First Horizon (FHN) Q2 2024 earnings summary

Executive summary

• Adjusted EPS was $0.36, up $0.01 sequentially, with stable pre-provision net revenue and strong credit performance; net income available to common shareholders was $184 million.

• Adjusted return on tangible common equity reached 12.0%, aided by $212 million in share repurchases in Q2 and $366 million year-to-date.

• Tangible book value per share increased to $12.22, up $0.06 from the prior quarter.

• Asset quality remained strong with net charge-offs at 0.22% and ACL coverage at 1.41%.

• Navigated a highly competitive deposit environment, defending customer relationships amid aggressive rate offers and industry-wide pricing pressure.

Financial highlights

• Net interest income rose to $633 million (FTE), up $5 million sequentially, with net interest margin expanding 1 basis point to 3.38%.

• Average loans and leases grew 1–2% sequentially, driven by mortgage company and commercial real estate lending.

• Deposit balances declined 1% due to seasonality and money supply contraction, but client retention remained high at 95%.

• Fee income, excluding deferred compensation, decreased $3 million sequentially, with fixed income business moderating and mortgage fees rising seasonally.

• Adjusted noninterest expense was essentially flat sequentially, as lower personnel costs were offset by higher marketing and technology spend.

Outlook and guidance

• FY24 net interest income is expected to be flat to down 2% from FY23, reflecting increased deposit competition and funding mix shifts.

• Noninterest income projected to rise 6–10% on fixed income and mortgage rebound; noninterest expense to increase 4–6% due to tech and personnel investments, offset by operational efficiencies.

• CET1 ratio targeted at ~11.0% for the year, with flexibility to adjust as macro and regulatory clarity improves.

• Net charge-offs expected in the 0.25–0.30% range amid macro uncertainty.

• Management expects continued competitive pressure on deposit costs in the second half of 2024.