First Horizon Corporation · NYSE:FHN
First Horizon — First Horizon National — Q2 2014 Earnings Presentation
32 slides from First Horizon's earnings presentation, Jul 18, 2014
Slide 1: FHN Performance Highlights
FHN PERFORMANCE HIGHLIGHTS Summary of Second Quarter 2014 Significant Items Segment Item Income Statement Amount Comments Capital Markets Litigation Expense Recoveries Litigation and regulatory matters $38.6 million Pre-tax recoveries related to agreements reached with insurance companies for litiga
Slide 2: Second Quarter 2014 Earnings, July 18, 2014
First Horizon National Corporation Second Quarter 2014 Earnings July 18, 2014
Slide 3: Forward-looking statements and non-GAAP disclosure
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 contains forward-look
Slide 4: Building Franchise Value: Executing Blue Chip Priorities
Building Franchise Value Executing “Blue Chip” Priorities Being easy to do business with Providing differentiated customer service Using the bonefish to drive profitability 3
Slide 5: Executing Profitable Growth Opportunities
Building Franchise Value Executing Profitable Growth Opportunities Solid progress toward achieving long-term bonefish Regional Bank Areas of Loan Growth Since 2Q131 profitability Markets: Consolidated and Regional Banking average loan East TN2 6% growth of 2% and 4% linked quarter, respectively Midd
Slide 6: Core Businesses Relative Positioning
Core Businesses Relative Positioning Balance Sheet Positioned to Benefit from Rising Rates 9.0% ROTCE2,3 10.6% Capital ratios remain ~200-300bps Returns above normalized Bonefish Tier 1 Common capital levels 0.84% ROA2,3 0.87% 1 Significant latent income embedded in 3.14% balance sheet NIM2 A 200bps
Slide 7: Financial Results
FINANCIAL RESULTS FIRST HORIZON iS NATIONAL CORPORATION
Slide 8: 2Q14 Consolidated Financial Results
2Q14 Consolidated Financial Results $ in millions, except EPS Actuals 2Q14 vs Financial Results 2Q14 1Q14 2Q13 1Q14 2Q13 Net Interest Income $157 $152 $160 +$4 -$3 Fee Income $127 $146 $143 -$19 -$16 Expense $165 $220 $227 -$55 -$62 Loan Loss Provision $5 $10 $15 -$5 -$10 Net Income Available to Com
Slide 9: 2Q14 Significant Items
2Q14 Significant Items Significant Item Pre-Tax Amount After-Tax Amount1 Impact to EPS2 Litigation Expense Recovery +$47.1mm +$31.4mm +$0.13 Held-for-Sale (Primarily NPL) +$8.2mm +$5.5mm +$0.02 Portfolio Valuation Adjustment Numbers may not add to total due to rounding. 1After-tax impact assumes a t
Slide 10: 2Q14 Segment Highlights
2Q14 Segment Highlights Net Income1 2Q14 $ in millions, Per Share Drivers and Impacts except EPS 2Q14 1Q14 2Q13 Impact2 Pre-provision net revenue3 up 18% linked quarter as revenues Regional increased 6% and expenses remained relatively flat $47 $36 $43 $0.20 Banking 2Q14 provision of $8mm vs 1Q14 pr
Slide 11: Regional Banking Financial Results
Regional Banking Financial Results $ in millions Actuals 2Q14 vs Financial Results 2Q14 1Q14 2Q13 1Q14 2Q13 Net Interest Income $149 $142 $148 +$7 +$0 Fee Income $66 $60 $62 +$6 +$4 Expense $134 $133 $130 +$1 +$4 Loan Loss Provision $8 $13 $13 -$5 -$5 Net Income $47 $36 $43 +$11 +$4 Average loans in
Slide 12: Profitable Growth Opportunities: Regional Banking
Profitable Growth Opportunities: Regional Banking Broad Product Offerings with Focus on Specialty Lending Provides Growth Opportunities Average loans up 4% linked quarter, driven by targeted calling efforts, ongoing focus on specialty lending and seasonal rebound CRE increase due to growth in expans
Slide 13: Capital Markets
Capital Markets Capital Markets Provides a Unique Business Model Fixed income average daily revenue at $642k in 2Q14 Capital Markets Revenue and Expense Lower levels of fixed income ADR due to market conditions $800mm Left Axis: Revenue Expense $3mm Expense decline primarily driven by a $47mm expens
Slide 14: NII and Net Interest Margin
NII and Net Interest Margin Balance Sheet Positioned to Benefit from Rising Rates NIM increased 9bps linked quarter to 2.97%, primarily Consolidated Net Interest Margin due to lower levels of cash balances at the Fed 3.1% 3.09% Current second half 2014 NIM expectations in the ~2.90%-2.95% range 3.0%
Slide 15: Continued Efficiencies
Continued Efficiencies Execution Capabilities Demonstrated Performance vs Peers Meaningfully Differentiated Annualized noninterest expense declined 25% from 2Q111Further efficiency improvements achievable by:Continued focus on reducing Non-Strategic expenseWorking on 133 processes that are candidate
Slide 16: Asset Quality Trends
Asset Quality Trends Continued Improvement in Credit Trends Net charge-offs of $9mm, down 48% linked quarter Non-Performing Assets and 53% year over year $500mm NPLs NPLs Held for Sale ORE NPL levels at $301mm, down 1% linked quarter and 21% year over year $400 Commercial NPLs down 7% linked quarter
Slide 17: Building Long-Term Earnings Power: Bonefish Targets
Building Long-Term Earnings Power: Bonefish Targets Focused on Growing Our Company Selectively and Profitably While Positioning Our Balance Sheet for Sustainable, Higher Returns in the Long Term Total Assets Earning Assets Return on Assets Pre-tax Income 1.25%—1.45% Net Interest Margin 3.50%—4.00% T
Slide 18: Closing the Gap to Bonefish Targets
Building Franchise Value Closing the Gap to Bonefish Targets Rise in Interest Rates Capital Latent income Optimization/ embedded in Deployment asset sensitive Economic Dividends balance sheet Profit Improvement Share Profitable Resource buybacks Bonefish Growth allocation to M&A Earnings Opportuniti
Slide 19: Successfully Executing on Key Priorities
Successfully Executing on Key Priorities FHN Is Well Positioned For Attractive Long-Term Earnings Power Proven execution capabilities Unique size, scope, and strengths Focused on efficiency, productivity, economic profitability, and growth opportunities Organizational alignment on the path to achiev
Slide 20: Appendix
APPENDIX FIRST HORIZON iS NATIONAL CORPORATION
Slide 21: 2Q14 Credit Quality Summary by Portfolio
2Q14 Credit Quality Summary by Portfolio Regional Banking Corporate4 Non-Strategic Commercial HE & Permanent Commercial HE & Permanent ($ in millions) CRE Other1 Total CRE Other2 Total (C&I & Other) HELOC Mortgage (C&I & Other) HELOC Mortgage Period End Loans $7,947 $1,226 $3,334 $346 $12,853 $155 $
Slide 22: C&I and CRE Portfolio Detail
C&I and CRE Portfolio Detail $8.4B C&I portfolio, diversified by industry, managed primarily in Regional Banking $1.2B CRE portfolio, comprising 8% of total loans Commercial (C&I and CRE) net charge-offs at $3mm in 2Q14 , largely driven by sale of TRUP loan Income CRE: Loan Type Construction 23% Min
Slide 23: Home Equity Overview
Home Equity Overview Portfolio Characteristics First Second Total Balance $ 2.8B $ 2.4B $ 5.2B Original FICO 752 735 743 Refreshed FICO 752 723 736 Original CLTV 76% 81% 78% Full Doc 91% 74% 83% Owner Occupied 92% 94% 93% HELOCs $ 0.7B $ 2.0B $ 2.7B Weighted Average HELOC Utilization 48% 59% 57% Per
Slide 24: Non-Strategic Update
Non-Strategic Update Wind-down of Non-Strategic on track with reduced balances and improving credit quality TRUPs balances declined to $339mm, down 3% linked quarter and 11% year over year1 Sold one TRUP on interest deferral in 2Q14 Non-Strategic comprised less than 19% of total average loans in 2Q1
Slide 25: Agency & Non-Agency Update
Agency & Non-Agency Update Entered Repurchase Resolution Agreements with Both GSEs Mortgage Repurchase Reserve ($ in millions) 2Q13 3Q13 4Q13 1Q14 2Q14 Beginning Balance $184 $123 $294 $165 $145 Net Realized Losses $(61) $(29) $(98) $(20) $(4) Provision $0 $200 $(30) $0 $0 Ending Balance $123 $294 $
Slide 26: FH Proprietary Securitizations Litigation
FH Proprietary Securitizations Litigation Certificate Breakdown ($ in millions) Original Paid Current Performing 60D+ Cumulative Certificate Deal UPB Off UPB UPB Delinquent Loss FHASI 2005-AR51 Senior $30.0 $19.3 $10.7 $10.0 $0.7 $0.0 (Schwab) FHASI 2007-AR21 Senior $50.0 $32.3 $15.4 $13.7 $1.7 $2.2
Slide 27: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of risk weighted assets, tangible common equity, net income, non-controlling interest, average common equity, intangibles, and various ratios using those measures. That information is not presented according to ge
Slide 28: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of net interest income, FTE adjustments, earning assets, and various ratios using one or more of those measures. That information is not presented according to generally accepted accounting principles (GAAP) & is
Slide 29: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of equity, assets, tier 1 capital, risk weighted assets, and various ratios using one or more of those measures. That information is not presented according to generally accepted accounting principles (GAAP) and i
Slide 30: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of expense, revenue, repurchase provision, and various ratios using one or more of those measures. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled t
Slide 31: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of expense, pre-tax income, average assets, net income, diluted shares, and various ratios using one or more of those measures. That information is not presented according to generally accepted accounting principl
Slide 32: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of revenue, expense, and various ratios using one or more of those measures. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information bel
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