First Horizon Corporation · NYSE:FHN
First Horizon — Q2 2021 Earnings Presentation
31 slides from First Horizon's earnings presentation, Jul 16, 2021
Slide 1: Second Quarter 2021 Earnings
Second Quarter 2021 Earnings July 16, 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: 2Q21 GAAP financial summary
2Q21 GAAP financial summary1 Reported 2Q21 Change vs. $s in millions except per share data 2Q21 1Q21 4Q20 3Q20 2Q20 1Q21 2Q20 $/bps % $/bps % Net interest income $ 497 $ 508 $ 522 $ 532 $ 305 $ (11) (2)% $ 192 63 % Fee income 285 298 288 823 206 (13) (4)% 79 38 % Total revenue 781 806 810 1,355 512
Slide 4: Table of contents
Table of contents 2Q21 overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2Q21 notable items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 5: Key Messages
Key Messages • More diversified business model performing as expected – Strong fee income results helping mitigate interest rate headwinds • Controlling what we can control while investing for the future – Results reflect resiliency of our balanced business model and continued strong execution • MOE
Slide 6: Delivering solid PPNR in line with expectations
Delivering solid PPNR in line with expectations 2Q21 Adjusted EPS of $0.58 and PPNR of $321 million reflects benefit of more diversified business model and improved credit outlook1 More • Adjusted revenue of $787 million decreased 3% QoQ from strong 1Q21 levels given expected reductions in fixed inc
Slide 7: 2Q21 notable items
2Q21 notable items1 2Q21 results were reduced by $26 million after-tax, or $0.05 per share, of notable items ($s in millions, except per share data) Notable Items IBKC Estimated Pre-tax Merger Costs 2Q21 Total merger-related notable items • Pre-tax merger costs expected to total ~$500 million; up 2Q
Slide 8: 2Q21 adjusted financial highlights
2Q21 adjusted financial highlights1 Results relatively resilient despite overall industry headwinds; in line with expectations Adjusted Adjusted FHN FHN standalone 2Q21 Change vs. • Adjusted EPS of $0.58 up 14% QoQ $s in millions except per – Adjusted ROTCE of 22.2% and TBV per share share data 2Q21
Slide 9: NII performed in line with expectations despite increased headwinds
NII performed in line with expectations despite increased headwinds1 Continued deposit pricing discipline helping to mitigate impact of lower rates and overall muted loan demand ($s in millions) FTE NII and NIM Trends $535 $525 $511 $500 Legacy FHN $479 $482 $464 • FTE NII decreased $11 million QoQ
Slide 10: Adjusted fee income in line with expectations vs. strong 1Q21 levels
Adjusted fee income in line with expectations vs. strong 1Q21 levels1 Strength in fixed income and card fees with solid results in mortgage despite shift in originations towards portfolio Adjusted Adjusted FHN /IBKC FHN combined 2Q21 Change vs. • Adjusted fee income decreased $10 million $s in milli
Slide 11: Adjusted expense relatively stable
Adjusted expense relatively stable1 Results reflect continued expense discipline and the benefit of merger efficiencies • Adjusted expense of $465 million remained Adjusted Adjusted FHN /IBKC relatively stable with 1Q21 FHN combined 2Q21 Change vs. – $4 million benefit tied to incremental $s in mill
Slide 12: Loan trends reflect lower loans to mortgage companies/industry headwinds
Loan trends reflect lower loans to mortgage companies/industry headwinds1 Loan trends Period-end Average $58.8B $58.6B $60.1B $59.8B • Loans of $56.8 billion decreased $1.4 billion QoQ $56.7B 10% $58.2B $56.8B 7% 9% 11% 9% 9% 8% – $813 million decrease in commercial largely as a 7% 7% 7% 2% 9% 7% 2%
Slide 13: Deposit pricing discipline helping to mitigate NII headwinds
Deposit pricing discipline helping to mitigate NII headwinds1 Interest-bearing deposit costs remained stable QoQ as merger-related impact offset underlying decrease Interest-bearing liabilities & DDA trends Period-end Average $77.5B $77.7B $77.6B 1% 1% $74.0B $75.4B 1% 3% • Deposits of $73.2 billion
Slide 14: Strong credit quality performance
Strong credit quality performance Net recoveries of $10 million and improving economic and asset quality trends drive $115 million provision credit ($s in millions) Provision, credit losses, and net charge-offs Legacy FHN $227 • Net recoveries of 7 bps improved 13 bps QoQ compared $121 to NCOs of 6
Slide 15: Significant reserves for current environment
Significant reserves for current environment1 ($s in millions) 1Q21 vs. 2Q21 Allowance for credit losses (ACL) $995 $10 $890 • Reserve release of $105 million $(115) – Largely reflects the impact of improving macroeconomic scenario forecasts and lower loan balances and positive grade migration – Uti
Slide 16: Strong capital position
Strong capital position1 • Robust PPNR1 and enhanced earnings power Capital levels provide dividend support and additional loss- 13.21% absorbing capital 12.47% 12.57% 12.84% 12.05% • TBVPS of $10.74 increased 4% QoQ 11.50% 10.69% 10.25% 10.74% 11.04% • CET1 ratio of 10.33% improved ~36 bps 10.33% 9
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 • Associate retention remains strong, including in leadership/criti
Slide 18: 3Q21 and Updated FY2021 Outlook
3Q21 and Updated FY2021 Outlook Previous Adjusted 4Q20 Earnings Expectations for 2Q21 Actual 2Q21 Adjusted 3Q21 Adjusted 2021 Adjusted Annualized Comments Drivers 2Q21 Adjusted Results Baseline Expectations Expectations Baseline Results 3Q21: Assumes continued growth Flat to low single- Mid single-d
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 while investing for the future
Slide 20: APPENDIX
APPENDIX 20
Slide 21: Update on areas of perceived risk
Update on areas of perceived risk Portfolio by industry Portfolios subject to more heightened monitoring decreased 3/31/21 6/30/21 2% QoQ to $4.6 billion, ex. LMC/PPP or ~8.1% of loans Subject to % of more % of total heightened total $s in billions Balance Balance loans monitoring loans • Continuing
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 $ 1.4 0.1 5.9 % C&I excl. Energy, LMC, & PPP 22.6 0.3 1.3 Total C&I excl. LMC & PPP 24.1 0.4 1.6 CRE - Other 8.7 0.1 1
Slide 23: Notable Items
Notable Items ($s in millions except per share data) Favorable / (Unfavorable) FHN IBKC After-Tax After-Tax Favorable / (Unfavorable) at at Marginal Marginal (In millions, except per share data) 2Q21 1Q21 4Q20 3Q20 Financial Statement Caption Pre-Tax Tax Rate Pre-Tax Tax Rate Noninterest income: 2Q2
Slide 24: NII accretion schedule & NII/NIM reconciliation to GAAP financials
NII accretion schedule & NII/NIM 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 3Q21-4Q21 $ 22 3Q21-4Q21 $ 28 3Q21-4Q21 $ 10 2022 $ 36 2022 $ 50
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 2Q21 1Q21 4Q20 3Q20
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 2Q21 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. ($s in millions, except per share data) 2Q21 1Q20 4Q20 3Q20 2Q20 Tangibl
Slide 29: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. ($s in millions, except per share data) 2Q21 1Q21 4Q20 3Q20 2Q20 Adjuste
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. $ in millions except per share data) 2Q21 1Q21 4Q20 3Q20 2Q20 Adjusted N
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. $ in millions except per share data) 2Q21 Net income available to common