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01/11 03:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A indicate strong financial performance, optimistic guidance, and strategic capital deployment. The company expects revenue towards the high end of guidance and maintains a strong loan growth outlook. While there are some competitive pressures, the company is managing risks effectively. The positive sentiment is reinforced by the company's confidence in achieving its profitability targets and the potential for strategic M&A. Overall, these factors suggest a likely positive stock price movement over the next two weeks.
Adjusted Earnings Per Share (EPS) $0.51, a $0.06 increase from last quarter. This growth was attributed to improved returns and operational efficiency.
Adjusted Return on Tangible Common Equity (ROTCE) 15%, an increase of 135 basis points. This was driven by earnings growth and operational improvements.
Net Interest Income (NII) $33 million growth, supported by average loan balance growth and contributions from the high-yielding mortgage warehouse business.
Net Interest Margin (NIM) Expanded by 15 basis points to 3.55%, driven by a 14-basis point expansion in total loan yield and recognition of interest income from the MainStreet Lending Program.
Deposit Balances Decreased by $52 million compared to the prior quarter, primarily due to a $652 million decrease in brokered CDs, offset by growth in index and promotional deposits.
Noninterest-Bearing Deposits Increased by $131 million, reflecting strong retention rates of 97% for clients with repricing events.
Average Rate Paid on Interest-Bearing Deposits Increased slightly to 2.78% from 2.76% in the prior quarter, reflecting adjustments in deposit pricing.
Loan Portfolio Performance Period-end loans decreased slightly, with a $132 million decline in loans to mortgage companies due to seasonality, offset by a $174 million increase in C&I portfolio balances.
Fee Income Increased by $26 million from the prior quarter, driven by improved business conditions, higher ADRs, and a $6 million increase in mortgage fees due to MSR sales.
Adjusted Expenses Increased by $45 million from the prior quarter, including $9 million in personnel expenses and a $20 million contribution to the First Horizon Foundation.
Net Charge-Offs Decreased by $7 million to $26 million, with a net charge-off ratio of 17 basis points, aligning with expectations.
Loan Loss Provision A credit of $5 million, resulting from loan payoffs and a decline in the ACL to loans ratio to 1.38%.
Non-Performing Loans (NPLs) Increased by 2 basis points, remaining relatively flat and reflecting stable credit trends.
Common Equity Tier 1 (CET1) Ratio 11%, flat quarter-over-quarter, with a near-term target of 10.75%.
Share Buybacks $190 million, with approximately 8.6 million shares repurchased, leaving over $300 million in remaining buyback authorization.
High-yielding mortgage warehouse business: Contributed to a 14-basis point expansion of total loan yield and drove margin expansion to 3.55%.
Fixed income fee revenues: Increased to $57 million, driven by improved business conditions and customer activity.
Mortgage fees: Increased by $6 million, driven by MSR sales during the quarter.
Loan portfolio growth: Growth in C&I portfolio with period-end balances up $174 million quarter-over-quarter.
Deposit performance: Retention of 97% of $29 billion in balances associated with repricing events, with noninterest-bearing deposits growing by $131 million.
Operational efficiencies: Achieved $33 million net interest income growth and 15-basis point expansion of net interest margin.
Expense management: Adjusted expenses increased by $45 million, driven by incentives, commissions, and project expenses in technology and risk.
Capital management: Share buybacks accelerated to $190 million, with $300 million remaining in buyback authorization.
Technology and process investments: Invested in systems and processes to deepen client relationships and enhance financial capabilities.
Future M&A opportunities: Positioned for potential mergers in 2026 or beyond, focusing on cultural fit and footprint alignment.
Deposit Performance: Period-end balances decreased by $52 million compared to the prior quarter, driven by a $652 million decrease in brokered CDs. This could indicate challenges in maintaining deposit levels, which are critical for funding operations.
Loan Portfolio Performance: Period-end loans were down slightly from the prior quarter, with loans to mortgage companies decreasing by $132 million. This decline, attributed to seasonality, could impact revenue if not offset by growth in other areas.
Credit Trends: Net charge-offs decreased, but the net charge-off ratio of 17 basis points and a 2-basis point increase in NPLs indicate ongoing credit risks. While trends are stable, any deterioration could impact financial performance.
Capital Targets: The CET1 ratio remains flat at 11%, with a near-term target of 10.75%. Progress towards this target may require careful management of capital, especially in a declining rate environment.
Expense Management: Adjusted expenses increased by $45 million from the prior quarter, driven by personnel expenses and project costs. Rising expenses could pressure profitability if not managed effectively.
Economic Environment: The company is optimistic about the broader economy and rate cuts, but economic uncertainties and tariff issues could pose risks to growth and client confidence.
Strategic Execution: The company is targeting $100 million in additional pretax net revenue and exploring M&A opportunities. However, successful execution of these strategies is critical to achieving long-term goals.
Revenue Guidance: The company maintains its revenue guidance for 2025, supported by countercyclical fee income from FHN Financial and benefits from net interest income (NII) in a declining rate environment.
Expense Guidance: Expenses for 2025 are expected to finish at the top end of the current guidance range, driven by a significant foundation contribution and potential increases in commissions due to accelerated ADR growth.
Capital Targets: The company is targeting a near-term CET1 ratio of 10.75% and plans to progress towards this target in the coming quarters.
Loan Growth: The company expects profitable loan growth across diversified lines of business in the coming quarters, supported by the Fed's rate cuts and broader economic growth.
Credit Trends: The company remains confident in long-term credit trends and expects continued success in problem loan workouts.
Profitability Targets: The company aims to achieve a sustainable 15%+ adjusted ROTCE in the coming year.
Strategic Investments: Investments in systems, technology, and processes are expected to deepen client relationships and enhance financial capabilities.
M&A Outlook: The company is open to integrating a well-structured merger with a strong cultural fit in its existing footprint, potentially in 2026 or beyond.
Share Buybacks: With loan balance declining in the quarter, our share buybacks accelerated to $190 million with approximately 8.6 million shares repurchased. We have more than $300 million in remaining buyback authorization for our current program.
The earnings call summary and Q&A indicate strong financial performance, optimistic guidance, and strategic capital deployment. The company expects revenue towards the high end of guidance and maintains a strong loan growth outlook. While there are some competitive pressures, the company is managing risks effectively. The positive sentiment is reinforced by the company's confidence in achieving its profitability targets and the potential for strategic M&A. Overall, these factors suggest a likely positive stock price movement over the next two weeks.
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