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Variable Interest Entities | 3 Months Ended
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Mar. 31, 2025
Variable Interest Entities [Abstract] |
Variable Interest Entities | Variable Interest Entities FHN makes equity investments in various entities that are considered VIEs, as defined by GAAP. A VIE typically does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties. The Company’s variable interest arises from contractual, ownership, or other monetary interests in the entity, which change with fluctuations in the fair value of the entity's net assets. FHN consolidates a VIE if FHN is the primary beneficiary of the entity. FHN is the primary beneficiary of a VIE if FHN's variable interest provides it with the power to direct the activities that most significantly impact the VIE and the right to receive benefits (or the obligation to absorb losses) that could potentially be significant to the VIE. To determine whether or not a variable interest held could potentially be significant to the VIE, FHN considers both qualitative and quantitative factors regarding the nature, size, and form of its involvement with the VIE. FHN assesses whether or not it is the primary beneficiary of a VIE on an ongoing basis. Consolidated Variable Interest Entities FHN has established certain rabbi trusts related to deferred compensation plans offered to its employees. FHN contributes employee cash compensation deferrals to the trusts and directs the underlying investments made by the trusts. The assets of these trusts are available to FHN’s creditors only in the event that FHN becomes insolvent. These trusts are considered VIEs as there is no equity at risk in the trusts since FHN provided the equity interest to its employees in exchange for services rendered. FHN is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities that most significantly impact the economic performance of the rabbi trusts through its ability to direct the underlying investments made by the trusts. Additionally, FHN could potentially receive benefits or absorb losses that are significant to the trusts due to its right to receive any asset values in excess of liability payoffs and its obligation to fund any liabilities to employees that are in excess of a rabbi trust’s assets. The following table summarizes the carrying value of assets and liabilities associated with rabbi trusts used for deferred compensation plans which are consolidated by FHN as of March 31, 2025 and December 31, 2024.
CONSOLIDATED VIEs
(Dollars in millions) |  |  |  | March 31, 2025 |  |  |  | December 31, 2024
Assets: |  |  |  |  |  |  |  |
Other assets |  |  |  | $ | 190 |  |  |  |  | $ | 195 |
Liabilities: |  |  |  |  |  |  |  |
Other liabilities |  |  |  | $ | 163 |  |  |  |  | $ | 165 |
Nonconsolidated Variable Interest Entities Tax Credit Investments Through designated wholly-owned subsidiaries, First Horizon Bank makes equity investments as a limited partner in various partnerships that sponsor affordable housing projects utilizing the LIHTC. Through designated subsidiaries, First Horizon Bank periodically makes equity investments as a non-managing member in various LLCs that sponsor community development projects utilizing the NMTC. First Horizon Bank also makes equity investments as a limited partner or non-managing member in entities that receive historic tax credits. The purpose of these investments is to achieve a satisfactory return on capital and to support FHN’s community reinvestment initiatives. These entities are considered VIEs as First Horizon Bank's subsidiaries represent the holders of the equity investment at risk, but do not have the ability to direct the activities that most significantly affect the performance of the entities. FHN is therefore not the primary beneficiary of any of these entities. Accordingly, FHN does not consolidate these VIEs and accounts for these investments in other assets on the Consolidated Balance Sheets. FHN accounts for qualifying LIHTC investments under the PAM. Effective for periods after 2023, all LIHTC investments qualify for the PAM. Commencing in 2024, FHN determined that its equity investments in NMTC and historic tax credit entities qualify for the PAM and made the election to apply the PAM for these programs. Expenses associated with non-qualifying LIHTC investments were not significant for the three months ended March 31, 2025 and 2024. The following table summarizes the impact to income tax expense on the Consolidated Statements of Income for the three months ended March 31, 2025 and 2024 for investments accounted for under the PAM. The impact of these investments is included in other operating activities, net in the Consolidated Statements of Cash Flows.
TAX CREDIT IMPACTS ON TAX EXPENSE |  |  |  |
|  | Three Months Ended March 31, |  |  |  |
(Dollars in millions) |  | 2025 |  | 2024 |  |  |  |  |  |  |  |
Income tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Amortization of qualifying investments |  | $ | 17 |  |  | $ | 15 |  |  |  |  |  |  |  |  |
Tax credits |  | (20) |  |  | (17) |  |  |  |  |  |  |  |  |
Other tax benefits related to qualifying investments |  | (2) |  |  | (2) |  |  |  |  |  |  |  |  |
Small Issuer Trust Preferred Holdings First Horizon Bank holds variable interests in trusts which have issued mandatorily redeemable preferred capital securities (“trust preferreds”) for smaller banking and insurance enterprises. First Horizon Bank has no voting rights for the trusts’ activities. The trusts’ only assets are junior subordinated debentures of the issuing enterprises. The creditors of the trusts hold no recourse to the assets of First Horizon Bank. Since First Horizon Bank is solely a holder of the trusts’ securities, it has no rights which would give it the power to direct the activities that most significantly impact the trusts’ economic performance and thus it is not considered the primary beneficiary of the trusts. First Horizon Bank has no contractual requirements to provide financial support to the trusts. On-Balance Sheet Trust Preferred Securitization In 2007, First Horizon Bank executed a securitization of certain small issuer trust preferreds for which the underlying trust meets the definition of a VIE as the holders of the equity investment at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entity’s economic performance. Since First Horizon Bank did not retain servicing or other decision-making rights, First Horizon Bank is not the primary beneficiary as it does not have the power to direct the activities that most significantly impact the trust’s economic performance. Accordingly, First Horizon Bank has accounted for the funds received through the securitization as a term borrowing in its Consolidated Balance Sheets. First Horizon Bank has no contractual requirements to provide financial support to the trust. Holdings in Agency Mortgage-Backed Securities FHN holds securities issued by various Agency securitization trusts. Based on their restrictive nature, the trusts meet the definition of a VIE since the holders of the equity investments at risk do not have the power through voting rights, or similar rights, to direct the activities that most significantly impact the entities’ economic performance. FHN could potentially receive benefits or absorb losses that are significant to the trusts based on the nature of the trusts’ activities and the size of FHN’s holdings. However, FHN is solely a holder of the trusts’ securities and does not have the power to direct the activities that most significantly impact the trusts’ economic performance and is not considered the primary beneficiary of the trusts. FHN has no contractual requirements to provide financial support to the trusts. Commercial Loan Modifications to Borrowers Experiencing Financial Difficulty For certain troubled commercial loans, First Horizon Bank modifies the terms of the borrower’s debt in an effort to increase the probability of receipt of amounts contractually due. Following a modification to borrowers experiencing financial difficulty, the borrower entity typically meets the definition of a VIE as the initial determination of whether an entity is a VIE must be reconsidered as events have proven that the entity’s equity is not sufficient to permit it to finance its activities without additional subordinated financial support or a restructuring of the terms of its financing. As First Horizon Bank does not have the power to direct the activities that most significantly impact such troubled commercial borrowers’ operations, it is not considered the primary beneficiary even in situations where, based on the size of the financing provided, First Horizon Bank is exposed to potentially significant benefits and losses of the borrowing entity. First Horizon Bank has no contractual requirements to provide financial support to the borrowing entities beyond certain funding commitments established upon restructuring of the terms of the debt that allows for preparation of the underlying collateral for sale. Proprietary Trust Preferred Issuances In conjunction with its acquisitions, FHN acquired junior subordinated debt underlying multiple issuances of trust preferred debt. All of the trusts are considered VIEs because the ownership interests from the capital contributions to these trusts are not considered “at risk” in evaluating whether the holders of the equity investments at risk in the trusts have the ability to direct the activities that most significantly impact the entities’ economic performance. Thus, FHN cannot be the trusts’ primary beneficiary because its ownership interests in the trusts are not considered variable interests as they are not considered “at risk”. Consequently, none of the trusts are consolidated by FHN. The following tables summarize FHN’s nonconsolidated VIEs as of March 31, 2025 and December 31, 2024.
NONCONSOLIDATED VIEs AT MARCH 31, 2025
(Dollars in millions) |  | Maximum Loss Exposure |  | Liability Recognized |  | Classification
Type |  |  |  |  |  |
Low income housing partnerships |  | $ | 659 |  |  | $ | 251 |  |  | (a)
Other tax credit investments (b) |  | 89 |  |  | 73 |  |  | Other assets
Small issuer trust preferred holdings (c) |  | 172 |  |  | — |  |  | Loans and leases
On-balance sheet trust preferred securitization |  | 26 |  |  | 88 |  |  | (d)
Holdings of agency mortgage-backed securities (c) |  | 8,158 |  |  | — |  |  | (e)
Commercial loan modifications to borrowers experiencing financial difficulty (f) |  | 397 |  |  | — |  |  | Loans and leases
Proprietary trust preferred issuances (g) |  | — |  |  | 167 |  |  | Term borrowings
(a)Maximum loss exposure represents $408 million of current investments and $251 million of accrued contractual funding commitments. Accrued funding commitments represent unconditional contractual obligations for future funding events and are also recognized in other liabilities. FHN currently expects to be required to fund these accrued commitments by the end of 2026. (b)Maximum loss exposure represents the value of current investments. (c)Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts’ securities. (d)Includes $113 million classified as loans and leases and $2 million classified as trading securities, which are offset by $88 million classified as term borrowings. (e)Includes $237 million classified as trading securities, $1.3 billion classified as securities held to maturity, and $6.7 billion classified as securities available for sale. (f)Maximum loss exposure represents $397 million of current receivables with no additional contractual funding commitments on loans related to commercial loan modifications to borrowers experiencing financial difficulty. (g)No exposure to loss due to nature of FHN's involvement.
NONCONSOLIDATED VIEs AT DECEMBER 31, 2024
(Dollars in millions) |  | Maximum Loss Exposure |  | Liability Recognized |  | Classification
Type: |  |  |  |  |  |
Low income housing partnerships |  | $ | 617 |  |  | $ | 222 |  |  | (a)
Other tax credit investments (b) |  | 90 |  |  | 73 |  |  | Other assets
Small issuer trust preferred holdings (c) |  | 171 |  |  | — |  |  | Loans and leases
On-balance sheet trust preferred securitization |  | 26 |  |  | 88 |  |  | (d)
Holdings of agency mortgage-backed securities (c) |  | 8,017 |  |  | — |  |  | (e)
Commercial loan modifications to borrowers experiencing financial difficulty (f) |  | 381 |  |  | — |  |  | Loans and leases
Proprietary trust preferred issuances (g) |  | — |  |  | 167 |  |  | Term borrowings
(a)Maximum loss exposure represents $395 million of current investments and $222 million of accrued contractual funding commitments. Accrued funding commitments represent unconditional contractual obligations for future funding events and are also recognized in other liabilities. FHN currently expects to be required to fund these accrued commitments by the end of 2026. (b)Maximum loss exposure represents current investments. (c)Maximum loss exposure represents the value of current investments. A liability is not recognized as FHN is solely a holder of the trusts’ securities. (d)Includes $113 million classified as loans and leases and $2 million classified as trading securities, which are offset by $88 million classified as term borrowings. (e)Includes $278 million classified as trading securities, $1.3 billion classified as securities held to maturity, and $6.5 billion classified as securities available for sale. (f)Maximum loss exposure represents $381 million of current receivables with no additional contractual funding commitments on loans related to commercial loan modifications to borrowers experiencing financial difficulty. (g)No exposure to loss due to nature of FHN's involvement.

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- Definition Variable Interest Entities. + References No definition available. + Details
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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/810/tableOfContent + Details
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