8-K: First Horizon Corp Reports Solid Full Year and Fourth Quarter 2023 Results

First Horizon Corporation reported full year 2023 net income of $865 million and fourth quarter net income of $175 million, demonstrating strong performance amidst economic challenges.

Summary

• First Horizon Corporation (FHN) announced its full year 2023 net income available to common shareholders was $865 million, or $1.54 per share, compared to $868 million, or $1.53 per share in 2022.
• The company's fourth quarter 2023 net income available to common shareholders was $175 million, or $0.31 per share, up from $129 million, or $0.23 per share in the third quarter.
• Full year 2023 results included a net benefit of $59 million after-tax from notable items, while 2022 had a net reduction of $82 million.
• Fourth quarter results were reduced by a net $3 million after-tax from notable items, compared to a $20 million impact in the third quarter.
• Period-end deposits increased by $2 billion, or 4%, and period-end loans grew by $3 billion, or 5%, in 2023.
• The company raised $6 billion of new-to-bank deposits mid-year through a successful deposit campaign.
• Net interest income for the full year was $2.5 billion, an increase of $148 million, with a net interest margin of 3.42%, up 32 basis points.
• Noninterest income for the full year was $927 million, up $111 million, including a $225 million merger termination fee.
• Noninterest expense for the full year was $2.1 billion, up $127 million, including $196 million of notable items.
• The CET1 ratio was 11.4% and the total capital ratio was 14.0% at the end of 2023, up from 10.2% and 13.3% respectively at the end of 2022.
• The company's tangible book value per share was $12.13, up 8% quarter-over-quarter.

Sentiment

Score: 7

Explanation: The sentiment is positive, reflecting solid financial results and strategic execution, but tempered by economic uncertainties and increased credit costs.

Positives

• The company demonstrated strong performance through economic headwinds.
• Loan growth of 5% was supported by prudent risk management, strong liquidity, and robust capital levels.
• A successful deposit campaign raised $6 billion of new-to-bank deposits.
• The company's capital ratios improved year-over-year.
• Tangible book value per share increased significantly quarter-over-quarter.
• Net interest margin improved due to asset repricing and favorable balance sheet mix.

Negatives

• Noninterest expense increased by $127 million for the full year, including notable items.
• Credit began to normalize in 2023, with provision expense increasing from $95 million to $260 million.
• Net charge-offs increased to $170 million, or 0.28%, from $59 million, or 0.11% in 2022.
• Average deposits decreased by 8% due to Federal Reserve quantitative tightening.
• Adjusted noninterest income decreased by $66 million due to rising interest rates impacting counter-cyclical businesses.

Risks

• The company faces uncertainties related to business, operational, economic, and competitive factors.
• Future results could differ materially from forward-looking statements due to various contingencies.
• Credit normalization could lead to further increases in provision expense and net charge-offs.
• Rising interest rates could continue to impact noninterest income.
• The company is subject to regulatory risks and changes in banking regulations.

Future Outlook

The company expects modest growth in net interest income, noninterest income, and noninterest expense for 2024, with a focus on capital deployment and efficiency improvements. They anticipate net charge-offs between 25 and 30 bps and a tax rate between 21% and 23%.

Management Comments

• We reported strong fourth quarter and full-year 2023 results demonstrating our ability to successfully execute on our strategic priorities and navigate the economic headwinds during the year.
• Prudent risk management, strong liquidity, and robust capital levels supported loan growth of 5% during the year.
• We ran a successful deposit campaign mid-year, raising $6 billion of new-to-bank deposits.
• We remain intently focused on credit discipline and expect to continue to perform well over the cycle.
• As we enter 2024 and celebrate 160 years in business, we are well-positioned to capitalize on our exceptional client relationships, diversified business model, and attractive footprint.

Industry Context

The results reflect a challenging environment for regional banks, with rising interest rates impacting both revenue and expenses. The company's focus on deposit gathering and capital management aligns with industry trends.

Comparison to Industry Standards

• First Horizon's deposit growth of 4% significantly outperformed the industry decline of 2%, as measured by the Federal Reserve Board's H8 data series.
• The company's loan growth of 5% also outpaced the industry growth of 2%.
• The CET1 ratio of 11.4% is above the regulatory threshold of 7.0%, indicating a strong capital position compared to many regional banks.
• The company's net interest margin of 3.42% is within the range of other regional banks, but the 32 basis point increase is a positive sign.
• The company's efficiency ratio of 59.91% is comparable to other regional banks, but there is room for improvement.

Stakeholder Impact

• Shareholders will benefit from the company's strong financial performance and capital position.
• Employees will benefit from the company's investment in personnel and well-being.
• Customers will benefit from the company's focus on client relationships and service.
• The company's strong financial position will benefit creditors.

Next Steps

• The company will focus on deploying excess capital organically and potentially through capital repatriation.
• They will continue to invest in technology and personnel while focusing on operational efficiencies.
• The company will continue to focus on deepening existing customer relationships and strategic market share expansion.

Key Dates

Keywords

First Horizon, Financial Results, Net Income, Earnings Per Share, Deposits, Loans, Net Interest Margin, Capital Ratios, Asset Quality, Noninterest Income, Noninterest Expense