FHN — First Horizon Corporation

First Horizon (FHN) 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: 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%.
• Deposit Performance: Period-end balances decreased by $52 million, primarily due to a $652 million drop in brokered CDs, though noninterest-bearing deposits increased 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.
• Credit Metrics: Net charge-offs decreased to $26 million, with a net charge-off ratio of 17 basis points. The allowance for credit losses (ACL) to loans ratio declined to 1.38%.

2. Strategic Updates and Business Highlights

• Investment in Technology: Continued investments in systems and technology to enhance client relationships and operational efficiency.
• M&A Outlook: Management expressed confidence in potential future mergers and acquisitions, particularly in 2026, contingent on finding culturally compatible targets within their existing footprint.
• Foundation Contribution: A notable $20 million contribution to the First Horizon Foundation was made this quarter, maximizing tax advantages.
• Fee Income Growth: Increased by $26 million from the previous quarter, driven by improved business conditions and customer activity.

3. Forward Guidance and Outlook

• 2025 Guidance: Confident in achieving year-over-year growth in pre-provision net revenue (PPNR) and maintaining revenue guidance. Expecting expenses to potentially finish at the higher end of the guidance range due to increased commissions.
• Capital Target: Aiming for a Common Equity Tier 1 (CET1) ratio of 10.75% in the near term, with longer-term targets between 10% to 10.5%.
• Loan Growth: Anticipating mid-single-digit loan growth in 2026, with optimism for a rebound in commercial real estate (CRE) lending as rates decline.

4. Bad News, Challenges, or Points of Concern

• Deposit Competition: Significant competition for deposits continues, with a noted decrease in core deposits over the past two quarters, raising concerns about the sustainability of the deposit base.
• Loan-to-Deposit Ratio: At 97%, indicating potential pressure on liquidity and funding.
• Economic Environment: While there is optimism about economic growth, uncertainties around tariffs and macroeconomic conditions could impact future performance.
• Expense Management: Increased expenses were noted, with personnel costs rising due to incentives and commissions, which may pressure margins if not managed carefully.

5. Notable Q&A Insights

• Growth Confidence: Management noted a noticeable increase in client confidence and pipeline momentum, particularly as the Fed initiates rate cuts.
• Margin Expectations: Management indicated that the current margin may be elevated due to one-time adjustments and expects it to stabilize around the high 330s to low 340s in the near term.
• NDFI Exposure: Credit officer Thomas Hung addressed concerns regarding exposure to non-depository financial institutions (NDFIs), emphasizing careful monitoring and control over this segment.
• M&A Strategy: CEO D. Bryan Jordan reiterated that while the focus remains on organic growth, they are open to opportunistic acquisitions if they align with strategic goals and enhance shareholder value.

Overall, First Horizon demonstrated solid financial performance in Q3 2025, with positive growth in earnings and strategic initiatives, though challenges in deposit competition and economic uncertainties remain. The outlook for the remainder of the year appears cautiously optimistic, with a focus on maintaining profitability and exploring growth opportunities through both organic and potential M&A avenues.