First Horizon Corporation · NYSE:FHN
First Horizon — First Horizon National — Investor Day (November 2018)
34 slides from First Horizon's investor day presentation, Nov 6, 2018
Slide 1: First Horizon National Corporation Investor Day Reference Materials
First Horizon National Corporation Investor Day Reference Materials November 6, 2018
Slide 2: Non-GAAP and forward-looking statements
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: Who We Are
Who We Are Assets Market Cap $41B $6B Loans Regional Banking $27B Consumer Banking Deposits Retail Banking $31B Private Client/Wealth Mgt. Core Commercial Commercial & Industrial Financial Business Banking Centers Specialty Banking Commercial Real Estate 292 Asset-Based Lending Loans to Mortgage Com
Slide 4: We Are a Great Place to Bank and Work
We Are a Great Place to Bank and Work 4
Slide 5: Deeply Engrained Economic Profit Focus
Deeply Engrained Economic Profit Focus Economic Profit (EP)1 Focus Driving Increased Regional Banking Profitability EP more than doubled from 2013 to 2017 2013 2017 Net Income increased 55% Economic Profit Economic Profit Improvement was driven by: $83mm $175mm Core deposit growth in consumer, comme
Slide 6: Leveraging Data Analytics to Drive Profitable Growth
Leveraging Data Analytics to Drive Profitable Growth We Know Relationship We Know Our Customers’ Profitability Managers’ Productivity NII & NIOI Total Relationship View Expected Loss (Provision) Product Mixture Direct & Allocated Expenses Economic Profit/Relationship Cost of Capital 2013 2017 Econom
Slide 7: Regional Banking
Regional Banking1 Loans by LOB Loans by Type Loans by Geography Other Income 3% TN CRE Commercial Consumer 37% 27% 15% Loans to 33% Mortgage SC 4% C&I Companies GA 4% 52% Other 8% 25% TX 5% Commercial CRE FL 9% (Specialty) 22% NC 40% 16% Deposits by LOB Deposits by Type Deposits by Geography2 Nonint
Slide 8: Capital Bank Acquisition Strengthens FHN Franchise
Capital Bank Acquisition Strengthens FHN Franchise 82% of Deposits Are in Markets Where We Have Top 5 Share1 Tennessee Strong platform for deposit growth in the Total Deposits: $24.0B Carolinas Major MSA Rankings: Memphis MSA Rank: 1st Knoxville MSA Rank: 1st North Carolina (NC) and South Carolina (
Slide 9: Deposit Composition Reflects Stable Funding Mix
Deposit Composition Reflects Stable Funding Mix Total avg. deposits represent 87% of total funding Non-Maturity Interest-Bearing Deposits Stable and cost effective funding mix in Regional Banking Avg. Balance $19B with 56% DDA and interest checking deposits Weighted Avg. Rate Paid Avg. Fed Funds $14
Slide 10: Stability in Deposit Mix Trends
Stability in Deposit Mix Trends 10% 10% 10% 9% 9% 9% 9% 9% 10% 10% 8% 9% 9% 9% 10% 10% Insured Network Deposits 6% 6% 5% 5% 5% 13% 5% 11% 11% 11% 12% 13% 11% 11% 11% 12% Time Deposits 31% 32% 31% 31% 31% 30% 28% 28% 28% 28% 28% 28% 28% 28% 27% 28% Money Market / Savings 25% 25% 26% 25% 26% 26% 25% 2
Slide 11: Deposit Beta Comparison
Deposit Beta Comparison1 3Q18 Total Deposit Beta 3Q18 Interest Bearing Deposit Beta 102% 128% 90% 65% 80% 55% Peer Median = 61% Peer Median = 39% 4% 7% Cumulative Total Deposit Beta Cumulative Interest Bearing Deposit Beta 46% 73% 36% 48% 24% 35% Peer Median = 18% Peer Median = 27% (0.6%) (0.2%) FHN
Slide 12: Net Interest Income and Net Interest Margin
Net Interest Income and Net Interest Margin Floating rate assets re-price at 100% beta. Loan portfolio Loan Betas Outpaced Deposit Betas comprised of 66% floating adjustable rate loans1 ~83% are tied to LIBOR Loan Yield 4.84% In ~16% are tiedRepayment to Prime 3.65% ~1% are tied to US Treasuries Sec
Slide 13: Select C&I and CRE Portfolio Metrics
Select C&I and CRE Portfolio Metrics1 Average Commercial Loans C&I: Loans to Mortgage Companies $ in billions Period-end Balance Average Balance 4% 4% $2.4 5% $2.1 $2.1 $2.1 $2.1 Commercial $2.0 $1.9 $1.9 Energy 40% ABL $1.9 $1.8 Correspondent 11% $1.6 $1.5 Franchise Finance LMC Healthcare 11% Corpo
Slide 14: Consumer Portfolio & Non-Strategic Overview
Consumer Portfolio & Non-Strategic Overview HELOC Draw vs Repayment Balances Home Equity Portfolio In Repayment $0.5B 64% In Draw 8% 7% 6% 7% 8% $1.1B 0-12 13-24 25-36 37-48 49-60 >60 Months Left in Draw Period Non-Strategic Consumer Real Estate Mortgage Repurchase Reserve 38% ($ in millions) 3Q17 4
Slide 15: Balance Sheet Evolution Yields High Quality Loan Profile
Balance Sheet Evolution Yields High Quality Loan Profile Loan portfolio underweight consumer and commercial real Commercial Credit Grade Migration1 estate PD 1-5 3% CRE/Total Capital Ratio of 112% significantly below peer High Pass average of 166% PD 6-9 Non-real estate consumer loans represent only
Slide 16: 3Q18 Credit Quality Summary by Portfolio
3Q18 Credit Quality Summary by Portfolio Regional Banking Corporate5 Non-Strategic FHNC Commercial Permanent Commercial Permanent ($ in millions) CRE HE & HELOC Other1 Subtotal HE & HELOC Other2 Total (C&I & Other) Mortgage (C&I & Other) Mortgage Period End Loans $15,675 $4,237 $5,749 $542 $26,203 $
Slide 17: Continued Momentum
Continued Momentum Strengthening asset quality reflected in materially lower annualized net charge-offs Asset Quality Highlights Decreasing loan to deposit ratio driven by strong deposit growth outpacing solid loan growth ($ in millions) 3Q17 4Q17 1Q18 2Q18 3Q18 Average deposit CAGR: 13% since 3Q13
Slide 18: Stress Testing Results Confirm Capital Strength
Stress Testing Results Confirm Capital Strength On May 24th the Economic Growth, Regulatory Relief, and Consumer Protection Act was signed into law and eliminated Holding Company Capital Results Dodd-Frank Act (“DFA”) stress testing requirements for FHN. FHNC CET1 Peer4CET1 Total Capital 16.3% 9
Slide 19: Stress Testing
Stress Testing 2018 Severely Adverse Scenario FHNC Earnings Severe global recession accompanied by a global aversion to long- % Average Peer2 9 Quarter term fixed-income assets ($ in millions) Cumulative Assets DFAST Real GDP down 7.5% 4Q17 - 1Q20 Results Pre-provision net revenue $1,225 3.1% 3.0% U
Slide 20: Optimizing Capital Deployment
Optimizing Capital Deployment Invest Internally Repatriate to Shareholders Invest Externally Strong organic loan growth Cash dividends Bank M&A since 2012 Increased 4 times since 20131 Mountain National Bank — 2013 Established new specialty LOBs Branch Acquisitions — 2014 Capital Share buybacks Ener
Slide 21: Material Positive Impact from Visa B Shares Monetization
Material Positive Impact from Visa B Shares Monetization Impact to Tangible Book Value (TBV)1 2Q18 $0.64 Increase in TBV per Share 3Q18 +$0.36 NIAC (Ex-Visa B Monetization) $7.94 $8.58 TBV per Share +$0.49 Visa B Monetization TBV per Share -$0.12 Common Dividends -$0.09 AOCI & Other Impact to TCE/TA
Slide 22: Outstanding Long-Term Debt and Preferred Stock
Outstanding Long-Term Debt and Preferred Stock Credit Ratings1 Issuance Coupon Rate Callable Date Maturity Principal Outstanding Moody's Fitch FTBNA Senior Debt2 11/21/14 2.95% 11/1/19 12/1/19 $400mm Baa3 BBB- Preferred Stock 3/23/05 3 Month LIBOR + 85bps3 4/10/10 Perpetual $300mm Ba2 B REIT Preferr
Slide 23: Securities Portfolio Overview
Securities Portfolio Overview 95% US Gov’t Agencies Securities to Assets1 (Primarily MBS/CMO) Corporates 2% 22% 21% 21% 21% 21% $4.6B Other 3% 15% 14% 14% 13% 13% 11% 4.8 99+% Effective Duration2 Classified as Available for Sale 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 2.78% $177mm Peer Median FHN Yield Net Un
Slide 24: FTN Financial: Clear and Consistent for 90+ Years
FTN Financial: Clear and Consistent for 90+ Years FTN Financial Value Proposition We cultivate enduring relationships with our customers by providing a compelling combination of fixed income products and services to support their investment needs and overall balance sheet management activities. Exte
Slide 25: FTN Financial: Diversified Fixed Income Platform
FTN Financial: Diversified Fixed Income Platform Unique, low-risk fixed income business model focused on sales and Industry Leader1 distribution #3 issuer of SBA 7(a) Pools Delivers strong risk-adjusted returns through the cycle and provides counter-cyclicality to Regional Banking segment Top 10 und
Slide 26: Capital Bank Acquisition Expenses
Capital Bank Acquisition Expenses1 ($ in millions) 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 Employee compensation, incentives and benefits (a) $2.0 $2.5 $3.9 $16.8 $0.2 $- Occupancy (b) $0.1 $2.2 $- $- $- $- Miscellaneous expense (c) $1.4 $3.1 $2.0 $1.0 $0.1 $0.1 Professional fees (d) $4.6 $9.0 $5.6 $20.1 $3.5
Slide 27: Notable Items
Notable Items Pre-Tax Pre-Tax 2017 1 2018 Amount Amount1 Acquisition Expense ($31.4mm) 1Q None Gain on property sale $3.3mm Mortgage Repurchase Reserve Release $20.0mm Acquisition Expense ($43.2mm) Acquisition Expense ($6.4mm) 2Q Effective tax rate adjustment associated with reversal of a capital lo
Slide 28: Appendix
Appendix 28
Slide 29: Notes
Notes Slide Note Comment Economic Profit equals Regional Banking Net Income less an internal capital charge. Regional Banking key metrics table excludes the effect of 5 (1) Capital Bank. 5 (2) Estimated based on initial profitability work done in 2013. 6 (1) Economic Profit equals Regional Banking N
Slide 30: Notes
Notes Slide Note Comment 12 (1) Includes $250mm of 3 month LIBOR loans and $650mm of 1 month LIBOR loans swapped to fixed for varying maturities. Core excludes the accretion from CBF’s loans, and is a Non-GAAP number reconciled in the table found in the Appendix. The average earning 12 (2) assets im
Slide 31: Notes
Notes Slide Note Comment 18 (1) The Company is developing a framework to continue stress testing activities outside of the DFAST requirements. 18 (2) Assumes flat share count and maintenance of dividend payments on preferred stock. 18 (3) Includes regulatory disallowances and taxes. Results represen
Slide 32: Notes
Notes Slide Note Comment Effective 1/1/18 FHN adopted ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" which resulted in the reclassification of all equity investments from investment securities to other assets. 23 (1) Source of Peer Data: S&P Global Market In
Slide 33: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of adjusted fee income, adjusted revenue, adjusted noninterest expense, adjusted pre-tax income, adjusted net income available to common, adjusted earnings per share, core net interest income (NII), and core net i
Slide 34: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of the ratio of tangible common equity to tangible assets and tangible book value per share. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP
First Horizon National — Investor Day (November 2018) on 6ix