First Horizon Corporation · NYSE:FHN
First Horizon — First Horizon National — Investor Day (November 2018)
164 slides from First Horizon's investor day presentation, Nov 6, 2018
Slide 1: First Horizon National Corporation
FIRST HORIZON ~ NATIONAL CORPORATION, =
Slide 2: FHN Investor Day Agenda
FHN Investor Day Agenda Proven | Focused | Better 9:00 AM PROVEN | FOCUSED | BETTER 11:30 AM COMMERCIAL BANKING: SPECIALIZATION IS OUR ADVANTAGE Bryan Jordan, Chairman and Chief Executive Officer Todd Jones, EVP, Wholesale Banking 9:30 AM CUSTOMER FOCUSED, BONEFISH DRIVEN David Popwell, President of
Slide 3: Proven | Focused | Better
Proven | Focused | Better Bryan Jordan | CEO
Slide 4: Non-GAAP financial information notice
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. Annualized, pro forma, projected and es
Slide 5: Proven success, focused strategy, better opportunities
Proven success Focused strategy Better opportunities Proven 3
Slide 6: Building From a Position Of Strength
Building From a Position Of Strength 2018 Expansion Recovery Growth Profitability Credit Crisis Soundness 2008 Proven 4
Slide 7: We do what we say we will do
We do what we say we will do Proven 5
Slide 8: Capital Bank Integration Efforts Were Significant
Capital Bank Integration Efforts Were Significant 572K new clients 1,300 team members involved 23,000 335 test scripts ambassadors 30K 210K proactive calls to clients training hours 700 vendors exited branch 51 consolidations Proven 6
Slide 9: 2018 efforts position us well for 2019
Successfully integrate Capital Bank 2018 efforts position Deliver merger cost saves us well for 2019 Build merger revenue synergies Strengthen the balance sheet Proven 7
Slide 10: We Are Exceeding Our Bonefish Financial Targets
17%+ RETURN ON TANGIBLE COMMON EQUITY 1 We Are Exceeding Our Bonefish Financial Targets 1.20%+ RETURN ON ASSETS 1 Proven For footnoted items, refer to slide 24 for additional information. 8
Slide 11: We Have Profitably Grown Our Balance Sheet
We Have Profitably Grown Our Balance Sheet Loans Deposits $27.3 $7.3B 6% Added Loans 9% CAGR from Capital Bank CAGR $30.8 $16.6 $15.3 $8.1B Added Deposits from Capital Bank 3Q13 3Q18 3Q13 3Q18 Proven 3Q13 and 3Q18 average balances. CAGRs calculated from 2013 and 2017 average balances. 9
Slide 12: Shift in loan portfolio mix toward specialty banking
Total Loan Portfolio Mix 3Q13 3Q18 We have shifted the loan 33% 27% portfolio toward more 37% 40% economically profitable Specialty Banking areas 30% 33% Consumer Commercial Specialty Proven Reflects average loan balances. 10
Slide 13: Deposit base expanded into higher growth markets
Total Deposit Mix 2013 2018 3% 3% 5% Our deposit base has 15% expanded into higher growth markets 77% 97% Tennessee North Carolina Florida Rest of US Proven Reflects period-end balance as of 2Q13 and 2Q18, respectively. Source: FDIC. 11
Slide 14: We deployed capital effectively
10% 23% OF COMPANY @ DISCOUNT TO REPURCHASED1 CURRENT PRICE1 We deployed capital effectively 7 $161mm SUCCESSFUL VISA B SHARE ACQUISITIONS MONETIZATION 2 Proven For footnoted items, refer to slide 24 for additional information. 12
Slide 15: We created shareholder value
Five Year Total Shareholder Return1 FHN 60% KRX 48% We created EPS Quarterly Dividends shareholder value $1.80 +140% $0.12 $1.41 +22% CAGR $0.05 $0.53 ($0.15) 3Q13 3Q18 3Q13 YTD 3Q18 YTD Reported Adjusted2 Proven YTD EPS is annualized. For footnoted items, refer to slide 24 for additional informatio
Slide 16: We play to our strengths
We play to our strengths Focused 14
Slide 17: Specialization is our advantage
Specialization is our advantage Focused 15
Slide 18: Our success is a matter of business model
Our success is a matter of business model Focused 16
Slide 19: We have a lower risk model
High Quality Lending Portfolio Consumer Real Estate 24% We have a Commercial & lower risk model Other Consumer Industrial (C&I) 2% 59% Commericial Real Estate (CRE) 15% Better Reflects average balances as of 3Q18. 17
Slide 20: We have a lower risk model
Investment Grade Equivalent Commercial Loans 38% We have a 18% lower risk model 20% 3Q13 3Q18 Better Reflects period-end balances. Investment grade equivalent refers to PD Grades 1-5. 18
Slide 21: Significantly Lower Stressed Loss Rates
Significantly Lower Stressed Loss Rates1 We have a 9 Quarter Cumulative FHN 2.9% lower risk model Loss Rates DFAST Peers 6.4% Better For footnoted item, refer to slide 24 for additional information. 19
Slide 22: We have better opportunities
82% of FHN Deposits in Markets with Top 5 134% Share Specialty Banking Loan Growth Over Past 5 Years We have better opportunities $730B Size of NC, SC, and South Florida Deposit 1.9x Expected Population Markets Growth in Our Newer Markets vs. US as a Whole1 Better For footnoted item, refer to slide
Slide 23: Strategic Priorities
Dominate Tennessee Profitably Grow Key Markets and Specialty Businesses Strategic Priorities Transform the Customer Experience Optimize the Expense Base Better 21
Slide 24: The FHN Investment Thesis
The FHN Investment Thesis 1 We have delivered results 2 We have a strong return profile 3 We have multiple growth opportunities 4 We have capital to deploy 5 We have a lower risk model Proven 22
Slide 25: Proven | Focused | Better
Proven | Focused | Better Bryan Jordan | CEO
Slide 26: Notes
Notes Slide Note Comment ROTCE, Adjusted ROTCE, and Adjusted ROA are Non-GAAP numbers and are reconciled on slide 26. Adjusted numbers exclude notable items as 8 (1) outlined on slide 25. 23mm shares repurchased from beginning of 2013 to 11.02.18 at volume weighted average price of $12.70. Percentag
Slide 27: Notable Items
Notable Items Pre-tax Pre-tax 3Q13 YTD Notable Items Amount 3Q18 YTD Notable Items Amount Restructuring Charges ($3.0mm) Acquisition Expense ($86.0mm) Legal Accrual ($6.1mm) Gain on property sale $3.3mm Acquisition Expense ($2.9mm) Other Expense (Visa Shares) ($4.1mm) Settlement of a legal matter $1
Slide 28: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use Non-GAAP information of return on tangible common equity, adjusted return on tangible common equity, and adjusted return on average assets. That information is not presented according to generally accepted accounting principles (GAAP)
Slide 29: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use Non-GAAP information of adjusted earnings per share. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. (CAGR) 3Q18 3Q13 3Q18 YTD Adjusted Earnin
Slide 30: Customer Focused, Bonefish Driven
Customer Focused, Bonefish Driven Proven | Focused | Better David Popwell | President of Banking
Slide 31: Our Business Model Is Proven, Focused, and Better
Our Business Model Is Proven, Focused, and Better 1 We have a strong economic profit and risk focus 2 We make decisions close to our customers 3 We have high return specialty banking areas 4 We have strong growth opportunities in new markets Proven | Focused | Better 2
Slide 32: We doubled Regional Banking Economic Profit from 2014 to 2017
Economic Profit = Net Income Less Cost of Capital Other ($7) Specialty We doubled Regional Comm'l / Loans $27 Banking Economic Profit Specialty Deposits $155 from 2014 to 2017 $18 Retail Deposits $70 $46 2014 2017 Economic Profit Economic Profit Proven 3
Slide 33: Total Tennessee Deposits
67% Faster Deposit CAGR Since 3Q13 (Vs Peers)1 Total Deposit CAGR (5yr) FHN 14% Peers 9% Deposits have meaningfully driven 45% Faster Deposit Growth (Vs TN Market)2 Economic Profit $24.0B Total Tennessee Deposits 8% CAGR $16.6B 2013 2018 Proven For footnoted items, refer to slide 21 for additional i
Slide 34: Strong Specialty Loan Growth Since 3Q13
Strong Specialty Loan Growth Since 3Q13 Total Specialty Loans ($B) $10.4 134% $4.4 3Q13 3Q18 Diversified portfolio of 27% 29% high growth, high return RAROC Efficiency Ratio Specialty Banking areas Correspondent drive Economic Profit 3% Energy 3% Franchise Finance 7% Healthcare CRE 7% 30% Specialty
Slide 35: Our goal is to double economic profit again in 5 years
Our goal is to double economic profit again in 5 years Proven 6
Slide 36: We are building from a position of strength
We are building from a position of strength Proven 7
Slide 37: Bonefish is in our DNA
Bonefish is in our DNA Focused 8
Slide 38: Economic Profit Permeates Our Whole Company
Economic Profit Permeates Our Whole Company Front Line Executive Employees Audience Management RAROC Relationship Product Bonefish Pricing Profitability Profitability Financial Tool Reports Reports Reports Individual Segment-level tool Portfolio-level view of economic profitability transaction-level
Slide 39: Economic Profit Drives Incentives
Risk-Adjusted Full Returns Relationships Economic Profit Drives Relationship EP Drivers Incentives We incentivize based on the 3 main drivers of relationship economic profit growth Growth Focused 10
Slide 40: We have a differentiated market approach
We have a differentiated market approach Focused 11
Slide 41: Decisions Made Closest to the Customer
Bank President Market Specialty Leaders LOB Leaders Decisions Made Closest Customer- Facing Customer- Facing to the Customer Employees Employees Market and LOB leaders report directly to Bank President Credit leaders located in market, facilitating nimble Relationship Customer Local Credit Manager L
Slide 42: Our success in Nashville is our blueprint for growth
Invest in Talent Elevate the Brand Our success in Nashville is our blueprint for growth Targeted Industry Focus Focused 13
Slide 43: We have better growth opportunities ahead
We have better growth opportunities ahead Better 14
Slide 44: Profitably growing in key markets and businesses
Specialty Businesses Profitably growing Key in key markets Markets and businesses Small Business & Affluent Better 15
Slide 45: Capital Bank Enhances Growth Opportunities
Capital Bank Enhances Growth Opportunities North and South Carolina Tennessee 16% % of FHN 1.3x 77% 1.1x Deposits in Market1 5yr HH Income Growth vs Nat’l Avg2 % of FHN 5yr HH Income Deposits in Growth vs Nat’l Avg2 Market1 1.9x 5yr Population 1.3x Growth vs Nat’l Avg2 5yr Population Growth vs Nat’l
Slide 46: Our credit culture enables soundness, profitability, and growth
Our credit culture enables soundness, profitability, and growth Better 17
Slide 47: Our Loan Portfolio Provides Strong, Sustainable Returns
Our Loan Portfolio Provides Strong, Sustainable Returns Commercial Loans by Geography CRE to Total Capital SC GA 4% 5% 166% TX 112% 6% Other 30% FL 8% FHN Peers¹ Regional Banking NCO% NC 0.20% 16% TN 0.06% 31% 3Q13 3Q18 Better Commercial Loans by Geography as of 3Q18. CRE to Total Capital as of 2Q18
Slide 48: Our Business Model Is Proven, Focused, and Better
Our Business Model Is Proven, Focused, and Better 1 We have a strong economic profit and risk focus 2 We make decisions close to our customers 3 We have high return specialty banking areas 4 We have strong growth opportunities in new markets Proven | Focused | Better 19
Slide 49: Customer Focused, Bonefish Driven
Customer Focused, Bonefish Driven Proven | Focused | Better David Popwell | President of Banking
Slide 50: Notes
Notes Slide Note Comment CAGRs calculated on average deposit balances from 3Q13 to 3Q18. Peers include BKU, BOKF, BXS, CBSH, CFR, FCNC.A, HWC, IBKC, PB, PNFP, 4 (1) SNV, TCBI, UMBF. 4 (2) Deposit data as of 6.30.13 and 6.30.18, respectively. Source: FDIC. 16 (1) Percentages of FHN deposits in key MS
Slide 51: Blueprint for Success in High Growth Markets
Blueprint for Success in High Growth Markets Proven | Focused | Better Carol Yochem| Nashville Market President Jeff Jackson | South Florida Market President
Slide 52: Our Nashville Strategy Is a Blueprint for New Markets
Our Nashville Strategy Is a Blueprint for New Markets 1 We have delivered strong results in Nashville 2 Nashville is our blueprint for profitable growth 3 We will adapt our strategy to fast-growing markets Proven | Focused | Better 2
Slide 53: Top tier growth in Nashville
Driving Profitable Growth Since 3Q13 4.6 4.5 3.7 3.6 3.2 3.3 3.0 2.8 2.6 2.6 We have delivered top tier 2.4 2.5 growth in Nashville, Tennessee’s fastest 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 growing market Loans ($B) Deposits ($B) 242% Pretax Contribution Increase 91% 83% Loan Growth Deposit Growth Proven G
Slide 54: 2.3x Proven
2.3xX Va Proven
Slide 55: Loans: +91% Deposits: +83%
Loans: +91% Deposits: +83% Proven 5
Slide 56: Investing in talent, elevating the brand, targeted industry focus
Investing in talent Elevating the brand Targeted industry focus Focused 6
Slide 57: We will adapt our strategy to new, high-growth markets
We will adapt our strategy to new, high-growth markets Better 7
Slide 58: Sizable Growth Opportunities in North and South Carolina
Sizable Growth Opportunities in North and South Carolina Leveraging strong platform for deposit growth Deepening commercial relationships Moving up-market in commercial relationships Building industry specialization 2x 1.3x NC and SC Population NC and SC HH Income Growth vs Nat’l Avg1 Growth vs Nat’
Slide 59: Targeting Profitable Growth Opportunities in South Florida
Targeting Profitable Growth Opportunities in South Florida Exploiting meaningful deposit opportunities 2x Recruiting and retaining top tier talent South FL Total Deposit Market vs TN Building brand awareness Targeting key growth industries 2x South FL Population Growth vs Nat’l Avg Better For footno
Slide 60: Our Nashville Strategy Is a Blueprint for New Markets
Our Nashville Strategy Is a Blueprint for New Markets 1 We have delivered strong results in Nashville 2 Nashville is our blueprint for profitable growth 3 We will adapt our strategy to fast-growing markets Proven | Focused | Better 10
Slide 61: Blueprint for Success in High Growth Markets
Blueprint for Success in High Growth Markets Proven | Focused | Better Carol Yochem| Nashville Market President Jeff Jackson | South Florida Market President
Slide 62: Notes
Notes Slide Note Comment Key MSA’s in North and South Carolina include Raleigh, NC; Charlotte, NC; Greensboro, NC; Winston-Salem, NC; and Charleston, SC. All 8 (1) comparisons are of expected demographic changes from 2019 to 2024. The expected growth in national average household income is 8.8%. The
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Slide 64: Consumer Banking: Pressing our Advantages, Positioned for Growth
Consumer Banking: Pressing our Advantages, Positioned for Growth Proven | Focused | Better Tammy LoCascio | EVP, Director of Consumer Banking
Slide 65: Consumer Banking Is Building from a Position of Strength
Consumer Banking Is Building from a Position of Strength 1 We have a strong foundation in Tennessee 2 We are evolving with customer preferences 3 We have multiple deposit growth opportunities 4 We have a blueprint for success in newer markets Proven | Focused | Better 2
Slide 66: We delivered exceptional results over the past 5 years
Retail | Private Client | Wealth Small Business | Mortgage 90% 80% Deposit Revenue Growth Growth 21% 12% We delivered exceptional Branch Network Efficiency results over the past 5 years Optimization Ratio Reduction 91% $68mm Economic Customer Profit Retention Growth $18B $7B $32B 820k Deposits Loans
Slide 67: Strong Tennessee growth and #1 deposit market share
Strong Tennessee Growth Last 5 Years 44% 1.5x TN Deposit Growth Overall TN Market Growth Exceeded statewide growth 78% rates to enhance #1 deposit Nashville Deposit Growth market share in Tennessee 1.3x Memphis/Knoxville/Chattanooga Combined Market Growth Proven Market Rank and Share Source: FDIC da
Slide 68: Network optimization facilitates ongoing growth and efficiency
Locations Assets 2013 12 $424MM Buy, Integrate, 13 $437MM 2014 Optimize 2013-20181 2015 5 $400MM 2017 197 $10.1B Network optimization Consolidated 21% of total branches since 2013 facilitates ongoing growth 94% retention rate following Capital Bank integration and efficiency Lower Cost Reinvestment
Slide 69: Evolving with our customers' expectations will drive our growth
Evolving with our customers’ expectations will drive our growth Focused 6
Slide 70: Leveraging our distinctive attributes to grow
Serves all banking needs Leveraging our distinctive Looks out for attributes to grow customers Friendly & helpful Focused 7
Slide 71: Balancing Personal and Digital-Led Engagement
Balancing Personal and Digital-Led Engagement Personalized Experience Technology-Enabled Friendly & Helpful Focused 8
Slide 72: Data-driven insights will inform interactions, innovation, and messaging
Leverage data to Agile delivery of improve customer distinctive interactions enhancements INSIGHTS PRODUCT & SERVICES Understands Data-driven insights will and looks out for me Serves all Full suite of capabilities inform interactions, banking needs innovation, and messaging POSITIONING Delivered th
Slide 73: Deposit rich segments provide significant growth potential
Deposit rich segments provide significant growth potential Better 10
Slide 74: Affluent Segments and Small Businesses Deposit Growth Opportunity
Affluent Segments and Small Businesses Provide Significant Deposit Growth Opportunity in Our Markets $150B+ Consumer Deposits $160B+ Small Business Deposits Across Our Footprint1 Across Our Footprint2 100% $19B 100% $19B $34B 80% 80% $31B 60% $49B 60% 40% 40% $118B 20% $71B 20% 0% 0% Affluent (>$500
Slide 75: We will grow in key markets using a differentiated approach
We will grow in key markets using a differentiated approach Better 12
Slide 76: #1 in Tennessee with a strong base in the Carolinas and Florida
Tennessee #1 in Tennessee with a Carolinas Florida strong base to build from in the Carolinas and Florida Better 13
Slide 77: Multiple delivery strategies to support diverse market opportunities
Press advantage in Core Markets Memphis, Knoxville, Chattanooga, Florida Keys Multiple delivery strategies Capitalize in our to support diverse market Growth Markets opportunities Nashville, Raleigh Opportunistic expansion in Target Markets Fort Lauderdale, Naples, Charleston Better 14
Slide 78: Nashville provides a blueprint for success
Team-based Approach Delivering Full Suite of Banking Products & Services Nashville provides a 1.5x 85% Market Deposit Growth Revenue Growth blueprint for success and ongoing growth opportunity 5 Year 67% Growth 85% Loan Growth Deposit Growth Rates 558% Pre-Tax Income Growth Focus on Niche Segments W
Slide 79: Blueprint for growth in expansion markets
Raleigh-Durham Chapel Hill Experienced Bankers Marketing Investment Digital Engagement Targeted de novo branch and ATM investment Our blueprint for growth in expansion markets builds convenience through multiple channels with more efficient investment Current branches De Novo branches Cobranded ATMs
Slide 80: Consumer Banking Is Building from a Position of Strength
Consumer Banking Is Building from a Position of Strength 1 We have a strong foundation in Tennessee 2 We are evolving with customer preferences 3 We have multiple deposit growth opportunities 4 We have a blueprint for success in newer markets Proven | Focused | Better 17
Slide 81: Consumer Banking: Pressing our Advantages, Positioned for Growth
Consumer Banking: Pressing our Advantages, Positioned for Growth Proven | Focused | Better Tammy LoCascio | EVP, Director of Consumer Banking
Slide 82: Notes
Notes Slide Note Comment 5 (1) Acquisitions include Mountain National Bank (2013); Bank of America (13 branches) (2014); TrustAtlantic (2015); and Capital Bank (2017). 11 (1) Source: Claritas 2018 (HHs), FTB BAI Report (average balance). 11 (2) Source: Novantas Wallet Model (small businesses). 11 (3
Slide 83: Commercial Banking: Specialization Is Our Advantage
Commercial Banking: Specialization Is Our Advantage Proven | Focused | Better Todd Jones | EVP, Wholesale Banking
Slide 84: Commercial Banking Is Building from a Position of Strength
Commercial Banking Is Building from a Position of Strength 1 We build deep, profitable relationships 2 We have multiple growth opportunities 3 We have unique, high-return specialty banking areas Proven | Focused | Better 2
Slide 85: The Commercial Bank Is Strong and Diversified
The Commercial Bank Is Strong and Diversified Loan Mix Deposit Mix Mid-Atlantic East TN 15% 21% Specialty Average Loans Average Deposits 30% $19B $9B Specialty Middle TN 11% 51% Texas East TN 0.2% Middle TN 8% Florida 17% Business 3% West TN Community Relationships Employees Florida 6% 5% West TN ~9
Slide 86: We Have Delivered Strong Balance Sheet Growth
We Have Delivered Strong Balance Sheet Growth Loans Deposits $19.0 $9.2 14% $4.7B 11% CAGR Added Loans CAGR from Capital Bank $5.3 $8.1 $1.2B Added Deposits from Capital Bank 3Q13 3Q18 3Q13 3Q18 Proven CAGRs calculated using full-year average balances from 2013 to 2017. 4
Slide 87: Customers Value Our Differentiated Approach
We Are the Lead Bank for 76% of Our Customers Non-Lead Bank 24% Customers Value Our Lead Bank Differentiated Approach 76% Localized decision making Long-tenured employees 94% of Our Customers Are Highly Satisfied Community involvement Average Below Average 1% Brand recognition in Tennessee 5% Excell
Slide 88: We transformed the profitability profile in Commercial Banking
84% Increase in Economic Profit Per Client Since 20151 We transformed the Drivers of Economic Profit Growth Full relationships with deposit emphasis profitability profile in Increased average loan relationship size Commercial Banking Disciplined use of risk-adjusted loan pricing 136% Increase in Net
Slide 89: Our customer data helps us build deep, profitable relationships
Our customer data helps us build deep, profitable relationships Focused 7
Slide 90: We Use Profitability Data on Every Relationship
We Use Profitability Data on Every Relationship Loan Accounts: 24 Revenue: $476,521 2018 AVG Bal: $10,557,131 Expense: -64,861 Deposit Accounts 30 Expected Loss: -7,859 2018 AVG Bal: $9,418,772 Taxes: -155,463 Fee Inc./Bal.: 1.76% Net Income: $248,337 Relationship Net Income Treasury Rel.: Yes Alloc
Slide 91: Improving Existing Relationship Manager Productivity
Improving Existing Relationship Manager (RM) Productivity Loan Portfolio by RM Deposits by RM 300 300 250 250 200 200 Deposits ($mm) Loans ($mm) 150 150 100 100 50 50 0 0 1 5 9 13 17Legacy 21 25 29 FTB 33 37Commercial RMs 41 45 49 53 57 61 65 69 73 77 81 85 89 1 5 9 13 17 Legacy FTB 21 25 29 33 37 C
Slide 92: Improving New Capital Bank RM Productivity
Improving New Capital Bank RM Productivity Loan Portfolio by RM Deposits by RM 300 100 90 250 80 70 200 60 FTB Avg $58mm 150 50 40 100 30 FTB Avg $77mm 20 CBF Avg $17mm 50 CBF Avg $62mm 10 0 0 1 4 7 10131619222528313437404346495255 CBF Commercial RMs 1 4 7 10 13 16CBF 19 22Commercial 25 28 31 34RMs
Slide 93: Pretax Income Opportunity from Shifting Below-Average RMs
$42mm Pretax Income Opportunity from Shifting Below Portfolio Average RMs to Commercial Banking Average1 Deepening relationships and driving RM productivity drives $800mm continued profitable growth Improving Capital Bank RM Loan Opportunity2 Production to FHN Levels $2.3B Deposit Opportunity2 Focus
Slide 94: We have a proven blueprint for profitable growth
We have a proven blueprint for profitable growth Better 12
Slide 95: We Will Adapt the Nashville Playbook to New Markets
We Will Adapt the Nashville Playbook to New Markets North and South Carolina $1B current commercial deposits $3B current commercial loans Moving up-market for larger relationships Deepening relationships with deposit cross-sell Targeting key industries: Manufacturing and Healthcare South Florida $30
Slide 96: Specialization creates advantages
Specialization creates advantages Better 14
Slide 97: Specialty Banking Areas: High Growth with High Profitability
We Have More Than Doubled Specialty Loans in 5 Years Total Specialty Loans ($B) $10.4 134% Specialty Banking Areas: $4.4 High Growth with High Profitability 3Q13 3Q18 Deep industry experience adds customer value Specialty Relationship Profitability & Profit Growth Fewer, more focused competitors Str
Slide 98: Specialty Banking Areas Deliver Strong Loan Growth
Specialty Banking Areas Deliver Strong Loan Growth Loans to Mortgage Companies Asset-Based Lending Franchise Finance $2.1B $0.7B $2.0B +21% +75% +124% $0.6B $1.1B $1.0B 3Q13 3Q18 3Q13 3Q18 3Q17¹ 3Q18 Commercial Real Estate Healthcare Other2 $3.2B $0.8B $1.6B +43% +253% +130% $1.1B $0.3B $0.9B 3Q13 3
Slide 99: Loans to Mortgage Companies
$2.1B $9mm Average Loans Average Loan Relationship Loans to Mortgage ~270 23% Companies Client Relationships Efficiency Ratio Lines of credit for mortgage lenders secured by high quality, liquid mortgage loans Economic Profit Growth Nationwide footprint $23mm Most economically profitable lending bus
Slide 100: Asset Based Lending
$2.0B $14mm Average Loans Average Loan Relationship Asset Based Lending 50% 25% Working capital credit facilities secured by 5yr EP Growth Efficiency Ratio receivables, inventory, and equipment National footprint, with focus on the Southeast Customer Profile Focus 77% of economic capital generates p
Slide 101: Franchise Finance
$0.8B $9mm Average Loans Average Loan Relationship Franchise Finance 26% 27% Lending to franchisors, franchisees, regional chains, RAROC Efficiency Ratio and private equity sponsors Credit primarily secured by cash flows and equipment Portfolio Composition Representative Brands Acquired portfolio an
Slide 102: Commercial Real Estate
$3.2B $14mm Average Loans Average Relationship Commercial Real Estate 28% Efficiency Ratio Acquisition, development, and construction lending Predominantly Southeast regional footprint Portfolio Composition Focused on institutional quality projects Other Balanced asset quality and growth mindset Lan
Slide 103: Capturing deposit opportunities across Specialty Banking areas
Mortgage Warehouse Targeting based on corporate and escrow deposits We are focused on Correspondent Enhancing our digital platform to improve the capturing deposit customer experience opportunities across our Specialty Banking areas Corporate Creating and implementing new treasury management product
Slide 104: Commercial Banking Is Building from a Position of Strength
Commercial Banking Is Building from a Position of Strength 1 We build deep, profitable relationships 2 We have multiple growth opportunities 3 We have unique, high-return specialty banking areas Proven | Focused | Better 22
Slide 105: Commercial Banking: Specialization Is Our Advantage
Commercial Banking: Specialization Is Our Advantage Proven | Focused | Better Todd Jones | EVP, Wholesale Banking
Slide 106: Notes
Notes Slide Note Comment 6 (1) Growth in economic profit per relationship is measured from 1Q15 to 1Q18. 11 (1) Pretax income opportunity source: Galt. 11 (2) Loan and Deposit growth opportunities assume approximately 60 Commercial RMs in Legacy Capital Bank markets. 16 (1) Franchise Finance strateg
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Slide 108: Transforming the Customer Experience
Transforming the Customer Experience Proven | Focused | Better Dawn C. Morris | Chief Digital Banking & Marketing Officer
Slide 109: Our Road Map to an Enhanced Customer Experience
Our Road Map to an Enhanced Customer Experience Our commitment to excellence yields customer and 1 employee loyalty 2 We have expansive customer profitability insights We will connect existing profitability insights to a 3 greater understanding of customer needs 4 We use profitability insights to un
Slide 110: Transforming the customer experience starts with building on our strengths
Transforming the customer experience starts with building on our strengths Proven 3
Slide 111: Our culture is locally and nationally recognized
BEST PLACES TO WORK Our culture is locally BEST PLACES TO BANK and nationally recognized for a commitment to excellence AWARD WINNING BEST BANK VALENCE1 B2B 0 200 CONSUMER 0 150 Proven 1May 2018, Annual Brand Tracker, Brand Valence (emotional connection). 4
Slide 112: Loyalty runs deep with our employees and customers
FRONT LINE EMPLOYEES: 10 YEARS BUSINESS CUSTOMERS: Loyalty runs deep with our employees and customers 11 YEARS CONSUMER CUSTOMERS: 12 YEARS Proven Average employee tenure for front-line, FTB personnel serving target segments. 5
Slide 113: Transformation Is in Our DNA
Transformation Is in Our DNA Bonefish transformed our business from the inside-out Today, Bonefish permeates every part of our organization Proven 6
Slide 114: Connecting profitability knowledge with customer-centric insights
Connecting profitability knowledge with customer-centric insights Focused 7
Slide 115: Our Mission: An Outside-in Application of Bonefish
INSIDE OUT Our Mission: An Outside-in Application of Our Proven Bonefish Process OUTSIDE IN By applying customer centricity to our strategy, we can drive deeper levels of profitability Focused 8
Slide 116: Customers aren't one size fits all
A 5% improvement in customer profitability is worth ~$75mm in annualized revenue HIGH PROFITABILITY, LOW TENURE (HP/LT) HIGH PROFITABILITY, HIGH TENURE (HP/HT) Customers aren’t PROFITABILITY one size fits all LOW PROFITABILITY, LOW TENURE (LP/LT) LOW PROFITABILITY, HIGH TENURE (LP/HT) TENURE Focused
Slide 117: High profitability, low tenure customers
HIGH PROFITABILITY, LOW TENURE (HP/LT) HIGH PROFITABILITY, HIGH TENURE (HP/HT) High profitability, low CUSTOMER INSIGHT: Reducing customer tenure customers offer attrition rate PROFITABILITY and improving net promoter-score one of our biggest LOW PROFITABILITY, LOW TENURE (LP/LT) (NPS) offers a key
Slide 118: High profitability and tenure customers
HIGH PROFITABILITY, LOW TENURE (HP/LT) HIGH PROFITABILITY, HIGH TENURE (HP/HT) CUSTOMER INSIGHT: High profitability and Prioritize increasing both advocacy and PROFITABILITY tenure customers offer net-promoter-score (NPS) LOW PROFITABILITY, LOW TENURE (LP/LT) LOW PROFITABILITY, HIGH TENURE (LP/HT) o
Slide 119: Low profitability, low tenure customers
HIGH PROFITABILITY, LOW TENURE (HP/LT) HIGH PROFITABILITY, HIGH TENURE (HP/HT) Low profitability and PROFITABILITY tenure customers offer an opportunity to optimize LOW PROFITABILITY, LOW TENURE (LP/LT) LOW PROFITABILITY, CUSTOMER INSIGHT: HIGH TENURE (LP/HT) and streamline Reducing cost to acquire
Slide 120: Low profitability, high tenure customers
HIGH PROFITABILITY, LOW TENURE (HP/LT) HIGH PROFITABILITY, HIGH TENURE (HP/HT) Low profitability, high tenure customers PROFITABILITY offer an opportunity to LOW PROFITABILITY, LOW TENURE (LP/LT) LOW PROFITABILITY, HIGH TENURE (LP/HT) refine and reallocate CUSTOMER INSIGHT: Reduce cost to serve and
Slide 121: Optimization through deep customer insights
BETTER UNDERSTANDING MOMENTS OF ASPIRATION IDENTIFY OR ANXIETY CUSTOMER Optimization through DISCONNECTS deep customer insights UNCOVER RECOGNIZE INNOVATION OPPORTUNITIES FRICTION POINTS Better 14
Slide 122: Focusing First on Our Highest Priority Customers
Focusing First on Our Highest Priority Customers Better 15
Slide 123: Focusing Next on the Highest Priority Moments
Optimize under / over invested moments Focusing Next on the Highest Priority Moments to increase customer lifetime value (CLTV) Reduce high cost / low value moments Identify & improve key moments Better 16
Slide 124: Transforming the customer experience will drive improved profitability
Transforming the customer experience will drive improved profitability Better 17
Slide 125: A Business Case for Customer Experience
DRIVE PROFITABLE GROWTH TARGETED NTB: CROSS- WOM: NEW TO SELL INVESTMENTS WORD OF BANK OPPORTUNITY MOUTH CUSTOMERS OPTIMIZE EXPENSE A Business Case for RETENTION CTS: CTA: Customer Experience OF TARGET CUSTOMERS COST TO COST TO SERVE ACQUIRE Transforming the customer experience creates INCREASE oppo
Slide 126: Our Road Map to an Enhanced Customer Experience
Our Road Map to an Enhanced Customer Experience Our commitment to excellence yields customer and 1 employee loyalty 2 We have expansive customer profitability insights We will connect existing profitability insights to a 3 greater understanding of customer needs 4 We use profitability insights to un
Slide 127: Transforming the Customer Experience
Transforming the Customer Experience Proven | Focused | Better Dawn C. Morris | Chief Digital Banking & Marketing Officer
Slide 128: Financial Outlook: Delivering Shareholder Value
Financial Outlook: Delivering Shareholder Value Proven | Focused | Better BJ Losch | CFO
Slide 129: We are building from a position of strength
We are building from a position of strength Proven 2
Slide 130: The FHN Investment Thesis
The FHN Investment Thesis 1 We have delivered results 2 We have a strong return profile 3 We have multiple growth opportunities 4 We have capital to deploy 5 We have a lower risk model Proven | Focused | Better 3
Slide 131: We Have Delivered Strong Results Over the Past Five Years
We Have Delivered Strong Results Over the Past Five Years ROTCE1 EPS 22.6% $1.41 1110bps 14% Adjusted ROTCE Adjusted EPS Improvement1 17.4% CAGR1 6.3% (2013-2017) $1.11 -1.9% Reported Adjusted1 3Q13 YTD 3Q18 YTD $0.94 $0.81 ROA $0.67 $0.69 62bps 1.52% Adjusted ROA 1.20% Improvement1 0.58% 2013 2014
Slide 132: Strong Growth & Operating Leverage
We Have Delivered Strong Growth & Operating Leverage Loans $7.3B Deposits Added Loans from Capital Bank 6% $20.1 9% CAGR CAGR $23.1 $15.7 $8.1B Added Deposits from Capital Bank $16.3 Efficiency Ratio 2013 2017 2013 2017 94% 67% 75% 64% 1100bps Adjusted Efficiency Ratio Improvement1 2013 3Q18 Proven
Slide 133: 2018 efforts position us well for 2019
Successfully integrate Capital Bank 2018 efforts position Deliver merger cost saves us well for 2019 Build merger revenue synergies Strengthen the balance sheet Proven 6
Slide 134: Strong Results While Integrating Capital Bank
We Delivered Strong Results While Integrating Capital Bank EPS ROTCE1 ROA 2.72% $0.83 40.5% $0.36 17.9% 1.21% $0.23 0.82% 10.3% 1Q17 3Q18 1Q17 3Q18 1Q17 3Q18 Efficiency Ratio Net Interest Margin 58% Adjusted EPS Increase1 72% 3.44% 67% 3.28% 750bps Adjusted ROTCE Increase1 64% 2.92% 850bps Adjusted
Slide 135: Delivering on Merger Efficiencies & Revenue Opportunities
We Are Delivering on Merger Efficiencies & Revenue Opportunities ~$53mm ~$85mm Annual 2018 Cost Saves Annual 2019 Cost Saves Cost savings on track, $19mm $21mm $22mm $22mm $16mm $16mm 100% realization in 2019 $12mm $8mm 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 Achieved Expected Additional Balance She
Slide 136: Optimized Our Loan Portfolio for Long-term Profitability
We Optimized Our Loan ~2% $27.7B annualized growth Portfolio for Long-term -$265mm $27.4B Profitability & Lower Risk -$357mm -$50mm +$363mm $357mm of runoff in low-spread loan portfolio improved portfolio yields by 73bps Sold $50mm of Non-Strategic TRUPs at $4mm gain Sold ~$106mm of subprime auto lo
Slide 137: We manage the totality of the NIM
Strong NIM Expansion Since Beginning of Rate Cycle1 61% 37% We manage the totality 2 38% 38% 26% 23% 23% 19% 18% 18% 16% 16% of the NIM to improve 9% 0% 6% 4% RF CFG CFR BBT CMA PNFP SNV FHN PNC HBAN MTB KEY FITB ZION STI balance sheet profitability 1 Improving our balance sheet mix 2 Managing our p
Slide 138: We are focused on the best opportunities
We are focused on the best opportunities Focused 11
Slide 139: Strong Growth Aspirations Over the Next Five Years
We Have Strong Growth Aspirations Over the Next Five Years Specialty1 Consumer Commercial Consumer 38% 60% 20% 26% $27B $31B Corporate Other 3Q18 Loans 11% 3Q18 Deposits 5% Specialty1 9% Commercial 31% 5-year Loan Opportunities 5-year Deposit Opportunities Continue Specialty Banking growth Press our
Slide 140: Continue Driving Positive Operating Leverage
We Will Continue Driving Positive Operating Leverage We know how to We will reduce our We will make customer And we will drive reduce expenses existing expense base focused investments continued efficiency 2009 Today Manual Process 64% Adjusted Efficiency Automation $1.5B $1.1B Strategic Hires in Ra
Slide 141: We Have Flexibility to Optimize Capital
We Have Flexibility to Optimize Capital Capital 3Q18 Adjusted Annualized Annual Excess Capital Priorities Net Income1 Currently Generated 1 Invest in organic growth ~$465mm ~$170mm Dividend Pay ~35% of earnings Payout 2 in dividends Existing Excess Capital2 3 Return excess capital ~$160mm $293mm+ vi
Slide 142: Adversity doesn't build character, it exposes it
Adversity doesn’t build character, it exposes it Better 15
Slide 143: We Have a Lower Risk Model
Significantly Lower Stressed Loss Rates 9 Quarter FHN 2.9% Cumulative DFAST We Have a Lower Risk Model Loss Rates1 Peers 6.4% Lower CRE exposure than peers2 Minimal auto lending, student lending, and subprime ~38% of commercial loans investment-grade equivalent Lower CRE to Total Capital Ratios vs P
Slide 144: Complementary Business Model Works in Various Economic Environments
Our Complementary Business Model Works in Various Economic Environments Stressed Economy Growing Economy Stressed Economy Muted Economy Growing Economy FTN PTI Trailing Twelve Months $700 Regional Bank PTI Trailing Twelve Months $600 $500 $400 $300 $200 $100 $0 ($100) ($200) 2Q01 2Q09 2Q18 Why is FT
Slide 145: Stronger Capital Resiliency in Severely Adverse Scenario
Stronger Capital Resiliency in Severely Adverse Scenario1 0.4% 3.3% 0.3% (1.0%) Lower Credit Risk (3.9%) + 8.9% 8.0% Better Earnings Resiliency = 4Q17 Provision PPNR Assets Dividends Other 4Q19 Capital Strength 90bps FHN CET1 Decline1 < 440bps DFAST Peers’ CET1 Decline1 Better Note: For footnoted in
Slide 146: We evolve to succeed
We evolve to succeed Better 19
Slide 147: Long-term performance metrics
Total Assets Earning Assets Pre-tax Income Return on Assets Net Interest Margin Tax Rate Risk Adjusted Margin Annualized Net Charge-Offs Return on Tangible Common Equity % Fee Income Common Equity Equity / Assets Tier 1 Efficiency Ratio Better 20
Slide 148: Long-term performance metrics
Total Assets ROA Earning Assets NIM Pre-tax Income Risk Adjusted ROTCE Tax Rate Margin % Fee Income NCO% Equity/ Assets Efficiency Ratio CET1 Better 21
Slide 149: Strategic priorities are earnings growth levers
Dominate Tennessee Profitably Grow key markets Strategic priorities are and specialty businesses earnings growth levers Transform the customer experience Optimize the expense base Better 22
Slide 150: 2019 Outlook: Building from a Position of Strength
2019 Outlook: Building from a Position of Strength Efficiency ROTCE ROA NIM Ratio NCOs CET1 3Q18 17.9%1 1.21%1 3.44% 64%1 6bps 9.9% 17% - 1.20% - 3.40% - 60% - 9.5% - 2019 18% 1.30% 3.50% 62% <10bps 10% 3% - 6% Dec 18 & Jun 19 Fully Phased In 35% - 70% Key Assumptions Loan & Deposit Fed Funds Merger
Slide 151: Evolving the Bonefish: Long-term Objectives
Top-Quartile Returns Evolving the Bonefish: Better Risk Profile Long-term Objectives Profitable Growth Enhanced Operating Leverage Better 24
Slide 152: FHN: A Compelling Investment
FHN: A Compelling Investment P/TBV Unique 2.1x Franchise 1.9x 8% Discount to KRX 17%+ 2.9% FHN KRX ROTCE1 Dividend Yield 2019 Forward P/E Ratio 12.3x $200mm 14% 10.6x Discount to KRX Share Repurchase Authorization FHN KRX Better For footnoted item, refer to slide 30 for additional information. All p
Slide 153: Our future is bright
Our future is bright Better 26
Slide 154: Proven success, focused strategy, better opportunities
Proven success Focused strategy FHN Better opportunities Better 27
Slide 155: Financial Outlook: Delivering Shareholder Value
Financial Outlook: Delivering Shareholder Value Proven | Focused | Better BJ Losch | CFO
Slide 156: Notes
Notes Slide Note Comment ROTCE, Adjusted ROTCE, Adjusted ROA, and Adjusted EPS are Non-GAAP numbers. ROTCE and Adjusted ROTCE are reconciled on slide 33. 4 (1) Adjusted ROA is reconciled on slide 34. Adjusted EPS is reconciled on slide 35. Adjusted numbers exclude notable items as outlined on slides
Slide 157: Notes
Notes Slide Note Comment 3Q18 YTD Annualized Adjusted NIAC is Non-GAAP and excludes notable items as outlined on slide 32. 3Q18 YTD Annualized Adjusted NIAC is 14 (1) reconciled on slide 35. Excess capital is generated by assuming a targeted CET1 ratio of 9.0%. With 3Q18 CET1 at 9.9%, the 90bps diff
Slide 158: Notable Items – 2013 to 2015
Notable Items – 2013 to 2015 Pre-tax Pre-tax 2013 Notable Items Amount 2014 Notable Items Amount 2015 Notable Items Amount (3Q13 YTD Notable Items) (Pre-tax) Acquisition Expense ($5.0mm) Restructuring Charges ($3.0mm) Legal Accrual ($162.5mm) Legal Accrual ($6.1mm) Restructuring Charges ($5.7mm) Acq
Slide 159: Notable Items – 2017 & 2018
Notable Items – 2017 & 2018 Pre-tax 2017 Notable Items Amount 3Q18 YTD Notable Items Amount (Pre-tax) (1Q18) Acquisition Expense ($31.4mm) Mortgage Repurchase Reserve Release $20.0mm (1Q18) Gain on property sale $3.3mm Acquisition Expense ($61.3mm) Loss on equity securities repurchase ($14.3mm) (2Q1
Slide 160: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of return on tangible common equity and adjusted return on tangible common equity. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP informati
Slide 161: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of adjusted return on average assets. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. (1) - (2) (3) - (4) (1) (2) (3) (4)
Slide 162: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of adjusted earnings per share. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. (1) - (2) (CAGR) (CAGR) (1) (2) 3Q18 QTD
Slide 163: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of adjusted efficiency ratio and adjusted noninterest expense. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. (1) (2) (3
Slide 164: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of adjusted (core) net interest margin. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. Core Net Interest Income & Net In
First Horizon National — Investor Day (November 2018) on 6ix