First Horizon Corporation · NYSE:FHN
First Horizon — First Horizon National — Q4 2019 Earnings Presentation
25 slides from First Horizon's earnings presentation, Jan 17, 2020
Slide 1: First Horizon National Corporation Fourth Quarter 2019 Earnings
First Horizon National Corporation Fourth Quarter 2019 Earnings January 17, 2020
Slide 2: Disclaimer
Disclaimer Forward-Looking Statement 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. An
Slide 3: Transformational Year in 2019
Transformational Year in 2019 Successfully Executing on Commitments, Building Momentum Successfully Executed on ● Strengthened franchise through market expansion, customer growth, Capital Bank improved efficiency, and more profitable funding mix Merger Delivered on ● Focus on strategic priorities an
Slide 4: Successful Execution of Capital Bank Merger
Successful Execution of Capital Bank Merger Established Strong Foundation for 2019 Results Enhanced Profitability 3Q17–4Q191 EPS ROA ROTCE $0.47 1.40% 18.9% 13.5% $0.32 1.08% $0.37 15.0% 1.12% 12.2% $0.28 0.99% 3Q17 4Q19 3Q17 4Q19 3Q17 4Q19 Significant improvement in efficiency ratio due to $85mm of
Slide 5: 2019 Results: Delivered on Strategic Priorities
2019 Results: Delivered on Strategic Priorities 2019 FY 2019 Outlook Commentary Reported Adjusted1 Investor Day ROTCE1 14.7% 17.6% 17% - 18% Strong earnings growth, profitable loan growth and effective capital deployment ROA 1.08% 1.30% 1.20% - 1.30% Profitable balance sheet growth and lower deposit
Slide 6: Financial Results
FINANCIAL RESULTS PS
Slide 7: Delivered Significant Earnings Growth in 2019
Delivered Significant Earnings Growth in 2019 EPS Trends: 2018 to 2019 EPS Trends: 4Q18 to 4Q19 $1.65 EPS includes impact of Visa Stock Monetization: $213mm $0.47 $0.42 $0.43 $1.65 $1.66 $1.41 $1.38 $0.35 $0.35 $0.37 $0.35 $0.35 $0.30 $0.31 4Q18 1Q19 2Q19 3Q19 4Q19 2018 2019 Reported Adjusted¹ Repor
Slide 8: Financial Results: Building Momentum
Financial Results: Building Momentum Actual Actual Adjusted Adjusted 4Q19 LQ YoY 4Q19 Adjusted¹ LQ YoY Actual $ in millions except per share data % Change % Change % Change1 % Change1 Net Interest Income $311 +4% +3% $311 4% 3% Fee Income $183 +7% +66% $183 7% 52% Total Revenue $495 +5% +20% $495 5%
Slide 9: Specialty Areas and Key Markets Drive Growth
Specialty Areas and Key Markets Drive Growth ● Total average YOY loan growth of 13% outpaced H.8 industry growth of 4%1 ● Broad-based loan growth across specialty areas and key markets ● Specialty areas grew across multiple areas o Specialty areas excluding loans to mortgage companies up 1% LQ, up 8
Slide 10: Regional Bank Deposits
Regional Bank Deposits Key Markets & Specialty Areas Driving Customer and Balance Growth ● Regional Banking average deposit growth of 7% YOY o Deposit costs declined 13bps LQ, down 1bp YOY ● Strategic focus on increasing customer deposits ● Growth across various markets with increase in specialty ar
Slide 11: Fixed Income Delivers Strong Countercyclical Growth
Fixed Income Delivers Strong Countercyclical Growth ● Fixed income product ADR up 72% from 2018 to 2019 ● Fixed Income net income in 2019 was $52mm vs. $9mm in 2018 ● Growth across all trading desks and across customer base ● Other product revenue up 54% due to derivatives and loan sales ● Focus on
Slide 12: Net Interest Income and Margin Trends
Net Interest Income and Margin Trends ● NII and NIM favorably impacted LQ by higher NII and NIM Linked-Quarter Change Drivers accretion, commercial loan growth, and lower deposit costs ($ in millions) NII NIM ● Total loan accretion of $42mm in 2019 3Q19 - Reported $301 3.21% ● Optimized balance shee
Slide 13: Disciplined Expense Management
Disciplined Expense Management ● Good expense discipline throughout 2019 o Expenses down, despite $40mm increase in Fixed Income expenses due to higher revenue ● Achieved $85mm of cost savings from CBF deal, 30% greater than initially targeted ● Implemented efficiency actions to right size expense b
Slide 14: Asset Quality
Asset Quality ● Asset quality remains stable ● Net charge-offs, non-performing loans, and delinquencies ratio declined YOY and LQ ● Loan loss provision reflects growth in commercial portfolios, offset by reserve decrease in nonstrategic portfolio Asset Quality Highlights Allowance for Loan Losses $3
Slide 15: CECL Impact
CECL Impact ● CECL replaces the current incurred loss methodology with a life of loan concept ● Currently expect a CECL allowance for loan losses ratio of 100bps to 110bps CECL Adoption ● Average peer estimated allowance to loan ratio at 134bps ● Increase in reserve largely due to longer term consum
Slide 16: Merger & Branch Acquisition Update
Merger & Branch Acquisition Update Initial Steps Next Steps ● Establish and Execute Communication Plans ● Next tier of leadership to be determined in January 2020 o Announced transformational MOE with IBERIABANK and acquisition of 30 branches divested by Truist ● Developing Go-To models to evaluate
Slide 17: Key Takeaways
Key Takeaways Successfully Executing on Commitments, Maintaining Momentum ● Delivered on 2019 financial targets from Investor Day o Meaningful earnings growth despite challenging rate environment o Significant loan and deposit growth across markets and specialty areas o Countercyclical businesses pr
Slide 18: Appendix
APPENDIX PS 18
Slide 19: 4Q19 Credit Quality Summary by Portfolio
4Q19 Credit Quality Summary by Portfolio Regional Banking Corporate5 Non-Strategic FHNC Commercial Commercial Permanent HE & Permanent (C&I & CRE HE & HELOC Other1 Subtotal (C&I & Other2 Total Mortgage HELOC Mortgage ($ in millions) Other) Other) Period End Loans $19,721 $4,292 $5,735 $465 $30,213 $
Slide 20: Select C&I and CRE Portfolio Metrics
Select C&I and CRE Portfolio Metrics Regional Bank Average Commercial Loans C&I: Loans to Mortgage Companies Specialty Commercial Real Estate Areas $5.0B 4% Asset-Based Lending 13% $4.4B $4.4B Loans to Mortgage Co. $3.8B $3.9B 9% Corporate $3.0B 37% Franchise Finance $2.3B 4Q19 Healthcare $2.0B $1.9
Slide 21: Consumer Portfolio & Non-Strategic Overview
Consumer Portfolio & Non-Strategic Overview HELOC Draw vs Repayment Balance Home Equity Portfolio In Draw In Repayment 68% $1.0B $0.3B 5% 6% 7% 7% 8% 0-12 13-24 25-36 37-48 49-60 >60 Non-Strategic Consumer Real Estate Mortgage Repurchase Reserve 4Q18 1Q19 2Q191 3Q19 4Q19 $405mm $372mm ($ in millions
Slide 22: 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) Restructuring ($18.7mm) Acquisition Expense ($43.2mm) Rebranding ($9.1mm) 2Q Acquisition Expense ($8.6mm) Other Expense
Slide 23: Expense: Acquisition, Restructuring, & Rebranding
Expense: Acquisition, Restructuring, & Rebranding Acquisition Expenses Restructuring Expenses ($ in millions) 4Q19 3Q19 4Q18 ($ in millions) 4Q19 3Q19 Legal and professional fees (a) $9.7 $3.5 $3.1 Legal and professional fees $1.0 $6.5 Employee comp., incentives, and benefits (b) $4.1 $1.5 $2.5 Empl
Slide 24: 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, and adjusted earnings per share. That information is not presented accordin
Slide 25: 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, adjusted return on average assets, and adjusted return on equity. That information is not presented accord
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