Forgan Reinforces First Horizon’s Commitment To Community

John Forgan, First Horizon Corp.'s Charlotte market president, has a message for employees — "just keep doing what you're doing."

Forgan and his colleagues awoke to surprising news on Monday morning. Toronto-based TD Bank Group announced it would acquire First Horizon in an all-cash, $13.4 billion deal set to close in November. That comes to about $25 per First Horizon share. Forgan views the transaction as accretive and isn't expecting any major changes to Charlotte operations in the near term.

"I think what's going to happen is there will be a lot of augmentation of our groups," Forgan said. "The group felt it'd be better for our clients long-term, better for the employees, and really, they're a very large supporter in the community."

TD Bank (NYSE: TD) and Memphis, Tennessee-based First Horizon (NYSE: FHN) have minimal overlap in the Charlotte market. As of 2021, First Horizon is this area's ninth-largest bank by deposits with 17 branches. TD, although plotting for future growth, is much smaller at No. 25 by deposits with three branches. The two banks also have little overlap nationwide. TD said it is retaining First Horizon’s client-facing employees and has no planned branch closures stemming from the deal.

First Horizon will continue hiring bankers and marketing that brand until closer to the post-merger core conversion, Forgan said.

In the U.S., First Horizon's $89 billion in assets will push TD Bank well past $600 billion in assets. The combined U.S operations will have 10.7 million customers across 1,560 locations in 22 states.

TD sees opportunities with First Horizon's strong credit quality and existing commercial footprint. For First Horizon, the merger brings scaled technological capabilities, growth in wealth and investment management, more career options for employees and the chance to do bigger deals, Forgan said.

Ajay Patel, a finance professor at Wake Forest University, said the industry is likely to see more acquisitions like this, given the competitive environment in technology. He said banks must either scale up or become a niche player within a localized customer base.

Hugh Allen, TD's regional president for the mid-South, discussed the bank's plans to grow through small business and real estate in a recent interview with the Charlotte Business Journal. At the time, Allen said there were no set plans for building a retail presence here. He did name Charlotte and Raleigh-Durham as attractive markets for TD.

Forgan said both banks have a decentralized strategy, meaning it gives more autonomy to its market-level executives.

"I've been part of bigger banks for most of my career, and I think in the world we're in today, being part of a bigger organization that is flat — which you cannot say that about a lot of different organizations — is refreshing," Forgan said. "We're big enough and have the balance sheet to do what we need to do in the markets and the resources and the capital spend, but be flat enough to make local decisions."

Forgan said TD will take a methodical approach to the post-merger conversion, with the timeframe likely closer to 2024. TD set aside $150 million for employee retention and will contribute about $40 million to First Horizon's foundation upon closing.

Chris Marinac, research director at Janney Montgomery Scott, noted the retention pool's significance. That $150 million can go beyond senior-management levels and keep employees with lower salaries at the bank as well. He compared it to employee retention efforts when BB&T and SunTrust merged into Truist Financial Corp. (NYSE: TFC), he said. Truist proved relatively slow in trimming its headcount.

Digital banking is another key factor to consider, Marinac said. It creates opportunities to reach more customers, but it also makes it easier for those customers to switch banks. Competitors could take market share away from TD and First Horizon while waiting on the transaction to close, he said.

TD entered the Carolinas when it acquired South Financial Group in 2010. Marinac said that $61 million deal was not enough to focus TD's attention on the larger Southeast region. He thinks this time will be different.

"TD has to have a good game plan. Now they're a big bank. They've got plenty of resources. I think they're intelligent, so they're up for the challenge because they clearly are paying for this to get the customer base, but like a lot of things, it's all in the execution," Marinac said.

Patel said the pandemic and a low-interest-rate environment may have been factors as to why TD didn't expand here sooner.

First Horizon has been growing its Southeastern footprint. It bought Louisiana's IberiaBank in 2020, creating a combined institution with about $79 billion in assets. It also snapped up 30 SunTrust branches across North Carolina, Virginia and Georgia, as part of a planned divestiture. In 2017, First Horizon expanded its presence here when it bought Charlotte's former Capital Bank in a $2.2 billion deal, later absorbing Capital and First Tennessee Bank into the First Horizon brand.

One outstanding question is how the TD and First Horizon cultures will mesh, Patel said, and what that will look like as it trickles down from leadership.