Attached files
| file | filename |
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| EX-99.1 - EXHIBIT 99.1 FINANCIAL SUPPLEMENT - FIRST HORIZON CORP | a1q18financialsupplementdo.htm |
| 8-K - 8-K - FIRST HORIZON CORP | a1q18financialsupplement8-.htm |
First Horizon National Corporation
First Quarter 2018 Earnings
April 13, 2018
2
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-looking statements, which may include guidance, involving significant risks and
uncertainties which will be identified by words such as “believe”,“expect”,“anticipate”,“intend”,“estimate”,
“should”,“is likely”,“will”,“going forward” and other expressions that indicate future events and trends and may be
followed by or reference cautionary statements. A number of factors could cause actual results to differ materially
from those in the forward-looking statements. These factors are outlined in our recent earnings and other press
releases and in more detail in the most current 10-Q and 10-K. FHN disclaims any obligation to update any such
forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking
statements to reflect future events or developments.
3
All comparisons are 1Q18 vs 1Q17.
1Adjusted EPS, Adjusted ROA, ROTCE and Adjusted ROTCE are Non-GAAP numbers and are reconciled in the appendix.
Adjusted numbers exclude notable items as outlined in the appendix.
First Quarter 2018 Highlights
Achieving Bonefish Targets, On Track with Capital Bank Merger Targets
Achieving strategic priorities and creating long-term value
Broad-based loan growth from specialty lending areas and markets
Good credit quality trends
Increased balance sheet capacity bringing scale and efficiency
Capital Bank (CBF) systems integration scheduled for 2Q18
Revenue synergies of ~$2mm annualized in 1Q18 run-rate, with
additional ~$3mm in process
Expect to achieve half of $85mm annual cost saves in 2018
Reported $0.27 +17% Reported 14.1% +373bps Reported 0.95% +13bps
Adjusted1 $0.34 +48% Adjusted1 17.4 +704bps Adjusted1 1.17 +35bps
EPS ROTCE1 ROA
FINANCIAL RESULTS
4
5
Financial Results
NM - Not Meaningful. Numbers may not add to total due to rounding. 1Adjusted Fee Income, Revenue, Expense, Pre-Tax Income, NIAC, and EPS are Non-GAAP numbers and are reconciled in the
appendix. Adjusted numbers exclude notable items as outlined in the appendix. EPS and Adjusted EPS calculated using 330.3mm shares.
2Net Income Available to Common (NIAC) includes the impact from $3mm of noncontrolling interest and $1.6mm of preferred stock dividends.
Strong results reflect:
Full quarter benefit from CBF
Positive NII trends
Ongoing expense discipline
Lower tax rate
Good credit quality
$ in millions except per share data Actuals Adjusted1 4Q17 1Q17 4Q17 1Q17
Net Interest Income $301 $301 +24% +59% +24% +59%
Fee Income $136 $133 +2% +16% - +13%
Total Revenue $437 $434 +16% +43% +16% +41%
Expense $313 $282 -10% +41% +9% +27%
Loan Loss Provision ($1) -$1 NM NM -133% -0%
Pre-Tax Income $125 $153 NM +46% +34% +79%
NIAC2 $91 $112 NM +68% +41% NM
EPS $0.27 $0.34 NM +17% +13% +48%
Avg Loans ($B) $27.1 $27.1 +20% +44% +20% +44%
Avg Deposits ($B) $30.2 $30.2 +21% +32% +21% +32%
Financial Results
Actuals vs Adjusted1 vs
Actuals Adjusted1
1Q18
$ in millions except per share data Per Share
1Q18 Reported NIAC2 & EPS $91 $0.27
Notable Items: Pre-tax After-tax EPS Impact
Acquisition Expenses $31 $24
Gain on Property Sale ($3) ($3)
1Q18 Adjusted1 NIAC2 & EPS $112 $0.34
Net Income Available to Common (NIAC) & EPS Reconciliation
Amount
+$0.07
Capital Bank Merger Update
Increasing Confidence in Merger Success
6
Systems conversion in 2Q18
Half of $85mm in annual cost savings expected in 2018
Annualized revenue synergies of ~$5mm
$2mm annualized closed
$3mm annualized in process
2018 Focus: Integration and Improved Accretion
Merger Economics More Favorable Than Original Announcement
Original Announcement Current Outlook
Accelerated Bonefish
Achievement
By End of 2019 1Q18
Annual Cost Savings $65mm $85mm
Revenue Synergies Not Originally Modeled $25mm-$30mm
Interest Rates Lower Higher
Tax Rate Higher Lower
7
Net Interest Income Sensitivity Impact
Net Interest Income and Net Interest Margin
Strong NII Growth and Margin Expansion
NII and NIM increases driven by:
Impact of full quarter of CBF loans
Accretion from CBF loans
Increase in short term interest rates
NIM Expansion and Loan Growth Drive NII Increase
NII and NIM Linked-Quarter Change Drivers
LQ – 1Q18 vs 4Q17. Numbers may not add to total due to rounding.
1Core excludes the accretion from CBF’s loans, and is a Non-GAAP number reconciled in the table found on this slide. The average earning assets impact from CBF’s loan accretion was $179mm
in 1Q18 and $63mm in 4Q17. 2NII sensitivity analysis uses FHN’s balance sheet as of 1Q18. Bps impact assumes increase in Fed Funds rate.
($ in millions)
+$10mm
+$19mm
+$36mm
+0.8%
+1.6%
+3.0%
0%
1%
2%
3%
4%
+25bps +50bps +100bps
2.80%
2.90%
3.00%
3.10%
3.20%
3.30%
3.40%
3.50%
$170
$190
$210
$230
$250
$270
$290
$310
1Q17 2Q17 3Q17 4Q17 1Q18
NII (left axis) CBF Loan Accretion Impact
NIM (right axis) NIM - Core¹
NII NIM
4Q17 - Reported $242.1 3.27%
-$4.7 -5bps
4Q17 - Core1 $237.4 3.22%
+$41.4 +3bps
+$2.7 +3bps
+$6.0 -
1Q18 - Core1 $287.4 3.28%
+$13.7 +16bps
1Q18 - Reported $301.2 3.43%
Higher Rates
Other
1Q18 CBF Loan Accretion
($ in millions)
Less: 4Q17 CBF Loan Accretion
CBF Excluding Loan Accretion
Energy, 1%
Correspondent, 2%
Healthcare, 4%
Franchise Finance, 4%
Corporate, 6%
Loans to Mortgage
Companies, 8%
Asset-Based
Lending, 11%
Commercial
Real Estate,
16%
Business Banking,
5%
Commercial, 43%
$21.1B
$25.7B
+$47mm
+$64mm
+$58mm
+$42mm -$39mm +$60mm
-$339mm
-$44mm
+$12mm
+$20mm
+$60mm
+$494mm +$1,650mm
+$2,166mm
+$351mm
4Q17 Asset-Based
Lending
Private Client/
Wealth Mgmt.
Healthcare Commercial
Real Estate
Consumer Commercial Loans to
Mortgage
Companies
Other² 1Q18
Avg. Loan Growth (ex-CBF) Avg. Loan Growth Attributable to CBF Merger¹
8
Loan Growth Diversified Across Multiple Businesses
CBF Merger Enhances Regional Banking Loan Portfolio
Regional Banking 1Q18 Average Loan Growth by Lending Area
LQ – Linked Quarter. YOY - Year over Year. Numbers may not add to total due to rounding.
1Average loan growth attributable to CBF is increased by approximately two-thirds in the averaging process from 4Q17 because CBF merger closed on November 30, 2017.
2Other includes Business Banking, Correspondent, Energy, and Franchise Finance.
1Q18 Average Regional Bank Commercial Loans
Specialty
Areas
Loan growth across various markets including Middle
Tennessee, West Tennessee, and Texas
Growth in specialty areas such as private client,
asset-based lending, and healthcare
Expected seasonal decline in loans to mortgage companies
Average outstandings up 19% YOY
Average commercial loans up 46% YOY and 19% LQ
9
LQ – Linked Quarter. YOY - Year over Year. Numbers/Percentages may not add to total due to rounding.
1Deposit beta equals change in average interest rate paid divided by change in average Fed funds rate.
Strong Deposit Franchise
Focused on Opportunities for Growth and Mix Improvement
Total Average Deposit Rate Overview Average Deposit Composition 27% 28% 29% 28% 26%
39% 41% 42%
41%
42%
14% 14% 13%
15%
18%
20% 17% 16%
16%
14%
$0B
$4B
$8B
$12B
$16B
$20B
$24B
$28B
$32B
1Q17 2Q17 3Q17 4Q17 1Q18
Non-Interest Consumer Interest Commercial Interest Market-Indexed
Overall deposit beta1 since 3Q15 is 27%
15% excluding market-indexed deposits
Emphasis on relationship pricing, treasury services, and deposit gathering in select markets
3Q15 4Q17 1Q18
Non-Interest - - -
Consumer Interest 0.14% 0.19 0.24%
Commercial Interest 0.25% 0.78% 0.89%
Market-Indexed 0.20% 1.23% 1.47%
Total Deposits 0.12% 0.39% 0.47%
Rate Paid
-0.10%
0.00%
0.10%
0.20%
0.30%
0.40%
-$3
$0
$3
$6
$9
$12
1Q17 2Q17 3Q17 4Q17 1Q18
NCOs $ Provision $ NCO %¹ (Right Axis)
10
Allowance for Loan Losses Net Charge-Offs (NCOs)
Asset Quality
Stable Credit Trends Reflect Strong Underwriting Discipline
Credit quality environment remains stable
Allowance to loans ratio at 69bps
Net charge-offs at $1mm in 1Q18
OREO decreased $8mm LQ
Non-strategic average loans declined 5% LQ, 21% YOY
CBF credit performance as expected
Numbers may not add to total due to rounding.
1Net charge-off % is annualized and as % of average loans.
Asset Quality Highlights
($ in B) ($ in millions)
($ in millions) 1Q17 2Q17 3Q17 4Q17 1Q18
Charge-offs ($8) ($10) ($11) ($17) ($8)
Recoveries $9 $7 $8 $9 $7
Net Charge-offs/
(Recoveries)
($1) $3 $2 $8 $1
Provision/(Credit) ($1) ($2) $0 $3 ($1)
$19 $20 $20
$28 $27
106bps
99bps 97bps
69bps 69bps
0bps
30bps
60bps
90bps
20bps
50bps
180bps
$0
$5
$10
$15
$20
$25
$30
1Q17 2Q17 3Q17 4Q17 1Q18
Total Period end Loans CBF Marked Loans ALLL to Loans Ratio
(Right Axis)
11
1 ROTCE, ROA, NIM, and NCO / Average Loans are annualized. ROTCE is a Non-GAAP number and reconciled in the appendix.
2 Current period is an estimate. 3CET1, NIM, and NCO% are reported (GAAP) numbers, and have not been adjusted for the notable items outlined in the appendix. Adjusted ROTCE, ROA, Fee
Ratio, and Efficiency Ratio are Non-GAAP and are reconciled to the comparative GAAP numbers ROE, ROA, Fee Ratio, and Efficiency Ratio in the appendix.
Achieving Strategic Priorities
Focused on Driving Sustainable Earnings Power
1Q18 Reported (GAAP) Adjusted3 Bonefish Targets
ROTCE1 14.1% 17.4% 15.0%+
ROA1 0.95% 1.17% 1.10% – 1.30%
CET12 9.0% 9.0% 8.0% – 9.0%
NIM1 3.43% 3.43% 3.25% – 3.50%
NCO / Average Loans1 0.02% 0.02% 0.20% – 0.60%
Fee Income / Revenue 31% 31% 30% – 40%
Efficiency Ratio 72% 65% 60% – 65%
ROTCE
15%+
CET1
8% - 9%
ROA
1.10% - 1.30%
Total
Assets
Pre-Tax
Income
Tax
Rate
Risk
Adjusted
Margin
NIM
3.25% - 3.50%
NCO Ratio
0.20% - 0.60%
% Fee Income
30% - 40%
Efficiency Ratio
60% - 65%
12
Building the Foundation for Sustainable Long-Term Earnings Power
Continue strong business momentum
Grow balance sheet profitably and prudently
Expand banking relationships with emphasis on economic profit
Ensure successful merger integration
Consistently deliver top quartile returns
Successfully Executing on Key Priorities
FHN Is Well Positioned For Attractive Long-Term Earnings Power
APPENDIX
13
14
NOTABLE ITEMS
1All notable item amounts are calculated on a pre-tax basis with the exception of the tax adjustments in 2Q17, 3Q17, and 4Q17.
2017
Pre-Tax
Amount1
2018
Pre-Tax
Amount1
Acquisition Expense ($31.4mm)
Gain on property sale $3.3mm
Mortgage Repurchase Reserve Release $20.0mm
Acquisition Expense ($6.4mm)
Effective tax rate adjustment associated
with reversal of a capital loss deferred tax
valuation allowance1
$19.5mm
Loss on equity securities repurchase ($14.3mm)
Acquisition Expense ($8.2mm)
Legal Matters ($8.2mm)
Tax rate adjustments primarily associated
with the reversal of a capital loss deferred
tax valuation allowance and certain
discrete period items1
$13.7mm
Tax Reform-Related Adjustments1 ($82.0mm)
Other Tax Adjustments1 $10.7mm
Acquisition Expense ($46.7mm)
Legal Matters ($32.1mm)
Employee Bonuses ($9.9mm)
4Q
1Q None
2Q
3Q
15
1Q18 Credit Quality Summary by Portfolio
Numbers may not add to total due to rounding. Data as of 1Q18. NM - Not meaningful.
1Credit card, Permanent Mortgage, and Other. 2Credit card, OTC, and Other Consumer.
3Non-performing loan excludes held-for-sale loans. 4Net charge-offs are annualized.
5Exercised clean-up calls on jumbo securitizations in 1Q13, 3Q12, 2Q11, and 4Q10, which are now on the balance sheet in the Corporate segment.
Corporate5 FHNC
($ in millions)
Commercial
(C&I &
Other)
CRE
HE &
HELOC
Other1 Subtotal
Permanent
Mortgage
Commercial
(C&I &
Other)
HE &
HELOC
Permanent
Mortgage
Other2 Total
Period End Loans $15,410 $4,234 $5,707 $669 $26,020 $49 $418 $540 $217 $6 $27,250
30+ Delinquency % 0.16% 0.08% 0.38% 0.88% 0.21% 5.51% 0.00% 2.64% 3.16% 1.61% 0.29%
Dollars $25 $4 $21 $6 $55 $3 $0 $14 $7 $0 $79
NPL3 % 0.16% 0.02% 0.53% 0.22% 0.22% 4.41% 0.72% 8.59% 10.43% 0.00% 0.48%
Dollars $25 $1 $30 $1 $58 $2 $3 $46 $23 $0 $132
Net Charge-offs4 % 0.02% NM NM 1.93% 0.06% NM 0.00% NM 0.17% NM 0.02%
Dollars $1 $0 $0 $3 $4 NM $0 ($2) $0 $0 $1
Allowance $99 $29 $16 $12 $156 NM $1 $17 $13 $0 $187
Allowance / Loans % 0.64% 0.69% 0.27% 1.82% 0.60% NM 0.30% 3.17% 5.93% 1.28% 0.69%
Allowance / Net Charge-offs 37.18x NM NM 0.90x 10.82x NM NM NM 33.55x NM 33.90x
Regional Banking Non-Strategic
16
Select C&I and CRE Portfolio Metrics
Data as of 1Q18. Numbers may not add to total due to rounding.
C&I: Loans to Mortgage Companies
CRE: Collateral Type CRE: Geographic Distribution
Office
15%
Other
20%
($ in billions)
Retail
20%
Other
15%
1Q18 Average Regional Bank Commercial Loans
Office
21%
Land, 2%
Hospitality, 9%
Other,
16%
Office,
19%
Reta l,
19%
Multi-Family,
24%
NC, 32%
TN, 18%
FL, 14%
SC, 9%
TX, 6%
Other,
16%
$2.0
$1.5
$2.1
$2.0
$2.1
$1.8
$2.2
$1.3
$1.6
$1.9 $1.9
$1.5
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Period End Balance Average Balance
Energy, 1%
Correspondent, 2%
Healthcare, 4%
Franchise Finance, 4%
Corporate, 6%
Loans to Mortgage
Companies, 8%
Asset-Based
Lending, 11%
Commercial
Real Estate,
16%
Business Banking,
5%
Commercial, 43%
Specialty
Areas
17
Non-Strategic Consumer Real Estate Run-Off Mortgage Repurchase Reserve
Consumer Portfolio & Non-Strategic Overview
Numbers may not add to total due to rounding.
38.2%
37.1%
35.0%
35.6%
34.9%
34%
35%
36%
37%
38%
39%
$0.0B
$0.2B
$0.4B
$0.6B
$0.8B
$1.0B
1Q17 2Q17 3Q17 4Q17 1Q18
Period End Balance Constant Pre-Payment Rate (Right Axis)
($ in millions) 1Q17 2Q17 3Q17 4Q17 1Q18
Beginning Balance $65 $65 $35 $34 $34
Net R alized Losses ($0) ($8) ($0) ($0) $0
Provision Credit ($0) ($22) ($1) $0 ($0)
Ending Balance $65 $35 $34 $34 $33
$1.2B
$0.5B
In Draw In Repayment
9% 7% 7% 8% 8%
62%
0%
10%
20%
30%
40%
50%
60%
70%
0-12 13-24 25-3 37-48 49-60 >60
HELOC Draw vs Repayment Balances Percent of Home Equity Portfolio:
Months Left in Draw Period
Reconciliation to GAAP Financials
18
Slides in this presentation use non-GAAP information of adjusted fee income, adjusted revenue, 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 principles (GAAP) and is reconciled to GAAP information below.
Numbers may not add to total due to rounding. NM – Not Meaningful.
1Tax-affected notable items assume an effective tax rate of ~24% in 1Q18 and ~39% in 4Q17. 2Because FHN recognized a net loss available to common shareholders in 4Q17, potentially issuable
shares are excluded from diluted shares because they are antidilutive. Excluding notable items, FHN would have recognized net income available to common shareholders. As a result,
adjusted shares are presented in order to include the dilutive impact of potentially issuable shares.
LQ YOY
Adjusted Fee Income & Revenue
Fee Income (GAAP) $136 $133 $117
Plus: Notable Items (GAAP) -$3 $0 $0
Adjusted Fee Income (Non-GAAP) $133 $133 $117 0% 13%
Plus: Net Interest Income (GAAP) $301 $242 $190
Adjusted Revenue (Non-GAAP) $434 $375 $307 16% 41%
Adjusted Noninterest Expense
Noninterest Expense (GAAP) $313 $347 $222
Plus: Notable Items (GAAP) -$31 -$89 $0
Adjusted Noninterest Expense (Non-GAAP) $282 $258 $222 9% 27%
Adjusted Pre-Tax Income
Pre-Tax Income (GAAP) $125 $26 $85
Plus: Notable Items (GAAP) $28 $89 $0
Adjusted Pre-Tax Income (Non-GAAP) $153 $114 $85 34% 79%
Adjusted Net Income
Net Income (GAAP) $95 -$48 $58
Plus: Tax-affected Notable Items (GAAP)1 $21 $133 $0
Adjusted Net Income (Non-GAAP) $116 $84 $58 38% 99%
Adjusted Net Income Available to Common (NIAC) & Earnings Per Share (EPS)
Net Income Available to Common (GAAP) $91 -$53 $54
Plus: Tax-affected Notable Items (GAAP)1 $21 $133 $0
Adjusted Net Income Available to Common (Non-GAAP) (a) $112 $80 $54 41% NM
Average Common Diluted Shares (GAAP) 330 265 237
Adjusted Average Common Diluted Shares (Non-GAAP)2 (b) 330 268 237
Earnings Per Share (GAAP) $0.27 ($0.20) $0.23
Adjusted Earnings Per Share (Non-GAAP) (a/b) $0.34 $0.30 $0.23 13% 48%
($ in millions) 1Q18 4Q17 1Q17
% Change
Reconciliation to GAAP Financials
19
Slides in this presentation use non-GAAP information of adjusted fee ratio, 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 accounting principles (GAAP) and is reconciled to GAAP information below.
Numbers may not add to total due to rounding.
1 Adjusted Fee Income, Adjusted Revenue, Adjusted Noninterest Expense, Adjusted Net Income Available to Common, and Adjusted Net Income are Non-GAAP numbers that are reconciled on the
previous slide.
LQ YOY
Adjusted Fee & Adjusted Efficiency Ratios
Adjusted Fee Income1 (Non-GAAP) (a) $133 $133 $117
Adjusted Revenue1 (Non-GAAP) (b) $434 $375 $307
Adjusted Fee Ratio (Non-GAAP) (a/b) 31% 35% 38% -5% -8%
Adjusted Noninterest Expense1 (Non-GAAP) (c) $282 $258 $222
Adjusted Revenue1 Excluding Securities Gains (Non-GAAP) (d) $434 $375 $307
Adjusted Efficiency Ratio (Non-GAAP) (c/d) 65% 69% 72% -4% -7%
Return on Tangible Common Equity (ROTCE)
Average Total Equity (GAAP) $4,574 $3,506 $2,723
Less: Average Noncontrolling Interest (GAAP) -$295 -$295 -$295
Less: Average Preferred Stock (GAAP) -$96 -$96 -$96
Average Common Equity (GAAP) (e) $4,183 $3,115 $2,332
Less: Average Intangible Assets (GAAP) -$1,568 -$727 -$212
Average Tangible Common Equity (Non-GAAP) (f) $2,615 $2,388 $2,120
Annualized Net Income Available to Common (GAAP) (g) $368 -$210 $219
Return on Average Common Equity (ROE) (GAAP) (g/e) 8.8% -6.7% 9.4%
Return on Average Tangible Common Equity (ROTCE) (Non-GAAP) (g/f) 14.1% -8.8% 10.3% 2,284bps 373bps
Adjusted Return on Tangible Common Equity (ROTCE)
Annualized Adjusted Net Income Available to Common1 (Non-GAAP) (h) $454 $316 $219
Average Tangible Common Equity (Non-GAAP) (f) $2,615 $2,388 $2,120
Return on Average Tangible Common Equity (ROTCE) (Non-GAAP) (h/f) 17.4% 13.2% 10.3% 414bps 704bps
Adjusted Return on Average Assets (ROA)
Annualized Adjusted Net Income1 (Non-GAAP) (i) $472 $334 $237
Average Total Assets (GAAP) (j) $40,351 $33,106 $28,806
Adjusted Return on Average Assets (Non-GAAP) (i/j) 1.17% 1.01% 0.82% 16bps 35bps
($ in millions) 1Q18 4Q17 1Q17
Change