FHN - Earnings call transcript Q1 2024 | First Horizon Corporation

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Operator

Welcome to the First Horizon First Quarter 2020 Earnings Conference Call. My name is Carla, now coordinating your call today. [Operator Instructions].

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

Natalie Flanders

Financial Good take Results Carlos. Today, to first we'll and our Chairman, prepared will Thank and questions. remarks, Call. morning. Thank XXXX then Chief Jordan, Bryan Conference and happy us. Hope you quarter Dmuchowski, President provide to you, be CEO, Welcome Officer, your for our joining

as Credit here to Springfield, are pleased well. We Susan also to Officer, have with our questions Chief assist

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

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

aware our release that These notable of comments you to GAAP our the presentation. our to review is for will Page items. exclude which adjusted important earnings please the Additionally, and in be on results, X impact of are measures, non-GAAP refer information

Bryan. but that And understand current and turn our views, our that, update over reflect And comments should I'll things to least, obligated with are you them. not we not to last

D. Jordan

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

to our another and been the announced The good celebrate credit strength In driven returns and do ability maintain we record has nonprofit are March, and XXXth to client while talented expanding celebrated organizations of to to First our improvement revenue our for continue strong grew the strong XX-state first grants We the our First produce in success. performance. In grants took award business support associate of campaign, for company, and by in countercyclical our simultaneously our of footprint. that XXXX the $X.X where foundation margin anniversary, quarter Horizon, to expenses reducing to businesses proud honor our business year in believe of are market. was we through of we million resiliency will a And which within communities we and opportunity our both dedicated consistent for the our quarter demonstrating base. XXXth communities Horizon's long which our shareholders. We recently

as we On quarter the returning We by revenue $X.XX delivered the X, excess net have the positive million. shared of slide capital highlights with from per well common as for pre-provision XX.X%, prior of Adjusted EPS benefit financial up some equity driven adjusted X% operating the of to quarter. to improved on shareholders. share, tangible return $XX of leverage

returns improved net to We drive improved Our on resulted points franchise from and margin our businesses. XX the in from a deposits, loans and million $X both both our quarter driving higher banking interest core increase interest pricing basis countercyclical ability the net fourth in revenue from our grew income.

of FHN a to stronger Financial a authorization. capital In with ending common equity quarter, to $XX a over Tier repurchasing million January, million quarter Board $XXX began million well We the fees. ratio as return this share stock of repurchase fixed in approved shareholders our XX.X%. had $XXX income with a X increase quarter

We near-term will XX% opportunistically our deploy above continue target. to capital

just Horizon past to will that over XXX serving remain rest optimistic XXXX, as look our after strong incredibly have the while years. results forward of customers the quarter, we As I to I First quarter continue communities deliver and

of ever-changing a economic attractive profitably and outlook navigate credit competitive footprint, the us the have a that We an strong year. upcoming allow will set culture to product

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

Hope Dmuchowski

$XX million and metrics of net financials We million, will our prior $XXX generated On adjusted morning. revenue for the Good find pre-provision quarter. Bryan. you, you Thank up X, quarter. key performance from Slide the

excluding driven quarter, deferred fourth million from loan increase million $X were linked last merit, basis comp, quarter, increased Fees were million saw which XX by from comp, increases fixed in in driven outside up income the by reduction both elevated business, down driven income partially which our within improvements mentioned, points. XX% by pricing, and a quarter, the was quarter. as significant excluding in benefits margin and deposits higher from income revenues fixed revenue-driven for ADR. previously by $XX our expanded business. interest which, Net Expenses reduction fourth by $X That were deferred to a incentives personnel services, annual offset seasonal

profitability. lever a remain are Expenses we that pull increased drive to to able

offset our resulting efficiencies in bank to across us implement of coverage returns. million shareholder a continue of Provision identify expense our to drive $XX quarter, help that ACL increase stable enhanced X.X%. will We ratio the this and operational was investments strategic

Our return on equity improved strong XX tangible points. common performance basis by

On results Slide reduced $X.XX which X, couple notable in of by we share. outlined items quarter, the a per

which First of estimates stemmed from February. the revised FDIC assessment, quarter in incremental provided FDIC of notable for items include: the special $XX expense million

We expenses also restructuring associated initiatives we personnel operational focused million as remain $X efficiencies. finding with had of on

quarter. an in noted second also event We upcoming

notice April the in stock X. to The May preferred all were it the fixed in The Horizon Iberia May. X.XX% X-month during treatment on the B convert acquired to Series provided redeem coupon of was equals D window. capital X, rate that for a call qualify set will Series plus X-year over On First interest merger not as shares a and first was of outstanding a from do shares date

prior points $X with include will Slide associated X.XX%, margin from to Second million. $X you that retirement charge X, this approximately million of the NII XX will see On instrument. by noncash quarter an quarter improving expanded basis

repricing benefited the from interest-bearing with points in from cost X the declining of basis [indiscernible] promotional XXXX, deposit on quarter. full quarter deposits prior quarter First gathered

markets. cut still yields to as points of flows the renewing of continue have to loans cash rates rate see Loan competition decides Fed well yields Meanwhile, flows. deposit the from cash as the over in loan for of the The level redeploy to room X as spreads lower-yielding as ability also basis expanded new on and when on well fixed wider modestly depend benefit costs path rest will replace. the year expand as the to our we fixed

As you X, costs. reduction deposit to X see successfully deposits flat total reduction the deposit interest-bearing rate Period-end with and paid. to while maintained basis can are point deposit we've Slide X a point the our reducing quarter-to-quarter on basis a rate balances

CDs and funded ahead retention on of a We We continue see retention balances promotional quarter modest balances. approximately of last quarter. had XXXX initiated broker with in increase the second million $XXX the XX% as in strong to up the on deposits repriced the both clients in number brokered about maturing contracts of

continue noninterest-bearing February. relatively January, some of out see to balances we rotation Though, were in flat since

X% loan the an to prior are have our We Loans of up XX% $XXX or diversified quarter. were mortgage up overview end. on Period-end loans companies XX. million period Slide from at portfolio

loans slightly to this million in business. were in in that additional the free geographical up added CRE are average So and by seasonality down driven granularity quarter, illustrates fund-ups including primarily a appendix of the detail typical portfolio. footprint breakdown due the balances $XXX multifamily. We some attractive the

cash well a flows a new from points, flows approximately should next continuing repricing up and have fixed rate coming flows. new year points Loan rate continued Spreads loans XX over with yield wider we on spreads year-over-year. benefit X.X%. increased as roll-up as basis on the be loans X yields renewing continue of of Fixed back as $X to to basis of cash cash tailwind billion are

million not cuts, reduced remains prospect by primarily strong Service Mortgage first was expect from included increased interchange that On accounting we our $XXX,XXX XX, driven rebounded our charges a due levels. inflation higher fixed increased the million have peaked numbers digital Slide had due million the quarter quarter the on have can lower. though from improving business revenue methodology and in of overdraft market's see banking that The nonrecurring sector the daily banking fourth by revenue strong to income impact this and in also million an an businesses as and conditions volumes. fees Card $XX contributing relatively short-term seasonality fourth you recent as $X income. rebates. business decreased rebound headed liquidity countercyclical quarter likely additional and adjustment expectation quarter. fee rates rate to Average a Though, were of fees. fees $X as solid, $X quarter, and

as our well reduction noninterest and swap dividends Lastly, declined letter income credit of FHLB a $X million, as modest due to mostly lower in fees.

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

First, Salaries such were benefits unemployment which effective compensation. our $X as benefits certain X seasonality and million annual to the lines, and merit due in January increase, and match were XXX(k) up

these personnel outside is $X on decrease increased Second, the income incentives significant fixed revenue Offsetting driven million, services. incentives by growth. commissions to a and increases

engaged elevated fourth As quarter deposit our campaigns well for and third-party was a brand reminder, services strategic as on our investments. expense marketing as

we progresses, technology lower efficiencies. XXXX moderately will but over increase retention expenses and the As expect those implement continuing to operational expenses by identify offset costs be year, and to investment

XX. quarter, charge-offs quality or quarter. flat was this Slide asset Net XX to on cover points. million I'll reserves provision loss Loan basis prior were $XX million $XX

a already fully was quarter a loan C&I reserved. million charge-off we largest consumer company Our for to $X this were which goods

gives additional remained some charge-downs had We partial appraisal also stable detail updated commercial portfolio. granularity on ratio values. on of real The coverage of insight into the based X.XX%. the We appendix and our loans in $XX X provided that loan estate million ACL diversification at

underwriting client We approach to and disciplined have selection. remained our in

we migration Overall, On that to seen industries. credit additional capital some through we While have negative share XX stable repurchase utilizing XX, million quarter, you of see capital first almost approximately we markets authority. the can continue $XXX performance the see shares, and across levels Slide in grade of our to million deploying $XXX have while shareholders maintained repurchase of million strong successfully

securities CETX CETX and Share in marks point threshold. the Adjusting the at X strong remains is repurchases regulatory above for a capital book, quarter our on ratio forma which very would pro well our while drew basis loan portfolio this X.X%, XX.X%. be reduction

above We opportunistically XX% our deploy will near-term target. to continue capital

income, mark-to-market $X.XX countercyclical $X.XX per our buybacks. On by reflect performance and impact book XX, tangible updated $X.XX Slide from quarter in benefiting of to businesses. $XX.XX, of we've slightly offset better-than-expected dividend First of higher XXXX value to share share outlook increased by our net

X% expect originally to we to year NII within to fall full continue the outlined. We that growth X% range our

material from continued for up and believe $X with June, assumptions of will million last countercyclical million to a interest $XX fees fixed We the forward in we to Though outlook. our the the income in that includes do have our market's our from saw quarter. mortgages businesses updated expectations have evolve prior it strong September and performance curve impact first reflect which November. from rates few the weeks, to March, We over not quarter cuts have

to perform range an our outlook continue to growth of to previously income businesses X.X% noninterest well, which from these a X% has XX%. expect We improved for to updated

The efficiencies times remains shareholder our really Slide benefit seen but to the expense due the value. a the XX, you company in focused have in drives implemented. up unchanged. few countercyclical Despite that I home all we that revenue-driven outlook will on a on slide is to increases wrap we which order of maximize businesses have operational it incentives now, are to

First quarter to is and beginning Horizon. great for this XXXX, the was a year strong to I start First a believe

to maintain guidance. original guidance, finding out efficiencies than we our expect better We deliver to operational in performance revenue laid expense our while

to these tremendous initiatives been talking improved almost associates and for we our our better better have We efficiencies. will are offer and on the products, and service us year progress a strategic about allow making now, investments clients

a has cycle. top provide can quartile any throughout business that Horizon First model diversified results

with We legacy communities. capitalize XXX-year our positioned passionate are and our to dedicated well clients bankers, and on

commitment continue increasing and We our returns. strength resiliency will demonstrate to shareholder while

Bryan. give it back I'll Now to

D. Jordan

you, Thank Hope.

Our franchise first strength competitive in the and industry. extremely ability quarter improve to results of the an profitability our reflect

franchise last great this the the enthusiasm quickly clients people, and in made remain efficiently. associates company build As which unparalleled strategic investments, more an on the the confident our to year mentioned, allow have teams the serve I that has our and will to banking Hope our our South. progress clients to over continue

shareholders that is look the our which will next expectation similar the tremendous of me the to months in our quarter, My ability rest for gives the generate economy confidence to year. the strong few for throughout first returns

year. Officer, Chief Finally, has I Susan that touch Monday on want we announcement this Springfield, made later retire to Credit to our decided the

We successor. her have named Tom as Hong

client and runs role. and currently franchise Tom experience a credit finance business brings our of the to wealth

end remain of missed. Tom We with seamless to started have be will to company the he a the with already process greatly ensure retire Susan's will suite officially she into a serving better October on X. the until is Chief Deputy the and as the Officer prepares Susan step help Credit role transition year The as to decision transition.

She credit her career. led Executive a for served number company having role through those credit as the our throughout has She Chief of countless vital of member us years, as distinguished her XX young under been Officer a model quality XX adeptly a strong well leadership. for cycles maintaining with has as Credit Management been professionals nearly to mentor of years. Committee and She

We are steadfast and our her unwavering to her incredibly grateful devotion and team for leadership clients. our

up Susan. Thank for we Carla, it questions. you, now can open

Operator

[Operator Ebrahim of America. from Poonawala first comes Instructions] question Bank Our from

Ebrahim Poonawala

and the costs. hope for NII outlook. guess question deposit provided past, around I maybe In just Hope spot first I rates you

And the spot in rest gifting XQ? was how should us, higher? I'm if cuts rate mind, of give terms the if year? the that we about you of don't drill if get assuming the we what Just we think into much for end rate at can of down don't

Hope Dmuchowski

hear Ebrahim. this Thanks, morning. Good to from

Our the quarter kind and end spot total timing. of the of average interest-bearing rate was some it's flat is at some up it mixed, on of of slightly deposits on

I our quarter. the what on for really overall costs So deposit to focus was want

Our from peak a to XX% betas of down went XX%.

the . momentum in are to continue the bottom to of have able repricing We We're promotional them. at seeing and reprice the retaining competition. being increased we and deposits, balances probably

We The deposit going within it to be the mentioned, down first the be next the quarter. will drive a a X% meaningfully. to here or The probably where be year you think month of competition we're and flow predict. basis that think, is I on harder, rate and the couple so rate then It beta points will month for costs to get As changing cut. could week. just of longer either within But the costs close is to to I up hard a there within really side. the us spot where deposit on X rest market quick takes continue is to a maybe pick

so And to of for I be month-by-month to you it's think. a going that? add the look Bryan, want to kind something industry,

D. Jordan

ahead, Ebrahim. Go

Ebrahim Poonawala

you X% step just a or back, and cuts, Yes. going going look more X% to be X%? to guide, is guess be -- like it growth? gets to we is No NII we what I rate taking get impactful? Is just -- the that not delta when it to whether at any what's around loan or

Hope Dmuchowski

would Yes. end cuts. the Ebrahim, if to definitely you rate get to have higher less of that guidance, we see

asset-sensitive an sheet. have We balance

to for And so cuts thing going us lower do on of the year The within end. the at handicap X% what I rate right puts higher is can't full costs the end, more are the to to less that X% deposit the the now rest year. put rate cut

year. deposit point we start competition in to for rate costs assuming guidance and see given an rate see cuts at originally don't half year, going some down we don't to of the as of late predict. industry. to cut any it But positive cuts to That's to we'll think end on harder as that end about the the for gets with a the curve lower guidance. it in us more the higher for current little get and where less is we if had a We cuts, the see And we to see rate early rate be be me

D. Jordan

in question X be ] to fourth under based cuts is seems remember today and X get that You'll we market over laid And XXXX. guidance laid bedding or X rate out it we as the when we're ] their whether that about [ ] on going out not. [ in to [ we quarter, and

will that it. dictate So

loan many be do get. deposit by both will actually we affected pricing So and cuts how

in some the [indiscernible] out that that margin up and of competition not most significantly. I As there. competitive pointed is you're pricing out, think releases show fairly earnings playing important we're this increased are seeing solitaire. aspect managing the marketplace the we've doing in We're seen of And a

base I growing deposit of sides continue basis managing to continue we'll continue We'll we're protect the compete on bit a franchise. protect long-term as of the both so to to every on our sheet. and our focused And say base. would we'll balance customer

and You think point this will continue given -- seen that on at you've and on stabilized competitively. think just spreads deposit we improvement loan improvement of saw it's on pricing what's going we sort

Operator

Our next from Raymond question comes from Rose Michael James.

Michael Rose

higher Can be? continue I of just flows what think the you in to you magnitude just prepared loan remarks, as the can could this potential in to us have move mature. And that just some I sense seeing side? a you're areas and the demand of of that you give commercial Brian, cash mentioned if little yields bit generally the a existing loan generally seeing comment from are on what at you some some real just commitments Obviously, think but estate C&I markets on your point. fund-ups weaker, for

Hope Dmuchowski

Michael. Thanks,

my I redeploy flow that have loan forecasting be prepared As we're up. comments, mentioned a to of a fair of amount able slightly flat to in will from we coming in we maybe kind growth perspective, do cash

we in that to and redeploy product we and As assets to us. at mortgage that yielding it's a our seasonal warehouse have. QX, of that highest for where is look and is one QX up fund tends those

seasonality look need of kind year how we to look of the project, business. at that when at So you the

some businesses. We continue point to way to and above margins basis in top XXX on anywhere the from XXX new renewing expanding up business spread all our and see business, XXX

client be will specialty when that the think about of businesses, confident new for on they able with and our to end that. existing to be be businesses, spread, regional But you we'll put higher clients bring you to that Horizon loan be they expanding are and think into the when lower slightly our clients able margin. so feel this we our about demand, either side portfolio and loan the And a have First into able franchises on slowing there

D. Jordan

up Loan real loan loan It really demand is demand aspects you has demand. in that pockets Carolinas okay. of have some pick I'll on very where is strength see Marc, you not great. It's good. the been

other softer. see probably You bit pockets is it a where

As seasonality third some business, second up to of in still and year and very the started as existing looking lending stronger of warehouse good up we where fund the and how the participate, we're moving really relationships usually and opportunities benefit tick have season opportunities. mortgage on in growth We're that's you structure, seeing do about see on and some in and quarters our but selective the you we the generational kicks overall, being still But we're in. particularly for price those to business. move long-term mentioned,

will benefit the to economy to a still our how as very a view, of we rates relative on good up. very to is move, I expect demand little South lean space in going it's from going and speaking, remain rates economy we're I the people much when being more general is and and dynamics. the not have economic think that has Fed the simply bit in know, about The in think people between But and because up certainty to sector somewhat in U.S. in. not are strong down. rates cautious more take moving likely you the is to And that I bit that's little start a in been And all loan coming that world the still modest broadly going anymore, going a

think loan the will soft, demand be fairly of year. we over the but it So improved course

Michael Rose

in balances upcoming think have the drove a That's Well, on maybe were retirement. if I billion of one at describe the quarter. Susan. just just you update the an $X they what my of little great increase for And Can to And criticized you end, at over color. the congratulations deserved. quarter nonperformers. then your kind fourth And follow-up, as maybe end

Susan Springfield

Sure. And Michael, comments. thanks, for the nice

consumer care were nonperforming, one credits, living, That nonperforming a facility about living increase -- we other finance As facility company. the loans. memory driven and go was a few new senior -- up million, living, that to X and was senior it new by relates assisted was $XX largely we nonperforming a saw

somewhat some kind industry continued grading. this -- [indiscernible] year NPLs, most up, see a so did We or more had but on so we not movement are we're in to And of special we're Again, borrowers. are was conservative still kind it criticized, that slight borrowers. seeing when have balances relates as it seeing mention weaknesses any potential look -- a specific seasonal getting taking as we go just with of working watch of those sector. at we're end frequent end financials And there focus more defined point, not XX% about where in credit status, much weaknesses on

to table them. have pleased really I'm than real this Is work in to see see, the well to bring rate We're wanting lines classified work interest with due commercial thing and really challenged We opportunities to additional is as may to as temporarily XX% other up us? in quarter-over-quarter. loans that were we with The wanting C&I. estate borrowers then be as And less environment. coming

Operator

Our from from next Jon question RBC. comes Arfstrom

Jon Arfstrom

just Arfstrom there? Just did question, a Susan, close. we John Can seeing set expect you're or so for think follow-up what new for nonperforming you, Michael's you trends And surprising should the do that credit? XXXX? on anything expectation any you on on That's --

Susan Springfield

regions. anything for conversations, [indiscernible] bankers a each borrower. by kind deep one that Great We've a seeing stories lines reviews our me. -- of Really business surprises number Yes. look, about in of going we're had portfolio on. what's different dozen Again, of across talking has

with great bankers are Our conversations having clients.

Michael's be As we pleased how question, what the I at talk to to table, still do? I'm to able a need rightsizing about do really loan to mentioned we're or see earlier

from projections updated getting happen, to going clients. is think you do What

about still portfolio. of ultimate performance feel we the So the good

interest now, on start any increases. go to good seeing of rates about see whether happens if efficient, able seeing adapted it's their you're to being any loan right environment, things differently, we Jon, cost who environment. loans in have The having do down, to terms that's how interest just higher of obviously, interest to think start in depending businesses new start not think to the I with increased to rates, going rates a probably And how operate pass this nonperforming or lot what a news slow [indiscernible] I or to effect. -- though, learning rate rate you'll borrowers in more

we're disciplined always cautious. and is, how underwrite selective. mentioned, it Bryan being We're client in we're still So we discipline selection.

And eye we're so that's keeping portfolio. us well, an serving on the but

D. Jordan

Jon, of see add really time. short higher I'm lot anything of at credit all terms what I a would movement higher fairly to not in that. you're surprised of a getting performance. by with rates inflation I period and you and interest would in expect

up And across as terms relationship that and our position. doing are the our stressed borrowers' RMs going portfolio, PMs deep their as teams, would understanding her have very credit proactive financial our have is well a dives who a teams through entire transaction more show and been at you're level to performance. Susan little I of going say economy, to and by borrowers in

very said, being with rightsizing loans, had want in with working tremendous work us as stepped borrowers and to cetera. with success said, also Susan a et As And up we've Susan who proactive borrowers. with

that going fact, So portfolio I'm in of performance we're comfortable very that underlying way in the loan a pleased see, position. I'm with we pretty this not good structured on surprised. economy nature the very I'm and the given And the I in what's

Jon Arfstrom

repricing X, highlighting you that? because billion what I from loans grind is you think And is opportunities off. you're about uplift Can deposit to that rolling are this message enough. higher the repricing margin Fair of and done. expect the probably of the Good. $X that some then of Hope bottom Slide talk the here in And repricing X. for Okay. are Slide securities on you The

driving about more this So over right of that time. higher the that's message? margin the Is kind it's repricing asset

Hope Dmuchowski

message, right the That's Jon.

X% rate I lower, in $X pretty first think change higher basis steadily a couple seeing and of yields rolling we could points in points some that the specialty quarter-to-quarter businesses. basis X% the But and you're cut. a until X.XX% billion positive in have go see yield, at may we off things of market our and X couple that

else that on securities And so of our money be with something versus to absolutely or spread. putting attention the in parking . increase work that sheet to side balance to our the client is able

Operator

Our from next from Jefferies. Haire Casey comes question

Casey Haire

you The Hope, you a DDA than a bit for highlighted outlook. January. NII guys kind attrition on lower question the in of little

Just going wondering guide presume DDA forward? for does what this mix

Hope Dmuchowski

is a range -- range point basis there. guide The a X Yes.

don't it is today, bearing, assuming with we noninterest balances again, that larger get of pickup we're kind the could assuming help in the below saw and material outflows any We taking us right? are range the -- risk we that I But saw a to some really a to end see we're February stabilized. We if if range. January runoff. bottom, flat that, the March think to were So of higher see at us in

through little the a First low and year. bit back come tend be then seasonally to quarter does more

Casey Haire

start if good. picture guys pretty link. ready for $XXX guys and on -- but Okay. down you out weak in there the have big billion question to that when X. guys know When you I are start the Cat the time, and you I'm a you versus Cat I X you on liquidity just And side. a group, the just book then to do is shape Very loan-to-deposit when getting compare that do securities good wondering build and/or It's ratio? drive address

D. Jordan

lot a on work there's the to impact all banks. -- understand the The of industry going category on potential for Yes. around

And in good I we've As pretty we it. lot around a Casey, you are note shape. of think work done

continued to stress testing. have run We

the categories, X compliance which sheet you balance issues will not major of side. some in have all place, highlighted, structure really The we build fall We and on into the infrastructure that out infrastructure is X liquidity.

X a those for of potential sheet a debt, sense loss is or TLAC. be liquid we fund absorbing total sense, that either. in on in the capital can And other some long-term And debt raise can lot don't assets. solving balance to if our mutually have The that high-quality we we use

in We're said, we to of have prepared that greater to particular sheet of mindful sheet any of from the TLAC game, steps threshold. moving the get III need have years shape around get And balance Basel we'll we as get we time. clarity today. we the for start that to X We don't take a FDIC's the to better next proposals would have the over. crossing you feel that urgency . or X X hurdles sense as So the those balance over

Casey Haire

Great.

last for Just Susan. question

You on updated Hope of within a the mentioned CRE losses mentioned, or appraisals. handful bucket

was color to if Just on decline as underlying the price what wondering provide you could some those properties.

Susan Springfield

average, office ones, saw varies had in range. markets I see on on market, I'd just And of really XX% some properties chief the [indiscernible] we're I they XX% like with decline. to but close or what the it major markets strong it about in say, seeing just good in can Yes. yet get in a did Florida, nonperforming on probably Casey, also but on seeing And a bit certain you're by in have office small that that you replaced, properties X% just larger a terms X%. may general. to haven't tenant a we our contact on reappraisal specific perspective, mean appraiser, in talk

basis. it of an individual is So kind on

as All a new credits and in the updated of markets one to had quarter are related so just office footprint. classify X was most relates that a and appraisals within charge where partial facility, office. more X we space our to different it this actually we As took mixed-use that the

Casey Haire

Okay.

sounds -- use? varied are property type? a most it these were like mixed And so One office. was by underlying Or -- the was

Susan Springfield

which had space real we was estate. were retail that in some took multifamily. also it space, some had . million mixed and the a $XX pure in Two then office The and commercial use was predominant X that that charge-offs office

Operator

next Our comes from Shaw Barclays. Jared from question

Unknown Analyst

the you saw the because this Maybe with Casey's happens sticking Is all what it's credit What that part Or CRE. CRE? revaluation? drove is if not question a revaluation? on broader, to guess of individual revaluation I a drive migration? broader And of

Susan Springfield

downgrade. within Yes, we months we of real a partial there we loans first whenever downgrade of loans where of Jared, several all, estate do get number that on are that appraisals have updated a downgraded to non-pass, the things, to -- nonpast policy

-- X start to we then deterioration -- at further be if -- later, going in having these months this look cases, X nonperforming case, all in see on. we these may as we'll repriced these to were loans what and then we And just were

in an other that or need the tenant it it maybe it's individual being be of was it the thing was lower an loss rate, up was if trigger I -- there's thought could at a The cause loan, the maybe could is that that to can appraisal. something renegotiated. come for renegotiated going it

X And need the to and got months like we've we'll that make So being we last valuations of not this in case, we then the to believe if within do in conservative. reappraise correct. sure

Unknown Analyst

Okay.

you X first an those talked reappraisal. that nonperformers you So reappraisal. loans, additional hit with I they previously were so and X-month, did what the they about guess happened

down that call these down if first What it, to are So was peak XX%. from maybe current? reappraisal step

Susan Springfield

So on that I -- mean... of them. on one

Unknown Analyst

I'm I reappraisal, now assuming markdown sort talked Well, of that X those from -- magnitude origination to markdown? what's the were is you what guess, XX% prior on previously about I a of current the loans guess X-month nonperformer, what

Susan Springfield

Right.

to what by average, that. it back terms But on seeing at again, does I we're because So do of hate I in really -- look vary property. -- to have and averages

down XX%, we've it underwrite was significant nearly case, But from we appraisal in was appraisal. that one cases, that seeing got much in them. we've then original when an charge these other of In XX%. properties our not we're changes got XX% because So equity

building. there's number for a So different . each

Unknown Analyst

business, on fixed to for the good right. in trends shifting Okay. lower quarter. how rate we ADRs for that the in Or Was what's pace the driving All good saw maybe going environment, should of it off? That's expectation stable be guess, I activity maybe this then thinking then really tapered just that color. the the a spurt and about ADRs -- early of And forward? of income some a you year? rest

Hope Dmuchowski

I'll start that. Jared, Yes.

put of a first to demand The pent-up of liquidity has been lot not is sheet right? been There not There was has use. a there balance a lot repositioning.

to earnings happen good on we through started in that call see a talked it just our carried We So had December, QX. last which December. and we really

pause And of Additionally, us little we behind of given current it more of bit that. a the just us, week and in so some a kind of has think is that catch-up was

could will see has We are like? see increase not -- talking about year, we a a period but will cuts, of time. And it stall we'll this that for that look freight if rate business what

call, QX. run year, at except all stronger in you the which know this significantly you if still for year I saw And do last every quarter rest the a $XXX,XXX-ish is current ADR guidance, kind than of it assumes for we of the

Unknown Analyst

Okay.

Okay. just the Or aggressive you $XXX buyback, in on million that was some And quarter there unique finally, that. me activity being authorization? of thinking Should be this we accelerated that may anything continue have you that for on the quarter. strong then first pretty

D. Jordan

stock believe growth, buyback very that been target. loan for No. look and growth. is for absence a balance opportunities to in of is but excess to great be we'll in has We'll and pickup XX% opportunistic, manage and vehicle the to our the i.e., sale, still relative on we that the continue doing . sheet near-term significant that capital a

Operator

Our next Chris question comes from KBW. from McGratty

Christopher McGratty

Great.

something follow Brian, question could wanted term. maybe in this I the that lead you is on up on down? there to would up directionally or mentioned And change XX% . consider to you the buyback. what Just year? near you guess, either Jared's

D. Jordan

think near percent I Well, think the right now, I about don't don't term. changing

inflation in it and anything environment the to I significant be changed, significantly. uncertainty few think economic if economy have more to want enough there's a still a the abating cards we interest pickup that in the and see rate would environment

I either point. And don't X anticipate at those of this

game probably in and Basel term. to is this So have about the We'll near likely what like can look year of clarity -- manage the by from III to greater end there. to we'll Basel is manage we likely III XX%

we So And as we're with start pointed that comfortable target. in out XX.X% ratio we with earlier, CETX.

a we're we bit to so of going gap have some little there and earnings. And have

the the significant in quarters. that we've next think can over we with dent make we X got the authorization a So that authorization capacity

Christopher McGratty

assumptions of the one banking on just mortgage, on gain mortgage but for linked hope guide quarter. about And fixed Great. more lot sale the is Okay. what's for talk line Maybe income. maybe in the jump just a had the item fee directionally your your a business. in income smaller The business, a

Hope Dmuchowski

was last was It's and here. QX year not that off mortgage QX coming materially from somewhat a up low for anemic record space. pretty in originations

we're . big not expecting And originations coming upturn, a so but just a in. continued

Operator

comes from from Our JPMorgan. question Steven next . Alexopoulos

Steven Alexopoulos

to has that York how Previously, out, I'm you Community a go impacted still question Curious you situation though crossing I how And your feel transaction billion. to answer back Bryan, if given about threshold. $XXX that how said this a wanted curious, think that New you played was method. Casey's crossing to the you way. preferred

D. Jordan

about I the part, it broke way bit. feel little again, up still a Sorry, last what? what

Steven Alexopoulos

-- want yes, that or want you fall the in to a you how to more Well, curious just over I'm less that community you past don't billion, played indicated past see to feel way transaction. leap over the still $XXX if you by out? your

D. Jordan

M&A a what two, have that's a bucket, it approved. I approved; couple separate long you put about takes and yes, thoughts. get it you still Well, have can of guess if significant I one, a in get yes, how to -- reservations One,

the And looks idea how greater it not And do much so crossing you a $XXX have? independently. threshold, good to readiness like in have something billion then particular, with without couple clarity that you that's and

make think achieving have category to I preparedness bank or a to while in cross, is it what M&A degree a inside would an would at don't information, show tell difficult that really gut transaction? greater happened a for tell I I me of recently there very of a path near-term to you'll significantly a to phase Is be the likely context in, X-year and a if have significant my more you any you that. for cross

it fashion, said with think it billion you perspective, in that the M&A make threshold. it's does organic in independent shareholder it of and way, the sense an So deal a to that makes if more the capital is a likely and term, I from then you it near cross trying right to makes sort and another of $XXX cross likely and deployment it be threshold strategy

Steven Alexopoulos

growth. funny not talk When helpful. That's and your in stronger Florida, If last loan up look sense. Okay. in year. flat pretty Texas I fire. look commercial probably markets. on or prior at Why going seeing what's quarter, you about at GDP C&I is Nashville or your bit makes it's X% is loan they're the could a balances, on market when I That shift versus And growth? they're are I gears versus

Susan Springfield

that, of take Stephen. part I'll

also taking full clients. as growth, terms said to clients of first in Brian loan terms very we're We're of been And selective existing and bringing earlier, new sure on focused all, underwriting remain relationship on we C&I we In making have on that continue of of first. focused new care businesses.

good That as new open business, hearing clients. increased to generational existing pipeline have we calls, also business. as bringing some for and but well customers opportunities we existing some are with hearing being opportunities our And specialty and in for we said, in both and some as are opportunities of brought again, lines we are us when additional in are we well have as seeing to opportunities our communities bank some

business. think our some for our and loan markets that you growth see I So opportunities will across to continue

D. Jordan

that a are As I is are pockets stronger others that Susan softer. pointed and And little are Steve, right. earlier, out exactly some there than

to it money, If door the the build and really doing easy you bank want do step transaction, is back, and relationships move banking, we lending the the and business. of relationship we looking part are to relationships, out getting

the we've there away long-term outstanding of working It's where I teams taken of to some nature build really opportunities the our think how long doing relationship. an business. are relationship And job from a in some relationships a is banking opportunity for for not you term. step And the transactions.

between that balance we're the profitability trying sheet and a So manages manage balance in to growth. way our

Steven Alexopoulos

that? more on refinance squeeze extensions, of real the you out like schedule quarter? tell on here what terms you loans maturity real of Can Okay. those one here in That's And I balance if things slide. in was work for estate. see in commercial the could how the did fair. Maybe do the first commercial estate that team I us

Susan Springfield

traditional things we've terms in came come that really up up, earlier, we've I maturity. -- again, just could at kind working things clicking way of terms It good appropriate -- had is things outcomes a had through, be the good and looking when have that along on been should, In there terms structure. look borrowers they in and to of we a renewal at with as are -- have we of rates of refinance said like

bringing to the about paydown in we a reserves. or money talk Sometimes with table terms do some borrowers of either

been kind our that that we I think, also to and more for have I cycles. we're a is this Bryan exiting work this see of disciplined incentive us. but the certain I being There's didn't again, in feelings XX% that borrowers not was seen -- really So we've you, good is to last one, the of approach refinanced is at in if about us. a that us something talked out I business. to earlier, right might The borrower emphasize out would also refinanced of that the the that network our do on thing been portfolio, in would we very underwriting cases with And really to we're the continue or our that updated book potentially also you about all through we aren't estate there's look allows and to of get grade will outcomes, have of either come our office our still occasionally tell add mentioned appraisals commercial in I've debt. able table stabilized of want loan-to-value of an even a things hurt -- work credit have relationships. lot us, because things But office have real that having, of things cushion is were And we've to of I equity our front where success with as that the in -- One them, good with to bars ability that like

refinance. there too, some it So them for there to going when forward are profile our that doesn't it's there, risk opportunities that fit to still are see good out opportunities

and options I So we all that maturity, for have work up ability our I all, in feel about with come them the that things feel good have. to

Steven Alexopoulos

upcoming the on retirement. congratulations Susan, And

Operator

comes from Our next Braziler question Wells Tilo Fargo. from

Timur Braziler

you, One real commercial Susan, more on estate. for

at over the lower. been here? coverage the ratio coverage thinking compared looking coverage modeling we don't give it Maybe ratio? looks couple and degradation get in that any kind And you of be if how two. quarters tracking I build of on us just coverage those ratio improvement broader in of the rates The about you book. to CRE to allowance to some That's kind XXX% space. see modeling the an should Are we ratio ratio? a puts allowance the it last the it's like Just Are takes guess today. of we and

Susan Springfield

for it every process a don't As and disciplined don't and that each I such -- relates as emphasis to various specific ultra We we cases. cases, at there go really lot We those out allowance are through ] you, base number. process, a upside quarter outlook, put different tell things on a that stress scenarios we but [ are of well. as don't things case we don't shoot would look are economic the there

like. qualitative outlook look needs to -- decide we related more have would need we certain then just may that And overlays segments either than an what that economic may

As you with considered CECL, loss approach. is know, CECL a lifetime

several emerge. know, is interest our quarter-to-quarter. what's reserve we -- change as based outlook things we're we earlier, know, this like on all dramatically know I each And coverage the you can So are we based on rate experts and internal what outcomes what as as that own different pretty reevaluating and that. could today quarter, But external mentioned right we're believe saying autonomous

able do quarter. is seeing that higher I still we inflation, think that this being said, talked to and economy each rates, remains higher the All I strong. interest -- a take economy Bryan look to every about being at We're something think the this, borrowers but adapt

Timur Braziler

component are buckets, give leverage Slide that then just funds and at of to what maybe XX% of composition Great. follow-up, using And specifically, XX C&I you what is? the is commercial ] that's looking companies. my Can loan finance for loans? insurance more C&I on [ balance as borrowers reminder the to And then those us that a

Susan Springfield

Yes.

bucket the lending how would one So to number and nicely side rate environment companies of consumer insurance tell number exact the have it has probably a things is me and to good sophisticated that I asset-based I funds. business lend for interest been to many had much we many, in they bar, borrowers. on just with further relates adopt that how our as years. things seen I of only the that in -- no [indiscernible] we've deploy. finance we've you A as finance got also higher we've to of different part of don't very business, it then others. commercial it to a is company,

not bucket. It's because portion number of big of have business-to-business site We of that not it's for lending but a some and a us. do significant arrangement, finance that insurance

would So highlight those are bucket. in the ones that I

Operator

Our next from Citi. Ben Gerlinger comes question from

Benjamin Gerlinger

curious here bit I the like the was change. seems belabored a on I as It the fees guidance in you -- know [indiscernible] quite positive. big uptick

Or think annual X being cited Should you at X So throughout I to fixed efficiency the kind of of can given of that you've cadence fees the from going income year. now range of see we to about Just higher are and X% X assume XX. higher the mortgage, also expenses closer kind to businesses? which the lower? X ratio think the

Hope Dmuchowski

the expenses on the a conclusion. question. high the will forward-on say be I not for would thanks Ben, and that's end, that

we efficiencies. As are at operational mentioned, to look continuing we

in right have go that is into growth we environment, this technology to at a the are that's what efficiency. place lower additional amount significant loan We year to of run way looking going creates the a organization spent

for looking coming at and it. we're what up that's We're looking every at contract doing

increased And assumption. the we but not have If high guidance derisk probably be increased end of so thought the [indiscernible] I But no, would revenue to would that it. end that, you make things on that, were high I not honestly, [indiscernible] the our and to was goal change. can just be I in at

Benjamin Gerlinger

Got you.

leads it I if To cut because worth implies of about? to our in new X? you even Or actually know my guidance. question end. would to going of It year, fair. ones X That's something . me, you're took to out kind next get is close to X it kind from the like a that affected, a to the of X we Okay. higher be to think plus X middle to Like

Hope Dmuchowski

I could. Ben, I wish

you every get as soon ALCO of which the every we number If run, will month. puts There's out. we release models to it saw And CPI month, new as said had single how data, somebody something. something,

let to the the that we side. you immediately an side don't know environment previous said to we expect come -- expect the said, in If We size it probably in low of that specific. to end expect side be we're where our don't guys knew was the could income. think we don't low that just high we was going because on of kind I we thought like so we high high the fee be or And that to be we guidance

hard, NII in a as is very within . this much X% very, we Forecasting have. with environment even parts range moving

Benjamin Gerlinger

you. Got

appreciate it. I Okay.

clinical worth, similar it's X numbers. want For and I model a run

you [indiscernible] So I appreciate [indiscernible]. doing the having

Operator

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

Christopher Marinac

modification. loan you to Susan, I wanted ask about often How are seeing

[Technical Difficulty]

Susan Springfield

repeat broke part of you Can last that up question. it? Chris, the you

Difficulty] [Technical

D. Jordan

be might He Chris, back. you back?

Susan Springfield

and Chris to in the queue. can back the on next question hop move Let's

Operator

Our Brennan question Crowley comes from from next Baird.

Brennan Crowley

I I know discussed, kind was guide of with And this XXXX what here, underway do at for but guidance, your number in a a the Is bit. months? X that to operating seen X difficult positive initiative walk kind you today? last year, know of investment and year? possibility it's what back Given you've And going as point the

Hope Dmuchowski

Brennan. for Thanks the question,

on we where you . the is, which range in. side leverage depending it of at or on operating if think is look positive, I neutral guide slightly the come

D. Jordan

the is short, in answer So yes.

Brennan Crowley

Great. I right. but just then the investment and portfolio that as actually this I prepared a quick saw the missed follow-up, yield fell And in sequentially. remarks, maybe All

over you you manage if the wondering . And there? about and portfolio just plan next talk then couple kind of driver guys the to off quarters? how maybe I'm of roll could So the

Hope Dmuchowski

Yes.

our portfolio. not mention, reinvesting I'll currently First, securities in we're

change is of was it the redeploying So we're saw But sheet. end just into lot our the and market volatility that letting of this sheet. that side where the run A of quarter There nothing in the mark-to-market the balance our the off loan is balance quarter. at material you with

Operator

Our Varga Samuel next from question comes UBS. from

Unknown Analyst

XXXX? ask color rate NII. on on similar of to on backloaded? you billion Is $X loan even where Or same last to is it the is wanted Could just bit I give one how it's follow-up some pretty much you fixed front a through securities appreciate I it the or the that touched more every repricing. quarter?

Hope Dmuchowski

Yes, bulge There's it's the a quarter. pretty or quarter through . consistent being not backloaded.

Operator

from And Christopher our from Montgomery comes Janney next question Marinac Scott.

Christopher Marinac

resolving often are to loan loan of a about wanted modifications any this they you year type I next? and for ask or Susan, how tactic

Susan Springfield

to maturity, a either not Well, if there's true always need I modification. really -- any time do. mean we're we do we a at have true what looking That's

in an some best the tell and for keep with sole figure about farmers bank frequently with deals by of special modifications. business. be obviously, them be our we're that to are lead modifications the that, also us loans are borrowers to bank our part handled to for of group work but of I our we on wanting the might ability shareholders, are in noncash complemented have together would has our our and outcome them to we we're in the loan work them the with a it when cases, on could then out what our where have work are bank the where we've and And appropriate or bank interest assets group on terms some best that Chris, of outcomes are if group, history you, in work location. best In there obviously, situations a

cases, And a ahead got as they've earlier, lot us. mentioned equity many of of I in

economically client. and have working with and viable a us come interest makes they is the for something with both for best up in So sense to bank that -- the

D. Jordan

Yes. to I'll I often say look a don't and say be our Loan we I accounting to modifications what And it said, lightly it this, partnership. client an at Susan used of ART. as term echo

through stronger. our that and our at really work of don't that same the use supporting And I communities downs. the we the modification. so consider and the drive . And our we just and that customers long-term consider sheet that and makes time, and relationship, long-term ups relationships profitability our balance I organization

Christopher Marinac

on ratios. going process a to customers? follow-up rates that's criticize quick No, just to And interest a the instances service great. coverage How you Are you falling? Susan, the due in have just DSCRs loan is debt where for stress seeing higher

Susan Springfield

a come special have if mentioned I their point. mention the time. interest would that expenses be upgrades at I mostly see special do coverage see debt we to It a been they rates lot than loan. predominant it in mention Yes. -- might be while that do service that's as start still loans status, I certain say would over category. of to earlier very be expect still covenant taking you'll point out do in we're either and able That's actually the category, downgrades coming criticized -- or and borrower good -- We Chris, the it's initial the or that into operating expect, adjust to that borrowers reason back either bit of of less a that expected at service a down. where a the dynamic

Operator

questions. Jordan We currently over have back Bryan I conclude. no to hand will further to

D. Jordan

we'll a time be joining appreciate Carla. . everyone information, interest this Hope reach you additional further company. or need the out and you you, your appreciate questions if have Thank to has your everyone, We day. please in any great to our you, if any help. try Thank call happy for morning.

Operator

Thank joining. for today's concludes you This call.

You disconnect may your now lines.

First Horizon (FHN) 17 Apr 242024 Q1 Earnings call transcript