Regulatory Capital and Restrictions

12 Months Ended

Dec. 31, 2019

Brokers and Dealers [Abstract]

Regulatory Capital and Restrictions

Regulatory Capital and Restrictions

Regulatory Capital. FHN and First Horizon Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on FHN’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of assets, liabilities, and certain derivatives as calculated under regulatory accounting practices must be met. Capital amounts and classification are also subject to qualitative judgment by the regulators such as capital components, asset risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require FHN and First Horizon Bank to maintain minimum amounts and ratios of Total, Tier 1, and Common Equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets (“Leverage”). Management believes that, as of December 31, 2019, FHN and First Horizon Bank met all capital adequacy requirements to which they were subject.

The actual capital amounts and ratios of FHN and First Horizon Bank are presented in the table below.

(Dollars in thousands)	First Horizon National Corporation				First Horizon Bank
	Amount		Ratio		Amount		Ratio
On December 31, 2019
Actual:
Total Capital	$	4,154,885	11.22	%	$	3,944,613	10.77	%
Tier 1 Capital	3,760,450		10.15		3,728,683		10.18
Common Equity Tier 1	3,408,936		9.20		3,433,867		9.38
Leverage	3,760,450		9.04		3,728,683		9.12
Minimum Requirement for Capital Adequacy Purposes:
Total Capital	2,963,663		8.00		2,930,159		8.00
Tier 1 Capital	2,222,747		6.00		2,197,620		6.00
Common Equity Tier 1	1,667,060		4.50		1,648,215		4.50
Leverage	1,663,338		4.00		1,634,695		4.00
Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital					3,662,699		10.00
Tier 1 Capital					2,930,159		8.00
Common Equity Tier 1					2,380,755		6.50
Leverage					2,043,368		5.00
On December 31, 2018
Actual:
Total Capital	$	3,940,117	11.94	%	$	3,689,180	11.32	%
Tier 1 Capital	3,565,373		10.80		3,492,541		10.72
Common Equity Tier 1	3,223,702		9.77		3,197,725		9.81
Leverage	3,565,373		9.09		3,492,541		9.10
Minimum Requirement for Capital Adequacy Purposes:
Total Capital	2,640,208		8.00		2,607,406		8.00
Tier 1 Capital	1,980,156		6.00		1,955,555		6.00
Common Equity Tier 1	1,485,117		4.50		1,466,666		4.50
Leverage	1,568,870		4.00		1,535,279		4.00
Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital					3,259,258		10.00
Tier 1 Capital					2,607,406		8.00
Common Equity Tier 1					2,118,518		6.50
Leverage					1,919,099		5.00

Restrictions on cash and due from banks. Under the Federal Reserve Act and Regulation D, First Horizon Bank is required to maintain a certain amount of cash reserves. On December 31, 2019 and 2018, First Horizon Bank's net required reserves were $396.1 million and $371.7 million, respectively, after the consideration of $273.7 million in average vault cash. The remaining net reserve requirement for each year was met with Federal Reserve Bank deposits. Vault cash is reflected in Cash and due from banks on the Consolidated Statements of Condition and Federal Reserve Bank deposits are reflected as Interest-bearing cash.

Restrictions on dividends. Cash dividends are paid by FHN from its assets, which are mainly provided by dividends from its subsidiaries. Certain regulatory restrictions exist regarding the ability of First Horizon Bank to transfer funds to FHN in the form of cash, dividends, loans, or advances. As of December 31, 2019, First Horizon Bank had undivided profits of $1.2 billion, of which a limited amount was available for distribution to FHN as dividends without prior regulatory approval. Certain regulatory restrictions exist regarding the ability of First Horizon Bank to transfer funds to FHN in the form of cash, dividends, loans, and advances. At any given time, the pertinent portions of those regulatory restrictions allow First Horizon Bank to declare preferred or common dividends without prior regulatory approval in an amount equal to First Horizon Bank's retained net income for the two most recent completed years plus the current year to date. 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, First Horizon Bank’s total amount available for dividends was $331.2 million at January 1, 2020. First Horizon Bank declared and paid common dividends to the parent company in the amount of $345.0 million in 2019 and $420.0 million in 2018. In January 2020, First Horizon Bank declared and paid a common dividend to the parent company in the amount of $65.0 million. During 2019 and 2018, First Horizon Bank declared and paid dividends on its preferred stock quarterly. Additionally, First Horizon Bank declared preferred dividends in first quarter 2020 payable in April 2020.

The payment of cash dividends by FHN and First Horizon Bank may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. Beginning January 1, 2019, the ability to pay dividends for both FHN and First Horizon Bank is restricted if capital ratios fall below regulatory minimums for Common Equity Tier 1, Tier 1, Total Capital ratios plus a 2.5 percent capital conservation buffer or 50 basis points above the capital ratios required to be considered well-capitalized. Furthermore, the Federal Reserve generally requires insured banks and bank holding companies only to pay dividends out of current operating earnings. Consequently, the decision of whether FHN will pay future dividends and the amount of dividends will be affected by current operating results.

Restrictions on intercompany transactions. Under current Federal banking laws, First Horizon Bank may not enter into covered transactions with any affiliate including the parent company and certain financial subsidiaries in excess of 10 percent of the bank’s capital stock and surplus, as defined, or $426.0 million, on December 31, 2019. Covered transactions include a loan or extension of credit to an affiliate, a purchase of or an investment in securities issued by an affiliate and the acceptance of securities issued by the affiliate as collateral for any loan or extension of credit. The equity investment, including retained earnings, in certain of a bank’s financial subsidiaries is also treated as a covered transaction. On December 31, 2019, the parent company had covered transactions of $.8 million from First Horizon Bank and two of the bank’s financial subsidiaries, FHN Financial Securities Corp. and First Horizon Advisors, Inc., had covered transactions from First Horizon Bank totaling $390.4 million and $34.7 million, respectively. In addition, the aggregate amount of covered transactions with all affiliates, as defined, is limited to 20 percent of the bank’s capital stock and surplus, as defined, or $851.9 million, on December 31, 2019. First Horizon Bank’s total covered transactions with all affiliates including the parent company on December 31, 2019 were $425.9 million.