First Horizon Corporation · NYSE:FHN
First Horizon — First Horizon National — Investor Day (November 2018)
38 slides from First Horizon's investor day presentation, Nov 6, 2018
Slide 1: Financial Outlook: Delivering Shareholder Value
Financial Outlook: Delivering Shareholder Value Proven | Focused | Better BJ Losch | CFO
Slide 2: Non-GAAP and forward-looking statements 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, projected and es
Slide 3: We are building from a position of strength
We are building from a position of strength Proven 2
Slide 4: 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 5: 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 6: We Have Delivered 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 7: 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 8: We Delivered 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 9: We Are 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 10: We Optimized Our Loan Portfolio for Long-term Profitability & Lower Risk
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 11: We manage the totality of the NIM to improve balance sheet profitability
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 12: We are focused on the best opportunities
We are focused on the best opportunities Focused 11
Slide 13: We Have 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 14: We Will 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 15: 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 16: Adversity doesn't build character, it exposes it
Adversity doesn’t build character, it exposes it Better 15
Slide 17: 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 18: Our 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 19: 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 20: We evolve to succeed
We evolve to succeed Better 19
Slide 21: Better
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 22: Better
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 23: 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 24: 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 25: 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 26: 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 27: Our future is bright
Our future is bright Better 26
Slide 28: FHN: Proven success, Focused strategy, Better opportunities
Proven success Focused strategy FHN Better opportunities Better 27
Slide 29: Financial Outlook: Delivering Shareholder Value
Financial Outlook: Delivering Shareholder Value Proven | Focused | Better BJ Losch | CFO
Slide 30: 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 31: 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 32: 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 33: 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 34: 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 35: 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 36: 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 37: 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 38: 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
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