Overview of Financial Performance

First Horizon Corporation (FHN) reported net income available to common shareholders of $738 million, or $1.36 per diluted share, for the year ended December 31, 2024. This was down from $865 million, or $1.54 per share, in 2023.

Net interest income, which is FHN’s largest source of revenue, decreased $29 million to $2.5 billion. This was largely due to higher funding costs, partially offset by higher loan yields and loan growth. The net interest margin decreased 7 basis points to 3.35%.

Provision for credit losses, which covers expected future loan losses, decreased to $150 million from $260 million in 2023. Net charge-offs, or loans written off, were $112 million compared to $170 million in 2023. The higher provision and charge-offs in 2023 were largely due to a $72 million loss on a single client relationship.

Noninterest income, which includes fees and other revenue, decreased $248 million to $679 million. This was primarily driven by a $225 million gain on the termination of a merger in 2023. Results in 2024 also included $91 million in securities losses from restructuring the investment portfolio.

Noninterest expense, which covers operating costs, decreased $44 million to $2.0 billion. This was largely due to lower FDIC insurance fees and charitable contributions, partially offset by higher personnel and technology costs.

Period-end loans and leases grew 2% to $62.6 billion, with increases in both commercial and consumer loans. Deposits of $65.6 billion were relatively flat compared to 2023.

Segment Performance

FHN’s business is organized into three segments: Commercial, Consumer & Wealth, Wholesale, and Corporate.

The Commercial, Consumer & Wealth segment generated $1.4 billion in pre-tax income, down $83 million from 2023. This was driven by higher funding costs and expenses, partially offset by lower provision for credit losses.

The Wholesale segment, which includes fixed income and mortgage banking, had pre-tax income of $122 million, up $56 million. This was due to improvements in fixed income and mortgage banking revenue.

The Corporate segment had a pre-tax loss of $546 million, compared to a $450 million loss in 2023. This was driven by the securities losses and the absence of the 2023 merger termination gain.

Asset Quality and Credit Trends

The allowance for loan and lease losses (ALLL) increased to $815 million, or 1.30% of total loans, from $773 million, or 1.26%, at the end of 2023. This reflected some deterioration in the commercial loan portfolio.

Nonperforming assets, which include nonaccrual loans and foreclosed properties, increased to $608 million, or 0.97% of total assets, from $469 million, or 0.76%, in 2023. The increase was primarily in the commercial real estate portfolio.

Net charge-offs decreased to $112 million, or 0.18% of average loans, from $170 million, or 0.28%, in 2023. The prior year had an elevated level of charge-offs due to the single client relationship issue.

Liquidity and Capital

FHN’s total equity decreased $180 million to $9.1 billion, largely due to common stock repurchases and dividends, partially offset by net income.

The bank’s regulatory capital ratios remained strong, with a Common Equity Tier 1 ratio of 11.20% and a Total Risk-Based Capital ratio of 13.87% at the end of 2024.

Total deposits of $65.6 billion were relatively flat compared to 2023, as a decrease in noninterest-bearing deposits was mostly offset by an increase in interest-bearing deposits. Estimated uninsured deposits were $26.7 billion, or 41% of total deposits.

Short-term borrowings increased to $4.0 billion, driven by higher FHLB advances, while term borrowings of $1.2 billion were unchanged from the prior year.

Outlook and Key Risks

Looking ahead, FHN faces a number of potential headwinds and uncertainties that could impact its financial performance:

• Continued pressure on net interest margin and net interest income due to the rising interest rate environment
• Potential for further deterioration in asset quality, particularly in the commercial real estate portfolio, if economic conditions weaken
• Ongoing competition for loans and deposits, which could squeeze margins
• Regulatory changes or increased compliance costs
• Cybersecurity threats and operational risks

To mitigate these risks, FHN will need to focus on prudent risk management, disciplined expense control, and diversifying its revenue streams. Maintaining a strong capital and liquidity position will also be critical.

Overall, FHN delivered a solid but lower performance in 2024 compared to the prior year. The company faces a challenging operating environment, but appears well-positioned to navigate the uncertainties ahead given its diversified business model and healthy financial foundation.