First Horizon(US:FHN)2024-04-17 18:07Financial Data and Key Metrics Changes - The company generated pre-provision net revenue of $323 million, an increase of $25 million from the prior quarter [4] - Adjusted EPS rose to $0.35 per share, up 9% from the previous quarter, with adjusted return on tangible common equity improving to 11.6% [13] - Net interest income increased by $7 million from the fourth quarter, driven by improved pricing on both deposits and loans, expanding the margin by 10 basis points [9][32] Business Line Data and Key Metrics Changes - FHN Financial experienced a stronger quarter with a $15 million increase in fixed-income fees [14] - Mortgage revenue increased by $4 million, primarily due to higher volumes, while service charges and fees decreased by $2 million due to seasonality [57] - The countercyclical businesses showed strong performance, with fixed income fees up $15 million and mortgages up $4 million from the prior quarter [53] Market Data and Key Metrics Changes - Period-end deposits remained flat quarter-to-quarter, with a 5 basis point reduction in the total deposit rate and a 9 basis point reduction in the interest-bearing rate paid [34] - Loan yields expanded by 9 basis points, benefiting from wider spreads on new and renewing loans [32] - The company maintained strong capital levels with a common equity Tier 1 ratio of 11.3% [51] Company Strategy and Development Direction - The company aims to continue delivering strong results while serving customers and communities, leveraging its competitive product set and strong credit culture [19] - The strategic focus includes operational efficiencies to offset increases in strategic investments and enhance shareholder returns [43][61] - The company plans to opportunistically deploy capital above its 11% near-term target, with a $650 million share repurchase authorization [14][51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to generate strong returns throughout the year, despite economic uncertainties [19][55] - The outlook for net interest income growth remains within the 1% to 4% range, with expectations for interest rate cuts later in the year [52] - Management noted that while loan demand is modest, there are good opportunities for growth, particularly in certain regions [88] Other Important Information - The company announced the retirement of Chief Credit Officer Susan Springfield, with Tom Hung named as her successor [65] - A non-cash charge of approximately $7 million will be included in the second quarter due to the redemption of Series D preferred stock [44] Q&A Session All Questions and Answers Question: What would lead to a change in the 11% near-term target? - Management indicated that a significant pickup in the economic environment or a substantial reduction in inflation would be necessary to consider changing the target [22][23] Question: What are the expectations for mortgage gain on sale business? - Management does not expect a significant upturn in mortgage originations, anticipating continued originations coming in [25] Question: Will the company continue to be aggressive on the $650 million buyback authorization? - Management confirmed they will be opportunistic with the buyback, viewing the stock as undervalued [26] Question: What drove the increase in non-performing loans? - The increase was largely driven by two specific credits, including a senior living facility and a consumer finance company [101] Question: What is the expected impact of interest rates on loan demand? - Management expects loan demand to remain modest but improve over the course of the year as economic conditions stabilize [89]