GENERAL INFORMATION

First Horizon National Corp. (NYSE: FHN) is a national financial services institution. From a small community bank chartered in 1864, FHN has grown to be one of the 30 largest bank holding companies in the United States in terms of asset size.

The 6,000 employees of FHN provide financial services to individuals and business customers through more than 200 bank locations in and around Tennessee and 14 capital markets offices in the U.S. and abroad. The corporation's two major brands - First Tennessee and FTN Financial- provide customers with a broad range of products and services including:

· Regional banking, with one of the largest market shares in Tennessee and one of the highest customer retention rates of any bank in the country

· Capital markets, one of the nation's top underwriters of U.S. government agency securities

FHN companies have been recognized as some of the nation's best employers by AARP and Working Mother magazines.

In first quarter 2008 FHN revised its business line segments to better align with its strategic direction, representing a focus on its regional banking franchise and capital markets business. To implement this change, the prior Retail/Commercial Banking segment was split into its major components with the national portions of consumer lending and construction lending assigned to a new National Specialty Lending segment that more appropriately reflects the ongoing wind down of these businesses. Additionally, correspondent banking was shifted from Retail/Commercial Banking to the Capital Markets segment to better represent the complementary nature of these businesses. To reflect its geographic focus, the remaining portions of the Retail/Commercial Banking segment now represent the new Regional Banking segment. All prior period information has been revised to conform to the current segment structure and the business line reviews below are based on the new segment presentation.

††† Regional Banking offers financial products and services, including traditional lending and deposit-taking, to retail and commercial customers in Tennessee and surrounding markets. Additionally, Regional Banking provides investments, insurance, financial planning, trust services and asset management, credit card, cash management, and check clearing. On March 1, 2006, FHN sold its national merchant processing business. The continuing effects of the divestiture, which is included in the Regional Banking segment, are being accounted for as a discontinued operation.

††† Capital Markets provides a broad spectrum of financial services for the investment and banking communities through the integration of traditional capital markets securities activities, equity research, loan sales, portfolio advisory services, structured finance and correspondent banking services.

††† National Specialty Lending consists of traditional consumer and construction lending activities outside the regional banking footprint. In January 2008, FHN announced the discontinuation of national home builder and commercial real estate lending through its First Horizon Construction Lending offices.

††† Mortgage Banking now consists of the origination of mortgage loans in and around the regional banking footprint and servicing activities related to the remaining portfolio. Historically, this division provided mortgage loans and servicing to consumers and operated in approximately 40 states. On August 31, 2008 First Horizon completed the sale of its servicing platform, origination offices outside Tennessee and $19.1 billion of the servicing portfolio to MetLife Bank, N.A.

††† Corporate consists of unallocated corporate expenses including restructuring, repositioning, and efficiency initiatives, gains and losses on repurchases of debt, 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 and venture capital.

For the purpose of this management discussion and analysis (MD&A), earning assets have been expressed as averages except as otherwise noted, and loans have been disclosed net of unearned income. The following is a discussion and analysis of the financial condition and results of operations of FHN for the three-month and nine-month periods ended September 30, 2008, compared to the three-month and nine-month periods ended September 30, 2007. To assist the reader in obtaining a better understanding of FHN and its performance, this discussion should be read in conjunction with FHN's unaudited consolidated condensed financial statements and accompanying notes appearing in this report. Additional information including the 2007 financial statements, notes, and MD&A is provided in the 2007 Annual Report.

FORWARD-LOOKING STATEMENT

This MD&A contains forward-looking statements with respect to FHN's beliefs, plans, goals, expectations, and estimates. Forward-looking statements are statements that are not a representation of historical information but rather are related to future operations, strategies, financial results or other developments. The words "believe," "expect," "anticipate," "intend," "estimate," "should," "is likely," "will," "going forward," and other expressions that indicate future events and trends identify forward-looking statements. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, operational, economic and competitive uncertainties and contingencies, many of which are beyond a company's control, and many of which, with respect to future business decisions and actions (including acquisitions and divestitures), are subject to change. Examples of uncertainties and contingencies include, among other important factors, general and local economic and business conditions; recession or other economic downturns, expectations of and actual timing and amount of interest rate movements, including the slope of the yield curve (which can have a significant impact on a financial services institution); market and monetary fluctuations; inflation or deflation; customer and investor responses to these conditions; the financial condition of borrowers and other counterparties; competition within and outside the financial services industry; geopolitical developments including possible terrorist activity; recent and future legislative and regulatory developments; natural disasters; effectiveness of FHN's hedging practices; technology; demand for FHN's product offerings; new products and services in the industries in which FHN operates; and critical accounting estimates. Other factors are those inherent in originating, selling and servicing loans including prepayment risks, pricing concessions, fluctuation in U.S. housing prices, fluctuation of collateral values, and changes in customer profiles. Additionally, the actions of the Securities and Exchange Commission (SEC), the Financial Accounting Standards Board (FASB), the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), Financial Industry Regulatory Authority (FINRA), and other regulators; regulatory and judicial proceedings and changes in laws and regulations applicable to FHN; and FHN's success in executing its business plans and strategies and managing the risks involved in the foregoing, could cause actual results to differ. FHN assumes no obligation to update any forward-looking statements that are made from time to time. Actual results could differ because of several factors, including those presented in this Forward-Looking Statements section, in other sections of this MD&A, and other parts of this Quarterly Report on Form 10-Q for the period ended September 30, 2008.

FINANCIAL SUMMARY (Comparison of Third Quarter 2008 to Third Quarter 2007)

FINANCIAL HIGHLIGHTS
For the third quarter 2008, FHN reported a net loss of $125.1 million or $.62 per diluted share compared to a net loss of $14.2 million or $.11 per diluted share for the third quarter 2007. The third quarter 2008 was impacted by several items including increased provisioning for loan losses, costs associated with the company's restructuring, repositioning, and efficiency initiatives, a settlement loss related to Visa legal matters and gains related to the repurchase of debt. Provisioning for loan losses increased by $296.6 million from the third quarter 2007 to $340.0 million in the current quarter as loan loss reserves grew from 1.08 percent of total loans in the third quarter 2007 to 3.52 percent in the third quarter 2008. FHN recognized gains of $18.9 million related to the repurchase of debt and incurred net charges of $33.9 million in the third quarter 2008 from restructuring, repositioning, and efficiency initiatives compared to $32.8 million in the third quarter 2007.

National Specialty Lending, Regional Banking, Mortgage Banking and Capital Markets were all impacted by increased provisioning in the third quarter 2008 as FHN continued to actively manage the credit risk within its loan portfolios. Capital Markets fixed income sales generated $80.1 million of revenues compared to $46.0 million in the third quarter of 2007 as the Federal Reserve's aggressive rate cuts in the first half of 2008 produced a steeper yield curve. Mortgage Banking pre-tax income was $46.4 million in the third quarter 2008 compared to a pre-tax loss of $39.2 million in the third quarter 2007 as origination income was positively impacted by higher gain on sale margins and servicing income was favorably impacted by hedging activities as compared to 2007.

Return on average shareholders' equity and return on average assets were (18.30) percent and (1.49) percent, respectively, for the third quarter 2008 compared to
(2.31) percent and (.15) percent respectively, for the third quarter 2007. Total assets were $32.8 billion and shareholders' equity was $2.6 billion on September 30, 2008, as compared to $37.5 billion and $2.4 billion, respectively, on September 30, 2007.

BUSINESS LINE REVIEW

Regional Banking
The pre-tax loss for Regional Banking was $6.5 million for the third quarter 2008 compared to pre-tax income of $56.2 million for third quarter 2007. Total revenues for Regional Banking were $210.3 million for third quarter 2008 compared to $228.6 million for the third quarter 2007.

Net interest income was $122.4 million in the third quarter 2008 compared to $136.9 million in the third quarter 2007. Regional Banking net interest margin was 4.43 percent in the third quarter 2008 compared to 4.85 percent in the third quarter 2007. This compression resulted from narrowing spreads on deposits as interest rates declined in the first half of 2008 and competition for deposits increased.

Noninterest income decreased slightly to $87.9 million in the third quarter 2008 as compared to $91.6 million in the third quarter 2007. The decrease was primarily driven by a decline in trust income of $1.8 million as the value of assets under management declined due to economic conditions.

Provision for loan losses increased to $58.2 million in the third quarter 2008 from $18.5 million for the third quarter 2007. This increase was primarily a result of deterioration in commercial and home equity loan portfolios compared to a year ago.

Noninterest expense increased to $158.6 million in the third quarter 2008 from $153.8 million for the third quarter 2007. Declines of $4.4 million in personnel expense were more than offset by increases in advertising, foreclosure losses, expense for off balance sheet commitments and low income housing corporation expenses.

Capital Markets
Capital Markets pre-tax loss was $8.6 million in the third quarter 2008 as compared to pre-tax income of $2.7 million in the third quarter 2007. Total revenues for Capital Markets were $117.5 million in the third quarter 2008 as compared to $78.6 million in the third quarter 2007.

Net interest income was $19.0 million in the third quarter 2008 as compared to $14.1 million in the third quarter 2007. This increase is primarily attributable to a steeper yield curve and the effect of increases in the average trust preferred loan balance.

Income from fixed income sales increased to $80.1 million in the third quarter 2008 from $46.0 million in the third quarter 2007, reflecting an increase in activity during the third quarter 2008 as the Federal Reserve aggressively lowered rates in the first half of 2008 resulting in a steeper yield curve as compared to last year. Other product revenues remained flat at $18.4 million in the third quarter 2008 compared to $18.5 million in the third quarter 2007.

Provision for loan losses increased to $38.5 million from $2.0 million to reflect deterioration of correspondent banking loans from current stress in the financial system.

Noninterest expense was $87.7 million in the third quarter 2008 as compared to $73.9 million in the third quarter 2007. This increase is a result of higher production levels during the third quarter 2008.

National Specialty Lending
National Specialty Lending had a pre-tax loss of $214.5 million in the third quarter 2008 as compared to a pre-tax income of $6.0 million in the third quarter 2007. The pre-tax loss in 2008 is primarily a result of an increase in the provision for loan losses to $240.5 million in the third quarter 2008 as compared to $22.8 million in the third quarter 2007 due to deterioration in the national construction lending portfolios.

Noninterest expense was $23.5 million in the third quarter 2008 as compared to $33.6 million for the third quarter 2007. Noninterest expense declined principally due to lower personnel costs related to the business wind-down initiated during first quarter 2008.

Mortgage Banking
Effective August 31, 2008, FHN completed the sale of Mortgage Banking's servicing operations, origination offices outside of Tennessee and $19.1 billion of servicing to MetLife Bank, N.A. As a result of this transaction, all components of origination activity for third quarter 2008 are significantly lower when compared to third quarter 2007.

Mortgage Banking had pre-tax income of $46.4 million in the third quarter 2008 as compared to a pre-tax loss of $39.2 million in the third quarter 2007. Total revenues for Mortgage Banking were $138.3 million for the third quarter 2008 as compared to $69.1 million for the third quarter 2007.

Net interest income was $22.5 million in the third quarter 2008 as compared to $26.9 million in the third quarter 2007 as the size of the mortgage warehouse decreased due to the sale of national origination offices and the warehouse spread increased to 3.83 percent in the current quarter compared to 1.34 percent in third quarter 2007. Provision for loan losses was $2.9 million in the third quarter 2008 reflecting deterioration of permanent mortgages in the portfolio.

Noninterest income was $115.8 million in the third quarter 2008 as compared to $42.1 million in the third quarter 2007. Noninterest income consists primarily of mortgage banking-related revenue from the origination and sale of mortgage loans, fees from mortgage servicing and changes in fair value of mortgage servicing rights (MSR) net of hedge gains or losses.

Net origination income increased to $19.8 million in the third quarter 2008 from a loss of $17.5 million in the third quarter 2007 primarily due to increased margin on deliveries to the secondary market and an increase of $6.7 million attributable to adopting accounting standards in the first quarter 2008. Gross origination fees decreased by $33.0 million as mortgage banking origination operations were sold to MetLife on August 31, 2008. Gain on loan sale deliveries increased $35.0 million as margins increased to 21 bps in the third quarter 2008 compared to negative 33 bps in 2007. Gains in 2008 were negatively impacted by a $15.5 million adjustment to reflect revised cash flow expectations related to mortgage origination activity while 2007 was impacted by credit market disruptions which negatively affected pricing and dealer concessions. See Note
15 - Other Events for a detailed discussion of the liability adjustment.

Net servicing income increased to $80.6 million in the third quarter 2008 from $49.7 million in 2007. Service fees decreased by $26.8 million to $49.9 million in the third quarter 2008 as the servicing portfolio declined to $65.3 billion from $108.4 billion in 2007. Servicing hedging activities positively impacted net revenues by $50.8 million in the third quarter as compared to $22.0 million in the third quarter 2007, primarily resulting from Federal Reserve interest rate decreases creating a steeper yield curve in 2008. The decrease in MSR value due to runoff was $20.1 million in the third quarter 2008 as compared to $49.0 million in the third quarter 2007.

Noninterest expense was $89.0 million in the third quarter 2008 as compared to $108.3 million in third quarter 2007. The decrease in the third quarter of 2008 was primarily the result of the divestiture of certain mortgage banking operations offset by a $21.1 million effect of no longer deferring origination costs on warehouse loans accounted for at elected fair value. This amount is offset by a corresponding increase in origination income.

Corporate
The Corporate segment's results yielded a pre-tax loss of $30.7 million in the third quarter 2008 compared to a pre-tax loss of $49.4 million in the third quarter 2007. Net interest income increased to $14.0 million compared to net interest expense of $1.4 million in the third quarter 2007 as proceeds from the common stock issuance reduced the need for higher cost short term funding. Results for the third quarter 2008 include $33.9 million of net charges associated with implementation of restructuring, repositioning and efficiency initiatives compared to $32.8 million of net charges in the third quarter 2007. See discussion of the restructuring, repositioning and efficiency initiatives below for further details. In the third quarter 2008, gains of $18.9 million related to the repurchase of debt were partially offset by an $11.0 million loss related to certain Visa legal settlement matters.

RESTRUCTURING, REPOSITIONING, AND EFFICIENCY INITIATIVES

Beginning in 2007, FHN conducted a company-wide review of business practices with the goal of improving its overall profitability and productivity. In addition, during 2007 management announced its intention to sell 34 full-service First Horizon Bank branches in its national banking markets. These sales were finalized in second quarter 2008. In the second half of 2007, FHN also took actions to right-size First Horizon Home Loans' mortgage banking operations and to downsize FHN's national lending operations, in order to redeploy capital to higher-return businesses. As part of its strategy to reduce its national real estate portfolio, FHN announced in January 2008 that it was discontinuing national homebuilder and commercial real estate lending through its First Horizon Construction Lending offices. Additionally, FHN initiated the repositioning of First Horizon Home Loans' mortgage banking operations, which included sales of MSR in fourth quarter 2007 and the first, second, and third quarters of 2008.

Net costs recognized by FHN in the nine months ended September 30, 2008, related to restructuring, repositioning, and efficiency activities were $81.1 million compared to $72.1 million for the first nine months of 2007. Included in noninterest income are $12.7 million of transaction costs related to contracted loan servicing sales and $18.9 million of losses related to the Mortgage divestiture and First Horizon Bank branch sales. All other costs incurred in relation to the restructuring, repositioning, and efficiency initiatives implemented by management are included in noninterest expense. All costs associated with FHN's restructuring, repositioning, and efficiency initiatives are recorded as unallocated corporate charges within the Corporate segment. Significant expenses for year to date 2008 resulted from the following actions:

· Expense of $39.4 million associated with organizational and compensation changes due to right-sizing operating segments, the divestiture of certain mortgage banking operations and First Horizon Bank branches, and consolidating functional areas

· Loss of $17.5 million on the divestiture of certain mortgage banking operations

· Loss of $1.4 million from the sales of certain First Horizon Bank branches

· Transaction costs of $12.7 million from the contracted sales of mortgage servicing rights

· Expense of $10.1 million for the write-down of certain premises and equipment, intangibles and other assets resulting from FHN's divestiture of certain mortgage operations and from the change in FHN's national banking strategy

Settlement of the obligations arising from current initiatives will be funded from operating cash flows. The effect of suspending depreciation on assets held for sale was immaterial to FHN's results of operations for all periods. As a result of the change in FHN's national banking strategy, a write-down of other intangibles of $2.4 million was recognized in first quarter 2008 related to certain banking licenses. As part of the divestiture of certain mortgage banking assets, an impairment of $1.7 million was recognized in second quarter 2008 related to noncompete agreements. The recognition of these impairment losses will have no effect on FHN's debt covenants. The impairment loss related to such intangible assets was recorded as an unallocated corporate charge within the Corporate segment and is included in all other expense on the Consolidated Condensed Statements of Income. As a result of the restructuring, repositioning, and efficiency initiatives implemented to date by management, the effects of $175 million in aggregate annual pre-tax improvements are being experienced by FHN beginning in its first quarter 2008 run-rate. An additional $70 million in annual profitability improvements is anticipated to be experienced by the end of 2008 in relation to the First Horizon Bank branch divestitures and the restructuring of mortgage operations and national lending operations. Due to the broad nature of the actions being taken, all components of income and expense will be affected. Additional amounts will likely be recognized in 2008 for adjustments related to the mortgage banking divestiture as well as the discontinuance of national businesses. At this time, the amount of these additional charges is expected to be between $5 and $15 million in the fourth quarter 2008.

Charges related to restructuring, repositioning, and efficiency initiatives for the three and nine month periods ended September 30, 2008, and 2007 are presented in the following table based on the income statement line item affected. See Note 13 - Restructuring, Repositioning, and Efficiency Charges and Note 2 - Acquisitions/Divestitures for additional information.

Table 1 - Charges for Restructuring, Repositioning, and Efficiency Initiatives

                                                                     Three Months Ended       Three Months Ended       Nine Months Ended       Nine Months Ended
                                                                        September 30             September 30            September 30            September 30
(Dollars in thousands)                                                      2008                     2007                    2008                    2007
Noninterest income:                                                                                                                                             -
  Mortgage banking                                                    $             (656 )     $                -       $         (12,667 )     $               -
  Losses on divestitures                                                         (17,489 )                      -                 (18,913 )                     -
Total noninterest income                                              $          (18,145 )     $                -       $         (31,580 )     $               -
Provision for loan losses                                             $                -       $                -       $               -       $           7,672
Noninterest expense:
. . .