First Horizon Corporation · NYSE:FHN
First Horizon — First Horizon National — Q1 2019 Earnings Presentation
39 slides from First Horizon's earnings presentation, May 17, 2019
Slide 1: First Horizon National Corporation 2Q19 Analyst Packet
First Horizon National Corporation 2Q19 Analyst Packet May 17, 2019
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: FHN: Strong, Diversified, and Differentiated
FHN: Strong, Diversified, and Differentiated Regional and National Footprint Key Highlights Market Cap $4.4B Assets $41B Deposits $32B Financial Centers 292 Employees 5,524 Full Service Banking Specialty Banking FTN (all 50 states) • Retail Banking • 8 Commercially oriented businesses Full Service •
Slide 4: Delivering on Key Strategic Priorities
Delivering on Key Strategic Priorities Dominate Tennessee • TN Deposit growth of 11% LQ annualized • TN Loan growth of 4% LQ annualized Profitably Grow Key Markets & Specialty Areas • Deposits up 15% in Mid-Atlantic and South Florida LQ annualized • Specialty lending growth of 14% LQ annualized Opti
Slide 5: 1Q19 Highlights
1Q19 Highlights Delivering on Key Strategic Priorities Loan Growth Broad-based C&I Growth (All comparisons are 1Q19 vs 4Q18) 1Q19 EPS $0.31 +3% Deposit Growth Strong deposit gathering in TN, Mid-Atlantic, & FL Adjusted EPS2 $0.35 – Revenue $436mm +6% Positive Revenues up, good expense discipli
Slide 6: Total Loan Growth
Total Loan Growth Improved Portfolio Mix with Strong C&I Growth • Period-end loans up 7% LQ annualized • Continued growth in Regional Banking offsets run-off in non-strategic portfolios • Broad–based C&I growth across various industries • CRE balances down, driven by ~$220mm of pay-offs due to strat
Slide 7: Total Deposits
Total Deposits Broad-based Core Deposit Growth, Significant Reduction in Market-indexed Deposits • Regional Banking growth of 14% LQ Strong PE LQ Deposit Growth in Key Markets (% is Annualized LQ) annualized with increases across key markets Tennessee Mid-Atlantic South FL • Market-indexed deposits
Slide 8: Optimizing The Expense Base
Optimizing The Expense Base Broad-based Expense Declines, Taking Further Efficiency Actions to Enable Reinvestment • Broad-based LQ decline across numerous categories • Deferred compensation net pre-tax impact of $1mm LQ; expense increase of $13mm offset by fee income increase of $12mm • Efficiency
Slide 9: Capital Deployment
Capital Deployment Invest Internally Repatriate to Shareholders Invest Externally Strong organic loan growth Cash dividends Bank M&A since 2012 Increased 5 times since 20131 Mountain National Bank — 2013 Established new specialty LOBs Branch Acquisitions — 2014 Capital Share buybacks Deployment Ener
Slide 10: Negative Shift in Macro Rate Environment
Net Interest Margin Outlook Changes Driven by Negative Shift in Macro Rate Environment • Balance sheet trends remain strong with steady loan growth and deposit momentum in key markets • Prior NIM/NII outlook impacted by meaningful changes in market rates and expectations • Current expectation is NIM
Slide 11: 2019 Outlook: Delivering on Strategic Priorities
2019 Outlook: Delivering on Strategic Priorities 1Q19 Reported Adjusted 2019 Outlook Commentary Higher TCE due to higher investment ROTCE1 14.2% 16.1%1 16% +/- securities valuations ROA 1.03% 1.16%1 1.15% +/- Loan & Deposit Growth at 3-6% NIM 3.31% 3.31% 3.30% +/- Assumes no changes to FF rate in 20
Slide 12: Delivering on Strategic Priorities
Dominate Tennessee Profitably Grow Key Markets & Specialty Areas Delivering on Strategic Priorities Optimize The Expense Base Transform the Customer Experience Strong Risk Profile & Effective Capital Deployment 12
Slide 13: Key Takeaways
Key Takeaways Delivering on Key Strategic Priorities & Controlling What We Can Control Controlling What We Can Control • Steady loan growth across markets and specialty areas • Strong deposit growth with momentum in key markets • Good expense discipline and taking additional efficiency actions to re
Slide 14: Regional Banking & Fixed Income
REGIONAL BANKING & FIXED INCOME 14
Slide 15: Regional Banking
Regional Banking Loans by LOB Loans by Type Loans by Geography Consumer Commercial C&I TN 2% 8% NC 27% 26% Commercial Other 35% 37% FL (Specialty) 14% Loans to Mortgage TX Commercial 54% Companies 4% SC CRE - Income 4% GA Producing 5% 22% Rest of US Consumer Real 9% 15% 38% Estate Deposits by LOB De
Slide 16: Regional Banking Driving Profitable Loan Growth
Regional Banking Driving Profitable Loan Growth Broad-based Loan Growth Particularly in Key Markets and Specialty Lending • Regional Banking loan growth of 8% LQ annualized • Key markets grew 16% LQ annualized with increases in South Florida, Middle TN, Houston • Specialty areas grew 14% LQ annualiz
Slide 17: 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 18: FTN Financial: Diversified Fixed Income Platform
FTN Financial: Diversified Fixed Income Platform • Unique, low-risk fixed income business model Industry Leader1 focused on sales and distribution • #4 issuer of SBA 7(a) Pools • Delivers strong risk-adjusted returns through the cycle and provides counter-cyclicality to Regional • Top 10 underwriter
Slide 19: Fixed Income Provides Counter-Cyclicality
Fixed Income Provides Counter-Cyclicality • Federal Reserve commentary and outlook for rates favorably impacted 1Q19 activity • ADR of $729k up 48% LQ as all trading desks showed LQ growth • Pre-tax income increased from higher ADR in addition to the benefit of lower fixed expenses Fixed Income Reve
Slide 20: 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 Regional Bank PTI $700 Trailing Twelve Months $600 $500 $400 $300 $200 $100 $0 ($100) ($200) 2Q01 2Q09 1Q19 Declining
Slide 21: Funding & Capital
FUNDING & CAPITAL 21
Slide 22: Deposit Composition Reflects Stable Funding Mix
Deposit Composition Reflects Stable Funding Mix • Total avg. deposits represent 90% of total funding Non-Maturity Interest-Bearing Deposits • Stable and cost effective funding mix in Regional Avg. Balance $20B Banking with 53% DDA and interest checking Weighted Avg. Rate Paid $19B 240bps deposits Av
Slide 23: Stability in Deposit Mix Trends
Stability in Deposit Mix Trends 1Q19 Total Deposit Beta 1Q19 Interest Bearing Deposit Beta 160% 180% 140% 160% 120% 140% 100% 120% 100% 80% 65% 60% 77% Peer Median = 71% Peer Median = 52% 80% 67% 60% 60% 40% 40% 20% 20% 0% PB 0% WBS CFR VLY CMA IBKC PNFP ZION WTFC TCBI BKU FHNexMI¹ HWC TCF UMPQ CBSH
Slide 24: Asset Sensitivity Overview
Asset Sensitivity Overview Benefiting From Sustained Loan Growth and Higher Short-Term Rates • Floating rate assets re-price at 100% beta. Loan 1Q19 Loan Composition: Fixed vs Floating portfolio comprised of 66% floating adjustable rate loans1 Floating 66% ￮ ~84% are tied to LIBOR Fixed LIBOR 34% 84
Slide 25: Balance Sheet Evolution Yields Lower Risk Model
Balance Sheet Evolution Yields Lower Risk Model • Commercial loan portfolio shifting to higher quality, Positive Commercial Credit Grade Migration with 41% of commercial loans qualifying as ($ are Total Ending Balance) $21B investment grade equivalent 2% PD 1-5 • High quality consumer portfolio with
Slide 26: Stress Testing
Stress Testing 2018 Severely Adverse Scenario Holding Company Capital Results % Average Peer2 • Severe global recession accompanied by a global 9 Quarter Assets DFAST aversion to long-term fixed-income assets ($ in millions) Cumulative 4Q17 - 1Q20 Results ￮ Real GDP down 7.5% Pre-provision net reven
Slide 27: 2018 Stress Testing Results Confirm Capital Strength
2018 Stress Testing Results Confirm Capital Strength • On May 24, 2018 the Economic Growth, Regulatory Relief, Holding Company Capital Results and Consumer Protection Act was signed into law and eliminated Dodd-Frank Act (“DFA”) stress testing FHNC CET1 Peer4 CET1 requirements for FHN. Stress test w
Slide 28: Outstanding Long-Term Debt and Preferred Stock
Outstanding Long-Term Debt and Preferred Stock Principal Credit Ratings1 Issuance Coupon Rate Callable Date Maturity Outstanding Moody's Fitch FTBNA Senior Debt2 11/21/14 2.95% 11/1/19 12/1/19 $400mm Baa3 BBB 3 Preferred Stock 3/23/05 3 Month LIBOR + 85bps 4/10/10 Perpetual $300mm Ba2 B+ REIT Prefer
Slide 29: Asset Quality
ASSET QUALITY 29
Slide 30: Asset Quality
Asset Quality • Solid asset quality demonstrated by historically low Asset Quality Highlights annualized net charge-offs • Decreasing loan to deposit ratio driven by strong ($ in millions) 1Q18 2Q18 3Q18 4Q18 1Q19 deposit growth outpacing solid loan growth Charge-offs ($8) ($10) ($9) ($18) ($11) ￮ A
Slide 31: 1Q19 Credit Quality Summary by Portfolio
1Q19 Credit Quality Summary by Portfolio Regional Banking Corporate5 Non-Strategic FHNC Commercial HE & Permanent Commercial HE & Permanent CRE Other1 Subtotal Other2 Total ($ in millions) (C&I & Other) HELOC Mortgage (C&I & Other) HELOC Mortgage Period End Loans $16,814 $3,947 $5,780 $439 $26,980 $
Slide 32: Select C&I and CRE Portfolio Metrics
Select C&I and CRE Portfolio Metrics Regional Banking Average Commercial Loans C&I: Loans to Mortgage Companies 2% 2% Energy Specialty Areas Correspondent $2.4 4% $2.3 4% Franchise Finance $2.1 $2.1 $2.0 5% $1.9 $1.9 $1.8 $1.7 Healthcare $1.5 43% 9% Corporate 1Q19 Loans to Mortgage Co. Asset-Based L
Slide 33: Consumer Portfolio & Non-Strategic Overview
Consumer Portfolio & Non-Strategic Overview HELOC Draw vs Repayment Balances Home Equity Portfolio In Draw In Repayment 65% $1.1B $0.4B 1Q19 6% 6% 7% 8% 8% 0-12 13-24 25-36 37-48 49-60 >60 Months Left in Draw Period Non-Strategic Consumer Real Estate Mortgage Repurchase Reserve $540mm $489mm ($ in m
Slide 34: Appendix
APPENDIX 34
Slide 35: Franchise Well-Positioned in Attractive Markets
Franchise Well-Positioned in Attractive Markets 82% of Deposits Are in Markets Where We Have Top 5 Share1 Tennessee Strong platform for deposit growth in the Total Deposits: $24.0B Carolinas Major MSA Rankings: Memphis MSA Rank: 1st Knoxville MSA Rank: 1st North Carolina (NC) and South Carolina (SC)
Slide 36: Capital Bank Acquisition & Restructuring Expenses
Capital Bank Acquisition & Restructuring Expenses Capital Bank Merger and Integration Expenses Restructuring Expenses ($ in millions) 1Q19 4Q18 1Q18 ($ in millions) 1Q19 Employee comp., incentives and benefits (a) $0.5 $1.2 $3.9 Employee comp., incentives and benefits $6.5 Occupancy (b) $0.1 $2.9 $-
Slide 37: Notable Items – 2018 & 2019
Notable Items – 2018 & 2019 Pre-Tax Pre-Tax 2018 Amount 2019 Amount Acquisition Expense ($31.4mm) Restructuring ($12.2mm) 1Q Gain on property sale $3.3mm Acquisition Expense ($5.7mm) Acquisition Expense ($43.2mm) 2Q Other Expense (Visa Shares) ($4.1mm) Acquisition Expense ($11.4mm) 3Q Visa B Share M
Slide 38: 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 net income available to common, and adjusted earnings per share. That information is not presented according to generally accepted a
Slide 39: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of adjusted efficiency ratio, return on tangible common equity, adjusted return on tangible common equity, and adjusted return on average assets. That information is not presented according to generally accepted a
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