New York, November 05, 2019 -- Moody's Investors Service ("Moody's") has affirmed
the ratings and assessments of First Horizon National Corporation (FHN)
and its bank subsidiary, First Horizon Bank. FHN has a senior
unsecured debt rating of Baa3. First Horizon Bank has a baa2 standalone
Baseline Credit Assessment (BCA), deposit ratings of A3/Prime-2,
an issuer rating of Baa3, Counterparty Risk Ratings of Baa2/Prime-2,
and Counterparty Risk Assessments of Baa1(cr)/Prime-2(cr).
Following the rating affirmations, the outlook is stable.
This rating action follows the announcement of the planned merger of FHN
and IBERIABANK Corporation (IBKC), which is unrated. The
companies expect the all-stock transaction to close in the second
quarter of 2020, subject to regulatory approvals.
Outlook Actions:
..Issuer: First Horizon National Corporation
....Outlook, Remains Stable
..Issuer: First Horizon Bank
....Outlook, Remains Stable
Affirmations:
..Issuer: First Horizon National Corporation
.... Issuer Rating, Affirmed Baa3,
stable
....Pref. Stock Shelf, Affirmed
(P)Ba1
....Jr Subordinate Shelf, Affirmed (P)Ba1
....Pref. Stock Non-cumulative
Shelf, Affirmed (P)Ba2
....Subordinate Shelf, Affirmed (P)Baa3
....Senior Unsecured Shelf, Affirmed
(P)Baa3
....Pref. Stock Non-cumulative
Preferred Stock, Affirmed Ba2 (hyb)
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa3, stable
..Issuer: First Horizon Bank
.... Adjusted Baseline Credit Assessment,
Affirmed baa2
.... Baseline Credit Assessment, Affirmed
baa2
.... ST Counterparty Risk Assessment,
Affirmed P-2(cr)
.... LT Counterparty Risk Assessment,
Affirmed Baa1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-2
.... LT Counterparty Risk Rating, Affirmed
Baa2
.... Issuer Rating, Affirmed Baa3,
stable
.... ST Deposit Rating, Affirmed P-2
.... LT Deposit Rating, Affirmed A3,
stable
.... Pref. Stock Non-cumulative
Preferred Stock, Affirmed Ba2 (hyb)
RATINGS RATIONALE
Moody's has affirmed First Horizon Bank's baa2 BCA and the ratings
of both FHN and First Horizon Bank to reflect its assessment that the
credit profile of the combined entity will be broadly similar to that
of FHN. The baa2 BCA reflects FHN's improved asset risk as well
as its solid core retail banking franchise in Tennessee, which supports
its core deposit funding profile. The BCA also reflects FHN's capitalization
and its profitability, which are weaker than rated peers.
Positively, the merger of equals will result in a more geographically
diverse loan and deposit franchise, and provide opportunity for
cost savings that could enhance profitability. However, the
merger presents material integration risks. Somewhat mitigating
this challenge is the companies' integration track record in recent
years, though the current transaction is much larger than any acquisition
previously undertaken by either entity. Any operational missteps
that would surface in the integration process could weaken the financial
standing and performance of the combined entity, which may in turn
incentivize management to increase the firm's risk appetite to preserve
profitability or capital.
Following completion of the merger, FHN's management has indicated
that it expects to maintain its Common Equity Tier 1 capital ratio within
its existing target range of 9.0%-9.5%.
Moody's noted that FHN's capitalization is weaker than similarly-rated
US regional bank peers and that it represents the company's primary
credit challenge.
The ratings outlook is stable reflecting Moody's expectation that
FHN's improved asset risk and good core funding and liquidity will be
maintained over the next 12-18 months, even following completion
of the merger, but the bank will also continue to be more leveraged
than its peers.
What could change the ratings up
Positive rating pressure could emerge from a sustained improvement in
FHN's capitalization and demonstration of bondholder friendly approach
to capital management, while maintaining good asset quality performance.
What could change the ratings down
Negative rating pressure could emerge from further weakening in FHN's
capitalization and/or significant deterioration in asset quality in either
FHN's originated portfolio or acquired portfolio. Any operational
missteps in the integration process that weaken the financial standing
and performance of the combined entity could also lead to a rating downgrade.
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Megan Fox
AVP - Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
