Q2 2025 First Horizon Corp Earnings Call

we welcome you all to the First Horizons second quarter 2025 earnings conference.

My name is Brika 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.

Thank you for joining. I would like to welcome you all to the first horizon. Second quarter 2025 earnings conference. Call my name is Bria and I will be your moderator for today.

I would now like to pass the conference over to your host Tyler Craft, Head of Investor Relations at First Horizon Bank. Thank you. You may proceed. Thank you, Brika.

All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

Speaker Change: I would now like to pass the conference over to your host. Tyler craft head of investor relations at First Horizon Bank thank you. You may proceed.

Good morning. Welcome to our second quarter 2025 results conference call. Thank you for joining.

Today, our Chairman, President, and CEO, Brian 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 Our remarks today will reference our earnings presentation, which is available on our website at ir.firsthorizons.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 file.

Speaker Change: Thank you, Bria. Good morning, Welcome to our second quarter, 2025 results conference call. Thank you for joining us.

Today our chairman president and CEO. Brian, Jordan, and Chief Financial Officer. Hoped, I'm chowski. Will provide prepared remarks after which, we'll be happy to take your questions.

Speaker Change: We're also pleased to have our chief credit officer, Thomas, Hoang here to assist questions as well.

Speaker Change: Our remarks today will reference our earnings presentation, which is available on our website at IR first horizon.com.

Additionally, please be aware that our comments will refer to adjusted results which exclude the impact of notable items. These are non-GAAP measures, so it's important that you review the GAAP information in our earnings release, page three of our presentation, and the non-GAAP reconciliations at the end of our presentation.

Speaker Change: 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 2 of our presentation. And in our FCC filings

Speaker Change: Additionally, Please be aware that our comments will refer to adjusted results which exclude the impact of notable items.

And last but not least, our comments reflect our current views, and you should understand that we are not obligated to update.

Speaker Change: H3 of our presentation and the non-gaap, reconciliations at the end of our presentation.

And with that, I'll hand it over to Brian. Thank you, Tyler. Good morning, everyone. And thank you for joining our call. We appreciate your continued interest in First Horizon.

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: Thank you, Tyler. Good morning, everyone and thank you for joining our call.

I'm pleased with our results in the second quarter. Our balance sheet growth, credit, and profitability were all strong in the quarter. The economy continues to be relatively stable. We are seeing improving customer confidence, but uncertainty remains around tariffs, interest rates, and the economic outlook. Sitting here today, we believe that the fundamentals in the economy, especially in our southern footprint, will remain good for the back half of 2025 and into 2026.

Brian: We appreciate your continued interest in first horizon.

Brian: I'm pleased with our results in the second quarter. Our balance sheet growth credit, and profitability were all strong in the quarter.

Brian: The economy continues to be relatively stable.

We are seeing improving customer confidence, but uncertainty, remains around tariffs, interest rates and the economic Outlook.

Our focus remains on safety and soundness, profitability, and sustainable growth. We are pleased to report that our credit trends remain consistently strong. We continue to deliver on our profitability targets with expense and pricing discipline despite increased deposit pressure and competition. And finally, balance sheet growth this quarter is in line with the broader industry trend.

Brian: Sitting here today we believe that the fundamentals in the economy especially in our Southern footprint will remain good for the back, half of 2025 and the end to 2026.

Brian: Our Focus remains on safety and soundness profitability and sustainable growth.

Brian: We are pleased to report that our credit Trends, remain consistently strong.

Brian: We continue to deliver on our profitability targets with expense and pricing discipline, despite increased deposit pressure and competition.

Brian: And finally balance sheet growth. This quarter is in line with the broader industry trends.

On slide five, we share a few highlights from the quarter. We earned an adjusted EPS of $0.45 per share, which was a $0.03 increase from the prior quarter. These results reflect pre-provisioned net revenue growth of $4 million from the first quarter and improving credit. The primary driver of our PPNR improvement was a $10 million of incremental net interest income, which came mostly from growth in our loan portfolio. We also maintain expense discipline with total expenses excluding deferred compensation increasing by only $4 million from the last quarter.

On slide 5, we share a few highlights from the quarter.

We earned an adjusted EPS of 45 cents per share which was a 3 Cent increase from the prior quarter.

Brian: These results reflect pre-provision net revenue, growth of 4 million dollars from the first quarter and improving credit conditions.

Brian: The primary driver of our ppnr Improvement was a 10 million dollars of incremental net interest income, which came mostly from our growth and loan from growth in our loan portfolio.

We also maintain expense discipline with total expenses. Excluding deferred compensation increasing by only 4 million from the last quarter.

Our credit portfolio remains strong. A charge-off ratio of 22 basis points remained in line with our expectations coming into the year. We saw a three-basis point decline to our coverage for credit losses, reflecting The loan balance makes improvements for mortgage warehouse lending growth as well as the reduction in classified loans. This quarter was a solid quarter for our balance sheet, with period-end balances for both loans and deposits finishing 2% higher quarter-over-quarter.

Our credit portfolio remains strong.

Our charge offer ratio of 22 basis, points remained in line with our expectations coming into the year.

Brian: We saw a 3 basis point decline to our coverage for credit losses. Reflecting.

The loan balance, mix improvements for mortgage Warehouse, lending growth, as well as the reduction in classified loans.

This quarter was a solid quarter for our balance sheet with period in balances, for both loans and deposits, finishing 2% higher, quarter over quarter.

We are optimistic about our momentum going into the second half of this year.

With that high level overview, I'll turn it over to Hope to run through our financial results in more detail. Thank you, Brian.

Brian: We are optimistic about our momentum, going into the second half of this year, with that high level overview. I'll turn it over to hope to run through our financial results in more detail. Hope.

Good morning, everyone. On slide six, you can see our adjusted highlights for the quarter driving our 45 cents of ETF. On slide seven, we highlight two notable items totaling $4 million of pre-tax impact in the quarter.

Hope: Thank you, Brian. Good morning, everyone.

On 56, you can see our adjusted highlights for the quarter driving our 45 cents of ETFs.

The largest impact was an accrual release in deferred compensation related to a business unit divested more than a decade ago. On slide 8, we cover our $10 million of net interest income growth and the two basis point compression of net interest margin. NII growth benefited from the seasonal loan growth, particularly our high-yielding mortgage warehouse business, which contributed to a three-basis point expansion of total loan yields. Our margin compression to 3.40 was mostly driven by a four-basis point increase to interest-bearing deposit costs, as we saw a slight increase to our rate paid on client deposits, and broker deposits grew to support loan growth, which was concentrated in mortgage warehouses.

Hope: On slide 7. We highlight 2 notable items, totaling 4, million of pre-tax impact in the quarter.

Hope: The largest impact was an acral release in deferred compensation related to a business unit devasted more than a decade ago.

Hope: On slide 8, we cover our 10 million of net interest income growth and the 2 basis point, compressions of net interest margins.

Hope: nii growth benefited from the seasonal loan growth, particularly our high yielding mortgage Warehouse business, which contributed to a 3 basis, point expansion of total loan meals,

Hope: Our margin compression to 3.40, was mostly driven by a 4 basis. Point increase to interest bearing deposit cost. As we saw a slight increase to our rate paid on client, deposits and broker deposits, grew to support loan growth, which was concentrated in mortgage Warehouse.

On slide nine, we provide more information about our deposit performance in the quarter. Period end balances increased by $1.4 billion compared to prior quarter, driven by a $1.6 billion increase in broker CDs, which primarily supported our loans to mortgage companies and offset broader industry trends in reduced deposit supply as deposit flows to other categories like brokerage. We did see growth within non-interest bearing deposits as period end balances were up $57 million. This growth includes the success of our seasonal marketing promotions, which start in the second quarter.

Hope: On slide 9, we provide more information about our deposit performance in the quarter.

Hope: Period and balances increased by 1.4 billion compared to Prior quarter.

Hope: Driven by a 1.6 billion increase in brokerage CDs, which primarily supported our loans to mortgage companies and offset broader industry Trends in reduced deposits of applied as the deposit flows to other categories like brokerage accounts.

We did see growth within non-interest-bearing deposits as period and balances were up 57 million.

Retention continues to be a highlight for our deposit story as we retained approximately 95% of the $23 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 2.76%, up from the first quarter average of 2.72%. Our strong pricing discipline through this interest rate cycle has achieved a 72% interest bearing deposit data since the Fed rate cuts began in the third quarter of 2024.

Hope: This growth includes the success of our seasonal marketing promotions, which started in the second quarter.

Hope: 5% of the 23 billion. Imbalances 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.

Hope: For deposit pricing overall, the average rate paid on interest bearing deposits increased to 2.76% up from the first quarter average of 2.72%.

Hope: Our strong pricing discipline.

Absent additional Fed cuts, deposit pricing will move around slightly quarter to quarter, reflecting reductions in deposit supply, evolution of competition, and balance sheet funding.

Hope: Through this interest rate cycle, has achieved a 72%, interest bearing deposit data. Since the Fed rate Cuts began in the third quarter of 2024,

Absent additional fed Cuts deposit. Pricing will move around slightly quarter to quarter reflecting reductions in deposit Supply

Hope: Evolution of competition and balance sheet funding needs.

On slide 10, we cover our loan portfolio performance. Period end loans were up 2% from the prior quarter, driven by increases in loans to mortgage companies of $689 million. This performance reflects both seasonal trends and the benefit of market share gains that we have achieved in recent quarters.

Hope: On slide 10. We cover our loan portfolio performance.

Hope: Period and loans for up to 2% from the prior quarter driven by increases in loans to mortgage companies of 689 million.

We also saw growth in our C&I portfolio with period end balances of $316 million quarter over quarter. Our CRE balances continue to decline as payoffs of stabilized projects continued, including a reduction of non-performing CRE loans this quarter. As I mentioned on the margin slide, total loan yields expanded three basis points from the first quarter due to the incremental balances within loans to mortgage companies, one of our highest yielding portfolios.

This performance, reflects both seasonal, Trends and the benefit of market share gains that we have achieved in recent quarters.

We also saw growth in our cni portfolio with period and balances of 316 million quarter over quarter.

Our Creed balances continue to decline as payoffs of stabilized projects.

Continued, including a reduction of non-performing, pre loans, this quarter.

As I mentioned on the margin slide total loan yields expanded 3 basis points from the first quarter, due to the incremental balances within loans, to mortgage companies, 1 of our highest yielding portfolios.

On slide 11, we detail our fee income performance for the quarter, which decreased $3 million from the prior quarter, excluding deferred compensation.

Fixed income performance decreased slightly with ADR declining by 6% amidst a less favorable environment. Additionally, non-ADR performed at normal levels after a slightly elevated first quarter. The current rate environment, with a flat short to middle part of the rate curve, creates a near-term headwind for this business.

Hope: On slide 11. We detail our fee income performance for the quarter which decreased 3 million from the prior quarter, excluding deferred compensation.

Hope: Fixed income performance decreased slightly with ADR declining by 6% amidst a less favorable environment.

Hope: Additionally non ADR performed at normal levels. After a slightly elevated. First quarter, the current rate environment with a flat short, to middle part of the rate, curve creates a near-term headwind for this business.

For mortgage banking, as well as service charges, we saw a decent pickup from a seasonally slow first quarter as spring and summer months tend to see higher client activities in those areas, combining to bring in an additional $4 million of fee income.

Hope: For Mortgage Banking, as well as service charges. We saw a decent pickup from a seasonally slow first quarter as spring. And summer months tend to see higher client activities in those areas.

Hope: Combining to bring in an in an additional 4 million of the income.

On slide 12, we highlight that excluding deferred compensation, adjusted expenses increased just $4 million from prior quarter. Personnel, excluding deferred comp, decreased by $3 million from last quarter, driven by an $8 million reduction within incentives and commissions on seasonality and retention awards being paid out. This was partially offset by a $5 million increase to salaries and benefits based on higher day count, benefits, seasonality, and continual investment in our associates. Outside services increased by $7 million, with the largest driver being advertising investments related to seasonal pickups and marketing activities.

Hope: On slide 12, we highlight that excluding deferred compensation, adjusted expenses increased Just 4 million from prior quarter.

Hope: Personnel excluding Deferred Comp, decreased by 3 million. From last quarter driven by an 8 million reduction within incentives and commissions on seasonality and retention Awards, being paid out.

Hope: This was partially offset by a 5 million increased to salaries and benefits based on higher Day Count benefits seasonality and continual investment in our Associates.

Outside Services increased by 7 million with the largest driver being advertising Investments, related to seasonal pickups and marketing activities.

Turning to credit on slide 13. Net charge-offs increased slightly by $5 million to $34 million. Our net charge-off ratio of 22 basis points of average loans remains in line with our expectations for the year.

Hope: Turning to credit on slide 13.

Hope: Net charge offs increased slightly by 5 million to 34 million.

Loan loss provision was $30 million this quarter, with our ACL to loan ratio declining slightly to 1.42%, primarily due to our growth in loans to mortgage companies, which is a portfolio that carries very little loss coverage, as well as reductions in classified loans. This reduction in MPLs represents a four basis point decline from last quarter and was partially driven by non-performing pre-payoffs.

Hope: Our net charge off ratio of 22 basis, points of average loans remains in line with our expectations for the year.

Hope: Loan loss. Provision was 30 million this quarter with our ACL to loan ratio. Declining slightly to 1.42% primarily due to our growth in loans to mortgage companies. Which is a portfolio that carries very little loss coverage as well as reductions in classified loans.

We remain extremely proud of our credit culture. Years of disciplined underwriting provide stability for our performance across economic cycles.

This reduction in mpls represents a 4 basis point decline from last quarter and was partially driven by non-performing creep payoffs.

Hope: We remain extremely proud of our credit, culture years of disciplined underwriting provides stability for a performance across economic Cycles.

On slide 14, you can see that we maintain capital levels in line with our near term target of 11% CET1. As we have mentioned before, our priority for capital deployment is organic loan growth, which we saw this quarter. We retained just over half of our $1 billion share repurchase authorization after using another $9 million in the second quarter, which provides flexibility in achieving our CET1 target over time.

Hope: On slide 14. You can see that. We maintain Capital levels in line with our near-term Target of 11% cet1, as we have mentioned before, our priority for Capital deployment is organic loan growth, which we saw this quarter

Our near-term target for capital remains unchanged at this point, and we will continue to have conversations with our board to determine the right time to adjust capital levels to achieve our long-term goals.

Hope: We retained just over half of our 1 billion, share, repurchase authorization, after using another 9 million in the second quarter, which provides flexibility in our cet1 Target over time.

Hope: Or determine the right time to adjust Capital levels to achieve our long-term goals.

On slide 15, we take another look at our full year 2025 guidance. Our goal for revenue and expense remains achieving TPNR growth, and we fully expect to hit this target. Our range for total revenue remains unchanged, and our performance is in range so far this year. Achieving the upper end of the range, we need to see continued NII momentum as well as significant pickup in our counter-cyclical business.

Hope: On slide 15. We take another look at our full year 2025 guidance.

Our goal.

For revenue and expense remains achieving ppnr growth and we fully expect to hit this target.

Hope: Our range for total revenue remains unchanged and our performance is in range so far this year,

Following another quarter of successful expense management and lower commissions in counter-cyclical businesses, we have made an adjustment to lower our expense range to flat to up 2%. Our outlook for charge-off, taxes, and capital remain unchanged as our performance to date and rest-of-the-year expectations fall within these ranges.

Hope: Achieving the upper end of the range. We need to see continued nii momentum as well as a significant pickup in our counter cyclical businesses.

Hope: Following a another quarter of successful expense management and lower commissions and counter cyclical businesses, we have made an adjustment to lower our expense range to Flat to up 2%

Hope: Our outlook for charge off taxes and capital remain unchanged as our performance to date and rest of the year. Expectations fall Within These ranges.

I'll wrap up this slide. Over the next two to three years, our target is still to reach and maintain a 15% plus ROTC. An important key to achieving these levels of profitability is the ability to operate efficiently and profitably. As we recently announced, we see opportunities to grow our PPNR by $100 million or more over the coming years within our existing businesses through execution on identified synergies and deepening our client relationship. We still believe that long-term capital management and a prudent credit culture are important drivers to maximizing our profitability. And we expect to capitalize on our years of focused performance to deliver these returns.

Hope: I'll wrap up with slide 16.

Over the next 2 to 3 years. Our Target is still to reach and maintain a 15% plus rotce an important key to achieving these levels of profitability, is the ability to operate efficiently and profitably.

As we recently announced we see opportunities to grow our pp&r by 100 million or more over the coming years within our existing businesses through execution on identified synergies and deepening our client relationships.

We still believe that long-term Capital Management and a prudent. Credit culture are important, drivers to maximizing our profitability.

Now, I will give it back to Brian. Thank you, Hope. As we close out another quarter, I'm incredibly proud of the focus, dedication, and resilience our associates continue to show. I'm extremely proud of the strong foundation that we have in place. We continue to make significant progress in enhancing our organization. Streamlining our go-to-market strategies, deepening collaboration between teams, and ensuring we are best positioned to capitalize on our opportunities. Over the last few quarters, we have further aligned the organization around common go to market strategies and clarity around our value add to clients, and how we deliver that value across all conditions.

Hope: And we expect to capitalize on our years of Focus performance to deliver these returns. Now I will give it back to Brian's.

Hope: Thank you, hub.

As we close out another quarter. I'm incredibly proud of the focus dedication and resilience our Associates continue to show.

Hope: I'm extremely proud of the strong Foundation that we have in place.

We continue to make significant progress in enhancing our organization.

Streamlining, our go to market strategies, deepening collaboration, between teams and ensuring. We are best positioned to capitalize on our opportunities.

Hope: Over the last few quarters. We have further aligned the organization around common, go to market, strategies and Clarity around our value, add to clients and how we deliver that value across all conditions.

Results of this focus will help us drive towards the 15% plus ROTCE that we expect to see in the next two to three years. As Hope highlighted, in addition to normalized capital and provision levels, we see over $100 million in pre-provisioned net revenue opportunity in our existing books. through consistent execution of our business. With this disciplined execution, our balanced business model, and unwavering focus on client needs, I am confident that First Horizon is exceptionally well positioned to capture the opportunities before us.

Hope: The results of this Focus will help us draft towards the 15% plus rotce that we expect to see in the next 2 to 3 years.

Hope: as hope, highlighted in addition to normalized Capital and provision levels, we see over 100 million dollars in pre-provision net revenue opportunity in our existing book of business, through consistent execution of our business model,

Thank you to our associates for their hard work and to our clients for their continued trust in First Horizon.

Hope: With this discipline execution, our balance of business model and unwavering focus on client needs. I am confident to first arrived in an exceptionally. Well positioned to capture the opportunities before us.

With that, we can now open it up for questions. Thank you, Brian.

Hope: Thank you to our Associates for their hard work and to our clients for their continued trust and first arise.

Africa with that. We can now open it up for questions.

If you would like to ask a question, you can do so by pressing star followed by one on your telephone keypads now. And if you change your mind and would like to remove that question, you can then press star and two to remove. And as a reminder, that is staff followed by one to register for a question.

Speaker Change: Thank you. Bye. If you would like to ask a question, you can do. So by pressing star, followed by 1 on your telephone keypad now.

And if you change your mind and would like to remove that question, you can then press star and to remove

When speaking, please ensure your phone is unmuted locally. We will pause here briefly whilst questions are registered.

Speaker Change: And as a reminder that is star followed by 1 to register for a question.

Speaker Change: When speaking please ensure your phone is unmuted. Locally, we will pause here. Briefly while questions are registered.

Your first question on the line comes from Michael Rose with Raymond James. Please go ahead. Hey, good morning, everyone. Thanks for taking my questions.

Speaker Change: Your first question on the line comes from Michael rose. With Raymond James, please go ahead.

Just wanted to get, Brian, just some background and colors to where, you know, clients stand at this point. I think we're seeing a little bit better loan growth. It was good to see the decency and high growth. This quarter, CRE was down a little bit, but I think we're hearing more and more banks talk about CRE opportunities, and especially on the construction side as well. Can you just give us a sense, you know, I know utilization was flat, but just where the health of the borrower is in a lot of places, you are starting to see increased activity.

I know you have a, you know, talked about kind of low single digit loan growth next year. So any updates to that as well would be great.

Yeah, sure, Michael. Thank you. The borrower is remarkably resilient and customers are in a very positive place.

Good morning everyone. Thanks for uh, taking my questions. Um, just wanted to get Brian, um, just some, just some background and color as to where, um, you know, clients stand. At this point, I, I think we're seeing a little bit better loan growth. It was good to see the, you know, decency and I growth. Um, this quarter CRA was down a little bit, but I think we're hearing more and more Banks talk about uh, Theory opportunities and and especially on the construction side as well. Can, can can you just give us a sense? You know, I know utilization was flat but just where where the the health of the borrower is and if you are starting to see increased activity, I know you have a, you know, you talked about kind of low single digit loan growth next year. So any updates to that as well? Would be great. Thanks.

Right now we If you were sitting here 90 days ago, you would have had a more significant evaluation, but it's interesting, borrowers have been very resilient. They've processed through some of the early impacts of tariffs and how that's going to affect business. are leaning in more and more to opportunities.

Brian: You the, the borrower is, is remarkably resilient and customers are in a very positive place right now. We if you were sitting here 90 days ago you would had a a more significant um, evaluation. But it's interesting borrowers have been very resilient they processed through some of the early impacts of tariffs and how that's going to affect business.

It's not, as all things, there's different places on the spectrum that people are, but we see increasing optimism, and we're likely to see, in our view, improved activity over the back half of this year as some of these tariff questions get further settled over the next 30, 60, 90 days, and we think borrowers are generally excited about the opportunities in front of them and will continue to invest.

Brian: Or leaning in more and more to Opportunities. It's, it's not, uh, as all things. There's, there's different places on the spectrum that people are, but we see increasing optimism and we're likely to see in our view improved activity, over the back half of this year, as some of these tariff questions, get further settled over the next 30, 60 90 days. And and we think borrowers are generally excited about the opportunities in front of them and we'll continue to invest

Great. Maybe just as one follow-up, I think we've seen a lot of progress on the deregulatory front. You guys still have the CET1 target of 10.5 to 11. Is there any chance that that could be kind of moved down? And then just crossing that with the fact that the stock's done pretty well here recently, the earnback and the buyback is getting a little longer. Just wanted to gauge your appetite for buybacks as we move forward. Thanks.

Yes, we've, this is a process that we go through and we work through it with our board. We complete annual stress testing. I would say that the results of the CCAR process with the largest institutions was generally favorable and you saw, I think, a more positive regulatory outcome in that regard. And I expect that over time we will be able to move those capital levels lower. We will continue to evaluate economic conditions. We'll continue to discuss it with the board and we'll continue to juxtapose it against what we expect in terms of growth in the balance sheet.

Speaker Change: Great. Maybe just as as 1 follow up, you know, I think we've seen a lot of progress on the deregulatory front. Um you guys still have the, the C1 Target. It's 10 and a half to to 11. Is there any, you know, chance that that could be, you know, kind of moved down and then just you know, Crossing that with the fact that the Stock's been pretty well here recently. Uh the earned back in the buyback is getting a little longer. Um just wanted to gauge your appetite for for BuyBacks as we move forward. Thanks.

That said, in the absence of organic opportunities for us to invest, i.e. loan growth, we certainly are comfortable repurchasing our common stock. We do believe that we will create significant value over the next several years. And even at these higher levels, we think that there is value in our repurchase program. And that as we drive towards this 15 plus percent RO2CE, that that value will move up. So we think we have lots of levers, we think we start with a very strong capital position.

Speaker Change: Yes, we we've, this is a a process that we we go through and, and we work through it with our board, we complete annual stress testing. I would say that the results of the, the car process with the largest institutions, was generally favorable and you saw, I think a more positive regulatory outcome in that regard. And I expect that over time, we will be able to move those Capital levels lower, we will continue to evaluate economic conditions. We'll continue to to discuss it with the board and we'll continue to juxtapose it against what we expect in terms of growth in the balance sheet.

And we think it gives us tremendous flexibility as we look at the back half of 2025 and into 2026.

Speaker Change: that said, and in the absence of organic opportunities for us to invest,

Great.

I appreciate you taking my questions. I'll step back. Sure thing. Thank you.

great, I appreciate you taking my question so I'll step back

Sure thing.

Your next question comes from Chris McGratty with KBW. Hey, how's it going? This is Andrew Laicheron for Chris McGratty.

Thank you. Your next question comes from Chris MC grati with KBW. Please go ahead.

Angela: Hey. How's it going? This is Angela on for Chris McGrady.

I know you've had strong depository pricing so far this cycle, and I know this quarter kicked up slightly on the brokered to fund mortgage warehouse, but do you see any incremental depository pricing opportunities going forward? Chris, I do see deposit repricing opportunities going forward, but I think that they could possibly be up or down. The forward curve is a big impact to how deposit competition is heating up. As we see that first cut move out, people are willing to guarantee rate and term. As I mentioned on our first quarter call, we weren't seeing much competition.

Um I know you've had strong deposit pricing so far this cycle. Um and I know this core ticked up slightly on the brokered uh to fund mortgage warehouse. But do you see any incremental? Depository pricing opportunities going forward? Thanks

Chris, I do see the

We weren't seeing guarantees that were out there past 30 or 45 days. We're now competing in an environment where we're seeing competition that's guaranteeing rates that are just slightly below the current Fed Fund rates and guaranteeing them for 6 to 9 months. Although we're going to continue to keep walking back our current clients, when we bring new-to-bank clients in with that promo, we have had to slightly uptick our current client promotion in order to achieve that 95% retention we want on client money. As I've said multiple times, I think that this deposit repricing cycle will be a little bit more of a zigzag than a typical hockey stick, where, as you saw last quarter, we were able to significantly bring it down.

door down the um forward curve, is a big impact to how deposit competition is heating up. As we see that first cut move out, people are willing to guarantee rate and turn as I mentioned on our first quarter. Call, we weren't seeing much competition. We weren't seeing, um, guarantees that were out there past 30, or 45 days. We're now competing in an environment where we're seeing, um, competition, that's guaranteeing rates at, you know, just slightly below the current fed fund rates and guaranteeing them for 6 to 9 months,

This quarter, we gave away a couple of basis points. I think as we see that cut come into expectation, if we do see one come in in September, we'll be able to continue to walk that back, and the pace of cuts will make a difference for how quickly we can walk back deposit pricing.

Andrew, I'll add to that. We clearly saw a pickup in deposit competition across the second quarter. And that really fits with what is a contracting Fed balance sheet, which contracts supply money, it fits with our longer term view that with the ease of transferring money with digital tools, for example, across multiple platforms, the deposit costs are going to have a slow migration up over time. That said, we work really hard in our markets with a lot of day to day interaction with customers to create win-win situations where we price deposits attractively for our customer and build strong long term relationships.

Make a difference for how quickly we can walk back deposit pricing.

Andrew: Andrew, I'll, I'll add to to that.

We clearly saw a pickup in deposit competition across the the second quarter.

Andrew: And and that really fits with what is a Contracting fed balance sheet which contracts the supply of money. It it fits with our longer term view that with the the the ease of transferring money with digital tools example of, for example, across multiple platforms. The deposit costs are are going to have a, a slow migration of

Andrew: over time that said, we we work really hard in our

And at the same time, do it in a way to create profitable long term value for our First Horizon shareholders. I think as you look at the next several quarters, I would not sit around and say, you know, there ought to be a wholesale objective to raise or lower deposit costs. I think it's about creating value for our customers and our shareholders by building those long-term relationships, recognizing that we're not playing solitaire in the marketplace and that there are a lot of forces in play and a lot of people opening the Novo branches and advertising exceptionally high rates and things of that nature.

Andrew: Our markets with a lot of of day-to-day interaction with customers to to create win-win situations, where we priced deposits attractively for our customer and build strong long-term relationships. And at the same time, do it in a way that creates profitable long-term value for our, our first horizon shareholders,

I think is, as you look at the, the next several quarters, I would not sit around and say, you know, there ought to be a wholesale objective to raise or lower deposit costs. I think it's about creating value for our, our customers and our shareholders by building those long-term relationships, recognizing that we're not playing solitude.

And I think our bankers have done a very nice job over the last 90 days, the last two years, to be more expansive in managing through a changing deposit environment, and we'll continue to deal with it in a very proactive way.

Andrew: Here in the marketplace. And that there are a lot of forces in play, and a lot of people opening the novo branches and advertising exceptionally, High rates, and things of that nature. And I think our Bankers have done a very nice job over the last 90 days, the last 2 years, to be to be more expansive in managing through a a changing deposit, environment and and we'll continue to, to deal with it in a very proactive way.

Great, thank you.

That was that was really helpful.

And then just one more for me. Creditors remain strong and within your guided range, but can you speak to any verticals or geographies that you're seeing signs of stress in or more concerned about right now?

Thank Yeah, I'm happy to take that one. It hasn't really changed significantly from what we've discussed in the last couple of quarters. It's generally speaking, on the C&I side, more the consumer facing type of industries. So for example, trucking, auto finance, consumer finance, those are the ones I'm watching more closely.

Speaker Change: Great. Thank you. That was um that was really helpful and then just 1 more for me. Um, creditors mean, strong and within your guided range, but can you speak to any verticals or geographies that you're seeing the signs of stress in or more concerned about right now? Thank you.

Yeah I'm happy to take that 1. Um I it hasn't really changed significantly from what we've discussed in the last couple of quarters. It's generally speaking uh

And then on the Cree side, it's generally speaking, where we're seeing great migration is more so on the multifamily side, and what that is being driven by is really more so what we believe a shorter term problem in terms of a lot of multifamily inventory coming online within the last few years, and hence, absorption is slower than expected, but we expect that to resolve over the next few years. Great, thank you.

Speaker Change: Uh, on the cni side, more the consumer-facing type of Industries. Uh, so for example, uh, Trucking Auto Finance, uh, Consumer Finance. Uh, those, those are the ones I'm watching more closely, and then, uh, on the crease side, it's generally speaking. Um, where we're seeing Great. Migration is more so on the multi-family side and what that is being driven by is really uh, more. So what we believe a shorter term problem in terms of a lot of multi-family inventory coming online within the last few years and

Speaker Change: And hence absorption is a slower than expected but we expect that to resolve over the next few years.

Speaker Change: Great. Thank you.

We now have John Armstrong, Armstrong with RBC Capital Markets, Reliance Ventures. Hey, thanks. Good morning. Morning, John.

John Armstrong: We now have John Armstrong.

John Armstrong: Armstrong with RBC Capital markets.

Hey, thanks. Good morning.

Morning, John.

Hope, what kind of expectations do you have for mortgage warehouse balances? You've got a big step up in period end versus average. This has been a really strong business for you, but do you expect this to continue into Q3, or do you expect to retreat in the fall? John, I do expect in Q3 that we'll, you know, be at this level or higher.

um,

John Armstrong: Hope. Um, what kind of expectations do you have for mortgage Warehouse balances? Um, you you got a big step up in Period and versus average and

it's been a really strong business for you but you expect us to continue in the Q3. Do you expect a retreat in the balances?

John Armstrong: John, I do.

John Armstrong: Sorry, that will.

I want to give you a different answer yesterday and this morning when I saw how bad the mortgage data was just from last week. So I guess the question is, is that a one-week trend or are we going to see continued decreases in mortgage originations? But Mortgage Warehouse has been a strong growth story for us for multiple years as we've continued to commit to our existing clients and pick up new clients. We're still adding new clients into that business every quarter. We just increased some lines and brought some new clients on in the last quarters.

I think we'll continue to see momentum in that in line with how the mortgage industry for purchases and refides are trending. If it trends up, I believe our balances will be up. If it stays stable, we'll continue to see that momentum about where it is today. Yeah, and John, there's always going to be seasonality to that business with home buying season, but in addition to winning some clients, I think what has really helped drive our growth and shown our success in the sector is we've continued to gain more share, especially with our existing customers who have access to multiple lines across multiple banks.

John Armstrong: You know, be at this level or higher, I want to give you a different answer yesterday and this morning when I saw how bad, the mortgage data was just from last week. So I guess the question is is is that a 1 week Trend or or are we going to see uh, continued decreases in mortgage origination? But mortgage Warehouse has been a, a strong, uh, growth story for us from multiple years. As we've continued to commit to our existing clients and pick up new clients. We're still adding new clients into that business. Every quarter, we just uh, increased some lines, and brought some new clients on in the last quarters. I think we'll continue to see momentum in that in line with uh how the mortgage industry for purchases and refis are trans

But because of our execution and service within specific customers as they grow, we're also getting a larger share of their businesses and that's partly what you're seeing as well. So that's helpful.

John Armstrong: I have access to multiple lines, across multiple Banks, but but because of our execution and service within specific customers as they grow, we're also getting a larger share of their businesses and that's partly what you're seeing as well.

And then hope for you maybe just a simple question. The adjusted expense guide Does that, does the high end of the revenue range? If you hit that at 4%, does that equate to hitting 2% on expenses, or if things are higher on the revenue trend, you might have to adjust that back higher again on expenses? Yes.

I don't see us having to go above 2%, John. We did do a lot of sensitivity analysis on what could our countercyclical businesses do and what would the commission be. So if we were to hit the higher end of the revenue, I still believe that we will be under that 2%. If we're at the lower end, you'll be closer to that flat expense guidance that we're giving now.

John Armstrong: Yeah, okay, so that's helpful. Um and then uh hopefully you maybe just a simple question. Um, the adjusted expense guidance, does that does the high end of the revenue range? If you hit that at 4%, does that equate to hitting 2% on expenses or if if if things are higher on the revenue Trend, you might have to adjust that back higher again on expenses.

Okay, that's great. Thank you very much. Nice job. Thank you.

I don't see us having to go above 2% John. We did do a lot of sensitivity analysis on. What could our counter cyclical businesses do and what would the commission be? So if we were to hit the higher end of the revenue, I still believe that we will be under that 2%. If we're, you know, at the lower end, you'll be closer to that flat expense guidance. That we're giving now. Yeah.

Okay, that's great. Uh, thank you very much. Nice job.

John Armstrong: Thank you.

We have a question from John McDonald with Truro. Hi, good morning. Got a follow up question on loan growth. What are you seeing in terms of momentum and the potential for loan growth in some of your specialty verticals?

We have a question from John McDonnell with tourist.

Hi, good morning, cut up the follow-up question on loan growth, what are you seeing in terms of momentum? And the potential for loan growth in some of your Specialties verticals?

Sure.

John, I can help address that one. We're seeing good growth on the regional banking side, but your question regarding specialty lines, we've talked about Mortgage Warehouse a lot, but beyond that, we actually saw pretty good growth and momentum from both our ABL line, as well as Equipment Finance. There's good pipelines in those and good momentum overall across a lot of businesses, but I'll especially highlight those two.

John Armstrong: Sure, uh, John, I can help address that 1. Um, we, we are seeing good growth on the regional banking side that your question regarding specialty lines. Uh, we've talked about mortgage Warehouse a lot, but beyond that, we actually saw a pretty good growth in momentum from both our abl line, uh, as well as equipment Finance. Uh, there's good pipelines and those and, uh, and good momentum overall and across a lot of businesses. But especially highlight, those 2

Okay, and Tom, maybe on CRE, what's the dynamic you're seeing between new business and your pipelines versus continued paydowns there? Yeah, as you saw, our CRE balance did decrease in the second quarter. Now, I would say that's actually a pretty good story, because what we saw in CRE was a lot of improvement in terms of working through our classified assets. Just in CRE alone, we had about $125 million in upgrades from classified, as well as about $125 million in payoffs. But as far as new business opportunities, our pipeline in CRE is slightly down, but I don't think that's unexpected, given our focus on construction, especially the multifamily sector.

John Armstrong: Okay, and and Tom, maybe on CRA, what's the dynamic you're seeing between new business and your pipelines versus continued pay Downs? There

And as I mentioned with what's going on in inventory in the Southeast right now, it would make sense that new stocks are down a little bit. Got it.

Yeah, as as you saw our creep balance. Did uh, decrease uh, in the second quarter. Now, I would say that's actually a pretty good story because what we saw in Corey was, uh, a lot of improvement in terms of working through our classified assets. Uh, just in Korea alone, we had about 125 million dollars in upgrades, uh, from classified as well as about 125 million. Uh, in payoffs. And uh, but as far as, you know, new business opportunities, our pipeline increased, uh, is slightly down, but I don't think that's unexpected given, uh, our focus on, uh, construction, especially the multi-family sector. And then, as I mentioned with what's going on in inventory,

John Armstrong: In the Southeast right now. Uh, it would make sense that, uh, new starts out down a little bit.

Thank you.

John Armstrong: Got it. Thank you.

Chief, we have Ebrahim Poonawala with Bank of America. Hey, good morning, this is Eric Osberg, EB. Wanted to follow up on the expense guide kind of as it relates to fee income. Even at the low end, you kind of have a step function in expenses here. Wanted to talk about if there's any downside there and kind of trends you're seeing on the fee income side as it relates to kind of hitting that up right Yeah, our fee income this quarter, as we mentioned in our prepared remarks, is down in ADR 6% quarter of quarter. And this is our lowest ADR quarter in a year now.

John Armstrong: Thank you.

We have Abraham Luna with Bank of America. Now

Speaker Change: Hey, good morning. This is Eric on for Ev wanted to follow up on the expense guide kind of as it relates to fee income. Um even at the low end you kind of have a step function and expenses here um wanted to talk about if there's any downside there and kind of Trends you're seeing on the fee income side um as it relates to kind of hitting that upper end of the expense guide.

Speaker Change: yeah, our our fee income, this

Speaker Change: quarter, as as

We mentioned in our Preparatory Market.

We've seen it a strong Q4, which we thought was going to continue. And we haven't seen, as we mentioned, there's a lot of dynamics for the FHN financial that impacted, but right now, it's the shape of the curve that's having a little bit of a downward pressure on their ADR. As we look at the expense guidance, we do have additional investments in marketing and advertising that are coming in. We typically see Q3 be a higher expense quarter for advertising specifically related to promotions. Right now, for checking accounts, there's a cash offer. It takes time to earn that.

Speaker Change: Quarter. And this is our lowest ADR quarter in a year now. Uh, we've seen it, um, a strong Q4, which we thought was going to continue and we haven't seen. As we mentioned the, there's a lot of Dynamics for the FHN Financial that impacted. But right now it's the, the shape of the curve. That's having a little bit of a, a downward pressure on their ADR. As we look at the expense guidance, we do have, um, additional Investments and marketing and advertising that are coming in that we typically see q3b a higher expense quarter for advertising specifically related to Promotions,

Those will get paid out at the end of Q2 and Q3. We also have some of our technology investments that are now hitting our run rate. Exciting news, we closed this quarter. All the financial statements you have is on our brand new general ledger. So, that project is starting to amortize through. We finished a couple other large projects. So, there's just some increases that are coming into the run rate in the second half, both seasonally and as we continue to invest in the organization. But I do believe that higher end of the 2% I said before, if our commission businesses significantly pick up here, getting into that higher 6 or 700 ADR range for the future quarters.

Speaker Change: Right now, for checking accounts, there's a cash offer and it takes time to earn that those will get paid out at the end of uh, Q2 and Q3. We also have some of our technology Investments that are now hitting our run rate. Uh, exciting news. We closed this quarter all the financial statements, you have is on our brand new general ledger and so that project is starting to advertise through. We finished, um, a couple other large projects. So there's just some, uh, increases that are coming into the Run rate in the second half, both seasonally, and as we continue to invest in the organization, but I do believe, you know, that that higher end of the 2% said before, is if our commission business is significantly pick up here, uh, you know, getting into that higher 6 or 700 ADR range for the future quarters.

Got it.

Yeah, glad to hear about the general ledger. I know we've heard about that for a while.

I guess the second is just one more, I guess, on the buyback, you know, very different quarter than first quarter.

How do you feel about, do you expect to use the remaining authorization kind of in the coming quarters? Or is it very market dependent on how low growth trends? It really depends on our growth story. We talked about $9 million of purchases. I'll tell you, those all were done early in the quarter as soon as we came out of the blackout period. As we had negative loan growth last quarter, we got back into purchasing our shares every day after earnings. And as we got into May, we started to see our pipelines really build. We started to see fund ups of existing lines.

Got it. Yeah, glad to hear about that General lecture. I know we've heard about that for a while. Um, I guess the second is just 1 more, I guess, on the buyback, um, you know, very different quarter than first quarter. Um, how do you feel about, do you expect to use the remaining authorization kind of in in the coming quarters, or is it very Market dependent on how long growth trends?

And so we stopped our share buybacks. We monitored on a weekly how do we deploy that excess capital into buybacks. We are anticipating that we'll continue to have loan growth in the back half of the year, excluding the seasonality of mortgage warehouse.

So I don't know if we'll spend all of it, but I do expect that we will spend more into it as we continue to have strong earnings growth and moderate loan growth in the back half of the God, thank you.

It really depends on our home growth story. You know, we talked about 9 million dollars of purchases. I'll tell you, those all were done early in the quarter. As soon as we came out of the blackout period, as we had had negative loan growth. Last quarter, we got back into purchasing, uh, our shares every day after earnings. And as we got into, uh, may we started to see our pipelines really build. We started to see fund UPS of existing lines. And so we stopped our share BuyBacks, we monitored on a weekly basis of where do we think our our loan growth is going to be first and then how do we deploy that excess Capital into BuyBacks? We are anticipating that we will continue to have loan growth in the back half of the year, um, excluding the seasonality of mortgage Warehouse. So I don't know if we'll spend all of it, but I do expect that we will spend more into it as we continue to have strong earnings growth and moderate loan, growth in the back, half of the year.

Speaker Change: Got, thank you.

We have Jared Shaw with Barclays, your line is open. Hi, this is John Rao for Jared. It's just quickly on that 600 to 700,000 ADR comment. Is that what you're expecting for the second half of the year? Is that like a longer term target? We did not have expectations at this time that the market is going to improve that much in the back half of the year, but the market continues to change day by day and week by week. And so we saw some stabilization in the equity market. We saw the forward curve start to steepen without that middle part being where it is today.

Speaker Change: We have Jared Shaw with Barclays. Your line is open.

Speaker Change: Hi. This is John ra, I'm for Jared.

Um, it's just quickly on that, uh, the 600 to 700,000 ADR comment. Is that what you're expecting for the second half of the year? Is that like a longer term?

Um, Target

Speaker Change: yeah, that was

Speaker Change: submissions.

And we need to, you know, increase our ADR about 200. You know, 150 to 200 to hit the high end of that guidance. As we think about, um, our FHN Financial business, we say it's about a 60% expense ratio and so if you think about adding a 100K a day um how that would impact your expense line is it out of 60 percent commission?

We could see weeks or months like that, but at this point, that's not part of our guidance. But that is why we still have the high end of the revenue range if we start to see some pickup in that business in the back half of the year.

I'll give you a couple of data points to give you some sense of how difficult it is to forecast. roughly two weeks in the month of July. So in the month of the third quarter, one month, we were a little, excuse me, one week, we were a little over 700,000 in ADR. The next week, we're a little over 450,000 in ADR. So there is a lot of volatility. It has to do with the headlines, what's happening, happening with interest rates, what's happening globally. And second quarter was very volatile. And our crystal ball, as we look into the back half, what's going to happen in terms of tariffs, interest rates, bid policy, all of that has gotten fuzzier, not clearer.

So, we do not have expectations at this time. The market is going to improve that much in the back half of the year but the market continues to change day by day and week by week. And so if we solve some uh, you know, stabilization in the equity Market, we saw the forward curve, uh, start to steepen without that. That middle part being where it is today. We we could see weeks or months, that that, but at this point, we don't, that's not part of our guidance. But that is why we still have the high end of the revenue range is if we start to see some pick up in that business, in the back, half of the year,

Speaker Change: I I'll give you a couple of data points to, to give you some sense of how difficult it is to forecast.

Speaker Change: We roughly 2 weeks in the, in the month of of July. So in the of the third quarter,

And so it's really hard for us to try to bend the number down with any real high degree of precision. That's why Hope's giving you the ranges she has.

Speaker Change: 1 month. We were a little over. Excuse me, 1 week, we were a little over 700,000 in ADR the next week. We're a little over 450,000 in ADR. So, there is a lot of volatility that has to do with the headlines. What's happened on happening with interest rates, what's happening globally? And the second quarter was very volatile and our crystal ball, as we look into the back half. And what's going to happen? In terms of tariffs, interest rates fed policy, all of that has gotten fuzzier, and not clearer. And so it's it's really hard for us to try to, to, to fit into the the, the number down with any real high degree of precision, that's why I hope it's giving you the ranges, she has

Okay, great. Thank you for that, Keller.

And then, I guess, on the $100 million PP&R opportunity that's been talked about, I'm wondering how much of that is on the revenue side versus the expense side, and is that mostly driven by, I guess, would the revenue side be more driven by fees than NII, just some more examples of what's behind that $100 million number? Yeah, the majority, if not all of that 100 million PPR is deepening our relationships with our clients. So that is increasing our loans to them, getting more deposits from them. We have a big focus, we've talked about many times on our treasury management program.

Okay, great. Thank you for that color.

Speaker Change: Um and then I guess on the the hundred million dollars ppnr opportunity that's been talked about, um, wondering how much of that is on the, the revenue side versus the expense side and um, is that mostly driven by I guess it's with the revenue side. Be more driven by fees than knee to some more examples of what's behind that hundred million dollar number

We converted our systems at the beginning of this year, we've invested in bankers in that business, and we're continuing to look at our current client base that we don't have treasury management and deepen that relationship. Fee income can also be a part of it, but that really is how do we get our current clients, how do we get deeper relationships with them that are more profitable for First Horizon.

Speaker Change: Yeah, the the majority, if not all of that 100 million PPR is deepening our relationships with our clients. So that is, uh, increasing our loans to them getting more deposits from them. We have a big Focus. We've talked about many times on our treasury Management program. We converted our systems at the beginning of this year. We've invested in Bankers in that business. And we're continuing to look at our current client base that we don't have treasury management and deep in that relationship. Uh fee income can also be a part of it, but that really is, how do we get our current clients? How do we get deeper relationships with them that are more profitable for first horizon?

We think there are a lot of benefits still for us in what I talked about in my prepared comments of really making sure that we're very effective in our go-to-market strategy across the entire franchise that we continue to invest. As we look at our book of business, the opportunity to drive greater value for our clients and at the same time create enhanced returns for our shareholders, we think there's a huge opportunity in the southern footprint. And so we think is, as I said, back in the spring, it's 100 million plus, and we think there's a lot of opportunity.

Speaker Change: We we think, you know, there are, there are a lot of benefits still for us.

In my prepared comments of a really making sure that we're very effective in our go to market strategy across the entire franchise that we continue to invest. And as, as we look at our, our book of business, the opportunity to drive greater value for our clients, and at the same time, create enhanced returns for our shareholders, we think there's a huge opportunity in the southern footprint and so we think as as I said back in the spring it's a 100 million plus and we think there's a lot of opportunity there.

Okay, great, thank you.

Speaker Change: Okay, great. Thank you. That's all from me.

Speaker Change: Thank you.

Your next question comes from Christopher Marinac with Jan A. Montgomery. Thanks.

The next question comes from Christopher, Marinette, with your name. Montgomery Scott.

Good morning, Brian, and this may be for Tom as well. When you look at your loans to other financial intermediaries, I know the large majority is to the mortgage channel. For the other smaller component, is anything interesting there for future growth? Are there opportunities to do treasury management services with those type of other players in the financial ecosystem? Yeah, sure.

Speaker Change: Thanks, good morning. Uh, Brian. And this may be for Tom as well. Um, when you look at your loans to other Financial intermediaries, I know though the large majority is to the mortgage channel uh, for the other smaller component is anything interesting there for future growth, or the opportunities to do treasury management, uh, services. With those type of of other players in the financial ecosystem.

Hey, Christopher, I can address that one. Outside of the loans to mortgage companies, we do lend into NDFIs and as well as, you know, I mentioned consumer finance earlier, that's always been a core part of especially our ADL business. You know, I think the performance has been relatively good, except for obviously there's some softness due to the economic uncertainty right now. In terms of treasury management opportunities specific to those businesses, it's actually fairly minimal. Those are generally more lending opportunities, but high yielding lending opportunities.

Speaker Change: Yeah, sure. Um, hey Christopher, I can address that 1 uh outside of uh the loans to mortgage companies. We do lean into ndf's and as well as you know, I mentioned that Consumer Financial earlier that's always been a core part of especially our, our abl business. You know, I think, um, the, uh, the performance has been uh, relatively good. Except for obviously, there's some softness due to the economic uncertainty right now, uh, in terms of Treasury management opportunities specific to those businesses. It's it's actually fairly minimal. Uh, those are generally more lending opportunities but but High yielding lending opportunities.

Great, thank you for that.

And Brian, from a, I guess, a large perspective, do you see opportunities where M&A from other banks is going to create opportunity for you in this next year? Or do you think that's a little further ahead? I know everybody, when they see a deal in their market, says that's going to create a lot of opportunities. I think there's a lot of opportunity just due to change in the industry at any given point in time. I think M&A is likely to pick up, given the example we saw earlier this week. It's really hard to target where and when, but everything that I see and hear anecdotally in terms of the regulatory approval process, confidence around timelines, things like that, lead me to believe that you'll probably see some pick up.

Christopher: Great. Thank you for that. And uh and Brian from a, I guess, a, a large um perspective, do you see opportunities? Um, where m&a from other Banks is going to create opportunity for you in this next year or do you think that's a little further? Uh, ahead.

Speaker Change: Yeah, I know everybody when they see a deal in their Market says, that's going to create a lot of opportunities. I I think there's a lot of opportunity if just do to change and, and, and the industry at any given point in time, I think m&a is likely to pick up given the the example we saw earlier this week, it, it's it's really hard to Target where and when but, but everything that I see and hear anecdotally, in terms of the regulatory approval process,

I think change in any marketplace, change in the environment creates opportunity, but as I said in answer to a previous question, just the opportunities we see to standardize, streamline that go-to-market strategy, how we deliver value for our customers, our clients, all of that coupled together, I think presents really nice opportunities for us, coupled with a high growth footprint. Understood.

Speaker Change: Best confidence, around timelines, things like that. Lead me to believe that you'll probably see some pickup and I think, I think change in any Marketplace changing the environment uh, creates opportunity. But but as I said, an answer to a previous question. Just the, the opportunities we see to standardize streamline that go to market strategy, how we deliver value for our customers, our clients, all of that coupled together. I think presents really nice opportunities for us, a coupled with a high growth footprint.

Thank you, Brian, and thank you for taking our questions today. All right. Thanks, Chris.

Speaker Change: Understood. Thank you, Brian. And thank you for taking our questions today.

All right. Thanks Chris.

We now have Anthony Elian with J.P. Morgan. Hi, good morning. Maybe for Hope, you reduced your expense outlook tied to lower commissions, but left the revenue guide unchanged. Is it fair to say that the mix of revenue growth you expect for this year is now skewed more towards NII rather than fee income compared to a quarter ago? Anthony, absolutely. When we came into this year, our guidance included multiple rate cuts, but we have not seen one yet. And so we are seeing stronger NII in the first half of the year. And we're not anticipating a cut until September at this point in our guidance outlook.

Anthony Eden: We now have Anthony Eden with JP Morgan.

Speaker Change: Hi, good morning.

Speaker Change: Maybe for hope you're reduced to your expense Outlook type to lower commissions, but left, the revenue guide on change, is it fair to say that the mix of Revenue growth? You expect for this year is now skewed, more towards nii rather than fee income compared to a quarter ago.

Anthony Eden: Anthony, absolutely. Um,

And that is allowing our NII to stay higher. And that is what's keeping our counter cyclical businesses lower. And so as we did not reset the revenue side, there is still the possibility that we could get to the higher end. But as commissions are paid out for those counter cyclical businesses, it is a monthly quarterly plan. And so the savings in the first half of the year in that commission guidance that we originally had won't be spent. Thank you, Hope.

At when we came into this year, our guidance included multiple rate Cuts, would we have not seen 1 yet? And so we are seeing stronger, nii, um, in the first half of the year and we're not anticipating a cut until September. At this point, in our guidance Outlook, and that is allowing our knee to stay higher. Uh, and that is what's keeping our counter cyclical, big businesses, lower. And so as we we did not reset the revenue side is there is still the possibility that we could get to the higher end. But is as commissions are paid out for those counter cyclical businesses, it is a monthly quarterly plan and so the Savings in the first half of the year, uh, in that commission guidance that we originally had, won't be spent.

And then my follow up, just on the additional $100 million incremental opportunity for free tax income. Do you have all of the, I guess, any incremental tech build infrastructure? Is that all in place to be able to support the incremental opportunities you'd expect from, you mentioned earlier, increasing loans, getting more deposits, more treasury management. Is that all built out to support the incremental free tax income you'd see? Thank you.

The incremental opportunities you'd expect from you know, you mentioned earlier, increasing loans, getting more deposits, more treasury management is that all built out to support the uh incremental uh pretext income. You'd see, thank you.

Great question, Anthony. And yes, that is built out. And a lot of this incremental revenue we're talking about is tied to our three-year investment into technology, into better systems, new platforms, and additional capabilities for our clients. So they go hand in hand. As we've talked about our three-year tech investment roadmap, we said the project, you know, every project that comes forward and comes through our board for funding, we have an investment board that looks at all of our tech projects. It comes with either a business case that drives revenue that we then track the businesses to, or it comes with a cost save, which we also track the businesses to.

So the tech investments, we're starting to see the benefits on the expense side, and we're starting to see the opportunity on the revenue side start to open up. That's great. Thank you. One final reminder, if you would like to ask any further questions, you can do so by pressing star one.

Speaker Change: Great question Anthony and yes that is built out in a lot of this incremental Revenue. We're talking about is tied to our our 3 year investment into technology into better systems new platforms and additional capabilities for our clients. So they they go hand in hand. As we've talked about our 3 year, Tech investment roadmap. We said the project, you know, every project that comes forward and comes through our board for funding, we have an investment board, that looks at all of our Tech projects, it comes with either a business case that drives Revenue that we then track the businesses to, or it comes with a cost save, which we also track the businesses too. So the tech Investments we're starting to see the benefits on the expense side and we're starting to see the opportunity on the revenue side, uh, start to open up now.

Speaker Change: That's great. Thank you.

And we have Nick Holowko with UBS on the line. Hi, good morning. Thanks for taking my question.

Speaker Change: Thank you 1, final reminder. If you would like to ask any further questions you can do so by pressing star 1

Speaker Change: And we have Nick Holo okay, with the UBS on the line.

Appreciate all your thoughts on the buyback and how you're thinking about evaluating the right level of CET-1 in the future, but I'm just curious if you have any updated thoughts on the regulatory development of the past couple months and whether there are any proposals either in the works or that could be on the horizon that might change the way you're thinking about other uses of capital. Yeah, thank you. Good morning. This is Brian.

Nick Holo: Hi, good morning. Thanks for taking my question.

Speaker Change: Um, appreciate the value, your thoughts on the buyback and how you're thinking about evaluating the right level of c21 in the future. Uh, but I'm just curious. If you have any updated thoughts on the regulatory development of the past couple months and whether, there are any proposals either in the works or that could be on the horizon that might change the way you're thinking about other uses of capital.

I think it's it's early to to reached conclusions about where the regulatory evolutions are likely to occur, but it does appear that there are some positive, if not very positive, developments around potential greater tailoring as it relates to bright lines around $100 billion, for example, opportunities for improved processing of M&A applications and things of that nature. I think in the short run, it probably does not change the way that we think about capital and capital employment in the organization. We are very committed to growing organically in this 12-state footprint that we have, principally a southern footprint that has very strong growth dynamics.

Brian: Yeah, this uh, thank good morning. This is Brian. I I think it's it's early to to

Brian: Reach conclusions about where the regulatory Evolutions are are likely to occur, but it does appear that, there are some positive if not very positive developments around. Potential greater tailoring, as it relates to Bright lines around 100 billion, for example, um opportunities for improved processing in them, and a application to send things of of that nature.

Brian: I think in the short run it it probably does not change the way that that we think about capital and capital employment in the organization. Uh we are very committed to Growing organically in this. In this 12 State footprint that we have principally a

We think it gives us, in all likelihood, the flexibility as the largest players bring down capital levels. We think that will be positive to mid- and smaller organizations, mid-sized and smaller organizations as well. And I think we're going to have plenty of opportunities to deploy capital in our business and in our footprint. As I said earlier, we're completely comfortable. and looking at opportunities to buy back the stock. And as Hope said, a couple of different ways, we have plenty of authorization that we can use to execute upon that.

Brian: Southern footprint, that is very strong growth Dynamics. Uh, we think it gives us uh in all likelihood, the flexibility is the largest players bring down Capital levels. We think that will be positive uh to Mid and and smaller organization midsize and smaller organizations as well. And and I think we're going to have plenty of opportunities to, to deploy capital in our in our business. And in our footprint, as I said earlier, we are completely comfortable.

If your question is, you know, asking about or inferring about M&A opportunities, I think nothing has really changed in our view. We think there is a tremendous amount of opportunities. We've been mentioned a couple of different ways, the footprint, $100 million for improved profitability. And we wanna move those things down the road before we get focused on anything else. And so who knows how things play out over a two or a three year period, but in the short run, we're very, very focused on deploying capital and growth in the business. We're focused on capitalizing on the customer client opportunities we have on our footprint.

Brian: And looking at opportunities to buy back the stock. And as hope said, a couple of different ways we have plenty of authorization that we can use to execute upon that. If if if your question is, is, you know, asking about or referring about m&a opportunities. I, I think nothing has really changed in our view, we think there's is a tremendous amount of opportunities. We've dimensioned a couple, a couple of different ways to footprint. A hundred million dollars of improved profitability and we want to move those things down the road before we get focused on anything else. And and so who knows how things play out over a 2 or a 3 year period, but in the short run, we're very very focused on deploying capital and growth in the business we're focused on capitalizing. On the the

We use our buyback where appropriate. and then we'll deal with regulatory changes as they get finalized, implemented over the next couple of years.

Brian: Customer client opportunities we have on our footprint, we use our buyback, we're appropriate.

Brian: And then we'll deal with regulatory changes as they get finalized implemented over the next couple of of years.

Perfect. Appreciate the color.

And just maybe as a follow up, thinking about the direction of the margin and NII over the next couple of quarters here, any color you can give on the trends you're seeing on loan repricing and any spread compression that you might be observing in the market? Thank you. I'll start. It's gotten to be, as I said earlier, much more competitive on the deposit side. It's gotten to be much more competitive on the lending side. And I would say that we are seeing greater competition on both price, i.e. lower spreads, and on the structure side in the marketplace.

Speaker Change: Perfect, appreciate the caller, and then just maybe as a follow-up, um, thinking about the direction of the margin and knee over the next couple of quarters here. Um any color you can give on the trends you're seeing on loan repricing and any spread compression that you might be observing in the market. Thank you.

Speaker Change: It's gotten to be, as I said earlier, much more competitive on the deposit side, it's gotten to be much more competitive on the lending side. And, and I would say

And I think that is a reflection of a number of things. Many of them would be positive in my view. One is, I think people have greater confidence in the likelihood that we're going to navigate through the changes that are going on in the economy. And so I think people see positive outlook to growth is still relatively slow, but borrowers are starting to lean in and they have a lot of competitors for their lending business. So in general, I think the spreads and the lending businesses will not be widening out significantly. I do think that it will be a very competitive marketplace as it has been for years and years and years.

Speaker Change: That we are seeing greater competition on both price, a lower spreads and on the, the structure side in the marketplace. And and I think that is

Speaker Change: A reflection of a number of things. Um, many of them would be positive in my view. 1 is I think people have greater confidence in

Speaker Change: the likelihood that we're going to navigate through the, the changes that are going on that are in in the economy. And and so I think people see positive outlook to growth is still relatively slow, but but borrowers are starting to lean in and they have a lot of of

But it's picking up the competition in the back half of this year, in my view, is likely to be greater than it was in the first half or in 2024 for sure.

Competitors for their lending business. So in general, I think the the spreads in The Lending, businesses will not be widening out significantly. I I do think that it will be a very competitive Marketplace as it has been for years and years and years, but it it's picking up the the competition in the back half of this year in my view is likely to be greater than it was in the first half or in 2024 for sure.

Got it.

Thanks for taking my questions. Thank you.

Speaker Change: Got it. Thanks for taking my questions.

Speaker Change: Thank you.

We have no further questions, so I would like to hand it back to our CEO, Brian Jordan, for some final closing. Thank you, Brika. Thank you all for joining our call on this very busy morning. I know there are a lot of releases going on. We appreciate your time. We appreciate your interest in First Horizon. If you need additional information or you have follow-up questions, please reach out to any of us. We'll be happy to try to get that information for you. Thank you again for your interest in First Horizon. I hope you all have a great day.

Thank you, we have no further questions. So I would like to hand it back to our CEO. Brian Jordan force and final closing comments.

Speaker Change: Thank you, ba.

Speaker Change: Thank you all for joining our call on this.

Speaker Change: I know there are a lot of of releases going on, we appreciate your time, we appreciate your interest in First Horizon. If you need additional information or you have follow-up questions, please reach out to any of us. We'll be happy to try to get that information for you. Thank you again for your interest in First Horizon, I hope you all have a great day.

Thank you all for dialing in.

I can confirm that does conclude today's conference call. Thank you all for your participation and you may now disconnect.

Speaker Change: Thank you for dialing in. I can confirm that does conclude today's conference call. Thank you all for your participation and you may now disconnect