First Horizon Corporation · NYSE:FHN
First Horizon — Q1 2024 Earnings Presentation
30 slides from First Horizon's earnings presentation, Apr 17, 2024
Slide 1: First Quarter 2024 Earnings
First Quarter 2024 Earnings April 17, 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: 1Q24 GAAP financial summary
1Q24 GAAP financial summary Reported Results 1Q24 Change vs. $ in millions except per share data 1Q24 4Q23 3Q23 2Q23 1Q23 4Q23 1Q23 Net interest income $ 625 $ 617 $ 605 $ 631 $ 688 $ 8 1 % $ (63) (9)% Fee income 194 183 173 400 171 11 6% 23 14 % Total revenue 819 800 778 1,031 859 19 2% (40) (5)% E
Slide 4: Table of contents
Table of contents 1Q24 highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1Q24 adjusted financial results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Slide 5: Strong 1Q24 results driven by stable, diversified business mix
Strong 1Q24 results driven by stable, diversified business mix Adj. EPS Adj. ROTCE NIM Adj. Efficiency $0.35 11.6% 3.37% 60.8% Earnings & • Adjusted pre-tax pre-provision of $323 million, up 8% from 4Q23 Returns • Net interest margin improved 10bps from loan and deposit repricing • Fees up $15 milli
Slide 6: 1Q24 Adjusted financial highlights
1Q24 Adjusted financial highlights $ in millions, Adjusted Results 1Q24 Change vs. • 1Q24 adjusted EPS of $0.35 vs. $0.32 in 4Q23 except per share data 1Q24 4Q23 1Q23 4Q23 1Q23 – Adjusted ROTCE of 11.6%, up 60bps Net interest income (FTE) $628 $621 $691 $ 7 1 % $ (63) (9)% – Tangible Book Value per
Slide 7: 1Q24 notable items
1Q24 notable items Notable Items Pre-Tax Notable Items ($ in millions, except EPS) 1Q24 FDIC Special Assessment $ (10) • FDIC special assessment of $10 million, based on revised resolution loss estimates received from the FDIC in February Restructuring expense $ (5) • $5 million of restructuring exp
Slide 8: NIM improved 10bps from improved loan and deposit pricing
NIM improved 10bps from improved loan and deposit pricing Net Interest Income and NIM Trends $ in millions NII Margin 4Q23 $621 3.27% $691 $635 $628 Days $(4) $609 $621 Non-Accrual Loans $(1) (0.01)% 3.88% Deposit Rates & Funding Mix $7 0.07% Loan Rates & Spreads $14 0.07% 3.38% 3.37% Loan Volumes &
Slide 9: Maintained strong client retention while reducing deposit costs
Maintained strong client retention while reducing deposit costs Period end deposits • 1Q24 period end deposits of $65.7 billion were stable $67.0B versus the prior quarter $65.4B $65.8B $65.7B – Non-interest bearing balances continued to re-mix $61.4B into interest-bearing products, though migration
Slide 10: Diversified portfolio across attractive geographic footprint
Diversified portfolio across attractive geographic footprint Period end loans • 1Q24 period end loans of $61.8 billion grew $0.5 billion $61.3B $61.8B $61.3B $61.8B or 1% versus 4Q23 $59.0B $2.7B $2.2B $2.0B $2.4B – Loans to mortgage companies (LMC) increased $2.0B $343 million at period end, but we
Slide 11: Strong fee income driven by higher fixed income production
Strong fee income driven by higher fixed income production Adjusted Results 1Q24 Change vs. $ in millions 1Q24 4Q23 3Q23 2Q23 1Q23 4Q23 1Q23 Fixed income $52 $37 $28 $30 $39 $15 40 % $13 33 % Mortgage banking $9 $5 $7 $6 $5 $4 71 % $4 71 % Service charges and fees $57 $59 $60 $59 $55 $(2) (3)% $2 4%
Slide 12: Expenses decline despite higher incentives on improved revenue production
Expenses decline despite higher incentives on improved revenue production Adjusted Results 1Q24 Change vs. $ in millions 1Q24 4Q23 3Q23 2Q23 1Q23 4Q23 1Q23 Salaries and benefits $199 $190 $188 $187 $188 $9 5% $11 6% Incentives and commissions $87 $80 $68 $65 $64 $7 9% $23 36 % Deferred compensation
Slide 13: Disciplined lending leads to strong performance across the cycle
Disciplined lending leads to strong performance across the cycle Net charge-offs $95 • 1Q24 net charge-offs of $40 million increased $4 million 0.61% 0.56% – NCO ratio of 0.27%1, which is below the peer average 0.45% 0.45% level for the past four quarters2 0.36% $36 $40 • Provision expense of $50 mi
Slide 14: Strong capital position even adjusted for unrealized losses
Strong capital position even adjusted for unrealized losses1 Capital levels • 1Q24 CET1 ratio decreased 9bps to 11.3% as share repurchases were 13.6% 13.6% 13.6% 14.0% 13.9% used to deploy excess capital to shareholders – CET1 net of unrealized losses of 8.8%1 above regulatory capital threshold of 7
Slide 15: Outlook includes pre-provision net revenue growth in 2024
Outlook includes pre-provision net revenue growth in 2024 FY23 Adjusted FY24 Adjusted Earnings Drivers Comments Baseline Expectations Reflects forward curve from March, Net Interest Income $2,556 million Up 1% – 4% which assumed three rate cuts in 2024 Updated: Up 6% – 10% Noninterest Income $699 mi
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: FHN Financial's strong full-cycle returns are counter-cyclical to bank franchise
FHN Financial’s strong full-cycle returns are counter-cyclical to bank franchise Fed Funds • FHN Financial provides fixed income sales & trading, Average ADR 6% in$2.0 millions FOMC easing investment advisory, interest rate derivatives and other during GFC services to financial institutions, municip
Slide 19: Attractive portfolio diversified by customer type, product, and geography
Attractive portfolio diversified by customer type, product, and geography • Stable, cost-effective deposits from a diverse commercial and 1Q24 deposits by state consumer client base across 12-state footprint and specialty LA, 12% AL, 3% lines of business TX, 2% NC, 13% GA, 2% AR, 2% • Commercial dep
Slide 20: High credit quality, diversified CRE portfolio
High credit quality, diversified CRE portfolio $6.3B • Disciplined risk management practice and underwriting Lease Maturity standards across CRE portfolio Renewals 12.8M Schedule 41% • No significant upcoming repricing event, as ~70% of loans are floating and maturities are dispersed over time $3.0B
Slide 21: Strong underwriting in the office and multi-family portfolios
Strong underwriting in the office and multi-family portfolios Office CRE Multi-Family CRE1 • Medical office comprises 47% of office exposure • Average debt service coverage of 1.2x • Only 12 buildings are 10 stories or taller • Average stabilized LTV of 52% • Within the traditional office portfolio1
Slide 22: Granular C&I portfolio and real estate backed consumer portfolio
Granular C&I portfolio and real estate backed consumer portfolio • The C&I portfolio is both geographically diverse and Consumer Portfolio by Product benefits from a lack of industry concentration $0.8B 5% – No more than 12% C&I exposure to any industry – Southeastern footprint is economically and d
Slide 23: Utilizing the $650 million repurchase program to return excess capital
Utilizing the $650 million repurchase program to return excess capital (0.12)% 0.27% 11.4% (0.22)% 11.3% (0.01)% (0.01)% CET1 Adjusted NIAC Common Share Change in Loan Notable Items CET1 1 4Q23 Dividend Buybacks Balances & & Other 1Q24 Actual Unfunded Estimate Commitments ROTCE and adjusted financia
Slide 24: Investment portfolio prudently managed to support liquidity and IRR
Investment portfolio prudently managed to support liquidity and IRR Investment portfolio • 1Q24 investment portfolio represents ~12% of total assets $10.3B $10.2B $9.8B $9.6B $9.4B – Moderate total portfolio effective duration of 5.0 – Low reliance on HTM designation at ~14% of total portfolio 2.54%
Slide 25: Notable Items
Notable Items $ in millions, except EPS 1Q24 4Q23 3Q23 2Q23 1Q23 Summary of Notable Items: Gain on merger termination $ — $ — $ — $ 225 $ — Net merger/acquisition/transaction-related items — — — (30) (21) Gain/(loss) related to equity securities investments (other noninterest income) — (6) — — — Net
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 1Q24 4Q23 3Q2
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 1Q24 4Q23 3Q23 2Q23 1Q23 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. $s in millions Quarterly, Unaudited 1Q24 4Q23 3Q23 2Q23 1Q23 Adjusted No
Slide 29: Reconciliation to GAAP financials
Reconciliation to GAAP financials Slides in this presentation use Non-GAAP information. That information is not presented according to generally accepted accounting principles (GAAP) and is reconciled to GAAP information below. Period-end Average ($s in millions) 1Q24 4Q23 1Q24 vs. 4Q23 1Q24 4Q23 1Q
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 1Q24 4Q23 Adjusted noninterest incom