Company-run stress test demonstrates ability to navigate the Fed CCAR Severely Adverse Scenario while maintaining capital well above regulatory minimums
CCAR Severely Adverse Scenario
Severe global recession with heightened stress in commercial real estate and corporate debt markets
Real GDP down 4%
Unemployment increased to 10.8% o House prices down 24%
o CRE prices down 40%
o Equity prices down 55%
Capital
FHN
Fed-run CCAR Peers
CET1↓ 114bps
CET1 ↓ ~240bps3
16.8%
15.3%
14.3%
12.6%
11.8%
12.4%
10.7%
9.6%
13.4%
11.4%
8.0%
9.7%
6.0%
8.5%
4.5%
4Q20
9Q
4Q20
9Q
Regulatory
Actual
Minimum
Actual
Minimum
Required
Minimum
CET1
Tier 1
Total Capital
Results and Key Assumptions
Minimum CET1 of 8.5% exceeded regulatory minimum by 400 bps
CET1 decline of 114bps compared to Fed-runCCAR peer1 median of 240 bps
3.1% loss rate compared to Fed-run CCAR peer1 median of 5.9%
$0.15/share quarterly common dividend
Utilized CECL2 methodology for allowance & losses; drove provision & capital into 1Q21
Drivers of Change in CET1
0.6%
0.6%
0.5%
(0.1%)
(0.1%)
(0.2%)
(2.5%)
9.7%
8.5%
4Q20
Provision
PPNR
Dividends
Taxes
CECL
Assets
Other
1Q21
Phase-in
2
Based on Fed Comprehensive Capital Analysis and Review (CCAR) Severely Adverse scenario released February 12, 2021 using a flat (static) balance sheet over 9 quarter planning horizon from 1Q21 to 1Q23 1References to peer stress testing data represent the median 2021 CCAR results of 23
participating firms. 2Company run results utilized Current Expected Credit Loss methodology vs. Fed methodology that sets allowance equal to the next four quarters of forecasted losses. 3Median change in peer results may not equal difference from median starting point to median minimum. PPNR = Pre-Provision Net Revenue Source: Federal Reserve
2021 Stress Test Results
Countercyclical businesses and favorable portfolio mix help First Horizon outperform peers in latest stress test
Key Stress Test Ratios
Fixed Income Contribution
5.9%
Fed-run CCAR Peers1
FHN
$350
25%
$300
20%
$250
3.1%
3.3%
$200
15%
$150
10%
1.6%
$100
0.4%
$50
5%
$0
0%
-0.6%
Loan Loss
PPNR
Pre-tax Net Income
Rate
% Assets
% Assets
Total PPNR
Fixed Income PPNR
Fixed Income PPNR %
Overall Portfolio Loss Rates Lower than CCAR Median
First-lien Mortgages
1.6%
1.8%
Junior liens and HELOCs
1.8%
4.1%
Commercial and Industrial
2.8%
7.5%
Commercial Real Estate
6.1%
10.2%
Credit Cards
9.6%
15.7%
Other Consumer
5.7%
8.4%
Other Loans
0.5%
4.0%
Total Loan Losses
3.1%
5.9%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Fed-run CCAR Peers 1
FHN
•
•
9-quarter cumulative losses of $1.7B; additional pre-tax loss capacity of ~$3.4B to 4.5% CET1 capital regulatory requirement
FHN's portfolio mix contributed to lower losses
Loans to mortgage companies had relatively low loss rates and represented ~9% of average loans
Credit card portfolio <0.5% of average loans
3
Based on Fed Comprehensive Capital Analysis and Review (CCAR) Severely Adverse scenario released February 12, 2021 using a flat (static) balance sheet over 9 quarter planning horizon from 1Q21 to 1Q23 1References to peer stress testing data represent the median 2021 CCAR results
of 23 participating firms. $ in millions
Attachments
Original document
Permalink
Disclaimer
First Horizon National Corporation published this content on 28 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 June 2021 19:58:05 UTC.
First Horizon Corporation is a bank holding company, which provides diversified financial services primarily through its principal subsidiary, First Horizon Bank (the Bank). The Company operates through three segments: Regional Banking, Specialty Banking, and Corporate. The principal lines of business in the regional banking segment include commercial banking, business banking, consumer banking, private client, and wealth management. This segment also provides investment, wealth management, financial planning, trust and asset management services for consumer clients. The principal lines of business in the specialty banking segment include fixed income/capital markets, professional commercial real estate, mortgage warehouse lending, asset-based (secured) lending, franchise finance, equipment finance, energy finance, healthcare finance, and tax credit finance. This segment also delivers treasury management solutions, loan syndications, and international banking.