UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

(Mark one)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2010

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to               

Commission file number: 001-15185

CIK number: 0000036966

First Horizon National Corporation

(Exact Name of Registrant as Specified in Charter)

TN (State or Other Jurisdiction of Incorporation)		62-0803242 (IRS Employer Identification No.)

165 MADISON AVENUE
MEMPHIS, TENNESSEE		38103
(Address of Principal Executive Office)		(Zip Code)

Registrant’s telephone number, including area code - (901) 523-4444

(Former name or former address, if changed from last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  X  No___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes___No___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   x		Accelerated filer ___		Non-accelerated filer ___		Smaller reporting company ___
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes___No  x  

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding on March 31, 2010
Common Stock, $.625 par value		225,676,659

FIRST HORIZON NATIONAL CORPORATION

INDEX

Part I. Financial Information			3
Part II. Other Information			95
Signatures			97
Exhibit Index			98
EX-31.A
EX-31.B
EX-32.A
EX-32.B

PART I.

FINANCIAL INFORMATION

Item 1.  Financial Statements

		The Consolidated Condensed Statements of Condition
		The Consolidated Condensed Statements of Income
		The Consolidated Condensed Statements of Equity
		The Consolidated Condensed Statements of Cash Flows
		The Notes to Consolidated Condensed Financial Statements

This financial information reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented.

CONSOLIDATED CONDENSED STATEMENTS OF CONDITION		First Horizon National Corporation
		March 31								December 31
(Dollars in thousands)(Unaudited)		2010				2009				2009
Assets:
Cash and due from banks (Restricted - $.1 million) (a)			$279,730				$438,181				$465,712
Federal funds sold and securities purchased under agreements to resell			523,237				515,858				452,883
Total cash and cash equivalents			802,967				954,039				918,595
Interest-bearing cash			383,571				1,174,442				539,300
Trading securities			964,800				933,316				699,900
Loans held for sale			505,794				643,518				452,501
Securities available for sale (Note 3)			2,697,719				3,016,013				2,694,468
Loans, net of unearned income (Restricted - $.9 billion) (Note 4) (a)			17,484,224				20,572,477				18,123,884
Less: Allowance for loan losses (Restricted - $59.8 million) (a)			844,060				940,932				896,914
Total net loans			16,640,164				19,631,545				17,226,970
Mortgage servicing rights (Note 5)			264,959				381,024				302,611
Goodwill (Note 6)			162,180				192,408				165,528
Other intangible assets, net (Note 6)			37,027				43,446				38,256
Capital markets receivables			743,514				1,502,033				334,404
Premises and equipment, net			308,714				330,299				313,824
Real estate acquired by foreclosure			122,060				132,653				125,190
Other assets (Restricted - $26.9 million) (a)			2,290,107				2,273,288				2,257,131
Total assets (Restricted - $.8 billion) (a)			$25,923,576				$31,208,024				$26,068,678
Liabilities and equity:
Deposits:
Savings			$5,174,901				$4,396,213				$4,847,709
Time deposits			1,642,820				2,152,837				1,895,992
Other interest-bearing deposits			3,256,040				1,868,902				3,169,474
Certificates of deposit $100,000 and more			534,889				1,583,928				559,944
Interest-bearing			10,608,650				10,001,880				10,473,119
Noninterest-bearing (Restricted - $1.5 million) (a)			4,461,050				4,908,175				4,394,096
Total deposits (Restricted - $1.5 million) (a)			15,069,700				14,910,055				14,867,215
Federal funds purchased and securities sold under agreements to repurchase			2,635,423				2,264,077				2,874,353
Trading liabilities			357,919				288,029				293,387
Other short-term borrowings and commercial paper			167,508				3,827,278				761,758
Term borrowings (Restricted - $.9 billion) (a)			2,932,524				3,353,464				2,190,544
Other collateralized borrowings			-				736,172				700,589
Total long-term debt			2,932,524				4,089,636				2,891,133
Capital markets payables			740,852				1,383,447				292,975
Other liabilities (Restricted - $.1 million) (a)			748,708				937,826				785,389
Total liabilities (Restricted - $.9 billion) (a)			22,652,634				27,700,348				22,766,210
Equity:
First Horizon National Corporation Shareholders’ Equity:
Preferred stock - no par value (shares authorized - 5,000,000; shares issued - series CPP 866,540 on March 31, 2010, March 31, 2009, and December 31, 2009) (Note 12)			802,760				786,582				798,685
Common stock - $.625 par value (shares authorized - 400,000,000; shares issued - 225,676,659 on March 31, 2010; 224,847,862 on March 31, 2009; and 225,212,464 on December 31, 2009) (b)			141,048				132,247				138,738
Capital surplus			1,251,776				1,087,252				1,208,649
Capital surplus common stock warrant - CPP (Note 12)			83,860				83,860				83,860
Undivided profits			809,624				1,265,073				891,580
Accumulated other comprehensive loss, net			(113,291	)			(142,503	)			(114,209	)
Total First Horizon National Corporation Shareholders’ Equity			2,975,777				3,212,511				3,007,303
Noncontrolling interest (Note 12)			295,165				295,165				295,165
Total equity			3,270,942				3,507,676				3,302,468
Total liabilities and equity			$25,923,576				$31,208,024				$26,068,678

  See accompanying notes to consolidated financial statements.

(a)		Restricted balances presented are as of March 31, 2010. See Note 1 for accounting updates adopted in first quarter 2010.
(b)		Outstanding shares have been restated to reflect stock dividends distributed through April 1, 2010.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME		First Horizon National Corporation
		Three Months Ended
		March 31
(Dollars in thousands except per share data)(Unaudited)		2010				2009
Interest income:
Interest and fees on loans			$173,342				$205,739
Interest on investment securities			31,155				40,102
Interest on loans held for sale			4,968				7,732
Interest on trading securities			9,714				15,655
Interest on other earning assets			317				865
Total interest income			219,496				270,093
Interest expense:
Interest on deposits:
Savings			7,418				15,404
Time deposits			10,593				18,244
Other interest-bearing deposits			2,518				1,068
Certificates of deposit $100,000 and more			3,375				9,459
Interest on trading liabilities			5,415				5,468
Interest on short-term borrowings			1,922				4,263
Interest on long-term debt			7,860				19,600
Total interest expense			39,101				73,506
Net interest income			180,395				196,587
Provision for loan losses			105,000				300,000
Net interest income/(expense) after provision for loan losses			75,395				(103,413	)
Noninterest income:
Capital markets			114,571				205,700
Deposit transactions and cash management			35,767				39,032
Mortgage banking			34,884				115,749
Trust services and investment management			7,270				6,820
Brokerage management fees and commissions			6,339				6,632
Insurance commissions			5,183				6,918
Equity securities losses, net			(1,906	)			(2	)
All other income and commissions			46,155				18,497
Total noninterest income			248,263				399,346
Adjusted gross income after provision for loan losses			323,658				295,933
Noninterest expense:
Employee compensation, incentives, and benefits			180,181				242,175
Mortgage banking foreclosure and repurchase provision			40,675				12,267
Occupancy			14,817				15,722
Operations services			14,608				15,339
Legal and professional fees			13,974				13,869
Foreclosed real estate			10,470				10,033
Deposit insurance premiums			8,493				7,628
Computer software			7,166				6,883
Communications and courier			6,255				6,920
Contract employment			6,174				10,161
Equipment rentals, depreciation, and maintenance			6,032				8,628
Miscellaneous loan costs			4,112				5,139
Amortization of intangible assets			1,380				1,636
All other expense			28,336				51,403
Total noninterest expense			342,673				407,803
Loss before income taxes			(19,015	)			(111,870	)
Benefit for income taxes			(16,393	)			(47,423	)
Loss from continuing operations			(2,622	)			(64,447	)
Loss from discontinued operations, net of tax			(7,271	)			(648	)
Net loss			$(9,893	)			$(65,095	)
Net income attributable to noncontrolling interest			2,844				2,750
Net loss attributable to controlling interest			$(12,737	)			$(67,845	)
Preferred stock dividends			14,918				14,956
Net loss available to common shareholders			$(27,655	)			$(82,801	)
Loss per share from continuing operations (Note 8)			$(0.09	)			$(0.37	)
Diluted loss per share from continuing operations (Note 8)			$(0.09	)			$(0.37	)
Loss per share available to common shareholders (Note 8)			$(0.12	)			$(0.37	)
Diluted loss per share available to common shareholders (Note 8)			$(0.12	)			$(0.37	)
Weighted average common shares (Note 8)			223,658				223,594
Diluted average common shares (Note 8)			223,658				223,594

  See accompanying notes to consolidated condensed financial statements.

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

 CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

		First Horizon National Corporation
		2010												2009
		Controlling				Noncontrolling								Controlling				Noncontrolling
(Dollars in thousands)(Unaudited)		Interest				Interest				Total				Interest				Interest				Total
Balance, January 1			$3,007,303				$295,165				$3,302,468				$3,279,467				$295,165				$3,574,632
Adjustment to reflect adoption of amendments to ASC 810			(10,562	)			-				(10,562	)			-				-				-
Net income/(loss)			(12,737	)			2,844				(9,893	)			(67,845	)			2,750				(65,095	)
Other comprehensive income/(loss):
Unrealized fair value adjustments, net of tax:
Securities available for sale			(1,654	)			-				(1,654	)			15,060				-				15,060
Recognized pension and other employee benefit plans net periodic benefit costs			2,571				-				2,571				(5,732	)			-				(5,732	)
Comprehensive income/(loss)			(11,820	)			2,844				(8,976	)			(58,517	)			2,750				(55,767	)
Preferred stock - (CPP) accretion			4,076				-				4,076				3,902				-				3,902
Preferred stock - (CPP) dividends			(14,907	)			-				(14,907	)			(14,945	)			-				(14,945	)
Common stock repurchased			-				-				-				(110	)			-				(110	)
Common stock issued for stock options and restricted stock			9				-				9				438				-				438
Stock-based compensation expense			1,675				-				1,675				2,276				-				2,276
Dividends paid to noncontrolling interest of subsidiary preferred stock			-				(2,844	)			(2,844	)			-				(2,750	)			(2,750	)
Other changes in equity			3				-				3				-				-				-
Balance, March 31			$2,975,777				$295,165				$3,270,942				$3,212,511				$295,165				$3,507,676

  See accompanying notes to consolidated condensed financial statements.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS		First Horizon National Corporation
		Three Months Ended March 31
(Dollars in thousands)(Unaudited)		2010				2009
Operating Activities
Net loss			$(9,893	)			$(65,095	)
Adjustments to reconcile net loss to net cash used by operating activities:
Provision for loan losses			105,000				300,000
(Benefit)/provision for deferred income tax			124,672				(79,844	)
Depreciation and amortization of premises and equipment			7,535				8,502
Amortization of intangible assets			1,380				1,636
Net other amortization and accretion			10,443				11,420
Decrease in derivatives, net			18,456				132,651
Market value adjustment on mortgage servicing rights			26,038				(26,734	)
Provision for foreclosure and repurchase losses			40,675				12,267
Fair value adjustment for real estate losses			6,011				5,734
Goodwill impairment			3,348				-
Stock-based compensation expense			1,675				2,276
Excess tax provision from stock-based compensation arrangements			(3	)			-
Equity securities losses, net			1,906				2
Gains on repurchases of debt			(17,060	)			(60	)
Net losses on disposal of fixed assets			793				1,560
Net (increase)/decrease in:
Trading securities			(271,971	)			30,665
Loans held for sale			(53,293	)			(76,864	)
Capital markets receivables			(409,110	)			(323,101	)
Interest receivable			(4,617	)			(1,239	)
Other assets			(144,624	)			(216,541	)
Net increase/(decrease) in:
Capital markets payables			447,877				268,019
Interest payable			3,270				(10,704	)
Other liabilities			(75,599	)			61,466
Trading liabilities			64,532				(71,473	)
Total adjustments			(112,666	)			29,638
Net cash used by operating activities			(122,559	)			(35,457	)
Investing Activities
Available for sale securities:
Sales			4,832				8,566
Maturities			275,917				149,505
Purchases			(287,988	)			(21,833	)
Premises and equipment:
Purchases			(3,218	)			(6,430	)
Net (increase)/decrease in:
Securitization retained interests classified as trading securities			2,296				(18,215	)
Loans			664,086				475,846
Interest-bearing cash			155,729				(966,650	)
Net cash provided/(used) by investing activities			811,654				(379,211	)
Financing Activities
Common stock:
Exercise of stock options			9				-
Repurchase of shares			-				(109	)
Excess tax provision from stock-based compensation arrangements			3				-
Cash dividends paid - preferred stock - CPP			(10,832	)			(10,952	)
Cash dividends paid - preferred stock - noncontrolling interest			(2,844	)			(4,209	)
Long-term debt:
Payments/maturities			(72,524	)			(664,929	)
Net cash paid for repurchase of debt			(87,840	)			(4,710	)
Net increase/(decrease) in:
Deposits			202,485				668,249
Short-term borrowings			(833,180	)			60,587
Net cash provided/(used) by financing activities			(804,723	)			43,927
Net decrease in cash and cash equivalents			(115,628	)			(370,741	)
Cash and cash equivalents at beginning of period			918,595				1,324,780
Cash and cash equivalents at end of period			$802,967				$954,039
Total interest paid			35,658				84,023
Total income taxes paid			$563				$106,246

  See accompanying notes to consolidated financial statements.

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

Notes to Consolidated Condensed Financial Statements

Note 1 - Financial Information

The unaudited interim Consolidated Condensed 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. In the opinion of management, all necessary adjustments have been made for a fair presentation of financial position and results of operations for the periods presented. The operating results for the interim 2010 periods are not necessarily indicative of the results that may be expected going forward. For further information, refer to the audited consolidated financial statements in the 2009 Annual Report to shareholders.

Principles of Consolidation and Basis of Presentation. The consolidated financial statements include the accounts of FHN and other entities in which it has a controlling financial interest. Variable Interest Entities (VIE) for which FHN or a subsidiary has been determined to be the primary beneficiary are also consolidated. Following adoption of the provisions of FASB Accounting Standards Update 2009-17 on January 1, 2010, the assets and liabilities of FHN’s consolidated residential mortgage securitization trusts have been parenthetically disclosed on the face of the Consolidated Condensed Statements of Condition as restricted in accordance with the presentation requirements of ASC 810, as amended, due to the assets being pledged to settle the trusts’ obligations and the trusts’ security holders having no recourse to FHN.

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 of the second lien mortgages and HELOC it produced in the secondary market through securitizations and loan sales through third quarter 2007. For periods ending prior to January 1, 2010, loan securitizations involved the transfer of the loans to qualifying special purposes entities (QSPE) that were not subject to consolidation in accordance with ASC 860, “Transfers and Servicing”. Upon the effective date of the provisions of FASB Accounting Standards Update 2009-16 and FASB Accounting Standards Update 2009-17 on January 1, 2010, the concept of a QSPE was removed from GAAP and the criteria in ASC 810, “Consolidation”, for determining the primary beneficiary of a VIE were amended, resulting in the reevaluation of all securitization trusts to which FHN had previously transferred loans for consolidation under ASC 810’s revised consolidation criteria. Following the reevaluation of the trusts for consolidation upon adoption of the amendments to ASC 810, the majority of the mortgage securitization trusts to which FHN transferred loans remain unconsolidated as FHN is deemed not to be the primary beneficiary based on the interests it retained in the trusts. Under ASC 810, as amended, continual reconsideration of conclusions reached regarding which interest holder is the primary beneficiary of a trust is required. See Note 14 - Variable Interest Entities for additional information regarding FHN’s consolidated and nonconsolidated mortgage securitization trusts.

Accounting Changes. Effective upon its issuance in February 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-09, “Subsequent Events - Amendments to Certain Recognition and Disclosure Requirements” (ASU 2010-09). ASU 2010-09 amends ASC 855 to clarify that an entity must disclose the date through which subsequent events have been evaluated in both originally issued and restated financial statements unless the entity has a regulatory requirement to review subsequent events up through the filing or furnishing of financial statements with the Securities and Exchange Commission. Upon adoption of the provisions of ASU 2010-09, FHN revised its disclosures accordingly.

Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-06, “Improving Disclosures about Fair Value Measurements” (ASU 2010-06), with the exception of the requirement to provide the activity of purchases, sales, issuances, and settlements related to recurring Level 3 measurements on a gross basis in the Level 3 reconciliation which is effective for quarters beginning after December 15, 2010. ASU 2010-06 updates ASC 820 to require disclosure of significant transfers into and out of Level 1 and Level 2 of the fair value hierarchy, as well as disclosure of an entity’s policy for determining when transfers between all levels of the hierarchy are recognized. The updated provisions of ASC 820 also require that fair value measurement disclosures be provided by each “class” of assets and liabilities, and that disclosures providing a description of the valuation techniques and inputs used to measure fair value be included for both recurring and nonrecurring fair value measurements classified as either Level 2 or Level 3. Under ASC 820, as amended, separate disclosure is required in the Level 3 reconciliation of total gains and losses recognized in other comprehensive income. Comparative

Note 1 - Financial Information (continued)

disclosures are required only for periods ending subsequent to initial adoption. Upon adoption of the amendments to ASC 820, FHN revised its disclosures accordingly.

Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2009-16, “Accounting for Transfers of Financial Assets” (ASU 2009-16). ASU 2009-16 updates ASC 860 to provide for the removal of the QSPE concept from GAAP, resulting in the evaluation of all former QSPEs for consolidation in accordance with ASC 810 on and after the effective date of the amendments. The amendments to ASC 860 modify the criteria for achieving sale accounting for transfers of financial assets and define the term participating interest to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale. The updated provisions of ASC 860 also provide that a transferor should recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. ASC 860, as amended, requires enhanced disclosures which are generally consistent with, and supersede, the disclosures previously required by the Codification update to ASC 810 and ASC 860 which was effective for periods ending after December 15, 2008. Upon adoption of the amendments to ASC 860, FHN applied the amended disclosure requirements to transfers that occurred both before and after the effective date of the Codification update, with comparative disclosures included only for periods subsequent to initial adoption for those disclosures not previously required. The adoption of the Codification update to ASC 860 had no material effect on FHN’s statement of condition or results of operations.

Effective January 1, 2010, FHN adopted the provisions of Accounting Standards Update 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (ASU 2009-17). ASU 2009-17 amends ASC 810 to revise the criteria for determining the primary beneficiary of a VIE by replacing the quantitative-based risks and rewards test previously required with a qualitative analysis. While ASC 810, as amended, retains the previous guidance in ASC 810 which requires a reassessment of whether an entity is a VIE only when certain triggering events occur, it adds an additional 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. Under ASC 810, as amended, separate presentation is required on the face of the balance sheet of the assets of a consolidated VIE that can only be used to settle the VIE’s obligations and the liabilities of a consolidated VIE for which creditors or beneficial interest holders have no recourse to the general credit of the primary beneficiary. ASC 810, as amended, also requires enhanced disclosures which are generally consistent with, and supersede, the disclosures previously required by the Codification update to ASC 810 and ASC 860 which was effective for periods ending after December 15, 2008. Comparative disclosures are required only for periods subsequent to initial adoption for those disclosures not required under such previous guidance.

Upon adoption of the amendments to ASC 810, FHN reevaluated all former QSPEs and entities already subject to ASC 810 under the revised consolidation methodology. Based on such reevaluation, consumer loans with an aggregate unpaid principal balance of $245.2 million were prospectively consolidated as of January 1, 2010, along with secured borrowings of $236.3 million, as the retention of MSR and other retained interests, including residual interests and subordinated bonds, results in FHN being considered the related trusts’ primary beneficiary under the qualitative analysis required by ASC 810, as amended. MSR and trading assets held in relation to the newly consolidated trusts were removed from the mortgage servicing rights and trading securities sections of the Consolidated Condensed Statements of Condition, respectively, upon adoption of the amendments to ASC 810. As the assets of FHN’s consolidated residential mortgage securitization trusts are pledged to settle the obligations due to the holders of the trusts’ securities and since the security holders have no recourse to FHN, the asset and liability balances have been parenthetically disclosed on the face of the Consolidated Condensed Statements of Condition as restricted in accordance with the presentation requirements of ASC 810, as amended. Since FHN determined that calculation of carrying values was not practicable, the unpaid principal balance measurement methodology was used upon adoption, with the ALLL related to the newly consolidated loans determined using FHN’s standard practices. FHN recognized a reduction to the opening balance of undivided profits of approximately $10.6 million for the cumulative effect of adopting the amendments to ASC 810, including the effect of the recognition of an adjustment to the ALLL of approximately $24.6 million ($15.6 million net of tax) in relation to the newly consolidated loans. Further, upon adoption of the amendments to ASC 810, the deconsolidation of certain small issuer trust preferred trusts for which FTBNA holds the majority of the mandatorily redeemable preferred capital securities (trust preferreds) issued but is not considered the primary beneficiary under the qualitative analysis required by ASC 810, as amended, resulted in reduction of loans net of unearned income and term borrowings on the Consolidated Condensed Statements of Condition by $30.5 million.

Note 1 - Financial Information (continued)

Effective January 1, 2010, FHN adopted the provisions of FASB Accounting Standards Update 2010-10, “Amendments for Certain Investment Funds” (ASU 2010-10). ASU 2010-10 delays the application of ASU 2009-17 for a reporting entity’s interest in an entity that has the attributes of an investment company or for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies. For entities that do not qualify for the deferral, ASU 2010-10 clarifies that related parties should be considered when evaluating whether each of the criteria related to permitted levels of decision maker or service provider fees in ASC 810 are met. Additionally, ASU 2010-10 amends ASC 810 to provide that when evaluating whether a fee is a variable interest in situations in which a decision maker or servicer provider holds another interest in the related VIE, a quantitative calculation may be used but should not be the sole basis for evaluating whether the other variable interest is more than insignificant. The adoption of the Codification update to ASC 810 had no effect on FHN’s statement of condition or results of operations.

Accounting Changes Issued but Not Currently Effective. In March 2010, the FASB issued Accounting Standards Update 2010-11, “Scope Exception Related to Embedded Credit Derivatives” (ASU 2010-11). ASU 2010-11 amends ASC 815 to provide clarifying language regarding when embedded credit derivative features are not considered embedded derivatives subject to potential bifurcation and separate accounting. The provisions of ASU 2010-11 are effective for periods beginning after June 15, 2010 and require reevaluation of certain preexisting contracts to determine whether the accounting for such contracts is consistent with the amended guidance in ASU 2010-11. If the fair value option is elected for an instrument upon adoption of the amendments to ASC 815, reevaluation of such preexisting contracts is not required. The effect of adopting the provisions of ASU 2010-11 will not be material to FHN.

FHN continued efforts to refocus on core businesses in 2010 as FHN exited its institutional research business, FTN Equity Capital Markets, and incurred a pre-tax goodwill impairment of $3.3 million (approximately $2 million after taxes). FHN had initially reached an agreement for the sale of this business which resulted in a pre-tax goodwill impairment of $14.3 million (approximately $9 million after taxes) in 2009; however, the contracted sale failed to close in early 2010. The financial results of this business, including the goodwill impairment, are reflected in the Loss from discontinued operations, net of tax line on the Consolidated Condensed Statements of Income for all periods presented.

In 2009, FHN executed the sale and closure of its 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 Condensed Statements of Income as a loss on divestiture within noninterest income. The losses on divestitures primarily reflect goodwill write-offs associated with the sale. FHN continues to have an insurance business within its Tennessee banking footprint and continues to operate other remittance processing locations.

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.

Note 3 - Investment Securities

The following tables summarize FHN’s available for sale securities on March 31, 2010 and 2009:

		On March 31, 2010
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
(Dollars in thousands)		Cost				Gains				Losses				Value
Securities available for sale:
U.S. Treasuries			$88,487				$36				$(5	)			$88,518
Government agency issued MBS (a)			951,074				54,948				(406	)			1,005,616
Government agency issued CMO (a)			1,129,803				42,414				-				1,172,217
Other U.S. government agencies (a)			106,409				5,980				-				112,389
States and municipalities			42,175				-				-				42,175
Equity (b)			275,551				550				-				276,101
Other			667				36				-				703
Total securities available for sale (c)			$2,594,166				$103,964				$(411	)			$2,697,719

(a)		Includes securities issued by government sponsored entities.
(b)		Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of $66.3 million. The remainder is money market, venture capital, and cost method investments. Additionally, $31.8 million is restricted pursuant to reinsurance contract agreements.
(c)		Includes $2.1 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes. As of March 31, 2010, FHN had pledged $1.4 billion of the $2.1 billion pledged available for sale securities as collateral for securities sold under repurchase agreements.

		On March 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
(Dollars in thousands)		Cost				Gains				Losses				Value
Securities available for sale:
U.S. Treasuries			$47,932				$570				$-				$48,502
Government agency issued MBS (a)			1,156,691				49,272				-				1,205,963
Government agency issued CMO (a)			1,232,844				38,701				-				1,271,545
Other U.S. government agencies (a)			127,735				5,376				-				133,111
States and municipalities			62,220				18				-				62,238
Equity (b)			292,484				107				(94	)			292,497
Other			2,212				2				(57	)			2,157
Total securities available for sale (c)			$2,922,118				$94,046				$(151	)			$3,016,013

(a)		Includes securities issued by government sponsored entities.
(b)		Includes restricted investments in FHLB-Cincinnati stock of $125.5 million and FRB stock of $44.3 million. The remainder is money market, venture capital, and cost method investments. Additionally, $56.7 million is restricted pursuant to reinsurance contract agreements.
(c)		Includes $2.5 billion of securities pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes. As of March 31, 2009, FHN had pledged $1.2 billion of the $2.5 billion pledged available for sale securities as collateral for securities sold under repurchase agreements.

National banks chartered by the federal government are, by law, members of the Federal Reserve System. Each member bank is required to own stock in its regional 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 March 31, 2010:

		Available for Sale
		Amortized				Fair
(Dollars in thousands)		Cost				Value
Within 1 year			$88,487				$88,518
After 1 year; within 5 years			18,369				19,561
After 5 years; within 10 years			91,280				96,068
After 10 years			38,935				38,935
Subtotal			237,071				243,082
Government agency issued MBS and CMO			2,080,877				2,177,833
Equity and other securities			276,218				276,804
Total			$2,594,166				$2,697,719

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.

For the three months ended March 31, 2010 and 2009, there were no realized gains or losses related to investments within the available for sale securities portfolio.

The following tables provide information on investments within the available for sale portfolio that have unrealized losses on March 31, 2010 and 2009:

		On March 31, 2010
		Less than 12 months								12 Months or Longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollars in thousands)		Value				Losses				Value				Losses				Value				Losses
US Treasuries			$80,485				$(5	)			$-				$-				$80,485				$(5	)
Government agency issued MBS			$102,830				$(406	)			$-				$-				$102,830				$(406	)
Total debt securities			183,315				(411	)			-				-				183,315				(411	)
Total temporarily impaired securities			$183,315				$(411	)			$-				$-				$183,315				$(411	)
		On March 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
Other			$-				$-				$581				$(57	)			$581				$(57	)
Total debt securities			-				-				581				(57	)			581				(57	)
Equity			-				-				137				(94	)			137				(94	)
Total temporarily impaired securities			$-				$-				$718				$(151	)			$718				$(151	)

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. FHN recognized a $.2 million other-than-temporary impairment of an equity investment in first quarter 2010. There were no other-than-temporary impairments in first quarter 2009.

The composition of the loan portfolio is detailed below:

		March 31								December 31
(Dollars in thousands)		2010				2009				2009
Commercial:
Commercial, financial and industrial			$6,865,577				$7,716,733				$7,159,370
Real estate commercial			1,430,801				1,501,964				1,479,888
Real estate construction			761,900				1,550,158				924,475
Retail:
Real estate residential			7,152,059				8,016,018				7,362,458
Real estate construction			105,375				772,982				229,487
Other retail			114,429				132,452				121,526
Credit card receivables			183,656				180,282				192,036
Restricted real estate loans			870,427				701,888				654,644
Loans, net of unearned income			17,484,224				20,572,477				18,123,884
Allowance for loan losses (Restricted - $59.8 million)			844,060				940,932				896,914
Total net loans			$16,640,164				$19,631,545				$17,226,970

FHN has a concentration of loans secured by residential real estate (51 percent of total loans), the majority of which is in the retail real estate residential portfolio (41 percent of total loans). This portfolio is primarily comprised of home equity lines and loans. Restricted real estate loans, which is primarily HELOC but also includes some first and second mortgages, is 5 percent of total loans. The remaining residential real estate loans are in the construction portfolios (5 percent of total loans) with national exposures being significantly reduced since 2008. Additionally, on March 31, 2010, FHN had bank-related and trust preferred loans (including loans to bank and insurance-related businesses) totaling $.7 billion (4 percent of total loans) that are included within the Commercial, Financial, and Industrial portfolio. Due to higher credit losses experienced throughout the financial services industry and the limited availability of market liquidity, these loans have experienced stress during the economic downturn. On March 31, 2010, FHN did not have any concentrations of Commercial, Financial and Industrial loans in any single industry of 10 percent or more of total loans.

On March 31, 2010 and 2009, FHN had $149.2 million and $24.1 million, respectively, of loans that have been restructured in accordance with regulatory guidelines. As of March 31, 2010, approximately 80 percent of the restructured loans are in the held to maturity loan portfolio with the remainder in loans held for sale. For restructured loans in the portfolio, FHN had loan loss reserves of $22.3 million or 19 percent as of March 31, 2010. A majority of these modified loans are within the consumer portfolio. On March 31, 2010 and 2009, there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured.

Nonperforming loans consist of loans which management has identified as individually impaired, other nonaccrual loans, and loans which have been restructured. Generally, classified nonaccrual commercial loans over $1 million are deemed to be individually impaired. The following table presents nonperforming loans on:

		March 31								December 31
(Dollars in thousands)		2010				2009				2009
Impaired loans			$556,806				$526,282				$509,073
Other nonaccrual loans (a)			371,401				606,826				428,611
Total nonperforming loans (b)			$928,207				$1,133,108				$937,684

(a)		On March 31, 2010 and 2009, and on December 31, 2009, other nonaccrual loans included $51.3 million, $14.5 million, and $38.3 million, respectively, of loans held for sale.
(b)		On March 31, 2010, total nonperforming loans included $45.3 million of loans that have been restructured.

Note 4 - Loans (continued)

Generally, interest payments received on impaired and nonaccrual loans are applied to principal. Once all principal has been received, additional payments are recognized as interest income on a cash basis. The following table presents information concerning impaired loans:

		Three Months Ended
		March 31
(Dollars in thousands)		2010				2009
Total interest recognized on impaired loans		NM					$243
Average balance of impaired loans			$532,940				500,186

  NM - Not meaningful

Activity in the allowance for loan losses related to non-impaired and impaired loans for the three months ended March 31, 2010 and 2009 is summarized as follows:

(Dollars in thousands)		Non-impaired				Impaired				Total
Balance on December 31, 2008			$836,907				$12,303				$849,210
Provision for loan losses			231,936				68,064				300,000
Charge-offs			(140,655	)			(76,506	)			(217,161	)
Recoveries			6,981				1,902				8,883
Net charge-offs			(133,674	)			(74,604	)			(208,278	)
Balance on March 31, 2009			$935,169				$5,763				$940,932
Balance on December 31, 2009			$876,121				$20,793				$896,914
Adjustment for adoption of amendments to ASC 810			24,578				-				24,578
Provision for loan losses			(2,239	)			107,239				105,000
Charge-offs			(110,374	)			(83,581	)			(193,955	)
Recoveries			5,819				5,704				11,523
Net charge-offs			(104,555	)			(77,877	)			(182,432	)
Balance on March 31, 2010			$793,905				$50,155				$844,060

Note 5 - Mortgage Servicing Rights

FHN recognizes all classes of mortgage servicing rights (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. See Note 16 – Fair Value of Assets & Liabilities, the “Determination of Fair Value” section for a discussion of FHN’s MSR valuation methodology. The balance of MSR included on the Consolidated Condensed Statements of Condition represents the rights to service approximately $40.3 billion of mortgage loans on March 31, 2010 for which a servicing right has been capitalized.

In first quarter 2010, FHN adopted the amendments to ASC 810 which resulted in the consolidation of loans FHN previously sold through proprietary securitizations but retained MSR and significant subordinated interests subsequent to the transfer. In conjunction with the consolidation of these loans, FHN derecognized the associated servicing assets. This adjustment is reflected in the rollfoward below. Following is a summary of changes in capitalized MSR for the three months ended March 31, 2010 and 2009:

		First				Second
(Dollars in thousands)		Liens				Liens				HELOC
Fair value on January 1, 2009			$354,394				$13,558				$8,892
Addition of mortgage servicing rights			189				-				11
Reductions due to loan payments			(17,480	)			(2,524	)			(419	)
Changes in fair value due to:
Changes in valuation model inputs or assumptions			26,740				(5	)			-
Other changes in fair value			(2,500	)			-				168
Fair value on March 31, 2009			$361,343				$11,029				$8,652
Fair value on January 1, 2010			$296,115				$1,174				$5,322
Adjustment due to adoption of amendments to ASC 810			(197	)			(928	)			(1,168	)
Reductions due to loan payments			(8,793	)			(7	)			(521	)
Changes in fair value due to:
Changes in valuation model inputs or assumptions			(26,968	)			3				-
Other changes in fair value			926				-				1
Fair value on March 31, 2010			$261,083				$242				$3,634

Servicing, late, and other ancillary fees recognized within mortgage banking income were $27.7 million and $35.1 million for the three months ended March 31, 2010 and 2009, respectively. Servicing, late, and other ancillary fees recognized within revenue from loan sales and securitizations were $1.1 million and $3.8 million for the three months ended March 31, 2010 and 2009, respectively.

FHN services a portfolio of mortgage loans related to transfers performed by other parties utilizing securitization trusts. The servicing assets represent FHN’s sole interest in these transactions. The total MSR recognized by FHN related to these transactions was $6.1 million and $7.4 million at March 31, 2010 and 2009, respectively. The aggregate principal balance serviced by FHN for these transactions was $.8 billion and $1.1 billion at March 31, 2010 and 2009, respectively. FHN has no obligation to provide financial support and has not provided any form of support to the related trusts. The MSR recognized by FHN has been included in the first lien mortgage loans column within the rollforward of MSR.

As of March 31, 2010, FHN had transferred $36.2 million of MSR to third parties in transactions that did not qualify for sales treatment due to certain recourse provisions that were included within the sale agreements. These MSR are included within the first liens mortgage loans column within the rollforward of MSR. The proceeds from these transfers have been recognized within other short term borrowings and commercial paper in the Consolidated Condensed Statements of Condition as of March 31, 2010 and 2009.

Note 6 - Intangible Assets

The following is a summary of intangible assets, net of accumulated amortization, included in the Consolidated Condensed Statements of Condition:

						Other
						Intangible
(Dollars in thousands)		Goodwill				Assets (a)
December 31, 2008			$192,408				$45,082
Amortization expense			-				(1,636	)
March 31, 2009			$192,408				$43,446
December 31, 2009			$165,528				$38,256
Amortization expense			-				(1,380	)
Impairment (b) (c)			(3,348	)			-
Additions			-				151
March 31, 2010			$162,180				$37,027

The gross carrying amount of other intangible assets subject to amortization is $125.8 million on March 31, 2010, net of $88.7 million of accumulated amortization. Estimated aggregate amortization expense is expected to be $4.1 million for the remainder of 2010, and $5.3 million, $4.3 million, $3.9 million, $3.6 million, and $3.4 million for the twelve-month periods of 2011, 2012, 2013, 2014, and 2015, respectively.

The following is a summary of gross goodwill and accumulated impairment losses and write-offs detailed by reportable segments included in the Consolidated Condensed Statements of Condition through December 31, 2009:

						Regional				Capital
(Dollars in thousands)		Non-Strategic				Banking				Markets				Total
Gross goodwill			$168,032				$64,759				$97,421				$330,212
Accumulated impairments			(98,380	)			-				-				(98,380	)
Accumulated divestiture related write-offs			(66,304	)			-				-				(66,304	)
December 31, 2009			$3,348				$64,759				$97,421				$165,528

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

  There is no goodwill associated with the Corporate segment.

The following is a summary of goodwill detailed by reportable segments for the three months ended March 31:

						Regional				Capital
(Dollars in thousands)		Non-Strategic				Banking				Markets				Total
December 31, 2008			$30,228				$64,759				$97,421				$192,408
March 31, 2009			$30,228				$64,759				$97,421				$192,408
December 31, 2009			$3,348				$64,759				$97,421				$165,528
Impairment			(3,348	)			-				-				(3,348	)
March 31, 2010			$-				$64,759				$97,421				$162,180

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

  There is no goodwill associated with the Corporate segment.

Note 6 - Intangible Assets (continued)

The following is a summary of gross goodwill and accumulated impairment losses and write-offs detailed by reportable segments included in the Consolidated Condensed Statements of Condition through March 31, 2010:

						Regional				Capital
(Dollars in thousands)		Non-Strategic				Banking				Markets				Total
Gross goodwill			$168,032				$64,759				$97,421				$330,212
Accumulated impairments			(101,728	)			-				-				(101,728	)
Accumulated divestiture related write-offs			(66,304	)			-				-				(66,304	)
March 31, 2010			$-				$64,759				$97,421				$162,180

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

  There is no goodwill associated with the Corporate segment.

Note 7 - Regulatory Capital

FHN is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on FHN’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of assets, liabilities, and certain derivatives as calculated under regulatory accounting practices must be met. Capital amounts and classification are also subject to qualitative judgment by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require FHN to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets (leverage). Management believes, as of March 31, 2010, that FHN met all capital adequacy requirements to which it was subject.

The actual capital amounts and ratios of FHN and FTBNA are presented in the table below. In addition, FTBNA must also calculate its capital ratios after excluding financial subsidiaries as defined by the Gramm-Leach-Bliley Act of 1999. Based on this calculation, FTBNA’s Total Capital, Tier 1 Capital, and Leverage ratios were 19.21 percent, 15.44 percent, and 12.94 percent, respectively, on March 31, 2010, and were 18.20 percent, 13.86 percent, and 11.41 percent, respectively, on March 31, 2009.

	First Horizon National									First Tennessee Bank
	Corporation									National Association
(Dollars in thousands)			Amount			Ratio				Amount				Ratio
On March 31, 2010:
Actual:
Total Capital			$4,505,835				21.43	%			$4,311,198				20.71	%
Tier 1 Capital			3,484,847				16.58				3,352,967				16.10
Leverage			3,484,847				13.71				3,352,967				13.31
For Capital Adequacy Purposes:
Total Capital			1,681,814	³			8.00				1,665,627	³			8.00
Tier 1 Capital			840,907	³			4.00				832,813	³			4.00
Leverage			1,016,982	³			4.00				1,007,997	³			4.00
To Be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital											2,082,033	³			10.00
Tier 1 Capital											1,249,220	³			6.00
Leverage											1,259,996	³			5.00
On March 31, 2009:
Actual:
Total Capital			$5,004,558				20.20	%			$4,731,268				19.27	%
Tier 1 Capital			3,708,962				14.97				3,518,478				14.33
Leverage			3,708,962				12.23				3,518,478				11.69
For Capital Adequacy Purposes:
Total Capital			1,981,748	³			8.00				1,963,701	³			8.00
Tier 1 Capital			990,874	³			4.00				981,851	³			4.00
Leverage			1,213,301	³			4.00				1,204,230	³			4.00
To Be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital											2,454,626	³			10.00
Tier 1 Capital											1,472,776	³			6.00
Leverage											1,505,287	³			5.00

Note 8 - Earnings per Share

The following tables show a reconciliation of the numerators used in calculating earnings per share attributable to common shareholders:

		Three Months Ended
		March 31
(In thousands)		2010				2009
Loss from continuing operations			$(2,622	)			$(64,447	)
Loss from discontinued operations, net of tax			(7,271	)			(648	)
Net loss			$(9,893	)			$(65,095	)
Net income attributable to noncontrolling interest			2,844				2,750
Net loss attributable to controlling interest			$(12,737	)			$(67,845	)
Preferred stock dividends			14,918				14,956
Net loss available to common shareholders			$(27,655	)			$(82,801	)
Loss from continuing operations			$(2,622	)			$(64,447	)
Net income attributable to noncontrolling interest			2,844				2,750
Preferred stock dividends			14,918				14,956
Net loss from continuing operations available to common shareholders			$(20,384	)			$(82,153	)

The following table provides a reconciliation of weighted average common shares to diluted average common shares:

		Three Months Ended
		March 31
(In thousands, except per share data)			2010				2009
Weighted average common shares outstanding - basic (a)			223,658				223,594
Effect of dilutive securities			-				-
Weighted average common shares outstanding - diluted (a)			223,658				223,594

(a) All share data has been restated to reflect stock dividends distributed through April 1, 2010.

The following table provides a reconciliation of earnings/(losses) per common and diluted share:

		Three Months Ended
		March 31
Loss per common share:		2010				2009
Loss per share from continuing operations available to common shareholders			$(0.09	)			$(0.37	)
Loss per share from discontinued operations, net of tax			(0.03	)			-
Net loss per share available to common shareholders			$(0.12	)			$(0.37	)
Diluted loss per common share:
Loss per share from continuing operations available to common shareholders			$(0.09	)			$(0.37	)
Loss per share from discontinued operations, net of tax			(0.03	)			-
Net loss per share available to common shareholders			$(0.12	)			$(0.37	)

Due to the net loss attributable to common shareholders for the three months ended March 31, 2010 and 2009, respectively, no potentially dilutive shares were included in the loss per share calculations as including such shares would have been antidilutive. Stock options of 12.5 million and 16.1 million with a weighted average exercise price of $28.59 and $28.76 per share for the three months ended March 31, 2010 and 2009, respectively, were excluded. Other equity awards of 3.1 million and 1.1 million for the three months ended March 31, 2010 and 2009, respectively, were also excluded from diluted shares. Additionally, 14.2 million potentially dilutive shares related to the CPP common stock warrant were excluded from the computation of diluted loss per common share for both periods presented because such shares would have been antidilutive.

Note 9 - Contingencies and Other Disclosures

Contingencies. Contingent liabilities arise in the ordinary course of business, including those related to litigation. Various claims and lawsuits are pending against FHN and its subsidiaries. In view of the inherent difficulty of predicting the outcome of legal matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories or involve a large number of parties, FHN cannot reasonably determine what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss or impact related to each pending matter may be. FHN establishes loss contingency reserves for litigation matters when estimated loss is both probable and reasonably estimable as prescribed by applicable financial accounting guidance. A reserve generally is not established when a loss contingency either is not probable or its amount is not reasonably estimable. If loss for a matter is probable and a range of possible loss outcomes is the best estimate available, accounting guidance generally requires a reserve to be established at the low end of the range. Based on current knowledge, and after consultation with counsel, management is of the opinion that loss contingencies related to pending matters should not have a material adverse effect on the consolidated financial condition of FHN, but may be material to FHN’s operating results for any particular reporting period depending, in part, on the results from that period.

Two subsidiaries of FHN, FTN Financial Securities Corp. (“FTNFS”) and First Tennessee Bank National Association, along with an executive officer, Frank J. Gusmus, Jr., another current employee, and a former employee, have received written “Wells” notices from the Staff of the United States Securities and Exchange Commission (the “SEC”) stating that the Staff intends to recommend that the SEC bring enforcement actions for allegedly aiding and abetting a former FTNFS customer, Sentinel Management Group, Inc. (“Sentinel”), in violations of the federal securities laws. The subject of the Wells notices is a 2006 year-end securities repurchase transaction entered into by FTNFS with Sentinel, which is discussed in Note 18 of FHN’s Annual Report to shareholders for the year 2009. A Wells notice by the SEC Staff is neither a formal allegation of wrongdoing nor a determination by the SEC that there has been wrongdoing. A Wells notice generally provides the recipient with an opportunity to provide his, her, or its perspective to address the Staff’s concerns prior to enforcement action being taken by the SEC. FHN believes that its subsidiaries and employees complied with all applicable laws and regulations regarding the transaction. FHN intends to work within the Wells process to try to avoid the commencement of enforcement actions. If such actions are brought nonetheless, FHN believes they have meritorious defenses and they intend to advance those defenses vigorously.

Visa Matters. FHN is a member of the Visa USA network. On October 3, 2007, the Visa organization of affiliated entities completed a series of global restructuring transactions to combine its affiliated operating companies, including Visa USA, under a single holding company, Visa Inc. (“Visa”). Upon completion of the reorganization, the members of the Visa USA network remained contingently liable for certain Visa litigation matters. Based on its proportionate membership share of Visa USA, FHN recognized a contingent liability of $55.7 million within noninterest expense in fourth quarter 2007 related to this contingent obligation.

In March 2008, Visa completed its initial public offering (“IPO”). Visa funded an escrow account from IPO proceeds that will be used to make payments related to the Visa litigation matters. Upon funding of the escrow, FHN reversed $30.0 million of the contingent liability previously recognized with a corresponding credit to noninterest expense for its proportionate share of the escrow account. A portion of FHN’s Class B shares of Visa were redeemed as part of the IPO resulting in $65.9 million of equity securities gains in first quarter 2008.

In October 2008, Visa announced that it had agreed to settle litigation with Discover Financial Services for $1.9 billion. Of this settlement amount, $1.7 billion was funded from the escrow account established as part of Visa’s IPO. In connection with this settlement, FHN recognized additional expense of $11.0 million within noninterest expense in third quarter 2008. In December 2008, Visa deposited additional funds into the escrow account and FHN recognized a corresponding credit to noninterest expense of $11.0 million for its proportionate share of the amount funded.

In July 2009, Visa deposited an additional $700 million into the escrow account. Accordingly, FHN reduced its contingent liability by $7.0 million through a credit to noninterest expense.

After the partial share redemption in conjunction with the IPO, FHN holds approximately 2.4 million Class B shares of Visa, which are included in the Consolidated Condensed Statements of Condition at their historical cost of $0. Conversion of these shares into Class A shares of Visa and, with limited exceptions, transfer of these shares is restricted until the later of the third anniversary of the IPO or the final resolution of the covered litigation. The final conversion ratio, which was estimated to approximate 58 percent as of March 31, 2010, will fluctuate based on the ultimate settlement of the Visa litigation matters for which FHN has a proportionate contingent obligation. Future funding of the escrow will dilute this exchange rate by an amount that is yet to be determined.

Note 9 - Contingencies and Other Disclosures (continued)

Other disclosures – Indemnification agreements and guarantees. In the ordinary course of business, FHN enters into indemnification agreements for legal proceedings against its directors and officers and standard representations and warranties for underwriting agreements, merger and acquisition agreements, loan sales, contractual commitments, and various other business transactions or arrangements. The extent of FHN’s obligations under these agreements depends upon the occurrence of future events; therefore, it is not possible to estimate a maximum potential amount of payouts that could be required with such agreements.

FHN is subject to potential liabilities and losses in relation to loans that it services, and in relation to loans that it originated and sold. FHN evaluates those potential liabilities and maintains reserves for potential losses. In addition, FHN has arrangements with the purchaser of its national home loan origination and servicing platforms that create obligations and potential liabilities.

Servicing. FHN services, through a sub-servicer, a predominately first lien mortgage loan portfolio of $40.3 billion as of March 31, 2010, a significant portion of which is held by FNMA and private security holders, with less significant portions held by GNMA and FHLMC. In connection with its servicing activities, FHN collects and remits the principal and interest payments on the underlying loans for the account of the appropriate investor. In the event of delinquency or non-payment on a loan in a private or agency securitization: (1) the terms of the private securities agreements require FHN, as servicer, to continue to make monthly advances of principal and interest (“P&I”) to the trustee for the benefit of the investors; and (2) the terms of the majority of the agency agreements may require the servicer to make advances of P&I, or to repurchase the delinquent or defaulted loan out of the trust pool. For servicer advances of P&I under the terms of private and FNMA (and GNMA pools) securitizations, FHN can utilize payments of P&I received from other prepaid loans within a particular loan pool in order to advance P&I to the trustee. In the event payments are ultimately made by FHN to satisfy this obligation, P&I advances and servicer advances are recoverable from: (1) in the case of private securitizations, the liquidation proceeds of the property securing the loan and (2) in the case of agency loans, from the proceeds of the foreclosure sale by the Government Agency.

FHN is also subject to losses in its loan servicing portfolio due to loan foreclosures. Foreclosure exposure arises from certain agency agreements which limit the agency’s repayment guarantees on foreclosed loans, resulting in certain foreclosure costs being borne by servicers. Foreclosure exposure also includes real estate costs, marketing costs, and costs to maintain properties, especially during protracted resale periods in geographic areas of the country negatively impacted by declining home values.

FHN is also subject to losses due to unreimbursed servicing expenditures made in connection with the administration of current governmental and/or regulatory loss mitigation and loan modification programs. Additionally, FHN is required to repurchase GNMA loans prior to modification.

Loans Originated and Sold. Prior to 2009, FHN originated loans through its legacy mortgage business, primarily first lien home loans, with the intention of selling them. Sometimes the loans were sold with full or limited recourse, but much more often the loans were sold without recourse. For loans sold with recourse, FHN has indemnity and repurchase exposure if the loans default. For loans sold without recourse, FHN has repurchase exposure primarily for claims that FHN breached its representations and warranties made to the purchasers at the time of sale. From 2005 through 2008, FHN sold approximately $114 billion of such loans.

For loans sold without recourse, FHN has obligations to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations or warranties made by FHN at the time of sale. Such representations and warranties typically include those made regarding loans that had missing or insufficient file documentation and loans obtained through fraud by borrowers or other third parties such as appraisers.

FHN utilizes multiple techniques in assessing the adequacy of its repurchase and foreclosure reserve for loans sold without recourse for which it has continuing obligations under representations and warranties. FHN tracks actual repurchase or make-whole losses by investor, loan pool, and vintage (year loan was sold) and this historical data is used to estimate inherent loss content observed within its vintages of loan sales. Due to the historical nature of this calculation, as well as the increasing volume of requests (“the pipeline”) from investors, FHN performs additional analysis of repurchase and make-whole obligations and applies management judgment which incorporates known current trends in repurchase and make-whole requests, loss severity trends, alternative resolutions, and rescission rates (repurchase requests rejected by FHN) in the determination of the appropriate reserve level.

Note 9 - Contingencies and Other Disclosures (continued)

FHN has sold certain agency mortgage loans with full recourse under agreements to repurchase the loans upon default. Loans sold with full recourse generally include mortgage loans sold to investors in the secondary market which are uninsurable under government guaranteed mortgage loan programs due to issues associated with underwriting activities, documentation, or other concerns. For mortgage insured single-family residential loans, in the event of borrower nonperformance, FHN would assume losses to the extent they exceed the value of the collateral and private mortgage insurance, FHA insurance, or VA guaranty. On March 31, 2010 and 2009, FHN had single-family residential loans with outstanding balances of $68.9 million and $76.9 million, respectively, that were sold, servicing retained, on a full recourse basis.

Loans sold with limited recourse include loans sold under government guaranteed mortgage loan programs including the Federal Housing Administration and Veterans Administration. FHN continues to absorb losses due to uncollected interest and foreclosure costs and/or limited risk of credit losses in the event of foreclosure of the mortgage loan sold. Generally, the amount of recourse liability in the event of foreclosure is determined based upon the respective government program and/or the sale or disposal of the foreclosed property collateralizing the mortgage loan. Another instance of limited recourse is the VA/No bid. In this case, the VA guarantee is limited and FHN may be required to fund any deficiency in excess of the VA guarantee if the loan goes to foreclosure. On March 31, 2010 and 2009, the outstanding principal balance of loans sold with limited recourse arrangements where some portion of the principal is at risk and serviced by FHN was $3.2 billion and $3.4 billion, respectively. Additionally, on March 31, 2010 and 2009, $.9 billion and $1.5 billion, respectively, of mortgage loans were outstanding which were sold under limited recourse arrangements where the risk is limited to interest and servicing advances.

The reserve for foreclosure losses for loans sold with full or limited recourse is based upon a historical progression model using a rolling 12-month average, which predicts the probability or frequency of a mortgage loan entering foreclosure. In addition, other factors are considered, including qualitative and quantitative factors (e.g., current economic conditions, past collection experience, risk characteristics of the current portfolio, and other factors), which are not defined by historical loss trends or severity of losses.

FHN has evaluated its exposure under all of these obligations and accordingly, has reserved for losses of $126.0 million and $37.8 million as of March 31, 2010 and 2009, respectively. Reserves for FHN’s estimate of these obligations are reflected in “Other liabilities” on the Consolidated Condensed Statements of Condition while expense related to this reserve is included within “Mortgage banking foreclosure and repurchase provision” on the Consolidated Condensed Statements of Income.

Equity-Lending Related Repurchase Obligations. FHN has sold HELOC and second lien mortgages without recourse through whole loan sales. In 2009, FHN settled a substantial portion of its repurchase obligations through an agreement with the primary purchaser of HELOC and second lien loans that were previously transferred through whole loan sales. This settlement included the transfer of retained servicing rights associated with the applicable second lien and HELOC loan sales. FHN does not guarantee the receipt of the scheduled principal and interest payments on the underlying loans but does have an obligation to repurchase the loans excluded from the above settlement for which there is a breach of representations and warranties provided to the buyers. The remaining repurchase reserve is minimal reflecting the settlement discussed above.

Other. A wholly-owned subsidiary of FHN has agreements with several providers of private mortgage insurance whereby the subsidiary has agreed to accept insurance risk for specified loss corridors for loans originated in each contract year in exchange for a portion of the private mortgage insurance premiums paid by borrowers (i.e., reinsurance arrangements). The loss corridors vary for each primary insurer for each contract year. No new reinsurance arrangements have been initiated after 2008. In 2009, FHN agreed to settle certain of its reinsurance obligations with primary insurers, resulting in a decrease in the reserve balance and the associated trust assets. As of March 31, 2010, FHN has reserved $29.5 million for its estimated liability under the reinsurance arrangements. In accordance with the terms of the contracts with the primary insurers, as of March 31, 2010, FHN has placed $31.8 million of prior premium collections in trust for payment of claims arising under the reinsurance arrangements.

2008 Sale of National Origination and Servicing Platforms. In conjunction with the sale of its servicing platform in August 2008, FHN entered into a three year subservicing arrangement with the purchaser for the unsold portion of FHN’s servicing portfolio. As part of the subservicing agreement, FHN has agreed to a make-whole arrangement whereby if the number of loans subserviced by the purchaser falls below specified levels and the direct servicing cost per loan is greater than a specified amount (determined using loans serviced on behalf of both

Note 9 - Contingencies and Other Disclosures (continued)

FHN and the purchaser), FHN will make a payment according to a contractually specified formula. The make-whole payment is subject to a cap, which is $15.0 million if triggered during the eight quarters following the first anniversary of the divestiture. As part of the 2008 transaction, FHN recognized a contingent liability of $1.2 million representing the estimated fair value of its performance obligation under the make-whole arrangement.

Note 10 – Pension and Other Employee Benefits

Pension plan. FHN sponsors a noncontributory, qualified defined benefit pension plan to employees hired or re-hired on or before September 1, 2007, excluding certain employees of FHN’s insurance subsidiaries. Pension benefits are based on years of service, average compensation near retirement, and estimated social security benefits at age 65. The contributions are based upon actuarially determined amounts necessary to fund the total benefit obligation. FHN contributed $50 million to the qualified pension plan in 2009. At this time, FHN does not expect to make a contribution to the qualified pension plan in 2010. In 2009, FHN’s Board of Directors determined that the accrual of benefits under the qualified pension plan and the supplemental retirement plan would cease as of December 31, 2012. FHN will continue to offer retirement benefits to employees by extending the profit-sharing program to more employees and increasing the 401k match.

FHN also maintains non-qualified plans including a supplemental retirement plan that covers certain employees whose benefits under the pension plan have been limited. Additionally, the Employee Non-voluntary Elective Contribution (“ENEC”) program was added under the FHN savings plan that is provided only to employees who are not eligible for the pension plan. With the ENEC program, FHN will generally make contributions to eligible employees’ savings plan accounts based upon company performance. Contribution amounts will be a percentage of each employee’s base salary (as defined in the savings plan) earned the prior year. FHN intends to make a contribution of $1.2 million for this plan in 2010 related to the 2009 plan year. Other non-qualified pension plans and postretirement benefit plans are unfunded. Contributions to these plans cover all benefits paid under the non-qualified plans. This amount was $6.7 million for 2009. FHN anticipates this amount will be $4.9 million in 2010.

Other employee benefits. FHN provides postretirement life insurance benefits to certain employees and also provides postretirement medical insurance to retirement-eligible employees. The postretirement medical plan is contributory with retiree contributions adjusted annually and is based on criteria that are a combination of the employee’s age and years of service. For any employee retiring on or after January 1, 1995, FHN contributes a fixed amount based on years of service and age at the time of retirement. FHN’s postretirement benefits include prescription drug benefits. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“the Act”) introduced a prescription drug benefit under Medicare Part D as well as a federal subsidy to sponsors of retiree health care that provide a benefit that is actuarially equivalent to Medicare Part D. FHN currently anticipates receiving a prescription drug subsidy under the Act through 2012.

The components of net periodic benefit cost for the three months ended March 31 are as follows:

		Pension Benefits								Other Benefits
(Dollars in thousands)			2010			2009					2010			2009
Components of net periodic benefit cost
Service cost			$3,778				$4,401				$136				$339
Interest cost			7,836				7,926				595				990
Expected return on plan assets			(11,879	)			(11,582	)			(287	)			(279	)
Amortization of unrecognized:
Transition obligation			-				-				247				247
Prior service cost/(credit)			67				190				(2	)			617
Actuarial (gain)/loss			3,772				1,973				(216	)			(124	)
Net periodic benefit cost			$3,574				$2,908				$473				$1,790

Note 11 – Business Segment Information

Periodically, FHN adapts its segments to reflect managerial or strategic changes and also expense allocations among segments. In first quarter 2010, FHN revised its operating segments to better align with its strategic direction, representing a focus on its regional banking franchise and capital markets business. Key changes include the addition of the non-strategic segment which combines the former mortgage banking and national specialty lending segments; correspondent banking has been moved from capital markets to regional banking; and first lien mortgage production in the Tennessee footprint is now in the regional banking segment. For comparability, previously reported items have been revised to reflect these changes.

FHN has four business segments: regional banking, capital markets, non-strategic, and corporate. The regional banking segment offers financial products and services, including traditional lending and deposit taking, to retail and commercial customers in Tennessee and surrounding markets. Regional banking provides investments, insurance services, financial planning, trust services and asset management, health savings accounts, cash management, and first lien mortgage originations within the Tennessee footprint. Additionally, the regional banking segment includes correspondent banking which provides credit, depository, and other banking related services to other financial institutions. The capital markets segment consists of fixed income sales, trading, and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio advisory, and derivative sales. The non-strategic segment consists of the wind-down consumer and construction lending activities, legacy mortgage banking elements, including originations though the national origination platform, servicing fees, and the associated ancillary revenues related to these businesses. Non-strategic also includes wind-down trust preferred loan portfolio and exited businesses, such as institutional equity research, along with the associated restructuring, repositioning, and efficiency charges. The corporate segment consists of gains on the repurchase of debt, unallocated corporate expenses, expense on subordinated debt issuances and preferred stock, bank-owned life insurance, unallocated interest income associated with excess equity, net impact of raising incremental capital, revenue and expense associated with deferred compensation plans, funds management, low income housing investment activities, venture capital, and various charges related to restructuring, repositioning, and efficiency.

Total revenue, expense, and asset levels reflect those which are specifically identifiable or which are allocated based on an internal allocation method. Because the allocations are based on internally developed assignments and allocations, they are to an extent subjective. This assignment and allocation has been consistently applied for all periods presented. The following table reflects the amounts of consolidated revenue, expense, tax, and assets for each segment for the quarters ended March 31:

		Three Months Ended
		March 31
(Dollars in thousands)		2010				2009
Consolidated
Net interest income			$180,395				$196,587
Provision for loan loss			105,000				300,000
Noninterest income			248,263				399,346
Noninterest expense			342,673				407,803
Loss before income taxes			(19,015	)			(111,870	)
Benefit for income taxes			(16,393	)			(47,423	)
Loss from continuing operations			(2,622	)			(64,447	)
Loss from discontinued operations, net of tax			(7,271	)			(648	)
Net loss			$(9,893	)			$(65,095	)
Average assets			$25,559,408				$30,467,211