Allowance

12 Months Ended

Dec. 31, 2016

Note 5 - Allowance for Loan Losses

As discussed in Note 1 – Summary of Significant Accounting Polices, the ALLL includes the following components: reserves for commercial loans evaluated based on pools of credit graded loans and reserves for pools of smaller-balance homogeneous consumer loans, both determined in accordance with ASC 450-20-50, and to a lesser extent, reserves determined in accordance with ASC 310-10-35 for loans determined by management to be individually impaired and an allowance associated with PCI loans.

For commercial loans, ASC 450-20-50 reserves are established using historical net loss factors by grade level, loan product, and business segment. The ALLL for smaller-balance homogenous consumer loans is determined based on pools of similar loan types that have similar credit risk characteristics. ASC 450-20-50 reserves for the consumer portfolio are determined using segmented roll-rate models that incorporate various factors including historical delinquency trends, experienced loss frequencies, and experienced loss severities. Generally, reserves for consumer loans reflect inherent losses in the portfolio that are expected to be recognized over the following twelve months. The historical net loss factors for both commercial and consumer ASC 450-20-50 reserve models are subject to qualitative adjustments by management to reflect current events, trends, and conditions (including economic considerations and trends), which are not fully captured in the historical net loss factors. The pace of the economic recovery, performance of the housing market, unemployment levels, labor participation rate, the regulatory environment, regulatory guidance, and portfolio segment-specific trends, are examples of additional factors considered by management in determining the ALLL. Additionally, management considers the inherent uncertainty of quantitative models that are driven by historical loss data. Management evaluates the periods of historical losses that are the basis for the loss rates used in the quantitative models and selects historical loss periods that are believed to be the most reflective of losses inherent in the loan portfolio as of the balance sheet date. Management also periodically reviews an analysis of the loss emergence period which is the amount of time it takes for a loss to be confirmed (initial charge-off) after a loss event has occurred. FHN performs extensive studies as it relates to the historical loss periods used in the model and the loss emergence period and model assumptions are adjusted accordingly.

Impairment related to individually impaired loans is measured in accordance with ASC 310-10. For all commercial portfolio segments, commercial TDRs and other individually impaired commercial 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 net realizable value (collateral value less estimated costs to sell). Impaired loans also include consumer TDRs. Generally, the allowance for TDRs in all consumer portfolio segments is determined by estimating the expected future cash flows using the modified interest rate (if an interest rate concession), incorporating payoff and net charge-off rates specific to the TDRs within the portfolio segment being assessed, and discounted using the pre-modification interest rate. The discount rates of variable rate TDRs are adjusted to reflect changes in the interest rate index to which the rates are tied. The discounted cash flows are then compared to the outstanding principal balance in order to determine required reserves. Residential real estate loans discharged through bankruptcy are collateral-dependent and are charged down to net realizable value (collateral value less estimated costs to sell).

The following table provides a rollforward of the allowance for loan losses by portfolio segment for December 31, 2016, 2015 and 2014:
				Commercial		Consumer		Permanent		Credit Card
(Dollars in thousands)		C&I		Real Estate		Real Estate		Mortgage		and Other		Total
Balance as of January 1, 2016		$	73,637	$	25,159	$	80,614	$	18,947	$	11,885	$	210,242
Charge-offs			(18,460)		(1,371)		(21,993)		(1,591)		(14,224)		(57,639)
Recoveries			6,795		1,927		23,719		2,403		3,621		38,465
Provision/(provision credit) for loan losses			27,426		8,137		(31,983)		(3,470)		10,890		11,000
Balance as of December 31, 2016			89,398		33,852		50,357		16,289		12,172		202,068
Allowance - individually evaluated for impairment			4,219		194		28,802		12,470		133		45,818
Allowance - collectively evaluated for impairment			85,015		33,503		21,151		3,819		12,039		155,527
Allowance - purchased credit-impaired loans			164		155		404		-		-		723
Loans, net of unearned as of December 31, 2016:
	Individually evaluated for impairment		47,962		3,124		153,460		93,926		306		298,778
	Collectively evaluated for impairment		12,059,593		2,127,481		4,368,716		329,199		358,675		19,243,664
	Purchased credit-impaired loans		40,532		4,918		1,576		-		52		47,078
Total loans, net of unearned income		$	12,148,087	$	2,135,523	$	4,523,752	$	423,125	$	359,033	$	19,589,520
Balance as of January 1, 2015		$	67,011	$	18,574	$	113,011	$	19,122	$	14,730	$	232,448
Charge-offs			(22,406)		(3,550)		(30,068)		(3,141)		(16,691)		(75,856)
Recoveries			13,339		1,876		23,895		1,687		3,853		44,650
Provision/(provision credit) for loan losses			15,693		8,259		(26,224)		1,279		9,993		9,000
Balance as of December 31, 2015			73,637		25,159		80,614		18,947		11,885		210,242
Allowance - individually evaluated for impairment			3,643		481		31,278		15,463		167		51,032
Allowance - collectively evaluated for impairment			69,980		23,519		48,828		3,484		11,717		157,528
Allowance - purchased credit-impaired loans			14		1,159		508		-		1		1,682
Loans, net of unearned as of December 31, 2015:
	Individually evaluated for impairment		30,472		9,055		165,684		102,461		377		308,049
	Collectively evaluated for impairment		10,389,841		1,644,792		4,596,654		351,662		354,106		17,337,055
	Purchased credit-impaired loans		16,077		21,088		4,180		-		53		41,398
Total loans, net of unearned income		$	10,436,390	$	1,674,935	$	4,766,518	$	454,123	$	354,536	$	17,686,502
Balance as of January 1, 2014		$	86,446	$	10,603	$	126,785	$	22,491	$	7,484	$	253,809
Charge-offs			(20,492)		(3,741)		(45,391)		(5,891)		(14,931)		(90,446)
Recoveries			9,666		4,150		22,824		2,314		3,131		42,085
Provision/(provision credit) for loan losses			(8,609)		7,562		8,793		208		19,046		27,000
Balance as of December 31, 2014			67,011		18,574		113,011		19,122		14,730		232,448
Allowance - individually evaluated for impairment			5,173		796		40,778		16,627		254		63,628
Allowance - collectively evaluated for impairment			61,806		14,702		72,156		2,495		14,476		165,635
Allowance - purchased credit-impaired loans			32		3,076		77		-		-		3,185
Loans, net of unearned as of December 31, 2014:
	Individually evaluated for impairment		35,698		19,430		173,225		113,459		533		342,345
	Collectively evaluated for impairment		8,966,512		1,222,658		4,874,171		425,502		357,588		15,846,431
	Purchased credit-impaired loans		5,076		35,629		675		-		10		41,390
Total loans, net of unearned income		$	9,007,286	$	1,277,717	$	5,048,071	$	538,961	$	358,131	$	16,230,166