First Horizon Corporation · NYSE:FHN
First Horizon — Q2 2020 Earnings Presentation
31 slides from First Horizon's earnings presentation, Jul 17, 2020
Slide 1: First Horizon National Corporation Second Quarter 2020 Earnings
First Horizon National Corporation Second Quarter 2020 Earnings July 17, 2020
Slide 2: Disclaimer
Disclaimer 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, proje
Slide 3: 2Q20 GAAP Financial Summary
2Q20 GAAP Financial Summary Reported Change vs. $s in millions 2Q20 1Q20 4Q19 3Q19 2Q19 1Q20 2Q19 Net Interest Income $305 $303 $311 $301 $304 $2 1% $1 - Fee Income $206 $175 $183 $172 $158 $31 18% $48 30% Total Revenue $512 $478 $495 $472 $462 $34 7% $50 11% Expense $332 $311 $327 $308 $300 $21 7%
Slide 4: Table of Contents
Table of Contents FHN: Well-positioned in a Challenging Environment ………………………………………………………………………………………………………………………5 2Q20 Adjusted Financial Highlights ……………………………………………………………………………………………………………………………………………..6 NII/NIM …………………………………………………………………..………………………………………………………………………………………………………………….7 Fee Income……
Slide 5: FHN: Well-Positioned in a Challenging Environment
FHN: Well- Positioned in a Challenging Environment ● Adjusted PPNR up 13% LQ and 2% YoY with revenue growth of 7% LQ and 11% YoY Solid Results with Counter-cyclical businesses (Fixed Income and Loans to Mortgage Companies) partially offset ZIRP impacts on NIM Strong Adjusted PPNR Modest NII incr
Slide 6: 2Q20 Adjusted Financial Highlights
2Q20 Adjusted1 Financial Highlights Adjusted Change vs. ● Adjusted EPS of $0.20; TBV per share of $9.99 $ in millions except per share data 2Q20 1Q20 2Q19 1Q20 2Q19 Provision reflects CECL reserve build of Net Interest Income $305 $303 $304 $3 1% $2 1% $93mm, or $0.23 per share Fee Income $206 $17
Slide 7: NII Relatively Stable Despite Interest Rate Headwinds
NII Relatively Stable Despite Interest Rate Headwinds ($s in millions) ● NII up modestly 2Q20 vs. 1Q20 NII NIM Impact of challenging yield curve more than offset by 1Q20 - Reported $303 3.16% growth in loans to mortgage companies & PPP and Less: 1Q20 CBF Loan Accretion -$9 -9bps deposit pricing di
Slide 8: Fee Income Growth Led By Strength in Fixed Income
Fee Income Growth Led By Strength in Fixed Income ($s in millions) ● Fee income up 18% LQ and up 31% YoY driven by strength in fixed income and deferred comp partially Fee Income offset by lower deposit, card and wealth fees given COVID-19 impacts $206 ● Fixed Income up $17mm reflecting robust sales
Slide 9: Adjusted Expense Trends Reflect Underlying Discipline
Adjusted Expense1 Trends Reflect Underlying Discipline ($s in millions) Adjusted Expense $316 $318 ● Employee comp. up $13mm LQ driven by a $20mm $276 $290 increase in deferred comp with offset in other income Deferred Comp $272 22% 22% Expense 16% 16% 17% ● Results reflect a reduction in stock-base
Slide 10: Loan Growth Driven by Loans to Mortgage Co. & PPP
Loan Growth Driven by Loans to Mortgage Co. & PPP Total Average Loans ● Average loan growth of 11% LQ and 18% YoY $34.0B Average loans to mortgage companies up $1.7B 6% $30.5B LQ, reflecting strong volume due to low rates $30.7B 1% $30.0B 2% $28.7B 2% 2% All other commercial loans grew ~$1.0B LQ
Slide 11: Continue to Enhance Funding Mix While Reducing Costs
Continue to Enhance Funding Mix While Reducing Costs Average Interest-bearing Liabilities and DDA $41.9B ● Deposits up 14% LQ driven by strength in DDA, and $40.5B Corporate Long Term 3% savings Funding $37.0B $37.6B 5% $35.6B $36.2B 2% 2% DDA of $11.3B increased $2.6B 2% $35.5B Fed Funds, Repos,
Slide 12: Strong Capital Position
Strong Capital Position1 Improving Capital Levels 12.48% 11.34% 11.01% 11.22% 10.78% ● Robust PPNR provides dividend support and 10.24% 10.15% 10.69% 9.97% 9.52% additional loss-absorbing capital ● CET1 improved 72bps driven by reduction in risk- 9.25% 9.01% 9.20% 8.54% 9.26% weighted assets ● Capit
Slide 13: Significant Reserves for Current Environment
Significant Reserves for Current Environment ($ in millions) 1Q20 vs. 2Q20 Loan Loss Reserves ● CECL reserve build reflects further deterioration in overall macro-economic outlook ($5) $538 $115 Utilized Moody’s May 27th scenario as baseline, $445 ($17) supplemented with two alternative scenarios
Slide 14: Prudently Managing Risk
Prudently Managing Risk ($s in millions ) Provision, Credit Losses, and Net Charge-offs ● Net charge-off ratio remained relatively low at 20 bps with increased losses driven by an energy credit and a $145 restaurant credit $110 $17 ● Nonperforming loans increased $36mm reflecting $15 $15 $13 relativ
Slide 15: IBKC 2Q20 Financial Highlights
IBKC 2Q20 Financial1 Highlights ● Total revenue of $314mm, up 7% LQ, flat YoY ● Average loan growth of 7% LQ and 12% YoY Change vs. Commercial and consumer line utilization $ in millions except per share data 2Q20 1Q20 2Q19 1Q20 2Q19 was 52% and 59%, respectively from 52% and 64% at 1Q20 Net Inter
Slide 16: IBKC Estimated Loan Marks & Accretion
IBKC Estimated Loan Marks & Accretion IBKC Estimated 7/1/20 Loan Portfolio Merger Accounting Impacts Interest/ Total Balances % of Total Credit Mark Liquidity Mark Mark PCD Loans ~$12.6 B ~52% ~($300mm)/~2.4% ~($60mm)/~0.45% ~($360mm)/~2.9% Non-PCD Loans ~$11.6 B ~48% ~($160mm)/~1.4% ~($40mm)/~0.35%
Slide 17: Estimated Merger Purchase Accounting Impact
Estimated Merger Purchase Accounting Impact Calculation of Merger Purchase Accounting Adjustments ($s in millions) Fair Value of Assets less Fair Value of Liabilities Net Fair Value of Assets/Liabilities Acquired ~$3,000 (Loans,securities, fixed assets, etc. less CDs, TRUPS, FHLB, etc.) Total IBKC P
Slide 18: Expected Merger-related Cost Saves & Expenses
Expected Merger-related Cost Saves & Expenses Targeted Cost Savings on Track 2020 2021 2022 ● ~$10mm of total savings achieved in 2Q20 (~$5mm FHN and ~$5mm IBKC) $42.5mm $127.5mm $170mm ● Targeted savings expected to come from run-rate by year-end in-year savings in-year savings personnel (~$120mm),
Slide 19: Key Takeaways
Key Takeaways ● Strong PPNR generation, liquidity, capital, and reserves ● Uniquely positioned to capture merger benefits Marked loan book Healthy reserves Targeted cost saves of ~$170mm ● More diversified business mix ● Solid deposit franchise ● Countercyclical businesses providing offsets in
Slide 20: Appendix
APPENDIX by 20
Slide 21: FHN Reserve by Portfolio
FHN Reserve by Portfolio 3/31/20 6/30/20 FHN Reserve 6/30/20 FHN Allowance FHN Build FHN Allowance Coverage Allowance Coverage $ in millions Loans to Mortgage Companies 0.07% - $4 0.10% Energy 2.95% $37 $59 7.64% C&I excl. Loans to Mortgage 1.46% $28 $256 1.54% Companies & Energy Total C&I 1.15% $65
Slide 22: FHN 2Q20 Credit Quality Summary by Portfolio
FHN 2Q20 Credit Quality Summary by Portfolio Regional Banking Corporate6 Non-Strategic FHNC Commercial Consumer Consumer Commercial Consumer ($ in millions) CRE Other2 Subtotal Other3 Total (C&I & Other) Real Estate1 Real Estate1 (C&I & Other) Real Estate1 $21,074 $4,794 $5,692 $430 $31,990 $28 $339
Slide 23: FHN/IBKC Loan Portfolio Mix
FHN/IBKC Loan Portfolio Mix ($ in millions) FHN IBKC 2Q20 Period- % of 2Q20 Period- % of end Balance Balance end Balance Balance Other C&I $4,320 13% $3,885 15% Loans to Mortgage Companies $4,055 12% $35 - Finance & Insurance $2,436 7% $701 3% Health Care & Social Assistance $1,863 6% $927 4% Accomm
Slide 24: IBKC Deferral Update
IBKC Deferral Update Loans Under Forbearance 6/30/2020 4/30/2020 4/15/2020 # of # of # of $ Volume $ Volume $ Volume Accounts on Accounts on Accounts on of Loans of Loans of Loans Deferral Deferral Deferral CRE 642 $1.7B 461 $1.2B 229 $0.6B C&I 1,659 $1.0B 1,153 $0.7B 486 $0.4B Mortgage 1,057 $0.6B
Slide 25: Estimated Purchase Accounting Marks
Estimated Purchase Accounting Marks Asset Pre-Tax Marks (Negative Mark is dilutive to TBV) Liability Pre-Tax Marks (Negative Mark is accretive to TBV) Announcement Announcement Estimate Current Estimate Estimate Current Estimate Securities (AFS & HTM) $8mm $15mm Time Deposits $2mm $20mm ($130mm) ($3
Slide 26: Notable Items-2019 & 2020
Notable Items-2019 & 2020 Pre-Tax Pre-Tax 2019 Amount 2020 Amount Restructuring ($12.2mm) 1Q Acquisition Expense ($5.8mm) Acquisition Expense ($5.7mm) Restructuring ($18.7mm) Acquisition Expense ($14.3mm) 2Q Rebranding ($9.1mm) Acquisition Expense ($8.6mm) Legal Resolution Expense Reversal $8.3mm Re
Slide 27: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. ($ in millions) Pre-provision Net Revenue ("PPNR") 2Q20 1Q20 4Q19 3Q19 2
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) Adjusted Noninterest expense 2Q20 1Q20 2Q19 LQ Change YO
Slide 29: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials NII in 000s NII Margin NII in 000s NII Margin NII in 000s NII Margin 1Q20 Reported $303 3.16% 4Q19 Reported $311 3.26% 3Q19 Reported $301 3.21% Prior Period Accretion -$9 -0.09% Prior Period Accretion -$14 -0.15% Prior Period Accretion -$6 -0.06% 1Q20 Actual Core NI
Slide 30: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials 3/31/2020 6/30/2020 FHN FHN Period-End Allowance Period-End Allowance $ in millions Allowance Loans Coverage Allowance Loans Coverage Loans to Mortgage Companies 4 5,714 0.07% 4 4,021 0.10% Energy 22 747 2.95% 59 772 7.64% C&I exlc. Loans to Mortgage Companies & Ene
Slide 31: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials $ in millions except per share data IBKC Adjusted Noninterest Expense 2Q20 1Q20 2Q19 Noninterest expense GAAP) $ 194 $ 177 $ 170 Less: Notable items (Non-GAAP) (a) $ (15) $ (3) $ - Adjusted Noninterest expense (Non-GAAP) $ 179 $ 174 $ 170 IBKC Pre-provision Net Reve