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What changed in FIRST HORIZON CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FIRST HORIZON CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+826 added−868 removedSource: 10-K (2024-02-23) vs 10-K (2023-03-01)

Top changes in FIRST HORIZON CORP's 2023 10-K

826 paragraphs added · 868 removed · 512 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

199 edited+64 added−96 removed190 unchanged
Biggest changeThe FHN Financial Municipal Advisors division of the Bank, and the IBERIA Wealth Advisors division of the Bank, each is registered with the SEC as a municipal adviser. • Martin & Company, Inc., First Horizon Advisors, Inc., and FHN Financial Main Street Advisors, LLC 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., FHIS, Inc., and First Horizon Insurance Agency, Inc., are licensed as insurance agencies in all states where they do 18 2022 FORM 10-K ANNUAL REPORT ITEM 1.
Biggest changeThe 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. 16 2023 FORM 10-K ANNUAL REPORT ITEM 1.
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 and 30-Branch Acquisition in this Item below for additional information.
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.
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 significantly, allowing us to remain in the third tier.
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.
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/mitigate rapidly those that get through.
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.
For example, as discussed under Capital Adequacy within this Supervision and Regulation discussion below, our ability to pay dividends would be restricted if its 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.
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.
In 2016 federal agencies proposed regulations 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.
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.
Organic growth is expected to be coordinated with a focus on strong and stable returns on capital. Organically, over the past several years we enhanced our market share in our regional banking markets with targeted hires and marketing, and we invested resources in specialty commercial lending and private client banking.
Organic growth is expected to be coordinated with a focus on strong and stable returns on capital. Organically, over the past several years we have enhanced our market share in our regional banking markets with targeted hires and marketing, and we have invested resources in specialty commercial lending and private client banking.
Credit Risks We face the risk that our clients may not repay their loans and that the realizable value of collateral 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.
Credit Risks We face the risk that our clients may not repay their loans 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.
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.
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.
The Bank and its subsidiaries generally may not extend credit to us or to any other affiliate 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 its capital stock and surplus.
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.
Moreover, 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.
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.
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.
BUSINESS Table of Contents 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.
The emergence of non-traditional, disruptive service providers (see Industry Disruption within this Item 1A beginning on page 35 ) 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.
The emergence of non-traditional, disruptive service providers (see Industry Disruption within this Item 1A beginning on page 31 ) 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.
BUSINESS Table of Contents Table 1.10 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, 2022, the Bank had sufficient capital to qualify as “well capitalized” under the regulatory capital requirements discussed above.
BUSINESS Table of Contents 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, 2023, the Bank had sufficient capital to qualify as “well capitalized” under the regulatory capital requirements discussed above.
As a result, under current law, compliance costs and restrictions grow with size, they tend to change abruptly as a company crosses to the next tier, and we are in a middle tier in many respects. The remainder of this Supervision and Regulation discussion focuses on current rules which apply to FHN based on our current asset size.
As a result, under current law, compliance requirements, costs, and restrictions grow with size, they tend to change abruptly as a company crosses to the next tier, and we are in a middle tier in many respects. The remainder of this Supervision and Regulation discussion focuses primarily on rules which apply to FHN based on our current asset size.
Lending to mortgage companies has been a significant business for us in all five years shown in Table 1.7, while the latter two businesses were insignificant for us until our merger with IBKC in 2020. All three mortgage-related businesses benefited substantially from the low interest rate environment that ended in 2022.
Lending to mortgage companies has been a significant business for us in all five years shown in Table 1.8, while the latter two businesses were insignificant for us until our merger with IBKC in 2020. All three mortgage-related businesses benefited substantially from the low interest rate environment that ended in 2022.
Volcker Rule The 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.
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.
If the yield curve remains relatively steep, with long-term interest rates noticeably higher than short rates, our net interest margin will tend not to be significantly compressed by the lower rate environment, since lower short rates will keep our deposit costs down while higher long rates will support the rates we can charge on lending.
If the yield curve remains relatively steep, with long-term interest rates noticeably higher than short 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.
In this report, segment information related to periods prior to our most recent segment change has been reclassified to conform with current segments. Financial and other additional information concerning our segments—including information concerning assets, revenues, and financial results—appears in our 2022 MD&A (Item 7) and in our 2022 Financial Statements (Item 8), especially in Note 19—Business Segment Information.
In this report, segment information related to periods prior to our most recent segment change has been reclassified to conform with current segments. Financial and other additional information concerning our segments—including information concerning assets, revenues, and financial results—appears in our 2023 MD&A (Item 7) and in our 2023 Financial Statements (Item 8), especially in Note 19—Business Segment Information.
Fixed Income Our fixed income and capital markets business, reported as part of our specialty 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 1.8.
Fixed Income Our fixed income and capital markets business, reported as part of our specialty 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.
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.
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 19 for additional information.
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 just want services to be convenient, personalized, and understandable.
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.
Liquidity Coverage Ratio The liquidity coverage ratio, or LCR, refers to the amount of liquid assets (cash, cash equivalents, or short-term securities) banks are required to keep on hand to meet a hypothetically projected total net cash outflows over a forward-looking 30-day period of stress.
Liquidity Coverage Ratio The liquidity coverage ratio, or LCR, refers to the amount of liquid assets (cash, cash equivalents, or short-term securities) 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.
It is extremely difficult for banks, and for investors, to know when an uptick in credit loss is merely idiosyncratic or instead portends a major credit cycle change. The composition of our loans inherently increases our sensitivity to certain credit risks.
It is extremely difficult for banks, and for investors, to know when an upturn in credit loss is merely idiosyncratic or instead portends a major credit cycle change. The composition of our loans inherently increases our sensitivity to certain credit risks.
Subsidiaries FHN’s consolidated operating subsidiaries at December 31, 2022 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.
Subsidiaries FHN’s consolidated operating subsidiaries at December 31, 2023 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.
As of June 30, 2022, the FDIC reports that the Bank held approximately 14% 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.
As of June 30, 2023, the FDIC reports that the Bank held approximately 14% 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.
Examples of the risks created or enhanced 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. Competition for talent is substantial and increasing. Moreover, revenue growth in some business lines increasingly depends upon top talent.
Examples of the risks created or enhanced 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. Competition for talent is substantial and increasing. Moreover, revenue retention and growth in some business lines depends substantially upon top talent.
As indicated in this Item 1A under the caption Accounting & Tax Risks beginning on page 50 , 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.
As indicated in this Item 1A under the caption Accounting Risks beginning on page 46 , 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.
We remain committed to creating a more equitable society, and that starts with our associates, our clients, and the communities we serve. We do this by elevating equity, providing capital and counsel, and committing to excellence in everything we do.
We remain committed to creating a more equitable society, and that starts with our associates, our clients, and the communities we serve. We do this by providing capital and counsel and committing to excellence in everything we do.
Significant oil-price volatility, such as that experienced in 2020-2022, can and often does impact our overall business in this industry by increasing provisioning and charge-offs, and by reducing demand for loans.
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.
Supreme Court affirms them, the legal validity of CFPB rules and actions generally could be called into question. Data Security & Portability Security & Privacy Federal law requires banks to implement a comprehensive information security program that includes administrative, technical, and physical safeguards.
Supreme Court affirms the first ruling, the legal validity of CFPB rules and actions generally could be called into question. Data Security & Portability Security & Privacy Federal law requires banks to implement a comprehensive information security program that includes administrative, technical, and physical safeguards.
In February 2022, we completed the main systems conversion work related to that merger. • As shown in Table 1.7, 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 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.
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.
BUSINESS Table of Contents 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.
BUSINESS Table of Contents 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.
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.
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. 25 2022 FORM 10-K ANNUAL REPORT ITEM 1.
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. 23 2023 FORM 10-K ANNUAL REPORT ITEM 1.
At December 31, 2022, 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 18 . Tennessee Law Tennessee law does not expressly restrict the activities of a bank holding company or its non-bank affiliates.
At December 31, 2023, 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 16 . Tennessee Law Tennessee law does not expressly restrict the activities of a bank holding company or its non-bank affiliates.
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 35 basis points annually, and in 2022 fully adjusted rates ranged from 2.5 to 45 basis points annually.
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 35 basis points annually, and in 2023 fully adjusted rates ranged from 2.5 to 42 basis points annually.
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 2022 MD&A (Item 7). Regulatory, Legislative, & Legal Risks The regulatory environment continues to be challenging.
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 85 of our 2023 MD&A (Item 7). Regulatory, Legislative, & Legal Risks The regulatory environment continues to be challenging.
BUSINESS Table of Contents 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.
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.
Key traditional competitors in many of our markets include Wells Fargo Bank N.A., Bank of America N.A., First-Citizens Bank & Trust Company (dba First Citizens Bank), Synovus Bank, Truist Bank, Regions Bank, JPMorgan Chase Bank National Association, PNC Bank National Association, BankUnited, Hancock Whitney Bank, and Pinnacle Bank, among many others including many community banks and credit unions.
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 Association, Synovus Bank, Truist Bank, and Wells Fargo Bank N.A., among many others including many community banks and credit unions.
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, or other criminal conduct by associates or third parties; and exposure to other external events.
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.
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. Increased fluidity across traditional boundaries is likely to continue.
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.
Although our current strategy is expected to evolve as business conditions change, in 2023 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 cost without significant revenue impact.
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 cost without significant revenue impact.
There are similar legal restrictions on: the Bank’s purchases of or investments in the securities of and purchases of assets from us or our nonbank subsidiaries; the Bank’s loans or extensions of credit to third parties collateralized by the securities or obligations of us or our nonbank subsidiaries; the issuance of guaranties, acceptances, and letters of credit on behalf of us or our nonbank subsidiaries; and certain bank transactions with us or our nonbank subsidiaries, or with respect to which we or our nonbank subsidiaries act as agent, participate, or have a financial interest.
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.
RISK FACTORS Table of Contents 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.
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.
Sale of Title Services Business in 2022 In third quarter of 2022, we sold our title services business, recognizing a $22 million pretax gain. 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.
Gain on Sale of Business In third quarter of 2022, we sold our title services business, recognizing a $22 million pre-tax gain. 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.
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 2022 MD&A (Item 7).
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 85 of our 2023 MD&A (Item 7).
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/deflation rates; and impacts upon us from our regulatory environment, which can change substantially and unpredictably from possible political response to major financial disruptions. 39 2022 FORM 10-K ANNUAL REPORT ITEM 1A.
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/deflation rates; and impacts upon us from our regulatory environment, which can change substantially and unpredictably from possible political response to major financial disruptions.
Additional information concerning market uncertainties and trends appears in Market Uncertainties and Prospective Trends within 2022 MD&A (Item 7) beginning on page 95 , 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 2022 MD&A (Item 7).
Additional information concerning market uncertainties and trends appears in Market Uncertainties and Prospective Trends within 2023 MD&A (Item 7) beginning on page 92 , 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 2023 MD&A (Item 7) beginning on page 54 .
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 standards.
RISK FACTORS Table of Contents 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.
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 f inancial industry regulations.
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 19 , for additional information concerning financial industry regulations.
Sources & Availability of Funds Information concerning the sources and availability of funds for our businesses can be found in our 2022 MD&A (Item 7), including the subsection entitled Liquidity Risk Management beginning on page 91 , which material is incorporated herein by reference. 30 2022 FORM 10-K ANNUAL REPORT ITEM 1A. RISK FACTORS Table of Contents Item 1A.
Sources & Availability of Funds Information concerning the sources and availability of funds for our businesses can be found in our 2023 MD&A (Item 7), including the subsection entitled Liquidity Risk Management beginning on page 88 , which material is incorporated herein by reference. 28 2023 FORM 10-K ANNUAL REPORT ITEM 1A. RISK FACTORS Table of Contents Item 1A.
Also in 2020 and 2021, the federal Paycheck Protection Program (“PPP”) contributed to deposit growth as proceeds from PPP loans boosted average deposit account balances. Organic growth in deposits from core banking clients grew throughout this period, even when interest rates were extremely low.
Also in 2020 and 2021, the PPP contributed to deposit growth as proceeds from PPP loans boosted average deposit account balances. Organic growth in deposits from core banking clients grew throughout this period, even when interest rates were extremely low.
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.
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.
But if rates fall low enough (as they have in recent years), 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.
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.
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.
BUSINESS Table of Contents 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.
Additional information concerning credit risks and our management of them is set forth under the caption Asset Quality beginning on page 69 of our 2022 MD&A (Item 7).
Additional information concerning credit risks and our management of them is set forth under the caption Asset Quality beginning on page 65 of our 2023 MD&A (Item 7).
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.
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.
Additional information regarding materials available on our website is provided in Item 10 of this report beginning on page 203 . No information external to this report and its exhibits, unless specifically noted otherwise, is incorporated into this report. 20 2022 FORM 10-K ANNUAL REPORT ITEM 1.
Additional information regarding materials available on our website is provided in Item 10 of this report beginning on page 205 . No information external to this report and its exhibits, unless specifically noted otherwise, is incorporated into this report. 18 2023 FORM 10-K ANNUAL REPORT ITEM 1.
At December 31, 2022, our Leverage ratio was 10.36% and the Bank’s was 9.76%. • 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.
At December 31, 2023, our Leverage ratio was 10.69% and the Bank’s was 10.20%. • 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.
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 pretax 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.
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. 35 2023 FORM 10-K ANNUAL REPORT ITEM 1A.
Further information regarding our loans is provided in Note 3 beginning on page 134 appearing in our 2022 Financial Statements (Item 8), 10 2022 FORM 10-K ANNUAL REPORT ITEM 1. BUSINESS Table of Contents and under the captions Analysis of Financial Condition and Asset Quality, beginning on pages 67 and 69 , respectively, of our 2022 MD&A (Item 7).
Further information regarding our loans is provided in Note 3 beginning on page 131 appearing in our 2023 Financial Statements (Item 8), and under the captions Analysis of Financial Condition and Asset Quality, beginning on 7 2023 FORM 10-K ANNUAL REPORT ITEM 1. BUSINESS Table of Contents pages 62 and 65 , respectively, of our 2023 MD&A (Item 7).
Those special risks include: • the potential for elevated and duplicative operating expenses if we are unable to integrate the two 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.
Those special risks include: • the potential for elevated and duplicative operating expenses if we are unable to integrate the two 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. 30 2023 FORM 10-K ANNUAL REPORT ITEM 1A.
Frequently, many of those affected are our clients. Although our systems are not breached by these third-party incursions, they can increase account fraud and can cause us to take costly steps to avoid significant theft loss to our Bank and our clients. Our ability to recoup our losses may be limited legally or practically in many situations.
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.
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, and other electronic crimes, and we educate our clients as well through regular and episodic security-oriented communications.
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, and other electronic crimes, and we educate our clients as well through regular and episodic security-oriented communications. We 33 2023 FORM 10-K ANNUAL REPORT ITEM 1A.
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, 2022, our Common Equity Tier 1 Capital Ratio was 10.17% and the Bank’s was 10.77%. • Tier 1 Capital Ratio.
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, 2023, our Common Equity Tier 1 Capital Ratio was 11.40% and the Bank’s was 11.40%. • Tier 1 Capital Ratio.
Percentages may not add to 100% due to rounding. 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.
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 10 of this report.
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.
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 broad terms, these relationships are summarized in Table 1.9.
In broad terms, these relationships are summarized in Table 1.10.
Prompt Corrective Action (PCA) Federal banking regulators must take “prompt corrective action” regarding FDIC-insured depository institutions that do not meet minimum capital requirements. For this purpose, insured depository institutions are divided into five capital categories. The specific requirements applicable to us are summarized in Table 1.10. 24 2022 FORM 10-K ANNUAL REPORT ITEM 1.
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. 22 2023 FORM 10-K ANNUAL REPORT ITEM 1.
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.
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. 26 2023 FORM 10-K ANNUAL REPORT ITEM 1.
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 29 ; under the caption Risks Associated with Monetary Events beginning on page 39 within Item 1A; and under the caption Federal Reserve Policy in Transition within the Market Uncertainties and Prospective Trends section of 2022 MD&A (Item 7), which begins on page 95 .
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 27 ; under the caption Risks Associated with Monetary Events begin ning on page 34 within Item 1A; and under the caption Federal Reserve Policy in Transition within the Market Uncertainties and Prospective Trends section of 2023 MD&A (Item 7), which begins on page 92 .
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.
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.
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 2022 MD&A (Item 7), in Executive Overview (page 59 ), Interest Rate Risk Management (page 89 ), and Market Uncertainties and Prospective Trends (page 95 ).
Further information on these topics is presented: within Item 1A (which begins on page 29 ), 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 2023 MD&A (Item 7), in Executive Overview (page 55 ), Interest Rate Risk Management (page 84 ), and Market Uncertainties and Prospective Trends (page 92 ).
Actions of this sort typically are elevated in the first few years after a significant merger. For example, in 2021 we closed/consolidated several dozen banking locations in the wake of the 2020 IBKC merger, and we divested our title insurance business in 2022.
Actions of this sort typically are elevated in the first few years after a significant merger. For example, in 2021 we closed/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.
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).
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 11 2023 FORM 10-K ANNUAL REPORT ITEM 1.
BUSINESS Table of Contents deteriorate in a rapid manner. Starting in March 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.
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.
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 18 . 21 2022 FORM 10-K ANNUAL REPORT ITEM 1.
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 16 .
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. 28 2022 FORM 10-K ANNUAL REPORT ITEM 1.
BUSINESS Table of Contents 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.
Table 1.7 SELECTED CONSOLIDATED FINANCIAL DATA (Dollars in millions; financial condition data shown period-end, as of December 31) 2022 2021 2020 2019 2018 Net interest income $ 2,392 $ 1,994 $ 1,662 $ 1,210 $ 1,220 Provision for credit losses 95 (310) 503 45 8 Noninterest income 815 1,076 1,492 654 723 Net income available to common shareholders 868 962 822 435 539 Total loans and leases 58,102 54,859 58,232 31,061 27,536 Total assets 78,953 89,092 84,209 43,311 40,832 Total deposits 63,489 74,895 69,982 32,430 32,683 Total term borrowings 1,597 1,590 1,670 791 1,171 Total liabilities 70,406 80,598 75,902 38,235 36,047 Preferred stock 1,014 520 470 96 96 Total shareholders’ equity 8,547 8,494 8,307 5,076 4,785 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.
Table 1.8 SELECTED CONSOLIDATED FINANCIAL DATA (Dollars in millions; financial condition data shown period-end, as of December 31) 2023 2022 2021 2020 2019 Net interest income $ 2,540 $ 2,392 $ 1,994 $ 1,662 $ 1,210 Noninterest income 927 815 1,076 1,492 654 Net income available to common shareholders 865 868 962 822 435 Total loans and leases 61,292 58,102 54,859 58,232 31,061 Provision (benefit) for credit losses 260 95 (310) 503 45 Net Charge-offs 170 59 2 120 27 Net interest margin 3.42 % 3.10 % 2.48 % 2.86 % 3.28 % Total assets 81,661 78,953 89,092 84,209 43,311 Total deposits 65,780 63,489 74,895 69,982 32,430 Total term borrowings 1,150 1,597 1,590 1,670 791 Total liabilities 72,370 70,406 80,598 75,902 38,235 Preferred stock 520 1,014 520 470 96 Total shareholders’ equity (financial statement) 9,291 8,547 8,494 8,307 5,076 Common Equity Tier 1 Capital (regulatory) 8,104 7,032 6,367 6,110 3,409 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeEconomic profit analysis attempts to relate ordinary profit to the capital employed to create that profit with the goal of achieving higher (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.
Biggest changeActivities 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. Mistakes in those judgments could result in a mis-allocation of resources and diminished profitability over the long run.
At present, 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.
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.
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 loss. Some government mortgage programs could impose penalties on us for misrepresentations at the time of obtaining benefits under the program.
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.
Accounting & Tax 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.
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.
In 2020, we issued to former IBKC shareholders common shares representing about 44% of our post-closing outstanding shares. Our issuance of preferred stock raises regulatory capital without issuing common shares, but creates or expands our general obligation to pay all preferred dividends ahead of any common dividends.
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.
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 2022 were met principally by deposits, by financing from other financial institutions, and by funds obtained from the capital markets.
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 2023 were met principally by deposits, by financing from other financial institutions, and by funds obtained from the capital markets.
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 is having difficulty with the mortgage loan. Failure to follow the applicable rules can result in significant penalties or other loss for us.
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.
Due to the inherent 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.
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.
Currently we have seven series of preferred stock outstanding, one issued by the Bank and six by First Horizon Corporation. Subject to capital needs and market conditions, additional series may be issued in the future.
Currently we have six series of preferred stock outstanding, one issued by the Bank and five by First Horizon Corporation. Subject to capital needs and market conditions, additional series may be issued in the future.
Moreover, once fully phased in, 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.
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.
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 2023 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.
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 2022 MD&A (Item 7). Declines, disruptions, or precipitous changes in markets or market prices can adversely affect our fees and other income sources.
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 82 of our 2023 MD&A (Item 7). Declines, disruptions, or precipitous changes in markets or market prices can adversely affect our fees and other income sources.
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 2022, 2021, and 2020.
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 $1.2 billion for 2023 and $1.4 billion for 2022.
At December 31, 2022, both rating agencies rated the unsecured senior debt of the Corporation and of the Bank as investment grade.
At December 31, 2023, both rating agencies rated the unsecured senior debt of the Corporation and of the Bank as investment grade.
Additional information concerning ASU 2016-13 appears in Note 1—Significant Accounting Policies within our 2022 Financial Statements (Item 8) beginning on page 119 , and 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.
Additional information concerning ASU 2016-13 appears in Note 1—Significant Accounting Policies within our 2023 Financial Statements (Item 8) beginning on page 115 , and 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 10 , all of which information is incorporated into this Item 1A by reference.
Political dysfunction and 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.
Political dysfunction and 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.
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 95 , and Contingent Liabilities beginning on page 101 , of our 2022 MD&A (Item 7); and under the captions Exposures from pre-2009 Mortgage Business and Mortgage Loan Repurchase and Foreclosure Liability , both within Note 16—Contingencies and Other Disclosures of our 2022 Financial Statements (Item 8), which Note begins on page 160 .
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 91 , and Contingent Liabilities beginning on page 98 , of our 2023 MD&A (Item 7); and under the captions Exposures from pre-2009 Mortgage Business and Mortgage Loan Repurchase and Foreclosure Liability , both within Note 16—Contingencies and Other Disclosures of our 2023 Financial Statements (Item 8), which Note begins on page 162 .
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, recently we engaged a third party to estimate our location-based emissions, even though not legally required.
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.
Applying the dividend restrictions imposed under applicable federal and state rules, the Bank’s total amount available for dividends, without obtaining regulatory approval, was $0.9 billion at January 1, 2023. Also, we are required to provide financial support to the Bank.
Applying the dividend restrictions imposed under applicable federal and state rules, the Bank’s total amount available for dividends, without obtaining regulatory approval, was $1.2 billion at January 1, 2024. Also, we are required to provide financial support to the Bank.
Additional information concerning monetary policy changes appears under the caption Risks Associated with Monetary Events beginning on page 39 within this Item 1A, and under the caption Federal Reserve Policy in Transition within the Market Uncertainties and Prospective Trends section of 2022 MD&A (Item 7), which begins on page 95 .
Additional information concerning monetary policy changes appears under the caption Risks Associated with Monetary Events beginning on page 34 within this Item 1A, and under the caption Federal Reserve Policy in Transition within the Market Uncertainties and Prospective Trends section of 2023 MD&A (Item 7), which begins on page 92 .
RISK FACTORS Table of Contents Pre-2009 Mortgage Business Risks We have risks from the mortgage-related businesses legacy First Horizon exited in 2008, including mortgage loan repurchase and loss-reimbursement risk, claims of improper foreclosure practices, and claims of non-compliance with contractual and regulatory requirements. In 2008 we exited our national mortgage and related lending businesses.
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.
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 50 ; under the captions Repurchase Obligations , Market Uncertainties and Prospective Trends , and Contingent Liabilities beginning on pages 95 , 95 , and 101 , respectively, of our 2022 MD&A (Item 7); and under the caption Contingencies in Note 16—Contingencies and Other Disclosures, beginning on page 160 of our 2022 Financial Statements (Item 8).
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 46 ; under the captions Repurchase Obligations , Market Uncertainties and Prospective Trends , and Contingent Liabilities beginning on pages 91 , 92 , and 98 , respectively, of our 2023 MD&A (Item 7); and under the caption Contingencies in Note 16—Contingencies and Other Disclosures, beginning on page 162 of our 2023 Financial Statements (Item 8).
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 83 , 90 , and 95 , respectively, of our 2022 MD&A (Item); and under the caption Regulatory Capital in Note 12—Regulatory Capital and Restrictions, beginning on page 153 of our 2022 Financial Statements (Item 8).
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 19 ; under the captions Capital , Capital Risk Management and Adequacy , and Market Uncertainties and Prospective Trends beginning on pages 77 , 85 , and 92 , respectively, of our 2023 MD&A (Item); and under the caption Regulatory Capital in Note 12—Regulatory Capital and Restrictions, beginning on page 154 of our 2023 Financial Statements (Item 8).
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.
RISK FACTORS Table of Contents 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.
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. 52 2022 FORM 10-K ANNUAL REPORT ITEM 1B. UNRESOLVED STAFF COMMENTS AND ITEM 2. PROPERTIES Table of Contents Item 1B. Unresolved Staff Comments Not applicable.
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. 48 2023 FORM 10-K ANNUAL REPORT ITEM 1B. UNRESOLVED STAFF COMMENTS THRU ITEM 4. MINE SAFETY DISCLOSURES Table of Contents Item 1B. Unresolved Staff Comments Not applicable.
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.
RISK FACTORS Table of Contents 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.
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 18 ; in Risks Associated with Monetary Events beginning on page 39 ; in Interest Rate and Yield Curve Risks beginning on page 47 ; and under the caption Federal Reserve Policy in Transition within the Market Uncertainties and Prospective Trends section of our 2022 MD&A (Item 7), beginning on page 95 .
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 16 ; in Risks Associated with Monetary Events beginning on page 34 ; in Interest Rate and Yield Curve Risks beginning on page 44 ; and under the caption Inflation, Recession, and Federal Reserve Policy within the Market Uncertainties and Prospective Trends section of our 2023 MD&A (Item 7), beginning on page 92 .
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, and in fact was common in the second half of 2022 and early 2023.
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 has been continuous since the second half of 2022 through early 2024.
We manage the risk of rate changes by investing plan assets in fixed income securities having maturities 48 2022 FORM 10-K ANNUAL REPORT ITEM 1A. RISK FACTORS Table of Contents aligned with the expected timing of payouts. Because there are no new participants, the actuarial-input risk should slowly diminish over time.
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.
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.
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.
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.
RISK FACTORS Table of Contents 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.
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, 51 2022 FORM 10-K ANNUAL REPORT ITEM 1A.
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.
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.
ITEM 1A. RISK FACTORS Table of Contents starts on page 19 . 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.
Examples of these kinds of risks include: earthquakes in Memphis; hurricanes in Florida, Louisiana, the Carolina coasts, or the Texas coast; a major change in health insurance laws impacting the many healthcare companies in middle Tennessee; and automotive industry plant closures. We have international assets, mainly in the form of loans and letters of credit.
Examples of these kinds of risks include: earthquakes in Memphis; hurricanes in Florida, Louisiana, the Carolina coasts, or the Texas coast; a major change in national health insurance laws impacting our healthcare-industry clients in middle Tennessee; and automotive industry plant closures.
Average fixed income trading liabilities (short positions) were $480 million, $540 million, and $457 million for 2022, 2021, and 2020, respectively. Average loans held for sale in our fixed income business were $693 million, $563 million, and $554 million for 2022, 2021, and 2020.
Average fixed income trading liabilities (short positions) were $301 million and $480 million for 2023 and 2022, respectively. Average loans held for sale in our fixed income business were $552 million and $693 million for 2023 and 2022, respectively.
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.
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 46 2023 FORM 10-K ANNUAL REPORT ITEM 1A.
If those regions of the U.S. were to experience adversity not shared by other parts of the country, we are likely to experience adversity to a 44 2022 FORM 10-K ANNUAL REPORT ITEM 1A. RISK FACTORS Table of Contents degree not shared by those competitors which have a broader or different regional footprint.
If those regions of the U.S. were to experience adversity not shared by other parts of the country, we are likely to experience adversity to a degree not shared by those competitors which have a broader or different regional footprint.
RISK FACTORS Table of Contents 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.
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.
Changes associated with LIBOR also may impact our funding ability; see Interest Rate and Yield Curve Risks beginning on page 47 . Events affecting interest rates, markets, and other factors may adversely affect the demand for our products and services in our fixed income business.
For additional information concerning these risks, see Interest Rate and Yield Curve Risks beginning on page 44 . Events affecting interest rates, markets, and other factors may adversely affect the demand for our products and services in our fixed income business.
Whether or not legally required, any such actions that we take increase our operating costs. In addition, such expectations could pressure us to discontinue business relationships with certain clients, or groups of clients, that have suboptimal reputations for emissions.
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 proposals concerning greenhouse gas (GHG) emissions could impose significant additional costs upon us.
We believe we could access the capital markets again if we desired to do so, though the Pending TD Merger likely would complicate such a transaction. 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.
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.
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.
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.
RISK FACTORS Table of Contents Reductions in our credit ratings could result in counterparties reducing or terminating their relationships with us. Some parties with whom we do business may 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.
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.
These efforts usually entail additional near-term expenses in the 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.
These efforts usually entail additional near-term expenses in the 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. 40 2023 FORM 10-K ANNUAL REPORT ITEM 1A.
Additional information concerning the risks associated with LIBOR discontinuance and our management of them, all of which is incorporated into this Item 1A by this reference, appears under the caption LIBOR and Reference Rate Reform within the Market Uncertainties and Prospective Trends section of our 2022 MD&A (Item 7), which begins on page 95 .
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 92 of our 2023 MD&A (Item 7).
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.
Many non-regulated, non-banking companies have gathered large amounts of personal details about millions of people, and have the ability to analyze that 39 2023 FORM 10-K ANNUAL REPORT ITEM 1A. RISK FACTORS Table of Contents data and act on that analysis very quickly. This situation has prompted governmental responses.
The two most significant impacts on us of crossing the $100 billion threshold are: becoming subject to Category IV enhanced prudential standards; and becoming at-risk for being subject to a liquidity coverage ratio requirement. Additional information appears in the Supervision & Regulation section of Item 1 which starts on page 21 .
The two most significant impacts on us of crossing the $100 billion threshold are: 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.
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. 46 2022 FORM 10-K ANNUAL REPORT ITEM 1A.
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.
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. Rates are likely to continue to rise in 2023, and further reductions in income from our mortgage-related businesses are possible.
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. 45 2023 FORM 10-K ANNUAL REPORT ITEM 1A. RISK FACTORS Table of Contents For example, by late 2022 consumer mortgage refinancings fell to extremely low levels. These impacts largely continued throughout 2023.
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.
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.
In comparison with former (pre-2020) standards, CECL accounting likely will continue 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 the increased provision, 50 2022 FORM 10-K ANNUAL REPORT ITEM 1A.
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.
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 there is significant risk, especially if inversion remains common and a recession begins, that our net interest margin could compress.
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.
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 several rating agencies for unsecured borrowings.
As a result, disruptions in those areas may adversely impact our earnings in that business unit. 43 2023 FORM 10-K ANNUAL REPORT ITEM 1A. RISK FACTORS Table of Contents Credit Ratings Our credit ratings directly affect the availability and cost of our unsecured funding.
Deposit levels may be affected, fairly quickly, by changes in monetary policy. The Federal Reserve currently is pursuing a tightening policy. The Federal Reserve has indicated it intends to continue tightening based on economic events during the year, including inflationary pressures, employment data, and overall economic activity.
The Federal Reserve currently has paused its 2022-23 tightening policy. The Federal Reserve has indicated it intends to consider whether and when to cut short-term rates in 2024 based on economic events during the year, including inflationary pressures, employment data, and overall economic activity.
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, substantial revenue reduction in fixed income is unavoidable during the "down" part of the cycle.
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.
Neither is a banking industry regulation, but both apply to banks in relation to certain clients. Further 43 2022 FORM 10-K ANNUAL REPORT ITEM 1A. RISK FACTORS Table of Contents general regulation to protect data privacy appears likely.
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.
Deposits traditionally have provided our most affordable funds and by far the largest portion of funding. However, deposit trends can shift with economic conditions. If interest rates fall, deposit levels in our Bank might fall, perhaps fairly quickly if a tipping point is reached, as depositors become more comfortable with risk and seek higher returns in other vehicles.
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.
For example: in 2021 and 2022, compensation costs rose markedly due to high-demand/low-supply circumstances beyond our control. Geographic Risks We are subject to risks of operating in various jurisdictions.
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.
Removed
ITEM 1A. RISK FACTORS Table of Contents 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.
Added
New regulations proposed in 2023 would substantially increase capital and other requirements, various restrictions, and costs.
Removed
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 .
Added
Moreover, we expect that a significant portion of those compliance costs, with or without the new regulations, will need to be borne as we approach the $100 billion tier, rather than commence abruptly when we enter the tier, as we upgrade compliance systems, processes, and staffing before they are fully needed.
Removed
Economic profit analysis involves significant judgment regarding capital allocation. Mistakes in those judgments could result in a mis-allocation of resources and diminished profitability over the long run. Despite our efforts, our costs could rise due to adverse structural changes, market shifts, or inflationary pressures.
Added
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 19 ; and under the caption Other Regulatory Proposals within the section captioned Market Uncertainties and Prospective Trends beginning on page 92 of our 2023 MD&A (Item 7).
Removed
This could pressure us to raise interest we pay on our deposits, which could shrink our net interest margin if loan rates do not rise correspondingly. 45 2022 FORM 10-K ANNUAL REPORT ITEM 1A. RISK FACTORS Table of Contents The extremely low interest rate environment of the past several years ended in 2022.
Added
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 U.S.
Removed
Contrary to the expectations outlined in the paragraph above, deposit levels prior to 2022 climbed, possibly buoyed by the severe volatility experienced by the stock markets in 2018-2020 coupled with Federal pandemic assistance, particularly direct cash payments to most citizens, in 2020 and 2021.
Added
Securities and Exchange Commission ("SEC") has proposed, but not yet adopted, rules that would require all U.S. companies with publicly-traded securities to report annually their GHG emissions and related climate-oriented information.
Removed
Although significant market volatility resumed in 2022, and we have generally raised deposit interest rates to attract and maintain clients, we do not expect deposit levels to rise appreciably in 2023, and in fact there is significant risk levels will fall, especially if Federal Reserve "tightening" actions push the economy into recession and push unemployment rates higher.
Added
If applicable to us, 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).
Removed
Generally we try to moderate our use of these products when rates are rising, and we followed that guideline in 2022. 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.
Added
Potentially of more significance: obtaining data could, depending upon how the new regimes are implemented, require us to obtain GHG-related information from clients, including clients that are not public companies and that do no business in California. If so, effectively we could be required to impose costs and/or inconveniences on clients.
Removed
The most recent revenue reduction occurred in 2022, and we cannot predict when it will end. The discontinuance of LIBOR as a viable benchmark rate may adversely affect our business and our operating results.
Added
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.
Removed
In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority ("FCA"), which regulates the London InterBank Offered Rate ("LIBOR"), announced that it intends to halt persuading or compelling banks to submit rates for the calculation of LIBOR.
Added
RISK FACTORS Table of Contents 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.
Removed
In 2021, the FCA announced that tenors of U.S. dollar ("USD") LIBOR will no longer be published as follows: • One week and 2-month USD LIBOR has not been published since December 31, 2021; and • All other USD LIBOR tenors (e.g., overnight, 1-month, 3-month, 6-month and 12-month tenors) will not be published after June 30, 2023.
Added
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 38 . Geographic Risks We are subject to risks of operating in various jurisdictions.
Removed
In the U.S., multiple alternative reference rates have become accepted alternatives to LIBOR. These alternatives include: SOFR.
Added
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.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed4 unchanged
Biggest changeInformation concerning our business locations, including banking center and other client-facing facilities, at year-end 2022 is provided under the caption Principal Businesses, Brands, & Locations within the Our Businesses section of Item 1 of this report, which begins on page 9 ; that information is incorporated into this Item 2 by this reference.
Biggest changeInformation concerning our business locations, including banking center and other client-facing facilities, at year-end 2023 is provided under the caption Principal Businesses, Brands, & Locations within the Our Businesses section of Item 1 of this report, which begins on page 6 ; that information is incorporated into this Item 2 by this reference.
Our operational and administrative offices are located in several cities where we have banking centers. At December 31, 2022, we believe our physical properties are suitable and adequate for the businesses we conduct.
Our operational and administrative offices are located in several cities where we have banking centers. At December 31, 2023, we believe our physical properties are suitable and adequate for the businesses we conduct.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

14 edited+1 added−0 removed7 unchanged
Biggest changeDuring that time he was also an Executive Vice President and a Senior Executive Vice President of Regions. Tammy S. LoCascio Age: 54 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.
Biggest changeLoCascio Age: 55 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.
Fleming Age: 61 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). D.
Fleming Age: 62 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). D.
Restel Age: 53 President—Regional Banking of First Horizon & the Bank (2021) 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.
Restel Age: 54 President—Regional Banking of First Horizon & the Bank (2021) 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.
Hope Dmuchowski Age: 44 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.
Hope Dmuchowski Age: 45 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.
Bryan Jordan Age: 61 Principal Executive Officer President and 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.
Bryan Jordan Age: 62 Principal Executive Officer President and 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.
Springfield Age: 58 Senior Executive Vice President—Chief Credit Officer of First Horizon & the Bank (2013) Ms. Springfield assumed the role of Executive Vice President—Chief Credit Officer of First Horizon & the Bank in 2013, with “Senior” added to her title in 2020.
Springfield Age: 59 Senior Executive Vice President—Chief Credit Officer of First Horizon & the Bank (2013) Ms. Springfield assumed the role of Executive Vice President—Chief Credit Officer of First Horizon & the Bank in 2013, with “Senior” added to her title in 2020.
Previously, starting in 1998, she served the Bank in several roles, the most recent of which (before her current role) was Executive Vice President—Commercial Banking (2011-2013). Selected Other Corporate Officers Clyde A. Billings, Jr. Senior Vice President, Assistant General Counsel, and Corporate Secretary Dane P. Smith Senior Vice President Corporate Treasurer 55 2022 FORM 10-K ANNUAL REPORT ITEM 5.
Previously, starting in 1998, she served the Bank in several roles, the most recent of which (before her current role) was Executive Vice President—Commercial Banking (2011-2013). Selected Other Corporate Officers Clyde A. Billings, Jr. Senior Vice President, Assistant General Counsel, and Corporate Secretary Dane P. Smith Senior Vice President Corporate Treasurer 51 2023 FORM 10-K ANNUAL REPORT ITEM 5.
Akins Age: 59 Senior Executive Vice President—Chief Risk Officer of First Horizon & the Bank (2020) Following the closing of the merger of equals between First Horizon and IBKC, Ms. Akins assumed the role of Senior Executive Vice President—Chief Risk Officer of First Horizon and the Bank.
Akins Age: 60 Senior Executive Vice President—Chief Risk Officer of First Horizon & the Bank (2020) Following the closing of the merger of equals between First Horizon and IBKC, Ms. Akins assumed the role of Senior Executive Vice President—Chief Risk Officer of First Horizon and the Bank.
Ardoin Age: 53 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.
Ardoin Age: 54 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.
Item 4. Mine Safety Disclosures Not applicable. 53 2022 FORM 10-K ANNUAL REPORT SUPPLEMENTAL PART I INFORMATION Table of Contents 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, 2023.
Item 4. Mine Safety Disclosures Not applicable. 49 2023 FORM 10-K ANNUAL REPORT SUPPLEMENTAL PART I INFORMATION Table of Contents 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, 2024.
Popwell Age: 63 President—Specialty Banking of First Horizon & the Bank (2020) Following the closing of the merger of equals between First Horizon and IBKC, Mr. Popwell assumed the role of President—Specialty Banking of First Horizon and the Bank.
Popwell Age: 64 President—Specialty Banking of First Horizon & the Bank (2020) Following the closing of the merger of equals between First Horizon and IBKC, Mr. Popwell assumed the role of President—Specialty Banking of First Horizon and the Bank.
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).
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.
In that role she led the retail, private client/wealth management, mortgage, and small business units. 54 2022 FORM 10-K ANNUAL REPORT SUPPLEMENTAL PART I INFORMATION Table of Contents Name & Age Current (Year First Elected to Office) and Recent Offices & Positions David T.
During that time he was also an Executive Vice President and a Senior Executive Vice President of Regions. 50 2023 FORM 10-K ANNUAL REPORT SUPPLEMENTAL PART I INFORMATION Table of Contents Name & Age Current (Year First Elected to Office) and Recent Offices & Positions Tammy S.
The executive officers generally are elected at the April meeting of our Board of Directors (following the annual meeting of shareholders) for a term of one year and until their successors are elected and qualified. Name & Age Current (Year First Elected to Office) and Recent Offices & Positions Terry L.
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.
Added
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. Name & Age Current (Year First Elected to Office) and Recent Offices & Positions Terry L.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−0 removed3 unchanged
Biggest changeAt year-end 2019 and earlier, First Horizon was included in the KBW Regional Bank Index. At year-end 2020 and later, First Horizon is included in the KBW Nasdaq Bank Index. The change in index resulted from the merger of equals in 2020 between First Horizon and IBERIABANK Corporation. 56 2022 FORM 10-K ANNUAL REPORT ITEM 5.
Biggest changeAt 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. 52 2023 FORM 10-K ANNUAL REPORT ITEM 5.
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 and for our stock option and other compensation plans, subject to market conditions, accumulation of excess equity, prudent capital management, and legal and regulatory restrictions.
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 and for our compensation plans, subject to market conditions, accumulation of excess equity, prudent capital management, and legal and regulatory restrictions.
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 2017-2022” performance graph nor Table 5.1 shall be incorporated by reference into any such filings.
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 2018-2023” performance graph nor Table 5.1 shall be incorporated by reference into any such filings.
Total Shareholder Return Performance Graph The “Total Shareholder Return 2017-2022” 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.
Total Shareholder Return Performance Graph The “Total Shareholder Return 2018-2023” 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.
The “Total Shareholder Return 2017-2022” performance graph compares the yearly percentage change in our cumulative total shareholder return with returns based on the Standards and Poor’s 500 and Keefe, Bruyette & Woods (KBW) Nasdaq and Regional Bank Indices. The graph assumes $100 is invested on December 31, 2017 and dividends are reinvested. Returns are market-capitalization weighted.
The “Total Shareholder Return 2018-2023” 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, 2018 and dividends are reinvested. Returns are market-capitalization weighted.
Additional information concerning repurchase activity during the final three months of 2022 is presented in Tables 7.21a and 7.21b, and the surrounding notes and other text under the caption Common Stock Purchase Programs beginning on page 85 of our 2022 MD&A (Item 7), which information is incorporated herein by this reference.
Additional information concerning repurchase activity during the final three months of 2023 is presented in Tables 7.20a and 7.20b, and the surrounding notes and other text under the caption Common Stock Purchase Programs beginning on page 79 of our 2023 MD&A (Item 7), which information is incorporated herein by this reference.
At December 31, 2022, there were approximately 9,002 shareholders of record of our common stock. Sales of Unregistered Common and Preferred Stock Common Stock . Not applicable. Preferred Stock . Not applicable.
At December 31, 2023, there were approximately 8,712 shareholders of record of our common stock. Sales of Unregistered Common and Preferred Stock Common Stock . Not applicable. Preferred Stock . Not applicable.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

18 edited+5 added−15 removed5 unchanged
Biggest changeTable 7.1 KEY PERFORMANCE INDICATORS For the years ended December 31, (Dollars in millions, except per share data) 2022 2021 2020 Pre-provision net revenue (a) $ 1,254 $ 974 $ 1,436 Diluted earnings per common share $ 1.53 $ 1.74 $ 1.89 Return on average assets (b) 1.08 % 1.15 % 1.33 % Return on average common equity (c) 11.81 % 12.53 % 13.66 % Return on average tangible common equity (a) (d) 15.58 % 16.46 % 19.03 % Net interest margin (e) 3.10 % 2.48 % 2.86 % Noninterest income to total revenue (f) 24.99 % 34.77 % 47.41 % Efficiency ratio (g) 61.24 % 68.56 % 54.37 % Allowance for loan and lease losses to total loans and leases 1.18 % 1.22 % 1.65 % Net charge-offs (recoveries) to average loans and leases 0.11 % — % 0.26 % Total period-end equity to period-end assets 10.83 % 9.53 % 9.86 % Tangible common equity to tangible assets (a) 7.12 % 6.73 % 6.89 % Cash dividends declared per common share $ 0.60 $ 0.60 $ 0.60 Book value per common share $ 13.48 $ 14.39 $ 13.59 Tangible book value per common share (a) $ 10.23 $ 11.00 $ 10.23 Common equity Tier 1 10.17 % 9.92 % 9.68 % Market capitalization $ 13,159 $ 8,713 $ 7,082 (a) Represents a non-GAAP measure which is reconciled in the non-GAAP to GAAP reconciliation in Table 7.29.
Biggest changeMANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents Table 7.1 KEY PERFORMANCE INDICATORS For the years ended December 31, (Dollars in millions, except per share data) 2023 2022 2021 Pre-provision net revenue (a) $ 1,388 $ 1,254 $ 974 Diluted earnings per common share $ 1.54 $ 1.53 $ 1.74 Return on average assets (b) 1.12 % 1.08 % 1.15 % Return on average common equity (c) 11.01 % 11.81 % 12.53 % Return on average tangible common equity (a) (d) 14.11 % 15.58 % 16.46 % Net interest margin (e) 3.42 % 3.10 % 2.48 % Noninterest income to total revenue (f) 26.82 % 24.99 % 34.77 % Efficiency ratio (g) 59.90 % 61.24 % 68.56 % Allowance for loan and lease losses to total loans and leases 1.26 % 1.18 % 1.22 % Net charge-offs (recoveries) to average loans and leases 0.28 % 0.11 % — % Total period-end equity to period-end assets 11.38 % 10.83 % 9.53 % Tangible common equity to tangible assets (a) 8.48 % 7.12 % 6.73 % Cash dividends declared per common share $ 0.60 $ 0.60 $ 0.60 Book value per common share $ 15.17 $ 13.48 $ 14.39 Tangible book value per common share (a) $ 12.13 $ 10.23 $ 11.00 Common equity Tier 1 11.40 % 10.17 % 9.92 % Market capitalization $ 7,913 $ 13,159 $ 8,713 (a) Represents a non-GAAP measure which is reconciled in the non-GAAP to GAAP reconciliation in Table 7.28.
Results of Operations—2022 compared to 2021 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).
Results of Operations—2023 compared to 2022 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 following table presents the major components of net interest income and net interest margin: 61 2022 FORM 10-K ANNUAL REPORT
The following table presents the major components of net interest income and net interest margin: 56 2023 FORM 10-K ANNUAL REPORT
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.
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 2023 increased $148 million, or 6%, from 2022.
Net interest margin and net interest spread were favorably impacted by a 79 basis point increase in earning asset yields, largely reflecting the impact of higher interest rates and lower levels of excess cash.
The net interest margin was favorably impacted by a 203 basis point increase in earning asset yields, largely reflecting the impact of higher interest rates and lower levels of excess cash. In addition, the tax-equivalent adjustment was favorably impacted by higher rates on floating rate tax-free commercial loans.
Management's Discussion and Analysis of Financial Condition and Results of Operations TABLE OF ITEM 7 TOPICS Introduction 59 Executive Overview 59 Results of Operations 61 Analysis of Financial Condition 67 Capital 83 Risk Management 86 Repurchase Obligations 95 Market Uncertainties and Prospective Trends 95 Critical Accounting Policies & Estimates 99 Non-GAAP Information 101 58 2022 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 55 Executive Overview 55 Results of Operations 56 Analysis of Financial Condition 62 Capital 77 Risk Management 81 Repurchase Obligations 91 Market Uncertainties and Prospective Trends 92 Critical Accounting Policies & Estimates 96 Accounting Changes 98 Non-GAAP Information 98 54 2023 FORM 10-K ANNUAL REPORT ITEM 7.
The higher yield on earning assets was partially offset by a 30 basis point increase in the cost of interest-bearing liabilities largely driven by higher deposit costs. Total average earning assets decreased $3.4 billion in 2022 largely from a decrease in interest-bearing deposits with banks partially offset by an increase in investment securities.
The cost of interest-bearing liabilities increased 244 basis points largely driven by higher deposit costs. Total average earning assets decreased $2.8 billion in 2023 largely from a decrease in interest-bearing deposits with banks partially offset by an increase in loans and leases. Total average interest-bearing liabilities increased $4.3 billion driven by increases in short-term borrowings and interest-bearing deposits.
Net interest income of $2.4 billion in 2022 increased $398 million, or 20%, from 2021 largely driven by higher earning asset yields partially offset by higher interest-bearing liability costs. FHN's net interest margin increased 62 basis points to 3.10% in 2022 compared to 2021 and the net interest spread increased 49 basis points to 2.85% over the same period.
Net interest income of $2.5 billion increased $148 million from 2022 largely driven by higher earning asset yields and loan growth, partially offset by higher funding costs. The net interest margin increased 32 basis points to 3.42% compared to 3.10% in 2022.
Noninterest expense of $2.0 billion decreased $143 million from 2021 largely attributable to lower personnel expense. Period-end loans and leases of $58.1 billion increased $3.2 billion from December 31, 2021 reflecting commercial loan growth of $1.8 billion, or 4%, and consumer loan growth of $1.4 billion, or 12%.
Period-end loans and leases of $61.3 billion increased $3.2 billion from December 31, 2022 reflecting commercial loan growth of $1.8 billion, or 4%, and consumer loan growth of $1.4 billion, or 10%.
(b) Calculated using net income divided by average assets. (c) Calculated using net income available to common shareholders divided by average common equity. 60 2022 FORM 10-K ANNUAL REPORT ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents (d) Calculated using net income available to common shareholders divided by average tangible common equity.
(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.
The CET1 ratio was 10.17% at December 31, 2022 compared to 9.92% at December 31, 2021.
The CET1 ratio was 11.40% at December 31, 2023 compared to 10.17% at December 31, 2022. 55 2023 FORM 10-K ANNUAL REPORT ITEM 7.
Executive Overview Merger Agreement with Toronto-Dominion Bank 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”), TD Bank US Holding Company, a Delaware corporation and indirect, wholly owned subsidiary of TD (“TD-US”), and Falcon Holdings Acquisition Co., a Delaware corporation and wholly owned subsidiary of TD-US (“Merger Sub”).
Executive Overview Significant Events and Transactions TD Merger Termination 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. On May 4, 2023, FHN and TD mutually terminated the TD Merger Agreement.
Refer to 2022 Merger Agreement with Toronto-Dominion Bank in Item 1, beginning on page 15 , for additional information. 2022 Financial Performance Summary FHN reported net income available to common shareholders of $868 million, or $1.53 per diluted share, compared to net income of $962 million, or $1.74 per diluted share in 2021.
FHN recognized an estimated expense of $68 million for the entire assessment in the fourth quarter of 2023. 2023 Financial Performance Summary FHN reported net income available to common shareholders of $865 million, or $1.54 per diluted share, compared to net income of $868 million, or $1.53 per diluted share in 2022.
At December 31, 2022, FHN had over 450 business locations in 24 states, including over 400 banking centers in 12 states, and employed more than 7,500 associates.
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, 2023, FHN had over 450 business locations in 24 states, including over 400 banking centers in 12 states, and employed approximately 7,300 associates.
Table of Contents Table 5.1 TOTAL SHAREHOLDER RETURN DATA 2017 2018 2019 2020 2021 2022 First Horizon Corporation $ 100.00 $ 67.66 $ 88.25 $ 72.21 $ 95.77 $ 147.43 S&P 500 Index 100.00 95.61 125.70 148.81 191.48 156.77 KBW Nasdaq Bank Index (BKX) 100.00 82.29 112.01 100.47 138.99 109.25 KBW Regional Bank Index (KRX) 100.00 82.51 102.20 93.33 127.53 118.71 Data source: Bloomberg Item 6. [reserved] 57 2022 FORM 10-K ANNUAL REPORT ITEM 7.
Table 5.1 TOTAL SHAREHOLDER RETURN DATA 2018 2019 2020 2021 2022 2023 First Horizon Corporation (FHN) $ 100.00 $ 130.43 $ 106.73 $ 141.55 $ 217.90 $ 131.82 S&P 500 Index 100.00 131.47 155.65 200.29 163.98 207.04 KBW Regional Bank Index (KRX) 100.00 123.87 113.11 154.57 143.87 143.30 KBW Nasdaq Bank Index (BKX) 100.00 136.12 122.09 168.90 132.76 131.58 Data source: Bloomberg Item 6. [Reserved] 53 2023 FORM 10-K ANNUAL REPORT ITEM 7.
Provision for credit losses increased to $95 million compared to a benefit of $310 million in 2021, largely reflecting the impact of loan growth and deterioration in the macroeconomic forecast. Noninterest income of $815 million decreased $261 million from 2021, largely driven by lower fixed income and mortgage banking and title income.
Provision for credit losses increased to $260 million compared to of $95 million in 2022, largely driven by loan growth, an uncertain macroeconomic outlook, and modest grade migration. Net charge-offs were $170 million compared to $59 million in 2022, largely reflecting the impact of an idiosyncratic credit loss on a single relationship.
Net interest income of $2.4 billion increased $398 million from 2021 reflecting the benefit of higher rates partially offset by higher funding costs. The net interest margin increased 62 basis points to 3.10% compared to 2.48% in 2021. Earning asset yields increased 79 basis points while the cost of interest-bearing liabilities increased 30 basis points.
The increase was largely driven by higher earning asset yields and loan growth partially offset by higher funding costs. FHN's net interest margin increased 32 basis points to 3.42% in 2023 compared to 2022 while the net interest spread decreased 41 basis points to 2.44% over the same period.
The decline in deposit balances largely reflects the continued downward trend from mid-2021 highs driven by elevated liquidity related to the COVID-19 pandemic. Tier 1 risk-based capital and total risk-based capital ratios at December 31, 2022 were 11.92% and 13.33%, respectively, compared to 11.04% and 12.34% at December 31, 2021.
Period-end deposits of $65.8 billion increased $2.3 billion, or 4%, from December 31, 2022 driven by an $8.6 billion increase in interest-bearing deposits offset by a $6.3 billion decrease in noninterest-bearing deposits. Tier 1 risk-based capital and total risk-based capital ratios at December 31, 2023 were 12.42% and 13.96%, respectively, compared to 11.92% and 13.33% at December 31, 2022.
Removed
Through the Bank and other subsidiaries, FHN offers regional banking, mortgage lending, specialized commercial lending, commercial leasing and equipment financing, brokerage, wealth management, capital markets, and other financial services to commercial, consumer, and governmental clients throughout the U.S.
Added
ITEM 6. Table of Contents 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.
Removed
Pursuant to the TD Merger Agreement, FHN and Merger Sub will merge (the “First Holding Company Merger”), with FHN continuing as the surviving entity in the merger.
Added
Under the terms of the termination agreement, TD made a $200 million cash payment to FHN, in addition to the $25 million fee reimbursement due to FHN pursuant to the TD Merger Agreement. Of the $200 million cash payment, FHN contributed $50 million to the First Horizon Foundation.
Removed
Following the First Holding Company Merger, at the election of TD, FHN and TD-US will merge (the “Second Holding Company Merger” and, together with the First Holding Company Merger, the “Holding Company Mergers”), with TD-US continuing as the surviving entity in the merger.
Added
FDIC Special Assessment In November 2023, the FDIC approved a final rule to implement a special assessment on banks to replenish the deposit insurance fund in connection with the three large bank failures in 2023.
Removed
Upon the terms and subject to the conditions set forth in the TD Merger Agreement, each share of FHN common stock, par value $0.625 per share, (“Company Common Stock”), issued and outstanding immediately prior to the effective time of the First Holding Company Merger (the “First Effective Time”) will be converted into the right to receive $25.00 (USD) per share in cash, without interest.
Added
The special assessment will be 13.4 basis points per year imposed on certain deposits over eight quarters, starting with the first quarterly assessment period of 2024.
Removed
Because the transaction did not close on or before November 27, 2022, shareholders will receive an additional $0.65 per share of Company Common Stock on an annualized basis (or approximately 5.4 cents per month) for the period from November 27, 2022 through the day immediately prior to the closing.
Added
Noninterest income of $927 million increased $112 million from 2022, largely driven by the gain on merger termination partially offset by lower fixed income and mortgage banking and title income. Noninterest expense of $2.1 billion increased $126 million from 2022, largely attributable to the FDIC special assessment and the contribution to the First Horizon Foundation discussed above.
Removed
Each outstanding share of FHN’s preferred stock, series B, C, D, E and F, will remain issued outstanding in connection with the First Holding Company Merger.
Removed
If TD elects to effect the Second Holding Company Merger, at the effective time of the Second Holding Company Merger, each outstanding share of FHN’s preferred stock will be converted into a share of a newly created, corresponding series of TD-US having terms as described in the TD Merger Agreement.
Removed
Following the completion of the First Holding Company Merger, at such time as determined by TD, First Horizon Bank and TD Bank, N.A., a national banking association (“TDBNA”) will merge, with TDBNA surviving as a subsidiary of TD-US (the “Bank Merger” and together with the Holding Company Mergers, the “Pending TD Merger”).
Removed
In connection with the TD Merger Agreement, TD purchased from FHN shares of non-voting Perpetual Convertible Preferred Stock, Series G, a new series of preferred stock of FHN (the “Series G Convertible Preferred Stock”) in a private placement transaction having an aggregate liquidation preference and purchase price of approximately $494 million, pursuant to a securities purchase agreement between FHN and TD entered into concurrently with the execution and delivery of the TD Merger Agreement.
Removed
The Series G Convertible Preferred Stock is convertible into up to 4.9% of the outstanding shares of Company Common Stock in certain circumstances, including the closing of the Pending TD Merger or the termination of the TD Merger Agreement. The Pending TD Merger is subject to customary closing conditions, including approvals from U.S. and Canadian regulatory authorities.
Removed
FHN's shareholders approved the Pending TD Merger on May 31, 2022. On February 9, 2023, FHN and TD agreed to extend the outside date to May 27, 2023.
Removed
Subsequent to the extension, TD recently informed FHN that TD does not expect that the necessary regulatory approvals will be received in time to complete the Pending TD Merger by May 27, 2023, and that TD cannot provide a new projected closing date at this time.
Removed
TD has initiated discussions with FHN regarding a potential further extension of the outside date. There can be no assurance that an extension will ultimately be agreed or that TD will satisfy all regulatory requirements so that the regulatory approvals required to complete the Pending TD Merger will be received. 59 2022 FORM 10-K ANNUAL REPORT ITEM 7.
Removed
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents Either TD or First Horizon may unilaterally elect to terminate the TD Merger Agreement in certain circumstances set forth in the TD Merger Agreement.
Removed
Commercial loan growth was tempered by a decrease of $2.3 billion in loans to mortgage companies and a decrease of $962 million in PPP loans. Period-end deposits of $63.5 billion decreased $11.4 billion, or 15%, from December 31, 2021 driven by a $7.0 billion decrease in interest-bearing deposits and a $4.4 billion decrease in noninterest-bearing deposits.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

214 edited+155 added−167 removed127 unchanged
Biggest changeThe 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: Table 7.20a REGULATORY CAPITAL DATA (Dollars in millions) December 31, 2022 December 31, 2021 FHN shareholders’ equity $ 8,252 $ 8,199 Modified CECL transitional amount (a) 85 114 FHN non-cumulative perpetual preferred (1,014) (520) Common equity tier 1 before regulatory adjustments $ 7,323 $ 7,793 Regulatory adjustments: Disallowed goodwill and other intangibles (1,658) (1,711) Net unrealized (gains) losses on securities available for sale 972 36 Net unrealized (gains) losses on pension and other postretirement plans 269 255 Net unrealized (gains) losses on cash flow hedges 126 (3) Disallowed deferred tax assets — (2) Other deductions from common equity tier 1 — (1) Common equity tier 1 $ 7,032 $ 6,367 FHN non-cumulative perpetual preferred (b) 920 426 Qualifying noncontrolling interest—First Horizon Bank preferred stock 295 295 Tier 1 capital $ 8,247 $ 7,088 Tier 2 capital 975 830 Total regulatory capital $ 9,222 $ 7,918 Risk-Weighted Assets First Horizon Corporation $ 69,163 $ 64,183 First Horizon Bank 68,728 63,601 Average Assets for Leverage First Horizon Corporation 79,583 87,683 First Horizon Bank 78,923 86,953 83 2022 FORM 10-K ANNUAL REPORT ITEM 7.
Biggest changeMANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents Table 7.19a REGULATORY CAPITAL DATA (Dollars in millions) December 31, 2023 December 31, 2022 FHN shareholders’ equity $ 8,996 $ 8,252 Modified CECL transitional amount (a) 57 85 FHN non-cumulative perpetual preferred (520) (1,014) Common equity tier 1 before regulatory adjustments $ 8,533 $ 7,323 Regulatory adjustments: Disallowed goodwill and other intangibles $ (1,617) $ (1,658) Net unrealized (gains) losses on securities available for sale 836 972 Net unrealized (gains) losses on pension and other postretirement plans 273 269 Net unrealized (gains) losses on cash flow hedges 79 126 Common equity tier 1 $ 8,104 $ 7,032 FHN non-cumulative perpetual preferred (b) 426 920 Qualifying noncontrolling interest—First Horizon Bank preferred stock 295 295 Tier 1 capital $ 8,825 $ 8,247 Tier 2 capital 1,097 975 Total regulatory capital $ 9,922 $ 9,222 Risk-Weighted Assets First Horizon Corporation $ 71,074 $ 69,163 First Horizon Bank 70,635 68,728 Average Assets for Leverage First Horizon Corporation $ 82,540 $ 79,583 First Horizon Bank 81,898 78,923 Table 7.19b REGULATORY RATIOS & AMOUNTS December 31, 2023 December 31, 2022 (Dollars in millions) Ratio Amount Ratio Amount Common Equity Tier 1 First Horizon Corporation 11.40 % $ 8,104 10.17 % $ 7,032 First Horizon Bank 11.40 8,055 10.77 7,405 Tier 1 First Horizon Corporation 12.42 8,825 11.92 8,247 First Horizon Bank 11.82 8,350 11.20 7,700 Total First Horizon Corporation 13.96 9,922 13.33 9,222 First Horizon Bank 13.17 9,303 12.41 8,532 Tier 1 Leverage First Horizon Corporation 10.69 8,825 10.36 8,247 First Horizon Bank 10.20 8,350 9.76 7,700 Other Capital Ratios Total period-end equity to period-end assets 11.38 10.83 Tangible common equity to tangible assets (c) 8.48 7.12 Adjusted tangible common equity to risk weighted assets (c) 10.72 9.35 (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, 2023.
Government. FHN’s investment portfolio consists principally of debt securities available for sale. FHN maintains a highly-rated securities portfolio consisting primarily of government agency 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.
Government. FHN’s investment securities portfolio consists principally of debt securities available for sale. FHN maintains a highly-rated securities portfolio consisting primarily of government agency 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.
FHN assesses and manages credit risk through a series of policies, processes, measurement systems, and controls. The Credit Risk Management Committee 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.
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.
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. HELOC's nearing the end of the draw period are closely monitored.
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.
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 OREO (excluding OREO from government insured mortgages).
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).
This program consolidated into a single share purchase program all of the previously authorized compensation plan share programs, as well as the renewal of the authorization to purchase shares for use in connection with two compensation plans for which the share purchase authority had expired.
This program consolidated into a single share purchase program all of the previously authorized compensation plan share programs as well as the renewal of the authorization to purchase shares for use in connection with compensation plans for which the share purchase authority had expired.
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.
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.
Within the HELOC and real estate installment loans classes of the consumer portfolio segment, TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 1% for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio.
Within the HELOC and real estate installment loans classes of the consumer portfolio segment, troubled loans are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 1% for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio.
The Capital & Stress Testing Committee also recommends capital management policies, which are submitted for approval to ALCO and the Risk Committee and the Board as necessary.
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.
Capital ratios for both FHN and First Horizon Bank as of December 31, 2022 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.
Capital ratios for both FHN and First Horizon Bank as of December 31, 2023 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.
Based on a static balance sheet as of December 31, 2022, 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 200 basis points are estimated to have variances as shown in the table below.
Based on a static balance sheet as of December 31, 2023, 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 200 basis points are estimated to have variances as shown in the table below.
The liability contemplates repurchase/make-whole and damages obligations and estimates for probable incurred losses associated with loan populations excluded from the settlements with the GSEs, as well as other whole loans sold, mortgage insurance cancellations rescissions, and loans included in bulk servicing sales effected prior to the settlements with the GSEs.
The liability contemplates repurchase/make-whole and damages obligations and estimates for probable incurred losses associated with 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.
The 2021 program is not tied to any compensation plan. Purchases 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 2024 program is not tied to any compensation plan. Purchases 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 CEO utilizes the executive management team and the Management Risk Committee to carry out these duties and to analyze existing and emerging strategic and reputation risks and determines the appropriate course of action. The Management Risk Committee is comprised of the CEO and certain officers designated by the CEO.
The CEO utilizes the executive management team and the Management Risk Committee to carry out these duties and to analyze existing and emerging strategic and reputational risks and determines the appropriate course of action. The Management Risk Committee is comprised of the CEO and certain officers designated by the CEO.
To obtain a consumer real estate loan, the loan applicant(s) in most cases 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.
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.
Within the credit card class of the consumer portfolio segment, TDRs 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.
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.
Permanent mortgage TDRs are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 2% for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio.
Permanent mortgage troubled loans are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 2% for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio.
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 2022 CCAR Resubmission Severely Adverse scenario.
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 2023 CCAR Severely Adverse scenario.
FHN paid cash dividends of $1,625 per Series E preferred share and $1,175 per Series F preferred share on January 10, 2023 and $331.25 per Series B preferred share and $165 per Series C preferred share on February 1, 2023.
FHN paid cash dividends of $1,625 per Series E preferred share and $1,175 per Series F preferred share on January 10, 2024 and $331.25 per Series B preferred share and $165 per Series C preferred share on February 1, 2024.
The following table provides FHN’s most recent credit ratings: Table 7.27 CREDIT RATINGS Moody's (a) Fitch (b) First Horizon Corporation Overall credit rating: Long-term/Short-term/Outlook Baa3/--/RUR BBB/F2/RWP 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/RUR BBB/F2/RWP Long-term/short-term deposits A3/P-2 BBB+/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.
The following table provides FHN’s most recent credit ratings: Table 7.27 CREDIT RATINGS Moody's (a) Fitch (b) First Horizon Corporation Overall credit rating: Long-term/Short-term/Outlook Baa3/--/NEG 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/NEG BBB/F2/Stable Long-term/short-term deposits A3/P-2 BBB+/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.
Loans to mortgage companies and borrowers in the finance and insurance industry were 20% of FHN’s C&I loan portfolio as of December 31, 2022, and as a result could be affected by items that uniquely impact the financial services industry.
Loans to mortgage companies and borrowers in the finance and insurance industry were 18% and 20% of FHN’s C&I loan portfolio as of December 31, 2023 and 2022, respectively, and as a result could be affected by items that uniquely impact the financial services industry.
As of December 31, 2022, both FHN and First Horizon Bank had sufficient capital to qualify as well-capitalized institutions and to meet the capital conservation buffer requirement.
As of December 31, 2023, both FHN and First Horizon Bank had sufficient capital to qualify as well-capitalized institutions and to meet the capital conservation buffer requirement.
First Horizon Bank paid preferred dividends in each quarter of 2022 and 2021 and declared preferred dividends in the first quarter of 2023 which are payable in April 2023. Payment of a dividend to shareholders of FHN is dependent on several factors which are considered by the Board.
First Horizon Bank declared and paid preferred dividends in each quarter of 2023 and 2022. Additionally, First Horizon Bank declared preferred dividends in first quarter 2024, payable in April 2024. Payment of a dividend to shareholders of FHN is dependent on several factors which are considered by the Board.
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, 2022 and 2021, FHN had held-to-maturity consumer mortgage loans secured by real estate totaling $42 million and $20 million, respectively, that were in the process of foreclosure.
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, 2023 and 2022, FHN had held-to-maturity consumer mortgage loans secured by real estate totaling $29 million and $42 million, respectively, that were in the process of foreclosure.
Separate measures of these component risks are as follows: Table 7.23 SCHEDULE OF RISKS INCLUDED IN VaR As of December 31, 2022 As of December 31, 2021 (Dollars in millions) 1-day 10-day 1-day 10-day Interest rate risk $ 1 $ 3 $ 1 $ 1 Credit spread risk 1 2 1 1 The potential risk of loss reflected by FHN’s VaR measures assumes the trading securities inventory is static.
Separate measures of these component risks are as follows: Table 7.22 SCHEDULE OF RISKS INCLUDED IN VaR As of December 31, 2023 As of December 31, 2022 (Dollars in millions) 1-day 10-day 1-day 10-day Interest rate risk $ 1 $ 2 $ 1 $ 3 Credit spread risk 1 1 1 2 The potential risk of loss reflected by FHN’s VaR measures assumes the trading securities inventory is static.
HELOCs comprised $2.0 billion of the consumer real estate portfolio for both December 31, 2022 and December 31, 2021. FHN’s HELOCs typically have a 5 or 10 year draw period followed by a 10 or 20 year repayment period, respectively.
HELOCs comprised $2.2 billion and $2.0 billion of the consumer real estate portfolio for December 31, 2023 and 2022, respectively. FHN’s HELOCs typically have a 5 or 10 year draw period followed by a 10 or 20 year repayment period, respectively.
(b) Includes goodwill and other intangible assets, net of amortization. (c) Defined by and calculated in conformity with bank regulations applicable to FHN. 103 2022 FORM 10-K ANNUAL REPORT ITEM 7A. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK Table of Contents Item 7A.
(b) Includes goodwill and other intangible assets, net of amortization. (c) Defined by and calculated in conformity with bank regulations applicable to FHN. 99 2023 FORM 10-K ANNUAL REPORT ITEM 7A. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK Table of Contents
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, 2022, approximately 92% of FHN's HELOCs were in the draw period compared to 88% at the end of 2021.
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, 2023, approximately 94% of FHN's HELOCs were in the draw period compared to 92% at the end of 2022.
A flattening yield curve scenario where long-term rates decrease by 50 basis points and short-term rates are static, results in 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. 89 2022 FORM 10-K ANNUAL REPORT ITEM 7.
A flattening yield curve scenario where long-term rates decrease by 50 basis points and short-term rates are static, results in an unfavorable NII variance of 0.5%. 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. 84 2023 FORM 10-K ANNUAL REPORT ITEM 7.
Finance and Insurance The finance and insurance component represented 13% of the C&I portfolio as of December 31, 2022 compared to 11% at the end of 2021 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.
Finance and Insurance The finance and insurance component represented 12% of the C&I portfolio as of December 31, 2023 compared to 13% at the end of 2022 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.
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 $840 million as of December 31, 2022 and $910 million as of December 31, 2021.
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 $793 million as of December 31, 2023 and $840 million as of December 31, 2022.
Credit Ratings FHN is currently able to fund a majority of the balance sheet through core deposits, which are generally not as sensitive to FHN’s credit ratings as other types of funding.
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.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents Table 7.22 VaR & SVaR MEASURES Year Ended December 31, 2022 As of December 31, 2022 (Dollars in millions) Mean High Low 1-day VaR $ 2 $ 4 $ 2 $ 3 SVaR 5 7 4 6 10-day VaR 8 11 3 10 SVaR 24 34 18 29 Year Ended December 31, 2021 As of December 31, 2021 (Dollars in millions) Mean High Low 1-day VaR $ 1 $ 4 $ 1 $ 2 SVaR 4 7 2 5 10-day VaR 5 21 1 5 SVaR 18 27 11 22 FHN’s overall VaR measure includes both interest rate risk and credit spread risk.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents Table 7.21 VaR & SVaR MEASURES 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 Year Ended December 31, 2022 As of December 31, 2022 (Dollars in millions) Mean High Low 1-day VaR $ 2 $ 4 $ 2 $ 3 SVaR 5 7 4 6 10-day VaR 8 11 3 10 SVaR 24 34 18 29 FHN’s overall VaR measure includes both interest rate risk and credit spread risk.
Based on when draw periods are scheduled to end per the line agreement, it is expected that $519 million, or 28%, of HELOCs currently in the draw period will enter the repayment period during the next 60 months, based on current terms.
Based on when draw periods are scheduled to end per the line agreement, it is expected that $571 million, or 27%, of HELOCs currently in the draw period will enter the repayment period during the next 60 months, based on current terms.
Curve steepening - assumes an instantaneous steepening of the interest rate yield curve through a decrease in short-term rates and an increase in long- 88 2022 FORM 10-K ANNUAL REPORT ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents term rates.
Curve steepening - assumes an instantaneous steepening of the interest rate yield curve through a decrease in short-term rates and an increase in long- 83 2023 FORM 10-K ANNUAL REPORT ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents term rates.
The largest geographical concentrations of balances as of December 31, 2022 were in Tennessee (21%), Florida (13%), Texas (11%), North Carolina (7%), Louisiana (7%), California (5%), and Georgia (5%), with no other state representing more than 5% of the portfolio. The following table provides the composition of the C&I portfolio by industry as of December 31, 2022 and 2021.
The largest geographical concentrations of balances as of December 31, 2023 were in Tennessee (21%), Florida (13%), Texas (11%), North Carolina (7%), Louisiana (6%), Georgia (5%), and California (5%) 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, 2023 and 2022.
Commercial Loan Modifications As part of FHN’s credit risk management governance processes, the Loan Rehab and Recovery Department (LRRD) is responsible for managing most commercial relationships with borrowers whose financial condition has deteriorated to such an extent that the credits are being considered for impairment, classified as substandard or worse, placed on nonaccrual status, foreclosed or in process of foreclosure, or in active or contemplated litigation.
Commercial Loan Modifications As part of FHN’s credit risk management governance processes, the Loan Rehab and Recovery Department (LRRD) 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.
(b) Calculated using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 21%, and where applicable, state income taxes. 62 2022 FORM 10-K ANNUAL REPORT ITEM 7.
(b) Calculated using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 21%, and where applicable, state income taxes. 57 2023 FORM 10-K ANNUAL REPORT ITEM 7.
(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 $3.2 billion, or 6%, to $58.1 billion as of December 31, 2022, driven by a $1.8 billion increase in commercial loans and a $1.4 billion increase in consumer loans.
(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 $3.2 billion, or 5%, to $61.3 billion as of December 31, 2023, driven by a $1.8 billion increase in commercial loans and a $1.4 billion increase in consumer loans.
Consumer loans are composed of consumer real estate loans and credit card and other loans. FHN has a concentration of residential real estate loans of 21% and 20% of total loans in 2022 and 2021, respectively. Industry concentrations are discussed under the C&I heading below.
Consumer loans are composed of consumer real estate loans and credit card and other loans. FHN has a concentration of residential real estate loans of 23% and 21% of total loans in 2023 and 2022, respectively. Industry concentrations are discussed under the C&I heading below.
Table 7.24 INTEREST RATE SENSITIVITY Shifts in Interest Rates (in bps) % Change in Projected Net Interest Income -100 (7.4)% -50 (3.6)% -25 (1.8)% +25 1.8% +50 3.6% +100 7.0% +200 11.5% 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%.
Table 7.23 INTEREST RATE SENSITIVITY Shifts in Interest Rates (in bps) % Change in Projected Net Interest Income -100 (3.6)% -50 (1.7)% -25 (0.9)% +25 0.7% +50 1.4% +100 2.6% +200 3.3% 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 0.4%.
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. 67 2022 FORM 10-K ANNUAL REPORT ITEM 7.
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. 62 2023 FORM 10-K ANNUAL REPORT ITEM 7.
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 $893 million as of January 1, 2023.
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 $1.2 billion as of January 1, 2024.
(d) Ratio is non-performing assets related to the loan and lease portfolio to total loans plus foreclosed real estate and other assets. 78 2022 FORM 10-K ANNUAL REPORT ITEM 7.
(d) Ratio is non-performing assets related to the loan and lease portfolio to total loans plus foreclosed real estate and other assets. 73 2023 FORM 10-K ANNUAL REPORT ITEM 7.
Generally, new loan originations to mortgage lenders increase when there is a decline in mortgage rates and decrease when rates rise; in 2022, rates rose. In periods of economic uncertainty, this trend may not occur even if interest rates are declining. In 2022, approximately 73% of the loan originations were home purchases and 27% were refinance transactions.
Generally, new loan originations to mortgage lenders increase when there is a decline in mortgage rates and decrease when rates rise; in 2023, rates rose. In periods of economic uncertainty, this trend may not occur even if interest rates are declining. In 2023, approximately 90% of the loan originations were home purchases and 10% were refinance transactions.
A summary of FHN's VaR and SVaR measures for 1-day and 10-day time horizons is presented in the following table: 87 2022 FORM 10-K ANNUAL REPORT ITEM 7.
A summary of FHN's VaR and SVaR measures for 1-day and 10-day time horizons is presented in the following table: 82 2023 FORM 10-K ANNUAL REPORT ITEM 7.
A deferred tax asset 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.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents A deferred tax asset 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.
The following table shows the HELOCs currently in the draw period and expected timing of conversion to the repayment period. 73 2022 FORM 10-K ANNUAL REPORT ITEM 7.
The following table shows the HELOCs currently in the draw period and expected timing of conversion to the repayment period. 68 2023 FORM 10-K ANNUAL REPORT ITEM 7.
Specific Risk Committees: The Board has delegated authority to the Chief Executive Officer to manage Business Strategy and Reputation Risk, and the general business affairs of FHN under the Board’s oversight.
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.
As of December 31, 2022, approximately 88% of the consumer real estate portfolio was in a first lien position. As of December 31, 2022, the weighted average FICO score at origination of this portfolio was 757 and the refreshed FICO scores averaged 754, no significant change from FICO scores of 755 and 754, respectively, as of December 31, 2021.
As of December 31, 2023, 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, 2023, no significant change from FICO scores of 757 and 754, respectively, as of December 31, 2022.
Loans 90 days or more past due and still accruing were $33 million as of December 31, 2022 compared to $40 million as of December 31, 2021.
Loans 90 days or more past due and still accruing were $21 million as of December 31, 2023 compared to $33 million as of December 31, 2022.
(c) Under the original terms of the loans, estimated interest income would have been approximately $21 million, $19 million, and $18 million during 2022, 2021 and 2020, respectively 77 2022 FORM 10-K ANNUAL REPORT ITEM 7.
(c) Under the original terms of the loans, estimated interest income would have been approximately $35 million, $21 million, and $19 million during 2023, 2022 and 2021, respectively. 72 2023 FORM 10-K ANNUAL REPORT ITEM 7.
FHN’s net DTA were $313 million and $52 million at December 31, 2022 and 2021, respectively. As of December 31, 2022, FHN had deferred tax asset balances related to federal and state income tax carryforwards of $34 million and $2 million, which will expire at various dates. Refer to Note 14 - Income Taxes for additional information.
FHN’s net DTA were $215 million and $313 million at December 31, 2023 and 2022, respectively. As of December 31, 2023, FHN had deferred tax asset balances related to federal and state income tax carryforwards of $32 million and $3 million, which will expire at various dates. Refer to Note 14 - Income Taxes for additional information.
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, 2022, FHN utilized Moody's Baseline, S1 (more favorable) and S2 (adverse) scenarios for the calculation of the ALLL.
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, 2023, FHN utilized Moody's Baseline and S3 (adverse) scenarios for the calculation of the ALLL.
(b) Industries in this category each comprise less than 5% for 2022. 71 2022 FORM 10-K ANNUAL REPORT ITEM 7.
(b) Industries in this category each comprise less than 5% for 2023. 66 2023 FORM 10-K ANNUAL REPORT ITEM 7.
Investment securities were $10.2 billion and $9.4 billion on December 31, 2022 and 2021, representing 13% and 11% of total assets, respectively. See Note 2 - Investment Securities for more information about the securities portfolio.
Investment securities were $9.7 billion and $10.2 billion on December 31, 2023 and 2022, representing 12% and 13% of total assets, respectively. See Note 2 - Investment Securities for more information about the securities portfolio.
Held-for-sale consumer mortgage loans secured by residential real estate in process of foreclosure totaled $3 million for both December 31, 2022 and 2021. 69 2022 FORM 10-K ANNUAL REPORT ITEM 7.
Held-for-sale consumer mortgage loans secured by residential real estate in process of foreclosure totaled $2 million and $3 million for December 31, 2023 and 2022, respectively. 64 2023 FORM 10-K ANNUAL REPORT ITEM 7.
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.
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.
Purchase obligations represent obligations under agreements to purchase goods or 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. 93 2022 FORM 10-K ANNUAL REPORT ITEM 7.
Purchase obligations represent obligations under agreements to purchase goods or 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.
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 for additional discussion of these instruments.
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 for additional discussion of these instruments. LIBOR & Reference Rate Reform In March 2022, Congress passed the Adjustable Interest Rate (LIBOR) Act.
Table 7.15 ACCRUING DELINQUENCIES December 31 (Dollars in millions) 2022 2021 2020 Accruing loans and leases 30+ days past due C&I $ 61 $ 58 $ 15 CRE 11 13 23 Consumer real estate 55 70 69 Credit card and other 11 7 10 Total accruing loans and leases 30+ days past due $ 138 $ 148 $ 117 Accruing loans and leases 30+ days past due % C&I 0.19 % 0.19 % 0.05 % CRE 0.08 0.11 0.19 Consumer real estate 0.44 0.65 0.58 Credit card and other 1.28 0.76 0.87 Total accruing loans and leases 30+ days past due % 0.24 % 0.27 % 0.20 % Accruing loans and leases 90+ days past due (a) (b) (c) C&I $ 11 $ 5 $ — CRE — — — Consumer real estate 18 33 16 Credit card and other 4 2 1 Total accruing loans and leases 90+ days past due $ 33 $ 40 $ 17 Loans held for sale 30 to 89 days past due (b) $ 10 $ 7 $ 6 30 to 89 days past due - guaranteed portion (b) (d) 7 2 5 90+ days past due (b) 16 24 12 90+ days past due - guaranteed portion (b) (d) 6 12 10 (a) Excludes loans classified as held for sale.
Table 7.15 ACCRUING DELINQUENCIES & OTHER CREDIT DISCLOSURES December 31, (Dollars in millions) 2023 2022 2021 Accruing loans and leases 30+ days past due C&I $ 32 $ 61 $ 58 CRE 8 11 13 Consumer real estate 57 55 70 Credit card and other 8 11 7 Total accruing loans and leases 30+ days past due $ 105 $ 138 $ 148 Accruing loans and leases 30+ days past due % C&I 0.10 % 0.19 % 0.19 % CRE 0.06 0.08 0.11 Consumer real estate 0.42 0.44 0.65 Credit card and other 1.03 1.28 0.76 Total accruing loans and leases 30+ days past due % 0.17 % 0.24 % 0.27 % Accruing loans and leases 90+ days past due (a) (b) (c) C&I $ 1 $ 11 $ 5 CRE — — — Consumer real estate 17 18 33 Credit card and other 3 4 2 Total accruing loans and leases 90+ days past due $ 21 $ 33 $ 40 Loans held for sale 30 to 89 days past due (b) $ 12 $ 10 $ 7 30 to 89 days past due - guaranteed portion (b) (d) 8 7 2 90+ days past due (b) 9 16 24 90+ days past due - guaranteed portion (b) (d) 4 6 12 (a) Excludes loans classified as held for sale.
First Horizon Bank declared and paid common dividends to the parent company in the amount of $435 million in 2022 and $770 million in 2021. In January 2023, First Horizon Bank declared and paid a common dividend to the parent company in the amount of $110 million.
First Horizon Bank declared and paid common dividends to the parent company in the amount of $220 million in 2023 and $435 million in 2022. In January 2024, First Horizon Bank declared and paid a common dividend to the parent company in the amount of $310 million.
Per the legislation, at the final cessation of USD LIBOR, banks may cause such loans to fall back to a SOFR-based benchmark rate, with such rate to be selected by the Federal Reserve Board. The LIBOR Act also provides safe harbor from liability for banks that 97 2022 FORM 10-K ANNUAL REPORT ITEM 7.
Per the legislation, at the final cessation of USD LIBOR, banks may cause such loans to fall back to a SOFR-based benchmark rate, with such rate to be selected by the Federal Reserve Board. The LIBOR Act also provides safe harbor from liability for banks that select the Board-selected replacement benchmark rate at the cessation of LIBOR.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents The following table provides nonperforming assets by business segment: Table 7.14 NONPERFORMING ASSETS BY SEGMENT December 31 (Dollars in millions) 2022 2021 2020 Nonperforming loans and leases (a) (b) Regional Banking $ 227 $ 163 $ 216 Specialty Banking 60 78 117 Corporate 29 34 53 Consolidated $ 316 $ 275 $ 386 Foreclosed real estate (c) Regional Banking $ — $ 2 $ 12 Specialty Banking 2 — 1 Corporate 1 1 2 Consolidated $ 3 $ 3 $ 15 Nonperforming Assets (a) (b) (c) Regional Banking $ 227 $ 165 $ 228 Specialty Banking 62 78 118 Corporate 30 35 55 Consolidated $ 319 $ 278 $ 401 Nonperforming loans and leases to total loans and leases Regional Banking 0.54 % 0.43 % 0.54 % Specialty Banking 0.37 0.48 0.68 Corporate 6.28 5.39 5.70 Consolidated 0.54 % 0.50 % 0.66 % NPA % (d) Regional Banking 0.55 % 0.44 % 0.57 % Specialty Banking 0.39 0.48 0.68 Corporate 6.54 5.51 5.87 Consolidated 0.55 % 0.51 % 0.69 % (a) Excludes loans and leases that are 90 or more days past due and still accruing interest.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents The following table provides nonperforming assets by business segment: Table 7.14 NONPERFORMING ASSETS BY SEGMENT December 31, (Dollars in millions) 2023 2022 2021 Nonperforming loans and leases (a) (b) Regional Banking $ 323 $ 227 $ 163 Specialty Banking 116 60 78 Corporate 23 29 34 Consolidated $ 462 $ 316 $ 275 Foreclosed real estate (c) Regional Banking $ 1 $ — $ 2 Specialty Banking 3 2 — Corporate — 1 1 Consolidated $ 4 $ 3 $ 3 Nonperforming Assets (a) (b) (c) Regional Banking $ 324 $ 227 $ 165 Specialty Banking 119 62 78 Corporate 23 30 35 Consolidated $ 466 $ 319 $ 278 Nonperforming loans and leases to total loans and leases Regional Banking 0.74 % 0.54 % 0.43 % Specialty Banking 0.68 0.37 0.48 Corporate 4.87 6.28 5.39 Consolidated 0.75 % 0.54 % 0.50 % NPA % (d) Regional Banking 0.74 % 0.55 % 0.44 % Specialty Banking 0.70 0.39 0.48 Corporate 4.96 6.54 5.51 Consolidated 0.76 % 0.55 % 0.51 % (a) Excludes loans and leases that are 90 or more days past due and still accruing interest.
The largest geographical concentrations of balances in the consumer real estate portfolio as of December 31, 2022 were in Florida (30%), Tennessee (22%), Louisiana (9%), Texas (9%), North Carolina (7%), and New York (5%), with no other state representing more than 5% of the portfolio.
The largest geographical concentrations of balances in the consumer real estate portfolio as of December 31, 2023 were in Florida (29%), Tennessee (22%), Texas (11%), Louisiana (8%), North Carolina (7%), New York (5%), and Georgia (5%), with no other state representing 5% or more of the portfolio.
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 repurchase and foreclosure liability was $16 million and $17 million as of December 31, 2022 and 2021, respectively.
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.
Common Stock Purchase Programs Pursuant to Board authority, 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. FHN’s Board has not authorized a preferred stock purchase program.
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.
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 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 90 2023 FORM 10-K ANNUAL REPORT ITEM 7.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents Consumer real estate 1.71 1.59 2.15 Credit card and other 3.72 2.09 2.30 Total ACL / loans and leases % 1.33 % 1.34 % 1.80 % Net charge-offs (recoveries) C&I $ 53 $ 13 $ 120 CRE — — 1 Consumer real estate (14) (22) (10) Credit card and other 20 11 9 Total net charge-offs $ 59 $ 2 $ 120 Average loans and leases C&I $ 30,969 $ 32,010 $ 27,638 CRE 12,722 12,314 8,508 Consumer real estate 11,397 10,969 9,191 Credit card and other 864 1,005 846 Total average loans and leases $ 55,952 $ 56,298 $ 46,183 Charge-off % C&I 0.17 % 0.04 % 0.43 % CRE — 0.01 0.01 Consumer real estate NM NM NM Credit card and other 2.39 1.05 1.04 Total charge-off % 0.11 % — % 0.26 % ALLL / net charge-offs C&I 578 % 2,645 % 376 % CRE NM 13,189 43,670 Consumer real estate NM NM NM Credit card and other 151 185 299 Total ALLL / net charge-offs 1,155 % 30,641 % 808 % 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.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents ACL / loans and leases % C&I 1.19 % 1.14 % 1.22 % CRE 1.36 1.27 1.37 Consumer real estate 1.79 1.71 1.59 Credit card and other 3.63 3.72 2.09 Total ACL / loans and leases % 1.40 % 1.33 % 1.34 % Net charge-offs (recoveries) C&I $ 142 $ 53 $ 13 CRE 15 — — Consumer real estate (5) (14) (22) Credit card and other 18 20 11 Total net charge-offs $ 170 $ 59 $ 2 Average loans and leases C&I $ 32,390 $ 30,969 $ 32,010 CRE 13,785 12,722 12,314 Consumer real estate 13,179 11,397 10,969 Credit card and other 815 864 1,005 Total average loans and leases $ 60,169 $ 55,952 $ 56,298 Charge-off % C&I 0.44 % 0.17 % 0.04 % CRE 0.10 — 0.01 Consumer real estate NM NM NM Credit card and other 2.18 2.39 1.05 Total charge-off % 0.28 % 0.11 % — % ALLL / net charge-offs C&I 239 % 578 % 2,645 % CRE 1,097 NM 13,189 Consumer real estate NM NM NM Credit card and other 162 151 185 Total ALLL / net charge-offs 455 % 1,155 % 30,641 % 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.
While every circumstance is different, LRRD 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, or entering into short sale agreements.
While every circumstance is different, LRRD 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.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents have at least 15% of cost invested in a project before FHN will provide loan funding. Income properties are required to achieve a debt service coverage ratio greater than or equal to 125% at inception or stabilization of the project based on loan amortization and a minimum underwriting interest rate.
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.
Loans 30 to 89 days past due were $105 million as of December 31, 2022 compared to $108 million as of December 31, 2021, largely reflecting lower commercial loan balances past due 30 to 89 days.
Loans 30 to 89 days past due and still accruing were $85 million as of December 31, 2023 compared to $105 million as of December 31, 2022, largely reflecting lower past due commercial loan balances.
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, 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.
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, and Technology. Risk management also works with business units and functional experts to establish appropriate operating standards and monitor business 81 2023 FORM 10-K ANNUAL REPORT ITEM 7.
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.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents 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.
Income-producing CRE loans Income-producing CRE loans are underwritten in accordance with credit policies and underwriting guidelines that are reviewed at least annually and revised as necessary based on market conditions. Loans are underwritten based upon project type, size, location, sponsorship, and other market-specific data.
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 reviewed at least annually and revised as necessary based on market conditions. Loans are underwritten based upon project type, size, location, sponsorship, and other market-specific data.
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.
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.
A summary of those results was posted in the “Events & Presentations” section on FHN’s investor relations website on August 26, 2022. Neither FHN’s stress test posting, nor any other material found on FHN’s website generally, is part of this report or incorporated herein.
A summary of those results was posted in the “Fixed Income - Stress Test Results” section on FHN’s investor relations website on September 29, 2023. Neither FHN’s stress test posting, nor any other material found on FHN’s website generally, is part of this report or incorporated herein.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents Table 7.13 NONPERFORMING ASSETS December 31 (Dollars in millions) 2022 2021 2020 Nonperforming loans and leases C&I $ 153 $ 125 $ 144 CRE 9 9 58 Consumer real estate 152 138 182 Credit card and other 2 3 2 Total nonperforming loans and leases (a) (c) $ 316 $ 275 $ 386 Nonperforming loans held-for-sale (a) $ 8 $ 7 $ 5 Foreclosed real estate and other assets (b) 3 3 15 Total nonperforming assets (a) (b) $ 327 $ 285 $ 406 Nonperforming loans and leases to total loans and leases C&I 0.48 % 0.40 % 0.43 % CRE 0.07 0.08 0.48 Consumer real estate 1.24 1.29 1.56 Credit card and other 0.27 0.31 0.18 Total NPL % 0.54 % 0.50 % 0.66 % ALLL / NPLs C&I 202 % 268 % 315 % CRE 1,554 1,671 415 Consumer real estate 131 118 133 Credit card and other 1,364 699 1,313 Total ALLL / NPLs 217 % 244 % 249 % (a) Excludes loans and leases that are 90 or more days past due and still accruing interest.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents Table 7.13 NONPERFORMING ASSETS December 31, (Dollars in millions) 2023 2022 2021 Nonperforming loans and leases C&I $ 184 $ 153 $ 125 CRE 136 9 9 Consumer real estate 140 152 138 Credit card and other 2 2 3 Total nonperforming loans and leases (a) (c) $ 462 $ 316 $ 275 Nonperforming loans held for sale (a) $ 3 $ 8 $ 7 Foreclosed real estate and other assets (b) 4 3 3 Total nonperforming assets (a) (b) $ 469 $ 327 $ 285 Nonperforming loans and leases to total loans and leases C&I 0.57 % 0.48 % 0.40 % CRE 0.96 0.07 0.08 Consumer real estate 1.02 1.24 1.29 Credit card and other 0.30 0.27 0.31 Total NPL % 0.75 % 0.54 % 0.50 % ALLL / NPLs C&I 184 % 202 % 268 % CRE 126 1,554 1,671 Consumer real estate 167 131 118 Credit card and other 1,202 1,364 699 Total ALLL / NPLs 167 % 217 % 244 % (a) Excludes loans and leases that are 90 or more days past due and still accruing interest.
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A) Table of Contents 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 2022 2021 (Dollars in millions) Balance Mix Balance Mix Securities available for sale: Government agency issued MBS and CMO $ 7,076 69 % $ 7,312 78 % Other U.S. government agencies (a) 1,163 12 850 9 States and municipalities 597 6 545 6 Total securities available for sale $ 8,836 87 % $ 8,707 93 % Securities held to maturity: Government agency issued MBS and CMO $ 1,371 13 % $ 712 7 % Total investment securities $ 10,207 100 % $ 9,419 100 % (a) Includes securities issued by government sponsored entities which are not backed by the full faith and credit of the U.S.
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 2023 2022 (Dollars in millions) Balance Mix Balance Mix Securities available for sale at fair value: Government agency issued MBS and CMO $ 6,630 68 % $ 7,076 69 % Other U.S. government agencies (a) 1,172 12 1,163 12 States and municipalities 589 6 597 6 Total securities available for sale $ 8,391 86 % $ 8,836 87 % Securities held to maturity at amortized cost: Government agency issued MBS and CMO $ 1,323 14 % $ 1,371 13 % Total investment securities $ 9,714 100 % $ 10,207 100 % (a) Includes securities issued by government sponsored entities which are not backed by the full faith and credit of the U.S.
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 (value is defined as the lower of cost or market) limits are set below regulatory prescribed ceilings and generally range between 50% and 80% depending on the underlying product set.
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 set. Term and amortization requirements are set based on prudent standards for interim real estate lending.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Quantitative and Qualitative Disclosures about Market Risk 104 Signatures 216 MD&A and Financial Statement References: In this report: "2022 MD&A" and "2022 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, "2022 Financial Statements" and "2022 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.
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Quantitative and Qualitative Disclosures About Market Risk The information called for by this Item is incorporated herein by reference to: 2023 MD&A (Item 7), which begins on page 54 of this report; Note 21—Derivatives, which begins on page 178 of this report; and Note 22—Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions, which begins on page 185 of this report.
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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 Bank First Horizon Bank BOLI Bank-owned life insurance C&I Commercial, financial, and industrial loan portfolio CAS Credit Assurance Services CARES Act Coronavirus Aid, Relief, and Economic Security Act CBF Capital Bank Financial CCAR Comprehensive Capital Analysis and Review 3 2022 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS and GLOSSARY CECL Current expected credit loss CEO Chief Executive Officer CFPB Consumer Financial Protection Bureau CMO Collateralized mortgage obligations Company First Horizon Corporation Corporation First Horizon Corporation CRA Community Reinvestment Act CRE Commercial Real Estate CRMC Credit Risk Management Committee DTA Deferred tax asset DTL Deferred tax liability EAD Exposure as 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 FTRESC FT Real Estate Securities Company, Inc.
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Within 2023 MD&A, these sections are especially pertin ent to this Item 7A: Market Risk Management and Interest Rate Risk Management which begin, respectively, on pages 82 and 84 of this report. Notes 21 and 22 are part of our 2023 Financial Statements (Item 8). 100 2023 FORM 10-K ANNUAL REPORT ITEM 8.
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GAAP Generally accepted accounting principles GSE Government sponsored enterprises, in this filing references Fannie Mae and Freddie Mac HELOC Home equity line of credit HFS Held for sale 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 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 LOCOM Lower of cost or market LRRD Loan Rehab and Recovery Department 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 NM Not meaningful NMTC New Markets Tax Credit NPA Nonperforming asset Non-PCD Non-Purchased Credit Deteriorated Financial Assets NPL Nonperforming loan OREO Other Real Estate-owned PCAOB Public Company Accounting Oversight Board PCD Purchased Credit Deteriorated Financial Assets PCI Purchased credit impaired PD Probability of default PM Portfolio managers PPP Paycheck Protection Program PSU Performance Stock Unit RE Real estate RM Relationship managers ROA Return on Assets ROU Right of use RPL Reasonably possible loss SBA Small Business Administration SEC Securities and Exchange Commission SOFR Secure Overnight Funding Rate SVaR Stressed Value-at-Risk TD The Toronto-Dominion Bank TDBNA TD Bank, N.A.
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FINANCIAL STATEMENTS & SUPPLEMENTARY DATA Table of Contents ITEM 8 TOPICS Item 8.
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TD-US TD Bank US Holding Company TD Merger Agreement Merger agreement between FHN, TD, TD-US, and a TD-US subsidiary Pending TD Merger The merger transactions contemplated by the TD Merger Agreement Bank Merger Agreement Merger agreement providing for the merger of the Bank into TDBNA TDR Troubled Debt Restructuring 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 4 2022 FORM 10-K ANNUAL REPORT EXECUTIVE SUMMARY OF PRINCIPAL INVESTMENT RISKS Table of Contents 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.
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Financial Statements and Supplementary Data TABLE OF ITEM 8 TOPICS Report of Management on Internal Control Over Financial Reporting 103 Report of Independent Registered Public Accounting Firm 104 Consolidated Balance Sheets 108 Consolidated Statements of Income 109 Consolidated Statements of Comprehensive Income 111 Consolidated Statements of Changes in Equity 112 Consolidated Statements of Cash Flows 113 Notes to the Consolidated Financial Statements 115 Note 1 Significant Accounting Policies 115 Note 2 Investment Securities 128 Note 3 Loans and Leases 131 Note 4 Allowance for Credit Losses 140 Note 5 Premises, Equipment, and Leases 143 Note 6 Goodwill and Other Intangible Assets 146 Note 7 Mortgage Banking Activity 147 Note 8 Deposits 148 Note 9 Short-Term Borrowings 149 Note 10 Term Borrowings 150 Note 11 Preferred Stock 152 Note 12 Regulatory Capital and Restrictions 154 Note 13 Components of Other Comprehensive Income (Loss) 156 Note 14 Income Taxes 157 Note 15 Earnings Per Share 161 Note 16 Contingencies and Other Disclosures 162 Note 17 Retirement Plans and Other Employee Benefits 164 Note 18 Stock Options, Restricted Stock, and Dividend Reinvestment Plans 169 101 2023 FORM 10-K ANNUAL REPORT ITEM 8.
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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. • Pending TD Merger.
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FINANCIAL STATEMENTS & SUPPLEMENTARY DATA Table of Contents ITEM 8 TOPICS Note 19 Business Segment Information 172 Note 20 Variable Interest Entities 175 Note 21 Derivatives 178 Note 22 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions 185 Note 23 Fair Value of Assets and Liabilities 187 Note 24 Parent Company Financial Information 202 102 2023 FORM 10-K ANNUAL REPORT ITEM 8.
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In 2022 we agreed to be acquired by TD for a cash price per FHN common share that, at the close of business on February 20, 2023, was $25.1531488 per share and rising very slightly each day thereafter. The market price of our common stock was and continues to be substantially impacted by the Pending TD Merger.
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FINANCIAL STATEMENTS & SUPPLEMENTARY DATA Table of Contents MANAGEMENT REPORT ON ICOFR 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.
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Completion of the Pending TD Merger is subject to customary closing conditions, including approvals from U.S. and Canadian regulatory authorities. On February 9, 2023, FHN and TD agreed to extend the outside date to May 27, 2023.
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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.
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Subsequent to the extension, TD recently informed FHN that TD does not expect that the necessary regulatory approvals will be received in time to complete the Pending TD Merger by May 27, 2023, and that TD cannot provide a new projected closing date at this time.
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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.
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TD has initiated discussions with FHN regarding a potential further extension of the outside date. There can be no assurance that an extension will ultimately be agreed or that TD will satisfy all regulatory requirements so that the regulatory approvals required to complete the Pending TD Merger will be received.
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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, 2023. 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).
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For additional information, see 2022 Merger Agreement with Toronto-Dominion Bank which begins on page 15 , and Risks Related to Pending TD Merger which begins on page 31 . • The Economy. Our businesses and our industry are heavily entwined with the U.S. economy.
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Based on our assessment and those criteria, management believes that First Horizon Corporation maintained effective internal control over financial reporting as of December 31, 2023. 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.
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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.
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That report appears on the following page. 103 2023 FORM 10-K ANNUAL REPORT ITEM 8.
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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 18 , and Risks from Economic Downturns and Changes which begins on page 38 . • Credit Loss.
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FINANCIAL STATEMENTS & SUPPLEMENTARY DATA Table of Contents OPINION ON ICOFR 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, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
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Our lending business—accounting for about half of our revenues—is critically 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.
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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
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If a client defaults on a loan, generally we will experience a financial loss which 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.
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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, 2023 and 2022, 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, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 2024 expressed an unqualified opinion on those consolidated financial statements.
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That process can result in a highly volatile pattern of recognizing credit loss each quarter. 2020 demonstrated this volatility, based on the economic and business disruptions associated with the COVID-19 pandemic in the first half of 2020.
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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.
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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 40 . • Loan Loss vs Loan Profit. Lending generally is a high-volume, low-margin business.
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Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
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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.
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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.
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This imbalance between loss and profit can amplify the potential for volatility in our earnings. For additional information, see Credit Risks beginning on page 40 . • Interest Rate Conditions. Interest rates and, especially, the shape of the yield curve, are critical drivers of our profit margin from lending.
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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.
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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. In 2022 the key agency in the U.S. shifted to strong tightening policy, raising short-term interest rates multiple times.
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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.
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This represented a significant change of policy compared with 2020-21. Moreover, by the end of 2021 and during all of 2022, inflation in the U.S. had risen to levels not seen in decades. This aggressive policy shift has caused short-term rates to rise substantially, and to exceed long-term rates on many occasions (a so-called yield curve inversion).
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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.
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Over half of our loan portfolio bears variable interest rates associated with short-term reference rates, which last year reacted fairly quickly to the new environment.
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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.
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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 18 ; Risks Associated with Monetary Events beginning on page 39 ; Interest Rate and Yield Curve Risks beginning on page 47 ; and discussion under the caption Federal Reserve Policy in Transition within the Market Uncertainties and Prospective Trends section of our 2022 MD&A (Ite 5 2022 FORM 10-K ANNUAL REPORT EXECUTIVE SUMMARY OF PRINCIPAL INVESTMENT RISKS Table of Contents m 7), which begins on page 95 . • Funding Balance.
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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.
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In our lending business, we aggregate money and lend it out at rates which more than cover our costs. We constantly must balance our funding sources (deposits and borrowings) with our funding needs (lending). Imbalances tend to hurt our earnings.
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Memphis, Tennessee February 22, 2024 104 2023 FORM 10-K ANNUAL REPORT ITEM 8.
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If sources become too large, generally we can cut back short-term borrowing or invest the excess, 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 increasing deposit or borrowing volumes and costs.
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FINANCIAL STATEMENTS & SUPPLEMENTARY DATA Table of Contents OPINION ON CONSOLIDATED FINANCIAL STATEMENTS 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, 2023 and 2022, 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, 2023, and the related notes (collectively, the consolidated financial statements).
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For additional information, see Liquidity and Funding Risks beginning on page 45 . • 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.
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In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
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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 34 . • Banking Consolidation.
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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, 2023, 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 22, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
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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, technological improvements 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, incenting banks to grow larger, faster.
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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.
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Consolidation can abruptly change the competitive environment in our markets. In addition, when we participate in consolidating actions, as we did in 2017 and 2020, typically it creates internal disruption and expense for a time while we integrate systems, consolidate branches, and take other consolidation-related actions.
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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.
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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 mentioned above coupled with the risk that the combination may not achieve management’s strategic or tactical objectives.
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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.
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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 18 ; and Traditional Strategic and Macro Risks beginning on page 34 . • Industry Disruption.
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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.
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Technological innovation, and the associated changes in client preferences, are radically transforming our industry and how financial services are delivered to clients. Keeping pace is expensive and difficult, while being a consistent innovation leader is practically impossible for a bank our size.
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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.
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Moreover, rapid innovation has the potential to be destructive of traditional companies in our industry, as it has done and is doing in other industries. For additional information, see Industry Disruption beginning on page 35 . • Regulated Industry. Our principal businesses are heavily regulated.
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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.
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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.
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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.
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The primary missions of the regulators are to protect the banking system as a whole, to protect the federal government’s deposit insurance fund and program, and to protect clients; none exists to enhance our profitability or promote the interests of our investors.
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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, 2023 was $773 million, of which a portion related to the allowance for loan losses for loans collectively evaluated for impairment (the collective ALLL).
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Moreover, regulators are government agencies, and as such can experience significant policy changes when the elected branches of government experience such changes. For additional information, see Regulatory, Legislative, and Legal Risks beginning on page 42 . • Security & Technology. Fraud and theft have always been significant risks for banks; we experience fraud and theft loss every year.
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The collective ALLL includes the measure of expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics.
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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.
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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.
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Typically, the more a system is built to be secure and robust, the less that system can be flexible and adaptable. Moreover, high-security often can be associated with sub-optimal user experience. For additional information, see Operational Risks beginning on page 36 . • Expense Control.
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The expected credit losses are the product of multiplying the Company’s estimates of probability of default (PD), loss given default (LGD), and individual loan level exposure at 105 2023 FORM 10-K ANNUAL REPORT ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA Table of Contents OPINION ON CONSOLIDATED FINANCIAL STATEMENTS default (EAD), including amortization and prepayment assumptions, on an undiscounted basis.
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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 36 , and Risks of Expense Control beginning on page 44 .
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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.
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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 . 6 2022 FORM 10-K ANNUAL REPORT FORWARD-LOOKING STATEMENTS Table of Contents Forward-Looking Statements This report on Form 10-K, including materials incorporated into it, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to FHN's beliefs, plans, goals, expectations, and estimates.
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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.
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Forward-looking statements are not a representation of historical information, but instead pertain to future operations, strategies, financial results or other developments. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “should,” “is likely,” “will,” “going forward,” and other expressions that indicate future events and trends identify forward-looking statements.
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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.

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