8-K: First Horizon Corp. Reports Strong Third Quarter Earnings, Driven by Diversified Business Model

First Horizon Corporation announced a robust third quarter with net income available to common shareholders reaching $213 million, or $0.40 per share, and $224 million, or $0.42 per share on an adjusted basis.

Summary

• First Horizon Corporation reported a net income available to common shareholders of $213 million, or $0.40 per share, for the third quarter of 2024.
• Adjusted net income available to common shareholders was $224 million, or $0.42 per share, after excluding notable items.
• The company's Return on Average Tangible Common Equity (ROTCE) was 12.6%, and the adjusted ROTCE was 13.2%.
• Tangible book value per share increased to $13.02, up $0.81 from the previous quarter.
• Net interest income was $631 million, a slight decrease of $2 million from the previous quarter.
• Noninterest income rose to $200 million, an increase of $14 million from the second quarter.
• The company's net interest margin was 3.31%, a decrease of 7 basis points from the previous quarter.
• Average loans and leases were $62.4 billion, up $0.4 billion from the previous quarter.
• Average deposits increased by $1.3 billion to $66.3 billion.
• The Common Equity Tier 1 (CET1) ratio was 11.2%, up from 11.0% in the second quarter.
• First Horizon repurchased 5 million shares of common stock at an average price of $15.80 during the quarter.
• Net charge-offs were $24 million, or 0.15% of average loans and leases.
• The allowance for credit losses to loans ratio was 1.44%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong earnings growth, improved capital ratios, and stable credit quality. While there are some challenges, the overall tone is optimistic and indicates a well-managed financial institution.

Positives

• Earnings per share grew by 18% compared to the prior quarter.
• The company's diversified business model contributed to strong performance.
• Credit quality remained stable, with net charge-offs declining for the second consecutive quarter.
• Tangible book value per share increased by $0.81 quarter-over-quarter.
• The company returned $75 million of capital to shareholders through share repurchases.
• Noninterest income increased by $14 million, driven by fixed income production and other gains.
• The CET1 ratio increased to 11.2%, indicating a strong capital position.

Negatives

• Net interest income decreased by $2 million compared to the previous quarter.
• Net interest margin declined by 7 basis points due to increased deposit costs and higher levels of brokered deposits.
• Noninterest expense increased by $11 million from the prior quarter, including $15 million of Visa derivative valuation expense.
• Nonperforming loans increased by $4 million.

Risks

• The company's future results could be impacted by economic and competitive uncertainties.
• Changes in interest rates could affect the company's net interest margin.
• The company's performance is subject to various business, operational, and economic risks.
• The company's forward-looking statements are subject to change and could differ materially from actual results.

Future Outlook

The document contains forward-looking statements regarding the company's beliefs, plans, goals, expectations, and estimates, but actual results could differ materially due to various uncertainties and contingencies. The company assumes no obligation to update or revise any forward-looking statements.

Management Comments

• We delivered 18% growth in earnings per share compared to the prior quarter, driven by strong performance from our counter-cyclical businesses.
• Our results reflect the strength of our diversified business model and our continued focus on growing and deepening client relationships.
• Our credit quality remains stable, with net charge-offs declining for the second consecutive quarter and modest increase in our reserve coverage.
• We remain intently focused on continuing to support our associates, clients and communities devastated by recent hurricanes throughout the arduous recovery process.

Industry Context

The results reflect a regional bank navigating a complex economic environment with rising interest rates and potential economic headwinds. The company's focus on a diversified business model and client relationships is a common strategy among regional banks to mitigate risks and maintain profitability.

Comparison to Industry Standards

• First Horizon's ROTCE of 12.6% is a strong result compared to many regional banks, though specific comparisons would require analysis of peer group data.
• The CET1 ratio of 11.2% is generally considered healthy and above regulatory minimums, but specific benchmarks vary.
• The net charge-off ratio of 0.15% is relatively low, indicating good credit quality compared to some peers.
• The company's loan-to-deposit ratio of 94% is within a reasonable range for regional banks, but specific comparisons would require peer analysis.
• The company's efficiency ratio of 61.9% is in line with industry averages, but there is room for improvement compared to top-performing banks.

Stakeholder Impact

• Shareholders benefit from increased earnings, share repurchases, and a higher tangible book value per share.
• Employees are supported through the company's focus on their well-being and the communities they serve.
• Clients benefit from the company's commitment to providing capital and counsel.
• Communities benefit from the company's support during recovery from recent hurricanes.

Next Steps

• The company will continue to focus on growing and deepening client relationships.
• The company will continue to manage its balance sheet sensitivity to interest rate changes.
• The company will continue to deploy excess capital organically and through share repurchases.

Key Dates

Keywords

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