First Horizon Corporation · NYSE:FHN
First Horizon — Q2 2023 Earnings Presentation
26 slides from First Horizon's earnings presentation, Jul 19, 2023
Slide 1: Second Quarter 2023 Earnings
Second Quarter 2023 Earnings July 19, 2023
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: 2Q23 GAAP financial summary
2Q23 GAAP financial summary1 Reported 2Q23 Change vs. $s in millions except per share data 2Q23 1Q23 4Q22 3Q22 2Q22 1Q23 2Q22 $/bps % $/bps % Net interest income $ 631 $ 688 $ 709 $ 662 $ 542 $ (57) (8)% $ 89 16 % Fee income 400 171 174 213 201 229 134 % 199 99 % Total revenue 1,031 859 882 875 743
Slide 4: Table of contents
Table of contents 2Q23 key messages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2Q23 adjusted financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 5: Strong results driven by stable, diversified business mix
Strong results driven by stable, diversified business mix1 Adj. EPS Adj. ROTCE NIM Adj. Efficiency $0.39 14.6% 3.38% 56.9% Earnings • Adjusted pre-tax pre-provision of $349 million, up 18% year-over-year Strength and • Strong net interest margin reflects benefit of asset sensitivity over the Solid R
Slide 6: 2Q23 adjusted financial highlights
2Q23 adjusted financial highlights1 Continued earnings strength with momentum in loans & deposits despite industry headwinds 2Q23 vs. 1Q23 Highlights 2Q23 Change vs. $s in millions except per • Adjusted EPS of $0.39 vs. $0.45 share data 2Q23 1Q23 2Q22 1Q23 2Q22 – Adjusted ROTCE of 14.6% $/bps % $/bp
Slide 7: 2Q23 notable items
2Q23 notable items1 GAAP results impacted by $0.17 per share net benefit from notable items ($s in millions, except per share data) Notable Items Pre-Tax Notable Items 2Q23 Merger-related items • $225 million gain on merger agreement termination Noninterest income: • Merger-related expense of $30 mi
Slide 8: NII trends reflect increased funding costs & macroeconomic environment
NII trends reflect increased funding costs & macroeconomic environment1 Successful deposit campaign accelerated deposit betas and improved funding profile FTE NII and NIM Trends 2Q23 vs. 1Q23 Highlights ($s in millions) $712 • Net interest margin remains strong, despite moderating $666 $691 $635 fro
Slide 9: Attractive deposit and pricing profile
Attractive deposit and pricing profile1 Net deposit growth of $4 billion reflects continued positive momentum Period end deposit trends 2Q23 vs. 1Q23 Highlights ($s in billions) • Period-end deposits of $65.4 billion increased $4.0 billion, $70.5 or 6% $66.0 $65.4 – $782 million of additional custom
Slide 10: Diversified portfolio across attractive geographic footprint
Diversified portfolio across attractive geographic footprint1 Average loans up 3% QoQ Average loan trends 2Q23 vs. 1Q23 Highlights $59.9B $57.6B $58.1B 4% $55.6B $56.5B 3% 5% 4% 1% • Average loans of $59.9 billion up $1.9 billion, or 3% 6% 1% 1% 2% 2% – Growth in attractive markets, including Nashvi
Slide 11: Adjusted fee income stable despite declines in countercyclical
Adjusted fee income stable despite declines in countercyclical1 Higher banking fees offset the decrease in fixed income 2Q23 vs. 1Q23 Highlights 2Q23 Change vs. • Adjusted fee income up $4 million, or 2%, $s in millions 2Q23 1Q23 4Q22 3Q22 2Q22 1Q23 2Q22 driven by deferred compensation increase of $
Slide 12: Expenses flat excluding deferred compensation
Expenses flat excluding deferred compensation1 Results reflect continued expense discipline 2Q23 vs. 1Q23 Highlights 2Q23 Change vs. • Adjusted expense of $461 million up $4 million $s in millions 2Q23 1Q23 4Q22 3Q22 2Q22 1Q23 2Q22 driven by a $5 million increase in deferred $/bps % $/bps % Salaries
Slide 13: Continued strong credit quality
Continued strong credit quality Reserve build reflects the impact of loan growth and revised macroeconomic outlook 2Q23 vs. 1Q23 Highlights ($s in millions) Net charge-offs • Net charge-offs of $23 million increased $7 million • Provision expense of $50 million flat with 1Q23 $26 $23 – ~$27 million
Slide 14: Strong capital position
Strong capital position1 Lower exposure to unrealized losses due to smaller portfolio and moderate effective duration Capital levels 2Q23 vs. 1Q23 Highlights • CET1 ratio remained strong at 11.1% as the benefit of Series G 13.0% 13.1% 13.3% 13.6% 13.6% conversion, adjusted NIAC, and merger terminati
Slide 15: FY2023 Outlook
FY2023 Outlook Earnings Drivers FY22 Adjusted Baseline1 FY23 Adjusted Expectations Comments Average Loans $56 billion Up 3% – 5% Growth rate moderating in 2H23 Assumes 0.25% rate hike in July; Net Interest Income (FTE) $2,405 million Up 6% – 9% DDA balances return to pre-pandemic levels Noninterest
Slide 16: 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 17: APPENDIX
APPENDIX 17
Slide 18: 2Q23 CET1 Walkforward
2Q23 CET1 Walkforward1,2 0.2% 0.3% (0.1)% (0.1)% 0.7% (0.1)% 11.1% (0.3)% 10.4% 1Q23 Actual Series G Adjusted NIAC Termination Foundation Other Common Higher Loan 2Q23 Estimate CET1 Conversion Fee Contribution Dividend Balances & Unfunded Commitments Numbers may not foot due to rounding. 1Adjusted f
Slide 19: Diversified, high credit quality CRE portfolio
Diversified, high credit quality CRE portfolio Geographically diverse portfolio with minimal concentration across property types 2Q23 Highlights • Disciplined risk management practice and underwriting standards across CRE portfolio • $8 million of net charge offs from CRE in the total portfolio – Dr
Slide 20: Well-diversified and stable funding mix
Well-diversified and stable funding mix1 68% of deposits insured or collateralized 2Q23 deposits by state • Stable, cost-effective deposits from a diverse commercial and LA, 12% consumer client base across 12-state footprint and specialty AL, 4% TX, 3% lines of business NC, 12% GA, 2% AR, 2% • Comme
Slide 21: Investment portfolio
Investment portfolio1 Prudently managed to support liquidity and IRR 2Q23 Highlights Investment portfolio ($s in billions) $9.8 $10.3 $10.1 $10.3 $10.2 • Portfolio represents ~12% of total assets • Effective duration of 5.2 years • Low reliance on HTM designation at ~13% of total portfolio 2.41% 2.4
Slide 22: Notable Items
Notable Items ($s in millions except per share data) (In millions) 2Q23 1Q23 4Q22 3Q22 2Q22 Summary of Notable Items: Gain on merger termination $ 225 $ — $ — $ — $ — Gain on sale of title services business — — 1 21 — Gain related to equity securities investments — — — 10 — Gain on sale of mortgage
Slide 23: 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. CONSOLIDATED NON-GAAP TO GAAP RECONCILIATION Quarterly, Unaudited ($s in
Slide 24: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. CONSOLIDATED NON-GAAP TO GAAP RECONCILIATION Quarterly, Unaudited ($s in
Slide 25: 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. CONSOLIDATED NON-GAAP TO GAAP RECONCILIATION Quarterly, Unaudited (In mi
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. Period-end Average ($s in millions) 2Q23 1Q23 2Q23 vs. 1Q23 2Q23 1Q23 2Q