First Horizon Corporation · NYSE:FHN
First Horizon — First Horizon National — Q3 2011 Earnings Presentation
60 slides from First Horizon's earnings presentation, Oct 17, 2011
Slide 1: Third Quarter 2011 Financial Supplement
Table of Contents Exhibit 99.1 THIRD QUARTER 2011 FINANCIAL SUPPLEMENT If you need further information, please contact: Aarti Bowman, Investor Relations 901-523-4017 aagoorha@firsthorizon.com
Slide 2: Table of Contents
Table of Contents TABLE OF CONTENTS Page First Horizon National Corporation Segment Structure 3 Performance Highlights 4 Charges for Restructuring, Repositioning, & Efficiency Initiatives 6 Consolidated Results Income Statement Summary Results 7 Income Statement 8 Other Income and Other Expense 9 Ba
Slide 3: First Horizon National Corporation Segment Structure
Table of Contents FIRST HORIZON NATIONAL CORPORATION SEGMENT STRUCTURE Regional Banking -Traditional lending and deposit taking, investments, financial planning, trust services, asset management, and cash management -Correspondent banking which provides credit, depository, and other banking related
Slide 4: Performance Highlights
Table of Contents PERFORMANCE HIGHLIGHTS Summary of Third Quarter 2011 Significant Items (Millions) Segment Item Income Statement Amount Comments Corporate Sale of Visa Shares Noninterest Income: Securities gains/(losses), net $35.1 million Pre-tax gain associated with the sale of Visa Class B Share
Slide 5: Performance Highlights (continued)
Table of Contents PERFORMANCE HIGHLIGHTS (continued) (Third Quarter 2011 vs. Second Quarter 2011) Non-Strategic - NII was flat at $30.6 million in third quarter driven by a favorable adjustment to accrued interest receivable of warehouse loans - Provision expense increased to $54.7 million in third
Slide 6: Charges for Restructuring, Repositioning, & Efficiency Initiatives
Table of Contents CHARGES FOR RESTRUCTURING, REPOSITIONING, & EFFICIENCY INITIATIVES Quarterly, Unaudited (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 By Income Statement Impact Noninterest income All other income and commissions (a) $ 1,200 $ - $ - $ - $ - Noninterest expense Employee compensation, incenti
Slide 7: Consolidated Summary Results
Table of Contents CONSOLIDATED SUMMARY RESULTS Quarterly, Unaudited 3Q11 Change vs. (Dollars in thousands, except per share data) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Income Statement Highlights Net interest income $ 176,340 $ 172,860 $ 172,755 $ 182,236 $ 186,143 2% (5)% Noninterest income 185,725 18
Slide 8: Consolidated Income Statement
Table of Contents CONSOLIDATED INCOME STATEMENT Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Interest income $ 208,360 $ 206,757 $ 207,605 $ 217,260 $ 223,165 1% (7)% Less: interest expense 32,020 33,897 34,850 35,024 37,022 (6)% (14)% Net interest income 176,3
Slide 9: Other Income and Other Expense
Table of Contents OTHER INCOME AND OTHER EXPENSE Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Other Income Bank owned life insurance $ 5,116 $ 4,920 $ 4,815 $ 7,732 $ 5,913 4% (13)% Bankcard income 5,258 5,151 4,720 4,977 4,965 2% 6% ATM interchange fees 3,709
Slide 10: Consolidated Period-End Balance Sheet
Table of Contents CONSOLIDATED PERIOD-END BALANCE SHEET Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Assets Investment securities $ 3,327,846 $ 3,230,477 $ 3,085,478 $ 3,031,930 $ 2,611,460 3% 27% Loans held for sale 386,147 397,931 370,487 375,289 414,259 (3)%
Slide 11: Consolidated Average Balance Sheet
Table of Contents CONSOLIDATED AVERAGE BALANCE SHEET Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Assets: Earning assets: Loans, net of unearned income: Commercial, Financial, and Industrial (C&I) $ 7,181,058 $ 6,867,893 $ 6,823,350 $ 7,229,808 $ 7,017,427 5% 2
Slide 12: Average Balance Sheet: Income and Expense
Table of Contents CONSOLIDATED AVERAGE BALANCE SHEET: INCOME AND EXPENSE Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Assets: Earning assets: Loans, net of unearned income (a) $163,773 $162,281 $164,747 $175,650 $177,059 1% (8)% Loans held for sale 5,126 3,267
Slide 13: Average Balance Sheet: Yields and Rates
Table of Contents CONSOLIDATED AVERAGE BALANCE SHEET: YIELDS AND RATES Quarterly, Unaudited (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 Assets: Earning assets: Loans, net of unearned income: Commercial loans 3.84% 3.90% 3.84% 3.99% 3.92% Retail loans 4.37 4.31 4.42 4.36 4.41 Total loans, net of unearned in
Slide 14: Mortgage Servicing Rights
Table of Contents MORTGAGE SERVICING RIGHTS Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 First Liens Fair value beginning balance $183,530 $204,257 $203,812 $188,397 $197,953 Reductions due to loan payments (5,286) (5,522) (7,163) (10,160) (8,752) Reductions du
Slide 15: Business Segment Highlights
Table of Contents BUSINESS SEGMENT HIGHLIGHTS Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Regional Banking Net interest income $140,603 $136,249 $134,671 $144,492 $142,220 3% (1)% Noninterest income 67,952 67,696 66,156 70,774 71,970 * (6)% Total revenues 208,
Slide 16: Regional Banking
Table of Contents REGIONAL BANKING Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Income Statement Net interest income $140,603 $136,249 $134,671 $144,492 $142,220 3% (1)% Provision for loan losses (22,698) (13,748) (12,404) 2,002 10,298 65% NM Noninterest income
Slide 17: Capital Markets
Table of Contents CAPITAL MARKETS Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Income Statement Net interest income $ 5,555 $ 5,564 $ 5,576 $ 5,877 $ 8,584 * (35)% Noninterest income: Fixed income 92,624 71,164 83,194 86,106 106,908 30% (13)% Other 6,881 6,761
Slide 18: Corporate
Table of Contents CORPORATE Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Income Statement Net interest income/(expense) $ (463) $ 444 $ (269) $ (2,064) $ (2,845) NM (84)% Noninterest income 2,911 9,005 12,100 10,718 7,943 (68)% (63)% Securities gains, net 35,14
Slide 19: Non-Strategic
Table of Contents NON-STRATEGIC Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Income Statement Net interest income $ 30,645 $ 30,603 $ 32,777 $ 33,931 $ 38,184 * (20)% Noninterest income 15,357 32,965 27,202 13,436 51,664 (53)% (70)% Securities gains/(losses), n
Slide 20: Non-Strategic: Mortgage Servicing
Table of Contents NON-STRATEGIC: MORTGAGE SERVICING Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Servicing Income Service fees $ 16,731 $ 19,248 $ 20,827 $ 17,119 $ 21,351 (13)% (22)% Change in MSR value - runoff (5,286) (5,526) (7,164) (10,160) (8,752) (4)% (4
Slide 21: Capital Highlights
Table of Contents CAPITAL HIGHLIGHTS Quarterly, Unaudited 3Q11 Change vs. (Dollars in thousands, except per share amounts) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Tier 1 capital (a) (b) $ 2,875,112 $ 2,818,535 $ 2,790,335 $ 2,812,471 $ 3,526,115 2% (18)% Tier 2 capital (a) 750,691 748,225 868,792 937,115
Slide 22: Asset Quality: Consolidated
Table of Contents ASSET QUALITY: CONSOLIDATED Quarterly, Unaudited 3Q11 Change vs. (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Allowance for Loan Losses Walk-Forward Beginning reserve $ 524,091 $ 589,128 $ 664,799 $ 719,899 $ 781,269 (11)% (33)% Provision 32,000 1,000 1,000 45,000 50,000 NM (36)%
Slide 23: Asset Quality: Consolidated
Table of Contents ASSET QUALITY: CONSOLIDATED Quarterly, Unaudited 3Q11 Change vs. 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Key Portfolio Details C&I Period-end loans ($ millions) $ 7,706 $ 7,180 $ 6,808 $ 7,338 $ 7,337 7% 5% 30+ Delinq. % (a) 0.43% 0.52% 0.46% 0.36% 0.68% NPL % 2.60 2.96 3.13 2.92 3.34 C
Slide 24: Rollforwards of Nonperforming Loans and OREO Inventory
Table of Contents ROLLFORWARDS OF NONPERFORMING LOANS AND OREO INVENTORY Unaudited (Millions) 3Q11 2Q11 1Q11 4Q10 3Q10 NPL Rollforward (a) Beginning NPLs $ 404 $ 462 $ 486 $ 580 $ 593 + Additions 36 31 46 54 98 + Principal Increase 2 2 4 3 7 - Resolutions and payments (54) (66) (47) (97) (46) - Net
Slide 25: Asset Quality: Regional Banking and Corporate
Table of Contents ASSET QUALITY: REGIONAL BANKING Quarterly, Unaudited 3Q11 Change vs. 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Total Regional Banking Period-end loans ($ millions) $ 11,378 $ 10,832 $ 10,486 $ 11,040 $ 11,147 5% 2% 30+ Delinq. % (a) 0.61% 0.82% 0.84% 0.80% 0.95% NPL % 2.14 2.62 3.02 2.96
Slide 26: Asset Quality: Non-Strategic
Table of Contents ASSET QUALITY: NON-STRATEGIC Quarterly, Unaudited 3Q11 Change vs. 3Q11 2Q11 1Q11 4Q10 3Q10 2Q11 3Q10 Total Non-Strategic Lending Period-end loans ($ millions) $ 4,703 $ 5,055 $ 5,336 $ 5,575 $ 5,913 (7)% (20)% 30+ Delinq. % (a) 2.87% 2.27% 2.69% 2.87% 3.11% NPL % 3.62 5.87 5.98 5.7
Slide 27: Asset Quality: Portfolio Metrics
Table of Contents ASSET QUALITY: PORTFOLIO METRICS Unaudited C&I Portfolio: $7.7 Billion (47.5% of Total Loans) % OS General Corporate, Commercial, and Business Banking Loans 78% Mortgage Warehouse Line Balances 14% Trust Preferred Loans 6% Bank Holding Company Lending 2% Income CRE Portfolio: $1.3
Slide 28: Glossary of Terms
Table of Contents GLOSSARY OF TERMS Adjusted Tangible Equity/RWA: Shareholders’ equity excluding intangible assets and unrealized gains/losses on available for sale securities and cash flow hedges divided by risk weighted assets. Core Business Segments: Management treats regional banking, capital ma
Slide 29: Non-GAAP to GAAP Reconciliation
Table of Contents NON-GAAP TO GAAP RECONCILIATION Quarterly, Unaudited (Thousands) 3Q11 2Q11 1Q11 4Q10 3Q10 Tangible Common Equity (Non-GAAP) (A) Total equity (GAAP) $ 2,743,230 $ 2,681,382 $ 2,640,057 $ 2,678,005 $ 3,306,888 Less: Preferred stock capital surplus - CPP - - - - 810,974 Less: Noncontr
Slide 30: First Horizon National Corporation Third Quarter 2011 Earnings
Table of Contents First Horizon National Corporation Third Quarter 2011 Earnings October 17, 2011
Slide 31: Non-GAAP and Forward-Looking Statements
Table of Contents Portions of this presentation use non-GAAP financial information. Each of those portions is so noted, and a reconciliation of that non-GAAP information to comparable GAAP information is provided in a footnote or in the appendix at the end of this presentation. This presentation con
Slide 32: Successful Execution: Controlling What We Can Control
Table of Contents Successful Execution: Controlling What We Can Control Core Businesses’ pre-tax income at $140mm, up $113mm Optimizing Business Mix For linked quarter and $60mm year over year Profitability And Returns Capital Markets fixed income average daily revenue at $1.4mm up from $1.1mm Perio
Slide 33: Solid Pre-Tax Income in Core Business Segments
Table of Contents Solid Pre-Tax Income in Core Business Segments FHN 3Q11 Pre-Tax Income By Business Segment $200mm $150 $100 $50 $0 Regional Bank Capital Markets Corporate Core Businesses¹ Non- Strategic Consolidated -$50 -$100 -$150 Core Businesses’ 3Q11 pre-tax income grew $113mm linked quarter,
Slide 34: Financial Results
Table of Contents FINANCIAL RESULTS 5
Slide 35: Consolidated Financial Results
Table of Contents Consolidated Financial Results Net income available to common shareholders of ($mm, except per share) 3Q10 2Q11 3Q11 $36mm, diluted EPS of $0.14 Net income from continuing operations of $34mm NII $186 $173 $176 Core Businesses¹ pre-tax income of $140mm Noninterest income 246 188 18
Slide 36: Third Quarter 2011 Segment Highlights
Table of Contents Third Quarter 2011 Segment Highlights 3Q11 Revenue Linked Quarter Pre-Tax Earnings ($mm) Change 2Q11 Drivers / Impacts 3Q10 2Q11 3Q11 3Q11 Expense $mm / Percent NII up 3% primarily due to loan $209 $5 / 2% volume. Fee income flat linked Regional quarter $52 $74 $94 Banking Provisio
Slide 37: Successful Execution: Balance Sheet and NIM
Table of Contents Successful Execution: Balance Sheet and NIM 3Q11 period end total assets at $26B Net Interest Margin by Segment¹ 3Q11 total period end loans at $16B, up 1% vs 2Q11 % of Total NIM 3Q11 Period end Regional Banking loans increased Period End Assets $546mm or 5% from 2Q11, including $4
Slide 38: Successful Execution: Driving More Value from the Balance Sheet
Table of Contents Successful Execution: Driving More Value from the Balance Sheet 3Q11 Regional Bank Loan Balances Regional Bank Commercial Loan Yields 4.1% 4.02% 4.00% Consumer 4.0% 3.97% Real Estate 3.9% 23% 3.8% Other 3% Income C&I 3.7% CRE 63% 11% 3.6% 3.5% 1Q11 2Q11 3Q11 Regional Bank Commercia
Slide 39: Improving Productivity and Efficiency in Core Businesses
Table of Contents Improving Productivity and Efficiency in Core Businesses, Environmental Costs Remain Elevated ~$124mm Identified in Cost Savings Regional Banking Expenses $155mm ~$124mm identified in cost savings, in addition to $150 10% expected reduction in Non-Strategic expenses over the $145 l
Slide 40: Mortgage Repurchase-Related Expenses Remain Manageable
Table of Contents Mortgage Repurchase-Related Expenses Remain Manageable Pipeline at $418mm for 3Q11 vs $451mm in 2Q11 Mortgage Repurchase Reserve $284mm of GSE-related claims ($ in mm) 3Q10 4Q10 1Q11 2Q11 3Q11 $86mm of mortgage-insurer (MI) related claims $4mm of private whole loan related claims B
Slide 41: Private Mortgage Securitizations: Private Securitization Risk Remains Manageable
Table of Contents Private Mortgage Securitizations: Private Securitization Risk Remains Manageable Private Loan Repurchase Risk 2004-2007 Private Mortgage Securitizations¹ Different than GSE Risk Generally, reps and warranties ~$33B of originations from 2004 to 2007 are not as comprehensive as 102 a
Slide 42: Successful Execution: Asset Quality Trends Continue to Improve
Table of Contents Successful Execution: Asset Quality Trends Continue to Improve Net charge-offs of $106mm, including $48mm of charge-offs related to loan sales NCOs excluding loan sale of $58mm, down 11% from 2Q11 Regional Bank NCOs down $16mm or 40% year over year Non-Strategic NCOs, excluding $42
Slide 43: Successful Execution: Non-Performing Assets Decline 22% in 3Q11
Table of Contents Successful Execution: Non-Performing Assets Decline 22% in 3Q11 NPAs down $165mm or 22% linked quarter, and down Non-Performing Assets 37% or $337mm year over year Loan sales of ~$150mm NPL levels down 25% from 2Q11, down 37% since 3Q10 ORE balances stable from continued dispositio
Slide 44: Building Long-Term Earnings Power: Long-Term Targets
Table of Contents Building Long-Term Earnings Power: FHNC Bonefish – Long-Term Targets Total Assets Earning Assets Return on Assets Pre-tax Income 1.25% - 1.45% Net Interest Margin 3.50% - 4.00% Tax Rate Risk Adjusted Margin Annualized Net Charge-Offs 0.30% - 0.70% Return on Tangible Equity 15% - 20
Slide 45: Successful Execution: FHN Strategic Priorities
Table of Contents Successful Execution: FHN Strategic Priorities 1) Optimize business mix for profitability and returns Replace runoff, low margin, Non-Strategic assets with higher margin, Regional Banking assets Focused on improving profitability in all lines of business Capital Markets continues t
Slide 46: Appendix
Table of Contents APPENDIX 17
Slide 47: Liquidity, Capital, and Reserves
Table of Contents Liquidity, Capital, and Reserves 1 1 Reserves vs. Peers Tier 1 Common Ratio 12% FHN Non-Strategic 4.62% 11% FHN Regional Bank 2.04% 10% 11.7% 11.9% 12.0% FHN Consolidated 2.77% 11.1% 9% Peer Median 2.34% 8% 1Q11 2Q11 3Q11 2Q11 Peer 0% 1% 2% 3% 4% 5% Median 2 1 Wholesale Funding Cap
Slide 48: FDIC Market Share
Table of Contents FDIC Market Share FDIC Deposit Market Share FHN Market Share YOY Deposit Growth Market 2011 FHN Deposits 2010 2011 FHN Overall Market West Tennessee 32.6% 33.7% $7.5B 5.8% 2.2% East Tennessee 21.9% 21.6% $2.9B 6.9% 8.4% Middle Tennessee 6.3% 6.6% $2.4B 7.4% 2.0% Southeast Tennessee
Slide 49: 3Q11 Credit Quality Summary by Portfolio
Table of Contents 3Q11 Credit Quality Summary by Portfolio ($ in millions) Regional Bank Corporate 4 Non-Strategic Commercial Income Residential HE & Permanent Commercial Income Residential HE & Permanent 2 Period End Other 1 Other Total (C&I & Other) CRE CRE HELOC Mortgage (C&I & Other) CRE CRE HEL
Slide 50: Income CRE Portfolio
Table of Contents Income CRE Portfolio Balances of $1.3B at 9/30/11 Performance 96% managed in Regional Banking with relationship- 12% oriented customers 10.13% 10.06% 10.07% Proactively managing problem projects and maturities 10% 8.54% to regulatory standards 8% 6.27% Do not capitalize interest an
Slide 51: C&I Portfolio
Table of Contents C&I Portfolio $7.7B portfolio, diversified by industry, managed in C&I Loan Composition Regional Bank Includes loans to mortgage warehouse companies Correspondent Bank-Related (correspondent banking) of $1.1B in 3Q11 vs Banking 3% $583mm in 2Q11 16% Net charge-offs down $7mm linked
Slide 52: C&I Portfolio: TRUPS & Bank-Related Loans
Table of Contents C&I Portfolio: TRUPS & Bank-Related Loans $653mm balances in TRUPS and bank-related loans $301mm whole-loan TRUPs to banks $156mm whole-loan TRUPs to insurance companies $119mm loans to bank holding companies $76mm other loans secured by bank stock Average TRUP size of $9mm Signifi
Slide 53: Home Equity: Performance and Characteristics
Table of Contents Home Equity: Performance and Characteristics Portfolio Characteristics Geographic Distribution First Second Total Balance $2.0B $3.9B $5.9B Original FICO 740 736 737 Core Refreshed FICO 738 724 728 Other Banking Customers Original CLTV 73% 81% 78% 40% TN Full Doc 83% 71% 75% 40% Ow
Slide 54: Consumer Real Estate Portfolio
Table of Contents Consumer Real Estate Portfolio 30+ Delinquency: Non-Strategic vs. Regional Net Charge-Offs Industry¹ = 6.75% $60mm $58 4% $54 $44 3% $40 2.36% $40 $35 2% 0.99% $20 1% 0% $0 3Q10 4Q10 1Q11 2Q11 3Q11 3Q10 4Q10 1Q11 2Q11 3Q11 Regional Banking Non-Strategic Regional Banking Non-Strateg
Slide 55: Mortgage Repurchases: Origination and Loan Characteristics
Table of Contents Mortgage Repurchases: Origination and Loan Characteristics GSE GSE Originations ~$70B of originations from 2005 to 2008 $25B 1 Received ~$1.1B of GSE-related repurchase requests $20 to date, or 1.6% of originations $15 Represent 98% of all active repurchase/make whole 2 requests in
Slide 56: Private Mortgage Securitizations: Delinquencies and Cumulative Losses
Table of Contents Private Mortgage Securitizations: Delinquencies and Cumulative Losses Jumbo 60+ Day Delinquencies Alt-A 60+ Day Delinquencies 18% 35% 28% 12% 21% 14% 6% 7% 0% 0% 2004 2005 2006 2007 2004 2005 2006 2007 6% 13% 8% 11% 6% 28% 19% 9% Vintage Remaining Balance / Total 2004-2007 Current
Slide 57: FHFA Litigation Securitizations
Table of Contents FHFA Litigation Securitizations FHFA Litigation Certificate Breakdown ($ in Millions) FHFA-Related Original Paid Current Performing 60D+ Cumulative Alt-A Deal Tranche UPB Off UPB UPB Delinq Loss FHAMS 2005-AA9 IIA1 $214 $117 $91 $75 $16 $6 FHAMS 2005-AA10 IA1 $140 $79 $58 $47 $11 $
Slide 58: Reconciliation to GAAP Financials
Table of Contents Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of net interest income adjusted for impact of FTE. That information is not presented according to generally accepted accounting principles (GAAP), and is reconciled to GAAP information below. ($
Slide 59: Reconciliation to GAAP Financials
Table of Contents Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of tangible assets, tangible common equity, tier 1 common capital, and various ratios using one or more of those measures. That information is not presented according to generally accepted accoun
Slide 60: Reconciliation to GAAP Financials
Table of Contents Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of net interest income, assets, net interest margin, net charge- offs, fee income, revenue, expense and various ratios using one or more of those measures. That information is not presented accor
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