8-K: First Horizon Corp. Reports Solid Second Quarter 2024 Earnings, Driven by Net Interest Income and Banking Fee Growth

First Horizon Corporation announced a net income available to common shareholders of $184 million, or $0.34 per share, for the second quarter of 2024, with adjusted earnings of $0.36 per share.

Summary

• First Horizon Corporation reported a net income available to common shareholders of $184 million, or $0.34 per share, for the second quarter of 2024.
• Adjusted net income available to common shareholders was $195 million, or $0.36 per share, which is up $0.01 from the prior quarter.
• The company's Return on Average Tangible Common Equity (ROTCE) was 11.3%, and the adjusted ROTCE was 12.0%.
• Tangible book value per share increased to $12.22, up $0.06 from the previous quarter.
• Net interest income was $629 million, a $4 million increase from the previous quarter.
• Noninterest income was $186 million, a decrease of $8 million from the previous quarter.
• Noninterest expense was $500 million, a decrease of $15 million from the previous quarter.
• The company returned $212 million of capital to shareholders through share repurchases.
• The Common Equity Tier 1 (CET1) ratio was 11.0%, down from 11.3% in the previous quarter.
• Average loans and leases were $62.0 billion, up $0.9 billion from the previous quarter.
• Average deposits were $65.0 billion, down $0.4 billion from the previous quarter.

Sentiment

Score: 7

Explanation: The sentiment is positive, reflecting solid financial results, strategic progress, and capital return to shareholders. However, there are some concerns about deposit outflows and nonperforming loans, which temper the overall positive outlook.

Positives

• The company achieved a solid quarter with growth in net interest income and banking fees.
• The balance sheet continues to perform well, enabling the return of $212 million of capital to shareholders.
• The company made significant progress on strategic investments while identifying operational efficiencies.
• The company achieved its near-term CET1 ratio target of 11.0%.
• Loan yields improved by 6 basis points due to wider spreads on new and renewing loans.
• The company's share repurchase program has returned $366 million to shareholders year-to-date.

Negatives

• Noninterest income decreased by $8 million due to a decline in fixed income production.
• Average deposits decreased by $0.4 billion, driven by lower noninterest-bearing deposits.
• Nonperforming loans increased by $69 million, with declines in C&I offset by increases in CRE.
• The CET1 ratio decreased from 11.3% to 11.0% due to share repurchases.
• The company incurred $2 million in FDIC special assessment and $3 million in restructuring costs.

Risks

• The company faces uncertainties and contingencies related to business, operational, economic, and competitive factors.
• Changes in market conditions and interest rates could impact future financial results.
• The company's forward-looking statements are subject to change and could cause actual results to differ materially.
• The company's non-GAAP measures may not be comparable to those used by other entities.
• The company's deposit costs and interest-bearing deposit costs increased from the prior quarter.

Future Outlook

The company expects relatively flat balance sheet growth in the second half of 2024 and a higher level of interest-bearing deposit costs. They anticipate a rebound in fixed income and mortgage from 2023 levels, with noninterest expense increasing due to investments in technology and personnel. The company expects net charge-offs to be between 0.25% and 0.30% and the tax rate to be between 21% and 23%. The CET1 ratio is expected to be around 11.0%, with excess capital to be deployed organically or through capital repatriation.

Management Comments

• Chairman, President and Chief Executive Officer Bryan Jordan stated that the banking franchise delivered a solid quarter with net interest income and banking fee growth.
• Jordan also mentioned that the balance sheet continues to perform well, enabling the return of $212 million of capital to shareholders.
• Jordan highlighted the progress made on strategic investments and the identification of operational efficiencies.

Industry Context

The results reflect a challenging environment for regional banks, with deposit pressures and the need to manage interest rate risk. The company's focus on strategic investments and operational efficiencies aligns with industry trends to improve profitability and competitiveness. The company's deposit trends are in line with the industry, indicating a broader trend of deposit outflows.

Comparison to Industry Standards

• First Horizon's net charge-off ratio of 0.22% is below the peer average for the past four quarters, indicating strong credit quality compared to its peers.
• The company's deposit trends are in line with the industry, which saw a 1% decline in deposits during the quarter, as reported by the Federal Reserve Board.
• The company's CET1 ratio of 11.0% is within the range of other regional banks, indicating a stable capital position.
• The company's loan growth of 2% is consistent with other regional banks that are experiencing moderate loan growth.
• The company's efficiency ratio of 61.4% is higher than some of its peers, indicating room for improvement in operational efficiency.

Stakeholder Impact

• Shareholders benefited from the return of capital through share repurchases and dividends.
• Employees may be impacted by restructuring efforts aimed at improving operational efficiencies.
• Customers may benefit from the company's strategic investments in technology and services.
• The company's strong financial performance supports its ability to serve its communities.

Next Steps

• The company will continue to focus on strategic investments and operational efficiencies.
• The company will continue to manage its capital and liquidity.
• The company will continue to monitor asset quality and credit risk.

Key Dates

Keywords

earnings, net income, ROTCE, tangible book value, net interest income, noninterest income, noninterest expense, share repurchase, CET1 ratio, loans, deposits, asset quality, financial results, banking, capital