FIRST HORIZON CORP [FHN-PB] Filings

10-Q 1 fhn-20230331.htm 10-Q fhn-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

_____________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-15185

____________________________________

(Exact name of registrant as specified in its charter)

______________________________________


TN		62-0803242
(State or other jurisdiction incorporation of organization)		(IRS Employer Identification No.)

165 Madison Avenue
Memphis,	Tennessee	38103
(Address of principal executive office)		(Zip Code)

(Registrant’s telephone number, including area code) (901) 523-4444

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Exchange on which Registered

$.625 Par Value Common Capital Stock

FHN

New York Stock Exchange LLC

Depositary Shares, each representing a 1/400th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series B

FHN PR B

New York Stock Exchange LLC

Depositary Shares, each representing a 1/400th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series C

FHN PR C

New York Stock Exchange LLC

Depositary Shares, each representing a 1/400th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series D

FHN PR D

New York Stock Exchange LLC

Depositary Shares, each representing a 1/4,000th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series E

FHN PR E

New York Stock Exchange LLC

Depositary Shares, each representing a 1/4,000th interest in
a share of Non-Cumulative Perpetual Preferred Stock, Series F

FHN PR F

New York Stock Exchange LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding on April 28, 2023
Common Stock, $.625 par value						537,811,498


10-Q REPORT TABLE OF CONTENTS

Table of Contents



Glossary of Acronyms and Terms			1
Forward-Looking Statements			3
Non-GAAP Information			5

Part I. Financial Information			6
Item 1. Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			69
Item 3. Quantitative and Qualitative Disclosures about Market Risk			103
Item 4. Controls and Procedures			103

Part II. Other Information			104
Item 1. Legal Proceedings			104
Item 1A. Risk Factors			104
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			104
Item 3. Defaults Upon Senior Securities			104
Item 4. Mine Safety Disclosures			104
Item 5. Other Information			104
Item 6. Exhibits			105









Signatures			107


GLOSSARY OF ACRONYMS & TERMS
Table of Contents

Glossary of Acronyms and Terms

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
AMERIBOR			American Interbank Offered Rate
AOCI			Accumulated other comprehensive income
ARRC			Alternative Reference Rates Committee
ASC			FASB Accounting Standards Codification
Associate			Person employed by FHN
ASU			Accounting Standards Update
Bank			First Horizon Bank
BOLI			Bank-owned life insurance
BSBY			Bloomberg short-term bank yield index
C&I			Commercial, financial, and industrial loan portfolio
CARES Act			Coronavirus Aid, Relief, and Economic Security Act
CBF			Capital Bank Financial
CECL			Current expected credit loss
CEO			Chief Executive Officer
CMO			Collateralized mortgage obligations
Company			First Horizon Corporation
Corporation			First Horizon Corporation
CRE			Commercial Real Estate
CRMC			Credit Risk Management Committee
DTA			Deferred tax asset
DTL			Deferred tax liability
EAD			Exposure as default
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
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.
GAAP			Generally accepted accounting principles (U.S.)
GNMA			Government National Mortgage Association or Ginnie Mae
GSE			Government sponsored enterprises, in this report 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 Market Tax Credit
NPA			Nonperforming asset
Non-PCD			Non-Purchased Credit Deteriorated Financial Assets
NPL			Nonperforming loan
OREO			Other Real Estate Owned


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GLOSSARY OF ACRONYMS & TERMS
Table of Contents


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
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
TD Merger Agreement			Merger agreement between FHN, TD, TD-US, and a TD-US subsidiary which the parties mutually terminated on May 4, 2023
TD Transaction			The merger transactions contemplated by the TD Merger Agreement
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


			2			1Q23 FORM 10-Q REPORT


FORWARD-LOOKING STATEMENTS AND NON-GAAP INFORMATION
Table of Contents

Forward-Looking Statements

This report, including material incorporated into it, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements pertain to FHN's beliefs, plans, goals, expectations, and estimates. Forward-looking statements are not a representation of historical information, but instead pertain to future operations, strategies, financial results, or other developments. Forward-looking statements can be identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “should,” “is likely,” “will,” “going forward,” and other expressions that indicate future events and trends.

Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, operational, economic, and competitive uncertainties and contingencies, many of which are beyond FHN’s control, and many of which, with respect to future business decisions and actions (including acquisitions and divestitures), are subject to change and could cause FHN’s actual future results and outcomes to differ materially from those contemplated or implied by forward-looking statements or historical performance. Examples of uncertainties and contingencies include, among other important factors:

•global, general and local economic and business conditions, including economic recession or depression;

•the potential impacts on FHN’s businesses of the COVID-19 pandemic, including negative impacts from quarantines, market declines, and volatility, and changes in client behavior related to the COVID-19 pandemic;

•the stability or volatility of values and activity in the residential housing and commercial real estate markets;

•potential requirements for FHN to repurchase, or compensate for losses from, previously sold or securitized mortgages or securities based on such mortgages;

•potential claims alleging mortgage servicing failures, individually, on a class basis, or as master servicer of securitized loans;

•potential claims relating to participation in government programs, especially lending or other financial services programs;

•expectations of and actual timing and amount of interest rate movements, including the slope and

shape of the yield curve, which can have a significant impact on a financial services institution;

•market and monetary fluctuations, including fluctuations in mortgage markets;

•the financial condition of borrowers and other counterparties;

•competition within and outside the financial services industry;

•the occurrence of natural or man-made disasters, global pandemics, conflicts, or terrorist attacks, or other adverse external events;

•effectiveness and cost-efficiency of FHN’s hedging practices;

•fraud, theft, or other incursions through conventional, electronic, or other means directly or indirectly affecting FHN or its clients, business counterparties, or competitors;

•the ability to adapt products and services to changing industry standards and client preferences;

•risks inherent in originating, selling, servicing, and holding loans and loan-based assets, including prepayment risks, pricing concessions, fluctuation in U.S. housing and other real estate prices, fluctuation of collateral values, and changes in client profiles;

•changes in the regulation of the U.S. financial services industry;

•changes in laws, regulations, and administrative actions, including executive orders, whether or not specific to the financial services industry;

•changes in accounting policies, standards, and interpretations;

•evolving capital and liquidity standards under applicable regulatory rules;

•accounting policies and processes require management to make estimates about matters that are uncertain;

•any adverse effect on FHN resulting from the termination of the TD Transaction;

•the outcome of any legal proceedings that may be instituted against FHN, including potential litigation that may be instituted against FHN or its directors or officers related to the TD Transaction or the TD Merger Agreement;

•reputational risk and potential adverse reactions or changes to business or employee relationships, including those resulting from the termination of the TD Transaction; and


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FORWARD-LOOKING STATEMENTS AND NON-GAAP INFORMATION
Table of Contents

•other factors that may affect the future results of FHN.

FHN assumes no obligation to update or revise any forward-looking statements that are made in this report or in any other statement, release, report, or filing from time to time. Actual results could differ and FHN’s estimates and expectations could change, possibly materially, because of one or more factors, including those factors listed above or presented elsewhere in this report or those factors listed in material incorporated by reference into this report. In evaluating forward-looking statements and assessing FHN’s prospects, readers of this report should carefully consider the factors mentioned above along with the additional risk and uncertainty factors discussed in Item 1A of Part II of this report and in the forepart, and in Items 1, 1A, and 7, of FHN’s most recent Annual Report on Form 10-K, among others.


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FORWARD-LOOKING STATEMENTS AND NON-GAAP INFORMATION
Table of Contents

Non-GAAP Information

Certain measures included in this report are “non-GAAP,” meaning they are not presented in accordance with U.S. GAAP and also are not codified in U.S. banking regulations currently applicable to FHN. Although other entities may use calculation methods that differ from those used by FHN for non-GAAP measures, FHN’s management believes such measures are relevant to understanding the financial condition, capital position, and financial results of FHN and its business segments. Non-GAAP measures are reported to FHN’s management and Board of Directors through various internal reports.

The non-GAAP measures presented in this report are: pre-provision net revenue, return on average tangible common equity, tangible common equity to tangible assets, adjusted tangible common equity to risk-weighted assets, and tangible book value per common share. Table I.2.22 appearing in the MD&A (Item 2 of Part I) of this report provides a reconciliation of non-GAAP items presented in this report to the most comparable GAAP presentation.

Presentation of regulatory measures, even those which are not GAAP, provide a meaningful base for comparability to other financial institutions subject to the same regulations as FHN, as demonstrated by their use by banking regulators in reviewing capital adequacy of financial institutions. Although not GAAP terms, these regulatory measures are not considered “non-GAAP” under U.S. financial reporting rules as long as their presentation conforms to regulatory standards. Regulatory measures used in this report include: common equity tier 1 capital, generally defined as common equity less goodwill, other intangibles, and certain other required regulatory deductions; tier 1 capital, generally defined as the sum of core capital (including common equity and instruments that cannot be redeemed at the option of the holder) adjusted for certain items under risk based capital regulations; and risk-weighted assets, which is a measure of total on- and off-balance sheet assets adjusted for credit and market risk, used to determine regulatory capital ratios.


			5			1Q23 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


Consolidated Balance Sheets (unaudited)			7

Consolidated Statements of Income (unaudited)			8

Consolidated Statements of Comprehensive Income (Loss) (unaudited)			10

Consolidated Statements of Changes in Equity (unaudited)			11

Consolidated Statements of Cash Flows (unaudited)			12

Notes to the Consolidated Financial Statements (unaudited)			13
Note 1 Basis of Presentation and Accounting Policies			13

Note 2 Investment Securities			15
Note 3 Loans and Leases			18
Note 4 Allowance for Credit Losses			27
Note 5 Mortgage Banking Activity			29
Note 6 Goodwill and Other Intangible Assets			30

Note 7 Preferred Stock			31
Note 8 Components of Other Comprehensive Income (Loss)			32
Note 9 Earnings Per Share			33
Note 10 Contingencies and Other Disclosures			34
Note 11 Retirement Plans			36
Note 12 Business Segment Information			37
Note 13 Variable Interest Entities			40
Note 14 Derivatives			43
Note 15 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions			50
Note 16 Fair Value of Assets and Liabilities			52
Note 17 Other Events			68


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PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents

CONSOLIDATED BALANCE SHEETS



	(Unaudited)		December 31,
	March 31,
(Dollars in millions, except per share amounts)	2023		2022
Assets
Cash and due from banks	$	987	$	1,061
Interest-bearing deposits with banks	2,488		1,384
Federal funds sold and securities purchased under agreements to resell	309		482
Trading securities	1,122		1,375
Securities available for sale at fair value	8,954		8,836
Securities held to maturity (fair value of $1,214 and $1,209, respectively)	1,362		1,371
Loans held for sale (including $68 and $51 at fair value, respectively)	650		590
Loans and leases	59,045		58,102
Allowance for loan and lease losses	(715)		(685)
Net loans and leases	58,330		57,417
Premises and equipment	603		612
Goodwill	1,511		1,511
Other intangible assets	222		234
Other assets	4,191		4,080
Total assets	$	80,729	$	78,953

Liabilities
Noninterest-bearing deposits	$	21,134	$	23,466
Interest-bearing deposits	40,306		40,023
Total deposits	61,440		63,489
Trading liabilities	144		335
Short-term borrowings	6,484		2,506
Term borrowings	1,605		1,597
Other liabilities	2,161		2,479
Total liabilities	71,834		70,406

Equity
Preferred stock, Non-cumulative perpetual, no par value; authorized 5,000,000 shares; issued 31,686 shares	1,014		1,014
Common stock, $0.625 par value; authorized 700,000,000 shares; issued 537,618,507 and 537,100,615 shares, respectively	336		336
Capital surplus	4,863		4,840
Retained earnings	3,595		3,430
Accumulated other comprehensive loss, net	(1,208)		(1,368)
FHN shareholders' equity	8,600		8,252
Noncontrolling interest	295		295
Total equity	8,895		8,547
Total liabilities and equity	$	80,729	$	78,953

See accompanying notes to consolidated financial statements.


			7			1Q23 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents

CONSOLIDATED STATEMENTS OF INCOME




	Three Months Ended March 31,
(Dollars in millions, except per share data; shares in thousands) (Unaudited)	2023		2022
Interest income
Interest and fees on loans and leases	$	806	$	444
Interest and fees on loans held for sale	11		10
Interest on investment securities	62		38
Interest on trading securities	20		11
Interest on other earning assets	21		7
Total interest income	920		510
Interest expense
Interest on deposits	171		11
Interest on trading liabilities	3		2
Interest on short-term borrowings	38		1
Interest on term borrowings	20		17
Total interest expense	232		31
Net interest income	688		479
Provision for credit losses	50		(40)
Net interest income after provision for credit losses	638		519
Noninterest income
Deposit transactions and cash management	42		44
Fixed income	39		73
Brokerage, management fees and commissions	22		24
Card and digital banking fees	20		20
Other service charges and fees	13		13
Trust services and investment management	11		13
Mortgage banking and title income	5		22
Securities gains (losses), net	—		6


Other income	19		14
Total noninterest income	171		229
Noninterest expense
Personnel expense	271		280
Net occupancy expense	31		32
Computer software	28		29
Operations services	22		20
Advertising and public relations	14		11
Contract employment and outsourcing	12		19
Amortization of intangible assets	12		13
Equipment expense	11		11
Communications and delivery	9		10
Legal and professional fees	8		23
Other expense	60		45
Total noninterest expense	478		493
Income before income taxes	331		255
Income tax expense	76		57
Net income	$	255	$	198
Net income attributable to noncontrolling interest	4		3
Net income attributable to controlling interest	$	251	$	195
Preferred stock dividends	8		8
Net income available to common shareholders	$	243	$	187


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PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents


Basic earnings per common share	$	0.45	$	0.35
Diluted earnings per common share	$	0.43	$	0.34
Weighted average common shares	536,938		533,218
Diluted average common shares	571,991		549,809

See accompanying notes to consolidated financial statements.


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PART I, ITEM 1. FINANCIAL STATEMENTS
Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



	Three Months Ended March 31,
(Dollars in millions) (Unaudited)	2023		2022
Net income	$	255	$	198
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale	114		(404)
Net unrealized gains (losses) on cash flow hedges	44		(21)
Net unrealized gains (losses) on pension and other postretirement plans	2		1
Other comprehensive income (loss)	160		(424)
Comprehensive income (loss)	415		(226)
Comprehensive income attributable to noncontrolling interest	4		3
Comprehensive income (loss) attributable to controlling interest	$	411	$	(229)
Income tax expense (benefit) of items included in other comprehensive income:
Net unrealized gains (losses) on securities available for sale	$	36	$	(130)
Net unrealized gains (losses) on cash flow hedges	14		(7)
Net unrealized gains (losses) on pension and other postretirement plans	1		1

See accompanying notes to consolidated financial statements


			10			1Q23 FORM 10-Q REPORT


PART I, ITEM 1. FINANCIAL STATEMENTS

FIRST HORIZON CORP [FHN-PB] Filings
FIRST HORIZON CORP [FHN] Filings
FIRST HORIZON CORP [FHN-PE] Filings
FIRST HORIZON CORP [FHN-PF] Filings
10-Q	[2023-05-08]
10-K	[2023-03-01]
10-Q	[2022-11-07]
10-Q	[2022-08-04]
10-Q	[2022-05-06]
10-K	[2022-03-01]
10-Q	[2021-11-05]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-02-25]
10-Q	[2020-11-05]
10-Q	[2020-08-05]
10-Q	[2020-05-08]
10-K	[2020-02-28]
10-Q	[2019-11-08]
10-Q	[2019-08-07]
10-Q	[2019-05-08]
10-K	[2019-02-28]
10-Q	[2018-11-07]
10-Q	[2018-08-07]
10-Q	[2018-05-08]
10-K	[2018-02-28]
10-Q	[2017-11-07]
10-Q	[2017-08-08]
10-Q	[2017-05-08]
10-K	[2017-02-27]
10-Q	[2016-11-07]
10-Q	[2016-08-08]
10-Q	[2016-05-06]
10-K	[2016-02-25]
10-Q	[2015-11-05]
10-Q	[2015-08-05]
10-Q	[2015-05-07]
10-K	[2015-02-24]
10-Q	[2014-11-06]
10-Q	[2014-08-07]
10-Q	[2014-05-08]
10-K	[2014-02-27]
10-Q	[2013-11-07]
10-Q	[2013-08-07]
10-Q	[2013-05-08]
10-K	[2013-02-27]
10-Q	[2012-11-08]
10-Q	[2012-08-08]
10-Q	[2012-05-08]
10-K	[2012-02-28]

FIRST HORIZON CORP [FHN-PB] Filings

FIRST HORIZON CORP [FHN] Filings

FIRST HORIZON CORP [FHN-PE] Filings

FIRST HORIZON CORP [FHN-PF] Filings