8-K: First Horizon Corp. Reports Strong First Quarter 2024 Earnings, Driven by Margin Expansion and Improved Counter-Cyclical Businesses

First Horizon Corporation announced a robust first quarter in 2024, with net income available to common shareholders reaching $184 million, or $0.33 per share, and $195 million, or $0.35 per share on an adjusted basis.

Summary

• First Horizon Corporation reported a net income available to common shareholders of $184 million, or $0.33 per share, for the first quarter of 2024.
• Adjusted net income available to common shareholders was $195 million, or $0.35 per share, which is a 10% increase from the previous quarter.
• The company's revenue increased, while expenses decreased, leading to positive operating leverage.
• Revenue growth was driven by margin expansion in the core banking franchise and improvements in counter-cyclical businesses.
• The company's return on average tangible common equity (ROTCE) was 11.0%, and the adjusted ROTCE was 11.6%.
• Tangible book value per share increased to $12.16, up $0.03 from the previous quarter.
• Net interest margin improved to 3.37%, a 10 basis point increase from the previous quarter.
• The company repurchased 10.7 million shares of common stock at a weighted average price of $14.39.
• The company's CET1 ratio was 11.3% and total capital ratio was 13.9%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, margin expansion, and improved performance in key business areas. The company's management expresses confidence in their ability to deliver exceptional results. However, there are some negative aspects such as the decrease in net income compared to the same quarter last year and the increase in nonperforming loans.

Positives

• The company experienced a 10% growth in adjusted net income available to common shareholders from the fourth quarter.
• Positive operating leverage was achieved due to revenue growth and expense reduction.
• The core banking franchise saw margin expansion.
• Counter-cyclical businesses showed significant improvement.
• The company's ROTCE and adjusted ROTCE were strong at 11.0% and 11.6%, respectively.
• Tangible book value per share increased by $0.03 to $12.16.
• Net interest margin improved by 10 basis points to 3.37%.
• Adjusted fee income increased by $15 million, driven by higher fixed income production.
• Fixed income average daily revenue increased by 58% to $731 thousand.
• The company repurchased 10.7 million shares of common stock at a weighted average price of $14.39.

Negatives

• The company's net income available to common shareholders decreased by $59 million or 24% compared to the same quarter last year.
• Net interest income decreased by $63 million or 9% compared to the same quarter last year.
• The company's CET1 ratio decreased by 9 basis points to 11.3% from the previous quarter.
• Nonperforming loans increased by $43 million to $505 million.

Risks

• The company's forward-looking statements are subject to significant business, operational, economic, and competitive uncertainties.
• The company's actual future results and outcomes could differ materially from those contemplated or implied by forward-looking statements.
• The company's net income available to common shareholders decreased by $59 million or 24% compared to the same quarter last year.
• Net interest income decreased by $63 million or 9% compared to the same quarter last year.
• The company's CET1 ratio decreased by 9 basis points to 11.3% from the previous quarter.
• Nonperforming loans increased by $43 million to $505 million.

Future Outlook

The company expects pre-provision net revenue growth in 2024, with net interest income up 1-4%, noninterest income up 6-10%, and noninterest expense up 4-6%. The company also anticipates a net charge-off rate between 0.25% and 0.30% and a tax rate between 21% and 23%. The CET1 ratio is expected to be around 11.0%.

Management Comments

• We reported a strong quarter with 10% growth in adjusted net income available to common shareholders from the fourth quarter.
• We achieved positive operating leverage versus the prior quarter, as revenue increased and expenses declined.
• Revenue growth was driven by margin expansion in the core banking franchise, as well as significant improvement in our counter-cyclical businesses.
• Credit quality remains stable, and our strong capital and liquidity position us to continue to win new client relationships and deepen existing ones.
• As we celebrate our 160th year in business, I remain confident in our ability to build on the value and earnings power of our long-standing organization to deliver exceptional results to our shareholders.

Industry Context

The results reflect a positive trend in the banking sector, with margin expansion and improved performance in counter-cyclical businesses. The company's focus on fixed income production aligns with the market's expectation that short-term rates have peaked and improved liquidity conditions in the banking sector.

Comparison to Industry Standards

• First Horizon's net charge-off ratio of 0.27% is below the peer average level for the past four quarters.
• The company's CET1 ratio of 11.3% is above the regulatory capital threshold of 7.0% when adjusted for unrealized losses.
• The company's performance in fixed income is strong compared to the previous quarter, with a 58% increase in average daily revenue.
• The company's loan growth of 1% is modest, but the growth in CRE and LMC is positive.
• The company's deposit base is stable, with 67% of balances FDIC insured or collateralized.

Stakeholder Impact

• Shareholders will benefit from the share repurchase program and the increase in tangible book value per share.
• Employees may benefit from the company's investment in technology and personnel.
• Customers will benefit from the company's focus on providing capital and counsel.
• The company's strong financial position will benefit creditors.

Next Steps

• The company will continue to focus on operational efficiencies and strategic investments.
• The company will continue to deploy excess capital organically and potentially through capital repatriation.
• The company will redeem all outstanding shares of the Series D Preferred Stock on May 1, 2024.

Key Dates

Keywords

earnings, net income, ROTCE, net interest margin, capital, share repurchase, financial results, banking, revenue, expenses