FHN currently has two plans which authorize the grant of new stock-based awards, the Equity Compensation Plan (ECP) and the IBERIABANK Corporation 2019 Stock Incentive Plan (SIP). New awards under the ECP may be granted to any of FHN's directors, officers, or associates. New awards under the SIP are limited to directors, officers, and associates who had one or more of those roles with IBKC before the merger closed. Most awards outstanding at year end were granted under these plans, though older stock options and certain deferred stock units remain outstanding under several plans which are no longer active.

The ECP authorizes a broad range of award types, including restricted shares, stock units, and stock options. Stock units may be paid in shares or cash, depending upon the terms of the award. The ECP also authorizes the grant of stock appreciation rights, though no such grants have been made. The SIP authorizes the granting of awards in the form of stock options, restricted stock, and restricted share units. Unvested awards have service and/or performance conditions which must be met in order for the shares to vest. Awards generally have service-vesting conditions, meaning that the associate must remain employed by FHN for certain periods in order for the award to vest. Some outstanding awards also have performance conditions, and one outstanding award has performance conditions associated with FHN’s stock price. FHN operates the ECP by establishing award programs, each of which is intended to cover a specific need. Programs are created, changed, or terminated as needs change.

On December 31, 2020, there were 3,115,117 shares available for new awards under the ECP and 10,558,375 shares available for new awards under the SIP. The ECP imposes a separate limit on full-value (non-option) awards which is included within the overall limit. At December 31, 2020, there were 2,311,791 shares available to be granted as full-value awards under the ECP and 5,279,187 shares available to be granted as full-value awards under the SIP.

Service condition full-value awards. Awards may be granted with service conditions only. In recent years, programs using these awards have included annual programs for executives and selected management associates, a mandatory deferral program for executives tied to annual bonuses earned, other mandatory or elective deferral programs, various retention programs, and special

hiring-incentive situations. Details of the awards vary by program, but most are settled in shares at vesting rather than cash, and vesting rarely begins earlier than the first anniversary of grant and rarely extends beyond the fifth anniversary of grant. Annual programs tend to use multiple annual vesting dates while retention programs tend to use a single vesting date, but there are exceptions.

Performance condition awards. Under FHN’s long-term incentive and corporate performance programs, performance stock units (PSUs) (executives) and cash units (selected management employees) are granted annually and vest only if predetermined performance measures are met. The measures are changed each year based on goals and circumstances prevailing at the time of grant. In recent years the performance periods have been three years, with service-vesting near the third anniversary of the grant. PSUs granted after 2014 also have a post-vest holding period of two years. Recent annual performance awards require pro-rated forfeiture for performance falling between a threshold level and a maximum. Performance awards sometimes are used to provide a narrow, targeted incentive to a single person or small group; one such award which includes a market performance condition to FHN’s CEO is discussed in the next paragraph. Of the annual program awards paid during 2020 or outstanding on December 31, 2020: the 2015 units vested in 2018 and their two year post-vesting holding period ended during 2020, 2016 and 2017 units vested in 2019 and 2020 at the 104.2% payout level, respectively, and remain in a two year post-vesting holding period; the three years performance period of the 2018 units has ended but performance is measured relative to peers and has not yet been determined; and, the three years performance periods for the 2019 and 2020 units have not ended.

Market condition award. In 2016, FHN made a special grant of performance stock units to FHN’s CEO which will vest at the end of a performance period of seven years. The award has no provision for pro-rated payment based on partial performance. The award’s performance goal is based on achievement of a specific level of total shareholder return during the performance period.

Director awards. Non-employee directors receive cash and annual grants of service-conditioned stock units under a program approved by the board of directors. Director stock units granted prior to the IBKC merger vest in the year following the year of

grant, require a payment deferral of two years, and settle in shares after the deferral period. In 2020 and 2019, each director received $85,000 or prorated equivalent of stock units, representing a portion of their annual retainer. Effective with the IBKC merger on July 1, 2020, the annual grant of director stock units was increased to $122,000 or prorated

equivalent of stock units and all directors then in office received a supplemental grant to bring all directors up to the new annual grant level. Prior to 2005, directors could elect to defer cash compensation in the form of discount-priced stock options, some of which remain outstanding.

Stock and stock unit awards. A summary of restricted and performance stock and unit activity during the year ended December 31, 2020, is presented below:


	Shares/ Units (a)	Weighted average grant date fair value (per share) (b)
January 1, 2020	4,709,987	$	16.25
Shares/units converted from IBKC	2,663,116	9.40
Shares/units granted	2,610,929	9.89
Shares/units vested/distributed	(1,551,877)	15.15
Shares/units canceled	(161,939)	12.55
December 31, 2020	8,270,216	$	12.47

(a)Includes only units that settle in shares; nonvested performance units are included at 100% payout level.

(b)The weighted average grant date fair value for shares/units granted in 2019 and 2018 was $16.25 and $18.70, respectively.

On December 31, 2020, there was $38 million of unrecognized compensation cost related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 2.5 years. The total grant date fair value of shares vested during 2020, 2019 and 2018, was $24 million, $15 million, and $13 million, respectively.

Stock option awards. Currently FHN operates only a single option program, calling for annual grants of service-vested options to executives. In the past, however, option programs varied widely in their uses and terms, and many old-program options, granted under the ECP or its predecessor plans, remain outstanding today. All options granted since 2005 provide for the issuance of FHN common stock at a price fixed at its fair market value on the grant date. Except for converted options and a special retention stock option award to the CEO in 2016, all options granted since 2008 vest fully no later than the fourth

anniversary of grant, and all such options expire 7 years from the grant date. CBF converted options and IBKC converted options granted prior to November 3, 2019 (the merger agreement date) are fully vested and expire ten years from grant date. IBKC converted options granted subsequent to the merger agreement vest fully no later than the fifth anniversary of the grant date and expire ten years from grant date. The 2016 retention award vests beginning on the fourth anniversary of grant and extends through the sixth anniversary of grant. A deferral program, which was discontinued in 2005, allowed for foregone compensation plus the exercise price to equal the fair market value of the stock on the date of grant if the grantee agreed to receive the options in lieu of compensation. Deferral options still outstanding expire 20 years from the grant date.

The summary of stock option activity for the year ended December 31, 2020, is shown below:


	Options Outstanding	Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
January 1, 2020	4,931,781	$	15.61
Converted IBKC	3,597,856	14.39
Options granted	584,881	15.90
Options exercised	(597,686)	11.55
Options expired/canceled	(767,750)	17.44
December 31, 2020	7,749,082	$	15.20	3.85	$	5
Options exercisable	5,766,528	15.02		3.16	4
Options expected to vest	1,982,554	15.70		5.86	—

The total intrinsic value of options exercised during 2020, 2019 and 2018 was $3 million, $4 million, and $3 million, respectively. On December 31, 2020, there was $1 million of unrecognized compensation cost related to nonvested stock options. That cost is expected to be recognized over a weighted-average period of 2.6 years.

FHN granted or converted 4,182,737, 530,787 and 394,296 stock options with a weighted average fair

value of $2.13, $2.69, and $3.89 per option at grant date in 2020, 2019 and 2018, respectively.

FHN used the Black-Scholes Option Pricing Model to estimate the fair value of stock options granted or converted in 2020, 2019, and 2018 with the following assumptions:


	2020	2019	2018
Expected dividend yield	3.77%	3.63%	2.57%
Expected weighted-average lives of options granted	6.25 years	6.24 years	6.21 years
Expected weighted-average volatility	23.94%	24.76%	24.61%
Expected volatility range	23.32 - 24.56%	23.07 - 26.45%	23.95 - 25.26%
Risk-free interest rate	1.47%	2.53%	2.69%

Expected lives of options granted are determined based on the vesting period, historical exercise patterns and contractual term of the options. FHN uses a blend of historical and implied volatility in determining expected volatility. A portion of the weighted average volatility rate is derived by compiling daily closing stock prices over a historical period approximating the expected lives of the options. Additionally, because of market volatility due to economic conditions and the impact on stock prices of financial institutions, FHN also incorporates a measure of implied volatility so as to incorporate more recent market conditions in the estimation of future volatility.

Phantom stock awards. As a result of the IBKC merger, FHN assumed phantom stock awards under various plans to officers and other key associates. The awards are subject to a vesting period of five years and are paid out in cash upon vesting. The

amount paid per vesting period is calculated as the number of vested share equivalents multiplied by closing market price of a share of the Company's common stock on the vesting date. Share equivalents are calculated on the date of grant as the total award's dollar value divided by the closing market price of a share of the Company's common stock on the grant date. As of December 31, 2020, there were 659,597 share equivalents of phantom stock awards outstanding. See Note 1 - Significant Accounting Policies for more discussion on FHN's phantom stock awards.

Compensation Cost. The compensation cost that has been included in the Consolidated Statements of Income pertaining to stock-based awards was $32 million, $22 million, and $23 million for 2020, 2019, and 2018, respectively. The corresponding total income tax benefits recognized were $8 million in 2020, $6 million in 2019, and $6 million in 2018.

Authorization. Consistent with Tennessee state law, only authorized, but unissued, stock may be utilized in connection with any issuance of FHN common stock which may be required as a result of stock based compensation awards. FHN has obtained authorization from the Board of Directors to repurchase up to certain numbers of shares related to issuance under the ECP and several older stock award plans. These authorizations are automatically adjusted for stock splits and stock dividends. Repurchases are authorized to be made in the open market or through privately negotiated transactions and will be subject to market conditions, accumulation of excess equity, legal and regulatory restrictions, and prudent capital management. FHN does not currently expect to repurchase a material number of shares under the compensation plan-related repurchase program during 2021.Dividend reinvestment plan. The Dividend Reinvestment and Stock Purchase Plan authorizes the sale of FHN’s common stock from stock acquired on the open market to shareholders who choose to invest all or a portion of their cash dividends or make optional cash payments of $25 to $10,000 per quarter without paying commissions. The price of stock purchased on the open market is the average price paid.