First Horizon Corporation · NYSE:FHN
First Horizon — First Horizon National — Q3 2019 Earnings Presentation
37 slides from First Horizon's earnings presentation, Aug 12, 2019
Slide 1: First Horizon National Corporation 3Q19 Analyst Packet
First Horizon National Corporation 3Q19 Analyst Packet August 12, 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 $4.7B Assets $42B Deposits $32B Financial Centers 292 Employees 5,287 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 average loan and deposit growth of 1% LQ • Middle TN produced 2% average growth in loans and deposits LQ Profitably Grow Key Markets & Specialty Areas • Specialty average loan growth of 14% LQ • Average deposits grew 2% LQ in key markets
Slide 5: 2Q19 Highlights
2Q19 Highlights Delivering Significant Earnings and Balance Sheet Growth Momentum Earnings Reported/Adjusted1 EPS Growth up 13% & 20% LQ, respectively (All comparisons are 2Q19 vs 1Q19) 2Q19 EPS $0.35 +13% Reported ROTCE1/ROA Adjusted EPS1 $0.42 +20% Strong at 15.1% and 1.11% Adjusted1 ROTCE1/ROA Re
Slide 6: Total Loan Growth Accelerated in 2Q19
Total Loan Growth Accelerated in 2Q19 Specialty Areas and Key Markets Drive Growth • Momentum driven by capturing growth opportunities in key markets after Capital Bank conversion • Total average loan growth of 5% from 2Q18 to 2Q19 ￮ Specialty areas loan growth of 13% YOY ￮ Key markets loan growth o
Slide 7: Improving Efficiency While Investing for Growth
Improving Efficiency While Investing for Growth Efficiency Actions Support Investment and Customer Experience Transformation • Efficiency actions to position us for challenging rate environment, and provide capacity to reinvest savings strategically ￮ Announced 22 branch closures, improved processes
Slide 8: 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 9: Key Takeaways
Key Takeaways Delivering on Key Strategic Priorities & Controlling What We Can Control Controlling What We Can Control • Strong loan growth across markets and specialty areas • Solid core customer deposit growth with momentum in key markets • Good expense discipline and taking additional efficiency
Slide 10: 2019 Outlook: Delivering on Strategic Priorities
2019 Outlook: Delivering on Strategic Priorities 2Q19 Full Year Reported Adjusted 2019 Outlook Commentary Outlook improved due to stronger ROTCE1 15.1% 18.2%1 17% +/- performance across franchise Increased fee income and cost reductions ROA 1.11% 1.32%1 1.20% +/- driving improved profitability Loan
Slide 11: 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 11
Slide 12: Regional Banking & Fixed Income
REGIONAL BANKING & FIXED INCOME 12
Slide 13: Regional Banking
Regional Banking Loans by LOB Loans by Type Loans by Geography Consumer Commercial C&I TN 2% 11% 26% NC Commercial Other 27% 33% 36% FL (Specialty) 15% Loans to Mortgage TX Commercial 50% Companies 4% CA CRE - Income Producing 5% GA 22% 5% Consumer Real 14% Rest of US 41% 9% Estate Deposits by LOB D
Slide 14: Loan Growth Reflects Strategic Focus
Loan Growth Reflects Strategic Focus Broad-Based Loan & Deposit Growth with Strength in Specialty Areas • Strategic priority on enhancing full banking relationships with specialty customers • Specialty businesses delivered 14% average loan growth with all areas up LQ ￮ Loans to mortgage companies gr
Slide 15: 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 16: 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 • #2 issuer of SBA 7(a) Pools • Delivers strong risk-adjusted returns through the cycle and provides counter-cyclicality to Regional • Top 10 underwriter
Slide 17: Strong Quarter for Fixed Income
Strong Quarter for Fixed Income Complementary and Countercyclical Business Demonstrated in 2Q19 • Decline in interest rates and rate outlook favorably impacted 2Q19 activity • Fixed income product ADR of $866k up 19% LQ, 85% YOY with growth across multiple trading desks • Other product revenue in Fi
Slide 18: 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 2Q19 Declining
Slide 19: Funding & Capital
FUNDING & CAPITAL 19
Slide 20: Deposit Composition Reflects Stable Funding Mix
Deposit Composition Reflects Stable Funding Mix • Total avg. deposits represent 88% of total funding Non-Maturity Interest-Bearing Deposits • Stable and cost effective funding mix in Regional Avg. Balance Banking with 53% DDA and interest checking Weighted Avg. Rate Paid $19B $20B deposits Avg. Fed
Slide 21: Stability in Deposit Mix Trends
Stability in Deposit Mix Trends 2Q19 Total Deposit Beta (YOY) 2Q19 Interest Bearing Deposit Beta (YOY) 90% 120% 80% 100% 70% 56% Peer Median = 55% Peer Median = 76% 60% 80% 73% 51% 67% 50% 60% 40% 30% 40% 20% 20% 10% 0% 0% PB WBS CMA VLY IBKC ZION CFR BKU TCBI PNFP UMPQ WTFC HWC TCF FHNexMI¹ ASB FNB
Slide 22: Asset Sensitivity Overview
Asset Sensitivity Overview Benefiting From Sustained Loan Growth and Higher Short-Term Rates • Floating rate assets re-price at 100% beta. Loan 2Q19 Loan Composition: Fixed vs Floating portfolio comprised of 68% floating adjustable rate loans1 Float 68% ￮ ~85% are tied to LIBOR Fixed LIBOR 32% 85% ￮
Slide 23: Balance Sheet Evolution Yields Lower Risk Model
Balance Sheet Evolution Yields Lower Risk Model • Commercial loan portfolio shifting to higher quality, Positive Commercial Credit Grade Migration with 42% of commercial loans qualifying as ($ are Total Ending Balance) $23B investment grade equivalent 3% PD 1-5 • High quality consumer portfolio with
Slide 24: Stress Testing
Stress Testing 2018 Severely Adverse Scenario Holding Company Capital Results % Average Peer2 • Severe global recession accompanied by a global 9 Quarter Assets DFAST aversion to long-term fixed-income assets ($ in millions) Cumulative 4Q17 - 1Q20 Results ￮ Real GDP down 7.5% Pre-provision net reven
Slide 25: 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 26: 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 $300mm Ba2 B+ REIT Prefer
Slide 27: Asset Quality
ASSET QUALITY 27
Slide 28: Asset Quality
Asset Quality • Solid asset quality demonstrated by historically low Asset Quality Highlights annualized net charge-offs • Decreasing loan to deposit ratio driven by strong ($ in millions) 2Q18 3Q18 4Q18 1Q19 2Q19 deposit growth outpacing solid loan growth Charge-offs ($10) ($9) ($18) ($11) ($12) ￮
Slide 29: 2Q19 Credit Quality Summary by Portfolio
2Q19 Credit Quality Summary by Portfolio Regional Banking Corporate5 Non-Strategic FHNC Commercial HE & Permanent Commercial HE & Permanent CRE Other1 Subtotal Other2 Total ($ in millions) (C&I & Other) HELOC Mortgage (C&I & Other) HELOC Mortgage Period End Loans $18,710 $3,787 $5,773 $441 $28,711 $
Slide 30: 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% Correspondent • 50% conventional conforming Specialty Areas • 40% government insured Energy 4% • 10% jumbo/other 4% Franchise Finance $3.8 5% • 70% purchase/30% refi in 2Q19 Healthca
Slide 31: Consumer Portfolio & Non-Strategic Overview
Consumer Portfolio & Non-Strategic Overview HELOC Draw vs Repayment Balances Home Equity Portfolio In Draw In Repayment 66% $1.0B $0.4B 2Q19 5% 6% 7% 8% 7% 0-12 13-24 25-36 37-48 49-60 >60 Months Left in Draw Period Non-Strategic Consumer Real Estate Mortgage Repurchase Reserve $489mm $442mm ($ in m
Slide 32: Appendix
APPENDIX 32
Slide 33: 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: $24.0B Carolinas Major MSA Rankings: Memphis MSA Rank: 1st Knoxville MSA Rank: 1st North Carolina (NC) and South Carolina (SC)
Slide 34: Expense Schedules
Expense Schedules Capital Bank Acquisition, Restructuring, & Rebranding Capital Bank Merger and Integration Expenses Restructuring Expenses ($ in millions) 2Q19 1Q19 2Q18 ($ in millions) 2Q19 1Q19 Employee comp., incentives and benefits (a) $0.4 $0.5 $2.5 Employee comp., incentives and benefits $2.6
Slide 35: 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 Expen
Slide 36: Reconciliation to GAAP Financials
Reconciliation to GAAP Financials Slides in this presentation use non-GAAP information of adjusted noninterest expense, adjusted pre-tax income, adjusted net income available to common, and adjusted earnings per share. That information is not presented according to generally accepted accounting prin
Slide 37: 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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