FHN - Earnings call 3 2023 | First Horizon Corporation

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Operator

Thank you all for joining. I would like to welcome you all to the First Horizon Corp.

Third Quarter 2023 Earnings Conference Call. My name is Brika, and I'll be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Natalie Flanders, Head of Investor Relations, to begin.

begin are may you Natalie, when ready. you So,

Natalie Flanders

Bryan will Welcome third Officer, you then be Hope Susan quarter you, as to and with joining take remarks, Brika. Springfield, happy to have results our well. morning. and also questions Good CEO, President Chairman, Thank Thank XXXX Financial questions. to conference here We're pleased prepared Today, our our provide and Jordan; Chief us. Officer, to Dmuchowski, for we'll your call. Chief Credit assist

Our available remarks ir.firsthorizon.com. today which will reference our on earnings presentation, is at our website

As our remind to SEC make risks I to expectations our results factors you X that subject forward-looking Therefore, uncertainties. we the we ask differ our our from always, will in need Page presentation to and and to filings. on are cause statements of may that review you that

our are And exclude important results, X Additionally, of information turn notable please to the review earnings refer over be in These adjusted you measures, we presentation. will should GAAP to not that aware our last our release update least, our but of I'll comments views, reflect understand Page on are to impact obligated the you and comments with to non-GAAP and not that, so our which them. current that And Bryan. items. for it's things

D. Jordan

Good Natalie. you, morning, Thank call. for everyone. you our Thank joining

our reflect of key highlighted the franchise, results on of quarter quality strengths we third X. and our Our some Slide have

and deliver to increasingly in returns. ability communities our I've serve customers become months, X shareholder and past confident the Over strong our

year X have talent We've average. experienced. years been over highly with are the XX% retained associates over of of team on us our who past Our

extraordinary XX years. us client that's We [ a with long a medium have ] tenure of with time been an base

Our retain is past of of to to year. serving the over XX% ability dedication clients clients driver our key our this team's

through capital to communities for hard they growth, seeing service the shareholders. excellent businesses loan solid and work we're our our associates experienced clients, momentum grateful deploy bankers customer our on focused I'm our our in and as and for of With ability deposit now. value deliver right

are you will detail. of adjusted a X common pretax per revenue more of return share highlights in We which with EPS X.X%. cover Slide some -- from the pre-provision Hope tangible in of quarter, resulting delivered this $XXX On $X.XX financial on equity of on million, net

who bankruptcy. $XX earlier results to Our credit balance of loss million by Chapter quarter. converted to well. Chapter XX unexpectedly X communicated company a this idiosyncratic were impacted we very was sheet This an charge-off from a perform continues to that the related Otherwise,

over X.X% opened acquiring billion balances, going in with were over deposits We balances or customers and to we checking [ deposit XX,XXX products. continue in franchise of billion this accounts from X/X campaigns. into new up Period-end quarter, bringing ] have throughout quarter as the $X.X deposit our $X success last in

have under stabilized relatively XX% Our as the prior businesses lows. flat our as Fees growth improved quarter loan for X%. at just to growth of loan-to-deposit ratio are countercyclical outpaced cyclical deposit

So we two. next over some need or the to investments year make

We have managing we'll a reinvestment our our proven strategy. track be disciplined expense base, in record and of

quarter be the continues ratio for very with at our flat strong, to position capital CETX prior Our XX.X%.

eye look XX.X%. X.X% to towards capital be we of shareholders, to CETX to will our As XXXX, repatriate range toward options our ratio evaluating we longer-term an with

and our challenge. but and clients Overall, be bankers positive. supply sentiment of Inflation to continued cautious labor a remain

performing are economies well. in our footprint the However,

adverse in of Fed's regulatory the minimums the released most results recent in severely we scenario. our demonstrated which stress Additionally, capital of levels well our test, capacity maintain even recently to excess

profitably navigate stable credit we our culture, strong mix, feel ability and economic In confident diversified in business short, footprint, to given scenario. our attractive any

record returns track relationships delivering the top quarter's proven communities' quartile team meet of to enable run produce cycle. call tenured, needs. that long service experienced deep to clients' has results. to this over hand financial through This us Hope? high-quality to Hope a and With yields our Our I'll over the that,

Hope Dmuchowski

Bryan. everyone. morning, Thank Good you,

financials in to modestly Turning X. prior key second expenses and metrics relatively $XXX and driven main costs. stable Fees of higher generated The income to quarter. a the quarter. quarter. Slide $XX interest was We performance the million, We million provide adjusted PPNR down deposit by for from driver are decline net

million single mentioned, Other which earnings the line This share million charge-offs idiosyncratic an credit we the increase with $XX adjusted $XX expense per of prior $XX experienced drove quarters. by in $XXX loss As already of credit were million, quarter. impacted Bryan the $X.XX. provision to in million in approximately

in book results by $X.XX of dividends. reduced value On impact which at the higher per $X.XX the $X.XX, in with share offsetting earnings a outlined notable share and our securities $XX.XX, of adjusted partially of quarter, on Tangible came of per X, per and items marks $X.XX hedges quarter. couple we Slide

items notable of pretax related at include in force, look our efficiencies our increasing within operational reductions to mortgage structure to to some $XX continue quarter Third primarily million offset to restructuring businesses addition in a within costs. market expense streamlining as we

[ low-yielding an AA+, tax approximately to items. U.S. the acquisitions. the on triggered impact the $XX cash RAP offsetting ] of million by alternatives. attractive million value [ book caused and is separate liability $XXX the this primarily the higher exit corporate and investment $XX there the of to million Partially related the of surrender with related rate benefit this to account addition which guidelines interest was tax tax surrender to higher-yielding more noncompliance us liquid the of This returns X redeploy Fitch of In fully. A into provider. Lower the and tax made most rates downgrade AAA from to are policy, restructuring, underlying asset tax amended of ] option the prior notable

the strong interest margin. million of and costs despite increased from net deposit interest a this through points, XX basis we full moderating benefit impact asset-sensitive. partial net campaign. Interest-bearing quarter quarter quarter income hike cyclical remain $XXX highs. as was remained by X, I partially driven NII and floating Slide On the X.XX% a of will walk margin July assets of on second of rate rate increase deposit Offsetting

quarter's the hike, our this we interest-bearing well quarter, the to market the full fourth The opportunity have deposit margin the benefit as us promotional accounts NII the beta will from In quarter rate reached as money reprice to quarter. cumulative acquired ability of in July's second and XX% third level. improve giving

cycle. us We expect this for watermark high be this to in the

remaining will also benefit in deposits Over the quarter. margin and FHLB rate Our customer the to continued spreads. enabled flows time, this grow credit of success borrowings of from widening fixed continuing repricing payoff all cash

remain well to As portfolio X/X rising benefit floating rate, is our rate a of positioned environment. we in loan

our points can second checking from you Slide XX,XXX were demonstrating last a XX, the quarter, driven was our was deposits new campaign. rate over customer by including our market billion, average customer deposits relationships. the promotional deposit million flat over see existing growth to whole. rates. deposits we're $XXX deepening approximately Period-end $X We shows quarter share our on new over basis balances. from of deposit The account new-to-bank up acquisition Deposit essentially X.X%, As still data down as as XXX bringing accounts, Fed's X.X% industry and on expand strong seeing inflows ability for from HX opened

costs QX. quarter's during increase their impact brought drove Fed [ the we in deposit $XXX interest-bearing customers an in the $X.XX a from campaign funds higher balances Additionally, The million. in increased in to last of [ full approximately ] successful deposit ] QX promotion by $X.XX and rate quarter

strong focus With liquidity is on our position, primacy. our

We over are that for promotional meet primacy launching time. offer checking a cash accounts benchmarks

guarantees in acquired the markets the come repricing fourth back half customers quarter, on will for in the up For the quarter. money second rate of

will [ as moderate the to We from converting to on funding promo focus have primacy. ] opportunity we costs

businesses. across and growth growth lines multifamily, of were the from diversified fund see or in industries, was you'll primarily portfolios. that and flat. $XXX million was seasonality loans, on $XX.X markets loans mortgage impact volumes growth mortgage geographies million to of across remain higher our $XXX from largely XX, diversified by existing rates. Slide period-end due while billion Loans to was C&I quarter. ups and driven linked companies declined X% CRE On Loan multiple commitments up

doctor quarter. This this our deepen mortgage for We on sheet focused XX% channel these management production vertical been can us, attractive on-balance over with of that medical an program, wealth relationships the and have has products. coming through balances we other with as new

treasury deepening through almost relationships on bankers depository, on cross-sell Spreads wealth points increased have and are points approximately increased new Our XX management quarter and since basis last fundings XX products. spreads basis expanding year-over-year. and focused

prior the income Fee $XXX income million on at fee in quarter. $XXX trends XX. cover million will I is versus stable Slide

up compensation, in However, QX an levels by excluding $X income I'll in and $X have $X swap increased last including million Other customer borrowing a FHLB deferred higher in increase our [ $X FHLB deposits. noninterest Again, ] all of borrowings we paid increase off million new-to-bank income million, quarter with dividends of million. reiterate, our fees. fee from was

Our into with due the cyclical revenues countercyclical decrease fee we fixed We market. average our income lows. volume of businesses are was daily Mortgage $X to stabilizing modified banking pricing saw near up secondary to million as conditions. challenging down drive income market strategy slightly the in million $X a modest the

on XX. Slide expenses Moving on to

largely is expenses by adjusted $X Personnel Excluding $XX declined are a retention driven or merger-related X% into million $XX and parts. moving This expenses the results of there million. are moving couple deferred expenses different core of this quarter. compensation, up million,

offset deferred First, is fee in income $X million, corresponding declined which the compensation by line.

change moving results. previously Second, mentioned, retention I as merger-related million expense the of core of the $XX into geography

million, we a quarter were compensation. prior and as included discrete benefit Other of an nonrecurring realty few items, in up $X $X taxes. variable reduction million which Lastly, expenses the other lower included a franchise had

a environment, we remains for economic challenging a our expense discipline within business. continue operational look With to efficiencies and focus,

fewer quarter, regional business. bank X by moderated restructured mortgage our consolidating into regions This we and our

efficiency QX. was at in Our ratio XX%

on million charge-off asset recovery QX we a driven increased of initially bank. a by $XX the cover million Chapter was bankruptcy I shared by loan $XX anticipated million. from This credit in through The lead national a QX. $XXX We will reserves single was Loan were Slide loss increase XX. provision where C&I and a sale. XX quality to

we quarter. our point August, we a have of an and within specific which that the conversion supported for imminent charged However, third-party in loan. an did credit off we had to an valuation the X there Chapter not this value, sale We amount unexpected reserve updated carrying full the at as was anticipate

with the any. if timing pursue potential time, we are to counsel estimate this working no of or outside have evaluate recoveries, At amount recoveries. We identify, of and ultimate

million $XX QX. were charge-offs Total in

X compares increased basis charge-offs the to loan Excluding which Like we do line office expect is favorably vacancy with million, the loss loss, around outlook. portfolio. idiosyncratic CRE X.XX%, would credit in portfolio of to experiencing which variable, levels broad-based are been can reflecting we industry, Though prior point low others, caution $XX continued seeing is from ratio macroeconomic our in the in pandemic. ACL quarter. vacancy be and historically Southeast. credit XX%, XX% have the deterioration normalize our commercial in the during growth not significant The rate coverage the

you Slide see can exceptionally levels. to XX, that have we strong continue On capital

the ratio forma deployed our our the adjusting and would prior CETX as book, portfolio pro security loan for to after X.X%. on of growth. CETX be XX.X% to we Even ratio Our capital quarter, flat remained loan even organically marks

a per were strong very slight mark-to-market prior from value QX, $X.XX from share higher partially capital in of also that due book remained by quarter impacts $X.XX adjusted offset XX.X%. Total was at NIAC. Tangible reduction decrease a $XX.XX to the

within of gave meeting be to from On mentioned, enabled other deposits range RWA expect clients. The Bryan idiosyncratic capital assumes share to Slide X% X% updated our XX, we we the into PPNR impact to net outlook [indiscernible] to head to guidance capital evaluate has and to updated continue to quarter's that we new at include guidance. will be updated growth couple XXXX. Investor borrowing in our this though X% new the intend This as June. The as prior expectations to success outlook, excess loss, loan a we acquiring tweaks us no as but clients' our of Day capital is loan our charge-offs believe we to guidance. organically needs into raising have deployment made we buybacks, charge-off in We X% within deploy strategically but

unique up very on challenges XX. passion have far we of wrap proud the Slide and to despite the macroeconomic faced. team how our this To XXXX I with and commitment navigated clients am environment so

acquisition and clients or not serving retention our any be have through focus challenge. would in they success our associates consistent possible of cycle Our client without on the that

diversified highly capitalize attractive are balance on opportunities positioned asset-sensitive franchise business our the of and We well to sheet. model,

clients technology We and are products, result support services efficiency. will with making investments improved strategic to upgrades in that

efficiencies to committed will for continue through shareholders We for remain cycle. to look We offset investments. returns the operational to attractive our delivering

to Now I back Bryan. will hand it

D. Jordan

you, Hope. roughly Thank ago. moment something said Hope I'll reiterate a

execute ability economic We Over to necessary the course we unusual environments. history, have in the of to sometimes and know operate profitably. to demonstrated order our pull in levers our changing how

footprint me Our for and our tremendous teams generate our returns ability our give in confidence shareholders. strong to

and to determination conditions necessary our we positive confident the leverage to that expect soften the can this open call questions. XXXX has likely While revenue, support cycle. resources do year. expenses shareholders are and am that now we and economic people, I for the record I communities what's economic control to throughout grow up somewhat, company the will the operating next Brika,

Operator

have first America. you. [Operator Bank question from Poonawala Thank Instructions] We the from Ebrahim of

Ebrahim Poonawala

guess just I question, for first -- through this maybe rates, kind where were last. the they of versus running quarter promotion thanks Hope,

into guide, still promotional the And that rolling shakes about can NII guess, versus lower year we promotional as a us sense to range. back or X%, we have of how of give end full X% I quarter end think then you XQ, CDs think As fourth about higher we moving forward, deposits off. guidance out, or

NII half it be 'XX? continues at to makes X% could the Is this the in and of if through first again, versus that -- think Just And to what it? should way X% about the X%, growth the least right X%? that this trough it --

Hope Dmuchowski

one. try covered. in Thank all you, you if me accountable. hold of missed I questions get them Ebrahim, many I'll can to for one, Apologies

Day we a we similar net noninterest of we expect -- that our quarter to increase we look quarter our next lower interest margin coming expanding we'll that, to very to ranges quarter with go up we believe a here, of right revenue in as bit on yields on and the as of that side towards we're to do but reiterated being think the about basis, a expect costs. have lower deposit current On lower the the little as to end with how First, PPNR exception guidance we increase that trends percentage, ahead. updated specific to not advantage expenses NII side. the expect in sorry, Investor middle do well able we margin -- take next

Ebrahim Poonawala

No, go ahead.

Hope Dmuchowski

next said As bringing into on lending to focused we quarter about how down as our to continue think rates next prepared and core disciplined we deposit our year, in we that be did. going we and remarks,

at rates and back able XXX promotion times to about to acquire rates. I in the quarter those bankers clients a QX, we to And walk walk able in we out existing order franchise, back. that our the reenergize billion in shows As client and were multiple went believe new large ticks our very our and that clients, we've that ] bring with plan [ talked to we're we

Ebrahim Poonawala

And it. just Got a question. separate

that the this get completely was idiosyncratic. a post-GFC heavy quarter balance I in you've had very cleaning of credit But up Bryan, done sheet. this So lifting ton you

larger the to about through portfolio to credit, the book to make chunky you sure talk -- kind this look that. surprises? big at do are another revisit other some did on of As credits, does that you dive cause the to Just of there of deep loan us no went this review kind

Susan Springfield

Susan and Springfield. comments. take any can Hope I'll that Ebrahim is Bryan this then and add

as downturn, an across reviews to sectors economic During portfolio well do markets. we as opportunity really any take

We business, that. lines regional doing of of are specialty as for we banks. lines -- all as our well So

we do cetera. underwriting, analysis The timing, the thing we whether have milk done call a, is other I there it, kind any servicing, could were at that things et the original time look was any of differently, we spilled communication, pause, have it to a

take we seriously. So obviously do very that

are both of Hope portfolio. that That feel outcome and process said, credit. about improved be the and being evaluating do Bryan of that in -- very related good to indicated anything that the I Our the could

strong We of consistent top conservative history staying in a selection, and of our client being on and services. have underwriting our

D. Jordan

I is conditions tighten started to economy has to cost would slow The impact. higher going to to some financial add down comments. Susan's interest and extent, have

expect we selection, and borrower at And those we value. collateral so see strong we do and do reviews. underwriting extraordinarily what And said, not will this terms we we when credit you good credit think things we credit as structure focus start happening place monitoring, only with soften Susan of strong strong ultimately some, an but continue typically in some

have, we happened learn X for with will as and our Susan we but to or the course effort idiosyncratic this next we individual fundamentals likely credit. said, that credit position undertook that, over of underwriting that's will so. So the to an believe our year process understand soften some economy of very from us the we And what selection, well delivery

Ebrahim Poonawala

my taking questions. for Thanks

Operator

you. Thank

question next Casey Your comes Jefferies. Haire of from

Casey Haire

Wanted touch on to expenses.

So And a accurate? year-to-date, holding -- X%. guide, and is the which they're up would big still versus then I last that there. to X% at looking pretty you quarter. step-up Or I'll X%, mean, if that guys are fourth is Is to the in start I'm that imply And conservative? guide year,

Hope Dmuchowski

Casey, Ebrahim say, low probably would reiterating to to for we're thank you the I on the my side. expenses, on going question. response be

projects technology run yet to of trying have deploy that not are new We a and rate. lot a into come

base. the will unknown And really businesses variable such our they QX, cyclical QX. then in start have of is revenue Some where those a bigger have

expense for QX have an of are that we X%, uptick expecting we a up. set to at FHN, at we're low though bit and in even levels so little drive And pretty

Casey Haire

in to like unless -- that feels would come below have It you anyway. Okay.

that Okay. -- at up that X% your comments up [ that does just there And still for Does your then, to positive about to -- ] another 'XX, X% leverage believe leverage possibility year. that expense Or positive talking were expenses about in contemplate year. hope flex your [ X% I lower? ] Investor does operating Bryan, on being that operating following is a guide? next X% you Day, next to

D. Jordan

in up what next drive that the in I terms operating wider times Well, continue and I work the ability remedial some be past. particularly talked making I'm it the as next will deposits different leverage. in and to Hope portfolios. doing expenses think drive we reinvestment of we in think we of really to cost we is year. that talked said, believe positive and over can spreads very have franchise lending Part of the have the some do the in investments Hope just of technology bring That the to somewhat loan a and the about our do optimistic still couple our year. on ways, growth of ability course down And mentioned about of

expenses going need that said, up. we spend to think spend. be can not don't I if all to $X So We're

to going slightly generate expenses. higher control we the even we're think At leverage. so And though, the with end operating still positive of can expenses, I day,

Casey Haire

the just And lastly, return. good. Very Okay. capital on

it up sounds is to obviously the guys You what warming to like buyback me.

in -- just if uncertainty. 'XX. that have given just macro-wise, been is not time to uncertainty you not saying what the It's guys all it's on the fairly is improve consistent this going front as wondering, and like Just

driving is decision wondering appetite that more to for share increased Just what buyback.

D. Jordan

Yes.

that break I we as XX.X% north that here probably X to And fair through it's varying accumulate. prepared into 'XX, comments, believe fair think think to we not a it as I XX% think or cycles to into longer We're we down but that's a And we the economic be in -- our of that today. One, little term look capital way we much continue I at think it need about business to in X.X% below range, don't range. said would we that probably to may sit it let sort XX%. and bring pieces. of

think happens the and repatriate XX%, there's shareholders in with still of what excess in sheet balance to ] this today. any ratios So the they're in that capital terms depending growth, [ area those hold on current we XX.X%

do capital same capital us less let we are might strong here we an don't levels we base from maintain time, view. in both, in that can certain situation like. important So grow our probably of to economic than the think continue need that's And any which to at

Operator

Raymond Your James. next line comes the question from of Rose of Michael

Michael Rose

Just actually following with businesses, look if to be Casey's a going in countercyclical on X what And mortgage ability income Ebrahim's is I will struggling questions. drive up positive like specifically under higher-for-longer on here pressure. guess continued operating the trying are -- scenario. especially fixed does pressure fixed I'm last leverage, it to be I'm and and income well, to under on the

So you all help of positive operating if some kind can you Hope, understand the drive certainly actually think that struggling that's with, e-mails. how drivers just something I'm maybe us of I Because we're leverage? getting

Hope Dmuchowski

question, and to hear I the little as third a from good to answer it And more well can as bit in Michael, detail. try appreciate I'll I you.

it looking We're how looking offset think only investments to we figure that Casey this how our out and we're quarter. X% reorganized our going and mortgage downsized hard at termination, business. drive for what X% deal trying X X.X to I the us that post ways followed we hit franchise to down We've expenses. months for to the regions. We up and Bryan of to are be our we've make expenses. it's said

to We bring look costs. back are can deposit we continuing at how

as what will perspective, revenue. I that expenses. budget and in continue see XXXX would be in We're to bit guidance. from we XXXX the as to the we're cost So increase regional the a that -- We we're need next finalize down to going looking and stabilization to we just But high cycle able expenses going just a our looking watermark see are love I better in quickly, as first deal expect year. do a after did efficiently -- going We're year can that redeploy terminated of well the have rates how us investments be this will -- going side improve margin quarter margin. we business to at we're that full see focus is We to of quarters. keep the bank disciplined our to on we now think at be looking was in every this drive everything. XXXX to our run pretty as XXXX future more for believe client And will you to on out and in more opportunity should bring mortgage and businesses you getting at time to we to give little the experience. our restructure a

Michael Rose

back... Okay. stepping And then just

Hope Dmuchowski

one I'll Michael, sorry, ahead, -- And note Michael. go other mention

You go.

Michael Rose

go ahead. No,

Hope Dmuchowski

at we core, to our mentioned as only we well. retention $X quarter, know expenses The is we I came on back up When million. look with increase coming Barclays this in prior the that year-over-year

pays in model. year year and full because year, you half big it we a though a out year-over-year core in have in your think this year first even a increase have of as next May, portion I of as So some the only not is

I think year. $XX assuming was taking that double million, next guys almost are you the

at expense overweighting that you in so guys I the that when I And see piece. your think look you models, were

Michael Rose

actually NII? certainly is the expectations? I tailwinds XXXX it's I But it expectation all hard an that the at understand to actually again, then, I that grow margin. too for baked this into there mean, you And But is relates know Helpful. just can at preliminary least point. as Okay. broadly

Hope Dmuchowski

We positive decreases increases In being up asset-sensitive to NII. a rate XXXX the and do yes, curve believe us. year scenario, no for our current the we have for and has is rate is continuing that strong to flat that

Operator

from comes question UBS. Brody next of Preston The

Broderick Preston

Good the impossible I end morning, to get a I put everyone. point your expenses. guidance kind beat up It's not for To a $XXX dead on range, of horse, million low like kind to high. that the but need to Hope, if million sorry to increase, peak, to finer of to the of expenses $XX just which flex wanted fourth the numerically linked quarter seems step a quarter. model

drive you low specifically is increase end can of what get me guidance? the So million why, the $XX to the tell going like to to

Hope Dmuchowski

I of rounds think the X.X% the X%, low to also or X.XX%. guidance, right, up end

we variable sitting here as we seen compensation look sitting that at a haven't kind X%, model a a are we compensation. at at -- quarter a our And comes again, we're was projects it, them. increased there, We're for a lot about so start. with still And low expecting increased And FHN. we at technology which have of of and revenue watermark

We program also account well launched new acquiring checking that marketing just campaigns our additional to as tied have deposits. we as new

Broderick Preston

can Is there anything work the so, tell And left from me from the deal the you the to amount needs still TD that rate? if into run deferred compensation what way its dollar is there?

D. Jordan

in the ZIP $XX in base, million code the about quarter, quarter same same and same should it the that the third Not fourth quarter. the incremental -- had you about in third It's quarter. in in the expense the fourth be

Broderick Preston

rate on to rate happen deposit you Got costs X/XX. XX/XX move of with spot to the have here. Do have you deposit you kind you've moderating Do guys where that view a And then ] was it. about at to interest-bearing [ talked from by [ expect ]? spot

Hope Dmuchowski

We and it. beta down. out out We I right do walk have there the put a to there miss current ] rate, that to rate it looking there. we spot put out are time every want to seem XXX, or don't I [ that

to and the billion have deposit quicker. QX deposits been QX guidance, guidance, able do we've rate for beta our repricing brought in We missed we've on far, our almost in related $X campaign. money raise So we to the

a ability back is new -- And in our quickly at back more. to be to so rate, continue it reprices I we what average in ] as of can able think deposits in walk half bring [ second it if well that really a how the tied bring of most them as and November to lot XXX walk we'll December. that to But

seeing is. got our really what competition we've see steep to But ability we're pricing. deposit some So on

pricing I we deposit back. generate their change and walk December from it competitors really our kind how of how will changes, much that now ours can how when reprice think so November until And

D. Jordan

The from naturally that mix noninterest-bearing is in other big interest-bearing moves factor the to Hope's that cost to as comment money up shift ] moves as well. [

think the a we we play. the to the terms we basis, money it's lending balances as bringing a have was the we've in there highlighted been mix line are and opportunity quarter time. lot was, levers comments, in all a So over those think that quarter And her than on in Hope reprice, brought in more -- it to costs. the we in new significantly where this start aggregate, with new -- down We to lower of in costs prepared third promo in second bring of as deposit

Broderick Preston

And on? exposure switching it. gears have do And you happen -- portion are what portfolio, in lead your of that, loan credits? Got what to shared is you the do maybe lender you the to national

Susan Springfield

got Yes. that information. We've

on X.X% In a X% and of -- the as lead of we're than terms about around XX% balances, of shared the national it that. less X% about credits percent to represents portfolio, our of

Broderick Preston

the on what do Do the the are? hop And before you set for exposure, office me properties X-parter sense office what LTV a then have allowances was happen on specifically average have Great. the against nonmedical Okay. that for then currently? the those I the to you just aside on office. have last X a And you nonmedical

Susan Springfield

detail office, terms out -- allowance. office nonmedical about in correct? in of our it the loan-to-values terms have on I that you're talking don't But in of broken

Broderick Preston

Yes, that's correct.

Susan Springfield

Just the traditional office.

stabilized at today office, on portfolio average about So have on is XX%. upfront traditional the about we're loan-to-value And we equity the basis, XX%. our

Broderick Preston

I questions. very taking Got it. my you appreciate Thank you much, everyone.

D. Jordan

Brody. Thanks,

Operator

of KBW. Brady have now We you. Gailey Thank

Brady Gailey

X of good your as get to still Are as we should And targeting in to that a next growth? head XQ in loan-to-deposit growth growth, your year? ratio. mind you helped ratio? think big to to see loan had there We've and lower as has is which been want loan-to-deposit How have outpace far it's you deposit you where have about forward going quarters deposit we target

D. Jordan

say would want acquisition we it's customer Well, about Hope it to to It's discussion. less deepen to and grow about it's I We want position us, relationship. be And continue balances the broaden grow deposits. relationships. the and an to a interesting than is loan-to-deposit I customer ratio. and clearly in and to the talked

higher that's we're Our tend that, you sort of ratio you X.XX. ended grow if on the a loan-to-deposit portfolio, -- about little if have peers. securities, a line. in which we And than blend quarter bit But smaller probably at to relative right much relative

as well. we think us grow we customer gives deposits, to can fuel that to the the support credit We that to grow continue on needs relationships side the extent it

manage proactively And ratio much not are we managing in ability to fashion. profitable so and are our trying the to our communities loan-to-deposit a we proactively customers our as as serve

the day, relationships, of deposits going to grow end So do at have the I'd we're absolutely, and we if continue the to say opportunity priced attractively to that.

Hope Dmuchowski

And it. capital capital Brady, can to us we great what to allows position are -- a have we a deposit do we that, in shown now we've base. quarters that feel our to we build add that we're also I'll because place growth, deploy don't is we have of X we that have like

when on, and trajectory that to believe add we Bryan looking -- we're peer coming we deposits So what that grow ratio, which continue our margin XX into quarters. to good we're securities right feel loans we about and median, they're at deploy in we our improve will the loan-to-deposit higher as is said, really the ability yielding at. the

D. Jordan

markets, a we're And economy. get U.S. One think the fortunate that great relative the outperform fact final we will to great they that in on point is, look, we business in economies. do basis,

we're think momentum positive to spot deposit in good see -- base. we're our in So a I

Brady Gailey

you see that number a could then to of Or range? your would I level Is you like relatively then be And more on question follow you Tier And elevated is sounds that buyback hold to about down flat X.X% it at good consider lower? kind take to potentially your XX%. Tier equity for my more to you common Did down correct? that to instead to you it common that I last 'XX. into it what take X agree. up South. It's into what of comments just economic to just equity the get buybacks If it that heard getting to I like understand of in XX.X%, X correctly, uncertainty? would want

D. Jordan

look things that today, given XX.X% direction level economy play more Yes. To said the as and the the confident at keep said, is of we it had to likely constant approximation how Board's what you we to about what bring I That's to area. a ratio, is support, be certainty area, CETX out. it of Board that would down think likely a further, I at were and greater we which that XX% have we're rough that the around

we uncertain in So We that don't see more it of We table. little as rate our completely that's favor just it be sit still outlook, more we like. negative. But like a than see prematurely. the say still down as economic tends strong it than extremely than capital base XXXX, and think just as in today, feels terms here bringing uncertain to maintaining more is would a it not to off we

Operator

Steven have Alexopoulos now from We JPMorgan.

Anthony Elian

Anthony for you This XQ. new billion second $X deposits in added is billion in Elian In the And then quarter, from $X the another about added on campaigns. Steve. you

retain As that that these how overall you you've XQ, both in rates lower added? on you client the are importantly, confident these the relationships as well balances move can as deposit more campaigns

D. Jordan

Yes.

of attract So being about XX,XXX the something we new in when number think that like the recognize those second relationships, you I was retail. quarter, customer XX,XXX

is the our deepen -- all that customer was and deepen only the and bankers our XX,XXX -- relationships, in and it important you it. it every markets you think single broaden relationship the attract I that bank quarter. new the And across relationships new bank day those That are broaden customers. to new accounts third with not new working about

but of can a around sit have confidence think a a we significant deepen So broaden, those. X we and going every of retain that confidence with significant degree don't high degree we're retain to of relationships. portion we have that of we will I high them, a number of those

Anthony Elian

total then campaigns, supported noninterest-bearing the growth strong the continued in deposits by really And deposit decline. Okay. the to quarter, was but

to like On you're the balances looks point level slide, to you pre-pandemic that to XX%. close but DDA guidance very it levels, of returning

you how guess, get to do by and more there see what much I time? So

Hope Dmuchowski

look where we right, were. pre-pandemic the done about But versus On at the of how there's is debit on we're We've billion And much additional percentage, $X $X how higher. we're about to each value, a only the versus credit absolute quarter. billion about on you're billion an at analysis which accounts we much we XX%, is accounts. of operating downside, they're think $X using, in

operating in, cash So the that interest-bearing. cash not moved we don't losing clients in have, they are their have holding less holding feel that less we're -- to are working environment accounts, balances macroeconomic clients. the operating inflationary environment in that they're It's And they accounts. as

look got In had And really so debits that of account, we think we same kind and credits. absolute where at they if dollar-wise, we'd value, to are. every a you exactly, we the client exact point amount be of

working new attract are DDA to hard We well. as very clients

is to these and which our this earlier new their just clients of launched we accounts the program, current in just X a have with than that. a this the quarter we is factor hand As new there, cash go marketing a the on campaign mix in things and X saw days. year; two, mentioned, program we operating It after less

Anthony Elian

for cycle, range this XX% But the XX% this then are range last over you provided your quarter that through know provided weighed that. just you And of how elevated X%. but I question. charge-offs Okay. Investor at you of thinking Day? on XX% quarter my to XX% ROTCE about an At the adjusted to was ROTCE previous the ROTCE Investor Day,

Hope Dmuchowski

still number. Yes. will That's a through-the-cycle be number, and the we that believe

we X ROTCE. the back quarter X.X% about and this at look you to If add we take charge-off, out

closer range. So we our to get

As earlier, create looking to capital to and we shareholders. leverage. positive have talked about I return operating are We're looking Bryan to

And run target through still look so our rate. cycle, at the we company our being do and that

no have should or hit We to that reason that believe we that can't we down. bring that

D. Jordan

range about levels impact and running that. talked root we're times, different As as that we've at on cycle the well is we a sort believe has of today, an of number higher of capital

drive can cycle. mid- we the of So higher-teens through a degree of confidence We sort still those have ROTCEs. high to

Operator

Montgomery Thank you. We of Christopher Scott. now have Janney Marinac

Christopher Marinac

Thanks. I looking early seeing Susan to expect few maybe and ask 'XX? what quarter also quarters, of loan what she criticized want trends next and the this she is into would about kind

Susan Springfield

Chris. Thanks,

at it's We this are point. but some seeing increase in assets, slight criticized

a it's -- But little a systemic, are estate more credits. we million at We're of anything we it's normalization I'm seeing are -- C&I. upgrades. also some I than kind guess, real continue just We handful quarter-over-quarter. to up, And $XXX about of we terms this point. in in criticized credit commercial of seeing in assets again, have bit not

Christopher Marinac

Does levels? that change, Okay. there or is

Susan Springfield

coverage. Yes. Obviously, slight terms of about We we've got a [indiscernible]. at increase were reserve in

Christopher Marinac

as deals SNC well. wouldn't that ] Very XX% beyond define above a and based be And then like few that us other minutes any that sort [ SNCs on there would club-type gave the number? you that of information are ago,

Susan Springfield

[ ] more. X% Not

Operator

Securities. David We of Chiaverini Wedbush have now

begin. may You

David Chiaverini

benefits about And potential a updated wondering potential factors mentioned deal? thoughts was the factors previously could billion open I in crossing accelerate would You've deal? potential scale out and how helpful. could what you're what be there for to a a $XXX MOE assets. doing Any push

D. Jordan

factors bringing are more pushing out in. say are it than there Yes. I'd there it

think they're same of point the I sides in some opposite sense.

to marks. interest I still processes about from X, And of a as Basel very, X next term. of Part years -- start proposed III X demonstrated think it's really is anything years I addition years. before years X.X our to minimal around would near likely that think, be very anywhere the of guess the approval couple unlikely is pickup regulatory last activity. in to rules to in the I make probably you view see is the that few the over M&A environment over is uncertainty quarters, Part economic. in And rate M&A

our So that's on something radar today. that's strain not

David Chiaverini

the sense. Makes to X% loan guidance growth leaning and And the was to X%. shifting areas increased are into I loan increased guidance? to curious, growth you with what over

Susan Springfield

So opportunities we some completely. banks pulled do other out have where see

talk There's bring We asset-based opportunities lending. in about just So opportunities in to some markets. in companies some lending. We've we family in got what to some can for also generational call continue mortgage our opportunities the of commercial over we've that serve. opportunities I markets in warehouse would got

some reasons widening to even too more ability attractive think be spreads have underwriting. the we seeing this are of One that could we and is conservative

part Gartour like have to [ that thing. better tour more more things So covenants, and opportunities of ], upfront kind resource, equity,

D. Jordan

to We're cycles. interrupt. We're And relationships. I'm think high-value we all grow economic sorry about we always -- through opportunistic always that's how as

always how thinking we're so grow And the we about business.

the nature a this portion have at spring what in some year, The the driving the we continued sheet that fund and that's thing the described ups the third which look if of of to is of continues of loaded the construction you be in substantial growth, balance our past, quarter other growth I've assets growth. driving

grow to activity in grow ways Organic opportunistic growth has like using broadly customers we likely be feel see to it's at slow, our to support by has appropriate our in It continue communities. and our slowed. customers and slowed balance customer economy, what the lending business to from base more and does and will -- to but look we sheet and

Operator

Jon Arfstrom Capital. now Thank of have RBC you. We

Jon Arfstrom

of growth, my loan into kind pace stole X% growth okay. this but the kind Bryan, you sequential 'XX? for question you feel as too. of question, is David that's -- out this a guess like you, is look of on I Just this to do a on growth, question X% sustainable

D. Jordan

that, just some up as Well, of be articulate good. right or are loans mention on tried construction to Susan natural -- projects completed. to and now, to to as these some of described, these the continue And look say, in is continue -- I and I of projects growth fund going think get be has the track as

of drive will that it. So some

customer back slowdown a the middle little like the feel to half started more it feel demand, it activity. quarter, started starting really in this this of to of like quarter, in -- customer In the

a do to base will add dies relationships [ about But see, the strong slower. we there's that. in as that ] continue bit lot like We are Susan and being a use sheet of not be communities, things described, in So support -- euphemisms when strength opportunities that we X feel serve. things like it's to out We're effectively the customer of mode. having selectively otherwise and our do a there RWA and capital our it think and think opportunities a to relationships pool of the I that can does credits franchise position the new and to and or customers benefits for across in compete balance entire generational we

Jon Arfstrom

sheet And limits Investor you're year you Day, And runway. any on threshold growth near you like a but asset at your this sheet I asked the in your Okay. term? related, but somewhat couple expectations balance growth the maybe later, just think about know feels size, at $XXX have it in balance billion

D. Jordan

real No short-term limits.

I think a water. we've got we few of years can necessary, if tread runway. And

and not to that about that stumbling line going intentional understand very be bright where over threshold. is, we So inadvertently we're

grow that not about we sheet the regulatory at will looks in we what stumble time, clarity greater got a the think and until concern an same get all term. over. near landscape we've not But inadvertently like, the years. to balance It's do can immediate we So few we

Jon Arfstrom

Okay. Good.

a too. one, Just small

new that? checking the drove a flagged material XX,XXX that of Is accounts as part a what And One is quarterly the just it's And deposit that know numbers was to of the you number I campaign. that number. you? repeatable?

D. Jordan

of to compares it, around, probably XX,XXX because it's number It new Well, important an it's relationships. a call relationships. customer XXX,XXX base

this in footed, well. a as relationships the the So they're it's it quarter, across important in any marketplace few acquiring that note lose But there bankers is will number. customer are an our front We, entire out to earlier insignificant relationships. not given and we mentioned to tenure said it's about I We clearly, as relationship. that I not just And those customer want broaden build first want a It call, our footprint. the of is to relationships. in account. deepen

there with and then it's first from is So it's I that step? I our account, mean, we've broadened the old goal. what's the -- starts and first deepened proverb about journey guess every

Hope Dmuchowski

Hope. is this Jon,

that why our big not called we've It's it We're municipal is forward time. that at client out deposits of growth, funding. deposit a there CDs, our deposits. reason others acquiring and We're that deposits know talking growing -- about deposit that's big they're I other money. X The growing. have chunks we're but buying shows not out flat about clients, talking truly are

doing us succeed product that X, then for franchise way are clients long, And client we time. make XX, a sell relationships with excel and these our are XX XX, it them them in will that bring years. X to deep at We the is first believe because and their with to

Jon Arfstrom

Yes. Yes, makes sense.

very much. Thank Okay. you

Operator

a Wells Securities. We now Braziler question you. of Fargo have from Timur Thank

Unknown Analyst

This John is on Rowan Timur. for [ ]

CETX longer-term what any billion move mark? does provided? any the your to, a in your guess, just work you already if to could were CETX, question that I been your range. has X.X% there of done has preliminary long-term that kind Just about been target on XX.X% long-term -- there the that how that at into range maybe $XXX And impact capital return factor all, Or would to if as plans? cross

D. Jordan

Yes.

we that very given we'll otherwise, into point. impacts our it of factored threshold, the some group the do of at really growth above done sort the at have $XXX haven't billion long-term that update fact, Basel the puts above or But various flux tiers We preliminary proposals how $XXX through of that whether we III work. ratio, billion that state if, And in organic us it's and point. something it this goals

Unknown Analyst

guidance. X the just Okay. on And then expense clarification question

assessment the yet? XQ. that full hits for Or guidance assume year been the in So special included FDIC the that has not

Hope Dmuchowski

expenses. in No. don't We that have

as item. the We excluding an But an is in It as adjusted item. adjusted guidance, capital our that for we're expense have forecast. that

Unknown Analyst

helpful. That's Great. Okay.

Operator

you. Thank

no hand final Bryan any for back As questions, we it have to to further I'd like remarks.

D. Jordan

to Thank you everyone attention time, questions. information great hope taking morning. that you appreciate us. additional a you, We this I your from has for and need all any time out day. Brika. reach Thank if there's Please us join

Operator

all Thank day, conclude lovely does rest your and disconnect you lines. have you today's your now for call. that can confirm of a Please joining. I may

First Horizon (FHN) 18 Oct 232023 Q3 Earnings call transcript