Loans

The following table provides the balance of loans, net of unearned income, by portfolio segment as of December 31, 2018 and 2017:



	December 31
(Dollars in thousands)	2018		2017
Commercial:
Commercial, financial, and industrial	$	16,514,328	$	16,057,273
Commercial real estate	4,030,870		4,214,695
Consumer:
Consumer real estate (a)	6,249,516		6,479,242
Permanent mortgage	222,448		287,820
Credit card & other	518,370		619,899
Loans, net of unearned income	$	27,535,532	$	27,658,929
Allowance for loan losses	180,424		189,555
Total net loans	$	27,355,108	$	27,469,374

Certain previously reported amounts have been reclassified to agree with current presentation.


(a)	Balances as of December 31, 2018 and 2017, include $16.2 million and $24.2 million of restricted real estate loans, respectively. See Note 21—Variable Interest Entities for additional information.

COMPONENTS OF THE LOAN PORTFOLIO

The loan portfolio is disaggregated into segments and then further disaggregated into classes for certain disclosures. GAAP defines a portfolio segment 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 FHN’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, loans to mortgage companies, the trust preferred loans (“TRUPS”) (i.e. long-term unsecured loans to bank and insurance-related businesses) portfolio and purchased credit-impaired (“PCI”) loans. Loans to mortgage companies include commercial lines of credit to qualified mortgage companies primarily 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 CRE include income CRE, residential CRE and PCI loans. Consumer loan portfolio segments include consumer real estate, permanent mortgage, and the credit card and other portfolio. Consumer classes include home equity lines of credit (“HELOCs”), real estate (“R/E”) installment and PCI loans within the consumer real estate segment, permanent mortgage (which is both a segment and a class), and credit card and other.

Concentrations

FHN has a concentration of residential real estate loans (24 percent of total loans), the majority of which is in the consumer real estate segment (23 percent of total loans). Loans to finance and insurance companies total $2.8 billion (17 percent of the C&I portfolio, or 10 percent of the total loans). FHN had loans to mortgage companies totaling $2.0 billion (12 percent of the C&I segment, or 7 percent of total loans) as of December 31, 2018. As a result, 29 percent of the C&I segment is sensitive to impacts on the financial services industry.

Restrictions

On December 31, 2018, $6.1 billion of commercial loans were pledged to secure potential discount window borrowings from the Federal Reserve Bank. As of December 31, 2018 and 2017, FHN pledged all of its first and second lien mortgages and HELOCs, excluding restricted real estate loans, to secure potential borrowings from the FHLB-Cincinnati. Additionally, beginning in November 2017, FHN pledged all of its commercial real estate loans to secure potential borrowings from the FHLB-Cincinnati. Restricted loans secure borrowings associated with consolidated VIEs. See Note 21 - Variable Interest Entities for additional discussion.

Acquisition

On November 30, 2017, FHN completed its acquisition of CBF. The acquisition included $7.6 billion in unpaid balance of loans with a fair value of $7.4 billion of which $121.8 million is held-for-sale.

Generally, the fair value for the acquired loans is estimated using a discounted cash flow analysis with significant unobservable inputs (Level 3) including adjustments for expected credit losses, prepayment speeds, current market rates for similar loans, and an adjustment for investor-required yield given product-type and various risk characteristics.

At acquisition, FHN designated certain loans as PCI with the remaining loans accounted for under ASC 310-20, “Nonrefundable Fees and Other Costs”. Of the loans designated as PCI at acquisition, $4.7 million is held-for-sale. For loans accounted for under ASC 310-20, the difference between each loan’s book value and the estimated fair value at the time of the acquisition will be accreted into interest income over its remaining contractual life and the subsequent accounting and reporting will be similar to a loan in FHN’s originated portfolio.

The following tables reflect FHN's contractually required payments receivable, cash flows expected to be collected and the fair value of the acquired loans at the acquisition date of November 30, 2017.



	Non-PCI Loans
(Dollars in thousands)	November 30, 2017
Contractually required payments including interest	$	9,182,610
Less : expected losses and foregone interest	(801,546		)
Cash flows expected to be collected	8,381,064
Fair value of loans acquired (a)	$	7,220,094


(a)	Includes $117.1 million of loans held-for-sale.



	PCI Loans
(Dollars in thousands)	November 30, 2017
Contractually required payments including interest	$	258,950
Less : nonaccretable difference	(77,022		)
Cash flows expected to be collected	181,928
Less : accretable yield	(14,271		)
Fair value of loans acquired (a)	$	167,657


(a)	Includes $4.7 million of loans held-for-sale.

Purchased Credit-Impaired Loans

The following table presents a rollforward of the accretable yield for the year ended December 31, 2018 and 2017:



	Year Ended December 31
(Dollars in thousands)	2018			2017
Balance, beginning of period	$	15,623		$	6,871
Addition	—			13,957
Accretion	(9,467		)	(3,564		)
Adjustment for payoffs	(3,896		)	(1,917		)
Adjustment for charge-offs	(1,115		)	(45		)
Adjustment for pool excess recovery (a)	(123		)	(222		)
Increase in accretable yield (b)	12,791			467
Disposals	(240		)	—
Other	(198		)	76
Balance, end of period	$	13,375		$	15,623


(a)	Represents the removal of accretable difference for the remaining loans in a pool which is now in a recovery state.


(b)	Includes changes in the accretable yield due to both transfers from the nonaccretable difference and the impact of changes in the expected timing of the cash flows.

At December 31, 2018, the ALLL related to PCI loans was $4.0 million compared to $3.2 million at December 31, 2017. The loan loss provision expense related to PCI loans during 2018 was $4.8 million, compared to $2.5 million during 2017.

The following table reflects the outstanding principal balance and carrying amounts of the acquired PCI loans as of December 31, 2018 and 2017:



	December 31, 2018				December 31, 2017
(Dollars in thousands)	Carrying value		Unpaid balance		Carrying value		Unpaid balance
Commercial, financial and industrial	$	38,873	$	44,259	$	96,598	$	109,280
Commercial real estate	15,197		17,232		36,107		41,488
Consumer real estate	30,723		34,820		38,176		42,568
Credit card and other	1,627		1,879		5,500		6,351
Total	$	86,420	$	98,190	$	176,381	$	199,687

Impaired Loans

The following tables provide information at December 31, 2018 and 2017, by class related to individually impaired loans and consumer TDRs, regardless of accrual status. Recorded investment is defined as the amount of the investment in a loan, excluding any valuation allowance but including any direct write-down of the investment. For purposes of this disclosure, PCI loans and the TRUPS valuation allowance have been excluded.



	December 31, 2018
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance recorded:
Commercial:
General C&I (a)	$	42,902	$	45,387	$	—	$	24,186	$	757
Income CRE	1,589		1,589		—		1,434		51
Residential CRE	$	—	$	—	$	—	$	374	$	—
Total	$	44,491	$	46,976	$	—	$	25,994	$	808
Consumer:
HELOC (b)	$	8,645	$	16,648	$	—	$	8,723	$	—
R/E installment loans (b)	4,314		4,796		—		4,300		—
Permanent mortgage (b)	3,601		6,003		—		4,392		—
Total	$	16,560	$	27,447	$	—	$	17,415	$	—
Impaired loans with related allowance recorded:
Commercial:
General C&I	$	2,802	$	2,802	$	149	$	16,011	$	—
TRUPS	2,888		3,700		925		2,981		—
Income CRE	377		377		—		348		10
Residential CRE	—		—		—		99		—
Total	$	6,067	$	6,879	$	1,074	$	19,439	$	10
Consumer:
HELOC	$	66,482	$	69,610	$	11,241	$	69,535	$	2,273
R/E installment loans	38,993		39,851		6,743		40,118		1,024
Permanent mortgage	67,245		78,010		9,419		73,259		2,290
Credit card & other	695		695		337		626		14
Total	$	173,415	$	188,166	$	27,740	$	183,538	$	5,601
Total commercial	$	50,558	$	53,855	$	1,074	$	45,433	$	818
Total consumer	$	189,975	$	215,613	$	27,740	$	200,953	$	5,601
Total impaired loans	$	240,533	$	269,468	$	28,814	$	246,386	$	6,419


(a)	In Q1 2018, the allowance for TDRs within the commercial portfolio was removed.


(b)	All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance.



	December 31, 2017
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance recorded:
Commercial:
General C&I	$	8,183	$	17,372	$	—	$	7,810	$	—
Income CRE	—		—		—		—		—
Total	$	8,183	$	17,372	$	—	$	7,810	$	—
Consumer:
HELOC (a)	$	9,258	$	19,193	$	—	$	10,374	$	—
R/E installment loans (a)	4,093		4,663		—		4,076		—
Permanent mortgage (a)	5,132		7,688		—		5,602		—
Total	$	18,483	$	31,544	$	—	$	20,052	$	—
Impaired loans with related allowance recorded:
Commercial:
General C&I	$	31,774	$	38,256	$	5,119	$	29,183	$	773
TRUPS	3,067		3,700		925		3,139		—
Income CRE	1,612		1,612		49		1,695		52
Residential CRE	795		1,263		83		1,106		10
Total	$	37,248	$	44,831	$	6,176	$	35,123	$	835
Consumer:
HELOC	$	72,469	$	75,207	$	14,382	$	77,454	$	2,261
R/E installment loans	43,075		43,827		8,793		48,473		1,246
Permanent mortgage	79,662		90,934		12,105		81,422		2,455
Credit card & other	593		593		311		406		11
Total	$	195,799	$	210,561	$	35,591	$	207,755	$	5,973
Total commercial	$	45,431	$	62,203	$	6,176	$	42,933	$	835
Total consumer	$	214,282	$	242,105	$	35,591	$	227,807	$	5,973
Total impaired loans	$	259,713	$	304,308	$	41,767	$	270,740	$	6,808


(a)	All discharged bankruptcy loans are charged down to an estimate of net realizable value and do not carry any allowance.

Asset Quality Indicators

FHN employs a dual grade commercial risk grading methodology to assign an estimate for the probability of default (“PD”) and the loss given default (“LGD”) for each commercial loan using factors specific to various industry, portfolio, or product segments that result in a rank ordering of risk and the assignment of grades PD 1 to PD 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. Each PD 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 12 are “pass” grades. PD grades 13-16 correspond to the regulatory-defined categories of special mention (13), substandard (14), doubtful (15), and loss (16). Pass loan grades are required to be reassessed annually or earlier whenever there has been a material change in the financial condition of the borrower or risk characteristics of the relationship. All commercial loans over $1 million and certain commercial loans over $500,000 that are graded 13 or worse are reassessed on a quarterly basis. Loan grading discipline is regularly reviewed internally by Credit Assurance Services to determine if the process continues to result in accurate loan grading across the portfolio. FHN may utilize availability of guarantors/sponsors to support lending decisions during the credit underwriting process and when determining the assignment of internal loan grades. LGD grades are assigned based on a scale of 1-12 and represent FHN’s expected recovery based on collateral type in the event a loan defaults. See Note 5 – Allowance for Loan Losses for further discussion on the credit grading system.

The following tables provide the balances of commercial loan portfolio classes with associated allowance, disaggregated by PD grade as of December 31, 2018 and 2017:



	December 31, 2018
(Dollars in thousands)	General C&I		Loans to Mortgage Companies		TRUPS (a)		Income CRE		Residential CRE		Total		Percentage of Total		Allowance for Loan Losses
PD Grade:
1	$	610,177	$	—	$	—	$	12,586	$	—	$	622,763	3	%	$	100
2	835,776		—		—		1,688		29		837,493		4		274
3	782,362		716,971		—		289,594		147		1,789,074		9		315
4	1,223,092		394,862		43,220		563,243		—		2,224,417		11		686
5	1,920,034		277,814		77,751		798,509		14,150		3,088,258		15		8,919
6	1,722,136		365,341		45,609		657,628		33,759		2,824,473		14		8,141
7	2,690,784		96,603		11,446		538,909		26,135		3,363,877		16		16,906
8	1,337,113		53,224		—		265,901		20,320		1,676,558		8		18,545
9	1,472,852		96,292		45,117		455,184		29,849		2,099,294		10		15,454
10	490,795		13,260		18,536		60,803		3,911		587,305		3		8,675
11	311,967		—		—		66,986		788		379,741		2		7,973
12	244,867		9,379		—		82,574		5,717		342,537		2		6,972
13	285,987		—		5,786		55,408		251		347,432		2		10,094
14,15,16	224,853		—		—		28,835		837		254,525		1		23,307
Collectively evaluated for impairment	14,152,795		2,023,746		247,465		3,877,848		135,893		20,437,747		100		126,361
Individually evaluated for impairment	45,704		—		2,888		1,966		—		50,558		—		1,074
Purchased credit-impaired loans	41,730		—		—		12,730		2,433		56,893		—		2,823
Total commercial loans	$	14,240,229	$	2,023,746	$	250,353	$	3,892,544	$	138,326	$	20,545,198	100	%	$	130,258

(a)

Balances presented net of a $20.2 million valuation allowance. Based on the underlying structure of the notes, the highest possible internal grade was “13” prior to second quarter 2018. In second quarter 2018, this portfolio was re-graded to align with its scorecard grading methodologies which resulted in upgrades to a majority of this portfolio. In 3Q18, FHN sold $55.5 million of TRUPS loans with a $5.0 million valuation allowance. Upon sale, a gain of $3.8 million was recognized in the Non-Strategic segment within Fixed Income in the Consolidated Statement of Income. An additional TRUPS loan with a principal balance of $3.0 million and a valuation of $.3 million was paid off in fourth quarter 2018.



	December 31, 2017
(Dollars in thousands)	General C&I		Loans to Mortgage Companies		TRUPS (a)		Income CRE		Residential CRE		Total		Percentage of Total		Allowance for Loan Losses
PD Grade:
1	$	536,244	$	—	$	—	$	2,500	$	—	$	538,744	3	%	$	70
2	877,635		—		—		1,798		69		879,502		4		339
3	582,224		652,982		—		210,073		40		1,445,319		7		272
4	959,581		629,432		—		309,699		—		1,898,712		9		854
5	1,461,632		328,477		—		415,764		2,474		2,208,347		11		7,355
6	1,668,247		335,169		—		456,706		3,179		2,463,301		12		10,495
7	2,257,400		47,720		—		554,590		9,720		2,869,430		14		13,490
8	1,092,994		35,266		—		241,938		6,454		1,376,652		7		21,831
9	2,633,854		70,915		—		1,630,176		61,475		4,396,420		22		9,804
10	373,537		—		—		43,297		4,590		421,424		2		8,808
11	226,382		—		—		31,785		2,936		261,103		1		6,784
12	409,838		—		—		156,717		6,811		573,366		3		5,882
13	202,613		—		303,848		15,707		268		522,436		3		7,265
14,15,16	228,852		—		—		6,587		823		236,262		1		24,400
Collectively evaluated for impairment	13,511,033		2,099,961		303,848		4,077,337		98,839		20,091,018		99		117,649
Individually evaluated for impairment	39,957		—		3,067		1,612		795		45,431		—		6,176
Purchased credit-impaired loans	99,407		—		—		31,615		4,497		135,519		1		2,813
Total commercial loans	$	13,650,397	$	2,099,961	$	306,915	$	4,110,564	$	104,131	$	20,271,968	100	%	$	126,638


(a)	Balances presented net of a $25.5 million valuation allowance. Based on the underlying structure of the notes, the highest possible internal grade was “13” prior to second quarter 2018. In second quarter 2018, this portfolio was re-graded to align with its scorecard grading methodologies which resulted in upgrades to a majority of this portfolio.

The consumer 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 consumer loan-types, FHN is able to utilize the Fair Isaac Corporation (“FICO”) score, among other attributes, to assess the credit quality of consumer borrowers. FICO scores are refreshed on a quarterly basis in an attempt to reflect the recent risk profile of the borrowers. Accruing delinquency amounts are indicators of asset quality within the credit card and other consumer portfolio.

The following table reflects the percentage of balances outstanding by average, refreshed FICO scores for the HELOC, real estate installment, and permanent mortgage classes of loans as of December 31, 2018 and 2017:



	December 31, 2018						December 31, 2017
	HELOC		R/E Installment Loans		Permanent Mortgage		HELOC		R/E Installment Loans		Permanent Mortgage
FICO score 740 or greater	61.4	%	71.3	%	51.8	%	60.0	%	73.1	%	46.4	%
FICO score 720-739	8.5		8.8		7.6		8.7		8.0		12.8
FICO score 700-719	7.6		7.0		10.6		8.3		6.4		9.2
FICO score 660-699	10.9		7.6		14.7		11.1		7.2		14.8
FICO score 620-659	5.1		2.8		6.5		4.9		2.8		7.3
FICO score less than 620 (a)	6.5		2.5		8.8		7.0		2.5		9.5
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%


(a)	For this group, a majority of the loan balances had FICO scores at the time of the origination that exceeded 620 but have since deteriorated as the loans have seasoned.

Nonaccrual and Past Due Loans

The following table reflects accruing and non-accruing loans by class on December 31, 2018:



	Accruing								Non-Accruing
(Dollars in thousands)	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		Total Loans
Commercial (C&I):
General C&I	$	14,153,275	$	8,234	$	102	$	14,161,611	$	26,325	$	5,537	$	5,026	$	36,888	$	14,198,499
Loans to mortgage companies	2,023,746		—		—		2,023,746		—		—		—		—		2,023,746
TRUPS (a)	247,465		—		—		247,465		—		—		2,888		2,888		250,353
Purchased credit-impaired loans	39,433		624		1,673		41,730		—		—		—		—		41,730
Total commercial (C&I)	16,463,919		8,858		1,775		16,474,552		26,325		5,537		7,914		39,776		16,514,328
Commercial real estate:
Income CRE	3,876,229		626		—		3,876,855		30		—		2,929		2,959		3,879,814
Residential CRE	135,861		—		—		135,861		32		—		—		32		135,893
Purchased credit-impaired loans	13,308		103		1,752		15,163		—		—		—		—		15,163
Total commercial real estate	4,025,398		729		1,752		4,027,879		62		—		2,929		2,991		4,030,870
Consumer real estate:
HELOC	1,443,651		11,653		10,129		1,465,433		49,009		3,314		8,781		61,104		1,526,537
R/E installment loans	4,652,658		10,470		6,497		4,669,625		15,146		1,924		4,474		21,544		4,691,169
Purchased credit-impaired loans	24,096		2,094		5,620		31,810		—		—		—		—		31,810
Total consumer real estate	6,120,405		24,217		22,246		6,166,868		64,155		5,238		13,255		82,648		6,249,516
Permanent mortgage	193,591		2,585		4,562		200,738		11,227		996		9,487		21,710		222,448
Credit card & other:
Credit card	188,009		2,133		1,203		191,345		—		—		—		—		191,345
Other	320,551		3,570		526		324,647		110		60		454		624		325,271
Purchased credit-impaired loans	746		611		397		1,754		—		—		—		—		1,754
Total credit card & other	509,306		6,314		2,126		517,746		110		60		454		624		518,370
Total loans, net of unearned income	$	27,312,619	$	42,703	$	32,461	$	27,387,783	$	101,876	$	11,831	$	34,042	$	147,749	$	27,535,532

(a) TRUPS is presented net of the valuation allowance of $20.2 million.

The following table reflects accruing and non-accruing loans by class on December 31, 2017:



	Accruing								Non-Accruing
(Dollars in thousands)	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		Total Loans
Commercial (C&I):
General C&I	$	13,514,752	$	8,057	$	95	$	13,522,904	$	1,761	$	7,019	$	19,306	$	28,086	$	13,550,990
Loans to mortgage companies	2,099,961		—		—		2,099,961		—		—		—		—		2,099,961
TRUPS (a)	303,848		—		—		303,848		—		—		3,067		3,067		306,915
Purchased credit-impaired loans	77,843		2,207		19,357		99,407		—		—		—		—		99,407
Total commercial (C&I)	15,996,404		10,264		19,452		16,026,120		1,761		7,019		22,373		31,153		16,057,273
Commercial real estate:
Income CRE	4,077,106		1,240		—		4,078,346		56		—		546		602		4,078,948
Residential CRE	98,844		—		—		98,844		—		—		791		791		99,635
Purchased credit-impaired loans	31,173		2,686		2,253		36,112		—		—		—		—		36,112
Total commercial real estate	4,207,123		3,926		2,253		4,213,302		56		—		1,337		1,393		4,214,695
Consumer real estate:
HELOC	1,743,776		17,744		9,702		1,771,222		40,508		3,626		8,354		52,488		1,823,710
R/E installment loans	4,587,156		7,274		3,573		4,598,003		14,439		1,957		2,603		18,999		4,617,002
Purchased credit-impaired loans	35,356		2,016		1,158		38,530		—		—		—		—		38,530
Total consumer real estate	6,366,288		27,034		14,433		6,407,755		54,947		5,583		10,957		71,487		6,479,242
Permanent mortgage	254,040		3,930		3,460		261,430		13,245		1,052		12,093		26,390		287,820
Credit card & other:
Credit card	193,940		1,371		1,053		196,364		—		—		—		—		196,364
Other	415,070		2,666		103		417,839		31		—		165		196		418,035
Purchased credit-impaired loans	2,993		1,693		814		5,500		—		—		—		—		5,500
Total credit card & other	612,003		5,730		1,970		619,703		31		—		165		196		619,899
Total loans, net of unearned income	$	27,435,858	$	50,884	$	41,568	$	27,528,310	$	70,040	$	13,654	$	46,925	$	130,619	$	27,658,929

Certain previously reported amounts have been reclassified to agree with current presentation.

(a) TRUPS is presented net of the valuation allowance of $25.5 million.

Troubled Debt Restructurings

As part of FHN’s 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.

A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that FHN has granted a concession to the borrower. FHN may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future. Many aspects of a borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty. Concessions could include extension of the maturity date, reductions of the interest rate (which may make the rate lower than current market for a new loan with similar risk), reduction or forgiveness of accrued interest, or principal forgiveness. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty, and whether a concession has been granted, are subjective in nature and management’s judgment is required when determining whether a modification is classified as a TDR.

For all classes within the commercial portfolio segment, TDRs are typically modified through forbearance agreements (generally 6 to 12 months). Forbearance agreements could include reduced interest rates, reduced payments, release of guarantor, or entering into short sale agreements. FHN’s proprietary modification programs for consumer loans are generally structured using parameters of U.S. government-sponsored programs such as the former Home Affordable Modification Program (“HAMP”). Within the HELOC and R/E installment loans classes of the consumer portfolio segment, TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 1 percent for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years, the interest rate generally returns to the original interest rate prior to modification; for certain modifications, the modified interest rate increases 2 percent per year until the original interest rate prior to modification is achieved. Permanent mortgage TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 2 percent for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years, the interest rate steps up 1 percent every year until it reaches the Federal Home Loan Mortgage Corporation Weekly Survey Rate cap. Contractual maturities may be extended to 40 years on permanent mortgages and to 30 years for consumer real estate loans. Within the credit card class of the consumer portfolio segment, TDRs are typically modified through either a short-term credit card hardship program or a longer-term credit card workout program. In the credit card hardship program, borrowers may be granted rate and payment reductions for 6 months to 1 year. In the credit card workout program, customers are granted a rate reduction to 0 percent and term extensions for up to 5 years to pay off the remaining balance.

Despite the absence of a loan modification, the discharge of personal liability through bankruptcy proceedings is considered a concession. As a result, FHN classifies all non-reaffirmed residential real estate loans discharged in Chapter 7 bankruptcy as nonaccruing TDRs.

On December 31, 2018 and 2017, FHN had $228.2 million and $234.4 million of portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of $27.7 million, or 12 percent as of December 31, 2018, and $37.3 million, or 16 percent as of December 31, 2017. Additionally, $57.8 million and $63.2 million of loans held-for-sale as of December 31, 2018 and 2017, respectively, were classified as TDRs.

The following tables reflect portfolio loans that were classified as TDRs during the year ended December 31, 2018 and 2017:



	2018					2017
(Dollars in thousands)	Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial (C&I):
General C&I	9	$	27,639	$	27,190	5	$	1,095	$	1,086
Total commercial (C&I)	9	27,639		27,190		5	1,095		1,086
Commercial real estate:
Income CRE	4	643		637		1	199		198
Total commercial real estate	4	643		637		1	199		198
Consumer real estate:
HELOC	103	9,406		9,283		143	12,739		12,422
R/E installment loans	92	8,077		7,848		53	4,092		4,027
Total consumer real estate	195	17,483		17,131		196	16,831		16,449
Permanent mortgage	8	1,001		1,184		34	5,078		5,045
Credit card & other	132	604		570		91	572		550
Total troubled debt restructurings	348	$	47,370	$	46,712	327	$	23,775	$	23,328

The following tables present TDRs which re-defaulted during 2018 and 2017, and as to which the modification occurred 12 months or less prior to the re-default. For purposes of this disclosure, FHN generally defines payment default as 30 or more days past due.



	2018			2017
(Dollars in thousands)	Number	Recorded Investment		Number	Recorded Investment
Commercial (C&I):
General C&I	2	$	579	5	$	11,498
Total commercial (C&I)	2	579		5	11,498
Commercial real estate:
Income CRE	—	—		1	88
Total commercial real estate	—	—		1	88
Consumer real estate:
HELOC	6	239		5	776
R/E installment loans	2	146		—	—
Total consumer real estate	8	385		5	776
Permanent mortgage	6	749		3	715
Credit card & other	49	239		10	77
Total troubled debt restructurings	65	$	1,952	24	$	13,154