First Horizon : 2021 Stress Testing Results

2021 Stress Test Results

6/28/21

2021 Stress Test Results

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

1. Real GDP down 4%

1. 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

1. Loans to mortgage companies had relatively low loss rates and represented ~9% of average loans

1. 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