First Horizon Corporation · NYSE:FHN
First Horizon — Investor Presentation (June 2020)
12 slides from First Horizon's investor presentation, Jun 30, 2020
Slide 1: First Horizon/IBERIABANK Investor Community Information Session: CECL Loan Purchase Accounting
First Horizon/IBERIABANK Investor Community Information Session CECL Loan Purchase Accounting June 30, 2020
Slide 2: Topics to be Covered
Topics to be Covered Definition and Identification of PCD vs Non-PCD Loans Accounting for PCD and Non-PCD Loans at closing Accretion and Provisioning in Future Periods Alternate Credit Performance and Prepayment Speed Copyright © 2020 Deloitte & Touche LLP. All rights reserved. 2
Slide 3: Acquired Loan Accounting Considerations
Acquired Loan Accounting Considerations CECL methodology requires the acquirer to make an assessment of the credit quality of acquired loans and categorize them as either: (1) Non-purchased credit deteriorated (Non-PCD) loans, or (2) Purchased credit deteriorated (PCD) loans In contrast to PCI l
Slide 4: Possible PCD classification criteria
Possible PCD classification criteria Modified loans or loans in forbearance Watch list loans or those under heightened monitoring Increased probability of default or wider credit spreads Reduced refreshed FICO scores Potential Downgraded credit ratings/loan grades PCD Loan Delinquent loa
Slide 5: CECL Day 1 Illustrative Accounting – PCD
CECL Day 1 Illustrative Accounting – PCD Line # PCD Day 1 Accounting Recognition Debit Credit 1 Loans - Outstanding Balance $ 10,000,000 2 Rate only FV Mark $ 250,000 3 CECL Allowance for Loan Loss (Approximates Credit Mark) $ 500,000 4 FV Consideration / Goodwill $ 9,250,000 Rate Mark of 2.5% (Li
Slide 6: CECL Day 1 Illustrative Accounting – Non-PCD
CECL Day 1 Illustrative Accounting – Non-PCD Line # Non-PCD Day 1 Accounting Recognition Debit Credit 1 Loans - Outstanding Balance $ 5,000,000 2a Rate FV Mark $ 25,000 2b Credit FV Mark $ 75,000 3 FV Consideration / Goodwill $ 4,900,000 4 Provision Expense (Double Count) $ 75,000 5 CECL Allowance f
Slide 7: Additional Accounting for Both PCD and Non-PCD Loans
Additional Accounting for Both PCD and Non-PCD Loans Existing “Seller” Allowance for Loan Loss is reversed at closing and increases TBV Any existing “Seller” discounts (premiums) on acquired loans are reversed at closing increasing (decreasing) TBV In the future, greater than expected losses r
Slide 8: CECL Day 2 – Illustrative Accounting - Same for PCD and non-PCD loans
CECL Day 2 – Illustrative Accounting - Same for PCD and non-PCD loans Portfolio expectations at close: Total discount ($350K) will accrete over five years as shown below Includes impact of expected prepayment/charge-offs Day one allowance is sufficient to cover charge-offs and charge-offs oc
Slide 9: CECL Day 2 Illustrative Accounting – Same for PCD and non-PCD loans
CECL Day 2 Illustrative Accounting – Same for PCD and non-PCD loans Portfolio payoff in year 3 – faster than expected Day 1 Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Discount accretion 150 100 100 0 0 Provision (benefit)* 75 75 (230) Net 75 100 330 0 0 Charge-offs 115 115 115 0 0 Provision (230) Allowance 575 4
Slide 10: CECL Purchase Accounting Q&A
CECL Purchase Accounting Q&A Copyright © 2020 Deloitte & Touche LLP. All rights reserved. 10
Slide 11: Today's Speakers
Today’s Speakers Gregory Norwood Greg is a managing director with more than 40 years of banking Managing Director experience. Greg serves as a senior advisor to our CECL clients and Deloitte & Touche LLP Deloitte teams regarding implementation challenges ranging from grnorwood@deloitte.co m benefits
Slide 12: Deloitte general information disclaimer
This presentation and the accompanying discussion is general information only and Deloitte is not, by means of this presentation and discussion, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation and discussion is not a subs