FHN-PC — First Horizon Corporation

First Horizon Q3 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Adjusted EPS: $0.51, up $0.06 from Q2 2025.
• Return on Tangible Common Equity (ROTCE): Increased by 135 basis points to 15%.
• Net Interest Income (NII): Grew by $33 million; net interest margin (NIM) expanded by 15 basis points to 3.55%.
• Loan Portfolio: Period-end loans decreased slightly, with a notable decline in loans to mortgage companies.
• Deposits: Period-end balances decreased by $52 million, mainly due to a drop in brokered CDs, though noninterest-bearing deposits increased by $131 million.
• Net Charge-Offs: Decreased to $26 million, with a net charge-off ratio of 17 basis points.
• Common Equity Tier 1 (CET1): Remained flat at 11%.

2. Strategic Updates and Business Highlights

• Focus on profitability, safety, and sustainable growth, with a strong emphasis on client relationships.
• Significant growth in the C&I portfolio, with period-end balances up $174 million.
• Continued investment in technology and systems to enhance client service and operational efficiency.
• Share buybacks accelerated to $190 million, with over $300 million remaining in the buyback authorization.
• The bank is optimistic about capitalizing on growth opportunities as the economic environment improves, particularly with anticipated Fed rate cuts.

3. Forward Guidance and Outlook

• 2025 Guidance: Confident in achieving year-over-year growth in pre-provision net revenue (PPNR) and maintaining revenue guidance.
• Expense Management: Expenses may trend toward the high end of the guidance range due to increased commissions and a significant contribution to the First Horizon Foundation.
• Loan Growth Outlook: Expectation of mid-single-digit loan growth in 2026, driven by improving economic conditions and lower mortgage rates.
• CET1 Target: Near-term target set at 10.75%, with plans to progress toward long-term targets of 10% to 10.5%.

4. Challenges and Points of Concern

• Deposit Pressure: Core deposits have decreased by nearly 8% over the last two quarters, raising concerns about the sustainability of the deposit franchise amid intense competition.
• Loan to Deposit Ratio: Currently at 97%, indicating potential challenges in maintaining liquidity and funding.
• Market Conditions: The competitive landscape for deposits is heating up, with banks vying for customer funds, particularly in a declining rate environment.
• Credit Risks: While credit trends are stable, there are concerns about the potential impact of economic fluctuations on loan performance, particularly in the NDFI sector.

5. Notable Q&A Insights

• Economic Confidence: CEO D. Bryan Jordan noted a noticeable increase in client confidence and pipeline momentum, attributing this to lower interest rates.
• Margin Sustainability: CFO Hope Dmuchowski indicated that while margins were positively impacted by one-time adjustments, the expected range for future margins would be in the high 3.30s to low 3.40s.
• M&A Strategy: The management reiterated a focus on organic growth while remaining open to opportunistic M&A in the future, particularly in their existing footprint.
• Credit Monitoring: Chief Credit Officer Thomas Hung emphasized ongoing vigilance regarding NDFI loans, indicating that while the portfolio is manageable, it warrants close monitoring.
• Future Investments: The bank plans to continue investing in technology and infrastructure while maintaining a disciplined approach to expenses.

Overall, First Horizon reported a strong quarter with positive earnings growth and strategic initiatives aimed at enhancing profitability and client service, despite facing challenges in deposit growth and competitive pressures.