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 June 30, 2022

or

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

For the transition period from         to                     

Commission File Number 001-15185

____________________________________ 

(Exact name of registrant as specified in its charter)

 ______________________________________  

TN		62-0803242
(State or other jurisdiction 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 July 29, 2022
Common Stock, $.625 par value	536,609,492

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	74
Item 3. Quantitative and Qualitative Disclosures about Market Risk	111
Item 4. Controls and Procedures	111
Part II. Other Information	112
Item 1. Legal Proceedings	112
Item 1A. Risk Factors	112
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	112
Item 3. Defaults Upon Senior Securities	112
Item 4. Mine Safety Disclosures	112
Item 5. Other Information	112
Item 6. Exhibits	113
Signatures	115

GLOSSARY OF ACRONYMS & TERMS

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 loan portfolio
CRMC	Credit Risk Management Committee
DTA	Deferred tax asset
DTL	Deferred tax liability
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
PCAOB	Public Company Accounting Oversight Board

1 2Q22 FORM 10-Q REPORT

GLOSSARY OF ACRONYMS & TERMS

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
TDBNA	TD Bank, N.A.
TD-US	TD Bank US Holding Company
TD Merger Agreement	Merger agreement between FHN, TD, TD-US, and a TD-US subsidiary
Proposed TD Merger	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 2Q22 FORM 10-Q REPORT

FORWARD-LOOKING STATEMENTS AND NON-GAAP INFORMATION

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:

•the possibility that the anticipated benefits of the IBKC merger will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in any or all of FHN’s market areas;

•potential adverse reactions or changes to business or associate relationships resulting from the IBKC merger;

•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;

•the 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;

3 2Q22 FORM 10-Q REPORT

FORWARD-LOOKING STATEMENTS AND NON-GAAP INFORMATION

•the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the TD Merger Agreement;

•the outcome of any legal proceedings that have been or may be instituted against FHN, TD, or TD-US, including potential litigation that has been or may be instituted against FHN or its directors or officers related to the Proposed TD Merger or the TD Merger Agreement;

•the timing and completion of the Proposed TD Merger, including the possibility that the Proposed TD Merger will not close when expected or at all because required regulatory, shareholder, or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated;

•the extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations of the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Tennessee Department of Financial Institutions, and other regulators;

•the risk that any announcements relating to the Proposed TD Merger could have adverse effects on the market price of the common stock of FHN;

•certain restrictions during the pendency of the Proposed TD Merger that may impact FHN’s ability to pursue certain business opportunities or strategic transactions;

•the possibility that the Proposed TD Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events;

•the diversion of management’s attention from ongoing business operations and opportunities caused by the Proposed TD Merger;

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

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

FHN cautions readers of this report that the list above is not exhaustive as of the date of this report. Further, 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, as amended, along with any additional factors which might materially affect future results and outcomes.

4 2Q22 FORM 10-Q REPORT

FORWARD-LOOKING STATEMENTS AND NON-GAAP INFORMATION

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, tangible book value per common share, and loans and leases excluding PPP loans. Table I.1.27 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 2Q22 FORM 10-Q REPORT

PART I, ITEM 1. FINANCIAL STATEMENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets (unaudited)	7
Consolidated Statements of Income (unaudited)	8
Consolidated Statements of Comprehensive Income (unaudited)	10
Consolidated Statements of Changes in Equity (unaudited)	11
Consolidated Statements of Cash Flows (unaudited)	13
Notes to the Consolidated Financial Statements (unaudited)	14
Note 1 Basis of Presentation and Accounting Policies	14
Note 2 Investment Securities	16
Note 3 Loans and Leases	19
Note 4 Allowance for Credit Losses	27
Note 5 Mortgage Banking Activity	30
Note 6 Goodwill and Other Intangible Assets	31
Note 7 Preferred Stock	32
Note 8 Components of Other Comprehensive Income (Loss)	33
Note 9 Earnings Per Share	35
Note 10 Contingencies and Other Disclosures	36
Note 11 Retirement Plans	38
Note 12 Business Segment Information	39
Note 13 Variable Interest Entities	44
Note 14 Derivatives	47
Note 15 Master Netting and Similar Agreements - Repurchase, Reverse Repurchase, and Securities Borrowing Transactions	54
Note 16 Fair Value of Assets and Liabilities	56
Note 17 Other Events	73

6 2Q22 FORM 10-Q REPORT

PART I, ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

	(Unaudited)		December 31,
	June 30,
(Dollars in millions, except per share amounts)	2022		2021
Assets
Cash and due from banks	$	1,133	$	1,147
Interest-bearing deposits with banks	9,475		14,907
Federal funds sold and securities purchased under agreements to resell	712		641
Trading securities	1,392		1,601
Securities available for sale at fair value	8,941		8,707
Securities held to maturity (fair value of $601 and $705, respectively)	687		712
Loans held for sale (including $143 and $258 at fair value, respectively)	870		1,172
Loans and leases	56,529		54,859
Allowance for loan and lease losses	(624)		(670)
Net loans and leases	55,905		54,189
Premises and equipment	636		665
Goodwill	1,511		1,511
Other intangible assets	272		298
Other assets	3,598		3,542
Total assets	$	85,132	$	89,092
Liabilities
Noninterest-bearing deposits	$	27,114	$	27,883
Interest-bearing deposits	43,436		47,012
Total deposits	70,550		74,895
Trading liabilities	394		426
Short-term borrowings	1,953		2,124
Term borrowings	1,599		1,590
Other liabilities	2,085		1,563
Total liabilities	76,581		80,598
Equity
Preferred stock, Non-cumulative perpetual, no par value; authorized 5,000,000 shares; issued 31,686 and 26,750 shares, respectively	1,014		520
Common stock, $0.625 par value; authorized 700,000,000 shares; issued 536,332,507 and 533,576,766 shares, respectively	335		333
Capital surplus	4,791		4,743
Retained earnings	3,079		2,891
Accumulated other comprehensive loss, net	(963)		(288)
FHN shareholders' equity	8,256		8,199
Noncontrolling interest	295		295
Total equity	8,551		8,494
Total liabilities and equity	$	85,132	$	89,092

See accompanying notes to consolidated financial statements.

7 2Q22 FORM 10-Q REPORT

PART I, ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions, except per share data; shares in thousands) (Unaudited)	2022		2021		2022		2021
Interest income
Interest and fees on loans and leases	$	492	$	496	$	936	$	1,003
Interest and fees on loans held for sale	10		7		20		14
Interest on investment securities	45		29		83		58
Interest on trading securities	13		7		24		14
Interest on other earning assets	23		3		31		5
Total interest income	583		542		1,094		1,094
Interest expense
Interest on deposits	18		24		29		48
Interest on trading liabilities	4		2		6		3
Interest on short-term borrowings	2		1		3		2
Interest on term borrowings	17		18		35		37
Total interest expense	41		45		73		90
Net interest income	542		497		1,021		1,004
Provision for credit losses	30		(115)		(10)		(160)
Net interest income after provision for credit losses	512		612		1,031		1,164
Noninterest income
Fixed income	51		102		124		228
Deposit transactions and cash management	42		44		86		86
Mortgage banking and title income	34		38		56		91
Brokerage, management fees and commissions	24		21		48