• Adjusted EPS: $0.42 per share, a $0.06 increase from the prior quarter.
• Pre Provision Net Revenue: Increased by $11 million from last quarter.
• Adjusted Return on Tangible Common Equity: Improved to 13.2%.
• Common Equity Tier 1 Ratio: Ended the quarter at 11.2%.
• Net Charge Offs: $24 million or 15 basis points of average loans.
• Net Interest Income: $631 million, relatively stable to the prior quarter.
• Net Interest Margin: Compressed 7 basis points to 3.31%.
• Average Loan Growth: Up 1% from the prior quarter.
• Fee Income: Increased by $11 million from the prior quarter.
• Adjusted Expenses: Decreased by $1 million excluding deferred compensation.
• ACL Coverage: Increased to 1.44%.
• Share Repurchases: $75 million in the third quarter, over $440 million year-to-date.

• Warning! GuruFocus has detected 5 Warning Sign with FHN.

Release Date: October 16, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• First Horizon Corp (NYSE:FHN) achieved an adjusted EPS of $0.42 per share, a $0.06 increase from the prior quarter.
• The company maintained strong credit performance with net charge-offs of just 15 basis points.
• First Horizon Corp (NYSE:FHN) increased its common equity Tier 1 ratio to 11.2%, slightly above its near-term target.
• The company successfully grew customer deposits by 3% during the quarter, driven by client acquisition.
• First Horizon Corp (NYSE:FHN) demonstrated strong performance in its fixed income business, contributing to an $11 million increase in fee income.

Negative Points

• The net interest margin compressed by 7 basis points to 3.31%, indicating pressure on interest income.
• There is an expectation of modest margin contraction in the fourth quarter due to the lag between loan and deposit repricing.
• The company experienced a decline in period-end loans by 1%, partly due to an opportunistic sale of a loan portfolio.
• First Horizon Corp (NYSE:FHN) faces uncertainty in loan growth due to external factors such as interest rates and economic conditions.
• The company is preparing for regulatory changes as it approaches the $100 billion asset threshold, which may require additional investments.

Q & A Highlights

Q: Can you discuss the outlook for net interest income (NII) and fixed income business performance in the near term? A: Hope Dmuchowski, CFO, explained that while there might be some compression in NII over the next quarter or two, there is potential upside in the fixed income business if rates decline. The company saw muted activity in July but stronger performance in August and September, suggesting continued momentum if rates decrease further.

Q: What is the strategy regarding the loan-to-deposit ratio and deposit pricing? A: Hope Dmuchowski, CFO, stated that the company monitors both loan-to-deposit and loans plus securities to deposit ratios. The focus is on defending existing client relationships and acquiring new ones, which may involve higher deposit pricing. Bryan Jordan, CEO, added that deposit activity is viewed through a customer acquisition lens rather than strictly managing loan-to-deposit ratios.

Q: How does the company view the potential for loan growth, particularly in commercial real estate (CRE) and commercial and industrial (C&I) sectors? A: Bryan Jordan, CEO, noted that loan growth is currently muted due to market conditions, including interest rate uncertainty and economic outlook. The company is not self-imposing limits on balance sheet growth but is cautious about certain participations. There is optimism for potential growth if market conditions stabilize.

Q: What are the expectations for the net interest margin (NIM) and potential inflection points? A: Hope Dmuchowski, CFO, indicated that the NIM might experience push and pull quarter-to-quarter, depending on the pace of rate cuts. The company is working to mitigate asset sensitivity and has adjusted deposit promotions to allow more flexibility. Bryan Jordan, CEO, emphasized the focus on total revenue rather than just NIM, given the balanced business model.

Q: Can you provide insights into the company's approach to managing capital and regulatory thresholds, particularly regarding the $100 billion asset threshold? A: Bryan Jordan, CEO, stated that the company is preparing for crossing the $100 billion threshold by making necessary investments and building infrastructure. The focus is on growing the balance sheet and being opportunistic in market conditions. The CET1 ratio is currently above the target, and adjustments will be considered as economic conditions clarify.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.