First Horizon (FHN) Q4 2025 Earnings Transcript

Core Insights - The company reported a strong fourth quarter with earnings per share of $0.52 and a net interest margin (NIM) of 3.512%, despite a four basis point compression in margin [2] - The company is optimistic about improving profitability and growth in 2026, with a focus on returning capital to shareholders while investing in growth opportunities [3][4] Financial Performance - Net interest income (NII) grew by approximately $2 million, driven by deposit pricing and strong loan growth, particularly in loans to mortgage companies, which increased by $767 million [2][5] - Average interest-bearing deposits decreased to 2.53% from 2.78%, with period-end balances increasing by $2 billion compared to the prior quarter [1][5] - The company returned nearly $900 million in stock repurchases and over $300 million in dividends in 2025 [4] Loan and Deposit Trends - Period-end loans increased by $1.1 billion or 2% from the prior quarter, with significant growth in the mortgage sector due to a pickup in refinancing activity [5][6] - The commercial real estate (CRE) portfolio saw a slight reduction in balances but an increase in commitments, indicating positive momentum entering 2026 [6] Expense Management - Adjusted expenses, excluding deferred compensation, increased by $4 million, with personnel expenses rising due to incentives and commissions [7] - The company expects expenses to remain flat in 2026, with a focus on managing costs while investing in technology and personnel [10][61] Credit Quality - Net charge-offs increased to $30 million, with a net charge-off ratio of 19 basis points, aligning with expectations [8] - The allowance for credit losses (ACL) to loan ratio declined to 1.31%, reflecting improvements across the commercial portfolio [8] Capital Management - The company ended the quarter with a Common Equity Tier 1 (CET1) ratio of 10.64%, with plans to maintain a target range of 10.5% to 10.75% [8][12] - A new repurchase program of $1.2 billion was announced, with nearly $1 billion of authorization remaining [10][9] Outlook and Growth Strategy - The company anticipates year-over-year PPNR growth with total revenue expectations ranging from 3% to 7% in 2026 [10] - Continued improvements in market conditions for fixed income and mortgage lines of business are expected to drive higher revenues [11] - The company is focused on deepening client relationships and enhancing product offerings to achieve sustainable growth [16]