Business Segment Information

FHN has four business segments: regional banking, fixed income, corporate, and non-strategic. The regional banking segment offers financial products and services, including traditional lending and deposit taking, to consumer and commercial customers in Tennessee, North Carolina, South Carolina, Florida and other selected markets. Regional banking also provides investments, wealth management, financial planning, trust services and asset management, mortgage banking, credit card, and cash management. Additionally, the regional banking segment includes correspondent banking which provides credit, depository, and other banking related services to other financial institutions nationally. The fixed income segment consists of fixed income securities sales, trading, underwriting, and strategies for institutional clients in the U.S. and abroad, as well as loan sales, portfolio advisory services, and derivative sales. The corporate segment consists of unallocated corporate expenses, expense on subordinated debt issuances, 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, tax credit investment activities, derivative valuation adjustments related to prior sales of Visa Class B shares, and acquisition- and integration-related costs. The non-strategic segment consists of run-off consumer lending activities, legacy (pre-2009) mortgage banking elements, and the associated ancillary revenues and expenses related to these businesses. Non-strategic also includes the wind-down trust preferred loan portfolio and exited businesses.

Periodically, FHN adapts its segments to reflect managerial or strategic changes. FHN may also modify its methodology of allocating expenses and equity among segments which could change historical segment results. Business segment revenue, expense, asset, and equity 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, to an extent they are subjective. Generally, all assignments and allocations have been consistently applied for all periods presented. The following table reflects the amounts of consolidated revenue, expense, tax, and average assets for each segment for the three and nine months ended September 30:



	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in thousands)	2018		2017		2018		2017
Consolidated
Net interest income	$	305,700	$	209,817	$	917,805	$	600,226
Provision/(provision credit) for loan losses	2,000		—		1,000		(3,000		)
Noninterest income (a)	348,972		112,417		612,514		357,029
Noninterest expense	294,031		236,869		940,064		676,991
Income/(loss) before income taxes	358,641		85,365		589,255		283,264
Provision/(benefit) for income taxes (b)	83,925		13,596		133,553		57,903
Net income/(loss)	$	274,716	$	71,769	$	455,702	$	225,361
Average assets	$	40,077,033	$	28,874,827	$	40,199,487	$	28,852,679



	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in thousands)	2018			2017			2018			2017
Regional Banking
Net interest income	$	302,448		$	209,100		$	902,546		$	604,075
Provision/(provision credit) for loan losses	8,045			8,552			17,428			11,910
Noninterest income	79,857			64,370			240,093			188,089
Noninterest expense	207,591			150,445			619,283			451,135
Income/(loss) before income taxes	166,669			114,473			505,928			329,119
Provision/(benefit) for income taxes	39,101			41,191			118,929			118,771
Net income/(loss)	$	127,568		$	73,282		$	386,999		$	210,348
Average assets	$	28,659,158		$	19,158,852		$	28,450,747		$	18,519,999
Fixed Income
Net interest income	$	9,048		$	5,985		$	26,686		$	12,126
Noninterest income	41,123			55,803			125,091			161,833
Noninterest expense	47,306			53,136			145,635			155,865
Income/(loss) before income taxes	2,865			8,652			6,142			18,094
Provision/(benefit) for income taxes	532			2,970			988			5,929
Net income/(loss)	$	2,333		$	5,682		$	5,154		$	12,165
Average assets	$	3,247,016		$	2,586,773		$	3,326,118		$	2,388,740
Corporate
Net interest income/(expense)	$	(15,415	)	$	(13,769	)	$	(48,651	)	$	(42,408	)
Noninterest income (a)	222,619			(9,476		)	240,665			2,219
Noninterest expense	33,323			23,926			152,797			65,365
Income/(loss) before income taxes	173,881			(47,171		)	39,217			(105,554		)
Provision/(benefit) for income taxes (b)	40,529			(34,167		)	4,253			(82,758		)
Net income/(loss)	$	133,352		$	(13,004	)	$	34,964		$	(22,796	)
Average assets	$	6,904,585		$	5,697,894		$	6,990,484		$	6,421,643
Non-Strategic
Net interest income	$	9,619		$	8,501		$	37,224		$	26,433
Provision/(provision credit) for loan losses	(6,045		)	(8,552		)	(16,428		)	(14,910		)
Noninterest income (c)	5,373			1,720			6,665			4,888
Noninterest expense	5,811			9,362			22,349			4,626
Income/(loss) before income taxes	15,226			9,411			37,968			41,605
Provision/(benefit) for income taxes	3,763			3,602			9,383			15,961
Net income/(loss)	$	11,463		$	5,809		$	28,585		$	25,644
Average assets	$	1,266,274		$	1,431,308		$	1,432,138		$	1,522,297

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


(a)	Three and nine months ended September 30, 2018 includes a $212.9 million pre-tax gain from the sale of Visa Class B Shares. Three and nine months ended September 30, 2017 includes a $14.3 million pre-tax loss from the repurchase of equity securities previously included in a financing transaction.

(b)

Provision/(benefit) for income taxes for consolidated results and the Corporate segment for the three and nine months ended September 30, 2017 was affected by a decline in the effective tax rate in 2017 primarily related to the reversal of the valuation allowance for the deferred tax asset related to its 2012 federal capital loss carry forward based on capital gain transactions initiated in second quarter 2017. See Note 15 - Income Taxes in the Notes to Consolidated Financial Statements on FHN’s Form 10-K for the year ended December 31, 2016 for additional information related to FHN’s valuation allowance related to its capital loss carryforward.


(c)	Three and nine months ended September 30, 2018 includes a $3.8 million gain from the reversal of a previous valuation adjustment due to sales of TRUPs loans.

The following table reflects a disaggregation of FHN’s noninterest income by major product line and reportable segment for the three and nine months ended September 30, 2018 and 2017:



	Three Months Ended September 30, 2018
(Dollars in thousands)	Regional Banking		Fixed Income		Corporate			Non-Strategic			Consolidated
Noninterest income:
Fixed income (a)	$	103	$	40,937	$	(5	)	$	3,778		$	44,813
Deposit transactions and cash management	34,008		3		1,725			56			35,792
Brokerage, management fees and commissions	14,200		—		—			—			14,200
Trust services and investment management	7,453		—		(15		)	—			7,438
Bankcard income	6,999		—		57			(178		)	6,878
Bank-owned life insurance (b)	—		—		4,337			—			4,337
Debt securities gains/(losses), net (b)	—		—		—			—			—
Equity securities gains/(losses), net (b) (d)	—		—		212,859			—			212,859
All other income and commissions (c)	17,094		183		3,661			1,717			22,655
Total noninterest income	$	79,857	$	41,123	$	222,619		$	5,373		$	348,972

	Three Months Ended September 30, 2017
	Regional Banking		Fixed Income		Corporate			Non-Strategic			Consolidated
Noninterest income:
Fixed income	$	135	$	55,623	$	—		$	—		$	55,758
Deposit transactions and cash management	26,620		—		1,339			52			28,011
Brokerage, management fees and commissions	11,937		—		—			—			11,937
Trust services and investment management	6,968		—		(15		)	—			6,953
Bankcard income	6,057		—		56			57			6,170
Bank-owned life insurance	—		—		3,539			—			3,539
Debt securities gains/(losses), net	—		—		1			—			1
Equity securities gains/(losses), net	—		—		5			—			5
All other income and commissions (e)	12,653		180		(14,401		)	1,611			43
Total noninterest income	$	64,370	$	55,803	$	(9,476	)	$	1,720		$	112,417


(a)	Includes $8.4 million of underwriting, portfolio advisory, and other noninterest income in scope of Accounting Standards Codification ("ASC") 606, "Revenue From Contracts With Customers." Non-Strategic includes a $3.8 million gain from the reversal of a previous valuation adjustment due to sales of TRUPs loans excluded from the scope of ASC 606.


(b)	Represents noninterest income excluded from the scope of ASC 606. Amount is presented for informational purposes to reconcile total non-interest income.


(c)	Includes other service charges, ATM and interchange fees, electronic banking fees, and insurance commission in scope of ASC 606.


(d)	In third quarter 2018, FHN sold its remaining holdings of Visa Class B shares resulting in a pre-tax gain of $212.9 million.


(e)	Corporate includes a $14.3 million pre-tax loss from the repurchase of equity securities previously included in a financing transaction.



	Nine Months Ended September 30, 2018
(Dollars in thousands)	Regional Banking		Fixed Income		Corporate			Non-Strategic			Consolidated
Noninterest income:
Fixed income (a)	$	314	$	123,929	$	(5	)	$	3,778		$	128,016
Deposit transactions and cash management	103,275		9		4,416			159			107,859
Brokerage, management fees and commissions	41,423		—		—			—			41,423
Trust services and investment management	22,891		—		(44		)	—			22,847
Bankcard income	19,921		—		168			(131		)	19,958
Bank-owned life insurance (b)	—		—		14,103			—			14,103
Debt securities gains/(losses), net (b)	—		—		52			—			52
Equity securities gains/(losses), net (b) (d)	—		—		212,924			—			212,924
All other income and commissions (c) (e)	52,269		1,153		9,051			2,859			65,332
Total noninterest income	$	240,093	$	125,091	$	240,665		$	6,665		$	612,514

	Nine Months Ended September 30, 2017
	Regional Banking		Fixed Income		Corporate			Non-Strategic			Consolidated
Noninterest income:
Fixed income	$	348	$	161,198	$	—		$	—		$	161,546
Deposit transactions and cash management	76,288		—		4,004			142			80,434
Brokerage, management fees and commissions	35,872		—		—			—			35,872
Trust services and investment management	21,360		—		(56		)	—			21,304
Bankcard income	16,894		—		169			167			17,230
Bank-owned life insurance	—		—		11,137			—			11,137
Debt securities gains/(losses), net	386		—		64			—			450
Equity securities gains/(losses), net	—		—		5			—			5
All other income and commissions (f)	36,941		635		(13,104		)	4,579			29,051
Total noninterest income	$	188,089	$	161,833	$	2,219		$	4,888		$	357,029


(a)	Includes $24.0 million of underwriting, portfolio advisory, and other noninterest income in scope of Accounting Standards Codification ("ASC") 606, "Revenue From Contracts With Customers." Non-Strategic includes a $3.8 million gain from the reversal of a previous valuation adjustment due to sales of TRUPs loans excluded from the scope of ASC 606.


(b)	Represents noninterest income excluded from the scope of ASC 606. Amount is presented for informational purposes to reconcile total non-interest income.


(c)	Includes other service charges, ATM and interchange fees, electronic banking fees, and insurance commission in scope of ASC 606.


(d)	In third quarter 2018, FHN sold its remaining holdings of Visa Class B shares resulting in a pre-tax gain of $212.9 million.


(e)	Corporate includes $4.1 million of gains on the sales of buildings.


(f)	Corporate includes a $14.3 million pre-tax loss from the repurchase of equity securities previously included in a financing transaction.