First Horizon Corporation · NYSE:FHN
First Horizon — Q1 2021 Earnings Presentation
33 slides from First Horizon's earnings presentation, Apr 21, 2021
Slide 1: First Quarter 2021 Earnings
First Quarter 2021 Earnings April 21, 2021
Slide 2: Disclaimer
Disclaimer Non-GAAP Information Certain measures included in this document are “non-GAAP,” meaning they are not presented in accordance with generally accepted accounting principles in the U.S. and also are not codified in U.S. banking regulations currently applicable to FHN. FHN’s management believ
Slide 3: 1Q21 GAAP financial summary
1Q21 GAAP financial summary1 Reported 1Q21 Change vs. $s in millions except per share data 1Q21 4Q20 3Q20 2Q20 1Q20 4Q20 1Q20 $/bps % $/bps % Net interest income $ 508 $ 522 $ 532 $ 305 $ 303 $ (14) (3)% $ 205 68 % Fee income 298 288 823 206 175 10 3% 123 71 % Total revenue 806 810 1,355 512 478 (4)
Slide 4: Table of contents
Table of contents Delivering on our commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1Q21 overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 5: Delivering on our commitments
Delivering on our commitments • More diversified business model performing as expected – Strong fee income results helping mitigate interest rate headwinds • Controlling what we can control – Results reflect continued expense and deposit pricing discipline • MOE delivering revenue synergies and expe
Slide 6: Continued execution driving strong start to 2021
Continued execution driving strong start to 2021 1Q21 Adjusted EPS of $0.511and PPNR of $343 million2 reflects resiliency of more diversified business model, continued expense discipline and improved credit outlook More • Adjusted revenue of $808 million2 remained relatively stable despite NII headw
Slide 7: 1Q21 notable items
1Q21 notable items1 ($s in millions except per share data) Notable Items Unusual Items 1Q21 merger-related notable items In addition to notable items, linked quarter trends reflect the Noninterest income: impact of the following 4Q20 unusual items Merger accounting adjustment: other noninterest inco
Slide 8: 1Q21 adjusted financial highlights
1Q21 adjusted financial highlights1 Adjusted NIAC up 12% QoQ despite NII headwinds driven by strength in fixed income and wealth and trust fees, continued expense discipline and strong asset quality Adjusted Adjusted FHN • Adjusted EPS of $0.51 increased 11% QoQ; FHN standalone 1Q21 Change vs. Adjus
Slide 9: FTE NII and NIM reflect strong deposit pricing discipline
FTE NII and NIM reflect strong deposit pricing discipline1 ($s in millions) FTE NII and NIM Trends $535 $525 $511 Legacy FHN $479 $482 • FTE NII of $511 million decreased $14 million QoQ $464 – Core NII of $464 million decreased $18 million $305 $308 QoQ largely reflecting the impact of lower loan $
Slide 10: Adjusted fee income increased 3%
Adjusted fee income increased 3%1 Results reflect strength in fixed income and wealth and trust Adjusted Adjusted FHN / • Adjusted fee income increased $10 million FHN IBKC combined 1Q21 Change vs. from 4Q20 $s in millions 1Q21 4Q20 3Q20 2Q20 1Q20 4Q20 1Q20 $/bps % $/bps % – Strength in fixed income
Slide 11: Adjusted expense decreased 2%
Adjusted expense decreased 2%1 Results reflect continued expense discipline and the benefit of merger efficiencies Adjusted Adjusted FHN / • Adjusted expense of $464 million decreased FHN IBKC combined 1Q21 Change vs. $10 million from 4Q20 $s in millions 1Q21 4Q20 3Q20 2Q20 1Q20 4Q20 1Q20 – Results
Slide 12: Loans trends driven by mortgage-related activity and industry headwinds
Loans trends driven by mortgage-related activity and industry headwinds1 Lending pipelines strengthening Loan trends • Average loans of $58.2 billion decreased $1.6 billion QoQ $58.6B $59.8B – $893 million decrease in commercial largely reflects a $57.9B $58.2B $58.2B $55.1B 11% 9% $972 million decl
Slide 13: Deposit pricing discipline helping to mitigate NII headwinds
Deposit pricing discipline helping to mitigate NII headwinds1 Interest-bearing deposit costs improved 6 bps QoQ Interest-bearing liabilities & DDA trends $77.5B $74.2B 1% $74.0B $75.4B • Average deposits of $71.0 billion increased $1.3 billion —% 3% —% 1% $68.2B 3% 3% 3% QoQ driven by a $1.2 billion
Slide 14: Strong credit quality performance
Strong credit quality performance NCOs of 6 bps, or $8 million, on a $58.2 billion portfolio ($s in millions) Provision, credit losses, and net charge-offs • Net charge-offs of 6 bps improved 14 bps QoQ Legacy FHN $227 • NPL ratio of 67 bps remained relatively stable QoQ $154 • ACL coverage ratio de
Slide 15: Significant reserves for current environment
Significant reserves for current environment1 ($s in millions) 4Q20 vs. 1Q21 Allowance for credit losses (ACL) $1,048 • Reserve release of $53 million – Largely reflects the impact of improving $(8) $995 macroeconomic scenario forecasts and lower $(45) consumer loan balances – Utilized Moody’s Febru
Slide 16: Strong capital position
Strong capital position1 Capital levels • Robust PPNR1 and enhanced earnings power provide 12.47% 12.57% 12.83% dividend support and additional loss-absorbing capital 12.05% 10.78% • TBVPS of $10.30 increased 1% QoQ 10.69% • CET1 ratio of 9.96% improved ~28 bps largely reflecting: 10.25% 10.74% 11.0
Slide 17: Merger integration update
Merger integration update • Continue to make substantial progress toward achieving key Integration Highlights Integration merger milestones Framework • Focused on retaining and growing client base with expanded products and services Targeting annualized cost saves of ~$200 million • Associate retent
Slide 18: 2Q21 and Updated FY2021 Outlook
2Q21 and Updated FY2021 Outlook Expectations for Adjusted 4Q20 Earnings 1Q21 Actual 1Q21 Adjusted 2Q21 Adjusted 2021 Adjusted 1Q21 Adjusted Annualized Comments Drivers Results Baseline Expectations Expectations Results Baseline 2Q21: Assumes continued growth Mid single-digit % Flat to low single- Lo
Slide 19: Well positioned to deliver strong execution
Well positioned to deliver strong execution • Expanded franchise in attractive, high-growth Southern markets • More diversified business model performing as expected – Strong fee income results helping mitigate interest rate headwinds • Controlling what we can control – Results reflect continued exp
Slide 20: Appendix
APPENDIX 20
Slide 21: Update on areas of perceived risk
Update on areas of perceived risk Portfolio by industry as of 3/31/2021 Portfolios subject to more heightened monitoring decreased % of Subject to more % of 2% QoQ to $4.7 billion, or ~8.0% of loans ex. LMC/PPP total heightend total $s in billions Balance loans monitoring loans Other C&I $ 6.1 10.4
Slide 22: FHN reserve and deferrals by portfolio
FHN reserve and deferrals by portfolio Allowance Allowance Loan for Loan Coverage $s in billions Balance Losses Ratio Portfolios excl. Loans to Mortgage Companies (LMC) & PPP Energy $ 1.6 $ 0.1 6.4 % C&I excl. Energy, LMC, & PPP 21.9 0.3 1.5 Total C&I excl. LMC & PPP 23.5 0.4 1.9 CRE - Other 8.9 0.1
Slide 23: Notable Items
Notable Items ($s in millions except per share data) Favorable / (Unfavorable) F FHN IBKC H P After-Tax After-Tax Favorable / (Unfavorable) r at at e Marginal Marginal (In millions, except per share data) 1Q21 4Q20 3Q20 Financial Statement Caption - Pre-Tax Tax Rate Pre-Tax Tax Rate T Noninterest in
Slide 24: Estimated future accretion schedule & reconciliation to GAAP financials
Estimated Future accretion schedule & reconciliation to GAAP financials Estimated IBKC Securities Premium Amortization1 Estimated IBKC Loan Accretion Estimated Loan Accretion - Other Acquisitions $s in millions $s in millions $s in millions 1Q21 $ 14 1Q21 $ 24 1Q21 $ 8 2Q21-4Q21 $ 35 2Q21-4Q21 $ 47
Slide 25: 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. Adjusted FHN historical quarterly income statements 1Q21 4Q20 3Q20 2Q20
Slide 26: 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. Adjusted Combined Historical Data: non-interest income and expense 2Q20
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. Adjusted 1Q21 FHN compared to adjusted combined historical data: non-int
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. FHN Adjusted 1Q21 compared to Adjusted 4Q20 excluding unusual items 1Q21
Slide 29: 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. 1Q21 & 4Q20 compared to Combined Historical Balance Sheet Data 1Q21 4Q20
Slide 30: 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. ($s in millions, except per share data) 1Q21 4Q20 3Q20 2Q20 1Q20 Tangibl
Slide 31: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. ($s in millions, except per share data) 1Q21 4Q20 3Q20 2Q20 1Q20 Adjuste
Slide 32: 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 except per share data) 1Q21 4Q20 3Q20 2Q20 1Q20 Adjusted N
Slide 33: 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 except per share data) 1Q21 NIAC (GAAP) $ 225 Tax effected