postretirement
benefits
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>8.00</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.05</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.42</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>8.05</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.42</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">8.87</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Postretirement benefit
(retirees prior to
January 1, 1993)
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.20</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.23</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.47</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>5.23</b></td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.47</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">5.77</td>
<td nowrap="nowrap"></td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Rate of compensation increase</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>4.10</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.10</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.10</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>4.10</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.10</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">4.10</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The assumed health care cost trend rates used in the other employee benefit plan was as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>Assumed health care cost trend rates</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Participants</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Participants 65</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Participants</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Participants 65</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><b>on December 31</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>under age 65</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>years and older</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">under age 65</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">years and older</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="15" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Health care cost trend rate assumed for next year
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>8.50</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>8.50</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">7.00</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">9.00</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Rate to which the cost trend rate is assumed to decline
(the ultimate trend rate)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5.00</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>5.00</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.00</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.00</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Year that the rate reaches the ultimate trend rate
</div></td>
<td> </td>
<td> </td>
<td align="right">2017</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2017</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2014</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2018</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The health care cost trend rate assumption has a significant effect on the amounts reported.
A one-percentage-point change in assumed health care cost trend rates would have the following
effects:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1% Increase</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">1% Decrease</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjusted total service and interest cost components
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,160</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,096</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjusted postretirement benefit obligation at end of plan year
</div></td>
<td> </td>
<td> </td>
<td align="right">15,721</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,612</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The components of net periodic benefit cost for the plan years 2010, 2009, and 2008 are as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Components of net periodic benefit cost</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Service cost
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>15,225</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,167</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,809</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>515</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">971</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">276</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>31,441</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31,766</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,516</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,277</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,194</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,339</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected return on plan assets
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(47,534</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(46,327</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(46,938</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,161</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,133</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,749</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of unrecognized:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Transition (asset)/obligation
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>987</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">987</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">988</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Prior service cost/(credit)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>419</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">758</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">864</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(8</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">1,437</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(176</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Actuarial (gain)/loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>14,771</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,262</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,417</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,048</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(836</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(368</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net periodic benefit cost</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>14,322</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">8,626</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,668</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,562</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,620</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,310</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px" ><b>ASC 715 curtailment/settlement expense </b><sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,867</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,269</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total ASC 715 expense</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>14,322</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">11,493</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,937</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,562</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">4,620</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,310</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr style="font-size:6pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>2009 includes curtailment expense reflecting management’s decision to cease benefit accruals as
of December 31, 2012.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The long-term expected rate of return is applied to the market-related value of plan assets in
determining the expected return on plan assets. FHN determines the market-related value of plan
assets using a calculated value that recognizes changes in the fair value of plan assets over five
years, as permitted by GAAP.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN utilizes the minimum amortization method in determining the amount of actuarial gains or losses
to include in plan expense. Under this approach, the net deferred actuarial gain or loss that
exceeds a threshold is amortized over the average remaining service period of active plan
participants. The threshold is measured as the greater of: 10 percent of a plan’s projected
benefit obligation as of the beginning of the year or 10 percent of the market-related value of
plan assets as of the beginning of the year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, lump sum payments from a non-qualified plan triggered settlement accounting. In
accordance with its practice, FHN performed a remeasurement of the plan in conjunction with the
settlement and recognized the ASC 715 settlement expense reflected above.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables set forth the plans’ benefit obligations and plan assets for 2010 and
2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Change in Benefit Obligation</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Benefit obligation, beginning of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>533,475</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">472,074</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>41,726</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">35,762</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Benefit obligation, adjustment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,133</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Service cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>15,225</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,167</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>515</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">971</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest cost
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>31,441</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31,766</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,277</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,194</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Plan amendments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(17,088</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Actuarial (gain)/loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>30,576</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">64,032</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,716</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,082</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual benefits paid
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(21,002</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(19,778</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,868</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,532</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Liability (gain)/loss due to curtailment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(28,844</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected Medicare Part D reimbursement
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>340</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">368</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Special termination benefits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Benefit obligation, end of year</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>589,715</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">533,475</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>41,274</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">41,726</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr style="font-size:10pt">
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Change in Plan Assets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of plan assets, beginning of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>496,330</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">378,519</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>15,923</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,605</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual return on plan assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>70,172</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">83,272</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,820</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,240</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Employer contributions
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,116</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">54,317</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>398</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">610</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual benefits paid — settlement payments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(18,387</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,868</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,532</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Actual benefits paid — other payments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(21,002</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,391</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Fair value of plan assets, end of year</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>549,616</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">496,330</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>16,273</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15,923</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Funded status of the plan </b><sup style="font-size: 85%; vertical-align: text-top"><b>(a)</b></sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(40,099</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(37,145</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(25,001</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(25,803</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Additional Amounts Recognized in the
Statements of Financial Condition</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>12,247</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">14,525</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,136</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(52,346</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(51,670</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(26,137</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(25,803</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net asset/(liability) at end of year</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(40,099</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(37,145</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(25,001</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(25,803</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr style="font-size:6pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>The qualified pension plan is over funded by $12.2 million, which is offset by non-qualifed
pension plan liabilities of $52.3 million.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In 2009, FHN determined that a previously existing retiree life insurance benefit met the
requirements for reporting under ASC 715. A liability for these benefits was not previously
recorded as the premiums were expensed over the insurance period. A $10.7 million adjustment to
recognize the cumulative impact of establishing the employee benefit liability is not included in
the 2009 net periodic benefit cost. The recognition of this liability of $23.1 million is
presented as an adjustment in the reconciliation of the benefit obligation for other benefits in
2009. In third quarter 2009, FHN modified post-retirement benefits payable to active employees
under this plan. As a result of this change, FHN recognized a reduction in its benefit liability
of $17.1 million with an offset, net of tax, to accumulated other comprehensive income. This
change is reflected as a plan amendment in the reconciliation of the benefit obligation for other
benefits in 2009.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">ASC 715-60 requires that a liability be recognized for contracts written to employees which
provide future postretirement benefits that are covered by endorsement split-dollar life insurance
arrangements because such obligations are not considered to be effectively settled
upon entering into the related insurance arrangements. FHN recognized a decrease to undivided
profits of $8.5 million, net of tax, upon adoption of ASC 715-60.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The accumulated benefit obligation for the pension plan was $575.2 million as of December 31, 2010,
and $509.8 million as of December 31, 2009. At December 31, 2010, both the projected benefit
obligation and the accumulated benefit obligation for the qualified pension plan was less than the
fair market value of plan assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Unrecognized transition assets and obligations, unrecognized actuarial gains and losses, and
unrecognized prior service costs and credits are recognized as a component of accumulated other
comprehensive income. Balances reflected in accumulated other comprehensive income on a pre-tax
basis for the years ended December 31, 2010 and 2009 consist of:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td style="border-bottom:0px solid #000000"> </td>
<td style="border-bottom:0px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Amounts Recognized in Accumulated Other
Comprehensive Income</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net transition (asset)/obligation
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,725</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,714</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Prior service cost/(credit)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,095</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,484</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>621</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">613</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net actuarial (gain)/loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>289,016</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">296,879</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(13,111</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(11,786</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total</b>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>291,111</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">298,363</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(10,765</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(8,459</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The amounts recognized in other comprehensive income during 2010 and 2009 were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Changes in plan assets and benefit obligation
recognized in other comprehensive income</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net actuarial (gain)/loss arising during measurement period <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,814</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(1,812</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(2,375</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(3,934</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Prior service cost arising during measurement period
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(17,088</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Items amortized during the measurement period:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net transition (asset)/obligation
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(987</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(987</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Prior service (credit)/cost
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(419</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3,567</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>8</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,549</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net actuarial (gain)/loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(14,771</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8,262</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>1,048</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,018</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total recognized in other comprehensive income</b>
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(7,376</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(13,641</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"><b>$</b></td>
<td align="right"><b>(2,306</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(10,478</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr style="font-size:6pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>2009 includes a positive, after-tax effect of $18.3 million due to a curtailment.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The estimated net actuarial (gain)/loss, prior service cost/(credit), and transition
(asset)/obligation for the plan that will be amortized from accumulated other comprehensive income
into net periodic benefit cost during 2010 and 2009 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Total Pension Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Benefits</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net transition obligation
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>986</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">987</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Prior service cost/(credit)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>417</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(9</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net actuarial (gain)/loss
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>20,107</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,086</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1,039</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(862</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FHN does not expect any defined benefit pension plan’s and other employee benefit plan’s assets to
be returned to FHN in 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides detail on expected benefit payments, which reflect expected future
service, as appropriate, and projected Medicare reimbursements:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Pension</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Other</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Medicare</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Benefits</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Reimbursements</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">22,464</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2,225</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">388</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">24,791</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,330</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">436</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">27,279</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,428</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">478</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">29,176</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,519</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">527</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">31,375</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,608</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">570</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2016 – 2020
</div></td>
<td> </td>
<td> </td>
<td align="right">189,196</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,170</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Plan assets. </i></b>FHN’s overall investment goal is to create, over the life of the pension plan and
retiree medical plan, respectively, an adequate pool of sufficiently liquid assets to support the
pension benefit obligations to participants, retirees, and beneficiaries, as well as to partially
support the medical obligations to retirees and beneficiaries. Thus, the pension plan and retiree
medical plan seek to achieve a high level of investment return consistent with a prudent level of
portfolio risk.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During 2010, FHN adopted a dynamic investment strategy for the management of its pension assets.
The strategy will lead to a reduction in equities and an increase in long duration fixed income
allocations over time with the intention of reducing volatility of funded status and pension costs.
At December 31, 2010, the target allocation to equities was 57.5 percent and the target allocation
to fixed income and cash equivalents was 42.5 percent. Equity securities, some of which are
included in common and collective funds, primarily include investments in large capital and small
capital companies located in the U.S., as well as international equity securities in developed and
emerging markets. Fixed income securities include U.S. Treasuries, corporate bonds of companies
from diversified industries, mortgage backed securities, and foreign bonds. Fixed income
investments generally have long durations consistent with the pension liabilities of FHN. Retiree
medical funds are kept in short-term investments, primarily money market funds. On December 31,
2010, FHN did not have any significant concentrations of risk within the plan assets related to the
pension plan or the retiree medical plan.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of FHN’s pension plan assets at December 31, 2010, by asset category classified
using the Fair Value measurement hierarchy is shown in the table below. See Note 22 — Fair Value
of Assets and Liabilities for more details about Fair Value measurements.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 1</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 2</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 3</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash equivalents and money market funds
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">6,064</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">6,064</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. small capital
</div></td>
<td> </td>
<td> </td>
<td align="right">94,885</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">94,885</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Mutual funds <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">1,226</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,226</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fixed income securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">656</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">656</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and foreign bonds
</div></td>
<td> </td>
<td> </td>
<td align="right">111,879</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">111,879</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Common and collective funds:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and foreign bonds
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">119,315</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">119,315</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. large capital
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">139,455</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">139,455</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">International
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">76,137</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">76,137</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">214,054</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">335,563</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">549,617</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Primarily includes investments in small-cap equity securities.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Any shortfall of investment performance compared to investment objectives should be
explainable in terms of general economic and capital market conditions. The Retirement Investment
Committee, comprised of senior managers within the organization, meets monthly to review asset
performance and the need for rebalancing. At a minimum, rebalancing occurs annually for the
purpose of remaining within the established target asset allocation ranges and to maintain
liquidity for benefit payments. Risk management is also reviewed and evaluated based upon the
organization’s ability to assume investment risk.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of FHN’s retiree medical plan assets at December 31, 2010, by asset category are as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2010</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(Dollars in thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 1</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 2</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Level 3</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash equivalents and money market funds
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">288</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">288</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. large capital
</div></td>
<td> </td>
<td> </td>
<td align="right">5,930</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,930</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. small capital
</div></td>
<td> </td>
<td> </td>
<td align="right">4,479</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,479</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mutual funds <sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">4,764</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,764</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fixed income securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Treasuries
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate and foreign bonds
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">545</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">545</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">15,461</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">812</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">16,273</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div style="margin-top: 3pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Primarily includes investments in fixed income corporate and foreign bonds.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The number of shares of FHN common stock held by the plan was 778,500 for 2010 and 780,917 for
2009.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
</div>
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pestringNo definition available.falsefalse4false0us-gaap_CashAndDueFromBanksus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse344384000344384[1]falsetruefalsefalsefalse2truefalsefalse465712000465712falsetruefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryFor banks and other depository institutions: Includes cash on hand (currency and coin), cash items in process of collection, noninterest bearing deposits due from other financial institutions (including corporate credit unions), and balances with the Federal Reserve Banks, Federal Home Loan Banks and central banks.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 95
-Paragraph 8, 9
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-DEP
-Chapter 6
-Paragraph 1, 2, 3, 7, 11
-IssueDate 2006-05-01
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 1, 2, 3
-Article 9
falsefalse5false0us-gaap_FederalFundsSoldAndSecuritiesPurchasedUnderAgreementsToResellus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse424390000424390falsefalsefalsefalsefalse2truefalsefalse452883000452883falsefalsefalsefalsefalse
Monetaryxbrli:monetaryItemTypemonetaryIncludes: (1) the amount outstanding of funds lent to other depository institutions, securities brokers, or securities dealers in the form of Federal Funds sold; for example, immediately available funds lent under agreements or contracts that mature in one business day or roll over under a continuing contract, regardless of the nature of the transaction or the collateral involved, excluding overnight lending for commercial and industrial purposes. Also include Federal Funds sold under agreements to resell on a gross basis, excluding (1) sales of term Federal Funds, (2) due bills representing purchases of securities or other assets by the reporting bank that have not yet been delivered and similar instruments, (3) resale agreements that mature in more than one business day involving assets other than securities,
and (4) yield maintenance dollar repurchase agreements (Federal Funds Sold) and (2) the dollar amount outstanding of funds lent in the form of security resale agreements regardless of maturity, if the agreement requires the bank to resell the identical security purchased or a security that meets the definition of substantially the same in the case of a dollar roll. Also include purchases of participations in pools of securities, regardless of maturity (Securities Purchased Under Agreements to Re-sell).Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Subsection I
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph m
-Subparagraph 1(i)
-Article 4
truefalse6false0us-gaap_CashCashEquivalentsAndFederalFundsSoldus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1<
/Id>truefalsefalse768774000768774[1]falsefalsefalsefalsefalse2truefalsefalse918595000918595falsefalsefalsefalsef
alseMonetaryxbrli:monetaryItemTypemonetaryThe sum of cash and cash equivalents plus Federal Funds Sold. Cash and cash equivalents consist of short term, highly liquid investments that are readily convertible to known amounts of cash and are so near their maturity that they present negligible risk of changes in value due to changes in interest rates -- usually with an original maturity less than 90 days.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 95
-Paragraph 8, 9, 10
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Subsection I
truefalse7false0us-gaap_InterestBearingDepositsInBanksus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1tr
uefalsefalse517739000517739falsefalsefalsefalsefalse2truefalsefalse539300000539300falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryFor banks and other depository institutions: Interest-bearing deposits in other financial institutions for relatively short periods of time including, for example, certificates of deposits, which are presented separately from cash on the balance sheet.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-DEP
-Chapter 6
-Paragraph 4, 11
-IssueDate 2006-05-01
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 2
-Article 9
falsefalse8false0us-gaap_TradingSecuritiesus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse769750000769750falsefalsefalsefalsefalse2truefalsefalse699900000699900falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe total of financial instruments that are bought and held principally for the purpose of selling them in the near term (thus held for only a short period of time) or for debt and equity securities formerly categorized as available-for-sale or held-to-maturity which the entity held as of the date it opted to account for such securities at fair value. An enterprise may also categorize such a security as trading without the intent to sell it in the near term assuming the decision to categorize the security as trading occurred at acquisition; this is the reason why the trading category of investments in debt and equity securities are bought and sold "principally" for sale in the near term. Transfers into and out of the trading category should be rare. Such financial instruments that are held as of the reporting date are measured at fair value with unrealized holding gains and losses (the diffe
rence between fair value and the previously reported carrying amount) included in earnings.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 29
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 13
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Implementation Guide (Q and A)
-Number FAS115
-Paragraph 35
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 12
-Subparagraph a
falsefalse9false0fhn_LoansHeldForSalefhnfalsedebitinstantThe aggregate amount of loans receivable that will be sold to other entities. Includes mortgage and all other loans not...falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse375289000375289falsefalsefalsefalsefalse2truefalsefalse452501000452501falsefalsefalsefalse
falseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate amount of loans receivable that will be sold to other entities. Includes mortgage and all other loans not classified as held for investment. A substantial portion of mortgage loans held for sale are reflected at elected fair value with the remainder stated at lower of cost or market.No authoritative reference available.falsefalse10false0us-gaap_AvailableForSaleSecuritiesus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse30319300003031930falsefalsefalsefalsefalse2truefalsefalse26944680002694468falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryFor an unclassified balance sheet, this item represents investments in debt and equity securities which are categorized neither as held-to-maturity nor trading. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of shareholder
s' equity (other comprehensive income), unless the Available-for-sale Security is designated as a hedge or is determined to have had an other than temporary decline in fair value below its amortized cost basis. All or a portion of the unrealized holding gain or loss of an Available-for-sale Security that is designated as being hedged in a fair value hedge shall be recognized in earnings during the period of the hedge, as should other than temporary declines in fair value below costs basis.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 16
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 22
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 12
-Subparagraph b
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 13
Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 14
falsefalse11false0us-gaap_LoansAndLeasesReceivableNetOfDeferredIncomeus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse1678257200016782572[1]falsefalsefalsefalsefalse2truefalsefalse1812388400018123884falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryReflects the aggregate gross carrying amount of all categories of loans and leases held in portfolio, after deducting deferred income, but before deducting the allowance for losses on loans and leases.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 01-6
-Paragraph 13
-Subparagraph e
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-DEP
-Chapter 8
-Paragraph 116
-IssueDate 2006-05-01
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 8
-Subparagraph e
-Subsection I
falsefalse12false0us-gaap_LoansAndLeasesReceivableAllowanceus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse664799000664799[1]falsefalsefalsefalsefalse2truefalsefalse896914000896914falsefalsefalsefalsefalse
hasScenarios>Monetaryxbrli:monetaryItemTypemonetaryThe allowance for loan and lease losses represents the reserve to cover probable credit losses related to specifically identified loans and leases, as well as probable credit losses inherent in the remainder of the loan portfolio as of the balance sheet date. For banks, include currently required allocated transfer risk reserves. Include carryover of or adjustments to the allowance for loan losses in connection with business combinations determined to be appropriate.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher OTS
-Name Federal Regulation (FR)
-Number Title 12
-Chapter V
-Section 563c.102
-Paragraph 8
-Subparagraph a(ii)
-Subsection I
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 6
-Section L
-Subsection 1
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 114
-Paragraph 20
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 7
-Subparagraph d
-Article 9
Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 5
-Paragraph 8, 9
truefalse13false0us-gaap_LoansAndLeasesReceivableNetReportedAmountus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse1611777300016117773[1]falsefalsefalsefalsefalse2truefalsefalse1722697000017226970falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryReflects the aggregate carrying amount of all categories of loans and leases held in portfolio, net of unearned income and the allowance for losses on loans and leases.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 01-6
-Paragraph 13
-Subparagraph e
truefalse14false0us-gaap_ServicingAssetAtFairValueAmountus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1true<
IsRatio>falsefalse207319000207319falsefalsefalsefalsefalse2truefalsefalse302611000302611falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryFair value as of the balance sheet date of an asset representing net future revenues from contractually specified servicing fees, late charges, and other ancillary revenues, in excess of future costs related to servicing arrangements. The fair value of an asset is the amount at which that asset could be bought or sold (or settled) in a current transaction between willing parties, other than in a forced or liquidation sale. Rights may be obtained via (1) acquisition or assumption of a servicing obligation that does not relate to financial assets of the servicer or its consolidated affiliates; or (2) by originating loans and then (a) transferring the loans to a qualifying special purpose entity in a transaction that meets the necessary transfer and classification requirements, or (b) transferring the loans in a transaction that meets the requirements for sale
accounting.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 140
-Paragraph 13A, 13B
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Staff Position (FSP)
-Number FAS140-4 and FIN46(R)-8
-Paragraph B9
-Subparagraph a(1)
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 140
-Paragraph 17
-Subparagraph f(1)(a)
falsefalse15false0us-gaap_Goodwillus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse162180000162180falsefalsefalsefalsefalse2truefalsefalse165528000165528falsefalsefalsefalsefalseMon
etaryxbrli:monetaryItemTypemonetaryCarrying amount as of the balance sheet date, which is the cumulative amount paid, adjusted for any amortization recognized prior to adoption of FAS 142 and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 43
falsefalse16false0us-gaap_IntangibleAssetsNetExcludingGoodwillus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse3288100032881falsefalsefalsefalsefalse2truefalsefalse3825600038256falsefalsefalsefalsefalseM
onetaryxbrli:monetaryItemTypemonetarySum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 142
-Paragraph 42, 45
falsefalse17false0us-gaap_ReceivablesFromBrokersDealersAndClearingOrganizationsus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse146091000146091falsefalsefalsefalsefalse2truefalsefalse334404000334404falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAmount receivable from securities failed to deliver, certain deposits for securities borrowed, open transactions, good faith and margin deposits, commissions and floor brokerage items. Also cash and securities [guarantee] on deposit with [commodities] clearing organizations and other entities which provide services necessary to operations of the Company. This item would include, for instance, cash and securities advanced as [refundable] collateral for securities borrowed.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-BRD
-Chapter 4
-Paragraph 80
-Subparagraph Exhibit 4-8, 4
-IssueDate 2006-05-01
falsefalse18false0us-gaap_PropertyPlantAndEquipmentNetus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse322319000322319falsefalsefalsefalsefalse2truefalsefalse313824000313824falsefalsefalsefalsefalse<
Unit>Monetaryxbrli:monetaryItemTypemonetaryTangible assets that are held by an entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year; net of accumulated depreciation. Examples include land, buildings, and production equipment.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 13
-Subparagraph a
-Article 5
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 12
-Paragraph 5
-Subparagraph b, c
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 8
-Article 7
falsefalse19false0us-gaap_RealEstateAcquiredThroughForeclosureus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1true<
IsRatio>falsefalse125401000125401falsefalsefalsefalsefalse2truefalsefalse125190000125190falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryCarrying amount as of the balance sheet date of land and buildings obtained through foreclosure proceedings or defeasance in full or partial satisfaction of a debt arrangement.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 28
-Article 12
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 01-6
-Paragraph 13
-Subparagraph f
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-DEP
-Chapter 11
-Paragraph 2, 9, 10, 11
-IssueDate 2006-05-01
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Paragraph c
-Subparagraph Schedule III
-Article 5
falsefalse20false0us-gaap_OtherAssetsus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse21215060002121506[1]falsefalsefalsefalsefalse2truefalsefalse22571310002257131falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryCarrying amount as of the balance sheet date of assets not otherwise specified in the taxonomy. Also serves as the sum of assets not individually reported in the financial statements, or not separately disclosed in notes.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 17
-Article 5
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 10
-Article 7
truefalse21false0us-gaap_Assetsus-gaaptruedebitinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse2469895200024698952[1]falsefalsefalsefalsefalse2truefalsefalse2606867800026068678falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetarySum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Concepts (CON)
-Number 6
-Paragraph 25
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 18
-Article 5
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 12
-Article 7
truefalse23true0us-gaap_DepositsAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsefalsefalse2falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse24false0us-gaap_DepositsSavingsDepositsus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse60368950006036895falsefalsefalsefalsefalse2truefalsefalse48477090004847709falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAmount of interest bearing deposits with no stated maturity, which may include passbook and statement savings accounts and money-market deposit accounts (MMDAs).Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-DEP
-Chapter 13
-Paragraph 6
-IssueDate 2006-05-01
falsefalse25false0us-gaap_TimeDepositsus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse13909950001390995falsefalsefalsefalsefalse2truefalsefalse18959920001895992falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate amount of time deposits, including certificates of deposits, individual retirement accounts and open accounts.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 12
-Article 9
falsefalse26false0fhn_OtherInterestBearingDepositsfhnfalsecreditinstantAll other interest-bearing deposit liabilities excluding savings and time deposits.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse28423060002842306falsefalsefalsefalsefalse2truefalsefalse31694740003169474falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAll other interest-bearing deposit liabilities excluding savings and time deposits.No authoritative reference available.falsefalse27false0us-gaap_TimeDeposits100000OrMoreus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse561750000561750falsefalsefalsefalsefalse2truefalsefalse559944000559944falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate amount of domestic and foreign time deposit liabilities (including certificates of deposits, individual retirement accounts and open accounts) in denominations of $100,000 or more.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 01-6
-Paragraph 14
-Subparagraph e
truefalse28false0us-gaap_InterestBearingDepositLiabilitiesus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse1083194600010831946falsefalsefalsefalsefalse2truefalsefalse1047311900010473119falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate of all domestic and foreign interest-bearing deposit liabilities.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 12
-Article 9
falsefalse29false0us-gaap_NoninterestBearingDepositLiabilitiesus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse43762850004376285[1]falsefalsefalsefalsefalse2truefalsefalse43940960004394096falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate amount of all domestic and foreign noninterest-bearing deposits liabilities held by the entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 12
-Article 9
truefalse30false0us-gaap_Depositsus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1truefalsefalse1520823100015208231[1]falsefalsefalsefalsefalse2truefalsefalse1486721500014867215falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe aggregate of all deposit liabilities held by the entity, including foreign and domestic, interest and noninterest bearing; may include demand deposits, saving deposits, Negotiable Order of Withdrawal (NOW) and time deposits among others.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 12
-Article 9
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Audit and Accounting Guide (AAG)
-Number AAG-DEP
-Chapter 13
-Paragraph 37, 38, 39
-IssueDate 2006-05-01
truefalse31false0us-gaap_FederalFundsPurchasedAndSecuritiesSoldUnderAgreementsToRepurchaseus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse21149080002114908falsefalsefalsefalsefalse2truefalsefalse28743530002874353falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe amount shown on the books that a bank with insufficient reserves borrows, at the federal funds rate, from another bank to meet its reserve requirements and the amount of securities that an institution sells and agrees to repurchase at a specified date for a specified price, net of any reductions or offsets.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 13
-Subparagraph 1
-Article 9
falsefalse32false0us-gaap_TradingLiabilitiesus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse361920000361920falsefalsefalsefalsefalse2truefalsefalse293387000293387falsefalsefalsefalsefalse
Cell>Monetaryxbrli:monetaryItemTypemonetaryThe carrying amount of liabilities as of the balance sheet date that pertain to principal and customer trading transactions, or which may be incurred with the objective of generating a profit from short-term fluctuations in price as part of an entity's market-making, hedging and proprietary trading. Examples include short positions in securities, derivatives and commodities, obligations under repurchase agreements, and securities borrowed arrangements.No authoritative reference available.falsefalse33false0us-gaap_OtherShortTermBorrowingsus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse180735000180735false
falsefalsefalsefalse2truefalsefalse761758000761758falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetarySum of the carrying amounts at the balance sheet date of short-term borrowings not otherwise specified in the taxonomy having initial terms less than one year or the normal
operating cycle, if longer.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 19
-Article 5
falsefalse34false0us-gaap_OtherLongTermDebtus-gaaptruecreditinstantNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1truefalsefalse32280700003228070[1]falsefalsefalsefalsefalse2truefalsefalse21905440002190544falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryIncluding both current and noncurrent portions, carrying amount as of the balance-sheet date of other forms of debt not elsewhere specified in the taxonomy with initial maturities beyond one year or beyond the normal operating cycle, if longer.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 19, 20, 22
-Article 5
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-Number 210
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netaryxbrli:monetaryItemTypemonetaryTotal of all Liabilities and Stockholders' Equity items.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Number 210
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