Exhibit 99.2

CONSOLIDATED STATEMENTS OF CONDITION

		December 31
(Dollars in thousands)		2009				2008
Assets:
Cash and due from banks (Note 18)		$	465,712			$	552,423
Federal funds sold and securities purchased under agreements to resell			452,883				772,357
Total cash and cash equivalents			918,595				1,324,780
Interest-bearing cash			539,300				207,792
Trading securities			699,900				945,766
Loans held for sale			452,501				566,654
Securities available for sale (Note 3)			2,694,468				3,125,153
Loans, net of unearned income (Note 4)			18,123,884				21,278,190
Less: Allowance for loan losses			896,914				849,210
Total net loans			17,226,970				20,428,980
Mortgage servicing rights, net (Note 6)			302,611				376,844
Goodwill (Note 7)			165,528				192,408
Other intangible assets, net (Note 7)			38,256				45,082
Capital markets receivables			334,404				1,178,932
Premises and equipment, net (Note 5)			313,824				333,931
Real estate acquired by foreclosure			125,190				125,538
Other assets			2,257,131				2,170,120
Total assets		$	26,068,678			$	31,021,980
Liabilities and equity:
Deposits:
Savings		$	4,847,709			$	4,824,939
Time deposits			1,895,992				2,294,644
Other interest-bearing deposits			3,169,474				1,783,362
Certificates of deposit $100,000 and more			559,944				1,382,236
Interest-bearing			10,473,119				10,285,181
Noninterest-bearing			4,394,096				3,956,633
Total deposits			14,867,215				14,241,814
Federal funds purchased and securities sold under agreements to repurchase (Note 9)			2,874,353				1,751,079
Trading liabilities (Note 9)			293,387				359,502
Other short-term borrowings and commercial paper (Note 9)			761,758				4,279,689
Term borrowings			2,190,544				4,022,297
Other collateralized borrowings			700,589				745,363
Total long-term debt (Note 10)			2,891,133				4,767,660
Capital markets payables			292,975				1,115,428
Other liabilities			785,389				932,176
Total liabilities			22,766,210				27,447,348
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 and 2008) (Note 12)			798,685				782,680
Common stock — $.625 par value (shares authorized - 400,000,000; shares issued — 236,098,435 on December 31, 2009 and 234,784,332 on December 31, 2008) *			138,738				128,302
Capital surplus			1,208,649				1,048,602
Capital surplus common stock warrant — CPP (Note 12)			83,860				83,860
Undivided profits			891,580				1,387,854
Accumulated other comprehensive loss, net (Note 15)			(114,209	)			(151,831	)
Total First Horizon National Corporation Shareholders’ Equity			3,007,303				3,279,467
Noncontrolling interest (Note 12)			295,165				295,165
Total equity			3,302,468				3,574,632
Total liabilities and equity		$	26,068,678			$	31,021,980

See accompanying notes to consolidated financial statements.

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

CONSOLIDATED STATEMENTS OF INCOME

		Year Ended December 31
(Dollars in thousands except per share data)		2009				2008				2007
Interest income:
Interest and fees on loans		$	769,748			$	1,153,546			$	1,621,881
Interest on investment securities			141,853				162,306				188,733
Interest on loans held for sale			25,811				151,554				253,587
Interest on trading securities			53,162				114,625				174,188
Interest on other earning assets			2,365				24,694				67,570
Total interest income			992,939				1,606,725				2,305,959
Interest expense:
Interest on deposits:
Savings			38,886				79,921				115,954
Time deposits			60,857				101,225				136,571
Other interest-bearing deposits			5,012				13,863				25,852
Certificates of deposit $100,000 and more			27,709				76,293				369,313
Interest on trading liabilities			20,869				33,195				51,516
Interest on short-term borrowings			12,955				189,568				294,074
Interest on long-term debt			50,183				217,578				372,037
Total interest expense			216,471				711,643				1,365,317
Net interest income			776,468				895,082				940,642
Provision for loan losses			880,000				1,080,000				272,765
Net interest income/(loss) after provision for loan losses			(103,532	)			(184,918	)			667,877
Noninterest income:
Capital markets			632,093				483,526				284,236
Mortgage banking			235,450				518,034				69,454
Deposit transactions and cash management			163,761				179,034				175,271
Trust services and investment management			29,482				33,821				40,335
Brokerage management fees and commissions			26,934				32,234				37,830
Insurance commissions			25,248				29,104				31,739
Debt securities gains, net			—				761				6,292
Equity securities gains/(losses), net			(1,178	)			65,349				(7,475	)
Gains/(losses) on divestitures			(9,183	)			(19,019	)			15,695
All other income and commissions (Note 14)			152,236				145,546				162,149
Total noninterest income			1,254,843				1,468,390				815,526
Adjusted gross income after provision for loan losses			1,151,311				1,283,472				1,483,403
Noninterest expense:
Employee compensation, incentives, and benefits			777,581				928,982				932,443
Repurchase and foreclosure provision			147,772				29,503				17,181
Foreclosed real estate			66,197				21,471				7,581
Legal and professional fees			66,121				62,173				52,879
Occupancy			65,402				103,573				129,626
Operations services			62,485				72,602				69,460
Deposit insurance premiums			46,272				14,664				3,327
Contract employment			36,217				33,515				21,510
Equipment rentals, depreciation, and maintenance			34,305				56,744				72,402
Communications and courier			26,960				38,183				41,965
Computer software			26,883				30,318				53,860
Miscellaneous loan costs			23,050				38,221				12,783
Amortization of intangible assets			6,017				8,229				10,489
Goodwill impairment			2,294				—				84,084
All other expense (Note 14)			184,289				174,136				267,486
Total noninterest expense			1,571,845				1,612,314				1,777,076
Loss before income taxes			(420,534	)			(328,842	)			(293,673	)
Benefit for income taxes (Note 16)			(174,945	)			(154,405	)			(139,909	)
Loss from continuing operations			(245,589	)			(174,437	)			(153,764	)
Income/(loss) from discontinued operations, net of tax			(12,846	)			(3,534	)			2,453
Net loss			(258,435	)			(177,971	)			(151,311	)
Net income attributable to noncontrolling interest			11,402				14,016				18,835
Net loss attributable to controlling interest		$	(269,837	)		$	(191,987	)		$	(170,146	)
Preferred stock dividends			59,585				7,413				—
Net loss available to common shareholders		$	(329,422	)		$	(199,400	)		$	(170,146	)
Loss per common share from continuing operations (Note 17)		$	(1.35	)		$	(0.95	)		$	(1.14	)
Diluted loss per common share from continuing operations (Note 17)		$	(1.35	)		$	(0.95	)		$	(1.14	)
Loss per share available to common shareholders (Note 17)		$	(1.41	)		$	(0.96	)		$	(1.13	)
Diluted loss per share available to common shareholders (Note 17)		$	(1.41	)		$	(0.96	)		$	(1.13	)
Weighted average common shares (Note 17)			234,431				206,681				151,060
Diluted average common shares (Note 17)			234,431				206,681				151,060

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF EQUITY

																														Accumulated
																														Other
		Common								Preferred Stock -				Common				Capital				Capital Surplus -				Undivided				Comprehensive				Noncontrolling
(Amounts in thousands)		Shares				Total				Capital Surplus				Stock				Surplus				Warrants				Profits				Income/(Loss)				Interest
Balance, December 31, 2006			124,866			$	2,757,660				—			$	78,041			$	312,521				—			$	2,144,276				($72,448	)		$	295,270
REIT preferred stock issuance			—				7				—				—				—				—				—				—				7
Adjustment to reflect change in accounting for tax benefits (ASC 740)			—				(862	)			—				—				—				—				(862	)			—				—
Adjustment to reflect change in accounting for purchases of life insurance (ASC 325-30)			—				(548	)			—				—				—				—				(548	)			—				—
Effects of changing pension and postretirement plans measurement dates pursuant to ASC 715:
Service cost, interest cost, and expected return on plan assets for October 1 — December 31, net of tax			—				(711	)			—				—				—				—				(711	)			—				—
Amortization of prior service cost, transition asset/obligation, and net actuarial gain/loss for October 1 — December 31, net of tax			—				—				—				—				—				—				(1,366	)			1,366				—
Additional gain for October 1 — December 31, net of tax			—				6,944				—				—				—				—				—				6,944				—
Beginning balance, as adjusted			124,866				2,762,490				—				78,041				312,521				—				2,140,789				(64,138	)			295,277
Net income/(loss)			—				(151,311	)			—				—				—				—				(170,146	)			—				18,835
Other comprehensive income/(loss):
Unrealized fair value adjustments, net of tax:
Cash flow hedges			—				(344	)			—				—				—				—				—				(344	)			—
Securities available for sale			—				13,700				—				—				—				—				—				13,700				—
Pension and postretirement plans:
Prior service cost arising during period			—				(95	)			—				—				—				—				—				(95	)			—
Net actuarial gain/(loss) arising during period			—				(2,284	)			—				—				—				—				—				(2,284	)			—
Amortization of prior service cost, transition asset/obligation, and net actuarial gain/loss included in net periodic benefit cost			—				5,060				—				—				—				—				—				5,060				—
Comprehensive income/(loss)			—				(135,274	)			—				—				—				—				(170,146	)			16,037				18,835
Cash dividends declared ($1.50/share) (a)			—				(227,722	)			—				—				—				—				(227,722	)			—				—
Common stock repurchased			(27	)			(1,114	)			—				(17	)			(1,097	)			—				—				—				—
Common stock issued for:
Stock options and restricted stock			1,384				33,736				—				865				32,871				—				—				—				—
Tax benefit from incentive plans			—				6,258				—				—				6,258				—				—				—				—
Stock-based compensation expense			—				11,338				—				—				11,338				—				—				—				—
Dividends paid to noncontrolling interest of subsidiary preferred stock			—				(18,835	)			—				—				—				—								—				(18,835	)
Other			143				(4	)			—				90				(65	)			—				(29	)			—				—
Balance, December 31, 2007			126,366				2,430,873				—				78,979				361,826				—				1,742,892				(48,101	)			295,277
Adjustment to reflect change in accounting for split dollar life insurance (ASC 715-60)			—				(8,530	)			—				—				—				—				(8,530	)			—				—
Adjustment to reflect change in accounting for fair value of interest rate lock commitments (ASC 820)			—				(12,502	)			—				—				—				—				(12,502	)			—				—
Beginning balance, as adjusted			126,366				2,409,841				—				78,979				361,826				—				1,721,860				(48,101	)			295,277
Net income/(loss)			—				(177,971	)			—				—				—				—				(191,987	)			—				14,016
Other comprehensive income/(loss):
Unrealized fair value adjustments, net of tax:
Cash flow hedges			—				(6	)			—				—				—				—				—				(6	)			—
Securities available for sale			—				21,852				—				—				—				—				—				21,852				—
Pension and postretirement plans:
Prior service cost arising during period			—				(37	)			—				—				—				—				—				(37	)			—
Net actuarial gain/(loss) arising during period			—				(127,960	)			—				—				—				—				—				(127,960	)			—
Amortization of prior service cost, transition asset/obligation, and net actuarial gain/(loss) included in net periodic benefit cost			—				2,421				—				—				—				—				—				2,421				—
Comprehensive income/(loss)			—				(281,701	)			—				—				—				—				(191,987	)			(103,730	)			14,016
Preferred stock and common stock warrant issuance — CPP			—				866,540				782,680				—				—				83,860				—				—				—
REIT preferred stock redemption			—				(112	)			—				—				—				—				—				—				(112	)
Cash dividends declared ($.33/share) (a)			—				(64,401	)			—				—				—				—				(64,401	)			—				—
Stock dividends declared			9,689				—				—				6,056				71,525				—				(77,581	)			—				—
Common stock issuance (69 million shares issued at $10 per share net of offering costs)			69,000				659,656				—				43,125				616,531				—				—				—				—
Common stock repurchased			—				(306	)			—				(19	)			(287	)			—				—				—				—
Common stock issued for:
Stock options and restricted stock — equity awards			258				(1,956	)			—				128				(2,084	)			—				—				—				—
Tax benefit from incentive plans			—				(7,910	)			—				—				(7,910	)			—				—				—				—
Stock-based compensation expense			—				9,034				—				—				9,034				—				—				—				—
Dividends paid to noncontrolling interest of subsidiary preferred stock			—				(14,016	)			—				—				—				—								—				(14,016	)
Other			(30	)			(37	)			—				33				(33	)			—				(37	)			—				—
Balance, December 31, 2008			205,283				3,574,632				782,680				128,302				1,048,602				83,860				1,387,854				(151,831	)			295,165
Net income/(loss)			—				(258,435	)			—				—				—				—				(269,837	)			—				11,402
Other comprehensive income/(loss):
Unrealized fair value adjustments, net of tax:
Securities available for sale			—				22,614				—				—				—				—				—				22,614				—
Pension and postretirement plans:
Prior service cost arising during period			—				10,829				—				—				—				—				—				10,829				—
Net actuarial gain/(loss) arising during period (b)			—				3,541				—				—				—				—				—				3,541				—
Amortization of prior service cost, transition asset/obligation, and net actuarial gain/(loss) included in net periodic benefit cost			—				638				—				—				—				—				—				638				—
Comprehensive income/(loss)			—				(220,813	)			—				—				—				—				(269,837	)			37,622				11,402
Preferred stock — (CPP) accretion			—				16,005				16,005				—				—				—				—				—				—
Preferred stock — (CPP) dividends			—				(59,543	)			—				—				—				—				(59,543	)			—				—
Stock dividends declared			15,532				—				—				9,708				157,398				—				(167,106	)			—				—
Common stock repurchased			—				(392	)			—				(22	)			(370	)			—				—				—				—
Common stock issued for:
Stock options and restricted stock — equity awards			1,200				2,015				—				750				1,265				—				—				—				—
Tax benefit from incentive plans			—				(5,701	)			—				—				(5,701	)			—				—				—				—
Stock-based compensation expense			—				7,455				—				—				7,455				—				—				—				—
Dividends paid to noncontrolling interest of subsidiary preferred stock			—				(11,402	)			—				—				—				—				—				—				(11,402	)
Other changes in equity			(35	)			212				—				—				—				—				212				—				—
Balance, December 31, 2009		$	221,980			$	3,302,468			$	798,685			$	138,738			$	1,208,649			$	83,860			$	891,580				($114,209	)		$	295,165

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year Ended December 31
(Dollars in thousands)		2009				2008				2007
Operating Activities
Net loss		$	(258,435	)		$	(177,971	)		$	(151,311	)
Adjustments to reconcile net loss to net cash provided/(used) by operating activities:
Provision for loan losses			880,000				1,080,000				272,765
Benefit for deferred income tax			(173,900	)			(411,429	)			(215,294	)
Depreciation and amortization of premises and equipment			32,538				41,278				57,125
Amortization of intangible assets			6,017				8,229				10,959
Net other amortization and accretion			43,176				47,941				63,550
Decrease/(increase) in derivatives, net			186,578				(110,044	)			62,278
Market value adjustment on mortgage servicing rights			(67,817	)			422,561				238,236
Repurchase and foreclosure provision			147,772				29,503				17,181
Fair value adjustment for real estate losses			34,924				4,393				2,100
Goodwill impairment			16,591				—				84,084
Impairment of other intangible assets			341				4,034				990
(Gains)/losses on divestitures			9,183				19,020				(15,695	)
Stock-based compensation expense			7,455				9,034				11,338
Excess tax benefit/(provision) from stock-based compensation arrangements			5,701				7,910				(6,258	)
Equity securities (gains)/losses, net			1,178				(65,349	)			7,475
Debt securities gains, net			—				(761	)			(6,292	)
Gains on repurchases of debt			(16,412	)			(33,845	)			—
Net losses on disposal of fixed assets			8,749				3,218				1,753
Net (increase)/decrease in:
Trading securities			181,872				782,470				461,982
Loans held for sale			114,153				2,926,558				(588,135	)
Capital markets receivables			844,528				(654,513	)			207,863
Interest receivable			15,061				46,314				18,678
MSR due to sale			87,274				256,323				90,074
Other assets			(230,811	)			(224,416	)			(189,834	)
Net increase/(decrease) in:
Capital markets payables			(822,453	)			529,070				(213,131	)
Interest payable			(31,144	)			(51,765	)			(8,739	)
Other liabilities			(171,732	)			(16,018	)			152,163
Trading liabilities			(66,115	)			(196,642	)			(233,813	)
Total adjustments			1,042,707				4,453,074				283,403
Net cash provided by operating activities			784,272				4,275,103				132,092
Investing Activities
Held to maturity securities:
Maturities			—				240				29
Available for sale securities:
Sales			48,743				157,984				653,627
Maturities			710,652				592,776				847,174
Purchases			(287,464	)			(729,984	)			(573,426	)
Premises and equipment:
Purchases			(21,180	)			(23,666	)			(33,539	)
Net (increase)/decrease in:
Securitization retained interests classified as trading securities			63,994				(47,336	)			—
Loans			2,259,477				418,985				(754,806	)
Interest-bearing cash			(331,508	)			(168,370	)			(21,381	)
Cash (payments)/receipts related to divestitures			803				(40,608	)			23,318
Net cash provided/(used) by investing activities			2,443,517				160,021				140,996
Financing Activities
Common stock:
Exercise of stock options			3				511				34,542
Cash dividends paid			—				(120,575	)			(225,011	)
Repurchase of shares			(392	)			(303	)			(1,104	)
Issuance of common shares			—				659,656				—
Issuance of preferred equity and common stock warrant — CPP			—				866,540				—
Excess tax benefit from stock-based compensation arrangements			(5,701	)			(7,910	)			6,258
Cash dividends paid — preferred stock — CPP			(43,447	)			—				—
Cash dividends paid — preferred stock — noncontrolling interest			(12,741	)			(14,459	)			(18,890	)
Long-term debt:
Issuance			—				25,002				1,230,171
Payments/Maturities			(1,600,613	)			(1,969,207	)			(292,288	)
Cash paid for repurchase of debt			(201,858	)			(244,928	)			—
Issuance of preferred stock of subsidiary			—				—				8
Repurchase of preferred stock of subsidiary			—				(112	)			(1	)
Net increase/(decrease) in:
Deposits			625,432				(2,321,483	)			(2,956,271	)
Short-term borrowings			(2,394,657	)			(2,242,791	)			2,063,121
Net cash used by financing activities			(3,633,974	)			(5,370,059	)			(159,465	)
Net increase/(decrease) in cash and cash equivalents			(406,185	)			(934,935	)			113,623
Cash and cash equivalents at beginning of period			1,324,780				2,259,715				2,146,092
Cash and cash equivalents at end of period		$	918,595			$	1,324,780			$	2,259,715
Total interest paid			246,832				761,130				1,374,583
Total income taxes paid		$	109,242			$	336,681			$	13,052

See accompanying notes to consolidated financial statements.

Notes to Consolidated Financial Statements

Note 1 — 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.

Subsequent Events. Events occurring after the date of the Consolidated Statements of Condition but before the issuance of the financial statements included in this filing have been evaluated through the time of this filing.

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. 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.

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 as “Capital markets receivables” or “Capital markets payables.” Retained interests, in the form of excess interest, interest-only and principal-only strips, and subordinated securities 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. Retained interests, in the form of certificated residual interests from the securitization of second lien mortgages and home equity lines of credit (“HELOC”) are 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.

Note 1 — Summary of Significant Accounting Policies (continued)

Investment Securities. Investment securities are reviewed quarterly for possible other-than-temporary impairment. 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. Following adoption of the provisions of the FASB Codification update to FASB Accounting Standards Codification (ASC) 820 on January 1, 2008, unrealized gains and losses on such securities are recognized prospectively in noninterest income. Prior to FHN’s adoption of the provisions of the Codification update to ASC 820, venture capital investments were initially valued at cost based on their unmarketable nature. Subsequently, these investments were adjusted to reflect changes in valuation as a result of public offerings or other-than-temporary declines in value.

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.

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. Securities delivered under these transactions are delivered to either the dealer custody account at the Federal Reserve Bank or to the applicable counterparty. Collateral is valued daily and FHN may require counterparties to deposit additional collateral or FHN may return collateral pledged when appropriate to maintain full collateralization for these transactions.

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. As of December 31, 2009 and 2008, FHN had pledged $1.5 billion and $1.2 billion, respectively, of available for sale securities as collateral for these arrangements.

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 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 second lien mortgages and HELOC it produced in the secondary market through securitizations and loan sales through third quarter 2007. Loan securitizations involve the transfer of the loans to qualifying special purposes entities (“QSPE”) that are not subject to consolidation in accordance with ASC 860, “Transfers and Servicing”. Generally, FHN retained the right to service the transferred loans. 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.

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

Note 1 — Summary of Significant Accounting Policies (continued)

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 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.

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, and December 31, 2008, 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.

Note 1 — Summary of Significant Accounting Policies (continued)

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.

Loans. Loans are stated at principal amounts outstanding, net of unearned income. 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. Loans are ordinarily placed on nonaccrual status when, in management’s opinion, the collection of principal or interest is unlikely. Accrued but uncollected interest is reversed and charged against interest income when the loan is placed on nonaccrual status. On retail loans, 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. 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.

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.

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. Management’s evaluation process to determine the adequacy of the allowance utilizes analytical models based on loss experience subject to adjustment to reflect current events, trends, and conditions (including economic considerations and trends). The actual amounts realized could differ in the near future from the amounts assumed in arriving at the allowance for loan losses reported in the financial statements.

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, 2009, FHN had $11.5 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. For the year ended December 31, 2007, as a result of impairment assessments completed in relation to two full-service First Horizon Bank branches sold as part of FHN’s restructuring, repositioning, and efficiency initiatives, a goodwill impairment of $13.0 million and impairments of other intangible assets of $.9 million were recognized. Additionally, in fourth quarter 2007, FHN incurred a noncash impairment charge of $71.1 million for the writedown of goodwill associated with the non-strategic business segment. 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. See Note 26 – Restructuring, Repositioning, and Efficiency Initiatives for additional information regarding the impairments of other intangible assets during 2008 and the impairments of goodwill and other intangible assets during 2007 and 2009. See Note 7 – Intangible Assets for additional information regarding the goodwill impairment charge recognized by the non-strategic segment in 2007.

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, 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.

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.

Note 1 — Summary of Significant Accounting Policies (continued)

FHN adopted the provisions of a Codification update to ASC 740 on January 1, 2007. As a result of the implementation of the provisions of the Codification update, FHN recognized a $.9 million increase in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of undivided profits. The total balance of unrecognized tax benefits at December 31, 2009 and December 31, 2008, respectively, were $30.0 million and $31.1 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 $7.6 million and $6.0 million accrued for the payment of interest at December 31, 2009 and December 31, 2008, 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 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 net loss periods. As a result of the stock dividends distributed in 2008, 2009, through October 1, 2010, and expected to be distributed on January 1, 2011, weighted average basic and diluted shares were restated to reflect the effect of the stock dividends.

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 employee’s retirement eligibility date.

Accounting Changes. 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.

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 or results of operations.

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 or results of operations.

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.

Effective June 30, 2009, FHN adopted ASC 855-10 which provides general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. ASC 855-10-50 requires disclosure of the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. An assessment of subsequent events must be performed for both interim and annual reporting periods. FHN initially applied the guidance of ASC 855-10 when assessing subsequent events through the time of the filing of the financial statements for the quarter ended June 30, 2009, and the effects of adoption were not material.

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 Bulletin Topic 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.

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 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

Note 1 — Summary of Significant Accounting Policies (continued)

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.

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 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.

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 or results of operations.

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 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

Note 1 — Summary of Significant Accounting Policies (continued)

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 810 and ASC 860 which require additional disclosures related to transfers of financial assets as well as FHN’s involvement with variable interest entities and qualifying special purpose entities. Upon adoption of the Codification update to ASC 810 and ASC 860, FHN revised its disclosures accordingly.

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 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.

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.

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 or results of operations.

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.

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.

Note 1 — Summary of Significant Accounting Policies (continued)

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 or results of operations as all of FHN’s preexisting hedging relationships met the requirements of ASC 815-20-25, as amended, at their inception.

Effective January 1, 2007, FHN adopted the provisions of the Codification update to ASC 815-15-25 which permits fair value remeasurement for hybrid financial instruments that contain an embedded derivative that otherwise would require bifurcation. Additionally, ASC 815-15-25, as amended, clarifies the accounting guidance for beneficial interests in securitizations. Under the provisions of the Codification update, all beneficial interests in a securitization require an assessment in accordance with ASC 815-15-25 to determine if an embedded derivative exists within the instrument. In addition, effective January 1, 2007, FHN adopted the provisions of an additional Codification update to ASC 815-15-25 which provides an exemption from the embedded derivative test of ASC 815-15-25-26(b) for instruments that would otherwise require bifurcation if the test is met solely because of a prepayment feature included within the securitized interest and prepayment is not controlled by the security holder. Since FHN presents all retained interests in its proprietary securitizations as trading securities and due to the clarifying guidance of ASC 815-15-25, as amended, the impact of adopting the Codification update to ASC 815-15-25 was immaterial to the results of operations.

Effective January 1, 2007, FHN adopted the provisions of the Codification update to ASC 740 which provides guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740, as amended, also provides guidance on the classification and disclosure of uncertain tax positions in the financial statements. Upon adoption of the updated provisions of ASC 740, FHN recognized a cumulative effect adjustment that decreased the beginning balance of undivided profits in the amount of $.9 million for differences between the tax benefits recognized in the statements of condition prior to the adoption of the Codification update to ASC 740 and the amounts reported after adoption.

Effective January 1, 2007, FHN adopted the provisions of the Codification update to ASC 325-30 which provides that in addition to cash surrender value, the asset recognized for a life insurance contract should consider certain other provisions included in a policy’s contractual terms with additional amounts being discounted if receivable beyond one year. Additionally, ASC 325-30, as amended, requires that the determination of the amount that could be realized under an insurance contract be performed at the individual policy level. FHN recognized a reduction of undivided profits in the amount of $.5 million as a result of adopting the Codification update to ASC 325-30.

Effective January 1, 2007, FHN elected early adoption of the final provisions of the Codification update to ASC 715 which required that the annual measurement date of a defined benefit postretirement plan’s assets and liabilities be as of the date of the financial statements. As a result of adopting the measurement date provisions of the Codification update to ASC 715, total equity was increased by $6.2 million on January 1, 2007, consisting of a reduction to undivided profits of $2.1 million and a credit to accumulated other comprehensive income of $8.3 million.

Accounting Changes Issued but Not Currently Effective In January 2010, the FASB issued Accounting Standards Update 2010-06, “Improving Disclosures about Fair Value Measurements” (ASU 2010-06), which 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. ASC 820, as amended, also provides enhanced disclosure requirements regarding purchases, sales, issuances, and settlements related to recurring Level 3 measurements, and requires separate disclosure in the Level 3 reconciliation of total gains and losses recognized in other comprehensive income. The updated provisions of ASC 820 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. The provisions of ASU 2010-06 are effective for periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis which will be effective for

Note 1 — Summary of Significant Accounting Policies (continued)

periods beginning after December 15, 2010. Comparative disclosures are required only for periods ending subsequent to initial adoption. FHN is currently assessing the effects of adopting the provisions of ASU 2010-06.

In June 2009, the FASB issued guidance, the provisions of which have been subsequently reissued as 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 qualifying special purpose entity (“QSPE”) concept from GAAP, resulting in the evaluation of all former QSPEs for consolidation on and after January 1, 2010 in accordance with ASC 810. 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. The provisions of ASU 2009-16 are effective prospectively for new transfers of financial assets occurring in fiscal years beginning after November 15, 2009, and in interim periods within those fiscal years. ASC 860’s amended disclosure requirements should be applied to transfers that occurred both before and after the effective date of the Codification update, with comparative disclosures required only for periods subsequent to initial adoption for those disclosures not previously required under the Codification update to ASC 810 and ASC 860 which was effective for periods ending after December 15, 2008. The effect of adopting the provisions of ASU 2009-16 will not be material to FHN.

In June 2009, the FASB issued guidance, the provisions of which have been subsequently reissued as 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. 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 criteria 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. Following the Codification update, ASC 810 will require separate presentation 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 (e.g., consolidated residential mortgage securitization trusts). 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. The provisions of ASU 2009-17 are effective for periods beginning after November 15, 2009 and require reevaluation under ASC 810’s amended consolidation requirements of all QSPEs and entities currently subject to ASC 810 as of the beginning of the first annual period that begins after November 15, 2009. If consolidation of a VIE is required upon initial adoption, the assets, liabilities, and noncontrolling interests of the VIE should be measured at their carrying amounts as if ASC 810, as amended, had been applied from inception of the VIE, with any difference between the net amounts recognized and the amount of any previously recognized interests reflected as a cumulative effect adjustment to undivided profits. However, if determining the carrying amounts is not practicable, the assets, liabilities, and noncontrolling interests of the VIE may be measured at fair value. Further, if determining the carrying amounts is not practicable, and if the activities of the VIE are primarily related to securitizations or other forms of asset-backed financings and the assets of the VIE can be used only to settle obligations of the entity, then the assets and liabilities of the VIE may be measured at their unpaid principal balances. The fair value option provided under ASC 825 may also be elected for financial assets and financial liabilities requiring consolidation as a result of initial adoption, provided that the election is made for all eligible financial assets and financial liabilities of the VIE. If initial application of the amendments to ASC 810 results in deconsolidation of a VIE, any retained interest in the VIE should be measured at its carrying value as if ASC 810, as amended, had been applied from inception of the VIE. Comparative disclosures are required only for periods subsequent to initial adoption for those disclosures not previously required under the Codification update to ASC 810 and ASC 860 which was effective for periods ending after December 15, 2008.

FHN is continuing to assess the effects of adopting the provisions of ASU 2009-17 on all of its proprietary residential mortgage securitization trusts based on the size and priority of interests retained. Based on its current level of involvement, upon adoption of the Codification update to ASC 810, FHN anticipates that consumer loans with an aggregate unpaid principal balance of approximately $250 million will be prospectively consolidated 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.

Note 1 — Summary of Significant Accounting Policies (continued)

Additionally, FHN has determined that calculation of carrying values is not practicable and thus it anticipates using the unpaid principal balance measurement methodology upon adoption, with the ALLL related to the newly consolidated loans determined using FHN’s standard practices. Upon adoption of the provisions of ASU 2009-17, MSR and trading assets held in relation to the newly consolidated trusts will be removed from the Consolidated Statements of Condition. FHN expects to recognize an increase to the opening balance of undivided profits approximating $6.0 million for the cumulative effect of adopting the amendments to ASC 810. An adjustment to the ALLL through provision approximating $10 million ($6 million, net of tax) is expected to be recognized by FHN in first quarter 2010 in relation to the newly consolidated loans.

Note 2 — Acquisitions/Divestitures

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 sale. 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 nointerest 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.

In 2009, FHN reached a definitive agreement for the sale of FTN ECM, the institutional equity research division of FTN Financial. As a result of this agreement, FHN incurred a pre-tax goodwill impairment of $14.3 million (approximately $9 million after taxes) in 2009. The financial results of FTN ECM, including the goodwill impairment, are reflected in the Income/loss from discontinued operations, net of tax line on the Consolidated Statements of Income for all periods presented. During first quarter 2010, the contracted sale of FTN ECM failed to close, and FHN exited this business.

Effective August 31, 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 to MetLife. MetLife 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 with MetLife for the remainder of FHN’s servicing portfolio. MetLife generally paid book value for the assets and liabilities it acquired, less a purchase price reduction. The assets and liabilities related to the mortgage operations divested were included in the non-strategic segment and were reflected as “divestiture” on the Consolidated Statements of Condition for the reporting period ended June 30, 2008. FHN recognized a loss on divestiture of $17.5 million in the third quarter 2008 and a gain on divestiture of $0.9 million in the fourth quarter of 2008. Gains and losses related to this transaction were included in the noninterest income section of the Consolidated Statements of Income as gains/losses on divestitures.

Due to efforts initiated by FHN in 2007 to improve profitability, FHN sold 34 branches in Atlanta, Baltimore, Dallas, and Northern Virginia which were outside the Regional Bank’s footprint. The First Horizon Bank branch sales were completed in both 2007 and 2008. These divestitures resulted in aggregate gains of $15.7 million during 2007 and losses of $2.4 million during 2008. These transactions resulted in the transfer of certain loans, certain fixed assets (including branch locations), and assumption of all the deposit relationships of the First Horizon Bank branches that were divested. The assets and liabilities related to the First Horizon Bank branches were included in the non-strategic segment and were reflected as “divestiture” on the Consolidated Statements of Condition for reporting periods ended prior to June 30, 2008. The gains and losses realized on the disposition of First Horizon Bank branches were included in the noninterest income section of the Consolidated Statements of Income as gains and losses on divestitures.

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.

The following tables summarize FHN’s available for sale securities on December 31, 2009 and 2008:

		On December 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
(Dollars in thousands)		Cost				Gains				Losses				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

		On December 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
(Dollars in thousands)		Cost				Gains				Losses				Value
Securities available for sale:
U.S. Treasuries		$	47,911			$	809			$	—			$	48,720
Government agency issued MBS (a)			1,217,608				31,909				—				1,249,517
Government agency issued CMO (a)			1,303,378				34,602				—				1,337,980
Other U.S. government agencies (a)			131,216				2,485				—				133,701
States and municipalities			65,915				—				(555	)			65,360
Equity (b)			287,663				33				—				287,696
Other			2,214				—				(35	)			2,179
Total securities available for sale (c)		$	3,055,905			$	69,838			$	(590	)		$	3,125,153

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 Federal Reserve Bank. 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.

Note 3 — Investment Securities (continued)

Provided below are the amortized cost and fair value by contractual maturity for the available for sale securities portfolio on December 31, 2009:

		Available for Sale
		Amortized				Fair
(Dollars in thousands)		Cost				Value
Within 1 year		$	39,987			$	40,114
After 1 year; within 5 years			27,351				28,486
After 5 years; within 10 years			95,734				100,914
After 10 years			41,160				41,160
Subtotal			204,232				210,674
Government agency issued MBS and CMO			2,089,991				2,189,507
Equity and other securities			293,985				294,287
Total		$	2,588,208			$	2,694,468

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:

		Available for Sale
(Dollars in thousands)		Debt				Equity				Total
December 31, 2009
Gross gains on sales		$	—			$	2,032			$	2,032
Gross losses on sales			—				(381	)			(381	)
December 31, 2008
Gross gains on sales		$	—			$	67,253			$	67,253
Gross losses on sales			—				—				—
December 31, 2007
Gross gains on sales		$	6,289			$	3,914			$	10,203
Gross losses on sales			—				(1,440	)			(1,440	)

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 2009, 2008, and 2007, were $4.4 million, $110.5 million, and $602.1 million, respectively.

Losses totaling $.5 million, $1.5 million, and $10.4 million for the years 2009, 2008, and 2007, respectively, were recognized for securities that, in the opinion of management have been other-than-temporarily impaired. The other-than-temporarily impaired securities are related to cost method investment securities.

The following tables provide information on investments within the available for sale portfolio that have unrealized losses on December 31, 2009 and 2008:

		On December 31, 2009
		Less than 12 months								12 Months or Longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollars in thousands)		Value				Losses				Value				Losses				Value				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	)

		On December 31, 2008
		Less than 12 months								12 Months or Longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollars in thousands)		Value				Losses				Value				Losses				Value				Losses
States and municipalities		$	945			$	(555	)		$	—			$	—			$	945			$	(555	)
Other			—				—				813				(35	)			813				(35	)
Total debt securities			945				(555	)			813				(35	)			1,758				(590	)
Total temporarily impaired securities		$	945			$	(555	)		$	813			$	(35	)		$	1,758			$	(590	)

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. Additionally, 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.

Note 4 — Loans

A summary of the major categories of loans outstanding on December 31 is shown below:

(Dollars in thousands)		2009				2008
Commercial:
Commercial, financial and industrial		$	7,159,370			$	7,863,727
Real estate commercial			1,479,888				1,454,040
Real estate construction			924,475				1,778,140
Retail:
Real estate residential			7,362,458				8,161,435
Real estate construction			229,487				980,798
Other retail			121,526				135,779
Credit card receivables			192,036				189,554
Real estate loans pledged against other collateralized borrowings			654,644				714,717
Loans, net of unearned income			18,123,884				21,278,190
Allowance for loan losses			896,914				849,210
Total net loans		$	17,226,970			$	20,428,980