FHN - Earnings call 4 2023 | First Horizon Corporation

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Operator

Hello, everyone, and welcome to the First Horizon Fourth Quarter 2023 Earnings Conference Call. My name is Bruno and I'll be operating your call today. [Operator Instructions].

I will now hand over to your host, Natalie Flanders, Head of Investor Relations. Please go ahead.

Natalie Flanders

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

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

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

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

D. Jordan

for Good Thank and you, joining morning, us. thank Natalie. you everyone,

of you growth. expanding profitability revenue asset-sensitive This X the heard versus XXXX Slide of our highlights this disruption provision, me that planned with soundness, I countercyclical a our demonstrating our from of manage essentially offset termination all and diversified the extraordinary XXXX merger. Most the landscape margin our significant banking we of say the benefit associates think dealing Despite revenue We've some year. We on shift balance company our mind: pre-provision points sheet of safety and company in flat what model. from was was XXXX. business priorities with of our our and year, our businesses, to the top and have with benefit in our in decline detailed accomplished nothing short X. prior basis saw XX in the net the the

the strong balance benefit to well better our saw than enabled as market prudent of weather this This sheet our significantly expand sheet clients was You and at balance to capital and a rates management loans We that industry higher few the spring. levels. serve share. us whole, grew a strategically positioned of banks our the supported exceptionally crisis deposits when by both

retained customer quarter by was and we growth second have that deposit money as year-end. over of funds, kick-started We XX% Our of raised billion campaign. of new-to-bank our $X

We have we long-tenured with deep clients relationships the promo in to efforts XXXX. clients and continue we're to on deliver acquired primacy with our excited to the

equity improved of quarter, XX.X% XX quarter the basis XX.X%. Slide at some revenue year-end. us asset million, of deposit interest-bearing -- balance We tangible reducing of this on adjusted the we bringing successfully and by have the of on pricing a the quarter of into generated expansion X [Technical XX costs norm We the points continued grew per to mix. approximately pricing basis deposits EPS $X.XX end We return you Tier our our interest first the points delivered as our basis financial quarter sheet net promotional highlights $XXX capital on resulting on quarter common We highlights We of the the on from financial for equity quarter. share margin of points anticipate X. third Difficulty] XX common pre-provision we as the at net in

continue our shareholders. thankful communities as to incredibly I'm I for they the value As and our of for associates deliver reflect on dedication XXXX, clients,

financial our over I'll the detail. hand to results Hope to through that, run in call Hope? With more

Hope Dmuchowski

third our quarter, and of find will by This $XX you XX from asset net the mix. key basis the X, Net million million We metrics $XXX Slide for points repricing and margin performance revenue the quarter. On morning. grew income adjusted benefiting quarter. pre-provision this Good financials Bryan. prior you, interest our generated from from quarter. improve the ability expanded to funding Thank

of We expect which flat from comps this first Fees, upon to our by timing from was momentum will higher discrete quarter, the quarter deposit offset quarter. excluding which in late deferred a benefiting income, into pricing efforts of fixed build were benefit fourth couple items. linked

quarter, X moderate excluding variable expense tied to $XX expense expected, million. $XX and quarter. Provision by the comp, investments estate CECL value was were share driven real points, to for up was macroeconomic commercial modeling, X% scenarios coverage compensation million modest which the and ACL deferred higher Driven in which As expect first in by we quarter, strategic to used book in within per Tangible primarily revenue increased consumer. by largely increased this increasing $XX.XX. basis deterioration

per in $X.XX million quarter, the notable asset Fourth equities and $XX valuation On results Financial include the net of reduced Slide pretax $X a FDIC outlined assessment items of a by a disposition gain notable items of FHN our which couple opportunistic X, special share. million, adjustments. the from quarter we of small

Additionally, item, merger-related million primarily related the merger. items we IBERIA had attributable benefit notable of to tax tax a the Bank $XX discrete one to resolution

to were expanded quarter The prior Fourth occurred that repricing the million. our second X.X%. our months quarter X was asset the X, cash quarter our average July, in to deposits impact pay improved $XX excess basis of in Slide Though will success We we in yields. head margin deposits X.XX%, rate campaign see XXXX. NII able a that use down rate was to points promotional deposits on will by margin hike our benefit from XX a which paid from broker improving improving modest, of benefited also and you fourth significant gathered profile. amount full into quarter as of deposits, customer brokered those the the On funding

XX%. quarter up with a we've successful XX, acquire points. in the this Period-end decline noninterest-bearing, on This far down billion promotional able of expired retention pay deposits quarter, of been has reprice at X.X%, to acquired to the in of down second we an Slide exceptional HX The to those X.XX quarter. Fed's basis in a were been we're cost promotional at $X been essentially prior just interest-bearing of rate guarantees which Though us accounts deposits. by rotation able $X.X the under strong is fourth in X% cost interest-bearing executing was the on deposits flat deposits Those from some quarter. in compared allowed continuing average saw strategy deposit billion see third the paid X.X% see can broker of we you this data. Retention and year-to-date of out acquisition the quarter our X% As rate so are blended the down to XX new-to-bank we've year. rate to campaign higher late

Rates the roughly the back down declined end-of-period quarter. October while peaked back The repriced to half X.X%. interest-bearing in approximately and rate rate were promotional X.XX%, deposits of came accounts on the as fell to deposit in the total

next We to and margin NII expect to upside this provide quarter.

of an loans have overview XX. Slide on We

existing in the new lot seasonality was of quarter. from loans bit fairly of quarter, seasonality, business CRE position of companies. that first total would the capital quarter. in quarter X% prior in C&I in mortgage year-to-date growth. a decrease production half demand to X% then driven period-end the primarily declining fourth into of loans though peak to And This production tending to continues expect, entered with About loan to third that stabilize there's lows. multifamily. come we and the strong the down decline as half experiences muted that supported by to be Our softened as commitments back ups have grow deposits Loan a some in as from typically slightly loans the we until fund hitting was saw ability quarter quarter not you growth sector. due

are relatively deeper we customers continue doctor build as balances focused the our medical program, like sheet to Consumer we're relationships. where balance for on using flat

and XX basis since to spreads new XX We improve increasing year-over-year. points are with continuing loans points last pricing basis quarter on

you XX, see at comp, can stable that deferred fee excluding $XXX million. Slide On income, remained

increase raising fixed finished million business the participants Fed into back the income market. market's that an expectations some of saw brought is $X the rates Our as

was banking impact fees digital due increased to income largely million, interchange Brokerage lower Card by million, quarter. million, a down sales. resulting onetime $X $X revenue volume. $X and seasonally annuity were driven rebates down driven to fourth adjustment Mortgage in by on methodology higher a

in mostly to revenue. due noninterest FHLB a dividends quarter as $X elevated in BOLI Lastly, modest as income reduction well third million, other declined

last million. we up On Personnel that a Slide are couple deferred from quarter expenses XX, up excluding compensation, $XX adjusted of drivers. excluding $XX deferred comp, with was show million

quarter. incremental incentives of higher million is revenue there driven this our about by production businesses, First, $X in variable

expense this quarter. the We awards primarily XX% related also the stock additional accrued $X retention to million almost price of rose as

$X medical due Lastly, onetime up of claims. expenses linked large to seasonality and were a million quarter couple

to on our investments. Moving strategic

investments that can projects as quarter, a this and these modest third was should client campaigns client the and impact delayed initiated late increased brand be the elevated progress primarily online. and as by we growth to of in see here make couple the fourth Marketing mentioned to rate occur some services events continue related seasonality as items. run of technology There last occupancy the You and equipment. typically and quarter, well bringing sponsorship costs entering we Outside in of quarter. from acquisition quarter we driven

resource consulting third-party engaged projects. resources for also key and on We augmentation additional

these will XXXX, next throughout Fourth and cost quarter had elevated expenses efficiencies. due as moderate are offset stabilize retention that quarter. other investments operational will by items and technology increased but lower Expenses expense to

provision CECL grade quarter, as this a or and ratio sectors. across Slide and coverage I'll X.X%, loss ACL macroeconomic in includes scenarios XX The X modeling on XX. idiosyncratic deterioration migration. the $XXX charge-offs cover million reserves industries $XX quality million marginal in points to quarter, driven credit the million last well for basis CRE in was were $XX quarter. down multiple points consumer used million by modest Net basis as third primarily increased from loss $XX Loan which asset

to we in continue seeing see migration, pockets are observing not this We of feels are any what but and we specific manageable. stress environment credit

for On CETX the offset would our We Tangible levels. to forma points this increasing XX.X%. you lower $XX.XX, mark-to-market to XX remained share we marks our $X.XX capital build security by on of reaching income on us Total that Slide book, by net from $X.XX per portfolio driven book partially strong bringing was X%, Adjusting quarter, capital continued see and $X.XX on this CETX be value ratio strong, our XX% of dividends. loan quarter. and pro XX, X.X%. impact generated have basis can

the we've outlook reiterated we you gave XX, Slide December. On XXXX in

more than and revenue revenue our for We costs. grow net efficiencies to offset look operational from our strategic continue as to investments, ability offset to generate pre-provision levels expect XXXX to rising we

Our interest first rate May. rate the occurring outlook with cut cuts assumes X in

strategic a funding the Given will beginning modest interest our of exceed Fee continued as net asset growth, investment outlook ability that in went income sheet by includes in driven and a including rebound into expect adjustment repricing of merit countercyclical expense balance amount we reduce XXXX well modest The costs, the progress annual year. to businesses. incremental improvement levels. modest income continued the to on technology the at as investments personnel, effect be

charge-off net reflects uncertainty. guidance macroeconomic The continued

communicated, to deploy capital to us that of previously opportunity in see excess continue incremental a to we CETX capital we the XX% have need do target. As giving not build

Slide on up wrap will XX. I

times this few everything We of to have listed is Investor second that disruptions opened in expectations this on and this that I at serve the in team slide everything out this of this proud quarter. a several with significant during accomplished And laid year. things and clients look uncertainty remarkable deliver reflect slide, it year, I It we on to shown the our industry company a to that occurred am of meet you did version when XXXX. and Bryan the Day

guidance between recap X%, in X%. Similarly, To X% was a actual growth with income a for our with guidance XX% to range coming down XXXX, our growth fees of actual was X%. decline X% net interest income at Investor Day and fee

we Lastly, growth we as of X% guidance expense other efficiencies and in offset found gave to to X%, at we investments. to an range came X% favorable that

to business producing year-over-year challenging our XXXX, dedicated in our and pre-provision Despite on revenue consistent commitment a anticipate building in on we bankers environment, which diversified our model net XXXX. delivered clients

challenges safety the sorry, strong this a faced which have year, industry earlier We balance weathered last earlier sheet, demonstrating and ongoing first. the our commitment banking soundness year, to

client strong results As and on we clients, retention. always, focus in stay communities and associates our associate which

XXX-year our in the our on well franchise resiliency XXXX and continue We to and beyond. and positioned are demonstrate to legacy, to I capitalize am of excited strength

that, with it to back Bryan. I'll And give

D. Jordan

Hope. you, Thank

all as for franchise, incredibly reflect we My our associates South. our accomplished possible. serving proud our of Our clients much you like of that shareholders Thank landing XXXX for XXXX. Their like clients to done the us in all open and commitment our to strength an going the uncertain the for perform this to in company, XXXX. a still out our that's people, expectation and XXXX With results well, Bruno, navigate to and it the continue you build everything communities to our come I'm other to side have associates up in year. questions. confident now our for clients banking world, is the and the soft company looks economy stronger. on and remain continues has the the that environment of enabled unparalleled dedication an I this franchise and

Operator

Instructions]. from Markets. from Thank have our comes Jon Capital question RBC do you. first We [Operator Arfstrom

Jon Arfstrom

Maybe you, on outlook. the a net interest question Hope, income for

kind You margin an have performance about made curious some range. guidance. have I NII end the the the income what lower cuts impact the And puts of And to outlook and X ask to of and higher of And of your comments of kind getting company 'XX on . the wanted on against the and you your 'XX do the net what outlook? interest end range? takes kind for

Hope Dmuchowski

the Appreciate you. and Jon. good from Thanks, to question, hear

scenarios. I from We different do use is The get know range out biggest impact rate [indiscernible]. there seen other As guidance X the rate how we we there. look did in that cuts many XXXX, at cuts in I've

that, the can need at we range quickly scenarios the offset we funding we of look a benefit the different would in in promo those down decrease, that and quickly of rates is we the would be our our duration May, a Than So we deposits. happens that we anticipation we as first but we our in rates And -- in to that year. that that ones have. to client have The would costs. biggest later margins. the reprice We've be able how when shortened rates have our couple factor deepening saw

Jon Arfstrom

Okay.

So at higher lower it's if If fair? safe X%, we're to the than mid- to of less X, you're is probably range. end, say we're end we're . that at that

Hope Dmuchowski

the higher with with And X also, high -- range end all can that And we of we Jon. correct, That's down the could be pricing bring if on range deposit decreases. quicker the [indiscernible] rate

Jon Arfstrom

on was loan here, loan it Okay. may I missed have funds then for are but in expectations? you I about And growth how growth for it . think looking somewhere, overall feeling I overall XXXX. and

D. Jordan

We pretty is expectations. feel Bryan. good this loan about Jon, growth

end economy tight side. result still grow I'd I sheet will more We closing as muted with sort expect that. We on consistently this a the Financial be to see growing my and think, balance And year they're the of that the that loan said comments the say, growth some. But as in have of I ebbed still conditions overall, is flowed. of XXXX. expect

loaded Our the bit balance sheet little from nature. benefits a spring

very We selective have good put on et of opportunities opportunities set we're in up that We're commitments choose ago. some very fund years up sheet. a very, cetera, that balance couple feel to seeing. few originated of about Then we construction, years being some we ago to a the or the our was

but a the outlook don't expect modest for bit expect outsized economy. it of we be given to So little growth, we the

of go Hope making sort was to comments margin. that Now back the to about

the going comments could market there's forward year. about have in significant implied around December were moving rates fair will as is the the point in strongly cuts It's in implies. of time, don't actually don't that interest $X.XX what modeling been you lot, early Fed rates XX. some do. personally -- that just We tells on the on based a market uncertainty Fed's is the that's at which And a cut pretty curve Our feel interpreted whole it taking to amount and a I

hold than judgment up market's wouldn't are to expectations for rates our I better or think substitute now. right the But going higher market. I the

a ultimately just down. and is So use that what we interest reflects a slowing coming market curve rates economy

Jon Arfstrom

your framework helpful. I'm in but provided That's you helps. Bryan, more camp, Okay. the

Operator

Rose Our next James. question comes from Raymond from Michael

Michael Rose

go the to there. wanted it I the Slide to Just XX appendix in as appreciate putting FHN Financial. you relates in guys to that

can then [indiscernible] You slower. business we kind understand this kind give look Certainly for works. just and ADRs But of us reputations ADRs you guys nice your could uptick your a estimation quarter. move of expectation what if little like in had we your way this move what as through a baseline in is it the bit

D. Jordan

reaching implied We pickup year, a the was little you to Yes. quarter this is, did interest of do. rates FHN on very that as the just fourth in see sensitive based what peak and be rates really market falling. Fed our had conclusion to a fall rates for and that And that likely to business. we're good rates income see fixed tend reached in more the

for expect think are market the follows next in out to going average some is year. the expect the to will markets FHN slightly particularly path next stabilize levels, bounce of modest improvement year. expectations daily cuts don't revenue follows that [indiscernible] laid We that back terms but Our Financial it continue next sort We and XXXX year. past, somewhat improve, if to rate we of do higher

Michael Rose

just question. my as follow-up That's And maybe helpful.

much to assuming revenues if just in get be necessarily through. base come flex Just a the how I don't the wanted for sense expense that would -- there

maybe other come areas in what lower the For maybe some of could out? the that you technology there expectations. is of at costs instance, could expectations if end to look address Or kind push like revenue you

D. Jordan

tied revenue. base very is expense heavily at Financial FHN to Our

is that cost system scalable with scalable a have revenue. We

is has the average a I the the in And as cycle team control in daily in controlling fantastic Our business. clearly we've to of reach And still we higher costs, better those expectation at drop low of it with costs. how money much we will make for no course in or even you profitability lows as be as points revenue. and in through a when flex we expect matter to done, we levels them. term, the out ability terms higher we job in in think, to think profitable got position lowest ADR better not cycle, eke the the is it And we XXXX. the even a is ADR can near and some likely But the expect

Michael Rose

Bryan, holistically for the Financial. I color. FHN appreciate that not I firm, meant just

that clear. -- for Sorry wasn't

D. Jordan

Well, are that we stay we we over. on. expense yes, focused It's something control something that acknowledged that most so levels have have will

We to control organization. costs of have a of the years, over ability cost take demonstrated and number the out out

think we In levers. number terms that of hand, are the have a we levers of at

In we're get are that investments year. terms we -- deferred And while maintenance or caught had things from technology, described up. investing were what costs. to you There remedial we mentioned important, as think in last specifically some technology investments particularly those I

we the costs So organization, to think, that's the gives and a not move potential out in our revenues of the cost us effort I the sort us lever, expect. have we if but ability through consciousness to I expect an play way environment control overall as we don't one it's pull

will overall cost XXXX. consciousness in So think well serve that I us again,

Michael Rose

the Appreciate color.

D. Jordan

pleasure. misinterpreted the I'm half. my No, first sorry, I

Operator

from Jefferies. Haire comes question from Casey Our next

Casey Haire

everyone. things. follow-up specifically Quick on NII, morning, of the funding Good side

what . So you And $X then promotion. million first of over? deposit are expecting rolled these fully deposit off, cuts? along is X Is that beta kind the

Hope Dmuchowski

an hear XX% through [indiscernible] XXXX. as Casey, fully quarter is the are campaign yesterday. that number of in we that up-to-date from repricing retention of and good to you Yes, second

using in it probably not right May is up-to-date cycle, the cycle, our the money And as number. we saw do by cut, to we've it's number end be seen XX%. continue client about in prior well moderate think more my got we as If rates. we'd quarter. deposits, that so cut a a lower and around paying prepared beta can It mentioned it the FERC bit remarks, cost start wholesale year, than rates, cycle the later about quarter cutting And when December little retention in we're fourth we as, we in cycle We at a an we of the this think do new-to-bank what through in significantly we we down XX would when see continued, you XX%. that. Through of bringing on a deposit saw

back each second saw retain quarters, bring are of we $X in the rate existing the step so in quarter. about in also money X just seeing to billion new last So it, and we money the but ability a lower than not

Casey Haire

buyback And target. you're just comfortably to a follow-up, XX.X% your CETX trying gauge as appetite, XX% at it's above --

organic like mention that seems you CETX do deployment. above little you Or like You going point, -- buyback you to given kind the loan strength. I Bryan's there Do manage vague But to muted. back it . growth do to sounds it Is XX% run mean, -- guys the capital level? a that? are seem of doesn't on been -- have we

D. Jordan

Yes, is Bryan. this Casey,

at sort outlook Board We for of year. expect that we I an have we with things that, the our when remainder have respect this evaluate of share work through continued will -- repurchases. many one to the the authorization of that's point, don't

will is the ultimately, that economy. it outlook made one a on that's and that consider, we in of of so soundness, context And but Board decision the gets tools the safety

discussions. manage have on one those levers the to that that again, expect is And capital we level. so we the that's of to think And table

Operator

next Our Ben comes from from Citi. question Gerlinger

Benjamin Gerlinger

a got more implication we curious was. expected it's than I talk could what previously kind kind least coming of know in lot nature. was just at or more in campaign, of you through the if philosophical But CD money I obviously the

general of lending item i.e., get a a opportunity. much actually that is how business, more of something relationship there's in retention, So into income a that new line line the along terms bringing from turning but in that I over of

D. Jordan

relationships retention is we bankers what good, I are, taking that progress see been we and on of think very our well we doesn't very, as promo instantaneously, while are the to has terms very, think, encouraging. retention, we're happen relationships. to and those new-to-bank in And indications broadening it expanding early, executing still and early those And are primacy. In that good making very but referring the

Benjamin Gerlinger

embedded And over that is to anything? on just they like Or . 'XX start something in cake kind of is that for icing wealth or bring the that? if

D. Jordan

inherently, Well, our fee income estimates and in that's interest embedded margin. net of

inherently, it a yes, but we budgeting. specific not there's is terms So embedded, forecasting add-on the of and at our this in way point manage

Benjamin Gerlinger

And just because granular Are appetite. here could something be ball. office just get or Southeast areas [indiscernible] it get then switch perspective, you shying spreads seeing some risk-adjusted terms lot from take within them a to really away here any or I a I of little but just if pulling completely your in make category of kind you it. highlight that any the more easy Got conversely, back client commercial anything in out, potential call would have of just group eye to that or is than doesn't the their where seeing lending helpful. additional of an reorganizing sense. lending to gears add off thing better you're might there's competitors

D. Jordan

mortgage appetite XXXX and stabilized and conditions sort being think pulling of getting rates appetite taking in of terms and nature. essentially and gotten out more that of a probably which talking of number of the and new-to-bank you of up. lines lot as bit new created market. back are financial anecdotal. a mortgage loosening of have Susan bit lending topic Yes. more to have into like early I'll pick We for seems got and the that was The get the people a Fed's terms information markets middle late and restaurant fall whether examples has in finance of opportunities In potential for are start the lending the a who in about then The the and back degrees cuts warehouse are ask things There we of you peaking actually finance XXXX. of that us market by and it a of XXXX of market or saw the to X and rate from little varying sort little and is warehouse X bit stabilized things lending into not relationships now or of competitive. folks businesses, of

So and flows. it ebbs

us next by And our we the define volatility days in things XX our the or the for of that ourselves happening feel those said, how based we XX to we very on consistent believe conduct to next our seeing about with steady execute markets and we try We customers. XX a that is estimate. of essentially, good All that pull opportunities are very of out what not the approach. into periods years with clients try and go-to-market in are we and what's

try volume in the what encouraged And see . seeing I It's doesn't high a result, stable. a Susan? literally But a number we're and of because to economy steady think just very we not we're we So to very very attractive as be by the that. market. support opportunities. continue

Susan Springfield

do through with approach. I Bryan was us and what agree we take saying, cycle the

on to higher try be a challenging are good existing have where underwriting said, we good well. But we're today returns [indiscernible] are things a others the when too when good -- rate like market with the core metrics, up and clients structures we and there our slower to for able they not. times able not underwriting step way, risk-adjusted communities, instances Bryan or little have and were mid-year interest been. swing a environment. where some good want to were for are were As a is much we or We it either good clients really some pricing There as when to get more

for there clients. be to want we again, So

opportunities of do there some ability think our take having might kind -- We our who potentially some from disruption in to are in also away I well as specialty some their in as to execute. lines be opportunities generational think competitors markets some

Benjamin Gerlinger

I'll questions, in color. real the e-mail. helpful couple I'll queue. I really you. actually Got have set modeling That's of but back small a

Operator

from comes Our Gailey from next KBW. question Brady

Brady Gailey

morning, credit saw Good with the quarter, Last shared start the wanted loss. front. on we I guys. national a to little credit blip quality

saw into here, It you're we still on updated low quarter, but but NPAs level, relatively This increase thoughts maybe feels is XX%. credit how by normalizing thinking about credit about at updated just They're thoughts on. just like 'XX? a

Susan Springfield

it's Susan. that. I'll Brady, take

and We last question, being, we said the answer I disciplined have on been years. and approach to our as we are just very been, the in have for

that client do in I to the that us we're strong, to fact the so selection, will are that, approach markets disciplined well. serve believe And continue very

it a pointed higher downgrades executive continue you industry nonperforming a types at did out, We'll that -- is doing more the do really related reviews. into at and a interest point. portfolio but portfolio XXXX. touching of in had some any manageable We're we're the product in making environment, rate XXXX, things even work we especially seeing lot we're involved market this not level, deep-dive sure all to management where very that all. classified it's in We time, at specific As in and we've higher

disciplined and good fact how in very about grading we're feel servicing I got we've So credit. that the

both and quarter. we where one eyes and is outlook set the on do grading every our origination, conservative we'll continue to think well our perform marking ball, we but loans the I So be and about of how think each will

Brady Gailey

assets And billion then $XX now. Horizon about is First in

will growth you Horizon until have preparing be? billion. you're . what and organically? think you maybe thoughts billion think still First impact $XXX $XXX just on And when you some how see takes time to that could for But you updated So mark that the

D. Jordan

clear of the way not billion what the water it's And flexibility managing understand $XXX while LFI that right that we're and now. practicing out the proposals the of have preparing entails becoming day think on at Brady, the particularly we through a navigate balance end we're the time [indiscernible] with We to are and it. [indiscernible] sheet. taking some in that is terms we're treading

planning have aspects $XX resolution earlier, to rule Some the likely to if deal of $XXX to final issued gets it, on with billion organizations. we're for particularly million

now, day, right into groundwork to start we're end becoming for studying it. to way preparing what not Some the the work the But looks of their But going an those things LFI at of the we're system. we're like I $XXX that a keep of few over push have balance at we flexibility and across stumble sheet and our to, the bright ability level a a tread threshold line as accidentally. just years us billion, alluded water doesn't and to will

Operator

[Operator question next Timur Fargo. Instructions] Wells Our Braziler comes from from

Timur Braziler

quality Maybe question. credit a to follow-up Brady's

color any in the . what on quarter? fourth nonperformers in the Just increase was

Unknown Executive

-- retailer. We the was X one added. X you of It of a that credits And finance hotel was other an one credit. was C&I drivers then bigger general couple kind of different One had -- project CRE the increase. bigger, just were and then of added, top the the that industries really reflected kind several of restaurant had Yes. online or drivers that on we kind of had become franchise

Timur Braziler

or asset based It category this that looks opposed is see still portfolio is the to us like raw credit largely asset. that trends to of of by performing as driven idiosyncratic category as we

really start are -- pressures, that's I of So take position, sort borrowers and suggesting is some higher a interest price, its in cost more borrowers rates stressing levered more to ability stressed than more others. that stressing what

And trends not portfolio we're in now. the seeing so right broad-based

at spending more anything. of and than driven stories a day, end seem said, we're Susan But to trends As time dives by the idiosyncratic analytics. deep the of doing be the lot

Susan Springfield

Yes.

behind added would they're that the example, [indiscernible] an As according experienced project to they so some where be and construction on just a plan. delays we little

something said, related it situation. Bryan would one-off or like and stories example kind to of not of an similar others the related that's is industry have So necessarily

Timur Braziler

that's maybe going the technology cadence of greater that remedial Is spend been spend bit called Can maybe expenses around spend? next more Is you over that in out? over of that skewed. the even as that next some the to $XXX years. you be or spend the going million X years think little had pretty commentary a something provide Okay. forward prior I and X the to some clarity technology specifically, And back then on

Unknown Executive

thanks tends Timur, kind spend be back question. for the to loaded. of Technology

costs, maintenance go the into up, And software so yet. gearing projects as the applyzing doesn't

is to, QX. seen it bit talked our undershooting of the in QX, We've more We we that as so in little in And backloaded. quarter. expenses a kind about started

next said half hit the my XXXX those of increase started see projects year those as second that to of the the the year, this we have I half in we back So going and bulk we prepared into of then started remarks, starts increase will up. what rate expect in run costs side. of the full

increased But we of back efficiencies we that in we And P&L looking just we're that to to how and that year, being do are basis, XXXX, do continue expect we retention how we'll on to we to operational spend with can in out some that have a expect off of somewhat the the dollars the flat are, offset the the on looking continue that investment. at expenses said, as focus going that. at year throughout figure half running we say, it we offset technology

Timur Braziler

more, I And then if one could.

that off, money that promo borrowers guess right roll current impressive CDs, the those specials for at clients there on the retention those . Just those now I did And to back XX%. move you is CD market? deposits what rolling is in what Are out I or guys? did guess, into?

Unknown Executive

That in QX. was money market that repricing all

X QX. actually not we're were CDs Our at pricing in but [indiscernible] [indiscernible] XX or

D. Jordan

basis XX the were rates Those points XX, from rates. special down

Unknown Executive

current second of The what your part was was the question offers.

current XXX. offer of relationship is our So deepening a

bank, And relationship so bring the promo, if XXX. offer your coming you as us, you're is off deepen you to money more with the

XX about at up XX, ended we down. see points can You basis

discussion, There's believe So money the we've kind rate. new we target coming but that far is for of gotten overall, that the some that in. to negotiation XXX always in XXX pretty

Operator

from Janney Christopher comes Scott. from Montgomery question Marinac next Our

Christopher Marinac

this this Susan. deterioration C&I year? Or intact? credit . that kind question see should Just for would more you Do one still of quarter specifically some the stay think

Susan Springfield

that, I deep things most see of to is CRE. the when service kind I sectors, clients. portfolio interest like projections C&I on stability based outlook right in we've stress Chris, got dive be of credit. that you'll place. do feel the down. graded I different we've I'm not stressing the talk and what -- -- fact underwrite really Again, throughout doing rate We're continuing going done or We're we think reviews to stable may think rates

clients we I think, what this point and then. it if another know were [indiscernible] economy, worsen. so really feel based impact to now. of look in changing take kind And I the something outlook about today, good Obviously, But we're on on seeing absent based it we could at what stable a

Christopher Marinac

Great. you, where be scenario year? this to even fill consolidation would . in there And a we'll then Horizon in the interested for banks the something other in First buying in, industry And do you see think is Bryan, small footprint?

D. Jordan

I the you it's I Chris, that think a to consolidation don't start see later year. might be environment personally. think up to robust pick in going

context in it a deal a what billion approved still in that as purchase well some and lines then the takes some it what tremendous both regulatory headwinds. this deal of you takes number bright The LFI. being how of as with what there's long at mean uncertainty mark the I point. think accounting the around I And to $XXX get largest does think looks of landscape like, like the if of the

year. of expect a this tremendous So pickup during the course I don't amount of

Horizon, we've dealing First make client customer in and the priorities to on technology with about, relationships. and of investments are grow that terms things talked executing In the and want that's continuing we to our

integration had If merger years, to period. of how it. and count spent backwards, then you closer you on And the look the X pretermination roughly maybe equals we X depending

really of there. period we power use deploy have this to think out plenty we capital built. So of prove to of And we we've franchise opportunity the to the to XXXX want that continue

Operator

from UBS. Our next question comes Broderick from Preston

Broderick Preston

and it meeting on Bryan, your Board. authorization I next the heard I'd if an and meeting. will when's guess board I correctly, circle commentary. have it you back discuss you're said the addressed with I that wanted to don't board at you buyback ask you get expecting to

D. Jordan

Well, matter Board fact, week. as our of meeting is a next next

outlook, So capital Board. outlook with cover we financial our always capital our management,

do So do But in likely that's want the don't capital management our those Board prognosticate what one a meeting-to-meeting to of I to is things not is thing. that next or meeting. to We it capital the about adequate and and sheet, stress report on. as do context we from we we continue always that spend time think it test our publicly. balance of

into the a what may don't sheet our Board I in financial balance of outlook. next want not consider but So week, may terms and topic it's to always get or

Broderick Preston

you the you could you, provided? that Understood. . guidance that's Maybe mix I noninterest-bearing speak underlying could NII to ask the

Susan Springfield

noninterest-bearing went starting and new cash QX XXXX. the of for for QX we for accounts. end We the have offer a new-to-bank pretty Brody, increase aggressively do in -- small out guide NII checking the a with small at in

before. that done haven't We

momentum, prepared it's say which I remarks, my And positive in so we are some seeing had meaningful. wouldn't I but

Broderick Preston

would basis? some the does Is ability what pay And off it. on further you kind deposits? a it securities pay you pay of have to down look Got cash to . sources? grow quarterly broker that to with it down other an of take that deposit Or flows

Unknown Executive

of yes answer The all that. is to

year. to want continue growth projections offset loan have to we do next client We money bring growth. to our So in loan

And QX XXXX. our rate get marketing we in use we QX have we front XXXX our We push a into saw as on into securities so in expect happy paused reinvestment get focused sensitivity. to have are that, We're and at on portfolio And the we're it, and our we back. to securities as large you cash our come will continue interest flow that portfolio. where hedge us

one be us, have creating client that, For so lend number clients. And bit will to is we we can be. deposits, we for if them in little brokerage a to

great come you in us. for possibly see but have when So short at next the at the being look bigger being is warehouse a quarter, going term our and sheet thing balance and XXXX into out yielding as seasonality there, for the we look on can brokers you trade brokerage back asset to mortgage highest some the the us is

Broderick Preston

the totally kind rate we bottom XXX as it if cuts? that will you somebody unless from then out question, . get where that in we stuff quarter little the first promo incrementally of off? rolls level Or the last decline was I I of And addressed last And sorry this earlier. for it deposit I'm think one spot a that cost. on me. just Is about asked

Unknown Executive

loan at money anticipating of loan cash will have we growth The to at if basis beta a comes see growth. our QX, piece our you to or can it and do We in excess matter down rate the it like When bringing due not to off here it what put we be now targeting. until the we'll again, would is But the what will there of decrease. last end with brokerage We modestly. [indiscernible], bring the additional decline broker but it that we've is meaningful, definitely point peak down do continue We're the each when down do we does in that say we pay we're quarter QX XXX hit was back look believe be high and it bigger I quarter, pay balance quarter. right?

Operator

currently have questions. We no further

to like to our hand ahead. go Bryan Please I'd the call back CEO, Jordan. So

D. Jordan

reach Please taking Thank provide have has all time you, a joining appreciate you the information. Thank you Bruno. company, I in your additional or day. any call follow-up interest morning. for hope if great questions to everyone We you're any our our if join and this us. can we out

Operator

concludes joining. this for Thank gentlemen, today's call. you Ladies and

Thank now your lines. disconnect You may you.

First Horizon (FHN) 18 Jan 242023 Q4 Earnings call transcript