First Horizon Corporation · NYSE:FHN
First Horizon — Q4 2023 Earnings Presentation
30 slides from First Horizon's earnings presentation, Jan 18, 2024
Slide 1: Fourth Quarter 2023 Earnings
Fourth Quarter 2023 Earnings January 18, 2024
Slide 2: Disclaimers
Disclaimers Non-GAAP Information Certain measures included in this document are “non-GAAP,” meaning they are not presented in accordance with generally accepted accounting principles in the U.S. and also are not codified in U.S. banking regulations currently applicable to FHN. FHN’s management belie
Slide 3: 4Q23 GAAP financial summary
4Q23 GAAP financial summary Reported Results 4Q23 Change vs. $ in millions except per share data 4Q23 3Q23 2Q23 1Q23 4Q22 3Q23 4Q22 Net interest income $ 617 $ 605 $ 631 $ 688 $ 709 $ 12 2 % $ (92) (13)% Fee income 183 173 400 171 174 10 6% 9 5% Total revenue 800 778 1,031 859 882 22 3% (82) (9)% Ex
Slide 4: Table of contents
Table of contents 2023 highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4Q23 highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 5: 2023 Key Accomplishments
2023 Key Accomplishments Diversified Demonstrated ability to perform through the economic cycle with Business adjusted pre-tax pre-provision in 2023 consistent with 2022. Model Benefited from asset sensitivity with 32bps of NIM expansion in 2023. Managed balance sheet for safety and soundness, inclu
Slide 6: Strong 4Q23 results driven by stable, diversified business mix
Strong 4Q23 results driven by stable, diversified business mix Adj. EPS Adj. ROTCE NIM Adj. Efficiency $0.32 11.1% 3.27% 62.8% Earnings • Adjusted pre-tax pre-provision of $298 million Strength and • Net interest margin improved 10bps from asset repricing and Solid Returns favorable balance sheet mi
Slide 7: 4Q23 Adjusted financial highlights
4Q23 Adjusted financial highlights Revenue growth driven by NIM expansion and fixed income production $ in millions, Adjusted Results 4Q23 Change vs. • 4Q23 adjusted EPS of $0.32 vs. $0.27 in 3Q23 except per share data 4Q23 3Q23 4Q22 3Q23 4Q22 – Adjusted ROTCE of 11.1% – Tangible Book Value per shar
Slide 8: 4Q23 notable items
4Q23 notable items GAAP results reduced by a net $0.01 per share impact from notable items Notable Items 4Q23 Pre-Tax Notable Items ($ in millions, except EPS) Net gain on disposition & valuation adjustments $ 1 • FDIC special assessment of $68 million FDIC special assessment $ (68) • Net gain of $1
Slide 9: NIM improved 10bps from asset repricing and favorable balance sheet mix
NIM improved 10bps from asset repricing and favorable balance sheet mix Net interest income grew $12 million from the prior quarter Net Interest Income and NIM Trends $ in millions NII Margin $712 $691 3Q23 $609 3.17% $635 $621 $609 Deposits & Funding Mix $4 0.03% Loan Rates & Spreads $12 0.07% 3.88
Slide 10: Strong client retention supported pay down of brokered deposits
Strong client retention supported pay down of brokered deposits 2023 deposit growth of 4% significantly outperforms industry decline of 2%1 Period end deposits • 4Q23 period end deposits of $65.8 billion – New client acquisition continues to be strong with $0.9 billion or almost 18,000 new accounts
Slide 11: Diversified portfolio across attractive geographic footprint
Diversified portfolio across attractive geographic footprint Focused on deepening relationships and improved risk-adjusted pricing Period end loans • 4Q23 period end loans of $61.3 billion, declined $0.5 billion or 1% versus 3Q23 as credit conditions have tightened across the industry $61.3B $61.8B
Slide 12: Fee income stable with modest rebound in fixed income
Fee income stable with modest rebound in fixed income Adjusted fee income flat excluding deferred compensation Adjusted Results 4Q23 Change vs. $ in millions 4Q23 3Q23 2Q23 1Q23 4Q22 3Q23 4Q22 Fixed income $37 $28 $30 $39 $35 $9 32 % $2 6% Mortgage banking & title $5 $7 $6 $5 $4 $(2) (29)% $1 25 % S
Slide 13: Expense trend driven by strategic investments and higher production
Expense trend driven by strategic investments and higher production Investing in technology and personnel with a continued focus on operational efficiencies Adjusted Results 4Q23 Change vs. $ in millions 4Q23 3Q23 2Q23 1Q23 4Q22 3Q23 4Q22 Salaries and benefits $190 $188 $187 $188 $178 $2 1% $12 7% I
Slide 14: Disciplined lending leads to strong performance across the cycle
Disciplined lending leads to strong performance across the cycle ACL coverage ratio increased 4bps to 1.40%, reflecting macroeconomic uncertainty • 4Q23 net charge-offs of $36 million decreased $59 million Net charge-offs – 3Q23 included a $72 million idiosyncratic C&I charge-off $95 • Provision exp
Slide 15: Strong capital position even adjusted for unrealized losses
Strong capital position even adjusted for unrealized losses1 Prudently managed balance sheet focused on safety and soundness Capital levels • 4Q23 CET1 ratio grew 29bps to 11.4% from the benefit of NIAC and 13.6% 13.6% 14.0% period end loan reductions, partially offset by the common dividend 13.3% 1
Slide 16: FY2024 Outlook
FY2024 Outlook Expectations of pre-provision net revenue growth in 2024 FY23 Adjusted FY24 Adjusted Earnings Drivers Comments Baseline Expectations Assumes 25bps cuts in May, July, November, and Net Interest Income $2,556 million Up 1% – 4% December, as well as modest balance sheet growth Potential
Slide 17: Strategic focus on delivering enhanced shareholder value
Strategic focus on delivering enhanced shareholder value 1 Diversified business model with highly attractive geographic footprint provides opportunity to deliver outperformance through a variety of economic cycles Strong balance sheet and prudent risk management to drive increased capital efficiency
Slide 18: APPENDIX
APPENDIX 18
Slide 19: 4Q23 CET1 walkforward
4Q23 CET1 walkforward 0.03% 11.4% (0.12)% 0.13% 0.25% 11.1% 3Q23 Adjusted NIAC Common Change in Loan Notable Items & 4Q23 1 CET1 Dividend Balances & Other Estimate Unfunded Commitments 1 Other includes equity compensation. 19
Slide 20: High credit quality, diversified CRE portfolio
High credit quality, diversified CRE portfolio Geographically diverse portfolio with minimal concentration across property types • Disciplined risk management practice and underwriting standards across CRE portfolio • $2 million of total net charge-offs in 4Q23 from CRE in the total portfolio, drive
Slide 21: Well-diversified across segments, industries, and markets
Well-diversified across segments, industries, and markets Granular C&I portfolio and real estate backed consumer portfolio Consumer Portfolio by Product • The C&I portfolio is both geographically diverse and $0.8B benefits from a lack of industry concentration 5% ◦ No more than 12% C&I exposure to a
Slide 22: Attractive and stable funding mix
Attractive and stable funding mix Deposit portfolio diversified by customer type, product, and geography 4Q23 deposits by state • Stable, cost-effective deposits from a diverse commercial and LA, 12% TX, 4% consumer client base across 12-state footprint and specialty AL, 3% NC, 12% GA, 2% lines of b
Slide 23: Investment portfolio prudently managed to support liquidity and IRR
Investment portfolio prudently managed to support liquidity and IRR Lower exposure to unrealized losses due to smaller portfolio and moderate effective duration Investment portfolio • 4Q23 investment portfolio represents 11% of total assets $10.1B $10.3B $10.2B $9.8B $9.4B – Moderate total portfolio
Slide 24: FHN Financial
FHN Financial • FHN Financial provides fixed income sales & trading, investment advisory, interest rate derivatives and other Counter-cyclical business model services to financial institutions, municipalities and other institutional investors across the United States and internationally $1,477k $1,4
Slide 25: Notable Items
Notable Items $ in millions, except EPS 4Q23 3Q23 2Q23 1Q23 4Q22 Summary of Notable Items: Gain on merger termination $— $— $225 $— $— Net merger/acquisition/transaction-related items — — (30) (21) (36) Gain on sale of title services business (other noninterest income) — — — — 1 Gain/(loss) related
Slide 26: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. $s in millions, except per share data Quarterly, Unaudited 4Q23 3Q23 2Q2
Slide 27: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. $s in millions Quarterly, Unaudited 4Q23 3Q23 2Q23 1Q23 4Q22 Adjusted Di
Slide 28: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. $s in millions Quarterly, Unaudited 4Q23 3Q23 2Q23 1Q23 4Q22 Adjusted No
Slide 29: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. Period-end Average ($s in millions) 4Q23 3Q23 4Q23 vs. 3Q23 4Q23 3Q23 4Q
Slide 30: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. $s in millions Quarterly, Unaudited 4Q23 3Q23 Adjusted noninterest incom