• Adjusted EPS Growth: Increased by $0.12 or 8% from the prior year.
• Adjusted Return on Tangible Common Equity: 12.6% for the full year.
• Net Interest Margin: Maintained at 3.35% despite declining interest rates.
• Incremental Contribution from Countercyclical Businesses: $55 million to pre-provision net revenue.
• Average Loan Growth: Over 3% increase.
• Average Deposit Growth: More than 2% increase.
• Net Charge Off Ratio: 18 basis points, a decline of 10 basis points from the prior year.
• Capital Returned to Shareholders: Over $930 million through dividends and share repurchases.
• Adjusted Earnings Per Share (Q4): $0.43, a $0.01 increase from the prior quarter.
• Adjusted Return on Tangible Common Equity (Q4): 13.3%.
• Net Interest Income (Q4): Increased by $2 million.
• Net Charge Offs (Q4): 8 basis points with $10 million of provision expense.
• CET1 Ratio: Remained at 11.2%.
• Pre-Tax Notable Items (Q4): $91 million pretax loss due to securities portfolio restructuring.
• Incremental Annual Impact on NII: Expected to be approximately $35 million from securities restructuring.
• Average Daily Revenue (Q4): Increased to $659,000, up 11% from last quarter.
• Net Charge Offs (Q4): Decreased by $11 million to $13 million or 8 basis points of average loans.

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

Release Date: January 16, 2025

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

Positive Points

• First Horizon Corp (NYSE:FHN) reported strong EPS growth in the fourth quarter of 2024, driven by margin expansion and strong credit performance.
• The company achieved an adjusted return on tangible common equity of 12.6% for the year, highlighting the strength of its diversified business model.
• Net interest margin was maintained at 3.35% despite declining interest rates, showcasing effective interest rate management.
• FHN successfully attracted new clients and retained existing relationships, resulting in over 3% growth in average loans and more than 2% growth in deposits.
• The company returned over $930 million to shareholders through dividends and share repurchases, demonstrating a strong commitment to shareholder returns.

Negative Points

• Fourth quarter results were negatively impacted by notable items, including a $91 million pre-tax loss from securities portfolio restructuring.
• Non-performing loans increased by 4 basis points, driven by slower than anticipated multifamily lease-ups.
• The company faced a $4 million reduction in service charges and fees due to changes related to overdraft charges.
• Commercial real estate balances declined as clients refinanced in the permanent market, indicating potential challenges in this sector.
• The allowance for credit losses to loans ratio decreased slightly, reflecting a more favorable economic outlook but also indicating potential vulnerability to economic shifts.

Q & A Highlights

Q: With the securities portfolio restructuring, does this give you flexibility to accelerate investment priorities or widen positive operating leverage? A: Hope Dmuchowski, CFO, stated that the restructuring provides confidence in creating positive operating leverage. The company has a structured investment plan in place and doesn't foresee adding incremental investments. Bryan Jordan, CEO, added that the restructuring enhances their ability to achieve positive operating leverage, considering various economic scenarios.

Q: Can you discuss the prospects for the mortgage warehouse business and commercial loan demand? A: Bryan Jordan, CEO, noted that the mortgage warehouse business showed strong performance in 2024, with expectations of seasonal slowdown in Q1. The commercial loan pipelines are picking up, with optimism from clients, though the full impact may be seen post-presidential transition. Thomas Hung, Chief Credit Officer, highlighted their expertise and consistency in the mortgage warehouse space, leading to market share gains.

Q: What are your near-term margin expectations given the restructuring and deposit rate trends? A: Hope Dmuchowski, CFO, expressed confidence in maintaining margins despite rate cuts, with Q4 performance showing resilience. The company is prepared for various rate scenarios, with the expectation that margins will hold up well in the near term.

Q: What are your expectations for regulatory changes, and how might they impact First Horizon? A: Bryan Jordan, CEO, hopes for regulatory tiering based on riskiness to the financial system, particularly concerning the $100 billion asset threshold. He advocates for adjustments that reflect the actual risk profile of banks like First Horizon, which do not significantly change with asset growth.

Q: How do you view the timeline for achieving a 15% return on tangible common equity (ROTCE)? A: Hope Dmuchowski, CFO, outlined that achieving the 15% ROTCE depends on loan growth, rate stabilization, and provision normalization. The company is also focused on managing capital levels, with potential for repatriating excess capital to shareholders as conditions stabilize.

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