First Horizon Corp. 2024 Annual Report (10-K) Summary
Business Context and Reporting Period
This report covers the fiscal year ended December 31, 2024. First Horizon Corporation (FHN) is a bank holding company headquartered in Memphis, Tennessee, with its primary subsidiary being First Horizon Bank. The company operates through three reportable segments: Commercial, Consumer & Wealth; Wholesale; and Corporate. At year-end 2024, FHN reported total consolidated assets of $82.2 billion, total deposits of $65.6 billion, and total loans and leases of $62.6 billion. The company serves over 450 business locations across 24 U.S. states.
Key Financial Metrics
| Metric | 2024 | 2023 |
|---|---|---|
| Net Income Available to Common Shareholders | $738 million | $865 million |
| Diluted Earnings Per Share (EPS) | $1.36 | $1.54 |
| Net Interest Income | $2.51 billion | $2.54 billion |
| Net Interest Margin (NIM) | 3.35% | 3.42% |
| Noninterest Income | $679 million | $927 million |
| Noninterest Expense | $2.04 billion | $2.08 billion |
| Provision for Credit Losses | $150 million | $260 million |
| Net Charge-offs | $112 million | $170 million |
| Return on Average Assets (ROAA) | 0.97% | 1.12% |
| Return on Average Common Equity (ROAE) | 8.80% | 11.01% |
| Common Equity Tier 1 (CET1) Ratio | 11.20% | 11.40% |
| Total Shareholders' Equity | $9.11 billion | $9.29 billion |
Material Changes vs. Prior Period
- Net Income Decline: Net income available to common shareholders decreased 15% to $738 million, primarily due to the absence of a $225 million gain on merger termination recorded in 2023 and a $91 million pre-tax loss from a securities portfolio restructuring in Q4 2024.
- Net Interest Income: Decreased slightly by $29 million. While loan yields increased, they were offset by higher funding costs, particularly on deposits, resulting in a 7 basis point decline in NIM.
- Noninterest Income: Decreased significantly by $248 million (27%). This was largely driven by the one-time $225 million merger termination gain in 2023 and the $91 million securities loss in 2024. Excluding these items, fixed income and mortgage banking revenues improved.
- Provision for Credit Losses: Decreased to $150 million from $260 million. The 2023 figure was elevated by a $72 million idiosyncratic credit loss on a single relationship.
- Asset Quality: Nonperforming assets (NPAs) increased to $608 million (0.97% of loans) from $469 million (0.76% of loans), driven by an increase in nonaccrual Commercial Real Estate (CRE) loans, specifically in multi-family and office sectors.
- Capital Actions: The company redeemed $100 million of Series D Preferred Stock and repurchased approximately $626 million of common stock during the year.
Guidance, Outlook, and Risks
Outlook: Management expects capital ratios to remain above well-capitalized standards plus the required capital conservation buffer in 2025. The yield curve, which was inverted for much of 2023 and 2024, began to normalize in late 2024 as the Federal Reserve cut rates. Management anticipates continued competition for deposits and potential volatility in fixed income and mortgage businesses based on interest rate movements.
Key Risks and Contingencies:
- Interest Rate Risk: A flat or inverted yield curve compresses net interest margins. While the curve normalized in late 2024, future rate cuts or volatility remain a key driver of earnings.
- Credit Risk (CRE): Increased nonaccruals in the CRE portfolio, particularly in office and multi-family sectors, pose a risk to future asset quality. The company notes that office performance is impacted by remote work trends.
- Regulatory Changes: FHN is approaching the $100 billion asset threshold, which would subject it to enhanced prudential standards (Category IV) and potentially a Liquidity Coverage Ratio (LCR) requirement, increasing compliance costs.
- Climate Reporting: New SEC and California state regulations regarding greenhouse gas (GHG) emissions reporting could impose significant compliance costs and data collection burdens.
- Unusual Items: The $91 million securities loss in Q4 2024 was a strategic restructuring decision intended to improve future portfolio returns. The $225 million gain in 2023 was a one-time fee from the terminated Toronto-Dominion (TD) merger.
Investor Verification Checklist
- Asset Quality Trends: Verify the trajectory of nonaccrual CRE loans and the adequacy of the allowance for credit losses (currently 1.30% of loans) given the concentration in office and multi-family properties.
- Deposit Stability: Monitor the mix of interest-bearing vs. noninterest-bearing deposits and the cost of funds, as deposit costs lagged loan yield declines in 2024, compressing margins.
- Regulatory Thresholds: Assess the impact of approaching the $100 billion asset limit on future operating expenses and capital requirements.
- Securities Portfolio: Review the long-term impact of the Q4 2024 securities restructuring on future investment income and unrealized gains/losses.
- Capital Return: Confirm the sustainability of the dividend ($0.60/share) and share repurchase programs given the reduced net income and regulatory capital buffers.