First Horizon Corporation · NYSE:FHN
First Horizon — First Horizon National — Q2 2009 Earnings Presentation
33 slides from First Horizon's earnings presentation, Jul 17, 2009
Slide 1: Segment descriptions and methodology revisions
** In the second quarter, FHN reviewed cost allocation and funds transfer pricing methodologies used to determine segment performance. As a result of this review, certain of these methodologies were revised affecting all segments. Additionally, activities related to Low Income Housing Investments we
Slide 2: Second Quarter 2009 Earnings
First Horizon National Corporation Second Quarter 2009 Earnings July 17, 2009
Slide 3: 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. This presentation contains forward-look
Slide 4: Further Strategic Progress in Second Quarter 2009
Further Strategic Progress in Second Quarter 2009 Attractive Growth Opportunities Industry-Leading Strengths NPAs declined $19mm or 2% linked-quarter Charge-offs in-line with expectations at $239mm 90-day+ delinquencies down $68mm linked-quarter Core deposits up ~$200mm or 2% linked-quarter Loans to
Slide 5: Capital Analysis Demonstrates Balance Sheet Strength
Capital Analysis Demonstrates Balance Sheet Strength Loan Loss Assumptions Assumptions Capital Ratios Illustrates expected strong 2010 year-end capital ratios based on severe economic conditions Pre-tax, pre-provision income at current broker estimates2 Loan losses at reported SCAP median rates by c
Slide 6: Financial Highlights: Second Quarter 2009
Financial Highlights: Second Quarter 2009 Earnings per share of $(0.58) Net loss available to common shareholders of $(123) million $(15) million impact of TARP CPP preferred $(13)million pre-tax impact of FDIC special assessment fee Loan loss reserve increased by $20 million to 4.91% of total loans
Slide 7: Asset Quality
Asset Quality FA First HORIZON imac tarceerice
Slide 8: Asset Quality Overview
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 NPLs 208.3 307.1 537.3 770 900 1054.4 1132.7 1126.96 ORE 60 85.3 83.7 106.1 115.5 103.6 119 106.12 Asset Quality Overview NPAs declined 2% linked-quarter, first downtick since 3Q07 Net charge-offs totaled $239 million, annualized 4.77% of loans1 Reserves incre
Slide 9: NPAs declined 2% linked-quarter
NPAs declined 2% linked-quarter Problem loan outflows increased while inflows decreased Reduced ORE inventory partially via small bulk sales Individual sales at approximate carrying values Losses taken on bulk sales to move aging inventory Active re-valuation of inventory resulted in increased forec
Slide 10: C&I Portfolio Performance
C&I Portfolio Performance Bank Exposure1 2Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 30+ Delq. 0.52 0.005 0.0093 0.0146 0.0115 0.0053 0.0153 0.0082 Net Charge-Offs (Ann.) 0.74 0.002 0.0083 0.0084 0.0164 0.0221 0.0155 0.0143 NPLs 0.0064 0.012 0.0105 0.0103 0.0135 0.0152 Largely TN portfolio, diversified
Slide 11: Income CRE Portfolio
Income CRE Portfolio Traditional commercial real estate construction and mini-permanent loans Balances of ~$2 billion at 2Q09 Three-fourths managed in regional banking Market conditions impacting portfolio performance Recession increasing vacancy and rental rates (NOI) Lack of real estate financing
Slide 12: Home Equity Portfolio
Home Equity Portfolio 30+ Delinquency: National vs. Regional1 Net-Charge Offs2 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Regional Banking 0.52 0.004 0.0064 0.0076 0.015 0.0081 0.0123 0.0145 0.0136 National Specialty 0.74 0.0034 0.0062 0.0102 0.0191 0.017 0.021 0.0288 0.0394 Vintage Mix 1Q08 2Q08
Slide 13: National Wind-Down Portfolios: OTC, Perm Mortgage, & Res CRE
National Wind-Down Portfolios: OTC, Perm Mortgage, & Res CRE 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 OTC Commitments 3.4 3 2.6 2 1.5 1.3 1 0.776 OTC Balances 2.2 2 1.8 1.5 1.2 0.981 0.773 0.558 Unfunded Commitments 1 0.8 0.5 0.3 0.3 0.23 0.218 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Nat'l Res CRE Balance
Slide 14: Credit Expectations and Risks Summary
First Half 2009 Trends generally consistent with previously communicated expectations Res CRE charge-offs lower than expected, C&I and Income CRE reserves higher than expected 2Q09: Total charge-offs as expected; reserve growth driven by C&I, Income CRE, Perm Mortgage Home Equity delinquency remains
Slide 15: Financial Results
Financial Results First HORIZON fl Nareraetieroeariee
Slide 16: Consolidated Financial Results
Consolidated Financial Results Pre-tax, pre-provision income1 of $79mm NII flat linked-quarter Improved NIM offset smaller balance sheet Fees down $115mm linked-quarter Smaller mortgage hedging gains ($7mm compared to $85mm in 1Q09) Continued strong fixed income sales Expenses down to $412mm in 2Q09
Slide 17: Significant Impacts in Pre-Tax, Pre-Provision Earnings
Regional Banking 1Q09 Capital Markets Corporate Mortgage National Specialty Significant Impacts in Pre-Tax, Pre-Provision Earnings Pre-Tax, Pre-Provision Earnings1 2Q09 Drivers / Impacts 2Q09 Revenue 2Q09 Expense Repurchase reserves: $(29)mm vs. $(12)mm 1Q09 PMI reinsurance: $(8)mm vs. $(14)mm 1Q09
Slide 18: Reducing Balance Sheet Risk, Growing Deposits
Reduced balance sheet risk further in 2Q09 National portfolios continuing to wind-down; run-off rate increased in 2Q09 Soft loan demand in regional banking MSR bulk sale Total assets expected to shrink another $0.5-1.5B in 2H09 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Regional Banking 10 9.7 10.3 10.1 10.4 10.
Slide 19: Improved Net Interest Margin
Improved Net Interest Margin 2Q09 NIM improved 16bps to 3.05% Widening spreads on new loans with improved pricing Continued core deposit growth Successful step-down of 4Q08 promotional deposit rates Reduced NPA inflows, fewer interest reversals NIM expected to expand modestly over remainder of 2009
Slide 20: Fee Income Driven by Core Business
Fee Income Driven by Core Business 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Regional Banking 87204 92685 88032 82720 76316 81376 Capital Markets 133905 124633 98514 177285 216690 189588 Corporate 162021 8669 7537 6320 3106 6503 Mortgage/Nat'l Specialty 172707 116445 82878 114502 10183 Fees as % of Revenue 0.63
Slide 21: Continued Focus on Efficiency and Productivity
Continued Focus on Efficiency and Productivity 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Regional Banking 151 146 154 163 168 168 Capital Markets 116 101 88 115 152 114 Corporate 167 37 41 2 17 25 Mortgage/Nat'l Specialty 179 117 65 80 104 2Q09 expenses down $5mm from 1Q09 Core business expenses down 9% Mortgag
Slide 22: Segment Results: Regional Banking
Segment Results: Regional Banking Linked-quarter core deposit growth of 1% Target client wallet share focus Promotion balance retention NIM increased 21bps NIM improved from 1Q09's cyclical low Improving new loan spreads Fees increased $5mm linked-quarter Seasonality, improved environment Expenses u
Slide 23: Segment Results: Capital Markets
Segment Results: Capital Markets Pre-tax income of $79 million Another strong quarter of fixed income revenues at $170mm Strong distribution capabilities Market conditions (volatility, liquidity) Diverse product offering Expense decrease of $38mm from 1Q09 Reduced rate of incentive provisioning Lowe
Slide 24: Summary
Summary Solid earnings power from core franchises, opportunity for improvement NIM improving off previous quarter low Growing core deposit base in Regional Banking Capital Markets distribution model benefiting from environment Meaningful efficiency and productivity opportunities Flattening NPAs, cha
Slide 25: Driving Long-Term Returns & Profitability
Driving Long-Term Returns & Profitability
Slide 26: Appendix
Appendix Be FIRST HORIZON
Slide 27: Liquidity and Capital Remain Strong
Liquidity and Capital Remain Strong 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 1Q09 Peer Median Tangible Common Equity 0.0623 0.0629 0.085 0.0885 0.0896 0.0884 0.0889 0.069 Reserves 0.0113 0.0163 0.0199 0.0288 0.0337 0.038 0.0412 0.017 TCE+Res / RWA 0.0736 0.0791 0.105 0.1173 0.1234 0.1264 0.1301 0.086 Numb
Slide 28: Credit Quality Summary by Portfolio
Credit Quality Summary by Portfolio Numbers may not add to total due to rounding Material differences in the performance of the national portfolios vs. the core franchise portfolios Portfolio metrics in the national wind-down portfolios becoming increasingly worse as wind-down enters final stages
Slide 29: Home Equity Portfolio Characteristics
Portfolio Characteristics Home Equity - Differentiated Portfolio Characteristics TN 0.34 CA 0.15 VA 0.04 WA 0.04 MD 0.03 FL 0.03 GA 0.03 AZ 0.03 PA 0.02 NJ 0.02 Other 0.37 30+ Delinquency: Key Drivers FICO Score Channel Lien Position Geographic Distribution % of portfolio 86% 14% 1st Lien 2nd Lien L
Slide 30: Problem Loans Written Down to Realizable Values
Appraised Value Pre-Charge Down Balance Cumulative Charge Down Book Balance (6/30/09) East 836.8 785.1 522.2 522.2 262.9 Problem Loans Written Down to Realizable Values, Reserves Largely for Performing Credits FAS 114 Charge-Downs1 Commercial Loan Reserves 837 785 522 34% write-down (263) 1Approxima
Slide 31: Mortgage Segment Pre-Tax, Pre-Provision
Mortgage Segment Pre-Tax, Pre-Provision Numbers may not add to total due to rounding. 1Pre-tax, pre-provision is a non-GAAP number and is pre-tax income excluding provision; a reconciliation is provided in the appendix. Note: Segment financials reflect revised cost allocation and funds transfer pric
Slide 32: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides 3, 5, 15, 16, 21, and 22 use non-GAAP information of pre-tax, pre-provision earnings. That information is not presented according to generally accepted accounting principles (GAAP), and is reconciled to GAAP information below.
Slide 33: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides 3, 4, 5, and 26 use non-GAAP information of TCE, TA, and Tier 1 Common. That information is not presented according to generally accepted accounting principles (GAAP), and is reconciled to GAAP information below. 1Current quarter is an estimate 2Includes good
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