Second Quarter 2024 Earnings

July 17, 2024

2Q24 GAAP financial summary

$ in millions except per share data

Reported Results

2Q24 Change vs.

2Q24

1Q24

4Q23

3Q23

2Q23

1Q24

2Q23

Net interest income

$629

$625

$617

$605

$631

$4

1%

($2)

-%

Fee income

$186

$194

$183

$173

$400

($8)

(4%)

($214)

(54%)

Total revenue

$815

$819

$800

$778

$1,031

($4)

(1%)

($216)

(21%)

Expense

$500

$515

$572

$474

$555

($15)

(3%)

($55)

(10%)

Pre-provision net revenue (PPNR)

$315

$304

$227

$304

$475

$11

4%

($161)

(34%)

Provision for credit losses

$55

$50

$50

$110

$50

$5

10%

$5

10%

Pre-tax income

$260

$254

$177

$194

$425

$6

2%

($166)

(39%)

Income tax expense

$56

$57

($11)

$52

$96

($1)

(2%)

($40)

(42%)

Net income

$204

$197

$188

$142

$329

$7

4%

($125)

(38%)

Non-controlling interest

$5

$5

$5

$5

$5

$-

1%

$-

7%

Preferred dividends

$15

$8

$8

$8

$8

$7

85%

$7

94%

Net income available to common shareholders (NIAC)

$184

$184

$175

$129

$317

$-

-%

($133)

(42%)

Diluted EPS

$0.34

$0.33

$0.31

$0.23

$0.56

$0.01

2%

($0.22)

(39%)

Average diluted shares outstanding

547

558

561

561

561

(11)

(2%)

(14)

(2%)

ROCE

9.0%

8.8%

8.6%

6.3%

16.4%

22bps

(742bps)

ROTCE

11.3%

11.0%

10.9%

8.0%

21.1%

34bps

(981bps)

ROA

1.0%

1.0%

0.9%

0.7%

1.6%

3bps

(60bps)

Net interest margin

3.38%

3.37%

3.27%

3.17%

3.38%

1bp

-

Fee income / total revenue

22.8%

23.7%

23.3%

22.2%

38.8%

(97bps)

(1,605bps)

Efficiency ratio

61.4%

62.9% 71.1% 61.0%

53.9%

(148bps)

755bps

FTEs

7,297

7,327

7,277

7,340

7,327

(30)

-%

(30)

-%

CET1 ratio

11.0%

11.3%

11.4%

11.1%

11.1%

(26bps)

(3bps)

Effective tax rate

21.5%

22.5%

(6.2%)

26.7%

22.6%

(99bps)

(114bps)

Tangible book value per share

$12.22

$12.16

$12.13

$11.22

$11.50

$0.06

-%

$0.72

6%

Period end loans

$62.8B

$61.8B

$61.3B

$61.8B

$61.3B

$1.0

2%

$1.5

2%

Period end deposits

$64.8B

$65.7B

$65.8B

$67.0B

$65.4B

($0.9)

(1%)

($0.6)

(1%)

Period end loan to deposit ratio

97 %

94 %

93 %

92 %

94 %

296bps

321bps

TBV/share, ROTCE, and adjusted financial measures, including measures excluding deferred compensation, are Non-GAAP and are reconciled to GAAP measures in the appendix.

3

Pre-provision net revenue (PPNR) is a non-GAAP measure and is reconciled to pre-tax income (GAAP) in the table.

Table of contents

2Q24 highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2Q24 adjusted financial results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2Q24notable items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7NII and NIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Adjusted fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Adjusted expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Asset quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 FY24 outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Strategic focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

4

Strong 2Q24 results driven by stable, diversified business mix

Earnings &

Returns

Adj. EPS

Adj. ROTCE

NIM

Adj. Efficiency

$0.36

12.0%

3.38%

60.5%

  • Adjusted PPNR of $324 million, up $1 million from 1Q24
  • Net interest margin expanded 1bp as asset yields continue to improve
  • Fees excluding deferred comp down $3 million, as higher traditional banking fees partially offset the anticipated moderation in fixed income
  • Expenses excluding deferred comp essentially flat

Capital &

Credit Quality

CET1

TBV

NCO%

11.0%

$12.22

0.22%

  • Returned $212 million of capital to shareholders through repurchases
  • TBVPS up $0.06, driven by strong earnings, which supported the $0.15 common dividend and an $0.08 impact of share repurchases
  • ACL coverage of 1.41% with net charge-offs of $34 million

Balance Sheet &

Liquidity

PE Deposit Growth

PE Loan Growth

PE LDR1

(1)%

2%

97%

  • Deposits declined 1%, in line with the industry2
  • Noninterest-bearingdeposits remained stable

• Total loans grew $1.0 billion, driven by increases in loans to mortgage companies and continued commercial real estate fund-ups

Reflects 2Q24 vs. 1Q24 results. ROTCE, ACL coverage ratio, and adjusted financial measures, including measures excluding deferred compensation, are Non-GAAP and are reconciled to GAAP measures in the appendix.

5

Adjusted pre-provision net revenue (PPNR) is a non-GAAP measure and is reconciled to pre-tax income (GAAP) in the appendix.

1Period end Loan-to-Deposit ratio.

2Source for industry data: H8 data series (All Commercial Banks, Weekly, Not Seasonally Adjusted) of the Federal Reserve Board, 3/27/24 to 6/26/24.

2Q24 Adjusted financial highlights

$ in millions,

Adjusted Results

2Q24 Change vs.

except per share data

2Q24

1Q24

2Q23

1Q24

2Q23

Net interest income (FTE)

$633

$628

$635

$5

1%

($2) -%

Fee income

$186

$194

$175

($8)

(4%)

$11

6%

Total revenue (FTE)

$819

$823

$810

($4)

-%

$9

1%

Expense

$495

$500

$461

($5)

(1%)

$34

7%

Pre-provision net revenue

$324

$323

$349

$1

-%

($25)

(7%)

Provision for credit losses

$55

$50

$50

$5

10%

$5

10%

Net charge-offs

$34

$40

$23

($6)

(16%)

$11

46%

Reserve build / (release)

$21

$10

$27

$11

118%

($6)

(21%)

NIAC

$195

$195

$219

$-

-%

($24)

(11%)

Diluted EPS

$0.36

$0.35

$0.39

$0.01

2%

($0.03)

(9%)

Diluted shares

547

558

561

(11)

(2%)

(14)

(2%)

ROTCE

12.0%

11.6%

14.6%

34bps

(260bps)

ROA

1.0%

1.0%

1.1%

(1bp)

(11bps)

Net interest margin (NIM)

3.38%

3.37%

3.38%

1bp

-

Fee income / total revenue

22.6%

23.6%

21.6%

(97bps)

104bps

Efficiency ratio

60.5%

60.8%

56.9%

(31bps)

355bps

CET1 Ratio

11.0%

11.3%

11.1%

(26bps)

(3bps)

TBV per share

$12.22

$12.16

$11.50

$0.06

-%

$0.72

6%

Effective tax rate

21.5%

22.5%

21.6%

(100bps)

(2bps)

  • 2Q24 adjusted EPS of $0.36 vs. $0.35 in 1Q24
    • Adjusted ROTCE of 12.0%, up 34bps
    • Tangible Book Value per share increased $0.06 to $12.22
  • NII up $5 million or 1% linked quarter
    • NIM expanded 1bp vs 1Q24 driven by improved asset yields
  • Adjusted fee income down $3 million excluding deferred compensation
    • Higher traditional banking fees mostly offset the anticipated moderation in fixed income
  • Adjusted expense up less than $1 million excluding deferred compensation
  • Provision expense of $55 million, resulting in an ACL coverage of 1.41%

ROTCE, TBV per share, ACL coverage ratio, and adjusted financial measures, including measures excluding deferred compensation, are Non-GAAP and are reconciled to GAAP measures in the appendix.

6

2Q24 notable items

Notable Items

2Q24

($ in millions, except EPS)

FDIC Special Assessment

($2)

Restructuring expense

($3)

Pre-tax impact of notable items

($5)

Tax impact on pre-tax notable items

$1

Series D Preferred Stock

($7)

NIAC impact of notable items

($11)

EPS impact of notable items

($0.02)

Pre-Tax Notable Items

  • FDIC special assessment of $2 million, based on revised resolution loss totals received from the FDIC in 2Q24
  • $3 million of restructuring expense primarily related to implementing operational efficiencies

After-Tax Notable Items

  • Effective 5/1/24, First Horizon redeemed all outstanding shares of the Series D Preferred Stock and all related depositary shares
    • Did not qualify as Additional Tier 1 Capital (AT1)
    • $100 million par value and $94 million book value
    • The $6 million discount and $1 million tax liability resulted in a non-cash charge in 2Q24 to preferred dividends1
    • Fixed coupon of 6.10% was set to convert to 3 month SOFR +4.12% on May 1st

1Tax liability is result of the 1% excise tax on stock repurchases and redemptions imposed on publicly traded companies under The Inflation Reduction Act of 2022.

7

NII increased $5 million benefiting from higher loan volumes and yields

Net Interest Income ($) and NIM (%)

$ in millions

NII

Margin

$635

$609

$621

$628

$633

1Q24

$628

3.37%

Loan Volumes & Mix

$15

0.04%

3.38%

3.27%

3.37%

3.38%

Loan Rates & Spreads

$9

0.05%

3.17%

Investment Securities & Other

$(3)

0.01%

Deposit Rates & Funding Mix

$(15)

(0.09)%

2Q24

$633

3.38%

2Q23

3Q23

4Q23

1Q24

2Q24

  • 2Q24 net interest income increased $5 million and net interest margin expanded 1bp versus 1Q24
    • Improvement driven by wider spreads on new and renewing loans, continued repricing of fixed rate cash flows, and growth in loans to mortgage companies and other floating rate loans
    • Offsetting the increase in asset yields were continued mix shift within interest-bearing products, higher use of wholesale funds, and lower average noninterest-bearing deposits
  • Asset yields still able to modestly expand as fixed cash flows continue to reprice
    • Over the next twelve months, there are ~$4 billion of fixed rate loan cash flows with a roll-off yield of ~4.6% and $1 billion of securities cash flows at a roll-off yield of ~2.2%

Net interest income and margin are adjusted to a fully taxable equivalent ("FTE") basis assuming a statutory federal income tax of 21 percent and, where applicable, state income taxes.

8

Deposits trending in line with the industry1 while DDA remains stable

Period end deposits

  • 2Q24 period end deposits of $64.8 billion were down 1% versus 1Q24, in line with the 1% industry decline1

$65.4B

$67.0B

$65.8B

$65.7B

$64.8B

- Noninterest-bearing balances remained stable from

previous quarter

$18.8

$17.8

$17.2

$16.4

$16.3

$3.7

$3.8

$2.6

$3.1

$3.5

$42.9

$45.3

$45.9

$46.2

$45.0

    • Seasonality impacted public fund deposits, which declined $0.7 billion from the prior quarter
  • 2Q24 total deposit rate paid of 2.47% and interest- bearing rate paid of 3.30% both increased 2bps
    • The cumulative interest-bearing deposit beta of 61% remains below the peak of 63% in 3Q23
    • Deposit portfolio includes ~$8 billion of deposits which are market indexed

- Over $1 billion of balances migrated from lower-cost,

base rate accounts into higher-rate retention offers,

which increased the spot rate to ~3.35%

• Competition remains strong in our attractive southeast

footprint. Continuing to maintain competitive offers while

2Q23

3Q23

4Q23

1Q24

2Q24

focusing on retention of existing clients

Customer interest-bearing deposits

- Year-over-year client retention is 95%

Brokered deposits

Noninterest-bearing deposits

1Source for industry data: H8 data series (All Commercial Banks, Weekly, Not Seasonally Adjusted) of the Federal Reserve Board, 3/27/24 to 6/26/24.

9

Diversified portfolio across attractive geographic footprint

Period end loans

$61.3B

$61.8B

$61.3B

$61.8B

$62.8B

$2.7B

$2.2B

$2.0B

$2.4B

$2.9B

$13.5B

$13.7B

$13.7B

$13.6B

$13.9B

$13.9B

$14.1B

$14.2B

$14.4B

$14.7B

$30.4B

$30.9B

$30.6B

$30.5B

$30.5B

2Q23

3Q23

4Q23

1Q24

2Q24

C&I ex LMC

Commercial real estate (CRE)

Consumer real estate

LMC

Credit card & other2

  • 2Q24 period end loans of $62.8 billion grew $1.0 billion or 2% versus 1Q24
    • The spring home buying season drove
      $568 million higher balances in loans to mortgage companies (LMC), as well as a modest increase in consumer real estate
    • CRE growth of $242 million driven by fund-ups of previously committed loans, primarily multi- family
  • Period end line utilization of 43%1
  • Loan yields expanded 6bps to 6.34% driven by wider spreads on new and renewing loans, as well as continued repricing of fixed rate cash flows
  • Asset sensitive profile reflected in loan composition of 56% variable rate, 12% ARM, and 32% fixed rate

21Utilization rates exclude Loans to Mortgage Companies.

10

Credit card & other is $0.8B in all periods.

Attention: This is an excerpt of the original content. To continue reading it, access the original document here.

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

First Horizon Corporation published this content on 17 July 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 July 2024 10:33:09 UTC.