First Horizon Q4 Earnings Call Highlights

First Horizon (NYSE:FHN) detailed what management characterized as a strong finish to 2025, highlighting improved profitability metrics, solid loan and deposit trends, and substantial capital returns during its fourth-quarter earnings call. Chairman, President and CEO Brian Jordan and CFO Hope Dmuchowski also outlined a 2026 outlook that calls for revenue growth and continued expense discipline, while executives emphasized confidence in credit performance and balance sheet positioning.

Fourth-quarter performance and profitability

Dmuchowski said the company ended the year with fourth-quarter earnings per share of $0.52, a net interest margin (NIM) of 3.51%, and 2% loan growth. She described the quarter as benefiting from deposit pricing and loan growth in certain categories, even as headline margin was modestly lower.

Net interest income increased by approximately $2 million versus the prior quarter, according to management. NIM compressed by four basis points, though Dmuchowski noted that excluding the impact of Main Street Lending Program accretion referenced on the previous quarter’s call, NIM would have expanded by two basis points.

Deposit costs were a key tailwind. Dmuchowski said the average interest-bearing deposit cost declined by 25 basis points, and the average rate paid on interest-bearing deposits fell to 2.53% from 2.78% in the third quarter. The company reported a cumulative deposit beta of 64% since rates began falling in September 2024, with an interest-bearing spot rate ending the quarter at 2.34.

Loan growth led by mortgage company lending and C&I momentum

First Horizon reported period-end loans up $1.1 billion, or 2%, from the prior quarter. The largest increase came from loans to mortgage companies, which rose $776 million quarter over quarter. Dmuchowski said fourth quarter is not typically a seasonal high point for that business, but the company saw a pickup in refinance activity, with refinances comprising about one-third of activity versus roughly 25% in recent quarters.

Outside mortgage company lending, the company also cited broad-based strength in commercial and industrial lending. Period-end balances in the rest of the C&I portfolio increased by $727 million from the prior quarter, supported by higher origination volume. Executives described pipeline momentum as broad-based, spanning the regional bank footprint and specialty business units, with equipment finance cited as one area showing outsized growth.

Within commercial real estate, balances continued to decline, but at a slower pace. The CRE portfolio saw a $111 million reduction, and Dmuchowski said the pace of paydowns slowed relative to prior quarters. The company also reported a slight increase in CRE commitments, which management said provides momentum entering 2026. Chief Credit Officer Thomas Hung later added that the CRE pipeline had increased meaningfully and pointed to the quarter’s net increase in total CRE commitments as an early indicator for future balance trends.

Fee income, expenses, and operating priorities

Fee income increased by $3 million from the prior quarter, excluding deferred compensation, with the largest contribution coming from service charges and fee lines. Management attributed that increase largely to $4.4 million of income tied to elevated activity in the equipment finance lease business.

Adjusted expenses, excluding deferred compensation, rose $4 million from the prior quarter. Personnel expenses increased by $12 million excluding deferred compensation, driven in part by $8 million in incentives and commissions, which Dmuchowski said reflected annual bonus adjustments after the company hit the high end of its revenue targets. Outside services increased by $16 million, which included technology and product initiative costs as well as higher advertising expenses.

On expense guidance, management reiterated a “flattish” outlook for 2026, while acknowledging some variability tied to countercyclical revenues and related commissions. Dmuchowski said a rule of thumb for commission-based expense is to assume roughly 60% commission as revenue increases year over year in countercyclical businesses, adding that higher commission expense would be “a high-class problem” given the profitability of those businesses.

Jordan said the company remains focused on deepening client relationships and continuing investments in technology and tools, even while emphasizing efficiency and discipline. He also reiterated management’s view of a $100 million-plus pre-provision net revenue (PPNR) improvement opportunity, saying progress began in 2025 and is expected to build through 2026 and 2027, with more benefit anticipated in 2027 than 2026.

Credit trends, reserves, and capital return

Credit results remained stable in the quarter. Net charge-offs increased $4 million to $30 million, and the net charge-off ratio was 19 basis points, which management said was in line with expectations and recent performance. The company recorded no provision for credit losses in the fourth quarter, and the allowance for credit losses to loans declined to 1.31%, which Dmuchowski attributed to broad improvement across the commercial portfolio and payoffs of non-pass credits.

Hung said the company resolved more than $700 million of non-pass credits in the fourth quarter through a mix of payoffs and upgrades, and $2.2 billion for the full year. Executives noted that reserve levels and provisions can be influenced by multiple factors, including economic assumptions, loan growth, and business mix, and emphasized net charge-offs as the clearest indicator of credit performance.

On capital, First Horizon ended the quarter with CET1 of 10.64%, with buybacks and strong loan growth contributing to the decline. During the quarter, the company repurchased just under $335 million of common shares, bringing total 2025 buybacks to $894 million. Jordan also said the company returned just under $900 million through repurchases and just over $300 million in dividends during 2025.

The company announced a $1.2 billion repurchase program at the end of October and said it has just under $1 billion remaining under authorization. Management reiterated a near-term CET1 target of 10.75%, with expected fluctuations between 10.5% and 10.75% tied to loan growth, while continuing discussions about lowering the target over time toward an intermediate-term range of 10% to 10.5%.

2026 outlook: revenue growth range and key swing factors

For 2026, Dmuchowski said the company expects year-over-year PPNR growth supported by mid-single-digit balance sheet growth and positive operating leverage. Total revenue is projected to grow 3% to 7% year over year, reflecting different interest rate and business-mix outcomes. Management cited rate path uncertainty, loan growth timing, and performance of countercyclical businesses (including mortgage-related activity and fixed income) as key variables.

Other elements of the 2026 framework included:

• Net charge-offs expected at 15 to 25 basis points
• Tax rate expected at 21% to 23%, similar to 2025
• NIM outlook described as around the mid-340s with quarter-to-quarter variation; management said it does not view 3.50% as a “go-forward” level

Jordan said the company’s priorities for 2026 include serving clients, growing profitable relationships, and delivering on financial objectives, adding that management sees positive signs in commercial lending pipelines and remains confident the company can meet revenue growth targets across a variety of economic scenarios.

About First Horizon (NYSE:FHN)

First Horizon Corporation, headquartered in Memphis, Tennessee, is a diversified financial services company providing an array of retail, commercial and wealth management solutions. As the largest bank-based financial services firm in Tennessee, First Horizon operates through a network of branches and digital platforms across the Southeastern United States, offering personal and business banking, mortgage origination and servicing, payment solutions and treasury management services.

Tracing its origins to the First National Bank of Memphis established in 1864, First Horizon has grown through strategic acquisitions and organic expansion to serve customers in Tennessee, Texas, North Carolina, South Carolina, Georgia and Florida.