First Horizon(US:FHN)2024-05-03 20:17Part I. Financial Information Financial Statements This section presents the unaudited consolidated financial statements for Q1 2024, including balance sheets, income statements, and cash flows, along with detailed notes on accounting policies and financial disclosures Consolidated Balance Sheet Highlights (as of March 31, 2024) | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Assets | $81,799 | $81,661 | | Net Loans and Leases | $60,966 | $60,519 | | Total Deposits | $65,741 | $65,780 | | Total Equity | $9,173 | $9,291 | Consolidated Income Statement Highlights (Three Months Ended March 31) | Metric | 2024 (in millions) | 2023 (in millions) | | :--- | :--- | :--- | | Net Interest Income | $625 | $688 | | Provision for Credit Losses | $50 | $50 | | Noninterest Income | $194 | $171 | | Net Income Available to Common Shareholders | $184 | $243 | | Diluted EPS | $0.33 | $0.43 | - Net cash provided by operating activities was $838 million, primarily driven by net income and a net decrease in trading securities; net cash used in investing activities was $876 million, mainly due to a net increase in loans and leases; and net cash used in financing activities was $127 million, reflecting $159 million in share repurchases and $85 million in common dividend payments, partially offset by an increase in short-term borrowings31 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) This section provides management's perspective on the company's Q1 2024 financial condition and results, detailing performance drivers, balance sheet analysis, capital management, and market trends Executive Overview Management highlights key Q1 2024 events, including an additional FDIC special assessment and preferred stock redemption, alongside stable financial performance and strong capital ratios - An additional estimated FDIC special assessment expense of $10 million was recorded in Q1 2024, following an initial $68 million expense in Q4 2023341344 - On May 1, 2024, FHN redeemed all outstanding shares of its Series D Preferred Stock, which did not qualify as Tier 1 capital and thus did not impact regulatory capital ratios345 Q1 2024 Financial Performance Summary | Metric | Q1 2024 (in millions) | Q4 2023 (in millions) | Q1 2023 (in millions) | | :--- | :--- | :--- | :--- | | Net Income Available to Common Shareholders | $184 | $175 | $243 | | Diluted EPS | $0.33 | $0.31 | $0.43 | Results of Operations This sub-section details FHN's operating results, including net interest income, noninterest income, noninterest expense, and credit loss provisions, highlighting key drivers and trends - Net interest income increased $8 million QoQ to $625 million, with net interest margin (NIM) expanding 10 basis points to 3.37%; YoY, NII fell $63 million due to higher funding costs outpacing the increase in earning asset yields361363 - Noninterest income grew by $11 million QoQ to $194 million, primarily driven by a $15 million increase in fixed income revenue due to favorable market conditions366 - Noninterest expense decreased by $58 million QoQ to $515 million, largely reflecting a lower FDIC special assessment ($10 million in Q1'24 vs. $68 million in Q4'23)371 - The provision for credit losses remained unchanged at $50 million compared to both the previous quarter and the same quarter last year372379 Analysis of Financial Condition This sub-section analyzes the balance sheet as of March 31, 2024, detailing stable total assets, modest loan growth, flat deposits with a mix shift, and an increase in nonperforming assets Loan & Lease Portfolio (as of March 31, 2024) | Loan Category | Amount (in billions) | % of Total | | :--- | :--- | :--- | | Commercial, financial, and industrial | $32.9 | 53% | | Commercial real estate | $14.4 | 24% | | Consumer real estate | $13.6 | 22% | | Total Loans and Leases | $61.8 | 100% | - Total deposits remained stable at $65.7 billion; a $794 million decrease in noninterest-bearing deposits was offset by a $755 million increase in interest-bearing deposits452458 - Total nonperforming assets (NPAs) increased to $512 million from $469 million at year-end 2023, driven by an increase in commercial non-accrual loans; the nonperforming loans to total loans ratio rose to 0.82% from 0.75%430432 - The Allowance for Credit Losses (ACL) to total loans ratio was 1.40%, steady with year-end 2023; the ALLL to total loans ratio was 1.27%, up slightly from 1.26%424425 Capital FHN maintained a robust capital position, with all regulatory ratios exceeding 'well-capitalized' standards, and executed common stock repurchases under a new program Regulatory Capital Ratios (as of March 31, 2024) | Ratio | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 11.31% | 11.40% | | Tier 1 Capital | 12.33% | 12.42% | | Total Capital | 13.93% | 13.96% | | Tier 1 Leverage | 10.82% | 10.69% | - A new $650 million common share purchase program was approved in January 2024, scheduled to expire on January 31, 2025; in Q1 2024, FHN repurchased $154 million in shares under this program475478 Risk Management This sub-section details the company's market and liquidity risk management, including Value-at-Risk for trading, interest rate sensitivity, and total available liquidity - The mean 1-day Value-at-Risk (VaR) for the trading portfolio was $2 million for Q1 2024485 Interest Rate Sensitivity (Next 12 Months NII) | Rate Shock (bps) | % Change in NII | | :--- | :--- | | +100 | +1.7% | | +50 | +0.9% | | -50 | -1.3% | | -100 | -2.7% | - Total available liquidity was $36.4 billion as of March 31, 2024, comprising cash, FHLB capacity, discount window access, and unencumbered securities501503 Market Uncertainties and Prospective Trends Management discusses key external factors, including the macroeconomic environment, emerging regulatory challenges, and the rising cost of property insurance in key coastal markets - The company is navigating an economic environment characterized by moderating inflation, a sustained inverted yield curve, and low near-term recession expectations522529 - FHN is monitoring new regulatory proposals, including increased requirements for banks over $100B in assets and new climate-related disclosure rules from the SEC and California, which are expected to increase compliance costs541549550 - A key concern is the rising cost and instability of property insurance in high-growth coastal markets (e.g., Florida), which poses a risk to loan collateral values, business activity, and regional economic growth562565568 Quantitative and Qualitative Disclosures About Market Risk This section incorporates by reference the 'Risk Management' section in the MD&A and Note 14 to the Consolidated Financial Statements for all market risk disclosures - This section incorporates by reference the 'Risk Management' section in the MD&A and Note 14 to the Consolidated Financial Statements for all disclosures on market risk582584 Controls and Procedures Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective, with no material changes to internal controls - Based on an evaluation by management, including the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of the end of the period583 - There were no changes in internal control over financial reporting during the first fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls583 Part II. Other Information Legal Proceedings This section incorporates by reference the 'Contingencies' section of Note 10 to the Consolidated Financial Statements for details on legal proceedings - The report incorporates by reference the 'Contingencies' section of Note 10 to the Consolidated Financial Statements for details on legal proceedings586 Risk Factors The company reported no material changes to the risk factors previously disclosed in its 2023 Annual Report on Form 10-K - No material changes from the risk factors disclosed in the 2023 Annual Report on Form 10-K were reported for this quarter587 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section provides information on the company's equity repurchase activities, incorporating by reference the 'Common Stock Purchases' section within the MD&A - The report incorporates by reference the 'Common Stock Purchases' section in the MD&A for details on equity repurchases588 Other Information The company reported no adoption, modification, or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or executive officers during Q1 2024 - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024589591 Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and financial data in Inline XBRL format - The report includes a table listing all filed exhibits, such as CEO/CFO certifications (Exhibits 31a, 31b, 32a, 32b) and financial statements in Inline XBRL format (Exhibit 101)593