FHN-PF — First Horizon Corporation

Summary of First Horizon (FHN-PF) Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Adjusted Earnings Per Share (EPS): $0.51, up $0.06 from Q2 2025.
• Return on Tangible Common Equity (ROTCE): 15%, an increase of 135 basis points.
• 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 decrease in period-end loans, with a notable decline in loans to mortgage companies, consistent with seasonal patterns.
• 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

• The company is focusing on profitability, safety, soundness, and sustainable growth, with a commitment to enhancing client relationships through technology investments.
• First Horizon is seeing a positive trend in client confidence and pipeline momentum, particularly in the context of recent Fed rate cuts.
• The company has accelerated share buybacks, repurchasing approximately $190 million worth of shares.
• A significant contribution of $20 million to the First Horizon Foundation was made, maximizing tax advantages for 2025.

3. Forward Guidance and Outlook

• The company maintains its guidance for year-over-year growth in pre-provision net revenue (PPNR) and expects to achieve a sustainable ROTCE of over 15%.
• First Horizon is targeting a CET1 ratio of 10.75% in the near term, with plans to progress towards long-term targets of 10% to 10.5%.
• The outlook for charge-offs and taxes remains unchanged, with expectations of continued loan growth in 2026.

4. Bad News, Challenges, or Points of Concern

• Deposit Trends: There is a notable decline in core deposits over the last two quarters, raising concerns about the sustainability of the deposit franchise amid increasing competition for deposits.
• Loan Growth: The company anticipates continued paydowns in the commercial real estate (CRE) segment, which may delay net growth in that area.
• Market Competition: Increased competition for loans and deposits, particularly following recent M&A activity in the banking sector, may pressure margins and growth.
• Economic Uncertainties: Potential impacts from tariffs and macroeconomic conditions could affect client confidence and lending activity.

5. Notable Q&A Insights

• Client Confidence: CEO D. Bryan Jordan noted a noticeable increase in client confidence and activity, particularly in the context of lower interest rates.
• Margin Expectations: CFO Hope Dmuchowski indicated that while the margin was positively impacted this quarter, a more normalized range would likely be in the high 3.30s to low 3.40s moving forward.
• M&A Strategy: The leadership emphasized a focus on organic growth but acknowledged the potential for opportunistic M&A in the future, particularly if it aligns with their existing footprint and enhances shareholder value.
• Credit Quality: Credit trends remain stable, with a focus on monitoring the non-depository financial institution (NDFI) loan exposure, which is being managed carefully.

Overall, First Horizon reported a solid quarter with strong earnings growth, but faces challenges in deposit retention and loan growth amidst a competitive landscape. The outlook remains cautiously optimistic, with strategic initiatives aimed at sustaining profitability and growth.