First Horizon 3Q16 Earnings Call Notes

First Horizon National’s (FHN) CEO Bryan Jordan on Q3 2016 Results

Have a low for long view

“our plans at least call for the Fed to raise rates in December and then really not much after that, you can call that a low-for-long view of the world if you like, but essentially we don’t think there is very much in terms of the rate increases in the future, but we do expect one in the fourth quarter.”

The industry has gotten comfortable working in an environment where rates don’t do much, but it will probably get more competitive if the Fed doesn’t raise rates

“ I guess you could say we and the rest of the industry have gotten pretty comfortable working in an industry where rates don’t do very much. I think it’s probably a bad thing for the industry. I don’t think it changes much in the things that we do day-in, day-out, but I do think it continues to put pressure on the industry in the sense that there’s very little revenue growth opportunities. There’s still a tremendous amount of competition for what appears to be sort of a flattening trend line in terms of loan demand, particularly with an environment where there’s emphasis, industry-wide, on products like commercial real estate, et cetera.
So I think it’s going to make our business more competitive. I think that could have some marginal impact on pricing, but I think day-in, day-out we’re pretty comfortable that if we get the 25 basis points, we can deal with that.

Some opportunity in CRE

“. We do see that as an emerging and improving opportunity. In some ways, it does look like that marketplace is, particularly the environment around commercial real estate lending has slowed very significantly. Pricing has shown improvement. Structure has shown improvement. You’re seeing better structure, better pricing. And given our relative underexposure to that space, we do think that is an opportunity, much like we had in 2009, 2010, to look to continue to invest in our lending relationships with our strong long-term customers, but also to build some new relationships. So, we do see that as an opportunity or an area where we can be, again, front-footed and lean into a little bit over the foreseeable future.”

BJ Losch

Have taken some actions to reduce asset sensitivity

Sure. Yeah it’s BJ. So as you know, last year, at the end of the year, we took some actions to reduce asset sensitivity. And if you were to look at the asset sensitivity for our company year-over-year, it would be down. So, we have done some things, mostly in the securities portfolio with some bond swaps, some macro hedges, et cetera, to do that. And they’ve been successful. There hasn’t been great entry points, honestly, to do more of that this year or else we probably would have.
Our business is still very oriented towards natural asset sensitivity, meaning that most of our businesses are generating loans that are LIBOR based or floating rate. And so we recognize that. And one of the reasons that, among many, that the franchise finance business was so attractive to us was that it was a more fixed rate versus variable-rate-type lending business that we thought would also help us with our asset sensitivity. So, I think, as Bryan talked about at the beginning, we don’t have high hopes for a lot of rate increases, but we do expect or hope for one in December. And so if lower-for-longer continue to persist, we’ll look for opportunities to continue to chop away at our asset sensitivity, while also remaining – also keeping that optionality if rates do rise.

Susan Springfield

Houston appears to be reemerging

“ The leadership team here spent a good bit of time going to Houston, visiting with customers, really, in all these lines of business, so energy, commercial real estate and C&I. And it’s been, I think, very good time spent in terms of understanding that market. And many believe that Houston is emerging from – beset from oil as the oil prices have stabilized and increased.”