First Horizon Corporation Q1 FY2026 earnings call

• Started 2026 with strong momentum, delivering third straight quarter of 15% or greater adjusted ROTCE fueled by strong C&I client growth and relationship-focused client activity.
• Focused on building true client relationships, staying disciplined on price and structure, and supporting clients with franchise capabilities.
• Diversified business model and counter-cyclical businesses positioned well as operating environment evolves.
• Net interest income consistent with fourth quarter absent day count impacts, margin expanded 1 basis point due to effective deposit cost management.
• Deposit end balances declined $1 billion from prior quarter, mainly due to reduced broker deposits, average rate paid on interest-bearing deposits decreased to 2.28%.
• C&I loan portfolio grew $624 million in the quarter, building on momentum from the second half of 2025 with strong pipelines in 2026.
• Fee income declined quarter-over-quarter mainly due to day count and seasonality, fixed income revenues slightly lower but up 27% year over year.
• Adjusted expenses decreased, with personnel and outside services expenses down.
• Credit loss provision and ACL to loans ratio change reflected mixed portfolio changes.
• Common share buyback and preferred stock issuance improved capital ratios.

In the first quarter, net interest income grew 6% year-over-year, outpacing loan (before LEO) growth of 3% over the same period. Adjusted pre-provision net revenue improved 8% compared to the first quarter of 2025. Adjusted ROPSI was 15.1%, up over 200 basis points year over year. Period end loans increased slightly by $221 million from the prior quarter. C&I loan portfolio grew $624 million. Loans to mortgage companies decreased $62 million due to seasonality. Commercial real estate was a headwind for loan balance growth. Consumer loan portfolio declined $198 million. Fee income decreased $12 million quarter-over-quarter (excluding deferred compensation) but was up $13 million year-over-year. Adjusted expenses (excluding deferred compensation) decreased $32 million from prior quarter. Net charge-offs decreased $1 million to $29 million, with a net charge-off ratio of 18 basis points. Provision for credit losses was $15 million, and ACL to loans ratio declined slightly to 1.28%. CET1 was 10.53%, with $230 million of common shares bought back and $400 million of Series H preferred stock issued, raising Tier 1 capital ratio to 11.95%. Tangible book value per share was $14.34, up 9% year over year.

• Continues to maintain full-year outlook and updated near-term CET1 target to 10.5% in the first quarter.
• Achieved 15% plus adjusted ROTC for third consecutive quarter, reflecting focused execution on business priorities.
• Expect revenue growth as the year progresses driven by discipline, healthy C&I demand, and strength of markets.
• Will be opportunistic with share repurchases while being thoughtful on capital management.

• Macro-economic environment changes creating new headwinds and uncertainties.
• Potential downward impact on CNI pipelines from short-term Middle East unrest.
• Energy price increase affecting consumer discretionary spending, need to closely watch sectors like trucking, auto, restaurants.
• Fixed income business risk from market volatility.
• Operational risk in mortgage warehouse business but with low historical credit losses.

Q: John Avstrom of RBC Capital Markets asked about CNI pipelines and macro uncertainty.

A: Brian responded that CNI pipelines remain very good with no significant downward impact from short-term Middle East issues, and CRE pipelines are strong.

Q: John Avstrom asked about loans to mortgage companies and seasonal bounce.

A: Hope said they expect a seasonal increase in Q2, already seeing some fund up, but mortgage origination is likely low in the near term.

Q: Michael Rose of Raymond James asked about deposit competition and credit.

A: Hope talked about deposit costs slightly trending up in Q2 and Q3 due to seasonality, Tom said credit performance is consistent with 18 basis points net charge off, watching consumer discretionary spending sectors.

Q: Jared Shaw of Barclays asked about $100 million PPNR assumptions and AI.

A: Brian said no expenses in that, AI is about scaling revenue without scaling back office, Hope said expense outlook is flat excluding countercyclical commissions.

Q: Jared Shaw asked about lowering CET1 target.

A: Brian said comfortable with 10.5% currently, will evaluate as uncertainty settles.

Q: Casey Hare of Autonomous asked about NII outlook and ACL ratio.

A: Hope said deposit costs pickup is manageable, Brian talked about fixed asset repricing, Tom said ACL is well-reserved relative to net charge-off performance.

Q: Bernard Fongazicki of Deutsche Bank asked about 100 million plus PPNR examples and loan growth.

A: Bernard Fongazicki was told about CRE pricing, specialty and regional bank partnership benefits, and CRE loan growth momentum.

Q: Chris McGrathy of KBW asked about revenue guide and expense.

A: Brian said revenue guide range is due to economic growth uncertainty, expense is flat with quarter-to-quarter variability.

Q: Ben Gerlinger of Citi asked about buybacks and mortgage warehouse.

A: Brian said will be opportunistic with buybacks, mortgage warehouse has low credit losses.

Q: Tim O'Brivilla of UBS asked about expense guide and M&A.

A: Hope said expense is agnostic to revenue guide except countercyclical, M&A approach remains to maximize return on capital.

Q: Anthony Elian of J.P. Morgan asked about NIM and capital proposals.

A: Hope said NIM expected to be in high three-fours, Brian said capital proposals are net positive but uncertain.

Q: Christopher Marinak of Breen Capital Research asked about reserve for Mortgage Warehouse and NDFI.

A: Tom said Mortgage Warehouse has low charge-offs, NDFI performance is close to overall CNI book.

Q: David Chiaverini of Jefferies asked about fixed income and ROTC trajectory.

A: Brian said fixed income business is a strong contributor, ROTCE trajectory is expected to continue improving through improved balance sheet profitability, leverage, and regulatory guidance.