8-K: First Horizon Completes $400M Preferred Stock Offering

First Horizon Corporation successfully completed the sale of 16 million depositary shares representing interests in its new Series H Non-Cumulative Perpetual Preferred Stock, raising significant capital.

Summary

• First Horizon Corporation completed the sale of 16,000,000 depositary shares on March 12, 2026.
• Each depositary share represents a 1/4,000th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series H, which has a liquidation preference of $100,000 per share.
• The offering was made pursuant to an Underwriting Agreement dated March 5, 2026, with Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, RBC Capital Markets, LLC, and UBS Securities LLC as representatives of the underwriters.
• The Articles of Amendment establishing the preferences, limitations, and relative rights of the Series H Preferred Stock became effective upon filing with the Secretary of State of Tennessee on March 6, 2026.
• The Deposit Agreement, dated March 12, 2026, governs the terms and conditions of the depositary shares.
• The Series H Preferred Stock carries a non-cumulative cash dividend rate of 6.750% per annum, payable quarterly on January 10, April 10, July 10, and October 10, commencing July 10, 2026.
• The company has the option to redeem the Series H Preferred Stock, in whole or in part, on any Dividend Payment Date on or after April 10, 2031, or in whole, but not in part, at any time within 90 days following a Regulatory Capital Treatment Event.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive development, as the successful capital raise strengthens First Horizon's financial position and regulatory capital, which is generally favorable for stability and future growth prospects.

Positives

• Successful completion of a significant capital raise, totaling approximately $400 million in liquidation preference of preferred stock.
• Strengthens the company's capital base, potentially improving regulatory capital ratios and overall financial stability.
• Diversifies funding sources through the issuance of preferred stock, which is a common strategy for financial institutions.

Negatives

• Dividends on the Series H Preferred Stock are non-cumulative, meaning if the Board of Directors does not declare a dividend for a period, the company has no obligation to pay it in the future, which could impact investor returns.
• The ability to declare or pay dividends on, or purchase, redeem, or otherwise acquire shares of common stock is subject to certain restrictions if full dividends on Series H Preferred Stock are not declared and paid (or set aside).

Risks

• The Series H Preferred Stock and the related depositary shares may not have an active trading market, and any such market for depositary shares may be illiquid.
• Any redemption of all or part of the Series H Preferred Stock is subject to the receipt of any required prior approval by the Board of Governors of the Federal Reserve System (or any successor Appropriate Federal Banking Agency).

Future Outlook

The filing details the terms of the newly issued Series H Preferred Stock and depositary shares, which are perpetual, indicating a long-term capital component for the company. The optional redemption feature on or after April 10, 2031, provides future flexibility for the company regarding its capital structure, allowing for potential refinancing or capital optimization depending on market conditions and regulatory requirements.

Industry Context

StockSavvy.ai notes that the issuance of non-cumulative perpetual preferred stock is a common strategy for financial institutions like First Horizon Corporation to raise Tier 1 regulatory capital. This type of security helps strengthen the balance sheet and meet capital adequacy requirements, which are critical in the banking sector. The non-cumulative nature of dividends is typical for preferred stock designed to qualify as regulatory capital, as it provides flexibility to the issuer during periods of financial stress, allowing them to conserve capital by not declaring dividends without accumulating arrears.

Comparison to Industry Standards

• The 6.750% non-cumulative dividend rate for First Horizon's Series H Preferred Stock is within the typical range for similar preferred stock offerings by regional banks, reflecting current market conditions and the company's credit profile.
• Comparable offerings from other regional banks in recent periods have seen dividend rates ranging from 6.0% to 7.5% for non-cumulative perpetual preferred stock, depending on the issuer's size, credit rating, and market demand.
• The liquidation preference of $100,000 per preferred share, with depositary shares representing 1/4,000th interest, is a standard structure for institutional preferred stock offerings, making them more accessible to a broader investor base.

Corporate Governance

Stakeholder Impact

• **Shareholders (Common Stock)**: The issuance of preferred stock can dilute the earnings per common share, but it also strengthens the company's capital base, which can be positive for long-term stability. Restrictions on common stock dividends/repurchases if preferred dividends are not paid could impact common shareholder returns.
• **Shareholders (Preferred Stock Series H)**: Holders receive a fixed non-cumulative dividend of 6.750% per annum. They have a liquidation preference over common stock. Their voting rights are limited but provide protection against certain adverse corporate actions and a mechanism for board representation in case of prolonged dividend non-payment.
• **Creditors**: The capital raise strengthens the company's equity base, providing a larger buffer against losses, which is generally favorable for creditors, potentially improving the company's credit profile.
• **Regulatory Authorities**: The issuance of preferred stock, particularly one designed to qualify as Tier 1 capital, helps First Horizon meet regulatory capital requirements, ensuring compliance and financial soundness, which is a key objective for banking institutions.

Next Steps

• The company shall use reasonable efforts to list the Shares on the NYSE so that trading on such exchange will begin within 30 days after March 5, 2026.
• The Depositary will distribute cash dividends to record holders of Receipts on Dividend Payment Dates, commencing July 10, 2026.
• The Depositary will mail notices of redemption to record holders of Receipts if the company elects to redeem shares of Stock on or after April 10, 2031, or following a Regulatory Capital Treatment Event.

Key Dates

Recommendation

The successful capital raise is a positive for First Horizon's financial stability and regulatory compliance. However, the filing primarily details the mechanics of the offering and the terms of the new security, rather than providing new operational or financial performance data that would warrant a 'buy' or 'sell' recommendation. The non-cumulative nature of the preferred dividends is a standard feature for regulatory capital but implies a degree of risk for preferred shareholders. Investors should 'hold' while evaluating the broader financial performance and strategic direction of the company.

Keywords

First Horizon Corporation, FHN, Preferred Stock, Series H, Depositary Shares, Capital Raise, SEC Filing, 8-K, Underwriting Agreement, Deposit Agreement, Non-Cumulative, Financial Services, Banking, Equity Offering, Regulatory Capital