RISK FACTORS
An investment in depositary shares involves certain risks. You should carefully consider the risks described below and in the Risk Factors included in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as well as other information included or incorporated by
reference into the accompanying prospectus before making an investment decision.
Risks Relating to First Horizon
Under the caption Risk Factors in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, we have described a number of important factors that could materially impact our business, future results of operations and future cash flow. They include risks related to
COVID-19, the IBKC merger, competition risks, risks from economic downturns and changes, risks associated with domestic and foreign monetary events, traditional strategic and macro risks, industry disruption, risks related to exited businesses, mortgage business risks, pre-2009 mortgage business risks,
reputation risks, risks related to credit ratings, credit risks, operational risks, service risks, regulatory, legislative and legal risks, risks of expense control, geographic risks, insurance risks, liquidity and funding risks, interest rate and yield curve risks, securities inventories and market risks and accounting and
tax risks. Investors should review and carefully consider these factors, as well as the factors described below, before deciding to invest in our depositary shares.
Risks Relating to the Depositary Shares
You are making an investment decision with regard to the depositary shares as well as the Series F Preferred Stock.
As described in this prospectus supplement and the accompanying prospectus, we are issuing depositary shares representing fractional interests in shares of Series F Preferred Stock. Accordingly, the depositary will rely on the payments it receives on the Series F Preferred Stock to fund all payments
on the depositary shares. You should carefully review the information in this prospectus supplement and the accompanying prospectus regarding both of these securities before making an investment decision.
The Series F Preferred Stock is equity and is subordinate to our existing and future indebtedness.
Shares of the Series F Preferred Stock are equity interests in First Horizon and do not constitute indebtedness. As such, shares of the Series F Preferred Stock will rank junior to all indebtedness and other non-equity claims on us with respect to assets available to satisfy claims on us, including in our
liquidation. Additionally, unlike indebtedness, where principal and interest would customarily be payable on specified due dates, in the case of preferred stock like the Series F Preferred Stock, dividends are payable only if declared by our board of directors and there is no maturity date.
Also, as a bank holding company, our ability to declare and pay dividends is dependent on certain federal regulatory considerations, and we may not redeem or repurchase Series F Preferred Stock without the approval of the Federal Reserve. We have issued and outstanding debt securities under
which we may defer interest payments from time to time, but in that case we would not be permitted to pay dividends on any of our capital stock, including the Series F Preferred Stock, during the deferral period. Because dividends on the Series F Preferred Stock are non-cumulative, any dividends not
paid during a deferral period with respect to any such debt securities will not become payable upon the conclusion of, or any time after, such deferral period.
If we are deferring payments on our outstanding junior subordinated debentures or are in default under the indentures governing those debentures, we will be prohibited from making distributions on or redeeming the Series F Preferred Stock.
The terms of our outstanding junior subordinated debentures prohibit us from declaring or paying any dividends or distributions on the Series F Preferred Stock, or redeeming, purchasing,
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acquiring or making a liquidation payment with respect to the Series F Preferred Stock, if we are aware of any event that would be an event of default under the indenture governing those junior subordinated debentures or at any time when we have deferred interest thereunder.
Additional issuances of depositary shares, preferred stock or securities convertible into preferred stock may dilute existing holders of the depositary shares.
We may, in the future, determine that it is advisable, or we may encounter circumstances where we determine it is necessary, to issue additional depositary shares, shares of preferred stock, securities convertible into, exchangeable for or that represent an interest in preferred stock, or preferred
stock-equivalent securities. Our board of directors is authorized to cause us to issue one or more classes or series of preferred stock from time to time without any action on the part of the shareholders, including issuing additional shares of the Series F Preferred Stock or additional depositary shares. Our
board of directors also has the power, without shareholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting and dividend rights. The market price of the depositary shares could decline as a result of these other offerings, as well as other sales
of a large block of depositary shares, the Series F Preferred Stock or similar securities in the market thereafter, or the perception that such sales could occur. Though the approval of holders of depositary shares representing interests in the Series F Preferred Stock will be needed to issue any equity
security ranking senior to the Series F Preferred Stock, if we issue preferred stock in the future that has preference over the Series F Preferred Stock with respect to the payment of dividends or amounts upon liquidation, or if we issue preferred stock with voting rights that dilute the voting power of the
Series F Preferred Stock or depositary shares, the rights of holders of the depositary shares or the market price of the depositary shares could be adversely affected. Holders of the Series F Preferred Stock or depositary shares are not entitled to preemptive rights or other protections against dilution.
Our ability to declare and pay dividends is subject to statutory and regulatory restrictions.
We are subject to statutory and regulatory limitations on our ability to declare and pay dividends on the Series F Preferred Stock. In particular, the Federal Reserves capital rules include a capital conservation buffer that has been fully phased-in since January 1, 2019. The buffer can be satisfied only
with common equity Tier 1 capital. If our risk-based capital ratios do not satisfy minimum requirements plus the capital conservation buffer, we will face graduated constraints on, among other things, capital distributions (including dividends on the Series F Preferred Stock) based on the amount of the
shortfall and the amount of our eligible retained income.
Investors should not expect us to redeem the Series F Preferred Stock on the date it first becomes redeemable or on any particular date after it becomes redeemable.
The Series F Preferred Stock is a perpetual equity security. This means that the Series F Preferred Stock has no maturity or mandatory redemption date and is not redeemable at the option of investors. Subject to the approval of the Federal Reserve (if then required), the Series F Preferred Stock
may be redeemed by us at our option either in whole or in part on or after July 10, 2026. Any decision we may make at any time to propose a redemption of the Series F Preferred Stock will depend, among other things, upon our evaluation of the overall level and quality of our capital, our liquidity,
our risk exposures, our earnings and growth strategy, as well as general market conditions at such time.
Under the Federal Reserves current risk-based capital guidelines applicable to bank holding companies, we may redeem the Series F Preferred Stock only with the prior approval of the Federal Reserve, and the Federal Reserve may not approve any redemption of the Series F Preferred Stock that we
may propose. We understand that the factors that the Federal Reserve will consider in evaluating a proposed redemption include its evaluation of the overall level and quality of our capital components, considered in light of our risk exposures, earnings and growth strategy, and other supervisory
considerations. Accordingly, investors should not expect us to redeem the Series F Preferred Stock on the date it first becomes redeemable or on any particular date thereafter.
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We may be able to redeem the Series F Preferred Stock prior to July 10, 2026.
By its terms, the Series F Preferred Stock may be redeemed by us prior to July 10, 2026 upon the occurrence of certain events involving the capital treatment of the Series F Preferred Stock. In particular, upon our determination in good faith that an event has occurred that would constitute a
Regulatory Capital Event (as defined under Description of the Series F Preferred StockRedemption below), we may, at our option at any time within 90 days following such Regulatory Capital Event, redeem in whole but not in part the Series F Preferred Stock, subject to the approval of the Federal
Reserve (if then required). See Description of the Series F Preferred StockRedemption.
Dividends on the Series F Preferred Stock are discretionary and non-cumulative.
Dividends on the Series F Preferred Stock are discretionary and will not be cumulative. If our board of directors does not authorize and declare a dividend for any dividend period, holders of depositary shares would not be entitled to receive any such dividend, and any such unpaid dividend will not
accrue or be payable. We will have no obligation to pay dividends for any dividend period.
In addition, if we fail to comply, or if and to the extent the payment of a dividend would cause us to fail to comply, with applicable laws and regulations (including applicable capital adequacy guidelines), we may not declare, pay or set aside for payment dividends on the Series F Preferred Stock. As
a result, if payment of dividends on Series F Preferred Stock for any dividend period would cause us to fail to comply with any applicable law or regulation, we will not declare or pay a dividend for such dividend period. In such a case, holders of the depositary shares will not be entitled to receive any
dividend for that dividend period, and the unpaid dividend will cease to accrue and be payable.
If we are not paying full dividends on any outstanding parity stock, we will not be able to pay full dividends on the Series F Preferred Stock.
When dividends are not paid in full upon the Series F Preferred Stock and dividend parity stock, if any, all dividends declared upon the Series F Preferred Stock and dividend parity stock, if any, will be declared on a proportional basis so that the amount of dividends declared per share will bear to
each other the same ratio that accrued dividends for the then-current dividend period per share on Series F Preferred Stock, and accrued dividends, including any accumulations, if any, on dividend parity stock, if any, bear to each other. Therefore if we are not paying full dividends on any outstanding
dividend parity stock, we will not be able to pay full dividends on the Series F Preferred Stock.
We are a holding company and depend on our subsidiaries for dividends, distributions and other payments.
We are a separate and distinct legal entity from the Bank and our non-banking subsidiaries and depend on dividends, distributions and other payments from the Bank and our non-banking subsidiaries to fund any dividend payments on our common stock and our preferred stock and to fund all
payments on our other obligations. Regulations of both the Federal Reserve and the State of Tennessee affect the ability of the Bank to pay dividends and other distributions to us and to make loans to us. Regulatory action of that kind could impede access to funds we need to make payments on our
obligations or dividend payments. Additionally, we are required to provide financial support to the Bank. If our subsidiaries earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, we may not be able to make dividend payments to our common or preferred
shareholders.
Furthermore, our right to participate in any distribution of assets of any of our subsidiaries upon its liquidation or otherwise, and thus your ability as a holder of the depositary shares to benefit indirectly from such distribution, will be subject to the prior claims of such subsidiarys creditors (including,
in the case of the Bank, its depositors), except to the extent that any of our
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claims as a creditor of such subsidiary may be recognized. As a result, our depositary shares are effectively subordinated to all existing and future liabilities and obligations of our subsidiaries.
Holders of Series F Preferred Stock, and therefore holders of the depositary shares, will have limited voting rights.
Holders of the Series F Preferred Stock, and therefore holders of the depositary shares, will have no voting rights with respect to matters that generally require the approval of our voting shareholders. Holders of the Series F Preferred Stock will have voting rights only in the event of non-payment of
six quarterly dividends, with respect to certain changes in terms of the Series F Preferred Stock and certain other matters and as otherwise required by applicable law. See Description of the Series F Preferred StockVoting Rights.
Moreover, holders of the depositary shares must act through the depositary to exercise any voting rights in respect of the Series F Preferred Stock. Although each depositary share is entitled to 1/4,000th of a vote, the depositary can only vote whole shares of Series F Preferred Stock. While the
depositary will vote the maximum number of whole shares of Series F Preferred Stock in accordance with the instructions it receives, any remaining votes of holders of the depositary shares will not be voted.
General market conditions and unpredictable factors could adversely affect market prices for the depositary shares.
Market prices for the depositary shares are subject to change. Several factors, many of which are beyond our control, will influence the market value of the depositary shares. Factors that might influence the market value of the depositary shares include (among other things):
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whether dividends have been declared and the perception as to whether dividends will be declared on the Series F Preferred Stock in the future;
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our creditworthiness;
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the ratings given to our securities by credit rating agencies, including the ratings given to the Series F Preferred Stock or depositary shares;
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the market for similar securities;
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changes in public health (including the impact of the COVID-19 pandemic);
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regulatory changes, interpretations or directives that may prevent us from paying dividends; and
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economic, financial, geopolitical, regulatory or judicial events that affect us or the financial markets generally.
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Accordingly, the depositary shares that an investor purchases, whether in this offering or in the secondary market, may trade at a discount to the price that the investor paid for the depositary shares.
A downgrade, suspension or withdrawal of any rating assigned by a rating agency to us or our securities, including the depositary shares and the Series F Preferred Stock, could cause the liquidity or trading price of the depositary shares to decline significantly.
Neither the Series F Preferred Stock nor the depositary shares will initially be investment grade-rated by any of Moodys Investor Services, Standard & Poors Ratings Services or Fitch Ratings, Inc. There is no assurance that the credit rating of the Series F Preferred Stock or the depositary shares will
be upgraded or become investment grade in the future. Consequently, the depositary shares may be subject to a higher risk of price volatility than similar, higher-rated securities, particularly in volatile markets. Real or anticipated changes in the credit ratings assigned to the depositary shares, the Series F
Preferred Stock or our credit ratings generally could affect the trading price of the depositary shares.
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Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. In addition, credit rating agencies continually review their ratings for the companies that they follow, including us. The credit rating
agencies also evaluate the financial services industry as a whole and may change their credit rating for us and our securities, including the Series F Preferred Stock and depositary shares, based on their overall view of our industry. A future downgrade, withdrawal, or the announcement of a possible
downgrade or withdrawal in the ratings assigned to the depositary shares, the Series F Preferred Stock, us or our other securities, or any perceived decrease in our creditworthiness could cause the trading price of the depositary shares to decline significantly.
The Series F Preferred Stock and the related depositary shares may not have an active trading market, and any such market for depositary shares may be illiquid.
The Series F Preferred Stock and the related depositary shares are new issues with no established trading market. Although we plan to apply to have the depositary shares listed on the New York Stock Exchange, there is no guarantee that we will be able to list the depositary shares. Even if the
depositary shares are listed, there may be little or no secondary market for the depositary shares. The underwriters have advised us that they presently intend to make a market in the depositary shares, as permitted by applicable laws and regulations. However, they are not obligated to do so and may
discontinue any market making in the depositary shares at any time in their sole discretion. Even if a secondary market for the depositary shares develops, it may not provide significant liquidity and transaction costs in any secondary market could be high. As a result, the difference between bid and ask
prices in any secondary market could be substantial. Therefore, a liquid trading market for the depositary shares may not develop and you may be unable to sell your depositary shares at a particular time or the price you receive when you sell may not be favorable. We do not expect that there will be
any separate public trading market for the Series F Preferred Stock except as represented by the depositary shares.
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