First Horizon Corporation Q3 FY2025 earnings call

Management Statement and Operational Highlights: - Strong adjusted EPS of $0.51 per share, adjusted return on tangible common equity at 15%. - Net interest income and margin expansion due to loan balance growth and Main Street lending program. - Focus on deposit retention, with noninterest-bearing deposits showing growth. - Loan portfolio performance with C&I growth, CRE decline, and focus on higher profitability relationships. - Fee income growth from ADR increase and mortgage fees. - Expenses increased $45 million, with personnel and outside services driving growth, $20 million contribution to foundation. - Confident in credit trends and problem loan workouts. - Targeting 10.75% CET1 near term, share buybacks tied to loan growth. - Pipeline momentum and confidence in growth with Fed rate cuts, progress in systems/technology, highest origination funding order in two years, M&A activity acceleration, confidence in integrating well-structured mergers.

Segment Performance: - Net interest income grew by $33 million with a 15 basis point expansion of net interest margin to 3.55%, driven by average loan balance growth including the high-yielding mortgage warehouse business and Main Street lending program accretion. - Deposit period-end balances decreased by $52 million, with brokered CDs down $652 million offset by growth in index and promotional deposits, and noninterest-bearing deposits up $131 million; retention of ~97% of $29 billion repricing event balances. - Loan portfolio: Loans to mortgage companies down $132 million seasonally, C&I portfolio up $174 million quarter over quarter, CRE balances declining. - Fee income increased $26 million from prior quarter, with ADR at $771,000, fixed income fee revenues $57 million, and mortgage fees up $6 million. - Credit: Net charge-offs decreased by $7 million to $26 million, net charge-off ratio 17 basis points, loan loss provision a credit of $5 million, ACL to loans ratio 1.38%. - Capital: CET1 at 11% flat quarter over quarter, share buybacks accelerated to $190 million with 8.6 million shares repurchased.

Guidance: - Remain confident in year-over-year PPNR growth, maintain revenue guidance. - Expense guidance unchanged but potential for top end of range due to increased commissions. - Target 10.75% CET1 near term, long-term normalized CET1 targets. - Outlook for charge-offs and taxes unchanged. - Target sustainable 15% plus adjusted ROTCE.

Risks: - Forward-looking statements subject to risks and uncertainties, need to review SEC filings for factors affecting results. - Deposit competition, loan to deposit ratio challenges, regulatory environment impacts on M&A.

Q: How optimistic are you on growth?

A: It has picked up, there is more confidence, and it's noticeable. Customers are more confident and forward-leaning with lower rates contributing to confidence.

Q: Margin surprise, better starting point?

A: There was a one-time adjustment this quarter that increased the margin; last quarter was in the high thirties and low forties and has been consistent.

Q: Core deposit franchise?

A: Focus on growing noninterest-bearing deposits, with noninterest-bearing deposits showing quarter-over-quarter momentum. DDA is a subset, but we're focused on the core deposit franchise.

Q: M&A plans?

A: Focus on core footprint, confident in regulatory environment improving, near term priorities unchanged but increasingly confident in potential to integrate well-structured mergers in 2026 or beyond.