Earnings call transcript: First Horizon beats Q3 2025 expectations, stock fluctuates

First Horizon National Corporation reported its third-quarter 2025 earnings, surpassing Wall Street expectations with an adjusted earnings per share (EPS) of $0.51, compared to the forecasted $0.44. This beat represents a 15.91% surprise. The company also outperformed revenue projections, posting $889 million against the expected $847.27 million. Trading at an attractive P/E ratio of 13.02 and maintaining a "GOOD" financial health score according to InvestingPro, First Horizon demonstrates solid fundamentals. Despite the positive earnings report, the stock witnessed a volatile pre-market session, dropping 12.25% to $24.04.

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Key Takeaways

• EPS of $0.51 exceeded forecasts by 15.91%.
• Revenue reached $889 million, surpassing expectations by 4.93%.
• Pre-market stock price fell by 12.25% despite earnings beat.
• Net interest income and margin showed significant growth.
• Continued investment in technology and client relationships.

Company Performance

First Horizon demonstrated strong performance in Q3 2025, driven by increased net interest income and margin expansion. The company’s strategic investments in technology and customer relationships have yielded the highest origination funding in two years. However, the competitive lending environment and slight decline in period-end loans pose ongoing challenges.

Financial Highlights

• Revenue: $889 million, up from the forecasted $847.27 million.
• Earnings per share: $0.51, compared to the forecast of $0.44.
• Net interest income increased by $33 million.
• Net interest margin expanded by 15 basis points to 3.55%.
• Fee income rose by $26 million from the previous quarter.

Earnings vs. Forecast

First Horizon’s Q3 2025 results surpassed analyst expectations with a 15.91% EPS surprise and a 4.93% revenue surprise. This performance marks a positive deviation from previous quarters, showcasing the company’s resilience and strategic focus.

Market Reaction

Despite the earnings beat, First Horizon’s stock fell 12.25% in pre-market trading to $24.04. This decline contrasts with the broader market trend and the company’s 52-week high of $23.70. However, the stock has shown remarkable strength with a 33% price return over the past six months, suggesting strong underlying momentum. The recent pullback may present an opportunity, as InvestingPro analysis indicates the stock is currently undervalued relative to its Fair Value.

Outlook & Guidance

Looking forward, First Horizon is targeting a 15%+ adjusted return on tangible common equity (ROTCE) in 2026 and expects mid-single-digit loan growth. The company is also exploring small M&A opportunities and aims to maintain a 10.75% CET1 capital ratio.

Executive Commentary

CEO Bryan Jordan emphasized the company’s focus on capital deployment, stating, "We are very focused on deploying capital in the business." CFO Hope Dmuchowski highlighted growth prospects, noting, "We have $100 million plus of opportunities that we expect to get out of our existing client base and franchise over the next two-plus years."

Risks and Challenges

• Competitive lending environment may pressure margins.
• Potential Federal Reserve rate cuts could impact interest income.
• Economic uncertainties could affect loan growth.
• Increased expenses, including a $20 million contribution to the First Horizon Foundation.
• Market volatility impacting investor sentiment and stock performance.

Q&A

During the earnings call, analysts inquired about potential M&A opportunities and the company’s strategies for deposit and loan growth. Executives addressed concerns about credit quality and non-deposit financial institution (NDFI) loan exposure, reinforcing their confidence in the company’s strategic direction.

Full transcript - First Horizon National Corporation (FHN) Q3 2025:

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you all for standing by for the First Horizon Third Quarter 2025 earnings conference call. Today’s call will be starting in about two minutes’ time. Just a reminder, star one to ask a question. Star two if you do wish to remove yourself from the queue. Should you need operator assistance at any point during the call today, you can press star then zero. Thank you. Good morning all, and thank you all for attending the First Horizon Third Quarter 2025 earnings conference call. My name is Tyler Craft, and I will be your moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Tyler Craft, Head of Investor Relations at First Horizon Corporation. Thank you. You may proceed, Tyler.

Thank you, Brika. Good morning. Welcome to our Third Quarter 2025 results conference call. Thank you for joining us. Today, our Chairman, President, and CEO, Bryan Jordan, and Chief Financial Officer, Hope Dmuchowski, will provide prepared remarks after which we’ll be happy to take your questions. We’re also pleased to have our Chief Credit Officer, Thomas Hung, here to assist with questions as well. Our remarks today will reference our earnings presentation, which is available on our website at ir.firsthorizon.com. As always, I need to remind you that we will make forward-looking statements that are subject to risks and uncertainties. Therefore, we ask you to review the factors that may cause our results to differ from our expectations on page two of our presentation and in our SEC filings.

Additionally, please be aware that our comments will refer to adjusted results, which exclude the impact of notable items and to other non-GAAP measures. Therefore, it is important for you to review the GAAP information in our earnings release, page three of our presentation, and the non-GAAP reconciliations at the end of our presentation. Last but not least, our comments reflect our current views, and you should understand that we are not obligated to update them. With that, I’ll hand it over to Bryan.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Thank you, Tyler. Good morning, everyone. Thanks for joining us. We appreciate your continued interest in First Horizon. I’m extremely pleased with our performance this quarter, highlighted by strong adjusted EPS of $0.51 per share. We continue to deliver excellent returns for our shareholders and execute on our priorities across the franchise, focusing on safety and soundness, profitability, and sustainable growth. Thank you to our associates and clients for their continued dedication and trust in First Horizon. I’ll invite Hope to walk through the financial results, and I’ll share my perspective on the rest of the year and the broader economy at the end. Hope?

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Thank you, Bryan. Good morning, everyone, and thank you for joining us today. I’m excited to share the details behind another great quarter for First Horizon. Getting started on slide five with some of our key performance metrics. We generated an adjusted earnings per share of $0.51, a $0.06 increase from last quarter. This earnings growth increased our adjusted return on tangible common equity by 135 basis points to 15%. Moving ahead to slide seven, we cover our $33 million of net interest income growth and the 15 basis point expansion of net interest margin. NII growth benefited from average loan balance growth, including our high-yielding mortgage warehouse business, which contributed to a 14 basis point expansion of total loan yield and drove margin expansion to 3.55%.

NII and NIM this quarter also benefited from the recognition of interest income associated with increased accretion related to the Main Street lending program. This impact is primarily concentrated in the third quarter. On slide eight, we provide more information about our deposit performance in the quarter. Period end balances decreased by $52 million compared to prior quarter, driven by a $652 million decrease in brokered CDs, offset by growth in index and promotional deposits, which reflect loans to mortgage companies’ seasonality. We did see growth within non-interest-bearing deposits as period end balances were up $131 million. Retention continues to be a highlight for our deposit story as we retained approximately 97% of the $29 billion in balances associated with clients who had a repricing event in the quarter, while continuing to reduce our costs on those deposits even in a flat-rate environment.

For deposit pricing overall, the average rate paid on interest-bearing deposits increased to 2.78%, up from the second quarter average of 2.76%. Our objective is to achieve consistent data through the cycle as the rate environment evolves. Please keep in mind that there is a delay between Fed rate moves and deposit rate adjustments as we work through client repricing. On slide nine, we cover our loan portfolio performance. Period end loans were down slightly from prior quarter. Loans to mortgage companies decreased $132 million during the third quarter, which is in line with our normal seasonality that peaks in the middle of the summer. This portfolio continues to see roughly three-fourths purchase transactions versus refinances. To the extent that mortgage rates decline in a falling rate environment, refinance activity could pick up.

We saw a growth again this quarter in our CNI portfolio with period-end balances up $174 million quarter over quarter. We continued seeing pre-balances decline in line with the longer-term pattern we’ve seen of stabilized projects moving to the permanent markets. Importantly, we remain focused on growing higher profitability relationships. We see this in relationship depth with our clients and yields in our loan portfolio with spreads from the mid-100 basis points to the upper 200 basis point range. This overall growth pattern is consistent with our expectations for average loan balance growth in 2025. On slide 10, we detail our fee income performance for the quarter, which increased $26 million from the prior quarter, excluding deferred compensation, as improved business conditions led to increased customer activity for FHN Financial. We saw ADR increase to 771,000 and drive fixed income fee revenues of $57 million.

Mortgage fees increased by $6 million, driven by an MSR sale during the quarter. On slide 11, we highlight that excluding deferred compensation, adjusted expenses increased $45 million from prior quarter. Personnel expenses, excluding deferred compensation, increased by $9 million from last quarter, driven by $6 million in incentives and commissions growth on the improved ADRs. Outside services increased by $8 million, with the largest driver being project expenses and technology and risk, partially offset by declines in advertising as prior quarter campaign costs moved to new account promotion payouts within other expenses. Expenses this quarter reflect a contribution of $20 million to the First Horizon Foundation. This higher amount for the contribution we typically make to our foundation maximizes the relative tax advantages available for contributions made in 2025. Turning to credit on slide 12, net charge-offs decreased by $7 million to $26 million.

Our net charge-off ratio of 17 basis points is in line with our expectations for the year. Loan loss provision was a credit of $5 million this quarter. This resulted from loan payoffs, and the ACL to loans ratio declined to 1.38% as we saw criticized and classified loans decline and balances grow in lower risk categories. Our two basis point increase to MPLs is relatively flat, and we feel confident in continuing long-term credit trends and success in problem loan workouts. On slide 13, we ended the quarter with a CET1 of 11%, which is flat quarter over quarter. When we completed our annual stress testing during the quarter, we noted that our updated near-term target will be 10.75%, and we intend to make progress towards this target in the coming quarters.

With loan balance declining in the quarter, our share buybacks accelerated to $190 million, with approximately 8.6 million shares repurchased. We have more than $300 million in remaining buyback authorization for our current program. On slide 14, we take another look at our full year 2025 guidance. We remain confident in achieving year-over-year PP&R growth. We maintain our revenue guidance. The NII benefit this quarter discussed earlier and countercyclical fee income from FHN Financial provided offset to the asset sensitivity or balance sheet in this falling rate environment. Our expense guidance remains unchanged. With the significant foundation contribution noted earlier and the potential for increased commissions driven by ADR growth as that business has accelerated in the third quarter, we currently expect that expenses may finish 2025 at the top end of our current guidance range.

As we noted in our stress testing press release, in the near term, we are targeting 10.75% CET1 as we continue progressing towards our long-term normalized CET1 targets. Our outlook for charge-offs and taxes remains unchanged as we close out the year. I will wrap up on slide 15. We are proud of our performance, our 15% adjusted ROCI this quarter, and to see our countercyclical business model support profitability as we enter a declining rate environment. Through continued capital normalization, the value generated by our credit culture and performance, and most importantly, our ability to execute on creating value through efficiency and revenue enhancements like those aligned with our $100 million plus PP&R opportunity, we are confident in our ability to hit our near and long-term targets. Our target for the coming year remains achieving a sustainable 15% plus adjusted ROCI.

With that, I will give it back to Bryan.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Thank you, Hope. We’re starting to see activity pick up overall, and the economy continues to perform reasonably well. On the whole, our clients are growing more confident navigating tariff uncertainty, and we are seeing their willingness to take action flow through to solid pipeline momentum. Now that we have seen the Fed initiate rate cuts, the potential for more to come, we are optimistic that this will drive growth across a broader economy and is an important opportunity for First Horizon to capitalize on profitable loan growth across our diversified lines of business in the coming quarters. This past quarter, our organization continued to make meaningful progress positioning First Horizon for the future. We invested further in our systems, technology, and processes, which enables us to deepen client relationships and deliver our broad financial capabilities with a community banking approach.

Our bankers continue delivering our relationship approach to our clients. The third quarter was our highest origination funding quarter in the last two years. Bank M&A activity clearly accelerated in the third quarter. While our near-term focus is unchanged, I am increasingly confident in our ability to integrate a well-structured merger with a strong cultural fit in our existing footprint if such an opportunity arises in 2026 or beyond. Our team’s energy remains high, our strategy is clear, and our competitive position in our attractive southern U.S. footprint is enviable. We see continued strength in both our credit trends and our capital outlook. Forward-looking, we remain focused on executing the initiatives that result in more than $100 million of additional pre-tax net revenue. We expect to drive sustained profitable growth supported by our balanced business model and our unwavering commitment to safety, soundness, and serving our clients.

Our goal of delivering sustained 15% plus adjusted return on tangible common equity remains firmly in sight, powered by the hard work of each of our associates. Their dedication and resilience continue to drive our momentum and success. Brika, we can now open it up for questions.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you. We will now begin the question and answer session. If you would like to ask a question, you can do so by pressing star followed by one on your telephone keypads. If you change your mind at any time and would like to remove yourself from the queue, you can do so by pressing star followed by two. As a reminder, that is star followed by one. The first question we have from the phone lines comes from John Armstrong with RBC Capital Markets. You may proceed.

Hey, thanks. Good morning, everyone.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Good morning.

Hey, Bryan, maybe we’ll just start the call with you talked a little bit about the activity picking up and some pipeline momentum. How optimistic are you on growth, and is it really a noticeable change from a quarter ago?

Yeah, it has picked up. There is more confidence, and it is noticeable. I would say it’s yet to be seen how anything that occurs with the new friction around Chinese tariffs may impact things. We did see confidence building throughout the quarter and pipelines beginning to build in the middle of the quarter and beyond. It has been a noticeable change. Customers are more confident and more forward-leaning. Lower rates and the trajectory of rates added to folks’ confidence. I see no reason in the immediate near term that that ought to solve it. It looks like it’s sustainable at this point.

Okay, good. Hope, one for you. Just on the margin, it surprised us positively. It feels a little bit elevated. Is there a better starting point for the margin for the fourth quarter, given the Main Street impact and the mortgage company impact?

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: John, great to hear from you. Thanks for that question. Yes, we did have, as we note in our earnings slide, a one-time adjustment this quarter that did increase our margin. Last quarter, we were at 340, and I think that’s a good way to think of us in the high 330s and 340. We’ve been pretty consistently there for the last few quarters, and even this quarter, if you adjust out that one-time item.

Okay. All right. Thank you very much.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Thanks, John.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Your next question comes from Michael Rose with Raymond James. Your line is open.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Michael.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Michael, could you please ensure your line is unmuted locally before speaking? Michael, if you could please ensure your line is unmuted? We have had.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Michael, why don’t we go ahead? We’ll go ahead and come back to Michael later, maybe.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Your next question comes from Casey Hare with Autonomous. Please go ahead.

Great, thanks. Good morning, everyone.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Good morning.

I wanted to touch on the core deposit franchise on slide eight. I know there were some seasonal challenges this quarter, but just looking at the trends, the core deposit franchise is down almost 8% over the last two quarters. What is driving this and what is being done to kind of stabilize or reverse the trend and the outlook?

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Yeah, Casey, I’m not sure exactly what you’re calling core deposits. We really pull out brokered and wholesale in the deck in order to really show the match funding that we do with mortgage warehouse. H8 data is slightly flat to decreasing. The deposits in the industry are shrinking. Specifically out of banking, we mentioned in our last earnings call that we saw a mix out of money markets. When we looked at where our clients were transferring their funds, it was into brokerage accounts. I think the competition for deposits will continue to heat up. We talked about last quarter and this quarter in prepared remarks that we have a high retention rate of our existing clients, and we’ve put additional money into marketing and cash offers in order to increase new-to-bank clients.

Deposit competition has been significant this year, as you’ve seen, especially as it comes to rate and bringing that rate down on existing customers. It’s really a balance that we focus on. How do we keep existing customers with a fair rate through this environment?

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Okay. All right. I’m referring to like the DDA and the base rates, right? That’s down 8% over the last two quarters. You know, that’s definitely below. That’s definitely lagging H8. You guys are talking about keeping beta consistent with the prior cycle. That just seems kind of a challenge with the loan-to-deposit ratio at 97% and the core deposit franchise under pressure.

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Yeah. Casey, on slide eight, if you look at the stacked bar chart, third quarter 2024, non-interest-bearing deposits, which is really, you know, a lot of our DDA and our customer money there, it went from $9.2 billion to $11.4 billion in a year. I don’t see that as decreasing. DDA is just a subset when you look at price quarter. We are focused on growing that non-interest-bearing deposit core, and we’ve continued to see momentum quarter over quarter, as you illustrated on slide eight.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Casey, we feel very good about the core deposit franchise. We feel very good about the retention of customers and particularly our ability to adjust to repricing. We are mindful of the loan-to-deposit ratio, and that’s one measure. I think when you look at loans and securities to total deposits, our comparisons are much more in the middle of the pack. We feel good about the momentum we see in the business. We have a significant focus on our core consumer banking business. We have recently hired a new Head of Consumer Banking, and we see very good momentum there. It’s easy to conflate what’s happening in wholesale and brokered with what’s the core franchise. We feel very, very good about the progress we’re making there, and we have a very optimistic outlook as we look into 2026 and beyond.

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Casey, one note. I think you may be talking about the promotional deposits and CDs. That is a subset that we show for what the opportunity is to reprice down during a decreasing rate cycle. A lot of those do go to base pricing and are somewhere else in the chart. It may be a correlation that’s not a causation. We are trying to bring new-to-bank clients down to base rate, and then they fall out of that bucket over time.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Okay. All right. Just last one for me, Bryan. I wanted to touch on your M&A comment. In terms of what you guys would be looking for in terms of size and geography if a bank acquisition were to present itself in 2026? Yeah. I want to be really clear and sort of reiterate where I started. Our near-term priorities are not changed, and we’re very focused on driving $100 million of incremental pre-tax pre-provision and continuing to focus on executing our business model. Given that the M&A environment has picked up and the progress we’re making on the foregoing, I feel very good about our ability to integrate if the right opportunity does present itself in 2026 and beyond.

That said, I tried to focus my comment on the fact that we’re very focused on the footprint that we’re in, that it’s a fill-in opportunity with a strong deposit franchise. It gives us the ability to leverage our middle-market commercial, consumer, private client wealth businesses across that. Cultural fit is very important. Our short-term focus is unchanged. We’re very focused on executing the business model, just really mindful of the fact that the environment has changed and that we will be opportunistic if it presents itself in 2026 or later.

Okay, thank you.

Thank you.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you. We have a question from Ben Gallinger with Barclays. Your line is open.

Hi. Good morning.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Morning, Ben.

I just wanted to follow up on Mike’s question regarding M&A. It seems like people have implied that First Horizon would be a potential seller down the road, given the one that has happened before, I guess you could say. When you think about the environment, it seems like bigger deals are more in vogue and more accepted by regulators. When you think about the opportunity in front of you and shareholder value, are you taking yourself off the table, or is this more so just positioning if something smaller did come up that you could potentially be a buyer yourself? The share price is down quite a bit on your comments.

I’m sorry, the last part broke up, Ben.

Based on your closing remarks, when you talk about being a potential buyer yourself, it’s taking your share price down a bit because that’s not really what an implication of people thought might happen. Hopefully, you can expand a little more.

I don’t think that I intended to change anything that we have previously said other than to enforce the idea that we are making progress on the priorities that we have laid out and that we are increasingly confident that given the right opportunity in our footprint, we could be in a position to do that. It is clear that with recent approvals and the otherwise enthusiastic M&A environment, the regulatory backdrop seems to be improving. In terms of our thinking about our franchise long-term, I’ve tried to be very consistent on this point over roughly 18 years, which is that we are very focused on creating value for our shareholders both near and long-term, that we believe we have to operate the franchise with a long-term mentality. That means focusing on building the business, in our case, for the next 161 years and investing in that regard.

I don’t believe that changes any of our optionality. While we were not for sale in the early part of 2022, we received an offer that our board did the right thing in considering that alternative and the various alternatives and the need to create maximum value for shareholders. I’m not changing anything about the future, just saying that we’re in a much better place today than we were six months ago. Given the changing environment, to the extent that opportunities present themselves, we’re in an increasingly improving position to consider fill-in opportunities in our franchise.

Gotcha. Okay. That’s helpful. Just thinking from a core basis, Hope, it seems like you said the Main Street lending program added roughly 7 bps. I mean, when we think about a starting point for the fourth quarter and into next year, kind of the high 340s, I feel like that’s an appropriate level. When you think about the cadence of potential cuts in October and December, you talk about repricing our deposits. How do you think we should position the margin movement, especially with mortgage warehouse using seasonal outflow over the fourth quarter or potentially one quarter down the road?

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Yeah. I think in the nearer term, Casey, you know the high 330s or low 340s is a way to think about us. That’s where we’ve been the prior two quarters. If you adjust out the Main Street lending program terminations, that would bring us down to the low 340s this quarter. As far as repricing the deposits, I would expect it to look a lot like it did last year, where in Q3, we saw the rate cut, and then in Q4, we picked up the beta. I don’t know if we’ll have an October cut or December, but that repricing will always lag. To my earlier comments about slide eight, I think we may have confused people about core deposits versus non-core deposits and trying to show the opportunity to reprice.

We particularly took out the added in the index bar, which shows what we can reprice down, more real-time. The promo, $13.6 billion of promo deposits and CDs, will reprice at promo expiration down with each rate cut. We’ve seen a high 60%, low 70% beta, and we are targeting trying to continue that trajectory as we go into a falling rate environment.

Great. Thank you.

Okay. Sorry, Ben. One correction. I was looking at my chart wrong. It’s 22% of promotional deposits and 13% of face. I’ve inverted that. Apologies for that.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you. We now have Anthony Restel with JP Morgan on the line.

Hi. Good morning. Hope, you had a strong quarter on both NII and fees, but in your remarks, you maintained the revenue outlook of flat to up 4%. I know you noted that expenses may trend at the high end of the range, but given the strength you saw in revenue in three Q, I’m wondering if you also expect revenue to trend closer to the high end of the range, or if there’s a level of conservatism in your outlook.

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Yeah. I think if you look at the fact that we have 9 out of the 12 months baked and you look at what our year-to-date results are, we’ll absolutely be, short of any unexpected event in the next two and a half months, we would expect to be towards the higher end of the revenue range. The one that I can’t predict well right now is FHN Financial. They had a really strong fixed income quarter, specifically a really strong September. In the last two weeks, we’ve seen that come down pretty significantly, partially we think due to the government shutdown. I think to get to the higher end of that range, we would need FHN Financial to have a similar quarter to Q3, if not better.

Thank you. One on credit, maybe for Tom if he’s on the line. There were several questions on the large bank calls yesterday on their loan exposure to NDFIs, given growth in that category over the past several quarters. I think your loan exposure to NDFIs is a little over 10% per the call report. Just given what’s happened in the past several weeks, is this a loan category you’re doing a deeper dive on now or anything more broadly on credit? Thank you.

Thomas Hung, Chief Credit Officer, First Horizon Corporation: Yeah. Hey, Anthony. I am on the line, and thanks for the question. If I look at our NDFI book, this is an area we’ve always, even before recent events, always monitored very carefully and looked at. Overall, I kind of break our NDFI book into three separate components. Our consumer lending portion of NDFI actually remains very, very strong. There’s a very low amount of CNCs. I think, you know, I would specifically more focus on, based on the recent events, our consumer financing portion of that. That’s where our auto and retail financing would fall into. For us, it’s a relatively small book. It’s only about 2% of CNI or about 1% of total. There are some elevated NPLs and classifieds in that book. However, it’s all well within control. We also have a lot of expertise and a lot of history in the space.

One thing I would point to, for example, is we’ve always maintained a full-time team of field examiners that are consistently out at our customers’ on-site visits. That team has an average of 18 years’ experience in the space. Between that team and outside vendors, we’re on site one to three times every year at our customer sites to examine the collateral.

Thank you.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you. Your next question comes from Jared Shaw with Barclays Capital. Your line is open. You may proceed with your question.

Hey, good morning. Thanks. I guess maybe sticking with credit, you talked about the broader improvement in the criticized and classified. Did you change any of the assumptions on the macro side for the seasonal analysis driving that allowance, or is it all just sort of fundamental loan-by-loan improvement?

Thomas Hung, Chief Credit Officer, First Horizon Corporation: On the seasonal modeling process, we use Moody’s Analytics for running our macroeconomic scenarios. There is some management judgment in terms of our weighting between the baseline and the upside and the downside scenarios. Like I said, largely, we really follow Moody’s Analytics. I think maybe what you’re driving at is regarding the decrease in ACL that we had this year. Some of that is individually loan-driven. I think you probably noticed our criticized assets are down about 9% or $330 million on the quarter. We’ve certainly seen some good overall positive grade migration that’s contributing to that. It’s partly that, as well as the updated Moody’s Analytics outlook.

Okay. All right. Thanks. On the loan growth, you know, you referenced, Bryan, you referenced the paydown of construction and move over to permanent. At what level or at what point could we expect to see net growth in CRE?

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Yeah. You know that, Jared, good morning. That’s a business that is, as you know, you originate a loan and it funds up over two or three or four years, and then it pays off all at once as it goes into the permanent market. It has a bit of a spring-loading effect over time. We are starting to see with lower rates that those pipelines have built. The third quarter origination activity was significantly better than earlier in the year. We’re seeing progress. As those projects fund up, you’ll start to see it come into equilibrium. I would expect you’ll have another quarter or two of continued paydown payoffs, but we’re starting to see borrowers lean in a bit more. Tom, I don’t know if there’s anything you’d add to that.

Thomas Hung, Chief Credit Officer, First Horizon Corporation: No, I think that’s right. That’s really kind of the effect of a more construction-heavy portfolio on our CRE side.

Okay. If I could just ask a final one on the Main Street accretion, was that related to loans acquired through Iberia and just accretion at the final payoff, or what was, I guess, what was driving that outsized accretion this quarter?

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: No, it’s not related to Iberia or an acquisition. The Main Street lending program is coming to an end, and they gave banks the opportunity to repurchase those loans for existing clients. We had some existing clients that were part of that program when we repurchased the loans or purchased the loans the first time. It’s now on our package.

And that’s.

Just from that loan hitting our balance sheet at the end of last quarter.

Okay, that’s all wrapped up. There shouldn’t be a tail end of fourth quarter with that.

Correct.

Thank you.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Thank you.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: We now have Tim Bezlia with Wells Fargo. Please go ahead.

Hi, good morning.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Good morning.

Sticking to the M&A theme, it’s been a couple of months now since the Pinnacle Sonovus announcement. I’m just wondering what you’re seeing in terms of fallout from that transaction. Is that increasing competitive nature on loans, deposit, talent? Just maybe talk us through kind of the first couple of months post that deal.

I think it’s too early to see an awful lot of impact from that. I would say that the environment for lending in particular and people to a certain extent who have really experienced RM, PM teams has gotten tighter over the last couple of quarters. You see it in pricing, terms, and structure. It’s a competitive environment. I think it goes back to, you know, we’ve had a significant shift in the last, call it, two years from people wanting to bring down risk-weighted assets to a real emphasis on growth and growth in lending. We think that the environment is pretty constructive as we look into the rest of 2025 and into 2026. We’ve had very good success in recruiting bankers, and we continue to talk to bankers all across the franchise.

We’re looking to be very, very focused in growing the franchise by focusing on our commercial middle market banking, our specialty businesses, our private client wealth teams. We think we are well positioned to do that over the next really several quarters.

Okay. Bryan, your comment on potentially integrating a well-structured merger, that’s a little bit more pointed than in the past in terms of First Horizon maybe looking to engage in M&A here in the next couple of years. What does that mean for just the potential pool of buyers out there? I know in recent quarters, the comment has always been that there’s just not that many logical buyers kind of lined up. Is this further reinforcing that statement? Is that really the driver here? Is it that there’s a lack of logical buyers and therefore you have to just keep going and kind of consider all possible options on the capital front? I’m just wondering what changed in terms of making that more pointed comment on the M&A side.

Yeah. I think it’s really much more narrow in that, one, the regulatory environment and particularly the bright line around $100 billion or category 4 in total assets seems to be a little less bright and potentially can be moved up over time and significantly easier to deal with. Two, the approval process is significantly quicker than it has been in the not-too-distant past. That’s a positive. There does appear to be more activity in terms of institutions thinking about what the future may look like. As we look at our footprint, it is an opportunity to potentially gain a bigger foothold in some of these very fantastic markets that we have across our franchise. With respect to our longer-term thinking, it really is not a change. We are very focused on deploying capital in the business. We want to focus first on deploying that capital on an organic basis.

M&A is an alternative to deploying that capital, but it is not our priority. Number one growth is focused on organic deployment of capital in our franchise, and we think we have a number of growth opportunities. I don’t think it changes anything about the optionality we have as an organization. We believe we create maximum shareholder value by deploying capital in the business and growing and building for the long term. We don’t think that in any way changes other alternatives that are available. The big shift is the environment has changed significantly in the last several quarters, and the bright line seems to be a little less bright. Approval processes and the ability to announce a transaction and get it done in a timely manner seems to be better.

While I said earlier that we’re not making a big shift in the near term, I am saying that given that backdrop, you know, who knows what happens in 2026 and 2027 and beyond?

Got it. Thank you.

Thank you.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: We now have Ibrahim Punwala with Bank of America on the line.

Hey, everyone. Good morning. This is Eric on for EB. Hope, you mentioned kind of the 15% ROCI target next year. I know you guys have talked previously kind of about expenses at a high level for next year. Can you just talk about, as we head into 2026, kind of what you need to do to hit that 15% and to achieve that and kind of what’s baked into being able to kind of get there?

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Yeah. Our last slide in the deck shows the three components pretty clearly. The first is bringing capital down. We have a near-term target of 10.75%, which we’re working towards after we’ve successfully completed our stress testing. Longer term, Bryan and I have been very public. We think 10% to 10.5% is the right capital level for our balance sheet. The second is credit normalization. We’ve been building provision for two-plus years now for charge-offs that haven’t materialized that we don’t expect that we will see spike. We’ve given guidance this year of charge-offs between 15 and 25 basis points, and we’re coming in on the low end of that. Not having to build provision and being able to have a more normalized credit cost, we build our balance sheet. The third is PP&R growth in our existing book.

We have $100 million plus of opportunities that we expect to get out of our existing client base and franchise over the next two-plus years.

Okay. Got it. That’s helpful. I guess as the follow-up, was curious just about capital. You know, CET1 kind of at 11%. You’ve said 10.75% is kind of the near-term target. Bryan, maybe with respect to the M&A point, is that excess capital? I mean, you talked about buyback capabilities. Are the deals you’re thinking about kind of tuck-in, or are they larger deals that could be done in 2026?

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: I think as we sit here today, if we use capital for M&A, it would largely be tuck-in. We think we have significant growth opportunities to invest organically in the franchise. We really do believe that buyback opportunity or returning capital, repatriating capital to shareholders through that program gives us the tools or the flexibility to manage our capital levels. We talk to our board consistently about capital adequacy and how we deploy excess capital. We’re not making any significant shifts in the way we thought about it for a number of years.

Got it. Okay. Yeah, a lot of M&A questions. You know, the stock’s down 12% right now just because of that fear, I think. I wanted to make sure that you had the chance to kind of clarify those comments.

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Yep. I’ll reiterate what Bryan said is we haven’t changed our stance. We’ve been talking about opportunistically. What has changed is that there are smaller banks that are selling in our footprint, and the comment was meant to note that we are able to take advantage of that with our strong franchise. You know, and reiterate what Bryan said earlier. We were not for sale when TD brought us an offer, but our board looked at it and did the right thing. I think we might be over-indexing a little bit on a couple of comments Bryan made about a changing M&A environment. We have not changed our stance on optionality.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you. We will now move on to the next questioner. We have Chris McGratty with KBW.

Hey, how’s it going? This is Andrew Leichner on for Chris McGrathy. Just on.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Good morning.

Just going back to capital. As you make progress towards that updated 10.75% CET1 target, will buybacks continue to be more of a function of where loan growth lands in any given quarter, or will we see a greater appetite for those buybacks going forward? Thanks.

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Yes, absolutely. The first priority is to grow the balance sheet with loan growth. As we put out the target for our share buybacks at the beginning of a quarter, we look at what our forecast is for loan growth. What capital we cannot deploy to loan growth, we then deploy to share buybacks second.

Okay, great. Thank you.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Sure thing. Thank you.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: We now have Christopher J. Steenberg with Janney Montgomery Scott on the line. Please go ahead.

Thanks. Good morning. Bryan, I know Tom talked about NDFI loans earlier, and I was just curious about the deposit opportunity with these customers, particularly outside of the mortgage finance channel. Is that an area that you can grow in the treasury area and otherwise?

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Yeah. That’s an area where we’ve had a tremendous amount of focus over really the last several years. We have made significant progress with respect to our focus on deposit gathering activities and our specialty lines of business more broadly. I think in our supplemental information, you’ll see that the loan deposit ratio is very high. It’s not relatively high. It’s just very high. We’ve made progress in that regard. Those businesses have traditionally been more lending-oriented. They are very, very attractive because they have attractive competitive dynamics. We have deep expertise and knowledge in those businesses. We have made progress, and I expect that we will continue to make progress penetrating deposits. We’ve put in place treasury management products that make it significantly easier with the ability to gather those deposits.

I feel good about the focus and the progress, and I expect that we will continue to see that deposit growth.

Sounds great. Thank you for that background. I appreciate it. Thank you for taking our questions today.

All right. Thanks, Chris.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: We have a question from Janet Lee with TD Cowen. Please go ahead.

Good morning. I know you guys touch up on FHN Financial trading revenue before, but I want to just get more color. Most of the strength came in September, it seems. Is it sort of around when the rate cuts came? When I look at the shape of the curve, looking at the two-to-five and the spread between the two-year and five-year, the average spread hasn’t changed that much in the third quarter versus two Qs. I’m trying to understand what drove the 40% increase in ADR in the quarter and the sustainability of the level going forward, or if the strength had anything to do with more securities repositioning from the banks.

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: Yeah. Janet, we saw the momentum pick up really the two weeks before the rate cut as the Fed started to strongly signal that we would see a rate cut. We saw it continue through early October, the first week of October until the government shutdown. I don’t believe, and we have not heard that it’s a ton of balance sheet repositioning. We typically tend to see that at the end of the year. We’ve commented in our last two years in our earnings that in Q4, we saw FHN Financial pick up due to balance sheet restructuring at year-end, but I don’t believe we had much of it this quarter.

As far as the ability to maintain it, I think whether we see a rate cut this month or in December would be positive for their business as well as the shape of the yield curve, which is moving around a lot right now in the last week or two as we look at both the tariff impact and the government shutdown impact. I’m hoping it rebounds from where we’ve been in the last two weeks.

Okay. Got it. No, that’s helpful. In terms of the other C&I balances, excluding the loans to mortgage companies, that increased this quarter, but roughly at half the pace reported in the second quarter. Has anything changed? I know that Bryan commented that the pipelines are building, but is there anything to read from the change in C&I loan growth this quarter versus the last quarter? Do you still expect that sort of mid-single-digit loan growth in 2026 is a reasonable place to be?

Thomas Hung, Chief Credit Officer, First Horizon Corporation: Yeah. No, I would say there’s no significant change third quarter, second quarter. In the second quarter, our C&I balances, excluding mortgage warehouse, was up over $170 million. I think that reflects good momentum. When we’re talking kind of one-point difference quarter to quarter, that’s a matter of just a couple of deals. That’s just a little bit of inherent lumpiness, but overall, we have really good momentum in our C&I and in our create channels.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: With respect to the 2026 outlook, I’m still comfortable with the mid-single-digit loan growth numbers. Clearly, we’ve, as I said earlier, we’re expecting to turn in commercial real estate lending as rates have come down and projects pencil out better and the momentum that we’re seeing in the organization. Yeah, we’re still comfortable with what I said several months ago about 2026.

Got it. Thank you. My last question is just, you know, following up on M&A. Would you, for potential M&A opportunities, look at contiguous footprint, or is it focused on your core footprint? Also, in terms of the timing, would you be comfortable crossing $100 billion without the regulatory, I mean, without the asset threshold being lifted above $100 billion?

Yeah. A couple of thoughts. One, I said near-term, nothing’s really changed. I think this is, if anything, it’s 2026 and beyond. Yes, we’d be focused on our core franchise. Two, I’m increasingly confident that the ability to cross $100 billion is significantly better than it would have been 18, 24 months ago.

Thank you.

Thank you.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you. Just a quick reminder that it’s star followed by one to register for questions. We have another question from Nick Alawukai with UBS. Please go ahead.

Hi. Thanks for taking my question. Maybe just one more on M&A. I know that you’ve flagged in the past the PP&R opportunity, $100 million plus over the next couple of years here, with a chunk of that at least stemming from residual opportunity because of the Iberia First Horizon merger. Do you feel like you need to realize a significant portion of that $100 million plus opportunity prior to engaging in any further M&A?

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: It has been our focus to be well down the path. As we continually have said, it’s $100 million plus in pre-tax pre-provision. We are in the process of realizing that. My message this morning is we are making progress in that regard. I feel good about the progress that we are making and that we are likely to make. That gives us increasing confidence that if anything presented itself in terms of a fill-in opportunity, we would be in a position to execute on both.

Understood. Thank you. I guess looking out to 2026 and the potential for flattish expenses there, excluding any changes in the fixed income business, can you just touch on how you’re thinking about balancing expense discipline versus investing, especially as you think about the possibility of being a much larger institution?

I’ll start and then Hope can clean it up, I suppose. Look, we think we have the ability, given the levers that are in place and particularly some of the investments that we’ve been making over the last couple of years, to deliver on flattish expenses, caveated, as you appropriately did with the fee income businesses. We can deliver on that, we can continue to invest in technology, infrastructure, and continue to deliver superior customer and associate experiences, and we can do all of that and maintain flattishness. That does include continuing to build the capability to be an LFI or a category 4 banking institution. Our outlook for expenses does not in any way inhibit our ability to continue to build the franchise for the long term and continue to build it in a way that delivers for our customers, communities, and for our associates and shareholders.

Hope Dmuchowski, Chief Financial Officer, First Horizon Corporation: I think Bryan said it well. I’ll reiterate, we are still investing with flat expenses. We do have banker growth built in there. We have De Novos that are opening later this year and next year. Bryan mentioned earlier hiring a new retail head that is also going to make some investments back into our franchise. We announced two and a half years ago that we would have a three-year $100 million investment back into our technology. Those investments do come with additional revenue and cost savings. We’re getting to see, as we come to complete that third year, we’re seeing the benefit of those efficiencies. We’ve also made many strategic decisions that decrease our operating costs. We’ve talked before when we’ve had some restructuring charges in our earnings about outsourcing our facilities management to JLL, our broker-dealer partnership with LPL.

All of these things are items that help us drive efficiencies in our expenses while raising revenue.

Thanks for taking my questions.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Thank you.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you, Nick. Our final question comes from John Ostrom with RBC with a follow-up.

Hey, thanks. Thanks for taking the follow-up. I’m annoying here, Bryan, to talk about this, but I think you’re saying you can run the company. You cannot run the company as if someone larger like TD is going to come in with a big premium in the near term. You have to keep looking ahead, growing the franchise. If a small deal comes up, you consider it. If it enhances franchise value, a big premium comes in next week or a year from now, the board would consider it. If it doesn’t happen, you can’t just sit there and wait. Is that? I know it’s annoying, but that’s the message, right? Really, nothing’s changed in terms of your approach?

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Yeah, absolutely, John. You said it much more articulately than I’ve said it this morning. Nothing has changed in our view. We believe we have to run the franchise for the long term, and that does include considering deploying capital and fill-in acquisitions. We believe very strongly that if we create value by delivering high returns, improving profitability, growing the franchise, and capitalizing on one of the best footprints, we believe in the banking space, that not only keeps our optionality open, but it doesn’t take any off the table. I think, as you articulated, we don’t see ourselves limiting our optionality in any way by continuing to invest in delivering the franchise.

Okay. Thank you very much. Appreciate it.

No, thanks for your help.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you. We now have another follow-up from Anthony Restel with JP Morgan on the line.

Hey, Bryan. One more on M&A. I’m curious, you kept emphasizing in-footprint, existing footprint, but if I think Iberia and Capital Bank, they expanded your footprint to the Carolinas, Texas, Louisiana. I’m curious, why put the emphasis on in-footprint this time around in your prepared remarks? Thank you.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Yeah. Anthony, it really is in many ways very, very different. If you think about Capital Bank, for example, we were largely a Tennessee-based franchise at that point in time, and that really enhanced our small presence in the Carolinas, expanded South Carolina in particular, and Florida. Iberia Bank sort of rounded out that footprint. Today, we have a geographic footprint that broadly ranges from Texas to Florida to Virginia to Arkansas and back to Texas. We look at the growth and the opportunities in that footprint. It really seems the place that we ought to focus. We don’t see anything, at least immediately, that says we ought to try to expand upon what is one of the highest growing parts of the U.S. economy.

Thank you.

Thank you.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you. I can confirm that does conclude our question and answer session today. I would like to hand it back to our CEO, Bryan Jordan, for some final closing comments.

Bryan Jordan, Chairman, President, and CEO, First Horizon Corporation: Thank you. We appreciate everyone joining us this morning. We appreciate your time and your interest. If you have follow-up questions or you need additional information, please do not hesitate to reach out. Hope everyone has a great day. Thank you.

Tyler Craft, Head of Investor Relations, First Horizon Corporation: Thank you all for joining the First Horizon Third Quarter 2025 earnings conference call. Today’s call has now concluded. You may now disconnect.

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