First Horizon Corporation · NYSE:FHN
First Horizon — Q4 2021 Earnings Presentation
31 slides from First Horizon's earnings presentation, Jan 20, 2022
Slide 1: Fourth Quarter 2021 Earnings
Fourth Quarter 2021 Earnings January 20, 2022
Slide 2: Disclaimer
Disclaimer Non-GAAP Information Certain measures included in this document are “non-GAAP,” meaning they are not presented in accordance with generally accepted accounting principles in the U.S. and also are not codified in U.S. banking regulations currently applicable to FHN. FHN’s management believ
Slide 3: 4Q21 and 2021 GAAP financial summary
4Q21 and 2021 GAAP financial summary1 Reported 4Q21 Change vs. Reported 2021 vs. 2020 $s in millions except per share data 4Q21 3Q21 2Q21 1Q21 4Q20 3Q21 4Q20 2021 2020 $/bps % $/bps % $/bps % Net interest income $ 498 $ 492 $ 497 $ 508 $ 522 $ 6 1% $ (24) (5)% $ 1,994 $ 1,662 $332 20 % Fee income 24
Slide 4: Table of contents
Table of contents 4Q21 key messages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4Q21 overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 5: Well positioned to benefit given economic recovery and outlook for rates
Well positioned to benefit given economic recovery and outlook for rates Adjusted EPS1 Adjusted ROTCE TBV $0.48 17.5% $11.00 +3% -8% -1% Core Adjusted Adjusted Net Interest Income Noninterest Income Expense +2% -24% -9% Commercial Loans Adjusted Incentives and ex. PPP Provision Credit Commissions -6
Slide 6: 4Q21 results reflect improving NII, credit quality and capital returns
4Q21 results reflect improving NII, credit quality and capital returns Adjusted EPS of $0.48 and PPNR of $274 million1 • Adjusted revenue of $748 million decreased 2% QoQ – NII up $7 million QoQ despite a $5 million reduction in net merger-related and PPP benefits – Core NII up 3% driven by the bene
Slide 7: 4Q21 notable items
4Q21 notable items1 GAAP results reduced by $41 million after-tax, or $0.08 per share, of notable items ($s in millions, except per share data) Notable Items Notable Items 4Q21 Total IBKC merger-related notable items Noninterest income: • 4Q21 pre-tax merger-related expense of $38 million Branch sal
Slide 8: 4Q21 adjusted financial highlights
4Q21 adjusted financial highlights1 NII and PPNR outperformance reflects impact of lower funding costs 4Q21 vs. 3Q21 Highlights Adjusted FHN 4Q21 Change vs. • Adjusted EPS of $0.48 vs. $0.50; includes a $0.03 per share reduction tied to lower provision credit $s in millions except per share data 4Q2
Slide 9: NII outperformance driven by lower deposit costs
NII outperformance driven by lower deposit costs1 Continued deposit pricing discipline, securities portfolio investments and commercial loan growth ex. PPP drove solid growth in core NII ($s in millions) FTE NII and NIM Trends $525 $511 $500 $502 4Q21 vs. 3Q21 Highlights $495 $482 $464 $454 $466 $45
Slide 10: Adjusted fee income trends in line with expectations
Adjusted fee income trends in line with expectations1 Results largely reflect expected declines in fixed income, mortgage and NSF 4Q21 vs. 3Q21 Highlights Adjusted FHN 4Q21 Change vs. • Adjusted fee income decreased $22 million, $s in millions 4Q21 3Q21 2Q21 1Q21 4Q20 3Q21 4Q20 or 8%, largely reflec
Slide 11: Adjusted expense largely impacted by lower revenue-based incentives
Adjusted expense largely impacted by lower revenue-based incentives Lower revenue-based incentives partially offset by $3 million of front-line associate bonuses 4Q21 vs. 3Q21 Highlights • Adjusted expense of $474 million decreased $6 Adjusted million, or 1% FHN 4Q21 Change vs. – $1 million benefit
Slide 12: Annualized loan growth of 5% before the impact of PPP
Annualized loan growth of 5% before the impact of PPP1 Period-end C&I ex PPP & LMC up 5% QoQ 4Q21 vs. 3Q21 Highlights Loan trends Period-end Average • Loans of $54.7 billion down $827 million driven by a $1.5 billion decrease in PPP loans $58.2B $58.2B $56.8B $55.4B $54.9B $55.5B $54.7B – $654 milli
Slide 13: Deposit pricing discipline lifts net interest income in 4Q21
Deposit pricing discipline lifts net interest income in 4Q211 Interest-bearing deposit costs down 6 bps and improved deposit mix Interest-bearing liabilities & DDA trends Period-end Average 4Q21 vs. 3Q21 Highlights $74.3B $74.9B $73.2B $73.7B $74.6B • Total deposits of $74.6 billion increased $70.0B
Slide 14: Strong credit quality performance
Strong credit quality performance Stabilizing economic outlook and improving asset quality trends Provision, credit losses, and net charge-offs 4Q21 vs. 3Q21 Highlights • Net charge offs of 1 bp remained relatively stable $29 $1 $8 $3 $1 • NPL ratio of 50 bps improved 13 bps $(10) 0.19% 0.06% 0.02%
Slide 15: Strong capital position
Strong capital position1 4Q21 vs. 3Q21 Highlights Capital levels • TBVPS of $11.00 increased 1% QoQ and reflects $0.24 12.6% 12.8% 13.1% 12.6% 12.4% reduction tied to return on capital 11.4% 11.2% 11.1% • CET1 ratio remained strong at 9.9% 10.7% 11.0% – NIAC more than offset by a 36 bp reduction tie
Slide 16: Merger integration update
Merger integration update Integration Highlights • Continue to make substantial progress toward achieving key Integration merger milestones Targeting annualized cost Framework • Focused on retaining and growing client base with expanded products saves of ~$200 million and services by 4Q22 • Associat
Slide 17: FY2022 Outlook
FY2022 Outlook Earnings Drivers FY21 Adjusted Baseline FY22 Adjusted Expectations Comments Assumes ~$120 million reduction in accretion/ Net Interest Income $2,006 million Relatively stable amortization and PPP benefits offset by the benefit (FTE) of higher rates, loan growth and low deposit costs A
Slide 18: 1Q22 Outlook
1Q22 Outlook Earnings Drivers 4Q21 Adjusted Baseline 1Q22 Adjusted Expectations Comments Net Interest Income High end of mid single-digit % Assumes lower accretion and PPP benefits with $502 million (FTE) decrease relatively stable core NII and lower day count Avg. Interest Earning Down modestly wit
Slide 19: Focused on delivering enhanced shareholder value
Focused on delivering enhanced shareholder value • Deliver further benefits of diversified business model through revenue synergies and loan growth – Complete systems integration and product and capabilities alignment – Redeploy expense and capital to higher growth/return opportunities – Prudent inv
Slide 20: APPENDIX
APPENDIX 20
Slide 21: Underlying FY2021 & 4Q21 performance vs. guidance
Underlying FY2021 & 4Q21 performance vs. guidance Previous Expectations for 4Q21 Adjusted Actual Previous Expectations for Earnings Drivers FY21 Adjusted Actual Results 4Q21 Adjusted Results Results FY21 Adjusted Results1 Net Interest Income High end of low single-digit % 1% Mid single-digit % decre
Slide 22: Well-positioned to benefit from rising rates
Well-positioned to benefit from rising rates Net Interest Income Interest Rate Sensitivity 16.4% Loan Portfolio1 9.8% 7.6% • $55.2 billion: variable/fixed repricing mix of 5.6% 64%/36% net of hedges 3.7% 1.8% • ~$28.5 billion tied to LIBOR/ARRs and ~$4.5 billion tied to Prime +25 bps +50 bps +100 bp
Slide 23: NII accretion schedule & NII/NIM reconciliation to GAAP financials
NII accretion schedule & NII/NIM reconciliation to GAAP financials Estimated IBKC Securities Premium Amortization1 Estimated IBKC Loan Accretion Estimated Loan Accretion - Other Acquisitions $s in millions $s in millions $s in millions 1Q22 $ (10) 1Q22 $ 14 1Q22 $ 4 2Q22-4Q22 $ (25) 2Q22-4Q22 $ 34 2
Slide 24: Notable Items
Notable Items ($s in millions except per share data) Favorable / (Unfavorable) (In millions, except per share data) 4Q21 3Q21 2Q21 1Q21 4Q20 2021 2020 Noninterest income: Purchase accounting gain (other noninterest income)1 $ — $ — $ 2 $ (1) $ (1) $ 1 $ 533 Retirement of legacy IBKC TruPS (other non
Slide 25: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. Adjusted FHN historical quarterly income statements 4Q21 3Q21 2Q21 1Q21
Slide 26: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. Adjusted FHN historical annual income statements 2021 2020 Notable Non-
Slide 27: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. ($s in millions, except per share data) 4Q21 3Q21 2Q21 1Q21 4Q20 2021 20
Slide 28: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. ($s in millions, except per share data) 4Q21 3Q21 2Q21 1Q21 4Q20 2021 20
Slide 29: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. $ in millions except per share data) 4Q21 3Q21 2Q21 1Q21 4Q20 2021 2020
Slide 30: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. $ in millions except per share data) 4Q21 Net income available to common
Slide 31: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. Period-end Average $s in millions 4Q21 3Q21 4Q21 vs 3Q21 4Q21 3Q21 4Q21