First Horizon Corp (FHN)

A. Company Overview

First Horizon Corporation is a publicly traded bank holding company that operates predominantly in the United States financial services industry. Established in 1968 and headquartered in Memphis, Tennessee, the corporation has grown into a significant player in the banking sector, primarily through its principal subsidiary, First Horizon Bank. As of December 31, 2023, First Horizon reported total consolidated assets of $82 billion, with a substantial portion derived from net interest income, which accounted for approximately 73% of revenues, while noninterest income contributed the remaining 27%.

First Horizon’s stock is traded on the New York Stock Exchange under the symbol “FHN.” The firm operates under the auspices of regulatory frameworks established for bank holding companies and financial holding companies, which allow it to engage in a broader range of financial activities, including banking, insurance, securities, and asset management.

B. Subsidiaries and Principal Businesses

First Horizon Bank

First Horizon Bank serves as the corporate entity's primary subsidiary and is itself a Tennessee banking corporation founded in 1864 as First National Bank of Memphis. The Bank plays a crucial role in generating the vast majority of First Horizon's consolidated revenue, reporting approximately $3 billion in revenues during 2023. The Bank's portfolio includes total assets of $82 billion, total deposits amounting to $66 billion, and total loans reaching $61 billion (inclusive of certain leases).

Business Lines and Offerings

At the end of 2023, First Horizon's retail banking centers numbered over 450 across 24 states (excluding ATMs), with 415 of those locations specifically serving retail banking clients in twelve states. The Bank offers a suite of services, including:

• Commercial banking
• Business banking
• Consumer banking
• Wealth management and private client services

Moreover, First Horizon engages in specialty banking segments that include fixed income sales, mortgage warehouse lending, and other forms of asset-based lending, allowing the firm to operate both on a regional scale and in broader markets.

C. Loan Portfolio Composition

First Horizon’s lending operations are robustly segmented, with loans categorized mainly into commercial and consumer types:

• Commercial Loans: Comprising the larger slice of the lending portfolio, commercial loans accounted for a major portion of the loans extended by First Horizon.
• Consumer Loans: These include home equity loans and mortgages, collectively representing a significant share of total loans.

The largest loan portfolio is comprised of traditional commercial and industrial loans, which amounted to $33 billion at year-end 2023. This category includes loans to various sectors, notably financial services, with an industry concentration of about 18%. The commercial real estate (CRE) portfolio accounted for $14 billion, predominantly in multi-family properties, followed by office, retail, and industrial segments.

D. Deposit Structure

Deposits represent a principal funding source for First Horizon's lending activities. As of December 31, 2023, total deposits stood at $66 billion, with the majority held within regional and specialty banking segments. This significant volume of deposits not only underpins lending but also positions First Horizon favorably relative to financing costs, as deposits are typically the least expensive funding source for banks.

E. Business Segments and Geographic Reach

Regional Banking

Most of First Horizon's financial results are derived from the regional banking segment, where consumer and commercial needs are met through a network of physical banking centers. This segment serves traditional markets associated with the Bank's geographical footprint, primarily in the Southern United States.

Specialty Banking

Contrarily, the specialty banking segment covers a broader geographic reach, providing services such as fixed income, healthcare finance, and franchise financing to clients across multiple states. These businesses have experienced varying demand based on economic conditions and interest rate fluctuations.

F. Significant Developments and Strategic Priorities

Over the past five years, First Horizon has implemented strategic initiatives aimed at expanding its suite of consumer and commercial banking products. Key developments include the 2020 merger with IBERIABANK Corporation, which enhanced its market presence, particularly in the Southeastern United States, and the subsequent acquisition of additional branches from Truist Bank.

First Horizon has focused its efforts on enhancing risk-adjusted returns, managing operational expenses prudently, and investing in scalable technology to improve client services while navigating the evolving financial landscape.

G. Regulatory Environment

As a financial holding company, First Horizon operates under stringent regulatory supervision from various entities, including the Federal Reserve and the Tennessee Department of Financial Institutions (TDFI). Regulations shape its operational framework, impacting aspects ranging from capital adequacy to consumer credit lending practices.

First Horizon maintains a robust capital structure, with key ratios indicating a well-capitalized status relative to regulatory requirements. The Tier 1 Capital Ratio at the end of 2023 was reported at 12.42%, reflective of the company's strong financial foundation amidst the dynamic banking environment.

H. Future Outlook

The outlook for First Horizon remains influenced by macroeconomic factors, including interest rate trends and regulatory developments. The U.S. banking sector's capacity to adapt to shifts in monetary policy remains paramount, especially in light of changes enacted by the Federal Reserve in response to inflationary pressures. The ongoing evolution in consumer behavior, particularly with the growing preference for digital banking solutions, will also shape First Horizon’s strategic focus moving forward.