First Horizon Corporation · NYSE:FHN
First Horizon — Q3 2023 Earnings Presentation
28 slides from First Horizon's earnings presentation, Oct 18, 2023
Slide 1: Third Quarter 2023 Earnings
Third Quarter 2023 Earnings October 18, 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: 3Q23 GAAP financial summary
3Q23 GAAP financial summary1 Reported Results 3Q23 Change vs. $s in millions except per share data 3Q23 2Q23 1Q23 4Q22 3Q22 2Q23 3Q22 Net interest income $ 605 $ 631 $ 688 $ 709 $ 662 $ (26) (4)% $ (57) (9)% Fee income 173 400 171 174 213 (227) (57)% (40) (19)% Total revenue 778 1,031 859 882 875 (2
Slide 4: Table of contents
Table of contents 3Q23 key messages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3Q23 highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 5: Client-Centric Model Remains Foundation for Success
Client-Centric Model Remains Foundation for Success Our experienced team has a proven track record of delivering high quality service to meet our clients’ and communities’ needs. This yields long-tenured, deep relationships that enable us to produce top quartile returns over the cycle. 90% associate
Slide 6: Strong results driven by stable, diversified business mix
Strong results driven by stable, diversified business mix1 Adj. EPS Adj. ROTCE NIM Adj. Efficiency $0.27 9.2% 3.17% 59.4% Earnings • Adjusted pre-tax pre-provision of $318 million Strength and • Strong net interest margin reflects benefit of asset sensitivity over the Solid Returns cycle, despite re
Slide 7: 3Q23 adjusted financial highlights
3Q23 adjusted financial highlights1 Adaptable business model capable of managing through shifting macroeconomic environment $ in millions, Adjusted Results 3Q23 Change vs. • 3Q23 adjusted EPS of $0.27 vs. $0.39 in 2Q23 except per share data 3Q23 2Q23 3Q22 2Q23 3Q22 – Adjusted ROTCE of 9.2%, the prov
Slide 8: 3Q23 notable items
3Q23 notable items1 GAAP results reduced by a net $0.04 per share impact from notable items After-tax Notable Items 3Q23 Pre-Tax Notable Items Restructuring costs (after-tax) (7) • Pre-tax restructuring costs of $10 million related to Tax impact of 3Q23 notable tax items (13) streamlining the number
Slide 9: NII trends reflect increased funding costs & macroeconomic environment
NII trends reflect increased funding costs & macroeconomic environment1 Net interest margin remains strong, despite moderating from cyclical highs Net Interest Income (FTE) and NIM Trends $ in millions NII Margin $712 2Q23 $635 3.38% $666 $691 $635 $609 Days $4 Deposit Rates $(63) (0.33)% 3.89% 3.88
Slide 10: Demonstrated successful customer acquisition capability
Demonstrated successful customer acquisition capability Deposit growth of 2.4% significantly outperforms industry growth of 0.3%1 Period end deposits • 3Q23 period-end deposits of $67.0 billion increased $1.6 billion or 2%, versus 2Q23 – Loan-to-deposit ratio of 92% improved from 94% $66.0B $67.0B –
Slide 11: Diversified portfolio across attractive geographic footprint
Diversified portfolio across attractive geographic footprint1 Focused on deepening relationships and appropriately pricing Period end loan trends • 3Q23 period-end loans of $61.8 billion up $0.5 billion or 1% versus 2Q23 – $0.9 billion or 2% increase in loans excluding loans to mortgage companies (L
Slide 12: Fee income stable with fixed income and mortgage cyclically low
Fee income stable with fixed income and mortgage cyclically low Adjusted fee income up $6 million excluding deferred compensation Adjusted Results 3Q23 Change vs. $ in millions 3Q23 2Q23 1Q23 4Q22 3Q22 2Q23 3Q22 Fixed income $28 $30 $39 $35 $46 $(2) (7)% $(18) (39)% Mortgage banking & title $7 $6 $5
Slide 13: Results reflect continued expense discipline
Results reflect continued expense discipline Increase in expense driven by transfer of acquisition-related retention into core expense Adjusted Results 3Q23 Change vs. $ in millions 3Q23 2Q23 1Q23 4Q22 3Q22 2Q23 3Q22 Salaries and benefits $188 $187 $188 $178 $185 $1 1% $3 2% Incentives and commissio
Slide 14: Disciplined lending leads to strong performance across the cycle
Disciplined lending leads to strong performance across the cycle Reserve build reflects the impact of loan growth and macroeconomic uncertainty • 3Q23 net charge-offs of $95 million increased $72 million Net charge-offs – 3Q23 included a $72 million idiosyncratic C&I charge- off related to a credit
Slide 15: Strong capital position
Strong capital position1 Lower exposure to unrealized losses due to smaller portfolio and moderate effective duration Capital levels • 3Q23 CET1 ratio remained strong at 11.1% as the benefit of 13.6% 13.6% 13.6% adjusted NIAC offsets reductions from deploying capital into loans, 13.1% 13.3% paying c
Slide 16: FY2023 Outlook
FY2023 Outlook PPNR guidance continues to be within the range conveyed at investor day Updates from investor day guidance shown in blue FY22 Adjusted FY23 Adjusted Earnings Drivers Comments Baseline1 Expectations Successful deposit campaign Updated: Up 7% – 9% Average Loans $56 billion enabled bette
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: 3Q23 CET1 Walkforward
3Q23 CET1 Walkforward1,2 (0.03)% 0.05% (0.12)% 0.21% (0.07)% 11.1% 11.1% 2Q23 Adjusted NIAC Notable Items Other Common Change in Loan 3Q23 CET1 Dividend Balances & Estimate Unfunded Commitments Numbers may not foot due to rounding. 1Adjusted financial measures, TBV per share, ROTCE, fully taxable eq
Slide 20: Diversified, high credit quality CRE portfolio
Diversified, high credit quality CRE portfolio Geographically diverse portfolio with minimal concentration across property types • Disciplined risk management practice and underwriting standards across CRE portfolio • $4 million of net charge offs in 3Q23 from CRE in the total portfolio – $3 million
Slide 21: Well-diversified and stable funding mix
Well-diversified and stable funding mix1 68% of deposits insured or collateralized 3Q23 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% lines of business TX, 4% NC, 12% GA, 2% • Commercial d
Slide 22: Investment portfolio
Investment portfolio1 Prudently managed to support liquidity and IRR 3Q23 Highlights Investment portfolio $10.3B $10.1B $10.3B $10.2B $9.8B • Portfolio represents ~12% of total assets • Effective duration of 5.2 years • Low reliance on HTM designation at ~14% of total portfolio 2.41% 2.45% 2.49% 2.5
Slide 23: Notable Items
Notable Items ($s in millions except per share data) (In millions) 3Q23 2Q23 1Q23 4Q22 3Q22 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 Net Merger/acquisition/tr
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 ($s in millions, except per
Slide 25: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. CONSOLIDATED NON-GAAP TO GAAP RECONCILIATION ($s in millions, except per
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. CONSOLIDATED NON-GAAP TO GAAP RECONCILIATION (In millions) Quarterly, Un
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. Period-end Average ($s in millions) 3Q23 2Q23 3Q23 vs. 2Q23 3Q23 2Q23 3Q
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. (a) Amounts adjusted for notable items as detailed on page 22. Numbers m