10-K: First Horizon Corporation Grants Executive Stock Awards and Outlines Compensation Recovery Policy

First Horizon Corporation outlines the terms of recent executive stock awards, including performance-based and time-based vesting, and details its compensation recovery policy.

Summary

• First Horizon Corporation has granted performance stock units (PSUs) and restricted stock units (RSUs) to executives under the 2021 Incentive Plan.
• The PSU awards are performance-based, with vesting contingent on achieving certain return on tangible common equity (ROTCE) and total shareholder return (TSR) goals over a three-year or five-year period.
• The RSU awards are time-based, with vesting occurring on a specified date, contingent on continued employment.
• Both PSU and RSU awards are subject to forfeiture under certain conditions, including termination of employment, misconduct, and failure to meet performance goals.
• The awards are also subject to FHs compensation recovery policy, which allows for clawback of compensation in certain circumstances.
• The number of PSUs that vest will be determined based on the extent to which the performance goals are achieved during the ROTCE Performance Period, modified by FHs ranking of its TSR relative to peers TSR.
• The target number of PSUs granted is the number that would be paid if A-ROTCE rank and TSR rank both are achieved at the median rank.
• Higher rank would result in a higher amount paid; a lesser number would be paid if a lesser rank is achieved; and, all PSUs would forfeit if the minimum A-ROTCE rank is not achieved.
• The overall performance percentage is the product of the A-ROTCE and TSR outcomes expressed as percentages.
• The Committee will make appropriate adjustments of FH accounting numbers so that results are comparable across periods and will make final determinations of performance achievement and any final adjustments.
• The number of RCUs that vest will be the number of RCUs granted as provided on the first page of this Grant Notice (the nominal number), increased at the rate of 5% for each dollar of growth in FHs common stock value per share compared to the Base Price shown on the first page of this Grant Notice.
• The maximum increase in RCUs is 25%, which would occur if growth reached or exceeded $5 per share.
• The awards will accrue cash dividend equivalents to the extent cash dividends are paid on common shares prior to vesting.
• The awards are subject to withholding for taxes, and recipients are not permitted to make a Section 83(b) election.

Sentiment

Score: 7

Explanation: The documents are generally positive, outlining the terms of executive compensation and incentives. However, the inclusion of forfeiture and clawback provisions introduces a note of caution.

Positives

• The awards are designed to align executive compensation with company performance and shareholder value.
• The performance-based vesting of PSUs incentivizes executives to achieve specific financial goals.
• The time-based vesting of RSUs encourages executive retention.
• The compensation recovery policy provides a mechanism for clawback of compensation in cases of misconduct or financial restatements.

Negatives

• The awards are subject to forfeiture under various conditions, including termination of employment and misconduct.
• The performance-based vesting of PSUs may result in lower payouts if performance goals are not met.
• The compensation recovery policy may result in clawback of compensation in certain circumstances.

Risks

• The value of the awards is subject to fluctuations in FHs stock price.
• The performance-based vesting of PSUs may not be achieved, resulting in forfeiture of the awards.
• The compensation recovery policy may result in clawback of compensation in cases of misconduct or financial restatements.
• The awards are subject to changes in the Governing Plan, Procedures, and Policy.

Future Outlook

The documents outline the terms of the awards and do not provide specific forward-looking statements about the company's future performance. However, the performance-based vesting of PSUs suggests that the company expects to achieve certain financial goals in the future.

Management Comments

• The Committee will make appropriate adjustments of FH accounting numbers so that results are comparable across periods and will make final determinations of performance achievement and any final adjustments, all as provided or permitted by Committee action and the Governing Plan.
• The Committee reserves the right, in its sole discretion, to waive forfeiture or accelerate vesting in whole or part. You have no right to any such discretionary waiver or acceleration.

Industry Context

The use of performance-based and time-based equity awards is common in the financial services industry to align executive compensation with company performance and shareholder value. The inclusion of a compensation recovery policy is also a common practice to mitigate risks associated with misconduct or financial restatements.

Comparison to Industry Standards

• The use of ROTCE and TSR as performance metrics is consistent with industry standards for performance-based equity awards.
• The vesting periods and forfeiture provisions are also typical for executive stock awards.
• The compensation recovery policy is similar to those adopted by other financial institutions in response to regulatory requirements.
• The specific terms of the awards, such as the target number of PSUs and the performance goals, are specific to First Horizon and may differ from those of other companies.

Corporate Governance

Stakeholder Impact

• Shareholders may benefit from the alignment of executive compensation with company performance.
• Employees may be motivated by the potential for equity awards.
• Executives are subject to forfeiture and clawback provisions, which may impact their compensation.

Next Steps

• Executives will need to meet the service and performance requirements to vest in the awards.
• The Committee will make final determinations of performance achievement for PSU awards.
• FH will monitor compliance with the compensation recovery policy.

Key Dates

Keywords

Performance Stock Units, Restricted Stock Units, Executive Compensation, Stock Awards, Vesting, Forfeiture, Compensation Recovery Policy, Return on Tangible Common Equity, Total Shareholder Return, Incentive Plan, Restricted Cash Units