First Horizon Q3 2025 Earnings Call Summary

1Key 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%.

2Strategic 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.

3Forward 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%.

4Challenges 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.

5Notable 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.