On Wednesday, First Horizon (NYSE:FHN) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/649915677
Summary
Full Transcript
OPERATOR
Hello everyone and thank you for joining the First Horizon first quarter 2026 earnings conference call. My name is Lucy and I’ll be coordinating the call today. During the presentation, you can register a question by pressing STAR followed by one on your telephone keypad. If you change your mind, please press STAR followed by two to remove yourself from the question queue. It is now my pleasure to hand over to your host, Tyler Craft, Head of Investor Relations to begin. Please go ahead.
Tyler Craft
Thank you. Lucy Good morning. Welcome to our first quarter 2026 results conference call. Thank you for joining us today. Our Chairman, President and CEO Brian Jordan and Chief Financial Officer Hope Domchowski 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 Hahn 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’s important for you to review the GAAP information in our earnings release pages 2 and 3 of our presentation and the non GAAP reconciliation at the end of our presentation. And last but not least, our comments reflect our current views and you should understand that we are not obligated to update them. And with that, I’ll hand it over to Brian.
Brian Jordan
Thank you Tyler Good morning everyone. We started 2026 with strong momentum. In the first quarter we delivered our third straight quarter of 15% or greater adjusted ROTC in line with our expectations, fueled by strong C and I client growth and relationship focused client activity across our markets. Through our differentiated business model, we continue to successfully execute by providing tailored solutions to meet client needs and turning insights into profitable outcomes. We’re focused on building true client relationships, staying disciplined on price and structure, and supporting our clients with the full capabilities of our franchise. Our diversified business model with countercyclical businesses positions us well as the operating environment evolves. I’ll now turn the call over to HOPE to walk through our first quarter results. I’ll provide some closing comments at the end of the call.
Hope Domchowski
Hope thank you Brian Good morning everyone and thank you for joining us today. Over the last year we have talked a lot about our efforts to improve the profitability of the balance sheet and how we laid out our strategy for the entire organization. That work is evidenced in our results this quarter which includes a return on average assets of 1.30%, up 19 basis points from first quarter last year. Amidst rate decreases over the last year we have grown net interest income 6% year over year which outpaced our loan portfolio growth of 3% in that same time. Demonstrating our continued focus on profitable growth. We started 2026 with great momentum including earnings per share of 53 cents which is an increase of 11 cents over the first quarter. 2025 excluding loans to mortgage companies, our C and I portfolio grew 624 million in the quarter compared to having approximately flat growth in the first quarter of 2025. Our performance also includes 8% improvement in adjusted pre provision net revenue compared to the first quarter of 2025. Our adjusted ROTC of 15.1% increased over 200 basis points year over year. Starting on Slide 7, we walk through our net interest income and margin performance in the first quarter which saw NII consistent with the fourth quarter absent day count impacts. Our margin expanded by 1 basis point on continued strong performance in managing deposit costs following the Fed’s last rate cut in December 2025. While our variable loan portfolio experienced yield declines in the quarter, our deposit pricing discipline offset this impact. On slide 8, we cover details around our deposit performance in the quarter period. End balances decreased by 1 billion compared to prior quarter driven primarily by reductions in brokered deposits. The average rate paid on interest bearing deposits decreased to 2.28% coming down from the fourth quarter average of 2.53%. We maintain a cumulative deposit beta of 69% since rates started to fall in September 2024. Our interest bearing spot rate ended the quarter at 2.27%. On slide 9 we cover our quarterly loan growth period. End loans increased slightly by 221 million from the prior quarter. This quarter’s results, which include an impressive start to the year for our core C and I business which saw 624 million in loan balance growth. This builds on momentum we saw in the second half of 2025 and supported by continued strong pipelines in 2026. Loans to mortgage companies experienced typical seasonality in the first quarter and ended down $62 million versus year end. This business continues to have momentum as a source of strength for our company. Commercial real estate continues to be a headwind for loan balance growth as stabilized loans move to permanent markets and non past loan resolutions reduce balances Encouragingly, our CRE pipelines are strong and present notable opportunities to stabilize CRE balances in the future. I will also note that our consumer loan portfolio declined $198 million in the quarter which is in line with normal fluctuations. Our goal for consumer lending is to focus on relationship expansion and profitability. While competition in the market is strong, commercial loan spreads remain generally in the mid-100s to upper 200 base points. Turning to slide 10, we detail our fee income performance for the quarter which decreased 12 million from the prior quarter excluding deferred compensation and is up 13 million year over year. The largest decreases for fee income comes from our service charges and fee lines which was driven by the impact of day count and normal seasonality and other service charges like treasury management fees, interchange income and NSF fees and by quarter over quarter fluctuations in our equipment finance business. We saw a slight quarter over quarter decline in fixed income revenues due to the decrease in ADR to 742,000, though this is still a 27% increase year over year. We saw slightly lower ADRs at quarter end as market volatility increased. On slide 11 we cover our adjusted expenses that excluding deferred compensation decreased 32 million from prior quarter. Personnel expenses excluding deferred comp decreased by 10 million from last quarter driven by an 8 million decline in incentives and commissions which followed higher incentive accruals last quarter. Quarter outside services decreased by 26 million which includes reduced expenses related to technology initiatives from last quarter and decreased marketing expenses in the quarter. Turning to credit on slide 12, net charge offs decreased by 1 million to 29 million. Our net charge off ratio of 18 basis points remains in line with our expectations. We recorded a provision for credit losses of 15 million in the quarter and our ACL to loans ratio declined slightly to 1.28%. This was driven by mix change in the portfolio. On slide 13 we ended the quarter with a CET1 of 10.53% driven by buyback activity and loan growth in the quarter. During the quarter we bought back approximately $230 million of common shares. We have approximately 765 million in our current board authorization remaining. During the quarter we successfully issued 400 million of Series H preferred stock which drove the 44 basis point increase to our Tier 1 capital ratio of 11.95%. Our tangible book value per share is $14.34 which is up 9% year over year which includes buybacks of 766 million during that period and an increase to our dividend. I’LL wrap up on slide 15. I am proud of the momentum we have to start 2026. We continue to maintain our full year outlook and updated our near term CET1 target to 10.5% during the first quarter. For the third consecutive quarter we achieved 15% plus adjusted ROTC reflecting our focused execution on our business priorities. We continue focusing on deepening our client relationships, fully delivering our products and services across our excellent footprint, and enhancing our capabilities to create value for clients and shareholders. All of this moves us towards achieving the 100 million plus PPNR we noted last year as our opportunity in the next couple of years. We made initial progress on this objective last year and continue doing so in 2026. Our revenue expectations reflect continued capture of this profitability throughout the year. Expense discipline and underwriting consistency continue to be central to our company and disciplined capital deployment continues moving us towards our intermediate CET1 targets. And with that I’ll turn it back
Brian Jordan
over to Brian thank you Hope on the whole, we feel very good about how we started the year. We’re seeing strong client activity in our commercial pipelines as well as business owners. Planning for growth Relationship banking remains our priority, focusing on primary relationships, deepening treasury and wealth management, and making sure our solutions match client needs. In the first quarter we saw strong production, essentially evenly balanced between our regional banking and specialty verticals. C and I loan commitments reflected both deepening of existing relationships and new client acquisitions, and our CRE pipelines are as strong as they’ve been in years. We manage our business with three priorities, safety and soundness, profitability and growth, which is evident in our results. Again this quarter. We’re not playing solitaire. Competition is active, but our associates are protecting our base and winning with exceptional service and value. We expect that discipline, along with healthy CNI demand and the strength of our markets to drive revenue growth. As the year progresses. Our diversified model gives us a balance as the macro and geopolitical backdrop evolves. If the rate path is choppy or sentiment shifts, our countercyclical businesses are positioned to contribute. If confidence builds. Our core banking engine benefits from client growth, credit remains in line with our expectations and we continue to approach opportunities selectively. On price and structure, our footprint is a real advantage. The Southeast and Texas remain growth corridors. We deliver big bank capabilities with the personalized touch of a community bank across our entire footprint. That combination allows us to serve clients locally while bringing the resources of the entire bank when they need them. We remain focused on expense discipline while strategically investing in talent, technology and tools that make our associates more effective for their clients. We’ll stay thoughtful on capital management and we’ll be opportunistic with share repurchases. While the macroeconomic environment changes and creates new headwinds and uncertainties, I remain optimistic about our outlook for the year. Our job is to stack one good quarter on top of the next by effectively serving our clients and communities. Thank you to our associates for their hard work and to our clients and shareholders for their continued confidence and First Horizon. Lucy with that, we can now open it up for questions.
OPERATOR
Thank you, Brian. To ask a question, please press STAR followed by one on your telephone keypad. Now, if you change your mind, please press Star followed by two to remove yourself from the question queue. When preparing to ask your question, please ensure your device is unmuted locally. The first question today is from John Astrom of RBC Capital Markets.
John Astrom
Your line is now open. Please go ahead.
Brian Jordan
Hey, thanks. Good morning. Good morning, John. Brian, question for you. You touched on some of this, but you seem a little more optimistic on the lending environment and wondering if you could touch a little bit more on the pipelines in CNI and whether or not you’ve seen any impact on pipelines from the macro uncertainty. Yes, happy to. John. The pipelines in CNI continue to be very, very good. And while the short term effects of the disturbance or the trouble in the Middle east has people asking questions, it really has not had a significant downward impact on CI pipelines at this point. And in fact, we still see what is a continuation of what we saw building in 25, which is business owners and leaders looking to grow, invest and build. And so that has been positive. In addition, I mentioned, and I think Hope did as well, that CRE pipelines have continued to build. And as you know, that’s a business for us, that loans originate and fund up over a 3, 4, 5 year period and then pay off all at once. And we haven’t seen pipelines this Strong since the 22, 21, 22 timeframe when rates were essentially zero. So those pipelines are building. So we’re very optimistic about the outlook for lending growth over the course of this year. You will see in our results and it’s somewhat evident in the way that we have transformed our balance sheet over the last 18 months. We have continued to focus on profitable growth. We’ve repositioned the business to align around our consolidated strategy and with that we’re seeing an improvement in the profitability of the lending that we’re doing. We’re focused on very much on relationship lending Things that are not relationship oriented we’re being very disciplined about. And so we look at the year and are very optimistic. I said in my closing comments that the market is still very competitive and without a doubt the markets are still very competitive. Very good loan transactions have a lot of competition for those. And our bankers are doing a very nice job of, of not only getting our fair share, but maybe a little bit more.
John Astrom
Okay, that’s helpful. And then maybe one more on lending, I think hope usually you handle this one. But on the loans to mortgage companies you’re, you know, despite the fact it’s been maybe a choppy environment, you’re still up like 35% year over year. Do you expect a typical seasonal bounce in warehouse balances and since it’s a bigger category for you, what, you know what, maybe you can size it for us and give us an idea of what we could see in Q2 and Q3.
Hope Domchowski
Thanks, John. I will say we do expect to see a seasonal increase in Q2. We’re already starting to see some of that fund up at the end of March and beginning to April now. Whether it’s typical, I can’t say what typical is anymore. Last two years, John, have been some of the lowest mortgage origination years in the last 20 years. And I think the way rates have been going the first part of the year, we’re probably going to see a low …
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