SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
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Definitive Proxy Statement
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Pursuant to Sec. 240.14a-12
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FIRST HORIZON NATIONAL CORPORATION
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March 16, 2015
Dear Fellow Shareholder:
You are cordially invited to attend First Horizon National Corporation’s
2015 annual meeting of shareholders. We will hold the meeting on April 28, 2015 in the Auditorium, First Tennessee Building, 165
Madison Avenue, Memphis, Tennessee, at 10:00 a.m. local time.
2014 was a strong year for First Horizon. This is reflected in
the solid operating performance of our core business segments and in our strategic accomplishments, including
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10% growth, year over year, in average loans in our regional banking business, |
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expansion in our Mid-Atlantic banking region via offices in Virginia, the Carolinas and north
Florida, |
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the opening of an office in Houston, Texas, |
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completion of the acquisition of 13 bank branches in middle and eastern Tennessee, |
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our agreement to buy a five-branch bank in Raleigh, North Carolina, |
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the ongoing wind-down of our non-strategic assets and obligations, and |
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significant reductions in our consolidated employee expense and consolidated non-interest expense. |
For the third year in a row, annual total shareholder return
exceeded 18%.
Our Firstpower culture, with its emphasis on Accountability,
Adaptability, Integrity and Relationships, continues to help us meet the challenges that we face. The strength of our culture and
the quality of our people were reaffirmed with top-employer recognition from American Banker, Professional Women’s Multicultural
magazine, Working Mother magazine
and the Dave Thomas Foundation for Adoption. We were also honored
to be chosen as a Top Ten Diversity Innovator in 2014.
In 2014 we celebrated the 150th anniversary of our
principal operating subsidiary, First Tennessee Bank National Association, spotlighting the legacy of service that began when Abraham
Lincoln was president. We’re proud of that legacy, and we’re focused on building for our next 150 years.
Accompanying this letter are the formal notice of the annual
meeting, our 2015 proxy statement and our annual report to shareholders, which contains detailed financial information relating
to our activities and operating performance during 2014. Though it is being delivered to you with our proxy statement, the annual
report to shareholders is not deemed to be “soliciting material” under SEC Regulation 14A.
At the meeting, we will ask you to elect twelve directors; to
vote on an advisory resolution to approve executive compensation (“say on pay”), and to ratify the appointment of KPMG
LLP as our independent auditors for 2015. The accompanying proxy statement contains information about these matters.
Your vote is important. You may vote your proxy by telephone,
over the internet or, if you received a paper proxy card by mail, you may also vote by signing, dating, and returning the proxy
card by mail (as directed on the proxy card). Even if you plan to attend the meeting, please vote your proxy by telephone or over
the internet or return your proxy card as soon as possible.
Thank you for your continued support of First Horizon, and I
look forward to seeing you at the annual meeting.
D. Bryan Jordan
Chairman of the Board,
President and Chief Executive Officer
Notice
of Annual Shareholders’ Meeting
April
28, 2015
10:00 a.m. Central Time
The annual meeting of the holders of First Horizon National
Corporation’s common stock will be held on April 28, 2015, at 10:00 a.m. local time in the Auditorium, First Tennessee Building,
165 Madison Avenue, Memphis, Tennessee.
The items of business are:
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Election of twelve directors to serve until the 2016 annual
meeting of shareholders or until their successors are duly elected and qualified. |
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Vote on an advisory resolution to approve executive compensation. |
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Ratification of the appointment of auditors. |
These items are described more fully in the following pages,
which are made a part of this notice. The close of business on February 27, 2015 is the record date for the meeting. All holders
of record of First Horizon’s common stock as of that time are entitled to vote at the meeting.
Management requests that you vote your proxy by telephone or
over the internet or that you sign and return the form of proxy promptly, as applicable, so that if you are unable to attend the
meeting your shares can nevertheless be voted. You may revoke a proxy at any time before it is exercised at the annual meeting
in the manner described on page 2 of the proxy statement.
Clyde
A. Billings,Jr.
Senior Vice President, Assistant General Counsel
and Corporate Secretary
Memphis, Tennessee
March 16, 2015
IMPORTANT NOTICE
Please (1) vote your proxy by telephone (2) vote your proxy
over the internet or (3) mark, date, sign and promptly mail the form of proxy, as applicable, so that your shares will be represented
at the meeting.
If you hold your shares in street name, it is critical that
you instruct your broker or bank how to vote if you want your vote to count in the election of directors and the advisory resolution
to approve executive compensation (Vote Item Nos. 1 and 2 of this proxy statement). Under current regulations, if you hold your
shares in street name and you do not instruct your broker or bank how to vote in these matters, no votes will be cast on your behalf
with respect to these matters. For additional information, see pages 2-3 of the proxy statement.
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Proxy
Statement for 2015 First Horizon
National Corporation Annual Meeting
Table of Contents
2015
Annual Meeting & Proxy Statement—General Matters
Purpose of the Annual Meeting of Common Shareholders
Our Board of Directors is soliciting proxies to be voted at our
upcoming annual meeting of the holders of First Horizon’s common stock (and at any adjournment or adjournments of the meeting).
At the meeting, our common shareholders will act to elect twelve directors; to vote on an advisory resolution to approve executive
compensation (“say on pay”), and to ratify the appointment of KPMG LLP as our independent auditors for 2015.
Date, Time & Place of the Annual Meeting
The annual meeting of the holders of our common stock will be
held on Tuesday, April 28, 2015 at 10:00 a.m. local time in the Auditorium, First Tennessee Building, 165 Madison Avenue, Memphis,
Tennessee. To obtain additional information on directions to be able to attend the meeting and vote in person, contact our Community
Relations office at 866-365-4313.
Terms Used in this Proxy Statement
In this proxy statement, First Horizon National Corporation will
be referred to by the use of “we,” “us” or similar pronouns, or simply as “FHN” or “First
Horizon,” and First Horizon and its consolidated subsidiaries will be referred to collectively as “the company.”
The term “shares” will mean First Horizon’s common stock, and the term “shareholders” will mean the
holders of that common stock, unless otherwise clearly stated.
In addition, the notice of the 2015 annual meeting of shareholders,
this proxy statement, our annual report to shareholders for the year ended December 31, 2014, and the proxy card will be referred
to as our “proxy materials.” Though the annual report to shareholders is included in the term “proxy materials,”
it is not deemed to be “soliciting material” under SEC Regulation 14A.
Internet Availability of Proxy Materials
Again this year, we are using the SEC’s “notice and
access” rule, which allows us to furnish our proxy materials over the internet to our shareholders instead of mailing paper
copies of those materials to each shareholder. As a result, beginning on or about March 16, 2015, we sent to most of our shareholders
by mail or e-mail a notice of internet availability of proxy materials, which contains instructions on how to access our proxy
materials over the internet and vote online. This notice is not a proxy card and cannot be used to vote your shares. If you received
only a notice, you will not receive paper copies of the proxy materials unless you request the materials by following the instructions
on the notice.
If you received a paper copy of the notice, we encourage you
to help us save money and reduce the environmental impact of delivering paper notices by signing up to receive all of your future
proxy materials electronically.
If you own shares of common stock in more than one account—for
example, in a joint account with your spouse and in your individual brokerage account—you may have received more than one
notice. To vote all of your shares, please follow each of the separate voting instructions that you received for your shares of
common stock held in each of your different accounts.
Voting by Proxy & Revoking your Proxy
The First Horizon Board of Directors is asking you to give us
your proxy. Giving us your proxy means that you authorize another person or persons to vote your shares of our common stock at
the annual meeting of shareholders in the manner you direct. Giving us your proxy allows your shares to be voted even if you will
be unable to attend the annual meeting in person. You may revoke your proxy at any time before it is exercised by writing to the
Corporate Secretary, by timely delivering a properly executed, later-dated proxy (including by telephone or internet) or by voting
by ballot at the meeting. All shares represented by valid proxies received pursuant to this solicitation, and not revoked before
they are exercised, will be voted in
the manner specified on the proxy. If you submit a proxy
without giving specific voting instructions, your shares will be voted in accordance with the recommendations of our Board of
Directors as follows:
FOR:
1. |
Election of twelve directors to serve until the 2016 annual meeting of shareholders
or until their successors are duly elected and qualified. |
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Approval of an advisory resolution to approve executive compensation (“say on pay”). |
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Ratification of the appointment of auditors. |
Solicitation of Proxies
First Horizon will pay the entire cost of soliciting the proxies.
In following up the original solicitation of the proxies, we may request brokers and others to send proxy materials to the beneficial
owners of the shares and may reimburse them for their expenses in so doing. If we deem it necessary, we may also use several of
our employees to solicit proxies from the shareholders, either personally or by telephone, letter or e-mail, for which they will
receive no compensation in addition to their normal compensation.
We have hired Morrow & Co., LLC, 470 West Ave., Stamford, CT 06902 to aid us in the solicitation of proxies for a fee of $8,000
plus out-of-pocket expenses. An additional charge of $6.50 per holder will be incurred should we choose to have Morrow & Co.
solicit individual holders of record.
Quorum & Vote Requirements
Except for our depositary shares (each representing a 1/4000th
interest in a share of non-cumulative perpetual preferred stock, Series A, issued by First Horizon on January 31, 2013), which
have limited voting rights and no right to vote at the annual meeting, our common stock is our only class of voting securities.
There were 233,860,525 shares of common stock outstanding and entitled to vote as of February 27, 2015, the record date for the
annual shareholders’ meeting. Each share is entitled to one vote. A quorum of the shares must be represented at the meeting
to take action on any matter at the meeting. A majority of the votes entitled to be cast constitutes a quorum for purposes of the
annual meeting. Both “abstentions” and broker “non-votes” will be considered present for quorum purposes,
but will not otherwise have any effect on any of the vote items. The affirmative vote of a majority of the
votes cast is required to elect the nominees as directors, and
we have adopted a director resignation policy that requires a director who does not receive the affirmative vote of a majority
of the votes cast with respect to his or her election to tender his or her resignation. For additional information on our director
resignation policy, see the summary of the policy in the “Corporate Governance & Board Matters” section of this
proxy statement beginning on page 4. The policy is also contained in our Corporate Governance Guidelines, which are available on
our website at www.firsthorizon.com (click on “Investor Relations,” then “Corporate Governance,” and then
“Governance Documents”). The affirmative vote of a majority of the votes cast is required to approve the advisory resolution
to approve executive compensation and to ratify the appointment of auditors.
Effect of Not Casting Your Vote
Shares Held in Street Name. If you hold your shares
in street name it is critical that you instruct your broker or bank how to vote if you want your vote to count in the election
of directors and the advisory resolution to approve executive compensation (Vote Item Nos. 1 and 2 of this proxy statement). Under
current regulations, your broker or bank will not have the ability to vote your uninstructed shares in these matters on a discretionary
basis. Thus, if you hold your shares in street name and you do not instruct your broker
or bank how to vote, no votes will be cast on your behalf with
respect to these matters. Your broker or bank will have the ability to vote uninstructed shares on the ratification of the appointment
of auditors (Vote Item No. 3).
Shareholders of Record. If you are a shareholder of
record and you do not vote your proxy, no votes will be cast on your behalf on any of the items of business at the annual meeting
unless you attend the annual meeting and vote your shares there.
Duplicate Mailings & Householding
Duplicate mailings in most cases are inconvenient for you and
an unnecessary expenditure for us. We encourage you to eliminate them whenever you can as described below.
Multiple Accounts. Some of our shareholders own their
shares using multiple accounts registered in variations of the same name. If you have multiple accounts, we encourage you to consolidate
your accounts by having all your shares registered in exactly the same name and address. You may do this by contacting our stock
transfer agent, Wells Fargo Bank, N.A., by phone toll-free at 1-877-536-3558, or by mail to Shareowner Services, P.O. Box 64854,
St. Paul, MN 55164-0854.
Shares Held in Street Name. If you and other members of
your household are beneficial owners of shares, meaning that you own shares indirectly through a broker, bank, or other nominee,
you may eliminate any duplication of mailings by contacting your broker, bank, or other nominee. If you have eliminated duplicate
mailings but for any reason would like to resume them, you must contact your broker, bank, or other nominee.
Shareholders with the Same Address; Requesting Changes.
If you are among the shareholders who receive paper copies of our proxy materials, SEC rules allow us to mail a single copy of
those materials to all shareholders residing at the same address if certain conditions are met. This practice is referred to as
“householding.” (Householding does not apply to either the proxy card or the notice of internet availability of proxy
materials.) If your household receives only one copy of the proxy materials and
if you wish to start receiving separate copies in your name,
apart from others in your household, you must request that action by contacting our stock transfer agent, Wells Fargo Bank, N.A.,
by phone toll-free at 1-877-602-7615 or by writing to it at Shareowner Services, Attn: Householding, P.O. Box 64854, St. Paul,
MN 55164-0854. That request must be made by each person in the household who desires a separate copy. Within 30 days after your
request is received we will start sending you separate mailings. If you and members of your household are receiving multiple copies
and you want to eliminate the duplications, please request that action by contacting Wells Fargo using the contact information
given in this paragraph above. In either case, in your communications, please refer to your account number and our company number
(998). Please be aware that if you hold shares both in your own name and as a beneficial owner through a broker, bank or other
nominee, it is not possible to eliminate duplications as between these two types of ownership. If your household receives only
a single copy of the proxy materials, and if you desire your own separate copies for the 2015 annual meeting, you may pick up copies
in person at the meeting in April or download them from our website using the website address listed in the box below. If you would
like additional copies mailed, we will mail them promptly if you request them from our Investor Relations department at our website,
by phone toll-free at 1-800-410-4577, or by mail to Investor Relations, P.O. Box 84, Memphis, TN 38101. However, we cannot guarantee
you will receive mailed copies before the 2015 annual meeting.
Important Notice Regarding the Availability
of Proxy Materials
for the Shareholder Meeting to Be Held on April 28, 2015.
This proxy statement, our proxy card,
and our annual report to shareholders are
available at http://ir.fhnc.com/annual-proxy.cfm.
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Corporate
Governance & Board Matters
In accordance with our Bylaws, First Horizon is managed under
the direction of and all corporate powers are exercised by or under the authority of our Board of Directors. Our Board of Directors
currently has twelve members. All of our directors are also directors of First Tennessee Bank National Association (the “Bank”
or “FTB”). The Bank is our principal operating subsidiary.
First Horizon is dedicated to operating in accordance with sound
corporate governance principles. We believe that these principles not only form the basis for our reputation of integrity in the
marketplace but also are essential to our efficiency and overall success. Some of our corporate governance principles, policies
and practices are highlighted below.
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Corporate
Governance Highlights |
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Annual director elections. All our directors
are elected by our shareholders every year. |
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Majority voting. Our directors are elected by a majority
of the votes cast in uncontested elections (plurality vote in contested elections). |
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Director resignation policy. We have adopted a director
resignation policy for directors who do not receive the affirmative vote of a majority of the votes cast. |
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Independence. All of our current non-employee director
nominees are independent under the NYSE listing standards. |
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Board refreshment. Our Board values fresh perspectives.
Over the past five years, we have added five new directors to our Board, and a majority of our directors have served for fewer
than eight years. |
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Shareholder engagement. Dialogue with our shareholders
is a critical part of our company’s success. In addition to our Investor Relations area’s ongoing dialogue with
our shareholders via conferences, road shows and the like, over the past two years our outside directors have met a number
of times with both investors and proxy advisory firms to discuss issues of importance to them. |
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Lead director. Independent director R. Brad Martin
serves as the lead director. The principal duties of the lead director are specified in the Corporate Governance Guidelines. |
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Other directorships. All of our directors serve on
three or fewer public company boards (other than First Horizon); nine of twelve of our directors serve on one or no other
public company boards. |
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Clawback. Our Compensation Recovery Policy (commonly
known as a “clawback” policy) allows the company to recover incentive compensation paid to employees, including
executive officers, under certain circumstances. |
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Stock ownership guidelines. Our stock ownership guidelines
require non-employee directors to own three times their annual (cash and equity) retainer in First Horizon stock and executive
officers to own a certain amount of stock based on their position and salary. See page 39 for additional details about the
guidelines. |
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Sustainability. First Horizon’s sustainability
statement is available on our website at www.firsthorizon.com under the “Sustainability” heading in the “Community”
area. |
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Individual director evaluations. Each year, the Nominating
& Corporate Governance Committee evaluates the performance of each director prior to determining whether to recommend
him or her to the Board for renomination. See page 24 for additional detail on this process. |
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Hedging. Company policy effectively prohibits directors
and executive officers from hedging with respect to First Horizon stock. |
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Key Corporate Governance Documents
Our Board has adopted the following key corporate governance
documents, all of which are available on our website at www.firsthorizon.com (click on “Investor Relations,” then “Corporate
Governance,” and then “Governance Documents”). Paper copies are also available to shareholders upon request to
the Corporate Secretary.
Corporate Governance Guidelines |
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Provide our directors with guidance as to their legal accountabilities, promote
the functioning of the Board and its committees, and set forth a common set of expectations as to how the Board should perform
its functions. |
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Code of Business Conduct and Ethics |
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Sets forth the overarching principles that guide the conduct of every aspect of our business. |
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Any waiver of the Code of Business Conduct and Ethics for an executive officer or director must
be promptly disclosed to shareholders in any manner that is acceptable under the NYSE listing standards, including but not
limited to distribution of a press release, disclosure on our website, or disclosure on Form 8-K. |
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Code of Ethics for Senior Financial Officers |
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Promotes honest and ethical conduct, proper disclosure of financial information and compliance
with applicable governmental laws, rules and regulations by our senior financial officers and other employees who have financial
responsibilities. |
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We intend to satisfy our disclosure obligations under Item 5.05 of Form 8-K related to amendments
or waivers of the Code of Ethics for Senior Financial Officers by posting such information on the company’s website. |
The company has also adopted a Compliance and Ethics Program
Policy, which highlights our commitment to having an effective compliance and ethics program by exercising due diligence to prevent
and detect criminal conduct and otherwise by promoting an organizational culture that encourages ethical conduct and a commitment
to compliance with the law.
Director Resignation Policy
Our Board has adopted a director resignation policy that requires
a director who does not receive the affirmative vote of a majority of the votes cast with respect to his or her election to tender
his or her resignation. Under the policy, the Nominating & Corporate Governance Committee must promptly consider the resignation
tender and a range of possible responses and make a recommendation to the Board. The Board will act on the Nominating & Corporate
Governance Committee’s recommendation within 90 days following certification of the shareholder vote. Thereafter, the Board
will promptly disclose its decision regarding whether to accept the director’s resignation tender, including an explanation
of the decision (or the reason(s) for rejecting the resignation offer, if
applicable), in a Form 8-K (or other appropriate report) filed
with or furnished to the Securities and Exchange Commission. If any director’s tender of resignation under the policy is
not accepted by the Board, such director will serve until the next annual meeting of shareholders and until his or her successor
has been duly elected and qualified. Any director who tenders his or her resignation pursuant to the director resignation policy
shall not participate in the Nominating & Corporate Governance Committee recommendation or Board action regarding whether to
accept the tender of resignation. If a majority of the members of the Nominating & Corporate Governance Committee did not receive
the affirmative vote of a majority of the votes cast at the same election, then all the
directors who are “independent” under the listing
standards of the New York Stock Exchange and who received the affirmative vote of a majority of the votes cast shall appoint a
committee amongst themselves to consider the resignation tenders and recommend to the Board whether to accept them. This committee
may, but need not, consist of all of
the independent directors who received the affirmative vote of
a majority of the votes cast. The director resignation policy is contained in our Corporate Governance Guidelines, which are available
on our website at www.firsthorizon.com (click on “Investor Relations,” then “Corporate Governance,” and
then “Governance Documents”).
Independence & Categorical Standards
Independence
Our common stock is listed on the New York Stock Exchange. The
NYSE listing standards require a majority of our directors and all of the members of the Compensation Committee, the Nominating
& Corporate Governance Committee and the Audit Committee of the Board of Directors to be independent as defined in the listing
standards. Under these standards, our Board of Directors is required to determine affirmatively that a director has no material
relationship with the company for that director to qualify as independent. In order to assist in making independence determinations,
the Board, upon the recommendation of the Nominating & Corporate Governance Committee, has adopted the categorical standards
set forth below. In making its independence determinations, each of the Board and the Nominating & Corporate Governance Committee
considered the relationships between each director and the company, including those that fall within the categorical standards.
In addition, the NYSE listing standards require that the Board specifically consider certain factors in determining the independence
of any director who will serve on the Compensation Committee. These factors are described under the heading “The Compensation
Committee—In General” below in
this proxy statement. Our Board specifically considered such
factors in making the independence determinations for all of our directors, including those who serve on the Compensation Committee.
Based on its review and the application of the categorical standards,
the Board, upon the recommendation of the Nominating & Corporate Governance Committee, determined that all eleven of our current
non-employee directors (Messrs. Carter, Compton, Emkes, Gilchrist, Martin, Niswonger, Reed, and Yancy and Mmes. Gregg, Palmer and
Stewart) are independent under the NYSE listing standards. The Nominating & Corporate Governance Committee and the Board determined
that all transactions and relationships with each director identified above as independent fell within our categorical standards.
Mr. Jordan, as our Chief Executive Officer, is not independent.
The categorical standards established by the Board, which were
last revised in 2010, are set forth below and are also available on our website at www.firsthorizon.com (click on “Investor
Relations,” then “Corporate Governance,” and then “Governance Documents”).
Director Transactions by Category or Type
With respect to each director who is identified above as independent
under the NYSE listing standards, the Board considered the following types or categories of transactions, relationships or arrangements
in determining the director’s independence under the NYSE standards and our categorical standards.
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Provision by the company, in the ordinary course of business and on substantially
the same terms and conditions as those prevailing at the time for comparable transactions with non-affiliated persons, of
the following banking and financial services and services incidental thereto to directors, their immediate family members
and/or to entities with which directors or their immediate family members are affiliated: deposit accounts (all directors
except Mr. Gilchrist and Ms. Stewart); cash management services (Messrs. Carter, Compton, Emkes, Martin, Niswonger, and Yancy);
loans (including mortgage loans), letters of credit, guaranties, credit cards and/or other lines of credit (all directors
except Mr. Gilchrist and Ms. Stewart); interest rate swaps (Mr. Martin); investment management (Messrs. Emkes and Niswonger);
broker/dealer services (Messrs. Emkes, Martin, Niswonger, Reed and Yancy and Ms. Palmer); financial planning (Mr. Reed); capital
markets (Mr. Carter); trust services (Messrs. Compton, Martin and Niswonger); insurance brokerage (Messrs. Niswonger, Reed
and Yancy); safe deposit boxes (Messrs. Carter, Martin and Niswonger |
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and Ms. Gregg); pay card services (Mr. Carter); purchasing card services (Mr. Niswonger) and
currency exchange (Messrs. Compton, Martin and Niswonger). |
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Provision by an entity affiliated with a director or his or her immediate family member, in
the ordinary course of business and on substantially the same terms and conditions as those prevailing at the time for comparable
transactions with non-affiliated persons, of the following products and services to the company: package delivery and print
services (Mr. Carter); hotel lodging for business travel by employees of the company (Messrs. Niswonger and Reed); venues
for business development and for holding seminars and other corporate functions (Messrs. Martin, Niswonger and Reed); leased
space for ATMs (Mr. Martin); university classes for employee training (Mr. Martin); restaurant meals for business purposes
(Mr. Reed). |
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Sponsorship of athletic team (Mr. Martin). |
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Charitable contributions by the company or the First Horizon Foundation to charitable organizations
with which a director or immediate family member is affiliated (Mesdames Gregg and Palmer and Messrs. Carter, Emkes, Martin,
Niswonger and Yancy). |
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Employment by the company in a non-executive position of an immediate family member of a director
(Mr. Yancy). |
Categorical Standards
Each of the following relationships between the Corporation (as
defined below) and its subsidiaries, on the one hand, and a director, an immediate family member of a director, or a company or
other entity as to which the director or an immediate family member is a director, executive officer, employee or shareholder (or
holds a similar position), on the other hand, will be deemed to be immaterial and therefore will not preclude a determination by
the Board of Directors that the director is independent for purposes of the NYSE listing standards:
1. |
Depository and other banking and financial services relationships (excluding extensions
of credit which are covered in paragraph 2), including transfer agent, registrar, indenture trustee, other trust and fiduciary
services, personal banking, capital markets, investment banking, equity research, asset management, investment management,
custodian, securities brokerage, financial planning, cash management, insurance brokerage, broker/ dealer, express processing,
merchant processing, bill payment processing, check clearing, credit card and other similar services, provided that the relationship
is in the ordinary |
|
course of business and on substantially the same terms and conditions as those prevailing
at the time for comparable transactions with non-affiliated persons. |
|
|
2. |
An extension of credit, provided that, at the time of the initial approval of the extension
of credit as to (1), (2) and (3), (1) such extension of credit was in the ordinary course of business, (2) such extension
of credit was made in compliance with applicable law, including Regulation O of the Federal Reserve, Section 23A and 23B of
the Federal Reserve Act and |
|
Section 13(k) of the Securities and Exchange Act of 1934, (3) such extension of credit was on substantially
the same terms as those prevailing at the time for comparable transactions with non-affiliated persons, and (4) the extension
of credit has not been placed on non-accrual status. |
|
|
3. |
Contributions (other than mandatory matching contributions) made by the Corporation or any of its subsidiaries or First
Horizon Foundation to a charitable organization as to which the director is an executive officer, director, or trustee or
holds a similar position or as to which an immediate family member of the director is an executive officer; provided that
the amount of the contributions to the charitable organization in a fiscal year does not exceed the greater of $500,000 or
2% of the charitable organization’s consolidated gross revenue (based on the charitable organization’s latest
available income statement). |
|
|
4. |
Vendor or other business relationships (excluding banking and financial services relationships and extensions of credit
covered by paragraph 1 or 2 above), provided that the relationship is in the ordinary course of business and on substantially
the same terms and conditions as those prevailing at the time for comparable transactions with non-affiliated persons. |
|
|
5. |
All compensation and benefits provided to non-employee directors for service as a director. |
|
|
6. |
All compensation and benefits provided in the ordinary course of business to an immediate family member of a director
for services to the Corporation or any of its subsidiaries as long as such immediate family member is compensated comparably
to similarly situated employees and is not an executive officer of the Corporation or based on salary and bonus within the
top 1,000 most highly compensated employees of the Corporation. |
Excluded from relationships considered by the Board is any relationship (except contributions included
in category 3) between the Corporation and its subsidiaries, on the one hand, and a company or other entity as to which the director
or an immediate family member is a director or, in the case of an immediate family member, an employee (but not an executive officer
or significant shareholder), on the other hand.
The fact that a particular relationship or transaction is not addressed by these standards or exceeds
the thresholds in these standards does not create a presumption that the director is or is not independent.
The following definitions apply to the categorical standards listed above:
“Corporation” means First Horizon National Corporation and its consolidated subsidiaries.
“Executive Officer” means an entity’s president, principal financial officer, principal
accounting officer (or, if there is no such accounting officer, the controller), any vice president of the entity in charge of
a principal business unit, division or function, any other officer who performs a policy-making function, or any other person
who performs similar policy-making functions for the entity.
“Immediate family members” of a director means the director’s spouse, parents, children,
siblings, mother-in-law, father-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law and anyone (other than
domestic employees) who shares the director’s home.
“Significant shareholder” means a passive investor [meaning a person who is not in control
of the entity] who beneficially owns more than 10% of the outstanding equity, partnership or membership interests of an entity.
“Beneficial ownership” will be determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934.
Board Leadership Structure & Role in Risk Oversight
Leadership Structure
First Horizon’s Board leadership structure has evolved significantly in the past several years.
Prior to 2007, the Chairman of the Board and Chief Executive Officer roles were held by the same individual (except for two transition
periods relating to CEO succession). In 2007, the Board made certain governance changes in order to facilitate
the implementation of strategic changes it was then initiating, including the appointment of a new CEO
and of a separate individual as the Chairman of the Board. Under the Bylaws, the position of Chairman of the Board was at that
time an executive officer position, but in 2009, the Board adopted amendments to the Bylaws that made the
position of Chairman of the Board a non-officer position. In 2012, the Board elected Mr. Jordan, our
President and CEO, as Chairman of the Board as well.
Under First Horizon’s current Bylaws, the Chairman of the Board presides at all meetings of the
shareholders and of the Board (except, with respect to meetings of the Board, as the Board may otherwise determine) and has the
powers and performs the duties as are normally incident to the position and as may be assigned by the Board. The Chief Executive
Officer is responsible for carrying out the orders of and the resolutions and policies adopted by the Board, has general management
of the business of the company and exercises general supervision over all of its affairs.
Under our Corporate Governance Guidelines, the Board designates our independent lead director from time
to time from among the members of the Nominating & Corporate Governance Committee. Mr. Martin, who is independent under the
listing standards of the NYSE, is currently serving as lead director for the Board. The lead director’s responsibilities
include, among other things, supporting the Chairman of the Board in developing (in conjunction with the Corporate Secretary)
the agenda for each Board meeting and in defining the scope, quality, quantity and timeliness of the flow of information between
management and the Board; presiding (or, if he cannot be in attendance, designating another director to preside) at executive
sessions of the Board; taking any actions he deems necessary or appropriate in connection with the Board and committee self-evaluation
process (including contacting each director individually to obtain additional input on Board and committee effectiveness, if he
deems appropriate); receiving reports from directors who have concerns about another director’s performance pursuant to
our process for individual director performance evaluations; and receiving communications from shareholders pursuant to our process
for communications with the Board.
We believe that our current board leadership structure, with a combined CEO and Chairman position and
with a separate lead director who is independent under the NYSE listing standards and has the principal duties specified in the
Corporate Governance Guidelines, is most appropriate for our company at this time. We believe that combining the roles of CEO
and Chairman facilitates our
prudent management of the company in the current challenging economic and regulatory environment we face.
Holding both roles best positions Mr. Jordan as CEO and Chairman to be aware of major issues facing the company on a day-to-day
and long-term basis and to identify key risks and developments facing the company that should be brought to the Board’s
attention. The combined role also provides a single point of leadership for the company at a time when it is crucial for the company
to maintain a unified message and strategic direction.
The combined CEO/Chairman position is counterbalanced by our strong lead director position, currently
held by Mr. Martin, a long-time director and chair of the Executive & Risk Committee. The lead director, who has the responsibilities
described above, provides an independent voice on issues facing the company and ensures that key issues are brought to the Board’s
attention. The Board and its committees also regularly hold executive sessions with no members of management present, thereby
providing an opportunity for the independent directors to discuss their views freely; the executive sessions of the Board are
generally presided over by the lead director (or his designee, if he cannot attend). All four regular meetings of the Board in
2014 concluded with such an executive session. The Board itself has a high degree of independence, with all eleven of the non-employee
directors qualifying as independent under the NYSE listing standards. In addition, the Board values the fresh perspectives brought
by new directors: over the past five years, we have added five new directors to our Board.
We recognize that different board leadership structures may be appropriate for First Horizon at different
times and in different situations. As part of our Board self-evaluation process, the Board annually evaluates the company’s
leadership structure to ensure that it provides the most appropriate structure. As stated in our Corporate Governance Guidelines,
the Board is free to select its Chairman and First Horizon’s Chief Executive Officer in the manner it considers in the best
interests of the company at any given point in time. The Board has separated the roles of Chairman and CEO in the recent past
and will consider doing so in the future should circumstances arise that make such separation appropriate.
Board Role in Risk Oversight
As stated in our Corporate Governance Guidelines, oversight of risk management is central to the role
of the Board. The company’s risk management processes are reflected in a Board policy on risk
management governance and in a Board statement of risk appetite. The policy delegates primary responsibility
for enterprise risk management oversight to the Executive & Risk Committee. The role of that Committee, as well as that of
the Audit, Compensation and Trust Committees, is outlined below. Each of these committees and the full Board receive regular reports
from management regarding the company’s risks, and each committee reports regularly to the full Board concerning risk.
Executive & Risk Committee. The Executive & Risk Committee’s charter authorizes
and directs the Committee to assist the Board in its oversight of First Horizon’s enterprise risk management governance
and processes, including the management of credit, market, operational, liquidity, interest rate sensitivity, capital and equity
investment risks, the adoption and implementation of significant risk and compliance policies and First Horizon’s risk appetite.
In fulfilling its risk responsibilities, the Board delegated the following duties to the Committee: to review periodically and
recommend to the Board the risk appetite parameters to be employed by management in operating the company; to receive information
on First Horizon’s business practices, policies and procedures related to the risks listed above; to monitor results to
ensure alignment with First Horizon’s risk appetite; to review periodic risk and compliance reports from the Chief Risk
Officer and the Chief Credit Officer, including reports on major risk exposures and steps taken to monitor, mitigate and control
such exposures; to review periodically with management regulatory correspondence and actions; to review and approve First Horizon’s
stress testing program and results; and to establish (or recommend to the Board the establishment of) risk management and compliance
policies, as appropriate. In connection with its credit risk responsibilities, the Committee oversees First Horizon’s independent
Credit Risk Assurance department. The Committee charter requires the Committee to advise the Chief Audit Executive (who has responsibility
for the Credit Risk Assurance department) that he or she is expected to provide the Committee summaries of and, as appropriate,
significant reports to management prepared by the Credit Risk Assurance department and management’s responses thereto; approve
the department’s Annual Review Plan and schedule of activities; meet quarterly with the Chief Audit Executive in separate
executive session to discuss any matters that the Committee or the Chief Audit Executive believes should be discussed privately;
and review the Annual Credit Risk Assurance department Statement of Independence.
Audit Committee. Other Board committees continue to play a role in First Horizon’s risk
management processes as well. In accordance with the NYSE listing standards and its charter, the Audit Committee, which formerly
had primary responsibility for oversight of risk management, retains an oversight role in that area, including receiving reports
from the Chief Audit Executive regarding risk governance, risk assessment and risk management, the adequacy of the company’s
policies and compliance with legal and regulatory requirements. Pursuant to its charter, the Audit Committee also reviews employee
complaints or material reports or inquiries received from regulators or government agencies and management’s responses;
meets periodically with the company’s Chief Risk Officer to discuss any risk and compliance matters that may have a material
effect on the company’s financial statements or internal controls; discusses any significant compliance issues raised in
reports or inquiries received from regulators or government agencies; reviews periodic reports regarding the Compliance and Ethics
Program on the effectiveness of that program; and discusses with the General Counsel pending and threatened claims that may have
a material impact on the financial statements. The Bank’s Trust Audit Committee carries out a risk oversight role with respect
to the fiduciary activities of the Bank. The Committee is charged with ensuring that suitable audits (by internal or external
auditors) of all significant Bank fiduciary activities are made either annually or on a continuous basis for the purpose of ascertaining
whether the Trust Division is being administered in accordance with applicable law, regulation and sound fiduciary principles.
Compensation Committee. The Compensation Committee is chiefly responsible for compensation-related
risks. The charter of the Committee requires the Committee to oversee our compliance with all applicable laws and regulations
relating to (i) appropriate management of the risks associated with compensation programs or arrangements or (ii) public, regulatory,
or other reporting associated with such risks. Additional information about the Committee’s role in risk management is included
under the heading “The Compensation Committee—Compensation Risk” on pages 18-19.
Trust Committee. The Trust Committee is responsible for overseeing the fiduciary activities of
the Bank, including risks arising in connection with such activities. The Trust Committee receives reports from Trust Division
management regarding the investment and distribution of fiduciary account funds and fiduciary account records.
Board Committees
Committee Charters & Committee Composition
The Board has four standing committees: the Executive &
Risk Committee, the Audit Committee, the Compensation Committee and the Nominating & Corporate Governance Committee. The charter
of each of these committees is currently available on our website at www.firsthorizon.com (click on “Investor Relations,”
then “Corporate Governance,” and then “Governance Documents”). Paper copies are available to shareholders
upon request to the Corporate Secretary. The Audit Committee, the Compensation Committee and the Nominating &
Corporate Governance Committee are each composed of directors
who are independent, as defined above under the heading “Independence & Categorical Standards” beginning on page
6. The current membership of each of the Board’s standing committees is set forth in the table below. Membership and chairmanship
continued during the entire period from January 1, 2014 until the filing of this proxy statement unless otherwise indicated in
the notes following the table.
Executive
& Risk |
|
|
Nominating
& Corporate |
Committee |
Audit Committee |
Compensation
Committee |
Governance Committee |
Corydon
J. Gilchrist(1) |
John C. Compton(2) |
Robert B. Carter(5) |
Robert B. Carter (chair) |
D. Bryan
Jordan |
Mark A. Emkes (chair)(3) |
John C. Compton |
John C. Compton |
R. Brad
Martin (chair) |
Corydon J. Gilchrist |
R. Brad Martin |
Corydon J. Gilchrist |
Scott M.
Niswonger |
Vicky B. Gregg |
Vicki R. Palmer(6) |
R. Brad Martin |
Vicki R.
Palmer |
Cecelia D. Stewart(4) |
Colin V. Reed (chair) |
Scott M. Niswonger |
Colin V.
Reed |
Luke Yancy III |
|
|
(1) |
Mr. Gilchrist joined the Executive & Risk Committee
in April 2014. |
|
|
(2) |
Mr. Compton became a member of the Audit Committee in April 2014. |
|
|
(3) |
Mr. Emkes became chair of the Audit Committee in April 2014. |
|
|
(4) |
Ms. Stewart became a director in October 2014, and her membership on
the Audit and Trust Committees commenced at that time. |
|
|
(5) |
Mr. Carter became a member of the Compensation Committee in April 2014. |
|
|
(6) |
Ms. Palmer became a member of the Compensation Committee in April 2014. |
Mr. Yancy also serves as chair of the Trust Committee, a standing
committee of the Bank on which Mesdames Gregg and Stewart and Mr. Niswonger also serve. Mr. Emkes is the chair of the Trust Audit
Committee, a standing committee of the Bank on which all the other members of the Audit Committee listed above except Ms. Stewart
also serve. Ms. Palmer served as chair (and a member) of the Audit Committee until April 2014; Mr. Carter served as a member of
the Audit Committee until April 2014; and Mr. Emkes served as a member of the Compensation Committee until April 2014.
The Executive & Risk Committee
The Executive & Risk Committee was established by our
Board of Directors and operates under a written charter, which was amended and restated in 2014 primarily to clarify the Committee’s
enterprise risk management responsibilities. The Committee met eight times during 2014.
The Board has delegated primary responsibility for enterprise
risk management oversight to the Executive & Risk Committee. In connection with its credit risk responsibilities, the Committee
oversees First Horizon’s independent Credit Risk Assurance department. Additional information on the Committee’s risk-related
duties is available under
the heading “Board Role in Risk
Oversight—Executive & Risk Committee” on page 10 above. As an executive committee, the Committee is
authorized and empowered to exercise during the intervals between meetings of the Board all authority of the Board, except as
prohibited by applicable law and provided that it may not approve acquisitions, divestitures or the entry into definitive
agreements (not in the ordinary course of business) where the purchase or sale price or transaction amount exceeds $100
million. Also, no authority has been delegated to the Committee in its charter to approve any acquisition involving the
issuance of our stock.
The Audit Committee
Overview
The Audit Committee was established by our Board of Directors
and operates under a written charter that was amended and restated in 2014 to update a reference to an accounting standard. The
charter is attached to this proxy statement at Appendix A. In 2014, the Committee met eight times for the principal purpose of
executing its responsibilities under the Committee’s charter, and all eight of those meetings concluded with an executive
session during which management was not present.
Subject to the limitations and provisions of its charter,
the Committee assists our Board in its oversight of our accounting and financial reporting principles and policies, internal controls
and procedures, the integrity of our financial statements, our compliance with legal and regulatory requirements, the independent
auditor’s qualifications and independence, and the performance of the independent auditor and our internal audit function.
The Committee is directly responsible for the appointment (subject, if applicable, to shareholder ratification), retention, compensation
and termination of the independent auditor as well as for overseeing the work of and evaluating the independent auditor and its
independence. The members of the Committee are themselves independent, as that term is defined in the NYSE listing standards (described
above), and meet the additional independence requirements prescribed by Section 10A(m)(3) of the Securities Exchange Act of 1934,
as amended, and the rules of the SEC promulgated thereunder. In addition, the Board of Directors has determined that all the members
of the Committee are financially literate as required by the NYSE listing standards. The Audit Committee’s Report is included
below.
Audit Committee Financial Experts
Mark A. Emkes. The Board of Directors has determined
that Mark A. Emkes (chair of the Audit Committee) is an audit committee financial expert, as that term is defined in Item 407(d)(5)
of SEC Regulation S-K. Mr. Emkes received his Bachelor of Arts in Economics from DePauw University and his Masters of Business
Administration in International Management from the Thunderbird School of Global Management. Over the course of his career, Mr.
Emkes served in various positions with Tokyo-based Bridgestone Corporation, including as President and Managing Director of Bridgestone
Firestone Mexico and of Bridgestone Firestone Brazil, President of Bridgestone Latin
America, and Chairman and CEO of Bridgestone North America.
In each of these positions, he actively supervised the divisional chief financial officer, who reported directly to him, and he
reviewed financial results regularly. His service with Bridgestone culminated in his position as Chairman, Chief Executive Officer
and President of Bridgestone Americas, Inc., a company with approximately $12 billion in revenue, and as a director of its parent
company, Bridgestone Corporation. As CEO of Bridgestone Americas, Inc., Mr. Emkes was responsible for the financial statements
of the subsidiary, and he actively supervised the CFO, regularly reviewing results in detail and discussing with the CFO issues
relating to the subsidiary’s financial statements, including issues relating to its estimates, accruals and reserves. He
annually signed a certificate for Bridgestone Corporation in connection with the certification process for Japan’s version
of the Sarbanes-Oxley Act and a management representation letter for Deloitte in connection with Deloitte’s audit of the
financial results of Bridgestone Corporation (the financial statements of which were audited in accordance with generally accepted
accounting principles). For part of Mr. Emkes’s tenure at Bridgestone Americas, the internal audit division reported to
him. Most recently, Mr. Emkes served as the Commissioner of the Department of Finance and Administration of the State of Tennessee,
a position he retired from in May 2013. Mr. Emkes has served on First Horizon’s Audit Committee since 2008.
Vicky B. Gregg. The Board of Directors has also determined
that Vicky B. Gregg (a member of the Audit Committee) is an audit committee financial expert, as that term is defined in Item
407(d)(5) of SEC Regulation S-K. A nurse by education, Ms. Gregg received training in finance and accounting upon entering the
management training program at Humana, Inc. She went on to hold a variety of positions with Humana over the course of fifteen
years, culminating in the position of Regional Vice President, and later became President and CEO of Volunteer State Health Plan,
a subsidiary of BlueCross BlueShield of Tennessee (“BCBST”) and one of the largest Medicaid health maintenance organizations
in the country. Both positions involved oversight responsibility for financial statements that were filed with state insurance
regulators. She served as Chief Executive Officer of BCBST from 2003 until her retirement in 2012. In that position, she had overall
responsibility for the financial statements, actively
supervising the Chief Financial Officer, who reported to her,
and regularly reviewing results and discussing issues relating to the BCBST financial statements with the CFO. During her tenure
as CEO, BCBST prepared financial statements in accordance with accounting practices prescribed by state insurance laws and regulations
as well as financial statements in conformity with U.S. generally accepted accounting practices, and the BCBST board voluntarily
elected to adopt the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting.
As BCBST CEO, Ms. Gregg regularly signed certificates regarding the effectiveness of BCBST’s internal controls over financial
reporting
in accordance with Section 404. In addition, the audit committee,
of which Ms. Gregg as CEO was an ex officio member, was accountable for BCBST’s internal controls, and the head of BCBST’s
internal audit division reported to the audit committee and the CFO. Ms. Gregg is also a member of the audit committee of another
public company, Team Health Holdings, Inc.
Independence of Audit Committee Financial Experts.
Each of Mr. Emkes and Ms. Gregg meet in all respects the independence requirements of the NYSE and Section 10A(m)(3) of the Securities
Exchange Act of 1934, as amended, and the rules of the SEC promulgated thereunder.
Notwithstanding anything to the contrary set forth in any
of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that
might incorporate future filings by reference, including this proxy statement, in whole or in part, the following Audit Committee
Report and the statements regarding members of the Committee who are not independent (if any) shall not be incorporated by reference
into any such filings.
Audit Committee Report
The roles of the Audit Committee (“Committee”)
are (1) to assist First Horizon’s Board of Directors in its oversight of (a) the company’s accounting and financial
reporting principles and policies and internal controls and procedures, (b) the integrity of its financial statements, (c) its
compliance with legal and regulatory requirements, (d) the independent auditor’s qualifications and independence, and (e)
the performance of the independent auditor and internal audit function; and (2) to prepare this report to be included in First
Horizon’s annual proxy statement pursuant to the proxy rules of the SEC. The Committee operates pursuant to a charter that
was last amended and restated by the Board in 2014. As set forth in the Committee’s charter, management of First Horizon
is responsible for preparation, presentation and integrity of the Corporation’s financial statements and for maintaining
appropriate accounting and financial reporting principles and policies and internal controls and procedures to provide for compliance
with accounting standards and applicable laws and regulations, and the internal auditor is responsible for testing such internal
controls and procedures. The independent auditor is responsible for planning and carrying out audits of First Horizon’s
annual financial statements and effectiveness of internal control over financial reporting, reviews of First Horizon’s quarterly
financial statements prior to the filing of each quarterly report on Form 10-Q and certain other procedures.
In the performance of its oversight function, the Committee
has considered and discussed the
audited financial statements with management and the independent
auditors. The Committee has discussed with the Chief Executive Officer and Chief Financial Officer their respective certifications
that were included in First Horizon’s Annual Report on Form 10-K for the year ended December 31, 2014. The Committee has
also discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 16, Communications
with Audit Committees, issued by the Public Company Accounting Oversight Board (formerly the Statement on Auditing Standards
No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), as adopted by the Public Company Accounting
Oversight Board in Rule 3200T). Finally, the Committee has received the written disclosures and the letter from the independent
auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s
communications with the audit committee concerning independence, has adopted an audit and non-audit services pre-approval policy
and considered whether the provision of non-audit services by the independent auditors to First Horizon is compatible with maintaining
the auditor’s independence and has discussed with the auditors the auditors’ independence. At each of its regular
quarterly meetings, the Committee is scheduled to meet, in separate executive sessions with no members of management present,
with both the independent auditors and the internal auditor to discuss any matters that the Committee in its discretion deems
appropriate.
While the Board of Directors has determined that each member
of the Audit Committee has the broad level of general financial experience required to serve on the Committee and that Mr. Emkes
and Ms. Gregg are audit committee financial experts as that term is defined in Item 407(d)(5) of Regulation S-K, none of the members
of the Committee currently devotes specific attention to the narrower fields of auditing or accounting or is professionally engaged
in the practice of auditing or accounting, nor are they performing the functions of auditors or accountants, nor are they experts
in respect of auditor independence. Members of the Committee rely without independent verification on the information provided
to them and on the representations made by management and the independent auditors. Accordingly, the Committee’s oversight
does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting
principles or
appropriate internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. Furthermore, the Committee’s considerations and
discussions referred to above do not assure that the audit of First Horizon’s financial statements has been carried out
in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally
accepted accounting principles or that First Horizon’s auditors are in fact “independent.”
Based upon the reports and discussions described in this report,
and subject to the limitations on the role and responsibilities of the Committee referred to above and in the Committee’s
charter, the Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report
on Form 10-K for the year ended December 31, 2014 filed with the SEC.
Submitted by the Audit Committee of our
Board of Directors.
Audit Committee
Mark A. Emkes, Chair
John C. Compton
Corydon
J. Gilchrist
Vicky B. Gregg
Cecelia D. Stewart
Luke Yancy III
The Nominating & Corporate Governance Committee
In General
The Nominating & Corporate Governance Committee operates
under a written charter that was last amended in 2014 to update a cross-reference. The charter is attached to this proxy statement
at Appendix B. The purposes of the Nominating & Corporate Governance Committee are (1) to identify and recommend to the Board
individuals for nomination as members of the Board and its committees, (2) to develop and recommend to the Board a set of corporate
governance principles applicable to the
Corporation, and (3) to oversee the evaluation of the Board
and management.
The Committee met four times in 2014 for the principal purpose
of executing its responsibilities under its charter, and one of those meetings concluded with an executive session during which
management was not present. In 2013, the company retained a director search firm to assist the Committee in assessing Board competencies
and identifying any potential director needs.
Nominations of Directors; Consideration of Diversity
in Identifying Director Nominees
With respect to the nominating process, the Nominating &
Corporate Governance Committee discusses and evaluates possible candidates in detail and suggests individuals whose potential
membership on the Board could be explored in greater depth. The Committee recommends new nominees for the position of independent
director based on the following criteria:
• | Personal qualities and characteristics, experience, accomplishments and reputation
in the business community. |
| |
• | Current knowledge and contacts in the communities in which the company does business
and in the company’s industry or other industries relevant to the company’s business. |
• |
Diversity of viewpoints, background, experience and other
demographics. |
|
|
• |
Ability and willingness to commit adequate time to Board and committee
matters. |
|
|
• |
The fit of the individual’s skills and personality with those
of other directors and potential directors in building a Board that is effective and responsive to its duties and responsibilities. |
The Nominating & Corporate Governance Committee does not
set specific, minimum qualifications that nominees must meet in order for the Committee to recommend them to the Board of Directors,
but rather believes that each nominee should be evaluated based on his or her individual merits, taking into account the needs
of the company and the composition of the Board of Directors.
As described above and set forth in our Corporate Governance
Guidelines, diversity, broadly defined to mean diversity of viewpoints, background, experience and other demographics, is one
criterion on which the Committee bases its recommendations
of new nominees for director positions. The inclusion of diversity in the listed criteria for director nominees reflects the Board’s
belief that diversity, broadly defined, is important to the effective functioning of the Board. More generally, our Board-adopted
Code of Business Conduct and Ethics reflects First Horizon’s firm commitment to non-discrimination and equal opportunity
for employees, customers and suppliers and to treatment of everyone without discrimination or harassment based on race, color,
religion, sex, sexual orientation, gender identity, national origin, age, veteran status or disability. However, neither the Committee
nor the Board has a formal policy with regard to the consideration of diversity in identifying director nominees.
Once a candidate is identified whom the Committee wants seriously
to consider and move toward nomination, the Chairman and CEO and/or other directors as the Committee determines will enter into
a discussion with that candidate.
Shareholder Recommendations of Director Nominees
The Nominating & Corporate Governance Committee will consider
individuals recommended by shareholders as director nominees, and any such individual is given appropriate consideration in the
same manner as individuals recommended by the Committee. Shareholders who wish to submit individuals for consideration by the
Nominating & Corporate Governance Committee as director nominees may do so by submitting, in compliance with the procedures
and along with the other information required by our Bylaws (as described below), a notice in writing that gives such individuals’
names to the Corporate Secretary. Our Bylaws require that to be timely, a shareholder’s notice must be delivered to or mailed
and received at our principal executive offices not less than 90 days nor more than 120 days prior to the date of the meeting.
However, if fewer than 100 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders,
a notice by a shareholder to be timely must be so delivered or received not later than the close of business on the 10th day following
the earlier of (i) the day on which such notice of the date of such meeting was mailed or (ii) the day on which such public disclosure
was made. A shareholder’s notice must state:
• | the name, age, business address and residence address of the person whom the shareholder |
proposes
to nominate; the principal occupation or employment of such person; the class and number of shares of First Horizon that are beneficially
owned by such person on the date of the notice;
• | any other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including, without limitation, such person’s written consent to being named
in the proxy statement as a nominee and to serving as a director if elected); |
| |
• | the name and address, as they appear on our books, of the shareholder giving the notice
and any other shareholders known by such shareholder to be supporting the proposed nominee; and |
| |
• | the class and number of
shares of our stock which are beneficially owned by the shareholder giving the notice on the date of the notice and by any other
shareholders known by the shareholder giving the notice to be supporting the proposed nominee on the date of such shareholder’s
notice. |
The Compensation
Committee
In General
The Compensation Committee operates under a written charter
that is attached to this proxy statement at Appendix C. Paper copies are available to shareholders upon request to the Corporate
Secretary. The charter was last amended and restated by the Board of Directors in July 2014 to update plan references, consolidate
officer creation duties, and add duties regarding the company’s stock ownership guidelines and compensation-related items
required to be included in the proxy statement.
The purposes of the Compensation Committee are (1) to discharge
the Board’s responsibilities relating to the compensation of our executive officers, (2) to produce an annual report on
executive compensation for inclusion in our proxy statement, in accordance with the rules and regulations of the SEC [the current
report is set forth below], (3) to identify and recommend to the Board individuals for appointment as officers, (4) to evaluate
our management, and (5) to carry out certain other duties as set forth in the Committee’s charter.
The members of the Committee are independent, as that term
is defined in the NYSE listing standards (described above), and meet the additional independence requirements that specifically
apply to Compensation Committee members as set forth in the listing standards (as prescribed by Section 10C of the Securities
Exchange Act of 1934, as amended, and the rules of the SEC promulgated thereunder). In affirmatively determining the independence
of all of the directors, including those who serve on the Committee, the Board has considered all factors specifically relevant
to determining whether any of those directors has a relationship to the company
which is material to that director’s ability to be independent
from management in connection with the duties of a Committee member, including, but not limited to, the source of compensation
of such director, including any consulting, advisory or other compensatory fee paid by the company to such director, and whether
such director is affiliated with First Horizon, a subsidiary of First Horizon, or an affiliate of a subsidiary of First Horizon.
Most of our executive compensation plans specify that they
will be administered by a committee. The Committee’s charter provides that the Committee will administer plan-committee
functions under our various executive-level compensation plans. Under the charter, at least two members of the Committee must
be “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, and at least
two members of the Committee must be “non-employee directors” for purposes of Section 16 of the Securities Exchange
Act of 1934. Many of our plans have similar provisions concerning their respective plan committees. The charter stipulates that
if a Committee member is disqualified under one or the other of those tests, then that member must recuse him- or herself from
participating in decisions impacted by the relevant test. In that situation, the remaining members would constitute the Committee
for that action. On occasion, in connection with a specific action, a Committee member may feel that his or her qualification
under one of those tests may be in doubt for some reason; in that case, the member may elect recusal to avoid any risk of possible
disqualification.
Processes & Procedures
Regarding Executive & Director Compensation
The Committee’s Authority
The charter of the Compensation Committee provides that the
Committee has the authority to review and approve corporate goals and objectives relevant to the compensation of the CEO, evaluate
the performance of the CEO in light of those goals and objectives, and set the CEO’s compensation level based on this evaluation
and to fix the compensation, including bonus and other compensation and any severance or similar termination payments, of executive
officers. The Committee also has the authority, pursuant to its charter, to make recommendations to the Board concerning the adoption
or amendment of
employee benefit plans, management compensation plans, incentive
compensation plans and equity-based plans, including plans applicable to executive officers, and to make recommendations to the
Board concerning director compensation. The charter also provides that the Committee will oversee the company’s compliance
with all applicable laws and regulations relating to (1) appropriate management of the risks associated with incentive compensation
programs or arrangements, (2) the compensation of the company’s executive officers and (3) any reporting associated with
either. The Committee may not delegate any of the authority described in this
paragraph related to executive and director compensation to
any other persons. In 2014, the Committee met five times (and took action by written consent three times) for the principal purpose
of executing its responsibilities under the Committee’s charter, and all five of those meetings concluded with an executive
session during which management was not present.
Director Compensation
The Committee periodically conducts a review of the company’s
director compensation program. The last comprehensive review took place during late 2012 and early 2013. During each comprehensive
review, the design and amount of director compensation is considered by management, and any changes are recommended to the Committee,
either as a short list of alternatives or as single-item recommendations. In general, management uses a consultant in formulating
many of its recommendations, both for advice in designing director compensation and as a source of peer-company data. (Additional
information on the use of consultants in compensation matters is provided below.) Management also prepares various presentations,
analyses, and other tools for the Committee to use in considering director compensation decisions. As a result of the most recent
review process, several changes were made and took effect on April 1, 2013, including (among other changes) a reduction of the
cash retainer amount from $45,000 to $25,000 annually. A complete description of our director compensation program can be found
under the heading “Director Compensation” beginning on page 63 of this proxy statement.
Executive Compensation
The Committee determines the CEO’s salary and bonus
in executive session independent of management, generally on an annual basis. That determination is based on a review of the CEO’s
personal plan results for the prior year, along with peer CEO salary data provided by management’s compensation consultant
as well as input from the Committee’s independent compensation consultant. The CEO is not involved in the determination
of his own salary.
Our CEO recommends to the Committee salary levels for the
executive officers other than himself. Other compensation matters (bonus, equity awards, etc.) involving executives are reviewed
by management, including the CEO, which then makes recommendations to the Committee, either as a short list of alternatives or
as single-item recommendations. Management uses a consultant in formulating certain of its recommendations, both
for advice and as a source of peer-company data. Management
also prepares various presentations, analyses, forecasts, and other tools for the Committee to use in considering compensation
decisions during the year. The Committee’s independent consultant reviews all proposals and makes recommendations to the
Committee.
Benefit Programs and Plans
Management monitors and considers new or modified benefit
programs used by other companies, or needed within our company, to attract and retain key employees. Recommendations are presented
by management to the Committee for review and discussion. The CEO ultimately oversees these management processes. New benefit
plans, or significant amendments to existing plans, typically are approved by the full Board based on recommendations from the
Committee. Enrollment and other administrative actions associated with the benefit plans are handled mainly through third party
vendors in accordance with the terms in the Board-approved plans. If executive-level exceptions are required for administration
of the plans, such as approval of an early retirement, management generally reviews the facts of the situation and provides a
recommendation to the Committee for approval.
Use of Consultants
Management uses a national compensation consulting firm to
provide advice with respect to executive and director compensation matters. Management also uses a number of other specialist
firms to provide data relevant to specific needs such as funding for non-qualified deferred compensation and any special compensation
arrangements that are unique to specific business units such as the capital markets industry. The consultants provide competitive
data/trends, keep management informed of best practices and work with management to develop programs that permit the company to
attract and retain the talent needed.
In 2014, management engaged McLagan as its primary advisor
for executive and director compensation matters. Among other things, management directed McLagan to provide objective advice to
management, the Committee and the Board on executive and director compensation, to provide expertise in executive and director
compensation design, market practices in our industry and data to support recommendations, and to ensure timely reports to management
and the Committee on all critical accounting, tax, securities law and market
developments and trends relating to executive and director
compensation. In addition, management engages nationally-recognized law firms as appropriate to provide advice on compliance with
new laws, administration of stock plans, and compensation-related agreements and arrangements. Management also engages other advisers
from time to time to provide expertise in executive and director compensation matters.
In 2014, the Compensation Committee continued its engagement
of Frederic W. Cook & Co., Inc. to provide it with independent analysis and advice on executive compensation-related matters.
Among other things, the Cook firm assists the Committee in its reviews of compensation program actions recommended by management,
reviewing the chosen peer group and survey data for competitive comparisons and advising the Committee on best practices and ideas
for board governance of executive compensation. The Cook firm was specifically directed to undertake no work on behalf of management,
and the firm has no other relationships with the company or management.
The NYSE listing standards require that all compensation consultants,
legal counsel or other advisers to the Committee (which we collectively refer to as “advisers”) undergo an assessment
of independence from management. The Committee must consider all factors relevant to each adviser’s independence from management,
including the following:
• |
the provision of other services to the company by the person
that employs the adviser; |
|
|
• |
the amount of fees received from the company by the person that employs
the adviser, as a percentage of the total revenue of the person that employs the adviser; |
|
|
• |
the policies and procedures of the person that employs the adviser that
are designed to prevent conflicts of interest; |
|
|
• |
any business or personal relationship of the adviser with a member of
the Committee; |
|
|
• |
any stock of the company owned by the adviser; and |
|
|
• |
any business
or personal relationship of the adviser or the person employing the adviser with an executive officer of the company. |
The Committee has assessed the independence of the Cook firm
and all other advisers to the Committee as required by the NYSE listing standards, considering the factors described above, and
has determined that the Cook firm (and the individual adviser that the Cook firm employs with respect to the engagement by the
company) is independent of management. The Committee has also considered the factors listed above for determining whether the
work performed by the Cook firm has raised any conflict of interest and has concluded that no such conflict of interest exists.
Compensation Risk
Management and the Committee seek to balance several competing
corporate goals: to provide compensation packages which are competitive and which motivate employees to achieve key corporate
goals through appropriate risk-taking; to discourage inappropriate risk-taking; and to comply with evolving regulatory standards
concerning compensation and risk management. At least once each year the Committee meets with management to review and assess
risks associated with incentive compensation plans of the company. For 2014 management surveyed incentive plans used throughout
the company using several specific criteria for identifying those incentive plans which represented material inherent risk. Those
criteria were payout levels (overall and per person), qualitative assessment of the impact on company risk-taking, and qualitative
assessment of the plan’s administration. For those plans judged to have material inherent risk, management assessed the
residual risk of each, taking into account, among other things, the specific inherent risks which had been identified for the
plan, the specific
controls established in relation to those risks, and the implementation
of those controls in the operation of the plan. Management then conducted a review in which residual risk was assessed for those
plans identified as having material inherent risk. Based on that work, management has reported to the Committee that each incentive
plan which entails material inherent risk has low residual risk after considering applicable controls and other relevant factors.
Management also considered recent past and possible future
enhancements of incentive plans related to risk management. Key secondary goals continue to be: (i) to identify incentive plans
where goals could be profit-based rather than revenue-based and (ii) to identify plans where mandatory deferral mechanisms are
appropriate. A shift away from revenues in favor of profits continued in 2014; that shift expands the scope of the incentive to
encompass the costs associated with creating revenues. A mandatory deferral feature can be used to measure the results of a one-year
incentive against a time frame longer than a single
year so that, for example, potential unforeseen or unknowable
costs of an activity have time to come to light. Deferral is also used to buttress the company’s compensation recovery policy
and its stock ownership guidelines.
The company believes that substantial progress towards the
secondary goals has been achieved. For example, most 2014 corporate annual bonuses, including those of most executive officers,
used a profit metric and also incorporated a qualitative assessment of risk related to performance. For most banking employees
2014 bonus opportunities used a profit metric tailored, in
many cases, to the applicable division or unit. Also, a number
of incentive programs in various parts of the company contain a mandatory deferral feature.
Management also conducted an assessment of nearly one hundred
senior managers immediately below the executive level. This “tone from the top” assessment evaluated leadership performance
and behaviors against risk management expectations, identifying areas that were satisfactory and where enhancement was indicated.
Management reported the results of this assessment to the Committee in 2014.
Notwithstanding anything to the contrary set forth in any
of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that
might incorporate future filings by reference, including this proxy statement, in whole or in part, the following Compensation
Committee Report shall not be incorporated by reference into any such filings.
Compensation Committee Report
The Compensation Committee of our Board of Directors has
reviewed and discussed with management, among other things, the section of this proxy statement captioned “Compensation
Discussion & Analysis” beginning on page 33. Based on that review and discussion, the Compensation Committee
recommended to our Board that the “Compensation Discussion & Analysis” section be included in this proxy
statement.
Compensation Committee
Colin V. Reed, Chair
Robert B. Carter
John C. Compton
R. Brad
Martin
Vicki R. Palmer
Compensation
Committee Interlocks & Insider Participation
Messrs. Carter, Compton, Emkes, Martin and Reed and Ms. Palmer,
all non-employee directors, served as members of the Board of Director’s Compensation Committee during 2014. Mr. Emkes’s
service on the Committee ceased in April 2014, and Mr. Carter’s and Ms. Palmer’s service
on the Committee began in April 2014. Refer to the table in
“Corporate Governance and Board Matters—Composition of Board Committees” above for additional committee information.
No interlocking relationships existed with respect to any of the members of the Committee.
Board & Committee Meeting
Attendance
During 2014, the Board of Directors held four meetings (three
of which took place over a period of two days) and took action by written consent two times (both of which involved action only
by the Bank’s Board). The Compensation Committee held five meetings and took action by written consent three times, the
Nominating &
Corporate Governance Committee held four meetings, the Audit
Committee held eight meetings and the Executive & Risk Committee held eight meetings. The average attendance at Board and
committee meetings exceeded 93 percent. No incumbent director attended fewer than 75 percent of the meetings of the Board and
the committees of the Board on which he or she served during
2014. As set forth in our Corporate Governance Guidelines,
our directors are expected to make every effort to attend every meeting of First Horizon’s shareholders. For the last 10
years, all
of our directors have been in attendance at every annual meeting
of shareholders, except for one director in 2012 and one director in 2014.
Executive Sessions of the Board
To ensure free and open discussion and communication among
the non-management directors of the Board and its committees, our Corporate Governance Guidelines provide that the non-management
directors will meet in regularly scheduled executive sessions and as often as the Board shall request, with no members of management
present, and that if any non-management directors are not independent under NYSE listing standards, the independent, non-
management directors will meet in executive session at least
once a year. All of our non-management directors were independent during all of 2014, and during 2014, those independent, non-management
directors met four times in executive session of the Board. The lead director, currently Mr. Martin, presides (or, if he cannot
be in attendance, designates another director to preside) at the executive sessions of the Board.
Communication with the Board of
Directors
A shareholder who desires to communicate with the Board of
Directors on matters other than director nominations should submit his or her communication in writing to the lead director, c/o
Corporate Secretary, First Horizon National Corporation, 165 Madison Avenue, Memphis, Tennessee 38103, and identify himself or
herself
as a shareholder. The Corporate Secretary will forward all
communications to the lead director for a determination as to how to proceed. Other interested parties desiring to communicate
with the Board of Directors should submit their communications in the same manner.
Approval, Monitoring & Ratification
Procedures for Related Party Transactions
The Audit Committee of the Board has adopted procedures for
the approval, monitoring, and ratification of transactions between First Horizon, on the one hand, and our directors, executive
officers or 5% shareholders, their immediate family members, their affiliated entities and their immediate family members’
affiliated entities, on the other hand. A copy of our procedures is available on our website at www.firsthorizon.com (click on
“Investor Relations,” then “Corporate Governance,” and then “Governance Documents”). Our procedures
require management to submit any proposed “related party transaction” (defined as a transaction that is required to
be disclosed in our proxy statement pursuant to the requirements of Item 404(a) of Regulation S-K promulgated by the SEC) or amendment
to an existing related party transaction to the Audit Committee for approval or ratification. In some cases, the matter may be
determined by the chair of the Audit Committee. In considering whether to approve a given transaction, the Audit Committee (or
chair) must consider:
• |
whether the terms of the related party transaction are fair
to First Horizon and on terms |
• |
at least as favorable as would apply if the other party was not, or
did not have an affiliation with, a director or executive officer of First Horizon; |
|
|
• |
whether First Horizon is currently engaged in other related party transactions
with the related party at issue or other related parties of the same director or executive officer; |
|
|
• |
whether there are demonstrable business reasons for First Horizon to
enter into the related party transaction; |
|
|
• |
whether the related party transaction would impair the independence
of a director; and |
|
|
• |
whether the related party transaction would present an improper conflict
of interest for any director or executive officer of First Horizon, taking into account the size of the transaction, the overall
financial position of the director or executive officer, the direct or indirect nature of the interest of the director or
executive officer in the transaction, the ongoing nature of any proposed relationship, and any other factors the Audit Committee
deems relevant. |
Transactions with Related Persons
First Horizon, the Bank and the subsidiaries of each, as applicable,
have entered into lending transactions and/or other banking or financial services transactions in the ordinary course of business
with our executive officers, directors, nominees, their immediately family members and affiliated entities, and the persons of
which we are aware that beneficially own more than 5 percent of our common stock, and we expect to have such transactions in the
future. Such transactions were made in the ordinary course of business, were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the
time for comparable transactions with persons not related to the company, and did not involve more than the normal risk of collectability
or present other unfavorable features. We note that as a perquisite we offer all employees discounts on certain financial services
(for example, no-fee domestic wire transfers). These discounts are available to our executive officers except in relation to credit
extended at the time an executive officer is serving as such.
Stock
Ownership Information
As of December 31, 2014, there were 5,941 shareholders of
record of our common stock. To our knowledge, there were four persons who owned beneficially, as that term is defined by Rule
13d-3 of the Securities Exchange Act of 1934, more than five percent (5%) of our common stock as of December 31, 2014. Certain
information concerning beneficial ownership of our common stock by those persons as of December 31, 2014 is set forth in the following
table:
Security
Ownership of Certain Beneficial Owners |
|
|
Amount
and Nature |
|
Name
and Address of |
of Beneficial |
|
Beneficial
Owner* |
Ownership |
Percent
of Class |
BlackRock, Inc |
16,631,143 |
7.1% |
State Street Corporation |
12,032,533 |
5.1% |
T. Rowe Price Associates, Inc |
22,041,971 |
9.3% |
The Vanguard Group, Inc |
14,705,839 |
6.25% |
* |
Addresses appear in the text below. |
BlackRock. The information in the table above with
respect to BlackRock is based on information set forth in Schedule 13G/A, filed with the Securities and Exchange Commission on
January 29, 2015 by BlackRock, Inc. on behalf of its subsidiaries BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock
Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Capital Management, BlackRock Fund Advisors,
BlackRock Institutional Trust Company, N.A., BlackRock Investment Management (Australia) Limited, BlackRock Investment Management
(UK) Ltd, BlackRock Investment Management, LLC, BlackRock Japan Co Ltd and BlackRock Life Limited, 55 East 52nd Street, New York,
NY 10022. According to this Schedule 13G, BlackRock has sole voting power with respect to 15,811,014 shares of our common stock
and sole dispositive power with respect to 16,631,143 shares of our common stock.
State Street. The information in the table above with
respect to State Street Corporation (“State Street”) is based on information set forth in Schedule 13G, filed with
the Securities and Exchange Commission on February 12, 2015 on behalf of its subsidiaries State Street Bank and Trust Company,
SSGA Funds Management, Inc., State Street Global Advisors Limited, State Street Global Advisors Ltd., State Street Global Advisors
Australia Limited, and State Street Global Advisors, Asia Limited (collectively, “State Street”) by State Street,
State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. According to this Schedule 13G, State Street has
shared voting power and shared dispositive power with respect to all 12,032,533 shares of our common stock that it beneficially
owns.
T. Rowe Price. The information in the table above with
respect to T. Rowe Price Associates, Inc. (“TRP”) is based on information set forth in
Amendment No. 6 to Schedule 13G, filed with the Securities and Exchange
Commission on February 13, 2015 by TRP, 100 E. Pratt Street, Baltimore, Maryland 21202. According to this document, TRP has sole
voting power with respect to 3,773,835 shares of our common stock and sole dispositive power with respect to 22,041,971 shares
of our common stock.
Vanguard. The information in the table above with respect
to The Vanguard Group, Inc. (“Vanguard”) is based on information set forth Amendment No.
3 to Schedule 13G, filed with the Securities and Exchange Commission
on February 10, 2015 by Vanguard, 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. According to this Schedule 13G, Vanguard
has sole voting power with respect to 158,007 shares of our common stock, shared dispositive power with respect to 138,546 shares
of our common stock and sole dispositive power with respect to 14,567,293 shares of our common stock.
The table below sets forth certain information concerning beneficial
ownership of our common stock by each director and nominee, each executive officer named in the Summary Compensation Table, and
the directors and executive officers as a group. The information in the table is as of December 31, 2014 except as otherwise noted
in the notes to the table.
Security
Ownership of Management
Name of Beneficial
Owner | |
Amount
and Nature of Beneficial Ownership(1) | |
Percent
of Class |
Robert B. Carter | |
| 43,712 | | |
| * | |
John C. Compton | |
| 57,419 | | |
| * | |
Mark A. Emkes | |
| 34,026 | | |
| * | |
Corydon J. Gilchrist | |
| 62,273 | | |
| * | |
Vicky B. Gregg | |
| 19,641 | (3) | |
| * | |
D. Bryan Jordan | |
| 1,132,065 | (4) | |
| * | |
Michael E. Kisber(2) | |
| 808,502 | (4) | |
| * | |
William C. Losch, III | |
| 294,731 | (4) | |
| * | |
R. Brad Martin(5) | |
| 604,281 | (3) | |
| * | |
Scott M. Niswonger | |
| 521,883 | | |
| * | |
Vicki R. Palmer | |
| 114,441 | (3) | |
| * | |
David T. Popwell | |
| 284,517 | (4) | |
| * | |
Colin V. Reed | |
| 85,440 | (3) | |
| * | |
Charles T. Tuggle, Jr | |
| 317,707 | (4) | |
| * | |
Cecelia D. Stewart | |
| 5,889 | | |
| * | |
Luke Yancy III | |
| 40,774 | (3) | |
| * | |
Directors and Executive Officers as a Group (20 persons) | |
| 5,089,432 | (4) | |
| 2.15 | % |
* |
|
No current individual director, nominee or executive officer beneficially
owns more than one percent (1%) of our common stock that is outstanding. |
|
|
|
(1) |
|
The respective directors, nominees and officers have sole voting
and investment powers with respect to all of such shares except as specified in notes (3) and (4). |
|
|
|
|
|
The numbers of shares covered by stock options reported in the
table have been adjusted proportionately to reflect the effects of dividends paid in common stock from October 1, 2008 through
January 1, 2011. |
|
|
|
|
|
No current director or executive officer beneficially owns any
of the depositary shares, each representing a 1/4000th interest in a share of non-cumulative perpetual preferred stock, Series
A, issued by First Horizon on January 31, 2013. |
(2) |
|
The share balance for Mr. Kisber does not include 27,994 shares
deferred prior to January 2005 under our stock option program and our restricted stock incentive plan, which at that time
permitted participants to defer receipt of shares upon the exercise of options and receipt of shares prior to the lapsing
of restrictions imposed on restricted stock awards, respectively. These shares are not currently issued and are not considered
to be beneficially owned for purposes of Rule 13d-3, but are reflected in a deferral account on our books as phantom stock
units or restricted stock units. |
|
|
|
(3) |
|
Includes 1,940 shares of restricted stock with respect to which
Mr. Reed possesses sole voting power, but no investment power. Includes the following shares as to which the named non-employee
directors have the right to acquire beneficial ownership through the |
|
|
exercise of stock options granted under our director plans, all
of which are 100% vested or will have vested within 60 days of December 31, 2014: Ms. Gregg—213; Mr. Martin—45,106;
Ms. Palmer—86,463; and Mr. Yancy—11,434. |
|
|
|
(4) |
|
Includes the following shares of restricted stock with respect
to which the named person or group has sole voting power but no investment power: Mr. Jordan—37,190; Mr. Kisber—0;
Mr. Losch—31,656; Mr. Popwell—29,982; Mr. Tuggle—33,646; and the director and executive officer group—263,850.
Includes the following shares as to which the named person or group |
|
|
has the right to acquire beneficial ownership through the exercise
of stock options granted under our stock option plans, all of which are 100% vested or will have vested within 60 days of
December 31, 2014: Mr. Jordan—594,023; Mr. Kisber—583,359; Mr. Losch–154,737; Mr. Popwell—138,515;
Mr. Tuggle—157,002; and the director and executive officer group—2,018,541. Also includes shares held at December
31, 2014 in 401(k) Savings Plan accounts. |
|
|
|
(5) |
|
The number of shares for Mr. Martin includes 48,014 shares held
by the R. Brad Martin Family Foundation. |
Vote Item No. 1—Election
of Directors
Overview. The Board of Directors is proposing for election
all twelve of our current directors: Messrs. Carter, Compton, Emkes, Gilchrist, Jordan, Martin, Niswonger, Reed, and Yancy and
Mmes. Gregg, Palmer and Stewart, at the 2015 annual meeting, to hold office until the 2016 annual meeting of shareholders or until
their successors are duly elected and qualified. Ms. Stewart was elected by the Board of Directors in October 2014. She was recommended
as a nominee for a position on our Board by Mr. Jordan, our CEO. If any nominee proposed by the Board of Directors is unable to
accept election, which the Board of Directors has no reason to anticipate, the persons named in the enclosed form of proxy will
vote for the election of such other persons as directed by the Board, unless the Board decides to reduce the number of directors
pursuant to the Bylaws.
Identification and Nomination of Candidates. The Board
and the Nominating & Corporate Governance Committee regularly assess the composition of the Board as a whole and the
contributions of each director. The Nominating & Corporate Governance Committee’s charter assigns to that Committee
the duty to identify individuals believed to be qualified to become Board members and to recommend to the Board the
individuals to stand for election or reelection as directors. In nominating candidates, the Committee may take into
consideration such factors as it deems appropriate, including personal qualities and characteristics, experience,
accomplishments and reputation in the business community; current knowledge and contacts in the communities in which the
company does business and in the company’s industry or other industries relevant to the company’s business;
diversity of viewpoints, background, experience and other demographics;
ability and willingness to commit adequate time to Board and committee
matters; and the fit of the individual’s skills and personality with those of other directors and potential directors in
building a Board that is effective and responsive to its duties and responsibilities and the needs of the company.
Assessment of the Board’s Composition. At each of its
regularly scheduled meetings, the Nominating & Corporate Governance Committee reviews the composition of the Board as a whole,
considering the mix of skills and experience that directors bring to the Board, and evaluates Board composition in light of the
company’s then-current business needs as well as applicable legal, regulatory and NYSE requirements. Among the areas considered
by the Committee are each director’s independence under the NYSE listing standards; experience, including experience as a
public company officer or director; primary area of business expertise; geographical markets experience; and projected retirement
date. In accordance with the requirements of the National Bank Act and the company’s focus on its core banking franchise
in Tennessee, the Committee also considers the proportion of directors who reside in Tennessee (or within 100 miles of Memphis).
In light of this review, the Committee assesses whether the Board has the necessary tools to perform its oversight functions effectively
and recommends, as appropriate, new nominees for consideration by the Board. The Board, with oversight provided by the Committee,
also conducts an annual self-evaluation that includes an evaluation of whether Board members have an appropriately broad and diverse
range of experience and whether committee members have the right expertise, background and skills to be
effective and responsive to their duties and responsibilities as
committee members.
Individual Director Evaluations. The Nominating & Corporate
Governance Committee also conducts annual individual director evaluations. To facilitate these evaluations, the Board has adopted
a Statement of Expectations of Directors. The Statement of Expectations contains specific activities and conduct each director
should engage in or adhere to and includes consideration of each director’s background, expertise and skills. The Statement
of Expectations is provided to each new director at the time of orientation and to all directors once a year. Each year, the Nominating
& Corporate Governance Committee conducts evaluations against the Statement of Expectations of the performance of each director
prior to determining whether to recommend him or her to the Board for renomination.
Board Experiences, Qualifications, Attributes and Skills.
Set forth below are the particular experiences, qualifications, attributes or skills that led the Board to conclude that each nominee
and incumbent director should serve as a director of First Horizon, as well as the age, current principal occupation (which has
continued for at least five years unless otherwise indicated), name and principal business of the organization in which his or
her occupation is carried on, directorships in other reporting companies (including those held within the last five years but not
currently held), and year first elected to our Board. All of our directors are also directors of the Bank. Director committee appointments
are disclosed in a table on page 11 in the “Corporate Governance and Board Matters—Committee Charters & Committee
Composition” section of this proxy statement above.
Nominees for Director
Robert B. Carter
Mr. Carter (55) is Executive Vice President—FedEx Information
Services and Chief Information Officer of FedEx Corporation, a provider of transportation, e-commerce and business services. He
was Executive Vice President and Chief Information Officer of FedEx from 2000 to 2007. Mr. Carter also served as a director of
one other public company, Saks Incorporated, within the last five years, although he is not serving in that position currently.
He was elected as a director of First Horizon in 2007. Mr. Carter is independent
under the NYSE listing standards. He has extensive experience in
the field of information technology and, in his current position as FedEx’s CIO, has the experience of serving as a public
company executive officer. His service on the compensation and governance committees while a director of Saks enhanced his knowledge
of the governance of public companies and the compensation of their executive officers. He also serves on the board of several
non-profit organizations.
John C. Compton
Mr. Compton (53) is a Partner at Clayton, Dubilier & Rice, a
New York-based private equity firm. Prior to January 2015, he was a private investor and consultant and served as an Operating
Advisor to Clayton, Dubilier & Rice. He served as CEO of Pilot Flying J, Knoxville, Tennessee, a national operator of travel
centers, until February 2013. Prior to September 2012, he served for twenty-nine years in various senior leadership positions with
PepsiCo Inc., a global food, snack and beverage company, including Chief Executive Officer of PepsiCo Americas Foods, President
and CEO of Quaker, Tropicana, Gatorade and CEO of PepsiCo North America, culminating in his service as President of PepsiCo. Mr.
Compton was elected
as a director of First Horizon in 2011. He is independent under the
NYSE listing standards. Mr. Compton has extensive experience in sales, marketing, operations and general management as well as
experience with the various matters, including finance and accounting, employee matters, mergers and acquisitions, risk assessment,
civic affairs and government relations, associated with executive positions at public companies. Mr. Compton also served on the
board of directors of the Pepsi Bottling Group from March 2008 until the company’s merger with PepsiCo in 2010. Pepsi Bottling
Group was a public company prior to the merger.
Mark A. Emkes
Mr. Emkes (62) retired in May 2013 as the Commissioner of the Department
of Finance and Administration of the State of Tennessee, a position he had served in since January 2011. Prior to his service as
Commissioner, he served as the Chairman, Chief Executive Officer and President of Bridgestone Americas, Inc. and as a director
of its parent company, Tokyo-based Bridgestone Corporation, a worldwide tire and rubber manufacturer (“Bridgestone”).
Mr. Emkes is a director of three other public companies, Clarcor Inc., Corrections Corporation of America and Greif, Inc., and
was elected as a director of First Horizon in 2008. Mr. Emkes is independent under the NYSE listing standards and is an audit committee
financial expert as defined in item 407(d)(5) of SEC Regulation S-K. Additional information about the background and experiences
that qualify him as an audit committee financial expert is provided under the heading “Audit Committee Financial Experts”
beginning on page 12 of this proxy
statement. Mr. Emkes’s most recent position afforded him experience
in finance and governmental affairs, and his past positions with Bridgestone gave him wide-ranging experience in retailing, wholesaling
and manufacturing as well as experience with the various matters, including finance and accounting, employee matters, mergers and
acquisitions, risk assessment, civic affairs, and government relations, associated with being the CEO of a large subsidiary of
a public company. He has served on the compensation and governance committees of the other public companies of which he is a director,
and that service has enhanced his knowledge of public company executive compensation and governance matters. As a resident of Nashville,
his knowledge of the Nashville market fits well with our strategy of focusing on our core banking franchise in Tennessee. He also
serves on the board of a non-profit organization.
Corydon J. Gilchrist
Mr. Gilchrist (44) is a private investor and a Chartered Financial
Analyst. From 2000 to 2011 he was a portfolio manager and partner at Marsico Capital Management. While at Marsico, Mr. Gilchrist
was the sole portfolio manager for Marsico’s 21st Century Fund and the lead portfolio manager for Marsico’s Global
Fund. Before joining Marsico, he was a senior analyst and portfolio manager covering emerging markets at The Principal Financial
Group. He was elected by the Board of Directors as a director of First Horizon in
2012. He is independent under the NYSE listing standards. Mr. Gilchrist’s
years of work in macro and micro investment analysis have afforded him an understanding of business value, business risk, and strategic
decision-making as well as experience analyzing various matters, including finance and accounting, securities markets, corporate
governance, mergers and acquisitions, risk assessment, and government relations, that affect public companies. He also serves on
the board of a non-profit organization.
Vicky B. Gregg
Ms. Gregg (60) retired as President and Chief Executive Officer and
a director of BlueCross BlueShield of Tennessee (“BCBST”) in December 2012. BCBST is a not-for-profit organization
that, together with its subsidiaries, provides a comprehensive range of group and individual health insurance plans, products and
services. She had held those positions with BCBST since 2003. Before becoming President and Chief Executive Officer, Ms. Gregg
served as BCBST’s President and Chief Operating Officer, overseeing all aspects of the company’s day-to-day operations.
Ms. Gregg is a director of two other public companies, Quest Diagnostics, Inc. and Team Health Holdings, Inc. She has been a director
of First Horizon since 2011. Ms. Gregg is independent under the NYSE listing standards and is an audit committee financial expert
as defined in Item 407(d)(5) of SEC Regulation S-K. Additional information about the background and experiences that qualify her
as an audit committee financial expert is provided under the heading “Audit Committee Financial Experts” beginning
on page 12 of this proxy
statement. Ms. Gregg has a diverse health care background that includes
clinical care, hospital administration, long term care, and healthcare benefits and financing. Her executive experience in the
health care industry has provided her with expertise in health care and health care finance and extensive experience in the matters
involved in running a large company, including finance and accounting, corporate governance, employee matters, mergers and acquisitions,
risk assessment, civic affairs, and government relations. Her service on the compensation and audit committees of the other public
company boards on which she serves has enhanced her knowledge of public company executive compensation and audit matters. As a
resident of east Tennessee, her knowledge of that market fits well with our strategy of focusing on our core banking franchise
in Tennessee. She also serves on the boards of a number of non-profit and trade organizations and in the past has also served on
several appointed commissions, including the Tennessee Governor’s Roundtable.
D. Bryan Jordan
Mr. Jordan (53) is Chairman of the Board, President and Chief Executive
Officer of First Horizon and the Bank. He was elected Chairman of the Board of Directors effective January 1, 2012 and has held
the positions of President and Chief Executive Officer since 2008. Mr. Jordan was the Chief Financial Officer of First Horizon
and the Bank from 2007 to 2008, and prior to that he served in various positions at Regions Financial Corporation and its subsidiary
Regions Bank, including (beginning in 2002) as Chief Financial Officer. Prior to 2000, he held various finance and accounting related
positions at Wachovia
Corporation. Mr. Jordan serves as a director of one other public
company, AutoZone, Inc., where he is a member of the audit and nominating committees. He has extensive experience in the banking
and financial services industry as well as the experience typically associated with serving as CEO of a public company, including
finance and accounting, securities markets and compliance, corporate governance, employee matters, mergers and acquisitions, risk
assessment, civic affairs, and government relations. He also serves on the board of several non-profit organizations.
R. Brad Martin
Mr. Martin (63) is the Chairman of RBM Venture Company, Memphis,
Tennessee, a private investment company. He served as interim president of The University of Memphis from 2013 to 2014. Mr. Martin
was Chairman of the Board and Chief Executive Officer of Saks Incorporated, Birmingham, Alabama, a retail merchandising company,
until his retirement in 2007. He had held the CEO position at Saks or its predecessor companies since 1989. Mr. Martin is a director
of two other public companies, Chesapeake Energy Corporation and FedEx Corporation. He has also held directorships at Dillards,
Inc., Ryman Hospitality Properties, Inc. (formerly known as Gaylord Entertainment Company), lululemon
athletica inc., and Ruby Tuesday, Inc. within the last five years,
although he is not serving in those positions currently. He also served until 2008 as a director of one other public company, Harrah’s
Entertainment, Inc. He has been a director of First Horizon since 1994. Mr. Martin is independent under the NYSE listing standards.
He has expertise in retailing as well as the experiences typically associated with serving as a CEO of a public company, including
finance and accounting, securities markets and compliance, corporate governance, employee matters, mergers and acquisitions, risk
assessment, civic affairs, and government relations. He has served on the audit, compensation and/or nominating and corporate
governance committees of several other public companies, further
adding to his experience with the business and affairs of public companies. He
also serves on the board of several non-profit organizations.
Scott M. Niswonger
Mr. Niswonger (67) is the Chairman and founder of Landair Transport,
Inc., a time-definite trucking, warehousing, and supply-chain management company. He previously served as Chief Executive Officer
(until 2003) of Landair and as Chairman of the Board (until 2005) and Chief Executive Officer (until 2003) of Forward Air, Inc.,
which operated as one company with Landair until the two were separated into two public companies in 1998; Landair has since again
become a private company. He was elected as a director of First Horizon in 2011. Mr. Niswonger is independent under the NYSE listing
standards. In his current role as Chairman of Landair and as the former CEO of both Landair and Forward Air, he gained
extensive experience in matters affecting both public and private
companies, including sales, marketing and logistics, finance and accounting, employee matters, mergers and acquisitions, risk assessment,
civic affairs and government relations, corporate governance and securities markets and compliance. As a resident of east Tennessee,
his knowledge of the east Tennessee market fits well with our strategy of focusing on our core banking franchise in Tennessee.
Mr. Niswonger serves on the boards of several non-profit organizations and has in the past served as Chair of the Economic Development
and Growth Board for the State of Tennessee. He is also a certified airline transport pilot.
Vicki R. Palmer
Ms. Palmer (61) is the President of The Palmer Group, LLC, Atlanta,
Georgia, a general consulting firm. Between 2004 and 2009, she served as Executive Vice President, Financial Services and Administration,
Coca-Cola Enterprises Inc. (“CCE”), Atlanta, Georgia, a bottler of soft drink products. In this position, she was responsible
for overseeing treasury, pension and retirement benefits, asset management, internal audit and risk management, and she was a member
of CCE’s Risk Committee, which was charged with establishing policy and internal controls for hedging and financial and non-financial
derivatives. In addition, she served on
CCE’s Senior Executive Committee and had oversight responsibility
for CCE’s enterprise-wide risk assessment process. Ms. Palmer is a director of one other public company, Haverty Furniture
Companies, Inc. She has been a director of First Horizon since 1993. Ms. Palmer is independent under the NYSE listing standards.
Ms. Palmer also has experience with public company governance and financial matters, having served on the audit and governance
committees at Haverty Furniture, where she has been a director since 2001. She also serves on the board of several non-profit organizations.
Colin V. Reed
Mr. Reed (67) is the Chairman of the Board and Chief Executive Officer
of Ryman Hospitality Properties, Inc. (“Ryman”), Nashville, Tennessee, a real estate investment trust. Ryman is the
successor by merger to Gaylord Entertainment Company (“Gaylord”), a diversified hospitality and entertainment company
whose conversion to a real estate investment trust and subsequent merger into Ryman was led by Mr. Reed. Mr. Reed was elected Chairman
of the Board of Gaylord in 2005 and Chief Executive Officer in 2001. Mr. Reed is a director of one other public company, Ryman.
He also served as a director of Rite Aid Corporation until 2005. He has been a director of First Horizon since 2006. Mr. Reed is
independent under the
NYSE listing standards. He has extensive experience in accounting
matters, having spent several years in chief accountant, financial controller and chief financial officer positions of public companies.
Mr. Reed also has expertise in retailing as well as the experiences typically associated with serving as a CEO of a public company,
including finance and accounting, securities markets and compliance, corporate governance, employee matters, mergers and acquisitions,
risk assessment, civic affairs, and government relations. As a resident of Nashville, his knowledge of the Nashville market fits
well with our strategy of focusing on our core banking franchise in Tennessee.
Cecelia D. Stewart
Cecelia D. Stewart (56) retired as the President of U.S. Consumer
and Commercial Banking of Citigroup, Inc., a global diversified financial services holding company, in April 2014. She had held
that position since January 2011. While at Citigroup, she had responsibility for retail banking, commercial banking, small business
banking, and personal banking and wealth management, and she also served on Citigroup’s Operating and Global Consumer Management
Committees. From 2009 to 2011, she was President of the retail banking group and CEO of Morgan Stanley Private Bank N.A. Ms. Stewart’s
career in banking began at Wachovia Bank N.A. in 1978, where she held a variety of regional banking positions, culminating in her
service as Executive Vice President and Head of Retail and Small Business Banking from 2003 to
2008. Ms. Stewart is a director of one other public company, United
States Cellular Corporation. She was elected as a director of First Horizon by the Board of Directors in October 2014. Ms. Stewart
is independent under the NYSE listing standards. She brings to the First Horizon Board extensive experience in banking and financial
services gained over a long career in the industry, as well as experience with the various matters, including finance and accounting,
employee matters and risk assessment, associated with running a division at a large public company. Her service on the United States
Cellular board and as a member of its compensation committee has enhanced her knowledge of matters affecting public companies,
including executive compensation. She also serves on the board of a non-profit organization.
Luke Yancy III
Mr. Yancy (65) is President and Chief Executive Officer of the MMBC
Continuum, Memphis, Tennessee, a non-profit organization that promotes minority and women business enterprises. Prior to 2000,
Mr. Yancy was President, West Region, of AmSouth Bank and, prior to its acquisition by AmSouth in 1999, First American Bank. He
has extensive experience in banking, including service as commercial lending division head, group manager of business lending and
consumer lending and senior credit officer. Mr. Yancy has
been a director since 2001. He is independent under the NYSE listing
standards. As CEO of MMBC Continuum, Mr. Yancy possesses broad knowledge of the mid-south community, which lies within the footprint
of our regional banking franchise. He is a board member of several non-profit organizations, including the Greater Memphis Chamber
of Commerce, LeMoyne Owen College, the Memphis Sports Development Corporation, and Methodist Healthcare and has wide-ranging ties
in the mid-south community.
The Board of Directors unanimously recommends that the shareholders
vote for the election of all director nominees as described in Item No. 1.
Vote Item No. 2—Advisory
Resolution to Approve Executive Compensation
First Horizon’s executive compensation program received solid
shareholder support last year and was approved, on an advisory basis, by 93.71% of the votes cast at the 2014 annual meeting. In
accordance with SEC rules, we are again seeking a vote from our shareholders to approve, on an advisory basis, the compensation
of our named executive officers as disclosed in this proxy statement. Highlights of our corporate
performance in 2014 and the ways in which we link executive compensation
to long-term performance are discussed below. The Compensation Discussion & Analysis beginning on page 33 of this proxy statement
provides a detailed discussion of 2014 compensation for our executive officers and related matters. We encourage you to review
closely both that section and the tabular disclosure that follows it.
2014 Corporate Performance
In 2014, we produced solid and strategic operating results. We believe
those results were built on the foundations laid in earlier years by our current management team.
Key outcomes considered by the Compensation Committee included:
• |
Consolidated earnings available to common shareholders were $0.90 per share, substantially higher than any of
the past four years. |
|
|
• |
Annual total shareholder return exceeding 18% for the third year in a row. |
|
|
• |
Loans up 5% overall compared to 2013, even while legacy non-strategic loan balances declined significantly. |
|
|
• |
We expanded our presence in our Mid-Atlantic banking region. The region now has offices in Virginia, the Carolinas, and north Florida. In addition, we opened an office in Houston, Texas with emphasis on commercial lending, including corporate, energy and commercial real estate relationships. |
|
|
• |
We acquired 13 bank branches located in several smaller markets in middle and eastern Tennessee, enhancing our presence in the state. |
|
|
• |
We agreed to buy a five-branch bank in Raleigh, North Carolina, which is expected to close later in 2015. |
|
|
• |
Although the low-and-stable interest rate environment continued to dampen capital markets’ revenues, the expense structure of that business allowed it to weather this part of the rate cycle and continue to make positive contributions to our overall net income. |
• |
We disciplined our investment of resources based on “economic profit” principles and analysis of risk-adjusted return on capital invested. These concepts have been ingrained throughout the company in terms of management practices and, increasingly, in incentive programs. |
|
|
• |
Efficiency remained critical. We reduced consolidated employee expense by about 10%, and consolidated noninterest expense by about 27%, compared to 2013. |
|
|
• |
We took advantage of opportunities to wind down, divest, and resolve non-strategic assets and obligations. We sold legacy mortgage servicing and loans, and the remaining loans continued to run off. |
The Compensation Committee used these outcomes in compensation decisions,
as examined in more detail in the Compensation Discussion & Analysis section beginning on page 33 of this proxy statement.
Of particular note, core segment pre-tax income was a major driver of annual bonus outcomes for 2014 under our shareholder-approved
Management Incentive Plan (MIP). See “Annual MIP Bonus” beginning on page 42 for additional information.
The Compensation Committee implemented several structural adjustments
to compensation for 2014. For additional information, see “2014 Pay Adjustments” beginning on page 34 of this proxy
statement.
Alignment with Long-Term Performance
Our compensation policies and philosophies are designed to align
the interests of our employees with the interests of our shareholders. We seek to
attract, retain, incent, and reward individuals who contribute to
the long-term success of the company.
Key practices linking performance to compensation include:
• |
Heavy weighting of performance-based, and of stock-based, awards. For our CEO, goal-based performance pay elements in 2014 represented 55% of his total compensation opportunity, measured at target. For most other named executives, the goal-based performance portion represented 40%. Over 40% of our CEO’s pay was linked directly to our stock price compared to 35% for the other NEOs, on average. See “Relative Sizing & Mix” beginning on page 41 below for details. |
|
|
• |
Share Ownership Requirement. Our stock ownership guidelines extend the effective time horizon of the stock awards substantially. They require that executives hold 50% of their net after tax shares from awards until retirement |
|
after multiple-of-salary minimum ownership levels are attained. For an executive holding less than the guideline minimum, the requirement is 75%. |
|
|
• |
Nearly exclusive use of stock to fund special retention and performance awards. The last executive-level special retention program (2011) utilized restricted stock awards, as have most selective individual retention awards since then. A special CEO performance award granted in 2012 was in the form of five-year performance stock units which will vest only if our stock value or total shareholder return increases substantially. |
Details regarding these practices are discussed throughout the Compensation
Discussion & Analysis beginning on page 32 of this proxy statement.
“Say on Pay” Resolution
Under Section 14A of the Securities Exchange Act, our shareholders
are entitled to an advisory vote on the compensation of our named executive officers as disclosed in this proxy statement pursuant
to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion & Analysis,
compensation tables and the related material. This advisory vote, commonly known as a “say on pay” proposal, gives
our shareholders the opportunity to endorse or not endorse our executive pay program. At the 2011 annual meeting, our shareholders
had the opportunity to cast an advisory vote on how frequently we should hold a “say on pay” vote. The Board recommended
and the shareholders approved an annual frequency for the “say on pay” vote, and the Board subsequently determined
that we would in fact conduct a “say on pay” vote at each annual meeting.
We believe that the information we have provided in the Compensation
Discussion & Analysis, the executive compensation tables and the related disclosure contained in this proxy statement demonstrates
that our executive compensation program was designed appropriately and is working to ensure management’s interests are aligned
with our shareholders’ interests to support
the long-term success of First Horizon. Accordingly, the Board of
Directors unanimously recommends that you vote in favor of the following resolution:
“RESOLVED, that the holders of the common
stock of First Horizon National Corporation (“Company”) approve, on an advisory basis, the compensation of the Company’s
executive officers named in the Summary Compensation Table of the Company’s proxy statement for the 2015 annual meeting of
shareholders as such compensation is disclosed in such proxy statement pursuant to the compensation disclosure rules of the Securities
and Exchange Commission, including the Compensation Discussion & Analysis, the executive compensation tables and the related
disclosure contained in the proxy statement.”
Because your vote is advisory, it will not be binding upon the Board, and the
vote on this item will not be construed as overruling a Board decision or as creating or implying any additional fiduciary duty
by the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive
compensation arrangements.
The Board of Directors unanimously recommends that the shareholders
vote for Item No. 2.
Vote Item No. 3—Ratification
of Appointment of Auditors
Appointment of Auditors for 2015
KPMG LLP audited our annual consolidated financial statements
for the year 2014. The Audit Committee has appointed KPMG LLP to be our auditors for the year 2015. Although not required by law,
regulation or the rules of the New York Stock Exchange, the Board has determined, as a matter of good corporate governance and
consistent with past practice, to submit to the shareholders as Vote Item No. 3 the ratification of KPMG LLP’s appointment
as our auditors for the year 2015, with the recommendation that the
shareholders vote for Item No. 3. Representatives of KPMG LLP
are expected to be present at the annual meeting of shareholders with the opportunity to make a statement and to respond to appropriate
questions. The 2014 engagement letter with KPMG LLP was subject to alternative dispute resolution procedures. If the shareholders
do not vote to ratify KPMG LLP’s appointment as our auditors for the year 2015, the Board of Directors will consider what
course of action would be appropriate.
Fees Billed to Us by Auditors during 2013 and 2014
The table below and the paragraphs following it provide information
regarding the fees billed to us by KPMG LLP during 2013 and 2014 for services
rendered in the categories of audit fees,
audit-related fees, tax fees and all other fees.
| |
2013 | | |
2014 | |
Audit Fees | |
$ | 1,515,000 | | |
$ | 1,617,000 | |
Audit-Related Fees | |
| 293,500 | | |
| 273,500 | |
Tax Fees | |
| 0 | | |
| 0 | |
All Other Fees | |
| 0 | | |
| 161,850 | |
Total | |
$ | 1,808,500 | | |
$ | 2,052,350 | |
Audit Fees. Represents the aggregate fees billed to
us by KPMG LLP for professional services rendered for the audit of our consolidated financial statements, including the audit
of internal controls over financial reporting, and review of our quarterly financial statements or for services that are normally
provided by KPMG LLP in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. Represents
the aggregate fees billed to us by KPMG LLP for assurance and related services that are reasonably related to the performance
of the audit or review of our consolidated financial statements and that are not reported under “Audit Fees” above.
The amount for both years consists of fees for audits of
subsidiaries, compliance attestation and other procedures and
reports on controls placed in operation and tests of operating effectiveness.
Tax Fees. Represents the aggregate fees, if any, billed
to us by KPMG LLP for professional services for tax compliance, tax advice, and tax planning.
All Other Fees. Represents the aggregate fees billed
to us by KPMG LLP for professional services related to regulatory reporting.
None of the services provided to us by KPMG LLP and described
in the paragraphs entitled “Audit-Related Fees,” “Tax Fees” and “All Other Fees” above were
approved pursuant to the de minimis exception of SEC Rule 2-01(c)(7)(i)(C).
Policy on Pre-Approval of Audit & Non-Audit Services
The Audit Committee has adopted a policy providing for pre-approval
of all audit and non-audit services to be performed by KPMG LLP, as the registered public accounting firm that performs the audit
of our consolidated financial statements that are filed with the SEC. Services either may be approved in advance by the Audit
Committee
specifically on a case-by-case basis (“specific pre-approval”)
or may be approved in advance (“advance pre-approval”). Advance pre-approval requires the Committee to identify in
advance the specific types of services that may be provided and the fee limits applicable to such types of services, which limits
may be expressed as a limit
by type of service or by category of services. Unless the type
of service to be provided by KPMG LLP has received advance pre-approval under the policy and the fee for such service is within
the limit pre-approved, the service will require specific pre-approval by the Committee.
The terms of and fee for the annual audit engagement must receive
the specific pre-approval of the Committee. “Audit,” “Audit-related,” “Tax,” and “All
Other” services, as those terms are defined in the policy, have the advance pre-approval of the Committee, but only to the
extent those services have been specified by the Committee and only in amounts that do not exceed the fee limits specified by
the Committee. Such advance pre-approval shall be for a term of 12 months following the date of pre-approval unless the Committee
specifically provides for a
different term. Unless the Committee specifically determines
otherwise, the aggregate amount of the fees pre-approved for All Other services for the fiscal year must not exceed seventy-five
percent (75%) of the aggregate amount of the fees pre-approved for the fiscal year for Audit services, Audit-related services,
and those types of Tax services that represent tax compliance or tax return preparation. The policy delegates the authority to
pre-approve services to be provided by KPMG LLP, other than the annual audit engagement and any changes thereto, to the chair
of the Committee. The chair may not, however, make a determination that causes the 75% limit described above to be exceeded. Any
service pre-approved by the chair will be reported to the Committee at its next regularly scheduled meeting.
The Board of Directors unanimously recommends that the shareholders
vote for Item No. 3.
Other Matters
The Board of Directors, at the time of the preparation and printing
of this proxy statement, knew of no other business to be brought before the meeting other than the matters described in this proxy
statement. If any other business properly comes before the meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies in accordance with their best judgment.
Shareholder
Proposal & Nomination Deadlines
If you intend to present a shareholder proposal at the 2016
annual meeting, it must be received by the Corporate Secretary, First Horizon National Corporation, P.O. Box 84, Memphis, Tennessee,
38101, not later than November 16, 2015, for inclusion in the proxy statement and form of proxy relating to that meeting. In addition,
Sections 2.8 and 3.6 of our Bylaws provide that a shareholder who wishes to nominate a person for election to the Board or submit
a proposal at a shareholders’ meeting must comply with certain procedures whether or not the matter is included in our proxy
statement. These procedures require written notification to us, generally not less than 90 nor more than 120 days prior to the
date of the shareholders’ meeting. If, however, we give fewer than 100 days’ notice or public disclosure of the shareholders’
meeting date to shareholders, then we must receive the shareholder notification not later than 10 days after the earlier of the
date notice of the shareholders’ meeting was mailed or publicly disclosed. Shareholder proposals and
nominations for election to the Board must be submitted to the
Corporate Secretary. The shareholder must disclose certain information about the nominee or item proposed, the shareholder and
any other shareholders known to support the nominee or proposal. Section 2.4 of our Bylaws provides that our annual meeting of
shareholders will be held each year on the date and at the time fixed by the Board of Directors. The Board of Directors has determined
that our 2016 annual meeting will be held on April 26, 2016. Thus, shareholder proposals submitted outside the process that permits
them to be included in our proxy statement and director nominations must be submitted to the Corporate Secretary between December
28, 2015 and January 27, 2016, or the proposals will be considered untimely. Untimely proposals may be excluded by the Chairman
or our proxies may exercise their discretion and vote on these matters in a manner they determine to be appropriate.
Compensation
Discussion & Analysis
This CD&A section of our proxy statement discusses and analyzes
the compensation programs applicable to our senior executives. In particular, this section focuses on five of those executives,
referred to as the “Named Executive Officers” or “NEOs”:
Named Executive Officer |
Position |
D. Bryan Jordan |
Chairman of the Board, President, and Chief Executive Officer |
William C. Losch III |
Executive Vice President – Chief Financial Officer |
Michael E. Kisber |
President – FTN Financial |
David T. Popwell |
President – Banking |
Charles T. Tuggle, Jr. |
Executive Vice President – General Counsel |
The Compensation Committee of the Board oversees compensation
for all NEOs. For more information see “The Compensation Committee” beginning on page 16 of this proxy statement.
CD&A Executive Highlights
2014 Corporate Performance
In 2014, we produced solid and strategic operating results.
Consolidated earnings available to common shareholders were $0.90 per share, substantially higher than any of the past four years.
Annual total shareholder return (TSR) of our stock exceeded 18% for the third year in a row.
Underlying our results were a number of solid achievements in
our core businesses of regional banking and capital markets. Loans were up 5% overall compared to 2013, even while legacy non-strategic
loan balances declined significantly. Business lending growth was especially strong in our middle Tennessee and Mid-Atlantic regions.
We expanded our presence in our Mid-Atlantic banking region, which now has offices in Virginia, the Carolinas, and north Florida.
We opened a loan office in Houston, Texas with emphasis on commercial lending including corporate, energy and commercial real
estate relationships. We acquired 13 bank branches located in several smaller markets in middle and eastern Tennessee, enhancing
our presence in the state, and we agreed to buy a five-branch bank in Raleigh, North Carolina, which is expected to close later
in 2015. Although the low-and-stable interest rate environment continued to dampen capital markets’ revenues, the expense
structure of that business allowed it to weather this part of the rate cycle and continue to make positive contributions to our
overall net income. Additional factors considered by the Committee
this year included:
• | We disciplined our investment of resources based on “economic profit”
principles and analysis of risk-adjusted return on capital invested. These concepts have been ingrained throughout the company
in terms of management practices and, increasingly, in incentive programs. |
• | Efficiency remained critical. We reduced consolidated employee expense by about 10%,
and consolidated noninterest expense by about 27%, compared to 2013. |
• | We took advantage of opportunities to wind down, divest, and resolve non-strategic
assets and obligations. We sold legacy mortgage servicing and loans, and the remaining loans continued to run off. |
The Compensation Committee used these outcomes in compensation
decisions, as examined in more detail later in this CD&A section. Of particular note, core segment pre-tax income was a major
driver of annual bonus outcomes for 2014 under our shareholder-approved Management Incentive Plan (MIP). See “Annual MIP
Bonus” beginning on page 42 for additional information.
2014 Pay Adjustments
For 2014, the Committee implemented several structural adjustments.
The components of the executive compensation packages were re-balanced while holding the total value of each package constant.
Compared with 2013: cash salary was unchanged; the salary stock unit (SSU) deferral program was discontinued; and, as a result,
amounts for bonus and stock awards were increased. Within the stock awards group, compared with 2013: the grant date fair value
of performance stock units (PSUs) and stock options was reduced. Annual restricted stock units (RSUs) were granted for the first
time. The overall structures and terms of PSUs and options were not changed significantly, except that 20% of PSUs will be driven
by subjective assessments of
performance rather than pre-set quantitative formulas. Compared
with the old SSUs, RSUs have a three-year term rather than approximately one year, and RSUs are paid in shares rather than cash.
These changes were implemented after an extensive evaluation
of our executive compensation program and comparison of our practices versus peer practices. The Committee intends for these adjustments
to better meet competitive pressures, which is consistent with our overall goal of incenting management to drive corporate performance,
contain non-productive costs, and create shareholder value.
Industry Operating Environment
In 2014, the environment for the financial services industry
in the United States improved in several respects while stresses remained in others.
• |
Although during the year the Federal Reserve ended its quantitative easing policy, interest rates continued
at historically low levels. This rate environment compressed loan margins and dampened capital markets activity. |
|
|
• |
Unemployment improved during the year. |
|
|
• |
Mortgage rates continued to be historically low. Housing values and transaction activity in many markets strengthened.
Business activity in many areas increased. |
|
|
• |
Consolidation within our industry continued to rebound from recessionary lows but remained relatively muted. |
• |
New regulatory and infrastructure costs continued to weigh on the industry. |
• |
Those companies with substantial current or legacy ties to the mortgage industry continued to work through significant
exposures created before the 2008-09 recession. Some of the largest mortgage companies announced settlements with government
agencies; the large size of some settlements was unprecedented. |
2015 presents us with significant opportunities even while challenges
continue. Using economic profit principles to discipline our choices, we will actively seek new business opportunities, both organically
and acquisitively, in our existing markets and complementary new ones. We will continue to embed efficiency in our culture, and
we will continue to unwind our legacy assets and obligations.
Alignment of Pay with Performance
Our compensation policies and philosophies are designed to align
the interests of our employees with the interests of our shareholders. We seek to attract, retain, incent, and reward individuals
who contribute to our long-term success.
Key practices linking performance to compensation include:
• |
Heavy weighting of performance-based, and of stock-based, awards.
For our CEO, goal-based performance pay elements in 2014 represented 55% of his total compensation opportunity, measured
at target. For most other named executives, the goal-based performance portion represented 40%. Over 40% of our CEO’s
pay |
|
was linked directly to our stock price compared to 35% for the other NEOs, on average. See “Relative
Sizing & Mix” beginning on page 41 below for details. |
• |
Share Ownership Requirement. Our stock ownership guidelines extend
the effective time horizon of the stock awards substantially. They require that executives hold 50% of their net after tax
shares from awards until retirement after multiple-of-salary minimum ownership levels are attained. For an executive holding
less than the guideline minimum, the requirement is 75%. |
• |
Nearly exclusive use of stock to fund special retention and performance
awards. The last |
|
executive-level special retention program (2011) utilized restricted stock
(RS) awards, as have most selective individual retention awards since then. A special CEO performance award granted in 2012 was
in the form of five-year PSUs which |
|
will vest only if our stock value or TSR increases substantially. |
Details regarding these practices are discussed throughout this
CD&A section.
CEO Pay & Performance
Mr. Jordan was recruited as CFO in 2007. He was subsequently
promoted to CEO in September 2008, to rebuild First Horizon. Previous management embarked on a strategy to build national mortgage
origination and servicing businesses, along with related real estate lending. These legacy businesses were significantly impacted
by the financial crisis; they have resulted in large expenses for FHN in most years since 2007.
Mr. Jordan has led the restructuring of the company, the development
and implementation of new strategies, and the recruitment of a new management team. He has led with a strong emphasis on economic
profit and controlling costs, which has improved operating results. The Compensation Committee considered his significant contributions
in turning around the company when making decisions about his pay for 2014. In each of the past three years, Mr. Jordan has met
or exceeded his personal goals. He continues to
provide leadership for our company in a dynamic period for our
industry.
Mr. Jordan’s target pay level is less than the median
of FHN’s peer group, and was 5% less overall in 2013 and 2014 than in 2012. His pay mix is generally in line with company
peers. Final amounts paid vary from target based on achievement of performance goals and changes in our stock price.
The following charts show total short-term compensation paid
to the CEO in recent years and year-end TSR over the same period, respectively. For this purpose, short-term pay is limited to
cash salary, SSUs measured at grant (from 2010-13), and total annual bonus measured when earned. Those components have short time
horizons and are the most sensitive to the annual changes in performance and environmental circumstances which tend to drive TSR.
These two charts show that short-term pay for the CEO is significantly
related to TSR. Pay and TSR both fell in 2011 and both rose in 2012. However, CEO pay in 2009 and 2010 was distorted by FHN’s
participation in the TARP program which resulted in a substantial single-year increase in non-variable salary stock units in lieu
of any variable bonus opportunity. From 2011 through 2013, FHN continued the SSU program as a retention incentive, reducing other
pay components compared to current levels. In keeping with FHN’s expense reduction initiatives, the CEO’s salary and
annual MIP bonus opportunity were 5% less in 2013 than in 2012 even though TSR rose approximately 20%. In addition, earnings and
TSR during these years have been significantly impacted by mortgage repurchase and other obligations associated with businesses
conducted by prior management, while the Committee believes that the CEO and the current management team have dealt with these
matters well. These factors have reduced the congruity of pay with performance for the years presented.
Alignment with Governance Principles
Our compensation practices embrace many best practice corporate
governance principles.
Practices We Employ Include |
|
Practices We Avoid or Prohibit Include |
|
|
|
|
|
|
Performance-based and stock-based pay emphasized |
|
|
Tax gross-up features* |
|
|
|
|
|
|
Performance measures correlate to shareholder value |
|
|
Stock option repricings |
|
|
|
|
|
|
Performance measures emphasize controllable outcomes |
|
|
Discount-priced stock options |
|
|
|
|
|
|
Committee use of independent consultant on pay |
|
|
Recycling of shares withheld for taxes in our equity plan |
|
|
|
|
|
|
Meaningful share ownership requirements |
|
|
Single-trigger change in control payouts |
|
|
|
|
|
|
Double-trigger on change in control features and agreements (CIC event plus termination) |
|
|
Employment agreements |
|
|
|
|
|
|
Require holding 50% of after-tax vested stock awards during career with the company, rising to 75% if multiple-of-salary
minimum ownership levels are not met |
|
|
Hedging transactions in First Horizon stock (e.g., trading derivatives, taking short positions, or hedging long
positions) |
|
|
|
|
|
|
Clawbacks if financial results relevant to performance awards are restated under various circumstances |
|
|
Personal use of corporate aircraft |
* |
An excise tax gross-up feature is grandfathered in certain older change-in-control severance agreements,
and has not been used in new agreements since 2008. |
Overview of Direct Compensation Components
Major components of NEO compensation in 2014 were cash salary,
annual bonus under the MIP, and annual stock awards consisting of PSUs, RSUs, and stock options. In 2012 and 2013, NEOs also received
SSUs but did not receive RSUs. Mr. Jordan’s total pay level was not raised in 2014, though his mix was adjusted as mentioned
above. For 2013 and 2014, the MIP bonus was paid wholly in cash. In 2012, bonuses were partially paid in stock awards.
The key corporate performance measure for 2014 bonuses was adjusted
pre-tax earnings in our core business segments. The key performance measure for most 2014 PSUs was adjusted return on equity (ROE)
for our core segments measured in relation to certain peer banks over three years.
The following presents an overview of the direct compensation
components in 2014 for our NEOs.
Regular Direct Compensation Components
in 2014
Component |
|
Primary Purpose |
|
Key Features |
Cash salary |
|
Provide competitive baseline compensation to attract and retain executive talent. |
|
Salaries are determined based on prevailing market levels with adjustments for individual
factors such as performance, experience, skills, and tenure. |
Annual cash
bonus under MIP |
|
Create a financial incentive for achieving or exceeding one-year company and/or executive
team goals. |
|
For the CEO and other NEOs except Mr. Kisber, the key metrics in 2014 were core pre-tax
earnings coupled with several non-numeric factors such as the outcome of a balanced scorecard process, earnings quality, and
risk management. |
Component |
|
Primary Purpose |
|
Key Features |
Annual stock
awards: PSUs,
stock options,
and RSUs |
|
Provide performance and service-vested equity-based incentives which reward achievement
of specific earnings or other corporate goals, provide a retention incentive, and promote alignment with shareholders’
interests. |
|
For our CEO, 50% of stock awards were in the form of PSUs and 25% each were options and
RSUs. For other NEOs except Mr. Kisber, 50% of the awards were RSUs and 25% each were options and PSUs. For 80% of the PSUs,
payout depends upon our core ROE ranking relative to peers during the performance period 2014-16. Payout for the remaining
PSUs depends upon the Committee’s subjective assessment of total corporate performance over that period coupled with
an assessment of individual performance. Stock options are priced at market, vest annually over four years, and have seven
year terms. RSUs vest after three years and are paid in shares of stock. |
Compensation Practices & Philosophies
Retention & Competition
Our compensation programs are designed to attract and retain
a talented workforce. Our employees are a significant and valuable asset. We recruit from a broad talent pool; our people in turn
may be recruited by competitors, other financial services firms, and firms in other industries.
The total compensation opportunity we provide at each level
is competitive so that over the long term we do not risk losing our best people.
Nevertheless, one of the expense-reduction steps recommended
by management and approved by the Compensation Committee was a 5% reduction in the 2013 total compensation opportunity for the
CEO and most other executives. No NEO received an increase in his overall compensation package in 2014. The 2013 reduction was
consistent with payroll reduction actions taken throughout the company.
Use of Peer Bank Data
The Compensation Committee reviews the compensation practices
of a peer group of selected U.S. banks of roughly comparable size (“Peer Banks”). These are banks with whom we most
typically compete for talent, and the review helps our programs remain competitive. For many years, the Committee has considered
specific data from
Peer Banks in setting the compensation components for our executives.
The Peer Banks used in 2014 were 14 regional financial services companies selected by the Committee. The Peer Banks group is adjusted
periodically in response to changes in First Horizon and the industry, but was not adjusted in 2014. The 2014 Peer Banks were:
2014 Peer Banks |
Associated Banc-Corp |
Commerce Bancshares Inc. |
M&T Bank Corp. |
TCF Financial Corp. |
BOK Financial Corp. |
Cullen/Frost Bankers Inc. |
People’s United Financial |
Webster Financial Corp. |
City National Corp. |
First Niagara Financial Group |
Synovus Financial Corp. |
Zions Bancorporation |
Comerica Inc. |
Huntington Bancshares |
|
|
The Committee uses peer and other market data to help establish
the size and terms of the components of direct compensation for executives. Cash salary is targeted at the median of the market
for each position. Actual salaries may be higher or lower than median based on individual factors – performance, experience,
skills, and tenure – or retention needs. Bonus opportunities and equity awards are targeted similarly: target-level compensation
is intended to be paid for median performance, and maximum compensation is intended to be paid for top-quartile performance. In
some cases, relative performance is estimated based on projections of market or peer performance, but in 2014 significant metrics
were based on First Horizon ranking relative to the Peer Banks.
For special compensation components, including retention awards
and individual retirement and severance arrangements, relevant market data
often is not available. In those cases, the Committee relies
on recommendations from management along with external advice from the Committee’s independent consultant to determine the
types, amounts, or terms of such benefits that are reasonable and appropriate for the circumstances.
The Total Shareholder Return Performance Graph (“TSR graph”)
that appears in our annual report to shareholders (on page 194 of that report) uses the published Keefe, Bruyette & Woods
regional banking index (ticker symbol KRX) against which to compare our total shareholder return, which is stock price performance
plus reinvested dividends. The KRX index encompasses 50 regional U.S. banks. Eighty percent of the annual PSU awards granted to
executives in 2014 used the KRX index banks as the group against which our core-segment ROE will be ranked over the three-year
performance period of those awards.
Impact of Shareholder Vote on Compensation
The Compensation Committee made nearly all key decisions regarding
2014 compensation for the named executives early in the year. At that time, the Committee was aware of the outcome of the
vote for the shareholder advisory resolution on executive compensation
at the 2013 annual meeting. At the 2013 meeting, “For” received 90.9% of the shares voted, similar to the results
in
2012. The 2013 outcome was part of the mix of factors considered
by the Committee early in 2014, and had no direct or separately identifiable effect on Committee decisions. Although not considered
by the Committee in relation to 2014 awards, at the annual meeting
that year “For” received 93.7% of the vote.
Stock Ownership Guidelines
Under our stock ownership guidelines the CEO is required to
maintain beneficial ownership over time of at least six times his cash salary. Other named executives are expected to maintain
beneficial ownership levels over time of two or three times their cash salaries, depending upon position. For this purpose, fully-owned
shares, restricted stock, RSUs paid in shares, and shares held in tax-deferred plans are counted, while PSUs, stock options, and
RSUs paid in cash are not counted. If the ownership guideline is satisfied, 50% of the net after-tax shares received from our
stock incentive plans must be retained; otherwise, 75% after taxes must be retained. The retention requirement
applies during the rest of their careers with the company, except
that executives who reach age 55 are permitted to sell shares held at least three years to diversify in preparation for retirement.
We intend for the combined emphasis on corporate performance in setting executive compensation and meaningful stock ownership
to strongly link the interests of our executives with those of our shareholders.
For guideline purposes, compliance is assessed annually in the
third quarter. In the 2014 assessment, all NEOs exceeded the guideline levels.
Clawback Policy & Practices
Performance compensation paid based on erroneous financial data
is recoverable by First Horizon under our Compensation Recovery Policy if the recipient caused the error or is responsible for
the data’s accuracy. Additional clawback provisions apply to most types of stock awards if certain other misconduct occurs,
such as fraud or solicitation.
Starting in 2014, our clawback provisions were expanded to include
the following events: grant or payment of an award based on erroneous financial data; and termination for cause. Older provisions
have been aligned with the new ones, and some provisions apply to a wider range of awards. The look-back period for recovery generally
is two years.
Use of Compensation Consultants
In 2014, the Committee continued its engagement of an independent
consulting firm, Frederic W. Cook & Co. (“Cook”), to provide analysis and advice on all executive compensation-related
matters (including assessment of peer groups, competitive market data, pay mix, and compensation design). Among other things,
Cook assists the Committee in its reviews of compensation program actions recommended by management. Cook has no other relationships
with the company or management. Key engagement items for Cook in 2014 were:
• |
Review written Committee meeting materials. |
• |
Participate in key pre-meeting conferences with the Committee chairperson and management on compensation matters. |
|
|
• |
Annually meet with the Committee in executive session. This took place in July 2014. |
In 2014, management engaged an external compensation consultant
mainly to conduct an updated competitive pay assessment for executives and for peer metrics.
Additional information concerning our use of compensation consultants
appears under the caption “The Compensation Committee—Use of Consultants” beginning on page 17 of this proxy
statement.
Role of Management in Compensation Decisions
Management administers our compensation plans, monitors compensation
programs used by other companies, and considers whether new or amended compensation programs are needed to maintain the competitiveness
of our executive
compensation packages. Recommendations are presented by management
to the Committee for review, discussion, and approval. The CEO ultimately oversees the development of these management recommendations.
If executive-level
exceptions are appropriate, such as approval of an executive’s
early retirement, management generally reviews the facts of the situation and provides a
recommendation to the CEO and, ultimately,
to the Committee for approval.
Tax Deductibility
Section 162(m) of the U.S. Internal Revenue Code generally disallows
a tax deduction to public companies for compensation exceeding $1 million paid during the year to the CEO and the three other
highest-paid executive officers at year-end
(excluding the Chief Financial Officer). Certain performance-based
compensation is not, however, subject to the deduction limit. The Committee considered these tax implications in making compensation
decisions for 2014.
Direct Compensation Components for NEOs
The direct components of NEO compensation in 2014 were cash
salary, annual bonus under the MIP, and annual stock awards consisting of RSUs, stock options, and PSUs under our shareholder-
approved Equity Compensation Plan. A description of these components
appears under “Overview of Direct Compensation Components” beginning on page 36 of this proxy statement above.
Relative Sizing & Mix
In setting the size of the direct compensation components for
2014, the Compensation Committee considered the total compensation opportunity at target payout levels for each position. The
target total mix of the direct components is summarized in the following chart,
which illustrates the regular annual pay packages planned by
the Committee early in 2014. See “Summary Compensation Table” beginning on page 50 for additional information concerning
amounts paid or earned in 2014.
2014 Direct Compensation Mix at Target
* |
Mr. Kisber’s compensation package differs from the other NEOs’ to be
competitive within the capital markets industry. His annual bonus opportunity has roughly double the weighting of other NEOs,
and the other components are relatively compressed. Also, unlike other NEOs, stock awards actually granted to him in a given
year depend significantly upon performance of our capital markets business the previous year. His stock award mix shown in
this chart reflects his total opportunity for grants early in 2015 based on 2014 performance. See “Stock Awards—Capital
Markets Award Practices” on page 46 below for additional information. |
The amount of each component usually is determined in relation
to cash salary. Cash salaries, and overall target compensation levels, are based largely on these factors: individual experience,
individual performance, level of responsibility, and competitive market levels. A specific need for retention also can
play a role. No specific weighting is given to any one factor.
The size of each direct component for the named executives as a percentage of cash salary is shown below.
Sizing of 2014 Direct Compensation
Components
As a Percentage of Annual Cash Salary
| |
| |
2014 Annual Stock Awards |
| |
Annual | |
| |
| |
Performance | |
|
| |
Bonus | |
Restricted | |
| |
Stock Units | |
Total Stock |
NEO | |
(target) | |
Stock Units | |
Stock Options | |
(target) | |
Awards |
Mr. Jordan | |
140 | % | |
46 | % | |
46 | % | |
93 | % | |
185 | % |
Mr. Losch | |
100 | % | |
63 | % | |
31 | % | |
31 | % | |
125 | % |
Mr. Kisber* | |
583 | % | |
84 | % | |
73 | % | |
110 | % | |
267 | % |
Mr. Popwell | |
100 | % | |
63 | % | |
31 | % | |
31 | % | |
125 | % |
Mr. Tuggle | |
90 | % | |
47 | % | |
24 | % | |
24 | % | |
95 | % |
* |
Mr. Kisber’s compensation package differs from the other NEOs’ to provide
a compensation opportunity which is competitive within the capital markets industry. |
For NEOs, the mix of stock awards in 2012 and 2013 was 60% PSUs
and 40% service-vested stock options. In 2014, the Committee introduced a new award type – service-vested RSUs – and
adjusted the mix. In 2014, the CEO’s annual stock award mix was one-half PSUs, with RSUs and options comprising one-quarter
each. For other NEOs, the more heavily weighted component consisted of RSUs. The Committee believes that the new mix of equity
provides appropriate incentives to focus on performance goals, especially for the CEO, and to remain with the company.
Certain benefits such as life and disability insurance are also
related to cash salary. There is no other significant interdependence among the compensation components. The percentages shown
for all regular 2014 stock awards in the
table above are based upon the salary rate that was in effect
on the grant date, February 12, 2014, and upon the closing stock value on that date, which was $11.77 per share.
Two key factors considered when target levels were set are:
the appropriate mix of base pay (salary) versus pay at risk for corporate performance or stock value performance; and the mix
between short- and long-term compensation. The chart and table above show that the CEO’s regular compensation package is
more heavily weighted in favor of performance-based pay than the other NEOs (except Mr. Kisber). This practice is consistent with
the greater responsibilities of the CEO position, prevalent market practices among our Peer Banks, and our compensation philosophy
which endeavors to link a substantial portion of executive pay to performance.
Salary
Early in the year, the CEO develops a personal plan that contains
financial and strategic goals. The CEO submits that plan to the Committee for review and approval. The Board of Directors also
reviews the plan. The Committee reviews the CEO’s achievement of objectives in his personal plan for the preceding year
when assessing the CEO’s salary for the coming year. The Committee
also weighs competitive practices within the industry as well
as corporate initiatives.
For other NEOs, the Committee approves salaries each year taking
the CEO’s recommendations into account. In 2014, salary rates of the NEOs and of the executive team generally remained the
same based on the company’s overall cost reduction strategy.
Annual MIP Bonus
Under our Management Incentive Plan (MIP), the annual bonus
opportunity offered to each NEO other than Mr. Kisber (whose MIP bonus is discussed at the end of this section) is based on targets
that are approved by the Committee early in that year. Each MIP bonus is based on
achievement of company and/or business unit financial targets
as well as individual personal plan objectives. For these NEOs, MIP bonus amounts can be adjusted based on several corporate as
well as individual performance factors.
For 2014, similar to 2012 and 2013, the Committee established
a maximum MIP bonus opportunity per person equal to 2% of adjusted 2014 core pre-tax earnings. Pre-tax earnings are adjusted to
exclude the results of our non-strategic business segment as well as certain one-time or unusual financial or accounting items.
Subject to that maximum, the Committee may exercise negative discretion to determine the final bonus amount.
Early in 2014, the Committee established a grid to guide the
exercise of negative discretion. Individual bonuses were determined by applying a corporate rating, subject to potential adjustments
for various factors, along with an individual rating to individual target bonus levels set for each NEO.
The corporate rating was driven by budgeted core pre-tax earnings
as shown in the following table. A
discretionary adjustment was planned based on a multi-point balanced
scorecard which rates the company against the Peer Banks. The earnings levels used to create the grid were selected to provide
an incentive to achieve or exceed budget. In all cases, core pre-tax earnings were adjusted for specific items such as changes
in accounting principles and certain unusual or non-recurring items, such as litigation settlements. Each NEO’s bonus was
subject to further adjustments for risk management results, quality of earnings, contributions to non-strategic results, and individual
personal plan results. All points on the grid and all calculated bonus amounts were subject to further discretionary adjustment
up or down by the Committee. However, the final bonus paid could not exceed 150% of target.
2014 MIP Bonus Calculation Grid
Adjusted
2014
Core
Pre-Tax
Earnings |
|
Percent
of
Budget |
|
Core
Pre-Tax
Earnings
Rating* |
|
Balanced
Scorecard
Adjustment |
|
Other
Discretionary
Adjustment
Factors |
|
Corporate
Rating |
|
Bonus
Target
Amount |
|
Calculated
MIP Bonus
Amount |
|
Individual
Rating
Adjustment |
$383
million or
more |
|
125%
or higher |
|
150% |
|
Discretionary
adjustment
factor, up or
down, based
on multi-point
balanced
scorecard of
First Horizon
versus Peer
Banks
|
|
• Risk management
results
• Quality of earnings
• Contribution to non-strategic outcomes
|
|
Corporate
rating of 0%
to 150%
|
|
Bonus target
amounts are
pre-set
percentages of
cash salary,
ranging
from 90% to
140% for the
NEOs
|
|
Calculated
Bonus = [corporate
rating] x
[bonus target
amount]
|
|
Execution of
personal plan
goals for the
year results in
a personal
plan rating of
0% to 150%
|
$308
million |
|
101% |
|
111% |
|
|
|
|
|
$277
Million |
|
91% |
|
90% |
|
|
|
|
|
$245
Million |
|
80% |
|
75% |
|
|
|
|
|
$154
million |
|
50% |
|
50% |
|
|
|
|
|
$153
million or
less |
|
less
than
50% |
|
0% |
|
|
|
|
|
* Core Pre-Tax Earnings Rating is interpolated if results fall
between two points on the grid.
The balanced scorecard used to adjust the Corporate Rating in
2014 ranked our company among Peer Banks on the following financial measures: total assets; market capitalization; Tier 1 capital
ratio; ratio of total common equity to total assets; reliance on wholesale funding; ratio of loans to deposits; ratio of non-performing
assets to total assets; ratio of loan reserves to total loans; ratio of net charge-offs to average loans; net interest margin;
efficiency ratio; return on average assets; return on average equity; fee income percentage; ratio of securities to total assets;
shareholder return; and the ratio of share price to tangible
book value. The scorecard uses quantitative financial measures and peer rankings, but was not used in a quantitative manner to
determine a specific numerical rating. Instead, the Committee considered the scorecard results in a subjective manner to adjust
the quantitative corporate rating.
In 2014, the CEO’s personal plan included six major performance
areas: strategic, financial (expense control and revenue growth), customer, shareholder value, employees, and risk
management & credit quality. These areas had no particular
weighting and were not applied in a quantitative manner. Each NEO’s personal plan substantially overlapped the CEO’s
and also was related to operations managed by that NEO. All
NEO personal plans were overseen by the Committee.
The outcomes of the bonus process for the NEOs other than Mr.
Kisber are summarized below.
2014 MIP Bonus Outcomes
NEO | |
Core
PTE Rating | |
Balanced
Scorecard
Adjustment |
| Impact of Other Adjustments |
|
Corporate Rating | |
Bonus
Target ($) | |
Calculated Bonus ($) | |
Individual
Rating | |
Final
Bonus ($) |
Mr. Jordan | |
| 72.6 | % | |
| 105 | % |
| |
+8.8% | |
|
| 85 | % | |
| 1,064,000 | | |
| 904,400 | | |
| 100 | % | |
| 904,400 | |
Mr. Losch | |
| 72.6 | % | |
| 105 | % |
| |
+8.8% | |
|
| 85 | % | |
| 425,000 | | |
| 361,250 | | |
| 100 | % | |
| 361,250 | |
Mr. Popwell | |
| 72.6 | % | |
| 105 | % |
| |
+8.8% | |
|
| 85 | % | |
| 450,000 | | |
| 382,500 | | |
| 105 | % | |
| 400,000 | |
Mr. Tuggle | |
| 72.6 | % | |
| 105 | % |
| |
+8.8% | |
|
| 85 | % | |
| 427,500 | | |
| 363,375 | | |
| 100 | % | |
| 363,000 | |
Adjusted core pre-tax earnings for 2014 were $236.4 million.
That resulted in an overall maximum bonus per person of $4.7 million, and an adjusted core pre-tax earnings rating of 72.6%. The
Committee’s assessment of the balanced scorecard process mentioned above resulted in a 105% scorecard adjustment. Our performance
on several scorecard categories was well above median. In several other categories we fell in the middle of the group.
The Committee determined that the corporate rating should be
further adjusted, to 85% overall, primarily because the quality of earnings was high and our non-strategic results, quantitatively
and qualitatively, were excellent.
The following factors, among others, influenced the Committee’s
exercise of discretion in determining the various non-financial adjustments noted above. None were given any particular weighting.
Ø |
We executed on our strategic priorities throughout 2014 as outlined in “2014 Corporate Performance” above. Earnings in 2014 substantially exceeded those in 2013, 2012, and 2011. Annual total shareholder return in 2014 exceeded 18%, outperforming our peers. |
Ø |
Loans were up 5% overall compared to 2013, even while legacy non-strategic loan balances declined significantly. Business lending growth was especially strong in our middle Tennessee and Mid-Atlantic regions. Deposits were up 9%. |
Ø |
We opened or enhanced several offices in our Mid-Atlantic region, opened an office in Houston, Texas, acquired thirteen branches in smaller markets in Tennessee, and agreed to acquire a bank in Raleigh, North Carolina. |
Ø |
We continued our long-term focus on efficiency. Non-interest expense declined substantially from 2013. |
Ø |
Asset quality continued to improve. Net charge-offs declined, and our non-performing loans comprised only 1.25% of total loans at year-end 2014 compared with 1.66% in 2013. |
Ø |
Non-strategic highlights included, by year-end: settlements with both government-sponsored mortgage entities (Fannie Mae and Freddie Mac), settlement with their regulator (FHFA), sale of most remaining legacy mortgage servicing, and sale of a substantial number of legacy loans. |
Ø |
Risk management processes and standards remained robust. |
Ø |
Capital ratios remained strong, well above well-capitalized levels. Shareholders received a quarterly cash dividend of $.05 per share each quarter in 2014. The quarterly dividend rate will increase to $.06 starting April 2015. The company renewed its common stock purchase program in 2014. |
Mr. Kisber is the president of our capital markets business unit
(FTN Financial). His bonus for 2014 was earned under the MIP, but was driven by the overall incentive pool created under the Capital
Markets Incentive Compensation Plan to provide a compensation opportunity consistent with that of capital markets competitors.
The incentive pool generally is funded as a specified percentage of
divisional net profits, as defined, plus an additional percentage
if net profits exceed a specified return on expense. Mr. Kisber’s 2014 compensation package generally is a percentage of
the pool approved by the Committee each year, not to exceed 15% and subject to certain limits imposed by the Committee. The Committee
imposed a $3.5 million overall limit on Mr. Kisber’s 2014
bonus. The first $2.5 million was to be paid in cash and any
amount over that, up to $1 million, would be paid in RSUs. Unlike the regular annual RSU awards, these MIP-driven RSUs would vest
18 months after grant and be payable in cash. The Committee also retains the discretion under the MIP to reduce any calculated
bonus
amount for Mr. Kisber, but made no reduction for 2014.
Capital markets’ operating contribution to FHN’s
pretax earnings in 2014 was $76 million. Mr. Kisber’s earned bonus for 2014 was $2,124,000 in cash; no RSUs were granted.
Stock Awards
Overview
For NEOs, the mix of stock awards in 2012 and 2013 was 60% PSUs
and 40% service-vested stock options. In 2014, the Committee introduced a new award type – service-vested RSUs – and
adjusted the mix. In 2014, the CEO’s annual stock award mix was one-half PSUs, with RSUs and options comprising one-quarter
each. For other NEOs the more heavily weighted component consisted of RSUs. The Committee believes that the enhanced mix of equity
provides appropriate incentives to focus on performance goals, especially for the CEO, and to remain with First Horizon.
Performance Stock Units
Consistent with competitive practice, the Committee makes annual
grants of performance equity awards with a multi-year performance period. The financial goals established at the beginning of each
performance period are company-wide in focus and are uniform for all executives. Grants are annual, so financial results in any
given year can affect several outstanding awards. The Committee sets performance goals each year based on the company’s objectives
at that time, and may change the types and amounts of awards compared to prior years based on desired managerial focus, competitive
pressures, and other factors.
For 2014, the Committee granted two types of PSUs to the NEOs.
Eighty percent of the PSUs were traditional, with payout based directly upon our core-segment ROE performance relative to peers,
as discussed below. Payout of the remaining PSUs will depend upon the Committee’s subjective assessment of total corporate
performance and individual contributions to that performance. For both, the performance period is 2014-2016. Payout can range from
50% to 150% of the target amount granted, or payout can be zero if performance falls below the 50% threshold level. Dividends accrue
during the performance period but are paid only to the extent the underlying units vest.
PSUs – Core ROE (80%)
Payout of the traditional PSUs will be based on goal achievement
as shown in the following chart. Adjusted ROE of FHN’s core business segments, averaged over the three-year period 2014-2016,
will be ranked against the average ROE results of those banks which, at the end of the performance period, comprise the KBW Regional
Bank Index (ticker symbol KRX).
Only whole-year ROE results count in the rankings. The adjustments
to our ROE consist of several exclusions including the non-strategic segment’s earnings and allocated equity, certain accounting
changes, litigation settlements, restructuring or right-sizing expenses, and items described under certain specific areas of accounting
guidance.
The KRX banks currently are fifty U.S. regional banks, a wider
range of institutions than those in our Peer Bank group used for other purposes. For PSU awards, the Committee believes that an
independently-selected basket of competitors like the KRX banks provides a larger, more suitable group against which to measure
our performance over a three-year period. This rank structure was continued from recent years primarily because the use of a relative-rank
goal rather than an absolute measure provides a better reflection of our results versus competitors. It was chosen in part because
of the volatile environment for us and our industry. The awards should self-adapt to industry events
which will unfold over a three-year time horizon and which cannot
be predicted in advance.
PSUs – Total Corporate Performance (20%)
Payout of the remaining PSUs will be based on a combination of
total corporate performance (TCP) and individual performance over the performance period. No quantitative performance goals have
been pre-established, and the Committee may use subjective judgment in making assessments. All TCP awards granted to executives
in 2014 will be assigned the same corporate performance result. Individual results may vary from person to person.
Stock Options
NEO stock option awards in 2014 vest in equal installments on
the first four anniversaries of grant if the NEO remains employed with the company through the vesting dates. There is no accrual
of cash dividends on options. Each option has a seven-year term and is priced at market at the time of grant. Grants occur on the
day the Committee meets, early in the year, to make final compensation decisions for the coming year. Options will achieve value
only to the extent market value on the exercise date exceeds the option price fixed on the grant date.
A stock option provides a direct retention incentive over its
vesting period. Options inherently align a significant portion of compensation with the interests of shareholders.
In 2014, the Committee approved the grant of options to executives
in dollar amounts measured as a percentage of base salary, as noted above. The approved dollar amounts were converted into a number
of option shares by valuing each option at 25% of the exercise price. The exercise price was market value on the grant date. The
actual value of a service-vested option cannot be determined in any definitive way. Many commonly used estimation methods, including
the method used for financial reporting, were developed for
non-compensatory options related to industrial companies in ordinary
situations. The Committee believes that those methods are seriously flawed in the context of our company at this time, and overstate
the value that an executive generally would ascribe to our options. Those flaws are due in large part to the legacy and environmental
factors noted above under the headings “2014 Corporate Performance” and “Industry Operating Environment.”
At the time of approving these grants the Committee believed that using a 25% valuation method was a fair estimate of the options’
value.
Restricted Stock Units
Regular executive RSUs vest on the third anniversary of grant
if the NEO remains employed with the company through the vesting date and are settled in shares. Dividends accrue during the vesting
period and are paid in cash at vesting.
Capital Markets Award Practices
The overall amount of annual stock awards granted to Mr. Kisber,
the head of our capital markets business, is impacted by the previous year’s results. Early each year, a maximum stock award
opportunity is approved by the Committee as part of his entire compensation package, as discussed in “Relative Sizing and
Mix” starting on page 41 above. Early in the next year, actual grants are approved which may be less than the opportunity
levels. The amounts actually granted are based on an assessment of capital markets results. Quantitative and qualitative factors
are considered.
The awards granted in early 2014 (shown in the Summary Compensation
Table on page 50) were less than Mr. Kisber’s 2013 opportunity. No grants were awarded in 2015 due to the level of earnings
achieved by the capital markets segment in 2014 in the face of unfavorable market conditions.
Deferral Programs
We offer many employees and directors the means to manage their
personal tax obligations associated with compensation from the company through various nonqualified deferral programs. All contributions
are from participant deferrals; the
company pays administrative costs but makes no direct contributions.
Amounts deferred earn at-market returns indexed to the performance of certain mutual funds selected by the participant.
Benefits
We provide a broad-based welfare benefit program to employees
in line with competitors. Through this
program employees may select a variety of
benefits such as health and dental insurance
coverage, a vision benefit, and other items. We also provide
broad-based death and disability benefits. We provide other benefits to executives to remain competitive, including the following:
• |
Survivor Benefit Plan—This plan provides a benefit of 2.5 times base salary if death occurs during active service, which is reduced to 1.0 times salary spread over a ten-year period if death occurs following departure due to disability or early or normal retirement. This benefit is provided to about 350 active employees, including all NEOs, based on job grade, as an alternative to the broad-based survivor benefit. |
• |
Executive disability program—Our broad-based disability benefit provides up to 60% of monthly pay (including base salary, bonus, commissions and incentive compensation) income replacement, subject to a cap. The executive program benefit has a higher cap of $25,000 per month. An executive may elect to purchase an additional benefit of up to $5,000 per month. |
|
|
• |
Perquisites—We provide a limited range of perquisites which are customary in our industry. Details of executive perquisites are discussed on page 52 of this proxy statement in footnote (i) to the Summary Compensation Table. |
Post-Employment Benefits
We provide retirement and other post-employment benefits, discussed
below, that we believe are customary in our industry. We provide them to remain competitive in retaining and recruiting talent.
Savings Plans
We provide all qualifying full-time employees with the opportunity
to participate in our tax-qualified 401(k) savings plan. The plan allows employees to defer receipt of earned salary on a tax-advantaged
basis. Accounts may be invested in a wide range of mutual funds and in our common stock. Since 2013, we have provided a 100% match
for the first 6% of salary each eligible participant (having at least one year of service) elects to defer into the plan, up from
a 100% match on the first 3% of salary deferred in previous years. Matched
contributions can be invested in company stock or certain other
investment vehicles at the participant’s election.
Qualifying contributions to the savings plan are capped by tax
law. Our savings restoration plan provides a restorative benefit to participants in the savings plan whose compensation exceeds
the limits, including all participating NEOs. The combined qualified and restoration contributions occur as if the tax limitations
did not exist.
Pension Plans
Our pension plan is a traditional broad-based plan providing
a defined benefit to eligible employees upon retirement. Employees hired after August 31, 2007 (including Mr. Losch) were not eligible
to participate. The benefit is based upon a participant’s average base salary for the highest five years of the ten most
recent years of credited service, and social security benefits (under an offset formula). Benefits normally are payable after age
65. The formula works in a traditional manner so that longevity with the company is rewarded. Benefits under the plan were frozen
in 2012. As a result, no new years of service or changes in base compensation after 2012 will affect benefit levels.
Tax laws limit the qualifying salary that can be used, and thus
the benefit that can be paid, under the pension plan to a dollar amount that is adjusted each year for inflation. Our pension restoration
plan provides a restorative benefit to certain executives who participate in the pension plan, including all participating NEOs,
so that the combined pension and restoration benefit is calculated as if the limitations on the qualifying pension benefit did
not exist. The pension and pension restoration plans thus operate as a single plan in terms of defining a person’s benefit.
Benefits under the restoration plan also were frozen in 2012.
Change in Control (CIC) Benefits
Since the mid-1980s the financial services industry has experienced
an extraordinary period of consolidation as old legal barriers, which prevented multi-state banking and restricted the business
lines in which bank holding companies could engage, have been
relaxed or eliminated. Merger activity abated substantially as a result of the last recession, but the current environment may
provide an impetus for many companies to seek an acquisition
partner in the years ahead. Although these circumstances have created substantial business opportunities for us and others, they
have also created substantial personal uncertainties for employees. Our CIC severance agreements and CIC plan features were put
in place a number of years ago in response to these uncertainties.
We have CIC severance agreements with each NEO other than Mr.
Kisber. These are not employment agreements. They provide significant benefits if employment is terminated in connection with a
CIC event, but otherwise provide no employment protection. Additional information about these contracts is provided in the “Change
in Control Arrangements” section beginning on page 61 of this proxy statement.
The primary objectives of our severance agreements are to allow
us to compete for executive talent during normal times and, if a CIC situation were to arise, to provide an incentive for our executive
team to remain with the company, focused on corporate objectives, during the pursuit, closing, and transition periods that accompany
CIC transactions in our industry.
Under many of our programs a CIC event can cause awards or benefits
to vest, be paid, or be calculated and paid at target payout levels. The main objective of these features is to allow us to offer
competitive compensation packages in an industry where consolidation is likely to be robust in the years ahead. Like our CIC severance
agreements, these program features have a double trigger, which means that vesting or payment is accelerated only when a CIC event
occurs resulting in termination of employment.
Performance awards which accelerate would be paid on the assumption
that performance would have occurred at target. The Committee believes this outcome is appropriate because: (i) it is unfair for
the executive to give up stock-based awards when all shareholders are receiving the benefit of the CIC transaction in relation
to their stock holdings; (ii) it is unfair for the executive to forfeit awards based on service when he or she has provided the
company with those services that were needed but are not any longer; and (iii) in most cases there will be no fair way to honor
our commitment to pay awards based on company performance because there will be no appropriate way to measure our performance when
the performance period ends.
Compensation Committee Report
The Compensation Committee Report is located on page 19 of this
proxy statement under the caption “The Compensation Committee.”
Recent
Compensation
This Recent Compensation section provides detailed information
about the compensation paid to our named executive officers in 2014. This section should be read in conjunction with the preceding
Compensation Discussion & Analysis section.
2014 Direct Compensation Actually Paid
A comprehensive Summary Compensation Table, along with detailed
footnotes and commentary, is presented in the next several sections. To provide context for that information, the following chart
shows direct compensation amounts actually paid in 2014 to our named executive officers, except that the 2014 bonus (which was
paid early in
2015) is included rather than any earlier bonus. Direct compensation
components include salary, bonus paid, and stock awards paid. For this purpose, amounts are considered “paid” if they
were paid or deferred on a fully-vested basis. All amounts are shown before reduction for withholding taxes and other payroll deductions.
2014
Direct Compensation Actually Paid
($ in millions)
Key details regarding the segments in this chart follow:
• |
Salary Stock
Units. SSUs paid during 2014 were granted in 2013. This segment reflects cash paid at vesting. No SSUs were granted in
2014. |
|
|
• |
MIP Bonus.
Each annual bonus award under the MIP for 2014 was paid in cash early in 2015. |
|
|
• |
Stock Awards.
Awards vested in 2014 consisted of performance stock units (PSUs), restricted stock shares (RS) and units (RSUs), long-term |
|
incentive units (LTIs), and stock options. Vested awards are valued based on the market value of First Horizon stock on the vesting date. Stock options are valued based on the “spread” at vesting, which is the difference between market value at that time and the option price; negative spreads and values at exercise are ignored. Bonuses for 2011 and 2012 were paid partly in RS or RSUs, portions of which vested in 2014 and are included in this segment. |
Summary Compensation & Award Grant Tables
Summary Compensation Table
The amounts shown in the Summary Compensation Table include all
compensation earned for 2014, including amounts deferred by those persons for all services rendered in all capacities to us and
our subsidiaries. Compensation amounts from the past two years
are also included. Additional compensation information is provided
in the remainder of this section. No named executive officer who served as a director was separately compensated as a director
of First Horizon.
Summary Compensation Table
(a) | |
(b) | | |
(c) | | |
(d) | | |
(e) | | |
(f) | | |
(g) | |
(h) | |
(i) | | |
(j) | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
Change in | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| | |
Non-Equity | |
Pension | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| | |
Incentive | |
Value & | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| | |
Plan | |
Non-Qualified | |
| | |
| |
Name and | |
| | |
| | |
| | |
Stock | | |
Option | | |
Compensa- | |
Deferred | |
All Other | |
| |
Principal | |
| | |
Salary | | |
Bonus | | |
Awards* | | |
Awards | | |
tion* | |
Compensation | |
Compensation | |
Total | |
Position | |
Year | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | |
Earnings($) | |
($) | |
($) | |
D.B. Jordan | |
| 2014 | | |
$ | 760,000 | | |
| — | | |
$ | 1,054,486 | | |
$ | 418,371 | | |
$ | 904,400 | | |
$ | 243,395 | | |
$ | 97,485 | | |
$ | 3,478,137 | |
Chairman, | |
| 2013 | | |
| 760,154 | | |
| — | | |
| 1,057,165 | | |
| 595,874 | | |
| 820,800 | | |
| — | | |
| 75,736 | | |
| 3,309,729 | |
President, & | |
| 2012 | | |
| 800,000 | | |
| — | | |
| 2,774,729 | | |
| 1,092,599 | | |
| 1,000,000 | | |
| 319,523 | | |
| 78,302 | | |
| 6,065,153 | |
CEO | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
W.C. Losch | |
| 2014 | | |
$ | 425,000 | | |
| — | | |
$ | 398,415 | | |
$ | 158,080 | | |
$ | 361,250 | | |
$ | — | | |
$ | 47,732 | | |
$ | 1,390,477 | |
EVP & CFO | |
| 2013 | | |
| 423,077 | | |
| — | | |
| 468,020 | | |
| 201,949 | | |
| 260,000 | | |
| — | | |
| 32,377 | | |
| 1,385,423 | |
| |
| 2012 | | |
| 400,000 | | |
| — | | |
| 458,267 | | |
| 321,351 | | |
| 280,000 | | |
| — | | |
| 29,966 | | |
| 1,489,584 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
M.E. Kisber | |
| 2014 | | |
$ | 600,000 | | |
| — | | |
$ | 509,994 | | |
$ | 404,684 | | |
$ | 2,124,000 | | |
$ | 185,746 | | |
$ | 109,308 | | |
$ | 3,933,732 | |
President–FTN | |
| 2013 | | |
| 600,000 | | |
| — | | |
| 1,802,270 | | |
| 712,767 | | |
| 2,000,000 | | |
| — | | |
| 52,752 | | |
| 5,167,789 | |
Financial | |
| 2012 | | |
| 600,000 | | |
| — | | |
| 1,790,315 | | |
| 964,056 | | |
| 3,000,000 | | |
| 157,633 | | |
| 44,424 | | |
| 6,556,428 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
D.T. Popwell | |
| 2014 | | |
$ | 450,000 | | |
| — | | |
$ | 421,860 | | |
$ | 167,375 | | |
$ | 400,000 | | |
$ | 144,163 | | |
$ | 67,633 | | |
$ | 1,651,031 | |
President– | |
| 2013 | | |
| 450,000 | | |
| — | | |
| 495,548 | | |
| 213,829 | | |
| 325,000 | | |
| — | | |
| 55,185 | | |
| 1,539,562 | |
Banking | |
| 2012 | | |
| 450,000 | | |
| — | | |
| 421,054 | | |
| 260,292 | | |
| 337,500 | | |
| 220,324 | | |
| 40,898 | | |
| 1,730,068 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
C.T. Tuggle | |
| 2014 | | |
$ | 475,000 | | |
| — | | |
$ | 338,411 | | |
$ | 134,275 | | |
$ | 363,000 | | |
$ | 208,636 | | |
$ | 51,266 | | |
$ | 1,570,588 | |
EVP & General | |
| 2013 | | |
| 475,000 | | |
| — | | |
| 404,220 | | |
| 169,282 | | |
| 300,000 | | |
| — | | |
| 41,349 | | |
| 1,389,851 | |
Counsel | |
| 2012 | | |
| 475,000 | | |
| — | | |
| 487,947 | | |
| 321,351 | | |
| 332,500 | | |
| 498,875 | | |
| 42,514 | | |
| 2,158,187 | |
* For 2012, MIP bonuses were paid partly in restricted stock
or stock units issued early in 2013. The full amount of the 2012 MIP bonus earned is reported in column (g). MIP-driven stock awards
are not included in column (e).
Explanations of certain columns follow:
Col (c) Salary. Cash salary is shown in this
column. SSUs have service-vesting conditions and are included in column (e).
Col (d) Bonus. No discretionary bonuses were
paid to the named executive officers. Column (g) shows the annual MIP bonus awards earned.
Cols (e)-(f) Accounting Values. Columns (e)
and (f) show the grant date fair value of the awards using the accounting method applicable to our financial statements. The accounting
valuation method makes assumptions about growth and volatility of our stock value, expected duration in the case of options, vesting,
forfeiture, future company performance, and other matters. A discussion of those assumptions appears in
note 20 to our 2014 annual report to shareholders. Actual future
events may be substantially inconsistent with the assumptions. Accordingly, the actual values realized by an award holder are likely
to differ substantially from the accounting values reflected in columns (e) and (f).
Col (e) Stock Awards. Column (e) includes the
accounting values of SSU, RS, RSU, and PSU awards granted during each year. These do not represent amounts paid or earned; they
are the values attributed to awards under applicable accounting rules.
Col (e) Regular PSUs. PSUs are performance-based,
using a three-year performance period. Eventual payout may be higher or lower than the accounting values used in column (e) and
may be zero. PSUs also have a service-vesting
requirement. For 2012, the PSUs’ performance depends
upon First Horizon’s adjusted return-on-equity (ROE) ranking relative to certain peer banks. The 2013 PSUs’ performance
depends upon First Horizon’s adjusted core-segment ROE ranking relative to certain peer banks. For 2014, 80% of the PSUs
depends upon First Horizon’s adjusted core-segment ROE ranking versus peers; the remaining 20% depends upon the Committee’s
subjective assessment of total corporate performance as well as individual performance. In all cases, a percentage of PSUs (50%
to 150%) will vest if threshold or higher performance goals are achieved during the performance period and if the holder remains
employed with the company through the vesting date. The PSUs shown settle with shares rather than cash. In column (e) PSU amounts
are shown at their original accounting values assigned at grant. Because the values reflected in column (e) are less than the
possible payouts if all performance conditions are maximally achieved, the following table provides a summary of the maximum payouts
of the PSU awards for each named executive, based on our stock values on the respective grant dates.
Maximum Dollar Values of Regular PSUs*
(Share Price at Grant Date)
Name | |
2012 | | |
2013 | | |
2014 | |
Mr. Jordan | |
$ | 1,529,994 | | |
$ | 1,128,591 | | |
$ | 1,054,486 | |
Mr. Losch | |
| 449,993 | | |
| 382,498 | | |
| 199,207 | |
Mr. Kisber | |
| 1,350,000 | | |
| 1,350,000 | | |
| 764,991 | |
Mr. Popwell | |
| 364,503 | | |
| 404,993 | | |
| 210,930 | |
Mr. Tuggle | |
| 449,993 | | |
| 320,629 | | |
| 169,194 | |
* |
Maximum dollar values = 150% of target levels for all years
presented |
Col (e) CEO Special PSUs. In 2012, the Compensation
Committee made a special grant of PSUs to Mr. Jordan having a five-year performance and service period. Vesting occurs only if
one of the following performance conditions is satisfied: (i) First Horizon’s stock maintains a price of at least $20 per
share for 60 consecutive trading days during the five-year term; or (ii) the total shareholder return value of a share of First
Horizon’s stock is at least $20 measured over the five-year term. First Horizon’s stock price on the grant date was
$9.22. The maximum value of this award, measured at the grant date with no discount for risk of non-performance, was $3 million.
Mr. Jordan has led the restructuring of First Horizon, the development and implementation of
new strategies, recruitment of a new management team, and
a return to profitability. The Committee considered his significant contributions in turning First Horizon around and his future
value to the company in making this award.
Col (e) Regular RSUs. In 2014, the annual equity
award package included RSUs which vest in three years and settle in shares. Regular RSUs were not granted in earlier years.
Col (e) MIP-Driven Stock Awards. In 2013, MIP
bonuses relating to 2012 performance generally were paid 40% in RS awards and 60% in cash. The full amounts of those bonuses are
reported in column (g) for 2012. To avoid double-counting, the MIP-driven awards are not reported in column (e). Mr. Kisber’s
MIP bonus for 2012 was also paid partly in equity awards, but differed in mix and award type: his was paid one-third in RSUs.
Col (f) Stock Options. Column (f) includes the
accounting values of stock options granted.
Col (g) Annual MIP Bonus Awards. This column
shows the annual bonus earned for each year under our shareholder-approved Management Incentive Plan (MIP). For all three years,
MIP bonuses (except for Mr. Kisber) were based upon achievement in the following areas: pre-set levels of adjusted annual pre-tax
core earnings; the results of a balanced scorecard process ranking First Horizon among selected peer banks on a matrix of balance
sheet, capital, expense, earnings, and other measures; execution of personal plan goals; and individual contribution to risk management,
quality of earnings, and objectives for our non-strategic business segment. Mr. Kisber’s bonuses were based on the net profits
of our FTN Financial division.
Col (h) Pension & Deferred Compensation.
Column (h) includes changes in defined benefit (DB) pension actuarial values, which are the aggregate increase during the year
in actuarial value of all DB pension plans, both qualified and restoration. Our DB pension plans were closed to new employees
in 2007; as a result, Mr. Losch does not participate. The DB pension plan benefits were frozen effective December 31, 2012. Incremental
increases in actuarial pension values occurred in 2014 mainly due to lower discount rates used and the adoption of an updated
mortality table based on generally increased life expectancies. No above-market earnings on deferred compensation were accrued
during the year for any of the named executives.
Col (i) All Other. Elements of “All Other
Compensation” for 2014 consist of the following:
All Other Compensation
(Col (i)) for 2014
(a) | |
(b) | |
(c) | |
(d) | |
|
Name | |
Perquisites & Other Personal Benefits | |
401(k) Match | |
Life Insur. Prems. | |
Total Col (i) |
Mr. Jordan | |
$ | 22,813 | | |
$ | 65,826 | | |
$ | 8,846 | | |
$ | 97,485 | |
Mr. Losch | |
| 11,110 | | |
| 31,837 | | |
| 4,785 | | |
| 47,732 | |
Mr. Kisber | |
| 6,120 | | |
| 95,676 | | |
| 7,512 | | |
| 109,308 | |
Mr. Popwell | |
| 20,682 | | |
| 41,779 | | |
| 5,172 | | |
| 67,633 | |
Mr. Tuggle | |
| 20,160 | | |
| 25,541 | | |
| 5,565 | | |
| 51,266 | |
Explanations of certain columns in the Col (i) table follow:
Col (i)(b) “Perquisites and Other Personal Benefits”
includes the following types of benefits: Flexible Dollars; Financial Counseling; Disability Insurance; and Aircraft Usage.
Benefits are valued at the incremental cost to First Horizon. “Flexible Dollars” represents First Horizon’s
contribution to our broad-based benefits plan, a qualified cafeteria-type benefit plan. “Financial Counseling” represents
payments for the preparation of income tax returns and related financial counseling. “Disability Insurance” represents
insurance premiums with respect to our disability program. “Aircraft Usage” represents imputed income to the executives
when their spouses accompany them on a business trip using non-commercial aircraft. This column also includes imputed taxable
income from our company-wide wellness program, and (for Mr. Jordan) the cost of participating in the Mayo Clinic Executive Health
Program. The Board of
Directors requires Mr. Jordan to participate in the Mayo program.
Col (i)(c) “401(k) Match” represents
First Horizon’s matching contribution to our 401(k) savings plan. Starting in 2013, coincident with freezing the DB pension
benefits, the 401(k) match rate was doubled to 100% on the first 6% of salary each eligible participant (having at least one year
of service) elects to defer into the plan, up from a 100% match on the first 3% of salary deferred in previous years, and First
Horizon implemented a savings restoration plan for all employees whose base salary exceeds the IRS limit. Any flexible benefits
plan contributions to the savings plan are included in column (b).
Col(i)(d) “Life Insurance Premiums”
represents supplemental life insurance premiums. Under our survivor benefits plan a benefit of 2.5 times annual base salary is
paid upon the participant’s death prior to retirement, or a maximum of one times final salary upon death after retirement.
Grants of Plan-Based Awards
The following table provides information about the MIP bonus
opportunity established for, and the grants of PSUs, stock options, and RSUs during, 2014. In this table, the MIP opportunity
is considered a “Non-Equity Incentive Plan Award,” PSUs are considered to be “Equity Incentive Plan
Awards,” and RSUs are considered to be “All Other
Stock Awards.” In the table each row represents a separate award grant; a column for a row is blank if it does not apply
to the type of award listed in that row or if the dollar amount is $0.
Grants of Plan-Based Awards in 2014
(a) | |
| | |
(b-1) | |
(b-2) | |
(c) | |
(d) | |
(e) | |
(f) | |
(g) | |
(h) | |
(i) | |
(j) | |
(k) | |
(l) |
| |
| | |
| |
| |
Estimated Possible Payouts under Non-Equity Incentive Plan Awards | |
Estimated Future Payouts under Equity Incentive Plan Awards | |
All Other Stock Awards: Number of Shares of Stock | |
All Other Option Awards: Number of Securities Underlying | |
Exercise or base price of Option | |
Grant date Fair Value of Stock |
Name | |
| | |
Grant Date | |
Action Date | |
Threshold ($) | |
Target ($) | |
Maximum ($) | |
Threshold (#) | |
Target (#) | |
Maximum (#) | |
or Units (#) | |
Options (#) | |
Awards ($/sh) | |
and Option Awards($) |
Mr. Jordan | |
| MIP | | |
2-12 | |
2-12 | |
$ | 532,000 | | |
$ | 1,064,000 | | |
$ | 1,596,000 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
NA |
| |
| Opt | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 119,456 | | |
$ | 11.77 | | |
$418,371 |
| |
| PSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| 29,864 | | |
| 59,727 | | |
| 89,591 | | |
| | | |
| | | |
| | | |
702.987 |
| |
| RSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 29,864 | | |
| | | |
| | | |
351,499 |
Mr. Losch | |
| MIP | | |
2-12 | |
2-12 | |
$ | 212,500 | | |
$ | 425,000 | | |
$ | 637,500 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
NA |
| |
| Opt | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 45,136 | | |
$ | 11.77 | | |
$158,080 |
| |
| PSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| 5,642 | | |
| 11,283 | | |
| 16,925 | | |
| | | |
| | | |
| | | |
132,801 |
| |
| RSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 22,567 | | |
| | | |
| | | |
265,614 |
Mr. Kisber | |
| MIP | | |
2-12 | |
2-12 | |
| NA | | |
| NA | | |
$ | 3,500,000 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
NA |
| |
| Opt | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 115,548 | | |
$ | 11.77 | | |
$404,684 |
| |
| PSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| 21,665 | | |
| 43,330 | | |
| 64,995 | | |
| | | |
| | | |
| | | |
509,994 |
| |
| RSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| NA | | |
| | | |
| | | |
NA |
Mr. Popwell | |
| MIP | | |
2-12 | |
2-12 | |
$ | 225,000 | | |
$ | 450,000 | | |
$ | 675,000 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
NA |
| |
| Opt | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 47,790 | | |
$ | 11.77 | | |
$167,375 |
| |
| PSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| 5,974 | | |
| 11,947 | | |
| 17,921 | | |
| | | |
| | | |
| | | |
140,616 |
| |
| RSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 23,895 | | |
| | | |
| | | |
281,244 |
Mr. Tuggle | |
| MIP | | |
2-12 | |
2-12 | |
$ | 213,750 | | |
$ | 427,500 | | |
$ | 641,250 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
NA |
| |
| Opt | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 38,339 | | |
$ | 11.77 | | |
$134,275 |
| |
| PSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| 4,792 | | |
| 9,583 | | |
| 14,375 | | |
| | | |
| | | |
| | | |
112,792 |
| |
| RSU | | |
2-12 | |
2-12 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 19,169 | | |
| | | |
| | | |
225,619 |
Explanations of certain columns follow:
Col (b). An award is effective for legal and
accounting purposes on its grant date. The Compensation Committee took final action to grant each award on its action
date.
Cols (c)-(e) MIP Bonus Opportunities. The Committee
established performance criteria and set target amounts early in 2014 for MIP bonus opportunities. Details about the opportunities,
their goals, and their limitations are discussed in “Annual MIP Bonus” beginning on page 42.
The annual MIP bonus for Mr. Kisber was established based
on divisional net profits generated by the FTN Financial capital markets division, without any threshold or target levels. The
Compensation Committee established an overall maximum of $3.5 million for Mr. Kisber’s 2014 bonus opportunity. The first
$2.5 million of earned bonus was payable in cash, and the last $1 million was payable in the form of MIP-driven RSUs.
The information in columns (c)-(e) shows 2014 MIP bonus opportunities.
Information concerning MIP bonuses actually earned for 2014 is shown in column (g) of the Summary Compensation Table and under
the caption “Annual MIP Bonus” beginning on pages 51 and 42, respectively.
Cols (f)-(h) Stock Incentives. The performance
requirements for the 2014 PSU awards are discussed in the notes for column (e) of the Summary Compensation Table above. Performance
below the threshold level will result in 0% payout. Performance above threshold will result in payouts ranging from 50% (col (f))
to 100% (col (g)) to 150% (col (h)) of target levels. See “Performance Stock Units” beginning on page 45 for additional
information.
Col (i) Other Stock Awards. Column (i) includes
RSUs granted in 2014.
Cols (j)-(k) Stock Options. Column (j) shows
the number of shares granted under options to the named executives in 2014, and column (k) shows
the exercise price per share of those options. The exercise
price was the market price of First Horizon stock on the grant date. For additional information see the discussion of column (f)
of the Summary Compensation Table beginning on page 50 of this proxy statement.
Col (l) Grant date fair values. Column (l) reflects
the accounting value of the awards shown in
columns (g), (i) and (j). For stock options, the grant date
fair value is based on the Black Scholes value on the grant date, which was $3.5023 per share. For additional information see
the discussion of columns (e) and (f) of the Summary Compensation Table beginning on page 50.
Supplemental
Disclosures
Summary Compensation & Award Grant Tables
For information about the rationale behind, sizing of, and
other aspects concerning the major compensation elements, see “Overview of Direct Compensation Components,” “Relative
Sizing & Mix,” and “Salary” beginning on pages 36, 41, and 42, respectively.
The vesting schedules of equity-based awards granted in 2014
are as follows:
• |
Stock options vest in equal parts on the first four anniversaries
of the grant date. |
|
|
• |
PSUs will vest approximately three years after grant, assuming achievement
of goals at the 50% payout level or greater. |
|
|
• |
RSUs vest on the third anniversary of grant. |
Vesting information related to all equity awards held by the
named executives at year-end appears under the heading “Outstanding Stock Awards at Fiscal Year-End” beginning on
page 55, especially in the notes to the table in that section. For all awards, vesting will or may be accelerated or prorated
in the cases of death, disability, and change in control. For non-performance awards, vesting may be accelerated in the event
of retirement. For performance awards, service-vesting may be
waived, but performance goals generally are not waived, following
retirement, and awards may be pro-rated at the Compensation Committee’s discretion. Additional information concerning the
acceleration features of awards is set forth under the caption “Change in Control (CIC) Arrangements” on page 61.
Dividends or dividend equivalents accrue at normal declared
rates on stock awards other than options. Accrued dividends and equivalents are paid at vesting, or forfeit if the award is forfeited.
Under the terms of all stock options, participants are permitted
to pay the exercise price of the options with shares of our stock which they own.
The Compensation Committee has approved a mandatory tax withholding
feature under which vested shares are automatically withheld in an amount necessary to cover minimum required withholding taxes.
Options have no such feature.
The Compensation Committee generally has the power to impose
deferral of payment as a term or condition of an award. Deferrals do not affect the amounts reported in the Summary Compensation
Table.
Outstanding Stock Awards at Fiscal Year-End
The following table provides information about stock options,
all types of restricted stock and stock units, and all performance stock awards held at December 31, 2014 by the named executive
officers.
Outstanding Equity Awards at Fiscal
Year-End 2014
(a) | |
(b) | |
(c) | |
(d) | |
(e) | |
(f) | |
(g) | |
(h) | |
(i) | |
(j) |
| |
Option Awards | |
Stock Awards |
Name | |
Number of Securities Underlying
Unexercised Options(#) Exercisable | |
Number of Securities Underlying
Unexercised Options(#) Unexercisable | |
Equity Incentive Plan Awards:
Number of Securities Underlying Unearned Options(#) | |
Option Exercise Price ($/sh) | |
Option Expiration Date | |
Number of Shares or Units of Stock
Held that Have Not Vested(#) | |
Market Value of Shares or Units
of Stock that Have Not Vested($) | |
Equity Incentive Plan Awards:
Number of Unearned Shares, Units or Other Rights that Have Not Vested(#) | |
Equity Incentive Plan Awards:
Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested($) |
Mr. Jordan | |
| 60,019 | | |
| — | | |
| — | | |
$ | 20.83 | | |
| 2/25/2015 | | |
| | | |
| | | |
| | | |
| | |
| |
| 146,835 | | |
| 48,945 | | |
| — | | |
| 11.85 | | |
| 2/11/2018 | | |
| | | |
| | | |
| | | |
| | |
| |
| 143,762 | | |
| 143,764 | | |
| — | | |
| 9.46 | | |
| 2/14/2019 | | |
| | | |
| | | |
| | | |
| | |
| |
| 46,358 | | |
| 139,076 | | |
| — | | |
| 10.82 | | |
| 2/12/2020 | | |
| | | |
| | | |
| | | |
| | |
| |
| — | | |
| 119,456 | | |
| — | | |
| 11.77 | | |
| 2/12/2021 | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| 67,054 | | |
$ | 910,593 | | |
| 562,465 | | |
$ | 7,638,275 | |
Mr. Losch | |
| 36,455 | | |
| 12,152 | | |
| — | | |
$ | 11.85 | | |
| 2/11/2018 | | |
| | | |
| | | |
| | | |
| | |
| |
| 42,282 | | |
| 42,284 | | |
| — | | |
| 9.46 | | |
| 2/14/2019 | | |
| | | |
| | | |
| | | |
| | |
| |
| 15,711 | | |
| 47,135 | | |
| — | | |
| 10.82 | | |
| 2/12/2020 | | |
| | | |
| | | |
| | | |
| | |
| |
| — | | |
| 45,136 | | |
| — | | |
| 11.77 | | |
| 2/12/2021 | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| 54,223 | | |
$ | 736,348 | | |
| 66,562 | | |
$ | 903,912 | |
Mr. Kisber | |
| 10,910 | | |
| — | | |
| — | | |
$ | 25.99 | | |
| 7/1/2016 | | |
| | | |
| | | |
| | | |
| | |
| |
| 10,025 | | |
| — | | |
| — | | |
| 28.27 | | |
| 7/1/2017 | | |
| | | |
| | | |
| | | |
| | |
| |
| 151,898 | | |
| 50,633 | | |
| — | | |
| 11.85 | | |
| 2/11/2018 | | |
| | | |
| | | |
| | | |
| | |
| |
| 7,846 | | |
| — | | |
| — | | |
| 36.09 | | |
| 7/1/2018 | | |
| | | |
| | | |
| | | |
| | |
| |
| 126,849 | | |
| 126,850 | | |
| — | | |
| 9.46 | | |
| 2/14/2019 | | |
| | | |
| | | |
| | | |
| | |
| |
| 10,312 | | |
| — | | |
| — | | |
| 27.46 | | |
| 7/1/2019 | | |
| | | |
| | | |
| | | |
| | |
| |
| 55,452 | | |
| 166,359 | | |
| — | | |
| 10.82 | | |
| 2/12/2020 | | |
| | | |
| | | |
| | | |
| | |
| |
| — | | |
| 115,548 | | |
| — | | |
| 11.77 | | |
| 2/12/2021 | | |
| | | |
| | | |
| | | |
| | |
| |
| 8,513 | | |
| — | | |
| — | | |
| 23.49 | | |
| 7/2/2021 | | |
| | | |
| | | |
| | | |
| | |
| |
| 3,156 | | |
| — | | |
| — | | |
| 15.84 | | |
| 7/1/2022 | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| NA | | |
| NA | | |
| 221,646 | | |
$ | 3,009,953 | |
Mr. Popwell | |
| 31,443 | | |
| 10,481 | | |
| — | | |
$ | 11.85 | | |
| 2/11/2018 | | |
| | | |
| | | |
| | | |
| | |
| |
| 34,248 | | |
| 34,250 | | |
| — | | |
| 9.46 | | |
| 2/14/2019 | | |
| | | |
| | | |
| | | |
| | |
| |
| 16,635 | | |
| 49,908 | | |
| — | | |
| 10.82 | | |
| 2/12/2020 | | |
| | | |
| | | |
| | | |
| | |
| |
| — | | |
| 47,790 | | |
| — | | |
| 11.77 | | |
| 2/12/2021 | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| 53,877 | | |
$ | 731,650 | | |
| 62,587 | | |
$ | 849,931 | |
Mr. Tuggle | |
| 43,240 | | |
| 14,414 | | |
| — | | |
$ | 11.85 | | |
| 2/11/2018 | | |
| | | |
| | | |
| | | |
| | |
| |
| 42,282 | | |
| 42,284 | | |
| — | | |
| 9.46 | | |
| 2/14/2019 | | |
| | | |
| | | |
| | | |
| | |
| |
| 13,170 | | |
| 39,510 | | |
| — | | |
| 10.82 | | |
| 2/12/2020 | | |
| | | |
| | | |
| | | |
| | |
| |
| — | | |
| 38,339 | | |
| — | | |
| 11.77 | | |
| 2/12/2021 | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| 52,815 | | |
$ | 717,228 | | |
| 61,050 | | |
$ | 829,059 | |
Explanations of certain columns follow:
Col (c) Unvested Options. The vesting dates
of options reported in column (c) are:
Stock Options Unvested at Year-End
Grant
Date | |
Vesting
Date | |
Mr.
Jordan | |
Mr.
Losch | |
Mr.
Kisber | |
Mr.
Popwell | |
Mr.
Tuggle |
2/11/2011 | |
| 2/11/2015 | | |
| 48,945 | | |
| 12,152 | | |
| 50,633 | | |
| 10,481 | | |
| 14,414 | |
2/14/2012 | |
| 2/14/2015 | | |
| 71,882 | | |
| 21,142 | | |
| 63,425 | | |
| 17,125 | | |
| 21,142 | |
| |
| 2/14/2016 | | |
| 71,882 | | |
| 21,142 | | |
| 63,425 | | |
| 17,125 | | |
| 21,142 | |
2/12/2013 | |
| 2/12/2015 | | |
| 46,358 | | |
| 15,711 | | |
| 55,453 | | |
| 16,636 | | |
| 13,170 | |
| |
| 2/12/2016 | | |
| 46,359 | | |
| 15,712 | | |
| 55,453 | | |
| 16,636 | | |
| 13,170 | |
| |
| 2/12/2017 | | |
| 46,359 | | |
| 15,712 | | |
| 55,453 | | |
| 16,636 | | |
| 13,170 | |
2/12/2014 | |
| 2/12/2015 | | |
| 29,864 | | |
| 11,284 | | |
| 28,887 | | |
| 11,947 | | |
| 9,584 | |
| |
| 2/12/2016 | | |
| 29,864 | | |
| 11,284 | | |
| 28,887 | | |
| 11,947 | | |
| 9,585 | |
| |
| 2/12/2017 | | |
| 29,864 | | |
| 11,284 | | |
| 28,887 | | |
| 11,948 | | |
| 9,585 | |
| |
| 2/12/2018 | | |
| 29,864 | | |
| 11,284 | | |
| 28,887 | | |
| 11,948 | | |
| 9,585 | |
Col (g) Unvested Non-Performance Shares & Units.
Column (g) includes unvested RS and RSUs, specifically regular annual RSUs, RS granted in connection with MIP bonuses,
and special retention awards. The vesting dates of those awards are shown below:
RS & RSU Awards
Unvested at Year-End
Grant
Date | |
Award
Type | |
Vesting
Date | |
Mr.
Jordan | |
Mr.
Losch | |
Mr.
Kisber | |
Mr.
Popwell | |
Mr.
Tuggle |
2/11/2011 | |
| Ret RS | | |
| 2/11/2015 | | |
| — | | |
| 21,097 | | |
| — | | |
| 16,878 | | |
| 21,097 | |
2/14/2012 | |
| MIP RS | | |
| 2/14/2015 | | |
| 12,421 | | |
| 3,623 | | |
| — | | |
| 4,745 | | |
| 4,313 | |
2/12/2013 | |
| MIP RS | | |
| 2/12/2015 | | |
| 12,199 | | |
| 3,416 | | |
| — | | |
| 4,117 | | |
| 4,056 | |
| |
| | | |
| 2/12/2016 | | |
| 12,570 | | |
| 3,520 | | |
| — | | |
| 4,242 | | |
| 4,180 | |
2/12/2014 | |
| RSU | | |
| 2/12/2017 | | |
| 29,864 | | |
| 22,567 | | |
| — | | |
| 23,895 | | |
| 19,169 | |
Cols (h) & (j) Values. The values in columns
(h) and (j) reflect the market values at year-end of the awards reported in columns (g) and (i), respectively, with no discount
for the risk of forfeiture or for the time delay until vesting. The values are not based on financial accounting methods.
Col (i) PSUs. Column (i) reports PSU awards
granted 2012-14. The performance periods for PSUs which were not yet performed at year-end 2014 are shown below. Awards are reported
in units at target levels; maximum is 150% of target.
PSU Awards Unvested at Year-End
Grant Date | |
Performance Period | |
Mr. Jordan | |
Mr. Losch | |
Mr. Kisber | |
Mr. Popwell | |
Mr. Tuggle |
2/14/2012 | |
| 2012-14 | | |
| 107,822 | | |
| 31,712 | | |
| 95,137 | | |
| 25,687 | | |
| 31,712 | |
5/07/2012 | |
| 5/12-5/17 | | |
| 325,379 | | |
| — | | |
| — | | |
| — | | |
| — | |
2/12/2013 | |
| 2013-15 | | |
| 69,537 | | |
| 23,567 | | |
| 83,179 | | |
| 24,953 | | |
| 19,755 | |
2/12/2014 | |
| 2014-16 | | |
| 59,727 | | |
| 11,283 | | |
| 43,330 | | |
| 11,947 | | |
| 9,583 | |
Options Exercised & Stock Vested
The following table shows stock options exercised by the named
officers along with other stock awards that vested during 2014. SSUs and RSUs included in the table were paid in cash based on
the market value of First Horizon stock at vesting, while
PSUs and restricted stock awards paid in shares.
Options Exercised
and Stock Vested During 2014
(a) | |
(b) | |
(c) | |
(d) | |
(e) |
| |
Option Awards | |
Stock Awards |
Name | |
Number of Shares Acquired on Exercise(#) | |
Value Realized on Exercise($) | |
Number of Shares Acquired or Units Paid on Vesting(#) | |
Value Realized on Vesting($) |
Mr. Jordan | |
| — | | |
| — | | |
| 148,770 | | |
$ | 1,789,264 | |
Mr. Losch | |
| — | | |
| — | | |
| 74,678 | | |
| 893,582 | |
Mr. Kisber | |
| 2,813 | | |
$ | 5,823 | | |
| 240,801 | | |
| 2,885,755 | |
Mr. Popwell | |
| 24,007 | | |
| 52,043 | | |
| 70,378 | | |
| 843,222 | |
Mr. Tuggle | |
| — | | |
| — | | |
| 79,127 | | |
| 945,592 | |
Post-Employment
Compensation
Overview & Common Terms
FHN offers programs focused on providing benefits after retirement
or for certain other terminations. Other programs have features that enhance, accelerate, reduce, shorten, or forfeit benefits
if employment terminates in various ways. Those programs and features are discussed in this section.
Common post-employment terms include:
• |
Discharge or Resignation. A termination of employment
by First Horizon or by the executive, respectively, other than by reason of disability or retirement. |
• |
Disability. A permanent inability to work. |
|
|
• |
Retirement. A termination of employment after meeting certain
age and service requirements specified in the applicable program. Some programs specify early and normal retirement requirements;
others specify only normal retirement or make no provision for retirement. |
|
|
• |
Change in Control, or CIC. A corporate change in control of FHN
as defined in the applicable program. The definition used in active programs is discussed in “CIC Definition”
on page 61. |
Pension Plans
FHN has two defined benefit retirement plans: a broad-based
tax-qualified pension plan and an unfunded non-qualified pension restoration plan limited to employees for whom the qualified
benefit is limited by tax law. The restoration plan extends the benefit beyond that tax law limit. The two plans effectively provide
a single pension benefit.
The plans were closed to new hires in 2007, and benefits were
frozen at year-end 2012. Credited service years will no longer increase, and changes in compensation will no longer matter.
Pension benefits are based on average compensation for the
highest 60 consecutive months of the last 120 months of service prior to 2013, length of service prior to 2013, and social security
benefits. Covered compensation includes cash salary reportable to the IRS plus pre-tax contributions under the savings plan and
employee contributions under the flexible benefits plan, and excludes bonuses, commissions, other deferred compensation, and incentives.
A “normal” pension benefit provides a monthly
payment to the employee for life beginning at retirement at age 65. Participants under age 65 who are at least age 55 with 15
years of service may retire early with a reduced pension benefit. The reduction amount varies based on age at retirement. Similarly,
a delay in retirement will increase benefits. A participant may make other elections which change the benefit. Those include a
spousal benefit election, a minimum (certain) payment term, and a lump sum benefit (restoration plan only). Married participants
often choose a
qualified joint and survivor annuity with a surviving spouse
receiving 50 percent of the participant’s benefit.
The following table shows estimated normal retirement benefits
under the pension plans as of December 31, 2014. Mr. Losch was hired after 2007 and does not participate in the plans.
Pension Benefits
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
Name |
|
Plan |
|
Number of
Years of Credited
Service (#) |
|
Present
Value of
Accumulated
Benefit ($) |
|
Payments
During Last
Fiscal Year ($) |
Mr.
Jordan |
|
Qualified |
|
6 yrs |
|
$234,136 |
|
— |
|
Restoration |
|
6 yrs |
|
720,067 |
|
— |
Mr.
Kisber |
|
Qualified |
|
20 yrs |
|
788,779 |
|
— |
|
Restoration |
|
NA |
|
NA |
|
NA |
Mr.
Popwell |
|
Qualified |
|
6 yrs |
|
253,339 |
|
— |
|
Restoration |
|
6 yrs |
|
339,027 |
|
— |
Mr.
Tuggle |
|
Qualified |
|
9 yrs |
|
602,162 |
|
— |
|
Restoration |
|
9 yrs |
|
1,012,665 |
|
— |
Explanations of certain columns follow:
Col (c). This column shows full years of credited
service at year-end, unchanged since 2012.
Col (d). Column (d) reflects the actuarial present
value of the named executive’s accumulated benefit, computed as of the same pension plan measurement date used for financial
statement reporting purposes with respect to the 2014 fiscal year except that retirement age is assumed to be the normal retirement
age of 65. The amounts presented in the above table were calculated by
the pension plan actuary. The valuation method chosen to calculate
those amounts is the projected unit credit cost method. This method recognizes cost in an increasing pattern as a participant
approaches retirement. The 2014 discount rates are 5.15% for the pension plan and 4.7% for the pension restoration plan and reflect
the expected
average term until settlement of each of these plans. The
assumptions on which the amounts presented in the table are based are discussed in note 19 to FHN’s financial statements.
Col (e). No pension benefit amounts were paid
during 2014 to any named executive officer.
Non-Qualified Deferred Compensation Plans
First Horizon provides plans allowing executives to defer
receipt and taxation of cash salary and bonus. Deferred amounts are credited to accounts and earnings accrue according to the
provisions of each plan. Participants have some discretion regarding the length of the deferral period, the investment criteria
upon which earnings are based, and whether payout will be lump sum or an annuity. A commonly selected deferral period lasts until
employment terminates. These plans are unfunded: no trust holds funds in the accounts, which legally are unsecured debt of FHN.
In all plans each account is fully vested and non-forfeitable.
Except for the timing of payments, plan accounts are not reduced or enhanced by termination of employment, change in control,
or other event.
Starting in 2013, with the freezing of the pension plans discussed
above, we have provided a 100% match under the broad-based tax-qualified savings plan for the first 6% of salary each eligible
participant (having at least one year of service) elects to defer into the plan, up from a 100% match on the first 3% of salary
deferred in previous years. The qualified plan allows employee
contributions subject to dollar limits imposed by tax laws.
FHN has adopted a savings restoration plan for those employees,
including most executives, whose base salary exceeds the qualified plan’s ceiling. The restoration plan provides a non-qualified
vehicle for highly-paid employees to continue to participate in a savings plan beyond the tax law limits. Unlike the qualified
plan, the restoration plan is unfunded. Restoration plan participants are offered many of the investment options offered under
the qualified plan; the FHN stock fund is among those not offered.
FHN has a program that is intended to reduce the risk of its
obligations under the restoration and other nonqualified deferred compensation plans by purchasing investments intended to track
the performance of the investment elections made by participants.
Information concerning account activities and balances of
the named executive officers with respect to non-qualified deferred compensation plans is presented below.
Nonqualified Deferred Compensation |
|
(a)
Name | |
(b)
Executive
Contributions in
Last Fiscal
Year ($) | |
(c)
Company
Contributions in
Last Fiscal
Year ($) | |
(d)
Aggregate
Earnings in
Last
Fiscal Year ($) | |
(e)
Aggregate
Withdrawals/
Distributions ($) | |
(f)
Aggregate
Balance at Last
Fiscal Year
End ($) |
Mr. Jordan | |
$ | 460,626 | | |
$ | 50,226 | | |
$ | 57,937 | | |
| — | | |
$ | 1,008,962 | |
Mr. Losch | |
| 24,037 | | |
| 24,037 | | |
| 2,816 | | |
| — | | |
| 72,462 | |
Mr. Kisber | |
| 80,280 | | |
| 80,280 | | |
| 81,125 | | |
| — | | |
| 937,043 | |
Mr. Popwell | |
| 26,369 | | |
| 26,369 | | |
| 1,950 | | |
| — | | |
| 79,323 | |
Mr. Tuggle | |
| 25,541 | | |
| 25,541 | | |
| 20,369 | | |
| — | | |
| 374,402 | |
Explanations of certain columns follow:
Col (b). Traditional deferred
compensation plan. Currently up to 80% of cash salary and 100% of annual cash bonus may be deferred in the traditional
deferred compensation plan for executives.
Savings restoration plan. Column (b) includes executive
contributions of salary.
Col (c). Includes FHN matching contributions
under the savings restoration plan.
Col (d). Earnings reflect interest for those
accounts that earn interest. For accounts that are
phantom shares of FHN stock or of mutual funds, earnings reflect
increases and decreases of account value throughout the year. Those amounts are netted as applicable to the individual.
Col (e). Hardship withdrawals are allowed under
certain plans. Except under the savings restoration plan, an in-service distribution date may be selected when the deferral election
is made.
Col (f). Certain plan accounts are denominated
as numbers of shares of FHN stock or of certain mutual funds. All such accounts are valued based on the fair market value of those
shares at year-end.
The information above excludes the tax-qualified savings plan.
For additional information concerning deferred compensation plans see “Deferral Programs” beginning on page 46.
Employment & Termination Arrangements
FHN has no employment agreement with any named executive. Many
plans and programs contain special provisions regarding termination of employment in various common situations, including in connection
with retirement and a
change in control of FHN. FHN also has certain other arrangements
that deal primarily with retirement and change in control situations. This section provides information concerning those provisions
and arrangements.
Termination Unrelated to Change in Control
The table below summarizes the impact upon the amounts of various
items of compensation of a termination of employment under certain circumstances, other than termination related to a change in
control event. Change in control
situations are discussed in the following section. In addition
to forfeiture of unpaid benefits, many awards provide for clawback of paid benefits if discharge “for cause,” as defined
in the applicable program, occurs within two years of payment.
Impact of Termination Events on Unpaid
Compensation Items
|
|
Resignation/Discharge |
|
Death/Disability |
|
Retirement |
|
Key Facts |
|
|
|
|
|
|
|
|
|
MIP Bonus Opportunity |
|
Forfeit |
|
Generally forfeit, but discretionary payment is possible |
|
Generally forfeit, but discretionary payment is possible |
|
Committee can pro-rate or fully waive service requirement, still subject to performance conditions |
|
|
|
|
|
|
|
|
|
PSUs |
|
Forfeit |
|
Pro-rated waiver of service requirement, no waiver of performance |
|
For approved retirement, pro-rated waiver of service requirement, no waiver of performance |
|
Committee may require covenants such as non-competes as a condition for approval |
|
|
|
|
|
|
|
|
|
Exercisable Stock Options |
|
Expire 3 months after termination |
|
Expire 3 years after termination |
|
Expire 3 years after termination |
|
Option term is shortened to new expiration date, cannot be extended |
|
|
|
|
|
|
|
|
|
Unexercisable Stock Options |
|
Forfeit |
|
Expire 3 years after termination |
|
Expire 3 years after termination |
|
Option term is shortened to new expiration date, cannot be extended |
|
|
|
|
|
|
|
|
|
Restricted stock & RSUs |
|
Forfeit |
|
Pro-rated |
|
Generally forfeit, but discretionary payment is possible |
|
Committee may accelerate vesting in normal retirement situations subject to compliance with covenants such as non-competes |
|
|
|
|
|
|
|
|
|
Pension Plans |
|
No impact |
|
No impact |
|
No impact |
|
Benefits are fully vested |
|
|
|
|
|
|
|
|
|
Qualified Savings Plan |
|
No impact |
|
No impact |
|
No impact |
|
Benefits are fully vested |
|
|
|
|
|
|
|
|
|
Savings Restoration Plan |
|
Lump sum payment |
|
Lump sum payment |
|
Lump sum payment |
|
Benefits are fully vested; any termination triggers payment |
|
|
|
|
|
|
|
|
|
NQ Def’d Comp |
|
No impact |
|
No impact |
|
No impact |
|
Benefits are fully vested |
Change in Control (CIC) Arrangements
Special change in control (CIC) severance agreements are in place
with all of the named executive officers except Mr. Kisber. In addition, many of the company’s compensation programs have
special provisions that apply if FHN experiences a CIC event. This section provides information concerning arrangements and benefits
that would apply if a CIC event occurs.
CIC Definition
In FHN’s compensation programs the term “change in
control” includes the following events:
• |
A majority of the members of FHN’s Board of Directors changes, with certain
exceptions. |
|
|
• |
A person or other entity becomes the beneficial owner of 20 percent or more of FHN’s outstanding
voting stock, with certain exceptions. |
|
|
• |
FHN’s shareholders approve, and there is a consummation of, a merger or other business combination,
unless (i) more than 50% (60% in |
| the CIC severance agreements) of the voting power of FHN
resulting from the business combination is represented by voting securities outstanding immediately prior thereto, (ii) no person
or other entity beneficially owns 20% or more of the resulting corporation, and (iii) at least a majority (two-thirds in the CIC
severance agreements) of the members of the board of directors of the resulting corporation were FHN directors at the time of
board approval of the transaction. |
• |
FHN’s shareholders’ approve a plan of complete liquidation or dissolution
or a sale of substantially all of FHN’s assets. |
Summary of CIC Effects
The following table summarizes the impacts of a CIC event on
various items of compensation. Details about current dollar amounts of many of these items are provided in the “CIC Potential
Payout” section below.
Impact of CIC on Unpaid Compensation Items
Item |
|
Impact |
|
Key Facts |
MIP bonus opportunity |
|
Pro-rate target amount of bonus if employment terminates |
|
Performance at target is presumed; pro-rationing is based on % of performance period elapsed |
PSUs |
|
Pay at target of award if employment terminates involuntarily |
|
Performance at target is presumed |
Exercisable stock options |
|
No impact |
|
|
Restricted stock, RSUs, unexercisable stock options |
|
Accelerate if employment terminates, otherwise no impact |
|
Awards have a double-trigger feature |
Qualified pension plan |
|
Limited impact |
|
Any excess funding is allocated to all plan participants |
Pension restoration plan |
|
Lump sum payment |
|
See details below |
Qualified savings plan |
|
No impact |
|
|
Savings restoration plan |
|
No impact from CIC |
|
Any separation results in lump sum payment; CIC itself has no effect on amount or timing of payment |
NQ deferred compensation |
|
Limited impact |
|
Accounts are paid into rabbi trusts, inaccessible to FHN’s successor |
CIC severance agreements |
|
Cash payment & other benefits if employment terminates |
|
CIC benefits are discussed in the next section |
Under the pension restoration plan, a lump sum payment is made
to participants representing the present value, using a discount rate of 4.2%, of the participant’s scheduled projected benefits
actuarially adjusted based on the participant’s age at the time of the CIC event.
CIC Severance Agreements
FHN has CIC severance agreements with all of the named executive
officers except Mr. Kisber. The agreements provide a payment equal to three times annual base salary plus three times a “bonus
amount” if FHN discharges the officer other than for disability, retirement, or cause, or if the officer resigns for a pre-defined
good reason, in either case within 36 months after a CIC event. The
“bonus amount” is the average
actual annual cash bonus paid over the preceding five years, excluding the years with the highest and lowest bonuses, with certain
exceptions for executives who have participated in the executive bonus plan less than five years. Older agreements (with Messrs.
Jordan and Tuggle) provide generally for a federal excise tax gross-up; newer agreements (with Messrs. Losch and Popwell) have
no such provision. Severance payments are to be reduced if a small reduction in benefit (up to 5% or $50,000) would avoid the
excise tax. The agreements provide for continued healthcare and life insurance benefits for an 18-month period as allowed by tax
laws. Non-disparagement, cooperation, and non-solicitation covenants are included in the agreements. These agreements do not guarantee
employment for any term or period; they only apply if involuntary loss of employment occurs following a CIC event. Each agreement
can be terminated unilaterally upon three years’ prior notice.
CIC Potential Payout
The table below shows potential amounts payable to the named
executive officers if a CIC occurred and employment with FHN terminated on December 31, 2014. The closing stock price on December
31, 2014 of $13.58 per share is used when valuing stock based items. For purposes of the table, the following assumptions and
adjustments have been made: (1) the present value of future health and welfare and other non-cash benefits is calculated by using
current costs; (2) the value of non-forfeited stock options is based solely on the year-end spread between the option price and
the stock value; and (3) no forfeiture factors exist. Many of the amounts shown in the table below primarily accelerate the timing
of payment of an amount that would have been paid eventually and do not increase the amount paid. The table shows all payment
amounts, whether or not increased by the CIC, for the sake of completeness.
Potential Dollar Value of Payments Upon An Assumed
Termination
of Employment at Year-End 2014 Related to a CIC Event
| |
Cash | | |
Pro Rata | | |
Stock | | |
| |
Pension | |
Savings | |
Health & | | |
| | |
Tax Gross-up | |
| |
Name | |
Severance | | |
Bonus* | | |
Awards | | |
SSUs | |
& Restoration | |
Restoration | |
Welfare | | |
Other | | |
Payments** | |
Total | |
Mr. Jordan | |
$ | 4,303,841 | | |
$ | 674,614 | | |
$ | 10,074,378 | | |
NA | |
$ | 649,222 | | |
$ | 165,526 | | |
$ | 28,095 | | |
$ | 25,000 | | |
$ | 5,892,326 | | |
$ | 21,813,002 | |
Mr. Losch | |
| 1,888,712 | | |
| 204,571 | | |
| 2,091,925 | | |
NA | |
| NA | | |
| 72,462 | | |
| 23,007 | | |
| 25,000 | | |
| NA | | |
| 4,305,677 | |
Mr. Kisber | |
| NA | | |
| 3,500,000 | | |
| 4,361,178 | | |
NA | |
| NA | | |
| 216,306 | | |
| NA | | |
| NA | | |
| NA | | |
| 8,077,484 | |
Mr. Popwell | |
| 2,230,000 | | |
| 293,333 | | |
| 2,007,053 | | |
NA | |
| 306,885 | | |
| 79,323 | | |
| 23,588 | | |
| 25,000 | | |
| NA | | |
| 4,965,182 | |
Mr. Tuggle | |
| 2,145,783 | | |
| 240,261 | | |
| 1,966,797 | | |
NA | |
| NA | | |
| 85,522 | | |
| 23,675 | | |
| 25,000 | | |
| 1,244,670 | | |
| 5,731,708 | |
| |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
* |
|
For Messrs. Jordan, Losch, Popwell, and Tuggle, the amounts
in this column reflect “the bonus amount” defined in their CIC severance agreements discussed above. For Mr. Kisber,
who has no CIC severance agreement, the amount in this column reflects the amount that the MIP (annual bonus plan) would have
required to be paid to him. |
|
|
|
** |
|
Messrs. Jordan and Tuggle have the right to receive an excise tax gross-up
payment, an estimate of which is included in the table. For Messrs. Losch and Popwell, whose agreements are dated after 2008,
no gross-up would be paid by FHN. |
Director Compensation
Non-Employee Director Compensation
Programs
Mr. Jordan serves on the Board but is not paid for that service.
No program discussed in this “Director Compensation” section applies to him. No other director is an employee of FHN.
Non-employee director compensation falls into two main categories:
annual retainer, and fees. In 2014, each director was paid a retainer of $70,000, with $25,000 paid in cash and the rest in restricted
stock units, or RSUs. Fees are paid in fee stock units, or FSUs. The amount of FSUs varies by committee assignment and the number
of regular meeting days scheduled. Audit Committee members who also serve on the Trust Audit Committee of the Bank are not separately
compensated for that service. Also, the lead director receives a supplemental FSU award annually. The pay structure is summarized
in the following table:
Director Compensation Elements in 2014
Item |
Amount |
Form |
Retainer – cash portion |
$25,000 annually |
Cash |
Retainer – RSU portion |
$45,000 annually |
RSUs |
Board fees |
$2,000 per meeting day |
FSUs |
Committee member fees: |
|
|
Audit |
$2,000 per meeting
day |
FSUs |
All Other Committees |
$1,500 per meeting day |
FSUs |
Committee chair fees: |
|
|
Audit and Executive & Risk |
$5,000 per meeting day |
FSUs |
Compensation |
$6,000 per meeting day |
FSUs |
All Other Committees |
$4,000 per meeting day |
FSUs |
Special meeting fees |
none |
NA |
Lead director supplemental |
$20,000 annually |
FSUs |
The Board’s compensation year begins in the second quarter
following the annual meeting and ends with the following first quarter. RSUs and FSUs are granted under FHN’s Equity Compensation
Plan following election at the annual meeting. Both award types vest in the year following grant, and both accrue dividends or
dividend equivalents while unvested. RSUs are
paid in stock. FSUs are paid in cash based on stock value
at vesting. Because they are paid in cash, payment of FSUs may be deferred for tax purposes. Grants are pro-rated for anyone elected
to the Board after the annual meeting.
Directors may serve as members of the Bank’s regional
boards and may be paid, as additional Board compensation, cash attendance fees up to $500 per regional board meeting. In addition,
directors may receive the following benefits: a personal account executive, a no fee personal checking account for the director
and his or her spouse, a debit card, a no-fee VISA card, no fee for a safe deposit box, no fee for traveler’s checks and
cashier’s checks, use of tickets for marketing and other business events up to $5,000 in value, and, subject to certain
restrictions and limitations, the repurchase of shares of FHN common stock under a Board-approved repurchase program with no payment
of any fees or commissions. Directors may participate in a charitable gift matching program up to $25,000 per year.
FHN’s stock ownership guidelines set a benchmark for
directors to own FHN stock having a value of at least $210,000, or three times annual retainer. For this purpose, fully-owned
shares, restricted stock, and shares held in tax-deferred plans are counted, but stock options are not counted. If the ownership
guideline is satisfied, 50% of the net after-tax shares received from stock awards must be retained. If the guideline is not satisfied,
75% must be retained. The retention requirement applies during the rest of their tenure on the Board, except that after age 60
directors are permitted to sell shares held at least three years to diversify in preparation for retirement.
Many directors have nonqualified deferred compensation accounts
that earn interest or returns indexed to the performance of certain mutual funds selected by the director.
Prior to 2006, directors could receive stock options in lieu
of fees under certain deferral plans. Prior to 2007 directors received long-term restricted stock when first elected and every
ten years afterward. Options and unvested shares under those discontinued programs remain outstanding.
From 1985 to 1995, directors could defer fees and receive
an accrual of interest at rates ranging from 17-22 percent annually. Although new deferrals under that old plan have not been
permitted since
1995, interest continues to accrue on outstanding accounts.
Rates are re-set annually and have varied since 1995. For many years, the rate has been set at 7 percentage points above a benchmark
rate. For the 2014 plan year, the interest rate was 10.94% for all active participants including two current directors, Ms. Palmer
and Mr.
Martin. For 2015, the rate has decreased to 10.57%, corresponding
to a decrease in the benchmark rate. The plan’s purpose was to provide a deferral opportunity and also a strong retention
tool for FHN since the above-market rates of return are largely forfeited in a case of early departure from Board service.
Non-Employee Director Compensation
Table
The following table shows compensation earned by directors
last year, whether or not deferred.
Director Compensation 2014 |
(a) | |
(b) | |
(c) | |
(d) | |
(e) | |
(f) | |
(g) | |
(h) |
| |
| | |
| | |
| | |
| | |
Change in | |
| | |
| |
| |
| | |
| | |
| | |
| | |
Pension Value | |
| | |
| |
| |
| | |
| | |
| | |
| | |
and Nonqualified | |
| | |
| |
| |
Fees Earned | |
| | |
| | |
Non-stock | |
Deferred | |
| | |
| |
| |
or | |
| | |
Option | |
Incentive Plan | |
Compensation | |
All Other | |
| |
| |
Paid in Cash | |
Stock Awards | |
Awards | |
Compensation | |
Earnings | |
Compensation | |
Total |
Name | |
($) | |
($) | |
($) | |
($) | |
($) | |
($) | |
($) |
Mr. Carter | |
$ | 25,000 | | |
$ | 83,765 | | |
| — | | |
| — | | |
| — | | |
| $25,000 | | |
$ | 133,765 | |
Mr. Compton | |
| 25,000 | | |
| 89,707 | | |
| — | | |
| — | | |
| — | | |
| 20,000 | | |
| 134,707 | |
Mr. Emkes | |
| 25,000 | | |
| 100,122 | | |
| — | | |
| — | | |
| — | | |
| 21,400 | | |
| 146,522 | |
Mr. Gilchrist | |
| 25,000 | | |
| 94,169 | | |
| — | | |
| — | | |
| — | | |
| 25,000 | | |
| 144,169 | |
Ms. Gregg | |
| 25,000 | | |
| 80,783 | | |
| — | | |
| — | | |
| — | | |
| 25,000 | | |
| 130,783 | |
Mr. Martin | |
| 25,000 | | |
| 133,327 | | |
| — | | |
| — | | |
| $6,713 | | |
| 25,000 | | |
| 190,040 | |
Mr. Niswonger | |
| 25,000 | | |
| 82,756 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 107,756 | |
Ms. Palmer | |
| 25,000 | | |
| 79,797 | | |
| — | | |
| — | | |
| 7,434 | | |
| 17,500 | | |
| 129,731 | |
Mr. Reed | |
| 25,000 | | |
| 102,094 | | |
| — | | |
| — | | |
| — | | |
| 25,400 | | |
| 152,494 | |
Ms. Stewart | |
| 6,250 | | |
| 38,567 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 44,817 | |
Mr. Yancy | |
| 25,000 | | |
| 88,216 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 113,216 | |
Explanations of certain columns follow:
Col (c) Stock Awards. Includes all RSUs and
FSUs granted during 2014. Amounts shown are the grant date fair values of awards using the accounting method applicable to our
financial statements. For additional information about valuation see the note for cols (e)-(f) to the Summary Compensation Table
on page 50. Additional information about outstanding awards appears under the caption “Outstanding Director Equity Awards
at Year-End” beginning on page 65.
Col (f) Deferred Compensation. Amounts consist
of above-market interest accrued during the year under a plan discontinued in 1995.
Col (g) All Other Compensation. Amounts consist
primarily of matching donations to eligible charitable organizations by First Horizon Foundation. Also included are amounts paid
in accordance with FHN’s Director Policy for attending local advisory board meetings.
Outstanding Director Equity Awards at Year-End
As discussed above, FHN grants RSU and FSU awards annually to
directors. Some option and restricted stock awards remain outstanding under old programs. The following table provides
information about equity awards held at December 31, 2014 by
non-employee directors. All options are vested; other awards were unvested at year-end.
Outstanding Equity
Awards at Fiscal Year-End 2014
Held by Non-Employee Directors
(a) | |
(b) | |
(c) | |
(d) | |
(e) | |
(f) |
| |
Stock Options | |
Restricted Stock or Unit Awards |
Name | |
Number of Securities Underlying Unexercised Options(#) | |
Option Exercise Price($/sh) | |
Option Expiration Date | |
Number of Shares or Units of Stock Held that Have Not Vested(#) | |
Market Value of Shares or Units of Stock that Have Not Vested($) |
Mr. Carter | |
| — | | |
| — | | |
— |
| |
| 7,303 | | |
$ | 99,175 | |
Mr. Compton | |
| — | | |
| — | | |
— |
| |
| 7,821 | | |
$ | 106,209 | |
Mr. Emkes | |
| — | | |
| — | | |
— |
| |
| 8,729 | | |
$ | 118,540 | |
Mr. Gilchrist | |
| — | | |
| — | | |
— |
| |
| 8,210 | | |
$ | 111,492 | |
Ms. Gregg | |
| — | | |
| — | | |
— |
| |
| 7,043 | | |
$ | 95,644 | |
| |
| 88 | | |
$ | 18.04 | | |
1/3/2015 |
| |
| | | |
| | |
| |
| 55 | | |
| 18.28 | | |
7/1/2023 |
| |
| | | |
| | |
| |
| 70 | | |
| 18.24 | | |
1/2/2024 |
| |
| | | |
| | |
Mr. Martin | |
| — | | |
| — | | |
— |
| |
| 11,624 | | |
$ | 157,854 | |
| |
| 1,718 | | |
$ | 18.04 | | |
1/3/2015 |
| |
| | | |
| | |
| |
| 5,694 | | |
| 17.10 | | |
6/30/2017 |
| |
| | | |
| | |
| |
| 4,950 | | |
| 23.46 | | |
12/31/2017 |
| |
| | | |
| | |
| |
| 4,704 | | |
| 22.26 | | |
6/30/2018 |
| |
| | | |
| | |
| |
| 3,951 | | |
| 26.53 | | |
12/31/2018 |
| |
| | | |
| | |
| |
| 3,484 | | |
| 27.22 | | |
6/30/2019 |
| |
| | | |
| | |
| |
| 3,334 | | |
| 20.40 | | |
12/31/2019 |
| |
| | | |
| | |
| |
| 2,985 | | |
| 18.85 | | |
1/2/2021 |
| |
| | | |
| | |
| |
| 2,852 | | |
| 23.49 | | |
7/2/2021 |
| |
| | | |
| | |
| |
| 3,009 | | |
| 23.91 | | |
1/2/2022 |
| |
| | | |
| | |
| |
| 2,842 | | |
| 25.34 | | |
7/1/2022 |
| |
| | | |
| | |
| |
| 3,119 | | |
| 24.36 | | |
1/2/2023 |
| |
| | | |
| | |
| |
| 1,094 | | |
| 18.28 | | |
7/1/2023 |
| |
| | | |
| | |
| |
| 1,370 | | |
| 18.24 | | |
1/2/2024 |
| |
| | | |
| | |
Mr. Niswonger | |
| — | | |
| — | | |
— |
| |
| 7,215 | | |
$ | 97,980 | |
Ms. Palmer | |
| — | | |
| — | | |
— |
| |
| 6,957 | | |
$ | 94,476 | |
| |
| 1,884 | | |
$ | 18.04 | | |
1/3/2015 |
| |
| | | |
| | |
| |
| 9,266 | | |
| 8.16 | | |
6/30/2015 |
| |
| | | |
| | |
| |
| 7,960 | | |
| 10.68 | | |
12/31/2015 |
| |
| | | |
| | |
| |
| 8,140 | | |
| 10.85 | | |
6/30/2016 |
| |
| | | |
| | |
| |
| 8,568 | | |
| 13.37 | | |
12/31/2016 |
| |
| | | |
| | |
| |
| 5,363 | | |
| 17.10 | | |
6/30/2017 |
| |
| | | |
| | |
| |
| 4,710 | | |
| 23.46 | | |
12/31/2017 |
| |
| | | |
| | |
| |
| 4,196 | | |
| 22.26 | | |
6/30/2018 |
| |
| | | |
| | |
| |
| 4,378 | | |
| 26.53 | | |
12/31/2018 |
| |
| | | |
| | |
| |
| 3,848 | | |
| 27.22 | | |
6/30/2019 |
| |
| | | |
| | |
| |
| 4,584 | | |
| 20.40 | | |
12/31/2019 |
| |
| | | |
| | |
| |
| 5,226 | | |
| 11.85 | | |
7/3/2020 |
| |
| | | |
| | |
| |
| 3,518 | | |
| 18.85 | | |
1/2/2021 |
| |
| | | |
| | |
| |
| 3,107 | | |
| 23.49 | | |
7/2/2021 |
| |
| | | |
| | |
| |
| 3,093 | | |
| 23.91 | | |
1/2/2022 |
| |
| | | |
| | |
| |
| 2,764 | | |
| 25.34 | | |
7/1/2022 |
| |
| | | |
| | |
Outstanding
Equity Awards at Fiscal Year-End 2014
Held by Non-Employee
Directors
(a) | |
(b) | |
(c) | |
(d) | |
(e) | |
(f) |
| |
Stock Options | |
Restricted Stock or Unit Awards |
Name | |
Number of Securities Underlying Unexercised Options(#) | |
Option Exercise Price($/sh) | |
Option Expiration Date | |
Number of Shares or Units of Stock Held that Have Not Vested(#) | |
Market Value of Shares or Units of Stock that Have Not Vested($) |
| |
| 2,709 | | |
| 24.36 | | |
1/2/2023 |
| |
| | | |
| | |
| |
| 1,121 | | |
| 18.28 | | |
7/1/2023 |
| |
| | | |
| | |
| |
| 2,028 | | |
| 18.24 | | |
1/2/2024 |
| |
| | | |
| | |
Mr. Reed | |
| — | | |
| — | | |
— |
| |
| 10,841 | | |
$ | 147,221 | |
Ms. Stewart | |
| — | | |
| — | | |
— |
| |
| 3,190 | | |
$ | 43,320 | |
Mr. Yancy | |
| — | | |
| — | | |
— |
| |
| 7,691 | | |
$ | 104,444 | |
| |
| 1,386 | | |
$ | 18.04 | | |
1/3/2015 |
| |
| | | |
| | |
| |
| 1,379 | | |
| 23.91 | | |
1/2/2022 |
| |
| | | |
| | |
| |
| 2,921 | | |
| 25.34 | | |
7/1/2022 |
| |
| | | |
| | |
| |
| 3,202 | | |
| 24.36 | | |
1/2/2023 |
| |
| | | |
| | |
| |
| 1,011 | | |
| 18.28 | | |
7/1/2023 |
| |
| | | |
| | |
| |
| 1,535 | | |
| 18.24 | | |
1/2/2024 |
| |
| | | |
| | |
Explanations of certain columns follow:
Cols (b)/(c). The numbers of stock options and the option
prices have been adjusted to reflect stock dividends distributed from October 2008 through January 2011. The cumulative compound
rate of all such dividends was 20.0380%.
Col (e). The awards are unvested RSUs, FSUs, and restricted
stock shares outstanding on December 31, 2014. The restricted stock amounts
include adjustments for past stock dividends. The vesting dates
of the awards are shown in the table following the explanation of column (f).
Col (f). The values reflect the closing value at December
31, 2014, of FHN common stock with no discount for the risk that the award might be forfeited or for the time remaining before
vesting. The values are not based on financial accounting assumptions or methods.
Vesting Dates
of Director Full-Value Stock Awards
Outstanding
at Year-End 2014
Name | |
Grant Date | |
Vesting Dates | |
RSUs + Shares Vesting(#) | |
FSUs Vesting(#) | |
Total Units + Shares Unvested(#) |
Mr. Carter | |
5/1/2014 | |
4/2/2015 | |
3,889 |
| |
| 3,414 | | |
| 7,303 | |
Mr. Compton | |
5/1/2014 | |
4/2/2015 | |
3,889 |
| |
| 3,932 | | |
| 7,821 | |
Mr. Emkes | |
5/1/2014 | |
4/2/2015 | |
3,889 |
| |
| 4,840 | | |
| 8,729 | |
Mr. Gilchrist | |
5/1/2014 | |
4/2/2015 | |
3,889 |
| |
| 4,321 | | |
| 8,210 | |
Ms. Gregg | |
5/1/2014
10/27/2014 | |
4/2/2015
4/2/2015 | |
3,889
— |
| |
| 3,025
129 | | |
| 6,914
129 | |
Mr. Martin | |
5/1/2014 | |
4/2/2015 | |
3,889 |
| |
| 7,735 | | |
| 11,624 | |
Mr. Niswonger | |
5/1/2014
10/27/2014 | |
4/2/2015
4/2/2015 | |
3,889
— |
| |
| 3,197
129 | | |
| 7,086
129 | |
Ms. Palmer | |
5/1/2014 | |
4/2/2015 | |
3,889 |
| |
| 3,068 | | |
| 6,957 | |
Mr. Reed | |
4/14/2006
5/1/2014 | |
4/30 each yr 2015-16
4/2/2015 | |
*
3,889 |
| |
| NA
5,012 | | |
| 1,940
8,901 | |
Ms. Stewart | |
10/27/2014 | |
4/2/2015 | |
1,889 |
| |
| 1,301 | | |
| 3,190 | |
Mr. Yancy | |
5/1/2014
10/27/2014 | |
4/2/2015
4/2/2015 | |
3,889
— |
| |
| 3,457
345 | | |
| 7,346
345 | |
* |
The number of old restricted shares vesting on 4/30 of each year is 955 and 985, respectively. |
Director Options Exercised and Stock Vested
The following table provides information about stock options
and similar rights exercised during 2014 by our non-employee directors as well as
stock units and restricted shares that vested during 2014. Amounts
in column (e) represent the fair market value of shares as of the vesting dates.
Director Options Exercised and Stock Vested During 2014
(a) | |
(b) | |
(c) | |
(d) | |
(e) |
| |
Option Awards | |
Stock Awards |
Name | |
Number of Shares Acquired on Exercise(#) | |
Value Realized Upon Exercise ($) | |
Number of Shares Acquired or Units Paid Upon Vesting(#) | |
Value Realized Upon Vesting ($) |
Mr. Carter | |
| — | | |
| — | | |
| 8,924 | | |
$ | 109,973 | |
Mr. Compton | |
| — | | |
| — | | |
| 7,149 | | |
| 88,243 | |
Mr. Emkes | |
| — | | |
| — | | |
| 8,108 | | |
| 99,984 | |
Mr. Gilchrist | |
| — | | |
| — | | |
| 7,964 | | |
| 98,221 | |
Ms. Gregg | |
| — | | |
| — | | |
| 7,676 | | |
| 94,695 | |
Mr. Martin | |
| — | | |
| — | | |
| 12,907 | | |
| 158,733 | |
Mr. Niswonger | |
| — | | |
| — | | |
| 7,868 | | |
| 97,045 | |
Ms. Palmer | |
| — | | |
| — | | |
| 10,843 | | |
| 133,465 | |
Mr. Reed | |
| — | | |
| — | | |
| 10,840 | | |
| 132,605 | |
Ms. Stewart | |
| — | | |
| — | | |
| — | | |
| — | |
Mr. Yancy | |
| — | | |
| — | | |
| 8,156 | | |
| 100,571 | |
Section
16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended
(“Exchange Act”), requires our directors and officers to file with the SEC initial reports of ownership and reports
of changes in ownership of our stock and to furnish us with copies of all forms filed.
To our knowledge, based solely on a review of the copies of
such reports furnished to us and written representations that no other reports were required, during the past fiscal year our
officers and directors complied with all applicable Section 16(a) filing requirements.
Availability
of Annual Report on Form 10-K
A copy of our Annual Report on Form 10-K, including the financial
statements and schedules thereto, which is filed with the SEC, is available free of charge to each shareholder of record upon
written request to the Treasurer, First Horizon National Corporation, P. O. Box 84, Memphis, Tennessee, 38101. Each such written
request must set forth a good faith representation that as of the record date specified in the notice of annual shareholders’
meeting the person making the request was a beneficial owner of a security
entitled to vote at the annual meeting of shareholders.
The exhibits to the Annual Report on Form 10-K will also be
supplied upon written request to the Treasurer and payment to us of the cost of furnishing the requested exhibit or exhibits.
A document containing a list of each exhibit to Form 10-K, as well as a brief description and the cost of furnishing each such
exhibit, will accompany the Annual Report on Form 10-K.
BY ORDER OF THE BOARD OF DIRECTORS
Clyde A. Billings, Jr.
Senior Vice President,
Assistant General Counsel and
Corporate Secretary
March 16, 2015
Appendix A
AUDIT COMMITTEE CHARTER
FIRST HORIZON NATIONAL CORPORATION
(As Amended and Restated as of July 22, 2014)
Establishment and Purposes of the Committee
Acting pursuant to Tennessee Code Annotated Section 48-18-206,
Article 11(b)(8) of the Corporation’s restated charter, as amended, and Section 3.5 of the Corporation’s bylaws, as
amended, the Board of Directors of First Horizon National Corporation hereby creates the Audit Committee (the “Committee”)
of the Board of Directors, which shall: (1) assist the Board of Directors in its oversight of (a) the Corporation’s accounting
and financial reporting principles and policies and internal controls and procedures, (b) the integrity of the Corporation’s
financial statements, (c) the Corporation’s compliance with legal and regulatory requirements, (d) the independent auditor’s
qualifications and independence, and (e) the performance of the independent auditor and Corporation’s internal audit function;
and (2) prepare the report to be included in the Corporation’s annual proxy statement pursuant to the proxy rules of the
Securities and Exchange Commission (“SEC”).
The function of the Committee is oversight. Management of the
Corporation is responsible for preparation, presentation and integrity of the Corporation’s financial statements. Management
is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and
procedures to provide for compliance with accounting standards and applicable laws and regulations, and the officer in charge
of the Corporation’s internal audit function (“internal auditor”) is responsible for testing such internal controls
and procedures. The independent auditor is responsible for planning and carrying out a proper audit of the Corporation’s
annual financial statements, reviews of the Corporation’s quarterly financial statements prior to the filing of each quarterly
report on Form 10-Q, and other procedures. It is recognized that, in fulfilling their responsibilities hereunder, members of the
Committee are not full-time employees of the Corporation and are not, and do not represent themselves to be, performing the functions
of accountants or auditors. As such, it is not the duty or responsibility of the Committee or its members to conduct “field
work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards, and each
member of the Committee shall be entitled to rely on (1) the integrity of those persons and organizations within and outside the
Corporation from which it receives information, (2) the accuracy of the financial and other information provided to the Committee
by such persons or organizations absent actual knowledge to the contrary (which shall be promptly reported to the Board) and (3)
the representations made by management as to any non-audit services provided by the independent auditor to the Corporation. Further,
in fulfilling their responsibilities hereunder, the members of the Committee will incorporate the use of reasonable materiality
standards, including the size of the Corporation and the nature, scope and risks of the activities conducted.
The independent auditor for the Corporation is accountable to
the Committee as representatives of the shareholders and must report directly to the Committee. The Committee has the authority
and responsibility directly to appoint (subject, if applicable, to shareholder ratification), retain, compensate, evaluate and
terminate the Corporation’s independent auditor and to oversee the work of such independent auditor.
The independent auditor shall submit to the Committee annually
a formal written statement (the “Auditor’s Statement”) describing: the independent auditor’s internal
quality-control procedures; any material issues raised by the most recent internal quality-control review or peer review of the
independent auditor, or by any inquiry or investigation by governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the independent auditor, and any steps taken to deal with such
issues; and (to assess the independent auditor’s independence) all relationships between the independent auditor and the
Corporation addressing each non-audit service provided to the Corporation and at least the matters set forth in the applicable
requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the
Audit Committee concerning independence.
The independent auditor shall submit to the Committee annually
a formal written statement of the aggregate fees billed for each of the last two fiscal years for professional services rendered
by the independent auditor in the following categories (as defined by the rules of the SEC): audit, audit-related, tax and all
other services.
Qualifications of Committee Members
The Committee shall consist of at least three members appointed
annually by a majority of the entire Board on the recommendation of the Nominating and Corporate Governance Committee of the Board
of Directors, acting in its capacity as the nominating committee. Members shall be directors who meet the independence and experience
requirements of the NYSE and Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and the rules of the SEC promulgated
thereunder. Under these requirements as currently adopted, the Board must determine:
|
• |
that each member has no material relationship, either direct or indirect, with the Corporation; |
|
|
|
|
• |
that each member is financially literate, or shall become financially literate within a reasonable period of time after
his or her appointment to the Committee; and |
|
|
|
|
• |
that at least one of the members has accounting or related financial management expertise, |
as such requirements are interpreted by the Board of Directors
in the exercise of its business judgment. Members may be replaced by the Board.
No director may serve as a member of the Committee if such director
serves on the audit committees of more than two other public companies unless the Board of Directors determines that such simultaneous
service would not impair the ability of such director to serve effectively on the Committee, and discloses this determination
in the Corporation’s annual proxy statement. No member of the Committee may be an affiliated person (as such term is defined
in SEC Rule 10A-3, including any exceptions or exemptions permitted thereby) of the Corporation or any subsidiary thereof or may
receive any compensation from the Corporation other than (i) director’s fees, which may be received in cash, stock options
or other in-kind consideration ordinarily available to directors; (ii) a pension or other deferred compensation for prior service
that is not contingent on future service; and (iii) any other regular benefits that other directors receive; provided, however,
that notwithstanding the foregoing, it shall be permissible for Committee members to receive those types of compensation permitted
by the rules of the SEC and the NYSE regarding the independence of audit committee members.
Operation of the Committee
Meetings shall be held at least four times yearly, or more frequently
if circumstances dictate, and may be called at any time by the Committee Chairperson or by any two members of the Committee upon
written or oral notice to a majority of the members of the Committee prior to the meeting. A quorum shall consist of a majority
of the members and the vote of a majority of the members present at a meeting at which a quorum is present shall be the act of
the Committee. Proceedings of the Committee over the signature of a member in attendance shall be recorded in a minute book and
reflect the names of those in attendance. The Chairperson of the Committee, or acting Chairperson of the meeting, will present
a report of Committee activities to the full Board of Directors at its next regularly scheduled meeting. The Secretary of the
Board will permanently maintain the minutes of Committee meetings. Meetings may be held jointly with a similar committee of First
Tennessee Bank National Association (“Bank”) if either the members of the Bank’s committee and the members of
this Committee are identical or all of the members of the Bank’s committee would meet the eligibility requirements of the
NYSE, Section 10A(m)(3) and the rules of the SEC, including any exceptions permitted thereby, and meetings may also be held jointly
with the Trust Audit Committee of the Bank under the same conditions. The Committee may, in its discretion, delegate all or a
portion of its authority and duties to a subcommittee of the Committee, and may delegate to the Chairperson the authority to grant
pre-approvals of audit and permitted non-audit services as provided herein, provided that the decisions of such Chairperson to
grant pre-approvals shall be presented to the full Committee at its next regularly scheduled meeting.
The Committee shall have unrestricted access to Corporation
personnel and documents. The Committee will be given the resources and authority appropriate to discharge its duties and responsibilities,
including (i) the authority to retain and compensate special or independent counsel, accountants or other experts or consultants
to advise the Committee, without seeking approval of the Board or management, and (ii) appropriate funding, as determined by the
Committee, for payment of compensation to such counsel, accountants or other experts and consultants. The Committee may request
any officer or employee of the Corporation or of the Corporation’s outside counsel or independent auditor to attend a meeting
of the Committee or to meet with any members of, or consultants to, the Committee. It will be the responsibility of the Committee
to maintain free and open means of communication between the directors and
management of the Corporation. The Committee shall meet separately
periodically with management, the internal auditor, and the independent auditor in separate executive sessions to discuss any
matters that the Committee or any of these persons believes should be discussed privately.
Duties and Responsibilities of the
Committee
The Committee is hereby delegated full authority with respect
to the following matters and such additional matters as may be provided in the bylaws of the Corporation or as the Board of Directors
may from time to time by resolution adopted by a majority of the entire Board specify:
1. |
with respect to the independent auditor, |
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a. |
directly appoint (subject, if applicable, to shareholder ratification), retain, compensate, oversee
the work of, evaluate and terminate the independent auditor. |
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b. |
adopt a policy for the Corporation regarding preapproval of all audit and non-audit engagement fees and terms and approve,
in advance, all such fees and terms in accordance with such policy. |
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c. |
ensure that the independent auditor prepares and delivers annually an Auditor’s Statement (it being understood that
the independent auditor is responsible for the accuracy and completeness of this Statement) and consider such Auditor’s
Statement in assessing the independence of the independent auditor. |
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d. |
ensure that the independent auditor timely reports on all critical accounting policies and practices to be used; all alternative
treatments of financial information within generally accepted accounting principles that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor;
and other material written communications between the independent auditor and management, such as any management letter or
schedule of unadjusted differences. |
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e. |
review and evaluate the qualifications, performance and independence of the lead partner of the independent auditor |
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f. |
discuss with management the timing and process for implementing the rotation of the lead audit partner, the concurring
partner, and any other active audit engagement team partner and consider whether there should be a regular rotation of the
audit firm itself. |
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g. |
instruct the independent auditor that the independent auditor is ultimately accountable to the Committee as representatives
of the shareholders. |
2. |
with respect to the internal audit department, |
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a. |
appoint and remove the Corporation’s internal auditor and approve the salary and annual bonus
of the internal auditor. |
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b. |
advise the internal auditor that he or she is expected to provide the Committee summaries of and, as appropriate, significant
reports to management prepared by the internal audit department and management’s responses thereto (including but not
limited to reports on the Corporation’s risk governance, risk assessment and risk management, the adequacy of policies,
and compliance with legal and regulatory requirements). |
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c. |
advise the internal auditor that he or she is expected to provide the Committee with such additional information and reports
as may be provided in the internal audit department charter. |
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d. |
approve the internal audit department charter, review it annually, and approve such amendments thereto as the Committee
may deem necessary or appropriate. |
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e. |
approve annually the budget, staffing levels, audit plan, and risk assessment methodology of the internal audit department. |
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f. |
together with the internal auditor, oversee any outsourcing to third parties of internal audit functions. |
3. |
with respect to financial reporting principles and policies and internal controls and procedures, |
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a. |
advise management, the internal auditor and the independent auditor that each is expected to provide
to the Committee a timely analysis of significant financial reporting issues and practices. |
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b. |
consider any reports or communications (and management’s and/or the internal auditor’s responses thereto)
submitted to the Committee by the independent auditor required by or referred to in Auditing Standard No. 16. Communication
with Audit Committees, issued by the Public Company Accounting Oversight Board, as may be modified or supplemented. |
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c. |
meet with management, the independent auditor and, if appropriate, the internal auditor (i) to discuss the scope of the
annual audit; the audited financial statements and quarterly financial statements; any significant matters arising from any
audit, including any audit problems or difficulties and management’s response thereto; any significant matters arising
from changes to the Corporation’s auditing and accounting principles, policies, controls, procedures and practices proposed
or contemplated by the independent auditor, the internal auditor or management; any major issues regarding accounting principles
and financial statement presentations; any major issues as to the adequacy of the Corporation’s internal controls and
any special audit steps adopted in light of material control deficiencies; analyses prepared by management and/or the independent
auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the
financial statements; the effect, if significant, of regulatory and accounting initiatives, as well as off-balance sheet structures,
on the financial statements of the Corporation; (ii) to review the form of opinion the independent auditor proposes to render
to the Board of Directors and shareholders; and (iii) to discuss the Corporation’s risk assessment and risk management
policies and to inquire about significant risks and exposures, if any, and the steps taken to monitor and minimize such risks. |
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d. |
obtain from the independent auditor assurance that the audit was conducted in a manner consistent with Section 10A of
the Securities Exchange Act of 1934, as amended, which set forth certain procedures to be followed in any audit of financial
statements required under that act. |
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e. |
review any employee complaints or material reports or inquiries received from regulators or government agencies and management’s
responses; in addition to receiving reports from the internal auditor regarding risk and compliance matters as described in
Section 2 of this Charter, meet periodically with the Corporation’s chief risk officer to discuss any risk and compliance
matters that may have a material effect on the Corporation’s financial statements or internal controls; discuss any
significant compliance issues raised in reports or inquiries received from regulators or government agencies; review periodic
reports regarding the effectiveness of the Compliance and Ethics Program; and discuss with the Corporation’s General
Counsel pending and threatened claims that may have a material impact on the financial statements. |
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f. |
discuss earnings press releases, including the use of “proforma” or “adjusted” non-GAAP information,
as well as financial information and earnings guidance provided to analysts and rating agencies; provided, however, that the
Committee’s responsibility to discuss earnings releases as well as financial information and earnings guidance may be
done generally and may be limited to the types of information to be disclosed and the types of presentations to be made. |
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g. |
establish hiring policies for employees or former employees of the independent auditor. |
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h. |
review and oversee related party transactions. |
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i. |
establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting,
internal accounting controls or auditing matters, and for the confidential anonymous submission by the Corporation’s
employees of concerns regarding questionable accounting or auditing matters. |
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j. |
review disclosures made to the Committee by the Corporation’s CEO and CFO during their certification process for
the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material
weaknesses therein and any fraud involving management or other employees who have a significant role in the Corporation’s
internal controls. |
4. |
with respect to reporting and recommendations, |
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a. |
prepare any report or other disclosures, including any recommendation of the Committee, required by
the rules of the SEC to be included in the Corporation’s annual proxy statement. |
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b. |
review this Charter at least annually and recommend any changes to the Board. |
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c. |
report its activities to the full Board of Directors on a regular basis and make such recommendations with respect to
the above and other matters as the Committee may deem necessary or appropriate. |
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d. |
prepare and review with the Board an annual performance evaluation of the Committee, which evaluation must compare the
performance of the Committee with the requirements of this Charter. The performance evaluation by the Committee shall be conducted
in such manner as the Committee deems appropriate. The report to the Board may take the form of an oral report by the chairperson
of the Committee or any other member of the Committee designated by the Committee to make this report. |
Appendix B
NOMINATING AND CORPORATE GOVERNANCE
COMMITTEE CHARTER
FIRST HORIZON NATIONAL CORPORATION
(As Amended and Restated July 22, 2014)
Acting pursuant to Tennessee Code Annotated Section 48-18-206,
Article 11(b)(8) of the Corporation’s restated charter, as amended, and Section 3.5 of the Corporation’s bylaws, as
amended, the Board of Directors of First Horizon National Corporation hereby creates the Nominating and Corporate Governance Committee
(the “Committee”) of the Board of Directors, which shall serve as a nominating committee and as a corporate governance
committee for the Corporation, with such specific authority as is herein provided.
Purposes of the Committee
The purposes of the Committee are (1) to identify and recommend
to the Board individuals for nomination as members of the Board and its committees, (2) to develop and recommend to the Board
a set of corporate governance principles applicable to the Corporation, and (3) to oversee the evaluation of the Board and management.
Qualifications of Committee Members
The Committee shall be appointed annually by a majority of
the entire Board, upon recommendation of the Committee, and shall consist of at least three members of the Board, each of whom
is “independent” under the rules of the New York Stock Exchange (“NYSE”). Members of the Committee may
be replaced by the Board.
Operation of the Committee
Meetings shall be held at least two times yearly and may be
called at any time by the Committee Chairperson or by any two members of the Committee upon written or oral notice to a majority
of the Committee prior to the meeting. A quorum shall consist of a majority of the members, and the vote of the majority of the
members present at a meeting at which a quorum is present shall be the act of the Committee. Proceedings of the Committee over
the signature of a member in attendance shall be recorded in a minute book and reflect the names of those in attendance. The Chairperson
of the Committee, or acting Chairperson of the meeting, will present a report of the Committee activities to the full Board of
Directors at its next regularly scheduled meeting. The Secretary of the Board will permanently maintain the minutes of Committee
meetings. Meetings may be held jointly with a similar committee of First Tennessee Bank National Association (“Bank”)
if either the members of the Bank’s committee and the members of this Committee are identical or all of the members of the
Bank’s committee meet the independence requirements of the NYSE. The Committee may invite to its meetings such members of
management as it may deem desirable or appropriate. It will be the responsibility of the Committee to maintain free and open means
of communication between the directors and management of the Corporation.
The Committee shall have unrestricted access to Corporation
personnel and documents and shall have the resources and authority appropriate to discharge its duties and responsibilities, including
the authority to select, retain, terminate and approve the fees and other retention terms of special counsel or other experts
or consultants, as it deems appropriate, without seeking approval of the Board or management. The Committee shall have the authority
to retain consultants or search firms used to identify director candidates, including authority to approve the fees and other
retention terms. The Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee
of the Committee.
Duties and Responsibilities of the
Committee
The Committee is hereby delegated full authority with respect
to the following matters and such additional matters as may be provided in the bylaws of the Corporation or as the Board of Directors
may from time to time by resolution adopted by a majority of the entire Board specify:
1. |
With respect to the nominating function, |
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a. |
To consider recommendations to the Board from time to time
as to changes that the Committee believes to be desirable to the size of the Board or any committee thereof; |
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b. |
To identify individuals believed to be qualified to become
Board members, and to recommend to the Board the individuals to stand for election or reelection as directors. In the case
of a vacancy in the office of a director (including a vacancy created by an increase in the size of the Board), the Committee
shall recommend to the Board an individual to fill such vacancy either through appointment by the Board or through election
by shareholders. In nominating candidates, the Committee shall take into consideration such factors as it deems appropriate.
These factors may include: |
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• |
personal qualities and characteristics, experience, accomplishments
and reputation in the business community; |
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• |
current knowledge and contacts in the communities in which the Corporation
does business and in the Corporation’s industry or other industries relevant to the Corporation’s business; |
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• |
diversity of viewpoints, background, experience and other demographics;
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• |
ability and willingness to commit adequate time to Board and committee
matters; and |
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• |
the fit of the individual’s skills and personality with those
of other directors and potential directors in building a Board that is effective and responsive to its duties and responsibilities
and the needs of the Corporation. |
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The Committee may consider candidates proposed by management,
but is not required to do so; |
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c. |
To develop and recommend to the Board, in connection with
its assessment of director independence, guidelines to be applied in making determinations as to the absence of material relationships
between the Corporation and a director; |
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d. |
To identify Board members qualified to fill vacancies on
any committee of the Board (including the Committee) and to recommend that the Board appoint the identified member or members
to the respective committee. In nominating a candidate for committee membership, the Committee shall take into consideration
the factors set forth in the charter of the committee, if any, as well as any other factors it deems appropriate, including
without limitation the consistency of the candidate’s experience with the goals of the committee and the interplay of
the candidate’s experience with the experience of other committee members; and |
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e. |
To review, monitor and make recommendations to the Board
or management, as appropriate, with respect to any communications directed to the Corporation or one or more of the directors
relating to performance, nomination or removal of directors. |
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2. |
With respect to corporate governance and other matters, |
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a. |
To exercise oversight of the evaluation of the Board and
management; |
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b. |
To develop and recommend to the Board a set of corporate
governance principles applicable to the Corporation, to review and reassess those principles at least once a year, and recommend
any proposed changes to the Board for approval; and |
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c. |
To prepare and provide to the Board an annual performance
evaluation of the Committee, which evaluation shall compare the performance of the Committee with the requirements of this
Charter. The performance evaluation shall also recommend to the Board any improvements to the Committee’s Charter deemed
necessary or desirable by the Committee. The performance evaluation by the Committee shall be conducted in such manner as
the Committee deems appropriate. The report to the Board may take the form of an oral report by the chairperson of the Committee
or any other member of the Committee designated by the Committee to make this report. |
Appendix C
COMPENSATION COMMITTEE CHARTER
FIRST HORIZON NATIONAL CORPORATION
(As Amended and Restated July 22, 2014)
Acting pursuant to Tennessee Code Annotated Section 48-18-206,
Article 11(b)(8) of the Corporation’s restated charter, as amended, and Section 3.5 of the Corporation’s bylaws, as
amended, the Board of Directors of First Horizon National Corporation hereby creates the Compensation Committee (the “Committee”)
of the Board of Directors, which shall serve as a compensation committee for the Corporation, with such specific authority as
is herein provided. This Committee was known prior to January 20, 2004 as the Human Resources Committee, and all references to
the Human Resources Committee in any of the plans named in Section 8 herein shall be understood to refer to this Committee.
Purposes of the Committee
The purposes of the Committee are (1) to discharge the Board’s
responsibilities relating to the compensation of the Corporation’s executive officers, (2) to produce an annual report on
executive compensation for inclusion in the Corporation’s proxy statement, in accordance with the rules and regulations
of the Securities and Exchange Commission (“SEC”), (3) to identify and recommend to the Board individuals for appointment
as officers, (4) to evaluate the Corporation’s executive management, and (5) to carry out certain other duties set forth
herein.
Qualifications of Committee Members
The Committee shall be appointed annually by a majority of
the entire Board, upon recommendation of the Nominating and Corporate Governance Committee, and shall consist of at least three
members of the Board, each of whom is “independent” under the rules of the New York Stock Exchange (“NYSE”).
In addition, at least two members of the Committee must be directors of the Corporation who are “outside directors”
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, and at least two members of the Committee must
be directors of the Corporation who are “non-employee directors” for purposes of Section 16 of the Securities Exchange
Act of 1934. Only members who meet the Section 162(m) test may participate in decisions required to be made by “outside
directors” under Section 162(m), and any other member of the Committee must recuse himself or herself with respect to those
issues. Only members who meet the Section 16 test may participate in decisions required to be made by “non-employee directors”
under Section 16, and any other member of the Committee must recuse himself or herself with respect to those issues. Any member
may volunteer to recuse himself or herself if he or she believes his or her qualification under Section 162(m) or Section 16 may
be in doubt. In the event of any recusal for any of those reasons, the remaining members of the Committee would constitute “the
Committee” for the action in question for purposes of both this Charter and any applicable plan administered by the Committee,
provided that the Committee as so constituted for such action shall have at least two members. If a quorum of the Committee is
present in accordance with the requirements of the “Operation of the Committee” section of this Charter, then the
action taken by at least two “outside directors” (with respect to matters required to be acted upon by “outside
directors”) and the action taken by at least two “non-employee directors” (with respect to matters required
to be acted upon by “non-employee directors”) each shall be the valid action of this Committee and is fully authorized
by the Board of Directors, as long as such action is taken by a majority of the “outside directors” or a majority
of the “non-employee directors,” as applicable. Members of the Committee may be replaced by the Board.
Operation of the Committee
Meetings shall be held at least four times yearly and may
be called at any time by the Committee Chairperson or by any two members of the Committee upon written or oral notice to a majority
of the Committee prior to the meeting. A quorum shall consist of a majority of the members, and the vote of the majority of the
members present at a meeting at which a quorum is present shall be the act of the Committee. Proceedings of the Committee over
the signature of a member in attendance shall be recorded in a minute book and reflect the names of those in attendance. The Chairperson
of the
Committee, or acting Chairperson of the meeting, will present
a report of the Committee activities to the full Board of Directors at its next regularly scheduled meeting. The Secretary of
the Board will permanently maintain the minutes of Committee meetings. Meetings may be held jointly with a similar committee of
First Tennessee Bank National Association (“Bank”) if (i) the members of the Bank’s committee and the members
of this Committee are identical or (ii) all of the members of the Bank’s committee meet the independence requirements of
the NYSE. The Committee may invite to its meetings such members of management as it may deem desirable or appropriate, consistent
with the maintenance of the confidentiality of compensation discussions. The Corporation’s Chief Executive Office (“CEO”)
should not attend the portion of any meeting where the CEO’s performance or compensation is discussed, unless specifically
invited by the Committee. It will be the responsibility of the Committee to maintain free and open means of communication between
the directors and management of the Corporation.
The Committee shall have unrestricted access to Corporation
personnel and documents and shall have the resources and authority appropriate to discharge its duties and responsibilities, including
the authority to select, retain, terminate and approve the fees and other retention terms of special counsel or other experts
or consultants, as it deems appropriate, without seeking approval of the Board or management. The Committee shall have the authorities
enumerated below to fulfill the foregoing. The Committee may, in its discretion, delegate all or a portion of its duties, responsibilities,
and authorities to a subcommittee of the Committee.
Duties, Responsibilities, and Authorities
of the Committee
The Committee is hereby delegated full authority with respect
to the following matters and such additional matters as may be provided in the bylaws of the Corporation or as the Board of Directors
may specify from time to time by resolution adopted by a majority of the entire Board.
1. To adopt and amend, and to recommend to the Board as appropriate,
major corporate policies and objectives with respect to the Corporation’s compensation and management of its human resources.
2. To make regular reports to the Board and to provide a periodic
review, evaluation and reporting link between management and the Board with respect to the Corporation’s compensation and
management of its human resources.
3. To review periodically management’s human resources
policies, guidelines, procedures, and practices for conformity with corporate objectives and policies concerning the Corporation’s
compensation and management of its human resources, including a periodic review of compensation structures for non-executive officers.
4. To review and approve corporate goals and objectives relevant
to the compensation of the CEO, evaluate the performance of the CEO in light of those goals and objectives, and set the CEO’s
compensation level based on this evaluation.
5. To make recommendations to the Board concerning compensation
for directors.
6. To fix the compensation–including salary, bonus,
benefits, and other current, deferred, or retirement compensation including any severance or similar termination payments–of
executive officers, and to oversee the operation of the Corporation’s compensation plans, programs, and practices (collectively,
“plans”) for employees and directors.
7. To adopt and amend benefit plans and compensation plans,
including incentive compensation plans, applicable to executive officers but excluding the plans listed in 9 below.
8. To adopt and amend other employee benefit plans and compensation
plans but excluding the plans listed in 9 below, provided that the Committee’s authority hereunder is not exclusive so that
such plans may be adopted or amended by management consistent with explicit delegation or general Committee policy or practice.
9. To make recommendations to the Board concerning the adoption
or amendment of the following plans: the Pension Plan; the Pension Restoration Plan; the Savings Plan; the Savings Restoration
Plan; the Directors & Executives Deferred Compensation Plan; the First Horizon National Corporation Deferred Compensation
Plan; the First Horizon Deferred Compensation Plan; the terms and conditions of the change in control severance agreements offered
to executives and other officers from time to time; any
plan originally adopted by the Board which expressly provides
for amendment or administration solely by the Board; and any plan which involves the issuance of Corporation stock. The exclusion
of change in control severance agreements applies only to the terms and conditions of such agreements; the Committee is delegated
authority to select recipients and fix payment levels. The delegations in 7 and 8 are not exclusive and do not prevent the Board
from acting upon the matters covered therein; no such action by the Board shall diminish those delegations unless explicitly so
provided by the Board.
10. To serve as the Committee required:
|
a. |
by the terms of the 1990 Stock Option Plan and the 1995
and 1997 Employee Stock Option Plans; |
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b. |
by terms of the Directors & Executives Deferred Compensation Plan; |
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c. |
to resolve questions of interpretation arising under the Non-Employee
Directors’ Deferred Compensation Stock Option Plan and the 2000 Non-Employee Directors’ Deferred Compensation
Stock Option Plan; |
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d. |
by the terms of the Management Incentive Plan; |
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e. |
to review the appropriateness of the issuance of Corporation common
stock under the terms of the Savings Plan as required by resolutions of the Board as adopted from time to time; |
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f. |
to designate those eligible to participate in the Savings Restoration
Plan and the Survivor Benefit Plan; |
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g. |
by the terms of the 2002 Bank Director and Advisory Board Member Deferral
Plan, the Bank Director and Advisory Board Member Deferral Plan and the Bank Advisory Director Deferral Plan; |
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h. |
by the terms of the Equity Compensation Plan; and |
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i. |
by the terms of the First Horizon National Corporation Deferred Compensation
Plan and the First Horizon Deferred Compensation Plan. |
11. In consultation with management, to oversee regulatory
compliance with respect to compensation matters, including (a) overseeing the Corporation’s policies on structuring compensation
programs to maximize tax deductibility while retaining the discretion deemed necessary to compensate executive officers in a manner
commensurate with performance and the competitive market for executive talent, and (b) as and when required, establishing performance
goals and certifying that performance goals have been attained for purposes of Section 162(m) of the Internal Revenue Code.
12. To produce annually a report of the Committee for inclusion
in the Corporation’s proxy statement in accordance with applicable SEC rules and regulations, or as required by NYSE rule
or any other applicable law or regulation, and to approve or recommend to the Board, as appropriate, other disclosures or vote
items in the proxy statement as required by such rules, regulations, or laws.
13. To assess recommendations from management and make recommendations
to the Board regarding the creation of executive corporate offices, regarding how to define the authority and responsibility of
such offices, and concerning nominees to fill such offices; to create non-executive corporate offices and define the authority
and responsibility of such offices, except to the extent such authority or responsibility would not be consistent with the law,
the charter, or the bylaws; to appoint persons to any office of the Corporation except Chairman of the Board, Chief Executive
Officer, President, Chief Audit Executive, Secretary, and any office the incumbent in which is designated by the Board as an Executive
Officer; and, to remove from office any person that was, or could have been, so appointed by the Committee.
14. To review and approve recommendations from management
and recommend Board approval regarding the appointment of incumbent officers, including consideration of their performance in
determining whether to nominate them for reelection, and to review succession plans for executive officers, including the CEO.
15. To review, monitor, and make recommendations to the Board
or management, as appropriate, with respect to any communications directed to the Corporation or one or more of the directors
relating to performance, nomination or removal of officers.
16. To establish, amend, rescind, and oversee the administration
of stock ownership guidelines applicable to the Corporation’s officers, including its Executive Officers, and its directors;
and, to operate any such guidelines in conjunction with one or more compensatory plans and programs.
17. To evaluate performance of the Corporation’s executive
officers and review that performance with the Board.
18. To prepare and provide to the Board an annual performance
evaluation of the Committee, which evaluation shall compare the performance of the Committee with the requirements of this Charter.
The performance evaluation shall also recommend to the Board any improvements to this Charter deemed necessary or desirable by
the Committee. The performance evaluation by the Committee shall be conducted in such manner as the Committee deems appropriate.
The report to the Board may take the form of an oral report by the chairperson of the Committee or any other member of the Committee
designated by the Committee to make this report.
19. To serve as the committee required by the Bylaws and resolutions
of the Corporation to be responsible for and with authority to make and record all requests of directors, officers, and employees
of the Corporation, or any of its subsidiaries, to serve other business entities at the Corporation’s request and to be
indemnified against liability arising from such service.
20. To review compliance with the Management Interlocks Acts
and approve indemnification for officers and directors.
21. To retain or obtain, in its sole discretion, the advice
of a compensation consultant, legal counsel, or other adviser (collectively, “adviser”), which adviser may but need
not be independent of management, to assist the Committee in any respect that the Committee determines to be appropriate.
22. To be directly responsible for the appointment, compensation
and oversight of the work of any adviser retained by the Committee.
23. To require and obtain from the Corporation appropriate
funding, as determined by the Committee, for payment of reasonable compensation to and expenses of any adviser retained by the
Committee.
24. To select an adviser to the Committee only after taking
into consideration all factors relevant to that person’s independence from management, including the following:
|
A. |
the provision of other services to the Corporation by the
person that employs the adviser (the “adviser’s firm”); |
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B. |
the amount of fees received from the Corporation by the adviser’s
firm, as a percentage of the total revenue of the adviser’s firm; |
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C. |
the policies and procedures of the adviser’s firm that are designed
to prevent conflicts of interest; |
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D. |
any business or personal relationship of the adviser with a member of
the Committee; |
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E. |
any stock of the Corporation owned by the adviser; and |
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F. |
any business or personal relationship of the adviser or the adviser’s
firm with an executive officer of the Corporation. |
25. To oversee the Corporation’s compliance with all
applicable laws and regulations relating to (i) appropriate management of the risks associated with incentive compensation programs
or arrangements or (ii) public, regulatory, or other reporting associated with such risks, programs, or arrangements.
26. To oversee the Corporation’s compliance with all
applicable laws and regulations relating to the compensation of the Corporation’s executive officers or to public, regulatory,
or other reporting associated with such compensation.
ANNUAL MEETING
April 28, 2015
10:00 a.m. Central time
FIRST TENNESSEE BUILDING
M-Level Auditorium
165 Madison Avenue
Memphis, TN 38103
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND
VOTING INSTRUCTION CARD FOR
FIRST HORIZON NATIONAL CORPORATION SAVINGS PLAN (“Plan”) |
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Shareholders of Record: The undersigned appoints George P.
Lewis and Lewis R. Donelson, or any one or both of them with full power of substitution, as proxy or proxies, to represent and
vote all shares of stock standing in my name on the books of the corporation at the close of business on February 27, 2015, which
I would be entitled to vote if personally present at the annual meeting of shareholders of First Horizon National Corporation,
to be held in the auditorium of the First Tennessee Building, 165 Madison Avenue, Memphis, Tennessee, on April 28, 2015, at 10
a.m. Central time or any adjournments thereof, upon the matters set forth in the notice of said meeting as stated on the reverse
side. The proxies are further authorized to vote in their discretion as to any other matters which may come before the meeting.
The board of directors, at the time of preparation of the proxy statement, knows of no business to come before the meeting other
than that referred to in the proxy statement.
Plan Shareholders: Under the terms of the Plan, each participant
having funds allocated to the FHNC Stock Fund is entitled to instruct State Street Bank and Trust Company, plan trustee effective
April 1, 2015 (“Plan Trustee”), as to the manner in which to vote the shares of First Horizon common stock held in
the FHNC Stock Fund represented by the participant’s interest therein as of February 27, 2015 (the record date for the annual
meeting of shareholders). The purpose of this instruction card is for the participant to give instructions to the Plan Trustee
as to how to vote such shares in connection with the annual meeting of shareholders of First Horizon National Corporation to be
held in the Auditorium of the First Tennessee Building, 165 Madison Avenue, Memphis, Tennessee, on April 28, 2015, at 10 a.m. Central
time or any adjournments thereof, upon the matters set forth in the notice of said meeting as stated on the reverse side and also
on any other matters that may come before the meeting. The undersigned hereby directs the Plan Trustee to vote the shares of FHNC
common stock in the FHNC Stock Fund represented by the undersigned’s interest therein as specified on the reverse side.
THE SHARES COVERED BY THIS
PROXY/INSTRUCTION CARD WILL BE VOTED IN ACCORDANCE WITH THE AUTOMATED TELEPHONE VOTING INSTRUCTIONS, THE INTERNET VOTING
INSTRUCTIONS, OR THE INSTRUCTIONS GIVEN ON THE REVERSE SIDE. WHEN NO INSTRUCTIONS ARE GIVEN, SHARES HELD OF RECORD THAT ARE
COVERED BY THIS CARD WILL BE VOTED, IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS, FOR VOTE ITEMS
1, 2 AND 3, AND SHARES HELD IN THE PLAN THAT ARE COVERED BY THIS CARD WILL BY VOTED BY THE PLAN TRUSTEE IN THE SAME
PROPORTION AS ALL OTHER PLAN SHARES AS TO WHICH INSTRUCTIONS ARE RECEIVED BY THE PLAN TRUSTEE. ALL THE VOTE ITEMS ARE
DESCRIBED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING AND PROXY STATEMENT AND ON THE REVERSE SIDE OF THIS CARD.
YOU CAN VOTE BY TELEPHONE, OVER THE INTERNET, OR BY SIGNING AND
RETURNING THIS CARD AS DIRECTED ON THE REVERSE SIDE.
Vote by Internet, Telephone or Mail
There are three ways to vote. Internet or telephone
voting is available 24 hours a day, 7 days a week.
Your phone or Internet vote authorizes the named
proxies and/or the Plan Trustee to vote
your shares in the same manner as if you had marked, signed and returned this card.
You will need the last four digits of your Social Security or Tax ID number to vote your shares on the Internet or by phone.
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INTERNET |
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TELEPHONE |
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MAIL |
www.proxypush.com/fhn |
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1-866-883-3382 |
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Mark,
sign and date this card and return
it in the postage-paid envelope provided
or mail to Shareowner Services, P.O. Box
64873,
St. Paul, MN 55164-0873. |
Use the Internet to vote your shares
until 11:59 p.m. (CT) on
April 26, 2015
(for Plan shares) or April 27, 2015
(for all other shares). |
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Use any touch-tone telephone to
vote your shares until 11:59 p.m.
(CT) on
April 26, 2015 (for Plan shares) or
April 27, 2015 (for all other shares). |
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If you vote by Internet or by telephone, you do NOT need to mail
back this card.
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Shareowner Services |
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P.O. Box 64945 |
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St. Paul, MN 55164-0945 |
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Address Change? Mark box, sign, and indicate changes below: c |
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TO VOTE BY INTERNET OR TELEPHONE, SEE REVERSE SIDE OF THIS CARD. |
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The Board of Directors
unanimously recommends a vote FOR Items 1, 2 and 3.
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1. |
Election of twelve directors to serve until the 2016 Annual Meeting of Shareholders: |
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FOR |
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AGAINST |
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ABSTAIN |
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FOR |
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AGAINST |
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ABSTAIN |
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01 |
Robert B. Carter |
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c |
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c |
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c |
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07 |
R. Brad Martin |
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c |
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c |
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c |
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02 |
John C. Compton |
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c |
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c |
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c |
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08 |
Scott M. Niswonger |
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c |
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c |
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c |
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Please
fold here – Do not separate |
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03 |
Mark A. Emkes |
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c |
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c |
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c |
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09 |
Vicki R. Palmer |
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c |
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c |
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04 |
Corydon J. Gilchrist |
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c |
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c |
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c |
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10 |
Colin V. Reed |
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c |
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c |
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c |
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05 |
Vicky B. Gregg |
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c |
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c |
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c |
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11 |
Cecelia D. Stewart |
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c |
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c |
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c |
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06 |
D. Bryan Jordan |
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c |
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c |
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c |
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12 |
Luke Yancy III |
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c |
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c |
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c |
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2. |
Approval of an advisory resolution to approve executive compensation |
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c |
For |
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Against |
c |
Abstain |
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3. |
Ratification of appointment of KPMG LLP as auditors |
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c |
For |
c |
Against |
c |
Abstain |
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THE UNDERSIGNED
HEREBY ACKNOWLEDGES RECEIPT OF NOTICE OF SAID MEETING AND THE RELATED PROXY STATEMENT. |
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Date |
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,
2015 |
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Signature(s) in Box |
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Shareholders sign here exactly as shown on the imprint on this card. When signing as Attorney,
Executor, Administrator, Trustee or Guardian, please give full name. If more than one Trustee, all should sign. All Joint
Owners should sign. |
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