First Horizon Corporation (NYSE: FHN) today reported third quarter 2021 net income available to common shareholders (NIAC) of $224 million, or earnings per share of $0.41, compared with second quarter 2021 NIAC of $295 million, or earnings per share of $0.53.
Third quarter 2021 results were reduced by a net $51 million after-tax, or $0.09 per share, of notable items tied to the IBERIABANK Corporation Merger (IBKC Merger) and early retirement of certain trust preferred securities compared with a net $26 million after-tax reduction, or $0.05 per share, in second quarter 2021. Excluding notable items, adjusted third quarter 2021 NIAC of $275 million, or $0.50 per share, decreased from $321 million, or $0.58 per share in second quarter. The decrease was led by a $0.04 per share reduction tied to lower provision credit.
“Our results this quarter reflect the emerging benefits of the power of the combined organization,” said President and Chief Executive Officer Bryan Jordan. “Operating in high growth markets with an attractive base of specialty businesses positions us well to deliver more resilient results through a range of cycles. We delivered EPS of $0.50 and ROTCE of over 18% on an adjusted basis despite the challenging interest rate environment. Core net interest income was up 1% as we delivered loan growth of 1% before the impact of the PPP portfolio and continued to drive down our funding costs. Additionally as markets reopened during the quarter, we saw growth in more traditional banking fee income businesses including wealth and deposit products.”
“We also continued to focus on reallocating capital and investments toward higher growth, higher return opportunities across the franchise, said Jordan. “I am inspired by our associates whose shared passion for building relationships and strengthening the communities we serve helps position us to deliver top-quartile returns in the future.”
Third Quarter 2021 Highlights:
•Total revenue of $738 million decreased $43 million from second quarter 2021 levels driven by a net $19 million decrease tied to notable items. Adjusted revenue of $763 million decreased $24 million largely reflecting expected reductions in other noninterest income, fixed income and mortgage banking fees.
•Net interest income of $492 million declined $5 million, or 1% from second quarter 2021 levels driven by a $9 million reduction in net merger-related and PPP loan portfolio benefits. Core net interest income increased 1% from 2% growth in commercial loans excluding PPP and lower deposit costs.
•Noninterest expense of $526 million increased $29 million from second quarter 2021 driven by a $14 million increase in notable items. Adjusted noninterest expense of $480 million increased $15 million from second quarter 2021 largely on strategic investments and costs tied to markets reopening.
•Provision for credit losses was a benefit of $85 million compared with a benefit of $115 million, largely reflecting further improvement in the macroeconomic outlook and positive loan portfolio credit grade migration.
•Average interest earning assets of $81.8 billion increased $791 million, or 1%, from second quarter 2021 largely as a $2.0 billion increase in excess cash was partially offset by a $1.3 billion decrease in average loans driven by a $1.8 billion decrease in PPP loans.
•Average loans before the impact of PPP increased $519 million, or 1%, as a $691 million increase in commercial was partially offset by a $172 million decrease in consumer.
•Average deposits of $73.7 billion increased $575 million, or 1%, from second quarter 2021 as a $1.1 billion increase in noninterest-bearing deposits was partially offset by a $506 million decrease in interest-bearing deposits. Interest-bearing deposit costs of 0.17% improved 3 basis points from second quarter 2021.
•Allowance for credit losses to loans ratio of 1.45% decreased from 1.57% at June 30, 2021; the allowance for loan losses to nonperforming loans ratio of 211% decreased from 237% at June 30, 2021.
•Net charge-offs of 0.02% in third quarter 2021 compared with net recoveries of 0.07% reflecting an unusual level of recoveries in second quarter 2021; nonperforming loans of $347 million increased 1% from $344 million and the nonperforming loan ratio of 0.63% increased from 0.61% as of June 30, 2021.
•Tangible book value per share of $10.88 at September 30, 2021 increased 1% from $10.74 at June 30, 2021 as net income was partially offset by the impact of capital return.
•ROCE of 11.4%; ROTCE of 15.0%; Adjusted ROTCE of 18.4%; CET 1 ratio of 10.1%; and total capital ratio of 12.6%.
•Returned $224 million of capital to common shareholders including share repurchases and dividends.
•Share repurchases of 9 million shares of common stock during the quarter with a weighted average price of $15.82.
Strategic Update:
•Expect to fully integrate systems in February 2022 given Hurricane Ida impact.
•On track to deliver ~$200 million of targeted annualized net cost saves by 4Q22.
•Achieved $96 million of annualized net cost saves year-to-date.
•Committed to delivering additional efficiencies in 2022.
•~$4 billion Paycheck Protection Program (PPP) loans forgiven year-to-date; Period-end PPP loan balance of $2 billion.
•Loans on deferral represented 0.3% of total loans excluding PPP as of September 30, 2021, down from June 30, 2021 levels of 0.7%.