Business Segment Information

6 Months Ended

Jun. 30, 2011

Business Segment Information

Business Segment Information

Note 11 — Business Segment Information

Periodically, FHN adapts its segments to reflect managerial or strategic changes. FHN may also modify its methodology of allocating expenses among segments which could change historical segment results. In first quarter 2011, FHN agreed to sell First Horizon Insurance, Inc. ("FHI"), the former subsidiary of First Tennessee Bank, which provided property and casualty insurance to customers in over 40 states, and Highland Capital Management Corporation ("Highland"), the former subsidiary of First Horizon National Corporation, which provided asset management services. The results of operations for both businesses have been included in the Income/(loss) from discontinued operations, net of tax line on the Consolidated Condensed Statements of Income for all periods presented. Consistent with historical practice, these businesses were moved to the non-strategic segment with other exited businesses and discontinued products. For comparability, previously reported items have been revised to reflect these changes. Both divestitures closed in second quarter 2011.

FHN has four business segments: regional banking, capital markets, corporate, and non-strategic. 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, financial planning, trust services and asset management, health savings accounts, credit card, 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 corporate segment consists of gains on the extinguishment 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, and various charges related to restructuring, repositioning, and efficiency. The non-strategic segment consists of the wind-down national consumer and construction lending activities, legacy mortgage banking elements including servicing fees, 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 along with the associated restructuring, repositioning, and efficiency charges.

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 three and six month periods ended June 30:

	Three Months Ended						Six Months Ended
	June 30						June 30
(Dollars in thousands)	2011			2010			2011		2010
Consolidated
Net interest income	$	172,860		$	182,064		$	345,615	$	362,459
Provision for loan losses		1,000			70,000			2,000		175,000
Noninterest income		188,772			243,937			386,314		487,186
Noninterest expense		345,826			337,311			660,973		675,290
Income/(loss) before income taxes		14,806			18,690			68,956		(645	)
Provision/(benefit) for income taxes		(4,242	)		(1,659	)		7,866		(18,177	)
Income from continuing operations		19,048			20,349			61,090		17,532
Income/(loss) from discontinued operations, net of tax		3,788			129			4,748		(6,947	)
Net income	$	22,836		$	20,478		$	65,838	$	10,585
Average assets	$	24,518,015		$	25,600,578		$	24,543,948	$	25,580,107

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

	Three Months Ended						Six Months Ended
	June 30						June 30
(Dollars in thousands)	2011			2010			2011			2010
Regional Banking
Net interest income	$	137,080		$	138,179		$	272,582		$	272,036
Provision for loan losses		(13,743	)		27,975			(26,143	)		80,022
Noninterest income		68,881			74,652			136,251			145,577
Noninterest expense		146,892			153,964			298,013			310,587
Income before income taxes		72,812			30,892			136,963			27,004
Provision for income taxes		26,680			11,213			50,135			9,427
Net income	$	46,132		$	19,679		$	86,828		$	17,577
Average assets	$	11,090,295		$	11,237,708		$	11,073,610		$	11,264,974
Capital Markets
Net interest income	$	5,564		$	4,824		$	11,140		$	7,188
Noninterest income		77,925			100,975			168,005			215,559
Noninterest expense		103,383			78,066			176,946			161,943
Income/(loss) before income taxes		(19,894	)		27,733			2,199			60,804
Provision/(benefit) for income taxes		(7,736	)		10,384			698			22,766
Net income/(loss)	$	(12,158	)	$	17,349		$	1,501		$	38,038
Average assets	$	2,249,831		$	2,077,434		$	2,150,290		$	1,979,558
Corporate
Net interest income	$	445		$	1,113		$	175		$	6,670
Provision for loan losses		N/A			N/A			N/A			N/A
Noninterest income		9,007			4,925			21,878			29,832
Noninterest expense		36,286			11,833			56,957			32,322
Income/(loss) before income taxes		(26,834	)		(5,795	)		(34,904	)		4,180
Benefit for income taxes		(18,843	)		(10,392	)		(29,375	)		(15,466	)
Net income/(loss)	$	(7,991	)	$	4,597		$	(5,529	)	$	19,646
Average assets	$	5,086,989		$	4,940,675		$	5,098,012		$	4,748,205
Non-Strategic
Net interest income	$	29,771		$	37,948		$	61,718		$	76,565
Provision for loan losses		14,743			42,025			28,143			94,978
Noninterest income		32,959			63,385			60,180			96,218
Noninterest expense		59,265			93,448			129,057			170,438
Loss before income taxes		(11,278	)		(34,140	)		(35,302	)		(92,633	)
Benefit for income taxes		(4,343	)		(12,864	)		(13,592	)		(34,904	)
Loss from continuing operations		(6,935	)		(21,276	)		(21,710	)		(57,729	)
Income/(loss) from discontinued operations, net of tax		3,788			129			4,748			(6,947	)
Net loss	$	(3,147	)	$	(21,147	)	$	(16,962	)	$	(64,676	)
Average assets	$	6,090,900		$	7,344,761		$	6,222,036		$	7,587,370

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

N/A — Not applicable