First Horizon (FHN-PE) Q3 2025 Earnings Call Summary

1Key Financial Results and Metrics

Adjusted Earnings Per Share (EPS): $0.51, up $0.06 from the previous quarter.

Return on Tangible Common Equity (ROTCE): Increased by 135 basis points to 15%.

Net Interest Income (NII): Grew by $33 million, with a net interest margin (NIM) expansion of 15 basis points to 3.55%.

Deposits: Period-end balances decreased by $52 million, primarily due to a $652 million drop in brokered CDs, although noninterest-bearing deposits rose by $131 million.

Loan Portfolio: Slight decline in total loans, with a $132 million decrease in loans to mortgage companies, offset by a $174 million increase in commercial and industrial (C&I) loans.

Net Charge-offs: Decreased by $7 million 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

Continued focus on profitability, safety, soundness, and sustainable growth.

Strong performance in the mortgage warehouse business contributed to NII growth.

Retained approximately 97% of $29 billion in balances from clients with repricing events.

Increased fee income by $26 million, driven by improved business conditions and customer activity.

Accelerated share buybacks totaling $190 million, with $300 million remaining in buyback authorization.

Emphasis on enhancing technology and processes to deepen client relationships.

3Forward Guidance and Outlook

Confident in achieving year-over-year growth in pre-provision net revenue (PPNR) and maintaining revenue guidance.

Targeting a CET1 of 10.75% in the near term, with a long-term goal of 10% to 10.5%.

Expecting expenses to trend at the high end of the guidance range due to increased commissions and foundation contributions.

Anticipating continued loan growth in 2026, with a mid-single-digit growth outlook.

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 amidst competitive pressures.

Loan-to-Deposit Ratio: Currently at 97%, indicating potential challenges in maintaining liquidity.

Market Competition: Increased competition for deposits and lending, particularly following recent bank M&A activity.

Economic Uncertainty: Potential impacts from external factors such as tariffs and government shutdowns on client confidence and lending activity.

5Notable Q&A Insights

Growth Optimism: CEO D. Bryan Jordan noted a noticeable increase in client confidence and pipeline momentum, particularly in light of recent Fed rate cuts.

Margin Sustainability: CFO Hope Dmuchowski indicated that while NIM was positively impacted by one-time adjustments, a more normalized range for future quarters would likely be in the high 3.30% to low 3.40% range.

M&A Strategy: Jordan emphasized a focus on organic growth but acknowledged the potential for opportunistic M&A in the future, particularly if regulatory environments continue to improve.

Credit Quality: Credit trends remain stable, with a focus on managing NDFI loan exposure and maintaining strong underwriting standards. Overall, First Horizon reported a solid quarter with strong earnings growth and strategic initiatives aimed at enhancing profitability, though challenges in deposit retention and competitive pressures remain key concerns.