First Horizon Corporation · NYSE:FHN
First Horizon — Q3 2020 Earnings Presentation
29 slides from First Horizon's earnings presentation, Oct 26, 2020
Slide 1: Third Quarter 2020 Earnings
Third Quarter 2020 Earnings Updated October 26, 2020
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: 3Q20 GAAP financial summary
3Q20 GAAP financial summary Reported 3Q20 Change vs. $ in millions 3Q20 2Q20 1Q20 4Q19 3Q19 2Q20 3Q19 $/bps % $/bps % Net interest income $ 532 $ 305 $ 303 $ 311 $ 301 $ 227 74 % $ 231 77 % Fee income 823 206 175 183 172 617 NM 651 NM Total revenue 1,355 512 478 495 472 843 NM 883 NM Expense 587 321
Slide 4: Table of contents
Table of contents FHN: well-positioned in a challenging environment 5 3Q20 notable items 6 3Q20 adjusted financial highlights 7 NII and NIM reflect benefit of merger and deposit pricing discipline 8 Adjusted fee income vs. adjusted FHN/IBKC combined 9 Adjusted expense vs. adjusted FHN/IBKC combined
Slide 5: FHN: well-positioned in a challenging environment
FHN: well-positioned in a challenging environment Adjusted EPS of $0.35 in 3Q201 • Adjusted PPNR of $352 million reflecting strength of more diversified business model and Solid Results with expanded franchise1 Strong Adjusted NII and NIM impacted by low rate environment, somewhat offset by growth
Slide 6: 3Q20 Notable items
3Q20 Notable items $s in millions except per share data 3Q20 IBKC merger-related notable items Noninterest income: Merger accounting adjustment: other noninterest income¹ $ 532 • 3Q20 results include $269 million pre-tax, or Total noninterest income 532 $0.60 per share of net notable items largely t
Slide 7: 3Q20 adjusted financial highlights
3Q20 adjusted1 financial highlights Adjusted Adjusted FHN • Adjusted EPS of $0.35; TBV per share2 of $9.92 FHN standalone 3Q20 Change vs. remained relatively stable QoQ $s in millions except per share data 3Q20 2Q20 3Q19 2Q20 3Q19 $/bps % $/bps % Provision reflects CECL reserve build of $13 millio
Slide 8: NII and NIM reflect benefit of merger and deposit pricing discipline
NII and NIM reflect benefit of merger and deposit pricing discipline ($s in millions) NII and NIM Trends Legacy FHN $532 • NII up $227 million QoQ driven by the $223 million impact of the IBKC merger Reported NII includes loan accretion impact of $311 $44 million; $38 million from IBKC and $6 mill
Slide 9: Adjusted fee income vs. adjusted FHN/IBKC combined
Adjusted1 fee income vs. adjusted FHN/IBKC combined2 Adjusted Adjusted FHN/IBKC FHN combined 3Q20 Change vs. $s in millions 3Q20 2Q20 1Q20 4Q19 3Q19 2Q20 3Q19 • Adjusted fee income remained relatively $/bps % $/bps % stable compared with 2Q20 adjusted Fixed income $ 111 $ 112 $ 96 $ 81 $ 78 $ (1) (1
Slide 10: Adjusted expense vs. adjusted FHN/IBKC combined
Adjusted1 expense vs. adjusted FHN/IBKC combined2 Adjusted Adjusted $s in millions FHN 3Q20 2Q20 FHN/IBKC combined 1Q20 4Q19 3Q19 3Q20 Change vs. 2Q20 3Q19 • Adjusted expense down $15 million from 2Q20 adjusted FHN/IBKC combined levels $ % $ % and includes the benefit of merger Salaries and benefits
Slide 11: Total loans
Total loans 3Q20 reported vs combined1 loan trends • Period-end loans of $59.7 billion up modestly from 2Q20 combined1 levels as a $1.6 billion increase in Loans to Mortgage Companies (LMC) more than offset reductions in other C&I Average loans to mortgage companies of $5.8 billion, $58.8B $59.7B
Slide 12: Total funding
Total funding 3Q20 reported vs combined1 interest-bearing liabilities & DDA trends $73.2B $72.1B 0.3% 1% $72.1B 0.5% • 3Q20 total period-end deposits of $68.4 billion 4% 3% 3% compared with 2Q20 combined levels of $66.1 billion $63.2B 1% 20% Results driven by an increase in savings and DDA 5% 21%
Slide 13: Prudently managing risk
Prudently managing risk ($s in millions ) • Continuing to closely monitor industries currently impacted by Provision, credit losses, and net charge-offs COVID-19 disruptions with ongoing portfolio reviews; other sectors such as essential services, recreational goods, Legacy FHN $227 manufacturing, a
Slide 14: Significant reserves for current environment
Significant reserves for current environment ($ in millions) • CECL reserve build reflects stressed but improving outlook 2Q20 vs. 3Q20 Allowance for credit losses (ACL) for overall economy • Utilized Moody’s August 2020 baseline scenario and applied additional modest weighting to alternative upside
Slide 15: Update on areas of perceived risk
Update on areas of perceived risk Portfolio by industry as of 9/30/2020 Portfolios subject to more heightened monitoring Subject to ~10.8% of total loans more % of total heightend % of total • Continuing to closely monitor industries currently impacted by COVID-19 ($s in billions) Amount loans monit
Slide 16: Strong capital position
Strong capital position Capital levels 12.47% 11.97% 11.01% 11.22% 10.78% • Robust PPNR1 and enhanced earnings power provide dividend support and additional loss-absorbing capital 10.69% 9.97% 10.15% 9.52% 10.19% • TBVPS1 of $9.92 remained relatively stable with 2Q20 as strong earnings were offset b
Slide 17: Merger integration update
Merger integration update • Strong project management and governance framework in place Integration Highlights Integration • Strong head start pre-COVID building relationships, aligning cultures & Framework establishing cadence • Integration work being done effectively in largely remote manner Targe
Slide 18: Key takeaways
Key takeaways Well-positioned to capitalize on the benefits of our more diversified business model and expanded franchise in attractive Southern markets • Diversified revenue mix with countercyclical businesses helping to mitigate pressure from low rates • Uniquely positioned to deliver significant
Slide 19: Appendix
APPENDIX 19 | Py
Slide 20: FHN reserve and deferrals by portfolio
FHN reserve and deferrals by portfolio Allowance Loan Coverage $s in billions Balance Allowance Ratio Portfolios excl. Loans to Mortgage Companies (LMC) & PPP Energy $ 1.8 $ 0.1 7.46 % C&I excl. Energy, LMC, & PPP 22.4 0.4 1.56 Total C&I excl. LMC & PPP 24.2 0.5 2.00 CRE - Other 9.0 0.1 1.25 CRE - R
Slide 21: IBKC merger accounting impacts consistent with prior guidance
IBKC merger accounting impacts consistent with prior guidance Preliminary loan marks as of 7/1/20 Interest/liquidity Credit mark Total loan mark Other adjustments $s in millions mark Prior PCD Fair value Balances Pre-tax % of O/S Pre-tax % of O/S Pre-tax % of O/S discount allowance of assets reverse
Slide 22: Notable items
Notable items Favorable / (Unfavorable) FHN IBKC $s in millions After-Tax at After-Tax at $s in millions, except per share data Marginal Tax Marginal 3Q20 IBKC merger-related notable items Financial Statement Caption Pre-Tax Rate Pre-Tax Tax Rate Noninterest income: 2Q20 Merger accounting adjustment
Slide 23: 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 income statements 3Q20 2Q20 1Q20 4Q19 3Q19 Notab
Slide 24: 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 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 3Q20 FHN compared to adjusted combined historical data: non-int
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. 3Q20 compared to Combined Historical Balance Sheet Data 9/30/2020 6/30/2
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. $s and shares in millions except per share data 3Q20 2Q20 1Q20 4Q19 3Q19
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. $ in millions except per share data) 3Q20 2Q20 1Q20 4Q19 3Q19 Adjusted N
Slide 29: Reconciliation to GAAP financials
Reconciliation to GAAP financials ($s in millions) 3Q20 to 3Q20 1Q20 to 2Q20 4Q19 to 1Q20 $s in millions NII Margin NII Margin NII Margin 3Q20 Reported $ 532 2.84 % 1Q20 Reported $ 303 3.16 % 4Q19 Reported $ 311 3.26 % PPP Loans and Fees 26 0.00 Prior Period Accretion (9) (0.09) Prior Period Accreti