Stock Options and Restricted Stock

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

Equity Compensation Plans

FHN currently has one plan which authorizes the grant of new stock-based awards, the 2021 Incentive Plan (the IP). New awards under the IP may be granted to any of FHN's directors, officers, or associates. The IP was approved by shareholders in April 2021 and again in April 2024.

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

On December 31, 2024, there were 13,173,672 shares available for new awards under the IP. This includes the new/additional shares originally authorized under the IP along with shares underlying ECP awards that have been forfeited or canceled since the IP was approved by shareholders, net of shares underlying IP awards that are outstanding or have been paid.

Service condition full-value awards

Awards may be granted with service conditions only. In recent years, programs using these awards have included annual programs for executives and selected management associates, a mandatory deferral program for executives tied to annual bonuses earned, other mandatory or elective deferral programs, various retention programs, and special hiring-incentive situations. Details of the awards vary by program, but most are settled in shares at vesting rather than cash, and vesting generally begins no earlier than the third anniversary of grant and rarely extends beyond the fifth anniversary of grant.

Performance condition awards

Under FHN’s long-term incentive and corporate performance programs, performance stock units ("PSUs") (executives) and cash units (selected management employees) are granted annually and vest only if predetermined performance measures are met. The measures are changed each year based on goals and circumstances prevailing at the time of grant. In recent years the performance periods have been three years, with service-vesting near the third anniversary of the grant. PSUs granted from 2014 to 2020 had a post-vest holding period of two years. Recent annual performance awards require pro-rated forfeiture (in relation to the maximum possible) for performance falling between a threshold level and a maximum. Performance awards sometimes are used to provide a narrow, targeted incentive to a single person or small group. Of the annual program awards paid during 2024 or outstanding on December 31, 2024: the 2019, 2020 and 2021 units vested in 2022, 2023 and 2024 at the 187.5%, 187.5% and 162.5% payout level, respectively, and only the 2020 units remain in a two-year post-vesting holding period; the three-year performance period of the 2022 units has ended but performance is measured relative to peers and has not yet been determined; and, the three-year performance periods for the 2023 and 2024 units have not ended.

Director awards

Non-employee directors receive cash and annual grants of service-conditioned stock units under a program approved by the board of directors. Director stock units granted vest in the year following the year of grant and settle in shares. In 2024 and 2023, each director received a base stock unit award of $140,000 and $122,000, respectively, representing a portion of their annual retainer. Each director is permitted to increase the portion paid as stock units.

A summary of restricted and performance stock and unit activity during the year ended December 31, 2024, is presented below.

Table 8.18.1

RESTRICTED AND PERFORMANCE EQUITY AWARD ACTIVITY


	Shares/ Units (a)	Weighted average grant date fair value (per share) (b)
January 1, 2024	11,317,704	$	15.89
Shares/units granted	5,088,696	15.24
Shares/units vested/distributed	(4,110,142)	15.81
Shares/units canceled	(456,173)	13.90
December 31, 2024	11,840,085	$	15.71

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

(b)The weighted average grant date fair value for shares/units granted in 2023 and 2022 was $16.08 and $20.64, respectively.

On December 31, 2024, there was $90 million of unrecognized compensation cost related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of three years. The total grant date fair value of shares vested during 2024, 2023 and 2022, was $65 million, $32 million, and $29 million, respectively.

Stock option awards

In 2021 FHN ended its only remaining stock option program, making only one grant related to a 2020 commitment. Options under that program, for executives, have service-vesting requirements and seven-year terms.

In the past, option programs varied widely in their uses and terms, and many old-program options, granted under the ECP or its predecessor plans, remain outstanding today. All options granted since 2005 provide for the issuance of FHN common stock at a price fixed at its fair

market value on the grant date. Except for converted options and a special retention stock option award to the CEO in 2016, all options granted since 2008 vest fully no later than the fourth anniversary of grant, and all such options expire seven years from the grant date. CBF converted options and IBKC converted options granted prior to November 3, 2019 (the IBKC merger agreement date) are fully vested and expire ten years from grant date. IBKC converted options granted subsequent to the merger agreement vest fully no later than the fifth anniversary of the grant date and expire ten years from grant date. The 2016 retention award vested on the fourth through sixth anniversaries of grant and had a seven-year term.

The summary of stock option activity for the year ended December 31, 2024, is shown below.

Table 8.18.2

STOCK OPTION ACTIVITY


	Options Outstanding	Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
January 1, 2024	1,898,968	$	16.31
Options granted	—	—
Options exercised	(604,467)	15.52
Options expired/canceled	(335,879)	18.15
December 31, 2024	958,622	$	16.16	2.38	$	4
Options exercisable	883,705	16.24		2.23	3
Options expected to vest	74,917	15.20		4.07	—

The total intrinsic value of options exercised during 2024, 2023 and 2022 was $2 million, $4 million, and $17 million, respectively.

On December 31, 2024, there was no unrecognized compensation cost related to nonvested stock options. FHN did not grant or convert stock options in 2024, 2023 and 2022.

Expected lives of options granted are determined based on the vesting period, historical exercise patterns and contractual term of the options. FHN uses a blend of historical and implied volatility in determining expected volatility. A portion of the weighted average volatility rate is derived by compiling daily closing stock prices over a historical period approximating the expected lives of the options. Additionally, because of market volatility due to

economic conditions and the impact on stock prices of financial institutions, FHN also incorporates a measure of implied volatility so as to incorporate more recent market conditions in the estimation of future volatility.

Phantom stock awards

As a result of the IBKC merger, FHN assumed phantom stock awards under various plans to officers and other key associates. The awards are subject to a vesting period of five years and are paid out in cash upon vesting. The amount paid per vesting period is calculated as the number of vested share equivalents multiplied by closing market price of a share of the Company's common stock on the vesting date. Share equivalents are calculated on the date of grant as the total award's dollar value divided by the closing market price of a share of the Company's common stock on the grant date. As of December 31, 2024, there were 96,156 share equivalents of phantom stock awards outstanding. See Note 1 - Significant Accounting Policies for more discussion on FHN's phantom stock awards.

Compensation Cost

The compensation cost that has been included in the Consolidated Statements of Income pertaining to stock-based awards was $59 million, $36 million, and $75 million for 2024, 2023, and 2022, respectively. The corresponding total income tax benefits recognized were $14 million, $8 million and $18 million in 2024, 2023, and 2022, respectively.

Authorization

Consistent with Tennessee state law, only authorized, but unissued, stock may be utilized in connection with any issuance of FHN common stock which may be required as a result of stock-based compensation awards. Prior authorizations to repurchase shares issued in connection with compensation plans expired on December 31, 2023. After 2023, as authorized by FHN's Board and the Board's Compensation Committee, FHN continued to make automatic stock purchases by withholding shares associated with stock-based awards to cover tax obligations associated with those awards. Those limited, off-market purchases are not connected to a traditional, announced purchase program. Automatic tax withholding purchases are not subject to trading blackouts which affect senior executives and the general purchase program.