First Horizon Corporation Q2 FY2025 earnings call

• Chairman Bryan Jordan highlighted strong results in the quarter with balance sheet growth, credit, and profitability. Adjusted EPS was $0.45 per share, a $0.03 increase from the prior quarter. - Pre-provision net revenue grew by $4 million, driven by $10 million of incremental net interest income from loan portfolio growth. - Expense discipline was maintained with total expenses, excluding deferred compensation, increasing by only $4 million from the last quarter. - Credit portfolio remained strong with a charge-off ratio of 22 basis points and a decline in classified loans. - Balance sheet growth was in line with industry trends, with loans and deposits both up 2% quarter-over-quarter.

During the second quarter, the loan portfolio saw a 2% quarter-over-quarter increase, with loans to mortgage companies growing by $689 million and C&I portfolio up $316 million quarter-over-quarter. CRE balances declined due to payoffs of stabilized projects. Deposits also increased 2% quarter-over-quarter, driven by a $1.6 billion increase in brokered CDs. Net interest income grew by $10 million, while fee income decreased $3 million excluding deferred compensation. The net charge-off ratio was 22 basis points, in line with expectations, and the ACL to loan ratio declined slightly to 1.42%.

• Full year 2025 guidance remains focused on achieving PPNR growth. Total revenue range remains unchanged, and performance is within range so far. - Expense range has been adjusted to flat to up 2% due to successful expense management and lower commissions in countercyclical businesses. - Outlook for charge-offs, taxes, and capital remains unchanged. - Over the next 2-3 years, target is to reach and maintain a 15% plus ROTCE by executing on synergies and deepening client relationships, with an opportunity to grow PPNR by $100 million or more within existing businesses.

• Uncertainty around tariffs, interest rates, and the economic outlook. - Increased deposit pressure and competition. - Volatility in fee income due to market conditions and curve shape. - Potential impact of regulatory changes on capital deployment and M&A opportunities.

Q: Just wanted to get background and color as to where clients stand at this point, especially on loan growth and CRE.

A: Borrowers are remarkably resilient, with increasing optimism. CRE has some slow absorption in multifamily but expects resolution. Loan growth in specialty verticals like ABL and equipment finance is strong.

Q: What kind of expectations do you have for mortgage warehouse balances?

A: Expect to see momentum continuing in Q3, with balances at current levels or higher depending on mortgage industry trends.

Q: Got a follow-up question on loan growth. What are you seeing in terms of momentum in specialty verticals?

A: Seeing good growth in ABL and equipment finance with strong pipelines.

Q: Wanted to follow up on the expense guide. Does the high end of the revenue range equate to hitting 2% of expenses?

A: Don't see us having to go above 2% expense growth even at higher revenue ends, with sensitivity analysis done on countercyclical businesses.

Q: On the $100 million PPNR opportunity, how much is revenue vs expense driven?

A: Majority is from deepening client relationships, increasing loans and deposits, with focus on treasury management services.