UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
- or -
☐
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
(Exact name of registrant as specified in its charter)
TN
62-0803242
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
165 Madison Avenue
Memphis, Tennessee
38103
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: 901-523-4444
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
$.625 Par Value Common Capital Stock
FHN
New York Stock Exchange LLC
Depositary Shares, each representing a 1/400th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series B
FHN PR B
New York Stock Exchange LLC
Depositary Shares, each representing a 1/400th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series C
FHN PR C
New York Stock Exchange LLC
Depositary Shares, each representing a 1/4,000th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series E
FHN PR E
New York Stock Exchange LLC
Depositary Shares, each representing a 1/4,000th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series F
FHN PR F
New York Stock Exchange LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☒ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
☐ Yes ☒ No
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 ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
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 such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-
based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to
§240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
At June 30, 2024, the aggregate market value of registrant common stock held by non-affiliates of the registrant was
approximately $8.4 billion based on the closing stock price reported for that date.
At January 31, 2025, the registrant had 521,769,746 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement to be furnished to shareholders in connection with the Annual Meeting of shareholders
scheduled for April 29, 2025 or provided in an amendment to this Annual Report: Part III of this Report
Auditor Name:
KPMG LLP
Auditor Location: Memphis, TN
Auditor Firm ID: 185
Table of Contents
Page
Glossary
2
Executive Summary of Principal Investment Risks
4
Forward-Looking Statements
6
Part I
Item 1.
Business
8
Item 1A.
Risk Factors
31
Item 1B.
Unresolved Staff Comments
52
Item 1C.
Cybersecurity
52
Item 2.
Properties
52
Item 3.
Legal Proceedings
52
Item 4.
Mine Safety Disclosures
52
Supplemental Part I Information
53
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
55
Item 6.
[Reserved]
56
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
57
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
104
Item 8.
Financial Statements and Supplementary Data
105
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
211
Item 9A.
Controls and Procedures
211
Item 9B.
Other Information
211
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
211
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
212
Item 11.
Executive Compensation
214
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
215
Item 13.
Certain Relationships and Related Transactions, and Director Independence
217
Item 14.
Principal Accountant Fees and Services
217
Part IV
Item 15.
Exhibits and Financial Statement Schedules
218
Item 16.
Form 10-K Summary
222
Signatures
223
MD&A and Financial Statement References:
In this report: "2024 MD&A" and "2024 MD&A (Item 7)" generally refer to Management’s Discussion and Analysis of Financial
Condition and Results of Operations appearing in Item 7 within Part II of this report; and, "2024 Financial Statements" and
"2024 Financial Statements (Item 8)" generally refer to our Consolidated Balance Sheets, our Consolidated Statements of
Income, our Consolidated Statements of Comprehensive Income, our Consolidated Statements of Changes in Equity, our
Consolidated Statements of Cash Flows, and the Notes to the Consolidated Financial Statements, all appearing in Item 8
within Part II of this report.
TABLE OF CONTENTS and GLOSSARY
1
2024 FORM 10-K ANNUAL REPORT
Glossary
The following is a list of common acronyms and terms used throughout this report:
ACL
Allowance for credit losses
AFS
Available for sale
AIR
Accrued interest receivable
ALCO
Asset/Liability Committee
ALLL
Allowance for loan and lease losses
ALM
Asset/liability management
AOCI
Accumulated other comprehensive
income
ASC
FASB Accounting Standards Codification
Associate
Person employed by FHN
ASU
Accounting Standards Update
ATM
Automated teller machine
Bank
First Horizon Bank
BHCA
Bank Holding Company Act of 1956
BOLI
Bank-owned life insurance
C&I
Commercial, financial, and industrial loan
portfolio
CAS
Credit Assurance Services
CBF
Capital Bank Financial
CCAR
Comprehensive Capital Analysis and
Review
CECL
Current expected credit loss
CEO
Chief Executive Officer
CFPB
Consumer Financial Protection Bureau
CIO
Chief Information Officer
CME
Chicago Mercantile Exchange
CMO
Collateralized mortgage obligations
CODM
Chief Operating Decision-Maker
Company
First Horizon Corporation
Corporation
First Horizon Corporation
CRA
Community Reinvestment Act
CRE
Commercial Real Estate
CRMC
Credit Risk Management Committee
CSIRP
Computer Security Incident Response Plan
DIF
Deposit Insurance Fund
DTA
Deferred tax asset
DTL
Deferred tax liability
EAD
Exposure at default
ECP
Equity Compensation Plan
EPS
Earnings per share
Fannie Mae
Federal National Mortgage Association
FASB
Financial Accounting Standards Board
FDIC
Federal Deposit Insurance Corporation
Federal
Reserve
Federal Reserve Board
Fed
Federal Reserve Board
FHA
Federal Housing Administration
FHLB
Federal Home Loan Bank
FHN
First Horizon Corporation
FHNF
FHN Financial; FHN's fixed income division
FICO
Fair Isaac Corporation
First Horizon First Horizon Corporation
FRB
Federal Reserve Bank or the Federal
Reserve Board
Freddie Mac
Federal Home Loan Mortgage Corporation
FTE
Fully taxable equivalent
FTP
Funds transfer pricing
FTRESC
FT Real Estate Securities Company, Inc.
GAAP
Generally accepted accounting principles
(U.S.)
GHG
Greenhouse Gas
GNMA
Government National Mortgage
Association or Ginnie Mae
GSE
Government sponsored enterprises, in
this filing references Fannie Mae and
Freddie Mac
HELOC
Home equity line of credit
HFS
Held for sale
HR
Human Resources
HTM
Held to maturity
IBKC
IBERIABANK Corporation
IBKC merger
FHN's merger of equals with IBKC that
closed July 2020
ISDA
International Swap and Derivatives
Association
IRS
Internal Revenue Service
LCR
Liquidity coverage ratio
LGD
Loss given default
LIBOR
London Inter-Bank Offered Rate
LIHTC
Low Income Housing Tax Credit
LLC
Limited Liability Company
LMC
Loans to mortgage companies
LMI
Low- and moderate-income
LOCOM
Lower of cost or market
LTV
Loan-to-value
MBS
Mortgage-backed securities
MD&A
Management’s Discussion and Analysis of
Financial Condition and Results of
Operations
NAICS
North American Industry Classification
System
NII
Net interest income
TABLE OF CONTENTS and GLOSSARY
2
2024 FORM 10-K ANNUAL REPORT
NIM
Net interest margin
NM
Not meaningful
NMTC
New Market Tax Credit
NOL
Net operating loss
NPA
Nonperforming asset
NPL
Nonperforming loan
NYSE
New York Stock Exchange
OCI
Other comprehensive income
OREO
Other Real Estate Owned
PAM
Proportional amortization method
PCA
Prompt corrective action
PCAOB
Public Company Accounting Oversight
Board
PCD
Purchased credit deteriorated financial
assets
PCI-DSS
Payment Card Industry Data Security
Standard
PD
Probability of default
PM
Portfolio managers
PPNR
Pre-provision net revenue
PPP
Paycheck Protection Program
PSU
Performance Stock Unit
PTNI
Pre-tax net income
RE
Real estate
RM
Relationship managers
ROU
Right-of-use
SAD
Special Assets Department
SBA
Small Business Administration
SEC
Securities and Exchange Commission
SOFR
Secure Overnight Funding Rate
SOX
Sarbanes-Oxley Act of 2002
SVaR
Stressed Value-at-Risk
TD
The Toronto-Dominion Bank
TD Merger
Agreement
Merger agreement between FHN, TD, and
certain TD subsidiaries, which the parties
mutually terminated on May 4, 2023
TD
Transaction
The acquisition of FHN by TD
contemplated by the TD Merger
Agreement
TDFI
Tennessee Department of Financial
Institutions
TDR
Troubled Debt Restructuring
TPRM
Third-Party Risk Management
TRUP
Trust preferred loan
UPB
Unpaid principal balance
USDA
United States Department of Agriculture
VaR
Value-at-Risk
VIE
Variable Interest Entities
we/us/our
First Horizon Corporation
TABLE OF CONTENTS and GLOSSARY
3
2024 FORM 10-K ANNUAL REPORT
Executive Summary of Principal Investment
Risks
This section provides an executive summary of the
principal risks associated with an investment in our equity
or debt securities. Our businesses are complex, and so are
the risks associated with them. This summary is not a
complete statement of risks a prospective or current
investor should consider.
• The Economy. Our businesses and our industry are
heavily entwined with the U.S. economy. We tend to
perform better when economic conditions are
favorable, and our performance tends to be weaker
when the economy is weaker. That relationship can be
quite strong, which can make our income and other key
performance measures volatile, especially when
compared with companies in many other industries. The
economy tends to rise and fall in roughly a cyclical
manner which is difficult to predict, which in turn makes
our performance difficult to predict. For additional
information, see the Cyclicality discussion within Other
Business Information, which begins on page 19, and
Risks from Economic Downturns and Changes which
begins on page 36.
• Credit Loss. Our lending business—a major source of
our revenues—is dependent on our clients being able to
pay us back. That ability often depends on economic
conditions, but many individual factors can be critical as
well. If a client defaults on a loan, generally we will
experience a financial loss. Even if the loan is secured,
our loss from a default often is only reduced, not
eliminated, by collateral supporting the loan.
Accounting rules require us to evaluate current
expected credit loss (CECL) each quarter, booking losses
based on our expectations. That process can result in a
highly volatile pattern of recognizing credit loss each
quarter. For additional information, see: the discussion
captioned CECL Accounting and COVID-19 within the
Significant Business Developments Over Past Five Years
section of Item 1, which begins on page 12; and Credit
Risks beginning on page 38.
• Loan Loss vs Loan Profit. Lending generally is a high-
volume, low-margin business. This means that we often
need the profits from many loans to make up for losses
from one loan. For our earnings to be strong, we need
to hold loan losses to a very low level, which makes our
management of credit quality a critical function for us.
This imbalance between loss and profit can amplify the
potential for volatility in our earnings. For additional
information, see Credit Risks beginning on page 38.
• Interest Rate Conditions. Interest rates and, especially,
the shape of the yield curve, are critical drivers of our
profit margin from lending. If the yield curve is flat—
with long-term rates only slightly higher than short-term
rates—our lending margins shrink, and so does our net
interest income. Interest rate policy is controlled by
federal agencies and by market forces, not by us, and
can change significantly and abruptly, as occurred in
2022 and 2023, when the key agency in the U.S. shifted
to strong tightening policy, raising short-term interest
rates multiple times. Tightening ended in 2023 and
interest rates began to decline in the last half of 2024.
2022's aggressive policy shift caused short-term rates to
rise substantially, and to exceed long-term rates (a so-
called yield curve inversion) many times in 2022 and
during all of 2023 and the first half of 2024. Over half of
our loan portfolio bears variable interest rates
associated with short-term reference rates, which
reacted fairly quickly to the shifts in environment. For
additional information, see: the Monetary Policy Shifts
discussion within Significant Business Developments
Over Past Five Years, which begins on page 12; the
Cyclicality discussion within Other Business Information,
which begins on page 19; Risks Associated with
Monetary Events beginning on page 37; Interest Rate
and Yield Curve Risks beginning on page 46; and
discussion under the caption Inflation, Recession, and
Federal Reserve Policy within the Market Uncertainties
and Prospective Trends section of our 2024 MD&A (Item
7), which begins on page 97.
• Funding Balance. In our lending business, we aggregate
money from deposits and borrowings and lend it out at
rates which more than cover our costs. We constantly
must optimize the mix of our deposits and borrowings
to minimize our funding costs. In addition, we must
balance our overall funding sources (deposits and
borrowings) with our funding needs (lending).
Imbalances tend to hurt our earnings. If sources are
larger than our lending needs, generally we can cut back
short-term borrowing or invest excess funds in
securities, but our margins can be weaker as a result. If
sources become too small, we might have to forego
profitable lending or increase funding by selling
investments or increasing deposit or borrowing volumes
and costs, or, most likely, we might have to take some
combination of those actions. For additional
information, see Liquidity and Funding Risks beginning
on page 44.
• Deposit Instability. A large portion of bank deposits can
be removed by depositors very quickly. Public
confidence in banks therefore is a key foundation for
the banking business. If deposits are removed quickly by
a large cohort of depositors at the same time due to a
sudden loss of confidence, the resulting "run on the
bank" can cause the bank to become insolvent, as
occurred in 2023 when three large regional U.S. banks
EXECUTIVE SUMMARY OF PRINCIPAL INVESTMENT RISKS
Table of Contents
4
2024 FORM 10-K ANNUAL REPORT
failed after very substantial runs on their deposits.
Most other regional banks, including our Bank,
experienced significant deposit outflows during this
period, which we countered with a successful deposit
campaign, as public confidence in all but the largest
banks was shaken. While the aftermath of the 2023
bank failures has seen a restoration of public
confidence, future runs always are possible. For
additional information, see Liquidity and Funding Risks
beginning on page 44.
• Competition. Competition for clients and talent in our
industry is intense and unlikely to abate. Competition
for clients pressures us to make interest rate and other
concessions on lending and on deposits, which reduce
our margins. Competition for revenue-producing talent
is a key method of obtaining new client relationships in
many parts of our industry, and pressures us to increase
compensation expense. For additional information, see
Competition beginning on page 16, and Traditional
Competition Risks beginning on page 31.
• Banking Consolidation. Since the advent of nation-wide
branching in the 1980s, the banking industry has
experienced several waves of substantial consolidation.
In the past twenty years, increasingly sophisticated
technological systems have allowed institutions to
become extremely large while maintaining adequate
client service, and, due to cost efficiencies associated
with scalable technology, have rewarded the largest
institutions disproportionately. These rewards have
incented U.S. banks to grow larger, faster. Consolidation
can abruptly change the competitive environment in
our markets. In addition, when we participate in
consolidating actions, as we did in 2020, typically it
creates internal disruption and expense for a time while
we integrate systems, consolidate branches, and take
other consolidation-related actions. Moreover, in our
industry, the market tends to discount, for a time, the
stock price of banks that engage in major mergers, in
part due to the transaction and integration expenses
associated with those transactions coupled with the risk
that the combination may not achieve management’s
strategic or tactical objectives. For additional
information, see: Significant Business Developments
Over Past Five Years beginning on page 12; the Strategic
Transactions discussion within the Other Business
Information section which begins on page 19; and
Traditional Strategic Risks beginning on page 32.
• Industry Disruption. Technological innovation, and the
associated changes in client preferences, are radically
transforming our industry and how financial services are
delivered to clients. Being a consistent innovation
leader is practically impossible for a bank our size, while
keeping pace is expensive and difficult. Moreover, rapid
innovation has the potential to be destructive of
traditional business models and companies in our
industry, as it has done and is doing in other industries.
For additional information, see Industry Disruption
beginning on page 33.
• Regulated Industry. Our principal businesses are heavily
regulated. Our two primary banking regulators can
examine us, cause us to change our business operations,
and significantly restrict our ability to pursue lines of
business, in ways not applicable to companies in most
other industries. We also have several secondary
regulators, each with significant though less-
encompassing powers. The primary missions of the
regulators are to protect the banking system as a whole,
to protect clients, and to protect the federal
government’s deposit insurance fund and program;
none exists to protect or enhance our profitability or
protect or promote the interests of our investors.
Moreover, regulators are government agencies, and as
such can experience significant policy changes when the
elected branches of government experience such
changes. These policy shifts could result in changes in
our costs and earnings. For additional information, see
Regulatory, Legislative, and Legal Risks beginning on
page 40.
• Security & Technology. Fraud and theft have always
been significant risks for banks; we experience fraud
and theft loss every year. Technology has allowed fraud
and theft risks to grow substantially. Bad actors can
impact us from around the world, day or night, both
directly and through our clients or vendors.
Unfortunately, it is not practical to emphasize security
to the exclusion of other business needs. Typically, the
more a system is built to be robustly secure, the less
that system can be flexible and adaptable. Moreover, a
high-security system can be associated with sub-optimal
user experience (client frustration). For additional
information, see Operational Risks beginning on page 34
and Cybersecurity Risks beginning on page 35.
• Expense Control. Banks in the U.S. are focused on
reducing operating costs as much as possible while
maintaining competitive or superior service. Expense
control is viewed as crucial for long-term success. For
additional information, see Operational Risks beginning
on page 34, and Risks of Expense Control beginning on
page 42.
For a more complete discussion of the risks associated
with our businesses and operations and investment in our
securities, see Item 1A—Risk Factors, beginning on page
31.
EXECUTIVE SUMMARY OF PRINCIPAL INVESTMENT RISKS
Table of Contents
5
2024 FORM 10-K ANNUAL REPORT
Forward-Looking Statements
This report, including materials incorporated into it,
contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as
amended, with respect to FHN's beliefs, plans, goals,
expectations, and estimates. Forward-looking statements
are not a representation of historical information, but
instead pertain to future operations, strategies, financial
results or other developments. Forward-looking
statements often use words such as “believe,” “expect,”
“anticipate,” “intend,” “estimate,” “should,” “is likely,”
“will,” “going forward,” and other similar expressions that
indicate future events and trends.
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 our control, and many of which, with
respect to future business decisions and actions (including
acquisitions and divestitures), are subject to change and
could cause our actual future results and outcomes to
differ materially from those contemplated by forward-
looking statements or historical performance. While there
is no assurance that any list of uncertainties and
contingencies is complete, examples of factors which
could cause actual results to differ from those
contemplated by forward-looking statements or historical
performance include:
• global, national, and local economic and business
conditions, including economic recession or
depression;
• the stability or volatility of values and activity in the
residential housing and commercial real estate
markets;
• expectations of and actual timing and amount of
interest rate movements, including the slope and
shape of the yield curve, which can have a significant
impact on a financial services institution;
• market and monetary fluctuations, including
fluctuations in mortgage markets;
• the financial condition of borrowers and other
counterparties;
• the financial condition and stability of major financial
and market participants, including private financial
institutions as well as governments and governmental
agencies;
• competition within and outside the financial services
industry;
• the occurrence of natural or man-made disasters,
pandemics, conflicts, or terrorist attacks, or other
adverse external events;
• effectiveness and cost-efficiency of FHN’s hedging
practices;
• fraud, theft, or other incursions through conventional,
electronic, or other means directly or indirectly
affecting FHN or its clients, business counterparties,
or competitors;
• the ability to adapt products and services to changing
industry standards and client preferences;
• risks inherent in originating, selling, servicing, and
holding loans and loan-based assets, including
prepayment risks, pricing concessions, fluctuation in
U.S. housing and other real estate prices, fluctuation
of collateral values, and changes in client profiles;
• changes in the regulation of the U.S. financial services
industry;
• changes in laws, regulations, and administrative
actions, including executive orders, whether or not
specific to the financial services industry;
• potential claims alleging mortgage servicing failures,
individually, on a class basis, or as master servicer of
securitized loans;
• potential claims relating to participation in
government programs, especially lending or other
financial services programs;
• potential requirements for FHN to repurchase, or
compensate for losses from, previously sold or
securitized mortgages or securities based on such
mortgages;
• changes in accounting policies, standards, and
interpretations;
• evolving capital and liquidity standards under
applicable regulatory rules;
• accounting policies and processes that require
management to make estimates about matters that
are uncertain;
• reputational risk and potential adverse reactions or
changes to business or associate relationships; and
• other factors that may affect future results of FHN.
Any forward-looking statements made by or on behalf of
FHN speak only as of the date they are made, and FHN
assumes no obligation to update or revise any forward-
looking statements that are made in this report or in any
other statement, release, report, or filing from time to
time. Actual results could differ and expectations could
change, possibly materially, because of one or more
factors, including those factors listed above or presented
elsewhere in this report, those factors listed in material
incorporated by reference into this report, and other
factors not listed. In evaluating forward-looking
statements and assessing our prospects, readers of this
report should carefully consider the factors mentioned
FORWARD-LOOKING STATEMENTS
Table of Contents
6
2024 FORM 10-K ANNUAL REPORT
above along with the additional risks and factors discussed
in Items 1, 1A, and 7 of this report, among others. Readers
should also consult any further disclosures of a forward-
looking nature in any subsequent Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, or Current Reports
on Form 8-K.
FORWARD-LOOKING STATEMENTS
Table of Contents
7
2024 FORM 10-K ANNUAL REPORT
PART I
Item 1. Business
Our Businesses
Overview
First Horizon Corporation is a Tennessee corporation. We
incorporated in 1968, and are headquartered in Memphis,
Tennessee. We are a bank holding company under the
Bank Holding Company Act, and a financial holding
company under the Gramm-Leach-Bliley Act. Our common
stock is listed on the New York Stock Exchange under the
symbol “FHN.” At December 31, 2024, we had total
consolidated assets of $82 billion. We provide diversified
financial services through our subsidiaries, principally First
Horizon Bank. The Bank is a Tennessee banking
corporation headquartered in Memphis, Tennessee.
During 2024 approximately 21% of our consolidated
revenues were provided by fee and other noninterest
income, and approximately 79% of revenues were
provided by net interest income.
As a financial holding company, we coordinate the
financial resources of the consolidated enterprise and
maintain systems of financial, operational, and
administrative control intended to coordinate selected
policies and activities, including as described in Item 9A of
Part II.
The Bank
The Bank was founded in 1864 as First National Bank of
Memphis. During 2024, through its various business lines,
including consolidated subsidiaries, the Bank reported
revenues (net interest income plus noninterest income) of
approximately $3 billion. The Bank generated a substantial
majority of First Horizon’s consolidated revenue. At
December 31, 2024, the Bank had $82 billion in total
assets, $66 billion in total deposits, and $63 billion in total
loans (including certain leases, before considering the
allowance for loan and lease losses).
Principal Businesses, Brands, & Locations
Our principal brands at year-end 2024 are summarized in
Table 1.1.
Table 1.1
Principal Businesses & Brands at Year-End
Businesses
Principal Brands
Banking & financial
services generally
First Horizon &
First Horizon Bank
Fixed income / capital
markets
FHN Financial
Mortgage lending
First Horizon Bank
Insurance brokerage &
management services
First Horizon Advisors
Wealth management &
brokerage services
First Horizon Advisors
At December 31, 2024, First Horizon’s subsidiaries had
over 450 business locations in 24 U.S. states, excluding
off-premises ATMs. Most of those locations were banking
centers. At year-end, the Bank had 416 retail banking
centers in 12 states, as shown in Table 1.2.
Table 1.2
Retail Banking Centers at Year-End
State
#
State
#
Tennessee
137
Arkansas
12
North Carolina
79
South Carolina
10
Florida
76
Virginia
8
Louisiana
56
Texas
7
Alabama
13
Mississippi
4
Georgia
13
New York
1
Many banking centers contain special-service areas such
as wealth management and mortgage lending.
At year-end 2024, First Horizon also had over fifty client-
service offices not physically within banking centers,
including fixed income, home mortgage, wealth
management, and commercial loan offices. The largest
groups of those offices were 25 fixed income offices in 17
states across the U.S. and 7 stand-alone mortgage lending
offices in 5 states. First Horizon also has operational and
administrative offices.
ITEM 1. BUSINESS
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Loans
Loan Portfolios
Lending is a major source of revenue for us, and loans are
our largest asset type. Table 1.3 shows our total loans
(including certain leases) at year-end 2024, along with
some details regarding the composition of our loans. Most
of our loans are commercial.
As shown in Table 1.3, our loans are broken into two
major types: commercial and consumer. Each type is
broken into portfolios. Our three major portfolios are:
traditional, unsecured commercial, and financial and
industrial (“C&I”) loans; secured commercial real estate
(“CRE”) loans; and secured consumer real estate loans. A
fourth portfolio consists of consumer credit card and
other consumer debt.
Table 1.3
Loan Types & Portfolios1
Commercial
$48 B
76 %
Consumer
15 B
24
Total Loans
$63 B
100 %
Commercial Portfolios
% of Type
% of Total
C&I
70 %
53 %
CRE
30
23
Consumer Portfolios
% of Type
% of Total
Consumer real estate
95 %
23 %
Credit card/other
5
1
1 Dollars and percentages at December 31, 2024.
Geographic Mix
Geographically, a significant majority of our loans
originate from five states: Florida, Tennessee, Texas,
North Carolina, and Louisiana. The geographic dispersion
of our loans varies considerably among our three major
loan portfolios, as shown in Table 1.4.
Table 1.4
Major Loan Portfolios1 by Geography
C&I ($33B)
CRE ($14B)
Cons. RE ($14B)
Tennessee 20 %
Florida 26 %
Florida 29 %
Florida 12
Texas 13
Tennessee 22
Texas 11
N. Carolina 13
Texas 12
N. Carolina
7
Georgia 10
Louisiana
8
California
6
Tennessee
9
N. Carolina
7
Louisiana
6
Louisiana
7
Georgia
6
Georgia
4
All other 22
New York
5
All other 34
All other 11
1 Dollars and percentages at December 31, 2024.
C&I Loans
The C&I portfolio, our largest portfolio by far, was $33
billion at December 31, 2024. Our C&I portfolio has an
industry concentration: about 21% of C&I loans are to
businesses in the financial services industry, which
includes finance and insurance companies and mortgage
lending companies, while 12% of our C&I loans are to
borrowers in the real estate and rental and leasing
industry. The rest of C&I covers a wide range of industries,
as shown in Table 1.5a.
Table 1.5a
C&I Loans1 by Industry/Line of Business
Real estate and rental and leasing (a)
12 %
Finance and insurance
11
Loans to mortgage companies
10
Health care and social assistance
8
Wholesale trade
7
Manufacturing
7
Accommodation and food service
7
Retail trade
5
Transportation and warehousing
5
Energy
4
Other C&I
24
1 Percentages of C&I portfolio at December 31, 2024.
(a) Leasing, rental of real estate, equipment, and goods.
CRE Loans
The CRE portfolio was $14 billion at December 31, 2024.
The largest property type within CRE is multi-family, as
shown in Table 1.5b. The next three largest property types
were office, retail, and industrial. At year-end, nearly half
of the office loans were for medical industry office space.
Table 1.5b
CRE Loans1 by Property Type
Multi-family
36 %
Office
19
Retail
15
Industrial
15
Hospitality
9
Land/land development
2
Other CRE
4
1 Percentages of CRE portfolio at December 31, 2024.
ITEM 1. BUSINESS
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2024 FORM 10-K ANNUAL REPORT
Consumer Loans
Consumer loans totaled $15 billion at December 31, 2024,
as shown in Table 1.3 above. A substantial majority of
consumer loans consists of home equity loans, mortgages,
and other secured consumer real estate loans.
Further information regarding our loans is provided in
Note 3 beginning on page 135 appearing in our 2024
Financial Statements (Item 8), and under the captions
Analysis of Financial Condition and Asset Quality,
beginning on pages 67 and 70, respectively, of our 2024
MD&A (Item 7).
Deposits
Deposits comprise our largest resource to fund lending.
Deposits overall also tend to be our lowest-cost funding
source. At year-end 2024, we had total deposits of $66
billion. Most of our deposits are held in our commercial,
consumer & wealth banking segment. Table 1.6 provides a
deposit overview at December 31, 2024.
Further information regarding deposits is provided: in
Note 8 beginning on page 152 appearing in our 2024
Financial Statements (Item 8); under the caption Deposits
beginning on page 81 appearing in our 2024 MD&A (Item
7); and in other parts of this report referenced under
Deposits.
Table 1.6
Deposit1 Overview
Client Types % of Total
Acct Types % of Total
FDIC Insured Status % of Total
Source % of Total
Commercial
55 %
Savings
41 %
Estimated Insured
59 %
Tennessee
37 %
Consumer
45
Time deposits
10
Est. Uninsured - Total
41
Florida
18
Other interest
25
Est. Uninsured - Collateralized
7
N. Carolina
13
Noninterest
24
Louisiana
12
All other
20
1 Percentages of deposits at December 31, 2024.
Business Segments
Segment Overview
Our financial results of operations are reported through
operational business segments which are not closely
related to the legal structure of our subsidiaries. During
2024, we reorganized our internal management structure
and, accordingly, reclassified our reportable business
segments. Prior to the 2024 reclassification, we operated
through three business segments: (1) regional, (2)
specialty, and (3) corporate. As a result of the 2024
reclassification, our reportable business segments now
include: (1) commercial, consumer & wealth, (2)
wholesale, and (3) corporate. In this report, segment
information for prior periods has been reclassified to
conform with our current segments.
Financial and other additional information concerning our
segments—including information concerning assets,
revenues, and financial results—appears in our 2024
MD&A (Item 7) and in our 2024 Financial Statements
(Item 8), especially in Note 19—Business Segment
Information. Note 19 begins on page 175.
Commercial, Consumer & Wealth and Wholesale
Banking Segments
By far most of our loans and deposits are in the
commercial, consumer & wealth and wholesale banking
segments. Similarly, those segments are the sources of
most of our revenues and expenses. The two segments
create and use financial resources differently, and the
revenues they generate have a very different mix of net
interest income vs. noninterest income. In addition,
commercial, consumer & wealth banking is larger than
wholesale banking by many financial measures. Table 1.7
provides high-level financial information for each of those
two segments, highlighting these points.
Table 1.7
Commercial, Consumer & Wealth (CCW) vs
Wholesale Banking Snapshot
(Dollars in millions)
CCW
Wholesale
2024 Average assets
$ 59,402
$
8,209
2024 Net interest income
2,543
194
2024 Noninterest income
461
230
2024 Pre-tax income
1,429
122
Commercial, Consumer & Wealth and Wholesale Lines
of Business
The principal lines of business in the commercial,
consumer & wealth banking segment are:
• commercial banking (larger business enterprises)
• business banking (smaller business enterprises)
• consumer banking
• private client and wealth management
ITEM 1. BUSINESS
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10
2024 FORM 10-K ANNUAL REPORT
• asset-based lending
• professional commercial real estate (Prof-CRE)
• equipment finance
• energy finance
• international banking
• healthcare finance
• trucking and transportation finance
• corporate banking
The principal lines of business in the wholesale banking
segment are:
• fixed income/capital markets
• mortgage warehouse lending
• franchise finance
• correspondent banking
• mortgage origination
Geographically, commercial, consumer & wealth banking's
traditional lending and deposit taking activities mainly
serve commercial and consumer clients located in markets
associated with our banking center footprint. Many of the
businesses within wholesale banking, as well as several
specialty lines of business within commercial, consumer &
wealth banking, have much broader geographic reach. For
example, our fixed income business has offices from
Hawaii to Massachusetts and California is listed in Table
1.4 primarily because of wholesale banking's franchise
finance business line.
Revenues and earnings from three of the business lines in
the wholesale banking segment are significantly more
volatile over time than our traditional lending and deposit
taking activities. In addition to being sensitive to economic
conditions generally, those wholesale business lines can
be very strongly impacted or benefited by changes in
interest rates or in the shape of the yield curve. Those
business lines are fixed income/capital markets, mortgage
warehouse lending, and mortgage origination. Because
they can perform well when other business lines are
subdued, and vice-versa, we sometimes refer to these as
our counter-cyclical businesses. While 2023 overall was a
subdued year for these counter-cyclical businesses as
interest rates continued to rise before leveling, and the
yield curve was inverted for the entire year, 2024 saw
improvement as the yield curve flattened in the fourth
quarter and mortgage rates modestly abated from 2023
highs.
Services We Provide
At December 31, 2024, we provided the following services
through our subsidiaries and divisions:
• general banking services for consumers, businesses,
financial institutions, and governments
• fixed income sales and trading; underwriting of bank-
eligible securities and other fixed-income securities
eligible for underwriting by financial subsidiaries; loan
sales; advisory services; and derivative sales
• mortgage banking services
• brokerage services
• correspondent banking
• transaction processing: nationwide check clearing
services and remittance processing
• trust, fiduciary, and agency services
• credit card products
• equipment finance services
• investment and financial advisory services
• mutual fund sales as agent
• retail insurance sales as agent
Information about the net interest income and
noninterest income we obtained from our largest
categories of products and services appears under the
caption Results of Operations—2024 Compared to 2023
beginning on page 59 of our 2024 MD&A (Item 7).
ITEM 1. BUSINESS
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11
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Significant Business Developments Over Past Five Years
Selected Financial Data Past Five Years
Table 1.8 provides selected data concerning revenues, expenses, assets, liabilities, shareholders’ equity, and certain other
metrics for the past five years.
Table 1.8
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in millions; financial condition data shown period-end, as of December 31)
2024
2023
2022
2021
2020
Net interest income
$
2,511
$
2,540
$
2,392
$
1,994
$
1,662
Noninterest income
679
927
815
1,076
1,492
Net income available to common shareholders
738
865
868
962
822
Total loans and leases
62,565
61,292
58,102
54,859
58,232
Provision (benefit) for credit losses
150
260
95
(310)
503
Net Charge-offs
112
170
59
2
120
Net interest margin
3.35 %
3.42 %
3.10 %
2.48 %
2.86 %
Total assets
82,152
81,661
78,953
89,092
84,209
Total deposits
65,581
65,780
63,489
74,895
69,982
Total term borrowings
1,195
1,150
1,597
1,590
1,670
Total liabilities
73,041
72,370
70,406
80,598
75,902
Preferred stock
426
520
1,014
520
470
Total shareholders’ equity (financial statement)
9,111
9,291
8,547
8,494
8,307
Common Equity Tier 1 Capital (regulatory)
7,967
8,104
7,032
6,367
6,110
Priorities & Developments
Over the past five years, our strategic priorities have
focused on:
• targeted and opportunistic expansion of consumer
and commercial banking products and markets;
• targeted and opportunistic expansion of commercial
lending, mainly through strategic and tactical
transactions, talent development, and talent
acquisitions;
• rigorous expense management with continued
investment in revenue generating initiatives;
• managing business units and products with a strong
emphasis on risk-adjusted returns on invested capital;
• providing exceptional client service and experience as
a primary means to differentiate us from competitors;
and
• investment in scalable technology and other
infrastructure to attract and retain clients and to
support expansion.
Examples of our implementation of these priorities
include:
• In July 2020, we completed a merger of equals
transaction with IBERIABANK Corporation and
purchased 30 branches from Truist Bank, making
2020 a transformative year. See IBKC Merger of
Equals in 2020 and 30-Branch Acquisition in 2020 in
this Item below for additional information. In
February 2022, we completed the principal systems
conversion work related to that merger.
• As shown in Table 1.8, the COVID-19 pandemic
caused us to recognize substantial provision for credit
losses in 2020 and reduced our transaction volume
and revenues. See the discussion captioned CECL
Accounting and COVID-19 within Events Impacting
Year-to-Year Comparisons, immediately below. In
2021, a large portion of that 2020 provision expense
was effectively reversed, resulting in a provision
credit for the year.
• The pandemic also resulted in strong deposit growth
in 2020 and 2021, despite interest rates being
extremely low. We believe federal assistance and
stimulus programs in 2020 and early 2021 significantly
bolstered deposits in both years. The Federal Reserve
began quantitative tightening in mid-2022, which
reduced the level of liquidity in the banking system.
This resulted in a smaller deposit base for us and for
the industry as a whole. This development, coupled
with the regional bank crisis in the spring of 2023,
prompted us to launch a successful deposit-gathering
campaign in the second quarter of 2023.
• We have made key talent hires in critical areas
throughout our company, with the main focus on
ITEM 1. BUSINESS
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12
2024 FORM 10-K ANNUAL REPORT
organically growing economically profitable business
lines inside and outside our traditional markets.
• Throughout this period, we have pruned and adapted
our physical banking center network to reflect long-
term trends in client usage of banking centers and are
making more efficient use of other physical facilities.
Correspondingly, we have expanded and enhanced
our digital banking products and services. These
activities were significantly paused during the period
when the TD Transaction was pending.
• In 2022 interest rates rose aggressively. This improved
our lending margins during the year as we were able
to raise average lending rates faster than average
funding rates. In 2023 the rates and amounts we paid
for deposits rose appreciably, but the impact was
moderated by continued increases in lending rates
along with a decrease in our borrowings. In 2024 both
lending rates and deposit costs began to decline, but
the decline in deposit costs lagged the decline in
lending rates, resulting in a modest decline in our
2024 net interest margin.
• Until 2022, when interest rates in the U.S. began to
rise significantly, lending was strong in certain
wholesale areas, such as loans to mortgage
companies, where demand was strongly stimulated
by low interest rates. Mortgage-related lending and
services fell significantly in 2022 and 2023, driven by
the divestiture of our title services business in the
third quarter of 2022 and continued high interest
rates throughout the period. This downward trend in
mortgage lending reversed in 2024 as mortgage rates
modestly abated from 2023 highs, even while longer-
term rates remained well above the lows of a few
years ago.
• Similarly, 2022's rising rate environment and
significant financial market volatility negatively
impacted our fixed income and capital markets
business compared to earlier years in this period. That
adverse environment continued throughout 2023.
Like our mortgage-related businesses, our fixed
income and capital markets business rebounded in
2024, as interest rates declined and the yield curve
flattened after having been inverted throughout 2023
and the first half of 2024.
Events Impacting Year-to-Year Comparisons
Securities Portfolio Restructuring in 2024
In the fourth quarter of 2024, we engaged in a
restructuring of a portion of our investment securities
portfolio, resulting in a $91 million pre-tax loss. While this
action reduced income in 2024, it will improve our
investment portfolio returns over the next few years.
TD Transaction 2022-2023
In February 2022, we agreed to be acquired by TD in a
merger transaction. Our shareholders approved the TD
Transaction in May 2022. In May 2023, after TD failed to
obtain timely regulatory approval, we and TD agreed to
terminate the transaction. See Toronto-Dominion
Transaction below for further information.
Preparation for the consummation of the TD Transaction
resulted in significant noninterest expense in 2022 and
2023 unrelated to the ordinary course of business. TD paid
us a termination fee of $225 million which substantially
increased 2023 noninterest income. We used $50 million
of that fee to support the communities we serve.
As part of the TD Transaction, in 2022 TD paid us $494
million to purchase shares of our Series G convertible
preferred stock. After the transaction terminated, the
Series G stock was converted into our common stock in
2023 at a conversion price of $25 per common share.
Regional Bank Failures in 2023
Over the weekend of March 11, 2023, the FDIC closed two
large regional banks that had experienced a run on their
deposits. On May 1, 2023, the FDIC closed a third large
regional bank after a slower but extended run on its
deposits. During this period most regional bank stock
prices fell significantly and experienced substantial
volatility.
Although stock price drops and fluctuations do not directly
impact our financial results or position, we took action to
maintain client confidence in our financial stability when
the TD Transaction terminated just a few days after the
third bank failure. Those actions included a significant
deposit-acquisition campaign and a rapid uptick in
marketing efforts. Also, a special FDIC assessment,
prompted by the bank failures and applied to all large and
regional banks in the U.S., was recognized by us as a
significant expense item in 2023.
Stock Purchase Moratorium in 2022-2023
After announcing the TD Transaction in 2022, we halted
our stock purchase program except for tax withholding
related to stock awards. When the TD Transaction
terminated in the midst of market turmoil surrounding
three U.S. regional bank failures, and facing the prospect
of possible new regulatory requirements (stemming from
those failures) which would directly affect our capital, we
continued the moratorium for all of 2023. The moratorium
ended in first quarter 2024.
Gain on Sale of Business
In third quarter of 2022, we sold our title services
business, recognizing a $22 million pre-tax gain.
ITEM 1. BUSINESS
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IBKC Merger of Equals in 2020
In July 2020, we closed our merger of equals with
IBERIABANK Corporation (“IBKC”). IBKC was the parent
company of IBERIABANK based in Lafayette, Louisiana. At
year-end 2019, IBKC had $31.7 billion of total assets—
nearly 75% of our size at that time—and operated over
190 banking centers in 11 states: Louisiana, Texas,
Arkansas, Tennessee, Mississippi, Alabama, Georgia,
Florida, North and South Carolina, and New York. IBKC’s
largest concentrations of banking centers were in
Louisiana and Florida. We and IBKC offered many of the
same financial services before the merger, but IBKC
exceeded us in several areas, most notably in equipment
financing, mortgage, and title services. IBKC shareholders
collectively were issued 243 million First Horizon common
shares (on a net basis).
Under applicable accounting guidance, none of the
income or expense recognized by IBKC prior to the merger
was included in our income or expense for 2020. As a
result, our 2020 operating results consisted of
approximately two quarters of legacy First Horizon alone
plus approximately two quarters of combined First
Horizon and IBKC. In addition, operating results in 2020
were significantly affected by merger-related expenses
and by two significant accounting impacts, described in
Large Accounting Impacts from IBKC Merger below.
30-Branch Acquisition in 2020
In July 2020, we purchased 30 branches in North Carolina
(20), Virginia (8), and Georgia (2) from SunTrust Bank (now
Truist Bank). Those branches are in markets which we did
not serve previously, or in which we did not have a leading
market position. Along with the branch facilities, we
acquired $0.4 billion of related loans and assumed $2.2
billion of deposits.
Large Accounting Impacts from IBKC Merger
Under applicable accounting guidance, closing the IBKC
merger in July 2020 created two substantial impacts on
our operating results for 2020. First, although we were
required to record IBKC’s loans at fair value on the closing
date, we also were required to recognize, as a provision
for credit losses, an estimate of current expected credit
losses for certain acquired loans. A similar process, with
much smaller numbers, occurred for the loans associated
with the 30-branch purchase. The overall incremental
expense, recorded in third quarter 2020, was $147 million.
Moreover, we were required to record, on a preliminary
basis, a nontaxable purchase accounting gain from the
merger of $533 million, driven by the stock market decline
in 2020 associated with the COVID-19 pandemic. The net
result of those two impacts was a $386 million uplift to
our pre-tax income in 2020 unrelated to the ordinary
operation of our businesses.
Expenses related to IBKC Merger
Closing the IBKC merger, integrating the business
operations and systems, and making the changes
necessary to achieve intended cost and other synergies
resulted in substantial noninterest expense, especially in
2020 and 2021.
Low Credit Loss Rates
During this period, our provision expense and net charge-
offs have, for the most part, been lower than historical
norms. Provision expense spiked in 2020 when the very
sudden COVID recession triggered significant upward
revisions in our expected credit losses, and provision
expense was negative in 2021 when a sizeable portion of
the 2020 loss reserves were released as loss expectations
moderated substantially. Net charge-offs during those
years similarly were higher in 2020 and lower in 2021,
though the deviations from the norm were much less
severe. If 2020 and 2021 are viewed together as a single
period, annual provision expense and net charge-offs
were similar to levels in 2022. When loan losses are low,
differences from year to year can be idiosyncratic, driven
by just one or a few clients. In 2023, loss levels increased
but continued to be low in general; however, a single
commercial loan default drove an uptick in provision
expense and net charge-offs for the year.
CECL Accounting and COVID-19
Starting in 2020, accounting guidance changed, requiring
us to recognize “current expected credit loss” on all loans.
The new guidance had the effect of accelerating,
compared to prior guidance, the recognition of provision
expense at times when general economic conditions
deteriorate in a rapid manner. Also in 2020, government
and public reaction to the COVID-19 pandemic caused
substantial and rapid, and previously unexpected,
business disruption and economic deterioration. Those
events substantially changed our expectations for future
credit loss and, accordingly, our provision was significantly
elevated in 2020.
In 2021, we recognized net provision credit (negative
expense) in the year overall, as a portion of credit loss
accrued in 2020 was effectively reversed and underlying
credit loss trends remained modest in most portfolios. In
2022 our provision expense and underlying credit loss
trends returned to a more normal pattern.
PPP
In 2020, the U.S. government created a temporary
Paycheck Protection Program, or PPP, in response to the
COVID-19 pandemic. The PPP allowed qualifying
employers to take out qualifying bank loans that were
guaranteed by the federal government. The loans later
were forgiven, often within a year, with the bank made
whole by the program. The program ended in 2021. Our
PPP revenues were approximately $122 million in 2021,
but only $21 million in 2022.
ITEM 1. BUSINESS
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2024 FORM 10-K ANNUAL REPORT
Fixed Income Volatility
In 2020 and 2021 moderate market volatility and the
downward direction of interest rates resulted in much
higher trading volume and noninterest income in our fixed
income business. During most of 2022 the Federal Reserve
aggressively raised rates, resulting in a significant fall-off in
fixed income revenues, which continued in 2023. In 2024,
the Federal Reserve began reducing interest rates, cutting
rates by 50 basis points in September and by 25 basis
points in both November and December. This reduction in
rates resulted in increased trading volume and noninterest
income in our fixed income business for 2024. See the
Fixed Income discussion under Cyclicality within the Other
Business Information section of this Item, which begins on
page 19, for additional information.
Monetary Policy Shifts
Interest rates were low by historical standards in the first
two years of this five-year period and generally fell during
those years. This environment lowered our net interest
margin in 2020 and 2021. Net interest margin is a measure
of the profit we make on loans and other earning assets in
relation to our cost of deposits and other funding sources.
Because funding costs cannot realistically fall below zero,
the very low rate environment during 2020-21 resulted in
historically low net interest margin levels for us.
During much of 2021, the Federal Reserve kept short-term
rates low and maintained an asset-buying program
intended to put downward pressure on long-term rates. In
2022, the Federal Reserve began to raise short-term rates
in large (as much as 75 basis point) moves and ceased its
asset-buying program. This was in reaction to price
inflation experienced in the U.S. during much of 2021 and
in 2022. In 2023 short-term rate increases slowed
substantially and then stopped entirely, while long-term
rates rose and then fluctuated. The Federal Reserve
began reducing short-term rates in the second half of
2024, but despite these reductions, long-term rates have
remained well above the lows of a few years ago.
During the last half of 2022, all of 2023 and the first half
2024, the traditional two-year/ten-year yield curve for
U.S. Treasury debt was inverted, meaning the two-year
rate exceeded the ten-year. Historically, inversion is not
common, and extended periods of inversion are quite
rare. Although several factors likely contributed to the
inversion during this period, we believe a key factor in this
instance, especially in 2023 and the first half of 2024, was
that markets tried to anticipate when, and how
aggressively, the Federal Reserve would start cutting
short-term rates in order to avoid or mitigate a recession.
The yield curve steepened by the end of 2024 as the
Federal Reserve began reducing short-term rates in the
latter portion of the year. Our net interest margin
improved in 2022 and, despite the inversion, improved
again in 2023, but declined modestly in 2024.
Additional information concerning monetary policy and
changes to it appears: within the Effect of Governmental
Policies and Proposals section of Item 1 beginning on page
30; under the caption Risks Associated with Monetary
Events beginning on page 37 within Item 1A; and under
the caption Inflation, Recession, and Federal Reserve
Policy within the Market Uncertainties and Prospective
Trends section of 2024 MD&A (Item 7), which begins on
page 97.
Mortgage-Related Businesses
We lend to mortgage lending companies, we originate
mortgage loans, and (until 2022) we provided title and
related services, all of which depend significantly on new
and refinanced home mortgage activity. Lending to
mortgage companies has been a significant business for us
in all five years shown in Table 1.8; title and related
services were significant for us in 2020, 2021, and 2022.
All three mortgage-related businesses benefited
substantially from the low interest rate environment that
ended in 2022. All our remaining mortgage-related
businesses were adversely impacted when rates rose in
2022. Mortgage-related businesses rebounded in 2024, as
those businesses attracted new clients, existing clients
increased their lines of credit, and peers exited the
business.
Significant Trends Past Five Years
Noteworthy trends during these five years included:
• Net interest margin declined from 2020 to 2021,
though net interest income rose in 2021 as a result of
increased average loan balances following the 2020
IBERIABANK merger. Net interest income expanded
again in 2022 and 2023 as margins improved with the
rising-rate environment, and loan growth continued.
Both net interest income and net interest margin
declined modestly in 2024, driven largely by increased
deposit costs for the first 7 months of the year.
• Noninterest income declined in 2021 largely driven by
a $533 million nontaxable purchase accounting gain
from the IBERIABANK merger which was included in
2020 noninterest income, partially offset by a
substantial increase in noninterest income following
the merger, especially in relation to consumer
mortgage originations and related services, and by
strong fixed income revenues. The rising rates in 2022
negatively impacted mortgage and fixed income
revenues in 2022 and in 2023. The uptick in 2023's
noninterest income was driven by the fee paid to FHN
when the TD Transaction terminated. Noninterest
income declined in 2024 due to the merger
termination fee included in 2023 and a pre-tax loss
related to the restructuring of our investment
ITEM 1. BUSINESS
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15
2024 FORM 10-K ANNUAL REPORT
securities portfolio, partially offset by increased fixed
income and mortgage revenues related to interest
rate declines in the last half of 2024.
• Deposit growth in 2021 was driven by deposits of
proceeds of PPP loans and expansive monetary policy,
as well as by organic growth in deposits from core
banking clients. Deposits in 2022 fell as the PPP
impact receded and competitive pricing (rate)
pressures increased. Deposits grew again in 2023 as a
result of a successful deposit acquisition campaign,
but leveled off in 2024 as deposit campaign
promotional rates expired and short-term interest
rates declined.
Toronto-Dominion Transaction
On February 27, 2022, FHN entered into an Agreement
and Plan of Merger (the “TD Merger Agreement”) with
The Toronto-Dominion Bank, a Canadian chartered bank
(“TD”) and certain TD subsidiaries. Under that agreement,
TD was to acquire FHN for an all-cash purchase price of
$25 per FHN common share, with the price modestly
increasing if the transaction closed later than a certain
date.
On February 9, 2023, FHN and TD agreed to extend the
outside date for the transaction to close until May 27,
2023. Subsequent to the extension, TD informed FHN that
TD did not expect the necessary regulatory approvals to
be received in time to complete the transaction by May
27, 2023. On May 4, 2023, FHN and TD agreed to
terminate the transaction.
Exited Businesses
Over the past five years, we have focused primarily on
traditional lending and deposit taking to commercial and
consumer clients and on the specialty lines of businesses
within our commercial, consumer & wealth and wholesale
banking segments. We have partially or fully exited some
smaller businesses during those years. Exited businesses
are managed in our corporate segment.
Competition
In all aspects of the businesses in which we engage, we
face substantial competition from banks doing business in
our markets as well as from savings and loan associations,
credit unions, other financial institutions, consumer
finance companies, trust companies, investment
counseling firms, money market and other mutual funds,
insurance companies and agencies, securities firms,
mortgage banking companies, hedge funds, and other
firms offering financial products or services.
Banking Competition
Our traditional lending and deposit taking businesses
primarily compete in those areas within the southern U.S.
where we have banking center locations, summarized in
Table 1.2. However, competition in our industry is
trending away from the traditional geographic footprint
model. That trend is happening throughout the industry,
but the rate of change is highly uneven among different
types of clients, products, and services. In our company,
that trend is most evident in the specialty lines of business
that comprise our wholesale banking business, as well as
the specialty lines included in commercial, consumer &
wealth banking (such as asset-based lending, commercial
real estate, and equipment finance).
Our specialty lines of business serve both consumer and
commercial clients. The consumer businesses remain
strongly linked to our physical banking center locations,
even as our delivery of financial services to consumers is
increasingly focused on popular non-physical delivery
methods, such as online and mobile banking. Online and
mobile banking have contributed to a decline in banking
center usage, but not (so far) an erosion of the link
between banking center versus consumer client location.
Increasingly, however, consumers are able to manage,
through a single institution, their financial accounts at
multiple institutions. Cross-institutional management
features may contribute to a de-linking of consumers to
physical banking center networks.
Our commercial businesses, especially our specialty lines
of business, also have a geographic linkage, but it is
weaker. Some areas of specialty lending, such as franchise
finance, mortgage warehouse lending, asset-based
lending, and certain other specialty businesses (see Fixed
Income Competition below) are multi-regional or national
in scope rather than being heavily centered on banking
center locations.
Key traditional competitors in many of our markets
include Bank of America N.A., Fifth Third Bank National
Association, First-Citizens Bank & Trust Company (dba
First Citizens Bank), Hancock Whitney Bank, Huntington
National Bank, JPMorgan Chase Bank National Association,
Regions Bank, Pinnacle Bank, PNC Bank National
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Association, Synovus Bank, Truist Bank, and Wells Fargo
Bank N.A., among many others including many community
banks and credit unions.
A number of recent technologies created or operated by
non-banks have been integrated into the financial systems
used by traditional banks, such as the evolution of ATM
cards into debit/credit cards and the evolution of debit/
credit cards into smart phones. These sorts of
incrementally evolutionary technologies often have
expanded the market for banking services overall while
siphoning a portion of the revenues from those services
away from banks. Prior methods of delivering those
services were disrupted, but often at a pace which all but
the weakest banks could accommodate.
Recently, some evolutionary pressures have arisen which
may prove to be less incremental and more disruptive. For
example, in financial planning and wealth management,
companies that are not traditional banks, including both
long-established firms and new ones, have developed
highly interactive systems and applications. These services
compete directly with traditional banks in offering
personal financial advice. The low-cost, high-speed nature
of these “robo-advisor” services can be especially
attractive to younger, less-affluent clients and potential
clients. We and other traditional banks offer similar
services, but doing so risks cannibalizing traditional
business models for these services.
In recent years, certain financial companies or their
affiliates that traditionally were not banks have been able
to compete more directly with the Bank for deposits and
other traditional banking services and products. The trend
of increasing fluidity across traditional boundaries is likely
to continue. Non-traditional companies competing with us
for traditional banking products and services include
investment banks, brokerage firms, insurance company
affiliates, peer-to-peer lending arrangers, non-bank
deposit acceptors, companies offering payment
facilitation services, and extremely short-term consumer
loan companies.
Competition for clients related to traditional and specialty
banking products and services is most pronounced in rate
pricing (loan rates, loan spreads, and deposit rates),
services pricing, scope of services offered, quality of
service, convenience, and ease of use for self-service areas
such as online and mobile banking. Since 2022, rate
pricing competition for deposits has been more intense
than had been true in recent earlier years.
Fixed Income Competition
Our fixed income business, which is part of our wholesale
banking segment, serves institutional clients, broadly
segregated into depositories (including banks, thrifts, and
credit unions) and non-depositories (including money
managers, insurance companies, governmental units and
agencies, public funds, pension funds, and hedge funds).
Both client groups are widely dispersed geographically,
predominantly within the U.S. We have many competitors
within both groups, including major U.S. and international
securities firms as well as numerous regional and local
firms.
Additional Information About Competition
For additional information on the competitive position of
FHN and the Bank, refer to the General subsection above
within this Item 1. Also, refer to the subsections entitled
Supervision and Regulation and Effect of Governmental
Policies, both of which are relevant to an analysis of our
competitors. Due to the intense competition in the
financial services industry, we can make no representation
that our competitive position has or will remain constant,
nor can we predict how it may change in the future.
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Human Resources Management
Firstpower Culture
Our 160-year history is rooted in our people-focused
culture, centered around teamwork and collaboration to
achieve best in class results. Everything we do is aligned
with our Purpose, Core Values and Commitment, holding
ourselves to the highest standards of ethical conduct and
operational excellence.
Our Purpose: To help our clients unlock their full potential
with capital and counsel.
Our Core Values:
• Put Clients First – Go above and beyond to listen,
understand and solve the client’s needs. Follow through
and exceed expectations every step of the way.
• Care About People – Treat others with respect and
dignity. Foster a culture of collaboration. Demonstrate
kindness and empathy for all.
• Commit to Excellence in Everything We Do – Conduct
business with professionalism and dignity. Embody a
“can do” spirit that gets results for our clients.
• Expand Access—Make it easy to work and invest with
us.
• Foster Team Success – Measure wins in terms of “we”
not “me.” Take pride in company success. Be invested in
a shared vision for future growth.
Commitment: As teammates and as individuals, we must
own the moment. We listen, understand and deliver.
Continuously adapting to the changing needs and
expectations of our workforce remains a priority to ensure
we attract and retain top talent, have a highly engaged
workforce and are well positioned to serve our associates,
clients and communities and shareholders.
We strive to offer a workplace in which our associates feel
valued, motivated and empowered to grow and excel. In
addition to competitive health care benefits, wellness
programs and parental and care-giver support, we offer
professional development opportunities through
mentoring and career development programs. Associates
can actively engage with their colleagues at work and be
involved in the community in a variety of ways, including
through volunteerism and by participating in our
numerous associate resource groups.
We regularly communicate through a variety of channels
and seek input through formal surveys and through the
Firstpower Council, a group of associates representing
various areas of the company that provide direct feedback
on opportunities to enhance our culture and
organizational effectiveness. In 2024, we launched HR
Help, a new associate self-service platform, providing
detailed information designed to broaden the knowledge
and support of the total health of every associate.
Year-End Statistical Information
At December 31, 2024*:
• First Horizon had 7,252 associates, or 7,155 full-time-
equivalent associates and 97 part-time equivalent
associates, not including contract labor for certain
services:
◦65% white, 20% African American, 9% Hispanic, 3%
Asian, and 2% other races or ethnicities
◦62% female and 38% male
◦4% had disabilities
• Of those, First Horizon had 1,230 corporate managers:
◦74% white, 14% African American, 7% Hispanic, 2%
Asian, and 2% other races or ethnicities
◦54% female and 46% male
◦2% had disabilities
• 37 members of the CEO's Operating Committee
(composed of the CEO and leaders from across the
organization):
◦84% white, 11% African American, 0% Hispanic, 5%
Asian, and 0% other races or ethnicities
◦46% female and 54% male
__________
* Data compiled from information provided by associates. Percentages
may not add to 100% due to rounding.
ITEM 1. BUSINESS
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Other Business Information
Strategic Transactions
An element of our business strategy is to consider
acquisitions and divestitures that would enhance long-
term shareholder value. Significant acquisitions and
divestitures which closed during the past five years are
described in Significant Developments over the Past Five
Years beginning on page 12 of this report.
The most significant transactions in the past five years are
our merger of equals with IBKC and our 30-branch
purchase from Truist, both in 2020. IBKC’s assets
comprised roughly three-sevenths of our combined assets
immediately after closing in July 2020. We completed
systems integration for the IBKC merger in February 2022.
Subsidiaries
FHN’s consolidated operating subsidiaries at
December 31, 2024 are listed in Exhibit 21. Technical and
regulatory details follow:
• The Bank is supervised and regulated as described in
Supervision and Regulation in this Item below.
• The Bank is a government securities dealer. The FHN
Financial division of the Bank is registered with the
SEC as a municipal securities dealer. The FHN
Financial Municipal Advisors division of the Bank is
registered with the SEC as a municipal adviser.
• Martin & Company, Inc. and First Horizon Advisors,
Inc. are registered with the SEC as investment
advisers.
• First Horizon Advisors, Inc. and FHN Financial
Securities Corp. are registered as broker-dealers with
the SEC and all states where they conduct business
for which registration is required.
• First Horizon Insurance Services, Inc. and FHIS, Inc. are
licensed as insurance agencies in all states where they
do business for which licensing is required.
• First Horizon Advisors, Inc. is licensed as an insurance
agency in the states where it does business for which
licensing is required for the sale of annuity products.
• Our financial subsidiaries under the Gramm-Leach-
Bliley Act are: FHIS, Inc.; FHN Financial Securities
Corp.; First Horizon Advisors, Inc.; First Horizon
Insurance Agency, Inc.; and First Horizon Insurance
Services, Inc.
Client Concentration
Neither we nor any of our significant subsidiaries is dependent upon a single client or very few clients.
Calendar-Year Seasonality
We do not experience material seasonality. We do
experience seasonal variation in certain revenues,
expenses, and credit trends. Historically, these variations
have somewhat increased certain expenses and
diminished certain revenues for the consumer,
commercial & wealth and wholesale banking segments,
principally in the first quarter each year. In addition, we
experience seasonal variation in certain asset and liability
balances, principally in the fourth quarter (consumer
mortgages, commercial lending related to consumer
mortgages, and certain associate-related reserves) and
first quarter (consumer mortgages and commercial
lending related to consumer mortgages).
Cyclicality
Banking
Financial services facilitate commercial and consumer
economic activities in critical ways. In many key respects,
modern financial services make modern types and
volumes of economic activity possible. Put simply, we do
well when our clients do well, and vice-versa. As a result,
our banking business is broadly and strongly dependent
on the size and strength of the U.S. economy.
Generally, when the U.S. economy is in an expansionary
phase of the business cycle, our loan balances rise, income
from lending tends to rise (assuming static interest rates
and margins), credit losses tend to fall, and fee income
tends to increase. In a contracting phase, those patterns
tend to reverse. The impact of those factors on our
operating results can be substantial, especially if they
consistently move up or down at the same time.
Our traditional banking businesses are highly dependent
on the level of interest rates, whether federal monetary
policy is easing or tightening, and on the shape of the
interest rate yield curve. These factors also are cyclical,
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and are related in complex ways with the business cycle
mentioned above.
These factors, and their impacts on us, often are mixed
rather than consistently positive or negative. For example:
low interest rates reduce the interest income we earn,
reduce our costs of funding, tend to stimulate economic
activity and loan growth, and, through lower debt service,
tend to ease financial pressure on clients, reducing default
risk. If the yield curve remains relatively steep, with long-
term interest rates noticeably higher than short-term
rates, our net interest margin will tend not to be
significantly compressed by the lower rate environment,
since lower short rates will keep our funding costs down
while higher long rates will support the rates we can
charge on lending. But if rates fall low enough (as they did
in 2020-21), the yield curve will flatten and our margins
will suffer. Moreover, the Federal Reserve tends to lower
rates in response to, or to avoid, a weakening economy.
Economic weakness tends to diminish client borrowing
and other activities which benefit our performance.
Further information on these topics is presented: within
Item 1A (which begins on page 31), in Risk from Economic
Downturns and Changes, Risks Associated with Monetary
Events, Liquidity and Funding Risks, and Interest Rate and
Yield Curve Risks; and, within 2024 MD&A (Item 7),
Interest Rate Risk Management (page 89), and Market
Uncertainties and Prospective Trends (page 97).
Fixed Income
Our fixed income and capital markets business, reported
as part of our wholesale banking segment, is significantly
affected by interest rate cycles which, in turn, are affected
by general economic and business cycles.
In broad terms, the typical impact of Federal Reserve
interest and monetary policy on our fixed income business
is summarized in Table 1.9.
Table 1.9
Typical Impact of Fed Policy on
Fixed Income Performance
Federal Reserve Policy Phase
Tightening
Neutral
Easing
Fixed Income
Performance Tends to be
Weaker
Average
Stronger
“Tightening” can include actions by the Federal Reserve to
raise short-term interest rates, push long-term rates up,
tighten credit, shrink the money supply, and decelerate
economic activity. “Easing” can include actions by the
Federal Reserve to lower short-term interest rates, push
long-term rates down, loosen credit, expand the money
supply, and accelerate economic activity. Expectations of
policy actions can have impacts similar to the actions
themselves.
In terms of tightening vs. easing, the Federal Reserve
policy phase sometimes is clearly known, but sometimes is
not. Although Federal Reserve actions at a given time can
consistently support one phase, often they are a mix. For
example, the Federal Reserve may want to flatten the
yield curve by raising short-term rates while pushing long-
term rates down, or steepen the curve by taking the
opposite actions. Complicating any forecast, the Federal
Reserve can directly affect short-term rates but can only
influence long-term rates, which are market-driven and
which can defy the Federal Reserve's intentions. Also,
major exogenous factors, such as the COVID-19 pandemic,
can significantly impact the capital markets and the
performance of our fixed income business. In broad terms,
these relationships are summarized in Table 1.10.
Table 1.10
Key Drivers of
Fixed Income Performance
Driver
If Driver Is:
FI Revenues Tend to Be:
Interest rates
Rising/up
Lower
Falling/down
Higher
Market
volatility
Extreme
(low or high)
Lower
Moderate
Higher
Yield curve
Flat or
Inverted
Lower
Steep
Higher
Credit spreads
Tighter
Lower
Wider
Higher
Depository
Liquidity
Lower
Lower
Greater
Higher
Economy
outlook
Positive
Lower
Negative
Higher
In many circumstances these drivers deliver mixed
impacts on fixed income performance, with some pushing
higher while others push lower, or with some drivers
pushing weakly while others are stronger. If most or all
drivers strongly push in the same direction at the same
time, fixed income performance usually is strongly
impacted. Revenue levels in a strongly “higher” year can
be more than double what they are in a strongly “lower”
year. As a result, fixed income performance can be highly
variable from year to year.
Mortgage-Related Businesses
The strength or weakness of consumer mortgage lending
activity in the U.S. impacts two businesses of ours:
mortgage origination and related services, and
commercial lending to other mortgage lenders.
Mortgage lending activity is strongly linked to interest rate
cycles. Activity tends to be inversely related to prevailing
mortgage rates: when rates are high, home-buying and
refinancing decrease, and when rates are low, home-
buying and refinancing increase. Moreover, expectations
about near-term future mortgage rates can accelerate or
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delay those impacts, as borrowers rush to avoid future
rate increases or wait for future rate decreases.
Market Outlook
The most important market factors in 2025 for FHN likely
will be (i) whether U.S. economic growth accelerates in
2025, and (ii) whether the Federal Reserve continues
implementing short-term rate decreases, and, if so, the
number, timing and magnitude of any rate decreases.
Resumption of rising prices could prompt the Federal
Reserve to resume short-term rate increases which, in
turn, could decrease economic growth or increase the risk
of a recession.
Additional information concerning market uncertainties
and trends appears in Market Uncertainties and
Prospective Trends within 2024 MD&A (Item 7) beginning
on page 97, especially under the caption Inflation,
Recession, and Federal Reserve Policy.
Other Business Information Associated with this Report
For additional information concerning our business, refer to 2024 MD&A (Item 7) beginning on page 57.
Business Information External to this Report
Our current primary internet address is
www.firsthorizon.com. A link to the Investor Relations
section of our internet website appears near the bottom
of the home page of our website. Near the top of the
Investor Relations homepage there is a "SEC Filings" link in
the banner. Clicking that link makes available to the
public, free of charge, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form
8-K, proxy statements, and amendments thereto as soon
as reasonably practicable after we file such material with,
or furnish such material to, the Securities and Exchange
Commission. Additional information regarding materials
available on our website is provided in Item 10 of this
report beginning on page 212. No information external to
this report and its exhibits, unless specifically noted
otherwise, is incorporated into this report.
Supervision and Regulation
Scope of this Section
This section describes certain of the material elements of
the regulatory framework applicable to bank and financial
holding companies and their subsidiaries, and to
companies engaged in securities and insurance activities.
It also provides certain specific information about us. To
the extent that the following information describes
statutory and regulatory provisions, it is qualified in its
entirety by express reference to each of the particular
statutory and regulatory provisions. A change in applicable
statutes, regulations, or regulatory policy may have a
material effect on our business.
Overview
The Corporation
First Horizon Corporation is a bank holding company and
financial holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the “BHCA”),
and is registered with the Federal Reserve. We are subject
to the regulation and supervision of, and to examination
by, the Federal Reserve under the BHCA. We are required
to file with the Federal Reserve annual reports and such
additional information as the Federal Reserve may require
pursuant to the BHCA.
A bank holding company that is not a financial holding
company is limited to engaging in “banking” and activities
found by the Federal Reserve to be “closely related to
banking.” Eligible bank holding companies that elect to
become financial holding companies may affiliate with
securities firms and insurance companies and engage in a
broader range of activities that are “financial in nature.”
See Financial Activities other than Banking within this
Supervision and Regulation discussion below.
The Federal Reserve may approve an application by a bank
holding company to acquire a bank located outside the
acquirer’s principal state of operations without regard to
whether the transaction is prohibited under state law,
although state law may still impose certain requirements.
See Interstate Branching and Mergers and Community
Reinvestment Act (“CRA”), both within this Supervision
and Regulation discussion below.
The Tennessee Bank Structure Act of 1974, among other
things, prohibits (subject to certain exceptions) a bank
holding company from acquiring a bank for which the
home state is Tennessee (a “Tennessee bank”) if, upon
consummation, the company would directly or indirectly
control 30% or more of the total deposits in insured
depository institutions in Tennessee. As of June 30, 2024,
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the FDIC reports that the Bank held approximately 13% of
such deposits.
The Bank
First Horizon Bank, our most significant subsidiary, is a
Tennessee banking corporation subject to the regulation
and supervision of, and to examination by, the TDFI. In
addition to general supervision and examination powers,
the TDFI has the power to approve mergers with the Bank,
the Bank’s issuance of preferred stock or capital notes, the
establishment of banking centers, and many other
corporate actions.
The Bank has chosen to be a member of the Federal
Reserve. As a result, the Federal Reserve is the Bank’s
primary federal regulator. As a member, the Bank must
buy and hold stock in its district Federal Reserve Bank
equal to 6% of the Bank’s capital stock and surplus. The
Bank is paid a dividend on its investment at a rate which
varies with ten-year U.S. Treasury rates, capped at 6%.
The Bank cannot sell its investment in Federal Reserve
Bank stock, and the investment provides the Bank with no
control over the Federal Reserve System.
Tennessee law requires the Bank, as a member of the
Federal Reserve, to comply with federal capital and many
other regulatory requirements in lieu of, or sometimes in
addition to, state requirements. For that reason, this
Supervision and Regulation section focuses on federal
requirements for many topics related to the Bank,
mentioning state requirements only where significant.
The Bank is insured by, and subject to regulation by, the
FDIC and is subject to regulation in certain respects by the
CFPB. The Bank is also subject to various requirements
and restrictions under federal and state law, including
requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may
be made and the interest that may be charged, limitations
on the types of investments that may be made, activities
that may be engaged in, and types of services that may be
offered. Various consumer laws and regulations also affect
the operations of the Bank. In addition, several of the
Bank’s subsidiaries are regulated separately, as discussed
in Subsidiaries within this Item 1 under the Other Business
Information discussion above, which begins on page 19.
In addition to the impact of regulation, commercial banks
are affected significantly by the actions of the Federal
Reserve as it attempts to control interest rates, money
supply, and credit availability in order to influence the
economy. Also, the Bank and certain of its subsidiaries are
prohibited from engaging in certain tie-in arrangements in
connection with extensions of credit, leases or sales of
property, or furnishing products or services.
The regulatory framework governing banks and the
financial industry is intended primarily to protect
depositors, the Federal Deposit Insurance Fund, and the
stability of the financial system, not to protect our Bank or
our security holders.
Regulatory Tiers Based on Asset Size
Many rules dealing with critical regulatory topics divide
banks into tiers based largely or entirely on asset size.
Different topics have different cut-off points for the tiers.
Within each topic, different rules apply to the different
tiers.
Cut-off points vary significantly. However, as a rough
generalization, for many regulatory topics the critical cut-
off points are $10 billion, $100 billion, $250 billion, and
$700 billion. Companies with less than $10 billion are less
regulated in several important ways than we are, and
companies with $250 billion or more are regulated much
more severely in many important ways than we are. As a
result, under current law, compliance requirements, costs,
and restrictions grow with size. While compliance
requirements tend to change abruptly as a company
crosses to the next tier, companies in the middle tiers, like
FHN, may incur growing portions of the costs related to
the next compliance tier, as they near the next regulatory
threshold.
The remainder of this Supervision and Regulation
discussion focuses primarily on rules which apply to FHN
based on our current asset size.
Large-Bank Supervision Risk Categories
Federal regulators have established four risk-based
categories for applying enhanced prudential standards
(enhanced for larger banks). Category I applies to the
global systemically important companies. Categories II, III,
and IV apply (with certain exceptions) to institutions with
total consolidated assets of at least $700 billion, $250
billion, and $100 billion, respectively. Currently, we and
the Bank are below Category IV’s floor and therefore,
generally, we are not subject to enhanced prudential
standards.
As a practical matter, as we approach $100 billion, we
have to prepare for Category IV compliance. Doing that
requires us to invest in systems and staffing. As a result, a
portion of the compliance costs associated with Category
IV status are borne even before we reach the Category IV
threshold.
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Also, Category IV compliance requirements are proposed
to be expanded, but whether those proposals will be
adopted, or their final form if adopted, remains uncertain.
If adopted, compliance costs and restrictions would
increase substantially.
Payment of Dividends
First Horizon Corporation is a legal entity separate and
distinct from First Horizon Bank and other subsidiaries.
Our principal source of cash flow, including cash flow to
pay dividends on our stock or to pay principal (including
premium, if any) and interest on debt securities, is
dividends from the Bank. There are statutory and
regulatory limitations on the payment of dividends by the
Bank to us, as well as by us to our shareholders.
The Corporation
Under Tennessee corporate law, we are not permitted to
pay cash dividends if, after giving effect to such payment,
we would not be able to pay our debts as they become
due in the usual course of business or our total assets
would be less than the sum of our total liabilities plus any
amounts needed to satisfy any preferential rights if we
were dissolving. In addition, in deciding whether or not to
declare a dividend of any particular size, our Board must
consider our current and prospective capital, liquidity, and
other needs, including the needs of the Bank which we are
obligated to support.
The Bank
Under Tennessee corporate law, the Bank (like the
Corporation, discussed above) may not pay a dividend if
the Bank would not be able to pay its debts when due or if
the Bank’s assets would be inadequate, in a dissolution, to
pay liabilities and preferential rights. Similarly, the Bank’s
Board must consider current and prospective needs in
making a decision to declare a dividend.
In addition, in order to pay cash dividends, the Bank must
obtain the prior approval of the Federal Reserve and the
TDFI Commissioner if the total of all dividends declared by
the Bank’s board of directors in any calendar year exceeds
the total of (i) the Bank’s retained net income for that year
plus (ii) the Bank’s retained net income for the preceding
two years, less certain required capital transfers, as
applicable. Below that ceiling, approval generally is not
required (but see Other Factors Affecting Dividends
immediately following this discussion). Applying the
dividend restrictions imposed under applicable federal
and state rules, the Bank’s total amount available for
dividends, without obtaining regulatory approval, was
$374 million at January 1, 2025. The application of those
restrictions to the Bank is discussed in more detail in the
following sections, all of which is incorporated into this
Item 1 by reference: under the caption Liquidity Risk
Management in our 2024 MD&A (Item 7) beginning on
page 93 of this report; and under the caption Restrictions
on dividends in Note 12—Regulatory Capital and
Restrictions of our 2024 Financial Statements (Item 8),
beginning on page 157.
Other Factors Affecting Dividends
If, in the opinion of the Federal Reserve, we or the Bank
are engaged in or about to engage in an unsafe or
unsound practice (which, depending on the financial
condition of FHN or the Bank, could include the payment
of dividends), the Federal Reserve may require us or the
Bank to cease and desist from that practice. The federal
banking agencies have indicated that paying dividends
that deplete a depository institution’s or holding
company’s capital base to an inadequate level would be
an unsafe and unsound banking practice.
In addition, under the Federal Deposit Insurance Act, an
FDIC-insured depository institution (such as the Bank) may
not make any capital distributions, pay any management
fees to its holding company, or pay any dividend if it is
undercapitalized or if such payment would cause it to
become undercapitalized.
The payment of cash dividends by us or by the Bank also
may be affected or limited by other factors, such as the
requirement to maintain adequate capital above
regulatory guidelines and requirements imposed by debt
covenants. For example, as discussed under Capital
Adequacy within this Supervision and Regulation
discussion below, our ability to pay dividends would be
restricted if our capital ratios fell below minimum
regulatory requirements plus a capital conservation
buffer.
The Federal Reserve generally requires insured banks and
bank holding companies to pay dividends only out of
current operating earnings. The Federal Reserve has
released a supervisory letter advising, among other things,
that a bank holding company should inform the Federal
Reserve and should eliminate, defer, or significantly
reduce its dividends if (i) the bank holding company’s net
income available to shareholders for the past four
quarters, net of dividends previously paid during that
period, is not sufficient to fully fund the dividends; (ii) the
bank holding company’s prospective rate of earnings is
not consistent with the bank holding company’s capital
needs and overall current and prospective financial
condition; or (iii) the bank holding company will not meet,
or is in danger of not meeting, its minimum regulatory
capital adequacy ratios.
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Transactions with Affiliates
The Bank’s ability to lend or extend credit to us or our
other affiliates is restricted. The Bank and its subsidiaries
generally may not extend credit to us or to any other
affiliate of ours in an amount which exceeds 10% of the
Bank’s capital stock and surplus and may not extend credit
in the aggregate to us and all such affiliates in an amount
which exceeds 20% of the Bank's capital stock and surplus.
Extensions of credit and other transactions between the
Bank and us or such other affiliates must be on terms and
under circumstances, including credit standards, that are
substantially the same or at least as favorable to the Bank
as those prevailing at the time for comparable
transactions with non-affiliated companies. Further, the
type, amount, and quality of collateral which must secure
such extensions of credit is regulated.
There are similar legal restrictions on: the Bank’s
purchases of or investments in the securities of and
purchases of assets from us or other affiliates; the Bank’s
loans or extensions of credit to third parties collateralized
by the securities or obligations of us or other affiliates; the
issuance of guaranties, acceptances, and letters of credit
on behalf of us or other affiliates; and certain Bank
transactions with us or other affiliates, or with respect to
which we or other affiliates act as agent, participate, or
have a financial interest.
Capital Adequacy
Federal financial industry regulators require that regulated
institutions maintain minimum capital levels. The capital
rules in the U.S. are based on international standards
known as “Basel III.” Those U.S. rules require the
following:
• Common Equity Tier 1 Capital Ratio. For all supervised
financial institutions, including us and the Bank, the
ratio of Common Equity Tier 1 Capital to risk-
weighted assets (“Common Equity Tier 1 Capital
ratio”) must be at least 4.5%. To be “well capitalized”
the Common Equity Tier 1 Capital ratio must be at
least 6.5%. Common Equity Tier 1 Capital consists of
core components of Tier 1 Capital. The core
components consist of common stock plus retained
earnings net of goodwill, other intangible assets, and
certain other required deduction items. At
December 31, 2024, our Common Equity Tier 1
Capital Ratio was 11.20% and the Bank’s was 11.12%.
• Tier 1 Capital Ratio. For all supervised financial
institutions, including us and the Bank, the ratio of
Tier 1 Capital to risk-weighted assets must be at least
6%. To be “well capitalized” the Tier 1 Capital ratio
must be at least 8%. Tier 1 Capital consists of the Tier
1 core components discussed in the bulleted
paragraph immediately above, plus non-cumulative
perpetual preferred stock, a limited amount of
minority interests in the equity accounts of
consolidated subsidiaries, and a limited amount of
cumulative perpetual preferred stock, net of goodwill,
other intangible assets, and certain other required
deduction items. At December 31, 2024, our Tier 1
Capital Ratio was 12.22% and the Bank’s was 11.54%.
• Total Capital Ratio. For all supervised financial
institutions, including us and the Bank, the ratio of
Total Capital to risk-weighted assets must be at least
8%. To be “well capitalized” the Total Capital ratios
must be at least 10%. At December 31, 2024, our
Total Capital Ratio was 13.87% and the Bank’s was
13.00%.
• Capital Conservation Buffer. If a capital conservation
buffer of an additional 2.5% above the minimum
required Common Equity Tier 1 Capital ratio, Tier 1
Capital ratio, and Total Capital ratio is not maintained,
special restrictions would apply to capital
distributions, such as dividends and stock
repurchases, and on certain compensatory bonuses.
• Leverage Ratio—Base. For all supervised financial
institutions, including us or the Bank, the Leverage
ratio must be at least 4%. To be “well capitalized” the
Leverage ratio must be at least 5%. The Leverage ratio
is Tier 1 Capital divided by quarterly average assets
net of goodwill, certain other intangible assets, and
certain required deduction items. At December 31,
2024, our Leverage ratio was 10.64% and the Bank’s
was 10.06%.
• Leverage Ratio—Supplemental. For the largest
internationally active supervised financial institutions,
not including us or the Bank, a minimum
supplementary Leverage ratio must be maintained
that takes into account certain off-balance sheet
exposures.
Federal regulators have incorporated market and interest-
rate risk components into its risk-based capital standards.
Those standards explicitly identify concentration of credit
risk and certain risks arising from non-traditional activities,
and the management of such risks, as important
qualitative factors to consider in assessing an institution’s
overall capital adequacy.
Federal regulators’ market risk rules are applicable to
covered institutions—those with aggregate trading assets
and trading liabilities of at least 10% of their total assets
or at least $1 billion. We and the Bank are covered
institutions under the rule. The rules specify the
methodology for calculating the amount of risk-weighted
assets related to trading assets and include, among other
things, the addition of a component for stressed value at
ITEM 1. BUSINESS
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risk. In addition, an 8% capital surcharge applies to certain
covered institutions, not including us or the Bank.
The Federal Reserve has indicated that it considers a
“Tangible Tier 1 Capital Leverage Ratio” (deducting all
intangibles) and other indicators of capital strength in
evaluating proposals for expansion or new activities.
Failure to meet capital guidelines could subject a bank to a
variety of enforcement remedies, including the
termination of deposit insurance by the FDIC, and to
certain restrictions on its business and in certain
circumstances to the appointment of a conservator or
receiver. See Prompt Corrective Action (PCA) immediately
below for additional information.
In addition, the Bank is required to have a capital structure
that the TDFI determines is adequate, based on TDFI’s
assessment of the Bank’s businesses and risks. The TDFI
may require the Bank to increase its capital, if found to be
inadequate.
Prompt Corrective Action (PCA)
Federal banking regulators must take “prompt corrective
action” regarding FDIC-insured depository institutions
(such as the Bank) that do not meet minimum capital
requirements. For this purpose, insured depository
institutions are divided into five capital categories. The
specific requirements applicable to our Bank are
summarized in Table 1.11.
Table 1.11
REQUIREMENTS FOR PCA CAPITALIZATION CATEGORIES
Well capitalized
• Common Equity Tier 1 Capital ratio of at least 6.5%
• Tier 1 Capital ratio of at least 8%
• Total Capital ratio of at least 10%
• Leverage ratio of at least 5%
• Not subject to a directive, order, or written agreement to meet and
maintain specific capital levels
Adequately
capitalized
• Common Equity Tier 1 Capital ratio of at least 4.5%
• Tier 1 Capital ratio of at least 6%
• Total Capital ratio of at least 8%
• Leverage ratio of at least 4%
• Not subject to a directive, order, or written agreement to meet and
maintain specific capital levels
Undercapitalized
Failure to maintain any requirement to be adequately capitalized
Significantly
Undercapitalized
Failure to maintain Common Equity Tier 1 Capital ratio of at least 3%, Tier 1
Capital ratio of at least 4%, Total Capital ratio of at least 6%, or a Leverage
ratio of at least 3%
Critically
Undercapitalized
Failure to maintain a level of tangible equity equal to at least 2% of total
assets
At December 31, 2024, the Bank had sufficient capital to
qualify as “well capitalized” under the regulatory capital
requirements discussed above. An institution may be
deemed to be in a capitalization category that is lower
than is indicated by its actual capital position if it receives
an unsatisfactory examination rating. Institutions
generally are not allowed to publicly disclose examination
results.
An FDIC-insured depository institution generally is
prohibited from making any capital distribution (including
payment of dividends) or paying any management fee to
its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized
depository institutions are subject to restrictions on
borrowing from the Federal Reserve System. In addition,
undercapitalized depository institutions are subject to
growth limitations and are required to submit capital
restoration plans. An insured depository institution’s
holding company must guarantee the capital plan, up to
an amount equal to the lesser of 5% of the depository
institution’s assets at the time it becomes
undercapitalized or the amount of the capital deficiency
when the institution fails to comply with the plan, for the
plan to be accepted by the applicable federal regulatory
authority. The federal banking agencies may not accept a
capital plan without determining, among other things,
that the plan is based on realistic assumptions and is likely
to succeed in restoring the depository institution’s capital.
If a depository institution fails to submit an acceptable
plan, it is treated as if it were significantly
undercapitalized.
Significantly undercapitalized depository institutions may
be subject to a number of requirements and restrictions,
including orders to sell sufficient voting stock to become
adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from
correspondent banks.
Critically undercapitalized depository institutions are
subject to appointment of a receiver or conservator,
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2024 FORM 10-K ANNUAL REPORT
generally within 90 days of the date on which they
become critically undercapitalized.
Liquidity Coverage Ratio
The liquidity coverage ratio, or LCR, refers to the amount
of high quality liquid assets (such as Federal Reserve
balances and readily saleable government-guaranteed or
investment grade debt) banks are required to keep on
hand to meet a hypothetically projected total net cash
outflow over a forward-looking 30-day period of stress.
The stressed outflow estimate is based on a standard set
of hypothetical assumptions set forth in regulatory
requirements. The LCR is designed to ensure banks hold a
buffer of high-quality liquid assets so that they can meet
their short-term liquidity needs and remain stable and
strong in a stressed environment. Liquid assets generally
provide low income levels compared to other
investments, so a higher LCR requirement can negatively
impact a bank's earnings.
The LCR requirement does not apply to institutions with
assets of less than $100 billion, and so does not apply to
us or the Bank currently. For larger institutions, the
minimum LCR requirement increases based on a bank’s
asset size. Category IV banks, with at least $100 billion in
assets, are not subject to LCR requirements unless they
have at least $50 billion in weighted short-term wholesale
funding.
Holding Company Structure and Support of Subsidiary Banks
Because we are a holding company, our right to
participate in the assets of any subsidiary upon the latter’s
liquidation or reorganization will be subject to the prior
claims of the subsidiary’s creditors (including depositors in
the case of the Bank), except to the extent that we may be
a creditor with recognized claims against the subsidiary. In
addition, depositors of a bank, and the FDIC as their
subrogee, would be entitled to priority over other
creditors in the event of liquidation of the bank.
Under Federal Reserve policy we are expected to act as a
source of financial strength to, and to commit resources to
support, the Bank. This support may be required at times
even if, absent such Federal Reserve policy, we might not
wish to provide it. In addition, any capital loans by a bank
holding company to any of its subsidiary banks are
subordinate in right of payment to deposits and to certain
other indebtedness of the subsidiary bank. In the event of
a bank holding company’s bankruptcy, any commitment
by the bank holding company to a federal bank regulatory
agency to maintain the capital of a subsidiary bank will be
assumed by the bankruptcy trustee and entitled to a
priority of payment.
Cross-Guarantee Liability
A depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to
be incurred by, the FDIC in connection with (i) the default
of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to
any commonly controlled FDIC-insured depository
institution “in danger of default.” “Default” is defined
generally as the appointment of a conservator or receiver
and “in danger of default” is defined generally as the
existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance. The
FDIC’s claim for damages is superior to claims of
shareholders of the insured depository institution or its
holding company but is subordinate to claims of
depositors, secured creditors, and holders of subordinated
debt (other than affiliates) of the commonly controlled
insured depository institution.
Currently the Bank is our only depository institution
subsidiary. If we were to own or operate another
depository institution, any loss suffered by the FDIC in
respect of one subsidiary bank would likely result in
assertion of the cross-guarantee provisions, the
assessment of estimated losses against our other
subsidiary bank(s), and a potential loss of our investment
in our subsidiary banks.
Interstate Branching & Mergers
As mentioned above, the Bank generally must have TDFI’s
approval to establish a new banking center (technically, a
“branch”). For a new banking center located outside of
Tennessee, Tennessee law requires the Bank to comply
with branching laws applicable to the state where the new
banking center will be located. Federal law allows the
Bank to establish or acquire a branch in another state to
the same extent as a bank chartered in that other state
would be allowed to establish or acquire a branch in
Tennessee.
For an interstate merger or acquisition: the acquiring
bank must be well-capitalized and well-managed;
concentration limits on liabilities and deposits may not be
exceeded; regulators must assess the transaction for
incremental systemic risk; and the acquiring bank must
ITEM 1. BUSINESS
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2024 FORM 10-K ANNUAL REPORT
have at least “satisfactory” standing under the federal
Community Reinvestment Act (discussed immediately
below). Moreover, mergers and acquisitions that are large
enough are subject to anti-trust review by the U.S.
Department of Justice.
Once a bank has established branches in a state through
de novo or acquired branching or through an interstate
merger transaction, the bank may then establish or
acquire additional branches within that state to the same
extent that a bank chartered in that state is allowed to
establish or acquire branches within the state.
Community Reinvestment Act (“CRA”)
The CRA requires each U.S. bank, consistent with safe and
sound operation, to help meet the credit needs of each
community where the bank accepts deposits, including
low- and moderate-income (“LMI”) communities. The
Federal Reserve assesses the Bank periodically for CRA
compliance, and that assessment is made public. The
Bank’s LMI operations and activities traditionally are
critical focal points in those assessments.
A CRA rating below “Satisfactory” can slow or halt a bank’s
plans to expand by branching, acquisition, or merger, and
can prevent a bank holding company from becoming a
financial holding company. In its most recent publicly
reported CRA assessment, for 2020, the Bank received
ratings of "High Satisfactory" in Lending and in Service,
"Outstanding" in Investment, and "Satisfactory" overall.
Our 2024 CRA assessment recently has been completed
and we expect the results to be published in the Federal
Register in 2025.
In 2023, federal banking agencies adopted final rules
establishing a revised framework for applying the CRA.
The new rules, which could include assessment of a bank's
impact on credit needs of communities beyond those in
which the bank accepts deposits, were preliminarily
enjoined by a federal district court in 2024.
Financial Activities other than Banking
Federal Law
Federal law generally allows financial holding companies
broad authority to engage in activities that are financial in
nature or incidental to a financial activity. These include:
insurance underwriting and brokerage; merchant banking;
securities underwriting, dealing, and market-making; real
estate development; and such additional activities as the
Federal Reserve in consultation with the Secretary of the
Treasury determines to be financial in nature or
incidental. A bank holding company may engage in these
activities directly or through subsidiaries by qualifying as a
“financial holding company.” To qualify as a financial
holding company, a bank holding company must file an
initial declaration with the Federal Reserve, certifying that
all of its subsidiary depository institutions are well-
managed and well-capitalized.
Federal law also permits banks to engage in certain of
these activities through financial subsidiaries. To control
or hold an interest in a financial subsidiary, a bank must
meet the following requirements:
(1) The bank must receive approval from its primary
federal regulator for the financial subsidiary to
engage in the activities.
(2) The bank and its depository institution affiliates must
each be well-capitalized and well-managed.
(3) The aggregate consolidated total assets of all of the
bank’s financial subsidiaries must not exceed the
lesser of 45% of the bank’s consolidated total assets,
or $50 billion (subject to indexing for inflation).
(4) The bank must have in place adequate policies and
procedures to identify and manage financial and
operational risks and to preserve the separate
identities and limited liability of the bank and the
financial subsidiary.
(5) If the bank is among the 100 largest banks, the bank
must meet the creditworthiness or other criteria
adopted by the Federal Reserve and the U.S.
Secretary of the Treasury from time to time. If this
fifth requirement ceases to be met after a bank
controls or holds an interest in a financial subsidiary,
the bank cannot invest additional capital in that
subsidiary until the requirement again is met.
No new activity may be commenced unless the bank and
all of its depository institution affiliates have at least
“satisfactory” CRA ratings. Certain restrictions apply if the
bank holding company or the bank fails to continue to
meet one or more of the requirements listed above.
In addition, federal law contains a number of other
provisions that may affect the Bank’s operations, including
limitations on the use and disclosure to third parties of
client information.
At December 31, 2024, we are a financial holding
company and the Bank has a number of financial
subsidiaries, as discussed in Subsidiaries within this Item 1
under the Other Business Information discussion, which
begins on page 19.
ITEM 1. BUSINESS
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2024 FORM 10-K ANNUAL REPORT
Tennessee Law
Tennessee law does not expressly restrict the activities of
a bank holding company or its non-bank affiliates.
However, no Tennessee bank may maintain a branch
office on the premises of an affiliate if the affiliate is
engaged in activities that are not permissible for a bank
holding company, a financial holding company, a national
bank, or a national bank subsidiary under federal law.
Tennessee law permits Tennessee banks to establish
subsidiaries and to engage in any activities permissible for
a national bank located in Tennessee, subject to
compliance with Tennessee regulations relating to the
conduct of such activities for the purpose of maintaining
bank safety and soundness.
Interchange Fee Restrictions
Regulations severely cap interchange fees which the Bank
may charge merchants for debit card transactions.
Regulatory changes proposed in 2023, if adopted, would
lower that cap. In early 2025, these proposed changes
remained pending.
Volcker Rule
The so-called Volcker rule (1) generally prohibits banks
from engaging in proprietary trading, which is engaging as
principal (for the bank’s own account) in any purchase or
sale of one or more of certain types of financial
instruments, and (2) limits banks’ ability to invest in or
sponsor hedge funds or private equity funds.
Consumer Regulation by the CFPB
The CFPB adopts and administers significant rules
affecting consumer lending and consumer financial
services. Key rules for the Bank include detailed regulation
of mortgage servicing practices and detailed regulation of
mortgage origination and underwriting practices. The
latter rules, among other things, establish the definition of
a “qualified mortgage” using traditional underwriting
practices involving down payments, credit history, income
levels and verification, and so forth. The rules do not
prohibit, but do tend to discourage, lenders from
originating non-qualified mortgages. The future of CFPB
regulation remains uncertain.
Data Security & Portability
Security & Privacy
Federal law requires banks to implement a comprehensive
information security program that includes administrative,
technical, and physical safeguards. Banks are required to
have appropriate data governance practices and risk
management processes as key functions supporting their
operational resilience.
Data privacy and protection increasingly is a significant
legislative, regulatory, and societal concern. The concern
is driven by major technological and societal shifts in the
past 20 years, led by relatively unregulated firms such as
Alphabet (Google), Amazon.com, and Meta Platforms
(Facebook) and their many clients worldwide. Those firms
have gathered large amounts of personal details about
millions of people, and today have the ability to analyze
that data and act on that analysis very quickly. The firms
seek to understand enough about a person to know what
a person wants before the person does.
Banks (as mentioned above) already are subject to
significant privacy regulations. Probably for that reason,
the banking industry is not at the political center of these
concerns currently. Even so, banks are likely to be affected
by broader legislative and regulatory responses to the
perceived problems. Two prominent responses include
the European Union General Data Protection Regulation
and the California Data Privacy Protection Act. Neither is a
banking industry regulation, but both apply to banks in
relation to certain clients and data. To date, neither has
had a material impact on the Bank.
Portability & Client Control
Federal law restricts the Bank’s ability to share certain
information with affiliates and non-affiliates for marketing
and/or non-marketing purposes, or to contact clients with
marketing offers. Affiliate and non-affiliate sharing
initiated by the Bank generally is permitted unless the
client elects not to permit sharing.
Increasingly, banks are being required to permit, enable,
and support client control of client data, including the
sharing of client data with Bank affiliates and with outside
organizations. These requirements, which still are
evolving, are intended to foster data portability for clients
and greater competition among financial services firms.
However, they also significantly increase data security
risks because they create additional access channels for
bad actors to try to exploit, or they make accessing
existing channels easier or faster.
Most notably, the CFPB adopted a new "Personal Financial
Data Rights" rule in 2024. Under the CFPB rule, banks will
be required to make client data available upon request to
the client and authorized third parties in a secure and
reliable manner without charge. The CFPB will implement
its data portability rule in phases, with banks that hold at
ITEM 1. BUSINESS
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2024 FORM 10-K ANNUAL REPORT
least $10 billion in total assets, but less than $250 billion,
required to comply by April 1, 2027.
The future of CFPB regulation remains uncertain.
FDIC Insurance Assessments; DIFA
U.S. bank deposits generally are insured by the Deposit
Insurance Fund (“DIF”), administered by the FDIC. The
system of FDIC insurance premium rates charged consists
of a rate grid structure in which base rates range from 5 to
32 basis points annually, with fully adjusted rates ranging
from 2.5 to 42 basis points annually. (A basis point is equal
to 0.01%.) These rates reflect a temporary increase
generally equal to 2 basis points implemented by the FDIC
in 2023. Also, for eight quarters starting in 2024, the FDIC
has imposed a special assessment, of 3.36 basis points per
quarter, intended to replenish the DIF in the aftermath of
three large regional bank failures that occurred in March
and May of 2023. As of early 2025, the FDIC projected
that the special assessment will be collected for an
additional two quarters beyond the initial eight-quarter
collection period, but at a lower rate.
Key factors in the grid include: the institution’s risk
category (I to IV); whether the institution is deemed large
and highly complex; whether the institution qualifies for
an unsecured debt adjustment; and whether the
institution is burdened with a brokered deposit
adjustment. Other factors can impact the base against
which the applicable rate is applied, including (for
example) whether a net loss is realized.
Insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe
and unsound practices, is in an unsafe or unsound
condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition
imposed by a federal bank regulatory agency.
Depositor Preference
Federal law provides that deposits and certain claims for
administrative expenses and associate compensation
against an insured depository institution would be
afforded a priority over other general unsecured claims
against such an institution, including federal funds and
letters of credit, in the “liquidation or other resolution” of
such an institution by any receiver.
Securities Regulation
Certain of our subsidiaries are subject to various securities
laws and regulations and capital adequacy requirements
promulgated by the regulatory and exchange authorities
of the jurisdictions in which they operate.
Our registered broker-dealer subsidiaries are subject to
the SEC’s net capital rule, Rule 15c3-1. That rule requires
the maintenance of minimum net capital and limits the
ability of the broker-dealer to transfer large amounts of
capital to a parent company or affiliate. Compliance with
the rule could limit operations that require intensive use
of capital, such as underwriting and trading.
Two of our subsidiaries are registered investment advisers
which are regulated under the Investment Advisers Act of
1940. Advisory contracts with clients automatically
terminate under these laws upon an assignment of the
contract by the investment adviser unless appropriate
consents are obtained.
Insurance Activities
Certain of our subsidiaries sell various types of insurance
as agent in a number of states. Insurance activities are
subject to regulation by the states in which such business
is transacted. Although most of such regulation focuses on
insurance companies and their insurance products,
insurance agents and their activities are also subject to
regulation by the states, including, among other things,
licensing and marketing and sales practices.
Compensation & Risk Management
The Federal Reserve has issued guidance intended to
ensure that incentive compensation arrangements at
financial organizations take into account risk and are
consistent with safe and sound practices. The guidance is
based on three “key principles” calling for incentive
compensation plans to: appropriately balance risks and
rewards; be compatible with effective controls and risk
management; and be backed up by strong corporate
governance. In response: we operate an enhanced risk
management process for assessing risk in incentive
compensation plans; several key incentive programs use a
net profit approach rather than a revenues-only approach;
and mandatory deferral features are used in several key
programs, including an executive program.
ITEM 1. BUSINESS
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2024 FORM 10-K ANNUAL REPORT
In 2016 federal agencies proposed rules which could
significantly change the regulation of incentive
compensation programs at financial institutions. The
proposal would create four tiers of institutions based on
asset size. Institutions in the top two tiers would be
subject to rules much more detailed and proscriptive than
are currently in effect. If interpreted aggressively by the
regulators, the proposed rules could be used to prevent,
as a practical matter, larger institutions from engaging in
certain lines of business where substantial commission
and bonus pool arrangements are the norm. In the 2016
proposal, the top two tiers included institutions with more
than $50 billion of assets. We and the Bank currently
would fall into the lower of those top two tiers. However,
prompted by post-2016 legislation which significantly
raised several statutory asset-size tiers, if this proposal
were finalized today, the $50 billion floor might be raised,
allowing us to remain in the third tier.
Four of the six federal agencies who proposed the 2016
rules, but not the Federal Reserve, re-proposed those
rules in 2024. We cannot predict what final rules may be
adopted, nor how they may be implemented.
Effect of Government Policies & Proposals
The Bank is affected by the policies of regulatory
authorities, including the Federal Reserve, the TDFI, and
the CFPB. See Supervision and Regulation beginning on
page 21 for additional information.
The Federal Reserve also sets and manages monetary
policy for the U.S. In this latter role, the Federal Reserve’s
mandate from Congress is to pursue price stability and full
employment.
Among the instruments of monetary policy used by the
Federal Reserve are: purchases and sales of U.S.
government and other securities in the marketplace;
changes in the discount rate, which is the rate any
depository institution must pay to borrow from the
Federal Reserve; changes in the reserve requirements of
depository institutions; changes in the rate paid on banks’
required and excess reserve deposits at the Federal
Reserve; and changes in the federal funds rate, which is
the rate at which depository institutions lend balances to
each other overnight. These instruments are intended to
influence economic and monetary growth, interest rate
levels, and inflation.
The monetary policies of the Federal Reserve and other
governmental policies have had a significant effect on the
operating results of commercial banks in the past and are
expected to continue to do so in the future. Because of
changing conditions in the national and international
economies and in the money markets, as well as the result
of actions by monetary and fiscal authorities, it is not
possible to predict with certainty future changes in
interest rates, deposit levels, loan demand, or the
business and results of our operations, or whether
changing economic conditions will have a positive or
negative effect on operations and earnings. Additional
information concerning monetary policy changes appears:
under the caption Monetary Policy Shifts within the
Significant Business Developments section of Item 1,
which begins on page 12; under the caption Risks
Associated with Monetary Events beginning on page 37
within Item 1A; and under the caption Inflation, Recession,
and Federal Reserve Policy within the Market
Uncertainties and Prospective Trends section of our 2024
MD&A (Item 7), which begins on page 97.
Bills occasionally are introduced in the United States
Congress, the Tennessee General Assembly and other
state legislatures, and regulations occasionally are
proposed by our regulatory agencies, any of which could
affect our businesses, financial results, and financial
condition.
We are not able to predict what, if any, changes that
Congress, state legislatures, or the regulatory agencies will
enact or implement in the future, nor the impact that
those actions will have upon us.
Sources & Availability of Funds
Information concerning the sources and availability of
funds for our businesses can be found in our 2024 MD&A
(Item 7), including the subsection entitled Liquidity Risk
Management beginning on page 93, which material is
incorporated herein by reference.
ITEM 1. BUSINESS
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Item 1A. Risk Factors
This Item outlines specific risks that could affect the ability
of our various businesses to compete, change our risk
profile, or materially impact our operating results or
financial condition. Our operating environment continues
to evolve and new risks continue to emerge. To address
that challenge we have a risk management governance
structure that oversees processes for monitoring evolving
risks and oversees various initiatives designed to manage
and control our potential exposure.
This Item highlights risks that could impact us in material
ways by causing future results to differ materially from
past results, by causing future results to differ materially
from current expectations, or by causing material changes
in our financial condition. In this Item we have outlined
risks that we believe are important to us at the present
time. However, other risks may prove to be important in
the future, and new risks may emerge at any time. We
cannot predict all potential developments that could
materially affect our financial performance or condition.
TABLE OF ITEM 1A TOPICS
Topic
Page
Topic
Page
Traditional Competition Risks
31
Risks of Expense Control
42
Traditional Strategic Risks
32
Geographic Risks
43
Industry Disruption
33
Insurance
44
Operational Risks
34
Liquidity & Funding Risks
44
Cybersecurity Risks
35
Credit Ratings
46
Risks from Economic Downturns & Changes
36
Interest Rate & Yield Curve Risks
46
Risks Associated with Monetary Events
37
Asset Inventories & Market Risks
47
Risks Related to Businesses We May Exit
38
Mortgage Business Risks
48
Reputation Risks
38
Pre-2009 Mortgage Business Risks
48
Credit Risks
38
Accounting Risks
49
Service Risks
40
Share Owning & Governance Risks
50
Regulatory, Legislative, and Legal Risks
40
Traditional Competition Risks
We are subject to intense competition for clients, and
the nature of that competition is changing quickly. Our
primary areas of competition include: consumer and
commercial deposits, commercial loans, consumer loans
including home mortgages and lines of credit, financial
planning and wealth management, fixed income products
and services, and other consumer and commercial
financial products and services. Our competitors in these
areas include national, state, and non-US banks, savings
and loan associations, credit unions, consumer finance
companies, trust companies, investment counseling firms,
money market and other mutual funds, insurance
companies and agencies, securities firms, mortgage
banking companies, hedge funds, and other financial
services companies that serve in our markets. The
emergence of non-traditional, disruptive service providers
(see Industry Disruption within this Item 1A beginning on
page 33) has intensified the competitive environment.
Some competitors are traditional banks, subject to the
same regulatory framework as we are, while others are
not banks and in many cases experience a significantly
different or reduced degree of regulation. Examples of
less-regulated activities include private credit from non-
bank lenders, check-cashing services, independent ATM
services, and “peer-to-peer” lending, where investors
provide debt financing or other capital directly to
borrowers.
Competitive pressures shift with the business and rate
environment. Over much of 2020 and 2021, with deposits
relatively abundant, the competitive focus on lending and
fee-based services was relatively high. In 2023 and 2024,
after the major market transitions in 2022 discussed in
Risks Associated with Monetary Events starting on page
37, competition for deposits became much more
significant.
ITEM 1A. RISK FACTORS
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We expect that competition will continue to be intense
with respect to most of our products and services.
Heightened competition tends to put downward pressure
on revenues from affected items, upward pressure on
marketing and other promotional costs, or both. For
additional information regarding competition for clients,
refer to Competition within Item 1 beginning on page 16
of this report.
We compete for talent. Our most significant competitors
for clients also tend to be our most significant competitors
for top talent. See Operational Risks below within this
Item 1A for additional information concerning this risk.
We compete to raise capital in the equity and debt
markets. See Liquidity and Funding Risks beginning on
page 44 of this Item 1A for additional information
concerning this risk.
Traditional Strategic Risks
We may be unable to successfully implement our
strategies to operate and grow our commercial,
consumer & wealth and wholesale banking businesses.
Although our current strategies are expected to evolve as
business conditions change, currently our primary
strategies are to (1) invest resources in our banking
businesses, (2) seek to exploit growth opportunities,
especially within the markets we serve, and (3) seek to
exploit opportunities to cut costs without significant
revenue impact. Organic growth is expected to be
coordinated with a focus on strong and stable returns on
capital.
To foster organic growth, we have engaged in targeted
hiring and marketing in our traditional commercial and
consumer banking markets, and we have invested
resources in specialty commercial lending and private
client banking. In the future more generally, we expect to
continue to nurture profitable organic growth. We may
pursue acquisitions or strategic transactions if appropriate
opportunities, within or outside of our current markets,
present themselves.
Failure to achieve one or more key elements needed for
successful organic growth would adversely affect our
business and earnings. We believe that the successful
execution of organic growth depends upon a number of
key elements, including:
• our ability to attract and retain clients in our
commercial and consumer banking market areas and
in our specialty banking markets;
• our ability to achieve and maintain growth in our
earnings while pursuing new business opportunities;
• our ability to maintain a high level of client service
while optimizing our physical banking center count
due to changing client demand, all while expanding
our remote banking services and expanding or
enhancing our information processing, technology,
compliance, and other operational infrastructures
effectively and efficiently;
• our ability to manage the liquidity and capital
requirements associated with growth, especially
organic growth and cash-funded acquisitions; and
• our ability to manage effectively and efficiently the
changes and adaptations necessitated by a complex,
burdensome, and evolving regulatory environment.
We have in place strategies designed to achieve those
elements that we believe are significant to us at present.
Our challenge is to execute those strategies and adjust
them, or adopt new strategies, as conditions change.
Failure to achieve one or more key elements needed for
successful business acquisitions would adversely affect
our business and earnings. To the extent we engage in
future bank or non-bank business acquisitions, we face
various additional risks, including:
• our ability to realize planned strategic and tactical
objectives, including operating efficiencies and
revenue synergies, within a reasonable time period
after closing the transaction;
• our ability to identify, analyze, and correctly assess
the execution, credit, contingency, and other risks in
the acquisition and to price the transaction
appropriately;
• our ability to properly evaluate loss inherent in the
target business’ loan portfolios;
• our ability to integrate the acquired business’
operations, clients, and properties quickly and cost-
effectively;
• our ability to manage cultural assimilation risks
associated with growth through acquisitions, which
can be an often-overlooked and often-critical failure
point in mergers;
• our ability to combine the franchise values of the two
companies without significant loss from re-branding
and other similar changes; and
• our ability to retain core clients and key associates.
A type of strategic acquisition—a so-called “merger of
equals” where the company we nominally acquire has
similar size, operating contribution, or value—presents
unique opportunities but also unique risks. Those special
risks include:
• the potential for elevated and duplicative operating
expenses if we are unable to integrate the two
ITEM 1A. RISK FACTORS
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companies efficiently in a reasonable amount of time;
and
• the potential for a significant increase in the time
horizon that may be needed before substantial
economies of scale can be realized or substantial
revenue synergies can be developed effectively.
The IBKC merger in 2020 presented those risks. In fact, the
completion of systems integration was delayed several
months, resulting in increased integration expense.
Although the proximate reason for the delay was a 2021
hurricane event impacting key markets, the overall length
of the integration period likely would have been
significantly less if we had merely been integrating a small
bank's systems with ours.
Industry Disruption
Through technological innovations and changes in client
habits, the manner in which clients use financial services
continues to change at a rapid pace. We provide a large
number of services remotely (online and mobile), and
physical banking center utilization has been in long-term
decline throughout the industry for many years.
Technology has helped us reduce costs and improve
service, but also has weakened traditional geographic and
relationship ties and has allowed disruptors to enter
traditional banking areas.
Through digital marketing and service platforms, many
banks are making client inroads unrelated to physical
presence. This competitive risk is especially pronounced
from the largest U.S. banks, and from online-only banks,
due in part to the investments they are able to sustain in
their digital platforms.
Companies as disparate as PayPal (an online payment
clearinghouse) and Starbucks (a large chain of cafes)
provide payment and exchange services which compete
directly with banks in ways not possible traditionally.
We seek to meet these competitive challenges through
increased investments in our own digital platforms, and
through strategic equity investments, but there can be no
assurance that these efforts will be successful.
The nature of technology-driven disruption to our
industry is changing, in some cases seeking to displace
traditional financial service providers rather than merely
enhance traditional services or their delivery. A number
of recent technologies have worked with the existing
financial system and traditional banks, such as the
evolution of ATM cards into debit/credit cards and the
evolution of debit/credit cards into smart phones. These
sorts of technologies often have expanded the market for
banking services overall while siphoning a portion of the
revenues from those services away from banks and
disrupting prior methods of delivering those services. But
some recent innovations may tend to replace traditional
banks as financial service providers rather than merely
augment those services.
For example, companies which claim to offer applications
and services based on artificial intelligence compete much
more directly with traditional financial services companies
in areas involving personal advice, including high-margin
services such as financial planning and wealth
management. The low-cost, high-speed nature of these
“robo-advisor” services can be especially attractive to
younger, less-affluent clients and potential clients, as well
as persons interested in “self-service” investment
management. Other industry changes, such as zero-
commission securities trading offered by certain large
firms, may amplify this trend.
Other technologies, services, and systems based wholly or
in part on artificial intelligence and machine learning are
proliferating within our industry and among many of our
commercial clients, resulting in an environment which is
changing rapidly. These technologies are subject to risks
that algorithms and datasets may be flawed or insufficient
or contain biased information, risks that are exacerbated
because models and processes related to artificial
intelligence and machine learning are not always
transparent. Our challenge is to maintain critical stability
and security while also being nimble enough to adapt
quickly to changing circumstances and client demands.
We believe that, over the course of the technology-
driven evolution of our industry which is well underway,
the “winners” will be those institutions which can know
their clients and make those clients feel they are known,
even when many clients increasingly do not visit banking
centers or have face-to-face live interaction. Two keys to
achieving a psychological connection with such clients are
(1) data management and analytics, using artificial
intelligence processes, which allow an institution to
provide a differentiated, personalized experience for the
client at the point of interaction, and (2) seamless
integration of real-time client contact with a human being
through voice, chat, or other means.
A critical factor in successful data analytics, allowing real-
time differentiated interaction with clients, is how
traditionally uncaptured, unstructured, or siloed data is
acquired, managed, and accessed. While many banks are
attempting to address this business need in various ways,
it remains unclear which approaches will be successful in
the long run. In addition, external vendors are developing
processes to provide solutions. A basic challenge for all
these efforts is how to integrate analysis of extremely
disparate forms of data and utilize that analysis in each
client contact in a manner which most clients not only
ITEM 1A. RISK FACTORS
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accept, but value, and which aligns with regulatory and
compliance expectations.
Developing workable proprietary solutions to the data
analytics challenges ahead of competitors requires
substantial investment in information technology
systems and innovation. Even with a substantial IT
budget, we cannot outspend, or even come close to
matching, the largest U.S. banking institutions. Therefore,
like most U.S. banks, our strategy must be focused on
leveraging products and solutions which are within our
means, including those developed by external vendors.
Our goal must be to keep pace with industry
developments with a focus on improving the client’s
differentiated experience with us by recognizing and
responding to client needs.
Technological innovation has tended to reduce barriers to
entry based on cost. Put another way, once someone finds
a new, better method to accomplish a task in our industry,
often others are able to replicate or improve on that
method, sometimes quite rapidly. Key risks for us,
therefore, are whether we will be able: to catch up to
breakthroughs quickly enough to avoid client attrition; to
adopt and enhance breakthroughs frequently enough, and
without significant technical failures, to attract clients
from competitors; and, if we are able to truly innovate, to
press our advantage quickly before competitors adopt it.
To thrive as our industry is disrupted, we will need to
continue to embrace some of the attitudes of a
technology company and shed some of the traditional
attitudes often associated with banking. This has
required, and will continue to require, an evolution in our
corporate culture which, in turn, creates implementation
risk. In this evolutionary process it is critical that we not
lose sight of how our clients experience working with us
and our systems, including those clients who still want
traditionally-delivered services, those who seek and
embrace the latest innovations, and those who mainly
want services to be convenient, personalized, and
understandable.
Just as disruptive business changes driven by new
technologies and new client preferences can adversely
impact us and our entire industry, similar events can
adversely impact our commercial clients. In time, a major
business disruption can cause dominant businesses to fail
and can shrink or even end entire lines of business. An
example of this is the business failure of the Blockbuster
video distribution chain and most other video distribution
stores, and the rise of Netflix and similar services. Many
other examples of this kind of process are ongoing today
in many industries, including publishing, retail sales, news,
and the creation as well as distribution of audio and video
entertainment. To the extent disruptions impact our
clients, we may experience elevated loan losses and loss
of ongoing business which we may not be able to
recapture with new clients.
Operational Risks
Fraud is a major, and increasing, operational risk for us
and all banks. Two traditional areas—deposit fraud (check
forging, check kiting, wire fraud, etc.) and loan fraud—
continue to be major sources of fraud attempts and actual
loss. Fraud directed against clients—generally using
deception to persuade clients to transfer funds—has
emerged as a third large source of fraud loss. The methods
used to perpetrate and combat fraud continue to evolve
as technology changes. In addition to cybersecurity risk
(discussed below), new technologies—including the use of
artificial intelligence—have made it easier for bad actors
to obtain and use client personal information, mimic
communications to or from clients, mimic signatures, and
otherwise create false instructions and documents that
appear genuine.
Our anti-fraud actions are both preventive (anticipating
lines of attack, educating associates and clients, etc.) and
responsive (detecting, halting, and remediating actual
attacks). Our regulators require us to report actual and
suspected fraud promptly, and regulators often advise
banks of new schemes so that the entire industry can
adapt as quickly as possible. However, some level of fraud
loss is unavoidable, and the risk of a major loss cannot be
eliminated.
Our ability to conduct and grow our businesses is
dependent in part upon our ability to create, maintain,
expand, and evolve an appropriate operational and
organizational infrastructure, manage expenses, and
recruit and retain personnel with the ability to manage a
complex business. Operational risk can arise in many
ways, including: errors related to failed or inadequate
physical, operational, information technology, or other
processes; faulty or disabled computer or other
technology systems; fraud, theft, physical security
breaches, electronic data and related security breaches
(see Cybersecurity Risks below), or other criminal conduct
by associates or third parties; and exposure to other
external events. Inadequacies may present themselves in
myriad ways. Actions taken to manage one risk may be
ineffective against others. For example, information
technology systems may be insufficiently redundant to
withstand a fire, incursion, malware, or other major
casualty, and they may be insufficiently adaptable to new
business conditions or opportunities. Efforts to make
systems more robust may make them less adaptable, and
vice-versa. Also, our efforts to control expenses, which is a
significant priority for us, increase our operational
challenges as we strive to maintain client service and
compliance at high quality and low cost.
ITEM 1A. RISK FACTORS
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We expect to make significant investments over the next
several years in operational systems that are unlikely to
result in significant immediate returns. In 2021 we
started to invest significantly in new platforms and
processes to modernize operations, provide a better client
experience, reduce ongoing operating costs or otherwise
improve efficiencies, and support future growth. We
expect significant investments of that sort to grow over
the next several years as we prepare for business growth
and increased regulatory demands. Investments of that
sort are expensive. Although we believe they are
necessary for our future and are appropriate for our
company at this time, the financial returns on these
investments will be highly uncertain and, at best, likely to
occur only over a long time horizon. In addition,
investments of this sort lay the foundation for growth; if
growth does not materialize, many of these investments
may have little practical value.
Failure to build and maintain, or outsource, the
necessary operational infrastructure, failure of that
infrastructure to perform its functions, or failure of our
disaster preparedness plans if primary infrastructure
components suffer damage, can lead to risk of loss of
service to clients, legal actions, and noncompliance with
applicable regulatory requirements. Additional
information concerning operational risks and our
management of them, all of which is incorporated into
this Item 1A by this reference, appears under the caption
Operational Risk Management beginning on page 90 of
our 2024 MD&A (Item 7).
The delivery of financial services to clients and others
increasingly depends upon technologies, systems, and
multi-party infrastructures which are new, creating or
exacerbating several risks discussed elsewhere. Examples
of the risks created or compounded by the widespread
and rapid adoption of relatively untested technologies
include: security incursions; operational malfunctions or
other disruptions; and legal claims of patent or other
intellectual property infringement. A prominent
illustration, the distribution of a faulty update by a major
security software provider in 2024 triggered internet
outages across industries (including in banking and
financial services) and around the world, rendering
websites and mobile applications inaccessible for
extended periods.
Competition for talent is substantial and increasing.
Moreover, revenue retention and growth in some
business lines depends substantially upon top talent. In
recent years the cost to us of hiring and retaining top
revenue-producing talent, especially in specialty areas,
has increased, and that trend is likely to continue. The
primary tools we use to attract and retain talent are:
salaries; commission, incentive, and retention
compensation programs; retirement benefits; change in
control severance benefits; health and other welfare
benefits; and our corporate culture. To the extent we are
unable to use these tools effectively, we face the risk that,
over time, our best talent will leave us and we will be
unable to replace those persons effectively.
Incentives might operate poorly or have unintended
adverse effects. Incentive programs are difficult to design
well, and even if well-designed, often must be updated to
address changes in our business. A poorly designed
incentive program—where goals are too difficult, too
easy, or not well related to desired outcomes—could
provide little useful motivation to key associates, could
increase turnover, and could impact client retention.
Moreover, even where those pitfalls are avoided,
incentive programs may create unintended adverse
consequences. For example, a program focused entirely
on revenue production, without proper controls, may
result in costs growing faster than revenues.
Cybersecurity Risks
An information technology security (cybersecurity)
breach or other similar incident is a major type of
operational risk. A cybersecurity incident can cause
significant damage, and can be difficult to detect even
after it occurs. Among other things, that damage can
occur due to outright theft, loss or extortion of our funds
or our clients’ funds, fraud or identity theft perpetrated on
clients, loss of confidential or proprietary information,
business disruption, or adverse publicity associated with a
breach or incident and its potential effects. Perpetrators
potentially can be associates, clients, third parties, and
certain vendors, all of whom legitimately have access to
some portion of our systems, as well as outsiders with no
legitimate access.
Cybersecurity incidents happen frequently; they are an
unavoidable part of doing business. Often, but not
always, we detect and block the attempt. Often, but not
always, the number of clients impacted is modest and our
loss is minimal or none. However, even with significant
loss prevention and mitigation systems, the risk of a
financially or reputationally significant incursion cannot be
eliminated. Given the high volume of daily transactions in
modern banking, the question is not whether we will
experience a significant and costly incursion, but when.
For that reason, the key goals of our processes are: block
or prevent as many incursions as is practical, and detect
and mitigate rapidly those that get through. The
difference between a minor and a major incursion often
comes down to how quickly it is detected and countered.
Common categories of cybersecurity incidents relevant to
us, as a bank, include: account takeover, client spoofing,
and payment fraud; ransomware and other malware;
client interface attacks (attempts to shut down or slow
down our website or mobile app); and cloud (remote
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server) incursions. Common vulnerabilities include: clients
and associates that fall victim to malicious "phishing"
emails or other communications and inappropriately share
credentials allowing access to accounts or systems; older
software or systems that do not have up-to-date security
and are not sufficiently isolated from other systems; third-
party software vulnerabilities; and third-party systems
vulnerabilities. We believe the bad actors have a range of
motivations, including: illegal profit; politically or
geopolitically motivated disruption; and vandalism. Bad
actors can range from amateurs to criminal organizations
to nation-states.
Cybersecurity risks for banks and other financial
institutions have increased significantly in recent years in
part because of the proliferation of technology-based
products and services and the increased sophistication
and activities of organized crime, hackers, terrorists,
nation-states, nation state-supported actors, activists and
other external parties. This increase is expected to
continue and further intensify. The techniques used by
cyber criminals change frequently, may not be recognized
until launched (or may evade detection for considerable
time), can be initiated from a variety of sources, including
terrorist organizations and hostile foreign governments,
and may see their frequency increased, and effectiveness
enhanced, by the use of artificial intelligence.
Because of the potential for very serious consequences
associated with cybersecurity risks, our electronic systems
and their upgrades need to address internal and external
security concerns to a high degree, and our systems must
comply with applicable banking and other regulations
pertaining to bank safety and client protection. Although
many of our defenses are systemic and highly technical,
others are much older and more basic. For example,
periodically we train all our associates to recognize red
flags associated with fraud, theft, "phishing," and other
electronic crimes. In addition, we educate our clients as
well through regular and episodic security-oriented
communications. We expect our systems and regulatory
requirements will continue to evolve as technology and
criminal techniques also continue to evolve.
Additional information concerning cybersecurity risks and
our management of them, all of which is incorporated into
this Item 1A by this reference, appears under the caption
Cybersecurity Risk Management beginning on page 91 of
our 2024 MD&A (Item 7).
The operational functions we outsource to third parties
may experience similar disruptions that could adversely
impact us and over which we may have limited control
and, in some cases, limited ability to obtain an alternate
vendor quickly. To the extent we rely on third party
vendors to perform or assist operational functions, the
challenge of managing the associated risks may become
more difficult. We manage this risk by assessing the
adequacy of cybersecurity prevention and detection
systems and programs of critical vendors.
The operational functions of business counterparties, or
businesses with which we have no relationship, may
experience disruptions that could adversely impact us
and over which we may have limited or no control.
Although these events cannot be predicted individually,
over time and in the aggregate they happen as surely as
loan losses. For example, when a major U.S. consumer-
oriented firm experiences a data systems incursion
resulting in the theft of credit and debit card information,
online account information, and other data, it impacts
thousands or sometimes millions of people. Frequently,
many of those affected are our clients. Although our
systems are not breached by these third-party incursions,
they can increase fraud impacting accounts at our Bank
and can cause us to take costly steps to avoid significant
theft loss to our Bank and to our clients. Our ability to
recoup our losses may be limited legally or practically in
many situations. Possible points of incursion or disruption
not within our control include retailers, utilities, insurers,
health care service providers, internet service and
electronic mail providers, social media portals, distant-
server (“cloud”) service providers, electronic data security
providers, telecommunications companies, and smart
phone manufacturers.
Risks from Economic Downturns & Changes
Generally, in an economic downturn, our realized credit
losses increase, demand for our products and services
declines, and the credit quality of our loan portfolio
declines. Delinquencies and realized credit losses
generally increase during economic downturns due to an
increase in liquidity problems for clients and downward
pressure on collateral values. Likewise, demand for loans
(at a given level of creditworthiness), deposit and other
products, and financial services may decline during an
economic downturn, and may be adversely affected by
other national, regional, or local economic factors that
impact demand for loans and other financial products and
services. Such factors include, for example, changes in
employment rates, interest rates, real estate prices, or
expectations concerning rates or prices and changes in
government policy or the regulatory environment.
Accordingly, an economic downturn or other adverse
economic change (local, regional, national, or global) can
hurt our financial performance in the form of higher loan
losses, lower loan production levels, lower deposit levels,
compression of our net interest margin, and lower fees
from transactions and services. Those effects can continue
for many years after the downturn technically ends.
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Because all banks are sensitive to the risk of downturns,
the stock prices of all banks typically decline, sometimes
substantially, if the market believes that a downturn has
become more likely or is imminent. This effect can and
often does occur indiscriminately, initially without much
regard to different risk postures of different banks.
Risks Associated with Monetary Events
In recent years, the Federal Reserve has implemented,
reversed, and reversed again significant economic
strategies that have impacted interest rates, inflation,
asset values, and the shape of the yield curve. These
strategies have had, and will continue to have, a
significant impact on our business and on many of our
clients. To illustrate: in response to the recession in
2008-09 and the following uneven recovery, the Federal
Reserve implemented a series of domestic monetary
initiatives designed to lower rates and make credit easier
to obtain. The Federal Reserve changed course in 2015,
raising rates several times through 2018. The last raise in
2018 was accompanied by a substantial and broad stock
market decline. In 2019, the Federal Reserve began to
lower rates. In 2020, in response to economic disruption
associated with the COVID-19 pandemic, the Federal
Reserve quickly reduced short-term rates to extremely
low levels and acted to influence the markets to reduce
long-term rates as well. During 2021, the Federal Reserve
significantly reduced its "easing" actions that held down
long-term rates. During 2022, the Federal Reserve
switched to a tightening policy. It raised short term rates
significantly and rapidly over most of the year. Those
actions triggered a significant decline in the values of most
categories of U.S. stocks and bonds; significantly raised
recessionary expectations for the U.S.; and inverted the
yield curve in the U.S. Short-term rate rises in 2023 were
few and modest and ended mid-year. Long-term rates
rose during 2023 but slowly and unevenly. The 2022 yield
curve inversion continued until September 2024, when
Federal Reserve began reducing short-term rates and yield
curve flattened. Although the yield curve has returned to
a gradual upward slope in early 2025, there can be no
assurance that this trend will continue or that the yield
curve's upward slope will increase.
Additional information concerning monetary policy risks is
presented: under the caption Cyclicality within the Other
Business Information section of Item 1, which starts on
page 19; within the Effect of Governmental Policies and
Proposals section of Item 1 beginning on page 30; in
Interest Rate and Yield Curve Risks beginning on page 46;
and under the caption Inflation, Recession, and Federal
Reserve Policy within the Market Uncertainties and
Prospective Trends section of our 2024 MD&A (Item 7),
beginning on page 97.
Federal Reserve strategies can, and often are intended
to, affect the domestic money supply, inflation, interest
rates, and the shape of the yield curve. Effects on the
yield curve often are most pronounced at the short end of
the curve, which is of particular importance to us and
other banks. Among other things, easing strategies are
intended to lower interest rates, encourage borrowing,
expand the money supply, and stimulate economic
activity, while tightening strategies are intended to
increase interest rates, discourage borrowing, tighten the
money supply, and restrain economic activity. However,
as noted above, in 2022 short term rates rose faster than
long term rates to the point that the yield curve inverted
for much of the final two quarters of the year; that
inversion continued through September 2024, when the
Federal Reserve began reducing interest rates and the
yield curve began to return to its more typical upward
slope.
Many external factors may interfere with the effects of
the Federal Reserve's plans or cause them to be changed,
perhaps quickly. Such factors include significant economic
trends or events as well as significant international
monetary policies and events. Such strategies also can
affect the U.S. and world-wide financial systems in ways
that may be difficult to predict. Risks associated with
interest rates and the yield curve are discussed in this
Item 1A under the caption Interest Rate and Yield Curve
Risks beginning on page 46.
We may be adversely affected by economic and political
situations outside the U.S. The U.S. economy, and the
businesses of many of our clients, are linked significantly
to economic and market conditions outside the U.S.,
especially in North and Central America, Europe, and Asia,
and increasingly in South America. Although our direct
exposure to non-US-dollar-denominated assets or non-US
sovereign debt is insignificant, in the future major adverse
events outside the U.S. could have a substantial indirect
adverse impact upon us. Key potential events which could
have such an impact include (1) sovereign debt default
(default by one or more governments in their borrowings),
(2) bank and/or corporate debt default, (3) market and
other liquidity disruptions, and, if stresses become
especially severe, (4) the collapse of governments,
alliances, or currencies, and (5) military conflicts. The
methods by which such events could adversely affect us
are highly varied but broadly include the following: an
increase in our cost of borrowed funds or, in a worst case,
the unavailability of borrowed funds through conventional
markets; impacts upon our hedging and other
counterparties; impacts upon our clients; impacts upon
the U.S. economy, especially in the areas of employment
rates, real estate values, interest rates, and inflation rates;
and impacts upon us from substantial and unpredictable
shifts in our regulatory environment from possible
political responses to major financial disruptions.
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Risks Related to Businesses We May Exit
We may be unable to successfully implement a
disposition or wind-down of businesses or units which no
longer fit our strategic plans. We consider possible
closures and divestitures as we continue to adapt to a
changing business and regulatory environment. Actions of
this sort typically are elevated in the first few years after a
significant merger. For example, in 2021 we closed or
consolidated several dozen banking locations in the wake
of the 2020 IBKC merger, and we divested our title
insurance business in 2022. Other dispositions have
occurred in recent years and likely will continue in the
future. Key risks associated with exiting a business include:
• our ability to price a sale transaction appropriately
and otherwise negotiate acceptable terms;
• our ability to identify and implement key client,
personnel, technology systems, and other transition
actions to avoid or minimize negative effects on
retained businesses;
• our ability to mitigate the loss of any pre-tax income
that the exited business produced;
• our ability to assess and manage any loss of synergies
that the exited business had with our retained
businesses; and
• our ability to manage capital, liquidity, and other
challenges that may arise if an exit results in
significant legacy cash expenditures or financial loss.
Reputation Risks
Our ability to conduct and grow our businesses, and to
obtain and retain clients, is highly dependent upon
external perceptions of our business practices and
financial stability. Our reputation is, therefore, a key asset
for us. Our reputation is affected principally by our
business practices and how those practices are perceived
and understood by others. Adverse perceptions regarding
the practices of our competitors, or our industry as a
whole, also may adversely impact our reputation. In
addition, negative perceptions relating to parties with
whom we have important relationships may adversely
impact our reputation. Senior management oversees
processes for reputation risk monitoring, assessment, and
management.
Damage to our reputation could hinder our ability to
access the capital markets or otherwise impact our
liquidity, could hamper our ability to attract new clients
and retain existing ones, could impact the market value of
our stock, could create or aggravate regulatory difficulties,
and could undermine our ability to attract and retain
talented associates, among other things. Adverse impacts
on our reputation, or the reputation of our industry, also
may result in greater regulatory and/or legislative
scrutiny, which may lead to laws or regulations that
change or constrain our business or operations. Events
that result in damage to our reputation also may increase
our litigation risk.
Political and social fragmentation in the U.S., combined
with access to social media platforms, can increase
reputation risk in ways that might not be easily avoided
by traditional means. The predominant culture within the
banking industry remains traditional: in order to preserve
their business reputations, banks generally tend to avoid
direct, public involvement in political or social
controversy. Increasingly, though, certain groups—having
highly specific political or social agendas and with the
ability to communicate their views effectively using social
media platforms—have made it more difficult to maintain
a traditional approach. While the potential for interest
group pressure has always existed, special interest groups
today, using social media platforms, are more able and
willing to publicize their criticisms. Those criticisms, in
turn, ultimately may be acted upon by legislators or
regulators.
Credit Risks
We face the risk that our clients may not repay their
loans or make payments on their leases and that the
realizable value of collateral and other credit support
may be insufficient to avoid a charge-off. We also face
risks that other counterparties, in a wide range of
situations, may fail to honor their obligations to pay us. In
our business some level of credit charge-offs is
unavoidable and overall levels of credit charge-offs can
vary substantially over time. For example, net charge-offs
were $13 million in 2017 and remained historically very
low through 2019. In 2020, net charge-offs unexpectedly
rose to $120 million, driven strongly by the COVID-induced
recession starting in March. Net charge-offs in 2021 fell
sharply to $2 million, a very low level historically. We
believe this favorable outcome was substantially affected
by our client selection and underwriting processes, along
with our willingness to work with borrowers throughout
the pandemic. Net charge-offs rose in 2022 to a more
normal, but still low, $59 million. In 2023 they rose again
to $170 million, driven partly by continuing normalization
but also, significantly, by a single commercial credit loss,
before falling back to $112 million in 2024. It is extremely
ITEM 1A. RISK FACTORS
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difficult for banks, and for investors, to know when an
upturn or downturn in credit loss is merely idiosyncratic or
instead portends a major credit cycle change.
Our ability to manage credit risks depends primarily upon
our ability to assess the creditworthiness of loan and lease
clients and other counterparties and the value of any
collateral, including real estate, among other things. We
further manage credit risk by diversifying our loan and
lease portfolio, by managing its granularity, by following
per-relationship lending limits, and by recording and
managing an allowance for loan and lease losses based on
the factors mentioned above and in accordance with
applicable accounting rules. We further manage other
counterparty credit risk in a variety of ways, some of
which are discussed in other parts of this Item 1A and all
of which have as a primary goal the avoidance of having
too much risk concentrated with any single counterparty.
We record loan and lease charge-offs in accordance with
accounting and regulatory guidelines and rules. As
indicated in this Item 1A under the caption Accounting
Risks beginning on page 49, these guidelines and rules
could change and cause provision expense or charge-offs
to be more volatile, or to be recognized on an accelerated
basis, for reasons not always related to the underlying
performance of our portfolio. In fact, starting in 2020,
such an accounting change was made and, when the
COVID recession occurred starting in March, provision for
credit losses significantly increased. Moreover, the SEC or
PCAOB could take accounting positions applicable to our
holding company that may be inconsistent with those
taken by the Federal Reserve or other banking regulators.
Our credit and other loan-management models could be
wrong, or could become wrong if external factors
change. A significant challenge for us is to keep the credit
and other models and approaches we use to originate and
manage loans updated to take into account changes in the
competitive environment, in real estate prices and other
collateral values, in the economy, and in the regulatory
environment, among other things, based on our
experience originating loans and servicing loan portfolios.
Changes in modeling could have significant impacts upon
our reported financial results and condition. In addition,
we use those models and approaches to manage our loan
portfolios and lending businesses. To the extent our
models and approaches are not consistent with underlying
real-world conditions, our management decisions could be
misguided or otherwise affected with substantial adverse
consequences to us.
We must balance the desire for higher income or yield
with taking on greater risk. This challenge applies not only
to credit risk in lending activities but also to default and
interest rate risks regarding investments. Even if less acute
today because short term rates are higher, that traditional
risk-versus-yield challenge remains in place.
As interest rates rise, default risk generally also rises. As
borrowers’ obligations to pay interest increases, financial
weaknesses generally become more evident. Initially this
results in lower consumer credit scores and deteriorating
commercial loan grading, and later results in higher
default rates. Although interest rates began to decline in
last half of 2024, the full effects of the 2022-23 rate hikes
may not yet be fully reflected in loan default rates. In
addition, there be no assurance that the recent decline in
interest rates will persist.
The composition of our loans inherently increases our
sensitivity to certain credit risks. At December 31, 2024,
approximately 53% of total loans and leases consisted of
the commercial, financial, and industrial (C&I) portfolio,
approximately 23% of total loans and leases consisted of
the commercial real estate (CRE) portfolio, and
approximately 23% consisted of the consumer real estate
portfolio.
Two large components of the C&I portfolio at year end
were loans to finance and insurance companies and loans
to mortgage companies. Taken together, approximately
21% of the C&I portfolio was sensitive to impacts on the
financial services industry. As discussed elsewhere in this
Item 1A with respect to our company, the financial
services industry is more sensitive to interest rate and
yield curve changes, monetary policy, regulatory policy,
changes in real estate and other asset values, and changes
in general economic conditions, than many other
industries. Negative impacts on the industry could
dampen new lending in these lines of business and could
create credit impacts for the loans in our portfolio.
The stability and value of the CRE portfolio depends
substantially upon the financial health of the underlying
real estate assets and upon commercial real estate market
values generally. Many CRE assets are rental properties,
and for those occupancy and vacancy rates are critical
factors along with business trends that impact tenants.
Most of the remainder are owner-occupied, significantly
dependent on the financial health of the borrower. Part of
our rental CRE consists of traditional office space. The
COVID pandemic disrupted traditional office space
demand and utilization. It is highly uncertain what
demand and utilization will be once that disruption fully
ends.
The consumer real estate portfolio contains a number of
concentrations which affect credit risk assessment of the
portfolio.
• Product concentration. The consumer real estate
portfolio consists primarily of consumer installment
loans, and much of the remainder consists of home
equity lines of credit.
• Collateral concentration. This entire category is
secured by residential real estate. Approximately 89%
of the consumer real estate portfolio consists of loans
secured on a first-lien basis.
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• Geographic concentration. At year end, about 63% of
the consumer real estate portfolio related to clients in
three states: Florida, Tennessee, and Texas.
The consumer real estate category is highly sensitive to
economic impacts on consumer clients and on residential
real estate values. Job loss or downward job migration, as
well as significant life events such as divorce, death, or
disability, can significantly impact credit evaluations of the
portfolio. Also, regulatory changes, discussed above and
elsewhere in this Item 1A, are more likely to affect the
consumer category and our accounting estimates of credit
loss than other loan types.
Volatility in the oil and gas industry can impact us. At
year-end, approximately 2% of our total loans were
directly related to the oil and gas industry. In addition to
general credit and other risks mentioned elsewhere in this
Item 1A, these businesses and their related assets are
sensitive to a number of factors specific to that industry.
Key among those is global demand for energy and other
products from oil and gas in relation to supply. The
shifting balance between demand and supply is expressed
most simply in prices. Significant oil-price volatility, such
as that experienced in 2020-22, can and often does impact
our overall business in this industry by increasing
provisioning and charge-offs, and by reducing demand for
loans. Another set of risks specific to that industry relate
to environmental concerns, including the risks of
increased regulation or other governmental intervention,
and the risks of adverse changes in consumption habits or
public perceptions generally.
Additional information concerning credit risks and our
management of them is set forth under the caption Asset
Quality beginning on page 70 of our 2024 MD&A (Item 7).
Service Risks
We provide a wide range of services to clients, and the
provision of these services may create claims against us
that we provided them in a manner that harmed the
client or a third party, or was not compliant with
applicable laws or rules. Our services include lending,
loan servicing, fiduciary, custodial, depositary, funds
management, insurance, and advisory services, among
others. We manage these risks primarily through training
programs, compliance programs, and supervision
processes. Additional information concerning these risks
and our management of them, all of which is incorporated
into this Item 1A by this reference, appears under the
captions Operational Risk Management and Compliance
Risk Management, beginning on page 90 of our 2024
MD&A (Item 7).
Regulatory, Legislative, & Legal Risks
The regulatory environment continues to be challenging.
We operate in a heavily regulated industry. Our regulatory
burdens, including both operating restrictions and ongoing
compliance costs, are substantial.
We are subject to many banking, deposit, insurance,
securities brokerage and underwriting, investment
management, and consumer lending regulations in
addition to the rules applicable to all companies publicly
traded in the U.S. securities markets and, in particular, on
the New York Stock Exchange. Failure to comply with
applicable regulations could result in financial, structural,
and operational penalties. In addition, efforts to comply
with applicable regulations may increase our costs and/or
limit our ability to pursue certain business opportunities.
See Supervision and Regulation within Item 1 of this
report, beginning on page 21, for additional information
concerning financial industry regulations. Federal and
state regulations significantly limit the types of activities in
which we, as a financial institution, may engage. In
addition, we are subject to a wide array of other
regulations that govern other aspects of how we conduct
our business, such as in the areas of employment and
intellectual property. In addition, changes in federal and
state laws and regulations are always possible. New laws
and regulations could further limit the amount of interest
or fees we can charge, could further restrict our ability to
collect loans or realize on collateral, could affect the terms
or profitability of the products and services we offer, and
could materially affect us in other ways.
The following paragraphs highlight certain specific
important risk areas related to regulatory matters
currently. These paragraphs do not describe these risks
exhaustively, and they do not describe all such risks that
we face currently. Moreover, the importance of specific
risks will grow or diminish as circumstances change.
We and our Bank both are required to maintain certain
regulatory capital levels and ratios. U.S. capital standards
are discussed in Item 1 of this report, in tabular and
narrative form, under the caption Capital Adequacy within
the Supervision & Regulation section of Item 1 which
starts on page 21. Pressures to maintain appropriate
capital levels and address business needs in a changing
economy may lead to actions that could be dilutive or
otherwise adverse to our shareholders. Such actions could
include: reduction or elimination of dividends; the
issuance of common or preferred stock, or securities
convertible into stock; or the issuance of any class of stock
ITEM 1A. RISK FACTORS
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having rights that are adverse to those of the holders of
our existing classes of common or preferred stock.
Additional information concerning these risks and our
management of them, all of which is incorporated into
this Item 1A by this reference, appears: under the captions
Capital Adequacy and Prompt Corrective Action (PCA)
within the Supervision & Regulation section of Item 1
which starts on page 21; under the captions Capital,
Capital Risk Management and Adequacy, and Market
Uncertainties and Prospective Trends beginning on pages
82, 90, and 97, respectively, of our 2024 MD&A (Item);
and under the caption Regulatory Capital in Note 12—
Regulatory Capital and Restrictions, beginning on page
157 of our 2024 Financial Statements (Item 8).
Regulation of banks is tiered based on asset size; we are
close to reaching $100 billion, which is the next tier
above us. Regulatory restrictions and costs tend to
increase based on asset tier. For us, significant impacts of
crossing the $100 billion threshold include becoming
subject to Category IV enhanced prudential standards and
becoming at-risk for being subject to a liquidity coverage
ratio requirement. Compliance costs associated with those
and other over-$100-billion regulations are expected to be
significant. New regulations proposed in 2023 would
substantially increase capital and other requirements,
various restrictions, and costs, but whether those
regulations will be adopted, or their final form if adopted,
remains uncertain. With or without new regulations, we
expect that a significant portion of those compliance costs
will need to be borne as we approach the $100 billion tier,
rather than commence abruptly when we enter the tier.
Indeed, we are already incurring a portion of these costs
as we proceed with upgrading compliance systems,
processes, and staffing before these steps are required.
Additional information concerning these risks, which is
incorporated into this Item 1A by this reference, appears
in: the Supervision & Regulation section of Item 1 which
starts on page 21; and under the caption Other Regulatory
Proposals within the section captioned Market
Uncertainties and Prospective Trends beginning on page
97 of our 2024 MD&A (Item 7).
Legal disputes are an unavoidable part of business, and
the outcome of pending or threatened litigation cannot
be predicted with any certainty. We face the risk of
litigation from clients, associates, vendors, contractual
parties, and other persons, either singly or in class actions,
and from federal or state regulators. Matters of that sort
are pending currently. It is unlikely we will ever experience
a time when no litigation matter is outstanding. We
manage litigation risks through internal controls,
personnel training, insurance, litigation management, our
compliance and ethics processes, and other means.
However, the commencement, outcome, and magnitude
of litigation cannot be predicted or controlled with any
certainty.
Typically, we are unable to estimate our loss exposure
from legal claims until relatively late in the litigation
process, which can make our financial recognition of loss
from litigation unpredictable and highly uneven from
one period to the next. Financial accounting guidance
requires that litigation loss be both estimable and
probable before a reserve may be established (recorded
as a liability on our balance sheet). Under that guidance,
reserves typically are not established for most litigation
matters until after preliminary motions to dismiss or to
narrow the case are resolved, after discovery is
substantially in process, and (in many cases) after
preliminary overtures regarding settlement have
occurred. Potentially significant cases often are pending
for years before any loss is recognized and a reserve is
established. Moreover, many cases experience relatively
little progress toward resolution for a long period followed
by a brief period of rapid development. Lastly, although
most cases are resolved with little or no loss to us, for the
others our loss typically is recognized either all at once
(near the time of resolution) or very unevenly over the life
of the case.
Additional information concerning litigation risks and our
management of them, all of which is incorporated into
this Item 1A by this reference, appears: under the caption
Pre-2009 Mortgage Business Risks beginning on page 48;
under the captions Repurchase Obligations, Market
Uncertainties and Prospective Trends, and Contingent
Liabilities beginning on pages 96, 97, and 102,
respectively, of our 2024 MD&A (Item 7); and under the
caption Contingencies in Note 16—Contingencies and
Other Disclosures, beginning on page 165 of our 2024
Financial Statements (Item 8).
Political volatility within the federal government, both at
the regulatory and Congressional levels, creates
significant potential for major and abrupt shifts in federal
policy regarding bank regulation, taxes, and the
economy, any of which could have significant impacts on
our business and financial performance, as well as that of
our commercial clients. Moreover, political conflict within
and among branches of government, and within and
among government agencies, can rise to a level where
day-to-day functions could be interrupted or impaired,
including as a result of government shutdowns.
Data privacy is becoming a major political concern. The
laws governing it are new and are likely to evolve and
expand. Many non-regulated, non-banking companies
have gathered large amounts of personal details about
millions of people and have the ability to analyze that data
and act on that analysis very quickly. This situation has
prompted governmental responses. Two prominent
responses are the European Union General Data
Protection Regulation and the California Consumer Privacy
Act. Neither is a banking industry regulation, but both
apply to banks in relation to certain clients. Further
general regulation to protect data privacy appears likely.
ITEM 1A. RISK FACTORS
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Banks in the U.S. already operate under privacy-protection
laws and rules, but banking industry regulations in this
area might be enlarged in response to this concern.
Public expectations concerning corporate controls on
emissions of carbon dioxide, methane, and other
greenhouse gases could increase our operating costs in
the future without a corresponding increase in revenue,
could curtail some aspects of our business, or both. At
present, federal environmental regulations do not require
us to monitor the direct or indirect greenhouse gas
emissions associated with building, operating, or
maintaining our physical facilities, nor are we taxed or
fined in relation to those emissions, because such gases
generally are not considered to be pollutants under U.S.
federal law. Changing expectations could pressure us to
physically measure, monitor, and curtail direct emissions
and to estimate indirect emissions or impacts, and
eventually could result in legal requirements to take those
actions or to pay for measured or estimated emissions.
For example, we engage a third party to estimate our
Scope 1 and 2 location-based emissions, even though not
legally required. Whether or not legally required, any such
actions that we take increase our operating costs. In
addition, such expectations could pressure us to re-
evaluate business relationships with certain clients, or
groups of clients, that have suboptimal reputations for
emissions.
Recent state laws and federal disclosure rules concerning
greenhouse gas (GHG) emissions could impose significant
additional costs upon us. In 2023 the state of California
enacted two laws which, taken together, will require most
larger companies doing business in California to report
annually their greenhouse gas ("GHG") emissions, with an
external assurance requirement, and to report biennially
their climate-related financial risks and risk-mitigation
measures. The California laws include multi-year phase in
periods and encompass Scope 1, Scope 2, and Scope 3
GHG emissions. As currently enacted, the laws require
implementing regulations to be adopted by July 1, 2025
and reporting for Scopes 1 and 2 to begin in 2026 for the
2025 fiscal year. The California laws, especially the
application of those laws to companies outside of
California, have been challenged in court. These
challenges could take many years to resolve.
In March 2024, the U.S. Securities and Exchange
Commission ("SEC") adopted final rules, "The
Enhancement and Standardization of Climate-Related
Disclosures for Investors" (the "SEC Climate Disclosures
Rules"). These rules would require all U.S. companies with
publicly-traded securities to report annually their Scope 1
and 2 GHG emissions and related risk-management
processes, and would include a related financial statement
and audit requirement, among other things. There is
considerable uncertainty as to whether the SEC's Climate
Disclosure Rules will be implemented as adopted, both
because the SEC has suspended effectiveness of those
rules while legal challenges are pending and because shifts
in executive and legislative branches of government could
lead the SEC to withdraw or significantly alter those rules.
Direct compliance costs related to these state and federal
requirements, should they become effective, will include
creating systems to measure or estimate and capture
relevant data, staffing, and engagement of vendors,
including a firm to provide required assurances
(somewhat analogous to a financial statement auditor). In
addition, if we are required by California law to support
Scope 3 reporting by obtaining GHG-related information
from customers, effectively we would be required to
impose costs and/or inconveniences on our customers.
Other banks in our markets, particularly those that are
both private and not doing business in California, could
provide financial services without those requirements,
putting us at a competitive disadvantage.
Additional information concerning these risks, which is
incorporated into this Item 1A by this reference, appears
under the caption Greenhouse Gas (GHG) Reporting
Regimes within the section captioned Market
Uncertainties and Prospective Trends beginning on page
97 of our 2024 MD&A (Item 7).
General regulation of greenhouse gas emissions, carbon
taxation schemes, government subsidies for "green"
industries over carbon-intensive ones, and other such
political/governmental actions could substantially and
directly impact us or our clients. Even if we are not
directly impacted in any significant manner by such
actions, impacts on clients could have a significant impact
on us.
Risks of Expense Control
Our ability to successfully manage expenses is important
to our long-term success, but in part is subject to risks
beyond our control. Many factors can influence the
amount of our expenses, as well as how quickly they grow.
As our businesses change—whether by acquisition,
expansion, or contraction—additional expenses can arise
from asset purchases, structural reorganization, evolving
business strategies, and changing regulations, among
other things.
We manage controllable expenses and risk through a
variety of means, including selectively outsourcing or
multi-sourcing various functions and procurement
coordination and processes. In recent years we have
actively sought to make strategic businesses more
efficient primarily by investing in technology, re-thinking
and right-sizing our physical facilities, and re-thinking and
right-sizing our workforce and incentive programs. These
efforts usually entail additional near-term expenses in the
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form of technology purchases and implementation, facility
closure or renovation costs, and severance costs, while
expected benefits typically are realized with some
uncertainty in the future.
We have also focused on the economic profit generated
by our business activities and prospects. Economic profit
analysis attempts to relate ordinary profit to the capital
employed to create that profit with the goal of achieving
higher risk-adjusted (more efficient) returns on capital
employed overall. Activities with higher capital usage bear
a greater burden in economic profit analysis. The process
is intended to allow us to more efficiently manage
investment and utilization of resources. Economic profit
analysis involves judgment regarding capital allocation and
risk. Errors in those judgments could result in less efficient
allocations of resources and could impact long-term
profitability.
Despite our efforts, our costs could rise due to adverse
structural changes, market shifts, or inflationary
pressures. For example: in 2021 and 2022, compensation
costs rose markedly due to high-demand/low-supply
circumstances beyond our control.
Regulatory compliance expense will increase
substantially when we reach $100 billion in assets, which
is the next regulatory tier above us now. Moreover, we
expect such costs to increase significantly as we
approach that size. Additional information concerning
these expenses appears in Regulatory, Legislative, and
Legal Risks within this Item 1A beginning on page 40.
Geographic Risks
We are subject to risks of operating in various
jurisdictions. To a significant degree our banking business
is exposed to economic, regulatory, natural disaster, and
other risks that primarily impact the southeastern and
south-central U.S. states where we do most of our
traditional lending and deposit taking business. If those
regions of the U.S. were to experience adversity not
shared by other parts of the country, we would be likely to
experience adversity to a degree not shared by those
competitors which have a broader or different regional
footprint. Examples of these kinds of risks include:
earthquakes in Memphis; hurricanes in Florida, Louisiana,
the Carolina coasts, the Texas coast, and other parts of
our geographic footprint, including the inland areas of
Georgia and North Carolina impacted by Hurricane
Helene; a major change in national health insurance laws
impacting our healthcare-industry clients in middle
Tennessee; and automotive industry plant closures.
Significant cost increases and uncertainties impacting
clients and communities in our coastal markets may
jeopardize the substantial growth trends of those
markets. A significant part of our growth prospects are
concentrated in the major gulf coast markets and several
markets on the southern Atlantic seacoast of the U.S.
Many of our fastest growing markets, including most
significantly those in Florida, can be impacted significantly
by hurricanes and other severe coastal weather events. As
those markets grow, our economic commitment to them
grows, as does our financial exposure to those events.
In 2023 and 2024 it has been widely reported that the
economic costs of hurricane events in the U.S. gulf and
southern Atlantic coastal areas have been rising
significantly. We believe that rising costs are directly
related to growth in those areas.
For example, much of the growth in Florida has been
along the coasts moving out from older cities. A gulf coast
hurricane 50 or 60 years ago had a fair chance of making
landfall in a relatively unpopulated area. Now, the chances
of directly hitting a population center are much higher,
the average population in that center is much higher, and
the average value per building is much higher.
The reported significant increase in casualty risks and
costs is being reflected in property insurance practices
which currently are in significant flux. The insurance
industry is being forced to revise its risk assessment and
premium pricing practices in coastal areas as loss
experience has deviated from earlier predictions,
sometimes badly. In Florida, for example, some smaller
carriers have failed, some larger carriers have left markets,
and remaining carriers have significantly increased the
premiums of hurricane-related insurance, narrowed
coverage, or both.
Coastal states such as Florida and Louisiana have created
last-resort insurance pools for residents who cannot
obtain or afford private property insurance. However, as
the costs borne by those pools increase, either the
premiums will have to rise or general taxation will have to
cover the difference. In addition, those programs
generally do not help business clients.
State and local building and water-control codes are being
revised, but often unevenly and often not retroactive to
pre-existing structures and developments. The current
transition period could be lengthy.
The availability, reliability, and cost of adequate property
insurance is a significant concern for us as well as our
clients in affected markets. Instability in property
insurance has made, and will continue to make, our
business decisions more difficult. That instability increases
our risks of loan loss and business downturn.
More fundamentally, elevated insurance and casualty
costs blunt a key factor driving growth in many of these
high-growth markets: lower costs of living. If market
growth slows, our business will be impacted.
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Additional information concerning these risks, which is
incorporated into this Item 1A by this reference, appears
under the caption Coastal Market Growth and Rising Costs
within the section captioned Market Uncertainties and
Prospective Trends beginning on page 97 of our 2024
MD&A (Item 7).
We have international assets, mainly in the form of loans
and letters of credit. Holding non-U.S. assets creates a
number of risks: the risk that taxes, fees, prohibitions, and
other barriers and constraints may be created or
increased by the U.S. or other countries that would impact
our holdings; the risk that currency exchange rates could
move unfavorably so as to diminish the U.S. dollar value of
assets, or to enlarge the U.S. dollar value of liabilities; and
the risk that legal recourse against foreign counterparties
may be limited in unexpected ways. Our ability to manage
those and other risks depends upon a number of factors,
including: our ability to recognize and anticipate
differences in legal, cultural, and other expectations
applicable to clients, regulators, vendors, and other
business partners and counterparties; and our ability to
recognize and manage any exchange rate risks to which
we are exposed.
Insurance
Our property and casualty insurance may not cover, or
may be inadequate to fully cover, the risks that we face,
and we may be adversely affected by a default by
insurers. We use insurance to manage a number of risks,
including damage or destruction of property as well as
legal and other liability. Not all such risks are insured, in
any given insured situation our insurance may be
inadequate to cover all loss, and many risks we face are
uninsurable. For those risks that are insured, we also face
the risks that the insurer may default on its obligations or
that the insurer may refuse to honor them. We treat the
risk of default as a type of credit risk, which we manage by
reviewing the insurers that we use and by striving to use
more than one insurer when practical. The risk of refusal,
whether due to honest disagreement or bad faith, is
inherent in any contractual situation.
A portion of our consumer loan portfolio involves
mortgage default insurance. If a default insurer were to
experience a significant credit downgrade or were to
become insolvent, that could adversely affect the carrying
value of loans insured by that company, which could result
in an immediate increase in our loan loss provision or
write-down of the carrying value of those loans on our
balance sheet and, in either case, a corresponding impact
on our financial results. If many default insurers were to
experience downgrades or insolvency at the same time,
the risk of a financial impact would be amplified.
We own certain bank-owned life insurance policies as
assets on our balance sheet. Some of those policies are
“general account” and others are “separate account.” The
general account policies are subject to the risk that the
carrier might experience a significant downgrade or
become insolvent. The separate account policies are less
susceptible to carrier risk, but do carry a higher risk of
value fluctuations in securities which underlie those
policies. Both risks are managed through periodic reviews
of the carriers and the underlying security values.
However, particularly for the general account policies, our
ability to liquidate a policy in anticipation of an adverse
carrier event is significantly limited by applicable
insurance contracts and regulations as well as by a
substantial tax penalty which could be levied upon early
policy termination.
When we self-insure certain exposures, our estimates of
future expenditures may be inadequate for the actual
expenditures that occur. For example, we self-insure our
associate health-insurance benefit program. We estimate
future expenditures and establish accruals (reserves)
based on the estimates. If actual expenditures were to
exceed our estimates in a future period, our future
expenses could be adversely and unexpectedly increased.
Liquidity & Funding Risks
Liquidity is essential to our business model and a lack of
liquidity, or an increase in the cost of liquidity, may
materially and adversely affect our businesses, results of
operations, financial condition, and cash flows. In
general, the costs of our funding directly impact our costs
of doing business and, therefore, can positively or
negatively affect our financial results. Our funding
requirements in 2024 were met principally by deposits, by
financing from other financial institutions, and by funds
obtained from the capital markets.
Deposits traditionally have provided our most affordable
funds and deposits by far are the largest portion of our
funding. However, deposit trends can shift with
economic conditions and with public perception of risk in
the banking industry or of risk in our Bank in particular.
That shift can be sudden and extreme. If public
confidence fails, deposit levels in our Bank could fall,
perhaps fairly quickly if a tipping point is reached, as
depositors seek safety and are able to move their funds
rapidly. In the mildest version of this scenario, we could be
ITEM 1A. RISK FACTORS
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forced to raise interest we pay on our deposits, raising
costs appreciably. In a severe case, deposit flight could
render the Bank insolvent.
In the first half of 2023, actual events resulted in many of
these impacts. Three large U.S. regional banks failed,
largely as a result of massive deposit run-off. Along with
most other regional banks, we experienced significant but
much more modest levels of run-off, which we
successfully countered with a significant deposit
campaign. We believe significant portions of the outgoing
deposits transferred either to a few of the very largest
U.S. banks or to money market funds which, though not
FDIC insured, are supported by U.S. Treasury debt.
In the aftermath of the 2023 bank failures, the following
factors appear to have been key to institutional risk:
deposits not insured by FDIC insurance were much more
likely to depart rapidly when risk perceptions changed
suddenly; deposit clients who were not traditional clients
with primary banking relationships were much more likely
to depart rapidly; and deposits concentrated in fewer,
high-balance accounts (with FDIC insurance coverage on
only a small portion of the balances) were much more
likely to depart rapidly than deposits spread among many
more-typical clients and accounts. All but the very largest
banks, including our Bank, faced all three of these factors
to an extent. Banks with higher-than-usual levels of one or
more of these factors tended to be more strongly
impacted by the banking crisis events in the first half of
2023.
Deposit levels may be affected, fairly quickly, by changes
in monetary policy. The Federal Reserve began reducing
short-term rates in the last half of 2024 based on
economic events during the year, including reduced
inflationary pressures, employment data, and overall
economic activity. Whether, and to what extent, economic
conditions will support continued short-term rate
reductions in 2025 remains uncertain. Additional
information concerning monetary policy changes appears
under the caption Risks Associated with Monetary Events
beginning on page 37 within this Item 1A, and under the
caption Inflation, Recession, and Federal Reserve Policy
within the Market Uncertainties and Prospective Trends
section of 2024 MD&A (Item 7), which begins on page 97.
Loss of deposits or a change in deposit mix could increase
our funding costs. Deposits generally are a low cost and
stable source of funding. We compete with banks and
other financial institutions for deposits and as a result, we
could lose deposits in the future, clients may shift their
deposits into high cost products, or we may need to raise
interest rates to avoid deposit attrition. Funding costs
may also increase if deposits lost are replaced with
wholesale funding. Higher funding costs reduce our net
interest margin, net interest income, and net income.
The market among banks for deposits may be impacted
by regulatory funding and liquidity requirements.
Regulatory rules generally provide favorable treatment for
core deposits. Institutions with less than $100 billion of
assets are not required to maintain a minimum Liquidity
Coverage ratio. At or above $100 billion, the requirement
increases with size and certain activities. The largest
banks, which must maintain the highest minimum ratio,
may be incented to compete for core deposits vigorously.
Although mid-sized banks, like ours, are only lightly
impacted by this rule, if some large banks in our markets
take aggressive actions we could lose deposit share or be
compelled to adjust our deposit pricing and practices in
ways that could increase our costs.
Continued availability of funding from the Federal Home
Loan Bank and discount window at the Federal Reserve
depends on policies set by federal agencies, the federal
government and, ultimately, by the U.S. Congress; for
that reason, long-term continuation of current programs
is beyond our control. We have and use credit facilities
with one of the Federal Home Loan Banks. Those facilities
provide funding quickly when we need it, up to program
limits. Program limits are based, in part, on the fair value
of potential collateral we can provide, which fluctuates
with market conditions. We also have and use access to
the discount window at the Federal Reserve. Although we
do not view borrowing at the Federal Home Loan Bank or
at the discount window at the Federal Reserve as a
primary source of liquidity, the curtailment or elimination
of our access to these funding sources would significantly
alter how we plan for and manage routine and
contingency funding situations.
We also depend upon financing from private institutional
or other investors by means of the capital markets. In
2020 we issued and sold $150 million of preferred stock,
along with a total of $1.3 billion of senior and
subordinated notes. In 2021, we issued and sold another
$150 million of preferred stock. We believe we could
access the capital markets again if we desired to do so.
Risk remains, however, that capital markets may become
unavailable to us for reasons beyond our control.
A number of more general factors could make funding
more difficult, more expensive, or unavailable on
affordable terms. These include, but are not limited to,
our financial results, organizational or political changes,
adverse impacts on our reputation, changes in the
activities of our business partners, disruptions in the
capital markets, specific events that adversely impact the
financial services industry, counterparty availability,
changes affecting our loan portfolio or other assets,
changes affecting our corporate and regulatory structure,
interest rate fluctuations, ratings agency actions, general
economic conditions, and the legal, regulatory,
accounting, and tax environments governing our funding
transactions. In addition, our ability to raise funds is
strongly affected by the general state of the U.S. and
ITEM 1A. RISK FACTORS
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world economies and financial markets as well as the
policies and capabilities of the U.S. government and its
agencies, and may remain or become increasingly difficult
due to economic and other factors beyond our control.
For additional information concerning these risks, see
Interest Rate and Yield Curve Risks beginning on page 46.
Events affecting interest rates, markets, and other
factors may adversely affect the demand for our
products and services in our fixed income business. As a
result, disruptions in those areas may adversely impact
our earnings in that business unit.
Credit Ratings
Our credit ratings directly affect the availability and cost
of our unsecured funding. Our holding company (the
Corporation) and our Bank currently receive ratings from
rating agencies for unsecured borrowings. A rating below
investment grade typically reduces availability and
increases the cost of market-based funding. A debt rating
of Baa3 or higher by Moody’s Investors Service, or BBB- or
higher by Fitch Ratings, is considered investment grade for
many purposes. At December 31, 2024, both rating
agencies rated the unsecured senior debt of the
Corporation and of the Bank as investment grade. To the
extent that in the future we depend on institutional
borrowing and the capital markets for funding and capital,
we could experience reduced liquidity and increased cost
of unsecured funding if our debt ratings were lowered,
particularly if lowered below investment grade. In
addition, other actions by ratings agencies can create
uncertainty about our ratings in the future and thus can
adversely affect the cost and availability of funding,
including placing us on negative outlook or on watchlist.
Please note that a credit rating is not a recommendation
to buy, sell, or hold securities, is subject to revision or
withdrawal at any time, and should be evaluated
independently of any other rating.
Reductions in our credit ratings could result in
counterparties reducing or terminating their
relationships with us. Some parties with whom we do
business have internal policies restricting the business
that can be done with financial institutions, such as the
Bank, that have credit ratings lower than a certain
threshold.
Reductions in our credit ratings could allow some
counterparties to terminate and immediately force us to
settle certain derivatives agreements, and could force us
to provide additional collateral with respect to certain
derivatives agreements. Under our margin agreements,
we are required to post collateral in the amount of our
derivative liability positions with derivative
counterparties. FHN could be asked to post collateral of an
undetermined amount based on changes in credit ratings
and derivative value.
Interest Rate & Yield Curve Risks
We are subject to interest rate risk because a significant
portion of our business involves borrowing and lending
money and investing in financial instruments. A
considerable portion of our funding comes from short-
term and demand deposits, while a sizeable portion of our
lending and investing is in medium-term and long-term
instruments. Changes in interest rates directly impact our
revenues and expenses and could expand or compress our
net interest margin. We actively manage our balance
sheet to control the risks of a reduction in net interest
margin brought about by ordinary fluctuations in rates. In
addition, our fixed income business tends to perform
better when rates decline or markets are moderately
volatile, which tends to partially offset net interest margin
compression.
A flat or inverted yield curve may reduce our net interest
margin and adversely affect our lending and fixed income
businesses. The yield curve is a reflection of interest rates,
at various maturities, applicable to assets and liabilities.
The yield curve is steep when short-term rates are much
lower than long-term rates; it is flat when short-term rates
and long-term rates are nearly the same; and it is inverted
when short-term rates exceed long-term rates.
Historically, the yield curve is usually upward sloping
(higher rates for longer terms). However, the yield curve
can be relatively flat or inverted (downward sloping).
Inversion normally is rare, but has happened several times
in the past few years. In fact, inversion was continuous
from the second half of 2022 through September 2024,
when the Federal Reserve began to reduce short-term
interest rates and the yield curve flattened. A flat or
inverted yield curve tends to decrease net interest margin,
which would adversely impact our lending businesses, and
it tends to reduce demand for long-term debt securities,
which would adversely impact the revenues of our fixed
income business. During late 2022 our net interest margin
overall did not compress, but actually expanded, as we
were able to increase average loan rates faster than
average funding rates. In 2023, our net interest margin
compressed throughout much of the year as funding costs
accelerated, but still expanded on a full year basis
compared to 2022. Although compression eased late in
2023 and in 2024 as short-term interest rate increases
ended and reductions began, net interest margin for 2024
declined from 2023 as the yield curve remained inverted
for much of 2024. Compression continued to ease in the
fourth quarter of 2024, with net interest margin
ITEM 1A. RISK FACTORS
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expanding as compared with both the third quarter of
2024 and the fourth quarter of 2023.
Market-indexed deposit products are very sensitive to
changes in short-term rates, and our use of them
increases our exposure to such changes. If market rates
rise, an increase in those deposit rates may be necessary
before we are able to effect similar increases in loan rates.
Generally, we try to moderate our use of these products
when rates are rising.
Expectations by the market regarding the direction of
future interest rate movements can impact the demand
for and value of our fixed income investments and can
impact the revenues of our fixed income business. This
risk is most apparent during times when strong
expectations have not yet been reflected in market rates,
or when expectations are especially weak or uncertain.
Over a business cycle period of many years, there are
typically "up" parts of the cycle in which revenues increase
and "down" parts of the cycle in which revenues decrease,
with each being driven principally by changes in the
operating environment. The most recent "down" part of
the cycle started in 2022 and continued through 2023.
The improvement in the shape of the yield curve in the
second half of 2024 and the resulting increase in fixed
income revenues from 2023 to 2024 could signal a shift
toward the "up" part of the cycle.
Asset Inventories & Market Risks
The trading securities inventories and loans held for sale
in our fixed income business are subject to market and
credit risks. In the course of that business we hold trading
securities inventory and loan positions for purposes of
distribution to clients, and we are exposed to certain
market risks attributable principally to interest rate risk
and credit risk associated with those assets. We manage
the risks of holding inventories of securities and loans
through certain market risk management policies and
procedures, including, for example, hedging activities and
Value-at-Risk (“VaR”) limits, trading policies, modeling,
and stress analyses. Average fixed income trading
securities (long positions) were $1.4 billion for 2024 and
$1.2 billion for 2023. Average fixed income trading
liabilities (short positions) were $555 million and $301
million for 2024 and 2023, respectively. Average loans
held for sale in our fixed income business were
$347 million and $552 million for 2024 and 2023,
respectively. Additional information concerning these risks
and our management of them, all of which is incorporated
into this Item 1A by this reference, appears under the
caption Market Risk Management beginning on page 87 of
our 2024 MD&A (Item 7).
Declines, disruptions, or precipitous changes in markets
or market prices can adversely affect our fees and other
income sources. We earn fees and other income related
to our brokerage business and our management of assets
for clients. Declines, disruptions, or precipitous changes in
markets or market prices can adversely affect those
revenue sources.
Significant changes to the securities market’s
performance can have a material impact upon our assets,
liabilities, and financial results. We have a number of
assets and obligations that are linked, directly or
indirectly, to major securities markets. Significant changes
in market performance can have a material impact upon
our assets, liabilities, and financial results.
An example of that linkage is our obligation to fund our
pension plan so that it may satisfy benefit claims in the
future. Our pension funding obligations generally depend
upon actuarial estimates of benefits claims, the discount
rate used to estimate the present values of those claims,
and estimates of plan asset values. Our obligations to fund
the plan can be affected by changes in any of those three
factors. Accordingly, our obligations diminish if the plan’s
investments perform better than expectations or if
estimates are changed anticipating better performance,
and can grow if those investments perform poorly or if
expectations worsen. A rise in interest rates is likely to
negatively impact the values of fixed income assets held in
the plan, but would also result in an increase in the
discount rate used to measure the present value of future
benefit payments. Similarly, our obligations can be
impacted by changes in mortality tables or other actuarial
inputs. We manage the risk of rate changes by investing
plan assets in fixed income securities having maturities
aligned with the expected timing of payouts. Because
there are no new participants, the actuarial-input risk
should slowly diminish over time.
Changes in our funding obligation generally translate into
positive or negative changes in our pension expense over
time, which in turn affects our financial performance. Our
obligations and expenses relative to the plan can be
affected by many other things, including changes in our
participating associate population and changes to the plan
itself. Although we have taken actions intended to
moderate future volatility in this area, risk of some level of
volatility is unavoidable.
Our hedging activities may be ineffective, may not
adequately hedge our risks, and are subject to credit risk.
In the normal course of our businesses we attempt to
create partial or full economic hedges of various, though
not all, financial risks. For example: our fixed income unit
manages interest rate risk on a portion of its trading
portfolio with short positions, futures, and options
contracts; we hedge the risk of interest rate movements
related to the gap between the time we originate
mortgage loans and the time we sell them; and we use
derivatives, including swaps, swaptions, caps, forward
contracts, options, and collars, that are designed to
moderate the impact on earnings as interest rates change.
ITEM 1A. RISK FACTORS
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Generally, in the last example these hedged items include
certain term borrowings and certain held-to-maturity
loans.
Hedging creates certain risks for us, including the risk that
the other party to the hedge transaction will fail to
perform (counterparty risk, which is a type of credit risk),
and the risk that the hedge will not fully protect us from
loss as intended (hedge failure risk). Unexpected
counterparty failure or hedge failure could have a
significant adverse effect on our liquidity and earnings.
Mortgage Business Risks
Two of our mortgage-related businesses—mortgage
origination and lending to mortgage companies—are
highly sensitive to interest rates and rate cycles. When
rates are higher, client activity (and our related income)
tends to be muted. Lower rates tend to foster higher
activity. The U.S. experienced extremely low interest rates
for several years, ending in early 2022. Rising rates in 2022
substantially curtailed our income from these businesses.
For example, by late 2022 consumer mortgage
refinancings fell to extremely low levels. These impacts
largely continued throughout 2023 and 2024, but
modestly abated in the second half of 2024 as the Federal
Reserve began reducing short-term rates. Although lower
mortgage rates in the future, if and when they occur,
should moderate these impacts, it is very unlikely that the
low rate environment of 2020-21 will return. Additional
information concerning rates and their impacts upon us is
presented: under the caption Cyclicality within the Other
Business Information section of Item 1, which starts on
page 19; in Risks Associated with Monetary Events
beginning on page 37; in Interest Rate and Yield Curve
Risks beginning on page 46; and under the caption
Inflation, Recession, and Federal Reserve Policy within the
Market Uncertainties and Prospective Trends section of
our 2024 MD&A (Item 7), beginning on page 97.
We have contractual risks from our mortgage business.
Our traditional mortgage business primarily consists of
helping clients obtain home mortgages which we sell,
rather than hold, or which qualify for a government-
guarantee program. The mortgage terms conform to the
requirements of the mortgage buyers or government
agencies, and we make representations to those buyers or
agencies concerning conformity of each mortgage at
origination. Although the buyers and agencies generally
take the risk that a mortgage defaults, we retain the risk
that our representations were materially incorrect. In such
a case, the buyer or agency generally has the power to
force us to take the loan back for its face value, or to make
the buyer or agency whole for its loss.
Some government mortgage programs could impose
penalties on us for misrepresentations at the time of
obtaining benefits under the program. Penalties can be
severe, up to three times the agency’s loss. As a result,
mortgage origination processes need to emphasize being
thorough and correct, in compliance with all agency
standards. Those processes tend to slow the mortgage
lending process for clients and increase the complexity of
the paperwork.
The mortgage servicing business creates regulatory risks.
Servicing requires continual interaction with consumer
clients. Federal, state, and sometimes local laws regulate
when and how we interact with consumer clients. The
requirements can be complex and difficult for us to
administer, especially if a client experiences difficulty with
the mortgage loan. Failure to follow the applicable rules
can result in significant penalties or other loss for us.
Pre-2009 Mortgage Business Risks
We have risks from the mortgage-related businesses that
legacy First Horizon exited in 2008, including mortgage
loan repurchase and loss-reimbursement risk, and claims
of non-compliance with contractual and regulatory
requirements. In 2008 we exited our national mortgage
and related lending businesses. We retain the risk of
liability to clients and contractual parties with whom we
dealt in the course of operating those businesses.
Additional information concerning risks related to our
former mortgage businesses and our management of
them, all of which is incorporated into this Item 1A by this
reference, is set forth: under the captions Repurchase
Obligations beginning on page 96, and Contingent
Liabilities beginning on page 102, of our 2024 MD&A (Item
7); and under the caption Mortgage Loan Repurchase and
Foreclosure Liability, within Note 16—Contingencies and
Other Disclosures of our 2024 Financial Statements (Item
8), which Note begins on page 165.
ITEM 1A. RISK FACTORS
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Accounting Risks
The preparation of our consolidated financial statements
in conformity with U.S. generally accepted accounting
principles requires management to make significant
estimates that affect the financial statements. The
estimate that is consistently one of our most critical is the
level of the allowance for credit losses. However, other
estimates can be highly significant at discrete times or
during periods of varying length, for example the
valuation (or impairment) of our deferred tax assets.
Estimates are made at specific points in time. As actual
events unfold, estimates are adjusted accordingly. Due to
the inherently uncertain nature of these estimates, it is
possible that, at some time in the future, we may
significantly increase the allowance for credit losses and/
or sustain credit losses that are significantly higher than
the provided allowance, or we may recognize a significant
provision for impairment of assets, or we may make some
other adjustment that will differ materially from the
estimates that we make today. Moreover, in some cases,
especially concerning litigation and other contingency
matters where critical information is inadequate, often we
are unable to make estimates until fairly late in a lengthy
process.
A significant merger or acquisition requires us to make
many estimates, including the fair values of acquired
assets and liabilities. With larger transactions, fair value
and other estimations can take up to four quarters to
finalize. These estimates, and their revisions, can have a
substantial effect on the presentation of our financial
condition and operating results after the transaction
closes. In addition, the excess of the value “paid” by us in
the merger or acquisition over the fair value of the assets
acquired, net of liabilities assumed, is recorded as
goodwill. Goodwill is subject to periodic impairment
assessment, a process that can result in impairment
expense which may be significant and sudden.
Changes in accounting rules can significantly affect how
we record and report assets, liabilities, revenues,
expenses, and earnings. Although such changes generally
affect all companies in a given industry, in practice
changes sometimes have a disparate impact due to
differences in the circumstances or business operations of
companies within the same industry.
One such accounting change, ASU 2016-13,
“Measurement of Credit Losses on Financial
Instruments,” substantially impacts the measurement
and recognition of credit losses for certain assets,
including most loans. Under ASU 2016-13, when we
make or acquire a new loan, we are required to recognize
immediately the “current expected credit loss,” or “CECL,”
of that loan. We will also re-evaluate CECL each quarter
that the loan is outstanding. CECL is the difference
between our cost and the net amount we expect to collect
over the life of the loan using certain estimation methods
that incorporate macroeconomic forecasts and our
experience with other, similar loans. In contrast, the
pre-2020 accounting standard delayed recognition until
loss was “probable” (very likely). We adopted ASU
2016-13 and CECL accounting starting in 2020, with the
impact on regulatory capital having a phase-in period.
Starting in 2020, recognition of estimated credit loss was
significantly accelerated compared to pre-CECL practice,
which was aggravated by the actual and projected effects
of the pandemic. That acceleration could happen again,
especially if a recession occurs or is expected to occur.
Additional information concerning ASU 2016-13 appears
in Item 1 under the caption CECL Accounting and
COVID-19 within the section entitled Significant Business
Developments Over Past Five Years, which begins on page
12, all of which information is incorporated into this Item
1A by reference.
In comparison with former (pre-2020) standards, CECL
accounting tends to: result in a significant increase in our
provision for credit losses (expense) and allowance
(reserve) during any period of loan growth, including
organic growth and growth created by acquisition or
merger; through increased provision, adversely impact
our earnings and, correspondingly, our regulatory capital
levels; and enhance volatility in loan loss provision and
allowance levels from quarter to quarter and year to
year, especially during times when the economy is in
transition or experiencing significant volatility. Moreover,
CECL creates an incentive for banks to reduce new lending
in the “down” part of the economic cycle in order to
reduce loss recognition and conserve regulatory capital.
That perverse incentive could, nationwide, prolong a
down cycle in the economy and delay a recovery.
Changes in regulatory rules can create significant
accounting impacts for us. Because we operate in a
regulated industry, we prepare regulatory financial
reports based on regulatory accounting standards.
Changes in those standards can have significant impacts
upon us in terms of regulatory compliance. In addition,
such changes can impact our ordinary financial reporting,
and uncertainties related to regulatory changes can create
uncertainties in our financial reporting.
Our controls and procedures may fail or be
circumvented. Internal controls, disclosure controls and
procedures, and corporate governance policies and
procedures (“controls and procedures”) must be effective
in order to provide assurance that financial reports are
materially accurate. A failure or circumvention of our
controls and procedures or failure to comply with
regulations related to controls and procedures could have
a material adverse effect on our business, financial
condition and results of operations.
ITEM 1A. RISK FACTORS
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Share Owning & Governance Risks
The principal source of cash flow to pay dividends on our
stock, as well as service our debt, is dividends and
distributions from the Bank, and the Bank may become
unable to pay dividends to us without regulatory
approval. First Horizon Corporation primarily depends
upon common dividends from the Bank for cash to fund
dividends we pay to our common and preferred
shareholders, and to service our outstanding debt.
Regulatory constraints might constrain or prevent the
Bank from declaring and paying dividends to us in future
years without regulatory approval. Applying the dividend
restrictions imposed under applicable federal and state
rules, the Bank’s total amount available for dividends,
without obtaining regulatory approval, was $374 million at
January 1, 2025.
Also, we are required to provide financial support to the
Bank. Accordingly, at any given time a portion of our funds
may need to be used for that purpose and therefore
would be unavailable for dividends.
Furthermore, the Federal Reserve has issued policy
statements generally requiring insured banks and bank
holding companies only to pay dividends out of current
operating earnings. The Federal Reserve has released a
supervisory letter advising bank holding companies,
among other things, that as a general matter a bank
holding company should inform the Federal Reserve and
should eliminate, defer or significantly reduce its
dividends if (i) the bank holding company’s net income
available to shareholders for the past four quarters, net of
dividends previously paid during that period, is not
sufficient to fully fund the dividends; (ii) the bank holding
company’s prospective rate of earnings is not consistent
with the bank holding company’s capital needs and overall
current and prospective financial condition; or (iii) the
bank holding company will not meet, or is in danger of not
meeting, its minimum regulatory capital adequacy ratios.
Our shareholders may suffer dilution if we raise capital
through public or private equity financings to fund our
operations, to increase our capital, or to expand. If we
raise funds by issuing equity securities or instruments that
are convertible into equity securities, the percentage
ownership of our current common shareholders will be
reduced, the new equity securities may have rights and
preferences superior to those of our common or
outstanding preferred stock, and any additional issuances
could be at a sales price which is dilutive to current
shareholders. We may also issue equity securities directly
as consideration for acquisitions we may make that would
be dilutive to shareholders in terms of voting power and
share-of-ownership, and could be dilutive financially or
economically.
The IBKC merger, for example, resulted in a significant
increase in our outstanding shares. In 2020, we issued to
former IBKC shareholders common shares representing
about 44% of our post-closing outstanding shares.
Our issuance of ordinary preferred stock raises
regulatory capital without issuing or diluting common
shares, but creates or expands our general obligation to
pay all preferred dividends ahead of any common
dividends. Currently we have five series of preferred stock
outstanding, one issued by the Bank and four by First
Horizon Corporation. Subject to capital needs and market
conditions, additional series may be issued in the future.
Provisions of Tennessee law, and certain provisions of
our charter and bylaws, could make it more difficult for a
third party to acquire control of us or could have the
effect of discouraging a third party from attempting to
acquire control of us. These provisions could make it
more difficult for a third party to acquire us even if an
acquisition might be at a price attractive to many of our
shareholders. In addition, federal banking laws prohibit
non-financial-industry companies from owning a bank and
require regulatory approval of any change in control of a
bank.
Certain legal rights of holders of our common stock and
of depositary shares related to our preferred stock to
pursue claims against us or the depositary, as applicable,
are limited by our bylaws and by the terms of the deposit
agreements. Our bylaws provide that, unless we consent
in writing to an alternative forum, a state or federal court
located within Shelby County in the State of Tennessee
will be the sole and exclusive forum for (i) any derivative
action or proceeding brought in our right or name, (ii) any
action asserting a claim of breach of a fiduciary duty owed
by any director, officer or other associate of ours to us or
our shareholders, (iii) any action asserting a claim against
us or any director, officer or other associate of ours arising
pursuant to any provision of the Tennessee Business
Corporation Act or our charter or bylaws or (iv) any action
asserting a claim against us or any director, officer or
other associate of ours that is governed by the internal
affairs doctrine. In addition, each deposit agreement
between us and the depositary, which governs the rights
of the depositary shares related to our Series B and C
preferred stock (respectively), provides that any action or
proceeding arising out of or relating in any way to the
deposit agreement may only be brought in a state court
located in the State of New York or in the United States
District Court for the Southern District of New York.
The foregoing exclusive forum clauses may have the effect
of discouraging lawsuits against us or our directors,
officers or other associates, or against the depositary, as
applicable. Exclusive forum clauses may also lead to
increased costs to bring a claim or may limit the ability of
holders of our common stock or depositary shares to bring
a claim in a judicial forum they find favorable.
ITEM 1A. RISK FACTORS
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50
2024 FORM 10-K ANNUAL REPORT
In addition, the exclusive forum clauses in our bylaws and
deposit agreements could apply to actions or proceedings
that may arise under the federal securities laws,
depending on the nature of the claim alleged. To the
extent these exclusive forum clauses restrict the courts in
which holders of our common stock or depositary shares
may bring claims arising under the federal securities laws,
there is uncertainty as to whether a court would enforce
such provisions. These exclusive forum provisions do not
mean that holders of our common stock or depositary
shares have waived our obligations to comply with the
federal securities laws and the rules and regulations
thereunder.
ITEM 1A. RISK FACTORS
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51
2024 FORM 10-K ANNUAL REPORT
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Cybersecurity
The Cybersecurity Risk Management section within our 2024 MD&A (Item 7), beginning on page 91 of this report, is
incorporated herein by reference.
Item 2. Properties
We own or lease no single physical property that we
consider to be materially important to our financial
condition or results from operations.
Our banking centers, our fixed income and capital markets
offices, our wealth management offices, and our loan
origination, processing, and other physical offices, in the
aggregate, remain important to our ability to deliver
financial services to a large portion of our clients. For
many years, banking center usage by clients has slowly
declined, and for many years we have consolidated
banking center locations in response to changing
utilization patterns. We expect that long-term trend to
continue. Information concerning our business locations,
including banking center and other client-facing facilities,
at year-end 2024 is provided under the caption Principal
Businesses, Brands, & Locations within the Our Businesses
section of Item 1 of this report, which begins on page 8;
that information is incorporated into this Item 2 by this
reference.
In addition to the banking centers and other offices
mentioned in Item 1, we own or lease other offices and
office buildings, such as our headquarters building at 165
Madison Avenue in downtown Memphis, Tennessee.
Although some of these other offices contain banking
centers or other client-facing offices, primarily they are
used for operational and administrative functions. Our
operational and administrative offices are located in
several cities where we have banking centers.
At December 31, 2024, we believe our physical properties
are suitable and adequate for the businesses we conduct.
Item 3. Legal Proceedings
The Contingencies section from Note 16—Contingencies and Other Disclosures, beginning on page 165 of this report within
our 2024 Financial Statements (Item 8), is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
ITEM 1B. UNRESOLVED STAFF COMMENTS THROUGH ITEM 4. MINE SAFETY DISCLOSURES
Table of Contents
52
2024 FORM 10-K ANNUAL REPORT
Supplemental Part I Information
Executive Officers of the Registrant
The following is a list of our executive officers, as defined
by Securities and Exchange Commission rules, along with
certain supplemental information, all presented as of
February 20, 2025. The executive officers generally are
elected at the April meeting of our Board of Directors for a
term of one year and until their successors are elected
and qualified.
Mr. Jordan has an Employment Agreement with us. Under
it, Mr. Jordan will continue to be employed as President
and Chief Executive Officer for a term expiring August 3,
2028. Mr. Jordan’s employment will terminate when that
term expires unless the parties mutually agree later to
extend the term. Our mandatory retirement policy is
waived during the Employment Agreement's term.
Elizabeth A.
Ardoin
Age: 55
Senior Executive Vice President—Chief Communications Officer of First Horizon & the Bank (2020)
Following the closing of the merger of equals between First Horizon and IBKC, Ms. Ardoin assumed the
role of Senior Executive Vice President—Chief Communications Officer of First Horizon and the Bank.
Prior to the merger, she had several roles with IBERIABANK Corporation and IBERIABANK starting in
2002, the most recent of which was Senior Executive Vice President and Director of Communications
(2002-2020), which included marketing, public relations, human resources, and corporate real estate,
and she served as chief of staff to the CEO.
Ashley W. Argo
Age: 46
Senior Executive Vice President—Chief Risk Officer of First Horizon & the Bank (2025)
Mrs. Argo assumed the role of Senior Executive Vice President – Chief Risk Officer of First Horizon & the
Bank in January 2025, after serving as Deputy Chief Risk Officer since 2024. Previously, starting in 2004,
Mrs. Argo served in several roles with First Horizon and the Bank, including (prior to her role as Deputy
Chief Risk Officer) Director of Credit and Financial Risk (2020-2024).
Hope
Dmuchowski
Age: 46
Principal
Financial Officer
Senior Executive Vice President—Chief Financial Officer of First Horizon & the Bank (2021)
Ms. Dmuchowski was elected to her current position in November 2021. Previously, she was Executive
Vice President, Head of Financial Planning and Analysis and Management Reporting for Truist Financial
Corp. (Sept.-Nov. 2021); Executive Vice President, Chief Financial Officer Corporate Banking, Commercial
Banking and Corporate Groups for Truist (2019-2021); Executive Vice President, Chief Financial Officer
Group Director for BB&T Corp. (2017-2019); and Sr. Vice President, Chief Financial and Operations
Officer—Enterprise Operations Services for BB&T (2013-2017). Her career with BB&T, a predecessor of
Truist, started in 2007.
Jeff L. Fleming
Age: 63
Principal
Accounting
Officer
Executive Vice President—Chief Accounting Officer and Corporate Controller of First Horizon & the
Bank (2012)
Mr. Fleming assumed the role of Executive Vice President—Chief Accounting Officer and Corporate
Controller in 2012. Previously, starting in 1984, he held several positions with us, most recently (before
his current role) Executive Vice President—Corporate Controller (2010-2011).
Tanya L. Hart
Age: 55
Senior Executive Vice President—Chief Human Resources Officer of First Horizon & the Bank (2024)
Mrs. Hart assumed the role of Senior Executive Vice President—Chief Human Resources Officer of First
Horizon & the Bank in October 2024, after serving as Executive Vice President—Chief Human Resources
Officer since November 2021. Previously, starting in 1991, Mrs. Hart served in several roles with First
Horizon and the Bank, most recently (before her current role) Executive Vice President, Total Rewards,
Executive Vice President (2016-2021)
Thomas Hung
Age: 43
Senior Executive Vice President—Chief Credit Officer of First Horizon & the Bank (2024)
Mr. Hung assumed the role of Senior Executive Vice President – Chief Credit Officer of First Horizon &
the Bank in 2024. Previously, starting in 2019, he served the Bank in several roles, the most recent of
which (before his current role) was Executive Vice President – Deputy Chief Credit Officer (2024). Prior
to that, he served as Executive Vice President – Franchise Finance (2022-2024) and before that, Senior
Vice President – Franchise Finance (2019-2022).
Name & Age
Current (Year First Elected to Office) and Recent Offices & Positions
SUPPLEMENTAL PART I INFORMATION
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53
2024 FORM 10-K ANNUAL REPORT
D. Bryan Jordan
Age: 63
Principal
Executive Officer
President & Chief Executive Officer (2008) and Chairman of the Board (2012-2020 and since 2022) of
First Horizon & the Bank
Mr. Jordan became President and Chief Executive Officer in 2008. He was Chairman of the Board from
2012 until we closed the merger of equals between First Horizon and IBKC in 2020. He resumed being
Chairman in 2022 on the second anniversary of the IBKC merger. From 2007 until 2008 Mr. Jordan was
Executive Vice President and Chief Financial Officer of First Horizon and the Bank. From 2000 until 2002
Mr. Jordan was Comptroller, and from 2002 until 2007 Mr. Jordan was Chief Financial Officer, of Regions
Financial Corp. During that time he was also an Executive Vice President and a Senior Executive Vice
President of Regions.
Tammy S.
LoCascio
Age: 56
Senior Executive Vice President—Chief Operating Officer of First Horizon & the Bank (2021)
Following the closing of the merger of equals between First Horizon and IBKC in 2020, Ms. LoCascio
assumed the role of Senior Executive Vice President—Chief Human Resources Officer of First Horizon
and the Bank. Prior to the merger, starting in 2011, she served in several roles with the Bank, most
recently Executive Vice President—Consumer Banking (2017-2020). In that role she led the retail, private
client/wealth management, mortgage, and small business units.
David T.
Popwell
Age: 65
Senior Executive Vice President—Senior Strategic Executive of First Horizon & the Bank (2024)
From the closing of the merger of equals between First Horizon and IBKC in 2020 until September 2024,
Mr. Popwell served as President—Specialty Banking of First Horizon and the Bank. Prior to the merger,
starting in 2007, he served in several roles, the most recent of which was President—Regional Banking
(2013-2020). From 2004 to 2007 Mr. Popwell was President of SunTrust Bank—Memphis, and prior to
that was an Executive Vice President of National Commerce Financial Corp.
Anthony J.
Restel
Age: 55
Senior Executive Vice President—Chief Banking Officer of First Horizon & the Bank (2024)
From 2021 through September 2024, Mr. Restel served as President—Regional Banking of First Horizon
and the Bank. Following the closing of the merger of equals between First Horizon and IBKC in 2020, Mr.
Restel assumed the role of Senior Executive Vice President—Chief Operating Officer of First Horizon and
the Bank. From July to November 2021, Mr. Restel also acted as interim Chief Financial Officer. Prior to
the merger, he had several roles with IBERIABANK Corporation and IBERIABANK starting in 2001, the
most recent of which was Vice Chairman and Chief Financial Officer (2005-2020). During his tenure as
Chief Financial Officer, Mr. Restel also served as Chief Credit Officer of IBERIABANK (2007-2009).
T. Lang
Wiseman
Age: 53
Senior Executive Vice President—General Counsel of First Horizon & the Bank (2025)
Mr. Wiseman assumed the role of Senior Executive Vice President – General Counsel of First Horizon &
the Bank in January 2025. Previously, starting in 2024, Mr. Wiseman joined the organization as Executive
Vice President – Deputy General Counsel. From 2022-2024, he was a shareholder in the law firm of
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC. Previously, Mr. Wiseman served as Deputy
Governor and Chief Counsel to the Governor of the State of Tennessee from 2019—2021.
Name & Age
Current (Year First Elected to Office) and Recent Offices & Positions
Selected Other Corporate Officers
Shannon M. Hernandez
Senior Vice President, Assistant
General Counsel, and Corporate
Secretary
Dane P. Smith
Senior Vice President
Corporate Treasurer
SUPPLEMENTAL PART I INFORMATION
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54
2024 FORM 10-K ANNUAL REPORT
PART II
Item 5. Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer
Purchases of Equity Securities
Market for Our Common Stock; Common Shareholders
Our sole class of common stock, $0.625 par value, is listed
and trades on the New York Stock Exchange LLC under the
symbol FHN. At December 31, 2024, there were
approximately 8,317 shareholders of record of our
common stock.
Sales of Unregistered Common and Preferred Stock
Common Stock. Not applicable.
Preferred Stock. Not applicable.
Repurchases by Us of Our Common Stock
Under authorizations from our Board of Directors, we may
repurchase common shares from time to time for general
purposes, subject to various factors, including FHN's
capital position, financial performance, expected capital
market impacts of strategic initiatives, market conditions,
business conditions, and regulatory considerations, as well
as to cover tax obligations associated with stock-based
awards under our compensation plans. We evaluate the
level of capital and take action designed to generate or
use capital as appropriate for the interests of the
shareholders.
Additional information concerning repurchase activity
during the final three months of 2024 is presented in
Tables 7.20a, 7.20b and 7.20c, and the surrounding notes
and other text under the caption Common Stock Purchase
Programs beginning on page 84 of our 2024 MD&A (Item
7), which information is incorporated herein by this
reference.
Total Shareholder Return Performance Graph
The “Total Shareholder Return 2019-2024” performance
graph appearing on the next page, along with Table 5.1, is
“furnished” and not “filed” as part of this report, and is
not deemed to be soliciting material. Notwithstanding
anything to the contrary set forth in this report or in any
of our previous filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as
amended, that might incorporate future filings by
reference, including this report in whole or in part, neither
the “Total Shareholder Return 2019-2024” performance
graph nor Table 5.1 shall be incorporated by reference
into any such filings.
The “Total Shareholder Return 2019-2024” performance
graph compares the yearly percentage change in our
cumulative total shareholder return with returns based on
the Standard and Poor’s 500 and Keefe, Bruyette & Woods
(KBW) Regional and Nasdaq Bank Indices. The graph
assumes $100 is invested on December 31, 2019 and
dividends are reinvested. Returns are market-
capitalization weighted.
At year-end 2019 and earlier, FHN was included in the
KBW Regional Bank Index. At year-end 2020 and later,
FHN is included in the KBW Nasdaq Bank Index. The
change in index resulted from the merger of equals in
2020 between FHN and IBERIABANK Corporation.
ITEM 5. MARKET FOR COMMON EQUITY, STOCKHOLDER MATTERS, & EQUITY PURCHASES AND ITEM 6.
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55
2024 FORM 10-K ANNUAL REPORT
At year-end 2022, FHN's stock price was significantly
boosted by the then-pending acquisition of FHN by TD for
an all-cash purchase price of over $25 per FHN share.
After TD was unable to obtain regulatory approval, the TD
Transaction was terminated by the parties in May 2023.
Table 5.1
TOTAL SHAREHOLDER RETURN DATA
2019
2020
2021
2022
2023
2024
First Horizon Corporation (FHN)
$ 100.00 $
81.83 $ 108.52 $ 167.06 $ 101.06 $ 149.23
S&P 500 Index
100.00
118.39
152.34
124.73
157.48
196.85
KBW Regional Bank Index (KRX)
100.00
91.32
124.78
116.15
115.69
130.96
KBW Nasdaq Bank Index (BKX)
100.00
89.69
124.08
97.53
96.66
132.63
Data source: Bloomberg
Item 6. [Reserved]
ITEM 5. MARKET FOR COMMON EQUITY, STOCKHOLDER MATTERS, & EQUITY PURCHASES AND ITEM 6.
Table of Contents
56
2024 FORM 10-K ANNUAL REPORT
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
TABLE OF ITEM 7 TOPICS
Introduction
58
Financial Performance Summary
58
Results of Operations
59
Analysis of Financial Condition
67
Capital
82
Risk Management
86
Repurchase Obligations
96
Market Uncertainties and Prospective Trends
97
Critical Accounting Policies and Estimates
100
Accounting Changes
102
Non-GAAP Information
102
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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57
2024 FORM 10-K ANNUAL REPORT
Introduction
First Horizon Corporation (NYSE common stock trading
symbol “FHN”) is a financial holding company
headquartered in Memphis, Tennessee. FHN’s principal
subsidiary, and only banking subsidiary, is First Horizon
Bank. Through the Bank and other subsidiaries, FHN offers
commercial, private banking, consumer, small business,
wealth and trust management, retail brokerage, capital
markets, fixed income, and mortgage banking services.
At December 31, 2024, FHN had over 450 business
locations in 24 states, including over 400 banking centers
in 12 states, and employed approximately 7,200
associates.
This MD&A should be read in conjunction with the
accompanying audited Consolidated Financial Statements
and Notes to the Consolidated Financial Statements in
Part II, Item 8 of this Form 10-K, as well as with the other
information contained in this report.
Financial Performance Summary
FHN reported net income available to common
shareholders of $738 million, or $1.36 per diluted share,
for the year ended December 31, 2024, compared to $865
million, or $1.54 per diluted share, for the same period of
2023.
Net interest income of $2.5 billion decreased $29 million
compared to 2023, largely driven by higher funding costs,
partially offset by higher loan yields and loan growth. The
net interest margin decreased 7 basis points to 3.35%
compared to 3.42% in 2023.
Provision for credit losses decreased to $150 million
compared to $260 million in 2023, largely driven by lower
net charge-offs in 2024. Net charge-offs were $112 million
compared to $170 million in 2023, largely reflecting the
prior year impact of an idiosyncratic credit loss on a single
relationship.
Noninterest income of $679 million decreased $248
million from 2023, largely driven by a $225 million gain on
merger termination in 2023. Results in 2024 were also
impacted by $91 million in net securities losses from an
opportunistic restructuring of a portion of the securities
portfolio. The countercyclical businesses improved from
cycle lows in 2023 as fixed income increased $54 million
and mortgage banking income increased $12 million.
Noninterest expense of $2.0 billion decreased $44 million
from 2023, largely attributable to $68 million in FDIC
special assessment expense and a $50 million contribution
to the First Horizon Foundation in the previous year,
partially offset by increases in incentive-based
compensation tied to higher commission-based revenue
and strategic investments in technology.
Period-end loans and leases of $62.6 billion increased
$1.3 billion from December 31, 2023, reflecting
commercial loan growth of $1.0 billion, or 2%, and
consumer loan growth of $273 million, or 2%.
Period-end deposits of $65.6 billion decreased
$199 million from December 31, 2023, as a $1.2 billion
decrease in noninterest-bearing deposits more than offset
a $984 million increase in interest-bearing deposits.
Tier 1 risk-based capital and total risk-based capital ratios
at December 31, 2024 were 12.22% and 13.87%,
respectively, compared to 12.42% and 13.96% at
December 31, 2023. The CET1 ratio was 11.20% at
December 31, 2024 compared to 11.40% at December 31,
2023.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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58
2024 FORM 10-K ANNUAL REPORT
Table 7.1
KEY PERFORMANCE INDICATORS
For the years ended December 31,
(Dollars in millions, except per share data)
2024
2023
2022
Pre-provision net revenue (a)
$
1,155
$
1,388
$
1,254
Diluted earnings per common share
$
1.36
$
1.54
$
1.53
Return on average assets (b)
0.97 %
1.12 %
1.08 %
Return on average common equity (c)
8.80 %
11.01 %
11.81 %
Return on average tangible common equity (a) (d)
10.99 %
14.11 %
15.58 %
Net interest margin (e)
3.35 %
3.42 %
3.10 %
Noninterest income to total revenue (f)
23.42 %
26.82 %
24.99 %
Efficiency ratio (g)
62.06 %
59.90 %
61.24 %
Allowance for loan and lease losses to total loans and leases
1.30 %
1.26 %
1.18 %
Net charge-offs (recoveries) to average loans and leases
0.18 %
0.28 %
0.11 %
Total period-end equity to period-end assets
11.09 %
11.38 %
10.83 %
Tangible common equity to tangible assets (a)
8.37 %
8.48 %
7.12 %
Cash dividends declared per common share
$
0.60
$
0.60
$
0.60
Book value per common share
$
16.00
$
15.17
$
13.48
Tangible book value per common share (a)
$
12.85
$
12.13
$
10.23
Common equity Tier 1
11.20 %
11.40 %
10.17 %
Market capitalization
$ 10,559
$
7,913
$ 13,159
(a) Represents a non-GAAP measure which is reconciled in the non-GAAP to GAAP reconciliation in Table 7.28.
(b) Calculated using net income divided by average assets.
(c) Calculated using net income available to common shareholders divided by average common equity.
(d) Calculated using net income available to common shareholders divided by average tangible common equity.
(e) Net interest margin is computed using total net interest income adjusted to an FTE basis assuming a statutory federal income tax rate
of 21% and, where applicable, state income taxes.
(f) Ratio is noninterest income excluding securities gains (losses) to total revenue excluding securities gains (losses).
(g) Ratio is noninterest expense to total revenue excluding securities gains (losses).
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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59
2024 FORM 10-K ANNUAL REPORT
Results of Operations—2024 compared to 2023
Net Interest Income
Net interest income is FHN's largest source of revenue and
is the difference between the interest earned on interest-
earning assets (generally loans, leases and investment
securities) and the interest expense incurred in
connection with interest-bearing liabilities (generally
deposits and borrowed funds). The level of net interest
income is primarily a function of the difference between
the effective yield on average interest-earning assets and
the effective cost of interest-bearing liabilities. These
factors are influenced by the pricing and mix of interest-
earning assets and interest-bearing liabilities which, in
turn, are impacted by external factors such as local
economic conditions, competition for loans and deposits,
the monetary policy of the FRB and market interest rates.
Net interest income of $2.5 billion in 2024 decreased
$29 million, or 1%, from 2023. The decrease was largely
attributable to higher funding costs, partially offset by
higher loan yields and loan growth. Interest income
increased $252 million, largely driven by higher interest on
loans and leases of $299 million. Interest expense
increased $281 million, largely from higher interest
expense on deposits of $354 million, partially offset by a
decline in interest on short-term borrowings of $80
million.
FHN's net interest margin decreased 7 basis points to
3.35% in 2024 compared to 2023 and the net interest
spread decreased 6 basis points to 2.38% over the same
period. The decline in the margin was attributable to a 35
basis point increase in the cost of interest-bearing
liabilities, partially offset by a 29 basis point increase in
earning asset yields.
Total average earning assets increased $665 million in
2024, largely driven by average loan growth of $1.8 billion,
partially offset by lower levels of interest-bearing deposits
with banks and investment securities. Total average
interest-bearing liabilities increased $3.0 billion, largely
driven by average interest-bearing deposit growth of $4.4
billion, partially offset by a decrease in other short-term
borrowings.
The following table presents the major components of net
interest income and net interest margin.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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60
2024 FORM 10-K ANNUAL REPORT
Table 7.2
AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS/RATES
(Dollars in millions)
2024
2023
2022
Assets:
Average
Balance
Interest
Income/
Expense
Yield/
Rate
Average
Balance
Interest
Income/
Expense
Yield/
Rate
Average
Balance
Interest
Income/
Expense
Yield/
Rate
Loans and leases:
Commercial loans and leases
$ 47,429
$ 3,166
6.68 % $ 46,175
$ 2,958
6.41 % $ 43,691
$ 1,823
4.18 %
Consumer loans
14,576
720
4.93
13,994
630
4.48
12,261
479
3.89
Total loans and leases
62,005
3,886
6.27
60,169
3,588
5.96
55,952
2,302
4.11
Loans held for sale
472
36
7.61
664
51
7.71
884
39
4.41
Investment securities
9,386
244
2.60
9,912
250
2.52
9,976
200
2.01
Trading securities
1,399
85
6.12
1,179
78
6.62
1,438
58
4.04
Federal funds sold
39
2
5.61
61
4
5.56
191
4
2.09
Securities purchased under agreements to
resell
566
29
5.01
318
15
4.81
522
6
1.12
Interest-bearing deposits with banks
1,605
85
5.29
2,504
130
5.20
8,672
87
1.00
Total earning assets / Total interest income
$ 75,472
$ 4,367
5.79 % $ 74,807
$ 4,116
5.50 % $ 77,635
$ 2,696
3.47 %
Cash and due from banks
917
1,012
1,217
Goodwill and other intangible assets, net
1,674
1,720
1,777
Premises and equipment, net
580
596
636
Allowance for loan and lease losses
(812)
(740)
(648)
Other assets
3,991
4,288
3,600
Total assets
$ 81,822
$ 81,683
$ 84,217
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Savings
$ 25,941
$
848
3.27 % $ 23,547
$
679
2.88 % $ 24,292
$
94
0.39 %
Other interest-bearing deposits
16,215
449
2.77
15,300
351
2.30
15,641
72
0.47
Time deposits
7,224
323
4.47
6,095
236
3.87
2,963
18
0.60
Total interest-bearing deposits
49,380
1,620
3.28
44,942
1,266
2.82
42,896
184
0.43
Federal funds purchased
420
22
5.34
349
18
5.12
699
11
1.56
Securities sold under agreements to
repurchase
1,720
66
3.83
1,426
52
3.66
881
7
0.77
Trading liabilities
555
24
4.22
301
12
4.16
480
12
2.56
Other short-term borrowings
781
42
5.38
2,688
140
5.19
229
5
2.26
Term borrowings
1,180
67
5.63
1,335
72
5.39
1,596
72
4.51
Total interest-bearing liabilities / Total
interest expense
$ 54,036
$ 1,841
3.41 % $ 51,041
$ 1,560
3.06 % $ 46,781
$
291
0.62 %
Noninterest-bearing deposits
16,297
19,341
26,851
Other liabilities
2,353
2,396
2,006
Total liabilities
72,686
72,778
75,638
Shareholders' equity
8,841
8,610
8,284
Noncontrolling interest
295
295
295
Total shareholders' equity
9,136
8,905
8,579
Total liabilities and shareholders' equity
$ 81,822
$ 81,683
$ 84,217
Net earnings assets / Net interest income
(TE) / Net interest spread
$ 21,436
$ 2,526
2.38 % $ 23,766
$ 2,556
2.44 % $ 30,854
$ 2,405
2.85 %
Taxable equivalent adjustment
(15) 0.97
(16) 0.98
(13) 0.25
Net interest income / Net interest margin (a)
$ 2,511
3.35 %
$ 2,540
3.42 %
$ 2,392
3.10 %
(a) Calculated using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 21%, and where applicable, state income taxes.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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61
2024 FORM 10-K ANNUAL REPORT
The following table presents the change in interest income and interest expense due to changes in both average volume and
average rate.
Table 7.3
ANALYSIS OF CHANGES IN NET INTEREST INCOME
2024 Compared to 2023
2023 Compared to 2022
Increase (Decrease) Due to (a)
Increase (Decrease) Due to (a)
(Dollars in millions)
Rate (b)
Volume (b)
Total
Rate (b)
Volume (b)
Total
Interest income:
Loans and leases (c)
$
183
$
115
$
298
$
1,101
$
185
$
1,286
Loans held for sale
(1)
(14)
(15)
24
(12)
12
Investment securities (c)
7
(13)
(6)
51
(1)
50
Trading securities
(6)
13
7
32
(12)
20
Other earning assets:
Federal funds sold
—
(2)
(2)
3
(3)
—
Securities purchased under agreements to resell
1
13
14
13
(4)
9
Interest-bearing deposits with banks
2
(47)
(45)
143
(100)
43
Total other earning assets
3
(36)
(33)
159
(107)
52
Total change in interest income - earning assets
$
186
$
65
$
251
$
1,367
$
53
$
1,420
Interest expense:
Interest-bearing deposits:
Savings
$
96
$
73
$
169
$
588
$
(3) $
585
Other interest-bearing deposits
75
23
98
280
(1)
279
Time deposits
39
48
87
183
35
218
Total interest-bearing deposits
210
144
354
1,051
31
1,082
Federal funds purchased
1
3
4
15
(8)
7
Securities sold under agreements to repurchase
2
12
14
39
6
45
Trading liabilities
—
12
12
6
(6)
—
Other short-term borrowings
4
(102)
(98)
15
120
135
Term borrowings
3
(8)
(5)
13
(13)
—
Total change in interest expense - interest-bearing
liabilities
220
61
281
1,139
130
1,269
Net interest income, taxable equivalent
$
(34) $
4
$
(30)
$
228
$
(77) $
151
(a) The changes in interest due to both rate and volume have been allocated to change due to rate and change due to volume in proportion to the absolute
amounts of the changes in each.
(b) Variances are computed on a line-by-line basis and are non-additive.
(c) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, and where applicable, state income taxes.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Provision for Credit Losses
Provision for credit losses includes the provision for loan
and lease losses and the provision for unfunded lending
commitments. The provision for credit losses is the
expense necessary to maintain the ALLL and the accrual
for unfunded lending commitments at levels appropriate
to absorb management’s estimate of credit losses
expected over the life of the loan and lease portfolio and
the portfolio of unfunded loan commitments.
Provision for credit losses decreased to $150 million in
2024, compared to $260 million in 2023. Net charge-offs
were $112 million in 2024 compared to $170 million in
2023. The higher level of provision and net charge-offs in
2023 largely reflects the impact of a $72 million
idiosyncratic credit loss on a single relationship in 2023.
For additional information about general asset quality
trends refer to the Asset Quality section in this MD&A.
Noninterest Income
The following table presents the significant components of noninterest income for each of the periods presented.
Table 7.4
NONINTEREST INCOME
2024 vs. 2023
2023 vs. 2022
(Dollars in millions)
2024
2023
2022
$ Change % Change
$ Change
% Change
Noninterest income
Fixed income
$
187 $
133 $
205 $
54
41 % $
(72)
(35) %
Deposit transactions and cash
management
176
179
171
(3)
(2)
8
5
Brokerage, management fees and
commissions
101
90
92
11
12
(2)
(2)
Card and digital banking fees
77
77
84
—
—
(7)
(8)
Other service charges and fees
51
54
54
(3)
(6)
—
—
Trust services and investment
management
48
47
48
1
2
(1)
(2)
Mortgage banking income
35
23
68
12
52
(45)
(66)
Gain on merger termination
—
225
—
(225)
(100)
225
100
Securities gains (losses), net
(89)
(4)
18
(85)
NM
(22)
(122)
Other income
93
103
75
(10)
(10)
28
37
Total noninterest income
$
679 $
927 $
815 $
(248)
(27) % $
112
14 %
NM – Not meaningful
Noninterest income of $679 million decreased
$248 million from $927 million in 2023, largely driven by
the $225 million gain on merger termination in 2023.
Results in 2024 also reflect higher securities losses due to
an opportunistic restructuring of a portion of the
securities portfolio, partially offset by improvements in
fixed income and mortgage banking income. Noninterest
income represented 21% and 27% of total revenue for
2024 and 2023, respectively.
Fixed income improved $54 million, or 41%, for 2024
compared to 2023. Fixed income product revenue
increased $58 million, largely driven by more favorable
market conditions. Revenue from other products
decreased $4 million, largely driven by lower investment
advisory fees due to the sale of the assets of FHN Financial
Main Street Advisors in fourth quarter 2023 and lower
derivative sales.
Brokerage, management fees and commissions of $101
million increased $11 million, or 12%, as strong market
performance improved wealth management fees.
Mortgage banking income of $35 million increased
$12 million from $23 million in 2023, largely driven by
higher secondary volume.
Securities losses in 2024 reflect the impact of $91 million
in losses on the sale of AFS securities tied to an
opportunistic restructuring of a portion of the securities
portfolio during the fourth quarter of 2024.
Other income included a gain of $9 million on the
disposition of the assets of FHN Financial Main Street
Advisors in 2023.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Noninterest Expense
The following table presents the significant components of noninterest expense for each of the periods presented.
Table 7.5
NONINTEREST EXPENSE
2024 vs. 2023
2023 vs. 2022
(Dollars in millions)
2024
2023
2022
$ Change
% Change
$ Change
% Change
Noninterest expense
Personnel expense
$
1,137 $
1,100 $
1,101
$
37
3 % $
(1)
— %
Net occupancy expense
130
123
128
7
6
(5)
(4)
Computer software
121
111
113
10
9
(2)
(2)
Operations services
94
87
87
7
8
—
—
Deposit insurance expense
64
122
32
(58)
(48)
90
281
Legal and professional fees
64
49
62
15
31
(13)
(21)
Contract employment and outsourcing
51
49
54
2
4
(5)
(9)
Advertising and public relations
48
71
50
(23)
(32)
21
42
Amortization of intangible assets
44
47
51
(3)
(6)
(4)
(8)
Equipment expense
42
42
45
—
—
(3)
(7)
Communications and delivery
32
35
37
(3)
(9)
(2)
(5)
Contributions
18
61
7
(43)
(70)
54
771
Other expense
190
182
186
8
4
(4)
(2)
Total noninterest expense
$
2,035 $
2,079 $
1,953
$
(44)
(2) % $
126
6 %
NM - Not meaningful
Noninterest expense of $2.0 billion decreased $44 million,
or 2%, compared to 2023.
Personnel expense of $1.1 billion increased $37 million
compared to 2023, reflecting higher salaries and benefits
expense and incentive-based compensation, partially
offset by the decrease to merger-related expenses, as
there were no merger and integration expenses in 2024
compared to $51 million in 2023.
Net occupancy expense increased $7 million, computer
software expense increased $10 million and legal and
professional fees increased $15 million in 2024, largely
attributable to strategic investments.
Deposit insurance expense declined $58 million, largely
attributable to $68 million in special assessment expense
in 2023, compared to $9 million in 2024.
Advertising and public relations expense decreased $23
million from 2023, largely attributable to the end of
deposit campaign and brand awareness initiatives that
were launched in 2023.
Contributions decreased $43 million, largely attributable
to a $50 million contribution to the First Horizon
Foundation in 2023 following the termination of the TD
Transaction, compared to a $10 million contribution in
2024.
There were no merger and integration related expenses in
2024 compared to $51 million in 2023. Restructuring
expenses were $14 and $10 million for 2024 and 2023,
respectively.
Income Taxes
FHN recorded income tax expense of $211 million in 2024
compared to $212 million in 2023, resulting in an effective
tax rate of 21.0% and 18.8%, respectively.
FHN’s effective tax rate is favorably affected by recurring
items such as tax credits and other tax benefits from tax
credit investments, tax-exempt income, and bank-owned
life insurance. The effective rate is unfavorably affected by
the non-deductible portions of FDIC premium, executive
compensation, and merger expenses. FHN's effective tax
rate also may be affected by items that may occur in any
given period but are not consistent from period to period,
such as changes in unrecognized tax benefits. The rate
also may be affected by items resulting from business
combinations. During 2024, FHN recognized net favorable
discrete items primarily attributable to the lapse of the
statute of limitations for uncertain positions. In 2023, the
reduction in the rate from the statutory U.S. federal
income tax rate of 21% was primarily related to the
benefit from the settlement of uncertain tax positions
related to prior merger-related items, which was partially
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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64
2024 FORM 10-K ANNUAL REPORT
offset by the additional tax expense from the surrender of
bank-owned life insurance policies.
A deferred tax asset ("DTA") or deferred tax liability is
recognized for the tax consequences of temporary
differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities.
The tax consequence is calculated by applying current
enacted statutory tax rates to these temporary differences
in future years. FHN’s net DTA was $227 million and
$215 million at December 31, 2024 and 2023, respectively.
As of December 31, 2024, FHN had DTA balances related
to federal and state income tax carryforwards of $29
million and $3 million, respectively, which will expire at
various dates. Refer to Note 14 - Income Taxes for
additional information.
FHN’s gross DTA after valuation allowance was $768
million and $737 million as of December 31, 2024 and
2023, respectively. Based on current analysis, FHN
believes that its ability to realize the DTA is more likely
than not. FHN monitors its DTA and the need for a
valuation allowance on a quarterly basis. A significant
adverse change in FHN’s taxable earnings outlook could
result in the need for a valuation allowance.
FHN and its eligible subsidiaries are included in a
consolidated federal income tax return. FHN files separate
returns for subsidiaries that are not eligible to be included
in a consolidated federal income tax return. Based on the
laws of the applicable states where it conducts business
operations, FHN either files consolidated, combined, or
separate returns. The statute of limitations for FHN’s
consolidated federal income tax returns remains open for
tax years 2021 through 2023. On occasion, as federal or
state auditors examine the tax returns of FHN and its
subsidiaries, FHN may extend the statute of limitations for
a reasonable period. Otherwise, the statutes of limitations
remain open only for tax years in accordance with federal
and state statutes. See Note 14 - Income Taxes to the
Consolidated Financial Statements in Part II, Item 8 of this
Report for additional information.
Business Segment Results
During 2024, FHN reorganized its internal management
structure and, accordingly, its segment reporting
structure. Prior to the restructure, FHN's reportable
segments were Regional Banking, Specialty Banking, and
Corporate. As a result of the restructure, FHN revised its
reportable segments to include: (1) Commercial,
Consumer & Wealth, (2) Wholesale, and (3) Corporate.
Segment results for years prior to 2024 have been recast
to adjust for the realignment of the segment reporting
structure. See Note 19 - Business Segment Information to
the Consolidated Financial Statements in Part II, Item 8 of
this Report for additional disclosures related to FHN's
segments.
2024 vs. 2023
Commercial, Consumer & Wealth
The Commercial, Consumer & Wealth segment generated
pre-tax income of $1.4 billion in 2024 compared to
$1.5 billion in 2023, a decrease of $83 million.
Net interest income of $2.5 billion decreased $151 million,
reflecting higher funding costs, partially offset by the
benefit of higher interest rates and average loan balances.
Provision for credit losses decreased $102 million, largely
reflecting the impact of a $72 million credit loss on a single
relationship in 2023.
Noninterest income increased $13 million, largely driven
by an $11 million increase in brokerage, management fees
and commissions as strong market performance improved
wealth management fees.
Noninterest expense increased $47 million, largely driven
by higher personnel expense and other expenses related
to strategic investments.
Wholesale
Pre-tax income of $122 million in the Wholesale segment
increased $56 million compared to 2023, largely reflecting
a $67 million increase in revenue tied to improvements in
fixed income and mortgage banking income. Fixed income
of $187 million increased $53 million, largely driven by
more favorable market conditions. Mortgage banking
income of $33 million increased $12 million, largely driven
by higher secondary volume.
Noninterest expense of $299 million increased
$23 million, largely due to an increase in incentive-based
compensation expense tied to the improvement in fixed
income and mortgage banking income.
Corporate
Pre-tax loss for the Corporate segment was $546 million
for 2024 compared to $450 million for 2023.
Net interest income (expense) improved $111 million
compared to 2023, primarily driven by the impact of the
funds transfer pricing methodology.
Noninterest income decreased $317 million, largely
attributable to the $225 million gain on merger
termination in 2023 and $91 million in net securities losses
tied to an opportunistic restructuring of a portion of the
AFS securities portfolio in 2024.
Noninterest expense of $319 million for 2024 decreased
$114 million compared to 2023, largely driven by lower
FDIC special assessment expense, lower contributions to
the First Horizon Foundation, and a decline in advertising
and public relations expense. Restructuring expenses
totaled $14 million and $10 million for 2024 and 2023,
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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65
2024 FORM 10-K ANNUAL REPORT
respectively. There were no merger and integration
expenses in 2024 compared to $51 million in 2023.
2023 vs. 2022
Commercial, Consumer & Wealth
The Commercial, Consumer & Wealth segment generated
pre-tax income of $1.5 billion in 2023 compared to $1.3
billion in 2022, an increase of $164 million, driven by a
$400 million increase in revenue largely tied to higher net
interest income, partially offset by a $175 million increase
in provision for credit losses and a $61 million increase in
noninterest expense.
Net interest income of $2.7 billion increased $429 million,
reflecting the benefit of higher interest rates and average
loan balances, partially offset by higher funding costs.
The increase in the provision for credit losses largely
reflected loan growth, macroeconomic uncertainty, and
modest grade migration.
The increase in noninterest expense was largely driven by
higher personnel, deposit insurance, advertising and
public relations, and technology-related expenses.
Wholesale
Pre-tax income of $66 million in the Wholesale segment
decreased $91 million compared to 2022, largely
reflecting a $155 million decrease in revenue tied to lower
fixed income, mortgage banking income, and net interest
income. The decrease in revenue was partially offset by a
$68 million decrease in noninterest expense.
Income from the fixed income business of $134 million
decreased $71 million, largely driven by less favorable
market conditions.
Mortgage banking income of $21 million decreased $25
million largely driven by lower origination volume given
the impact of higher long-term rates. Results in 2022 also
reflected a $12 million gain on sale of mortgage servicing
rights.
Noninterest expense of $276 million decreased $68
million, largely due to lower incentive-based
compensation expense tied to the decline in fixed income
and mortgage banking income.
Corporate
Pre-tax loss for the Corporate segment was $450 million
for 2023 compared to $346 million for 2022.
Noninterest income increased $226 million, largely driven
by the gain on merger termination. Noninterest income
results also reflect lower securities gains of $22 million in
2023 and a $22 million gain on sale of the title business in
2022.
Noninterest expense of $433 million for 2023 increased
$133 million compared to 2022, largely driven by higher
deposit insurance expense, a $50 million contribution to
the First Horizon Foundation, and higher personnel
expense. Merger and integration expense was $51 million
in 2023 compared to $136 million in 2022.
Results of Operations—2023 compared to 2022
For a description of FHN's results of operations for 2023, see Results of Operations - 2023 compared to 2022 in Item 7 in the
2023 Form 10-K which is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Analysis of Financial Condition
Investment Securities
The following table presents the carrying value of securities by category as of December 31 for the years indicated.
Table 7.6
COMPOSITION OF SECURITIES PORTFOLIO
2024
2023
(Dollars in millions)
Balance
Mix
Balance
Mix
Securities available for sale at fair value:
Government agency issued MBS and CMO
$
6,469
70 % $
6,630
68 %
Other U.S. government agencies (a)
1,073
12
1,172
12
States and municipalities
354
4
589
6
Total securities available for sale
$
7,896
86 % $
8,391
86 %
Securities held to maturity at amortized cost:
Government agency issued MBS and CMO
$
1,270
14 % $
1,323
14 %
Total investment securities
$
9,166
100 % $
9,714
100 %
(a) Includes securities issued by government sponsored entities which are not backed by the full faith and credit of the U.S. Government.
FHN’s investment securities portfolio consists principally
of debt securities available for sale. FHN maintains a
securities portfolio consisting primarily of bank-eligible
GSE and GNMA issued mortgage-backed securities and
collateralized mortgage obligations. The securities
portfolio provides a source of income and liquidity and is
an important tool used to balance the interest rate risk of
the loan and deposit portfolios. The securities portfolio is
periodically evaluated in light of established ALM
objectives, changing market conditions that could affect
the profitability of the portfolio, the regulatory
environment, and the level of interest rate risk to which
FHN is exposed. These evaluations may result in steps
taken to adjust the overall balance sheet positioning.
Investment securities were $9.2 billion and $9.7 billion on
December 31, 2024 and 2023, representing 11% and 12%
of total assets, respectively. During the fourth quarter of
2024, as part of an opportunistic restructuring of a portion
of the securities portfolio, FHN sold $1.2 billion of AFS
securities, which resulted in realized losses of $91 million
for the year ended December 31, 2024. See Note 2 -
Investment Securities to the Consolidated Financial
Statements in Part II, Item 8 of this Report for more
information about the securities portfolio.
The following table presents an analysis of the amortized
cost, remaining contractual maturities, and weighted-
average yields by contractual maturity for the debt
securities portfolio.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Table 7.7
CONTRACTUAL MATURITIES OF INVESTMENT SECURITIES
As of December 31, 2024
After 1 year
After 5 years
Within 1 year
Within 5 years
Within 10 years
After 10 years
Total
(Dollars in millions)
Amount
Yield
(b)
Amount
Yield
(b)
Amount
Yield
(b)
Amount
Yield
(b)
Amount
Yield
(b)
Securities available for sale:
Government agency issued MBS
and CMO (a)
$
99
1.64 % $ 1,003
3.36 % $
610
2.63 % $ 5,590
2.65 % $ 7,302
2.45 %
Other U.S. government agencies
1
1.70
42
1.44
171
2.10
1,020
2.97
1,234
3.09
States and municipalities
23
0.42
34
1.70
99
2.57
238
2.88
394
2.75
Total securities available for sale $
123
1.41 % $ 1,079
3.23 % $
880
2.52 % $ 6,848
2.71 % $ 8,930
2.55 %
Securities held to maturity:
Government agency issued MBS
and CMO (a)
$
—
— % $
264
3.45 % $
55
3.71 % $
951
2.60 % $ 1,270
2.88 %
Total securities held to maturity
$
—
— % $
264
3.45 % $
55
3.71 % $
951
2.60 % $ 1,270
2.88 %
(a) Represents government agency-issued mortgage-backed securities and collateralized mortgage obligations which, when adjusted for early paydowns,
have an estimated average life of 5.7 years.
(b) Weighted average yields were calculated using amortized cost on a fully taxable equivalent basis, assuming a 24% tax rate where applicable.
Loans and Leases
Period-end loans and leases increased $1.3 billion, or 2%,
to $62.6 billion as of December 31, 2024. Commercial
loans and leases increased $1.0 billion, primarily from
growth in loans to mortgage companies and commercial
real estate, partially offset by a decline in other C&I loans.
Consumer loans increased $273 million, primarily from
growth in real estate installment loans, partially offset by
declines in HELOCs and consumer construction loans.
Average loans and leases increased to $62.0 billion in 2024
compared to $60.2 billion in 2023, primarily driven by a
$1.3 billion increase in commercial loans and a $582
million increase in consumer loans.
The following table provides detail regarding FHN's
period-end loans and leases.
Table 7.8
LOANS AND LEASES
(Dollars in millions)
2024
Percent
of total
2024
Growth
Rate
2023
Percent
of total
2023
Growth
Rate
2022
Percent
of total
2022
Growth
Rate
Commercial:
Commercial, financial,
and industrial (a)
$
33,428
53 %
2 % $
32,633
53 %
3 % $
31,781
55 %
2 %
Commercial real estate
14,421
23
1
14,216
23
7
13,228
23
9
Total commercial
47,849
76
2
46,849
76
4
45,009
78
4
Consumer:
Consumer real estate
14,047
23
3
13,650
23
11
12,253
21
14
Credit card and other
669
1
(16)
793
1
(6)
840
1
(8)
Total consumer
14,716
24
2
14,443
24
10
13,093
22
12
Total loans and leases
$
62,565
100 %
2 % $
61,292
100 %
5 % $
58,102
100 %
6 %
(a) Includes equipment financing loans and leases.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
The following table provides detail of the contractual maturities of loans and leases at December 31, 2024.
Table 7.9
CONTRACTUAL MATURITIES OF LOANS AND LEASES
(Dollars in millions)
Within 1 Year
After 1 Year
Within 5 Years
After 5 Years
Within 15
Years
After 15 Years
Total
Commercial, financial, and industrial
$
8,139
$
17,476
$
7,043
$
770
$
33,428
Commercial real estate
3,871
8,401
2,096
53
14,421
Consumer real estate
55
181
1,175
12,636
14,047
Credit card and other
235
255
66
113
669
Total loans and leases
$
12,300
$
26,313
$
10,380
$
13,572
$
62,565
For maturities over one year at fixed interest rates:
Commercial, financial, and industrial
$
4,945
$
4,763
$
724
$
10,432
Commercial real estate
2,620
829
36
3,485
Consumer real estate
144
1,017
3,178
4,339
Credit card and other
70
33
91
194
Total loans and leases at fixed interest rates
$
7,779
$
6,642
$
4,029
$
18,450
For maturities over one year at floating interest rates:
Commercial, financial, and industrial
$
12,531
$
2,280
$
46
$
14,857
Commercial real estate
5,781
1,267
17
7,065
Consumer real estate
37
158
9,458
9,653
Credit card and other
185
33
22
240
Total loans and leases at floating interest rates
$
18,534
$
3,738
$
9,543
$
31,815
Total maturities over one year
$
26,313
$
10,380
$
13,572
$
50,265
Because of various factors, the contractual maturities of
consumer loans are not indicative of the actual lives of
such loans. A significant component of FHN’s loan
portfolio consists of consumer real estate loans, a majority
of which are home equity lines of credit and home equity
installment loans. These loans have an initial period where
the borrower is only required to pay the periodic interest.
After the interest-only period, the loan will require the
payment of both principal and interest over the remaining
term. Numerous factors can contribute to the actual life of
a home equity line or installment loan. As a result, the
actual average life of home equity lines and loans is
difficult to predict, and changes in any of these factors
could result in changes in projections of average lives.
Loans Held for Sale
Loans held for sale primarily consists of government
guaranteed loans under SBA and USDA lending programs.
Smaller amounts of other consumer and home equity
loans are also included in loans HFS. Additionally, FHN's
mortgage banking operations include origination and
servicing of residential first lien mortgages that conform
to standards established by GSEs that are major investors
in U.S. home mortgages but can also consist of junior lien
and jumbo loans secured by residential property. These
non-conforming loans are primarily sold to private
companies that are unaffiliated with the GSEs on a
servicing-released basis. For further detail, see Note 7 -
Mortgage Banking Activity to the Consolidated Financial
Statements in Part II, Item 8 of this Report.
On December 31, 2024 and 2023, loans HFS were $551
million and $502 million, respectively. Held-for-sale
consumer mortgage loans secured by residential real
estate in process of foreclosure totaled $1 million and
$2 million for December 31, 2024 and 2023, respectively.
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Asset Quality
Loan and Lease Portfolio Composition
FHN groups its loans into portfolio segments based on
internal classifications reflecting the manner in which the
ALLL is established and how credit risk is measured,
monitored, and reported. From time to time, and if
conditions are such that certain subsegments are uniquely
affected by economic or market conditions or are
experiencing greater deterioration than other
components of the loan portfolio, management may
determine the ALLL at a more granular level. Commercial
loans are composed of C&I loans and leases and CRE
loans. Consumer loans are composed of consumer real
estate loans and credit card and other loans. FHN had a
concentration of residential real estate loans of 23% of
total loans as of both December 31, 2024 and 2023.
Industry concentrations are discussed under the C&I
heading below.
Underwriting Policies and Procedures
The following sections describe each portfolio as well as
general underwriting procedures for each. As economic
and real estate conditions develop, enhancements to
underwriting and credit policies and procedures may be
necessary or desirable. Loan policies and procedures for
all portfolios are reviewed by credit risk working groups
and management risk committees comprised of business
line managers and credit administration professionals as
well as by various other reviewing bodies within FHN.
Policies and procedures are approved by key executives
and/or senior managers leading the applicable credit risk
working groups as well as by management risk
committees.
The credit risk working groups and management risk
committees strive to ensure that the approved policies
and procedures address the associated risks and establish
reasonable underwriting criteria that appropriately
mitigate risk. Policies and procedures are reviewed,
revised and re-issued periodically at established review
dates or earlier if changes in the economic environment,
portfolio performance, the size of portfolio or industry
concentrations, or regulatory guidance warrant an earlier
review.
Commercial Loan and Lease Portfolios
FHN’s commercial loan approval process grants lending
authority based upon job description, experience, and
performance. The lending authority is delegated to the
business line (Market Managers, Departmental Managers,
Regional Presidents, Relationship Managers ("RM") and
Portfolio Managers ("PM") and to Credit Officers. While
individual limits vary, the predominant amount of
approval authority is vested with the Credit function.
Portfolio, industry, and borrower concentration limits for
the various portfolios are established by executive
management and approved by the Risk Committee of the
Board.
FHN’s commercial lending process incorporates an RM
and a PM for most commercial credits. The RM is primarily
responsible for communications with the borrower and
maintaining the relationship, while the PM is responsible
for assessing the credit quality of the borrower, beginning
with the initial underwriting and continuing through the
servicing period. Other specialists and the assigned RM/
PM are organized into units called relationship teams.
Relationship teams are constructed with specific job
attributes that facilitate FHN’s ability to identify, mitigate,
document, and manage ongoing risk. PMs and credit
analysts provide enhanced analytical support during loan
origination and servicing, including monitoring of the
financial condition of the borrower and tracking
compliance with loan agreements. Loan closing officers
and the construction loan management unit specialize in
loan documentation and the management of the
construction lending process. FHN strives to identify
problem assets early through comprehensive policies and
guidelines, targeted portfolio reviews, more frequent
servicing on lower rated borrowers, and an emphasis on
frequent grading. For smaller commercial credits,
generally $5 million or less, and income-producing CRE
credits greater than $10 million to non-professional real
estate developers and smaller professional real estate
investors/developers, FHN utilizes a centralized
underwriting unit in order to originate and grade these
credits more efficiently and consistently.
C&I
C&I loans are the largest component of the loan and lease
portfolio, comprising 53% of total loans and leases at both
December 31, 2024 and 2023. The C&I portfolio is
comprised of loans used for general business purposes.
Products offered in the C&I portfolio include term loan
financing, direct financing and sales-type leases, lines of
credit, and trade credit enhancement through letters of
credit.
Income-producing C&I loans are underwritten in
accordance with a well-defined credit origination process.
This process includes applying minimum underwriting
standards as well as separation of origination and credit
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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approval roles on transaction sizes over PM authorization
limits. Underwriting typically includes due diligence of the
borrower and the applicable industry of the borrower,
analysis of the borrower’s available financial information,
identification and analysis of the various sources of
repayment and identification of the primary risk
attributes. Stress testing the borrower’s financial capacity,
adherence to loan documentation requirements, and
assigning credit risk grades using internally developed
scorecards are also used to help quantify the risk when
appropriate. Underwriting parameters also include loan-
to-value ratios which vary depending on collateral type,
use of guaranties, loan agreement requirements, and
other recommended terms such as equity requirements,
amortization, and maturity. Approval decisions also
consider various financial ratios and performance
measures of the borrowers, such as cash flow and balance
sheet leverage, liquidity, coverage of fixed charges, and
working capital. Additionally, approval decisions consider
the capital structure of the borrower, sponsorship, and
quality/value of collateral. Generally, guideline and policy
exceptions are identified and mitigated during the
approval process. Pricing of C&I loans is based upon tenor
and the determined credit risk specific to the individual
borrower. Historically, the majority of these loans typically
have variable rates tied to SOFR, as the primary
replacement index for LIBOR, or prime rate of interest plus
or minus the appropriate margin.
The largest geographical concentrations of balances as of
December 31, 2024 were in Tennessee (20%), Florida
(12%), Texas (11%), North Carolina (7%), California (6%),
and Louisiana (6%) with no other state representing 5% or
more of the portfolio.
The following table provides the composition of the C&I
portfolio by industry as of December 31, 2024 and 2023.
For purposes of this disclosure, industries are determined
based on the NAICS industry codes used by Federal
statistical agencies in classifying business establishments
for the collection, analysis, and publication of statistical
data related to the U.S. business economy.
Table 7.10a
C&I PORTFOLIO BY INDUSTRY
December 31, 2024
December 31, 2023
(Dollars in millions)
Amount
Percent
Amount
Percent
Industry:
Real estate and rental and leasing (a)
$
3,888
12 % $
3,858
12 %
Finance and insurance
3,666
11
4,083
12
Loans to mortgage companies
3,471
10
2,024
6
Health care and social assistance
2,576
8
2,676
8
Wholesale trade
2,433
7
2,147
7
Manufacturing
2,312
7
2,267
7
Accommodation and food service
2,198
7
2,288
7
Retail trade
1,756
5
1,866
6
Transportation and warehousing
1,616
5
1,580
5
Energy
1,273
4
1,293
4
Other (professional, construction, education, etc.) (b)
8,239
24
8,551
26
Total C&I loan portfolio
$
33,428
100 % $
32,633
100 %
(a) Leasing, rental of real estate, equipment, and goods.
(b) Industries in this category each comprise less than 5%.
Industry Concentrations
Loan concentrations are considered to exist for a financial
institution when there are loans to numerous borrowers
engaged in similar activities that would cause them to be
similarly impacted by economic or other conditions. Loans
to mortgage companies and borrowers in the finance and
insurance industry were 21% and 18% of FHN’s C&I loan
portfolio as of December 31, 2024 and 2023, respectively,
and as a result could be affected by items that uniquely
impact the financial services industry. Loans to borrowers
in the real estate and rental and leasing industry were
12% of FHN's C&I portfolio as of both December 31, 2024
and 2023. As of December 31, 2024, FHN did not have any
other concentrations of C&I loans in any single industry of
10% or more of total loans.
Real Estate and Rental and Leasing
Loans to borrowers in the real estate and rental and
leasing industry were 12% of FHN's C&I portfolio as of
both December 31, 2024 and 2023. This portfolio primarily
consists of equipment financing loans and leases to clients
across FHN's footprint in a broad range of industries and
asset types. This portfolio also includes a smaller balance
of loans and leases for solar and wind generating facilities.
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Finance and Insurance
The finance and insurance component represented 11%
and 12% of the C&I portfolio as of December 31, 2024 and
2023, respectively, and includes TRUPs (i.e., long-term
unsecured loans to bank and insurance-related
businesses), loans to bank holding companies, and asset-
based lending to consumer finance companies. As of
December 31, 2024, asset-based lending to consumer
finance companies represents approximately $1.9 billion
of the finance and insurance component.
Loans to Mortgage Companies
Loans to mortgage companies were 10% and 6% of the
C&I portfolio as of December 31, 2024 and 2023,
respectively. This portfolio includes commercial lines of
credit to qualified mortgage companies primarily for the
temporary warehousing of eligible mortgage loans prior to
the borrower's sale of those mortgage loans to third party
investors. Balances in this portfolio generally fluctuate
with mortgage rates and seasonal factors. Generally, new
loan originations to mortgage lenders increase when there
is a decline in mortgage rates and decrease when rates
rise. In periods of economic uncertainty, this trend may
not occur even if interest rates are declining. In 2024,
approximately 78% of the loan originations were home
purchases and 22% were refinance transactions.
Commercial Real Estate
The CRE portfolio totaled $14.4 billion as of December 31,
2024, a $205 million, or 1%, increase compared to
December 31, 2023, largely driven by growth in multi-
family loans, partially offset by decreases across multiple
other property types.
The CRE portfolio includes both financings for commercial
construction and non-construction loans. This portfolio
contains loans, draws on lines, and letters of credit to
commercial real estate developers for the construction
and mini-permanent financing of income-producing real
estate.
Residential CRE loans include loans to residential builders
and developers for the purpose of constructing single-
family homes, condominiums, and town homes, and on a
limited basis, for developing residential subdivisions. The
residential CRE class is not currently an area of growth for
the bank.
Income-producing CRE loans
Income-producing CRE loans are underwritten in
accordance with credit policies and underwriting
guidelines that are formally reviewed at a minimum of
once every three years and revised as necessary based on
market conditions. Loans are underwritten based upon
project type, size, location, sponsorship, and other
market-specific data. Generally, minimum requirements
for equity, debt service coverage ratios, and level of pre-
leasing activity are established based on perceived risk in
each subcategory. Loan-to-value limits are set below
regulatory prescribed ceilings and generally range
between 50% and 80% depending on the underlying
product type. Term and amortization requirements are set
based on prudent standards for interim real estate
lending. Equity requirements are established based on the
quality and liquidity of the primary source of repayment.
For example, more equity would be required for a
speculative construction project or land loan than for a
property fully leased to a credit tenant or a roster of
tenants. Typically, a borrower must have at least 15% of
cost invested in a project before FHN will provide loan
funding. Income properties are generally required to
achieve a debt service coverage ratio greater than or
equal to 1.25x at inception or stabilization of the project
based on loan amortization and a minimum underwriting
interest rate. Some product types that possess a greater
risk profile require a higher level of equity, as well as a
higher debt service coverage ratio threshold. A proprietary
minimum underwriting interest rate is used to calculate
compliance with underwriting standards. Generally,
specific levels of pre-leasing must be met for construction
loans on income properties, where applicable. A global
cash flow analysis is typically performed at the sponsor
level.
The credit administration and ongoing monitoring consists
of multiple internal control processes. Construction loans
are closed by a centralized control unit and construction
loan management is administered centrally for loans $3
million and over. Underwriters and credit approval
personnel stress the borrower’s/project’s financial
capacity utilizing numerous attributes such as interest
rates, vacancy, capitalization rates, and debt service
coverage ratios under various scenarios. Key information
is captured from the various portfolios and then stressed
at the aggregate level. Results are utilized to assist with
the assessment of the adequacy of the ALLL and to steer
portfolio management strategies.
The largest geographical concentrations of CRE balances
as of December 31, 2024 were in Florida (26%), Texas
(13%), North Carolina (13%), Georgia (10%), Tennessee
(9%), and Louisiana (7%), with no other state representing
more than 5% of the portfolio.
The following table represents subcategories of CRE loans
by property type.
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Table 7.10b
CRE PORTFOLIO BY PROPERTY TYPE
December 31, 2024
December 31, 2023
Amount
Percent
Amount
Percent
Property Type:
Multi-family
$
5,122
36 % $
4,409
31 %
Office
2,785
19
2,782
20
Retail
2,167
15
2,310
16
Industrial
2,130
15
2,236
16
Hospitality
1,332
9
1,467
10
Land/land development
249
2
307
2
Other CRE (a)
636
4
705
5
Total CRE loan portfolio
$
14,421
100 % $
14,216
100 %
(a) Property types in this category each comprise less than 5%.
Consumer Loan Portfolios
Consumer Real Estate
The consumer real estate portfolio is primarily composed
of home equity lines and installment loans. This portfolio
totaled $14.0 billion and $13.7 billion as of December 31,
2024 and 2023, respectively. The largest geographical
concentrations of balances in the consumer real estate
portfolio as of December 31, 2024 were in Florida (29%),
Tennessee (22%), Texas (12%), Louisiana (8%), North
Carolina (7%), Georgia (6%), and New York (5%), with no
other state representing 5% or more of the portfolio.
As of December 31, 2024, approximately 89% of the
consumer real estate portfolio was in a first lien position.
At origination, the weighted average FICO score of this
portfolio was 759 and the refreshed FICO scores averaged
756 as of December 31, 2024, no change from those as of
December 31, 2023. Generally, performance of this
portfolio is affected by life events that affect borrowers’
finances, the level of unemployment, and home prices.
As of December 31, 2024 and 2023, FHN had held-to-
maturity consumer mortgage loans secured by real estate
totaling $26 million and $29 million, respectively, that
were in the process of foreclosure.
HELOCs comprised $2.1 billion and $2.2 billion of the
consumer real estate portfolio for December 31, 2024 and
2023, respectively. FHN’s HELOCs typically have a 5 or 10
year draw period followed by a 10 or 20 year repayment
period, respectively. During the draw period, a borrower is
able to draw on the line and is only required to make
interest payments. The line is frozen if a borrower
becomes past due on payments. Once the draw period has
concluded, the line is closed and the borrower is required
to make both principal and interest payments monthly
until the loan matures. The principal payment generally is
fully amortizing, but payment amounts will adjust when
variable rates reset to reflect changes in the prime rate.
As of December 31, 2024, approximately 95% of FHN's
HELOCs were in the draw period compared to 94% at the
end of 2023. Based on when draw periods are scheduled
to end per the line agreements, it is expected that $598
million, or 30%, of HELOCs currently in the draw period
will enter the repayment period during the next 60
months, based on current terms. Generally, delinquencies
for HELOCs that have entered the repayment period are
initially higher than HELOCs still in the draw period
because of the increased minimum payment requirement.
However, over time, performance of these loans usually
begins to stabilize. HELOCs nearing the end of the draw
period are closely monitored.
The following table shows the HELOCs currently in the
draw period and expected timing of conversion to the
repayment period.
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2024 FORM 10-K ANNUAL REPORT
Table 7.11
HELOC DRAW TO REPAYMENT SCHEDULE
December 31, 2024
December 31, 2023
(Dollars in millions)
Repayment
Amount
Percent
Repayment
Amount
Percent
Months remaining in draw period:
0-12
$
79
4 % $
30
1 %
13-24
90
5
90
4
25-36
134
7
110
5
37-48
147
7
163
8
49-60
148
7
178
9
>60
1,404
70
1,530
73
Total
$
2,002
100 % $
2,101
100 %
Underwriting
For loans in this portfolio, underwriting decisions are
made through a centralized loan underwriting center. To
obtain a consumer real estate loan, the loan applicant(s)
must first meet a minimum qualifying FICO score.
Minimum FICO score requirements are established by
management for both loans secured by real estate as well
as non-real estate loans. Management also establishes
maximum loan amounts, loan-to-value ratios, and debt-
to-income ratios for each consumer real estate product.
Applicants must have the financial capacity (or available
income) to service the debt by not exceeding a calculated
debt-to-income ratio. The amount of the loan is limited to
a percentage of the lesser of the current appraised value
or sales price of the collateral. Identified guideline and
policy exceptions require established mitigating factors
that have been approved for use by Credit.
HELOC interest rates are variable and adjust with
movements in the index rate stated in the loan
agreement. Such loans can have elevated risk of default,
particularly in a rising interest rate environment,
potentially stressing borrower capacity to repay the loan
at the higher interest rate. FHN’s current underwriting
practice requires HELOC borrowers to qualify based on a
sensitized interest rate (above the current note rate), fully
amortized payment methodology. FHN’s underwriting
guidelines require borrowers to qualify at an interest rate
that is 200 basis points above the note rate. This mitigates
risk to FHN in the event of a sharp rise in interest rates
over a relatively short time horizon.
HELOC Portfolio Risk Management
FHN performs continuous HELOC account reviews to
identify higher-risk home equity lines and initiate
preventative and corrective actions. The reviews consider
a number of account activity patterns and characteristics
such as the number of times delinquent within recent
periods, changes in credit bureau score since origination,
score degradation, performance of the first lien, and
account utilization. In accordance with FHN’s
interpretation of regulatory guidance, FHN may block
future draws on accounts in order to mitigate risk of loss
to FHN.
Credit Card and Other
The credit card and other consumer loan portfolio totaled
$669 million as of December 31, 2024 and $793 million as
of December 31, 2023. This portfolio primarily consists of
consumer-related credits, including home equity and
other personal consumer loans, credit card receivables,
and automobile loans. The $124 million decrease was
driven by net repayments.
Allowance for Credit Losses
The ACL is maintained at a level sufficient to provide
appropriate reserves to absorb estimated future credit
losses in accordance with GAAP. For additional
information regarding the ACL, see Notes 1 and 4 to the
Consolidated Financial Statements in Part II, Item 8 of this
Report.
The ALLL increased to $815 million as of December 31,
2024, or 1.30% of total loans and leases, compared to
$773 million, or 1.26% of total loans and leases, at the end
of 2023. The ACL to total loans and leases ratio increased
to 1.43% as of December 31, 2024 from 1.40% as of
December 31, 2023. The increase in the ALLL balance
reflects negative grade migration in the commercial loan
portfolio.
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2024 FORM 10-K ANNUAL REPORT
Consolidated Net Charge-offs
Net charge-offs were $112 million in 2024 compared to
$170 million in 2023. As a percentage of average total
loans and leases, net charge-offs decreased 10 basis
points from 2023.
Prior year net charge-offs were elevated primarily as the
result of a $72 million idiosyncratic charge-off related to
one client relationship.
Table 7.12
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES AND CHARGE-OFFS
December 31,
(Dollars in millions)
2024
2023
2022
Allowance for loan and lease losses
C&I
$
345
$
339
$
308
CRE
227
172
146
Consumer real estate
221
233
200
Credit card and other
22
29
31
Total allowance for loan and lease losses
$
815
$
773
$
685
Reserve for remaining unfunded commitments
C&I
$
57
$
49
$
55
CRE
11
22
22
Consumer real estate
11
12
10
Total reserve for remaining unfunded commitments
$
79
$
83
$
87
Allowance for credit losses
C&I
$
402
$
388
$
363
CRE
238
194
168
Consumer real estate
232
245
210
Credit card and other
22
29
31
Total allowance for credit losses
$
894
$
856
$
772
Period-end loans and leases
C&I
$
33,428
$
32,633
$
31,781
CRE
14,421
14,216
13,228
Consumer real estate
14,047
13,650
12,253
Credit card and other
669
793
840
Total period-end loans and leases
$
62,565
$
61,292
$
58,102
ALLL / loans and leases %
C&I
1.03 %
1.04 %
0.97 %
CRE
1.57
1.21
1.10
Consumer real estate
1.57
1.71
1.63
Credit card and other
3.28
3.63
3.72
Total ALLL / loans and leases %
1.30 %
1.26 %
1.18 %
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2024 FORM 10-K ANNUAL REPORT
ACL / loans and leases %
C&I
1.20 %
1.19 %
1.14 %
CRE
1.65
1.36
1.27
Consumer real estate
1.65
1.79
1.71
Credit card and other
3.28
3.63
3.72
Total ACL / loans and leases %
1.43 %
1.40 %
1.33 %
Net charge-offs (recoveries)
C&I
$
47
$
142
$
53
CRE
55
15
—
Consumer real estate
(6)
(5)
(14)
Credit card and other
16
18
20
Total net charge-offs
$
112
$
170
$
59
Average loans and leases
C&I
$
32,871
$
32,390
$
30,969
CRE
14,558
13,785
12,722
Consumer real estate
13,836
13,179
11,397
Credit card and other
740
815
864
Total average loans and leases
$
62,005
$
60,169
$
55,952
Charge-off %
C&I
0.14 %
0.44 %
0.17 %
CRE
0.38
0.10
—
Consumer real estate
NM
NM
NM
Credit card and other
2.11
2.18
2.39
Total charge-off %
0.18 %
0.28 %
0.11 %
ALLL / net charge-offs
C&I
738 %
239 %
578 %
CRE
411
1,097
NM
Consumer real estate
NM
NM
NM
Credit card and other
141
162
151
Total ALLL / net charge-offs
731 %
455 %
1,155 %
NM - not meaningful
Nonperforming Assets
Nonperforming loans are loans placed on nonaccrual if it
becomes evident that full collection of principal and
interest is at risk, if impairment has been recognized as a
partial charge-off of principal balance due to insufficient
collateral value and past due status, or (on a case-by-case
basis) if FHN continues to receive payments but there are
other borrower-specific issues. Included in nonaccrual are
loans for which FHN continues to receive payments,
including residential real estate loans where the borrower
has been discharged of personal obligation through
bankruptcy. NPAs consist of nonperforming loans and
leases and OREO (excluding OREO from government-
insured mortgages).
Total NPAs (including NPLs HFS) increased $139 million to
$608 million as of December 31, 2024, largely driven by an
increase in nonaccrual CRE loans, partially offset by
decreases in nonaccrual C&I and nonaccrual consumer
real estate loans. The increase in nonaccrual CRE loans
was largely driven by multi-family and office property
types. Multi-family has been affected by strong supply,
which is expected to be absorbed at a modestly slower
rate than experienced in recent years. Office performance
has been strong for the medical segment, while traditional
office has been impacted by the continued influence of
remote work on occupancy levels. These portfolios
continue to maintain strong underwriting and client
selection. In addition, over 60% of the commercial
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nonaccrual loan balance was current on payments as of
December 31, 2024. The vast majority of NPAs have
individual impairment reviews with no specific reserve
required. The nonperforming loans and leases ratio
increased 21 basis points to 0.96% as of December 31,
2024.
Table 7.13
NONPERFORMING ASSETS
December 31,
(Dollars in millions)
2024
2023
2022
Nonperforming loans and leases
C&I
$
173
$
184
$
153
CRE
294
136
9
Consumer real estate
133
140
152
Credit card and other
2
2
2
Total nonperforming loans and leases (a) (c)
$
602
$
462
$
316
Nonperforming loans held for sale (a)
$
3
$
3
$
8
Foreclosed real estate and other assets (b)
3
4
3
Total nonperforming assets (a) (b)
$
608
$
469
$
327
Nonperforming loans and leases to total loans and leases
C&I
0.52 %
0.57 %
0.48 %
CRE
2.04
0.96
0.07
Consumer real estate
0.95
1.02
1.24
Credit card and other
0.23
0.30
0.27
Total NPL %
0.96 %
0.75 %
0.54 %
ALLL / NPLs
C&I
199 %
184 %
202 %
CRE
77
126
1,554
Consumer real estate
167
167
131
Credit card and other
1,438
1,202
1,364
Total ALLL / NPLs
136 %
167 %
217 %
(a) Excludes loans and leases that are 90 or more days past due and still accruing interest.
(b) Excludes government-insured foreclosed real estate. There were no foreclosed real estate balances from GNMA loans at December 31, 2024,
2023, and 2022.
(c) Under the original terms of the loans, estimated interest income would have been approximately $43 million, $35 million, and $21 million
during 2024, 2023, and 2022, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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The following table provides nonperforming assets by business segment.
Table 7.14
NONPERFORMING ASSETS BY SEGMENT
December 31,
(Dollars in millions)
2024
2023
2022
Nonperforming loans and leases (a) (b)
Commercial, Consumer & Wealth
$
572
$
401
$
227
Wholesale
12
38
60
Corporate
18
23
29
Consolidated
$
602
$
462
$
316
Foreclosed real estate (c)
Commercial, Consumer & Wealth
$
1
$
1
$
—
Wholesale
1
2
2
Corporate
1
1
1
Consolidated
$
3
$
4
$
3
Nonperforming Assets (a) (b) (c)
Commercial, Consumer & Wealth
$
573
$
402
$
227
Wholesale
13
40
62
Corporate
19
24
30
Consolidated
$
605
$
466
$
319
Nonperforming loans and leases to total loans and leases
Commercial, Consumer & Wealth
1.01 %
0.71 %
0.43 %
Wholesale
0.20
0.87
1.27
Corporate
5.46
4.68
6.02
Consolidated
0.96 %
0.75 %
0.54 %
NPA % (d)
Commercial, Consumer & Wealth
1.02 %
0.71 %
0.43 %
Wholesale
0.23
0.93
1.33
Corporate
5.65
4.81
6.28
Consolidated
0.97 %
0.76 %
0.55 %
(a) Excludes loans and leases that are 90 or more days past due and still accruing interest.
(b) Excludes loans classified as held for sale.
(c) Excludes foreclosed real estate and receivables related to government-insured mortgages. There were no foreclosed real estate balances from GNMA
loans at December 31, 2024, 2023, and 2022.
(d) Ratio is non-performing assets to total loans and leases plus foreclosed real estate.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Past Due Loans and Potential Problem Assets
Past due loans are loans contractually past due as to
interest or principal payments, but which have not yet
been put on nonaccrual status.
Loans 90 days or more past due and still accruing were
$21 million as of both December 31, 2024 and 2023. Loans
30 to 89 days past due and still accruing were $89 million
as of December 31, 2024 compared to $85 million as of
December 31, 2023, largely reflecting higher consumer
real estate past due loan balances, partially offset by
lower past due CRE loan balances.
Table 7.15
ACCRUING DELINQUENCIES & OTHER CREDIT DISCLOSURES
December 31,
(Dollars in millions)
2024
2023
2022
Accruing loans and leases 30+ days past due
C&I
$
33
$
33
$
61
CRE
3
8
11
Consumer real estate
69
57
55
Credit card and other
5
8
11
Total accruing loans and leases 30+ days past due
$
110
$
106
$
138
Accruing loans and leases 30+ days past due %
C&I
0.10 %
0.10 %
0.19 %
CRE
0.02
0.06
0.08
Consumer real estate
0.50
0.42
0.44
Credit card and other
0.79
1.03
1.28
Total accruing loans and leases 30+ days past due %
0.18 %
0.17 %
0.24 %
Accruing loans and leases 90+ days past due (a) (b) (c)
C&I
$
1
$
1
$
11
Consumer real estate
19
17
18
Credit card and other
1
3
4
Total accruing loans and leases 90+ days past due
$
21
$
21
$
33
Loans held for sale
30 to 89 days past due (b)
$
9
$
12
$
10
30 to 89 days past due - guaranteed portion (b) (d)
6
8
7
90+ days past due (b)
9
9
16
90+ days past due - guaranteed portion (b) (d)
4
4
6
(a) Excludes loans classified as held for sale.
(b) Amounts are not included in nonperforming/nonaccrual loans.
(c) Amounts are also included in accruing loans and leases 30+ days past due.
(d) Guaranteed loans include FHA, VA, and GNMA loans repurchased through the GNMA buyout program.
Potential problem assets represent those assets where
information about possible credit problems of borrowers
has caused management to have serious doubts about the
borrower’s ability to comply with present repayment
terms and includes loans past due 90 days or more and
still accruing. This definition is believed to be substantially
consistent with the standards established by the Federal
banking regulators for loans classified as substandard.
Potential problem assets in the loan portfolio increased to
$1.9 billion as of December 31, 2024, compared to $666
million as of year-end 2023. This increase was largely
attributable to grade migration in the multi-family and
office portfolios. Multi-family has been affected by strong
supply, which is expected to be absorbed at a modestly
slower rate than experienced in recent years. Office
performance has been strong for the medical segment,
while traditional office has been impacted by the
continued influence of remote work on occupancy levels.
These portfolios continue to maintain strong underwriting
and client selection. The current expectation of losses
from potential problem assets has been included in
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
management’s analysis for assessing the adequacy of the
allowance for loan and lease losses.
Modifications to Borrowers Experiencing Financial Difficulty
As part of FHN’s ongoing risk management practices, FHN
attempts to work with borrowers when appropriate to
extend or modify loan terms to better align with their
current ability to repay. Modifications to loans are made
in accordance with internal policies and guidelines which
conform to regulatory guidance. Each occurrence is
unique to the borrower and is evaluated separately. See
Note 1 - Significant Accounting Policies, Note 3 - Loans and
Leases and Note 4 - Allowance for Credit Losses to the
Consolidated Financial Statements in Part II, Item 8 of this
Report for further discussion regarding troubled loan
modifications.
Commercial Loan Modifications
As part of FHN’s credit risk management governance
processes, the Special Assets Department ("SAD") is
responsible for managing most commercial relationships
with borrowers whose financial condition has deteriorated
to such an extent that the credits are individually
reviewed for expected credit losses, classified as
substandard or worse, placed on nonaccrual status,
foreclosed or in process of foreclosure, or in active or
contemplated litigation. SAD has the authority and
responsibility to enter into workout and/or rehabilitation
agreements with troubled commercial borrowers in order
to mitigate and/or minimize the amount of credit losses
recognized from these problem assets. While every
circumstance is different, SAD will generally use
forbearance agreements (generally 6-12 months) as an
element of commercial loan workouts, which might
include reduced interest rates, reduced payments, release
of guarantor, term extensions or entering into short sale
agreements. Principal forgiveness may be granted in
specific workout circumstances.
The individual expected credit loss assessments
completed on commercial loans may be used in evaluating
the appropriateness of qualitative adjustments to
quantitatively modeled loss expectations for loans that
are not considered collateral dependent. If a loan is
collateral dependent, the carrying amount of a loan is
written down to the net realizable value of the collateral.
Each assessment considers any modified terms and is
comprehensive to ensure appropriate assessment of
expected credit losses.
Consumer Loan Modifications
FHN does not currently participate in any of the loan
modification programs sponsored by the U.S. government
for its portfolio loans, but does generally structure
modified consumer loans using the parameters of the
former Home Affordable Modification Program ("HAMP").
Within the HELOC and permanent mortgage installment
loans in the consumer portfolio segment, troubled loans
are typically modified by reducing the interest rate (in
increments of 25 basis points to a minimum of 3%) and a
possible maturity date extension of up to 30 years to
reach an affordable housing debt-to-income ratio.
Within the credit card class of the consumer portfolio
segment, troubled loans are typically modified through
either a short-term credit card hardship program or a
longer-term credit card workout program. In the credit
card hardship program, borrowers may be granted rate
and payment reductions for 6 months to 1 year. In the
credit card workout program, clients are granted a rate
reduction to 0% and term extensions for up to 5 years to
pay off the remaining balance.
Consumer loans may also be modified through court-
imposed principal reductions in bankruptcy proceedings,
which FHN is required to honor unless a borrower
reaffirms the related debt.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Deposits
Total deposits of $65.6 billion as of December 31, 2024
decreased $199 million compared to December 31, 2023.
Interest-bearing deposits increased $984 million and
noninterest-bearing deposits decreased $1.2 billion.
FHN continues to maintain a well-diversified and stable
funding mix across its footprint and specialty lines of
business. At December 31, 2024, commercial deposits
were $36.2 billion, or 55% of total deposits, and consumer
deposits were $29.4 billion, or 45% of total deposits. At
December 31, 2023, commercial deposits were
$35.9 billion, or 55% of total deposits, and consumer
deposits were $29.9 billion, or 45% of total deposits.
At December 31, 2024, 37% of deposits were associated
with Tennessee, 18% with Florida, 13% with North
Carolina, and 12% with Louisiana, with no other state
above 10%. This mix remained relatively consistent with
the previous year-end.
Total estimated uninsured deposits were $26.7 billion, or
41% of total deposits, and $26.8 billion, or 41% of total
deposits, as of December 31, 2024 and 2023, respectively.
Of the uninsured deposits as of December 31, 2024,
$4.7 billion, or 7% of total deposits, were collateralized. As
of December 31, 2023, collateralized deposits were
$5.3 billion, or 8% of total deposits.
The following tables present the major components of
FHN's total deposits for 2024 and 2023, FHN's total
estimated uninsured deposits for the years ended
December 31, 2024 and 2023, and the maturities of FHN's
uninsured time deposits as of December 31, 2024 and
2023. See Table 7.2 - Average Balances, Net Interest
Income and Yields/Rates in this Report for information on
average deposits, including average rates paid.
Table 7.16
DEPOSITS
(Dollars in millions)
2024
Percent
of Total
2024
Growth
Rate
2023
Percent
of Total
2023
Growth
Rate
Savings
$
26,695
41 %
6 %
$
25,082
38 %
14 %
Time deposits
6,613
10
(3)
6,804
10
136
Other interest-bearing deposits
16,252
25
(3)
16,690
26
10
Total interest-bearing deposits
49,560
76
2
48,576
74
21
Noninterest-bearing deposits
16,021
24
(7)
17,204
26
(27)
Total deposits
$
65,581
100 %
— %
$
65,780
100 %
4 %
Table 7.17
ESTIMATED UNINSURED DEPOSITS
For the Year Ended December 31,
(Dollars in millions)
2024
2023
Uninsured deposits
$
26,679 $
26,752
Table 7.18
UNINSURED TIME DEPOSITS BY MATURITY
(Dollars in millions)
December 31, 2024
December 31, 2023
Portion of U.S. time deposits in excess of insurance limit
$
1,068 $
1,143
Time deposits otherwise uninsured with a maturity of:
3 months or less
328
304
Over 3 months through 6 months
379
519
Over 6 months through 12 months
332
282
Over 12 months
29
38
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Short-Term Borrowings
Short-term borrowings include federal funds purchased,
securities sold under agreements to repurchase, trading
liabilities, and other short-term borrowings. Total short-
term borrowings were $4.0 billion and $3.1 billion as of
December 31, 2024 and 2023, respectively. The increase
in short-term borrowings was largely driven by an increase
of $600 million in FHLB borrowings and an increase of
$132 million in federal funds purchased and securities sold
under agreements to repurchase.
Short-term borrowings balances fluctuate largely based on
the level of FHLB borrowing as a result of loan demand,
deposit levels and balance sheet funding strategies.
Trading liabilities fluctuate based on various factors,
including levels of trading securities and hedging
strategies. Federal funds purchased fluctuates depending
on the amount of excess funding of FHN's correspondent
bank customers. Balances of securities sold under
agreements to repurchase fluctuate based on cost
attractiveness relative to FHLB borrowing levels and the
ability to pledge securities toward such transactions. See
Note 9 - Short-Term Borrowings to the Consolidated
Financial Statements in Part II, Item 8 of this Report for
additional information.
Term Borrowings
Term borrowings include senior and subordinated
borrowings with original maturities greater than one year.
Total term borrowings were $1.2 billion as of both
December 31, 2024 and 2023. See Note 10 - Term
Borrowings to the Consolidated Financial Statements in
Part II, Item 8 of this Report for additional information.
Capital
Management’s objectives are to provide capital sufficient
to cover the risks inherent in FHN’s businesses, to
maintain excess capital to well-capitalized standards, and
to ensure ready access to the capital markets.
Total equity of $9.1 billion decreased $180 million
compared to December 31, 2023. Significant changes
included net income of $794 million and an increase of
$60 million in AOCI, offset by $626 million in common
stock repurchases, $358 million in common and preferred
dividends, and $100 million from the Series D Preferred
Stock redemption.
The following tables provide a reconciliation of
shareholders’ equity from the Consolidated Balance
Sheets to Common Equity Tier 1, Tier 1, and Total
Regulatory Capital, as well as certain selected capital
ratios.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Table 7.19a
REGULATORY CAPITAL DATA
(Dollars in millions)
December 31,
2024
December 31,
2023
FHN shareholders’ equity
$
8,816
$
8,996
Modified CECL transitional amount (a)
28
57
FHN non-cumulative perpetual preferred
(426)
(520)
Common equity tier 1 before regulatory adjustments
$
8,418
$
8,533
Regulatory adjustments:
Disallowed goodwill and other intangibles
$
(1,578) $
(1,617)
Net unrealized (gains) losses on securities available for sale
782
836
Net unrealized (gains) losses on pension and other postretirement plans
252
273
Net unrealized (gains) losses on cash flow hedges
94
79
Disallowed deferred tax assets
(1)
—
Common equity tier 1
$
7,967
$
8,104
FHN non-cumulative perpetual preferred
426
426
Qualifying noncontrolling interest—First Horizon Bank preferred stock
295
295
Tier 1 capital
$
8,688
$
8,825
Tier 2 capital
1,174
1,097
Total regulatory capital
$
9,862
$
9,922
Risk-Weighted Assets
First Horizon Corporation
$
71,108
$
71,074
First Horizon Bank
70,418
70,635
Average Assets for Leverage
First Horizon Corporation
$
81,645
$
82,540
First Horizon Bank
80,791
81,898
Table 7.19b
REGULATORY RATIOS & AMOUNTS
December 31, 2024
December 31, 2023
(Dollars in millions)
Ratio
Amount
Ratio
Amount
Common Equity Tier 1
First Horizon Corporation
11.20 % $
7,967
11.40 % $
8,104
First Horizon Bank
11.12
7,834
11.40
8,055
Tier 1
First Horizon Corporation
12.22
8,688
12.42
8,825
First Horizon Bank
11.54
8,129
11.82
8,350
Total
First Horizon Corporation
13.87
9,862
13.96
9,922
First Horizon Bank
13.00
9,156
13.17
9,303
Tier 1 Leverage
First Horizon Corporation
10.64
8,688
10.69
8,825
First Horizon Bank
10.06
8,129
10.20
8,350
Other Capital Ratios
Total period-end equity to period-end assets
11.09
11.38
Tangible common equity to tangible assets (b)
8.37
8.48
(a) The modified CECL transitional amount includes the impact to retained earnings from the initial adoption of CECL plus 25% of the change in the adjusted
allowance for credit losses since FHN’s initial adoption of CECL through December 31, 2021. For December 31, 2024 and 2023, 25% and 50%, respectively,
of the full amount is phased out and not included in Common Equity Tier 1 capital.
(b) Tangible common equity to tangible assets is a non-GAAP measure and is reconciled to total equity to total assets (GAAP) in the Non-GAAP to GAAP
Reconciliation - Table 7.28.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Banking regulators define minimum capital ratios for bank
holding companies and their bank subsidiaries. Based on
the capital rules and definitions prescribed by the banking
regulators, should any depository institution’s capital
ratios decline below predetermined levels, it would
become subject to a series of increasingly restrictive
regulatory actions.
The system categorizes a depository institution’s capital
position into one of five categories ranging from well-
capitalized to critically under-capitalized. For an institution
the size of FHN to qualify as well-capitalized, Common
Equity Tier 1, Tier 1 Capital, Total Capital, and Leverage
capital ratios must be at least 6.50%, 8.00%, 10.00%, and
5.00%, respectively. Furthermore, a capital conservation
buffer of 50 basis points above these levels must be
maintained on the Common Equity Tier 1, Tier 1 Capital
and Total Capital ratios to avoid restrictions on dividends,
share repurchases and certain discretionary bonuses.
As of December 31, 2024, both FHN and First Horizon
Bank had sufficient capital to qualify as well-capitalized
institutions and to meet the capital conservation buffer
requirement. Capital ratios for both FHN and First Horizon
Bank as of December 31, 2024 are calculated under the
final rule issued by the banking regulators in 2020 to delay
the effects of CECL on regulatory capital for two years,
followed by a three-year transition period.
For both FHN and First Horizon Bank, the risk-based
regulatory capital and Tier 1 leverage ratios decreased in
2024 relative to 2023 primarily from the impact of
common share repurchases. The Series D Preferred Stock
redemption in 2024 did not impact FHN's regulatory
capital ratios as it did not qualify as Tier 1 capital because
the earliest redemption date was less than five years from
the issuance date.
During 2025, capital ratios are expected to remain above
well-capitalized standards plus the required capital
conservation buffer.
Stress Testing
The Economic Growth, Regulatory Relief, and Consumer
Protection Act, along with an interagency regulatory
statement effectively exempted both FHN and First
Horizon Bank from Dodd-Frank Act stress testing
requirements starting in 2018.
For 2024, FHN and First Horizon Bank completed a
company run stress test using the Comprehensive Capital
Analysis and Review ("CCAR") scenarios published in
February 2024. Results of these tests indicate that both
FHN and First Horizon Bank would be able to maintain
capital well in excess of Basel III Adequately Capitalized
standards under the hypothetical severe global recession
of the 2024 CCAR Severely Adverse scenario. A summary
of those results was posted in the “Fixed Income - Stress
Test Results” section on FHN’s investor relations website
on July 30, 2024. Neither FHN’s stress test posting, nor any
other material found on FHN’s website generally, is part of
this report or incorporated herein.
FHN anticipates that it will continue performing an annual
enterprise-wide stress test as part of its capital and risk
management process. Results of this test will be
presented to executive management and the Board.
The disclosures in this “Stress Testing” section include
forward-looking statements. Please refer to “Forward-
Looking Statements” for additional information
concerning the characteristics and limitations of
statements of that type.
Common Stock Purchase Programs
If and as authorized by its Board of Directors, FHN may
repurchase shares of its common stock from time to time
and will evaluate the level of capital and take action
designed to generate or use capital, as appropriate, for
the interests of the shareholders, subject to legal and
regulatory restrictions. Two common stock purchase
programs authorized by FHN's Board of Directors
operated during the fourth quarter of 2024. FHN’s Board
has not authorized a preferred stock purchase program.
January 2024 General Purchase Program
On January 23, 2024, FHN announced that its Board of
Directors had approved a $650 million common share
purchase program that was scheduled to expire on
January 31, 2025. Purchases could be made in the open
market or through privately negotiated transactions,
including under Rule 10b5-1 plans as well as accelerated
share repurchase and other structured transactions. The
timing and exact amount of common share repurchases
were subject to various factors, including FHN's capital
position, financial performance, expected capital impacts
of strategic initiatives, market conditions, business
conditions, and regulatory considerations.
As of December 31, 2024, $476 million in purchases had
been made life-to-date under the January 2024 program
at an average price per share of $15.17, or $15.16
excluding commissions. Program purchases made during
the quarter ended December 31, 2024 are summarized in
the following table. The program was terminated effective
the close of business on October 29, 2024 with $174
million in authorization unused.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Table 7.20a
COMMON STOCK PURCHASES—JANUARY 2024 PROGRAM
(Dollar values and volume in thousands, except per
share data)
Total number
of shares
purchased
Average price
paid per share
(a)
Total number of
shares purchased
as part of publicly
announced programs
Maximum approximate
dollar value that may
yet be purchased under
the programs
2024
October 1 to October 31
2,010 $
17.30
2,010
N/A
November 1 to November 30
N/A
N/A
N/A
N/A
December 1 to December 31
N/A
N/A
N/A
N/A
Total
2,010 $
17.30
2,010
(a) Represents total costs including commissions paid. Average price paid does not reflect the one percent excise tax charged on public company share
repurchases.
October 2024 General Purchase Program
On October 29, 2024, FHN announced that its Board of
Directors had approved a new $1.0 billion common share
purchase program to replace the January 2024 program
discussed above. The new October program is scheduled
to expire on January 31, 2026. Purchases under the new
program may be made in the open market or through
privately negotiated transactions, including under Rule
10b5-1 plans as well as accelerated share repurchase and
other structured transactions. The timing and exact
amount of common share repurchases are at the
discretion of senior management and are subject to
various factors, including FHN's capital position, financial
performance, expected capital impacts of strategic
initiatives, market conditions, business conditions, and
regulatory considerations.
As of December 31, 2024, $129 million in purchases had
been made life-to-date under the October 2024 program
at an average price per share of $19.88, or $19.86
excluding commissions. Program purchases made during
the quarter ended December 31, 2024 are summarized in
the following table.
Table 7.20b
COMMON STOCK PURCHASES—OCTOBER 2024 PROGRAM
(Dollar values and volume in thousands, except per
share data)
Total number
of shares
purchased
Average price
paid per share
(a)
Total number of
shares purchased
as part of publicly
announced programs
Maximum approximate
dollar value that may
yet be purchased under
the programs
2024
October 1 to October 31
105 $
17.77
105 $
998,134
November 1 to November 30
3,803
19.51
3,803
923,941
December 1 to December 31
2,563
20.52
2,563
871,353
Total
6,471 $
19.88
6,471
(a) Represents total costs including commissions paid. Average price paid does not reflect the one percent excise tax charged on public company share
repurchases.
Stock Award Purchases
As authorized by the Board's Compensation Committee,
FHN makes automatic stock purchases by withholding
stock-based award shares to cover tax obligations
associated with those awards. Those limited, off-market
purchases are not associated with an announced purchase
program and are made any time an associated tax
obligation arises, whether or not a blackout period is in
effect. Tax withholding purchases made during the
quarter ended December 31, 2024 are summarized in the
following table.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Table 7.20c
COMMON STOCK PURCHASES—TAX WITHHOLDING FOR STOCK AWARDS
(Dollar values and volume in thousands,
except per share data)
Total number
of shares
purchased
Average price
paid per share
Total number of
shares purchased
as part of publicly
announced programs
Maximum number
of shares that may
yet be purchased
under the programs
2024
October 1 to October 31
25
$
16.53
N/A
N/A
November 1 to November 30
3
17.26
N/A
N/A
December 1 to December 31
3
20.60
N/A
N/A
Total
31 $
17.03
Risk Management
FHN derives revenue from providing services and, in many
cases, assuming and managing risk for profit, which
exposes FHN to strategic, reputational, liquidity, market,
capital adequacy, operational, compliance, legal, and
credit risks that require ongoing oversight and
management. FHN has an enterprise-wide approach to
risk governance, measurement, management, and
reporting, including an economic capital allocation process
that is tied to risk profiles used to measure risk-adjusted
returns. Through an enterprise-wide risk governance
structure and a Risk Appetite Statement approved by the
Board, management continually evaluates the balance of
risk/return and earnings volatility with shareholder value.
FHN’s enterprise-wide risk governance structure begins
with the Board. The Board, working with the Risk
Committee of the Board, establishes FHN’s risk appetite
by approving policies and limits that provide standards for
the nature and the level of risk FHN is willing to assume.
The Board regularly receives reports on management’s
performance against FHN’s risk appetite primarily through
the Board’s Risk and Audit Committees.
To further support the risk governance provided by the
Board, FHN has established accountabilities, control
processes, procedures, and a management governance
structure designed to align risk management with risk-
taking throughout FHN. The control procedures are
aligned with FHN’s four components of risk governance:
(1) Specific Risk Committees; (2) the Risk Management
Organization; (3) Business Unit Risk Management; and
(4) Independent Assurance Functions.
1. Specific Risk Committees: The Board has delegated
authority to the Chief Executive Officer to manage
Strategic Risk and Reputational Risk, and the general
business affairs of FHN under the Board’s oversight.
The CEO utilizes the executive management team to
carry out these duties in conjunction with the Risk
governance structure. The Management Risk
Committee is chaired by the Chief Risk Officer and is
comprised of the CEO and certain officers that oversee
all risk areas, including Strategic and Reputational
Risks, and analyzes both existing and emerging risks.
The Management Risk Committee is supported by a set
of specific risk committees focused on unique risk
types (e.g. liquidity, credit, operational, etc.). These
risk committees provide a mechanism that assembles
the necessary expertise and perspectives of the
management team to discuss emerging risk issues,
monitor FHN’s risk-taking activities, and evaluate
specific transactions and exposures. These committees
also monitor the direction and trend of risks relative to
business strategies and market conditions and direct
management to respond to risk issues.
2. The Risk Management Organization: FHN’s risk
management organization, led by the Chief Risk Officer
and Chief Credit Officer, provides objective oversight
of risk-taking activities. The risk management
organization translates FHN’s overall risk appetite into
approved limits and formal policies and is supported by
corporate staff functions, including the Corporate
Secretary, Legal, Finance, Human Resources
Operations, and Technology. Risk management also
works with business units and functional experts to
establish appropriate operating standards and monitor
business practices in relation to those standards.
Additionally, risk management proactively works with
business units and senior management to focus
management on key risks in FHN and emerging trends
that may change FHN’s risk profile. The Chief Risk
Officer has overall responsibility and accountability for
enterprise risk management and aggregate risk
reporting.
3. Business Unit Risk Management: FHN’s business units
are responsible for identifying, acknowledging,
quantifying, mitigating, and managing all risks arising
within their respective units. They determine and
execute their business strategies, which puts them
closest to the changing nature of risks, and they are
best able to take the needed actions to manage and
mitigate those risks. The business units are supported
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by the risk management organization that helps
identify and consider risks when making business
decisions. Management processes, structure, and
policies are designed to help ensure compliance with
laws and regulations as well as provide organizational
clarity for authority, decision-making, and
accountability. Business units have designated control
processes to help mitigate their identified risks, and
business units attest to the effectiveness of those
controls. The risk governance structure supports and
promotes the escalation of material items to executive
management and the Board.
4. Independent Assurance Functions: Internal Audit,
Credit Assurance Services ("CAS"), Compliance Testing,
and Model Validation provide an independent and
objective assessment of the design and execution of
FHN’s internal control system, including management
processes, risk governance, and policies and
procedures. These groups’ activities are designed to
provide reasonable assurance that risks are
appropriately identified and communicated; resources
are safeguarded; significant financial, managerial, and
operating information is complete, accurate, and
reliable; and associate actions are in compliance with
FHN’s policies and applicable laws and regulations.
Internal Audit and CAS are independent third line
functions within First Horizon for the purpose of
providing unfettered objective assurance. The Internal
Audit function reports to the Chief Audit Executive,
who is appointed by and reports functionally to the
Audit Committee of the Board and administratively to
the CEO. The CAS function reports to the CAS Director,
who is appointed by and reports functionally to the
Risk Committee of the Board and administratively to
the Chief Audit Executive. Internal Audit provides
quarterly reports to the Audit Committee of the Board,
while CAS provides quarterly reports to the Risk
Committee of the Board. Compliance Testing and
Model Validation report to the Chief Risk Officer and
provide annual reports to the Audit Committee of the
Board.
Market Risk Management
Market risk is the risk that changes in market conditions
will adversely impact the value of assets or liabilities, or
otherwise negatively impact FHN’s earnings. Market risk is
inherent in the financial instruments associated with
FHN’s operations, primarily trading activities within FHN
Financial, but also through non-trading activities which are
primarily affected by interest rate risk that is managed by
the ALCO within FHN.
FHN is exposed to market risk related to the trading
securities inventory and loans held for sale maintained by
FHN Financial in connection with its fixed income
distribution activities. Various types of securities inventory
positions are procured for distribution to clients by the
sales staff. When these securities settle on a delayed
basis, they are considered forward contracts. Refer to the
"Determination of Fair Value - Trading securities and
trading liabilities" section of Note 23 - Fair Value of Assets
and Liabilities, which section is incorporated into this
MD&A by this reference.
FHN’s market risk appetite is approved by the Risk
Committee of the Board of Directors and executed
through management policies and procedures of ALCO
and the FHN Financial Risk Committee. These policies
contain various market risk limits including, for example,
VaR limits for the trading securities inventory, and
individual position limits and sector limits for products
with credit risk, among others. Risk measures are
computed and reviewed on a daily basis to ensure
compliance with market risk management policies.
Value-at-Risk ("VaR") and Stress Testing ("SVaR")
VaR is a statistical risk measure used to estimate the
potential loss in value from adverse market movements
over an assumed fixed holding period within a stated
confidence level. FHN employs a model to compute daily
VaR measures for its trading securities inventory. FHN
computes VaR using historical simulation with a 1-year
lookback period at a 99% confidence level with 1-day and
10-day time horizons. Additionally, FHN computes a
Stressed VaR measure. The SVaR computation uses the
same model but with model inputs reflecting historical
data from a continuous 12-month period that reflects a
period of significant financial stress appropriate for our
trading securities portfolio.
A summary of FHN's VaR and SVaR measures for 1-day
and 10-day time horizons is presented in the following
table.
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Table 7.21
VaR & SVaR MEASURES
Year Ended December 31, 2024
As of
December 31, 2024
(Dollars in millions)
Mean
High
Low
1-day
VaR
$
3
$
4
$
2
$
2
SVaR
7
9
4
6
10-day
VaR
8
12
4
4
SVaR
32
43
21
31
Year Ended December 31, 2023
As of
December 31, 2023
(Dollars in millions)
Mean
High
Low
1-day
VaR
$
3
$
4
$
2
$
3
SVaR
6
8
3
6
10-day
VaR
8
11
4
10
SVaR
24
34
12
28
FHN’s overall VaR measure includes both interest rate risk and credit spread risk. Separate measures of these component risks
are as follows.
Table 7.22
SCHEDULE OF RISKS INCLUDED IN VaR
As of December 31, 2024
As of December 31, 2023
(Dollars in millions)
1-day
10-day
1-day
10-day
Interest rate risk
$
1
$
2
$
1
$
2
Credit spread risk
—
1
1
1
The potential risk of loss reflected by FHN’s VaR measures
assumes the trading securities inventory is static. Because
FHN Financial procures fixed income securities for
purposes of distribution to clients, its trading securities
inventory turns over regularly. Additionally, FHNF traders
actively manage the trading securities inventory
continuously throughout each trading day. Accordingly,
FHNF’s trading securities inventory is highly dynamic,
rather than static. As a result, it would be rare for FHNF to
incur a negative revenue day in its fixed income activities
at the levels indicated by its VaR measures.
In addition to being used in FHN’s daily market risk
management process, the VaR and SVaR measures are
also used by FHN in computing its regulatory market risk
capital requirements in accordance with the Market Risk
Capital rules. For additional information regarding FHN's
capital adequacy refer to the Capital section of this
MD&A.
FHN also performs stress tests on its trading securities
portfolio to calculate the potential loss under various
assumed market scenarios. Key assumed stresses used in
those tests are:
Down 25 bps - assumes an instantaneous downward
move in interest rates of 25 basis points at all points on
the interest rate yield curve.
Up 25 bps - assumes an instantaneous upward move in
interest rates of 25 basis points at all points on the
interest rate yield curve.
Curve flattening - assumes an instantaneous flattening
of the interest rate yield curve through an increase in
short-term rates and a decrease in long-term rates. The
2-year point on the Treasury yield curve is assumed to
increase 15 basis points and the 10-year point on the
Treasury yield curve is assumed to decrease 15 basis
points. Shifts in other points on the yield curve are
predicted based on their correlation to the 2-year and
10-year points.
Curve steepening - assumes an instantaneous
steepening of the interest rate yield curve through a
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decrease in short-term rates and an increase in long-
term rates. The 2-year point on the Treasury yield curve
is assumed to decrease 15 basis points and the 10-year
point on the Treasury yield curve is assumed to increase
15 basis points. Shifts in other points on the yield curve
are predicted based on their correlation to the 2-year
and 10-year points.
Credit spread widening - assumes an instantaneous
increase in credit spreads (the difference between
yields on Treasury securities and non-Treasury
securities) of 25 basis points.
Model Validation
Trading risk management personnel within FHN have
primary responsibility for model risk management with
respect to the model used by FHN to compute its VaR
measures and perform stress testing on the trading
inventory. Among other procedures, these personnel
monitor model results and perform periodic backtesting
as part of an ongoing process of validating the accuracy of
the model. Backtesting compares the previous day’s VaR
measurement to a regulatory-prescribed calculation of
daily trading profit/loss in the trading inventory. During
the years ended December 31, 2024 and 2023, there were
no days in which the regulatory-prescribed calculation
reflected a loss in the trading inventory that exceeded the
corresponding daily VaR measurement, resulting in zero
backtesting exceptions. Model risk management activities
are subject to annual review by FHN’s Model Validation
Group, an independent assurance group charged with
oversight responsibility for FHN’s model risk management.
Interest Rate Risk Management
Interest rate risk is the risk to earnings or capital arising
from movement in interest rates. ALCO is responsible for
overseeing the management of existing and emerging
interest rate risk for the company within risk tolerances
established by the Board. FHN primarily manages interest
rate risk by structuring the balance sheet to maintain a
desired level of associated earnings and to protect the
economic value of FHN’s capital.
Net interest income and the value of equity are affected
by changes in the level of market interest rates because of
the differing repricing characteristics of assets and
liabilities, the exercise of prepayment options held by loan
clients, the early withdrawal options held by deposit
clients, and changes in the basis between and changing
shapes of the various yield curves used to price assets and
liabilities. To isolate the repricing, basis, option, and yield
curve components of overall interest rate risk, FHN
employs Gap, Net Interest Income at Risk, and Economic
Value of Equity analyses generated by a balance sheet
simulation model.
Net Interest Income Simulation Analysis
The information provided in this section, including the
discussion regarding the outcomes of simulation analysis
and rate shock analysis, is forward-looking. Actual results,
if the assumed scenarios were to occur, could differ
because of interest rate movements, the ability of
management to execute its business plans, and other
factors, including those presented in the Forward-Looking
Statements section of this Report.
Management uses a simulation model to measure interest
rate risk and to formulate strategies to improve balance
sheet positioning, earnings, or both, within FHN’s interest
rate risk, liquidity, and capital guidelines. Interest rate
exposure is measured by forecasting 12 months of NII
under various interest rate scenarios and comparing the
percentage change in NII for each scenario to a base case
scenario where interest rates remain unchanged.
Assumptions are made regarding future balance sheet
composition, interest rate movements, and loan and
deposit pricing. In addition, assumptions are made about
the magnitude of asset prepayments and earlier than
anticipated deposit withdrawals. The results of these
scenarios help FHN develop strategies for managing
exposure to interest rate risk. While management believes
the assumptions used and scenarios selected in its
simulations are reasonable, simulation modeling provides
only an estimate, not a precise calculation, of exposure to
any given change in interest rates.
Based on a static balance sheet as of December 31, 2024,
NII exposures over the next 12 months, assuming rate
shocks of plus/minus 25 basis points, plus/minus 50 basis
points, plus/minus 100 basis points, and plus/minus 200
basis points are estimated to have variances as shown in
the table below.
Table 7.23
INTEREST RATE SENSITIVITY
Shifts in Interest Rates
(in bps)
% Change in Projected
Net Interest Income
-200
(4.7)%
-100
(2.0)%
-50
(0.9)%
-25
(0.5)%
+25
0.4%
+50
0.7%
+100
1.3%
+200
2.2%
A steepening yield curve scenario, where long-term rates
increase by 50 basis points and short-term rates are static,
results in a favorable NII variance of 0.2%. A flattening
yield curve scenario, where long-term rates decrease by
50 basis points and short-term rates are static, results in
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an unfavorable NII variance of 0.3%. These hypothetical
scenarios are used to create a risk measurement
framework, and do not necessarily represent
management’s current view of future interest rates or
market developments.
Short-term interest rates had reached their highest levels
in 15 years prior to September 2024's 50 basis point rate
cut. Coupled with market disruption from recent high
profile bank failures in 2023, this high interest rate
environment has increased competitive pressures on
deposit costs.
The yield curve was inverted for much of the last half of
2022, throughout 2023, and during the first eight months
of 2024 before flattening in September 2024. As of
December 2024, the yield curve has normalized and is
upward sloping. Following the 50 basis point rate cut in
September 2024, and 25 basis point cuts in both
November and December, market participants are now
projecting one additional rate cut in 2025. FHN continues
to monitor current economic trends and potential
exposures closely. For additional information, see Yield
Curve within Market Uncertainties and Prospective Trends
below.
Fair Value Shock Analysis
Interest rate risk and the slope of the yield curve also
affect the fair value of FHN's trading inventory that is
reflected in noninterest income.
Generally, low or declining interest rates with a positively
sloped yield curve tend to increase income through higher
demand for fixed income products. Additionally, the fair
value of FHN's trading inventory can fluctuate as a result
of differences between current interest rates and the
interest rates of fixed income securities in the trading
inventory.
Derivatives
In the normal course of business, FHN utilizes various
financial instruments (including derivative contracts and
credit-related agreements) to manage the risk of loss
arising from adverse changes in the fair value of certain
financial instruments generally caused by changes in
interest rates, including FHN's securities inventory, certain
term borrowings, and certain loans. Additionally, FHN may
enter into derivative contracts in order to meet clients'
needs. However, such derivative contracts are typically
offset with a derivative contract entered into with an
upstream counterparty in order to mitigate risk associated
with changes in interest rates.
The simulation models and related hedging strategies
discussed above exclude the dynamics related to how fee
income and noninterest expense may be affected by
actual changes in interest rates or expectations of
changes. See Note 21 - Derivatives to the Consolidated
Financial Statements in Part II, Item 8 of this Report for
additional discussion of these instruments.
Capital Risk Management & Adequacy
The capital management objectives of FHN are to provide
capital sufficient to cover the risks inherent in FHN’s
businesses, to maintain excess capital to well-capitalized
standards and Board policy, and to ensure ready access to
the capital markets. The Capital & Stress Testing
Committee, chaired by the Corporate Treasurer, reports
to ALCO and is responsible for capital management
oversight and provides a forum for addressing
management issues related to capital adequacy. This
committee reviews sources and uses of capital, key capital
ratios, segment economic capital allocation
methodologies, coordinates the annual enterprise-wide
stress testing process, and considers other factors in
monitoring and managing current capital levels, as well as
potential future sources and uses of capital. The Capital &
Stress Testing Committee also recommends capital
management policies, which are submitted for approval to
ALCO and the Risk Committee of the Board as necessary.
Operational Risk Management
Operational risk is the risk of loss from inadequate or
failed internal processes, people, or systems or from
external events including data or network security
breaches of FHN or of third parties affecting FHN or its
clients. Inherent drivers of operational risk include the
following:
• Business Resilience Risk
• Fraud Risk
• Physical Security Risk
• Financial Reporting and Recording Risk
• Technology Risk
• Cybersecurity Risk
• Model Risk
• Third Party Risk
Management, measurement, and reporting of operational
risk are overseen by the Operational Risk Committee
which includes key representatives from the business
segments and support functions. Operational risk is
assessed and aggregated across the enterprise quarterly
and reported to the Risk Committee.
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Cybersecurity Risk Management
Overview
As mentioned immediately above, FHN's operational risk
function is divided into several risk areas. Each area has
been established at the corporate level to address risks in
that area across the entire organization. One of those
areas—information technology ("IT") risk—includes
cybersecurity risk management.
As FHN manages it, IT risk includes cybersecurity risk,
which in turn includes the risks from cyber fraud, cyber
theft, cyber vandalism, cyber ransom, data and system
security, and other unauthorized incursions into FHN's IT
systems. IT risk management also includes IT system
reliability, data integrity, IT aspects of regulatory
compliance, and risks associated with the use of artificial
intelligence tools and systems. The discussion in this
section focuses on cybersecurity. Additional information
on this topic is presented in Cybersecurity Risks within
Item 1A beginning on page 35.
Key Cybersecurity Risk Management Goals
Cybersecurity risk management has two primary goals:
defend FHN and its clients from fraudulent and other
unauthorized incursions; and, when an incursion happens,
detect and respond as soon as practical. The optimal
cybersecurity program will defend as much as is practical
while also detecting rapidly those incursions that get
through.
Management Structure & Key Processes
Operational risk is managed by FHN's Operational Risk
("Op Risk") Committee. Members of the Op Risk
Committee include senior-level representatives from
these teams or departments: Enterprise Risk
Management, Operations, Model Risk, Enterprise Data,
Enterprise Technology, Enterprise Technology Risk
Management, Credit and Credit Risk Management, Legal,
Security, Internal Audit, Deposit & Loan Operations, Retail
and Digital Banking, Regional Bank Products, Mortgage
Banking, Accounting, and Fixed Income/Bond Trading. The
Op Risk Committee reports to FHN's Management Risk
Committee, which is headed by FHN's Chief Risk Officer,
who reports to FHN's Chief Executive Officer.
IT risk is managed by the IT Risk Working Group, overseen
by the Op Risk Committee. The IT Risk Working Group
meets quarterly to discuss emerging cyber risks,
regulatory changes, vendor risk, audits, and outstanding-
issue resolution. The Group also provides updates to the
Op Risk Committee on IT aspects of compliance, policies,
and security standards. Members of the IT Risk Working
Group include the head of Enterprise Technology along
with personnel from nearly all of the teams and
departments represented in Op Risk.
FHN also has a Cybersecurity Working Group. The
Cybersecurity Working Group, which is outside of the risk
management hierarchy, meets quarterly. Its primary
functions are to provide cybersecurity awareness to the
executive leadership team and to provide high-level
support if a significant cybersecurity event occurs. In
connection with awareness, (a) external vendors,
consultants, law enforcement, and other persons are
invited to speak on industry-wide cybersecurity topics to
provide an independent view of external threats facing
the industry; and (b) members of the Enterprise
Technology team provide updates regarding how FHN is
addressing current risks and threats. The Cybersecurity
Working Group includes: FHN's CEO; the heads of FHN's
banking segments; the heads of Risk Management,
Enterprise Technology, Security, Operations, and Legal;
and senior personnel in the other teams and departments
represented in the IT Risk Working Group.
Key leaders within these committees and groups and for
these processes are FHN's Chief Information Officer and
Chief Information Security Officer. The Chief Information
Officer has substantial banking, IT, and related experience:
had roles at FHN since 2009 related to IT and data systems
culminating in CIO since 2020; prior to joining FHN, had
roles at a large regional bank, including technology leader
of the bank's electronic payments platform related to
treasury management and enterprise IT architect; and,
earned an MS in computer science as well as an MBA. The
Chief Information Security Officer has over twenty years
of banking, IT, and related experience: oversees
information security and many related systems and
processes; has established risk-based security programs to
meet regulatory requirements and align with business
needs; and has implemented numerous data protection,
data access, and identity management systems.
FHN has a written Computer Security Incident Response
Plan ("CSIRP") outlining FHN's incident response and
communication processes. FHN's Chief Information
Security Officer or certain other managers have the
authority to initiate the execution of the CSIRP if an
incident occurs. A working group called the Computer
Security Incident Response Team has primary
responsibility to implement or coordinate many of the
CSIRP actions, along with FHN's IT Risk Working Group.
Key goals of the CSIRP are to: contain, remediate, and
recover; mitigate impact on FHN and clients; report
findings to Op Risk and other senior management; and
manage external communications. The Cybersecurity
Working Group is informed of incidents that appear to
have a significant risk of becoming material.
FHN engages third-party vendors to conduct several
periodic cybersecurity reviews: Network Penetration
testing; Cyber Security Maturity Assessment; Red Team
(simulated cyber-attack) testing; SOX (financial reporting
controls and data integrity) testing; and, PCI-DSS
(proprietary data security standard for payment systems)
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attestation of compliance and SOC 1 Type II reports
(attesting to the design and operation of cybersecurity
systems) for lockbox and electronic bill pay. The frequency
of these reviews ranges from several times per year to
every three years. FHN also has a cybersecurity incident
specialty firm on retainer for incident response, as
needed.
FHN has a dedicated Third-Party Risk Management
("TPRM") department reporting to the Chief Risk Officer.
TPRM engages the IT Risk and Control Team to perform
cybersecurity assessments for new vendors during
onboarding, re-assessments of existing vendors on a risk-
based cadence, and continuous monitoring of critical third
parties.
Board Oversight
The Board's Risk Committee oversees all risk management
functions for the enterprise, including operational risk, IT
risk, and cybersecurity risk. The Risk Committee, as well as
the full Board, each quarter receives a risk management
update from FHN's Chief Risk Officer. Each update
includes a written presentation covering all major risk
areas, including operational risk, and each is supported by
a detailed Enterprise Risk Report which is available to all
directors. Major topics in the operational risk portion of
the Enterprise Risk Report each quarter include fraud and
related incidents; process management, which includes
many processes related to cybersecurity defenses; and
information security, which addresses core cybersecurity
processes and incidents.
Tactical, Operational & Other Impacts
The measures FHN takes to manage cybersecurity risk
affect how associates and clients use FHN's platforms and
systems. For every safeguard considered or implemented,
FHN must weigh potential and actual inconveniences
against security concerns. Practical realities make it
impossible to maximize security and ignore resulting
restrictions on the ability of associates and clients to
conduct banking and financial business. Primarily for that
reason, cybersecurity risks are and will be a major risk
management concern, and losses from incursions will be
impossible to avoid. As mentioned above, FHN's goals are
to prevent what can be prevented, and detect and
respond to incursions that get through as quickly as
possible.
For those incursions that are not blocked, FHN's processes
are designed to detect them quickly enough so that the
financial and operational impact on FHN is zero or modest.
But the risk of a major incursion occurring cannot be
reduced to zero. A major incursion could have a material
financial impact on FHN's business operations and
earnings.
Compliance Risk Management
Compliance risk is the risk of legal or regulatory sanctions,
material financial loss, or loss to reputation the Company
may suffer as a result of its failure to comply with laws,
regulations, rules, self-regulatory organization standards,
and codes of conduct applicable to FHN’s activities.
Management, measurement, and reporting of compliance
risk are overseen by the Compliance Risk Committee and
other key Corporate Governance Committees. Key
executives from the business segments, legal, compliance,
risk management, and service functions are represented
on the Committees. Summary reports of Committee
activities and decisions are provided to the appropriate
Board governance committees. Reports include the status
of regulatory activities, internal compliance program
initiatives, compliance testing and internal audit results
and evaluation of emerging compliance risk areas.
Credit Risk Management
Credit risk is the risk of loss due to adverse changes in a
borrower’s or counterparty’s ability or willingness to meet
its financial obligations under agreed upon terms. FHN is
subject to credit risk in lending, trading, investing,
liquidity/funding, and asset management activities
although lending activities have the most exposure to
credit risk. The nature and amount of credit risk depends
on the types of transactions, the structure of those
transactions, collateral received, the use of guarantors
and the parties involved.
FHN assesses and manages credit risk through a series of
policies, processes, measurement systems, and controls.
The Credit Risk Management Committee ("CRMC") is
responsible for overseeing the management of existing
and emerging credit risks in the company within the broad
risk tolerances established by the Board. The CRMC
reports through the Management Risk Committee. The
Credit Risk Management function, which is shared by the
Chief Credit Officer and Chief Risk Officer, provides
strategic and tactical credit leadership by maintaining
policies, overseeing credit approval, assessing new credit
products, strategies and processes, and managing
portfolio composition and performance.
While the Credit Risk function oversees FHN’s credit risk
management, there is significant coordination between
the business lines and the Credit Risk function in order to
manage FHN’s credit risk and maintain strong asset
quality. The Credit Risk function recommends portfolio
industry/sector and individual country limits to the Risk
Committee of the Board for approval. Adherence to these
approved limits is vigorously monitored by Credit Risk
which provides recommendations to slow or cease lending
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to the business lines as commitments near established
lending limits. Credit Risk also ensures subject matter
experts are providing oversight, support and credit
approvals, particularly in the specialty lending areas where
industry-specific knowledge is required. Management
emphasizes general portfolio servicing such that emerging
risks are able to be spotted early enough to correct
potential deficiencies, prevent further credit
deterioration, and mitigate credit losses.
The Credit Risk Management function assesses the asset
quality trends and results, as well as lending processes,
adherence to underwriting guidelines (portfolio-specific
underwriting guidelines are discussed further in the Asset
Quality Trends section), and utilizes this information to
inform management regarding the current state of credit
quality and as a factor in the estimation process for
determining the allowance for credit losses. The CRMC
reviews on a periodic basis various reports issued by
assurance functions which provide an independent
assessment of the adequacy of loan servicing, grading
accuracy, and other key functions. Additionally, CRMC is
presented with and discusses various portfolios, lending
activity and lending-related projects.
All of the above activities are subject to independent
review by FHN’s Credit Assurance Services Group. CAS
reports to the CAS Director who is appointed by and
reports functionally to the Risk Committee of the Board
(and administratively to the Chief Audit Executive) and
provides quarterly reports to that Committee. CAS is
charged with providing the Risk Committee of the Board
and executive management with independent, objective,
and timely assessments of FHN’s portfolio quality, credit
policies, and credit risk management processes.
Liquidity Risk Management
Among other things, ALCO is responsible for liquidity
management: the funding of assets with liabilities of
appropriate duration, while mitigating the risk of
unexpected cash needs. ALCO and the Board of Directors
have adopted a Liquidity Policy of which the objective is to
ensure that FHN meets its cash and collateral obligations
promptly, in a cost-effective manner and with the highest
degree of reliability. The maintenance of adequate levels
of asset and liability liquidity should provide FHN with the
ability to meet both expected and unexpected cash and
collateral needs. Key liquidity ratios, asset liquidity levels,
and the amount available from funding sources are
reported to ALCO on a regular basis. FHN’s Liquidity Policy
establishes liquidity limits that are deemed appropriate
for FHN’s risk profile.
In accordance with the Liquidity Policy, ALCO manages
FHN’s exposure to liquidity risk through forecasts of its
liquidity position and funding needs. Base liquidity
forecasts are reviewed by ALCO and are updated as
financial conditions dictate. In addition to the baseline
liquidity reports, robust stress testing of assumptions and
funds availability are periodically reviewed. FHN maintains
a contingency funding plan that may be executed should
unexpected difficulties arise in accessing funding that
affects FHN, the industry, or both. As of December 31,
2024, available liquidity sources included cash,
incremental borrowing capacity at the FHLB, access to
Federal Reserve Bank borrowings through the discount
window, and unencumbered securities. Additional sources
of liquidity included dealer and commercial customer
repurchase agreements, access to the overnight and term
Federal Funds markets, brokered deposits, loan sales, and
syndications. The table below details FHN’s sources of
available liquidity as of December 31, 2024.
Table 7.24
AVAILABLE LIQUIDITY
as of December 31, 2024
(Dollars in
millions)
Total
Capacity
Outstanding
Borrowings
Available
Liquidity
Cash on
deposit with
FRB (a)
$
1,393 $
— $
1,393
FHLB
8,722
600
8,122
Discount
Window
23,475
—
23,475
Unencumbered
securities (b)
1,039
—
1,039
Total available liquidity
$
34,029
(a) Included in interest-bearing deposits with banks on the
Consolidated Balance Sheets.
(b) Subject to market haircuts on collateral.
Generally, a primary source of funding for a bank is core
deposits from the bank's client base. The period-end
loans-to-deposits ratio was 95% and 93% as of
December 31, 2024 and 2023, respectively.
FHN may also use unsecured short-term borrowings as a
source of liquidity. Federal funds purchased from
correspondent bank clients are considered to be
substantially more stable than funds purchased in the
national broker markets for federal funds due to the long,
historical, and reciprocal nature of banking services
provided by FHN to these correspondent banks. The
remainder of FHN’s wholesale short-term borrowings
consists of securities sold under agreements to repurchase
transactions accounted for as secured borrowings with
business clients or broker-dealer counterparties.
Both FHN and First Horizon Bank have the ability to
generate liquidity by issuing senior or subordinated
unsecured debt, preferred equity, and common equity,
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subject to market conditions and compliance with
applicable regulatory requirements. As of December 31,
2024, FHN had outstanding $798 million in senior and
subordinated unsecured debt and $426 million in non-
cumulative perpetual preferred stock. FHN redeemed all
outstanding shares of its Series D Non-Cumulative
Perpetual Preferred Stock during second quarter 2024.
Refer to Note 11 - Preferred Stock to the Consolidated
Financial Statements in Part II, Item 8 of this Report for
additional information. As of December 31, 2024, First
Horizon Bank and subsidiaries had outstanding preferred
shares of $295 million, which are reflected as
noncontrolling interest on the Consolidated Balance
Sheets.
Parent company liquidity is primarily provided by cash
flows stemming from dividends and interest payments
collected from subsidiaries. These sources of cash
represent the primary sources of funds to pay cash
dividends to shareholders and principal and interest to
debt holders of FHN. The amount paid to the parent
company through First Horizon Bank common dividends is
managed as part of FHN’s overall cash management
process, subject to applicable regulatory restrictions.
Certain regulatory restrictions exist regarding the ability of
First Horizon Bank to transfer funds to FHN in the form of
cash, common dividends, loans, or advances. At any given
time, the pertinent portions of those regulatory
restrictions allow First Horizon Bank to declare preferred
or common dividends without prior regulatory approval in
an aggregate amount equal to First Horizon Bank’s
retained net income for the two most recently completed
years plus the current year-to-date period. For any period,
First Horizon Bank’s "retained net income" generally is
equal to First Horizon Bank’s regulatory net income
reduced by the preferred and common dividends declared
by First Horizon Bank. Applying the dividend restrictions
imposed under applicable federal and state rules as
outlined above, the Bank’s total amount available for
dividends was $374 million as of January 1, 2025.
Consequently, on that date the Bank could pay common
dividends up to that amount to its sole common
shareholder, FHN, or to its preferred shareholders without
prior regulatory approval. Additionally, a capital
conservation buffer must be maintained (as described in
the Capital section of this Report) to avoid restrictions on
dividends.
First Horizon Bank declared and paid common dividends
to the parent company in the amount of $1.1 billion in
2024 and $220 million in 2023. In January 2025, First
Horizon Bank declared and paid a common dividend to the
parent company in the amount of $115 million. First
Horizon Bank declared and paid preferred dividends in
each quarter of 2024 and 2023. Additionally, First Horizon
Bank declared preferred dividends in first quarter 2025,
payable in April 2025.
Payment of a dividend to shareholders of FHN is
dependent on several factors which are considered by the
Board. These factors include FHN’s current and
prospective capital, liquidity, and other needs, applicable
regulatory restrictions (including capital conservation
buffer requirements) and availability of funds to FHN
through a dividend from First Horizon Bank. Additionally,
banking regulators generally require insured banks and
bank holding companies to pay cash dividends only out of
current operating earnings. Consequently, the decision of
whether FHN will pay future dividends and the amount of
dividends will be affected by current operating results.
FHN paid a cash dividend of $0.15 per common share on
January 2, 2025. FHN paid cash dividends of $1,625 per
Series E preferred share and $1,175 per Series F preferred
share on January 10, 2025 and $331.25 per Series B
preferred share and $165 per Series C preferred share on
February 3, 2025. In addition, in January 2025, the Board
approved cash dividends per share in the following
amounts:
Table 7.25
CASH DIVIDENDS APPROVED BUT NOT PAID
Dividend/
Share
Record Date
Payment Date
Common Stock
$
0.15
3/14/2025
4/1/2025
Preferred Stock
Series C
$
165.00
4/16/2025
5/1/2025
Series E
$
1,625.00
3/26/2025
4/10/2025
Series F
$
1,175.00
3/26/2025
4/10/2025
Off-Balance Sheet Arrangements
In the normal course of business, FHN is a party to a
number of activities that contain credit, market and
operational risk that are not reflected in whole or in part
in the consolidated financial statements. Such activities
include traditional off-balance sheet credit-related
financial instruments. FHN enters into commitments to
extend credit to borrowers, including loan commitments,
lines of credit, standby letters of credit, and commercial
letters of credit. Many of the commitments are expected
to expire unused or be only partially used; therefore, the
total amount of commitments does not necessarily
represent future cash requirements and are not included
in the table below. Based on its available liquidity and
available borrowing capacity, FHN anticipates it will
continue to have sufficient funds to meet its current
commitments. See Note 16 - Contingencies and Other
Disclosures to the Consolidated Financial Statements in
Part II, Item 8 of this Report for more information.
Contractual Obligations
The following table sets forth contractual obligations
representing required and potential cash outflows as of
December 31, 2024. Purchase obligations represent
obligations under agreements to purchase goods or
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services that are enforceable and legally binding on FHN
and that specify all significant terms, including fixed or
minimum quantities to be purchased; fixed, minimum, or
variable price provisions; and the approximate timing of
the transaction.
Table 7.26
CONTRACTUAL OBLIGATIONS
as of December 31, 2024
Payments due by period (a)
Less than
1 year -
3 years -
After 5
(Dollars in millions)
1 year
< 3 years
< 5 years
years
Total
Contractual obligations:
Time deposit maturities (b) (c)
$
6,398
$
157
$
52
$
6
$
6,613
Short-term borrowings (b) (d)
3,950
—
—
—
3,950
Term borrowings (b) (e)
350
—
—
862
1,212
Annual rental commitments under noncancelable leases
(b) (f)
45
87
71
199
402
Purchase obligations
242
216
88
9
555
Total contractual obligations
$
10,985
$
460
$
211
$
1,076
$
12,732
(a) Excludes a $13 million liability for unrecognized tax benefits as the timing of payment cannot be reasonably estimated.
(b) Amounts do not include interest.
(c) See Note 8 - Deposits for further details.
(d) See Note 9 - Short-Term Borrowings for further details.
(e) See Note 10 - Term Borrowings for further details.
(f) See Note 5 - Premises, Equipment, and Leases for further details.
Credit Ratings
FHN is currently able to fund a majority of the balance
sheet through core deposits, which are generally not
directly tied to FHN’s credit ratings as are other types of
funding. However, maintaining adequate credit ratings on
debt issues and preferred stock is critical to liquidity
should FHN need to access funding from other sources,
including from long-term debt issuances and certain
brokered deposits, at an attractive rate. The availability
and cost of funds other than core deposits is also
dependent upon marketplace perceptions of the financial
soundness of FHN, which include such factors as capital
levels, asset quality, and reputation. The availability of
core deposit funding is stabilized by federal deposit
insurance, which can be removed only in extraordinary
circumstances, but may also be influenced to some extent
by the same factors that affect other funding sources.
FHN’s credit ratings are also referenced in various respects
in agreements with certain derivative counterparties as
discussed in Note 21 - Derivatives to the Consolidated
Financial Statements in Part II, Item 8 of this Report.
The following table provides FHN’s most recent credit
ratings.
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Table 7.27
CREDIT RATINGS
Moody's (a)
Fitch (b)
First Horizon Corporation
Overall credit rating: Long-term/Short-term/Outlook
Baa3/--/Stable
BBB+/F2/Stable
Long-term senior debt
Baa3
BBB+
Subordinated debt (c)
Baa3
BBB+
Junior subordinated debt (c)
Ba1
BB
Preferred stock
Ba2
BB
First Horizon Bank
Overall credit rating: Long-term/Short-term/Outlook
Baa3/P-2/Stable
BBB+/F2/Stable
Long-term/short-term deposits
A3/P-2
A-/F2
Long-term/short-term senior debt (c)
Baa3/P-2
BBB+/F2
Subordinated debt
Baa3
BBB
Preferred stock
Ba2
BB
FT Real Estate Securities Company, Inc.
Preferred stock
Ba1
A rating is not a recommendation to buy, sell, or hold securities and is subject to revision or withdrawal at any time and should be
evaluated independently of any other rating.
(a) Last change in ratings was on May 14, 2015. Outlook changed to stable ("Stable") and ratings affirmed on June 25, 2024.
(b) Last change in ratings was on October 3, 2024. Outlook changed to stable ("Stable") on May 5, 2023.
(c) Ratings are preliminary/implied.
Repurchase Obligations
Prior to September 2008, legacy First Horizon originated
loans through its pre-2009 mortgage business, primarily
first lien home loans, with the intention of selling them. As
discussed in Note 16 - Contingencies and Other
Disclosures, FHN's principal remaining exposures for those
activities relate to (i) indemnification claims by
underwriters, loan purchasers, and other parties which
assert that FHN-originated loans caused or contributed to
losses which FHN is legally obliged to indemnify, and (ii)
indemnification or other claims related to FHN's servicing
of pre-2009 mortgage loans.
FHN’s approach for determining the adequacy of the
repurchase and foreclosure reserve has evolved,
sometimes substantially, based on changes in information
available. Repurchase/make-whole rates vary based on
purchaser, vintage, and claim type. For those loans
repurchased or covered by a make-whole payment,
cumulative average loss severities range between 50 and
60 percent of the UPB.
Repurchase Accrual Approach
In determining potential loss content, claims are analyzed
by purchaser, vintage, and claim type. FHN considers
various inputs including claim rate estimates, historical
average repurchase and loss severity rates, mortgage
insurance cancellations, and mortgage insurance
curtailment requests. Inputs are applied to claims in the
active pipeline, as well as to historical average inflows to
estimate loss content related to potential future inflows.
Management also evaluates the nature of claims from
purchasers and/or servicers of loans sold to determine if
qualitative adjustments are appropriate.
Repurchase and Foreclosure Liability
As discussed in Note 16 - Contingencies and Other
Disclosures, FHN's repurchase and foreclosure liability,
primarily related to its pre-2009 mortgage origination,
sale, securitization, and servicing businesses, is comprised
of accruals to cover estimated loss content in the active
pipeline, estimated future inflows, and estimated loss
content related to certain known claims not currently
included in the active pipeline. The active pipeline consists
of mortgage loan repurchase and make-whole demands
from loan purchasers or securitization participants,
foreclosure/servicing demands from borrowers, and
certain related exposures. The liability contemplates
repurchase/make-whole and damages obligations and
estimates for probable incurred losses associated with
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loan populations excluded from the settlements with the
GSEs, as well as other whole loans sold, mortgage
insurance cancellation rescissions, and loans included in
bulk servicing sales effected prior to the settlements with
the GSEs. FHN compares the estimated probable incurred
losses determined under the applicable loss estimation
approaches for the respective periods with current
reserve levels. Changes in the estimated required liability
levels are recorded as necessary through the repurchase
and foreclosure provision. The total repurchase and
foreclosure liability, which includes both the legacy
pre-2009 business and the current mortgage business,
was $15 million and $16 million as of December 31, 2024
and 2023, respectively.
Market Uncertainties and Prospective Trends
FHN’s future results could be affected both positively and
negatively by several known trends. Key among those are
changes in the U.S. and global economy and outlook,
government actions affecting interest rates, and
government actions and proposals which could have
positive or negative impacts on the economy at large or
on certain businesses, industries, or sectors. Additional
risks relate to political uncertainty, changes in federal
policies (including those publicly discussed, formally
proposed, or recently implemented) and the potential
impacts of those changes on our businesses and clients,
and whether FHN’s strategic initiatives will succeed.
In addition to trends and events noted elsewhere in this
MD&A, FHN believes the following trends and events are
noteworthy at this time.
Inflation, Recession, and Federal Reserve Policy
Economic Overview
The post-COVID economy in the U.S. has been marked by:
strong inflation, which began in 2021, peaked in 2022, and
abated, though not fully, starting in 2023; the Federal
Reserve "tightening" in 2022 and the first half of 2023 to
contain inflation by rapidly increasing short-term interest
rates and ending asset purchases; low unemployment
rates; moderate economic growth; and, until September
2024, an inverted yield curve. Key aspects were:
• The rise in short-term interest rates by the Federal
Reserve in 2022 was both rapid and substantial, taking
the overnight Fed Funds rate from 0.20% in March
2022 to 4.65% a year later. Hikes after that were much
more modest and infrequent.
• The Federal Reserve ended rate hikes in 2023. No rate
actions were taken for more than a year, until a 50
basis point cut in September 2024 followed by cuts of
25 basis points in both November and December.
• In response to 2022's extremely rapid and vigorous
tightening of monetary policy, the inflation rate in the
U.S. now is well below 2022's levels. However,
throughout 2024 and in early 2025, measures of
inflation generally remain higher than the Federal
Reserve's stated long-term goal of 2%.
• Monetary tightening often creates yield curve
inversion for a time. In the current cycle, traditional
inversion (when ten-year treasury rates are below two-
year rates) was both very deep and unusually
sustained, with inversion lasting from the summer of
2022 to September 2024 when the yield curve began
to return to its more typical upward slope.
Key events and circumstances are noted in the following
discussions.
Federal Reserve and Rates
The Federal Reserve raised short-term rates several times
in 2022 and in the first part of 2023. All but one of the rate
increases in 2022 were 75 and 50 basis points each—
aggressive by historical standards—while the 2023 rate
increases were the more-typical 25 basis points each. The
Federal Reserve cut rates 50 basis points in September
2024 and 25 basis points in November and again in
December 2024. Rates were held steady in late January
2025.
FHN cannot predict when or how much short-term rates
will be changed, how market-driven long-term rates will
behave, nor how those actions may affect financial
markets during the next several quarters.
Yield Curve
Unusual yield curve effects, including inversion, are
common when monetary policy changes. A traditional
measure of inversion occurs when the two-year U.S.
Treasury rate is higher than the ten-year rate. Traditional
inversion was sustained continuously from the summer of
2022 until September 2024, an unusually long period. The
degree of inversion varied during that period, but often
was much deeper than is typical. Sustained traditional
yield curve inversion is viewed, with statistical support, as
a harbinger of economic recession, but recession did not
occur.
Over the last several months, the yield curve has
steepened somewhat as longer-term rates have risen or
held steady while short-term rates have fallen.
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Yield curve flattening and inversion generally reduce the
profit FHN can make from lending by compressing FHN's
net interest margin, and also generally reduce FHN's
revenues from bond trading. Both of those impacts
occurred over the last three years, with fluctuations. Refer
to Interest Rate & Yield Curve Risks, located in Item 1A.
Risk Factors beginning on page 46, for a discussion of the
risks to FHN associated with flattening and inversion.
Recession
The U.S. economy contracted (experienced negative
growth) during the first two quarters of 2022, in both
cases modestly. Although the occurrence of two
consecutive quarters of contraction often coincides with
recession, in 2022 it did not. The economy has expanded
in each quarter since then. The expansion rate has varied
without a sustained trend.
Recession expectations in the U.S. were high in 2022 and
early 2023. They moderated significantly after that and
became generally low in 2024.
Fiscal Policy
The Federal Reserve controls monetary policy for the U.S.
government, but not fiscal policy (spending and taxation).
Fiscal policy directly affects U.S. government annual
deficits or surpluses, along with the size and trajectory of
the national debt. Fiscal policy often has a significant
impact on the U.S. economy. Some of the unusual or
unexpected aspects of the post-COVID economy likely
were created or supported by historically unusual fiscal
stimulus and other stimulative policies which pushed, and
in some cases continue to push, substantial amounts of
money into the economy.
The changes in the executive and legislative branches of
government in 2025 could result in significant changes in
U.S. fiscal policy in 2025 and 2026. Even if significant
changes to policy are made quickly, usually it takes time
for the effect of such changes to become a significant
factor in the economic data.
2023 Banking Crisis
In March 2023, two large regional U.S. banks failed after
sudden large deposit outflows, and a major Swiss bank
was acquired by another bank at the behest of regulators.
In May 2023, a third large regional U.S. bank failed after
experiencing very large deposit outflows in March. In the
aftermath of these failures, bank investors and clients
across the U.S. became more focused on deposit mix,
funding risk management, and other safety-soundness
concerns. Most U.S. banks saw abrupt net outflows of
deposits in the spring of 2023 following the failures. Most
have since recouped those deposits, mainly by offering
higher interest rates. In 2024, competition for deposits
was quite intense, and such competition is expected to
continue into 2025.
Impacts on FHN
In 2022, FHN benefited significantly from rising rates as
the rise in lending rates outpaced the rise in deposit and
other funding rates. In the first quarter of 2023, that
outpacing ended, and FHN's net interest margin (NIM)
started to compress. FHN was able to somewhat relieve
the compression during 2023 fueled in part by using
increased deposits and capital to reduce more-expensive
borrowings, so that NIM in 2023 improved over 2022. NIM
for the entire year 2024 was flat, declining very modestly
from 2023.
In 2024, improvements in loan yields were largely offset
by higher funding costs, especially for deposits. Deposit
costs increased largely in response to heightened
competition in many of FHN's markets.
In addition, some of FHN's businesses have been
negatively impacted by rate actions in the past two years
and by the unusual yield curve. Rate increases pushed
home mortgage rates in the U.S. much higher in 2022 and
2023, reducing demand. FHN's direct mortgage lending
and lending to mortgage companies saw business decline
significantly in 2022 and 2023. Mortgage rates modestly
abated early in 2024 and FHN's mortgage business saw
improvement, but then rates started to rise later in the
year as the yield curve steepened somewhat after its long
inversion. However, the negative impacts of these higher
rates were offset by gains in market share. Similarly, FHN's
revenues from bond trading and related activities fell
significantly in 2022 and 2023 due to rising rates coupled
with elevated market volatility. In 2024, bond trading
revenues improved markedly, but with significant volatility
quarter-to-quarter. Bond revenues have fluctuated, likely
due to changing market expectations about rate moves,
among other things; those fluctuations could continue
going into 2025.
Other Regulatory Proposals
In 2023, the Board of Governors of the Federal Reserve
and other regulators proposed regulatory changes that
would, if implemented, significantly increase regulatory
constraints and costs on all U.S. banks with assets over
$100 billion, but whether those regulations will be
adopted, or their final form, if adopted, remains
uncertain. A few new requirements would apply to banks,
like FHN, with assets over $50 billion, but by far the main
impacts would fall on banks greater than $100 billion in
assets.
The proposals touch upon many regulatory requirements,
including debt and equity capital requirements, credit risk
standards, and asset risk-weighting. The increased
requirements also would entail additional compliance
costs.
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The triggering of significant cost increases based on a
single threshold financial measure—$100 billion in assets
—has been in place for many years and has impacted the
U.S. banking industry. Compliance restrictions and costs
increase as the threshold is approached, but a step-up
pattern remains. Those effects have added to the
incentives for banks to consolidate, and the proposed new
rules are likely to enhance those incentives if adopted.
It appears likely that, if adopted as proposed, significant
parts of the proposals will be challenged in court as being
inconsistent with legislation enacted by Congress in 2018.
Such a challenge would be technical and complex, and
likely would take many years to resolve. Moreover, even if
a challenge of that sort were successful, many parts of the
proposals likely would remain intact and others might be
modified without being rescinded.
Greenhouse Gas (GHG) Reporting Regimes
In October 2023, the state of California enacted laws
which, taken together, will require most larger companies
doing business in California to report annually their
greenhouse gas ("GHG") emissions, with an external
assurance requirement, and to report biennially their
climate-related financial risks and risk-mitigation
measures. The California laws include multi-year phase in
periods and encompass Scope 1, Scope 2, and Scope 3
GHG emissions. As currently enacted, the laws require
implementing regulations to be adopted by July 1, 2025,
and reporting for Scopes 1 and 2 GHG emissions to begin
in 2026 for the 2025 fiscal year. The California laws,
especially the application of those laws to companies
outside of California, have been challenged in court.
These challenges could take many years to resolve.
In March 2024, the U.S. Securities and Exchange
Commission ("SEC") adopted final rules, “The
Enhancement and Standardization of Climate-Related
Disclosures for Investors” (the “SEC Climate Disclosures
Rules”). These Rules would require all U.S. companies with
publicly-traded securities to report annually their Scope 1
and 2 GHG emissions and related risk management
processes, and would include a related financial statement
and audit requirement, among other things. Refer to
"Accounting Changes" below for additional information.
The SEC Climate Disclosures Rules also have a lengthy
phase-in period. There is considerable uncertainty as to
whether the SEC's Climate Disclosure Rules will be
implemented as adopted, both because the SEC has
suspended effectiveness of those rules while legal
challenges are pending and because the shifts in the
executive and legislative branches of government could
lead the SEC to withdraw or significantly alter those rules.
Three GHG Scopes
Scope 1 GHG emissions are those from a source the
company owns or controls directly, such as a
manufacturing plant. Scope 2 emissions are indirect
emissions from company activities, such as from power
consumed by company operations. Scope 1 and 2
emissions generally can be measured or estimated using
information a company normally can obtain without
significant external inquiry.
Scope 3 GHG emissions are those from sources and
activities that a company neither owns nor controls. Scope
3 emissions are from a wide range of sources that touch
upon a company, such as: vendors; employees
(commuting, business travel, etc.); and customers. Scope 3
information generally is unknown to a company without
significant external inquiry and/or estimation.
Potential Business Impacts
Direct compliance costs will include creating systems to
measure or estimate and capture relevant data, staffing,
and engagement of vendors, including a firm to provide
required assurances (somewhat analogous to a financial
statement auditor). In addition, if FHN is required to
support Scope 3 reporting by obtaining GHG-related
information from customers, effectively FHN would be
required to impose costs and/or inconveniences on its
customers. Other banks in FHN's markets, particularly
those that are private and not doing business in California,
could provide financial services without those
requirements, putting FHN at a competitive disadvantage.
Market Growth and Weather Events
FHN's principal markets are in the southern and
southeastern United States, including most of the major
gulf coast markets and several markets on the southern
Atlantic seacoast. Many of FHN's markets, both coastal
and non-coastal, have experienced significant population
growth over at least the past twenty years, outpacing the
growth rate for the U.S. as a whole. That population
growth generally has been accompanied by economic
growth.
Many of FHN's fastest growing markets, including most
significantly those in Florida, can be impacted significantly
by hurricanes and other severe coastal weather events. As
those markets grow, FHN's economic commitment to
them grows, as does FHN's financial exposure to those
events.
Over the past two years it has been widely reported that
the economic costs of hurricane and other severe weather
events in the southeastern U.S. have been rising
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significantly. FHN believes that rising costs are directly
related to growth in those areas.
For example, much of the growth in Florida has been
along the coast. A gulf coast hurricane 50 or 60 years ago
had a fair chance of making landfall in a relatively
unpopulated area. Now, the chances of a hurricane
directly hitting a population center are much higher, the
average population in that center is much higher, and the
average value per building is much higher.
The reported significant increase in casualty risks and
costs is being reflected in property insurance practices
which currently are in significant flux. The insurance
industry is being forced to revise its risk assessment and
premium pricing practices in coastal and other impacted
areas as loss experience has deviated from earlier
predictions, sometimes badly. In Florida, for example,
some smaller carriers have failed, some larger carriers
have left markets, and remaining carriers have
significantly increased the premiums of hurricane-related
insurance, narrowed coverage, or both.
Coastal states such as Florida and Louisiana have created
last-resort insurance pools for residents who cannot
obtain or afford private property insurance. However, as
the costs borne by those pools increase, either the
premiums will have to rise, or general taxation will have to
cover the difference. In addition, those programs
generally do not help business clients, nor are they
offered in many states that can be severely impacted by
hurricane-related flooding.
State and local building and water-control codes have
been and are being revised, but often unevenly and often
not retroactive to pre-existing structures and
developments. The current transition period could be
lengthy. During the transition, insurance and other costs
are likely to reduce the practical life of properties built
under older codes even if the newer codes are not directly
applied to those properties.
The availability, reliability, and cost of adequate property
insurance is a significant concern for FHN as well as FHN's
clients in affected markets. Instability in property
insurance has made, and continues to make, FHN's
business decisions more difficult. That instability increases
FHN's risks of loan loss and business downturn.
More fundamentally, elevated insurance and casualty
costs blunt a key factor driving growth in many of these
high-growth markets: lower costs of living. If market
growth slows, FHN's business could be impacted.
Critical Accounting Policies and Estimates
Allowance for Loan and Lease Losses
Management’s policy is to maintain the ALLL at a level
sufficient to absorb expected credit losses in the loan and
lease portfolio. Management performs periodic and
systematic detailed reviews of its loan and lease portfolio
to identify trends and to assess the overall collectability of
the portfolio. Management believes the accounting
estimate related to the ALLL is a “critical accounting
estimate” as: (1) changes in it can materially affect the
provision for loan and lease losses and net income, (2) it
requires management to predict borrowers’ likelihood or
capacity to repay, including evaluation of inherently
uncertain future economic conditions, (3) prepayment
activity must be projected to estimate the life of loans
that often are shorter than contractual terms, (4) it
requires estimation of a reasonable and supportable
forecast period for credit losses for loan portfolio
segments before reversion to historical loss levels over the
remaining life of a loan and (5) expected future recoveries
of amounts previously charged off must be estimated.
Accordingly, this is a highly subjective process and
requires significant judgment since it is difficult to
evaluate current and future economic conditions in
relation to an overall credit cycle and estimate the timing
and extent of loss events that are expected to occur prior
to the end of a loan’s and lease's estimated life.
FHN believes that the principal assumptions underlying
the accounting estimates made by management include:
(1) the commercial loan portfolio has been properly risk
graded based on information about borrowers in specific
industries and specific issues with respect to single
borrowers; (2) borrower-specific information made
available to FHN is current and accurate; (3) the loan
portfolio has been segmented properly and individual
loans have similar credit risk characteristics and will
behave similarly; (4) the lives for loan portfolio pools have
been estimated properly, including consideration of
expected prepayments; (5) the economic forecasts utilized
and associated weighting selected by management in the
modeling of expected credit losses are reflective of future
economic conditions; (6) entity-specific historical loss
information has been properly assessed for all loan
portfolio segments as the initial basis for estimating
expected credit losses; (7) the reasonable and supportable
periods for loan portfolio segments have been properly
determined; (8) the reversion methodologies and
timeframes for migration from the reasonable and
supportable period to the use of historical loss rates are
reasonable; (9) expected recoveries of prior charge off
amounts have been properly estimated; and
(10) qualitative adjustments to modeled loss results
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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reasonably reflect expected future credit losses as of the
date of the financial statements.
While management uses the best information available to
establish the ALLL, future adjustments to the ALLL and
methodology may be necessary if economic or other
conditions differ substantially from the assumptions used
in making the estimates. Such adjustments to prior
estimates, as necessary, are made in the period in which
these factors and other relevant considerations indicate
that loss levels vary from previous estimates.
Selection and weighting of macroeconomic forecasts are
the most significant inputs in quantitative ALLL
calculations. Due to the sensitivity of the ALLL
determination to macroeconomic forecasts, changes in
those forecasts can result in materially different results
between reporting periods. In the determination of the
ALLL as of December 31, 2024, FHN utilized Moody's
Baseline and S3 (adverse) scenarios for the calculation of
the ALLL. FHN placed the most weight on the Moody's
Baseline scenario but included the S3 scenario to reflect
the uncertainty of macroeconomic forecasts related to
ongoing economic conditions.
Due to the dynamic relationship of macroeconomic inputs
in modeling calculations, quantifying the effects of
changing individual inputs is highly challenging.
Additionally, management applies judgment in developing
qualitative adjustments that are considered necessary to
appropriately reflect elements of credit risk that are not
captured in the quantitative model results. To provide
some hypothetical sensitivity analysis, FHN prepared two
alternate quantitative calculations, applying 100%
weighting to Moody's Baseline and S3 (adverse) scenarios.
These hypothetical calculations resulted in a 3% reduction
and 29% increase, respectively, in ALLL in comparison to
the ALLL recorded as of December 31, 2024, inclusive of
qualitative adjustments that are affected by the weighting
of forecast scenarios.
See Note 1 - Significant Accounting Policies and Note 4 -
Allowance for Credit Losses to the Consolidated Financial
Statements in Part II, Item 8 of this Report for detail
regarding FHN’s processes, models, and methodology for
determining the ALLL.
Income Taxes
FHN is subject to the income tax laws of the U.S. and the
states and jurisdictions in which it operates. FHN accounts
for income taxes in accordance with ASC 740, "Income
Taxes". Significant judgments and estimates are required
in the determination of the consolidated income tax
expense. FHN income tax expense, deferred tax assets and
liabilities, and liabilities for unrecognized tax benefits
reflect management’s best estimate of current and future
taxes to be paid.
Income tax expense consists of both current and deferred
taxes. Current income tax expense is an estimate of taxes
to be paid or refunded for the current period and includes
income tax expense related to uncertain tax positions. A
DTA or a DTL is recognized for the tax consequences of
temporary differences between the financial statement
carrying amounts and the tax bases of existing assets and
liabilities. Deferred taxes can be affected by changes in tax
rates applicable to future years, either as a result of
statutory changes or business changes that may change
the jurisdictions in which taxes are paid. Additionally,
DTAs are subject to a “more likely than not” test to
determine whether the full amount of the DTAs should be
realized in the financial statements. FHN evaluates the
likelihood of realization of the DTA based on both positive
and negative evidence available at the time, including (as
appropriate) scheduled reversals of DTLs, projected future
taxable income, tax planning strategies, and recent
financial performance. Realization is dependent on
generating sufficient taxable income prior to the
expiration of the carryforwards attributable to or
generated with respect to the DTA. In projecting future
taxable income, FHN incorporates assumptions including
the amount of future state and federal pre-tax operating
income, the reversal of temporary differences, and the
implementation of feasible and prudent tax planning
strategies. These assumptions require significant
judgment about the forecasts of future taxable income
and are consistent with the plans and estimates used to
manage the underlying business. If the “more likely than
not” test is not met, a valuation allowance must be
established against the DTA.
The income tax laws of the jurisdictions in which FHN
operate are complex and subject to different
interpretations by the taxpayer and the relevant
government taxing authorities. In determining if a tax
position should be recognized and in establishing a
provision for income tax expense, FHN must make
judgments and interpretations about the application of
these inherently complex tax laws. Interpretations may be
subjected to review during examination by taxing
authorities and disputes may arise over the respective tax
positions. FHN attempts to resolve disputes that may arise
during the tax examination and audit process. However,
certain disputes may ultimately be resolved through the
federal and state court systems.
FHN monitors relevant tax authorities and revises
estimates of accrued income taxes on a quarterly basis.
Changes in estimates may occur due to changes in income
tax laws and their interpretation by the courts and
regulatory authorities. Revisions of estimates may also
result from income tax planning and from the resolution
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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of income tax controversies. Revisions in estimates may
be material to operating results for any given period.
See Note 14 - Income Taxes to the Consolidated Financial
Statements in Part II, Item 8 of this Report for additional
information including discussion of valuation allowances
related to deferred tax assets and the potential impact of
unrecognized tax benefits on future earnings.
Contingent Liabilities
A liability is contingent if the amount or outcome is not
presently known but may become known in the future as
a result of the occurrence of some uncertain future event.
FHN estimates its contingent liabilities based on:
management’s ability to reasonably estimate the loss or
range of loss related to probable loss outcomes; and
management's estimates of reasonably possible loss
associated with less-than-probable, but more-than-
remote, loss outcomes. Accounting standards require that
a liability be recorded if management determines that it is
probable that a loss has occurred and the loss can be
reasonably estimated. In addition, it must be probable
that the loss will be confirmed by some future event. As
part of the estimation process, management is required to
make assumptions about matters that are by their nature
highly uncertain and difficult to estimate.
The assessment of contingent liabilities, including legal
contingencies, involves the use of critical estimates,
assumptions, and judgments. Management’s estimates
are based on their belief that future events will validate
the current assumptions regarding the ultimate outcome
of these exposures. However, there can be no assurance
that future events, such as court decisions or decisions of
arbitrators, will not differ from management’s
assessments. Whenever practicable, management
consults with third-party experts (e.g., attorneys,
accountants, claims administrators, etc.) to assist with the
gathering and evaluation of information related to
contingent liabilities. Based on internally and/or externally
prepared evaluations, management makes a
determination whether the potential exposure requires
accrual in the financial statements.
See Note 16 - Contingencies and Other Disclosures to the
Consolidated Financial Statements in Part II, Item 8 of this
Report for additional information regarding FHN's existing
material contingent liabilities, including those with and
without loss accruals, and discussion of reasonably
possible loss amounts for pending litigation matters.
Accounting Changes
Refer to Note 1 – Significant Accounting Policies to the
Consolidated Financial Statements in Part II, Item 8 of this
Report for a summary of accounting changes and
accounting changes issued but not currently effective,
which section is incorporated into this MD&A by this
reference.
Non-GAAP Information
Certain measures included in this report are “non-GAAP”,
meaning they are not presented in accordance with U.S.
GAAP and also are not codified in U.S. banking regulations
currently applicable to FHN. Although other entities may
use calculation methods that differ from those used by
FHN for non-GAAP measures, FHN’s management believes
such measures are relevant to understanding the capital
position or financial results of FHN and its business
segments. Non-GAAP measures are reported to FHN’s
management and Board of Directors through various
internal reports.
The non-GAAP measures presented in this report are pre-
provision net revenue, return on average tangible
common equity, tangible common equity to tangible
assets, and tangible book value per common share. Table
7.28 provides a reconciliation of non-GAAP items
presented in this report to the most comparable GAAP
presentation.
Presentation of regulatory measures, even those which
are not GAAP, provides a meaningful base for
comparability to other financial institutions subject to the
same regulations as FHN, as demonstrated by their use by
banking regulators in reviewing capital adequacy of
financial institutions. Although not GAAP terms, these
regulatory measures are not considered “non-GAAP”
under U.S. financial reporting rules as long as their
presentation conforms to regulatory standards.
Regulatory measures used in this MD&A include: common
equity tier 1 capital, generally defined as common equity
less goodwill, other intangibles, and certain other required
regulatory deductions; tier 1 capital, generally defined as
the sum of core capital (including common equity and
instruments that cannot be redeemed at the option of the
holder) adjusted for certain items under risk based capital
regulations; and risk-weighted assets, which is a measure
of total on- and off-balance sheet assets adjusted for
credit and market risk, used to determine regulatory
capital ratios.
The following table provides a reconciliation of non-GAAP
items presented in this MD&A to the most comparable
GAAP presentation.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Table 7.28
NON-GAAP TO GAAP RECONCILIATION
(Dollars in millions; shares in thousands)
2024
2023
2022
Pre-provision Net Revenue (Non-GAAP)
Net interest income (GAAP)
$
2,511
$
2,540
$
2,392
Plus: Noninterest income (GAAP)
679
927
815
Total revenues (GAAP)
3,190
3,467
3,207
Less: Noninterest expense (GAAP)
2,035
2,079
1,953
Pre-provision net revenue (Non-GAAP)
$
1,155
$
1,388
$
1,254
Tangible Common Equity (Non-GAAP)
(A) Total equity (GAAP)
$
9,111
$
9,291
$
8,547
Less: Noncontrolling interest (a)
295
295
295
Less: Preferred stock (a)
426
520
1,014
(B) Total common equity
8,390
8,476
7,238
Less: Goodwill and other intangible assets (GAAP) (b)
1,653
1,696
1,745
(C) Tangible common equity (Non-GAAP)
$
6,737
$
6,780
$
5,493
Tangible Assets (Non-GAAP)
(D) Total assets (GAAP)
$ 82,152
$ 81,661
$ 78,953
Less: Goodwill and other intangible assets (GAAP) (b)
1,653
1,696
1,745
(E) Tangible assets (Non-GAAP)
$ 80,499
$ 79,965
$ 77,208
Average Tangible Common Equity (Non-GAAP)
Average total equity (GAAP)
$
9,136
$
8,905
$
8,579
Less: Average noncontrolling interest (a)
295
295
295
Less: Average preferred stock (a)
450
758
935
(F) Total average common equity
8,391
7,852
7,349
Less: Average goodwill and other intangible assets (GAAP) (b)
1,674
1,720
1,777
(G) Average tangible common equity (Non-GAAP)
$
6,717
$
6,132
$
5,572
Net Income Available to Common Shareholders
(H) Net income available to common shareholders (GAAP)
$
738
$
865
$
868
Period-end shares outstanding
(I) Period-end shares outstanding
524,280
558,839
537,101
Ratios
(A)/(D) Total period-end equity to period-end assets (GAAP)
11.09 %
11.38 %
10.83 %
(C)/(E) Tangible common equity to tangible assets (Non-GAAP)
8.37
8.48
7.12
(H)/(F) Return on average common equity (GAAP)
8.80
11.01
11.81
(H)/(G) Return on average tangible common equity (Non-GAAP)
10.99
14.11
15.58
(B)/(I) Book value per common share (GAAP)
$
16.00
$
15.17
$
13.48
(C)/(I) Tangible book value per common share (Non-GAAP)
$
12.85
$
12.13
$
10.23
(a) Included in total equity on the Consolidated Balance Sheets.
(b) Includes goodwill and other intangible assets, net of amortization.
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
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2024 FORM 10-K ANNUAL REPORT
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
The information called for by this Item is incorporated
herein by reference to: 2024 MD&A (Item 7), which begins
on page 57 of this report; Note 21—Derivatives, which
begins on page 185 of this report; and Note 22—Master
Netting and Similar Agreements - Repurchase, Reverse
Repurchase, and Securities Borrowing Transactions, which
begins on page 192 of this report. Within 2024 MD&A,
these sections are especially pertinent to this Item 7A:
Market Risk Management and Interest Rate Risk
Management which begin, respectively, on pages 87 and
89 of this report. Notes 21 and 22 are part of our 2024
Financial Statements (Item 8).
ITEM 7A. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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2024 FORM 10-K ANNUAL REPORT
Item 8. Financial Statements and Supplementary
Data
TABLE OF ITEM 8 TOPICS
Report of Management on Internal Control over Financial Reporting
107
Report of Independent Registered Public Accounting Firm
108
Consolidated Balance Sheets
112
Consolidated Statements of Income
113
Consolidated Statements of Comprehensive Income (Loss)
115
Consolidated Statements of Changes in Equity
116
Consolidated Statements of Cash Flows
117
Notes to the Consolidated Financial Statements
119
Note 1 Significant Accounting Policies
119
Note 2 Investment Securities
132
Note 3 Loans and Leases
135
Note 4 Allowance for Credit Losses
144
Note 5 Premises, Equipment, and Leases
147
Note 6 Goodwill and Other Intangible Assets
150
Note 7 Mortgage Banking Activity
151
Note 8 Deposits
152
Note 9 Short-Term Borrowings
153
Note 10 Term Borrowings
154
Note 11 Preferred Stock
156
Note 12 Regulatory Capital and Restrictions
157
Note 13 Components of Other Comprehensive Income (Loss)
159
Note 14 Income Taxes
160
Note 15 Earnings Per Share
164
Note 16 Contingencies and Other Disclosures
165
Note 17 Retirement Plans and Other Employee Benefits
167
Note 18 Stock Options and Restricted Stock
172
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
ITEM 8 TOPICS
105
2024 FORM 10-K ANNUAL REPORT
Note 19 Business Segment Information
175
Note 20 Variable Interest Entities
182
Note 21 Derivatives
185
Note 22 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities
Borrowing Transactions
192
Note 23 Fair Value of Assets and Liabilities
194
Note 24 Parent Company Financial Information
209
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
ITEM 8 TOPICS
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2024 FORM 10-K ANNUAL REPORT
Report of Management on Internal Control over Financial Reporting
Management at First Horizon Corporation is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. First Horizon
Corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.
Even effective internal controls, no matter how well designed, have inherent limitations such as the possibility of human error
or of circumvention or overriding of controls, and consideration of cost in relation to benefit of a control. Moreover,
effectiveness must necessarily be considered according to the existing state of the art of internal control. Further, because of
changes in conditions, the effectiveness of internal controls may diminish over time.
Management assessed the effectiveness of First Horizon Corporation’s internal control over financial reporting as of
December 31, 2024. This assessment was based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on our assessment and those criteria, management believes that First Horizon Corporation maintained effective
internal control over financial reporting as of December 31, 2024.
KPMG LLP, the independent registered public accounting firm that audited First Horizon Corporation's financial statements,
issued an audit report on First Horizon Corporation’s internal control over financial reporting. That report appears on the
following page.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
MANAGEMENT REPORT ON ICOFR
107
2024 FORM 10-K ANNUAL REPORT
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
First Horizon Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited First Horizon Corporation and subsidiaries' (the Company) internal control over financial reporting as of
December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated
statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year
period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements), and our report
dated February 27, 2025 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of
Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Memphis, Tennessee
February 27, 2025
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
OPINION ON ICOFR
108
2024 FORM 10-K ANNUAL REPORT
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
First Horizon Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of First Horizon Corporation and subsidiaries (the Company)
as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in
equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes
(collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations
and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 27, 2025 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We
believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of the allowance for loan losses for loans collectively evaluated for impairment
As discussed in Notes 1 and 4 to the consolidated financial statements, the Company’s total allowance for loan losses
as of December 31, 2024 was $815 million, of which a portion related to the allowance for loan losses for loans
collectively evaluated for impairment (the collective ALLL). The collective ALLL includes the measure of expected
credit losses on a collective (pooled) basis for those loans that share similar risk characteristics. The Company
estimated the collective ALLL using a current expected credit losses methodology which is based on internal and
external information relating to past events, current conditions, and reasonable and supportable forecasts of future
conditions that affect the collectability of future cash flows. The expected credit losses are the product of multiplying
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
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OPINION ON CONSOLIDATED FINANCIAL STATEMENTS
109
2024 FORM 10-K ANNUAL REPORT
the Company’s estimates of probability of default (PD), loss given default (LGD), and individual loan level exposure at
default (EAD), including amortization and prepayment assumptions, on an undiscounted basis. The Company uses
models or assumptions to develop expected loss forecasts, inclusive of qualitative adjustments that are affected by
the weighting of multiple macroeconomic forecast scenarios over a four year reasonable and supportable forecast
period. After the reasonable and supportable forecast period, the Company immediately reverts to its historical loss
averages, evaluated over the historical observation period, for the remaining estimated life of the loans. In order to
capture the unique risks of the loan portfolio within the PD, LGD, and prepayment models, the Company segments
the portfolio into pools, generally incorporating loan grades for commercial loans. The Company uses qualitative
adjustments to adjust historical loss information in situations where current loan characteristics differ from those in
the historical loss information and for differences in economic conditions and other factors.
We identified the assessment of the collective ALLL as a critical audit matter. A high degree of audit effort, including
specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the
collective ALLL due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation
of the collective ALLL methodology, including the methods and models used to estimate the PD, LGD, and
prepayments and their significant assumptions, which included the selection of the economic forecast scenarios and
the weighting of each economic scenario. The assessment also included the evaluation of certain qualitative
adjustments and their significant assumptions. The significant assumptions are sensitive to variation, such that minor
changes in the assumption can cause significant changes in the estimates. The assessment also included an
evaluation of the conceptual soundness and performance of the PD, LGD, and prepayments models. In addition,
auditor judgment was required to evaluate the sufficiency of audit evidence obtained.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of
the collective ALLL estimate, including controls over the:
•
assessment of the collective ALLL methodology
•
performance monitoring of the PD, LGD and prepayment models
•
continued use and appropriateness of changes to the PD, LGD, and prepayment models, including the
significant assumptions used in the PD, LGD, and prepayment models
•
selection of the economic scenarios and the weighting of each economic scenario
•
development of the qualitative adjustments, including the significant assumptions used in the measurement
of the qualitative adjustments
•
analysis of the collective ALLL results, trends, and ratios.
We evaluated the Company’s process to develop the collective ALLL estimate by testing certain sources of data,
factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors,
and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who
assisted in:
•
evaluating the Company’s collective ALLL methodology for compliance with U.S. generally accepted
accounting principles
•
evaluating judgments made by the Company relative to the performance testing of the PD, LGD, and
prepayment models by comparing them to relevant Company-specific metrics and trends and the applicable
industry and regulatory practices
•
assessing the conceptual soundness and performance testing of the PD, LGD, and prepayment models by
inspecting the model documentation to determine whether the models are suitable for their intended use
•
evaluating the selection of the economic forecast scenarios and the weighting applied to each scenario by
comparing them to the Company’s business environment and relevant industry practices
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
OPINION ON CONSOLIDATED FINANCIAL STATEMENTS
110
2024 FORM 10-K ANNUAL REPORT
•
evaluating the methodology used to develop the qualitative adjustments and the effect of those
adjustments on the collective ALLL compared with relevant credit risk factors and consistency with credit
trends and identified limitations of the underlying quantitative models.
We also assessed the sufficiency of the audit evidence obtained related to the collective ALLL estimate by evaluating
the:
•
cumulative results of the audit procedures
•
qualitative aspects of the Company’s accounting practice
•
potential bias in the accounting estimates.
We have served as the Company’s auditor since 2002.
Memphis, Tennessee
February 27, 2025
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
OPINION ON CONSOLIDATED FINANCIAL STATEMENTS
111
2024 FORM 10-K ANNUAL REPORT
Consolidated Balance Sheets
December 31,
(Dollars in millions, except per share amounts)
2024
2023
Assets
Cash and due from banks
$
906
$
1,012
Interest-bearing deposits with banks
1,538
1,328
Federal funds sold and securities purchased under agreements to resell
631
719
Trading securities
1,387
1,412
Securities available for sale at fair value
7,896
8,391
Securities held to maturity (fair value of $1,083 and $1,161, respectively)
1,270
1,323
Loans held for sale (including $85 and $68 at fair value, respectively)
551
502
Loans and leases
62,565
61,292
Allowance for loan and lease losses
(815)
(773)
Net loans and leases
61,750
60,519
Premises and equipment
574
590
Goodwill
1,510
1,510
Other intangible assets
143
186
Other assets
3,996
4,169
Total assets
$
82,152
$
81,661
Liabilities
Noninterest-bearing deposits
$
16,021
$
17,204
Interest-bearing deposits
49,560
48,576
Total deposits
65,581
65,780
Trading liabilities
550
509
Short-term borrowings
3,400
2,549
Term borrowings
1,195
1,150
Other liabilities
2,315
2,382
Total liabilities
73,041
72,370
Equity
Preferred stock, Non-cumulative perpetual, no par value; authorized 5,000,000 shares;
issued 16,750 and 26,750 shares, respectively
426
520
Common stock, $0.625 par value; authorized 700,000,000 shares; issued 524,280,412
and 558,838,694 shares, respectively
328
349
Capital surplus
4,808
5,351
Retained earnings
4,382
3,964
Accumulated other comprehensive loss, net
(1,128)
(1,188)
FHN shareholders' equity
8,816
8,996
Noncontrolling interest
295
295
Total equity
9,111
9,291
Total liabilities and equity
$
82,152
$
81,661
See accompanying notes to consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
CONSOLIDATED BALANCE SHEETS
112
2024 FORM 10-K ANNUAL REPORT
Consolidated Statements of Income
Year Ended December 31
(Dollars in millions, except per share data; shares in thousands)
2024
2023
2022
Interest income
Interest and fees on loans and leases
$
3,874
$
3,575
$
2,292
Interest and fees on loans held for sale
36
51
39
Interest on investment securities
241
247
198
Interest on trading securities
85
78
58
Interest on other earning assets
116
149
96
Total interest income
4,352
4,100
2,683
Interest expense
Interest on deposits
1,620
1,266
184
Interest on trading liabilities
24
12
12
Interest on short-term borrowings
130
210
23
Interest on term borrowings
67
72
72
Total interest expense
1,841
1,560
291
Net interest income
2,511
2,540
2,392
Provision for credit losses
150
260
95
Net interest income after provision for credit losses
2,361
2,280
2,297
Noninterest income
Fixed income
187
133
205
Deposit transactions and cash management
176
179
171
Brokerage, management fees and commissions
101
90
92
Card and digital banking fees
77
77
84
Other service charges and fees
51
54
54
Trust services and investment management
48
47
48
Mortgage banking income
35
23
68
Gain on merger termination
—
225
—
Securities gains (losses), net
(89)
(4)
18
Other income
93
103
75
Total noninterest income
679
927
815
Noninterest expense
Personnel expense
1,137
1,100
1,101
Net occupancy expense
130
123
128
Computer software
121
111
113
Operations services
94
87
87
Deposit insurance expense
64
122
32
Legal and professional fees
64
49
62
Contract employment and outsourcing
51
49
54
Advertising and public relations
48
71
50
Amortization of intangible assets
44
47
51
Equipment expense
42
42
45
Communications and delivery
32
35
37
Contributions
18
61
7
Other expense
190
182
186
Total noninterest expense
2,035
2,079
1,953
Income before income taxes
1,005
1,128
1,159
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME
113
2024 FORM 10-K ANNUAL REPORT
Income tax expense
211
212
247
Net income
$
794
$
916
$
912
Net income attributable to noncontrolling interest
19
19
12
Net income attributable to controlling interest
$
775
$
897
$
900
Preferred stock dividends
37
32
32
Net income available to common shareholders
$
738
$
865
$
868
Basic earnings per share
$
1.37
$
1.58
$
1.62
Diluted earnings per share
$
1.36
$
1.54
$
1.53
Weighted average common shares
540,317
548,410
535,033
Diluted average common shares
544,285
561,732
566,004
See accompanying notes to consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME
114
2024 FORM 10-K ANNUAL REPORT
Consolidated Statements of Comprehensive Income (Loss)
Year Ended December 31
(Dollars in millions)
2024
2023
2022
Net income
$
794
$
916
$
912
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale
54
137
(937)
Net unrealized gains (losses) on cash flow hedges
(14)
47
(129)
Net unrealized gains (losses) on pension and other postretirement plans
20
(4)
(14)
Other comprehensive income (loss)
60
180
(1,080)
Comprehensive income (loss)
854
1,096
(168)
Comprehensive income attributable to noncontrolling interest
19
19
12
Comprehensive income (loss) attributable to controlling interest
$
835
$
1,077
$
(180)
Income tax expense (benefit) of items included in other comprehensive
income:
Net unrealized gains (losses) on securities available for sale
$
17
$
44
$
(302)
Net unrealized gains (losses) on cash flow hedges
(5)
15
(42)
Net unrealized gains (losses) on pension and other postretirement plans
7
(1)
(5)
See accompanying notes to consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
115
2024 FORM 10-K ANNUAL REPORT
Consolidated Statements of Changes in Equity
Preferred Stock
Common Stock
(Dollars in millions, except per share data; shares in
thousands)
Shares
Amount
Shares
Amount
Capital
Surplus
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss) (a)
Noncontrolling
Interest
Total
Balance, December 31, 2021
26,750
$
520
533,577
$
333
$
4,743
$
2,891
$
(288) $
295
$
8,494
Net income
—
—
—
—
—
900
—
12
912
Other comprehensive income (loss)
—
—
—
—
—
—
(1,080)
—
(1,080)
Cash dividends declared:
Preferred stock
—
—
—
—
—
(32)
—
—
(32)
Common stock ($0.60 per share)
—
—
—
—
—
(329)
—
—
(329)
Preferred stock issuance (4,936 shares issued at
$100,000 per share)
4,936
494
—
—
—
—
—
—
494
Common stock repurchased
—
—
(577)
—
(12)
—
—
—
(12)
Common stock issued for:
Stock options exercised and restricted stock awards
—
—
4,101
3
34
—
—
—
37
Stock-based compensation expense
—
—
—
—
75
—
—
—
75
Dividends declared - noncontrolling interest of
subsidiary preferred stock
—
—
—
—
—
—
—
(12)
(12)
Balance, December 31, 2022
31,686
1,014
537,101
336
4,840
3,430
(1,368)
295
8,547
Adjustment to reflect adoption of ASU 2022-02
—
—
—
—
—
4
—
—
4
Net income
—
—
—
—
—
897
—
19
916
Other comprehensive income (loss)
—
—
—
—
—
—
180
—
180
Cash dividends declared:
Preferred stock
—
—
—
—
—
(32)
—
—
(32)
Common stock ($0.60 per share)
—
—
—
—
—
(335)
—
—
(335)
Preferred stock conversion
(4,936)
(494)
—
—
—
—
—
—
(494)
Common stock repurchased
—
—
(807)
(1)
(9)
—
—
—
(10)
Common stock issued for:
Stock options exercised and restricted stock awards
—
—
2,802
—
5
—
—
—
5
Series G preferred stock conversion
—
—
19,743
12
481
—
—
—
493
Stock-based compensation expense
—
—
—
2
34
—
—
—
36
Dividends declared - noncontrolling interest of
subsidiary preferred stock
—
—
—
—
—
—
—
(19)
(19)
Balance, December 31, 2023
26,750
520
558,839
349
5,351
3,964
(1,188)
295
9,291
Adjustment to reflect adoption of ASU 2023-02
—
—
—
—
—
8
—
—
8
Net income
—
—
—
—
—
775
—
19
794
Other comprehensive income (loss)
—
—
—
—
—
—
60
—
60
Cash dividends declared:
Preferred stock
—
—
—
—
—
(29)
—
—
(29)
Common stock ($0.60 per share)
—
—
—
—
—
(329)
—
—
(329)
Series D preferred stock redemption
(10,000)
(94)
—
—
—
(6)
—
—
(100)
Excise tax on preferred stock redemption
—
—
—
—
—
(1)
—
—
(1)
Common stock repurchased (b)
—
—
(39,203)
(25)
(601)
—
—
—
(626)
Excise tax on common stock repurchased
—
—
—
—
(6)
—
—
—
(6)
Common stock issued for:
Stock options exercised and restricted stock awards
—
—
4,644
1
8
—
—
—
9
Stock-based compensation expense
—
—
—
3
56
—
—
—
59
Dividends declared - noncontrolling interest of
subsidiary preferred stock
—
—
—
—
—
—
—
(19)
(19)
Balance, December 31, 2024
16,750
$
426
524,280
$
328
$
4,808
$
4,382
$
(1,128) $
295
$
9,111
(a) Due to the nature of the preferred stock issued by FHN and its subsidiaries, all components of other comprehensive income (loss) have been attributed
solely to FHN as the controlling interest holder.
(b) 2024 includes $604 million repurchased under FHN's general purchase programs.
See accompanying notes to consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
116
2024 FORM 10-K ANNUAL REPORT
Consolidated Statements of Cash Flows
Year Ended December 31
(Dollars in millions)
2024
2023
2022
Operating Activities
Net income
$
794
$
916
$
912
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for credit losses
150
260
95
Deferred income tax expense (benefit)
(17)
44
91
Depreciation and amortization of premises and equipment
55
55
59
Amortization of intangible assets
44
47
51
Net other amortization and accretion
2
—
(25)
Net decrease in trading securities (a)
1,011
1,163
2,120
Net (increase) decrease in derivatives
(2)
(314)
524
Stock-based compensation expense
59
36
75
Securities (gains) losses, net
89
4
(18)
Net (gains) losses on sale/disposal of fixed assets
(3)
—
(1)
Gain on divestiture
—
(9)
—
Gain on BOLI
(5)
(7)
(9)
Loans held for sale:
Purchases and originations
(2,758)
(2,295)
(3,728)
Gross proceeds from settlements and sales
1,792
1,183
2,310
(Gain) loss due to fair value adjustments and other
(75)
(12)
107
Other operating activities, net
132
228
(272)
Total adjustments
474
383
1,379
Net cash provided by operating activities
1,268
1,299
2,291
Investing Activities
Proceeds from sales of securities available for sale
1,155
—
—
Proceeds from maturities of securities available for sale
831
856
1,351
Purchases of securities available for sale
(1,538)
(261)
(2,767)
Purchases of securities held to maturity
—
—
(712)
Proceeds from prepayments of securities held to maturity
57
53
55
Proceeds from sales of premises and equipment
8
1
18
Purchases of premises and equipment
(44)
(37)
(28)
Proceeds from BOLI
13
14
22
Net increase in loans and leases
(1,337)
(3,303)
(3,204)
Net (increase) decrease in interest-bearing deposits with banks
(209)
56
13,523
Cash received for divestitures
—
11
—
Other investing activities, net
6
5
75
Net cash (used in) provided by investing activities
(1,058)
(2,605)
8,333
Financing Activities
Common stock:
Stock options exercised
9
5
36
Cash dividends paid
(332)
(335)
(324)
Repurchase of shares
(626)
(10)
(12)
Preferred stock:
Preferred stock issuance
—
—
494
Call of preferred stock
(100)
—
—
Cash dividends paid - preferred stock - noncontrolling interest
(19)
(17)
(11)
Cash dividends paid - preferred stock
(29)
(32)
(32)
Net (decrease) increase in deposits
(201)
2,289
(11,406)
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
117
2024 FORM 10-K ANNUAL REPORT
Net increase in short-term borrowings
851
43
382
Net increase (decrease) in term borrowings
43
(449)
4
Net cash (used in) provided by financing activities
(404)
1,494
(10,869)
Net (decrease) increase in cash and cash equivalents
(194)
188
(245)
Cash and cash equivalents at beginning of period
1,731
1,543
1,788
Cash and cash equivalents at end of period
$
1,537
$
1,731
$
1,543
Supplemental Disclosures
Total interest paid
$
1,869
$
1,428
$
280
Total taxes paid
106
123
20
Total taxes refunded
7
19
7
Transfer from loans to OREO
3
4
3
Transfer from loans HFS to trading securities
992
1,212
1,893
Transfer from loans to loans HFS
—
7
—
Preferred stock conversion to common stock
—
493
—
(a) Includes transfers from loans HFS to trading securities.
See accompanying notes to consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
118
2024 FORM 10-K ANNUAL REPORT
Notes to the Consolidated Financial Statements
Note 1—Significant Accounting Policies
Basis of Accounting
The consolidated financial statements of 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.
Principles of Consolidation
The consolidated financial statements include the
accounts of FHN and other entities in which it has a
controlling financial interest. Variable interest entities for
which FHN or a subsidiary has been determined to be the
primary beneficiary are also consolidated. Affiliates for
which FHN is not considered the primary beneficiary and
in which FHN does not have a controlling financial interest
are accounted for under the equity method. These
investments are included in other assets, and FHN’s
proportionate share of income or loss is included in
noninterest income. All significant intercompany
transactions and balances have been eliminated.
Revenues
Revenue is recognized when the performance obligations
under the terms of a contract with a client are satisfied in
an amount that reflects the consideration FHN expects to
be entitled. FHN derives a significant portion of its
revenues from fee-based services. Noninterest income
from transaction-based fees is generally recognized
immediately upon completion of the transaction.
Noninterest income from service-based fees is generally
recognized over the period in which FHN provides the
service. Any services performed over time generally
require that FHN render services each period and,
therefore, FHN measures progress in completing these
services based upon the passage of time and recognizes
revenue as invoiced.
Following is a discussion of FHN's key revenues within the
scope of ASC 606, "Revenue from Contracts with
Customers," except as noted.
Fixed Income
Fixed income includes fixed income securities sales,
trading, and strategies, as well as loan sales and derivative
sales, which are not within the scope of revenue from
contracts with customers. Fixed income also includes
investment banking fees earned for services related to
underwriting debt securities and performing portfolio
advisory services. FHN's performance obligation for
underwriting services is satisfied on the trade date, while
the performance obligation for advisory services is
satisfied over time.
Mortgage Banking Income
Mortgage banking income includes mortgage servicing
income, mortgage loan originations and sales, derivative
settlements, as well as any changes in fair value recorded
on mortgage loans and derivatives. Mortgage banking
income from 1) the sale of loans, 2) the settlement of
derivatives, 3) changes in the fair value of loans,
derivatives, and servicing rights, and 4) the servicing of
loans is not within the scope of revenue from contracts
with customers. Prior to the sale of the title insurance
business during 2022, mortgage banking income also
included title income, which was earned when FHN
fulfilled its performance obligation at the point in time
when the services were completed.
Deposit Transactions and Cash Management
Deposit transactions and cash management activities
include fees for services related to consumer and
commercial deposit products (such as service charges on
checking accounts), cash management products and
services such as electronic transaction processing
(Automated Clearing House and Electronic Data
Interchange), account reconciliation services, cash vault
services, lockbox processing, and information reporting to
large corporate clients. FHN's obligation for transaction-
based services is satisfied at the time of the transaction
when the service is delivered, while FHN's obligation for
service-based fees is satisfied over the course of each
month.
Brokerage, Management Fees and Commissions
Brokerage, management fees and commissions include
fees for portfolio management, trade commissions, and
annuity and mutual fund sales. Asset-based management
fees are charged based on the market value of the client’s
assets. The services associated with these revenues, which
include investment advice and active management of
client assets, are generally performed and recognized over
a month or quarter. Transactional revenues are based on
the size and number of transactions executed at the
client’s direction and are generally recognized on the
trade date.
Trust Services and Investment Management
Trust services and investment management fees include
investment management, personal trust, employee
benefits, and custodial trust services. Obligations for trust
services are generally satisfied over time but may be
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES
119
2024 FORM 10-K ANNUAL REPORT
satisfied at points in time for certain activities that are
transactional in nature.
Card and Digital Banking Fees
Card and digital banking fees include credit interchange
and network revenues and various card-related fees.
Interchange income is recognized concurrently with the
delivery of services on a daily basis. Card-related fees such
as late fees, currency conversion, and cash advance fees
are loan-related and excluded from the scope of ASC 606.
Contract Balances
As of December 31, 2024 and 2023, accounts receivable
related to products and services on noninterest income
were $14 million and $13 million, respectively. For the
year ended December 31, 2024, FHN had no material
impairment losses on noninterest accounts receivable,
and there were no material contract assets, contract
liabilities, or deferred contract costs recorded on the
Consolidated Balance Sheets as of December 31, 2024.
Credit risk is assessed on these accounts receivable each
reporting period, and the amount of estimated
uncollectible receivables is not material.
Transaction Price Allocated to Remaining Performance
Obligations
For the year ended December 31, 2024, revenue
recognized from performance obligations related to prior
periods was not material. Revenue expected to be
recognized in any future year related to remaining
performance obligations, excluding revenue pertaining to
contracts that have an original expected duration of one
year or less and contracts where revenue is recognized as
invoiced, is not material.
Refer to Note 19 - Business Segment Information for a
reconciliation of disaggregated revenue by major product
line and reportable segment.
Statements of Cash Flows
For purposes of these statements, cash and due from
banks, federal funds sold, and securities purchased under
agreements to resell are considered cash and cash
equivalents. Federal funds are usually sold for one-day
periods, and securities purchased under agreements to
resell are short-term, highly liquid investments.
Interest-Bearing Deposits With Banks
Interest-bearing deposits with banks primarily consist of
funds on deposit with the Federal Reserve and collateral
posted with derivative counterparties. Interest is earned
at overnight rates.
Debt Investment Securities
Debt securities that may be sold prior to maturity are
classified as AFS and are carried at fair value. The
unrealized gains and losses on debt securities AFS,
including securities for which no credit impairment exists,
are excluded from earnings and are reported, net of tax,
as a component of other comprehensive income within
shareholders’ equity and the Consolidated Statements of
Comprehensive Income. Debt securities which
management has the intent and ability to hold to maturity
are reported at amortized cost. See Note 23 - Fair Value of
Assets and Liabilities for additional information. Realized
gains and losses (i.e., from sales) for debt investment
securities are determined by the specific identification
method and reported in noninterest income.
The evaluation of credit risk for HTM debt securities
mirrors the process described below for loans held for
investment. AFS debt securities are reviewed for potential
credit impairment at the individual security level. The
evaluation of credit risk includes consideration of third-
party and government guarantees (both explicit and
implicit), senior or subordinated status, credit ratings of
the issuer, the effects of interest rate changes since
purchase, and observable market information such as
issuer-specific credit spreads. Credit losses for AFS debt
securities are generally recognized through establishment
of an allowance for credit losses that cannot exceed the
amount by which amortized cost exceeds fair value.
Charge-offs are recorded as reductions of the security’s
amortized cost and the credit allowance. Subsequent
improvements in estimated credit losses result in
reduction of the credit allowance, but not beyond zero.
However, if FHN has the intent to sell or if it is more-likely-
than-not that it will be compelled to sell a security with an
unrecognized loss, the difference between the security's
carrying value and fair value is recognized through
earnings and a new amortized cost basis is established for
the security (i.e., no allowance for credit losses is
recognized).
FHN has elected to exclude accrued interest receivable
from the fair value and amortized cost basis on debt
securities when assessing whether these securities have
experienced credit impairment. Additionally, FHN has
elected to not measure an allowance for credit losses on
AIR for debt securities based on its policy to write off
uncollectible interest in a timely manner, which generally
occurs when delinquency reaches no more than 90 days
for all security types. Any such write-offs are recognized as
a reduction of interest income. AIR for debt securities is
included within other assets in the Consolidated Balance
Sheets.
Equity Investments
Equity investments are classified in other assets. Banks
organized under state law may apply to be members of
the Federal Reserve System. Each member bank is
required to own stock in its regional Federal Reserve Bank.
Given this requirement, FRB stock may not be sold,
traded, or pledged as collateral for loans. Membership in
the Federal Home Loan Bank 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-
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transferable and, generally, membership is maintained
primarily to provide a source of liquidity as needed. FRB
and FHLB stock are recorded at cost and are subject to
impairment reviews. FHN's subsidiary, First Horizon Bank,
was a state member bank throughout 2024.
Other equity investments primarily consist of mutual
funds, which are marked to fair value through earnings,
and equity investments without a readily determinable
fair value, which are recorded at cost minus impairment,
with adjustments through earnings for observable price
changes in orderly transactions for the identical or a
similar investment of the same issuer.
Federal Funds Sold and Purchased
Federal funds sold and purchased represent unsecured
overnight funding arrangements between participants in
the Federal Reserve system primarily to assist banks in
meeting their regulatory cash reserve requirements.
Federal funds sold are evaluated for credit risk each
reporting period. Due to the short duration of each
transaction and the history of no credit losses, no credit
loss has been recognized.
Securities Purchased Under Agreements to Resell and
Securities Sold Under Agreements to Repurchase
FHN purchases short-term securities under agreements to
resell, which are accounted for as collateralized financings
except where FHN does not have an agreement to sell the
same or substantially the same securities before maturity
at a fixed or determinable price. All of FHN’s securities
purchased under agreements to resell are recognized as
collateralized financings. Securities delivered under these
transactions are delivered to either the dealer custody
account at the FRB or to the applicable counterparty.
Securities sold under agreements to repurchase are
offered to cash management clients as an automated,
collateralized investment account. Securities sold under
agreements to repurchase are also used by the consumer
or commercial bank to obtain favorable borrowing rates
on its purchased funds. All of FHN's securities sold under
agreements to repurchase are secured borrowings.
Collateral is valued daily and FHN may require
counterparties to deposit additional securities or cash as
collateral, or FHN may return cash or securities previously
pledged by counterparties, or FHN may be required to
post additional securities or cash as collateral, based on
the contractual requirements for these transactions.
FHN’s fixed income business utilizes securities borrowing
arrangements as part of its trading operations. Securities
borrowing transactions generally require FHN to deposit
cash with the securities lender. The amount of cash
advanced is recorded within securities purchased under
agreements to resell in the Consolidated Balance Sheets.
These transactions are not considered purchases and the
securities borrowed are not recognized by FHN. FHN does
not conduct securities lending transactions.
Securities purchased under agreements to resell and
securities borrowing arrangements are evaluated for
credit risk each reporting period. As presented in Note 22 -
Master Netting and Similar Agreements - Repurchase,
Reverse Repurchase, and Securities Borrowing
Transactions, these agreements are collateralized by the
related securities and collateral maintenance provisions
with counterparties, including replenishment and
adjustment on a transaction-specific basis. This collateral
includes both the securities collateral for each transaction
as well as offsetting securities sold under agreements to
repurchase with the same counterparty. Given the history
of no credit losses and collateralized nature of these
transactions, no credit loss has been recognized.
Loans Held for Sale
Loans originated or purchased for which management
lacks the intent to hold are included in loans held for sale
in the Consolidated Balance Sheets. FHN generally
accounts for loans held for sale at the lower of amortized
cost or market value, with an exception for certain
mortgage loans held for sale and repurchased loans that
are not government insured which are accounted for
under the fair value option of reporting.
• Fair Value Option Election. These loans consist of
originated fixed-rate single-family residential
mortgage loans that are committed to be sold in the
secondary market. Gains and losses on these
mortgage loans are included in mortgage banking
income.
• Other loans held for sale. For these loans, gains on
sale are recognized through noninterest income. Net
unrealized losses, if any, are recognized through a
valuation allowance that is also recorded as a charge
to noninterest income.
Loans and Leases
Generally, loans are stated at principal amounts
outstanding, net of unearned income. Interest on loans is
recognized on an accrual basis at the applicable interest
rate on the principal amount outstanding. Loan origination
fees and direct costs as well as premiums and discounts
are amortized as level yield adjustments over the
respective loan terms. Unamortized net fees or costs,
premiums and discounts are recognized in interest income
upon early repayment of the loans. Loan commitment
fees are generally deferred and amortized on a straight-
line basis over the commitment period.
Equipment financing leases to commercial clients are
primarily classified as direct financing and sales-type
leases. Equipment financing leases are reported at the net
lease investment, which represents the sum of minimum
lease payments over the lease term and the estimated
residual value, less unearned interest income. Interest
income is accrued as earned over the term of the lease
based on the net investment in leases. Fees incurred to
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originate the lease are deferred and recognized as an
adjustment of the yield on the lease.
FHN has elected to exclude accrued interest receivable
from the amortized cost basis on its held-for-investment
loan portfolio. FHN has also elected to not measure an
allowance for credit losses on AIR for loans held for
investment based on its policy to write off uncollectible
interest in a timely manner, which occurs when a loan is
placed on nonaccrual status. Such write-offs are
recognized as a reduction of interest income. AIR for held-
for-investment loans is included within other assets in the
Consolidated Balance Sheets.
Nonaccrual and Past Due Loans
Generally, loans are placed on nonaccrual status if it
becomes evident that full collection of principal and
interest is at risk, impairment has been recognized as a
partial charge-off of principal balance due to insufficient
collateral value and past due status, or on a case-by-case
basis if FHN continues to receive payments, but there are
other borrower-specific issues. Consumer loans are
generally placed into nonaccrual status no later than 90
days past due.
• Residential real estate loans discharged through
Chapter 7 bankruptcy and not reaffirmed by the
borrower (“discharged bankruptcies”) are placed on
nonaccrual. They are not returned to accrual status
even if current and performing in the future.
• Current second-lien residential real estate loans that
are junior to first liens are placed on nonaccrual
status if in bankruptcy.
When commercial and consumer loans within each
portfolio segment and class are placed on nonaccrual
status, accrued but uncollected interest is reversed and
charged against interest income. Management may elect
to continue the accrual of interest when the estimated net
realizable value of collateral is sufficient to recover the
principal balance and accrued interest. Interest payments
received on nonaccrual loans are normally applied to
outstanding principal first. Once all principal has been
received, additional interest payments are recognized on a
cash basis as interest income.
Generally, commercial and consumer loans within each
portfolio segment and class that have been placed on
nonaccrual status can be returned to accrual status if all
principal and interest is current and FHN expects full
repayment of the remaining contractual principal and
interest. This typically requires that a borrower make
payments in accordance with the contractual terms for a
sustained period of time (generally for a minimum of six
months) before being returned to accrual status.
Residential real estate loans discharged through Chapter 7
bankruptcy and not reaffirmed by the borrower are not
returned to accrual status. For current second liens that
have been placed on nonaccrual because the first lien is
90 or more days past due, the second lien may be
returned to accrual upon pay-off or cure of the first lien.
Charge-offs
For all commercial and consumer loan portfolio segments,
all losses of principal are charged to the ALLL in the period
in which the loan is deemed to be uncollectible.
For consumer loans, the timing of a full or partial charge-
off generally depends on the loan type and delinquency
status. Generally, for the consumer real estate segment, a
loan will be either partially or fully charged off when it
becomes 180 days past due. At this time, if the collateral
value does not support foreclosure, balances are fully
charged off and other avenues of recovery are pursued. If
the collateral value supports foreclosure, the loan is
charged down to net realizable value (collateral value less
estimated costs to sell) and is placed on nonaccrual status.
For residential real estate loans discharged in Chapter 7
bankruptcy and not reaffirmed by the borrower, the fair
value of the collateral position is assessed at the time FHN
is made aware of the discharge and the loan is charged
down to the net realizable value (collateral value less
estimated costs to sell). Within the credit card and other
portfolio segment, credit cards are normally charged off
upon reaching 120 days past due. Other non-real estate
consumer loans are charged off or partially charged off
upon reaching 120 days past due.
For acquired PCD loans where all or a portion of the loan
balance had been charged off prior to acquisition, and for
which active collection efforts are still underway, the ALLL
recorded at acquisition is immediately charged off if
required by FHN’s existing charge off policy. Additionally,
FHN is required to consider its existing policies in
determining whether to charge off any financial assets,
regardless of whether a charge-off was recorded by the
predecessor company. The initial ALLL recognized on PCD
assets includes the gross-up of the loan balance reduced
by immediate charge-offs for loans previously charged off
by the predecessor company or which meet FHN’s charge-
off policy on the date of acquisition. Charge-offs against
the allowance related to such acquired PCD loans do not
result in an income statement impact.
Purchased Credit-Deteriorated Loans
At the time of acquisition, FHN evaluates all acquired
loans to determine if they have experienced a more-than-
insignificant deterioration in credit quality since
origination. PCD loans can be identified on either an 1)
individual or a 2) pooled basis when the loans share
similar risk characteristics. FHN evaluates various absolute
factors to assist in the identification of PCD loans,
including criteria such as existing PCD status, risk rating of
special mention or lower, nonaccrual or impaired status,
identification of prior loan modifications, and delinquency
status. FHN also utilizes relative factors to identify PCD
loans, such as commercial loan grade migration,
expansion of borrower credit spreads, declines in external
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risk ratings and changes in consumer loan characteristics
(e.g., FICO decline or LTV increase). In addition, factors
reflective of broad economic considerations are also
considered in identifying PCD loans. These include
industry, collateral type, and the geographic location of
the borrower’s operations. Internal factors for the
origination of new loans that are similar to the acquired
loans are also evaluated to assess loans for PCD status,
including increases in required yields, the necessity of
borrowers providing additional collateral and/or
guarantees, and changes in acceptable loan duration.
Other indicators may also be used to evaluate loans for
PCD status depending on borrower-specific
communications and actions, such as public statements,
initiation of loan modification discussions, and obtaining
emergency funding from alternate sources.
Upon acquisition, the expected credit losses are allocated
to the purchase price of individual PCD loans to determine
each individual asset's amortized cost basis, typically
resulting in a reduction of the discount that is accreted
prospectively to interest income. At the acquisition date
and prospectively, only the unpaid principal balance is
incorporated within the estimation of expected credit
losses for PCD loans. Otherwise, the process for
estimation of expected credit losses is consistent with that
discussed below. As discussed below, FHN applies
undiscounted cash flow methodologies for the estimation
of expected credit losses, which results in the calculated
amount of credit losses at acquisition that is added to the
amortized cost basis of the related PCD loans to exceed
the discounted value of estimated credit losses included in
the loan valuation.
For PCD loans where all or a portion of the loan balance
has been previously written off, or would be subject to
write-off under FHN’s charge-off policy, the initial ALLL
included as part of the grossed-up loan balance at
acquisition was immediately written off, resulting in a zero
period-end allowance balance and no impact on the ALLL
rollforward.
Allowance for Credit Losses
The nature of the process by which FHN determines the
appropriate ACL requires the exercise of considerable
judgment. The ACL is determined in accordance with ASC
326-20, "Financial Instruments—Credit Losses," which was
adopted on January 1, 2020. See Note 4 - Allowance for
Credit Losses for a discussion of FHN’s ACL methodology
and a description of the models utilized in the estimation
process for the commercial and consumer loan portfolios.
Future adjustments to the ACL may be necessary if
economic or other conditions differ substantially from the
assumptions used in making the estimates or, if required
by regulators, based upon information at the time of their
examinations or upon future regulatory guidance. Such
adjustments to original estimates, as necessary, are made
in the period in which these factors and other relevant
considerations indicate that loss levels vary from previous
estimates.
Management's estimate of expected credit losses in the
loan and lease portfolio is recorded in the ALLL and the
reserve for unfunded lending commitments, together
referred to as the ACL. The ACL is maintained at a level
that management determines is appropriate to absorb
current expected credit losses in the loan and lease
portfolio and unfunded lending commitments.
Management uses analytical models to estimate expected
credit losses in the loan and lease portfolio and unfunded
lending commitments as of the balance sheet date. The
models are carefully reviewed to identify trends that may
not be captured in the modeled loss estimates.
Management uses qualitative adjustments for those items
not reflected in the modeled loss information such as
recent changes from the macroeconomic forecasts utilized
in model calculations, results of additional stressed
modeling scenarios, observed and/or expected changes
affecting borrowers in specific industries or geographic
areas, exposure to large lending relationships, and
expected recoveries of prior charge-offs. Qualitative
adjustments are also used to accommodate for the
imprecision of certain assumptions and uncertainties
inherent in the model calculations as well as to align
certain differences in models used by acquired loan
portfolios to the methodologies described herein. Loans
accounted for at elected fair value are excluded from CECL
measurements.
The ALLL is increased by the provision for loan and lease
losses and is decreased by loan charge-offs. Credit loss
estimation is based on the amortized cost of loans, which
includes the following:
1. Unpaid principal balance for originated assets or
acquisition price for purchased assets
2. Accrued interest (see elections discussed previously)
3. Accretion or amortization of premium, discount, and
net deferred fees or costs
4. Collection of cash
5. Charge-offs
Premiums, discounts, and net deferred origination costs/
fees affect the calculated amount of expected credit
losses, but they are not considered when determining the
amount of expected credit losses that are recorded.
Under CECL, a loan must be pooled when it shares similar
risk characteristics with other loans. Loans that do not
share similar risk characteristics are evaluated individually.
Expected credit loss is estimated for the remaining life of
loan(s), which is limited to the remaining contractual
term(s), adjusted for prepayment estimates, which are
included as separate inputs into modeled loss estimates.
Renewals and extensions are not anticipated unless they
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are included in existing loan documentation and are not
unconditionally cancellable by the lender. However, prior
to January 1, 2023, losses were estimated over the
estimated remaining life of reasonably expected TDRs
which could extend beyond the current remaining
contractual term.
Management has developed multiple current expected
credit losses models which segment the loan and lease
portfolio by borrower type and loan or lease type to
estimate expected lifetime expected credit losses for loans
and leases that share similar risk characteristics. Estimates
of expected credit losses incorporate consideration of
available information that is relevant to assessing the
collectability of future cash flows. This includes internal
and external information relating to past events, current
conditions, and reasonable and supportable forecasts of
future conditions. FHN utilizes internal and external
historical loss information, as applicable, for all available
historical periods as the initial point for estimating
expected credit losses. Given the duration of historical
information available, FHN considers its internal loss
history to fully incorporate the effects of prior credit
cycles dating back to the Great Recession. The historical
loss information may be adjusted in situations where
current loan characteristics (e.g., underwriting criteria)
differ from those in existence at the time the historical
losses occurred. Historical loss information is also adjusted
for differences in economic conditions, macroeconomic
forecasts and other factors management considers
relevant over a period extending beyond the
measurement date which is considered reasonable and
supportable.
FHN generally measures expected credit losses using
undiscounted cash flow methodologies. Credit
enhancements (e.g., guarantors) that are not freestanding
are considered in the estimation of uncollectible cash
flows. Estimation of expected credit losses for loan
agreements involving collateral maintenance provisions
includes consideration of the value of the collateral and
replenishment requirements, with the maximum loss
limited to the difference between the amortized cost of
the loan and the fair value of the collateral. Expected
credit losses for loans for which foreclosure is probable
are measured at the fair value of collateral, less estimated
costs to sell when disposition through sale is anticipated.
Additionally, for borrowers experiencing financial
difficulty, certain loans are valued at the fair value of
collateral when repayment is expected to be provided
substantially through the operation of the collateral. The
fair value of the collateral is reduced for estimated costs
to sell when repayment is expected through sale of the
collateral. Prior to January 1, 2023, expected credit losses
for TDRs were measured in accordance with ASC 310-40,
which generally required a discounted cash flow
methodology, whereby the loans were measured based
on the present value of expected future payments
discounted at the loan’s original effective interest rate.
Subsequent to December 31, 2022, in accordance with the
provisions of ASU 2022-02, FHN has ceased recognition of
TDRs and no longer performs discounted cash flow
calculations for these loans to estimate expected credit
losses. FHN now monitors and discloses information
associated with modifications to borrowers experiencing
financial difficulty. For both commercial and consumer
portfolio segments, an adjustment to the ACL is generally
not recorded at the time of modification because FHN
includes these modified loans in its quantitative loss
estimation processes. In the event of principal forgiveness,
which primarily occurs for commercial loan workouts and
consumer loans experiencing bankruptcy, FHN records the
reduction in expected collectible principal balance as a
charge-off against the ALLL.
Expected recoveries of previously charged-off amounts
are also included as a qualitative adjustment in the
estimation of expected credit losses, which reduces the
amount of the allowance recognized. Estimates of
recoveries on previously charged-off assets included in the
allowance for loan losses do not exceed the aggregate of
amounts previously written off and expected to be written
off for an individual loan or pool.
Since CECL requires the estimation of credit losses for the
entire expected life of loans, loss estimates are highly
sensitive to changes in macroeconomic forecasts,
especially when those forecasts change dramatically in
short time periods. Additionally, under CECL credit loss
estimates are more likely to increase rapidly in periods of
loan growth.
Expected credit losses for unfunded commitments are
estimated for periods where the commitment is not
unconditionally cancellable by FHN. The measurement of
expected credit losses for unfunded commitments mirrors
that of loans with the additional estimate of future draw
rates (timing and amount). The liability for credit losses
inherent in lending-related commitments, such as letters
of credit and unfunded loan commitments, is included in
other liabilities on the Consolidated Balance Sheets and
established through a charge to the provision for credit
losses.
Premises and Equipment
Premises and equipment are carried at cost less
accumulated depreciation and amortization and include
additions that materially extend the useful lives of existing
premises and equipment. All other maintenance and
repair expenditures are expensed as incurred. Premises
and equipment held for sale are generally valued at
appraised values which reference recent disposition
values for similar property types but also consider
marketability discounts for vacant properties. The
valuations of premises and equipment held for sale are
reduced by estimated costs to sell. Impairments, and any
subsequent recoveries, are recorded in noninterest
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expense. Gains and losses on dispositions are reflected in
noninterest income and expense, respectively.
Depreciation and amortization are computed on the
straight-line method over the estimated useful lives of the
assets and are recorded as noninterest expense.
Leasehold improvements are amortized over the lesser of
the lease periods or the estimated useful lives using the
straight-line method. Useful lives utilized in determining
depreciation for furniture, fixtures, and equipment and for
buildings are three years to fifteen years and seven years
to forty-five years, respectively.
Other Real Estate Owned
Real estate acquired by foreclosure or other real estate-
owned consists of properties that have been acquired in
satisfaction of debt. These properties are carried at the
lower of the outstanding loan amount or estimated fair
value less estimated costs to sell the real estate. At the
time acquired, and in conjunction with the transfer from
loans to OREO, there is a charge-off against the ALLL if the
estimated fair value less costs to sell is less than the loan’s
cost basis. Subsequent declines in fair value and gains or
losses on dispositions, if any, are charged to other
expense on the Consolidated Statements of Income.
Required developmental costs associated with acquired
property under construction are capitalized and included
in determining the estimated net realizable value of the
property, which is reviewed periodically, and any write-
downs are charged against current earnings.
Goodwill and Other Intangible Assets
Goodwill represents the excess of cost over net assets of
acquired businesses less identifiable intangible assets. On
an annual basis, or more frequently if necessary, FHN
assesses goodwill for impairment. Other intangible assets
primarily represent client lists and relationships, acquired
contracts, covenants not to compete and premiums on
purchased deposits, which are amortized over their
estimated useful lives. Intangible assets related to
acquired deposit bases are primarily amortized over 10
years using an accelerated method. Management
evaluates whether events or circumstances have occurred
that indicate the remaining useful life or carrying value of
amortizing intangibles should be revised. Other
intangibles also include smaller amounts of non-
amortizing intangibles for state banking licenses.
Servicing Rights
FHN recognizes the rights to service mortgage and other
loans as separate assets, which are recorded in other
assets in the Consolidated Balance Sheets, when
purchased or when servicing is contractually separated
from the underlying loans by sale with servicing rights
retained. For loan sales with servicing retained, a servicing
right, generally an asset, is recorded at fair value at the
time of sale for the right to service the loans sold. All
servicing rights are identified by class and amortized over
the remaining life of the loan with periodic reviews for
impairment.
Transfers of Financial Assets
Transfers of financial assets, or portions thereof which
meet the definition of a participating interest, are
accounted for as sales when control over the assets has
been surrendered. Control over transferred assets is
deemed to be surrendered when 1) the assets have been
legally isolated from FHN, 2) the transferee has the right
to pledge or exchange the assets with no conditions that
constrain the transferee and provide more than a trivial
benefit to FHN, and 3) FHN does not maintain effective
control over the transferred assets. If the transfer does
not satisfy all three criteria, the transaction is recorded as
a secured borrowing. If the transfer is accounted for as a
sale, the transferred assets are derecognized from FHN’s
balance sheet and a gain or loss on sale is recognized. If
the transfer is accounted for as a secured borrowing, the
transferred assets remain on FHN’s balance sheet and the
proceeds from the transaction are recognized as a liability.
Derivative Financial Instruments
FHN accounts for derivative financial instruments in
accordance with ASC 815, which requires recognition of all
derivative instruments on the balance sheet as either an
asset or liability measured at fair value through
adjustments to either accumulated other comprehensive
income within shareholders’ equity or current earnings.
Fair value is defined as the price that would be received to
sell a derivative asset or paid to transfer a derivative
liability in an orderly transaction between market
participants on the transaction date. Fair value is
determined using available market information and
appropriate valuation methodologies. FHN has elected to
present its derivative assets and liabilities gross on the
Consolidated Balance Sheets. Amounts of collateral
posted or received have not been netted with the related
derivatives unless the collateral amounts are considered
legal settlements of the related derivative positions. See
Note 21 - Derivatives for discussion on netting of
derivatives.
FHN prepares written hedge documentation identifying
the risk management objective and designating the
derivative instrument as a fair value hedge or cash flow
hedge, as applicable, or as a free-standing derivative
instrument entered into as an economic hedge or to meet
clients’ needs. All transactions designated as ASC 815
hedges must be assessed at inception and on an ongoing
basis as to the effectiveness of the derivative instrument
in offsetting changes in fair value or cash flows of the
hedged item. For a fair value hedge, changes in the fair
value of the derivative instrument and changes in the fair
value of the hedged asset or liability attributable to the
hedged risk are recognized currently in earnings. For a
cash flow hedge, changes in the fair value of the derivative
instrument are recorded in accumulated other
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comprehensive income and subsequently reclassified to
earnings as the hedged transaction impacts net income.
For fair value hedges, the entire change in the fair value of
the hedging instrument included in the assessment of
effectiveness is recorded to the same financial statement
line item (e.g., interest expense) used to present the
earnings effect of the hedged item. For cash flow hedges,
the entire fair value change of the hedging instrument
that is included in the assessment of hedge effectiveness
is initially recorded in other comprehensive income and
later recycled into earnings as the hedged transaction(s)
affect net income with the income statement effects
recorded in the same financial statement line item used to
present the earnings effect of the hedged item (e.g.,
interest income). For free-standing derivative instruments,
changes in fair values are recognized currently in earnings.
See Note 21 - Derivatives for additional information.
Cash flows from derivative contracts are reported as
operating activities on the Consolidated Statements of
Cash Flows.
Leases
At inception, all arrangements are evaluated to determine
if they contain a lease, which is defined as a contract, or
part of a contract, that conveys the right to control the
use of identified property, plant, or equipment for a
period of time in exchange for consideration. Control is
deemed to exist when a lessor has granted and a lessee
has received both the right to obtain substantially all of
the economic benefits from use of the identified asset and
the right to direct the use of the identified asset
throughout the period of use.
Lessee
As a lessee, FHN recognizes lease (right-of-use) assets and
lease liabilities for all leasing arrangements with lease
terms that are greater than one year. The lease asset and
lease liability are recognized at the present value of
estimated future lease payments, including estimated
renewal periods, with the discount rate reflecting a fully-
collateralized rate matching the estimated lease term.
Renewal options are included in the estimated lease term
if they are considered reasonably certain of exercise.
Periods covered by termination options are included in
the lease term if it is reasonably certain they will not be
exercised. Additionally, prepaid or accrued lease
payments, lease incentives and initial direct costs related
to lease arrangements are recognized within the right-of-
use asset. Each lease is classified as a financing or
operating lease which depends on the relationship of the
lessee’s rights to the economic value of the leased asset.
For finance leases, interest on the lease liability is
recognized separately from amortization of the right-of-
use asset in earnings, resulting in higher expense in the
earlier portion of the lease term. For operating leases, a
single lease cost is calculated so that the cost of the lease
is allocated over the lease term on a generally straight-line
basis. Substantially all of FHN’s lessee arrangements are
classified as operating leases. For leases with a term of 12
months or less, FHN does not recognize lease assets and
lease liabilities and expense is generally recognized on a
straight-line basis over the lease term.
Lease assumptions and classification are reassessed upon
the occurrence of events that result in changes to the
estimated lease term or consideration. Modifications to
lease contracts are evaluated to determine 1) if a right to
use an additional asset has been obtained, 2) if only the
lease term and/or consideration have been revised, or 3)
if a full or partial termination has occurred. If an additional
right-of-use asset has been obtained, the modification is
treated as a separate contract and its classification is
evaluated as a new lease arrangement. If only the lease
term or consideration are changed, the lease liability is
revalued with an offset to the lease asset and the lease
classification is re-assessed. If a modification results in a
full or partial termination of the lease, the lease liability is
revalued through earnings along with a proportionate
reduction in the value of the related lease asset and
subsequent expense recognition is similar to a new lease
arrangement.
Lease assets are evaluated for impairment when triggering
events occur, such as a change in management intent
regarding the continued occupation of the leased space. If
a lease asset is impaired, it is written down to the present
value of estimated future cash flows and the prospective
expense recognition for that lease follows the accelerated
expense recognition methodology applicable to finance
leases, even if it remains classified as an operating lease.
Sublease arrangements are accounted for consistent with
the lessor accounting described below. Sublease
arrangements are evaluated to determine if changes to
estimates for the primary lease are warranted or if the
sublease terms reflect impairment of the related lease
asset.
Lease assets are recognized in other assets and lease
liabilities are recognized in other liabilities in the
Consolidated Balance Sheets. Since substantially all of its
leasing arrangements relate to real estate, FHN records
lease expense, and any related sublease income, within
net occupancy expense in the Consolidated Statements of
Income.
Lessor
As a lessor, FHN also evaluates its lease arrangements to
determine whether a finance lease or an operating lease
exists and utilizes the rate implicit in the lease
arrangement as the discount rate to calculate the present
value of future cash flows. Depending upon the terms of
the individual agreements, finance leases represent either
sales-type or direct financing leases, both of which require
de-recognition of the asset being leased with offsetting
recognition of a lease receivable that is evaluated for
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impairment similar to loans. Other than equipment leases
entered into as part of commercial lease financing
arrangements, all of FHN's lessor arrangements are
considered operating leases.
Lease income for operating leases is recognized over the
life of the lease, generally on a straight-line basis. Lease
incentives and initial direct costs are capitalized and
amortized over the estimated life of the lease. Lease
income is not significant for any reporting periods and is
classified as a reduction of net occupancy expense in the
Consolidated Statements of Income.
Tax Credit Investments
Commencing in 2024 with the adoption of ASU 2023-02
(see discussion below), FHN has elected to apply the
proportional amortization method ("PAM") to all
qualifying equity investments generating low income
housing tax credits, new markets tax credits and historic
tax credits. Under the PAM, the initial cost of a qualifying
equity investment is amortized in proportion to the tax
credits and other tax benefits received and recognizes the
net investment performance as a component of income
tax expense. Prior to 2024, FHN’s election to apply the
PAM was limited by then-existing GAAP to qualifying
equity investments generating low income housing tax
credits. Prior to 2024, low income housing tax credit
equity investments that did not qualify for the PAM, along
with new markets tax credit equity investments and
historic tax credit equity investments, were accounted for
using the equity method.
FHN has elected to utilize the deferral method for
investments that generate investment tax credits. This
includes both renewable energy tax credit investments
and historic tax credit equity investments that do not
qualify for the proportional amortization method. Under
this approach, the investment tax credits are recorded as
an offset to the related investment on the balance sheet.
Credit amounts are recognized in earnings over the life of
the investment within the same income or expense
accounts as used for the investment.
Advertising and Public Relations
Advertising and public relations costs are generally
expensed as incurred.
Income Taxes
FHN accounts for income taxes using the asset and liability
method pursuant to ASC 740, “Income Taxes,” which
requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of
events that have been included in the financial
statements. Under this method, FHN’s deferred tax assets
and liabilities are determined based on differences
between financial statement carrying amounts and the
corresponding tax basis of certain assets and liabilities
using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect of a
change in tax rates on DTAs and DTLs is recognized in
income in the period that includes the enactment date.
Additionally, DTAs are subject to a “more likely than not”
test to determine whether the full amount of the DTAs
should be recognized in the financial statements. FHN
evaluates the likelihood of realization of the DTA based on
both positive and negative evidence available at the time,
including (as appropriate) scheduled reversals of DTLs,
projected future taxable income, tax planning strategies,
and recent financial performance. If the “more likely than
not” test is not met, a valuation allowance must be
established against the DTA. In the event FHN determines
that DTAs are realizable in the future in excess of their net
recorded amount, FHN would make an adjustment to the
valuation allowance, which would reduce income tax
expense.
FHN records uncertain tax positions in accordance with
ASC 740 on the basis of a two-step process in which 1) it is
determined whether it is more likely than not that the tax
positions will be sustained on the basis of the technical
merits of the position and 2) for those tax positions that
meet the more-likely-than-not recognition threshold, the
largest amount of tax benefit that is more than 50 percent
likely to be realized upon ultimate settlement with the
related tax authority is recognized. FHN's ASC 740 policy is
to recognize interest and penalties related to
unrecognized tax benefits as a component of income tax
expense. Accrued interest and penalties are included
within the related tax asset or liability line in the
Consolidated Balance Sheets.
FHN and its eligible subsidiaries are included in a
consolidated federal income tax return. FHN files separate
returns for subsidiaries that are not eligible to be included
in a consolidated federal income tax return. Based on the
laws of the applicable state where it conducts business
operations, FHN either files consolidated, combined, or
separate returns.
Earnings per Share
Earnings per share is computed by dividing net income or
loss available to common shareholders by the weighted
average number of common shares outstanding for each
period. Diluted earnings per share in net income periods is
computed by dividing net income available to common
shareholders by the weighted average number of
common shares outstanding adjusted to include the
number of additional common shares that would have
been outstanding if the potential dilutive common shares
resulting from performance shares and units, restricted
shares and units, and options granted under FHN’s equity
compensation plans and deferred compensation
arrangements had been issued. FHN utilizes the treasury
stock method in this calculation. Diluted earnings per
share does not reflect an adjustment for potentially
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dilutive shares in periods in which a net loss available to
common shareholders exists.
Equity Compensation
FHN accounts for its employee stock-based compensation
plans using the grant date fair value of an award to
determine the expense to be recognized over the life of
the award. Stock options are valued using an option-
pricing model, such as Black-Scholes. Restricted and
performance shares and share units are valued at the
stock price on the grant date. For awards with service
vesting criteria, expense is recognized using the straight-
line method over the requisite service period (generally
the vesting period). Forfeitures are recognized when they
occur. For awards vesting based on a performance
measure, anticipated performance is projected to
determine the number of awards expected to vest, and
the corresponding aggregate expense is adjusted to reflect
the elapsed portion of the performance period. If a
performance period extends beyond the required service
term, total expense is adjusted for changes in estimated
achievement through the end of the performance period.
Some performance awards include a total shareholder
return modifier (“TSR Modifier”) that operates after
determination of the performance criteria, affecting only
the quantity of awards issued if the minimum
performance threshold is attained. The effect of the TSR
Modifier is considered in the grant date fair value of the
related performance awards. The fair value of equity
awards with cash payout requirements, as well as awards
for which fair value cannot be estimated at grant date, is
remeasured each reporting period through vesting date.
Performance awards with pre-grant date achievement
criteria are expensed over the period from the start of the
performance period through the end of the service vesting
term. Awards are amortized using the nonsubstantive
vesting methodology, which requires that expense
associated with awards having only service vesting criteria
that continue vesting after retirement be recognized over
a period ending no later than an associate’s retirement
eligibility date.
Cash settled awards with payouts partially or fully based
on changes in share price are accounted for as liability
awards and are remeasured based on changes in their fair
value until the end of the performance period.
Compensation cost for each reporting period is based on
the change in the fair value of the award within each
reporting period adjusted for the portion of required
service that occurred during the reporting period.
Repurchase and Foreclosure Provision
The repurchase and foreclosure provision is the charge to
earnings necessary to maintain the liability at a level that
reflects management’s best estimate of losses associated
with the repurchase of loans previously transferred in
whole loans sales or securitizations or make-whole
requests as of the balance sheet date. See Note 16 -
Contingencies and Other Disclosures for discussion related
to FHN’s obligations to repurchase such loans.
Legal Costs
Generally, legal costs are expensed as incurred. Costs
related to equity issuances are netted against capital
surplus. Costs related to debt issuances are included in
debt issuance costs that are recorded within term
borrowings. Costs related to equity issuances are recorded
as a reduction of the proceeds from the related issuance.
Contingency Accruals
Contingent liabilities arise in the ordinary course of
business, including those related to lawsuits, arbitration,
mediation, and other forms of litigation. FHN establishes
loss contingency liabilities for matters when loss is both
probable and reasonably estimable in accordance with
ASC 450-20-50, “Contingencies – Accruals for Loss
Contingencies.” If loss for a matter is probable and a range
of possible loss outcomes is the best estimate available,
accounting guidance generally requires a liability to be
established at the low end of the range. Expected
recoveries from insurance and indemnification
arrangements are recognized if they are considered
equally as probable and reasonably estimable as the
related loss contingency up to the recognized amount of
the estimated loss. Gain contingencies and expected
recoveries from insurance and indemnification
arrangements in excess of the associated recorded
estimated losses are generally recognized when received.
Recognized recoveries are recorded as offsets to the
related expense in the Consolidated Statements of
Income. The favorable resolution of a gain contingency
generally results in the recognition of other income in the
Consolidated Statements of Income. Contingencies
assumed in business combinations are evaluated through
the end of the one-year post-closing measurement
period. If the acquisition-date fair value of the contingency
can be determined during the measurement period,
recognition occurs as part of the acquisition-date fair
value of the acquired business. If the acquisition-date fair
value of the contingency cannot be determined, but loss is
considered probable as of the acquisition date and can be
reasonably estimated within the measurement period,
then the estimated amount is recorded within acquisition
accounting. If the requirements for inclusion of the
contingency as part of the acquisition are not met,
subsequent recognition of the contingency is included in
earnings.
Business Combinations
Assets and liabilities acquired in business combinations
are generally recognized at their fair values as of the
acquisition date, with the related transaction costs
expensed in the period incurred. Specified items such as
net investment in leases as lessor, acquired operating
lease assets and liabilities as lessee, employee benefit
plans and income-tax related balances are recognized in
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accordance with accounting guidance that results in
measurements that may differ from fair value. FHN may
record provisional amounts at the time of acquisition
based on available information. The provisional valuation
estimates may be adjusted for a period of up to one year
(“measurement period”) from the date of acquisition if
new information is obtained about facts and
circumstances that existed as of the acquisition date that,
if known, would have affected the measurement of the
amounts recognized as of that date. Business
combinations are included in the financial statements
from the respective dates of acquisition. Adjustments
recorded during the measurement period are recognized
in the current reporting period.
The excess of purchase price over the valuation of
specifically identified assets and liabilities is recorded as
goodwill. In certain circumstances the net values of assets
and liabilities acquired may exceed the purchase price,
which is recognized within noninterest income as a
purchase accounting gain.
Summary of Accounting Changes
ASU 2020-04, 2021-01, and 2022-06
In March 2020, the FASB issued ASU 2020-04, “Facilitation
of the Effects of Reference Rate Reform on Financial
Reporting” which provides several optional expedients
and exceptions to ease the potential burden in accounting
for (or recognizing the effects of) reference rate reform on
financial reporting. The provisions of ASU 2020-04
primarily affect 1) contract modifications (e.g., loans,
leases, debt, and derivatives) made in anticipation that a
reference rate (e.g., LIBOR) will be discontinued and 2) the
application of hedge accounting for existing relationships
affected by those modifications. The provisions of ASU
2020-04 were effective upon release and apply only to
contracts, hedging relationships, and other transactions
that reference LIBOR or another reference rate expected
to be discontinued because of reference rate reform.
Including the adoption of ASU 2022-06 (discussed below),
the expedients and exceptions provided by ASU 2020-04
do not apply to contract modifications made and hedging
relationships entered into or evaluated after December
31, 2024, except for hedging relationships existing as of
December 31, 2024, that an entity has elected certain
optional expedients for and that are retained through the
end of the hedging relationship.
FHN identified contracts affected by reference rate
reform, developed modification plans for those contracts
and implemented those modifications before the last
quotation of LIBOR on June 30, 2023. FHN elected to
utilize the optional expedients and exceptions provided by
ASU 2020-04 for contract modifications that immediately
converted the reference rate within each contract. FHN
also elected that revisions to contractual fallback
provisions, including modifications in accordance with the
provisions of Regulation ZZ, did not require evaluation for
modification accounting. Additionally, FHN elected that
the revisions to derivative contracts implemented by
central clearinghouses to convert centrally cleared
derivative contracts from LIBOR to SOFR plus an
appropriate spread adjustment were not considered
changes requiring assessment for modification accounting.
During the transition period, for cash flow hedges that
reference 1-Month USD LIBOR, FHN applied expedients
related to 1) the assumption of probability of cash flows
when reference rates are changed on hedged items 2)
avoiding dedesignation when critical terms (i.e., reference
rates) change and 3) the allowed assumption of shared
risk exposure for hedged items. Additionally, for its cash
flow hedges that reference 1-Month Term SOFR, FHN
applied expedients related to 1) the allowed assumption
of shared risk exposure for hedged items and 2) multiple
allowed assumptions of conformity between hedged items
and the hedging instrument when assessing effectiveness.
FHN continued to utilize these expedients and exceptions
through the final cash flows affected by the quotation of
LIBOR.
In accordance with the provisions of ASU 2020-04,
effective immediately after the end of the transition
period for its cash flow hedges (i.e., no more cash flows
were affected by LIBOR), FHN elected that the cessation of
effectiveness assessments under the transition guidance
and subsequent initiation of hedge effectiveness
assessments under ASC 815 did not require dedesignation
of the hedge relationships.
In December 2022, the FASB issued ASU 2022-06,
"Deferral of the Sunset Date of Topic 848" which extends
the transition window for ASU 2020-04 from December
31, 2022 to December 31, 2024, consistent with key USD
LIBOR tenors continuing to be published through June 30,
2023.
In January 2021, the FASB issued ASU 2021-01, "Scope" to
expand the scope of ASU 2020-04 to apply to certain
contract modifications that were implemented in October
2020 by derivative clearinghouses for the use of the
Secured Overnight Funding Rate ("SOFR") in discounting,
margining and price alignment for centrally cleared
derivatives, including derivatives utilized in hedging
relationships. ASU 2021-01 also applies to derivative
contracts affected by the change in discounting
convention regardless of whether they are centrally
cleared (i.e., bilateral contracts can also be modified) and
regardless of whether they reference LIBOR. ASU 2021-01
was effective immediately upon issuance with retroactive
application permitted. FHN elected to retroactively apply
the provisions of ASU 2021-01 because FHN's centrally
cleared derivatives were affected by the change in
discounting convention and because FHN has other
bilateral derivative contracts that may be modified to
conform to the use of SOFR for discounting. Adoption did
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not have a significant effect on FHN's reported financial
condition or results of operations.
All applicable asset, liability and equity instruments had
transitioned from LIBOR by the end of 2024.
ASU 2023-02
In March 2023, the FASB issued ASU 2023-02, “Accounting
for Investments in Tax Credit Structures Using the
Proportional Amortization Method” which permits
investors to elect to account for their tax equity
investments, regardless of the tax credit program from
which the income tax credits are received, using the
proportional amortization method if certain conditions are
met. The proportional amortization method results in the
cost of the investment being amortized in proportion to
the income tax credits and other income tax benefits
received, with the amortization of the investment and the
income tax credits being presented net in the income
statement as a component of income tax provision
(benefit). Prior to ASU 2023-02, the proportional
amortization method was only available to qualifying low
income housing equity investments. An investor is
required to make an accounting policy election to apply
the proportional amortization method on a tax-credit-
program-by-tax-credit-program basis. An investor that
applies the proportional amortization method to
qualifying tax equity investments must account for the
receipt of the investment tax credits using the flow-
through method, even if the entity applies the deferral
method for other investment tax credits received. ASU
2023-02 also requires specific disclosures that must be
applied to all investments that generate income tax
credits and other income tax benefits from a tax credit
program for which the entity has elected to apply the
proportional amortization method.
ASU 2023-02 was effective for fiscal years beginning after
December 15, 2023, including interim periods within those
fiscal years. Adoption of ASU 2023-02 is applied on either
a modified retrospective (cumulative catch up) or a
retrospective (restatement of prior years) basis. FHN has
assessed the applicability of ASU 2023-02 to its tax credit
program equity investments, determined that its New
Markets Tax Credit and Historic Tax Credit programs
qualified, and made the proportional method election for
them. The use of the proportional amortization method
continued for FHN's Low Income Housing Tax Credits
program. Upon adoption of ASU 2023-02, FHN recognized
a cumulative effect adjustment that increased retained
earnings by $8 million, net of tax, on January 1, 2024.
The adoption of ASU 2023-02 resulted in a revision to
FHN’s accounting policy for equity investments in tax
credit programs. After adoption, FHN’s election to utilize
the deferral method for investments that generate
Investment Tax Credits is made subsequent to the
determination of whether a tax credit program will apply
the proportional amortization method.
ASU 2023-07
In November 2023, the FASB issued ASU 2023-07,
"Improvements to Reportable Segment Disclosures" that
requires public entities to provide disclosures of significant
segment expenses and other segment items on an annual
and interim basis and to provide in interim periods all
disclosures about a reportable segment's profit or loss and
assets that are currently required annually. The ASU
requires a public entity to disclose, for each reportable
segment, the significant expense categories and amounts
that are regularly provided to the chief operating decision-
maker ("CODM") and included in each reported measure
of a segment's profit or loss. ASU 2023-07 also requires
disclosure of the title and position of the CODM and an
explanation of how the CODM uses the reported
measure(s) of segment profit or loss in assessing segment
performance and deciding how to allocate resources.
ASU 2023-07 was effective for fiscal years beginning after
December 15, 2023 and for interim periods beginning
after December 15, 2024. FHN adopted ASU 2023-07 as of
December 31, 2024 and its requirements have been
applied retrospectively to all periods presented in Note 19
— Business Segment Information.
Accounting Changes Issued But Not Currently Effective
ASU 2023-09
In December 2023, the FASB issued ASU 2023-09,
"Improvements to Income Tax Disclosures" to enhance
transparency and decision usefulness of income tax
disclosures. The provisions of this ASU require
disaggregated information about a reporting entity's
effective tax rate reconciliation in both percentages and
reporting currency amounts. Certain categories of
reconciling items are required by the ASU with additional
categories required if a specified quantitative threshold is
met. Reporting entities are also required to provide a
qualitative discussion of the primary state and local
jurisdictions for income taxes and the type of reconciling
categories. ASU 2023-09 also requires disaggregation of
income taxes paid by jurisdiction.
For public business entities, ASU 2023-09 is effective for
annual periods beginning after December 31, 2024. The
guidance will be applied on a prospective basis with the
option to apply the standard retrospectively. Early
adoption is permitted. FHN is currently assessing the
impact of adopting ASU 2023-09 on its income tax
disclosures.
ASU 2024-03
In November 2024, the FASB issued ASU 2024-03,
"Disaggregation of Income Statement Expenses" that
requires tabular disclosure, on an annual and interim
basis, of additional disaggregated information about
prescribed expense categories if they are present in any
expense caption on the face of the income statement
within continuing operations. The prescribed categories
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2024 FORM 10-K ANNUAL REPORT
applicable to FHN are employee compensation,
depreciation, and intangible asset amortization. Other
required expense disclosures must be included in the
tabular disclosure when they are included in the same
income statement caption as a prescribed expense
category. ASU 2024-03 also requires disclosure of the total
amount of selling expenses and, annually, an entity’s
definition of selling expenses.
ASU 2024-03 is effective for fiscal years beginning after
December 15, 2026, and for interim periods beginning
after December 15, 2027. The guidance is required to be
applied prospectively. Early adoption and retrospective
application are permitted. FHN is currently assessing the
effects of adopting ASU 2024-03 on its financial statement
disclosures.
SEC Final Rule
In March 2024, the SEC adopted final rules, “The
Enhancement and Standardization of Climate-Related
Disclosures for Investors” (the “Climate Disclosures
Rules”) to require registrants to disclose certain climate-
related information in registration statements and annual
reports. Information required for inclusion within the
footnotes to the financial statements for severe weather
events and other natural conditions includes 1) income
statement effects before insurance recoveries above 1%
of pre-tax income/loss, 2) balance sheet effects above 1%
of shareholders’ equity, and 3) certain carbon offsets and
renewable energy credits. Qualitative discussion is also
required for material impacts on financial estimates and
assumptions that are due to severe weather events and
other natural conditions or disclosed climate-related
targets or transition plans.
In April 2024, the SEC issued a stay of the Climate
Disclosures Rules pending the completion of judicial
review of various legal challenges. Therefore, the actual
timing of the implementation of the Climate Disclosure
Rules, if sustained through the judicial process and not
withdrawn by the SEC, is uncertain. FHN is assessing the
potential effects of the Climate Disclosure Rules on its
financial statements.
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Note 2—Investment Securities
The following table summarizes FHN’s investment securities as of December 31, 2024 and 2023.
Table 8.2.1
INVESTMENT SECURITIES AT DECEMBER 31, 2024
December 31, 2024
(Dollars in millions)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Securities available for sale:
Government agency issued MBS
$
4,223 $
1 $
(522) $
3,702
Government agency issued CMO
3,079
—
(312)
2,767
Other U.S. government agencies
1,234
—
(161)
1,073
States and municipalities
394
—
(40)
354
Total securities available for sale (a)
$
8,930 $
1 $
(1,035) $
7,896
Securities held to maturity:
Government agency issued MBS
$
804 $
— $
(109) $
695
Government agency issued CMO
466
—
(78)
388
Total securities held to maturity
$
1,270 $
— $
(187) $
1,083
(a) Includes $6.9 billion of securities available for sale and $1.3 billion of securities held to maturity pledged to secure public deposits, securities sold under
agreements to repurchase, and for other purposes.
INVESTMENT SECURITIES AT DECEMBER 31, 2023
December 31, 2023
(Dollars in millions)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Securities available for sale:
Government agency issued MBS
$
5,061 $
2 $
(579) $
4,484
Government agency issued CMO
2,487
—
(341)
2,146
Other U.S. government agencies
1,321
2
(151)
1,172
States and municipalities
627
3
(41)
589
Total securities available for sale (a)
$
9,496 $
7 $
(1,112) $
8,391
Securities held to maturity:
Government agency issued MBS
$
852 $
— $
(96) $
756
Government agency issued CMO
471
—
(66)
405
Total securities held to maturity
$
1,323 $
— $
(162) $
1,161
(a) Includes $7.6 billion of securities available for sale and $1.3 billion of securities held to maturity pledged to secure public deposits, securities sold under
agreements to repurchase, and for other purposes.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
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The amortized cost and fair value by contractual maturity for the debt securities portfolio as of December 31, 2024 is provided
below.
Table 8.2.2
DEBT SECURITIES PORTFOLIO MATURITIES
Held to Maturity
Available for Sale
(Dollars in millions)
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Within 1 year
$
— $
— $
24 $
24
After 1 year through 5 years
—
—
76
71
After 5 years through 10 years
—
—
270
241
After 10 years
—
—
1,258
1,091
Subtotal
—
—
1,628
1,427
Government agency issued MBS and CMO (a)
1,270
1,083
7,302
6,469
Total
$
1,270 $
1,083 $
8,930 $
7,896
(a) 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.
During the fourth quarter of 2024, as part of an
opportunistic restructuring of a portion of the securities
portfolio, FHN sold $1.2 billion of AFS securities, which
resulted in realized losses of $91 million for the year
ended December 31, 2024. There were no sales of AFS
securities for the years ended December 31, 2023 and
2022.
The following tables provide information on investments
within the available-for-sale portfolio that had unrealized
losses as of December 31, 2024 and 2023.
Table 8.2.3
AFS INVESTMENT SECURITIES WITH UNREALIZED LOSSES
As of December 31, 2024
Less than 12 months
12 months or longer
Total
(Dollars in millions)
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Government agency issued MBS
$
663
$
(9) $
2,992
$
(513) $
3,655
$
(522)
Government agency issued CMO
675
(2)
1,744
(310)
2,419
(312)
Other U.S. government agencies
210
(6)
863
(155)
1,073
(161)
States and municipalities
66
(1)
256
(39)
322
(40)
Total
$
1,614 $
(18) $
5,855 $
(1,017) $
7,469 $
(1,035)
As of December 31, 2023
Less than 12 months
12 months or longer
Total
(Dollars in millions)
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Government agency issued MBS
$
140
$
(2) $
4,231
$
(577) $
4,371
$
(579)
Government agency issued CMO
32
—
2,098
(341)
2,130
(341)
Other U.S. government agencies
114
(2)
905
(149)
1,019
(151)
States and municipalities
14
—
465
(41)
479
(41)
Total
$
300
$
(4) $
7,699
$
(1,108) $
7,999
$
(1,112)
FHN has evaluated all AFS debt securities that were in
unrealized loss positions in accordance with its accounting
policy for recognition of credit losses. No AFS debt
securities were determined to have credit losses. Total AIR
not included in the fair value or amortized cost basis of
AFS debt securities was $29 million and $32 million as of
December 31, 2024 and 2023. Consistent with FHN's
review of the related securities, there were no credit-
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 2—INVESTMENT SECURITIES
133
2024 FORM 10-K ANNUAL REPORT
related write downs of AIR for AFS debt securities during
the reporting periods. Additionally, for AFS debt securities
with unrealized losses, FHN does not intend to sell them
and it is more likely than not that FHN will not be required
to sell them prior to recovery. Therefore, no write downs
of these investments to fair value occurred during the
reporting periods. There were no transfers to or from AFS
or HTM securities during the years ended December 31,
2024, 2023, or 2022.
For HTM securities, an allowance for credit losses is
required to absorb estimated lifetime credit losses. Total
AIR not included in the fair value or amortized cost basis
of HTM debt securities was $3 million as of both
December 31, 2024 and 2023. FHN has assessed the risk of
credit loss and has determined that no allowance for
credit losses for HTM securities was necessary as of
December 31, 2024 and 2023. The evaluation of credit risk
includes consideration of third-party and government
guarantees (both explicit and implicit), senior or
subordinated status, credit ratings of the issuer, the
effects of interest rate changes since purchase and
observable market information such as issuer-specific
credit spreads.
The carrying amount of equity investments without a
readily determinable fair value was $96 million and $89
million as of December 31, 2024 and 2023, respectively.
The year-to-date 2024 gross amounts of upward and
downward valuation adjustments were not significant.
The year-to-date 2023 gross amounts of upward and
downward valuation adjustments included a $6 million
loss.
Unrealized gains of $11 million were recognized during
2024 and 2023 and unrealized losses of $11 million were
recognized during 2022 for equity investments with
readily determinable fair values.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 2—INVESTMENT SECURITIES
134
2024 FORM 10-K ANNUAL REPORT
Note 3—Loans and Leases
The loans and leases portfolio is disaggregated into
portfolio segments and then further disaggregated into
classes for certain disclosures. GAAP defines a portfolio
segment as the level at which an entity develops and
documents a systematic method for determining its
allowance for credit losses. A class is generally a
disaggregation of a portfolio segment and is generally
determined based on risk characteristics of the loan and
FHN’s method for monitoring and assessing credit risk and
performance. FHN's loan and lease portfolio segments are
commercial and consumer. The classes of loans and leases
are: (1) commercial, financial, and industrial, which
includes commercial and industrial loans and leases and
loans to mortgage companies, (2) commercial real estate,
(3) consumer real estate, which includes both real estate
installment and home equity lines of credit, and (4) credit
card and other.
The following table provides the amortized cost basis of
loans and leases by portfolio segment and class as of
December 31, 2024 and 2023, excluding accrued interest
of $271 million and $287 million, respectively, which is
included in other assets in the Consolidated Balance
Sheets.
Table 8.3.1
LOANS AND LEASES BY PORTFOLIO SEGMENT
December 31,
(Dollars in millions)
2024
2023
Commercial:
Commercial and industrial (a) (b)
$
29,957
$
30,609
Loans to mortgage companies
3,471
2,024
Total commercial, financial, and industrial
33,428
32,633
Commercial real estate
14,421
14,216
Consumer:
HELOC
2,092
2,219
Real estate installment loans
11,955
11,431
Total consumer real estate
14,047
13,650
Credit card and other (c)
669
793
Loans and leases
$
62,565
$
61,292
Allowance for loan and lease losses
(815)
(773)
Net loans and leases
$
61,750
$
60,519
(a) Includes equipment financing leases of $1.4 billion and $1.2 billion as of December 31, 2024 and 2023, respectively.
(b) Includes PPP loans fully guaranteed by the SBA of $12 million and $29 million as of December 31, 2024 and 2023, respectively.
(c) Includes $174 million and $180 million of commercial credit card balances as of December 31, 2024 and 2023, respectively.
Restrictions
Loans and leases with carrying values of $45.8 billion and
$46.1 billion were pledged as collateral for borrowings as
of December 31, 2024 and 2023, respectively.
Concentrations of Credit Risk
Most of FHN’s business activity is with clients located in
the southern United States. FHN’s lending activity is
concentrated in its market areas within those states. As of
December 31, 2024, FHN had loans to mortgage
companies of $3.5 billion and loans to finance and
insurance companies of $3.7 billion. As a result, 21% of
the C&I portfolio is sensitive to impacts on the financial
services industry.
Credit Quality Indicators
FHN employs a dual grade commercial risk grading
methodology to assign an estimate for the probability of
default and the loss given default for each commercial
loan using factors specific to various industry, portfolio, or
product segments that result in a rank ordering of risk and
the assignment of grades PD 1 to PD 16. This credit
grading system is intended to identify and measure the
credit quality of the loan and lease portfolio by analyzing
the migration between grading categories. It is also
integral to the estimation methodology utilized in
determining the ALLL since an allowance is established for
pools of commercial loans based on the credit grade
assigned. Each PD grade corresponds to an estimated one-
year default probability percentage. PD grades are
continually evaluated but require a formal scorecard
annually.
PD 1 through PD 12 are “pass” grades. PD grades 13-16
correspond to the regulatory-defined categories of special
mention (13), substandard (14), doubtful (15), and loss
(16). Special mention commercial loans and leases have
potential weaknesses that, if left uncorrected, may result
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 3—LOANS & LEASES
135
2024 FORM 10-K ANNUAL REPORT
in deterioration of FHN's credit position at some future
date. Substandard commercial loans and leases have well-
defined weaknesses and are characterized by the distinct
possibility that FHN will sustain some loss if the
deficiencies are not corrected. Doubtful commercial loans
and leases have the same weaknesses as substandard
loans and leases with the added characteristics that the
probability of loss is high and collection of the full amount
is improbable.
The following table provides the amortized cost basis of
the commercial loan portfolio by year of origination and
credit quality indicator as of December 31, 2024 and 2023.
Table 8.3.2
C&I PORTFOLIO
December 31, 2024
(Dollars in millions)
2024
2023
2022
2021
2020
Prior to
2020
LMC (a)
Revolving
Loans
Revolving
Loans
Converted
to Term Loans
Total
Credit Quality Indicator:
Pass (PD grades 1 through 12) (b)
$
5,590
$
2,607
$
3,649
$
2,336
$
1,055
$
3,853
$ 3,471
$
8,784
$
248
$
31,593
Special Mention (PD grade 13)
106
27
78
47
33
57
—
279
2
629
Substandard, Doubtful, or Loss (PD
grades 14,15, and 16)
84
184
113
179
33
169
—
383
61
1,206
Total C&I loans
$
5,780
$
2,818
$
3,840
$
2,562
$
1,121
$
4,079
$ 3,471
$
9,446
$
311
$
33,428
December 31, 2023
(Dollars in millions)
2023
2022
2021
2020
2019
Prior to
2019
LMC (a)
Revolving
Loans
Revolving Loans
Converted to
Term Loans
Total
Credit Quality Indicator:
Pass (PD grades 1 through 12) (b)
$
4,008
$
5,637
$
3,506
$
1,636
$
1,665
$
3,448
$ 2,019
$
9,087
$
327
$
31,333
Special Mention (PD grade 13)
75
60
64
56
101
57
—
186
—
599
Substandard, Doubtful, or Loss (PD
grades 14,15, and 16)
41
135
94
51
39
100
5
187
49
701
Total C&I loans
$
4,124
$
5,832
$
3,664
$
1,743
$
1,805
$
3,605
$ 2,024
$
9,460
$
376
$
32,633
(a) LMC includes non-revolving commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage
loans prior to the borrower's sale of those mortgage loans to third party investors. The loans are of short duration with maturities of less than one year.
(b) Balance includes PPP loans.
Table 8.3.3
CRE PORTFOLIO
December 31, 2024
(Dollars in millions)
2024
2023
2022
2021
2020
Prior to
2020
Revolving
Loans
Revolving
Loans
Converted
to Term Loans
Total
Credit Quality Indicator:
Pass (PD grades 1 through 12)
$
694
$
1,296
$
3,282
$
2,778
$
894
$
3,281
$
340
$
47
$
12,612
Special Mention (PD grade 13)
—
42
280
198
37
130
—
1
688
Substandard, Doubtful, or Loss (PD grades
14,15, and 16)
3
31
251
278
116
436
6
—
1,121
Total CRE loans
$
697
$
1,369
$
3,813
$
3,254
$
1,047
$
3,847
$
346
$
48
$
14,421
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 3—LOANS & LEASES
136
2024 FORM 10-K ANNUAL REPORT
December 31, 2023
(Dollars in millions)
2023
2022
2021
2020
2019
Prior to
2019
Revolving
Loans
Revolving
Loans Converted
to Term Loans
Total
Credit Quality Indicator:
Pass (PD grades 1 through 12)
$
853
$
3,473
$
3,518
$
1,162
$
1,216
$
2,853
$
393
$
18
$
13,486
Special Mention (PD grade 13)
5
1
129
86
175
82
—
—
478
Substandard, Doubtful, or Loss (PD grades
14,15, and 16)
—
2
5
11
175
59
—
—
252
Total CRE loans
$
858
$
3,476
$
3,652
$
1,259
$
1,566
$
2,994
$
393
$
18
$
14,216
The consumer portfolio is comprised primarily of smaller-
balance loans which are very similar in nature in that most
are standard products and are backed by residential real
estate. Because of the similarities of consumer loan types,
FHN is able to utilize the FICO score, among other
attributes, to assess the credit quality of consumer
borrowers. FICO scores are refreshed on a quarterly basis
in an attempt to reflect the recent risk profile of the
borrowers. Accruing delinquency amounts are indicators
of asset quality within the credit card and other consumer
portfolio.
The following table reflects the amortized cost basis by
year of origination and refreshed FICO scores for
consumer real estate loans as of December 31, 2024 and
2023. Within consumer real estate, classes include HELOC
and real estate installment loans. HELOCs are loans which
during their draw period are classified as revolving loans.
Once the draw period ends and the loan enters its
repayment period, the loan converts to a term loan and is
classified as a revolving loan converted to a term loan. All
loans classified in the following table as revolving loans or
revolving loans converted to term loans are HELOCs. Real
estate installment loans are originated as fixed term loans
and are classified below in their vintage year. All loans in
the following tables classified in a vintage year are real
estate installment loans.
Table 8.3.4
CONSUMER REAL ESTATE PORTFOLIO
December 31, 2024
(Dollars in millions)
2024
2023
2022
2021
2020
Prior to
2020
Revolving
Loans
Revolving
Loans
Converted
to Term
Loans
Total
FICO score 740 or greater
$
1,045
$
1,493
$
2,009
$
1,592
$
675
$
1,554
$
1,430
$
56
$
9,854
FICO score 720-739
149
197
270
213
99
271
175
17
1,391
FICO score 700-719
98
140
217
175
72
242
150
18
1,112
FICO score 660-699
133
160
183
100
75
294
146
25
1,116
FICO score 620-659
11
10
17
21
20
122
30
9
240
FICO score less than 620
18
22
19
18
18
203
25
11
334
Total consumer real
estate loans
$
1,454
$
2,022
$
2,715
$
2,119
$
959
$
2,686
$
1,956
$
136
$
14,047
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 3—LOANS & LEASES
137
2024 FORM 10-K ANNUAL REPORT
December 31, 2023
(Dollars in millions)
2023
2022
2021
2020
2019
Prior to
2019
Revolving
Loans
Revolving
Loans
Converted
to Term
Loans
Total
FICO score 740 or greater
$
1,572
$
2,099
$
1,720
$
730
$
465
$
1,332
$
1,522
$
50
$
9,490
FICO score 720-739
205
286
227
107
88
230
192
15
1,350
FICO score 700-719
154
232
193
81
52
224
159
17
1,112
FICO score 660-699
170
198
113
83
53
290
168
18
1,093
FICO score 620-659
11
20
23
22
36
106
36
7
261
FICO score less than 620
18
19
15
20
12
225
24
11
344
Total consumer real
estate loans
$
2,130
$
2,854
$
2,291
$
1,043
$
706
$
2,407
$
2,101
$
118
$
13,650
The following table reflects the amortized cost basis by year of origination and refreshed FICO scores for credit card and other
loans as of December 31, 2024 and 2023.
Table 8.3.5
CREDIT CARD & OTHER PORTFOLIO
December 31, 2024
(Dollars in millions)
2024
2023
2022
2021
2020
Prior to
2020
Revolving
Loans
Revolving
Loans
Converted
to Term
Loans
Total
FICO score 740 or greater
$
21
$
22
$
10
$
4
$
2
$
19
$
197
$
8
$
283
FICO score 720-739
7
3
1
1
—
3
20
2
37
FICO score 700-719
1
2
2
—
—
2
14
—
21
FICO score 660-699
1
2
1
—
—
3
15
4
26
FICO score 620-659
2
1
—
—
—
1
9
—
13
FICO score less than 620
8
8
5
4
4
78
181
1
289
Total credit card and
other loans
$
40
$
38
$
19
$
9
$
6
$
106
$
436
$
15
$
669
December 31, 2023
(Dollars in millions)
2023
2022
2021
2020
2019
Prior to
2019
Revolving
Loans
Revolving
Loans
Converted
to Term
Loans
Total
FICO score 740 or greater
$
52
$
26
$
10
$
5
$
3
$
27
$
207
$
5
$
335
FICO score 720-739
5
3
1
1
1
5
24
1
41
FICO score 700-719
5
4
1
1
1
4
25
1
42
FICO score 660-699
4
3
1
1
1
8
23
—
41
FICO score 620-659
2
1
1
—
—
3
7
—
14
FICO score less than 620
12
9
6
8
13
103
168
1
320
Total credit card and
other loans
$
80
$
46
$
20
$
16
$
19
$
150
$
454
$
8
$
793
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 3—LOANS & LEASES
138
2024 FORM 10-K ANNUAL REPORT
Nonaccrual and Past Due Loans and Leases
Loans and leases are placed on nonaccrual if it becomes
evident that full collection of principal and interest is at
risk, impairment has been recognized as a partial charge-
off of principal balance due to insufficient collateral value
and past due status, or on a case-by-case basis if FHN
continues to receive payments but there are other
borrower-specific issues. Included in nonaccrual are loans
for which FHN continues to receive payments including
residential real estate loans where the borrower has been
discharged of personal obligation through bankruptcy.
Past due loans are loans contractually past due as to
interest or principal payments, but which have not yet
been put on nonaccrual status.
The following table reflects accruing and non-accruing
loans and leases by class on December 31, 2024 and 2023.
Table 8.3.6
ACCRUING & NON-ACCRUING LOANS & LEASES
December 31, 2024
Accruing
Non-Accruing
(Dollars in millions)
Current
30-89
Days
Past Due
90+
Days
Past Due
Total
Accruing
Current
30-89
Days
Past Due
90+
Days
Past Due
Total
Non-
Accruing
Total
Loans and
Leases
Commercial, financial, and
industrial:
C&I (a)
$
29,751
$
32
$
1
$
29,784
$
101
$
26
$
46
$
173
$
29,957
Loans to mortgage companies
3,471
—
—
3,471
—
—
—
—
3,471
Total commercial, financial, and
industrial
33,222
32
1
33,255
101
26
46
173
33,428
Commercial real estate:
CRE (b)
14,124
3
—
14,127
221
10
63
294
14,421
Consumer real estate:
HELOC (c)
2,045
11
2
2,058
19
4
11
34
2,092
Real estate installment loans (d)
11,800
39
17
11,856
31
10
58
99
11,955
Total consumer real estate
13,845
50
19
13,914
50
14
69
133
14,047
Credit card and other:
Credit card
262
2
1
265
—
—
—
—
265
Other
400
2
—
402
—
1
1
2
404
Total credit card and other
662
4
1
667
—
1
1
2
669
Total loans and leases
$
61,853
$
89
$
21
$
61,963
$
372
$
51
$
179
$
602
$
62,565
December 31, 2023
Accruing
Non-Accruing
(Dollars in millions)
Current
30-89
Days
Past Due
90+
Days
Past Due
Total
Accruing
Current
30-89
Days
Past Due
90+
Days
Past Due
Total
Non-
Accruing
Total
Loans and
Leases
Commercial, financial, and
industrial:
C&I (a)
$
30,398
$
31
$
1
$
30,430
$
108
$
18
$
53
$
179
$
30,609
Loans to mortgage companies
2,018
1
—
2,019
5
—
—
5
2,024
Total commercial, financial, and
industrial
32,416
32
1
32,449
113
18
53
184
32,633
Commercial real estate:
CRE (b)
14,072
8
—
14,080
41
—
95
136
14,216
Consumer real estate:
HELOC (c)
2,158
11
4
2,173
30
6
10
46
2,219
Real estate installment loans (d)
11,295
29
13
11,337
43
6
45
94
11,431
Total consumer real estate
13,453
40
17
13,510
73
12
55
140
13,650
Credit card and other:
Credit card
271
3
3
277
—
—
—
—
277
Other
512
2
—
514
1
—
1
2
516
Total credit card and other
783
5
3
791
1
—
1
2
793
Total loans and leases
$
60,724
$
85
$
21
$
60,830
$
228
$
30
$
204
$
462
$
61,292
(a) $172 million and $178 million of C&I loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance in 2024
and 2023, respectively.
(b) $287 million and $129 million of CRE loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance for 2024
and 2023, respectively.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 3—LOANS & LEASES
139
2024 FORM 10-K ANNUAL REPORT
(c) $3 million and $4 million of HELOC loans are nonaccrual loans that have been specifically reviewed for impairment with no related allowance for 2024
and 2023, respectively.
(d) $9 million and $10 million of real estate installment loans are nonaccrual loans that have been specifically reviewed for impairment with no related
allowance for 2024 and 2023, respectively.
Collateral-Dependent Loans
Collateral-dependent loans are defined as loans for which
repayment is expected to be derived substantially through
the operation or sale of the collateral and where the
borrower is experiencing financial difficulty. At a
minimum, the estimated value of the collateral for each
loan equals the current book value.
As of December 31, 2024 and 2023, FHN had commercial
loans with amortized cost of approximately $352 million
and $250 million, respectively, that were based on the
value of underlying collateral. Collateral-dependent C&I
and CRE loans totaled $109 million and $243 million,
respectively, as of December 31, 2024. The collateral for
these loans generally consists of business assets including
land, buildings, equipment and financial assets. During the
years ended December 31, 2024 and 2023, FHN
recognized total charge-offs of approximately $75 million
and $144 million, respectively, on these loans related to
reductions in estimated collateral values.
Consumer HELOC and real estate installment loans with
amortized cost based on the value of underlying real
estate collateral were approximately $6 million and
$36 million, respectively, as of December 31, 2024, and
$6 million and $27 million, respectively, as of
December 31, 2023. Charge-offs were $2 million and
$1 million for collateral-dependent consumer loans during
the years ended December 31, 2024 and 2023,
respectively.
Loan Modifications to Troubled Borrowers
As part of FHN’s ongoing risk management practices, FHN
attempts to work with borrowers when necessary to
extend or modify loan terms to better align with their
current ability to repay. Modifications could include
extension of the maturity date, reductions of the interest
rate, reduction or forgiveness of accrued interest, or
principal forgiveness. Combinations of these modifications
may also be made for individual loans. Extensions and
modifications to loans are made in accordance with
internal policies and guidelines which conform to
regulatory guidance. Principal reductions may be made in
limited circumstances, typically for specific commercial
loan workouts, and in the event of borrower bankruptcy.
Each occurrence is unique to the borrower and is
evaluated separately.
Troubled loans are considered those in which the
borrower is experiencing financial difficulty. The
assessment of whether a borrower is experiencing
financial difficulty can be subjective in nature and
management’s judgment may be required in making this
determination. FHN may determine that a borrower is
experiencing financial difficulty if the borrower is currently
in default on any of its debt, or if it is probable that a
borrower may default in the foreseeable future absent a
modification. Many aspects of a borrower’s financial
situation are assessed when determining whether they
are experiencing financial difficulty.
Troubled commercial loans are typically modified through
forbearance agreements which could include reduced
interest rates, reduced payments, term extension, or
entering into short sale agreements. Principal reductions
may occur in specific circumstances.
Modifications for troubled consumer loans are generally
structured using parameters of U.S. government-
sponsored programs. For HELOC and real estate
installment loans, troubled loans are typically modified by
an interest rate reduction and a possible maturity date
extension to reach an affordable housing debt-to-income
ratio. Despite the absence of a loan modification by FHN,
the discharge of personal liability through bankruptcy
proceedings is considered a court-imposed modification.
For the credit card portfolio, troubled loan modifications
are typically enacted through either a short-term credit
card hardship program or a longer-term credit card
workout program. In the credit card hardship program,
borrowers may be granted rate and payment reductions
for six months to one year. In the credit card workout
program, borrowers are granted a rate reduction to 0%
and a term extension for up to five years.
Modifications to Borrowers Experiencing Financial
Difficulty
The following tables present the amortized cost basis at
the end of the reporting period of loans modified to
borrowers experiencing financial difficulty, disaggregated
by class of financing receivable and type of modification
made, as well as the financial effect of the modifications
made as of December 31, 2024.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 3—LOANS & LEASES
140
2024 FORM 10-K ANNUAL REPORT
Table 8.3.7
LOAN MODIFICATIONS TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY
Interest Rate Reduction
December 31, 2024
December 31, 2023
(Dollars in millions)
Balance
% of Total Class
Financial Effect
Balance
% of Total Class
Financial Effect
Consumer real estate
(a)
$
—
— % Reduced weighted-average
contractual interest rate from
10.70% to 6.75%
$
2
— % Reduced weighted-average
contractual interest rate from
8.60% to 5.00%
Credit card and other
(a)
—
—
Reduced weighted-average
contractual interest rate from
4.63% to 3.98%
—
—
Reduced weighted-average
contractual interest rate from
11.20% to 0.00%
Total
$
—
— %
$
2
— %
Term Extension
December 31, 2024
December 31, 2023
(Dollars in millions)
Balance
% of Total Class
Financial Effect
Balance
% of Total Class
Financial Effect
C&I
$
132
0.4 % Added a weighted-average 1.3
years to the life of loans, which
reduced monthly payment
amounts for the borrowers
$
90
0.3 % Added a weighted-average 1
year to the life of loans, which
reduced monthly payment
amounts for the borrowers
CRE
180
1.2
Added a weighted-average 1.3
years to the life of loans, which
reduced monthly payment
amounts for the borrowers
40
0.3
Added a weighted-average 0.8
year to the life of loans, which
reduced monthly payment
amounts for the borrowers
Consumer real estate
(a)
—
—
Added a weighted-average
24.4 years to the life of loans,
which reduced monthly
payment amounts for the
borrowers
2
—
Added a weighted-average 12
years to the life of loans, which
reduced monthly payment
amounts for the borrowers
Total
$
312
0.5 %
$
132
0.2 %
Principal Forgiveness
December 31, 2024
December 31, 2023
(Dollars in millions)
Balance
% of Total Class
Financial Effect
Balance
% of Total Class
Financial Effect
Consumer real estate
(a)
$
—
— % Less than $1 million of the
principal of consumer loans
was legally discharged in
bankruptcy during the period
and the borrowers have not
re-affirmed the debt as of
period end
$
2
— % $1.3 million of the principal of
consumer loans was legally
discharged in bankruptcy
during the period and the
borrowers have not re-
affirmed the debt as of period
end
Total
$
—
— %
$
2
— %
Payment Deferrals
December 31, 2024
December 31, 2023
(Dollars in millions)
Balance
% of Total Class
Financial Effect
Balance
% of Total Class
Financial Effect
Consumer real estate $
—
— % N/A
$
3
— % Payment deferral for 11
months, with a balloon
payment at the end of the
term
Total
$
—
— %
$
3
— %
(a) Balance less than $1 million
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 3—LOANS & LEASES
141
2024 FORM 10-K ANNUAL REPORT
Combination - Term Extension and Interest Rate Reduction
December 31, 2024
December 31, 2023
(Dollars in millions)
Balance
% of Total Class
Financial Effect
Balance
% of Total Class
Financial Effect
C&I (a)
$
8
— % Added a weighted-average 1
year to the life of loans and
reduced weighted-average
contractual interest rate from
8.00% to 7.50%
$
—
— % Added a weighted-average
1.2 years to the life of loans
and reduced weighted-
average contractual interest
rate from 13.00% to 11.50%
CRE
61
0.4
Added a weighted-average 2
years to the life of loans and
reduced weighted-average
contractual interest rate from
7.01% to 6.66%
—
—
N/A
Consumer real estate
3
—
Added a weighted-average 11
years to the life of loans and
reduced weighted-average
contractual interest rate from
8.72% to 4.09%
6
—
Added a weighted-average
14.3 years to the life of loans
and reduced weighted-
average contractual interest
rate from 5.00% to 4.70%
Total
$
72
0.1 %
$
6
— %
Combination - Term Extension, Interest Rate Reduction, and Interest Forgiveness
December 31, 2024
December 31, 2023
(Dollars in millions)
Balance
% of Total Class
Financial Effect
Balance
% of Total Class
Financial Effect
C&I
$
—
— % N/A
$
2
— % Added a weighted-average
3.7 years to the life of loans,
reduced weighted-average
contractual interest rate from
11.25% to 7.50% and
provided less than $1 million
in interest forgiveness
Total
$
—
— %
$
2
— %
Combination - Term Extension, Interest Rate Reduction, and Interest Deferrals
December 31, 2024
December 31, 2023
(Dollars in millions)
Balance
% of Total Class
Financial Effect
Balance
% of Total Class
Financial Effect
CRE
$
—
— % N/A
$
15
0.1 % Added a weighted-average 1
year to the life of loans,
reduced weighted-average
contractual interest rate from
8.65% to 8.00% and provided
less than $1 million in
deferred interest
Total
$
—
— %
$
15
— %
(a) Balance less than $1 million
Loan modifications to borrowers experiencing financial
difficulty that had a payment default during the period
and were modified in the 12 months before default
totaled $19 million and $28 million as of December 31,
2024 and 2023, respectively. FHN closely monitors the
performance of the loans that are modified to borrowers
experiencing financial difficulty to understand the
effectiveness of its modification efforts.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 3—LOANS & LEASES
142
2024 FORM 10-K ANNUAL REPORT
The following table depicts the performance of loans that have been modified in the last 12 months.
Table 8.3.8
PERFORMANCE OF LOANS THAT HAVE BEEN MODIFIED IN THE LAST 12 MONTHS
December 31, 2024
(Dollars in millions)
Current
30-89 Days Past Due
90+ Days Past Due
Non-Accruing
C&I
$
116
$
—
$
—
$
24
CRE
195
—
—
45
Consumer real estate
2
—
—
2
Credit card and other
—
—
—
—
Total
$
313
$
—
$
—
$
71
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 3—LOANS & LEASES
143
2024 FORM 10-K ANNUAL REPORT
Note 4—Allowance for Credit Losses
Management's estimate of expected credit losses in the
loan and lease portfolios is recorded in the ALLL and the
reserve for unfunded lending commitments, collectively
referred to as the Allowance for Credit Losses, or the ACL.
See Note 1 - Significant Accounting Policies for further
discussion of FHN's ACL methodology.
The ACL is maintained at a level management believes to
be appropriate to absorb expected lifetime credit losses
over the contractual life of the loan and lease portfolio
and unfunded lending commitments. The determination
of the ACL is based on periodic evaluation of the loan and
lease portfolios and unfunded lending commitments
considering a number of relevant underlying factors,
including key assumptions and evaluation of quantitative
and qualitative information.
The expected loan losses are the product of multiplying
FHN’s estimates of probability of default ("PD"), loss given
default ("LGD"), and individual loan level exposure at
default ("EAD"), including amortization and prepayment
assumptions, on an undiscounted basis. FHN uses models
or assumptions to develop the expected loss forecasts,
which incorporate multiple macroeconomic forecasts over
a reasonable and supportable forecast period of at most
four years. After the reasonable and supportable forecast
period, the Company reverts to its historical loss averages,
evaluated over the historical observation period, for the
remaining estimated life of the loans. In order to capture
the unique risks of the loan portfolio within the PD, LGD,
and prepayment models, FHN segments the portfolio into
pools, generally incorporating loan grades for commercial
loans. As there can be no certainty that actual economic
performance will precisely follow any specific
macroeconomic forecast, FHN uses qualitative
adjustments where current loan characteristics or current
or forecasted economic conditions differ from historical
periods.
The evaluation of quantitative and qualitative information
is performed through assessments of groups of assets that
share similar risk characteristics and certain individual
loans and leases that do not share similar risk
characteristics with the collective group. As described in
Note 3 - Loans and Leases, loans are grouped generally by
product type and significant loan portfolios are assessed
for credit losses using analytical or statistical models. The
quantitative component utilizes economic forecast
information as its foundation and is primarily based on
analytical models that use known or estimated data as of
the balance sheet date and forecasted data over the
reasonable and supportable period. The ACL is also
affected by qualitative factors that FHN considers to
reflect current judgment of various events and risks that
are not measured in the quantitative calculations,
including alternative economic forecasts.
In accordance with its accounting policy elections, FHN
does not recognize a separate allowance for expected
credit losses for AIR and records reversals of AIR as
reductions of interest income. FHN reverses previously
accrued but uncollected interest when an asset is placed
on nonaccrual status. AIR and the related allowance for
expected credit losses is included as a component of other
assets. The total amount of interest reversals from loans
placed on nonaccrual status and the amount of income
recognized on nonaccrual loans during the years ended
December 31, 2024, 2023, and 2022 were not material.
Expected credit losses for unfunded commitments are
estimated for periods where the commitment is not
unconditionally cancellable. The measurement of
expected credit losses for unfunded commitments mirrors
that of loans and leases with the additional estimate of
future draw rates (timing and amount).
The increase in the ACL balance as of December 31, 2024
as compared to December 31, 2023 largely reflects
negative grade migration in the commercial portfolio. In
developing credit loss estimates for its loan and lease
portfolios, FHN utilized a baseline and a downside forecast
scenario from Moody’s for its macroeconomic inputs. As
of December 31, 2024, among other things, FHN's
scenario selection process factored in the outlook for
production, inflation, interest rates, employment, real
estate prices, and international conflict. FHN selected one
scenario as its base case, which was the Moody's baseline
scenario. The heaviest weight was placed on this scenario.
A smaller weight was placed on the FHN-selected
downside scenario.
Management also made qualitative adjustments to reflect
estimated recoveries based on a review of prior charge-off
and recovery levels, for default risk associated with large
balances with individual borrowers, for estimated loss
amounts not reflected in historical factors due to specific
portfolio risk or identified model limitations, and for
instances where limited data for acquired loans is
considered to affect modeled results.
The following table provides a rollforward of the ALLL and
the reserve for unfunded lending commitments by
portfolio type for December 31, 2024, 2023 and 2022.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 4—ALLOWANCE FOR CREDIT LOSSES
144
2024 FORM 10-K ANNUAL REPORT
Table 8.4.1
ROLLFORWARD OF ALLL & RESERVE FOR UNFUNDED LENDING COMMITMENTS
(Dollars in millions)
Commercial,
Financial, and
Industrial (a)
Commercial
Real Estate
Consumer
Real Estate
Credit Card
and Other
Total
Allowance for loan and lease losses:
Balance as of January 1, 2024
$
339
$
172
$
233
$
29
$
773
Charge-offs
(77)
(56)
(3)
(21)
(157)
Recoveries
30
1
9
5
45
Provision for loan and lease losses
53
110
(18)
9
154
Balance as of December 31, 2024
345
227
221
22
815
Reserve for remaining unfunded commitments:
Balance as of January 1, 2024
49
22
12
—
83
Provision for unfunded lending commitments
8
(11)
(1)
—
(4)
Balance as of December 31, 2024
57
11
11
—
79
Allowance for credit losses as of December 31, 2024
$
402
$
238
$
232
$
22
$
894
Allowance for loan and lease losses:
Balance as of January 1, 2023
$
308
$
146
$
200
$
31
$
685
Adoption of ASU 2022-02 (b)
1
—
(7)
—
(6)
Charge-offs (c)
(156)
(17)
(4)
(22)
(199)
Recoveries
14
2
9
4
29
Provision for loan and lease losses
172
41
35
16
264
Balance as of December 31, 2023
339
172
233
29
773
Reserve for remaining unfunded commitments:
Balance as of January 1, 2023
55
22
10
—
87
Provision for unfunded lending commitments
(6)
—
2
—
(4)
Balance as of December 31, 2023
49
22
12
—
83
Allowance for credit losses as of December 31, 2023
$
388
$
194
$
245
$
29
$
856
Allowance for loan and lease losses
Balance as of January 1, 2022
$
334
$
154
$
163
$
19
$
670
Charge-offs
(62)
(1)
(5)
(25)
(93)
Recoveries
9
1
19
5
34
Provision for loan and lease losses
27
(8)
23
32
74
Balance as of December 31, 2022
308
146
200
31
685
Reserve for remaining unfunded commitments:
Balance as of January 1, 2022
46
12
8
—
66
Provision for unfunded lending commitments
9
10
2
—
21
Balance as of December 31, 2022
55
22
10
—
87
Allowance for credit losses as of December 31, 2022
$
363
$
168
$
210
$
31
$
772
(a) C&I loans as of December 31, 2024, 2023, and 2022 include $12 million, $29 million, and $76 million in PPP loans, respectively, which due to the government guarantee and
forgiveness provisions are considered to have no credit risk and therefore have no allowance for loan and lease losses.
(b) See Note 1 for additional information.
(c) Charge-offs in the C&I portfolio in 2023 include $72 million from a single credit from a company in bankruptcy.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 4—ALLOWANCE FOR CREDIT LOSSES
145
2024 FORM 10-K ANNUAL REPORT
The following table represents gross charge-offs by year of origination for the years ended December 31, 2024 and 2023.
Table 8.4.2
GROSS CHARGE-OFFS
(Dollars in millions)
2024
2023
2022
2021
2020
Prior to
2020
Revolving
Loans
Total
C&I
$
1
$
16
$
15
$
23
$
3
$
15
$
4
$
77
CRE
—
—
5
—
17
34
—
56
Consumer real estate
—
1
—
—
—
2
—
3
Credit card and other
8
1
1
—
—
2
9
21
Total
$
9
$
18
$
21
$
23
$
20
$
53
$
13
$
157
(Dollars in millions)
2023
2022
2021
2020
2019
Prior to
2019
Revolving
Loans
Total
C&I
$
1
$
17
$
82
$
5
$
10
$
34
$
7
$
156
CRE
—
—
—
—
2
15
—
17
Consumer real estate
—
1
—
—
—
3
—
4
Credit card and other
12
1
—
—
—
2
7
22
Total
$
13
$
19
$
82
$
5
$
12
$
54
$
14
$
199
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 4—ALLOWANCE FOR CREDIT LOSSES
146
2024 FORM 10-K ANNUAL REPORT
Note 5—Premises, Equipment, and Leases
Premises and equipment was comprised of the following
at December 31, 2024 and 2023.
Table 8.5.1
PREMISES & EQUIPMENT
(Dollars in millions)
December 31,
2024
December 31,
2023
Land
$
163
$
163
Buildings
570
554
Leasehold improvements
88
84
Furniture, fixtures, and equipment
304
295
Fixed assets held for sale (a)
1
—
Total premises and equipment
1,126
1,096
Less accumulated depreciation and
amortization
(552)
(506)
Premises and equipment, net
$
574
$
590
(a) Primarily comprised of land and buildings.
Fixed asset and leased asset impairments were immaterial
for 2024, 2023, and 2022. Net gains related to the sales of
fixed assets were $3 million for 2024, immaterial for 2023,
and $1 million for 2022.
First Horizon as Lessee
FHN has operating, financing, and short-term leases for
branch locations, corporate offices and certain equipment.
Substantially all of these leases are classified as operating
leases.
The following table provides details of the classification of
FHN's right-of-use assets and lease liabilities included in
the Consolidated Balance Sheets.
Table 8.5.2
RIGHT-OF-USE ASSETS & LEASE LIABILITIES
(Dollars in millions)
December 31, 2024
December 31, 2023
Lease right-of-use assets:
Classification
Operating lease right-of-use assets
Other assets
$
296 $
306
Finance lease right-of-use assets
Other assets
2
3
Total lease right-of-use assets
$
298 $
309
Lease liabilities:
Operating lease liabilities
Other liabilities
$
330 $
342
Finance lease liabilities
Other liabilities
3
3
Total lease liabilities
$
333 $
345
The calculated amount of ROU assets and lease liabilities
in the table above are impacted by the length of the lease
term and the discount rate used to determine the present
value of the minimum lease payments. The following table
details the weighted average remaining lease term and
discount rate for FHN's operating and finance leases as of
December 31, 2024 and 2023.
Table 8.5.3
REMAINING LEASE TERMS
& DISCOUNT RATES
December 31,
2024
December 31,
2023
Weighted Average Remaining
Lease Terms
Operating leases
11.68 years
11.79 years
Finance leases
8.60 years
9.15 years
Weighted Average Discount Rate
Operating leases
3.19 %
2.84 %
Finance leases
2.16 %
2.39 %
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 5—PREMISES, EQUIPMENT, & LEASES
147
2024 FORM 10-K ANNUAL REPORT
The following table provides a detail of the components of
lease expense and other lease information for the years
ended December 31, 2024, 2023, and 2022.
Table 8.5.4
LEASE EXPENSE &
OTHER INFORMATION
(Dollars in millions)
2024
2023
2022
Lease cost
Operating lease cost
$
44 $
45
$
47
Sublease income
(1)
(2)
(2)
Total lease cost
$
43 $
43
$
45
Other information
(Gain) loss on right-of-
use asset impairment -
operating leases
$
— $
1
$
1
Cash paid for amounts
included in the
measurement of lease
liabilities:
Operating cash
flows from
operating leases
43
46
50
Right-of-use assets
obtained in exchange
for new lease
obligations:
Operating leases
22
11
31
The following table provides a detail of the maturities of
FHN's operating and finance lease liabilities as of
December 31, 2024.
Table 8.5.5
LEASE LIABILITY MATURITIES
(Dollars in millions)
December 31, 2024
2025
$
45
2026
44
2027
43
2028
37
2029
34
2030 and thereafter
199
Total lease payments
402
Less lease liability interest
(69)
Total lease liability
$
333
FHN had aggregate undiscounted contractual obligations
totaling $4 million for lease arrangements that have not
commenced as of December 31, 2024. Payments under
these arrangements are expected to occur from 2025
through 2035.
First Horizon as Lessor
As a lessor, FHN engages in the leasing of equipment to
commercial clients primarily through direct financing and
sales-type leases. Direct financing and sales-type leases
are similar to other forms of installment lending in that
lessors generally do not retain benefits and risks incidental
to ownership of the property subject to leases. Such
arrangements are essentially financing transactions that
permit lessees to acquire and use property. As lessor, the
sum of all minimum lease payments over the lease term
and the estimated residual value, less unearned interest
income, is recorded as the net investment in the lease on
the commencement date and is included in loans and
leases in the Consolidated Balance Sheets. Interest income
is accrued as earned over the term of the lease based on
the net investment in leases. Fees incurred to originate
the lease are deferred on the commencement date and
recognized as an adjustment of the yield on the lease.
FHN’s portfolio of direct financing and sales-type leases
contains terms of 2 to 23 years, some of which contain
options to extend the lease for various periods of time
and/or to purchase the equipment subject to the lease at
various points in time. These direct financing and sales-
type leases typically include a payment structure set at
lease inception and do not provide any additional services.
Expenses associated with the leased equipment, such as
maintenance and insurance, are paid by the lessee directly
to third parties. The lease agreement typically contains an
option for the purchase of the leased property by the
lessee at the end of the lease term at either the property’s
residual value or a specified price. In all cases, FHN
expects to sell or re-lease the equipment at the end of the
lease term. Due to the nature and structure of FHN’s
direct financing and sales-type leases, there is no selling
profit or loss on these transactions.
The components of the Company’s net investment in
leases as of December 31, 2024 and 2023 were as follows.
Table 8.5.6
LEASE NET INVESTMENTS
(Dollars in millions)
December 31,
2024
December 31,
2023
Lease receivable
$
1,300
$
1,143
Unearned income
(279)
(244)
Guaranteed residual
166
147
Unguaranteed residual
228
189
Total net investment
$
1,415
$
1,235
Interest income for direct financing or sales-type leases
totaled $64 million, $50 million, and $34 million for the
years ended December 31, 2024, 2023, and 2022,
respectively. There was no profit or loss recognized at the
commencement date for direct financing or sales-type
leases for the years ended December 31, 2024, 2023, and
2022.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 5—PREMISES, EQUIPMENT, & LEASES
148
2024 FORM 10-K ANNUAL REPORT
Maturities of the Company's lease receivables as of
December 31, 2024 were as follows.
Table 8.5.7
LEASE RECEIVABLE MATURITIES
(Dollars in millions)
December 31, 2024
2025
$
292
2026
266
2027
226
2028
164
2029
128
2030 and thereafter
224
Total future minimum lease payments
$
1,300
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 5—PREMISES, EQUIPMENT, & LEASES
149
2024 FORM 10-K ANNUAL REPORT
Note 6—Goodwill and Other Intangible Assets
Goodwill
FHN performed the required annual goodwill impairment
test as of October 1, 2024. The annual impairment test did
not indicate impairment in any of FHN’s reporting units as
of the testing date. Following the testing date,
management evaluated the events and circumstances that
could indicate that goodwill might be impaired and
concluded that it is not more likely than not that goodwill
was impaired. If there are any triggering events between
annual evaluations, management will evaluate whether an
interim impairment analysis is warranted.
Accounting estimates and assumptions were made about
FHN’s future performance and cash flows, as well as other
prevailing market factors (e.g., interest rates, economic
trends, etc.) when determining fair value as part of the
goodwill impairment test. While management used the
best information available to estimate future performance
for each reporting unit, future adjustments to
management’s projections may be necessary if conditions
differ substantially from the assumptions used in making
the estimates.
As further discussed in Note 19 - Business Segment
Information, FHN reorganized its management reporting
structure during the fourth quarter of 2024 and,
accordingly, its segment reporting structure and reporting
units used in the assessment of goodwill impairment. In
connection with the reorganization, goodwill was
reallocated to segments and reporting units.
The following is a summary of goodwill by reportable
segment included in the Consolidated Balance Sheets as of
December 31, 2024.
Table 8.6.1
GOODWILL
(Dollars in millions)
Commercial,
Consumer &
Wealth
Wholesale
Total
December 31, 2021
$
1,217
$
294
$
1,511
Additions
—
—
—
December 31, 2022
$
1,217
$
294
$
1,511
Additions
—
—
—
Divestitures (a)
—
(1)
(1)
December 31, 2023
$
1,217
$
293
$
1,510
Additions
—
—
—
December 31, 2024
$
1,217
$
293
$
1,510
(a) Reduction in goodwill is related to the divestiture of FHN
Financial Main Street Advisors assets in December 2023.
Other intangible assets
The following table, which excludes fully amortized
intangibles, presents other intangible assets included in
the Consolidated Balance Sheets.
Table 8.6.2
OTHER INTANGIBLE ASSETS
December 31, 2024
December 31, 2023
(Dollars in millions)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Value
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Value
Core deposit intangibles
$
356
$
(233) $
123
$
368
$
(208) $
160
Client relationships
32
(18)
14
32
(16)
16
Other (a)
27
(21)
6
27
(17)
10
Total
$
415
$
(272) $
143
$
427
$
(241) $
186
(a) Includes non-compete covenants and purchased credit card intangible assets. Also includes state banking licenses which are not subject to amortization.
Amortization expense was $44 million, $47 million, and
$51 million for the years ended December 31, 2024, 2023
and 2022, respectively. The following table shows the
aggregated amortization expense estimated, as of
December 31, 2024, for the next five years.
Table 8.6.3
ESTIMATED AMORTIZATION EXPENSE
(Dollars in millions)
2025
$
38
2026
33
2027
29
2028
17
2029
15
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 6—GOODWILL & OTHER INTANGIBLE ASSETS
150
2024 FORM 10-K ANNUAL REPORT
Note 7—Mortgage Banking Activity
FHN originates mortgage loans for sale into the secondary
market. These loans primarily consist of residential first
lien mortgages that conform to standards established by
GSEs that are major investors in U.S. home mortgages, but
can also consist of junior lien and jumbo loans secured by
residential property. These loans are primarily sold to
private companies that are unaffiliated with the GSEs on a
servicing-released basis. Gains and losses on these
mortgage loans are included in mortgage banking income
on the Consolidated Statements of Income.
As of December 31, 2024, FHN had approximately
$31 million of loans that remained from pre-2009
mortgage business operations of legacy First Horizon.
Activity related to the pre-2009 mortgage loans was
primarily limited to payments and write-offs in 2024,
2023, and 2022, with no new originations or loan sales
and only an insignificant amount of repurchases. These
loans are excluded from the disclosure below.
The following table summarizes activity relating to
residential mortgage loans held for sale for the years
ended December 31, 2024, 2023, and 2022.
Table 8.7.1
MORTGAGE LOAN ACTIVITY
(Dollars in millions)
2024
2023
2022
Balance at beginning of
period
$
62 $
44 $
250
Originations and
purchases
951
692
1,275
Sales, net of gains
(932)
(674) (1,481)
Balance at end of period
$
81 $
62 $
44
Mortgage Servicing Rights
FHN records mortgage servicing rights at the lower of cost
or market value and amortizes them over the remaining
servicing life of the loans, with consideration given to
prepayment assumptions.
Mortgage servicing rights are included in other assets on
the Consolidated Balance Sheets. The following table
presents the carrying values of mortgage servicing rights
as of December 31, 2024 and 2023.
Table 8.7.2
MORTGAGE SERVICING RIGHTS
December 31, 2024
(Dollars in millions)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Mortgage servicing rights
$
30 $
(9) $
21
December 31, 2023
(Dollars in millions)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Mortgage servicing rights
$
25 $
(7) $
18
In addition, there was an insignificant amount of non-
mortgage and commercial servicing rights as of December
31, 2024 and 2023. Total mortgage servicing fees included
in mortgage banking income were $4 million for each of
the years ended December 31, 2024, 2023, and 2022.
Mortgage servicing rights with a net carrying amount of
$21 million were sold during 2022, resulting in a gain of
$12 million for the year ended December 31, 2022 which
is included in mortgage banking income on the
Consolidated Statements of Income.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 7—MORTGAGE BANKING ACTIVITY
151
2024 FORM 10-K ANNUAL REPORT
Note 8—Deposits
The composition of deposits is presented in the following
table.
Table 8.8.1
DEPOSITS
(Dollars in millions)
2024
2023
Savings
$
26,695
$
25,082
Time deposits
6,613
6,804
Other interest-bearing deposits
16,252
16,690
Total interest-bearing
deposits
49,560
48,576
Noninterest-bearing deposits
16,021
17,204
Total deposits
$
65,581
$
65,780
Time deposits in denominations that exceed the FDIC
insurance limit of $250,000 as of December 31, 2024 and
2023 were $1.9 billion and $1.8 billion, respectively.
Scheduled maturities of time deposits as of December 31,
2024 were as follows.
Table 8.8.2
TIME DEPOSIT MATURITIES
(Dollars in millions)
2025
$
6,398
2026
109
2027
48
2028
32
2029
20
2030 and after
6
Total
$
6,613
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 8—DEPOSITS
152
2024 FORM 10-K ANNUAL REPORT
Note 9—Short-Term Borrowings
A summary of short-term borrowings for the years 2024, 2023 and 2022 is presented in the following table.
Table 8.9.1
SHORT-TERM BORROWINGS
(Dollars in millions)
Trading Liabilities
Federal Funds
Purchased
Securities Sold
Under
Agreements to
Repurchase
Other Short-term
Borrowings
2024
Average balance
$
555
$
420
$
1,720
$
781
Year-end balance
550
259
2,096
1,045
Maximum month-end outstanding
767
626
2,096
2,067
Average rate for the year
4.22 %
5.34 %
3.83 %
5.38 %
Average rate at year-end
4.20 %
4.40 %
3.23 %
4.48 %
2023
Average balance
$
301
$
349
$
1,426
$
2,688
Year-end balance
509
302
1,921
326
Maximum month-end outstanding
509
622
1,957
7,476
Average rate for the year
4.16 %
5.12 %
3.66 %
5.19 %
Average rate at year-end
4.48 %
5.40 %
3.98 %
5.36 %
2022
Average balance
$
480
$
699
$
881
$
229
Year-end balance
335
400
1,013
1,093
Maximum month-end outstanding
700
1,023
1,211
1,093
Average rate for the year
2.56 %
1.56 %
0.77 %
2.26 %
Average rate at year-end
3.67 %
4.40 %
2.19 %
4.30 %
Federal funds purchased and securities sold under
agreements to repurchase generally have maturities of
less than 90 days. Trading liabilities, which represent short
positions in securities, are generally held for less than 90
days. Other short-term borrowings have original
maturities of one year or less. On December 31, 2024,
there were no fixed income trading securities pledged to
secure other short-term borrowings.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 9—SHORT-TERM BORROWINGS
153
2024 FORM 10-K ANNUAL REPORT
Note 10—Term Borrowings
Term borrowings include senior and subordinated borrowings with original maturities greater than one year. The following
table presents information pertaining to term borrowings as of December 31, 2024 and 2023.
Table 8.10.1
TERM BORROWINGS
(Dollars in millions)
2024
2023
First Horizon Bank:
Subordinated notes (a)
Maturity date – May 1, 2030 - 5.75%
$
448
$
448
Other collateralized borrowings - Maturity date – December 22, 2037
4.92% on December 31, 2024 and 5.95% on December 31, 2023 (b)
88
88
Other collateralized borrowings - SBA loans (c)
37
3
First Horizon Corporation:
Senior notes
Maturity date – May 26, 2025 - 4.00%
350
349
Junior subordinated debentures (d)
Maturity date - June 28, 2035 - 6.30% on December 31, 2024 and 7.33% on December 31, 2023
3
3
Maturity date - December 15, 2035 - 5.99% on December 31, 2024 and 7.02% on December 31, 2023
18
18
Maturity date - March 15, 2036 - 6.02% on December 31, 2024 and 7.05% on December 31, 2023
9
9
Maturity date - March 15, 2036 - 6.16% on December 31, 2024 and 7.19% on December 31, 2023
12
12
Maturity date - June 30, 2036 - 5.91% on December 31, 2024 and 6.91% on December 31, 2023
28
28
Maturity date - July 7, 2036 - 6.47% on December 31, 2024 and 7.21% on December 31, 2023
19
19
Maturity date - June 15, 2037 - 6.27% on December 31, 2024 and 7.30% on December 31, 2023
53
52
Maturity date - September 6, 2037 - 6.14% on December 31, 2024 and 7.05% on December 31, 2023
9
9
Tax Credit Investment Subsidiaries:
Notes payable - New market tax credit investments; 16 to 35 year term, 0.93% to 4.75% on
December 31, 2024; 7 to 35 year term, 0.93% to 4.95% on December 31, 2023
74
65
FT Real Estate Securities Company, Inc.:
Cumulative preferred stock (e)
Maturity date – March 31, 2031 – 9.50%
47
47
Total
$
1,195
$
1,150
(a) Qualifies for Tier 2 capital under the risk-based capital guidelines for First Horizon Bank as well as First Horizon Corporation up to certain limits for
minority interest capital instruments.
(b) Secured by trust preferred loans.
(c) Collateralized borrowings associated with SBA loan sales that did not meet sales criteria. The loans have remaining terms of 1 to 25 years. These
borrowings had a weighted average interest rate of 7.08% and 4.81% on December 31, 2024 and 2023, respectively.
(d) Acquired in conjunction with the acquisition of CBF. A portion qualifies for Tier 2 capital under the risk-based capital guidelines. All are floating rate
debentures tied to 3-month CME Term SOFR plus a term spread adjustment of 0.26161%.
(e) Qualifies for Tier 2 capital under the risk-based capital guidelines for both First Horizon Bank and First Horizon Corporation up to certain limits for
minority interest capital instruments.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 10—TERM BORROWINGS
154
2024 FORM 10-K ANNUAL REPORT
Annual principal repayment requirements as of
December 31, 2024 are as follows.
Table 8.10.2
ANNUAL PRINCIPAL REPAYMENT SCHEDULE
(Dollars in millions)
2025
$
350
2026
—
2027
—
2028
—
2029 and after
862
In conjunction with its acquisition of CBF, FHN obtained
junior subordinated debentures, each of which is held by a
wholly-owned trust that has issued trust preferred
securities to external investors and loaned the funds to
FHN as junior subordinated debt. The book value for each
issuance represents the purchase accounting fair value as
of the CBF acquisition closing date less accumulated
amortization of the associated discount, as applicable.
Through various contractual arrangements, FHN assumed
a full and unconditional guarantee for each trust’s
obligations with respect to the securities. While the
maturity dates are typically 30 years from the original
issuance date, FHN has the option to redeem each of the
junior subordinated debentures at par on any future
interest payment date, which would trigger redemption of
the related trust preferred securities. A portion of FHN's
remaining junior subordinated notes qualifies as Tier 2
capital under the risk-based capital guidelines.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 10—TERM BORROWINGS
155
2024 FORM 10-K ANNUAL REPORT
Note 11—Preferred Stock
FHN Preferred Stock
The following table presents a summary of FHN's non-cumulative perpetual preferred stock.
Table 8.11.1
PREFERRED STOCK
December 31,
(Dollars in millions)
2024
2023
Issuance
Date
Earliest
Redemption
Date (a)
Annual
Dividend
Rate
Dividend
Payments
Shares
Outstanding
Liquidation
Amount
Carrying
Amount
Carrying
Amount
Series B
7/2/2020
8/1/2025
6.625 % (b)
Semi-annually
8,000 $
80 $
77 $
77
Series C
7/2/2020
5/1/2026
6.600 % (c)
Quarterly
5,750
58
59
59
Series D
7/2/2020
5/1/2024
6.100 % (d)
Semi-annually
—
—
—
94
Series E
5/28/2020
10/10/2025
6.500 %
Quarterly
1,500
150
145
145
Series F
5/3/2021
7/10/2026
4.700 %
Quarterly
1,500
150
145
145
16,750 $
438 $
426 $
520
(a) Denotes earliest optional redemption date. Earlier redemption is possible, at FHN's election, if certain regulatory capital events occur.
(b) As a result of LIBOR transition, the fixed dividend rate will reset on August 1, 2025 to three-month CME Term SOFR plus 4.52361% (0.26161% plus
4.262%).
(c) As a result of LIBOR transition, the fixed dividend rate will reset on May 1, 2026 to three-month CME Term SOFR plus 5.18161% (0.26161% plus 4.920%).
(d) On May 1, 2024, FHN redeemed all outstanding shares of its Series D Preferred Stock. The fixed dividend rate was set to convert to three-month CME
Term SOFR plus 4.12061% (0.26161% plus 3.859%) on May 1, 2024.
FHN redeemed all outstanding shares of Series D
Preferred Stock effective May 1, 2024. The difference
between the $100 million outstanding liquidation
preference amount and the $94 million carrying value of
the Series D Preferred Stock along with the related share
repurchase tax resulted in $7 million in deemed dividends
that were included in net income available to common
shareholders and EPS for the year ended December 31,
2024.
Subsidiary Preferred Stock
First Horizon Bank has issued 300,000 shares of Class A
Non-Cumulative Perpetual Preferred Stock (Class A
Preferred Stock) with a liquidation preference of $1,000
per share. Dividends on the Class A Preferred Stock, if
declared, accrue and are payable each quarter, in arrears,
at a floating rate equal to the greater of three-month CME
Term SOFR plus 1.11161% (0.26161% plus 0.85%) or
3.75% per annum. These securities qualify fully as Tier 1
capital for both First Horizon Bank and FHN. On
December 31, 2024 and 2023, $295 million of Class A
Preferred Stock was recognized as noncontrolling interest
on the Consolidated Balance Sheets.
FT Real Estate Securities Company, Inc. ("FTRESC"), an
indirect subsidiary of FHN, has issued 50 shares of 9.50%
Cumulative Preferred Stock, Class B (Class B Preferred
Shares), with a liquidation preference of $1 million per
share; of those shares, 47 were issued to nonaffiliates.
FTRESC is a real estate investment trust established for
the purpose of acquiring, holding, and managing real
estate mortgage assets. Dividends on the Class B Preferred
Shares are cumulative and are payable semi-annually. As
of December 31, 2024 and 2023, the Class B Preferred
Shares qualified as Tier 2 regulatory capital. For all periods
presented, these securities are presented in the
Consolidated Balance Sheets as term borrowings.
The Class B Preferred Shares are mandatorily redeemable
on March 31, 2031, and redeemable at the discretion of
FTRESC in the event that the Class B Preferred Shares
cannot be accounted for as Tier 2 regulatory capital or
there is more than an insubstantial risk that dividends paid
with respect to the Class B Preferred Shares will not be
fully deductible for tax purposes.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 11—PREFERRED STOCK
156
2024 FORM 10-K ANNUAL REPORT
Note 12—Regulatory Capital and Restrictions
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, FHN must meet specific
capital guidelines that involve quantitative measures of
assets, liabilities, and certain off-balance sheet items
calculated pursuant to regulatory directives. Capital
amounts and classification are also subject to qualitative
judgment by the regulators such as capital components,
asset risk weightings, and other factors.
Management believes that, as of December 31, 2024, FHN
and First Horizon Bank met all capital adequacy
requirements to which they were subject. As of
December 31, 2024, First Horizon Bank was classified as
well-capitalized under the regulatory framework for
prompt corrective action. To be categorized as well-
capitalized, an institution must maintain minimum Total
Risk-Based, Tier 1 Risk-Based, Common Equity Tier 1, and
Tier 1 Leverage ratios, as set forth in the following table.
Management believes that no events or changes have
occurred subsequent to year-end that would change this
designation.
Quantitative measures established by regulation to ensure
capital adequacy require FHN to maintain minimum ratios
as set forth in the following table. FHN and First Horizon
Bank are also subject to a 2.5% capital conservation
buffer, which is an amount above the minimum levels
designed to ensure that banks remain well-capitalized,
even in adverse economic scenarios.
The actual capital amounts and ratios of FHN and First
Horizon Bank are presented in the following table.
Table 8.12.1
CAPITAL AMOUNTS & RATIOS
(Dollars in millions)
First Horizon Corporation
First Horizon Bank
Amount
Ratio
Amount
Ratio
December 31, 2024
Actual:
Total Capital
$
9,862
13.87 % $
9,156
13.00 %
Tier 1 Capital
8,688
12.22
8,129
11.54
Common Equity Tier 1
7,967
11.20
7,834
11.12
Leverage
8,688
10.64
8,129
10.06
Minimum Requirement for Capital Adequacy Purposes:
Total Capital
5,689
8.00
5,633
8.00
Tier 1 Capital
4,266
6.00
4,225
6.00
Common Equity Tier 1
3,200
4.50
3,169
4.50
Leverage
3,266
4.00
3,232
4.00
Minimum Requirement to be Well Capitalized Under
Prompt Corrective Action Provisions:
Total Capital
7,042
10.00
Tier 1 Capital
5,633
8.00
Common Equity Tier 1
4,577
6.50
Leverage
4,040
5.00
December 31, 2023
Actual:
Total Capital
$
9,922
13.96 % $
9,303
13.17 %
Tier 1 Capital
8,825
12.42
8,350
11.82
Common Equity Tier 1
8,104
11.40
8,055
11.40
Leverage
8,825
10.69
8,350
10.20
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 12—REGULATORY CAPITAL & RESTRICTIONS
157
2024 FORM 10-K ANNUAL REPORT
Minimum Requirement for Capital Adequacy Purposes:
Total Capital
5,686
8.00
5,651
8.00
Tier 1 Capital
4,264
6.00
4,238
6.00
Common Equity Tier 1
3,198
4.50
3,179
4.50
Leverage
3,302
4.00
3,276
4.00
Minimum Requirement to be Well Capitalized Under
Prompt Corrective Action Provisions:
Total Capital
7,064
10.00
Tier 1 Capital
5,651
8.00
Common Equity Tier 1
4,591
6.50
Leverage
4,095
5.00
Restrictions on cash and due from banks
Effective March 26, 2020, the Federal Reserve reduced its
reserve requirement to zero, and as a result, on December
31, 2024 and 2023, First Horizon Bank was not required to
maintain cash reserves.
Restrictions on dividends
Cash dividends are paid by FHN from its assets, which are
mainly provided by dividends from its subsidiaries. Certain
regulatory restrictions exist regarding the ability of First
Horizon Bank to transfer funds to FHN in the form of cash,
dividends, loans, or advances. As of December 31, 2024,
First Horizon Bank had undivided profits of $3.1 billion, of
which a limited amount was available for distribution to
FHN as dividends without prior regulatory approval. At
any given time, the pertinent portions of those regulatory
restrictions allow First Horizon Bank to declare preferred
or common dividends without prior regulatory approval in
an amount equal to First Horizon Bank's retained net
income for the two most recent completed years plus the
current year-to-date period. For any period, First Horizon
Bank’s "retained net income" generally is equal to First
Horizon Bank’s regulatory net income reduced by the
preferred and common dividends declared by First
Horizon Bank. Applying the dividend restrictions imposed
under applicable federal and state rules, First Horizon
Bank’s total amount available for dividends was $374
million as of January 1, 2025. First Horizon Bank declared
and paid common dividends to the parent company in the
amount of $1.1 billion in 2024 and $220 million in 2023.
During 2024 and 2023, First Horizon Bank declared and
paid dividends on its preferred stock according to the
payment terms of its issuances as noted in Note 11 -
Preferred Stock.
The payment of cash dividends by FHN and First Horizon
Bank may also be affected or limited by other factors, such
as the requirement to maintain adequate capital above
regulatory guidelines. Furthermore, the Federal Reserve
generally requires insured banks and bank holding
companies to pay dividends only out of current operating
earnings.
Restrictions on intercompany transactions
Under current Federal banking laws, First Horizon Bank
may not enter into covered transactions with any affiliate
including the parent company and certain financial
subsidiaries in excess of 10% of the bank’s capital stock
and surplus, as defined, or $937 million, on December 31,
2024. Covered transactions include a loan or extension of
credit to an affiliate, a purchase of or an investment in
securities issued by an affiliate, and the acceptance of
securities issued by the affiliate as collateral for any loan
or extension of credit. The equity investment, including
retained earnings, in certain of a bank’s financial
subsidiaries is also treated as a covered transaction. On
December 31, 2024, the parent company had no covered
transactions from First Horizon Bank and 840 Denning LLC,
a parent company subsidiary, had a covered transaction of
$2 million. Two of the bank’s financial subsidiaries, FHN
Financial Securities Corp. and First Horizon Advisors, Inc.,
had covered transactions from First Horizon Bank totaling
$387 million and $54 million, respectively. In addition, the
aggregate amount of covered transactions with all
affiliates, as defined, is limited to 20% of the bank’s capital
stock and surplus, as defined, or $1.9 billion, on
December 31, 2024. First Horizon Bank’s total covered
transactions with all affiliates including the parent
company on December 31, 2024 were $443 million.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 12—REGULATORY CAPITAL & RESTRICTIONS
158
2024 FORM 10-K ANNUAL REPORT
Note 13—Components of Other Comprehensive Income (Loss)
The following table provides the changes in accumulated other comprehensive income (loss) by component, net of tax, for the
years ended December 31, 2024, 2023, and 2022.
Table 8.13.1
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Securities AFS
Cash Flow
Hedges
Pension and
Post-retirement
Plans
Total
Balance as of December 31, 2021
$
(36) $
2
$
(254) $
(288)
Net unrealized gains (losses)
(937)
(144)
(22)
(1,103)
Amounts reclassified from AOCI
—
15
8
23
Other comprehensive income (loss)
(937)
(129)
(14)
(1,080)
Balance as of December 31, 2022
$
(973) $
(127) $
(268) $
(1,368)
Net unrealized gains (losses)
137
(5)
(11)
121
Amounts reclassified from AOCI
—
52
7
59
Other comprehensive income (loss)
137
47
(4)
180
Balance as of December 31, 2023
$
(836) $
(80) $
(272) $
(1,188)
Net unrealized gains (losses)
(15)
(63)
12
(66)
Amounts reclassified from AOCI
69
49
8
126
Other comprehensive income (loss)
54
(14)
20
60
Balance as of December 31, 2024
$
(782) $
(94) $
(252) $
(1,128)
Reclassifications from AOCI, and related tax effects, were as follows.
Table 8.13.2
RECLASSIFICATIONS FROM AOCI
(Dollars in millions)
Details about AOCI
2024
2023
2022
Affected line item in the statement
where net income is presented
Securities AFS:
Realized (gains) losses on securities AFS
$
91
$
—
$
—
Securities gains (losses), net
Tax expense (benefit)
(22)
—
—
Income tax expense
69
—
—
Cash flow hedges:
Realized (gains) losses on cash flow hedges
$
65
$
69
$
20
Interest and fees on loans and leases
Tax expense (benefit)
(16)
(17)
(5) Income tax expense
$
49
$
52
$
15
Pension and Postretirement Plans:
Amortization of prior service cost and net actuarial
(gain) loss
$
11
$
9
$
10
Other expense
Tax expense (benefit)
(3)
(2)
(2) Income tax expense
8
7
8
Total reclassification from AOCI
$
126
$
59
$
23
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 13—COMPONENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
159
2024 FORM 10-K ANNUAL REPORT
Note 14—Income Taxes
The aggregate amount of income taxes included in the Consolidated Statements of Income and the Consolidated Statements
of Changes in Equity for the years ended December 31 were as follows.
Table 8.14.1
INCOME TAX EXPENSE
(Dollars in millions)
2024
2023
2022
Consolidated Statements of Income:
Income tax expense
$
211
$
212
$
247
Consolidated Statements of Changes in Equity:
Income tax expense (benefit) related to:
Net unrealized gains (losses) on pension and other postretirement plans
7
(1)
(5)
Net unrealized gains (losses) on securities available for sale
17
44
(302)
Net unrealized gains (losses) on cash flow hedges
(5)
15
(42)
Total
$
230
$
270
$
(102)
The components of income tax expense (benefit) for the years ended December 31, were as follows.
Table 8.14.2
INCOME TAX EXPENSE COMPONENTS
(Dollars in millions)
2024
2023
2022
Current:
Federal
$
204
$
140
$
123
State
24
28
33
Deferred:
Federal
(14)
37
87
State
(3)
7
4
Total
$
211
$
212
$
247
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 14—INCOME TAXES
160
2024 FORM 10-K ANNUAL REPORT
A reconciliation of expected income tax expense (benefit) at the federal statutory rate of 21% for 2024, 2023, and 2022,
respectively, to total income tax expense follows.
Table 8.14.3
RECONCILIATION FROM STATUTORY RATES
(Dollars in millions)
2024
2023
2022
Federal income tax rate
21 %
21 %
21 %
Tax computed at statutory rate
$
211
$
237
$
243
Increase (decrease) resulting from:
State income taxes, net of federal income tax benefit
20
34
31
BOLI
(5)
(6)
(4)
Tax-exempt interest
(12)
(12)
(10)
FDIC premium
12
11
7
Non-deductible expenses
8
9
4
LIHTC credits and benefits, net of amortization
(13)
(15)
(16)
Other tax credits
(1)
(5)
(4)
Other changes in unrecognized tax benefits
(2)
(50)
(2)
Termination of BOLI policies
—
21
—
Other
(7)
(12)
(2)
Total
$
211
$
212
$
247
As of December 31, 2024, FHN had net deferred tax asset balances related to federal and state income tax carryforwards of
$29 million and $3 million, respectively, which will expire at various dates as follows.
Table 8.14.4
TAX CARRYFORWARD DTA EXPIRATION DATES
(Dollars in millions)
Expiration Dates
Net Deferred Tax
Asset Balance
Losses - federal
2028 - 2035
$
29
Net operating losses - states
2025 - 2034
2
Net operating losses - states
2035 - 2041
1
We believe it is more likely than not that the benefit from
certain state NOL carryforwards will not be realized. In
recognition of this risk, we have provided an immaterial
valuation allowance on the DTAs related to these state
NOL carryforwards. If our assumptions change and we
determine that we will be able to realize these NOLs, the
tax benefits related to any reversal of the valuation
allowance on DTAs will be recognized as a reduction of
income tax expense.
A DTA or DTL is recognized for the tax consequences of
temporary differences between the financial statement
carrying amounts and the tax bases of existing assets and
liabilities. The tax consequence is calculated by applying
enacted statutory tax rates, applicable to future years, to
these temporary differences. In order to support the
recognition of the DTA, FHN’s management must believe
that the realization of the DTA is more likely than not. FHN
evaluates the likelihood of realization of the DTA based on
both positive and negative evidence available at the time,
including (as appropriate) scheduled reversals of DTLs,
projected future taxable income, tax planning strategies,
and recent financial performance. Realization is
dependent on generating sufficient taxable income prior
to the expiration of the carryforwards attributable to the
DTA. In projecting future taxable income, FHN
incorporates assumptions including the estimated amount
of future state and federal pre-tax operating income, the
reversal of temporary differences, and the
implementation of feasible and prudent tax planning
strategies. These assumptions require significant
judgment about the forecasts of future taxable income
and are consistent with the plans and estimates used to
manage the underlying business.
As of December 31, 2024, FHN's net DTA was $227 million
compared to $215 million at December 31, 2023. At
December 31, 2024, FHN's gross DTA (net of a valuation
allowance) and gross DTL were $768 million and $541
million, respectively. Although realization is not assured,
FHN believes that it meets the more-likely-than-not
requirement with respect to the net DTA after valuation
allowance.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 14—INCOME TAXES
161
2024 FORM 10-K ANNUAL REPORT
Temporary differences which gave rise to deferred tax assets and deferred tax liabilities on December 31, 2024 and 2023 were
as follows.
Table 8.14.5
COMPONENTS OF DTAs & DTLs
(Dollars in millions)
2024
2023
Deferred tax assets:
Securities available for sale and financial instruments (a)
$
284
$
296
Loan valuations and loss reserves
152
107
Employee benefits
119
128
Lease liability
82
85
Depreciation and amortization
54
37
Accrued expenses
20
21
Federal loss carryforwards
29
32
State loss carryforwards
3
3
Other
25
28
Gross deferred tax assets
768
737
Deferred tax liabilities:
Leasing
$
363
$
316
ROU lease asset
73
76
Other intangible assets
71
75
Prepaid expenses
23
20
Equity investments
2
31
Other
9
4
Gross deferred tax liabilities
541
522
Net deferred tax assets
$
227
$
215
(a) Tax effects of unrealized gains and losses are tracked on a security-by-security basis.
Total unrecognized tax benefits at December 31, 2024 and
2023 were $13 million and $15 million, respectively. To
the extent such unrecognized tax benefits as of
December 31, 2024 are subsequently recognized, $13
million of tax benefits could impact tax expense and FHN’s
effective tax rate in future periods.
During 2023, FHN settled audits which allowed it to
reduce unrecognized benefits by $76 million, this resulted
in a reduction of tax expense by $32 million. A reduction
of accrued interest related to unrecognized benefits
resulted in a reduction of tax expense of $14 million.
It is reasonably possible that the unrecognized tax benefits
related to federal and state exposures could decrease by
$3 million during 2025 if the applicable statutes of
limitations expire as scheduled. FHN recognizes interest
accrued and penalties related to unrecognized tax benefits
within income tax expense. FHN had approximately $2
million and $3 million accrued for the payment of interest
as of December 31, 2024 and 2023, respectively. The total
amounts of interest and penalties recognized in the
Consolidated Statements of Income during 2024 and 2023
were net benefits of $1 million and $14 million,
respectively.
The rollforward of unrecognized tax benefits is shown in
the following table.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 14—INCOME TAXES
162
2024 FORM 10-K ANNUAL REPORT
Table 8.14.6
ROLLFORWARD OF UNRECOGNIZED TAX BENEFITS
(Dollars in millions)
Balance at December 31, 2022
$
89
Increases related to prior year tax positions
1
Increases related to current year tax positions
2
Settlements
(76)
Lapse of statutes
(1)
Balance at December 31, 2023
$
15
Increases related to prior year tax positions
2
Increases related to current year tax positions
3
Lapse of statutes
(7)
Balance at December 31, 2024
$
13
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 14—INCOME TAXES
163
2024 FORM 10-K ANNUAL REPORT
Note 15—Earnings Per Share
The computations of basic and diluted earnings per common share were as follows.
Table 8.15.1
EARNINGS PER SHARE COMPUTATIONS
(Dollars in millions, except per share data; shares in thousands)
2024
2023
2022
Net income
$
794
$
916
$
912
Net income attributable to noncontrolling interest
19
19
12
Net income attributable to controlling interest
775
897
900
Preferred stock dividends
37
32
32
Net income available to common shareholders
$
738
$
865
$
868
Weighted average common shares outstanding—basic
540,317
548,410
535,033
Effect of dilutive restricted stock, performance equity awards and
options
3,968
3,802
7,830
Effect of dilutive convertible preferred stock (a)
—
9,520
23,141
Weighted average common shares outstanding—diluted
544,285
561,732
566,004
Basic earnings per common share
$
1.37
$
1.58
$
1.62
Diluted earnings per common share
$
1.36
$
1.54
$
1.53
(a) On February 28, 2022, FHN issued $494 million of Series G Convertible Preferred Stock, which was converted into common stock on
June 26, 2023, following the termination of the TD Merger Agreement. Conversion occurred at the rate of 4,000 common shares per Series
G preferred share resulting in 19,742,776 additional common shares outstanding. 2023 includes the impact of the Series G based on the
final conversion rate and 2022 includes the impact based on the original maximum conversion rate.
The following table presents outstanding options and
other equity awards that were excluded from the
calculation of diluted earnings per share because they
were either anti-dilutive (the exercise price was higher
than the weighted-average market price for the period) or
the performance conditions have not been met.
Table 8.15.2
ANTI-DILUTIVE EQUITY AWARDS
(Shares in thousands)
2024
2023
2022
Stock options excluded from the calculation of diluted EPS
26
—
29
Weighted average exercise price of stock options excluded from the
calculation of diluted EPS
$
19.73
$
24.36
$
25.64
Other equity awards excluded from the calculation of diluted EPS
2,439
2,242
144
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 15—EARNINGS PER SHARE
164
2024 FORM 10-K ANNUAL REPORT
Note 16—Contingencies and Other Disclosures
Contingencies
Contingent Liabilities Overview
Contingent liabilities arise in the ordinary course of
business. Often they are related to lawsuits, arbitration,
mediation, and other forms of litigation. Various litigation
matters currently are threatened or pending against FHN
and its subsidiaries. Also, FHN at times receives requests
for information, subpoenas, or other inquiries from
federal, state, and local regulators, from other
government authorities, and from other parties
concerning various matters relating to FHN’s current or
former businesses. Certain matters of that sort are
pending at most times, and FHN generally cooperates
when those matters arise. Pending and threatened
litigation matters sometimes are settled by the parties,
and sometimes pending matters are resolved in court or
before an arbitrator or are withdrawn. Regardless of the
manner of resolution, frequently the most significant
changes in status of a matter occur over a short time
period, often following a lengthy period of little
substantive activity. In view of the inherent difficulty of
predicting the outcome of these 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, or where claims or
other actions may be possible but have not been brought,
FHN cannot reasonably determine what the eventual
outcome of the matters will be, what the timing of the
ultimate resolution of these matters may be, or what the
eventual loss or impact related to each matter may be.
FHN establishes a loss contingency liability for a litigation
matter when loss is both probable and reasonably
estimable as prescribed by applicable financial accounting
guidance. If loss for a matter is probable and a range of
possible loss outcomes is the best estimate available,
accounting guidance requires a liability 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 threatened or pending litigation
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.
Material Loss Contingency Matters
As used in this Note, except for matters that are reported
as having been substantially settled or otherwise
substantially resolved, FHN's “material loss contingency
matters” generally fall into at least one of the following
categories: (i) FHN has determined material loss to be
probable and has established a material loss liability in
accordance with applicable financial accounting guidance;
(ii) FHN has determined material loss to be probable but is
not reasonably able to estimate an amount or range of
material loss liability; or (iii) FHN has determined that
material loss is not probable but is reasonably possible,
and the amount or range of that reasonably possible
material loss is estimable. As defined in applicable
accounting guidance, loss is reasonably possible if there is
more than a remote chance of a material loss outcome for
FHN. FHN provides contingencies note disclosures for
certain pending or threatened litigation matters each
quarter, including all matters mentioned in categories (i)
or (ii) and, occasionally, certain matters mentioned in
category (iii). In addition, in this Note, certain other
matters, or groups of matters, are discussed relating to
FHN’s pre-2009 mortgage origination and servicing
businesses. In all litigation matters discussed in this Note,
unless settled or otherwise resolved, FHN believes it has
meritorious defenses and intends to pursue those
defenses vigorously.
FHN reassesses the liability for litigation matters each
quarter as the matters progress. At December 31, 2024,
the aggregate amount of liabilities established for all such
loss contingency matters was $1 million. These liabilities
are separate from those discussed under the heading
Mortgage Loan Repurchase and Foreclosure Liability
below.
In each material loss contingency matter, except as
otherwise noted, there is more than a remote chance that
any of the following outcomes will occur: the plaintiff will
substantially prevail; the defense will substantially prevail;
the plaintiff will prevail in part; or the matter will be
settled by the parties. At December 31, 2024, FHN
estimates that for all material loss contingency matters,
estimable reasonably possible losses in future periods in
excess of currently established liabilities could aggregate
in a range from zero to less than $1 million.
As a result of the general uncertainties discussed above
and the specific uncertainties discussed for each matter
mentioned below, it is possible that the ultimate future
loss experienced by FHN for any particular matter may
materially exceed the amount, if any, of currently
established liability for that matter.
Mortgage Loan Repurchase and Foreclosure Liability
FHN’s repurchase and foreclosure liability, primarily
related to its pre-2009 mortgage origination, sale,
securitization and servicing businesses, is comprised of
accruals to cover estimated loss content in the active
pipeline, estimated future inflows, and estimated loss
content related to certain known claims not currently
included in the active pipeline. The active pipeline consists
of mortgage loan repurchase and make-whole demands
from loan purchasers or securitization participants,
foreclosure/servicing demands from borrowers, and
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 16—CONTINGENCIES & OTHER DISCLOSURES
165
2024 FORM 10-K ANNUAL REPORT
certain related exposures. FHN compares the estimated
probable incurred losses determined under the applicable
loss estimation approaches for the respective periods with
current reserve levels. Changes in the estimated required
liability levels are recorded as necessary through the
repurchase and foreclosure provision.
Based on currently available information and experience
to date, FHN has evaluated its loan repurchase, make-
whole, foreclosure, and certain related exposures and has
accrued for losses of $15 million and $16 million as of
December 31, 2024 and 2023, respectively. Accrued
liabilities for FHN’s estimate of these obligations are
reflected in other liabilities on the Consolidated Balance
Sheets. Charges/expense reversals to increase/decrease
the liability are included within other income on the
Consolidated Statements of Income. The estimates are
based upon currently available information and fact
patterns that exist as of each balance sheet date and
could be subject to future changes. Changes to any one of
these factors could significantly impact the estimate of
FHN’s liability.
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 by such agreements.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 16—CONTINGENCIES & OTHER DISCLOSURES
166
2024 FORM 10-K ANNUAL REPORT
Note 17—Retirement Plans 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. Pension benefits are based on years
of service, average compensation near retirement or
other termination, and estimated social security benefits
at age 65. Benefits under the plan are “frozen” so that
years of service and compensation changes after 2012 do
not affect the benefit owed. Minimum contributions are
based upon actuarially determined amounts necessary to
fund the total benefit obligation. Decisions to contribute
to the plan are based upon pension funding requirements
under the Pension Protection Act, the maximum amount
deductible under the Internal Revenue Code, the actual
performance of plan assets, and trends in the regulatory
environment. FHN made no contributions to the qualified
pension plan in 2024, 2023, and 2022. Management does
not currently anticipate that FHN will make a contribution
to the qualified pension plan in 2025.
FHN also maintains non-qualified plans including a
supplemental retirement plan that covers certain
employees whose benefits under the qualified pension
plan have been limited by tax rules. These other non-
qualified plans are unfunded, and contributions to these
plans cover all benefits paid under the non-qualified plans.
Payments made under the non-qualified plans were
$4 million for 2024, $6 million for 2023, and $5 million for
2022. FHN anticipates making benefit payments under the
non-qualified plans of $5 million in 2025.
Savings Plan
FHN provides all qualifying full-time employees with the
opportunity to participate in FHN's tax-qualified 401(k)
savings plan. The qualified plan allows employees to defer
receipt of earned salary, up to tax law limits, on a tax-
advantaged basis. Accounts, which are held in trust, may
be invested in a wide range of mutual funds and in FHN
common stock. Up to tax law limits, FHN provides a 100%
match for the first 6% of salary deferred, with company
matching contributions invested according to a
participant’s current investment election. Through a non-
qualified savings restoration plan, FHN provides a
restorative benefit to certain highly compensated
employees who participate in the savings plan and whose
contribution elections are capped by tax limitations.
FHN also provides “flexible dollars” to assist employees
with the cost of annual benefits and/or allow the
employee to contribute to his or her qualified savings plan
account. These “flexible dollars” are pre-tax contributions
and are based upon the employees’ years of service and
qualified compensation. Contributions made by FHN
through the flexible benefits plan and the company
matches were $49 million, $48 million, and $47 million for
2024, 2023, and 2022, respectively.
Other Employee Benefits
FHN provides postretirement life insurance benefits to
certain employees and also provides postretirement
medical insurance benefits to retirement-eligible
employees, including certain prescription drug benefits.
The postretirement medical plan is contributory with FHN
contributing a fixed amount for certain participants.
Actuarial Assumptions
FHN’s process for developing the long-term expected rate
of return of pension plan assets is based on capital market
exposure as the source of investment portfolio returns.
Capital market exposure refers to the plan’s allocation of
its assets to asset classes, which primarily represent fixed
income investments. FHN also considers expectations for
inflation, real interest rates, and various risk premiums
based primarily on the historical risk premium for each
asset class. The expected return is based upon a time
horizon of 30 years. Given its funded status, the asset
allocation strategy for the qualified pension plan utilizes
fixed income instruments that closely match the
estimated duration of payment obligations.
The discount rates for the three years ended 2024 for
pension and other benefits were determined by using a
hypothetical AA yield curve represented by a series of
annualized individual discount rates from one-half to 30
years. The discount rates are selected based upon data
specific to FHN’s plans and employee population. The
bonds used to create the hypothetical yield curve were
subjected to several requirements to ensure that the
resulting rates were representative of the bonds that
would be selected by management to fulfill the company’s
funding obligations. In addition to the AA rating, only non-
callable bonds were included. Each bond issue was
required to have at least $300 million par outstanding so
that each issue was sufficiently marketable. Finally, bonds
more than two standard deviations from the average yield
were removed. When selecting the discount rate, FHN
matches the duration of high-quality bonds with the
duration of the obligations of the plan as of the
measurement date. For all years presented, the
measurement date of the benefit obligations and net
periodic benefit costs was December 31.
The actuarial assumptions used in the defined benefit
pension plans and other employee benefit plans were as
follows.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 17—RETIREMENT PLANS & OTHER EMPLOYEE BENEFITS
167
2024 FORM 10-K ANNUAL REPORT
Table 8.17.1
ACTUARIAL ASSUMPTIONS FOR DEFINED BENEFIT PLANS
Benefit Obligations
Net Periodic Benefit Cost
2024
2023
2022
2024
2023
2022
Discount rate
Qualified pension
5.66%
5.00%
5.20%
5.00%
5.20%
2.96%
Nonqualified
pension
5.50%
4.90%
5.10%
4.90%
5.10%
2.65%
Other nonqualified
pension
5.20%
4.75%
4.94%
4.75%
4.94%
1.99%
Postretirement
benefits
5.40% - 5.74%
4.84% - 5.06%
5.04% - 5.25%
4.84% - 5.49%
4.88% - 5.25%
2.42% - 5.08%
Expected long-
term rate of
return
Qualified pension/
postretirement
benefits
N/A
N/A
N/A
5.00%
5.15%
2.85%
Postretirement
benefit (retirees
post
January 1, 1993)
N/A
N/A
N/A
5.25%
5.50%
5.95%
Postretirement
benefit (retirees
prior to
January 1, 1993)
N/A
N/A
N/A
N/A
N/A
1.05%
Since the benefits in the defined benefit pension plan are
frozen, the rate of compensation increase has no effect on
qualified pension benefits.
FHN has one pension plan where participants' benefits are
affected by interest crediting rates. The plan's projected
benefit obligation as of December 31, 2024, 2023 and
2022 and interest crediting rates for the respective years
were as follows.
Table 8.17.2
PROJECTED BENEFIT OBLIGATION
& CREDITING RATE
(Dollars in millions)
2024
2023
2022
Projected benefit obligation
$
7
$
8
$
10
Interest crediting rate
12.25 %
12.04 %
10.77 %
The components of net periodic benefit cost for the plan years 2024, 2023 and 2022 were as follows.
Table 8.17.3
COMPONENTS OF NET PERIODIC BENEFIT COST
(Dollars in millions)
Pension Benefits
Other Benefits
2024
2023
2022
2024
2023
2022
Components of net periodic benefit cost
Interest cost
$
32
$
33
$
20
$
2
$
2
$
1
Expected return on plan assets
(32)
(32)
(24)
(1)
(1)
(2)
Amortization of unrecognized:
Actuarial (gain) loss
13
13
12
(1)
(1)
—
Net periodic benefit cost
$
13
$
14
$
8
$
—
$
—
$
(1)
The long-term expected rate of return is applied to the
market-related value of plan assets in determining the
expected return on plan assets. FHN determines the
market-related value of plan assets using a hybrid
methodology which recognizes liability-hedging assets at
current fair value while return-seeking assets use a
calculated value that recognizes changes in fair value over
five years, as permitted by GAAP.
FHN utilizes a spot rate approach which applies duration-
specific rates from the full yield curve to estimated future
benefit payments for the determination of interest cost.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 17—RETIREMENT PLANS & OTHER EMPLOYEE BENEFITS
168
2024 FORM 10-K ANNUAL REPORT
The following table presents the plans’ benefit obligations and plan assets for 2024 and 2023.
Table 8.17.4
BENEFIT OBLIGATIONS & PLAN ASSETS
(Dollars in millions)
Pension Benefits
Other Benefits
2024
2023
2024
2023
Change in benefit obligation
Benefit obligation, beginning of year
$
675
$
663
$
31
$
32
Interest cost
32
33
2
2
Actuarial (gain) loss (a)
(38)
20
(1)
—
Actual benefits paid
(42)
(41)
(2)
(3)
Premium paid for annuity purchase (b)
(28)
—
—
—
Benefit obligation, end of year
$
599
$
675
$
30
$
31
Change in plan assets
Fair value of plan assets, beginning of year
$
638
$
641
$
23
$
21
Actual return on plan assets
7
35
2
2
Employer contributions
3
3
1
3
Actual benefits paid – settlement payments
(41)
(40)
(2)
(3)
Actual benefits paid – other payments
(1)
(1)
—
—
Premium paid for annuity purchase (b)
(28)
—
—
—
Fair value of plan assets, end of year
$
578
$
638
$
24
$
23
Funded (unfunded) status of the plans
$
(21) $
(37) $
(6) $
(8)
Amounts recognized in the Balance Sheets
Other assets
$
1
$
—
$
22
$
21
Other liabilities
(22)
(37)
(28)
(29)
Net asset (liability) at end of year
$
(21) $
(37) $
(6) $
(8)
(a) Variances in the actuarial (gain) loss are due to normal activity such as changes in discount rates, updates to participant demographic information and
revisions to life expectancy assumptions.
(b) Amounts represent settlements of certain retired participants in the qualified pension plan that occurred during the year.
The projected benefit obligation for unfunded plans was as follows.
Table 8.17.5
BENEFIT OBLIGATION - UNFUNDED PLANS
Pension Benefits
Other Benefits
(Dollars in millions)
2024
2023
2024
2023
Projected benefit obligation
$
22
$
24
$
28
$
29
The qualified pension plan was overfunded by $1 million
and underfunded by $13 million as of December 31, 2024
and 2023, respectively. Because of the pension freeze at
the end of 2012, as of both December 31, 2024 and 2023,
the pension benefit obligation is equivalent to the
accumulated benefit obligation. FHN's funded
postretirement plan was in an overfunded status as of
December 31, 2024 and 2023.
Unrecognized actuarial gains and losses and unrecognized
prior service costs and credits are recognized as a
component of accumulated other comprehensive income.
Balances reflected in accumulated other comprehensive
income on a pre-tax basis for the years ended
December 31, 2024 and 2023 consist of the following.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 17—RETIREMENT PLANS & OTHER EMPLOYEE BENEFITS
169
2024 FORM 10-K ANNUAL REPORT
Table 8.17.6
PRE-TAX ACTUARIAL (GAINS) LOSSES REFLECTED IN AOCI
(Dollars in millions)
Pension Benefits
Other Benefits
2024
2023
2024
2023
Amounts recognized in accumulated other
comprehensive income
Net actuarial (gain) loss
$
341
$
367
$
(9) $
(8)
The pre-tax amounts recognized in other comprehensive income during 2024, 2023, and 2022 were as follows.
Table 8.17.7
PRE-TAX AMOUNTS RECOGNIZED IN OCI
(Dollars in millions)
Pension Benefits
Other Benefits
2024
2023
2022
2024
2023
2022
Changes in plan assets and benefit obligation
recognized in other comprehensive income
Net actuarial (gain) loss arising during measurement
period
$
(13) $
17 $
32
$
(2) $
— $
(3)
Items amortized during the measurement period:
Net actuarial gain (loss)
(13)
(13)
(11)
1
1
—
Total recognized in other comprehensive income
$
(26) $
4 $
21
$
(1) $
1 $
(3)
FHN utilizes the minimum amortization method in
determining the amount of actuarial gains or losses to
include in plan expense. Under this approach, the net
deferred actuarial gain or loss that exceeds a threshold is
amortized over the average remaining service period of
active plan participants. The threshold is measured as the
greater of 10% of a plan’s projected benefit obligation as
of the beginning of the year or 10% of the market-related
value of plan assets as of the beginning of the year. FHN
amortizes actuarial gains and losses using the estimated
average remaining life expectancy of the remaining
participants since all participants are considered inactive
due to the freeze.
The following table provides detail on expected benefit
payments, which reflect expected future service, as
appropriate.
Table 8.17.8
EXPECTED BENEFIT PAYMENTS
(Dollars in millions)
Pension
Benefits
Other
Benefits
2025
$
44
$
2
2026
45
2
2027
46
2
2028
46
2
2029
46
2
2030-2034
229
12
Plan Assets
FHN’s overall investment goal is to create, over the life of
the pension plan and retiree medical plan, an adequate
pool of sufficiently liquid assets to support the qualified
pension benefit obligations to participants, retirees, and
beneficiaries, as well as to partially support the medical
obligations to retirees and beneficiaries. Thus, the
qualified pension plan and retiree medical plan seek to
achieve a level of investment return consistent with
changes in projected benefit obligations.
Qualified pension plan assets primarily consist of fixed
income securities which include U.S. treasuries, corporate
bonds of companies from diversified industries, municipal
bonds, and foreign bonds. Fixed income investments
generally have long durations consistent with the
estimated pension liabilities of FHN. This duration-
matching strategy is intended to hedge substantially all of
the plan’s risk associated with future benefit payments.
Retiree medical funds are kept in short-term investments,
primarily money market funds and mutual funds. On
December 31, 2024 and 2023, FHN did not have any
significant concentrations of risk within the plan assets
related to the pension plan or the retiree medical plan.
The fair value of FHN’s pension plan assets at
December 31, 2024 and 2023, by asset category classified
using the fair value measurement hierarchy, is shown in
the table below. See Note 23 – Fair Value of Assets and
Liabilities for more details about fair value measurements.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 17—RETIREMENT PLANS & OTHER EMPLOYEE BENEFITS
170
2024 FORM 10-K ANNUAL REPORT
Table 8.17.9
FAIR VALUE OF PENSION ASSETS
(Dollars in millions)
December 31, 2024
Level 1
Level 2
Level 3
Total
Cash equivalents and money market funds
$
11
$
—
$
—
$
11
Fixed income securities:
U.S. treasuries
—
8
—
8
Corporate, municipal and foreign bonds
—
295
—
295
Common and collective funds:
Fixed income
—
264
—
264
Total
$
11
$
567
$
—
$
578
(Dollars in millions)
December 31, 2023
Level 1
Level 2
Level 3
Total
Cash equivalents and money market funds
$
6
$
—
$
—
$
6
Fixed income securities:
U.S. treasuries
—
9
—
9
Corporate, municipal and foreign bonds
—
317
—
317
Common and collective funds:
Fixed income
—
306
—
306
Total
$
6
$
632
$
—
$
638
The HR Investment and Risk Committee, comprised of
senior managers within the organization, meets regularly
to review asset performance and potential portfolio
revisions.
Adjustments to the qualified pension plan asset allocation
primarily reflect changes in anticipated liquidity needs for
plan benefits.
The fair value of FHN’s retiree medical plan assets at
December 31, 2024 and 2023 by asset category is as
follows.
Table 8.17.10
FAIR VALUE OF RETIREE MEDICAL PLAN ASSETS
(Dollars in millions)
December 31, 2024
Level 1
Level 2
Level 3
Total
Mutual funds:
Equity mutual funds
$
8
$
—
$
—
$
8
Fixed income mutual funds
16
—
—
16
Total
$
24
$
—
$
—
$
24
(Dollars in millions)
December 31, 2023
Level 1
Level 2
Level 3
Total
Mutual funds:
Equity mutual funds
$
7
$
—
$
—
$
7
Fixed income mutual funds
16
—
—
16
Total
$
23
$
—
$
—
$
23
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 17—RETIREMENT PLANS & OTHER EMPLOYEE BENEFITS
171
2024 FORM 10-K ANNUAL REPORT
Note 18—Stock Options and Restricted Stock
Equity Compensation Plans
FHN currently has one plan which authorizes the grant of
new stock-based awards, the 2021 Incentive Plan (the IP).
New awards under the IP may be granted to any of FHN's
directors, officers, or associates. The IP was approved by
shareholders in April 2021 and again in April 2024.
The IP authorizes a broad range of award types, including
restricted shares, stock units, cash units, and stock
options. Stock units may be paid in shares or cash,
depending upon the terms of the award. The IP also
authorizes the grant of stock appreciation rights, though
no such grants have been made under the IP or recent
predecessor plans. Unvested awards have service and/or
performance conditions which must be met in order for
the shares to vest. Awards generally have service-vesting
conditions, meaning that the associate must remain
employed by FHN for certain periods in order for the
award to vest. Some outstanding awards also have
performance conditions. FHN operates the IP by
establishing award programs, each of which is intended to
cover a specific need. Programs are created, changed, or
terminated as needs change.
On December 31, 2024, there were 13,173,672 shares
available for new awards under the IP. This includes the
new/additional shares originally authorized under the IP
along with shares underlying ECP awards that have been
forfeited or canceled since the IP was approved by
shareholders, net of shares underlying IP awards that are
outstanding or have been paid.
Service condition full-value awards
Awards may be granted with service conditions only. In
recent years, programs using these awards have included
annual programs for executives and selected management
associates, a mandatory deferral program for executives
tied to annual bonuses earned, other mandatory or
elective deferral programs, various retention programs,
and special hiring-incentive situations. Details of the
awards vary by program, but most are settled in shares at
vesting rather than cash, and vesting generally begins no
earlier than the third anniversary of grant and rarely
extends beyond the fifth anniversary of grant.
Performance condition awards
Under FHN’s long-term incentive and corporate
performance programs, performance stock units ("PSUs")
(executives) and cash units (selected management
employees) are granted annually and vest only if
predetermined performance measures are met. The
measures are changed each year based on goals and
circumstances prevailing at the time of grant. In recent
years the performance periods have been three years,
with service-vesting near the third anniversary of the
grant. PSUs granted from 2014 to 2020 had a post-vest
holding period of two years. Recent annual performance
awards require pro-rated forfeiture (in relation to the
maximum possible) for performance falling between a
threshold level and a maximum. Performance awards
sometimes are used to provide a narrow, targeted
incentive to a single person or small group. Of the annual
program awards paid during 2024 or outstanding on
December 31, 2024: the 2019, 2020 and 2021 units vested
in 2022, 2023 and 2024 at the 187.5%, 187.5% and 162.5%
payout level, respectively, and only the 2020 units remain
in a two-year post-vesting holding period; the three-year
performance period of the 2022 units has ended but
performance is measured relative to peers and has not yet
been determined; and, the three-year performance
periods for the 2023 and 2024 units have not ended.
Director awards
Non-employee directors receive cash and annual grants of
service-conditioned stock units under a program approved
by the board of directors. Director stock units granted vest
in the year following the year of grant and settle in shares.
In 2024 and 2023, each director received a base stock unit
award of $140,000 and $122,000, respectively,
representing a portion of their annual retainer. Each
director is permitted to increase the portion paid as stock
units.
A summary of restricted and performance stock and unit
activity during the year ended December 31, 2024, is
presented below.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 18—STOCK OPTIONS AND RESTRICTED STOCK
172
2024 FORM 10-K ANNUAL REPORT
Table 8.18.1
RESTRICTED AND PERFORMANCE EQUITY AWARD ACTIVITY
Shares/
Units (a)
Weighted average
grant date fair value
(per share) (b)
January 1, 2024
11,317,704
$
15.89
Shares/units granted
5,088,696
15.24
Shares/units vested/distributed
(4,110,142)
15.81
Shares/units canceled
(456,173)
13.90
December 31, 2024
11,840,085
$
15.71
(a) Includes only units that settle in shares; nonvested performance units are included at 100% payout level.
(b) The weighted average grant date fair value for shares/units granted in 2023 and 2022 was $16.08 and $20.64, respectively.
On December 31, 2024, there was $90 million of
unrecognized compensation cost related to nonvested
restricted stock awards. That cost is expected to be
recognized over a weighted-average period of three years.
The total grant date fair value of shares vested during
2024, 2023 and 2022, was $65 million, $32 million, and
$29 million, respectively.
Stock option awards
In 2021 FHN ended its only remaining stock option
program, making only one grant related to a 2020
commitment. Options under that program, for executives,
have service-vesting requirements and seven-year terms.
In the past, option programs varied widely in their uses
and terms, and many old-program options, granted under
the ECP or its predecessor plans, remain outstanding
today. All options granted since 2005 provide for the
issuance of FHN common stock at a price fixed at its fair
market value on the grant date. Except for converted
options and a special retention stock option award to the
CEO in 2016, all options granted since 2008 vest fully no
later than the fourth anniversary of grant, and all such
options expire seven years from the grant date. CBF
converted options and IBKC converted options granted
prior to November 3, 2019 (the IBKC merger agreement
date) are fully vested and expire ten years from grant
date. IBKC converted options granted subsequent to the
merger agreement vest fully no later than the fifth
anniversary of the grant date and expire ten years from
grant date. The 2016 retention award vested on the fourth
through sixth anniversaries of grant and had a seven-year
term.
The summary of stock option activity for the year ended
December 31, 2024, is shown below.
Table 8.18.2
STOCK OPTION ACTIVITY
Options
Outstanding
Weighted
Average
Exercise Price
(per share)
Weighted Average
Remaining
Contractual Term
(years)
Aggregate
Intrinsic Value
(millions)
January 1, 2024
1,898,968
$
16.31
Options granted
—
—
Options exercised
(604,467)
15.52
Options expired/canceled
(335,879)
18.15
December 31, 2024
958,622
$
16.16
2.38
$
4
Options exercisable
883,705
16.24
2.23
3
Options expected to vest
74,917
15.20
4.07
—
The total intrinsic value of options exercised during 2024,
2023 and 2022 was $2 million, $4 million, and $17 million,
respectively.
On December 31, 2024, there was no unrecognized
compensation cost related to nonvested stock options.
FHN did not grant or convert stock options in 2024, 2023
and 2022.
Expected lives of options granted are determined based
on the vesting period, historical exercise patterns and
contractual term of the options. FHN uses a blend of
historical and implied volatility in determining expected
volatility. A portion of the weighted average volatility rate
is derived by compiling daily closing stock prices over a
historical period approximating the expected lives of the
options. Additionally, because of market volatility due to
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 18—STOCK OPTIONS AND RESTRICTED STOCK
173
2024 FORM 10-K ANNUAL REPORT
economic conditions and the impact on stock prices of
financial institutions, FHN also incorporates a measure of
implied volatility so as to incorporate more recent market
conditions in the estimation of future volatility.
Phantom stock awards
As a result of the IBKC merger, FHN assumed phantom
stock awards under various plans to officers and other key
associates. The awards are subject to a vesting period of
five years and are paid out in cash upon vesting. The
amount paid per vesting period is calculated as the
number of vested share equivalents multiplied by closing
market price of a share of the Company's common stock
on the vesting date. Share equivalents are calculated on
the date of grant as the total award's dollar value divided
by the closing market price of a share of the Company's
common stock on the grant date. As of December 31,
2024, there were 96,156 share equivalents of phantom
stock awards outstanding. See Note 1 - Significant
Accounting Policies for more discussion on FHN's phantom
stock awards.
Compensation Cost
The compensation cost that has been included in the
Consolidated Statements of Income pertaining to stock-
based awards was $59 million, $36 million, and $75
million for 2024, 2023, and 2022, respectively. The
corresponding total income tax benefits recognized were
$14 million, $8 million and $18 million in 2024, 2023, and
2022, respectively.
Authorization
Consistent with Tennessee state law, only authorized, but
unissued, stock may be utilized in connection with any
issuance of FHN common stock which may be required as
a result of stock-based compensation awards. Prior
authorizations to repurchase shares issued in connection
with compensation plans expired on December 31, 2023.
After 2023, as authorized by FHN's Board and the Board's
Compensation Committee, FHN continued to make
automatic stock purchases by withholding shares
associated with stock-based awards to cover tax
obligations associated with those awards. Those limited,
off-market purchases are not connected to a traditional,
announced purchase program. Automatic tax withholding
purchases are not subject to trading blackouts which
affect senior executives and the general purchase
program.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 18—STOCK OPTIONS AND RESTRICTED STOCK
174
2024 FORM 10-K ANNUAL REPORT
Note 19—Business Segment Information
During 2024, FHN reorganized its internal management
structure and, accordingly, reclassified its reportable
business segments. Prior to the 2024 reclassification, FHN's
reportable segments were: (1) Regional Banking, (2)
Specialty Banking, and (3) Corporate. As a result of the
2024 reclassification, FHN revised its reportable segments
as described below. Segment information for prior periods
has been reclassified to conform to the current period
presentation.
FHN's operating segments are composed of the following:
• Commercial, Consumer & Wealth segment offers
financial products and services, including traditional
lending and deposit taking, to commercial and
consumer clients primarily in the southern U.S. and
other selected markets. Commercial, Consumer &
Wealth also consists of lines of business that deliver
product offerings and services with niche industry
knowledge including asset-based lending, commercial
real estate, equipment finance/leasing, energy,
international banking, healthcare, and trucking and
transportation. Additionally, Commercial, Consumer &
Wealth provides investment, wealth management,
financial planning, trust and asset management
services for consumer clients as well as delivering
treasury management solutions, loan syndications,
and corporate banking services.
• Wholesale segment consists of lines of business that
deliver product offerings and services with
differentiated industry knowledge. Wholesale’s lines
of business include mortgage warehouse lending,
franchise finance, correspondent banking, and
mortgage. Additionally, Wholesale has a line of
business focused on 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.
• Corporate segment consists primarily of corporate
support functions including risk management, audit,
accounting, finance, executive office, and corporate
communications. Shared support services such as
human resources, marketing, properties, technology,
credit risk and bank operations are allocated to the
activities of Commercial, Consumer & Wealth,
Wholesale, and Corporate. Additionally, the
Corporate segment includes centralized management
of capital and funding to support the business
activities of the company including management of
balance sheet funding, liquidity, and capital
management and allocation. The Corporate segment
also includes the revenue and expense associated with
run-off businesses such as pre-2009 mortgage banking
elements, run-off consumer and trust preferred loan
portfolios, and other exited businesses.
Basis of Presentation
Results of individual segments are presented based on
FHN's internal management reporting practices. There is
no comprehensive, authoritative body of guidance for
management accounting equivalent to GAAP; therefore,
the financial results of FHN's individual segments are not
necessarily comparable with similar information for any
other company.
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.
Funds Transfer Pricing
Net interest income in segment results reflects FHN's
internal funds transfer pricing methodology which is
designed to consider interest rate and liquidity risks. Under
this methodology, assets receive a funding charge while
liabilities and capital receive a funding credit based on
market interest rates, product characteristics, and other
factors.
The transfer pricing framework considers the application
of funding curves and methodologies consistently across
the balance sheet. A residual gain or loss from funds
transfer pricing operations is retained within Corporate.
Segment Allocations
Financial results are presented, to the extent practicable,
as if each segment operated on a standalone basis and
include expense allocations for corporate overhead
services used by the segments.
FHN has allocated the ALLL and the reserve for unfunded
lending commitments based on the loan exposures within
each segment’s portfolio.
The Company's Chief Operating Decision Maker ("CODM")
is comprised of the chief executive officer and segment
leadership.
For both the Commercial, Consumer & Wealth and
Wholesale segments, the CODM uses both Pre-Provision
Net Revenue ("PPNR") and Pre-Tax Net Income ("PTNI") to
evaluate performance and allocate resources. The
measure of PPNR focuses on the Company's primary
businesses principally by excluding the volatility associated
with credit risk estimates due to the CECL life-of-loan
estimation requirement, which is highly sensitive to
changes in economic forecasts. PPNR also represents a
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 19—BUSINESS SEGMENT INFORMATION
175
2024 FORM 10-K ANNUAL REPORT
metric utilized by regulatory agencies in stress testing
assessments. PTNI is used to incorporate credit risk
estimates for a holistic view of pre-tax results in the
evaluation of segment performance.
For the Corporate segment, the CODM uses after-tax
income to evaluate performance and allocate resources.
After-tax income is most relevant for the Corporate
segment because of minimal credit risk and inclusion of
the impacts from all consolidated tax matters, which are
not allocated, in addition to all other methodologies
affecting pre-tax income between reported segments (e.g.,
FTP and cost allocations).
The following table presents financial information for each
reportable business segment for the years ended
December 31.
Table 8.19.1
SEGMENT FINANCIAL INFORMATION
2024
(Dollars in millions)
Commercial,
Consumer & Wealth
Wholesale
Corporate
Consolidated
Interest income
$
3,538 $
530 $
284 $
4,352
Interest expense
1,413
125
303
1,841
Funds transfer pricing
418
(211)
(207)
—
Net interest income (expense)
2,543
194
(226)
2,511
Noninterest income (a)
461
230
(12)
679
Total revenues
3,004
424
(238)
3,190
Noninterest expense (c)(d)
1,417
299
319
2,035
Pre-provision net revenue (f)
1,587
125
(557)
1,155
Provision for credit losses
158
3
(11)
150
Income (loss) before income taxes
1,429
122
(546)
1,005
Income tax expense (benefit)
337
29
(155)
211
Net income (loss)
$
1,092 $
93 $
(391) $
794
Average assets
$
59,402 $
8,209 $
14,211 $
81,822
Depreciation and amortization
37
7
57
101
Expenditures for long-lived assets
26
1
18
45
2023
(Dollars in millions)
Commercial,
Consumer & Wealth
Wholesale
Corporate
Consolidated
Interest income
$
3,286 $
478 $
336 $
4,100
Interest expense
1,115
100
345
1,560
Funds transfer pricing
523
(195)
(328)
—
Net interest income (expense)
2,694
183
(337)
2,540
Noninterest income (a)
448
174
305
927
Total revenues
3,142
357
(32)
3,467
Noninterest expense (b)(c)(d)
1,370
276
433
2,079
Pre-provision net revenue (f)
1,772
81
(465)
1,388
Provision for credit losses
260
15
(15)
260
Income (loss) before income taxes
1,512
66
(450)
1,128
Income tax expense (benefit) (e)
357
16
(161)
212
Net income (loss)
$
1,155 $
50 $
(289) $
916
Average assets
$
58,126 $
7,583 $
15,974 $
81,683
Depreciation and amortization
34
7
61
102
Expenditures for long-lived assets
16
1
17
34
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 19—BUSINESS SEGMENT INFORMATION
176
2024 FORM 10-K ANNUAL REPORT
2022
(Dollars in millions)
Commercial,
Consumer & Wealth
Wholesale
Corporate
Consolidated
Interest income
$
2,053 $
339 $
291 $
2,683
Interest expense
156
47
88
291
Funds transfer pricing
368
(39)
(329)
—
Net interest income (expense)
2,265
253
(126)
2,392
Noninterest income (a)
477
259
79
815
Total revenues
2,742
512
(47)
3,207
Noninterest expense (b)(d)
1,309
344
300
1,953
Pre-provision net revenue (f)
1,433
168
(347)
1,254
Provision for credit losses
85
11
(1)
95
Income (loss) before income taxes
1,348
157
(346)
1,159
Income tax expense (benefit)
319
38
(110)
247
Net income (loss)
$
1,029 $
119 $
(236) $
912
Average assets
$
52,771 $
9,172 $
22,274 $
84,217
Depreciation and amortization
(1)
6
80
85
Expenditures for long-lived assets
15
10
(1)
24
(a) 2024 includes a $91 million loss on securities following the restructuring of a portion of the AFS securities portfolio. 2023 includes a $225 million gain on
merger termination and a $6 million loss on equities valuation adjustments in the Corporate segment and a $9 million gain on an FHN Financial asset
disposition in the Wholesale segment. 2022 includes a $12 million gain on sale of mortgage servicing rights in the Wholesale segment and a $22 million
gain related to the sale of the title insurance business, a $10 million gain on equity securities and a $6 million gain related to a fintech investment in the
Corporate segment.
(b) 2023 includes $51 million in merger and integration expenses related to the TD Transaction in the Corporate Segment. 2022 includes $136 million in
merger and integration expenses related to the IBKC merger and TD Transaction in the Corporate segment.
(c) 2024 includes $14 million of restructuring costs and an FDIC special assessment of $9 million in the Corporate segment. 2023 includes $10 million of
restructuring costs, an FDIC special assessment of $68 million, and a $50 million contribution to the First Horizon Foundation in the Corporate segment.
(d) 2024, 2023, and 2022 include $15 million, $15 million and $22 million, respectively, in derivative valuation adjustments related to prior Visa Class B share
sales in the Corporate segment.
(e) 2023 includes $24 million in expense related to the surrender of bank-owned life insurance policies and a $59 million benefit from merger-related tax
items in the Corporate segment.
(f) Pre-provision net revenue is a non-GAAP measure and is reconciled to income (loss) before income taxes (GAAP) in this table.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 19—BUSINESS SEGMENT INFORMATION
177
2024 FORM 10-K ANNUAL REPORT
The following table presents a disaggregation of FHN’s noninterest income by major product line and reportable segment for
the years ended December 31, 2024, 2023, and 2022.
Table 8.19.2
NONINTEREST INCOME DETAIL BY SEGMENT
December 31, 2024
(Dollars in millions)
Commercial,
Consumer &
Wealth
Wholesale
Corporate
Consolidated
Noninterest income:
Fixed income (a)
$
— $
187 $
— $
187
Deposit transactions and cash management
163
4
9
176
Brokerage, management fees and commissions
101
—
—
101
Card and digital banking fees
67
—
10
77
Other service charges and fees
48
2
1
51
Trust services and investment management
48
—
—
48
Mortgage banking income
1
33
1
35
Securities gains (losses), net (b)
—
—
(89)
(89)
Other income (c)
33
4
56
93
Total noninterest income
$
461 $
230 $
(12) $
679
December 31, 2023
(Dollars in millions)
Commercial,
Consumer &
Wealth
Wholesale
Corporate
Consolidated
Noninterest income:
Fixed income (a)
$
— $
134 $
(1) $
133
Deposit transactions and cash management
165
4
10
179
Brokerage, management fees and commissions
90
—
—
90
Card and digital banking fees
67
—
10
77
Other service charges and fees
51
3
—
54
Trust services and investment management
47
—
—
47
Mortgage banking income
1
21
1
23
Gain on merger termination
—
—
225
225
Securities gains (losses), net (b)
—
—
(4)
(4)
Other income (c)
27
12
64
103
Total noninterest income
$
448 $
174 $
305 $
927
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 19—BUSINESS SEGMENT INFORMATION
178
2024 FORM 10-K ANNUAL REPORT
December 31, 2022
(Dollars in millions)
Commercial,
Consumer &
Wealth
Wholesale
Corporate
Consolidated
Noninterest income:
Fixed income (a)
$
— $
205 $
— $
205
Deposit transactions and cash management
161
3
7
171
Brokerage, management fees and commissions
92
—
—
92
Card and digital banking fees
72
—
12
84
Other service charges and fees
49
3
2
54
Trust services and investment management
48
—
—
48
Mortgage banking income
22
46
—
68
Securities gains (losses), net (b)
—
—
18
18
Other income (c)
33
2
40
75
Total noninterest income
$
477 $
259 $
79 $
815
(a)
2024, 2023, and 2022 include $42 million, $42 million, and $43 million, respectively, of underwriting, portfolio advisory, and other noninterest income in scope of ASC 606,
"Revenue from Contracts with Customers."
(b) Represents noninterest income excluded from the scope of ASC 606. Amount is presented for informational purposes to reconcile total noninterest income.
(c)
Includes letter of credit fees and insurance commissions in scope of ASC 606.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 19—BUSINESS SEGMENT INFORMATION
179
2024 FORM 10-K ANNUAL REPORT
The following table presents a disaggregation of FHN’s noninterest expense by major product line and reportable segment for
the years ended December 31, 2024, 2023, and 2022.
Table 8.19.3
NONINTEREST EXPENSE DETAIL BY SEGMENT
December 31, 2024
(Dollars in millions)
Commercial,
Consumer &
Wealth
Wholesale
Corporate
Consolidated
Noninterest expense:
Personnel expense
$
540 $
196 $
401 $
1,137
Net occupancy expense
76
9
45
130
Computer software
25
6
90
121
Operations services
18
22
54
94
Deposit insurance expense
—
—
64
64
Legal and professional fees
11
3
50
64
Contract employment and outsourcing
5
3
43
51
Advertising and public relations
7
1
40
48
Amortization of intangible assets
39
2
3
44
Equipment expense
11
2
29
42
Communications and delivery
10
3
19
32
Contributions
2
—
16
18
Other expense
75
22
93
190
Cost allocations
598
30
(628)
—
Total noninterest expense
$
1,417 $
299 $
319 $
2,035
December 31, 2023
(Dollars in millions)
Commercial,
Consumer &
Wealth
Wholesale
Corporate
Consolidated
Noninterest expense:
Personnel expense
$
526 $
179 $
395 $
1,100
Net occupancy expense
72
9
42
123
Computer software
21
5
85
111
Operations services
20
25
42
87
Deposit insurance expense
—
—
122
122
Legal and professional fees
10
3
36
49
Contract employment and outsourcing
6
4
39
49
Advertising and public relations
7
1
63
71
Amortization of intangible assets
43
1
3
47
Equipment expense
13
1
28
42
Communications and delivery
10
5
20
35
Contributions
2
—
59
61
Other expense
71
20
91
182
Cost allocations
569
23
(592)
—
Total noninterest expense
$
1,370 $
276 $
433 $
2,079
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 19—BUSINESS SEGMENT INFORMATION
180
2024 FORM 10-K ANNUAL REPORT
December 31, 2022
(Dollars in millions)
Commercial,
Consumer &
Wealth
Wholesale
Corporate
Consolidated
Noninterest expense:
Personnel expense
$
516 $
240 $
345 $
1,101
Net occupancy expense
72
11
45
128
Computer software
27
4
82
113
Operations services
21
22
44
87
Deposit insurance expense
—
—
32
32
Legal and professional fees
11
3
48
62
Contract employment and outsourcing
6
5
43
54
Advertising and public relations
6
1
43
50
Amortization of intangible assets
46
2
3
51
Equipment expense
14
1
30
45
Communications and delivery
9
6
22
37
Contributions
2
—
5
7
Other expense
68
29
89
186
Cost allocations
511
20
(531)
—
Total noninterest expense
$
1,309 $
344 $
300 $
1,953
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 19—BUSINESS SEGMENT INFORMATION
181
2024 FORM 10-K ANNUAL REPORT
Note 20—Variable Interest Entities
FHN makes equity investments in various entities that are
considered VIEs, as defined by GAAP. A VIE typically does
not have sufficient equity at risk to finance its activities
without additional subordinated financial support from
other parties. The Company’s variable interest arises from
contractual, ownership or other monetary interests in the
entity, which change with fluctuations in the fair value of
the entity's net assets. FHN consolidates a VIE if FHN is the
primary beneficiary of the entity. FHN is the primary
beneficiary of a VIE if FHN's variable interest provides it
with the power to direct the activities that most
significantly impact the VIE and the right to receive
benefits (or the obligation to absorb losses) that could
potentially be significant to the VIE. To determine whether
or not a variable interest held could potentially be
significant to the VIE, FHN considers both qualitative and
quantitative factors regarding the nature, size and form of
its involvement with the VIE. FHN assesses whether or not
it is the primary beneficiary of a VIE on an ongoing basis.
Consolidated Variable Interest Entities
FHN has established certain rabbi trusts related to
deferred compensation plans offered to its employees.
FHN contributes employee cash compensation deferrals to
the trusts and directs the underlying investments made by
the trusts. The assets of these trusts are available to FHN’s
creditors only in the event that FHN becomes insolvent.
These trusts are considered VIEs as there is no equity at
risk in the trusts since FHN provided the equity interest to
its employees in exchange for services rendered. FHN is
considered the primary beneficiary of the rabbi trusts as it
has the power to direct the activities that most
significantly impact the economic performance of the
rabbi trusts through its ability to direct the underlying
investments made by the trusts. Additionally, FHN could
potentially receive benefits or absorb losses that are
significant to the trusts due to its right to receive any asset
values in excess of liability payoffs and its obligation to
fund any liabilities to employees that are in excess of a
rabbi trust’s assets.
The following table summarizes the carrying value of
assets and liabilities associated with rabbi trusts used for
deferred compensation plans which are consolidated by
FHN as of December 31, 2024 and 2023.
Table 8.20.1
CONSOLIDATED VIEs
(Dollars in millions)
December 31,
2024
December 31,
2023
Assets:
Other assets
$
195
$
177
Liabilities:
Other liabilities
$
165
$
150
Nonconsolidated Variable Interest Entities
Tax Credit Investments
Through designated wholly-owned subsidiaries, First
Horizon Bank makes equity investments as a limited
partner in various partnerships that sponsor affordable
housing projects utilizing the LIHTC. Through designated
subsidiaries, First Horizon Bank periodically makes equity
investments as a non-managing member in various LLCs
that sponsor community development projects utilizing
the NMTC. First Horizon Bank also makes equity
investments as a limited partner or non-managing
member in entities that receive historic tax credits. The
purpose of these investments is to achieve a satisfactory
return on capital and to support FHN’s community
reinvestment initiatives. These entities are considered
VIEs as First Horizon Bank's subsidiaries represent the
holders of the equity investment at risk, but do not have
the ability to direct the activities that most significantly
affect the performance of the entities. FHN is therefore
not the primary beneficiary of any of these entities.
Accordingly, FHN does not consolidate these VIEs and
accounts for these investments in other assets on the
Consolidated Balance Sheets.
FHN accounts for qualifying LIHTC investments under the
PAM. Effective for periods after 2023, all LIHTC
investments qualify for the PAM. Commencing in 2024,
FHN determined that its equity investments in NMTC and
historic tax credit entities qualify for the PAM and made
the election to apply the PAM for these programs.
Expenses associated with non-qualifying LIHTC
investments were not significant for 2023 and 2022.
The following table summarizes the impact to income tax
expense on the Consolidated Statements of Income for
the years ended December 31, 2024, 2023, and 2022 for
investments accounted for under the PAM. The impact of
these investments is included in other operating activities,
net in the Consolidated Statements of Cash Flows.
Table 8.20.2
TAX CREDIT IMPACTS ON TAX EXPENSE
(Dollars in millions)
2024
2023
2022
Income tax expense (benefit):
Amortization of qualifying
investments
$
65
$
54
$
44
Tax credits
(70)
(55)
(48)
Other tax benefits related to
qualifying investments
(9)
(13)
(12)
Small Issuer Trust Preferred Holdings
First Horizon Bank holds variable interests in trusts which
have issued mandatorily redeemable preferred capital
securities (“trust preferreds”) for smaller banking and
insurance enterprises. First Horizon Bank has no voting
rights for the trusts’ activities. The trusts’ only assets are
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 20—VARIABLE INTEREST ENTITIES
182
2024 FORM 10-K ANNUAL REPORT
junior subordinated debentures of the issuing enterprises.
The creditors of the trusts hold no recourse to the assets
of First Horizon Bank. Since First Horizon Bank is solely a
holder of the trusts’ securities, it has no rights which
would give it the power to direct the activities that most
significantly impact the trusts’ economic performance and
thus it is not considered the primary beneficiary of the
trusts. First Horizon Bank has no contractual requirements
to provide financial support to the trusts.
On-Balance Sheet Trust Preferred Securitization
In 2007, First Horizon Bank executed a securitization of
certain small issuer trust preferreds for which the
underlying trust meets the definition of a VIE, as the
holders of the equity investment at risk do not have the
power through voting rights, or similar rights, to direct the
activities that most significantly impact the entity’s
economic performance. Since First Horizon Bank did not
retain servicing or other decision-making rights, First
Horizon Bank is not the primary beneficiary as it does not
have the power to direct the activities that most
significantly impact the trust’s economic performance.
Accordingly, First Horizon Bank has accounted for the
funds received through the securitization as a term
borrowing in its Consolidated Balance Sheets. First
Horizon Bank has no contractual requirements to provide
financial support to the trust.
Holdings in Agency Mortgage-Backed Securities
FHN holds securities issued by various Agency
securitization trusts. Based on their restrictive nature, the
trusts meet the definition of a VIE since the holders of the
equity investments at risk do not have the power through
voting rights, or similar rights, to direct the activities that
most significantly impact the entities’ economic
performance. FHN could potentially receive benefits or
absorb losses that are significant to the trusts based on
the nature of the trusts’ activities and the size of FHN’s
holdings. However, FHN is solely a holder of the trusts’
securities and does not have the power to direct the
activities that most significantly impact the trusts’
economic performance and is not considered the primary
beneficiary of the trusts. FHN has no contractual
requirements to provide financial support to the trusts.
Commercial Loan Modifications to Borrowers
Experiencing Financial Difficulty
For certain troubled commercial loans, First Horizon Bank
modifies the terms of the borrower’s debt in an effort to
increase the probability of receipt of amounts
contractually due. Following a modification to borrowers
experiencing financial difficulty, the borrower entity
typically meets the definition of a VIE as the initial
determination of whether an entity is a VIE must be
reconsidered as events have proven that the entity’s
equity is not sufficient to permit it to finance its activities
without additional subordinated financial support or a
restructuring of the terms of its financing. As First Horizon
Bank does not have the power to direct the activities that
most significantly impact such troubled commercial
borrowers’ operations, it is not considered the primary
beneficiary even in situations where, based on the size of
the financing provided, First Horizon Bank is exposed to
potentially significant benefits and losses of the borrowing
entity. First Horizon Bank has no contractual requirements
to provide financial support to the borrowing entities
beyond certain funding commitments established upon
restructuring of the terms of the debt that allows for
preparation of the underlying collateral for sale.
Proprietary Trust Preferred Issuances
In conjunction with its acquisitions, FHN acquired junior
subordinated debt underlying multiple issuances of trust
preferred debt. All of the trusts are considered VIEs
because the ownership interests from the capital
contributions to these trusts are not considered “at risk”
in evaluating whether the holders of the equity
investments at risk in the trusts have the ability to direct
the activities that most significantly impact the entities’
economic performance. Thus, FHN cannot be the trusts’
primary beneficiary because its ownership interests in the
trusts are not considered variable interests as they are not
considered “at risk”. Consequently, none of the trusts are
consolidated by FHN.
The following tables summarize FHN’s nonconsolidated
VIEs as of December 31, 2024 and 2023.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 20—VARIABLE INTEREST ENTITIES
183
2024 FORM 10-K ANNUAL REPORT
Table 8.20.3
NONCONSOLIDATED VIEs AT DECEMBER 31, 2024
(Dollars in millions)
Maximum
Loss Exposure
Liability
Recognized
Classification
Type:
Low income housing partnerships
$
617
$
222
(a)
Other tax credit investments (b)
90
73
Other assets
Small issuer trust preferred holdings (c)
171
—
Loans and leases
On-balance sheet trust preferred securitization
26
88
(d)
Holdings of agency mortgage-backed securities (c)
8,017
—
(e)
Commercial loan modifications to borrowers experiencing
financial difficulty (f)
381
—
Loans and leases
Proprietary trust preferred issuances (g)
—
167
Term borrowings
(a) Maximum loss exposure represents $395 million of current investments and $222 million of accrued contractual funding commitments. Accrued funding
commitments represent unconditional contractual obligations for future funding events and are recognized in other liabilities. FHN currently expects to
be required to fund substantially all of these accrued commitments by the end of 2026.
(b) Maximum loss exposure represents the value of current investments.
(c) Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts’ securities.
(d) Includes $113 million classified as loans and leases and $2 million classified as trading securities, which are offset by $88 million classified as term
borrowings.
(e) Includes $278 million classified as trading securities, $1.3 billion classified as securities held to maturity, and $6.5 billion classified as securities available
for sale.
(f) Maximum loss exposure represents $381 million of current receivables with no additional contractual funding commitments on loans related to
commercial loan modifications to borrowers experiencing financial difficulty.
(g) No exposure to loss due to nature of FHN's involvement.
Table 8.20.4
NONCONSOLIDATED VIEs AT DECEMBER 31, 2023
(Dollars in millions)
Maximum
Loss Exposure
Liability
Recognized
Classification
Type:
Low income housing partnerships
$
587
$
223
(a)
Other tax credit investments (b)
79
64
Other assets
Small issuer trust preferred holdings (c)
173
—
Loans and leases
On-balance sheet trust preferred securitization
26
88
(d)
Holdings of agency mortgage-backed securities (c)
8,402
—
(e)
Commercial loan modifications to borrowers experiencing
financial difficulty (f)
129
—
Loans and leases
Proprietary trust preferred issuances (g)
—
167
Term borrowings
(a) Maximum loss exposure represents $364 million of current investments and $223 million of accrued contractual funding commitments. Accrued funding
commitments represent unconditional contractual obligations for future funding events and are recognized in other liabilities. FHN currently expects to
be required to fund substantially all of these accrued commitments by the end of 2026.
(b) Maximum loss exposure represents the value of current investments.
(c) Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts’ securities.
(d) Includes $113 million classified as loans and leases and $2 million classified as trading securities, which are offset by $88 million classified as term
borrowings.
(e) Includes $450 million classified as trading securities, $1.3 billion classified as securities held to maturity, and $6.6 billion classified as securities available
for sale.
(f) Maximum loss exposure represents $129 million of current receivables with no additional contractual funding commitments on loans related to
commercial loan modifications to borrowers experiencing financial difficulty.
(g) No exposure to loss due to nature of FHN's involvement.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 20—VARIABLE INTEREST ENTITIES
184
2024 FORM 10-K ANNUAL REPORT
Note 21—Derivatives
In the normal course of business, FHN utilizes various
financial instruments (including derivative contracts and
credit-related agreements) through its fixed income and
risk management operations, as part of its risk
management strategy and as a means to meet clients’
needs. Derivative instruments are subject to credit and
market risks in excess of the amount recorded on the
balance sheet as required by GAAP. The contractual or
notional amounts of these financial instruments do not
necessarily represent the amount of credit or market risk.
However, they can be used to measure the extent of
involvement in various types of financial instruments.
Controls and monitoring procedures for these instruments
have been established and are routinely reevaluated. The
ALCO controls, coordinates, and monitors the usage and
effectiveness of these financial instruments.
Credit risk represents the potential loss that may occur if a
party to a transaction fails to perform according to the
terms of the contract. The measure of credit exposure is
the replacement cost of contracts with a positive fair
value. FHN manages credit risk by entering into financial
instrument transactions through national exchanges,
primary dealers or approved counterparties, and by using
mutual margining and master netting agreements
whenever possible to limit potential exposure. FHN also
maintains collateral posting requirements with certain
counterparties to limit credit risk. Daily margin posted or
received with central clearinghouses is considered a legal
settlement of the related derivative contracts which
results in a net presentation for each contract in the
Consolidated Balance Sheets. Treatment of daily margin as
a settlement has no effect on hedge accounting or gains/
losses for the applicable derivative contracts. On
December 31, 2024 and 2023, respectively, FHN had $541
million and $406 million of cash receivables and $25
million and $33 million of cash payables related to
collateral posting under master netting arrangements,
inclusive of collateral posted related to contracts with
adjustable collateral posting thresholds and over-
collateralized positions, with derivative counterparties.
With exchange-traded contracts, the credit risk is limited
to the clearinghouse used. For non-exchange traded
instruments, credit risk may occur when there is a gain in
the fair value of the financial instrument and the
counterparty fails to perform according to the terms of
the contract and/or when the collateral proves to be of
insufficient value. See additional discussion regarding
master netting agreements and collateral posting
requirements later in this note under the heading “Master
Netting and Similar Agreements.” Market risk represents
the potential loss due to the decrease in the value of a
financial instrument caused primarily by changes in
interest rates or the prices of debt instruments. FHN
manages market risk by establishing and monitoring limits
on the types and degree of risk that may be undertaken.
FHN continually measures this risk through the use of
models that measure value-at-risk and earnings-at-risk.
Derivative Instruments
FHN enters into various derivative contracts both to
facilitate client transactions and as a risk management
tool. Where contracts have been created for clients, FHN
enters into upstream transactions with dealers to offset its
risk exposure. Contracts with dealers that require central
clearing are novated to a clearing agent who becomes
FHN’s counterparty. Derivatives are also used as a risk
management tool to hedge FHN’s exposure to changes in
interest rates or other defined market risks.
Forward contracts are over-the-counter contracts where
two parties agree to purchase and sell a specific quantity
of a financial instrument at a specified price, with delivery
or settlement at a specified date. Futures contracts are
exchange-traded contracts where two parties agree to
purchase and sell a specific quantity of a financial
instrument at a specified price, with delivery or settlement
at a specified date. Interest rate option contracts give the
purchaser the right, but not the obligation, to buy or sell a
specified quantity of a financial instrument, at a specified
price, during a specified period of time. Caps and floors
are options that are linked to a notional principal amount
and an underlying indexed interest rate. Interest rate
swaps involve the exchange of interest payments at
specified intervals between two parties without the
exchange of any underlying principal. Swaptions are
options on interest rate swaps that give the purchaser the
right, but not the obligation, to enter into an interest rate
swap agreement during a specified period of time.
Trading Activities
FHNF trades U.S. Treasury, U.S. Agency, government-
guaranteed loan, mortgage-backed, corporate and
municipal fixed income securities, and other securities for
distribution to clients. When these securities settle on a
delayed basis, they are considered forward contracts.
FHNF also enters into interest rate contracts, including
caps, swaps, and floors, for its clients. In addition, FHNF
enters into futures and option contracts to economically
hedge interest rate risk associated with a portion of its
securities inventory. These transactions are measured at
fair value, with changes in fair value recognized in
noninterest income. Related assets and liabilities are
recorded on the Consolidated Balance Sheets as derivative
assets and derivative liabilities within other assets and
other liabilities. The FHNF Risk Committee and the Credit
Risk Management Committee collaborate to mitigate
credit risk related to these transactions. Credit risk is
controlled through credit approvals, risk control limits,
and ongoing monitoring procedures. Total trading
revenues were $154 million, $97 million and $157 million
for the years ended December 31, 2024, 2023 and 2022,
respectively. Trading revenues are inclusive of both
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 21—DERIVATIVES
185
2024 FORM 10-K ANNUAL REPORT
derivative and non-derivative financial instruments and
are included in fixed income on the Consolidated
Statements of Income.
The following table summarizes derivatives associated
with FHNF's trading activities as of December 31, 2024
and 2023.
Table 8.21.1
DERIVATIVES ASSOCIATED WITH TRADING
December 31, 2024
(Dollars in millions)
Notional
Assets
Liabilities
Customer interest rate contracts
$
4,096
$
8
$
190
Offsetting upstream interest rate contracts
4,265
134
9
Forwards and futures purchased
1,421
1
6
Forwards and futures sold
1,426
7
—
December 31, 2023
(Dollars in millions)
Notional
Assets
Liabilities
Customer interest rate contracts
$
4,067
$
22
$
197
Offsetting upstream interest rate contracts
4,273
135
23
Forwards and futures purchased
777
9
—
Forwards and futures sold
912
—
9
Interest Rate Risk Management
FHN’s ALCO focuses on managing market risk by
controlling and limiting earnings volatility attributable to
changes in interest rates. Interest rate risk exists to the
extent that interest-earning assets and interest-bearing
liabilities have different maturity or repricing
characteristics. FHN uses derivatives, primarily swaps, that
are designed to moderate the impact on earnings as
interest rates change. Interest paid or received for swaps
utilized by FHN to hedge the fair value of long-term debt is
recognized as an adjustment of the interest expense of
the liabilities whose risk is being managed. FHN’s interest
rate risk management policy is to use derivatives to hedge
interest rate risk or market value of assets or liabilities,
not to speculate. In addition, FHN has entered into certain
interest rate swaps and caps as a part of a product
offering to commercial clients that includes customer
derivatives paired with upstream offsetting market
instruments that, when completed, are designed to
mitigate interest rate risk. These contracts do not qualify
for hedge accounting and are measured at fair value with
gains or losses included in current earnings in noninterest
expense on the Consolidated Statements of Income.
The following table summarizes FHN’s derivatives
associated with interest rate risk management activities as
of December 31, 2024 and 2023.
Table 8.21.2
DERIVATIVES ASSOCIATED WITH INTEREST RATE RISK MANAGEMENT
December 31, 2024
(Dollars in millions)
Notional
Assets
Liabilities
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer interest rate contracts
$
8,301
$
10
$
372
Offsetting upstream interest rate contracts
8,301
369
11
December 31, 2023
(Dollars in millions)
Notional
Assets
Liabilities
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer interest rate contracts
$
8,375
$
21
$
392
Offsetting upstream interest rate contracts
8,375
389
22
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 21—DERIVATIVES
186
2024 FORM 10-K ANNUAL REPORT
The following table summarizes gains (losses) on FHN’s derivatives associated with interest rate risk management activities for
the years ended December 31, 2024, 2023, and 2022.
Table 8.21.3
DERIVATIVE GAINS (LOSSES) ASSOCIATED WITH INTEREST RATE RISK MANAGEMENT
Year Ended December 31,
2024
2023
2022
(Dollars in millions)
Gains (Losses)
Gains (Losses)
Gains (Losses)
Customer Interest Rate Contracts Hedging
Hedging Instruments and Hedged Items:
Customer interest rate contracts (a)
$
10
$
195
$
(744)
Offsetting upstream interest rate contracts (a)
(10)
(195)
744
(a) Gains (losses) included in other expense within the Consolidated Statements of Income.
Cash Flow Hedges
Prior to 2021, FHN entered into pay floating, receive fixed
interest rate swaps designed to manage its exposure to
the variability in cash flows related to interest payments
on debt instruments. The debt instruments primarily
consist of held-to-maturity commercial loans that have
variable interest payments that historically were based on
1-month LIBOR. In second quarter 2023, the remaining
hedge was revised to reference 1-month Term SOFR after
the cessation of LIBOR-based cash flows. This hedge
matured in first quarter 2024. In conjunction with the IBKC
merger, FHN acquired interest rate contracts (floors and
collars) which were re-designated as cash flow hedges.
The debt instruments associated with these hedges also
primarily consisted of held-to-maturity commercial loans
that had variable interest payments that were based on 1-
month LIBOR. The last hedge acquired in conjunction with
the IBKC merger matured in second quarter 2023.
In 2022, FHN entered into interest rate contracts (floors
and swaps) which have been designated as cash flow
hedges. These hedges reference 1-month Term SOFR and
FHN made certain elections under ASU 2020-04 to
facilitate qualification for hedge accounting during the
time that hedged items transitioned away from 1-month
LIBOR.
In a cash flow hedge, the entire change in the fair value of
the interest rate derivatives included in the assessment of
hedge effectiveness is initially recorded in OCI and is
subsequently reclassified from OCI to current period
earnings (interest income or interest expense) in the same
period that the hedged item affects earnings.
The following tables summarize FHN’s derivative activities
associated with cash flow hedges as of December 31, 2024
and 2023.
Table 8.21.4
DERIVATIVES ASSOCIATED WITH CASH FLOW HEDGES
December 31, 2024
(Dollars in millions)
Notional
Assets
Liabilities
Cash Flow Hedges
Hedging Instruments:
Interest rate contracts
$
5,000
$
—
$
67
Hedged Items:
Variability in cash flows related to debt instruments (primarily loans)
N/A
$
5,000
N/A
December 31, 2023
(Dollars in millions)
Notional
Assets
Liabilities
Cash Flow Hedges
Hedging Instruments:
Interest rate contracts
$
5,200 $
—
$
32
Hedged Items:
Variability in cash flows related to debt instruments (primarily loans)
N/A
$
5,200
N/A
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 21—DERIVATIVES
187
2024 FORM 10-K ANNUAL REPORT
The following table summarizes gains (losses) on FHN’s derivatives associated with cash flow hedges for the years ended
December 31, 2024, 2023, and 2022.
Table 8.21.5
DERIVATIVE GAINS (LOSSES) ASSOCIATED WITH CASH FLOW HEDGES
Year Ended December 31,
2024
2023
2022
(Dollars in millions)
Gains (Losses)
Gains (Losses)
Gains (Losses)
Cash Flow Hedges
Hedging Instruments:
Interest rate contracts (a)
$
(19) $
45
$
195
Gain (loss) recognized in other comprehensive income (loss)
49
52
15
Gain (loss) reclassified from AOCI into interest income
(14)
47
(129)
(a) Approximately $21 million of pre-tax losses are expected to be reclassified into earnings in the next twelve months.
Other Derivatives
FHN has mortgage banking operations that include the
origination and sale of loans into the secondary market. As
part of the origination of loans, FHN enters into interest
rate lock commitments with borrowers. Additionally, FHN
enters into forward sales contracts with buyers for
delivery of loans at a future date. Both of these contracts
qualify as freestanding derivatives and are recognized at
fair value through earnings. The notional and fair values of
these contracts are presented in the table below.
Table 8.21.6
DERIVATIVES ASSOCIATED WITH MORTGAGE BANKING HEDGES
December 31, 2024
(Dollars in millions)
Notional
Assets
Liabilities
Mortgage Banking Hedges
Option contracts written
$
51
$
—
$
—
Forward contracts written
100
1
—
December 31, 2023
(Dollars in millions)
Notional
Assets
Liabilities
Mortgage Banking Hedges
Option contracts written
$
55
$
1
$
—
Forward contracts written
93
—
1
The following table summarizes gains (losses) on FHN's derivatives associated with mortgage banking activities for the years
ended December 31, 2024 and 2023.
Table 8.21.7
DERIVATIVE GAINS (LOSSES) ASSOCIATED WITH MORTGAGE BANKING HEDGES
Year Ended December 31,
2024
2023
2022
(Dollars in millions)
Gains (Losses)
Gains (Losses)
Gains (Losses)
Mortgage Banking Hedges
Option contracts written
$
1 $
— $
3
Forward contracts written
(2)
1
32
In conjunction with pre-2020 sales of Visa Class B shares,
FHN entered into derivative transactions whereby FHN
will make or receive cash payments whenever the
conversion ratio of the Visa Class B shares into Visa Class A
shares is adjusted. As of December 31, 2024 and 2023, the
derivative liabilities associated with the sales of Visa Class
B shares were $15 million and $23 million, respectively.
For each of the years ended December 31, 2024 and 2023,
FHN recognized $15 million in derivative valuation
adjustments related to prior sales of Visa Class B shares.
See Note 23 - Fair Value of Assets and Liabilities for
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 21—DERIVATIVES
188
2024 FORM 10-K ANNUAL REPORT
discussion of the valuation inputs and processes for these
Visa-related derivatives.
FHN utilizes cross-currency swaps and cross-currency
interest rate swaps to economically hedge its exposure to
foreign currency risk and interest rate risk associated with
non-U.S. dollar denominated loans. As of December 31,
2024 and 2023, these loans were valued at $16 million
and $17 million, respectively. The balance sheet amount
and the gains/losses associated with these derivatives
were not significant.
Related to its loan participation/syndication activities, FHN
enters into risk participation agreements, under which it
assumes exposure for, or receives indemnification for,
borrowers’ performance on underlying interest rate
derivative contracts. FHN’s counterparties in these
contracts are other lending institutions involved in the
loan participation/syndication arrangements for which the
underlying interest rate derivative contract is intended to
hedge interest rate risk for the borrower. FHN will make
(other institution is the lead bank) or receive (FHN is the
lead bank) payments for risk participations if the borrower
defaults on its obligation to perform under the terms of its
interest rate derivative agreement with the lead bank in
the participation.
As of December 31, 2024 and 2023, the notional values of
FHN’s risk participations were $268 million and $351
million of derivative assets and $916 million and $874
million of derivative liabilities, respectively. The notional
value for risk participation/syndication agreements is
consistent with the percentage of participation in the
lending arrangement. FHN’s maximum exposure or
benefit in the risk participation agreements is contingent
on the fair value of the underlying interest rate derivative
contracts for which the borrower is in a liability position at
the time of default. FHN monitors the credit risk
associated with the borrowers to which the risk
participations relate through the same credit risk
assessment process utilized for establishing credit loss
estimates for its loan portfolio. These credit risk estimates
are included in the determination of fair value for the risk
participations. Assuming all underlying third-party
customers referenced in the swap contracts defaulted at
December 31, 2024 and 2023, the exposure from these
agreements would not be material based on the fair value
of the underlying swaps.
Master Netting and Similar Agreements
FHN uses master netting agreements, mutual margining
agreements and collateral posting requirements to
minimize credit risk on derivative contracts. Master
netting and similar agreements are used when
counterparties have multiple derivatives contracts that
allow for a “right of setoff,” meaning that a counterparty
may net offsetting positions and collateral with the same
counterparty under the contract to determine a net
receivable or payable. The following discussion provides
an overview of these arrangements which may vary due to
the derivative type and market in which a derivative
transaction is executed.
Interest rate derivatives are subject to agreements
consistent with standard agreement forms of the ISDA.
Currently, all interest rate derivative contracts are entered
into as over-the-counter transactions and collateral
posting requirements are based on the net asset or
liability position with each respective counterparty. For
contracts that require central clearing, novation to a
counterparty with access to a clearinghouse occurs and
initial margin is posted.
Cash margin received (posted) that is considered
settlements for the derivative contracts is included in the
respective derivative asset (liability) value. Cash margin
that is considered collateral received (posted) for interest
rate derivatives is recognized as a liability (asset) on FHN’s
Consolidated Balance Sheets.
Interest rate derivatives with clients that are smaller
financial institutions typically require posting of collateral
by the counterparty to FHN. This collateral is subject to a
threshold with daily adjustments based upon changes in
the level or fair value of the derivative position. Positions
and related collateral can be netted in the event of
default. Collateral pledged by a counterparty is typically
cash or securities. The securities pledged as collateral are
not recognized within FHN’s Consolidated Balance Sheets.
Interest rate derivatives associated with lending
arrangements share the collateral with the related loan(s).
The derivative and loan positions may be netted in the
event of default. For disclosure purposes, the entire
collateral amount is allocated to the loan.
Interest rate derivatives with larger financial institutions
typically contain provisions whereby the collateral posting
thresholds under the agreements adjust based on the
credit ratings of both counterparties. If the credit rating of
FHN and/or First Horizon Bank is lowered, FHN could be
required to post additional collateral with the
counterparties. Conversely, if the credit rating of FHN and/
or First Horizon Bank is increased, FHN could have
collateral released and be required to post less collateral
in the future. Also, if a counterparty’s credit ratings were
to decrease, FHN and/or First Horizon Bank could require
the posting of additional collateral; whereas if a
counterparty’s credit ratings were to increase, the
counterparty could require the release of excess
collateral. Collateral for these arrangements is adjusted
daily based on changes in the net fair value position with
each counterparty.
The net fair value, determined by individual counterparty,
of all derivative instruments with adjustable collateral
posting thresholds was $5 million of assets and $187
million of liabilities on December 31, 2024, and $12 million
of assets and $188 million of liabilities on December 31,
2023. As of December 31, 2024 and 2023, FHN had
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 21—DERIVATIVES
189
2024 FORM 10-K ANNUAL REPORT
received collateral of $82 million and $95 million and
posted collateral of $96 million and $83 million,
respectively, in the normal course of business related to
these agreements.
Certain agreements also contain accelerated termination
provisions, inclusive of the right of offset, if a
counterparty’s credit rating falls below a specified level. If
a counterparty’s debt rating (including FHN’s and First
Horizon Bank's) were to fall below these minimums, these
provisions would be triggered, and the counterparties
could terminate the agreements and require immediate
settlement of all derivative contracts under the
agreements. The net fair value, determined by individual
counterparty, of all interest rate derivative instruments
with credit-risk-related contingent accelerated
termination provisions was $6 million of assets and $187
million of liabilities on December 31, 2024, and $12 million
of assets and $188 million of liabilities on December 31,
2023. As of December 31, 2024 and 2023, FHN had
received collateral of $82 million and $95 million and
posted collateral of $96 million and $83 million,
respectively, in the normal course of business related to
these contracts.
FHNF buys and sells various types of securities for its
clients. When these securities settle on a delayed basis,
they are considered forward contracts. For futures and
options, FHN transacts through a third party, and the
transactions are subject to margin and collateral
maintenance requirements. In the event of default, open
positions can be offset along with the associated
collateral.
For this disclosure, FHN considers the impact of master
netting and other similar agreements which allow FHN to
settle all contracts with a single counterparty on a net
basis and to offset the net derivative asset or liability
position with the related securities and cash collateral.
The application of the collateral cannot reduce the net
derivative asset or liability position below zero, and
therefore any excess collateral is not reflected in the
following tables.
The following table provides details of derivative assets
and collateral received as presented on the Consolidated
Balance Sheets as of December 31, 2024 and 2023.
Table 8.21.8
DERIVATIVE ASSETS & COLLATERAL RECEIVED
Gross amounts not offset in
the Balance Sheets
(Dollars in millions)
Gross amounts
of recognized
assets
Gross amounts
offset in the
Balance Sheets
Net amounts of
assets presented
in the Balance
Sheets (a)
Derivative
liabilities
available for
offset
Collateral
received
Net amount
Derivative assets:
December 31, 2024
Interest rate derivative
contracts
$
522 $
— $
522 $
(73) $
(436) $
13
Forward contracts
8
—
8
(3)
(4)
1
$
530 $
— $
530 $
(76) $
(440) $
14
December 31, 2023
Interest rate derivative
contracts
$
567 $
— $
567 $
(75) $
(486) $
6
Forward contracts
9
—
9
(4)
(3)
2
$
576 $
— $
576 $
(79) $
(489) $
8
(a) Included in other assets on the Consolidated Balance Sheets. As of December 31, 2024 and 2023, $2 million and $1 million, respectively, of derivative
assets have been excluded from these tables because they are generally not subject to master netting or similar agreements.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 21—DERIVATIVES
190
2024 FORM 10-K ANNUAL REPORT
The following table provides details of derivative liabilities and collateral pledged as presented on the Consolidated Balance
Sheets as of December 31, 2024 and 2023.
Table 8.21.9
DERIVATIVE LIABILITIES & COLLATERAL PLEDGED
Gross amounts not offset
in the Balance Sheets
(Dollars in millions)
Gross amounts
of recognized
liabilities
Gross
amounts
offset in the
Balance Sheets
Net amounts of
liabilities presented
in the Balance
Sheets (a)
Derivative
assets
available for
offset
Collateral
pledged
Net amount
Derivative liabilities:
December 31, 2024
Interest rate derivative
contracts
$
649
$
— $
649 $
(73) $
(168) $
408
Forward contracts
6
—
6
(3)
(1)
2
$
655
$
— $
655 $
(76) $
(169) $
410
December 31, 2023
Interest rate derivative
contracts
$
666
$
— $
666 $
(75) $
(164) $
427
Forward contracts
9
—
9
(4)
(5)
—
$
675
$
— $
675 $
(79) $
(169) $
427
(a) Included in other liabilities on the Consolidated Balance Sheets. As of December 31, 2024 and 2023, $16 million and $24 million, respectively, of
derivative liabilities (primarily Visa-related derivatives) have been excluded from these tables because they are generally not subject to master netting or
similar agreements.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 21—DERIVATIVES
191
2024 FORM 10-K ANNUAL REPORT
Note 22—Master Netting and Similar Agreements – Repurchase, Reverse
Repurchase, and Securities Borrowing Transactions
For repurchase, reverse repurchase and securities
borrowing transactions, FHN and each counterparty have
the ability to offset all open positions and related
collateral in the event of default. Due to the nature of
these transactions, the value of the collateral for each
transaction approximates the value of the corresponding
receivable or payable. For repurchase agreements through
FHN’s fixed income business (securities purchased under
agreements to resell and securities sold under agreements
to repurchase), transactions are collateralized by
securities and/or government guaranteed loans which are
delivered on the settlement date and are maintained
throughout the term of the transaction. For FHN’s
repurchase agreements through banking activities
(securities sold under agreements to repurchase),
securities are typically pledged at settlement and not
released until maturity. For asset positions, the collateral
is not included on FHN’s Consolidated Balance Sheets. For
liability positions, securities collateral pledged by FHN is
generally represented within FHN’s trading or available-
for-sale securities portfolios.
For this disclosure, FHN considers the impact of master
netting and other similar agreements that allow FHN to
settle all contracts with a single counterparty on a net
basis and to offset the net asset or liability position with
the related securities collateral. The application of the
collateral cannot reduce the net asset or liability position
below zero, and therefore any excess collateral is not
reflected in the tables below.
Securities purchased under agreements to resell is
included in federal funds sold and securities purchased
under agreements to resell in the Consolidated Balance
Sheets. Securities sold under agreements to repurchase is
included in short-term borrowings.
The following table provides details of securities
purchased under agreements to resell and collateral
pledged by counterparties as of December 31, 2024 and
2023.
Table 8.22.1
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Gross amounts not offset in the
Balance Sheets
(Dollars in millions)
Gross amounts
of recognized
assets
Gross amounts
offset in the
Balance Sheets
Net amounts of
assets presented
in the Balance Sheets
Offsetting
securities sold
under agreements
to repurchase
Securities collateral
(not recognized on
FHN’s Balance
Sheets)
Net amount
Securities purchased
under agreements to
resell:
2024
$
572
$
—
$
572
$
—
$
(567) $
5
2023
519
—
519
—
(516)
3
The following table provides details of securities sold under agreements to repurchase and collateral pledged by FHN as of
December 31, 2024 and 2023.
Table 8.22.2
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Gross amounts not offset in the
Balance Sheets
(Dollars in millions)
Gross amounts
of recognized
liabilities
Gross amounts
offset in the
Balance Sheets
Net amounts of
liabilities presented
in the Balance
Sheets
Offsetting securities
purchased under
agreements to resell
Securities/
government
guaranteed loans
collateral
Net amount
Securities sold under
agreements to
repurchase:
2024
$
2,096
$
—
$
2,096
$
—
$
(2,096) $
—
2023
1,921
—
1,921
—
(1,921)
—
Due to the short duration of securities sold under agreements to repurchase and the nature of collateral involved, the risks
associated with these transactions are considered minimal.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 22—MASTER NETTING & SIMILAR AGREEMENTS
192
2024 FORM 10-K ANNUAL REPORT
The following table provides details, by collateral type, of the remaining contractual maturity of securities sold under
agreements to repurchase as of December 31, 2024 and 2023.
Table 8.22.3
MATURITIES OF SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
December 31, 2024
(Dollars in millions)
Overnight and
Continuous
Up to 30 Days
Total
Securities sold under agreements to repurchase:
Government agency issued MBS
$
1,535
$
—
$
1,535
Government agency issued CMO
561
—
561
Total securities sold under agreements to repurchase
$
2,096
$
—
$
2,096
December 31, 2023
(Dollars in millions)
Overnight and
Continuous
Up to 30 Days
Total
Securities sold under agreements to repurchase:
Government agency issued MBS
$
1,717
$
—
$
1,717
Government agency issued CMO
161
—
161
Other U.S. government agencies
43
—
43
Total securities sold under agreements to repurchase
$
1,921
$
—
$
1,921
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 22—MASTER NETTING & SIMILAR AGREEMENTS
193
2024 FORM 10-K ANNUAL REPORT
Note 23—Fair Value of Assets and Liabilities
FHN groups its assets and liabilities measured at fair value
in three levels, based on the markets in which the assets
and liabilities are traded and the reliability of the
assumptions used to determine fair value. This hierarchy
requires FHN to maximize the use of observable market
data, when available, and to minimize the use of
unobservable inputs when determining fair value. Each
fair value measurement is placed into the proper level
based on the lowest level of significant input. These levels
are:
• Level 1—Valuation is based upon quoted prices for
identical instruments traded in active markets.
• Level 2—Valuation is based upon quoted prices for
similar instruments in active markets, quoted prices
for identical or similar instruments in markets that are
not active, and model-based valuation techniques for
which all significant assumptions are observable in
the market.
• Level 3—Valuation is generated from model-based
techniques that use significant assumptions not
observable in the market. These unobservable
assumptions reflect management’s estimates of
assumptions that market participants would use in
pricing the asset or liability. Valuation techniques
include the use of option pricing models, discounted
cash flow models, and similar techniques.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 23—FAIR VALUE OF ASSETS AND LIABILITIES
194
2024 FORM 10-K ANNUAL REPORT
Recurring Fair Value Measurements
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of
December 31, 2024 and 2023.
Table 8.23.1
BALANCES OF ASSETS & LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
December 31, 2024
(Dollars in millions)
Level 1
Level 2
Level 3
Total
Trading securities:
U.S. treasuries
$
—
$
3
$
—
$
3
Government agency issued MBS
—
98
—
98
Government agency issued CMO
—
180
—
180
Other U.S. government agencies
—
252
—
252
States and municipalities
—
64
—
64
Corporate and other debt
—
767
—
767
SBA interest-only strips
—
—
23
23
Total trading securities
—
1,364
23
1,387
Loans held for sale (elected fair value)
—
69
16
85
Securities available for sale:
Government agency issued MBS
—
3,702
—
3,702
Government agency issued CMO
—
2,767
—
2,767
Other U.S. government agencies
—
1,073
—
1,073
States and municipalities
—
354
—
354
Total securities available for sale
—
7,896
—
7,896
Other assets:
Deferred compensation mutual funds
111
—
—
111
Equity, mutual funds, and other
35
—
—
35
Derivatives, forwards and futures
8
—
—
8
Derivatives, interest rate contracts
—
522
—
522
Derivatives, other
—
1
—
1
Total other assets
154
523
—
677
Total assets
$
154
$
9,852
$
39
$
10,045
Trading liabilities:
U.S. treasuries
$
—
$
440
$
—
$
440
Other U.S. government agencies
—
7
—
7
Corporate and other debt
—
103
—
103
Total trading liabilities
—
550
—
550
Other liabilities:
Derivatives, forwards and futures
6
—
—
6
Derivatives, interest rate contracts
—
649
—
649
Derivatives, other
—
1
15
16
Total other liabilities
6
650
15
671
Total liabilities
$
6
$
1,200
$
15
$
1,221
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 23—FAIR VALUE OF ASSETS AND LIABILITIES
195
2024 FORM 10-K ANNUAL REPORT
December 31, 2023
(Dollars in millions)
Level 1
Level 2
Level 3
Total
Trading securities:
U.S. treasuries
$
—
$
3
$
—
$
3
Government agency issued MBS
—
114
—
114
Government agency issued CMO
—
336
—
336
Other U.S. government agencies
—
152
—
152
States and municipalities
—
17
—
17
Corporate and other debt
—
777
—
777
SBA interest-only strips
—
—
13
13
Total trading securities
—
1,399
13
1,412
Loans held for sale (elected fair value)
—
42
26
68
Securities available for sale:
Government agency issued MBS
—
4,484
—
4,484
Government agency issued CMO
—
2,146
—
2,146
Other U.S. government agencies
—
1,172
—
1,172
States and municipalities
—
589
—
589
Total securities available for sale
—
8,391
—
8,391
Other assets:
Deferred compensation mutual funds
102
—
—
102
Equity, mutual funds, and other
34
—
—
34
Derivatives, forwards and futures
9
—
—
9
Derivatives, interest rate contracts
—
568
—
568
Total other assets
145
568
—
713
Total assets
$
145
$
10,400
$
39
$
10,584
Trading liabilities:
U.S. treasuries
$
—
$
426
$
—
$
426
Government agency issued MBS
—
1
—
1
Corporate and other debt
—
82
—
82
Total trading liabilities
—
509
—
509
Other liabilities:
Derivatives, forwards and futures
10
—
—
10
Derivatives, interest rate contracts
—
666
—
666
Derivatives, other
—
—
23
23
Total other liabilities
10
666
23
699
Total liabilities
$
10
$
1,175
$
23
$
1,208
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 23—FAIR VALUE OF ASSETS AND LIABILITIES
196
2024 FORM 10-K ANNUAL REPORT
Changes in Recurring Level 3 Fair Value Measurements
The changes in Level 3 assets and liabilities measured at fair value for the years ended December 31, 2024, 2023 and 2022 on
a recurring basis are summarized as follows.
Table 8.23.2
CHANGES IN LEVEL 3 ASSETS & LIABILITIES MEASURED AT FAIR VALUE
Year Ended December 31, 2024
(Dollars in millions)
SBA interest-
only strips
Loans held
for sale
Net
derivative
liabilities
Balance on January 1, 2024
$
13
$
26
$
(23)
Total net gains (losses) included in net income
(5)
1
(15)
Purchases
—
2
—
Sales
(17)
(13)
—
Settlements
—
(2)
23
Net transfers into (out of) Level 3
32 (b)
2
—
Balance on December 31, 2024
$
23
$
16
$
(15)
Net unrealized gains (losses) included in net income
$
(2) (c)
$
1 (a) $
(15) (d)
Year Ended December 31, 2023
(Dollars in millions)
SBA interest-
only strips
Loans held
for sale
Net
derivative
liabilities
Balance on January 1, 2023
$
25
$
22
$
(27)
Total net gains (losses) included in net income
(12)
4
(15)
Purchases
—
3
—
Sales
(54)
(3)
—
Settlements
—
(2)
19
Net transfers into (out of) Level 3
54 (b)
2
—
Balance on December 31, 2023
$
13
$
26
$
(23)
Net unrealized gains (losses) included in net income
$
(1) (c)
$
4 (a)
$
(15) (d)
Year Ended December 31, 2022
(Dollars in millions)
SBA interest-
only strips
Loans held
for sale
Net
derivative
liabilities
Balance on January 1, 2022
$
38
$
28
$
(23)
Total net gains (losses) included in net income
(7)
—
(23)
Purchases
—
2
—
Sales
(76)
(12)
—
Settlements
—
(2)
19
Repayments
—
(1)
—
Net transfers into (out of) Level 3
70 (b)
7
—
Balance on December 31, 2022
$
25
$
22
$
(27)
Net unrealized gains (losses) included in net income
$
(2) (c)
$
— (a)
$
(23) (d)
(a) Primarily included in mortgage banking income on the Consolidated Statements of Income.
(b) Transfers into Level 3 SBA interest-only strips reflect transfers out of SBA loans held for sale, which are Level 2 assets measured on a nonrecurring basis.
Refer to Table 8.23.3.
(c) Primarily included in fixed income on the Consolidated Statements of Income.
(d) Included in other expense on the Consolidated Statements of Income.
There were no net unrealized gains (losses) for Level 3 assets and liabilities included in other comprehensive income as of
December 31, 2024, 2023 and 2022.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
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197
2024 FORM 10-K ANNUAL REPORT
Nonrecurring Fair Value Measurements
From time to time, FHN may be required to measure
certain other financial assets at fair value on a
nonrecurring basis in accordance with GAAP. These
adjustments to fair value usually result from the
application of lower of cost or market ("LOCOM")
accounting or write-downs of individual assets. For assets
measured at fair value on a nonrecurring basis which were
still held on the Consolidated Balance Sheets at
December 31, 2024, 2023 and 2022, respectively, the
following table provides the level of valuation
assumptions used to determine each adjustment and the
related carrying value.
Table 8.23.3
LEVEL OF VALUATION ASSUMPTIONS FOR ASSETS
MEASURED AT FAIR VALUE ON A NONRECURRING BASIS
Carrying value at December 31, 2024
Year Ended December 31, 2024
(Dollars in millions)
Level 1
Level 2
Level 3
Total
Net gains (losses)
Loans held for sale—SBAs and USDA
$
—
$
438
$
—
$
438
$
(1)
Loans and leases (a)
—
—
344
344
(73)
OREO (b)
—
—
3
3
—
$
(74)
Carrying value at December 31, 2023
Year Ended December 31, 2023
(Dollars in millions)
Level 1
Level 2
Level 3
Total
Net gains (losses)
Loans held for sale—SBAs and USDA
$
—
$
406
$
—
$
406
$
(3)
Loans and leases (a)
—
—
245
245
(42)
OREO (b)
—
—
4
4
—
Other assets (c)
—
—
90
90
(7)
$
(52)
Carrying value at December 31, 2022
Year Ended December 31, 2022
(Dollars in millions)
Level 1
Level 2
Level 3
Total
Net gains (losses)
Loans held for sale—SBAs and USDA
$
—
$
506
$
—
$
506
$
(3)
Loans and leases (a)
—
—
135
135
(19)
OREO (b)
—
—
3
3
—
Other assets (c)
—
—
91
91
(10)
$
(32)
(a) Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell.
Write-downs on these loans are recognized as part of provision for credit losses.
(b) Represents the fair value and related losses of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance
excludes OREO related to government-insured mortgages.
(c) Represents tax credit investments accounted for under the equity method.
Lease asset impairments recognized represent the
reduction in value of the right-of-use assets associated
with leases that are being exited in advance of the
contractual lease expiration.
Impairments are measured using a discounted cash flow
methodology, which is considered a Level 3 valuation.
Impairments of long-lived tangible assets reflect locations
where the associated land and building are either owned
or leased. The fair values of owned sites were determined
using estimated sales prices from appraisals and broker
opinions less estimated costs to sell with adjustments
upon final disposition. The fair values of owned assets in
leased sites (e.g., leasehold improvements) were
determined using a discounted cash flow approach, based
on the revised estimated useful lives of the related assets.
Both measurement methodologies are considered Level 3
valuations. Impairment adjustments recognized upon
disposition of a location are considered Level 2 valuations.
Fixed asset and leased asset impairments were immaterial
for the years ended December 31, 2024, 2023, and 2022.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
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198
2024 FORM 10-K ANNUAL REPORT
Level 3 Measurements
The following table provides information regarding the unobservable inputs utilized in determining the fair value of Level 3
recurring and nonrecurring measurements as of December 31, 2024 and 2023.
Table 8.23.4
UNOBSERVABLE INPUTS USED IN LEVEL 3 FAIR VALUE MEASUREMENTS
(Dollars in millions)
Values Utilized
Level 3 Class
Fair Value at
December 31,
2024
Valuation Techniques
Unobservable Input
Range
Weighted
Average (c)
Trading securities - SBA
interest-only strips
$
23
Discounted cash flow
Constant prepayment
rate
16% - 30%
17%
Bond equivalent yield
3% - 18%
17%
Loans held for sale -
residential real estate
$
16
Discounted cash flow
Prepayment speeds -
First mortgage
2% - 6%
3%
Foreclosure losses
63% - 71%
64%
Loss severity trends -
First mortgage
0.0% - 0.2%
of UPB
0.1%
Derivative liabilities,
other
$
15
Discounted cash flow
Visa covered litigation
resolution amount
$3.1 billion -
$4.1 billion
$3.8 billion
Probability of
resolution scenarios
10% - 25%
18%
Time until resolution
6 - 36
months
23 months
Loans and leases (a)
$
344
Appraisals from
comparable properties
Marketability
adjustments for
specific properties
0% - 25% of
appraisal
NM
Other collateral
valuations
Borrowing base
certificates liquidation
adjustment
25% - 50%
of gross
value
NM
Financial Statements
liquidation adjustment
50% - 100%
of reported
value
NM
Auction appraisals
marketability
adjustment
0% - 10% of
reported
value
NM
OREO (b)
$
3
Appraisals from
comparable properties
Adjustment for value
changes since
appraisal
0% - 10% of
appraisal
NM
NM - Not meaningful
(a) Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell.
Write-downs on these loans are recognized as part of provision for credit losses.
(b) Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related
to government-insured mortgages.
(c) Weighted averages are determined by the relative fair value of the instruments or the relative contribution to an instrument's fair value.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
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199
2024 FORM 10-K ANNUAL REPORT
(Dollars in millions)
Values Utilized
Level 3 Class
Fair Value at
December 31,
2023
Valuation Techniques
Unobservable Input
Range
Weighted
Average (c)
Trading securities - SBA
interest-only strips
$
13
Discounted cash flow
Constant prepayment
rate
14% - 15%
14%
Bond equivalent yield
18% - 21%
18%
Loans held for sale -
residential real estate
$
26
Discounted cash flow
Prepayment speeds -
First mortgage
2% - 7%
3%
Foreclosure losses
64% - 68%
65%
Loss severity trends -
First mortgage
0.0% - 2.8%
of UPB
1.6%
Derivative liabilities,
other
$
23
Discounted cash flow
Visa covered litigation
resolution amount
$5.7 billion -
$6.7 billion
$6.3 billion
Probability of
resolution scenarios
10% - 25%
18%
Time until resolution
6 - 36
months
24 months
Loans and leases (a)
$
245
Appraisals from
comparable properties
Marketability
adjustments for
specific properties
0% - 25% of
appraisal
NM
Other collateral
valuations
Borrowing base
certificates liquidation
adjustment
25% - 50%
of gross
value
NM
Financial Statements
liquidation adjustment
50% - 100%
of reported
value
NM
Auction appraisals
marketability
adjustment
0% - 10% of
reported
value
NM
OREO (b)
$
4
Appraisals from
comparable properties
Adjustment for value
changes since
appraisal
0% - 10% of
appraisal
NM
Other assets (d)
$
90
Discounted cash flow
Adjustments to
current sales yields for
specific properties
0% - 15%
adjustment
to yield
NM
Appraisals from
comparable properties
Marketability
adjustments for
specific properties
0% - 25% of
appraisal
NM
NM - Not meaningful
(a) Represents carrying value of loans for which adjustments are required to be based on the appraised value of the collateral less estimated costs to sell.
Write-downs on these loans are recognized as part of provision for credit losses.
(b) Represents the fair value of foreclosed properties that were measured subsequent to their initial classification as OREO. Balance excludes OREO related
to government-insured mortgages.
(c) Weighted averages are determined by the relative fair value of the instruments or the relative contribution to an instrument's fair value.
(d) Represents tax credit investments accounted for under the equity method.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 23—FAIR VALUE OF ASSETS AND LIABILITIES
200
2024 FORM 10-K ANNUAL REPORT
Trading Securities - SBA interest-only strips
Increases (decreases) in estimated prepayment rates and
bond equivalent yields negatively (positively) affect the
value of SBA interest-only strips. Management additionally
considers whether the loans underlying related SBA
interest-only strips are delinquent, in default or prepaying,
and adjusts the fair value down 20 - 100% depending on
the length of time in default.
Loans held for sale
Foreclosure losses and prepayment rates are significant
unobservable inputs used in the fair value measurement
of FHN’s residential real estate loans held for sale. Loss
severity trends are also assessed to evaluate the
reasonableness of fair value estimates resulting from
discounted cash flows methodologies as well as to
estimate fair value for newly repurchased loans and loans
that are near foreclosure. Significant increases (decreases)
in any of these inputs in isolation would result in
significantly lower (higher) fair value measurements. All
observable and unobservable inputs are re-assessed
quarterly.
Increases (decreases) in estimated prepayment rates and
bond equivalent yields negatively (positively) affect the
value of unguaranteed interests in SBA loans.
Unguaranteed interest in SBA loans held for sale are
carried at less than the outstanding balance due to credit
risk estimates. Credit risk adjustments may be reduced if
prepayment is likely, or as consistent payment history is
realized. Management also considers other factors such as
delinquency or default and adjusts the fair value
accordingly.
Derivative liabilities
In conjunction with pre-2020 sales of Visa Class B shares,
FHN and the purchasers entered into derivative
transactions whereby FHN will make, or receive, cash
payments whenever the conversion ratio of the Visa Class
B shares into Visa Class A shares is adjusted. FHN uses a
discounted cash flow methodology in order to estimate
the fair value of FHN’s derivative liabilities associated with
its prior sales of Visa Class B shares. The methodology
includes estimation of both the resolution amount for
Visa’s Covered Litigation matters as well as the length of
time until the resolution occurs. Significant increases
(decreases) in either of these inputs in isolation would
result in significantly higher (lower) fair value
measurements for the derivative liabilities. Additionally,
FHN performs a probability weighted multiple resolution
scenario to calculate the estimated fair value of these
derivative liabilities. Assignment of higher (lower)
probabilities to the larger potential resolution scenarios
would result in an increase (decrease) in the estimated fair
value of the derivative liabilities. Since this estimation
process requires application of judgment in developing
significant unobservable inputs used to determine the
possible outcomes and the probability weighting assigned
to each scenario, these derivatives have been classified
within Level 3 in fair value measurements disclosures.
Loans and leases and Other Real Estate Owned
Collateral-dependent loans and OREO are primarily valued
using appraisals based on sales of comparable properties
in the same or similar markets. Other collateral
(receivables, inventory, equipment, etc.) is valued through
borrowing base certificates, financial statements and/or
auction valuations. These valuations are discounted based
on the quality of reporting, knowledge of the
marketability/collectability of the collateral and historical
disposition rates.
Other assets – tax credit investments
Prior to 2024, the estimated fair value of tax credit
investments accounted for under the equity method was
generally determined in relation to the yield (i.e., future
tax credits to be received) an acquirer of these
investments expected in relation to the yields experienced
on current new issue and/or secondary market
transactions. Thus, as tax credits were recognized, the
future yield to a market participant was reduced, resulting
in consistent impairment of the individual investments.
Individual investments were reviewed for impairment
quarterly, which included the consideration of additional
marketability discounts related to specific investments
which typically included consideration of the underlying
property’s appraised value.
Fair Value Option
FHN previously elected the fair value option on a
prospective basis for substantially all types of mortgage
loans originated for sale purposes. FHN determined that
the election reduces certain timing differences and better
matches changes in the value of such loans with changes
in the value of derivatives and forward delivery
commitments used as economic hedges for these assets at
the time of election.
Repurchased loans relating to mortgage banking
operations conducted prior to the IBKC merger are
recognized within loans held for sale at fair value at the
time of repurchase, which includes consideration of the
credit status of the loans and the estimated liquidation
value. FHN has elected to continue recognition of these
loans at fair value in periods subsequent to reacquisition.
Due to the credit-distressed nature of the vast majority of
repurchased loans and the related loss severities
experienced upon repurchase, FHN believes that the fair
value election provides a more timely recognition of
changes in value for these loans that occur subsequent to
repurchase. Absent the fair value election, these loans
would be subject to valuation at the LOCOM value, which
would prevent subsequent values from exceeding the
initial fair value, determined at the time of repurchase,
but would require recognition of subsequent declines in
value. Thus, the fair value election provides for a more
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
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timely recognition of any potential future recoveries in
asset values while not affecting the requirement to
recognize subsequent declines in value.
The following table reflects the differences between the fair value carrying amount of residential real estate loans held for
sale measured at fair value in accordance with management’s election and the aggregate unpaid principal amount FHN is
contractually entitled to receive at maturity.
Table 8.23.5
DIFFERENCES BETWEEN FAIR VALUE CARRYING AMOUNTS AND CONTRACTUAL AMOUNTS OF RESIDENTIAL
REAL ESTATE LOANS REPORTED AT FAIR VALUE
December 31, 2024
(Dollars in millions)
Fair value
carrying
amount
Aggregate
unpaid
principal
Fair value carrying amount
less aggregate unpaid
principal
Residential real estate loans held for sale reported at fair value:
Total loans
$
85
$
89
$
(4)
Nonaccrual loans
3
5
(2)
December 31, 2023
(Dollars in millions)
Fair value
carrying
amount
Aggregate
unpaid
principal
Fair value carrying amount
less aggregate unpaid
principal
Residential real estate loans held for sale reported at fair value:
Total loans
$
68
$
73
$
(5)
Nonaccrual loans
2
5
(3)
Loans 90 days or more past due and still accruing
1
1
—
Assets and liabilities accounted for under the fair value election are initially measured at fair value with subsequent changes in
fair value recognized in earnings. Such changes in the fair value of assets and liabilities for which FHN elected the fair value
option are included in current period earnings with classification in the income statement line item reflected in the following
table.
Table 8.23.6
CHANGES IN FAIR VALUE RECOGNIZED IN NET INCOME
Year Ended December 31,
(Dollars in millions)
2024
2023
2022
Changes in fair value included in net income:
Mortgage banking noninterest income
Loans held for sale
$
1
$
1
$
(9)
For the years ended December 31, 2024, 2023 and 2022,
the amount for residential real estate loans held for sale
included an insignificant amount of gains in pre-tax
earnings that are attributable to changes in instrument-
specific credit risk. The portion of the fair value
adjustments related to credit risk was determined based
on estimated default rates and estimated loss severities.
Interest income on residential real estate loans held for
sale measured at fair value is calculated based on the note
rate of the loan and is recorded in the interest income
section of the Consolidated Statements of Income as
interest on loans held for sale.
Determination of Fair Value
Fair values are based on the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. The following describes the
assumptions and methodologies used to estimate the fair
value of financial instruments recorded at fair value in the
Consolidated Balance Sheets and for estimating the fair
value of financial instruments for which fair value is
disclosed.
Short-term financial assets
Federal funds sold, securities purchased under
agreements to resell, and interest-bearing deposits with
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other financial institutions and the Federal Reserve are
carried at historical cost. The carrying amount is a
reasonable estimate of fair value because of the relatively
short time between the origination of the instrument and
its expected realization.
Trading securities and trading liabilities
Trading securities and trading liabilities are recognized at
fair value through current earnings. Trading inventory held
for broker-dealer operations is included in trading
securities and trading liabilities. Broker-dealer long
positions are valued at bid price in the bid-ask spread.
Short positions are valued at the ask price. Inventory
positions are valued using observable inputs including
current market transactions, benchmark yields, credit
spreads, and consensus prepayment speeds. Trading loans
are valued using observable inputs including current
market transactions, swap rates, mortgage rates, and
consensus prepayment speeds.
Trading securities - SBA interest-only strips
Interest-only strips are valued at fair value based on an
income approach using an internal valuation model. The
internal valuation model includes assumptions regarding
projections of future cash flows, prepayment rates,
default rates and interest-only strip terms. These
securities bear the risk of loan prepayment or default that
may result in FHN not recovering all or a portion of its
recorded investment. When appropriate, valuations are
adjusted for various factors including default or
prepayment status of the underlying SBA loans. Because
of the inherent uncertainty of valuation, those estimated
values may be higher or lower than the values that would
have been used had a ready market for the securities
existed and may change in the near term.
Securities available for sale and held to maturity
Valuations of debt securities are performed using
observable inputs obtained from market transactions in
similar securities. Typical inputs include benchmark yields,
consensus prepayment speeds, and credit spreads. Trades
from similar securities and broker quotes are used to
support these valuations.
Loans held for sale
FHN determines the fair value of loans held for sale using
either current transaction prices or discounted cash flow
models. Fair values are determined using current
transaction prices and/or values on similar assets when
available, including committed bids for specific loans or
loan portfolios. Uncommitted bids may be adjusted based
on other available market information.
The fair value of residential real estate loans held for sale
is determined using a discounted cash flow model that
incorporates both observable and unobservable inputs.
Inputs in the discounted cash flow model include current
mortgage rates for similar products, estimated
prepayment rates, foreclosure losses, and various loan
performance measures (delinquency, LTV, credit score).
Adjustments for delinquency and other differences in loan
characteristics are typically reflected in the model’s
discount rates. Loss severity trends and the value of
underlying collateral are also considered in assessing the
appropriate fair value for severely delinquent loans and
loans in foreclosure. The valuation of HELOCs also
incorporates estimated cancellation rates for loans
expected to become delinquent.
Non-mortgage consumer loans held for sale are valued
using committed bids for specific loans or loan portfolios
or current market pricing for similar assets with
adjustments for differences in credit standing
(delinquency, historical default rates for similar loans),
yield, collateral values and prepayment rates. If pricing for
similar assets is not available, a discounted cash flow
methodology is utilized, which incorporates all of these
factors into an estimate of investor required yield for the
discount rate.
FHN utilizes quoted market prices of similar instruments
or broker and dealer quotations to value the SBA and
USDA guaranteed loans. FHN values SBA-unguaranteed
interests in loans held for sale based on individual loan
characteristics, such as industry type and pay history
which generally follows an income approach.
Furthermore, these valuations are adjusted for changes in
prepayment estimates and are reduced due to restrictions
on trading. The fair value of other non-residential real
estate loans held for sale is approximated by their carrying
values based on current transaction values.
Mortgage loans held for investment at fair value option
The fair value of mortgage loans held for investment at
fair value option is determined by a third party using a
discounted cash flow model using various assumptions
about future loan performance (constant prepayment
rate, constant default rate and loss severity trends) and
market discount rates.
Loans held for investment
The fair values of mortgage loans are estimated using an
exit price methodology that is based on present values
using the interest rate that would be charged for a similar
loan to a borrower with similar risk, weighted for varying
maturity dates and adjusted for a liquidity discount based
on the estimated time period to complete a sale
transaction with a market participant.
Other loans and leases are valued based on present values
using the interest rate that would be charged for a similar
instrument to a borrower with similar risk, applicable to
each category of instruments, and adjusted for a liquidity
discount based on the estimated time period to complete
a sale transaction with a market participant.
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For loans measured using the estimated fair value of
collateral less costs to sell, fair value is estimated using
appraisals of the collateral. Collateral values are
monitored and additional write-downs are recognized if it
is determined that the estimated collateral values have
declined further. Estimated costs to sell are based on
current amounts of disposal costs for similar assets.
Carrying value is considered to reflect fair value for these
loans.
Derivative assets and liabilities
The fair value for forwards and futures contracts is based
on current transactions involving identical securities.
Futures contracts are exchange-traded and thus have no
credit risk factor assigned as the risk of non-performance
is limited to the clearinghouse used.
Valuations of other derivatives (primarily interest rate
contracts) are based on inputs observed in active markets
for similar instruments. Typical inputs include benchmark
yields, option volatility and option skew. Centrally cleared
derivatives are discounted using SOFR as required by
clearinghouses. In measuring the fair value of these
derivative assets and liabilities, FHN has elected to
consider credit risk based on the net exposure to
individual counterparties. Credit risk is mitigated for these
instruments through the use of mutual margining and
master netting agreements as well as collateral posting
requirements. For derivative contracts with daily cash
margin requirements that are considered settlements, the
daily margin amount is netted within derivative assets or
liabilities. Any remaining credit risk related to interest rate
derivatives is considered in determining fair value through
evaluation of additional factors such as client loan grades
and debt ratings. Foreign currency related derivatives also
utilize observable exchange rates in the determination of
fair value. The determination of fair value for
FHN’s derivative liabilities associated with its prior sales of
Visa Class B shares are classified within Level 3 in the fair
value measurements disclosure as previously discussed in
the unobservable inputs discussion.
The fair value of risk participations is determined in
reference to the fair value of the related derivative
contract between the borrower and the lead bank in the
participation structure, which is determined consistent
with the valuation process discussed above. This value is
adjusted for the pro rata portion of the reference
derivative’s notional value and an assessment of credit
risk for the referenced borrower.
OREO
OREO primarily consists of properties that have been
acquired in satisfaction of debt. These properties are
carried at the lower of the outstanding loan amount or
estimated fair value less estimated costs to sell the real
estate. Estimated fair value is determined using appraised
values with subsequent adjustments for deterioration in
values that are not reflected in the most recent appraisal.
Other assets
For disclosure purposes, other assets consist of tax credit
investments, FRB and FHLB Stock, deferred compensation
mutual funds and equity investments (including other
mutual funds) with readily determinable fair values. For
periods prior to 2024, tax credit investments accounted
for under the equity method were written down to
estimated fair value quarterly based on the estimated
value of the associated tax credits which incorporated
estimates of required yield for hypothetical investors.
Subsequent to 2023, the fair value of tax credit
investments is estimated using recent transaction
information with adjustments for differences in individual
investments. Deferred compensation mutual funds are
recognized at fair value, which is based on quoted prices
in active markets. Investments in the stock of the Federal
Reserve Bank and Federal Home Loan Banks are
recognized at historical cost in the Consolidated Balance
Sheets which is considered to approximate fair value.
Investments in mutual funds are measured at the funds’
reported closing net asset values. Investments in equity
securities are valued using quoted market prices when
available.
Defined maturity deposits
The fair value of these deposits is estimated by
discounting future cash flows to their present value.
Future cash flows are discounted by using the current
market rates of similar instruments applicable to the
remaining maturity. For disclosure purposes, defined
maturity deposits include all time deposits.
Short-term financial liabilities
The fair value of federal funds purchased, securities sold
under agreements to repurchase, and other short-term
borrowings are approximated by the book value. The
carrying amount is a reasonable estimate of fair value
because of the relatively short time between the
origination of the instrument and its expected realization.
Loan commitments
Fair values of these commitments are based on fees
charged to enter into similar agreements taking into
account the remaining terms of the agreements and the
counterparties’ credit standing.
Other commitments
Fair values of these commitments are based on fees
charged to enter into similar agreements.
The following fair value estimates are determined as of a
specific point in time utilizing various assumptions and
estimates. The use of assumptions and various valuation
techniques, as well as the absence of secondary markets
for certain financial instruments, reduces the
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comparability of fair value disclosures between financial
institutions. Due to market illiquidity, the fair values for
loans and leases, loans held for sale, and term borrowings
as of December 31, 2024 and 2023 involve the use of
significant internally developed pricing assumptions for
certain components of these line items. The assumptions
and valuations utilized for this disclosure are considered
to reflect inputs that market participants would use in
transactions involving these instruments as of the
measurement date. The valuations of legacy assets,
particularly consumer loans and TRUPs loans within the
Corporate segment, are influenced by changes in
economic conditions since origination and risk perceptions
of the financial sector. These considerations affect the
estimate of a potential acquirer’s cost of capital and cash
flow volatility assumptions from these assets and the
resulting fair value measurements may depart significantly
from FHN’s internal estimates of the intrinsic value of
these assets.
Assets and liabilities that are not financial instruments —
such as premises and equipment, goodwill, other
intangible assets such as the value of long-term
relationships with deposit and trust clients, deferred
taxes, and certain other assets and other liabilities — have
not been included in the following table. Additionally, the
fair value measurements presented in the following table
are solely for financial instruments as of the measurement
date and do not consider the earnings potential of our
various business lines. Accordingly, the total of the fair
value amounts does not represent, and should not be
construed to represent, the underlying value of FHN.
The following table summarizes the book value and
estimated fair value of financial instruments recorded in
the Consolidated Balance Sheets as of December 31, 2024
and 2023.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 23—FAIR VALUE OF ASSETS AND LIABILITIES
205
2024 FORM 10-K ANNUAL REPORT
Table 8.23.7
BOOK VALUE AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
December 31, 2024
Book
Value
Fair Value
(Dollars in millions)
Level 1
Level 2
Level 3
Total
Assets:
Loans and leases, net of allowance for loan and lease losses
Commercial:
Commercial, financial and industrial
$
33,083
$
—
$
—
$
32,511
$
32,511
Commercial real estate
14,194
—
—
13,894
13,894
Consumer:
Consumer real estate
13,826
—
—
13,262
13,262
Credit card and other
647
—
—
657
657
Total loans and leases, net of allowance for loan and lease
losses
61,750
—
—
60,324
60,324
Short-term financial assets:
Interest-bearing deposits with banks
1,538
1,538
—
—
1,538
Federal funds sold
59
—
59
—
59
Securities purchased under agreements to resell
572
—
572
—
572
Total short-term financial assets
2,169
1,538
631
—
2,169
Trading securities (a)
1,387
—
1,364
23
1,387
Loans held for sale:
Mortgage loans (elected fair value) (a)
85
—
69
16
85
USDA & SBA loans - LOCOM
439
—
439
—
439
Mortgage loans - LOCOM
27
—
—
27
27
Total loans held for sale
551
—
508
43
551
Securities available for sale (a)
7,896
—
7,896
—
7,896
Securities held to maturity
1,270
—
1,083
—
1,083
Derivative assets (a)
531
8
523
—
531
Other assets:
Tax credit investments
706
—
—
692
692
Deferred compensation mutual funds
111
111
—
—
111
Equity, mutual funds, and other (b)
289
35
—
254
289
Total other assets
1,106
146
—
946
1,092
Total assets
$
76,660
$
1,692
$
12,005
$
61,336
$
75,033
Liabilities:
Defined maturity deposits
$
6,613
$
—
$
6,591
$
—
$
6,591
Trading liabilities (a)
550
—
550
—
550
Short-term financial liabilities:
Federal funds purchased
259
—
259
—
259
Securities sold under agreements to repurchase
2,096
—
2,096
—
2,096
Other short-term borrowings
1,045
—
1,045
—
1,045
Total short-term financial liabilities
3,400
—
3,400
—
3,400
Term borrowings:
Real estate investment trust-preferred
47
—
—
47
47
Term borrowings—new market tax credit investments
74
—
—
70
70
Secured borrowings
37
—
—
37
37
Junior subordinated debentures
151
—
—
142
142
Other long-term borrowings
886
—
866
—
866
Total term borrowings
1,195
—
866
296
1,162
Derivative liabilities (a)
671
6
650
15
671
Total liabilities
$
12,429
$
6
$
12,057
$
311
$
12,374
(a) Classes are detailed in the recurring measurement table.
(b) Level 1 primarily consists of mutual funds with readily determinable fair values. Level 3 includes restricted investments in FHLB-Cincinnati stock of $51
million and FRB stock of $203 million.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 23—FAIR VALUE OF ASSETS AND LIABILITIES
206
2024 FORM 10-K ANNUAL REPORT
December 31, 2023
Book
Value
Fair Value
(Dollars in millions)
Level 1
Level 2
Level 3
Total
Assets:
Loans and leases, net of allowance for loan and lease losses
Commercial:
Commercial, financial and industrial
$
32,294
$
—
$
—
$
31,673
$
31,673
Commercial real estate
14,044
—
—
13,831
13,831
Consumer:
Consumer real estate
13,417
—
—
12,605
12,605
Credit card and other
764
—
—
742
742
Total loans and leases, net of allowance for loan and lease
losses
60,519
—
—
58,851
58,851
Short-term financial assets:
Interest-bearing deposits with banks
1,328
1,328
—
—
1,328
Federal funds sold
200
—
200
—
200
Securities purchased under agreements to resell
519
—
519
—
519
Total short-term financial assets
2,047
1,328
719
—
2,047
Trading securities (a)
1,412
—
1,399
13
1,412
Loans held for sale:
Mortgage loans (elected fair value) (a)
68
—
42
26
68
USDA & SBA loans - LOCOM
406
—
407
—
407
Mortgage loans - LOCOM
28
—
—
28
28
Total loans held for sale
502
—
449
54
503
Securities available for sale (a)
8,391
—
8,391
—
8,391
Securities held to maturity
1,323
—
1,161
—
1,161
Derivative assets (a)
577
9
568
—
577
Other assets:
Tax credit investments
665
—
—
653
653
Deferred compensation mutual funds
102
102
—
—
102
Equity, mutual funds, and other (b)
261
34
—
227
261
Total other assets
1,028
136
—
880
1,016
Total assets
$
75,799
$
1,473
$
12,687
$
59,798
$
73,958
Liabilities:
Defined maturity deposits
$
6,804
$
—
$
6,851
$
—
$
6,851
Trading liabilities (a)
509
—
509
—
509
Short-term financial liabilities:
Federal funds purchased
302
—
302
—
302
Securities sold under agreements to repurchase
1,921
—
1,921
—
1,921
Other short-term borrowings
326
—
326
—
326
Total short-term financial liabilities
2,549
—
2,549
—
2,549
Term borrowings:
Real estate investment trust-preferred
47
—
—
47
47
Term borrowings—new market tax credit investments
65
—
—
60
60
Secured borrowings
3
—
—
3
3
Junior subordinated debentures
150
—
—
150
150
Other long-term borrowings
885
—
824
—
824
Total term borrowings
1,150
—
824
260
1,084
Derivative liabilities (a)
699
10
666
23
699
Total liabilities
$
11,711
$
10
$
11,399
$
283
$
11,692
(a) Classes are detailed in the recurring measurement table.
(b) Level 1 primarily consists of mutual funds with readily determinable fair values. Level 3 includes restricted investments in FHLB-Cincinnati stock of $24
million and FRB stock of $203 million.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 23—FAIR VALUE OF ASSETS AND LIABILITIES
207
2024 FORM 10-K ANNUAL REPORT
The following table presents the contractual amount and fair value of unfunded loan commitments and standby and other
commitments as of December 31, 2024 and 2023.
Table 8.23.8
UNFUNDED COMMITMENTS
Contractual Amount
Fair Value
(Dollars in millions)
December 31, 2024
December 31, 2023
December 31, 2024
December 31, 2023
Unfunded Commitments:
Loan commitments
$
20,992
$
24,579
$
1
$
1
Standby and other commitments
753
746
9
8
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 23—FAIR VALUE OF ASSETS AND LIABILITIES
208
2024 FORM 10-K ANNUAL REPORT
Note 24—Parent Company Financial Information
Following are statements of the parent company.
Parent Company Balance Sheets
Balance Sheets
December 31,
(Dollars in millions)
2024
2023
Assets:
Cash
$
837
$
854
Notes receivable
3
3
Investments in subsidiaries:
Bank
8,487
8,658
Non-bank
61
49
Other assets
251
256
Total assets
$
9,639
$
9,820
Liabilities and equity:
Accrued employee benefits and other liabilities
$
473
$
324
Term borrowings
350
500
Total liabilities
823
824
Total equity
8,816
8,996
Total liabilities and equity
$
9,639
$
9,820
Parent Company Statements of Income
Year Ended December 31,
(Dollars in millions)
2024
2023
2022
Dividend income:
Bank
$
1,110
$
220
$
435
Non-bank
—
—
16
Total dividend income
1,110
220
451
Other income
1
226
22
Total income
1,111
446
473
Interest expense - term borrowings
15
21
31
Personnel and other expense
111
114
128
Total expense
126
135
159
Income before income taxes
985
311
314
Income tax expense (benefit)
(27)
24
(31)
Income before equity in undistributed net income (loss) of
subsidiaries
1,012
287
345
Equity in undistributed net income (loss) of subsidiaries:
Bank
(238)
613
561
Non-bank
1
(3)
(6)
Net income attributable to the controlling interest
$
775
$
897
$
900
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 24—PARENT COMPANY FINANCIAL INFORMATION
209
2024 FORM 10-K ANNUAL REPORT
Parent Company Statements of Cash Flows
Year Ended December 31,
(Dollars in millions)
2024
2023
2022
Operating activities:
Net income
$
775 $
897 $
900
Less undistributed net income (loss) of subsidiaries
(237)
610
555
Income before undistributed net income (loss) of subsidiaries
1,012
287
345
Adjustments to reconcile income to net cash provided by operating
activities:
Deferred income tax expense
15
8
7
Stock-based compensation expense
59
36
76
Gain on sale of title services business
—
—
(22)
Other operating activities, net
(18)
—
2
Total adjustments
56
44
63
Net cash provided by operating activities
1,068
331
408
Investing activities:
Proceeds from sales and prepayments of securities
3
21
8
Purchases of securities
(1)
(1)
(1)
(Investment in) return on subsidiary
(9)
(10)
13
Proceeds from business divestitures, net
—
—
22
Net cash (used in) provided by investing activities
(7)
10
42
Financing activities:
Proceeds from issuance of preferred stock
—
—
494
Call of preferred stock
(100)
—
—
Cash dividends paid - preferred stock
(29)
(32)
(32)
Common stock:
Stock options exercised
9
5
36
Cash dividends paid
(332)
(335)
(324)
Repurchase of shares
(626)
(10)
(13)
Repayment of term borrowings
—
(450)
—
Net cash (used in) provided by financing activities
(1,078)
(822)
161
Net (decrease) increase in cash and cash equivalents
(17)
(481)
611
Cash and cash equivalents at beginning of year
854
1,335
724
Cash and cash equivalents at end of year
$
837 $
854 $
1,335
Total interest paid
$
26 $
33 $
35
Income taxes received from (paid to) subsidiaries
60
(46)
42
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
Table of Contents
NOTE 24—PARENT COMPANY FINANCIAL INFORMATION
210
2024 FORM 10-K ANNUAL REPORT
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls & Procedures
Our management, with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e)) as
of the end of the period covered by this report. Based on
that evaluation, the Chief Executive Officer and the Chief
Financial Officer have concluded that our disclosure
controls and procedures were effective as of the end of
the period covered by this report.
Reports on Internal Control over Financial Reporting
The report of management required by Item 308(a) of
Regulation S-K appears at page 107, and the attestation
report required by Item 308(b) of Regulation S-K appears
starting at page 108, of our 2024 Financial Statements
(Item 8). Both are incorporated herein by this reference.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control
over financial reporting during our fourth fiscal quarter
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
Item 9B. Other Information
Form 8-K Information not previously reported
Not applicable.
Trading Plans of Directors and Executive Officers
During our most recent fiscal quarter, no director (see
Item 10 beginning on page 212) or executive officer (see
the Supplemental Part I Information beginning on page 53)
adopted or terminated (i) any contract, instruction, or
written plan for the purchase or sale of our securities
intended to satisfy the affirmative defense conditions of
SEC Rule 10b5-1(c) (a "Rule 10b5-1 trading arrangement");
and/or (ii) any "non-Rule 10b5-1 trading arrangement" as
defined in SEC Reg. S-K Item 408(c).
Item 9C. Disclosure Regarding Foreign
Jurisdictions that Prevent Inspections
Not applicable.
ITEM 9. ACCOUNTANTS, ITEM 9A. CONTROLS & PROCEDURES, ITEM 9B. OTHER INFO, AND ITEM 9C. FOREIGN INSPECTIONS
Table of Contents
211
2024 FORM 10-K ANNUAL REPORT
PART III
Item 10. Directors, Executive Officers and
Corporate Governance
Required Item 10 Information
In 2024, there were no material amendments to the
procedures described in our 2025 Proxy Statement under
the caption Shareholder Recommendations and
Nominations, especially under the sub-caption Committee
Consideration of Shareholder Recommendations of
Nominees, by which security holders may recommend
nominees to our Board of Directors.
Our bylaws contain a process, if certain conditions are
met, for a shareholder to nominate a person for election
to the Board in advance of an annual meeting, and to
require us to include that nomination in our annual
meeting proxy statement. Additional information
regarding this process is available in our 2025 Proxy
Statement under the captions Shareholder
Recommendations and Nominations and 2026 Annual
Meeting—Proposal & Nomination Deadlines, which
information is incorporated herein by reference.
Our Board of Directors has adopted a Code of Ethics for
Senior Financial Officers that applies to the Chief
Executive Officer, Chief Financial Officer, and Chief
Accounting Officer and also applies to all professionals
serving in the financial, accounting, or audit areas of FHN
and its subsidiaries. A copy of the Code has been filed or
incorporated by reference as Exhibit 14 to this report and
is posted on our current internet website at
www.firsthorizon.com: click on “Investor Relations” at the
bottom of the web page, then hover over “Corporate
Governance” near the top of the page, then click on
“Governance Documents.” Scroll down the Governance
Documents page to find a link to the Code. A paper copy
of the Code is available without charge upon written
request addressed to our Corporate Secretary at our main
office, 165 Madison Avenue, Memphis, Tennessee 38103.
We intend to satisfy our disclosure obligations under Item
5.05 of Form 8-K related to Code amendments or waivers
by posting such information on our internet website, the
address for which is listed in this paragraph above.
We have adopted an Inside Information Policy and related
written Procedures for that Policy (collectively, our
"Insider Policy"). Our Insider Policy governs the purchase,
sale, and/or other dispositions of our securities by our
directors, officers, associates and certain other persons. It
is designed to promote compliance with insider trading
laws, rules, and regulations, and listing standards
applicable to us. By its terms as written, our Insider Policy
applies only to insiders (directors, officers, associates, and
certain other persons). In practice, senior management
applies the periodic and ad hoc blackout provisions to our
purchases of our securities in all market transactions, and
in all off-market transactions other than share-
withholding related to employee stock plan awards.
Exceptions to the blackout provisions must be approved
by our Chief Executive Officer in consultation with our
General Counsel. Our Inside Information Policy and its
Procedures have been filed or incorporated by reference
as Exhibits 19.1 and 19.2 to this report. In addition, the
following section of our 2025 Proxy Statement is
incorporated herein by reference: Policies on Insider
Trading and Hedging.
Other information required by this Item related to the
topics mentioned in Table 10.1 is incorporated herein by
reference to the disclosures indicated in the Table or is
provided in that Table.
ITEM 10. DIRECTORS & EXECUTIVE OFFICERS
Table of Contents
212
2024 FORM 10-K ANNUAL REPORT
Table 10.1
ITEM 10 TOPICS TABLE
Item 10 Topics
Responses or Incorporated Disclosures
Directors and nominees for director of FHN, the
Audit Committee of our Board of Directors,
members of the Audit Committee, and Audit
Committee financial experts
In our 2025 Proxy Statement: Independence & Categorical Standards, Committee
Charters & Composition, Audit Committee, and Vote Item 1—Election of Directors
(excluding the Audit Committee Report and the statements regarding the
existence and location of the Audit Committee’s charter)
Executive officers
In the Supplemental Part I Information following Item 4 of this report: Executive
Officers of the Registrant, beginning on page 53
Compliance with Section 16(a) of the Securities
Exchange Act of 1934
not applicable
First Horizon Directors
Table 10.2
OUR BOARD OF DIRECTORS
(at February 20, 2025)
Harry V. Barton, Jr.*
Age 70
CPA and Owner,
Barton Advisory Services, LLC,
an investment advisory firm
Jeffrey J. Brown
Age 51
President,
Hendrick Automotive Group, LLC,
a privately held automotive retail
organization
Velia Carboni
Age 54
Chief Information Officer,
SharkNinja, Inc., a global product
design and technology company
John C. Compton
Age 63
Partner,
Clayton, Dubilier & Rice
a private equity firm
Wendy P. Davidson
Age 55
President and Chief Executive Officer
The Hain Celestial Group, Inc.,
an organic and natural products
company
John W. Dietrich
Age 60
Executive Vice President and Chief
Financial Officer, FedEx Corporation,
a provider of transportation, e-
commerce and business services
D. Bryan Jordan
Age 63
Chairman of the Board,
President &
Chief Executive Officer,
First Horizon Corporation,
a financial services company
J. Michael Kemp, Sr.
Age 54
Founder and Chief Executive Officer,
Kemp Management Solutions,
a program management and
consulting firm
Rick E. Maples
Age 66
Retired Co-Head of Investment
Banking,
Stifel, Nicolaus and Company,
Incorporated,
a financial services company
Vicki R. Palmer
Age 71
President,
The Palmer Group, LLC
a general consulting firm
Colin V. Reed
Age 77
Executive Chairman,
Ryman Hospitality Properties, Inc.
a real estate investment trust
Cecelia D. Stewart
Age 66
Retired President, U.S. Consumer &
Commercial Banking,
Citigroup, Inc.
a financial services company
Rosa Sugrañes*
Age 67
Founder and former
Chief Executive Officer,
Iberia Tiles,
a ceramic tile distributor
R. Eugene Taylor
Age 77
Retired Chairman of the Board and
Chief Executive Officer,
Capital Bank Financial Corp.,
a financial services company
* Indicates a director who will retire when directors are elected for 2025-2026 at the 2025 Annual Meeting of Shareholders.
ITEM 10. DIRECTORS & EXECUTIVE OFFICERS
Table of Contents
213
2024 FORM 10-K ANNUAL REPORT
Item 11. Executive Compensation
The information called for by this Item is incorporated
herein by reference to the following sections of our 2025
Proxy Statement: Compensation Committee,
Compensation Committee Interlocks & Insider
Participation, Director Compensation, Policies on Insider
Trading and Hedging, Compensation Discussion &
Analysis, Recent Compensation, Post-Employment
Compensation, Pay Ratio of CEO to Median Employee,
Equity Grant Processes, and any Appendix to our Proxy
Statement referenced in those sections.
The subsection of our 2025 Proxy Statement captioned
Compensation Risk, within the Compensation Committee
section, provides information concerning our
management of certain risks associated with our
compensation policies and practices. We do not believe
those risks are reasonably likely to have a material
adverse effect upon us; accordingly, we do not believe
that information is required to be provided in this Item.
The information required by Item 407(e)(5) of Regulation
S-K is provided in our 2025 Proxy Statement within the
Compensation Committee section under the sub-section
captioned Compensation Committee Report. As permitted
by the instructions for that Item, the information under
that subsection is not “filed” with this report.
As to the information required by Item 402(w) of
Regulation S-K: (i) refer to Clawback Policies & Practices
within Compensation Discussion & Analysis in our 2025
Proxy Statement; and (ii) the conditions for disclosures
beyond those incorporated by reference above have not
occurred. Our Erroneously Awarded Compensation
Recovery Policy has been filed as Exhibit 97 to this report,
as shown in Item 15.
ITEM 11. EXECUTIVE COMPENSATION
Table of Contents
214
2024 FORM 10-K ANNUAL REPORT
Item 12. Security Ownership of Certain
Beneficial Owners and Management and
Related Stockholder Matters
Securities Authorized for Issuance under Equity Compensation
Plans
Equity Compensation Plan Information
Table 12.1 provides information as of December 31, 2024
regarding shares of our common stock that may be issued
under the following plans:
• 2021 Incentive Plan, as amended February 25, 2024
("2021 Plan")
• Equity Compensation Plan (“ECP”)
• IBERIABANK Corporation 2019 Stock Incentive Plan
("SIP")
• The following IBERIABANK Corporation plans
(together with the SIP, the “IBKC Plans”): 2016 Stock
Incentive Plan; and Amended and Restated 2010
Stock Incentive Plan
• The following Capital Bank Financial Corp. plans (“CBF
Plans”): Capital Bank Financial Corp. 2013 Omnibus
Compensation Plan; and FNB United Corp. 2012
Incentive Plan
Table 12.1
EQUITY COMPENSATION PLAN INFORMATION
As of December 31, 2024
A
B
C
Plan Category
Number of Securities to be
Issued upon Exercise of
Outstanding Options
Weighted Average
Exercise Price of
Outstanding Options
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (excluding securities
reflected in Col. A)
Equity Compensation Plans Approved
by Shareholders (1)
958,622
(2)
$16.16
13,173,672
Equity Compensation Plans Not
Approved by Shareholders
—
—
—
Total
958,622
$16.16
13,173,672
(1) Consists of the 2021 Plan, the ECP, the IBKC Plans, and the CBF Plans. The 2021 Plan was approved by shareholders in 2021 and, as amended, in 2024 and
remains active. The number of shares in Column C is entirely under the 2021 Plan; as provided in the 2021 Plan, the Column C number includes the new/
additional shares originally authorized under the 2021 Plan along with shares underlying ECP awards that have been forfeited or cancelled since the 2021
Plan was initially approved by shareholders, net of shares underlying 2021 Plan awards that are outstanding or have been paid. The ECP initially was
approved by shareholders in 2003, most recently was re-approved in 2016, and has terminated. The IBKC Plans were approved by IBKC's shareholders in
2020, 2011, 2014, 2016, and 2019, and all have terminated. FHN and IBKC closed a merger-of-equals transaction in 2020, as a result of which FHN
became the plan sponsor for the IBKC Plans and their awards. The CBF Plans were approved by shareholders of CBF or certain other predecessor
companies, and all have terminated. FHN merged with CBF in 2017, as a result of which FHN became the plan sponsor for the CBF Plans and their awards.
"Terminated" means no new awards may be granted under the plan.
(2) Consists entirely of outstanding options issued under terminated plans approved by shareholders.
Only the 2021 Plan permits new awards to be granted; all
other plans have terminated. At December 31, 2024, there
were no shares issuable upon exercise of outstanding
options under the 2021 Plan, and the total number of
shares issuable upon exercise of outstanding options
under the terminated plans was 958,622 shares.
Shares covered by outstanding options are shown in
column A of Table 12.1. Outstanding equity awards other
than options ("full-value awards"), consisting of unpaid
stock units and restricted stock, are not included in any
column in that Table. In total, 11,840,085 shares are
covered by unpaid full-value awards, all granted under the
2021 Plan, the ECP, or the SIP. Of those, 11,003,999 are
covered by unvested awards, and 836,086 are covered by
awards that have vested but are subject to an unfulfilled
mandatory deferral period.
Column C of Table 12.1 presents the total number of
shares available for new awards under the 2021 Plan at
ITEM 12. SECURITY OWNERSHIP & RELATED STOCKHOLDER MATTERS
Table of Contents
215
2024 FORM 10-K ANNUAL REPORT
December 31, 2024, assuming eventual full exercise or
vesting of all shares covered by awards outstanding on
that date. The 2021 Plan permits the grant of options and
full-value awards, as well as stock appreciation rights
(none of which have been granted).
Beneficial Ownership of Corporation Stock
The information required for this Item pursuant to Item
403(a) and (b) of Regulation S-K is presented in our 2025
Proxy Statement under the heading Stock Ownership
Information. That information is incorporated into this
Item by reference.
Change in Control Arrangements
We are not aware of any arrangements which may result in a change in control of First Horizon Corporation.
ITEM 12. SECURITY OWNERSHIP & RELATED STOCKHOLDER MATTERS
Table of Contents
216
2024 FORM 10-K ANNUAL REPORT
Item 13. Certain Relationships and Related
Transactions, and Director
Independence
The information called for by this Item is presented in the
following sections of our 2025 Proxy Statement:
• within the Corporate Governance section: Related
Party Transaction Procedures and Transactions with
Related Persons
• within the Board Matters section: Independence &
Categorical Standards.
That information is incorporated into this Item by
reference.
Our independent directors and nominees are identified in
the Independence discussion within the Independence &
Categorical Standards section of our 2025 Proxy
Statement, referenced above.
Item 14. Principal Accountant Fees and Services
The Audit Committee of the Board of Directors has a
policy providing for pre-approval of all audit and non-audit
services to be performed by our registered public
accounting firm that performs the audit of our
consolidated financial statements (our “Auditor”). Services
either may be approved in advance by the Audit
Committee specifically on a case-by-case basis (“specific
pre-approval”) or may be approved in advance (“advance
pre-approval”). Advance pre-approval requires the
Committee to identify in advance the specific types of
service that may be provided and the fee limits applicable
to such types of service, which limits may be expressed as
a limit by type of service or by category of services. All
requests to provide services that have been pre-approved
in advance must be submitted to the Chief Accounting
Officer prior to the provision of such services for a
determination that the service to be provided is of the
type and within the fee limit that has been pre-approved.
Unless the type of service to be provided by our Auditor
has received advance pre-approval under the policy and
the fee for such service is within the limit pre-approved,
the service will require specific pre-approval by the
Committee.
The terms of and fee for the annual audit engagement
must receive the specific pre-approval of the Committee.
“Audit,” “Audit-related,” “Tax,” and “All Other” services,
as those terms are defined in the policy, have the advance
pre-approval of the Committee, but only to the extent
those services have been specified by the Committee and
only in amounts that do not exceed the fee limits specified
by the Committee. Such advance pre-approval is to be for
a term of 12 months following the date of pre-approval
unless the Committee specifically provides for a different
term. Unless the Committee specifically determines
otherwise, the aggregate amount of the fees pre-
approved for All Other services for the fiscal year must not
exceed seventy-five percent (75%) of the aggregate
amount of the fees pre-approved for the fiscal year for
Audit services, Audit-related services, and those types of
Tax services that represent tax compliance or tax return
preparation. The policy delegates the authority to pre-
approve services to be provided by our Auditor, other
than the annual audit engagement and any changes
thereto, to the chair of the Committee. The chair may not,
however, make a determination that causes the 75% limit
described above to be exceeded. Any service pre-
approved by the chair will be reported to the Committee
at its next regularly scheduled meeting.
Information regarding fees billed to FHN by our Auditor,
KPMG LLP, for the two most recent fiscal years, as well as
other information related to our Auditor, is incorporated
herein by reference to the section of our 2025 Proxy
Statement captioned Vote Item 3—Auditor Ratification.
No services were approved by the Audit Committee
pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.
ITEM 13. CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS AND ITEM 14. PRINCIPAL ACCOUNTANT FEES & SERVICES
Table of Contents
217
2024 FORM 10-K ANNUAL REPORT
PART IV
Item 15. Exhibits and Financial Statement
Schedules
Financial Statements & Related Reports
Our consolidated financial statements, the notes thereto,
and the reports of management and independent public
accountants, as listed below, are incorporated herein by
reference to the pages of 2024 Financial Statements (Item
8) indicated in Table 15.1.
Table 15.1
Item 8 Page
Statement, Note, or Report Incorporated into Item 15
107
Report of Management on Internal Control over Financial Reporting
108
Reports of Independent Registered Public Accounting Firm
112
Consolidated Balance Sheets as of December 31, 2024 and 2023
113
Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022
115
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023, and 2022
116
Consolidated Statements of Changes in Equity for the years ended December 31, 2024, 2023, and 2022
117
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022
119
Notes to the Consolidated Financial Statements
Financial Statement Schedules
Not applicable.
Exhibits
In the Exhibit Table that follows: the “Filed Here” column
denotes each exhibit which is filed or furnished (as
applicable) with this report; the “Mngt Exh” column
denotes each exhibit that represents a management
contract or compensatory plan or arrangement required
to be identified as such; the “Furnished” column denotes
each exhibit that is “furnished” pursuant to 18 U.S.C.
Section 1350 or otherwise, and is not “filed” as part of this
report or as a separate disclosure document; and the
phrase “2024 named executive officers” refers to those
executive officers whose 2024 compensation is described
in our 2025 Proxy Statement. All references to “First
Horizon National Corporation” or to "First Tennessee
National Corporation" refer to us, under previous
corporate names.
In many agreements filed as exhibits, each party makes
representations and warranties to other parties. Those
representations and warranties are made only to and for
the benefit of those other parties in the context of a
business contract. Exceptions to such representations and
warranties may be partially or fully waived by such parties,
or not enforced by such parties, in their discretion. No
such representation or warranty may be relied upon by
any other person for any purpose.
ITEM 15. EXHIBITS & FINANCIAL STATEMENT SCHEDULES
Table of Contents
218
2024 FORM 10-K ANNUAL REPORT
Table 15.2
10-K EXHIBIT TABLE
Corporate Exhibits
3.1
Amended and Restated Charter of First Horizon Corporation
[2024]
8-K
3.1
7/24/2024
3.2
Bylaws of First Horizon Corporation, as amended and restated
January 27, 2025
8-K
3.1
1/30/2025
4.1
Deposit Agreement, dated as of July 1, 2020, by and among First
Horizon National Corporation, Equiniti Trust Company, as
depositary, and the holders from time to time of the depositary
receipts described therein [Series B]
8-K
4.1
7/2/2020
4.2
Form of Depositary Receipt--Series B (included as part of Exhibit
4.1 to this report)
8-K
4.1
7/2/2020
4.3
Deposit Agreement, dated as of July 1, 2020, by and among First
Horizon National Corporation, Equiniti Trust Company, as
depositary, and the holders from time to time of the depositary
receipts described therein [Series C]
8-K
4.2
7/2/2020
4.4
Form of Depositary Receipt--Series C (included as part of Exhibit
4.3 to this report)
8-K
4.2
7/2/2020
4.5
Deposit Agreement, dated as of May 28, 2020, by and among
First Horizon National Corporation, Equiniti Trust Company, as
depositary, and the holders from time to time of the depositary
receipts described therein [Series E]
8-K
4.1
5/28/2020
4.6
Form of certificate representing Series E Preferred Stock
8-K
4.2
5/28/2020
4.7
Form of Depositary Receipt--Series E (included as part of Exhibit
4.7 to this report)
8-K
4.1
5/28/2020
4.8
Deposit Agreement, dated as of May 3, 2021, by and among
First Horizon Corporation, Equiniti Trust Company, as
depositary, and the holders from time to time of the depositary
receipts described therein [Series F]
8-K
4.1
5/03/2021
4.9
Form of certificate representing the Series F Preferred Stock
8-K
4.2
5/03/2021
4.10
Form of Depositary Receipt-Series F representing the Depositary
Shares (included as part of Exhibit 4.10 to this report)
8-K
4.1
5/03/2021
4.11
Description of Securities Registered Pursuant to Section 12 of
the Securities Exchange Act of 1934
10-Q
2Q24
4.1
8/2/2024
4.12
FHN agrees to furnish to the Securities and Exchange
Commission upon request a copy of each instrument defining
the rights of the holders of the senior and subordinated long-
term debt of FHN and its consolidated subsidiaries
Equity-Based Award Plans
10.1
(a)
2021 Incentive Plan (as amended February 25, 2024)
X
Proxy
2024
App. A
3/11/2024
10.1
(b)
Equity Compensation Plan (as amended and restated April 26,
2016)
X
Proxy
2016
App. A
3/14/2016
10.1
(c)
IBERIABANK Corporation 2019 Stock Incentive Plan
X
10-K
2020
10.1(b)
2/25/2021
10.1
(d)
IBERIABANK Corporation 2016 Stock Incentive Plan
X
10-K
2020
10.1(c)
2/25/2021
Performance-Based Equity Award Documents
10.2
(a)
Form of Grant Notice for Executive Performance Stock Units
[2022]
X
10-Q
1Q22
10.1
5/6/2022
10.2
(b)
Form of Grant Notice for Executive Performance Stock Units
[2023]
X
10-K
2022
10.2(e)
3/1/2023
10.2
(c)
Form of Grant Notice for CEO Special Equity Performance Stock
Units [2023]
X
8-K
10.3
8/4/2023
Exh
No
Description of Exhibit to this 10-K Report
Filed
Here
Mngt
Exh
Furnis
hed
Incorporated by Reference to
Form
Exh No
Filing Date
ITEM 15. EXHIBITS & FINANCIAL STATEMENT SCHEDULES
Table of Contents
219
2024 FORM 10-K ANNUAL REPORT
10.2
(d)
Form of Grant Notice for Executive Performance Stock Units
[2024]
X
10-K
2023
10.2(e)
2/22/2024
10.2
(e)
Form of Grant Notice for Executive Special Performance Stock
Units [2024]
X
10-K
2023
10.2(f)
2/22/2024
10.2
(f)
Form of Grant Notice for Executive Performance Stock Units
[2025]
X
X
Stock Option Award Documents
10.3
(a)
Form of Grant Notice for Executive Stock Options [2018]
X
10-Q
1Q18
10.2
5/8/2018
10.3
(b)
Form of Grant Notice for Executive Stock Options [2019]
X
10-Q
1Q19
10.2
5/8/2019
10.3
(c)
Form of Grant Notice for Executive Stock Options [2020]
X
10-Q
1Q20
10.2
5/8/2020
10.3
(d)
Form of IBERIABANK Corporation Stock Option Agreement
X
10-K
2020
10.3(l)
2/25/2021
Other Equity-Based Award Documents
10.4
(a)
Form of Grant Notice for Executive Restricted Stock Units [2022]
X
10-Q
1Q22
10.2
5/6/2022
10.4
(b)
Form of Grant Notice for Executive Restricted Stock Units [2023]
X
10-K
2022
10.4(e)
3/1/2023
10.4
(c)
Form of Grant Notice for Executive Restricted Stock Units [2024]
X
10-K
2023
10.2(e)
2/22/2024
10.4
(d)
Form of Grant Notice for Executive Restricted Stock Units [2025]
X
X
10.4
(e)
Form of Grant Notice for Executive Special Restricted Stock
Units [2024]
X
10-K
2023
10.2(f)
2/22/2024
10.4
(f)
Form of Grant Notice for CEO Special Equity Restricted Stock
Units [2023]
X
8-K
10.4
8/4/2023
10.4
(g)
Form of Grant Notice for Restricted Cash Units (Modified
Retention Program, Cliff Vesting) [2023]
X
10-K
2023
10.2(h)
2/22/2024
10.4
(h)
Director Compensation Policy (as amended April 2024)
X
10-Q
2Q24
10.1
8/2/2024
Management Cash Incentive Plan Documents
10.5
(a)
Executive Bonus Plan
X
8-K
10.1
10/27/2021
Other Exhibits relating to Employment, Retirement, Severance, or Separation
10.6
(a)
Executive Change in Control Severance Plan
X
8-K
10.1
1/29/2021
10.6
(b)
Form of Pension Restoration Plan (amended and restated as of
January 1, 2008)
X
10-Q
3Q07
10.7(e)
11/7/2007
10.6
(c)
Form of Amendment to Pension Restoration Plan
X
10-K
2009
10.7(d2)
2/26/2010
10.6
(d)
Form of Amendment No. 3 to Pension Restoration Plan
X
10-Q
3Q11
10.2
11/8/2011
10.6
(e)
Form of First Horizon Corporation Savings Restoration Plan
X
8-K
10.1
7/17/2012
10.6
(f)
Conformed copy of Employment Agreement dated August 3,
2023 with D. Bryan Jordan
X
8-K
10.2
8/4/2023
10.6
(g)
Retention Agreement of Anthony J. Restel, dated November 3,
2019
X
8-K
10.1
7/2/2020
Documents Related to Other Deferral Plans and Programs
10.7
(a)
Directors and Executives Deferred Compensation Plan [originally
adopted 1985], as amended and restated [2017], with forms of
deferral agreement and 2007 addendum to deferral agreement
X
10-Q
2Q17
10.4
8/8/2017
Exh
No
Description of Exhibit to this 10-K Report
Filed
Here
Mngt
Exh
Furnis
hed
Incorporated by Reference to
Form
Exh No
Filing Date
ITEM 15. EXHIBITS & FINANCIAL STATEMENT SCHEDULES
Table of Contents
220
2024 FORM 10-K ANNUAL REPORT
10.7
(b)
Form of Amendment to Directors and Executives Deferred
Compensation Plan
X
10-Q
3Q07
10.1(a3)
11/7/2007
10.7
(c)
Rate Applicable to Participating Directors under the Directors
and Executives Deferred Compensation Plan
X
10-Q
3Q23
10.1
11/7/2023
10.7
(d)
Schedule of Deferral Agreements [Non-Employee Directors,
1995]
X
10-K
2018
10.7(d)
2/28/2019
10.7
(e)
Form of First Horizon National Corporation Deferred
Compensation Plan as Amended and Restated [formerly known
as First Tennessee National Corporation Nonqualified Deferred
Compensation Plan]
X
10-Q
3Q07
10.1(c)
11/7/2007
10.7
(f)
Conformed copy of Amendment No. 1 to the First Horizon
National Corporation Deferred Compensation Plan [removing
"National" from the plan name]
X
S-8 333-
273513
4.5
7/28/2023
10.7
(g)
Form of Deferred Compensation Agreement used under FHN’s
Equity Compensation Plan and First Tennessee National
Corporation Non-Qualified Deferred Compensation Plan, along
with form of Salary, Commission, and Annual Bonus Deferral
Programs Overview, form of Deferred Stock Option (“DSO”)
Program Summary, and description of share receipt deferral
feature
X
8-K
10(z)
1/3/2005
Other Exhibits related to Management or Directors
10.8
(a)
Survivor Benefits Plan, as amended and restated July 18, 2006
X
10-Q
3Q06
10.8
11/8/2006
10.8
(b)
Other Compensation and Benefit Arrangements for Non-
employee Directors
X
10-K
2020
10.8(b)
2/25/2021
10.8
(c)
Description of Long-Term Disability Program
X
10-Q
2Q17
10.2
8/8/2017
10.8
(d)
Form of Indemnity Agreement with directors and executive
officers [2004 form]
X
10-Q
2Q17
10.3
8/8/2017
10.8
(e)
Form of amendment to 2004 form of Indemnity Agreement with
directors and executive officers
X
8-K
10.4
4/28/2008
10.8
(f)
Form of Indemnity Agreement with directors and executive
officers (April 2008 revision)
X
8-K
10.5
4/28/2008
10.8
(g)
List of Certain Benefits Available to Certain Executive Officers
X
X
10.8
(h)
Description of 2025 Salary Rates for 2024 Named Executive
Officers
X
X
Other Exhibits
14
Code of Ethics for Senior Financial Officers
10-K
2022
14
3/1/2023
19.1
Inside Information Policy
10-Q
2Q23
19.1
8/4/2023
19.2
Inside Information Procedures
X
21
Subsidiaries of First Horizon Corporation
X
23
Accountant’s Consents
X
24
Power of Attorney
X
31(a)
Rule 13a-14(a) Certifications of CEO (pursuant to Section 302 of
Sarbanes-Oxley Act of 2002)
X
31(b)
Rule 13a-14(a) Certifications of CFO (pursuant to Section 302 of
Sarbanes-Oxley Act of 2002)
X
32(a)
18 USC 1350 Certifications of CEO (pursuant to Section 906 of
Sarbanes-Oxley Act of 2002)
X
X
32(b)
18 USC 1350 Certifications of CFO (pursuant to Section 906 of
Sarbanes-Oxley Act of 2002)
X
X
Exh
No
Description of Exhibit to this 10-K Report
Filed
Here
Mngt
Exh
Furnis
hed
Incorporated by Reference to
Form
Exh No
Filing Date
ITEM 15. EXHIBITS & FINANCIAL STATEMENT SCHEDULES
Table of Contents
221
2024 FORM 10-K ANNUAL REPORT
97
Erroneously Awarded Compensation Recovery Policy
10-K
2023
97
2/22/2024
XBRL Exhibits
101
The following financial information from First Horizon
Corporation’s Annual Report on Form 10-K for the year ended
December 31, 2024, formatted in Inline XBRL:
(i) Consolidated Balance Sheets at December 31, 2024 and 2023;
(ii) Consolidated Statements of Income for the Years Ended
December 31, 2024, 2023, and 2022;
(iii) Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 2024, 2023, and 2022;
(iv) Consolidated Statements of Changes in Equity for the Years
Ended December 31, 2024, 2023, and 2022;
(v) Consolidated Statements of Cash Flows for the Years Ended
December 31, 2024, 2023, and 2022; and
(vi) Notes to the Consolidated Financial Statements.
X
101.
INS
XBRL Instance Document-the instance document does not
appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document
X
101.
SCH
Inline XBRL Taxonomy Extension Schema
X
101.
CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
X
101.
DEF
Inline XBRL Taxonomy Extension Definition Linkbase
X
101.
LAB
Inline XBRL Taxonomy Extension Label Linkbase
X
101.
PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
X
104
Cover Page Interactive Data File, formatted in Inline XBRL
(included in Exhibit 101)
X
Exh
No
Description of Exhibit to this 10-K Report
Filed
Here
Mngt
Exh
Furnis
hed
Incorporated by Reference to
Form
Exh No
Filing Date
Item 16. Form 10-K Summary
Not applicable.
ITEM 15. EXHIBITS & FINANCIAL STATEMENT SCHEDULES
Table of Contents
222
2024 FORM 10-K ANNUAL REPORT
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
FIRST HORIZON CORPORATION
Date: February 27, 2025
By:
/s/ Hope Dmuchowski
Name:
Hope Dmuchowski
Title:
Senior Executive Vice President and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature*
Title
Date*
Signature*
Title
Date*
D. Bryan Jordan
D. Bryan Jordan
Chairman of the Board,
President & Chief
Executive Officer, and a
Director (principal
executive officer)
*
Hope Dmuchowski
Hope Dmuchowski
Senior Executive Vice
President and Chief
Financial Officer
(principal financial officer)
*
Jeff L. Fleming
Jeff L. Fleming
Executive Vice President
and Chief Accounting
Officer (principal
accounting officer)
*
Harry V. Barton, Jr.
Harry V. Barton, Jr.
Director
*
Jeffrey J. Brown
Jeffrey J. Brown
Director
*
Velia Carboni
Velia Carboni
Director
*
John C. Compton
John C. Compton
Director
*
Wendy P. Davidson
Wendy P. Davidson
Director
*
John W. Dietrich
John W. Dietrich
Director
*
J. Michael Kemp, Sr.
J. Michael Kemp, Sr.
Director
*
Rick E. Maples
Rick E. Maples
Director
*
Vicki R. Palmer
Vicki R. Palmer
Director
*
Colin V. Reed
Colin V. Reed
Director
*
Cecelia D. Stewart
Cecelia D. Stewart
Director
*
Rosa Sugrañes
Rosa Sugrañes
Director
*
R. Eugene Taylor
R. Eugene Taylor
Director
*
*By: /s/ Shannon M. Hernandez
February 27, 2025
Shannon M. Hernandez
As Attorney-in-Fact
SIGNATURES
Table of Contents
223
2024 FORM 10-K ANNUAL REPORT