First Horizon Corporation · NYSE:FHN
First Horizon — Q3 2021 Earnings Presentation
30 slides from First Horizon's earnings presentation, Oct 20, 2021
Slide 1: Third Quarter 2021 Earnings
Third Quarter 2021 Earnings October 20, 2021
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: 3Q21 GAAP financial summary
3Q21 GAAP financial summary1 Reported 3Q21 Change vs. $s in millions except per share data 3Q21 2Q21 1Q21 4Q20 3Q20 2Q21 3Q20 $/bps % $/bps % Net interest income $ 492 $ 497 $ 508 $ 522 $ 532 $ (5) (1)% $ (40) (8)% Fee income 247 285 298 288 823 (38) (13)% (576) (70)% Total revenue 738 781 806 810 1
Slide 4: Table of contents
Table of contents 3Q21 key messages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3Q21 overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 5: Power of more diversified, higher-growth business model starting to emerge
Power of more diversified, higher-growth business model starting to emerge Adjusted EPS1 Adjusted ROTCE TBV $0.50 18.4% $10.88 +1% +2% -7% Core Traditional Banking Adjusted Net Interest Income Fees2 Noninterest Income +3% -26% +2% Adjusted Adjusted Commercial Loans Expense Provision Credit ex. PPP -
Slide 6: 3Q21 results reflect improved loan trends & benefit of diversified model
3Q21 results reflect improved loan trends & benefit of diversified model Adjusted EPS of $0.50 and PPNR of $284 million1 • Adjusted revenue of $763 million decreased 3% QoQ from relatively robust 2Q21 levels – NII down $5 million QoQ driven by a $9 million reduction in net merger-related and PPP ben
Slide 7: 3Q21 merger-related notable items
3Q21 merger-related notable items1 GAAP results reduced by $51 million after-tax, or $0.09 per share, of notable items ($s in millions, except per share data) Notable Items 3Q21 Total IBKC merger-related notable items Noninterest income: • 3Q21 pre-tax merger-related expense of $46 million Branch sa
Slide 8: 3Q21 adjusted financial highlights
3Q21 adjusted financial highlights1 Results relatively resilient despite overall industry headwinds with underlying momentum in loans and traditional banking fees starting to emerge 3Q21 vs. 2Q21 Highlights Adjusted FHN 3Q21 Change vs. • Adjusted EPS of $0.50 vs. $0.58 reflects $0.04 per share reduc
Slide 9: NII performed in line with expectations despite increased headwinds
NII performed in line with expectations despite increased headwinds1 Continued deposit pricing discipline and commercial loan growth helping to mitigate impact of low rates and loan spread tightening ($s in millions) FTE NII and NIM Trends $535 $525 $511 $500 $495 3Q21 vs. 2Q21 Highlights $479 $482
Slide 10: Adjusted fee income in line with expectations
Adjusted fee income in line with expectations1 Strength in wealth and service charges and fees partially offset expected declines in other noninterest income, fixed income and mortgage 3Q21 vs. 2Q21 Highlights Adjusted FHN 3Q21 Change vs. • Adjusted fee income decreased $19 million $s in millions 3Q
Slide 11: Adjusted expense reflects strategic investments/market reopening costs
Adjusted expense reflects strategic investments/market reopening costs1 Results also impacted by seasonality and idiosyncratic items 3Q21 vs. 2Q21 Highlights Adjusted • Adjusted expense of $480 million increased FHN 3Q21 Change vs. $15 million, or 3% $s in millions 3Q21 2Q21 1Q21 4Q20 3Q20 2Q21 3Q20
Slide 12: Loan trends reflect underlying momentum
Loan trends reflect underlying momentum1 4% annualized loan growth before the impact of PPP Loan trends Period-end Average 3Q21 vs. 2Q21 Highlights • Loans of $55.5 billion down $1.3 billion driven by a $59.7B $59.8B $58.2B $56.7B $56.8B $1.8 billion decrease in PPP loans 9% $55.4B 11% $55.5B 9% 9%
Slide 13: Deposit pricing discipline helping to mitigate NII headwinds
Deposit pricing discipline helping to mitigate NII headwinds1 Improved deposit mix with interest-bearing deposit costs down 3 bps Interest-bearing liabilities & DDA trends Period-end Average 3Q21 vs. 2Q21 Highlights $74.3B • Total deposits of $73.7 billion increased $73.3B $73.2B $73.7B $69.6B $71.0
Slide 14: Strong credit quality performance
Strong credit quality performance Improving economic and asset quality trends drive $85 million provision credit Provision, credit losses, and net charge-offs $227 • Net charge offs of 2 bps compared to net recoveries of $80 7 bps in 2Q21 $67 0.44% $29 0.19% • NPL ratio of 63 bps remained relatively
Slide 15: Reserve release driven by continued improvement in the macroeconomic outlook
Reserve release driven by continued improvement in the macroeconomic outlook and improving credit quality1 3Q21 vs. 2Q21 Allowance for credit losses (ACL) • Reserve release of $88 million ($s in millions) $890 – Largely reflects improvement in economic $802 scenarios, a $12 million decrease in speci
Slide 16: Strong capital position
Strong capital position1 Capital levels • TBVPS of $10.88 increased 1% QoQ and reflects $0.23 12.6% 12.8% 13.1% 12.6% reduction tied to return of capital 12.1% 11.0% 11.4% 11.2% • Total capital down 52 bps including a 20 bp impact tied 10.7% 10.3% to retirement of legacy IBKC TruPS 10.0% 10.3% 10.1%
Slide 17: Merger integration update
Merger integration update • Continue to make substantial progress toward achieving key Integration Highlights Integration merger milestones Framework • Focused on retaining and growing client base with expanded products and services Targeting annualized cost saves of ~$200 million • Associate retent
Slide 18: 4Q21 Outlook
4Q21 Outlook Previous Expectations 3Q21 Adjusted Actual Earnings 3Q21 4Q21 Adjusted for 3Q21 Adjusted Comments Drivers Results Adjusted Baseline Expectations Results Net Interest High end of low single- Assumes lower accretion and PPP benefits Income Down modestly (1.0)% ✔ $495 million (FTE) digit %
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: Update on areas of perceived risk
Update on areas of perceived risk Portfolio by industry Portfolios subject to more heightened monitoring remained 6/30/21 9/30/21 flat QoQ at $4.6 billion, ex. LMC/PPP or ~8.2% of loans Subject to % of more % of total heightened total $s in billions Balance Balance loans monitoring loans • Continuin
Slide 22: FHN reserve and deferrals by portfolio
FHN reserve and deferrals by portfolio Allowance Allowance Loan for Loan Coverage $s in billions Balance1 Losses Ratio Portfolios excl. Loans to Mortgage Companies (LMC) & PPP Energy $ 1.29 0.07 5.6 % C&I excl. Energy, LMC, & PPP 23.23 0.30 1.3 Total C&I excl. LMC & PPP 24.51 0.37 1.5 CRE - Other 8.
Slide 23: Notable Items
Notable Items ($s in millions except per share data) Favorable / (Unfavorable) (In millions, except per share data) 3Q21 2Q21 1Q21 4Q20 3Q20 Noninterest income: Purchase accounting gain (other noninterest income)1 $ — $ 2 $ (1) $ (1) $ (532) Retirement of legacy IBKC TruPS (other noninterest income)
Slide 24: 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 4Q21 $ 11 4Q21 $ 12 4Q21 $ 5 2022 $ 36 2022 $ 50 2022 $ 14 2023
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 3Q21 2Q21 1Q21 4Q20
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. ($s in millions, except per share data) 3Q21 2Q21 1Q21 4Q20 3Q20 Tangibl
Slide 27: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. ($s in millions, except per share data) 3Q21 2Q21 1Q21 4Q20 3Q20 Adjuste
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. $ in millions except per share data) 3Q21 2Q21 1Q21 4Q20 3Q20 Adjusted N
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) 3Q21 Net income available to common
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. Period-end Average $s in millions 3Q21 2Q21 3Q21 vs 2Q21 3Q21 2Q21 3Q21