First Horizon targets sustained 15%+ adjusted ROTCE amid M&A optionality and robust deposit retention

Earnings Call Insights: First Horizon Corporation (FHN) Q3 2025

MANAGEMENT VIEW

* CEO D. Jordan expressed satisfaction with the quarter’s performance, highlighting "strong adjusted EPS of $0.51 per share" and emphasizing continued execution on safety, soundness, profitability, and sustainable growth. He noted, "We continue to deliver excellent returns for our shareholders and execute on our priorities across the franchise."
* CFO Hope Dmuchowski stated, "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%." She also detailed the $33 million net interest income growth and a 15-basis point expansion in net interest margin, attributed in part to higher mortgage warehouse activity and MainStreet Lending Program accretion.
* CEO Jordan pointed out, "Our strategy is clear and our competitive position in our attractive southern footprint is enviable. We see continued strength in both our credit trends and our capital outlook."

OUTLOOK

* Management maintained full-year 2025 guidance, with confidence in achieving year-over-year pre-provision net revenue (PPNR) growth. Revenue guidance was reiterated, with the NII benefit and countercyclical fee income expected to offset balance sheet asset sensitivity in a falling rate environment.
* CFO Dmuchowski said, "Our expense guidance remains unchanged. With a significant foundation contribution noted earlier and the potential for increased commissions driven by ADR growth... we currently expect that expenses may finish 2025 at the top end of our current guidance range."
* The company is targeting 10.75% CET1 in the near term and aims for a sustainable 15%+ adjusted ROTCE for the coming year.

FINANCIAL RESULTS

* Adjusted EPS for the quarter was $0.51, up $0.06 from Q2. Adjusted ROTCE reached 15%.
* Net interest income grew by $33 million, and net interest margin expanded by 15 basis points to 3.55%.
* Fee income increased $26 million quarter-over-quarter, with fixed income fee revenues of $57 million and a $6 million rise in mortgage fees due to MSR sales.
* Adjusted expenses (excluding deferred compensation) rose $45 million, with a $20 million foundation contribution and higher incentive and project costs.
* Net charge-offs decreased $7 million to $26 million; the net charge-off ratio was 17 basis points. Loan loss provision was a credit of $5 million, and the ACL to loans ratio declined to 1.38%.
* Share buybacks accelerated to $190 million, with 8.6 million shares repurchased; more than $300 million remains authorized.

Q&A

* Jon Arfstrom, RBC Capital Markets: Asked about pipeline momentum. CEO Jordan responded, "There is more confidence, and it is noticeable... Customers are more confident and more forward leaning; lower rates and the trajectory of rates added to folks' confidence."
* Casey Haire, Autonomous Research: Inquired about core deposit trends and pressures. CFO Dmuchowski clarified, "The deposits in the industry are shrinking, specifically out of banking... competition for deposits will continue to heat up."
* Casey Haire also asked about management’s M&A outlook. CEO Jordan reiterated, "Our near-term priorities are not changed... Given that the M&A environment has picked up... we will be opportunistic if it presents itself in '26 or later."
* Benjamin Gerlinger, Citi: Questioned M&A positioning. CEO Jordan stated, "We are very focused on creating value for our shareholders, both near and long term... I'm not changing anything about the future, just saying that we're in a much better place today than we were 6 months ago."
* Several analysts revisited margin sustainability, capital deployment, and the impact of the Main Street Lending Program; management provided detailed clarifications on one-time items and ongoing capital strategy.

SENTIMENT ANALYSIS

* Analysts pressed on deposit franchise health, margin sustainability, and the implications of M&A commentary—tone was neutral to slightly negative, with repeated references to share price performance and capital strategy.
* Management maintained a confident and consistent tone in both prepared remarks and Q&A. CEO Jordan repeatedly emphasized long-term value creation and strategic flexibility, stating, "We believe we have to run the franchise for the long term."
* Compared to the previous quarter, management’s tone remained steady, but analysts appeared more concerned about M&A signals and deposit trends.

QUARTER-OVER-QUARTER COMPARISON

* Adjusted EPS increased by $0.06; adjusted ROTCE rose to 15% from prior quarter.
* Net interest income growth accelerated, and fee income rebounded after Q2’s softness.
* Expense growth was higher due to a one-time foundation contribution and increased incentive costs.
* Deposit retention remained strong, but analysts highlighted core deposit pressures more intensely this quarter.
* M&A optionality received greater focus from both management and analysts, while previous calls centered more on organic growth and expense controls.
* Management’s confidence in margin and loan growth remained similar, but there was greater emphasis on readiness for future M&A opportunities.

RISKS AND CONCERNS

* Management noted continued industry-wide deposit competition and the need to balance retention with competitive pricing.
* Analysts raised concerns about core deposit outflows, loan-to-deposit ratios, and the sustainability of high noninterest-bearing balances.
* Uncertainty around the impact of M&A strategy on shareholder value was a recurring analyst theme.
* Credit risk from NDFI exposure was discussed, though Chief Credit Officer Hung described strong controls and minimal exposure outside of consumer financing.
* Expense discipline was flagged as an ongoing challenge with investments in technology and banker growth planned.

FINAL TAKEAWAY

First Horizon’s management emphasized a strong quarter with improved profitability, robust deposit retention, and a clear path to sustained 15%+ adjusted ROTCE. While analysts voiced concerns about deposit trends, expense growth, and the implications of M&A commentary, management reiterated its commitment to long-term value creation, operational discipline, and strategic optionality in a changing industry environment. The company remains focused on organic expansion while maintaining readiness to pursue M&A opportunities that complement its existing southern footprint and franchise strength.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/fhn/earnings/transcripts]

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