First Horizon Corporation · NYSE:FHN
First Horizon — Q4 2020 Earnings Presentation
33 slides from First Horizon's earnings presentation, Jan 22, 2021
Slide 1: Fourth Quarter 2020 Earnings
Fourth Quarter 2020 Earnings January 22, 2021
Slide 2: Disclaimer
Disclaimer 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, proje
Slide 3: 4Q20 and FY2020 GAAP financial summary
4Q20 and FY2020 GAAP financial summary1 Reported 4Q20 Change vs. Reported 2020 vs. 2019 $s in millions except per share data 4Q20 3Q20 2Q20 1Q20 4Q19 3Q20 4Q19 2020 2019 $/bps % $/bps % $/bps % Net interest income $ 522 $ 532 $ 305 $ 303 $ 311 $ (11) (2)% $ 210 68 % $ 1,662 $ 1,210 $ 452 37 % Fee in
Slide 4: Table of contents
Table of contents FHN: Strong execution in a challenging environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4Q20 notable items and other unusual items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 5: FHN: Strong execution in a challenging environment
FHN: Strong execution in a challenging 1 environment Adjusted EPS of $0.46 in 4Q20 and $1.22 in FY2020 • 4Q20 Adjusted PPNR of $335 million reflects a net $11 million reduction tied to unusual items with strong results in countercyclical businesses Countercyclical – NII of $522 million down 2%; Core
Slide 6: 4Q20 notable items and other unusual items
4Q20 notable items and other unusual items1 ($s in millions except per share data) Notable Items Unusual Items 4Q20 IBKC merger-related notable items In addition to merger-related notable items, Adjusted results were Noninterest income: also reduced by the following unusual items: Merger accounting
Slide 7: 4Q20 adjusted financial highlights
4Q20 adjusted financial highlights1 Adjusted QoQ Adjusted FHN • Adjusted EPS of $0.46 increased 31% QoQ; TBV ex- FHN standalone 4Q20 Change vs. unusual per share of $10.23 increased 3% $s in millions except per 4Q20 3Q20 4Q19 3Q20 4Q19 items share data • Adjusted revenue of $810 million down $/bps %
Slide 8: NII and NIM reflect benefit of merger and deposit pricing discipline
NII and NIM reflect benefit of merger and deposit pricing discipline1 ($s in millions) NII and NIM Trends Ex-unusual items $532 $522 $527 • NII down $11 million and NIM down 13 bps QoQ Legacy FHN on lower net merger-related and PPP loan benefits $476 $479 $484 – Core NII up $8 million before an unus
Slide 9: Adjusted fee income vs. adjusted FHN/IBKC combined
Adjusted fee income vs. adjusted FHN/IBKC combined1 Adjusted Adjusted FHN /IBKC QoQ FHN combined 4Q20 Change vs. ex- • Adjusted fee income stable before unusual $3 million of securities losses in 4Q20 3Q20 2Q20 1Q20 4Q19 3Q20 4Q19 items $s in millions unusual items $/bps % $/bps % Fixed income $ 104
Slide 10: Adjusted expense vs. adjusted FHN/IBKC combined
Adjusted expense vs. adjusted FHN/IBKC combined1 Adjusted Adjusted FHN /IBKC QoQ FHN combined 4Q20 Change vs. ex- • Adjusted expense relatively stable before unusual the net $3 million impact tied to unusual $s in millions 4Q20 3Q20 2Q20 1Q20 4Q19 3Q20 4Q19 items items in incentives/commission and o
Slide 11: Total loans
Total loans1 Loan trends • Average 4Q20 loans of $59.8 billion decreased $298 million from 3Q20 $59.7B $60.1B $59.8B $58.2B – Lower consumer real estate-secured and $54.9B $55.1B 9% 10% 11% 9% commercial real estate more than offset a 9% 8% 7% 7% 7% modest increase in C&I driven by growth in 7% 2% 2
Slide 12: Total funding
Total funding1 Interest-bearing liabilities & DDA trends • Average 4Q20 deposits of $69.6 billion increased $73.2B $74.2B $74.0B $2.5 billion QoQ reflecting an increase in interest- 1% —% $72.1B —% 3% 3% 0.5% 3% bearing and demand deposits 3% $64.7B $64.0B 1% 1% 20% 20% – 4Q20 period-end deposits of
Slide 13: Prudently managing risk
Prudently managing risk ($s in millions) Provision, credit losses, and net charge-offs Legacy FHN • Net charge-offs of $29 million driven by $23 million of $227 $154 losses in the energy portfolio • NPL ratio of 66 bps, down 9 bps QoQ $121 • Allowance for credit losses to loans ratio continued to $8
Slide 14: Significant reserves for current environment
Significant reserves for current environment1 ($s in millions) 3Q20 vs. 4Q20 Allowance for credit losses (ACL) $1,077 • Reserve release of $28 million – Reduction in Energy portfolio including expected $1 $1,048 January 2021 loan sale $(29) – Lower balances and improving economic scenarios • Utilize
Slide 15: Update on areas of perceived risk
Update on areas of perceived risk Portfolio by industry as of 12/31/2020 Portfolios subject to more heightened monitoring decreased % of Subject to more % of 24% to $4.9 billion, or ~8.4% of loans ex. LMC/PPP total heightend total $s in billions Balance loans monitoring loans Other C&I $ 6.2 10.6 %
Slide 16: Strong capital position
Strong capital position1 Capital levels • Robust PPNR1 and enhanced earnings power provide dividend 12.47% 12.05% 12.55% support and additional loss-absorbing capital 11.22% 10.78% • Tangible book value per share of $10.23 at December 31, 2020 10.73% increased 3% from $9.92 as of September 30, 2020.
Slide 17: Merger integration update
Merger integration update • Aligning cultures & establishing good cadence Integration Highlights Integration • Integration work continues to be done effectively in largely remote manner Framework • Finalized 3-year Strategic Plan Increased targeted annualized cost saves to • Associate retention rema
Slide 18: 1Q21 & FY2021 Outlook
1Q21 & FY2021 Outlook1 Earnings 4Q20 Adjusted 1Q21 Adjusted Adjusted 4Q20 2021 Adjusted Comments Drivers Baseline Expectations Annualized Baseline Expectations Mid single-digit Low to mid single-digit • 1Q21: Reflects lower net loan accretion/ $525 million (FTE) % decline $2.088 billion (FTE) % decl
Slide 19: Well-positioned to deliver strong execution
Well-positioned to deliver strong execution • Expanded franchise in attractive Southern markets • Diversified business model with countercyclical businesses helping to mitigate pressure from low rates • Uniquely positioned to deliver significant cost savings in a challenging environment – Strong pro
Slide 20: Appendix
“ APPENDIX 20| BX
Slide 21: Notable Items
Notable Items ($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) 4Q20 3Q20 2020 2019 Financial Statement Caption - Pre-Tax Tax Rate Pre-Tax Tax Rate T Nonintere
Slide 22: FY2020 adjusted financial highlights
FY2020 adjusted financial highlights1 Adjusted Adjusted FHN FHN standalone 2020 Change vs. 2019 • Adjusted EPS of $1.22 decreased $0.45 as the impact $s in millions except per share data 2020 2019 $/bps % of the IBKC merger/Truist branch acquisition was more than offset by a $311 million CECL-relate
Slide 23: 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 5.9 % C&I excl. Energy, LMC, & PPP 22.1 0.4 1.6 Total C&I excl. LMC & PPP 23.8 0.4 1.9 CRE - Other 8.7 0.1
Slide 24: Future Accretion Schedule & Reconciliation to GAAP financials
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 2021 $ 50 2021 $ 60 2021 $ 22 2022 32 2022 48 2022 13 2023 and beyond
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 4Q20 3Q20 2Q20 1Q20
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 FHN historical annual income statements 2020 2019 Notable Non-
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. Combined Historical Data: non-interest income and expense 2Q20 1Q20 4Q19
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. Adjusted 4Q20 FHN compared to adjusted combined historical data: non-int
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. FHN 4Q20 before unusual items and Adjusted 4Q20 compared to prior quarte
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. 4Q20 & 3Q20 compared to Combined Historical Balance Sheet Data 4Q20 3Q20
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. ($s in millions, except per share data) 4Q20 3Q20 2Q20 1Q20 4Q19 2020 20
Slide 32: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. ($s in millions, except per share data) 4Q20 3Q20 2Q20 1Q20 4Q19 2020 20
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) 4Q20 3Q20 2Q20 1Q20 4Q19 2020 2019