*  Second quarter 2009 net loss available to common shareholders      was $123.2 million, or $.58 per diluted share, compared to      the first quarter net loss available to common shareholders      of $82.8 million, or $.39 per diluted share.   *  Nonperforming Assets (NPAs) continued an improving trend,      declining 2 percent linked-quarter.   *  Consolidated net interest margin expanded 16 basis points to      3.05 percent.   *  Positive trends within core businesses - Regional Banking      net interest margin expanded 21 basis points to 4.71 percent      and period-end core deposits increased 1 percent from first      quarter 2009.  Capital markets experienced another strong      quarter with fixed income revenues of $170.1 million.   *  Stronger balance sheet with improved liquidity - Period-end      assets declined to $28.8 billion primarily due to the wind-down      of the national loan portfolios.   *  Strong capital position - Capital ratios improved, remaining      among industry leaders with Tier 1 estimate of 15.4 percent,       Tangible Common Equity to Tangible Assets at 7.3 percent, and       Tier 1 Common estimate of 9.5 percent. 

"Given our strong capital position, proactive approach to credit, and competitive advantages in our core businesses, First Horizon is well-positioned," said Bryan Jordan, CEO of First Horizon. "We believe the long-term earnings power of our core franchises is solid - capable of delivering 15 to 20 percent returns on equity - and we're focused on the fundamentals that will drive it. We've made significant progress on our strategic focus and the continued wind-down of our national businesses."

PERFORMANCE HIGHLIGHTS

FHN's total revenues decreased to $491.4 million in the second quarter from $604.5 million in the prior quarter as mortgage banking income slipped $100.3 million primarily due to a decline in net servicing income and capital markets fixed income sales declined following first quarter 2009's record performance. Noninterest expenses declined slightly to $411.9 million from first quarter 2009's $417.3 million as lower personnel costs were partially offset by increases in loan repurchase costs, foreclosure losses, and the FDIC special assessment. Provision for loan losses decreased $40.0 million to $260.0 million in second quarter 2009. These resulted in a pre-tax loss of $180.6 million in second quarter 2009 compared with the $112.9 million pre-tax loss in first quarter 2009.

The second quarter reflected continuing efforts to contract the balance sheet as total average assets declined $1.5 billion, or 5.1 percent, to $28.9 billion from first quarter. Average loans decreased 4.2 percent or $.9 billion linked-quarter and average total deposits were down slightly as escrow deposit balances declined due to an MSR bulk sale.

Consolidated net interest margin improved to 3.05 percent in second quarter 2009 compared to 2.89 percent in first quarter driven by higher loan and deposit spreads and a decline in earning assets.

Provision and NPAs Decline, Reserve for Loan Losses Increases, Net Charge-Offs Rise

Nonperforming assets were down $19.1 million from the first quarter principally due to a reduction in OREO balances and flattening in nonperforming loan growth. The nonperforming asset ratio increased to 6.15 percent in second quarter 2009 from 5.98 percent in the prior quarter primarily from a decrease in total loans from prior quarter.

Provision for loan losses decreased to $260.0 million in second quarter 2009 from $300.0 million in the first quarter while net charge-offs increased to $239.4 million from $208.3 million. Provisioning reflects continued efforts to address problem loans and recognition of portfolio stress as a result of the adverse economic conditions and prolonged weakness in the housing market. The ratio of allowance to total loans increased to 4.91 percent in second quarter 2009 from 4.57 percent in the prior quarter and the net charge-off ratio was 477 basis points in second quarter 2009 compared to 397 basis points in the prior quarter. The increase in net charge-offs was driven by the income-producing commercial real estate, home equity, permanent mortgage, and one-time close portfolios.

Business Line Reviews

In the second quarter, FHN reviewed cost allocation and funds transfer pricing methodologies used to determine segment performance. As a result of this review, certain of these methodologies were revised affecting all segments. Additionally, activities related to Low Income Housing Investments were moved from Regional Banking to Corporate. For comparability, previously reported amounts have been revised to reflect these changes. The FDIC special assessment was allocated to all segments using period end assets of the reporting segment less an estimate of segment-level Tier 1 Capital.

Regional Banking's Margin Improves, Provision Decreases

Regional Banking recognized a pre-tax loss of $12.6 million for second quarter 2009 compared to a pre-tax loss of $66.7 million in the first quarter 2009. Provision expense declined by $46.8 million to $51.0 million in the second quarter. Net interest margin increased to 4.71 percent in second quarter 2009 compared to 4.50 percent in first quarter 2009 primarily reflecting increased loan and deposit spreads and a decline in earning assets. Noninterest income increased slightly due to a seasonal rise in service fees on deposit accounts. Noninterest expense was flat as declines in personnel expense were offset by elevated foreclosure losses and the FDIC special assessment.

Capital Markets' Solid Fixed Income Performance Continues

Capital Markets recognized pre-tax income of $79.0 million in second quarter 2009 compared to $74.7 million in first quarter 2009. Fixed income sales declined $26.9 million, but remained strong as favorable market conditions continued into the second quarter. Noninterest expense decreased due to a reduced rate of incentive provisioning and the decline in production levels. Provision expense increased $7.1 million in relation to first quarter 2009 primarily due to continued stress on the trust preferred loan portfolios. Other product revenues of $19.5 million were flat compared to first quarter 2009.

Continued Reduction of National Specialty Lending Balance Sheet

National Specialty Lending's second quarter pre-tax loss of $195.3 million was relatively flat compared to a pre-tax loss of $193.6 million in the prior quarter. Period-end loans declined approximately $.5 billion in comparison to first quarter 2009. Net interest income declined due to the continuing contraction of loan portfolios from the wind-down of operations. Loan loss provision was $176.3 million reflecting increased reserves for the national commercial construction and consumer real estate portfolios. Noninterest income declined sequentially as charges related to repurchase obligations associated with prior loan sales were higher in second quarter 2009. Noninterest expense increased in comparison to the prior quarter primarily from higher foreclosure losses and the FDIC special assessment.

Mortgage Banking Impacted by Hedging

Mortgage Banking's second quarter 2009 pre-tax loss was $44.7 million compared to first quarter 2009's pre-tax income of $84.8 million. Net servicing income declined sequentially as the positive effects of hedging results significantly declined in comparison to first quarter 2009 and fees were down consistent with a decline in average MSR. Origination income decreased due to mortgage warehouse valuation adjustments recognized in second quarter 2009. Tennessee mortgage origination income increased in the second quarter as refinance activity increased from first quarter. Noninterest expense increased in the second quarter as foreclosure and repurchase losses associated with the legacy origination platform increased from first quarter 2009. Provision expense increased to $11.5 million in the second quarter reflecting deterioration in the permanent mortgage portfolio.

Corporate Reflects Decline in Restructuring, Repositioning, and Efficiency Initiatives

The pre-tax loss for second quarter 2009 was $7.0 million compared to $12.0 million in the first quarter. Noninterest income increased to $11.5 million as deferred compensation income increased which was mirrored by a corresponding increase in personnel expense. Noninterest expense also increased due to the FDIC special assessment. Net charges related to restructuring, repositioning, and efficiency initiatives were minimal in the second quarter compared to $4.7 million in the first quarter.

USE OF NON-GAAP MEASURES

Certain capital-related non-GAAP ratios are included in the text of this release and on the following Consolidated Summary Results table. FHN's management believes such ratios are relevant to understanding the capital position of the company. The non-GAAP ratios presented in this release are tangible common equity to tangible assets, tangible book value per common share, tier 1 common to risk-weighted assets, and adjusted tangible common equity to risk-weighted assets. These ratios are reported to FHN's management and Board of Directors through various internal reports.