Premises, Equipment, and Leases

12 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

Premises and equipment were comprised of the following at December 31, 2020 and 2019:


(Dollars in millions)	December 31, 2020		December 31, 2019
Land	$	182	$	99
Buildings	594		429
Leasehold improvements	73		50
Furniture, fixtures, and equipment	269		205
Fixed assets held for sale (a)	18		10
Total premises and equipment	1,136		793
Less accumulated depreciation and amortization	(377)		(338)
Premises and equipment, net	$	759	$	455

(a) Primarily comprised of land and buildings.

In 2020 and 2019, FHN recognized $12 million and $27 million, respectively, of fixed asset impairments and lease abandonment charges related to branch closures which are included in Other expense on the Consolidated Statements of Income. In 2020 and 2019, FHN had an insignifcant amount and $2 million of net gains, respectively, related to the sales of bank branches which are included in Other income on the Consolidated Statements of Income.

First Horizon as Lessee

FHN has operating, financing, and short-term leases for branch locations, corporate offices and certain equipment. Substantially all of these leases are classified as operating leases.

The following table provides a detail of the classification of FHN's right-of-use assets and lease liabilities included in the Consolidated Balance Sheets.


(Dollars in millions)		December 31, 2020		December 31, 2019
Lease Right-of-Use Assets:	Classification
Operating lease right-of use assets	Other assets	$	367	$	202
Finance lease right-of use assets	Other assets	4		2
Total Lease Right-of Use Assets		$	371	$	204

Lease Liabilities:
Operating lease liabilities	Other liabilities	$	407	$	223
Finance lease liabilities	Other liabilities	4		3
Total Lease Liabilities		$	411	$	226

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The

following table details the weighted average remaining lease term and discount rate for FHN's operating and finance leases as of December 31, 2020 and 2019.


	December 31, 2020		December 31, 2019
Weighted Average Remaining Lease Terms
Operating leases	12.49 years		12.36 years
Finance leases	11.45 years		9.61 years
Weighted Average Discount Rate
Operating leases	2.39	%	3.24	%
Finance leases	3.05	%	4.77	%

The following table provides a detail of the components of lease expense and other lease information for the years ended December 31, 2020 and 2019:


(Dollars in millions)	2020		2019
Lease cost
Operating lease cost	$	39	$	25





Sublease income	(1)		—
Total lease cost	$	38	$	25

Other information

(Gain) loss on right-of-use asset impairment - operating leases	$	6	$	3


Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	41		23



Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	216		48
Finance leases	2		1

The following table provides a detail of the maturities of FHN's operating and finance lease liabilities as of December 31, 2020:


(Dollars in millions)	December 31, 2020
2021	$	52
2022	49
2023	44
2024	40
2025	38
2026 and thereafter	257
Total lease payments	480
Less lease liability interest	(69)
Total	$	411

FHN had no aggregate undiscounted contractual obligations for lease arrangements that have not commenced as of December 31, 2020.

First Horizon as Lessor

As a lessor, FHN engages in the leasing of equipment to commercial clients primarily through direct financing and sales-type leases. Direct financing and sales-type leases are similar to other forms of installment lending in that lessors generally do not retain benefits and risks incidental to ownership of the property subject to leases. Such arrangements are essentially financing transactions that permit lessees to acquire and use property. As lessor, the sum of all minimum lease payments over the lease term and the estimated residual value, less unearned interest income, is recorded as the net investment in the lease on the commencement date and is included in loans and leases in the Consolidated Balance Sheets. Interest income is accrued as earned over the term of the lease based on the net investment in leases. Fees incurred to originate the lease are deferred on the commencement date and recognized as an adjustment of the yield on the lease.

FHN’s portfolio of direct financing and sales-type leases contains terms of 2 to 23 years. Some of these leases contain options to extend the leases for up to 12 months and/or to terminate the lease within one year. These direct financing and sales-type leases typically include a payment structure set at lease inception and do not provide any additional services. Expenses associated with the leased equipment, such as maintenance and insurance, are paid by the lessee directly to third parties. The lease agreement typically contains an option for the purchase of the leased property by the lessee at the end of the lease term at either the property’s residual value or a specified price. In all cases, FHN expects to sell or re-lease the equipment at the end of the lease term. Due to the nature and structure of FHN’s direct financing and sales-type leases, there is no selling profit or loss on these transactions.

The components of the Company’s net investment in leases as of December 31, 2020 were as follows:


(Dollars in millions)
Lease receivable	$	535
Unearned income	(99)
Guaranteed residual	92
Unguaranteed residual	68
Total net investment	$	596

For the year ended December 31, 2020, interest income for direct financing or sales-type leases totaled $10 million. During the year ended December 31, 2020, there was no profit or loss recognized at the commencement date for direct financing or sales-type leases.

Maturities of the Company's lease receivables as of December 31, 2020 were as follows:


(Dollars in millions)	December 31, 2020
2021	$	97
2022	92
2023	75
2024	54
2025	38
2026 and thereafter	179
Total future minimum lease payments	$	535