Regulatory Capital and Restrictions

12 Months Ended

Dec. 31, 2023

Broker-Dealer [Abstract]

Regulatory Capital and Restrictions

Regulatory Capital and Restrictions

Regulatory Capital

FHN is 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, FHN must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgment by the regulators such as capital components, asset risk weightings, and other factors.

Management believes that, as of December 31, 2023, FHN and First Horizon Bank met all capital adequacy requirements to which they were subject. As of December 31, 2023, First Horizon Bank was classified as

well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, an institution must maintain minimum Total Risk-Based, Tier 1 Risk-Based, Common Equity Tier 1 and Tier 1 Leverage ratios as set forth in the following table. Management believes that no events or changes have occurred subsequent to year-end that would change this designation.

Quantitative measures established by regulation to ensure capital adequacy require FHN to maintain minimum ratios as set forth in the following table. FHN and First Horizon Bank are also subject to a 2.5% capital conservation buffer which is an amount above the minimum levels designed to ensure that banks remain well-capitalized, even in adverse economic scenarios.

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

Table 8.12.1

CAPITAL AMOUNTS & RATIOS

(Dollars in millions)	First Horizon Corporation			First Horizon Bank
	Amount		Ratio	Amount		Ratio
December 31, 2023
Actual:
Total Capital	$	9,922	13.96%	$	9,303	13.17%
Tier 1 Capital	8,825		12.42	8,350		11.82
Common Equity Tier 1	8,104		11.40	8,055		11.40
Leverage	8,825		10.69	8,350		10.20
Minimum Requirement for Capital Adequacy Purposes:
Total Capital	5,686		8.00	5,651		8.00
Tier 1 Capital	4,264		6.00	4,238		6.00
Common Equity Tier 1	3,198		4.50	3,179		4.50
Leverage	3,302		4.00	3,276		4.00
Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital				7,064		10.00
Tier 1 Capital				5,651		8.00
Common Equity Tier 1				4,591		6.50
Leverage				4,095		5.00
December 31, 2022
Actual:
Total Capital	$	9,222	13.33%	$	8,532	12.41%
Tier 1 Capital	8,247		11.92	7,700		11.20
Common Equity Tier 1	7,032		10.17	7,405		10.77
Leverage	8,247		10.36	7,700		9.76

Minimum Requirement for Capital Adequacy Purposes:
Total Capital	5,533	8.00	5,498	8.00
Tier 1 Capital	4,150	6.00	4,124	6.00
Common Equity Tier 1	3,112	4.50	3,093	4.50
Leverage	3,183	4.00	3,157	4.00
Minimum Requirement to be Well Capitalized Under Prompt Corrective Action Provisions:
Total Capital			6,873	10.00
Tier 1 Capital			5,498	8.00
Common Equity Tier 1			4,467	6.50
Leverage			3,946	5.00

Restrictions on cash and due from banks

Effective March 26, 2020, the Federal Reserve reduced its reserve requirement to zero, and as a result, on December 31, 2023 and 2022, First Horizon Bank was not required to maintain cash reserves.

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, 2023, First Horizon Bank had undivided profits of $3.3 billion, of which a limited amount was available for distribution to FHN as dividends without prior regulatory approval. 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 period. 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 $1.2 billion at January 1, 2024. First Horizon Bank declared and paid common dividends to the parent company in the amount of $220 million in 2023 and $435 million in 2022. During 2023 and 2022, First Horizon Bank declared and paid dividends on its preferred stock according to the payment terms of its issuances as noted in Note 11 - Preferred Stock.

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. Furthermore, the Federal Reserve generally requires insured banks and bank holding companies to pay dividends only out of current operating earnings.

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% of the bank’s capital stock and surplus, as defined, or $951 million, on December 31, 2023. 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, 2023, the parent company had less than $1 million in covered transactions from First Horizon Bank and 840 Denning LLC, a parent company subsidiary, had a covered transaction of $2 million. Two of the bank’s financial subsidiaries, FHN Financial Securities Corp. and First Horizon Advisors, Inc., had covered transactions from First Horizon Bank totaling $387 million and $50 million, respectively. In addition, the aggregate amount of covered transactions with all affiliates, as defined, is limited to 20% of the bank’s capital stock and surplus, as defined, or $1.9 billion, on December 31, 2023. First Horizon Bank’s total covered transactions with all affiliates including the parent company on December 31, 2023 were $438 million.