# EDGAR Filing Document

**Accession Number:** 0001073299
**File Stem:** 0001073299-23-000001
**Filing Date:** 2023-2
**Character Count:** 43370
**Document Hash:** c088babff7de238a8576b262c9cad5f3
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001073299-23-000001.hdr.sgml**: 20230227

**ACCESSION NUMBER**: 0001073299-23-000001

**CONFORMED SUBMISSION TYPE**: X-17A-5

**PUBLIC DOCUMENT COUNT**: 2

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230227

**DATE AS OF CHANGE**: 20230227

**EFFECTIVENESS DATE**: 20230227

**PERIOD START**: 20220101

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** FHN FINANCIAL SECURITIES CORP.
- **CENTRAL INDEX KEY:** 0001073299
- **IRS NUMBER:** 621758945
- **STATE OF INCORPORATION:** TN
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** X-17A-5
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 008-51393
- **FILM NUMBER:** 23671532

**BUSINESS ADDRESS:**
- **STREET 1:** 1000 RIDGEWAY LOOP ROAD SUITE 200
- **CITY:** MEMPHIS
- **STATE:** TN
- **ZIP:** 38120
- **BUSINESS PHONE:** 212-418-5003

**MAIL ADDRESS:**
- **STREET 1:** 1000 RIDGEWAY LOOP ROAD
- **STREET 2:** SUITE 200
- **CITY:** MEMPHIS
- **STATE:** TN
- **ZIP:** 38120

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** FTN FINANCIAL SECURITIES CORP
- **DATE OF NAME CHANGE:** 20020923

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** FIRST TENNESSEE SECURITIES CORPORATION
- **DATE OF NAME CHANGE:** 20020502

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** FIRST TENNESSEE SECURITIES CORP                         /BD
- **DATE OF NAME CHANGE:** 20020502

### Attached PDF Documents

**Attachment 1:** `2022_FHNFSCPublic2.pdf`

# **FHN FINANCIAL SECURITIES CORP.**  
(A Wholly Owned Subsidiary of  
First Horizon Bank)

Statement of Financial Condition

December 31, 2022

(With Reports of Independent Registered Public Accounting Firm Thereon)

# UNITED STATES

# SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

OMB APPROVAL

OMB Number: 3235-0123

Expires: Oct. 31, 2023

Estimated average burden

hours per response: 12

# ANNUAL REPORTS

# FORM X-17A-5

# PART III

SEC FILE NUMBER

8-51393

# FACING PAGE

Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934

FILING FOR THE PERIOD BEGINNING 01/01/2022 AND ENDING 12/31/2022

MM/DD/YY

MM/DD/YY

# A. REGISTRANT IDENTIFICATION

NAME OF FIRM: FHN Financial Securities Corp

TYPE OF REGISTRANT (check all applicable boxes):

☑ Broker-dealer

☐ Security-based swap dealer

☐ Major security-based swap participant

☐ Check here if respondent is also an OTC derivatives dealer

ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.)

1000 Ridgeway Loop Rd, Ste 200

(No. and Street)

Memphis

TN

38120

(City)

(State)

(Zip Code)

PERSON TO CONTACT WITH REGARD TO THIS FILING

Donald A Ritcheson

901-435-8014

don.ritcheson@fhnfinancial.com

(Name)

(Area Code - Telephone Number)

(Email Address)

# B. ACCOUNTANT IDENTIFICATION

INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*

KPMG LLP

(Name - if individual, state last, first, and middle name)

6070 Poplar Ave, Suite 450

Memphis

TN

38119

(Address)

(City)

(State)

(Zip Code)

10/20/2003

185

(Date of Registration with PCAOB)(if applicable)

(PCAOB Registration Number, if applicable)

# FOR OFFICIAL USE ONLY

* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable.

Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

# OATH OR AFFIRMATION

I, Donald A Ritcheson, swear (or affirm) that, to the best of my knowledge and belief, the financial report pertaining to the firm of FHN Financial Securities Corp, as of 12/31, 2022, is true and correct. I further swear (or affirm) that neither the company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer.

![img-0.jpeg](img-0.jpeg)

![img-1.jpeg](img-1.jpeg)

My Commission Expires June 17, 2026

This filing** contains (check all applicable boxes):

☑ (a) Statement of financial condition.
☑ (b) Notes to consolidated statement of financial condition.
☐ (c) Statement of income (loss) or, if there is other comprehensive income in the period(s) presented, a statement of comprehensive income (as defined in § 210.1-02 of Regulation S-X).
☐ (d) Statement of cash flows.
☐ (e) Statement of changes in stockholders' or partners' or sole proprietor's equity.
☐ (f) Statement of changes in liabilities subordinated to claims of creditors.
☐ (g) Notes to consolidated financial statements.
☐ (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable.
☐ (i) Computation of tangible net worth under 17 CFR 240.18a-2.
☐ (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3.
☐ (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable.
☐ (l) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3.
☐ (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3.
☐ (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable.
☐ (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist.
☐ (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition.
☑ (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable.
☐ (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
☐ (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
☑ (t) Independent public accountant's report based on an examination of the statement of financial condition.
☐ (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable.
☐ (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
☐ (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
☐ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12, as applicable.
☐ (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k).
☐ (z) Other:

**To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable.

KPMG LLP
Triad Centre III
Suite 450
6070 Poplar Avenue
Memphis, TN 38119-3901

# Report of Independent Registered Public Accounting Firm

To the Stockholder and the Board of Directors
FHN Financial Securities Corp.:

# Opinion on the Financial Statement

We have audited the accompanying statement of financial condition of FHN Financial Securities Corp. (the Company) as of December 31, 2022, and the related notes (collectively, the financial statement). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2022, in conformity with U.S. generally accepted accounting principles.

# Basis for Opinion

This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.

We have served as the Company's auditor since 2002.

Memphis, Tennessee
February 24, 2023

KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

# Statement of Financial Condition

December 31, 2022

CONFIDENTIAL

# **Assets**

| Cash and cash equivalents | $44,475,330 |
| --- | --- |
| Cash segregated for regulatory purposes | 3,000,000 |
| Securities owned, at fair value | 128,972,086 |
| Securities purchased under agreements to resell | 41,470,000 |
| Securities borrowed | 59,371,390 |
| Receivable from customers | 85,669 |
| Receivable from brokers and dealers | 1,251,403 |
| Receivable from clearing organizations | 9,082,310 |
| Accrued interest receivable | 1,199,848 |
| Furniture, fixtures, and equipment, net | 2,117 |
| Other assets | 2,298,283 |
| Total assets | $291,208,436 |

# **Liabilities and Stockholder's Equity**

| Securities sold, not yet purchased, at fair value | $104,549,093 |
| --- | --- |
| Payable to customers | 284,212 |
| Payable to brokers and dealers | 3,543,785 |
| Payable to clearing organizations | 2,048 |
| Payable to affiliate, net | 533,875 |
| Accrued interest payable | 1,024,003 |
| Accrued compensation and benefits | 2,044,867 |
| Long-term secured borrowing | 1,668,460 |
| Deferred tax liability, net | 133,590 |
| Other accrued expenses | 175,871 |
| Total liabilities | 113,959,804 |

Commitments and contingencies (see note 12)

Stockholder's equity:

| Common stock, $1 par value per share. Authorized, issued, and outstanding 1,000 shares | 1,000 |
| --- | --- |
| Additional paid-in capital | 118,606,647 |
| Retained earnings | 60,624,790 |
| Accumulated other comprehensive loss, net | (1,983,805) |
| Total stockholder's equity | 177,248,632 |
| Total liabilities and stockholder's equity | $291,208,436 |

See accompanying notes to the financial statement.

2

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

# **(1) Organization and Significant Accounting Policies**

# **(a) Organization and Operations**

FHN Financial Securities Corp. (the Company), a Tennessee corporation, was formed on October 30, 1998, to act as an underwriter, broker, and dealer of certain debt and equity instruments, including corporate and municipal bonds, government and government agency securities, mortgage-backed securities, common and preferred stocks, and other asset-backed securities, and derivatives thereof. The Company is also permitted to engage in investment banking services. The Company was capitalized on January 19, 1999 as, and continues to be, a wholly owned subsidiary of First Horizon Bank (FHB), which is a wholly owned subsidiary of First Horizon Corporation (FHC).

The Company is registered as a securities dealer with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and various state agencies and is a member of the Municipal Securities Rulemaking Board (MSRB). As such, the Company is subject to the rules and regulations of these federal and state regulatory agencies. As a subsidiary of a bank holding company, the Company is also subject to oversight by the Federal Reserve.

The Company is a self-clearing broker/dealer and transacts business with non-broker/dealer customers in delivery versus payment/receipt versus payment accounts, but does not custody funds or securities on behalf of such customers.

On February 27, 2022, FHC, the ultimate parent company of FHN Financial Securities Corp. entered into a Merger Agreement and Plan of Merger with The Toronto-Dominion Bank, a Canadian chartered bank (“TD”), with TD Bank US Holding Company, a Delaware corporation and indirect, wholly owned subsidiary of TD (“TD-US”), and with a subsidiary of TD-US. The agreement is subject to regulatory approvals, approval by the shareholders of FHN and of TD, and other customary conditions.

# **(b) Use of Estimates**

The preparation of the financial statement in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement. Actual results could differ from those estimates.

On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to fair value measurements and income taxes. These estimates and assumptions are based on management’s best estimates and judgments. Management adjusts such estimates and assumptions when facts and circumstances dictate. The Company bases its estimates on historical experience and the current economic environment and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis

3

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Fair value measurements are potentially subject to material changes in the near term. Actual results could differ significantly from those estimates.

# **(c) *Cash and Cash Equivalents and Cash Segregated for Regulatory Purposes***

Cash and cash equivalents as presented in the statement of financial condition include cash on hand and due from banks and exclude cash segregated for regulatory purposes. The Company segregates cash for regulatory purposes which includes cash on deposit in a special bank account for the exclusive benefit of customers pursuant to SEC Rule 15c3-3.

# **(d) *Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase and Securities Borrowed***

The Company purchases short-term securities under agreements to resell which are accounted for as collateralized financings. Securities delivered under these transactions are delivered to the Company’s custody account at the Federal Reserve Board. Securities sold under agreements to repurchase are secured borrowings which are accounted for as collateralized financings. Securities purchased under agreements to resell and securities sold under agreements to repurchase consist primarily of U.S. government securities.

The Company utilizes securities borrowing arrangements as part of its trading operations. Securities borrowing transactions generally require the Company to deposit cash with the securities lender. The amount of cash advanced is recorded within Securities Borrowed in the statement of financial condition. These transactions are not considered purchases and the securities borrowed are not recognized by the Company. The Company does not conduct securities lending transactions. Securities borrowed consist primarily of corporate bonds.

Collateral is valued daily and the Company may require counterparties to deposit additional securities or cash as collateral, or the Company may return cash or securities previously pledged by counterparties, or the Company may be required to post additional securities or cash as collateral, based on the contractual requirements for these transactions.

Securities purchased under agreements to resell and securities borrowing arrangements are evaluated for credit risk each reporting period. The Company applies the practical expedient based on collateral maintenance provisions in estimating an allowance for credit losses

# **(e) *Furniture, Fixtures, and Equipment, net***

Furniture, fixtures, and equipment consist of, office furniture and fixtures, computer equipment, and other electronic data processing equipment.

# **(f) *Securities Transactions***

Securities transactions are recorded on a trade date basis, as if they had settled.

4

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

Securities owned and securities sold, not yet purchased are recorded at fair value.

# **(g) *Derivative Instruments***

The Company buys and sells securities for resale to customers. When these securities settle on a delayed basis, they are considered forward contracts as free-standing derivative instruments. For these free-standing derivative instruments, they are recorded in securities owned, at fair value, and securities sold, not yet purchased, at fair value. Fair value is defined as the amount the Company would receive or pay in the market to replace the derivative as of the valuation date. Fair value is determined using available market information and appropriate valuation methodologies, including recent transactions, quoted prices and reference to prices for similar securities. Credit risk related to these transactions is controlled through credit approvals, risk control limits, and ongoing monitoring procedures.

# **(h) *Summary of Accounting Changes***

In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides several optional expedients and exceptions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The provisions of ASU 2020-04 primarily affect 1) contract modifications (e.g., loans, leases, debt, and derivatives) made in anticipation that a reference rate (e.g., LIBOR) will be discontinued and 2) the application of hedge accounting for existing relationships affected by those modifications. The provisions of ASU 2020-04 are effective upon release and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by ASU 2020-04 do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. FHN Financial Securities Corp. noted no contracts were affected by the rate reform. Adoption resulted in no impacts to the Company’s financial statement.

# **(i) *Subsequent Events***

In connection with the preparation of the financial statement and in accordance with Accounting Standards Codification (“ASC”) 855, *Subsequent Events*, the Company has evaluated subsequent events through February 24, 2023, which was the date the financial statement was available to be issued, and concluded that no subsequent events have occurred that would require recognition in the financial statement or disclosure in the notes to the financial statement.

5

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

# **(2) Income Taxes**

The Company is included in the consolidated tax return of FHC. Income taxes are calculated by using a “separate return” method. Under this method, the Company calculates taxes as if a separate return is filed with the tax authority, thereby paying the applicable tax to or receiving the appropriate refund from FHC pursuant to a tax-sharing agreement. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. The Company provides for deferred taxes on temporary differences and on any carryforwards that could be claimed on a hypothetical return and assesses the need for a valuation allowance on the basis of the projected separate return results.

The components of deferred income taxes in the accompanying statement of financial condition at December 31, 2022 are as follows:

| Deferred tax assets: |  |
| --- | --- |
| Deferred tax on minimum pension liability | $616,114 |
| Other | 403 |
| Gross deferred tax assets | 616,517 |
| Deferred tax liabilities: |  |
| Employee benefits | 621,128 |
| Prepaid expenses | 128,979 |
| Gross deferred tax liabilities | 750,107 |
| Net deferred tax liability | $133,590 |

A valuation allowance is required for deferred tax assets if, based on available evidence, it is more likely than not that all or some portion of the asset may not be realized due to the inability to generate sufficient taxable income in the period and/or of the character necessary to utilize the benefit of the deferred tax asset. Management has concluded that the realization of the deferred tax asset is more likely than not as a result of the Company’s expected ability to generate sufficient taxable income in future periods to utilize the benefit of the deferred tax assets. Accordingly, there was no valuation allowance as of December 31, 2022.

ASC 740, *Income Taxes*, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely than-not” to be sustained by the taxing authority. This section also provides guidance on the derecognition, measurement, and classification of income tax uncertainties in interim periods. As of December 31, 2022, the Company had no unrecognized tax benefits related to federal or state income tax matters. With few exceptions, the Company is no longer subject to federal or state and local tax examinations by tax authorities for years before 2016.

6

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

# **(3) Receivable from and Payable to Customers, Brokers and Dealers, and Clearing Organizations**

Receivable from and payable to customers and brokers and dealers consist primarily of securities failed to deliver, securities failed to receive, and securities transactions which have yet to reach their settlement date. The amount receivable from clearing organizations consists of receivables from and deposits with various clearing organizations. The Company's trades are cleared through a clearing organization and settled between the clearing organization or the counterparty and the Company. Because trades generally settle two days after trade date, the amount of unsettled credit exposures is limited to the amount owed the Company for a very short period of time. The Company continually reviews the credit quality of its counterparties. Amounts receivable from and payable to customers, brokers and dealers and clearing organizations at December 31, 2022 consist of the following:

|  | Receivable | Payable |
| --- | --- | --- |
| Securities failed to deliver/receive - brokers and dealers | $1,030,995 | 551,402 |
| Net pending trades receivable/payable - brokers and dealers | - | 2,808,674 |
| Other - brokers and dealers | 220,408 | 183,709 |
| Brokers and dealers subtotal | 1,251,403 | 3,543,785 |
| Securities failed to deliver/receive - customer | 85,669 | 284,212 |
| Customer subtotal | 85,669 | 284,212 |
| Receivable from/payable to clearing organizations | 9,082,310 | 2,048 |
| Total | $10,419,382 | 3,830,045 |

# **(4) Securities Owned and Securities Sold, Not Yet Purchased**

As of December 31, 2022, securities owned and securities sold, not yet purchased consist of trading securities at fair value as follows:

|  | Securities owned | Securities sold, not yet purchased |
| --- | --- | --- |
| Corporate obligations | $92,193,880 | 58,076,289 |
| U.S. government and agency obligations | 36,582,627 | 46,472,804 |
| Equity and other securities | 195,579 | - |
| Total | $128,972,086 | 104,549,093 |

7

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of
First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

# **(5) Fair Value of Assets and Liabilities**

In accordance with ASC 820, *Fair Value Measurements and Disclosures*, the Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which such assets and liabilities are traded and the reliability of the inputs used to determine fair value. This hierarchy requires the Company to maximize the use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Each fair value measurement is placed into the proper level based on the lowest level of significant input. The levels are:

- Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.
- Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
- Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models, and similar techniques.

The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The best evidence of fair value is a quoted price in an active market. If listed prices or quotations are not available, fair value is determined by reference to prices for similar instruments, quoted prices or recent transactions in less active markets, or internally developed prices that primarily use as inputs market-based or independently sourced parameters, including, but not limited to, interest rates, volatilities, debt prices, credit curves and funding rates.

Fair value of assets and liabilities measured on a recurring basis are as follows:

|  | December 31, 2022 |  |  |  |
| --- | --- | --- | --- | --- |
|  | Total | Level 1 | Level 2 | Level 3 |
| Securities owned | $128,972,086 | - | 128,972,086 | - |
| Securities sold, not yet purchased | 104,549,093 | - | 104,549,093 | - |

The Company did not fair value any assets or liabilities on a nonrecurring basis at December 31, 2022.

8

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

# ***Level Changes in Fair Value Measurements***

For the year ended December 31, 2022, there were no transfers between levels.

# ***Other Fair Value Disclosures***

The following represent financial instruments which are not carried at fair value on the statement of financial condition. If the following instruments were carried at fair value and categorized using the above fair value hierarchy, these items would be considered level 2 for purposes of ASC 820, except for cash and cash equivalents and cash segregated for regulatory purposes, which would be considered level 1 for purposes of ASC 820.

*Short-Term Financial Instruments:* The carrying value of short-term financial instruments, including cash and cash equivalents, cash segregated for regulatory purposes, repurchase agreements, reverse repurchase agreements and securities borrowed are recorded at amounts that approximate the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates.

*Receivables and Other Assets:* Receivables from customers, brokers and dealers and clearing organizations, other receivables and certain other assets are recorded at amounts that approximate fair value due to their short-term expected maturities.

*Payables:* Payables to customers, brokers and dealers, clearing organizations and certain other liabilities are recorded at amounts that approximate fair value due to their short-term expected maturities.

# **(6) Securities Purchased Under Agreements to Resell, Securities Borrowed and Related Collateral Arrangements**

The Company enters into purchases of securities under agreements to resell and securities borrowed transactions, which are reflected as assets on the statement of financial condition. The Company has accepted securities, which it is permitted to repledge or sell, as collateral for securities purchased under agreements to resell and securities borrowed transactions. At December 31, 2022, securities with a fair value totaling $41,415,354 were purchased under agreements to resell at prices totaling $41,470,000; and the Company deposited cash in the amount of $59,371,390 and accepted as collateral securities with a fair value of $57,903,817 under securities borrowing arrangements. At December 31, 2022, the fair value of the above described collateral, including accrued interest, was $99,319,171, of which $96,872,986 had been repledged or sold by the Company. The collateral is primarily received from other brokers and dealers and is used by the Company to settle related securities sold, not yet purchased transactions to hedge its long inventory position.

9

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

# **(7) Securities Sold Under Agreements to Repurchase**

The Company enters into sales of securities under agreements to repurchase, with the obligation to repurchase the securities sold reflected as a liability on the statement of financial condition. At December 31, 2022, there were no securities sold under agreements to repurchase.

# **(8) Short-Term Secured Borrowing**

The Company has a line of credit with FHB, which has a maximum principal balance of $225 million, and which is subject to annual renewal. As of December 31, 2022 the loan balance on the Company's revolving line of credit with FHB was zero. The line of credit, when extended bears interest at a variable rate, which is based on FHB's base commercial rate less 2.43% (5.07% as of December 31, 2022). Based on the terms of the related security agreement, collateral of up to 130% of the outstanding principal balance is required to be pledged. The collateral percentage may vary based on the mix of the security inventory. The line of credit has a maturity date of June 24, 2023.

The Company also has a line of credit with a third party, which has a committed balance of $50 million and an uncommitted balance of $150 million, which is subject to annual renewal. As of and during the year-end December 31, 2022, the loan balance on the Company's revolving line of credit was zero. The line of credit, when extended, bears interest at a variable rate, which is based on the greater of (i) the upper limit of the Fed Funds target range, (ii) 1-month Term SOFR + 0.11448%, and (iii) 0.25%) plus 100 basis points. The Company posts collateral of corporate bonds as security for the outstanding short-term borrowing. The line of credit has a maturity date of August 2, 2023.

# **(9) Transactions with Related Parties**

FHB and FHC provide the Company certain accounting, technology, administrative, audit, and legal functions for a fee payable monthly, pursuant to various administrative services agreements between the Company and FHB and FHC. In addition, the Company uses office space and furniture and fixtures of FHB.

Salaries and other compensation for certain dual-registered employees that incur time related to both Company and FHB operating activities are allocated based on established policies and procedures.

Employees of the Company participate in certain benefit programs sponsored by FHB or FHC, including a defined benefit pension plan, a contributory savings plan, and a postretirement medical plan, as well as medical and group life insurance plans. A portion of the cost of these benefit programs has been allocated to the Company based upon the number of employees, salary levels, and other relevant measures. The actuarial and plan asset information pertaining to the employees of the Company is not segregated in FHB or FHC pension and postretirement calculations and is therefore not available.

Certain employees of the Company participate in the Equity Compensation Plan of FHC and have received restricted stock and/or restricted share units issued under this plan as part of their aggregate

10

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

compensation. Unvested awards have service conditions which must be met in order for the shares/units to vest. Awards generally have service-vesting conditions, meaning that the employee must remain employed by FHN for a certain period in order for the award to vest.

Occasionally, the Company enters into fixed-income securities trades with FHB at current market value.

As of December 31, 2022, $44,467,911 of the Company’s cash and cash equivalents is held in a noninterest bearing checking account with FHB.

As of December 31, 2022, the Company had a payable balance of $533,875 to FHB consisting of current income taxes payable of $86,010 and accrued compensation and other expenses payable of $447,865. There are no specific repayment terms related to this payable, but all related-party transactions are settled periodically throughout the year.

The transactions with FHB and FHC described above and the effect thereof on the accompanying financial statement may not necessarily be indicative of the effect that might have resulted from dealing with nonaffiliated parties.

# **(10) Furniture, Fixtures, and Equipment, net**

Furniture, fixtures, and equipment, consist of the following at December 31, 2022:

| Furniture, fixtures, and equipment | $ | 8,053 |
| --- | --- | --- |
| Communications and computer equipment |  | 11,250 |
|  |  | 19,303 |
| Less accumulated depreciation and amortization |  | (17,186) |
|  | $ | 2,117 |

# **(11) Regulatory Requirements**

The Company is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital, as defined. The Company has elected to use the alternative method permitted by this rule, which requires that minimum net capital be maintained at the greater of $1,000,000 or 2% of aggregate debit items computed in accordance with the formula for determination of reserve requirements pursuant to Rule 15c3-3 of The Securities Exchange Act of 1934 (the Act), as defined. At December 31, 2022, the Company’s net capital, as defined, totaled $116,750,118, which was $115,750,118 greater than its required net capital of $1,000,000.

In accordance with Rule 15c3-3 of the Act, as required, the Company segregates certain funds or qualified securities in accounts designated for the exclusive benefit of customers. Based on the computation for determination of reserve requirement at December 31, 2022, $19,514 was required to

11

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

be segregated; however, the Company chose to segregate $3,000,000 of cash for the exclusive benefit of customers.

# **(12) Commitments and Contingencies**

Some contracts that the Company enters into in the normal course of business include indemnification provisions that obligate the Company to make payments to the counterparty or others if certain events occur. The indemnification clauses are often standard contractual terms and were entered into in the normal course of business based on an assessment that the risk of loss would be remote. Since there are no stated or notional amounts included in the indemnification clauses and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur, the Company is not able to estimate the maximum potential amount of future payments under these indemnification clauses. There are no amounts reflected on the statement of financial condition as of December 31, 2022 related to these indemnifications.

The Company is a party to financial instruments and commitments in the normal course of business to conduct trading activities with customers and broker/dealers, and manage market risks. These financial instruments and commitments include forward commitments to purchase and sell securities, securities sold not yet purchased, securities purchased and sold on a when-issued basis (when-issued securities), and firm underwriting commitments. These instruments and commitments involve, to varying degrees, elements of credit and market risk. Credit risk is the possibility that a loss may occur because a party to a transaction fails to perform according to the terms of the contract or the creditworthiness of the issuer of a security declines. Market risk is the possibility that a change in interest rates will cause an unfavorable change in the value of a financial instrument.

The Company controls the credit risk arising from these instruments and commitments through its credit approval process and through the use of risk control limits and monitoring procedures. It evaluates each issuer's, customer's or other broker/dealer's creditworthiness on a case-by-case basis. If collateral is deemed necessary to reduce credit risk, the amount and nature of the collateral obtained is based on management's credit evaluation of the other party. Based on the Company's assessment of each of its counterparties, except for the collateral arrangements described in Note 6, no additional collateral was required by the Company at December 31, 2022.

The market risk associated with trading financial instruments and commitments, the prices of which fluctuate regularly, is managed by imposing limits as to the type, amounts, and degree of risk that traders may undertake. These limits are approved by senior management, and the risk positions of traders are reviewed on a daily basis to monitor compliance with the limits.

Contingent liabilities arise in the ordinary course of business, including those related to lawsuits, arbitration, mediation, and other forms of litigation. Various litigation matters are threatened or pending against the Company. Also, the Company at times receives requests for information, subpoenas, or other inquiries from federal, state and other regulators, from other government authorities, and from other parties concerning various matters relating to the Company's business.

12

# **FHN FINANCIAL SECURITIES CORP.**

(A Wholly Owned Subsidiary of First Horizon Bank)

Notes to the Financial Statement

December 31, 2022

Certain matters of that sort are pending at this time, and the Company is cooperating in those matters. In view of the inherent difficulty of predicting the outcome of these matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories or involve a large number of parties, or where claims are possible but have not been brought, the Company cannot reasonably determine what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters may be, or what the eventual loss or impact related to each matter may be. The Company establishes loss contingency liabilities for litigation matters when loss is both probable and reasonably estimable as prescribed by applicable financial accounting guidance. A liability generally is not established when a loss contingency either is not probable or its amount is not reasonably estimable. If loss for a matter is probable and a range of possible loss outcomes can be estimated, accounting guidance generally requires a liability to be established at the low end of the range. At December 31, 2022, there were no pending or threatened litigation matters as to which the Company had determined that material loss was probable and reasonably estimable or had established a material loss reserve.

13

### UNITED STATES SECURITIES AND EXCHANGE COMMISSION
**Washington, D.C. 20549**

## FORM X-17A-5

### ANNUAL AUDITED REPORT

### Filer Information

**Filer CIK:** 0001073299

**Filer CCC:** XXXXXXXX

**Is this a LIVE or TEST filing?:** LIVE

**Would you like a Return Copy?:** Yes

### Submission Information

**Report Period Begin Date:** 01-01-2022

**Report Period End Date:** 12-31-2022

**Type of Registrant:** Broker-dealer

**Any material weaknesses identified?:** No

### Registrant Identification

**Name of Broker-Dealer:** FHN FINANCIAL SECURITIES CORP.

**Business Address:** 1000 RIDGEWAY LOOP ROAD SUITE 200, MEMPHIS, TN, 38120

**Contact Person:** Donald A Ritcheson

**Contact Phone:** 901-435-8014

### Independent Public Accountant Identification

**Accountant Name:** KPMG LLC

**Accountant Address:** 6070 Poplar Avenue, Ste 450, Memphis, TN, 38119

**Accountant Type:** Certified Public Accountant

### OATH OR AFFIRMATION

I, **Donald A Ritcheson**, swear (or affirm) that, to the best of my knowledge and belief, the accompanying financial statements and supporting schedules pertaining to the firm of **FHN FINANCIAL SECURITIES CORP.**, as of **12-31-2022**, are true and correct.

**Signature:** Donald A Ritcheson

**Title:** Chief Financial Officer

**Notarized:** Yes