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Loans
 3 Months Ended
Mar. 31, 2012
Loans [Abstract]  
Loans

Note 4—Loans

The following table provides the balance of loans by portfolio segment as of March 31, 2012, March 31, 2011 and December 31, 2011:

 

                         
     March 31      December 31  

(Dollars in thousands)

    2012      2011      2011  

Commercial:

                           

Commercial, financial, and industrial

    $ 7,705,153       $ 6,808,163       $ 8,014,927   

Commercial real estate

                           

Income CRE

      1,247,089         1,397,741         1,257,497   

Residential CRE

      99,837         221,113         120,913   

Retail:

                           

Consumer real estate

      5,391,801         5,487,370         5,291,364   

Permanent mortgage

      750,723         1,037,611         787,597   

Credit card & other

      271,730         298,057         284,051   

Restricted real estate loans and secured borrowings(a)

     504,997         722,317         640,778   
    

 

 

     

 

 

     

 

 

  

Loans, net of unearned income

    $ 15,971,330       $ 15,972,372       $ 16,397,127   

Allowance for loan losses

      346,016         589,128         384,351   
    

 

 

     

 

 

     

 

 

  

Total net loans

    $ 15,625,314       $ 15,383,244       $ 16,012,776   
    

 

 

     

 

 

     

 

 

  

 

(a) Balances as of March 31, 2012 and 2011, and December 31, 2011, include $467.0 million, $672.4 million, and $600.2 million of consumer real estate loans and $38.0 million, $49.9 million, and $40.6 million of permanent mortgage loans, respectively.

Components of the Loan Portfolio

For purposes of this disclosure, 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, loans to mortgage companies, and the trust preferred loans ("TRUPs")(i.e., loans to bank and insurance-related businesses) portfolio. Loans to mortgage companies 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 credit card and other portfolio. Retail classes include home equity lines of credit ("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 and secured borrowings include residential real estate loans in both consolidated and nonconsolidated variable interest entities. Restricted real estate loans relate to consolidated securitization trusts and are discussed in Note 13 – Variable Interest Entities. Other real estate loans secure borrowings related to nonconsolidated VIEs and remain on FHN's balance sheet as the securitizations do not qualify for sale treatment.

Concentrations

FHN has a concentration of loans secured by residential real estate (42 percent of total loans), the majority of which is in the consumer real estate portfolio (34 percent of total loans). Additionally, on March 31, 2012, FHN had a sizeable portfolio of bank-related loans, including TRUPs totaling $.6 billion (8 percent of the C&I portfolio, or 4 percent of total loans). While the stronger borrowers in this portfolio class have stabilized, the weaker financial institutions remain under stress due to limited availability of market liquidity and capital, and the impact from economic conditions on these borrowers.

Allowance for Loan Losses

The allowance for loan losses ("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 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, elevated unemployment levels, and both positive and negative portfolio segment-specific trends, 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.

 

Commercial

For commercial loans, reserves are established using historical net loss factors by grade level, loan product, and business segment. An assessment of the quality of individual commercial loans is made utilizing credit grades assigned internally based on a dual grading system which estimates both the probability of default ("PD") and loss severity in the event of default. PD grades range from 1-16 while estimated loss severities, or loss given default ("LGD") grades, range from 1-12. 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 team 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 the 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, the credit risk grading system employs scorecards for particular categories of loans that 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 grading discipline is regularly reviewed by Credit Risk Assurance 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. 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 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. 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. 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 and capacity to support are 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 guarantor's obligation to pay is not considered if the performance was involuntary.

Retail

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 segmented roll-rate models that incorporate various factors including historical delinquency trends, experienced loss frequencies, and experienced loss severities. Generally, reserves for retail loans reflect inherent losses in the portfolio that are expected to be recognized over the following twelve months.

Individually Impaired

Generally, classified nonaccrual commercial loans over $1 million and all commercial and consumer loans classified as troubled debt restructurings ("TDRs") are deemed to be impaired and are individually assessed for impairment measurement 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 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 until such time as a loss is expected and recognized; however, for impaired collateral-dependent loans, FHN will charge off the full difference between the book value and the best estimate of net realizable value. In first quarter 2012, the allowance for TDRs in all consumer portfolio segments was 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 discounted cash flows are then compared to the outstanding principal balance in order to determine required reserves.

The following table provides a rollforward of the allowance for loan losses by portfolio segment for the three months ending March 31, 2012 and 2011:

 

                                                 

(Dollars in thousands)

    C&I     Commercial
Real Estate		     Consumer
Real Estate		     Permanent
Mortgage		     Credit Card
and Other		     Total  

Balance as of January 1, 2011

    $ 239,469      $ 155,085      $ 192,350      $ 65,009      $ 12,886      $ 664,799   

Charge-offs

      (12,059 )      (14,286 )      (47,238 )      (9,417 )      (4,352 )      (87,352 ) 

Recoveries

      1,956        3,315        3,782        550        1,078        10,681   

Provision

      (8,766 )      (20,634 )      30,500        (502 )      402        1,000   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance as of March 31, 2011 (a) (b)

     220,600        123,480        179,394        55,640        10,014        589,128   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance—individually evaluated for impairment

      56,962        11,255        20,968        14,248        449        103,882   

Allowance—collectively evaluated for impairment

      163,638        112,225        158,426        41,392        9,565        485,246   
                                               —     

Loans, net of unearned as of March 31, 2011:

                                                 

Individually evaluated for impairment

      214,167        221,400        78,571        103,890        1,314        619,342   

Collectively evaluated for impairment

      6,593,996        1,397,454        6,081,203        983,634        296,743        15,353,030   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total loans, net of unearned (a) (b)

     6,808,163        1,618,854        6,159,774        1,087,524        298,057        15,972,372   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance as of January 1, 2012

      130,413        55,586        165,077        26,194        7,081        384,351   

Charge-offs

      (6,074 )      (9,619 )      (34,133 )      (4,638 )      (2,619 )      (57,083 ) 

Recoveries

      4,514        496        4,139        523        1,076        10,748   

Provision

      (9,275 )      (414 )      6,564        10,493        632        8,000   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Balance as of March 31, 2012 (a) (b)

     119,578        46,049        141,647        32,572        6,170        346,016   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance—individually evaluated for impairment

      29,148        7,975        32,384        16,639        241        86,387   

Allowance—collectively evaluated for impairment

      90,430        38,074        109,263        15,933        5,929        259,629   

Loans, net of unearned as of March 31, 2012:

                                                 

Individually evaluated for impairment

      157,126        110,123        117,556        102,033        1,028        487,866   

Collectively evaluated for impairment

      7,548,027        1,236,803        5,741,265        686,667        270,702        15,483,464   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total loans, net of unearned (a) (b)

   $ 7,705,153      $ 1,346,926      $ 5,858,821      $ 788,700      $ 271,730      $ 15,971,330   
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a) Balances as of March 31, 2012 and 2011 include $20.1 million and $36.5 million of reserves, respectively, and $467.0 million and $672.4 million of balances in restricted consumer real estate loans and secured borrowings, respectively.
(b) Balances as of March 31, 2012 and 2011 include $5.4 million and $3.3 million of reserves, respectively, and $38.0 million and $49.9 million of balances in restricted permanent mortgage loans and secured borrowings, respectively.

Impaired Loans

The average balance of impaired loans was $483.8 million and $621.1 million for three months ended March 31, 2012 and 2011, respectively. Interest income of approximately $2 million and $1 million was recognized during the three months ended March 31, 2012 and 2011, respectively, related to such impaired loans.

The following tables provide information by class related to individually impaired loans. Recorded investment is defined as the amount of the investment in a loan, before valuation allowance but which does reflect any direct write-down of the investment.

                                         
     March, 31, 2012  

(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

    $ 63,595       $ 80,563       $ —         $ 69,288       $ 203   

TRUPs

      47,000         47,000         —           47,000         —     

Income CRE

      64,190         111,789         —           65,921         77   

Residential CRE

      24,210         41,518         —           24,250         72   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 198,995       $ 280,870       $ —         $ 206,459       $ 352   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Impaired loans with related allowance recorded:

                                             

Commercial:

                                             

General C&I

    $ 12,831       $ 12,993       $ 5,322       $ 13,637       $ 34   

TRUPs

      33,700         33,700         23,825         33,700         —     

Income CRE

      2,208         2,208         446         2,215         15   

Residential CRE

      19,515         19,515         7,530         20,334         —     
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 68,254       $ 68,416       $ 37,123       $ 69,886       $ 49   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Retail:

                                             

HELOC

    $ 52,411       $ 52,411       $ 14,165       $ 51,165       $ 373   

R/E installment loans

      65,145         65,145         18,135         67,676         265   

Permanent mortgage

      102,033         102,033         16,722         87,548         656   

Credit card & other

      1,028         1,028         241         1,073         11   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 220,617       $ 220,617       $ 49,263       $ 207,462       $ 1,305   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total commercial

    $ 267,249       $ 349,286       $ 37,123       $ 276,345       $ 401   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total retail

    $ 220,617       $ 220,617       $ 49,263       $ 207,462       $ 1,305   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total impaired loans

    $ 487,866       $ 569,903       $ 86,386       $ 483,807       $ 1,706   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

                                         
     March 31, 2011  

(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

    $ 90,225       $ 112,750       $ —         $ 66,045       $ 257   

TRUPs

      38,000         38,000         —           33,000         —     

Income CRE

      123,269         200,128         —           115,578         139   

Residential CRE

      64,222         116,748         —           61,812         75   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 315,716       $ 467,626       $ —         $ 276,435       $ 471   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Impaired loans with related allowance recorded:

                                             

Commercial:

                                             

General C&I

    $ 55,942       $ 62,871       $ 29,696       $ 84,741       $ 60   

TRUPs

      30,000         30,000         27,266         30,000         —     

Income CRE

      11,603         11,603         3,378         23,072         —     

Residential CRE

      22,306         22,306         7,877         31,310         —     
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 119,851       $ 126,780       $ 68,217       $ 169,123       $ 60   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Retail:

                                             

HELOC

    $ 30,398       $ 30,398       $ 10,073       $ 27,886       $ 140   

R/E installment loans

      48,173         48,173         10,895         46,286         162   

Permanent mortgage

      103,890         103,890         14,248         100,328         480   

Credit card & other

      1,314         1,314         449         1,039         12   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 183,775       $ 183,775       $ 35,665       $ 175,539       $ 794   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total commercial

    $ 435,567       $ 594,406       $ 68,217       $ 445,558       $ 531   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total retail

    $ 183,775       $ 183,775       $ 35,665       $ 175,539       $ 794   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total impaired loans

    $ 619,342       $ 778,181       $ 103,882       $ 621,097       $ 1,325   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

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

 

Asset Quality Indicators

As previously discussed, FHN employs a dual grade commercial risk grading methodology to assign an estimate for PD and the LGD for each commercial loan, 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. 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. Prior to second quarter 2011, all loans with an assigned PD grade of "12" which is the lowest pass grade were included on the Watch List. In second quarter 2011, FHN implemented an enhanced process for determining which loans warrant additional oversight and monitoring. The identification of Watch List loans is now determined by the appropriate relationship team and is generally driven by specific events that may impact borrowers, rather than being driven solely by the assigned PD grade. This process enhancement did not have a material impact on the allowance for loan losses. 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 no less frequently than annually or 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. 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.

The following tables provide the balances of commercial loan portfolio classes, disaggregated by PD grade as of March 31, 2012 and 2011:

                                                                 
     March 31, 2012  

(Dollars in millions)

    General
C&I		      Loans to
Mortgage
Companies		      TRUPS (a)      Income
CRE		      Residential
CRE		      Total      Percent of
Total		     Allowance
for Loan
Losses		  

PD Grade:

                                                                       

1

    $ 185       $ —         $ —         $ —         $ —         $ 185         2 %    $ —     

2

      189         —           —           3         —           192         2        —     

3

      163         —           —           21         —           184         2        —     

4

      216         —           —           6         —           222         2        —     

5

      384         —           —           31         —           415         5        1   

6

      883         123         —           97         4         1,107         12        4   

7

      886         434         —           214         6         1,540         17        9   

8

      979         367         —           151         —           1,497         16        13   

9

      609         128         —           158         3         898         10        12   

10

      491         19         —           94         2         606         7        9   

11

      464         —           —           125         1         590         7        12   

12

      153         —           —           16         3         172         2        4   

13

      226         —           334         67         8         635         7        12   

14,15,16

      311         —           4         198         29         542         6        53   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Total loans collectively evaluated for impairment

      6,139         1,071         338         1,181         56         8,785         97      129   

Total loans individually evaluated for impairment

      82         —           75         66         44         267         3     37   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Total commercial loans

    $ 6,221       $ 1,071       $ 413       $ 1,247       $ 100       $ 9,052         100 %    $ 166   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

 

                                                                 
     March 31, 2011  

(Dollars in millions)

    General
C&I		      Loans to
Mortgage
Companies		      TRUPS (a)      Income
CRE		      Residential
CRE		      Total      Percent of
Total		     Allowance
for Loan
Losses		  

PD Grade:

                                                                       

1

    $ 89       $ —         $ —         $ —         $ —         $ 89         1 %    $ —     

2

      97         —           —           3         —           100         1        —     

3

      151         —           —           15         —           166         2        —     

4

      194         —           —           7         —           201         2        1   

5

      300         —           —           26         —           326         4        1   

6

      686         44         —           54         1         785         9        7   

7

      841         108         —           107         3         1,059         13        10   

8

      1,073         157         —           174         4         1,408         17        18   

9

      539         74         —           132         6         751         9        19   

10

      411         —           —           108         3         522         6        12   

11

      476         —           —           129         1         606         7        21   

12

      213         —           —           27         7         247         3        9   

13

      358         —           288         143         9         798         10        44   

14,15,16

      414         1         80         338         100         933         11        134   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Total loans collectively evaluated for impairment

      5,842         384         368         1,263         134         7,991         95        276   

Total loans individually evaluated for impairment

      152         —           62         135         87         436         5        68   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Total commercial loans

    $ 5,994       $ 384       $ 430       $ 1,398       $ 221       $ 8,427         100 %    $ 344   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

 

(a) Balances as of March 31, 2012 and 2011 presented net of $34.2 million and $35.6 million respectively lower of cost or market ("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.

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 Corporation ("FICO") score, among other attributes, to assess the 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 also indicators of other retail portfolio asset quality.

The following tables reflect period-end balances and average FICO scores by origination vintage for the HELOC, real estate installment, and permanent mortgage classes of loans as of March 31, 2012 and 2011.

 

 

 

 HELOC                                                

(Dollars in millions)

    March 31, 2012      March 31, 2011  

Origination Vintage

    Period End
Balance (a)		      Avg orig
FICO		      Avg
Refreshed
FICO		      Period End
Balance (a)		      Avg orig
FICO		      Avg Refreshed
FICO		  

pre-2003

    $ 168         722         715       $ 218         724         720   

2003

      259         733         724         308         733         726   

2004

      566         728         718         662         728         721   

2005

      705         734         720         822         734         720   

2006

      524         741         724         610         742         727   

2007

      542         746         731         614         746         732   

2008

      286         755         749         314         755         751   

2009

      170         754         751         199         755         758   

2010

      168         755         755         199         757         757   

2011

      159         760         757         30         752         752   

2012

      35         762         758        

 —

       

 —

       

 —

  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 3,582         740         729       $ 3,976         740         730   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(a) Balances as of March 31, 2012 and 2011 include $467.0 million and $672.4 million of restricted loan and secured borrowing balances.

 

 

 R/E Installment Loans                                                
(Dollars in millions)    March 31, 2012      March 31, 2011  

Origination Vintage

    Period End
Balance		      Avg orig
FICO		      Avg
Refreshed
FICO		      Period End
Balance		      Avg orig
FICO		      Avg Refreshed
FICO		  

pre-2003

    $ 51         689         685       $ 75         694         687   

2003

      147         722         730         206         724         732   

2004

      91         709         707         120         713         710   

2005

      254         720         713         322         722         713   

2006

      278         720         704         353         722         706   

2007

      389         729         712         489         731         715   

2008

      144         733         724         195         738         729   

2009

      85         750         748         125         753         752   

2010

      187         746         756         215         748         748   

2011

      462         761         758         84         755         754   

2012

      188         765         767        

 —

       

 —

       

 —

  
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 2,276         737         729       $ 2,184         730         722   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

 Permanent Mortgage                                                
(Dollars in millions)    March 31, 2012      March 31, 2011  

Origination Vintage

    Period End
Balance (a)		      Avg orig
FICO		      Avg
Refreshed
FICO		      Period End
Balance (a)		      Avg orig
FICO		      Avg Refreshed
FICO		  

pre-2004

    $ 153         725         733       $ 146         724         736   

2004

      10         722         696         13         717         701   

2005

      54         739         718         64         737         719   

2006

      75         737         708         130         726         685   

2007

      390         734         700         395         726         678   

2008

      107         744         712         340         728         678   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 789         734         711       $ 1,088         727         693   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(a) Balances as of March 31, 2012 and 2011 include $38.0 million and $49.9 million of restricted loan and secured borrowing balances.

 

The following table reflects accruing delinquency amounts for the credit card and other portfolio classes.

 

                                 
     Credit Card      Other  

(Dollars in millions)

    March 31, 2012      March 31, 2011      March 31, 2012      March 31, 2011  

Accruing delinquent balances:

                                    

30-89 days past due

    $ 1.4       $ 1.7       $ 0.5       $ 0.9   

90+ days past due

      1.4         1.4         0.1         —     
    

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 2.8       $ 3.1       $ 0.6       $ 0.9   
    

 

 

     

 

 

     

 

 

     

 

 

  

Nonaccrual and Past Due Loans

For all portfolio segments and classes, 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 on a case-by-case basis if FHN continues to receive principal and interest payments, but there are atypical loan structures or other borrower-specific issues. FHN does have a meaningful portion of loans that are classified as nonaccrual but where it continues to receive payments.

The following table reflects accruing and non-accruing loans by class on March 31, 2012:

 

                                                                         
     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

    $ 6,112,259       $ 29,520       $ 540       $ 6,142,319       $ 35,470       $ 13,202       $ 30,608       $ 79,280       $ 6,221,599   

Loans to mortgage companies

      1,070,581         —           —           1,070,581         —           —           —           —           1,070,581   

TRUPs (a)

      338,180         —           —           338,180         —           —           74,793         74,793         412,973   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total commercial (C&I)

      7,521,020         29,520         540         7,551,080         35,470         13,202         105,401         154,073         7,705,153   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Commercial real estate:

                                                                                 

Income CRE

      1,168,182         9,160         —           1,177,342         23,289         2,701         43,757         69,747         1,247,089   

Residential CRE

      55,081         1,057         —           56,138         22,958         2,713         18,028         43,699         99,837   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total commercial real estate

      1,223,263         10,217         —           1,233,480         46,247         5,414         61,785         113,446         1,346,926   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Consumer real estate:

                                                                                 

HELOC (b)

      3,482,488         34,419         23,398         3,540,305         26,822         6,426         8,901         42,149         3,582,454   

R/E installment loans

      2,226,170         21,185         9,834         2,257,189         11,097         1,561         6,520         19,178         2,276,367   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total consumer real estate

      5,708,658         55,604         33,232         5,797,494         37,919         7,987         15,421         61,327         5,858,821   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Permanent mortgage (b)

     735,156         8,454         8,900         752,510         14,401         987         20,802         36,190         788,700   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Credit card & other

                                                                                 

Credit card

      179,744         1,368         1,456         182,568         —           —           —           —           182,568   

Other

      86,425         533         65         87,023         4         —           2,135         2,139         89,162   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total credit card & other

      266,169         1,901         1,521         269,591         4         —           2,135         2,139         271,730   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans, net of unearned

   $ 15,454,266       $ 105,696       $ 44,193       $ 15,604,155       $ 134,041       $ 27,590       $ 205,544       $ 367,175       $ 15,971,330   
    

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(a) Includes LOCOM valuation allowance $34.2 million.
(b) Includes restricted real estate loans and secured borrowings.

 

The following table reflects accruing and non-accruing loans by class on March 31, 2011:

 

                                                                         
     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

    $ 5,813,511      $ 29,641       $ 1,478      $ 5,844,630      $ 85,803      $ 5,867      $ 58,623      $ 150,293      $ 5,994,923   

Loans to mortgage companies

      382,891        —           —          382,891        —          —          821        821        383,712   

TRUPs (a)

     367,291        —           —          367,291        —          —          62,237        62,237        429,528   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial (C&I)

      6,563,693        29,641         1,478        6,594,812        85,803        5,867        121,681        213,351        6,808,163   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Commercial real estate:

                                                                          

Income CRE

      1,241,297        15,648         60        1,257,005        35,308        5,892        99,536        140,736        1,397,741   

Residential CRE

      116,582        11,235         —          127,817        31,032        9,727        52,537        93,296        221,113   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial real estate

      1,357,879        26,883         60        1,384,822        66,340        15,619        152,073        234,032        1,618,854   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Consumer real estate:

                                                                          

HELOC (b)

     3,883,059        44,569         28,294        3,955,922        11,179        1,087        7,441        19,707        3,975,629   

R/E installment loans

      2,122,291        26,809         14,667        2,163,767        17,361        1,699        1,318        20,378        2,184,145   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer real estate

      6,005,350        71,378         42,961        6,119,689        28,540        2,786        8,759        40,085        6,159,774   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Permanent mortgage (b)

     894,682        30,734         27,692        953,108        29,650        4,295        100,471        134,416        1,087,524   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Credit card & other

                                                                          

Credit card

      185,265        1,658         1,443        188,366        —          —          —          —          188,366   

Other

      93,528        870         29        94,427        7        —          15,257        15,264        109,691   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total credit card & other

      278,793        2,528         1,472        282,793        7        —          15,257        15,264        298,057   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total loans, net of unearned

   $ 15,100,397      $ 161,164       $ 73,663      $ 15,335,224      $ 210,340      $ 28,567      $ 398,241      $ 637,148      $ 15,972,372   
    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a) Includes LOCOM valuation allowance of $35.6 million.
(b) Includes restricted real estate loans and secured borrowings.

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. FHN considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. As such, qualification criteria and payment terms consider the borrower's current and prospective ability to comply with the modified terms of the loan.

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 difficultly 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, particularly as it relates to commercial borrowers due to the complex nature of loan structures, business/industry risk and borrower/guarantor structures. Concessions could include reductions of interest rates, extension of the maturity date at a rate lower than current market rate for a new loan with similar risk, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, FHN also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate FHN for the restructured terms. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management's judgment is required when determining whether a modification is classified as a TDR.

Although each occurrence is unique to the borrower and is evaluated separately, for all classes within the commercial portfolio segment, TDRs are typically modified through forbearance agreements (generally 3 to 6 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 Home Affordable Modification Programs ("HAMP"). Within the HELOC, R/E installment loans, and permanent mortgage 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 ratio. Contractual maturities may be extended up to 40 years on permanent mortgages and up to 20 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. On March 31, 2012 and 2011, FHN had $303.3 million and $285.1 million portfolio loans classified as TDRs, respectively. For TDRs in the loan portfolio, FHN had loan loss reserves of $49.9 million and $42.0 million, or 16 percent and 15 percent of TDR balances, as of March 31, 2012 and 2011, respectively. Additionally, FHN had restructured $126.3 million and $62.6 million of loans held for sale as of March 31, 2012 and 2011, respectively. The rise in TDRs from 2011 resulted from increased loan modifications of troubled borrowers in an attempt to prevent foreclosure and to mitigate losses to FHN.

 

The following table reflects modifications of portfolio loans occurring during the quarter ending March 31, 2012, that have been classified as TDRs:

 

 

                         
     March 31, 2012  

(Dollars in thousands)

    Number      Pre-Modification
Outstanding
Recorded Investment		      Post-Modification
Outstanding
Recorded Investment		  

Commercial (C&I):

                           

General C&I

      4       $ 583       $ 576   

Loans to Mortgage Companies

      —           —           —     

TRUPs

      —           —           —     
    

 

 

     

 

 

     

 

 

  

Total commercial (C&I)

      4         583         576   
    

 

 

     

 

 

     

 

 

  

Commercial real estate:

                           

Income CRE

      3         7,961         7,829   

Residential CRE

      1         50         50   
    

 

 

     

 

 

     

 

 

  

Total commercial real estate

      4         8,011         7,879   
    

 

 

     

 

 

     

 

 

  

Consumer real estate:

                           

HELOC

      34         4,081         4,073   

R/E installment loans

      59         7,543         7,611   
    

 

 

     

 

 

     

 

 

  

Total consumer real estate

      93         11,624         11,684   
    

 

 

     

 

 

     

 

 

  

Permanent mortgage

      38         29,893         30,064   
    

 

 

     

 

 

     

 

 

  

Credit card & other:

                           

Credit card

      22         91         87   

Other

      —           —           —     
    

 

 

     

 

 

     

 

 

  

Total credit card & other

      22         91         87   
    

 

 

     

 

 

     

 

 

  

Total troubled debt restructurings

      161       $ 50,202       $ 50,290   
    

 

 

     

 

 

     

 

 

  

 

The following table reflects receivables that became classified as TDRs within the previous 12 months for which there was a payment default during the quarter ending March 31, 2012. Financing receivables that became classified as TDRs within the previous 12 months and for which there was a payment default during the period are calculated by first identifying TDRs that defaulted during the period and then determining whether they were modified within the 12 months prior to the default. For purposes of this disclosure, FHN defines payment default as generally 30 plus days past due.

                 
     March 31, 2012  

(Dollars in thousands)

    Number      Recorded Investment  

Commercial (C&I):

                  

General C&I

      7       $ 3,990   

Loans to Mortgage Companies

      —           —     

TRUPs

      —           —     
    

 

 

     

 

 

  

Total commercial (C&I)

      7         3,990   
    

 

 

     

 

 

  

Commercial real estate:

                  

Income CRE

      5         2,358   

Residential CRE

      1         50   
    

 

 

     

 

 

  

Total commercial real estate

      6         2,408   
    

 

 

     

 

 

  

Consumer real estate:

                  

HELOC

      10         1,210   

R/E installment loans

      18         1,706   
    

 

 

     

 

 

  

Total consumer real estate

      28         2,916   
    

 

 

     

 

 

  

Permanent mortgage

      —           —     
    

 

 

     

 

 

  

Credit card & other:

                  

Credit card

      11         36   

Other

      —           —     
    

 

 

     

 

 

  

Total credit card & other

      11         36   
    

 

 

     

 

 

  

Total troubled debt restructurings

      52       $ 9,350   
    

 

 

     

 

 

  

The determination of whether a TDR is placed on nonaccrual status generally follows the same internal policies and procedures as other portfolio loans. However, FHN will typically place a consumer loan on nonaccrual status if it is 30 or more days delinquent upon modification into a TDR. For commercial loans, nonaccrual TDRs that are reasonably assured of repayment according to their modified terms may be returned to accrual status by FHN upon a detailed credit evaluation of the borrower's financial condition and prospects for repayment under the revised terms. For consumer loans, FHN's evaluation supporting the decision to return a modified loan to accrual status includes consideration of the borrower's 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. FHN may also consider a borrower's sustained historical repayment performance for a reasonable time prior to the restructuring in assessing whether the borrower can meet the restructured terms, as it may indicate that the borrower is capable of servicing the level of debt under the modified terms. Otherwise, FHN will continue to classify restructured loans as nonaccrual. Consistent with regulatory guidance, upon sustained performance and classification as a TDR over FHN's year-end, the loan will be removed from TDR status as long as the modified terms were market-based at the time of modification.