First Horizon Corp Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Rose - Raymond James Financial, Inc. - Analyst : Maybe I wanted to just start on the PPNR growth outlook, just given some of the uncertainty and volatility. And specifically, if you -- on the revenue side, I think you talked about a bunch of different scenarios. Last quarter, I think you had baked in three rate cuts into kind of the baseline outlook. So just on the upper and lower end, what does it assume in terms of potential rate cuts? And then on the expense side, just to even get to the low end, it assumes a pretty big ramp over the next three quarters. I assume that's going to come with revenue as well. But just wanted to dig into the confidence in the ability to generate PPNR growth and then maybe some of the puts and takes.

Question: Michael Rose - Raymond James Financial, Inc. - Analyst : And maybe just as a follow-up, good amount of share buyback this quarter. I heard the color on kind of the nearer-term CET1 target, maybe around 11% could be a little bit lower. Can you just discuss the appetite to continue buying back at elevated levels, just given your confidence in positive PPNR growth and just given where the stock is trading up.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Can you talk a little bit more about C&I? It's good to see that the balances were stable. But you referenced, I think, the term some pause, there was some pause. Can you just talk a little bit about what you're hearing from borrowers and maybe if that said, any impact on pipelines. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 1:30PM, FHN.N - Q1 2025 First Horizon Corp Earnings Call

Question: Jon Arfstrom - RBC Capital Markets - Analyst : And then Thomas, as long as you have the mic, can you talk a little bit more about the reserve increase? I know maybe it's hard to quantify. I think we all get it. But you see any evidence of deterioration and how are you feeling about reserve levels from here if we're maybe kind of stuck in the same spot in a quarter?

Question: Ebrahim Poonawala - Bank of America - Analyst : I guess maybe just first, Bryan, for you, big picture. As we think about what this bank should deliver from an ROTCE perspective, you've talked about the 15% target for, I think, the last year. Just give us a sense of the time line of when you see that happening. Is it just operating leverage? Is it a certain type of macro environment that gets us there. And structurally, do you think a bank of First Horizon's size business mix, is that the right level? Or as a shareholder, should you expect that this can do better than 15% ROTCE?

Question: Ebrahim Poonawala - Bank of America - Analyst : And maybe Bryan or Hope, just tell us about how you're thinking about the mortgage warehouse business. It feels like mortgage rates are not budging lower. You've added a lot of -- sort of client commitments over the last, I guess, year or two in that business. Give a sense of what's going on and absent a big drop off in rates, like how you're thinking about the size, how the business is structured and what drives growth there in the absence of a big move lower in interest rates?

Question: Ebrahim Poonawala - Bank of America - Analyst : And just one, if I could follow-up very quickly on the falling rates, given the persistently sort of relatively high rates, is there any sort of discussion internally to protect the margin a little bit to the downside? Or you just don't want to take -- pull that out?

Question: Ebrahim Poonawala - Bank of America - Analyst : Yeah, in terms of hedging, the margin for downside, like by adding duration or swaps, like is that even in consideration?

Question: Chris McGratty - Keefe, Bruyette & Woods, Inc. - Analyst : Bryan, I hope there's a question on the reserve scenarios that you're using. I think you touched upon the tweaking to some of your scenarios. Could you share, I guess, what's your baseline scenario for unemployment in your base case? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 1:30PM, FHN.N - Q1 2025 First Horizon Corp Earnings Call

Question: Chris McGratty - Keefe, Bruyette & Woods, Inc. - Analyst : And Hope in terms of just dialing in the balance sheet, the earning asset levels, given the seasonality in the mortgage warehouse and the effects of loan growth. How should we think about just earning asset trajectory relative to first quarter levels? And ultimately, I'm trying to get at, well, NII, if you're right on the three cuts, will NII grow off these levels from here?

Question: Chris McGratty - Keefe, Bruyette & Woods, Inc. - Analyst : (multiple speakers) to growth of NII. Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 1:30PM, FHN.N - Q1 2025 First Horizon Corp Earnings Call

Question: Jared Shaw - Barclays - Analyst : Maybe just going back to the question on the Moody's scenarios. Could you just tell us what the percent weight to the downside is now versus 4Q? Was that just a little bit of a tweak? Or is that more substantial?

Question: Jared Shaw - Barclays - Analyst : Got it. So it is sort of a combination of a waiting change as well as a qualitative or quantitative overlay.

Question: Jared Shaw - Barclays - Analyst : And then separately, looking at the fixed income business and that dynamic between the ADRs down a little bit and then some of the revenue from the other areas, should we think of that going forward as maybe a little bit of an inherent natural hedge? Or is that other revenue growing just because of more of a focus of growing that business. So if we do see ADRs up, could we see maybe some of those other fees stay elevated? Or should we think of those as moving around?

Question: Jared Shaw - Barclays - Analyst : Any updates or quarter to date on ADRs are shaping up in April?

Question: Jared Shaw - Barclays - Analyst : And then just finally for me. Looking at the outside services going down, are there other projects near term that are going to be implemented to sort of rebuild that expense or that comment of future expenses more just as projects come up, they'll backfill?

Question: Casey Haire - Autonomous Research - Analyst : Bryan, I wanted to follow up on that because that was kind of the crux of my question here. So like you guys sound pretty optimistic on the revenue front and rebounding from here. But it sounds like if loan growth doesn't materialize and fixed income kind of models through the extreme volatility that you can't pull the expenses below this guide to PPNR. Is that a fair way of summarizing?

Question: Casey Haire - Autonomous Research - Analyst : And then on the NIM with a focus on the deposit costs, the loan-to-deposit ratio at 97%, Obviously, if we get Fed cuts, there's more leverage on the deposit cost. But if we don't how will that loan-to-deposit ratio be managed by way of deposit cost, given it's swinging a little high relative to peers?

Question: Timur Braziler - Wells Fargo - Analyst : Following upon the deposits line of questioning. Just some of the campaigns that you had mentioned that are going to hit in kind of 2Q to 3Q. I'm just wondering the ability to further bring down deposit costs, and I know, Hope, you had mentioned that deposit costs kind of stabilized here. subsequent any additional rate cuts, but the ability to maybe bring down deposit costs if loan growth doesn't materialize outside of warehouse? And then just talk to the new-to-bank campaigns that are going to be rolling out here in the summer months? And just kind of what types of rates we're looking at for those? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 1:30PM, FHN.N - Q1 2025 First Horizon Corp Earnings Call

Question: Timur Braziler - Wells Fargo - Analyst : And I guess just tying all of that together, looking at demand deposits, looking at kind of broader uncertainty versus the new campaigns, do you think you'll be able to actually grow DDA deposits here in the coming quarters? Or are some of the lack of borrowing needs and using your own liquidity? Is that going to cause borrowers to continue kind of leaning on their own balance sheet and maybe you see additional pressure in that line item just maybe not at the same extent that we've seen in the last couple of quarters?

Question: Timur Braziler - Wells Fargo - Analyst : And then just lastly for me, I want to circle back to expenses. Again, that outside services line, is that fully reflective of kind of sunsetting the GL related expense and the treasury management related expense? Or is there more on the come there? And then I guess as we go to the next half of that $100 million spend, the change, the bank, what's kind of the gap to hitting some of those projects and maybe capitalize versus not how much of that outsized service cost do you expect to come back online as some of those projects are going?

Question: Anthony Elian - J.P. Morgan - Analyst : Just a follow-up on Timur's question on deposits. Could the second quarter actually be a growth quarter for total deposits given the campaigns that, Hope, you mentioned that are coming? Or are there still reductions of broker that you expect, which could offset the new deposits coming in?

Question: Anthony Elian - J.P. Morgan - Analyst : And then my follow-up, just on the impact from tariffs, uncertainty, trade war. Are there -- or I guess, what are the loan portfolios that you're paying a closer attention to today that may have borrowers with outsized exposure to tariffs, trade war, Asia? And can you size these up for us in terms of loans outstanding?

Question: Christopher Marinac - Janney Montgomery Scott LLC - Analyst : Bryan and team, does this sort of second, third quarter, remind you all of the early part of COVID back in 2020 from a reserve and uncertainty standpoint? Does any of that sort of kind of apply to what we learned five years ago?

Question: Brennan Crowley - Robert W. Baird - Analyst : I was hoping to hear a little more commentary around trends in CRE lending. Some of your peers have highlighted increased competition. So just wanted to hear some more detail around your outlook for any potential loan growth this year? Or are these kind of ongoing fund-ups going to limit upside in that portfolio? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 1:30PM, FHN.N - Q1 2025 First Horizon Corp Earnings Call