First Horizon Corp (FHN) March 2026 Conference Transcript

Welcome to the First Horizon Second Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Tyler Craft, Head of Investor Relations.

Thank you, Rebecca. Good morning. Welcome to our second quarter 2026 results conference call. Thank you for joining us. Today, our Chairman, President, and CEO, Brian Jordan, and Chief Financial Officer, Hope Domchowski, 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 well. Our remarks today will reference our earnings presentation, which is available on our website at ir.firsthorizon.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 2 of our presentation and in our SEC filings. Additionally, please be aware that our comments will refer to adjusted results, which exclude the impact of notable items and to other non-GAAP measures. Therefore, it's important for you to review the GAAP information in our earnings release, pages 2 and 3 of our presentation, and the non-GAAP reconciliations at the end of our presentation. 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.

Thanks, Tyler. Good morning, everyone. Thank you for joining us this morning. I'm proud of the results we achieved in the second quarter. Comparing our year-over-year performance, adjusted earnings per share for the quarter are up $0.09 or 20%. We saw an 8% increase in adjusted PPNR, and period end loan balances grew by approximately $2 billion compared to 2025. These outcomes are the direct results of our clear objectives, discipline execution, and the value we demonstrate to clients day in and day out. We see continued growth momentum going into the second half of the year. Our entire organization is focused on delivering strong performance through the cycle, through our core regional and specialty businesses, and our counter-cyclical. Building long-term relationships with clients who benefit most from the value we provide remains at the center of our strategy. We continue to grow and invest in the people that meet client needs and drive continued performance. Comments on the second quarter And I'll return at the end of the call for some closing comments.

Thank you for joining us today. We highlight our strong earnings momentum shown by our results for both the second quarter and the first half. In the quarter, we grew adjusted EPS by a penny to $0.54, adjusted PPNR by 1% to $364 million, and average loan balances by $1.5 billion. Compared to the first half of 2025, our adjusted ROCSE increased by over 180 basis points, adjusted PPNR increased 8%, and adjusted earnings per share was up 21 cents. As we move through the detailed slides, we will walk through the drivers of this performance in more detail. On slide 8, we walk through our net interest income and margin performance in the second quarter. Our margin compressed by three basis points, which saw NIMS settle into the high 340s as we expected, reflecting the rate environment evolution into a flat two-up expectation. We grew NII by $9 million this quarter, reflecting our strong loan growth. On slide nine, we covered details around our deposit performance in the quarter. Period end balances increased by $1.6 billion compared to prior quarter. driven primarily by growth in brokered deposits. The average rate paid on interest-bearing deposits increased to 2.33%, which is a five-basis point increase from the prior quarter. While deposit costs came up due to the competitive environment and portfolio blend, our cumulative deposit beta remained strong at 66% since rates started to fall in September 2024. The rate paid increase in the quarter are in line with the patterns we saw in 2025. While the environment remains competitive, we saw average cost of client interest-bearing deposits remain roughly flat in the quarter. As always, we remain focused on growing our core deposit base and prioritizing relationship growth to sustainably and profitably grow our balance sheet. On slide 10, we cover our quarterly loan growth. Period-end loans increased by $953 million from the prior quarter, driven by $1 billion in commercial loan growth. This growth includes $710 million in C&I growth, excluding loans to mortgage companies, and $175 million in commercial real estate growth, which reflects the momentum we have seen in that portfolio over the last few quarters. Loans to mortgage companies grew $118 million in the quarter, which reflects normal home buying seasonality with some headwinds from the rate environment. We saw strong production in the quarter with new commitments up more than 50% year-over-year driven by commercial real estate activity. This creates an opportunity for flat to slightly up Cree balances this year as construction projects fund up over time. Additionally, our pipelines remain strong across our business lines and throughout our footprint. Our commercial loan spreads remain generally consistent with prior quarters amidst the competitive environment for loan growth. Starting to slide 11, we detail our fee income performance for the quarter, which decreased $1 million from the prior quarter, excluding deferred compensation, and is up $14 million year-over-year. We saw a quarter-over-quarter decline in fixed income revenues due to a decrease in ADRs to $594,000, though this is still an 8% increase year-over-year. Lower ADRs were driven by macroeconomic volatility amidst a changing geopolitical environment and uncertain rate environment. The decline in fixed income is partially offset by increased brokerage, trust, and insurance income from continued momentum in our wealth management business and increased client activity. This is one of the revenue-driven profitability lines that we see driving our $100 million plus PPNR opportunity. On slide 12, we cover adjusted expenses that, excluding deferred compensation, increased $6 million from prior quarter. Personnel expenses, excluding deferred comp, increased by $1 million from last quarter, driven by a $4 million increase in salaries and benefits. This reflects hiring as well as higher day count. Outside services increased by $10 million, which primarily reflects typical seasonality with higher market expenses that are partially offset in other non-interest expenses by reduced client cash incentive payouts from prior quarter's marketing program. Turning to credit on slide 13, net charge-offs increased by $4 million to $33 million. Our net charge-off ratio of 20 basis points remains in line with our expectations for the year. Our provision for credit losses was $15 million in the quarter, and our ACL to loan ratio declined to 1.24%, driven by mixed change in the portfolio and continued credit resolutions as NPL declined 13 basis points. Our teams continue to do an excellent job of working with our clients to resolve credit issues. As rates decreased over the last several quarters, we have been able to consistently find ways to resolve credits and maintain our strong credit performance. On slide 14, we ended the quarter with CET1 of 10.5%, which is in line with our near-term targets. We had strong loan growth as well as buybacks of 4 million shares, totaling $100 million this quarter. Our tangible book value per share ended the quarter at $14.53 and is up 7% year-over-year, which includes buybacks of $857 million and an increase to our dividend. We continue analyzing the potential impacts of Basel III and currently expect an approximate 10% reduction in risk-weighted assets in the standardized approach as it is currently proposed. I'll wrap up on slides 15 and 16. We continue to reiterate our full year expectations as outlined on slide 15. While the macroeconomic environment and competition may change, our business model creates resilient earnings, and our associates consistently deliver on expectations, including our 100 million PPNR opportunity. Now, I will give it back to Brian.

Thank you, Hope. The second quarter of 2026 was very similar to what we saw in the second quarter of 2025 regarding increases in macroviolence and various other seasons. We've done over the last 18 months to create a clear, common understanding of the ways we win in the market. It strengthens our ability on top of the next by serving clients well and staying disciplined. We continue to strategically invest in tools that make it possible. Near-term, we will continue to support organic growth. We'll stay thoughtful on capital deployment and an opportunity to believe we can operate a lower CET1 ratio over time as conditions allow. Our operating model continues to serve as competitive advantage of the community bank touch. We are well positioned to attract full client relationships and grow with the markets and lines of business. Thank you to our associates for their hard work and to our clients and shareholders for their continued confidence. Rebecca, with that, we will open it up for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from John Armstrong with RBC Markets.

Hey, good morning. Good morning, John. Hey, just wanted to ask a couple of questions about the revenue environment. But, Hope, can you touch a little bit on the deposit cost outlook and, you know, help us understand what you're seeing? I know you said the average client interest-bearing deposits were roughly flat sequentially. But what can we expect from here on deposit costs and funding costs in general?

Good morning, John. Thanks for the question. As we look out as to where deposit costs will go in Q3 and the rest of the year, I expect it to look very similar to last year. As you looked at what happened in 2025, following the success of rate cuts at the end of the year, rates came back up. The competition increased. And if we continue to see this trajectory, I do think that, you know, our beta will continue to shrink slightly. But I want to make the point in that we said at the end of last year, both Q3 and Q4, we were maximizing the decrease in our deposit costs, knowing that we'd give some back once rates stopped cutting. So this is as expected, John. Also, Q2 and Q3 is the most competitive time for offers. You see in our expenses every year in Q2, we talk about the increased marketing cost that goes with those acquisition offers. I think really the trajectory for the back half of the year, we start looking at Q3 and Q4, it does depend on which way rates go. I mentioned in my prepared remarks, as did Brian, the uncertain outlook is the next rate move this year, and is it an increase or decrease will drive that. But I do expect it to continue to increase consistent with what we saw last year as a great cut.

And then I guess loan competition and yields, you know, see a little bit of compression this quarter, but do you feel like it's still rational, Brian, anything you'd like to flag in terms of yields and anything that's more competitive than other areas?

Yes, I would describe the loan markets, John, as maybe a little surprisingly optimistic. Pipelines have continued to be very strong, whether it's in customer requests for lending or just in anecdotal conversations with customers, people are still very optimistic about the economy and very forward-optimistic things feel. Loan pricing and structure, I can always give you anecdotes where it seems irrational. It is very, and it's transactions in particular. But at the end of the day, I think you will see in the course of this year, the demand for deposits and lending continued to probably put a little bit of continues to so a little little pressure on spreads but feeling good about volumes is the summary yes yeah very yes very accurate okay all right thank you very much thank you have a great day your next question comes from michael rose with raymond james please go ahead hey good morning

guys thanks for uh taking my questions um maybe we can just start on the adr side i mean obviously you guys kind of gave the update inter-quarter um just based on you know where the curve is now what the expectations for for rates are um i know it's hard to forecast but can you just talk about you know the the puts and takes in that business just given where we are thanks it's it's hard to in the marketplace.

Given the CPI, you know, the market is taking, I think we're in a repeat reel. It's always happening. Investors see it as opportunistic. We'll see a trending down. I think you'll see less in the Middle East. We'll know more.

Perfect. And maybe just a follow up there. You know, when we do get, you know, capital reform, that's obviously going to benefit the system as a whole. Would you expect to see more volume from that? Because not all of it can be returned through buybacks and dividends. I would assume that some of it would be put in insecurities and that could benefit the business. Just wanted to see if you guys have thought about the potential uptick from higher capital levels and reg reform.

I think it's possible. I agree. I I do think that the relative, you might see some lending activity also come back from the secondary markets. But on the whole, I think it's for the fixed income.

All right, great. Maybe just one follow-up, just as it relates to credit. You know, last quarter we spent a lot of time talking about NDFI and things like that. It doesn't seem to be a real topic this quarter. Obviously, the improvement was good. But I guess how much, you know, how much better can it really get in your eyes? And if volatility, you know, does persist, could we start to see things maybe trend the other way?

Hey, Michael. I think the short answer on NDFI is there's been no real change since the last quarter. It continues to be a relatively steady performing portfolio for us with no major concerns. And so no part of me is necessarily looking for it to get better. I think just the consistent, steady performance that we've already had, that's what I'm expecting, and that's what we're managing towards.

Thanks for taking my questions. Thank you.

Your next question comes from Jared Shaw with Barclays. Please go ahead.

Thanks, and good morning. Maybe going back to the deposit discussion, Were there any unique drivers of some of the non-time interest-bearing runoff, and how should we look at sort of the outlook for broker deposits from here?

No main themes. I will say it was pretty broad-based on these changes and balances. It's not long trend. We did see is money moving from traditional money markets or CDs back into the equities market in our wealth business. We've seen a little bit of a churn there, but no real main theme. I think just as we know, the consumer has less cash flowing through their checking accounts and they're spending down their savings and our commercial clients are funding up projects and putting that cash.

All right. Thanks. And then looking at the securities side, you continue to run that down and use that to fund other growth. how low should we expect the securities as a percentage of assets to go? And, you know, are you doing anything differently in that right now in terms of purchases compared to what we see for average yields in the second quarter?

Third quarter, just as you look how we continue to reinvest. We have $1.2 billion rolling off. I say now because as we just talked about earlier, the rate outlook continues to change. But yes, there's positive momentum for earnings there, but we do not expect a shift in mix onto our balance sheet.

Yeah, that's security support. Great. Thank you.

Your next question comes from Bernard von Gazzicchi with Deutsche Bank. Please go ahead.

Hi, good morning. Just the first question on the brokerage, trust, and insurance fees. They've been growing nicely versus a year ago period, as well as versus the first quarter. Could you provide some color on what's driving results? Is it a combination of the macro and micro factors? Just talked on how you expect revenues to trend in the second half of the year. I believe you mentioned increased wealth management penetration across the footprint with $5 million recognized and $1.526 as part of the growth.

Yes, thank you for the question. In Q3 of last year, we completed our conversion onto the LPL platform. It's allowed us to deepen our product penetration with our existing clients, new clients, wealth advisors. We've been building out the deepening initiative that you spoke of, commercial clients. And I think that momentum, or I expect that momentum to continue as we continue to get the benefit of growing our franchise through the LPL part.

Great. And just maybe a follow-up on the hirings, like you mentioned in wealth. I know you added a headcount of 53 during the quarter. Just any color on the mix of front versus, say, mid-back office during the quarter or year-to-date, and just any expectations on hirings in the second half of the year?

We are continuing to hire a banker we did last year. It's pretty broad-based in some key growth areas, as well as some key businesses. We just talked about wealth, support areas, efficiency, so you can scale your front office without having to add the support partners. The one exception to that in headcount growth is fraud. We're continuing to invest people into our fraud business as it gets more and more difficult to prevent fraud for our consumer and our commercial.

Great. Thanks for taking my question.

Thank you.

Your next question comes from Janet Lee with TD Cohen. Please go ahead. Good morning.

Just following up on deposits, is there room for broker deposit balances to unwind versus the $2 billion increase in the quarter and interest-bearing deposit costs in the third quarter could potentially come in below the $243 spot rate, given the seasonal strength and core deposits?

Janet, absolutely. That is a possibility. And, you know, we do not, you know, we do not try to fund loan growth as a priority with deposits. We have seen two successive quarters, strong loan growth and the seasonality of deposit campaigns when clients move deposits as well as the balances that there are to go after. it does tend to take up in Q2 and Q3, and we would trade that in paying down brokers. However, is it going to come in lower than where we ended the quarter? It's really hard to know this early in the quarter. It's really hard to know with the changing macroeconomic outlook and the rate outlook what we will see. But it is our goal to continue to grow customer deposits to fund loans.

Got it. And on 2026 revenue growth guide, if we assume, you know, current mid single digit long growth, perhaps relatively stable cyclical account, sorry, counter cyclical fee businesses and NIM likely coming down if deposit costs are rising. That implies revenue growth coming in at the low end of the 3% to 7%. Is that the fair baseline expectation or assumption that we could assume? Or if not, what are the levers to do better than the low end?

I think that is one assumption that you can run. we run a, you know, a series of different scenarios in a changing rate environment and economic outlook. One of the comments you meant is you said is compressing NIM. If NII is growing and NIM is compressing, that's still positive to revenue growth over the year. We are for the first half of the year at the average for revenue growth. When I look at the back half of the year, it really depends on what happens with the rate outlook and how our counter cyclicals perform. Our FHN financial, as Brian mentioned earlier, had a great second half of last year. So to get to the higher end of that range, you would have to be equal or outperforming that. But a rate increase, we have an asset sensitive balance sheet, so early rate increase is another scenario you can run. And we would pick up more NII than that on the exact same balance sheet without growth. And so I think you've got to play all those factors out, not knowing if we'll have a rate decrease or increase this year. And we've run all of those scenarios for the back half this year, and we feel confident that we will be well within that range.

The other lever that Hope mentioned earlier in her prepared comments was we're really focused on how we improve the profitability of the balance sheet. And if you look at loan growth over the last year and improvement in PPNR, we're outpacing the growth and the balance. And there is a real positive effort and we're getting very good traded in the business. And I think the combination of all of those gives us confidence in what essentially is the framework for 2026 that we laid out in the early part of this year, even in the context of the 80 days.

Thank you. Your next question comes from Casey Hare with Autonomous Research. Please go ahead.

Thanks. Good morning, everyone. I wanted to touch on expenses. So the expense guide, which you reiterated, it assumes that expenses kind of hold flat with this second quarter run rate. The outside services was up quarter to quarter, and it kind of ramped last year. So, just wondering, you know, do I have that right that expenses kind of hold flat with this second quarter run rate and, you know, what's the outlook on the outside services?

Casey, you said it perfectly. You answered the question for me. We are expecting expenses to be flat from here on out, and we did have in the back half of last year one-time expenses related to finishing up some projects and some initiatives that will not repeat in the back half of this year. so we do expect it to be flattish here. We will see some movement between outside services and other, and that's really related to the marketing campaigns. Right now, we're in the acquisition phase, so it hits above, and then when we pay the cash incentives, you'll see our DDAs are up this quarter. We're seeing positive momentum with our DDA cash offer, and those will pay out in future quarters. You'll see it switch a little bit in the P&L, but we do expect flat expenses the next two quarters from here.

Great, thank you. And then Tom, a question for you, two-parter on credit. So the ACL down 18 bps over the last year, you did have a very nice NPL redux this quarter. I guess first question is, you know, how low can that ACL ratio go? And then separately, the NPL ratio, So can this momentum continue, you know, is there an outlook that you can drive that lower from 81 basis points?

Yeah, sure. Hey, Casey, I'll answer that in a few different parts. I'll start with the 18 basis points reduction that you mentioned. That is one of the different factors. We have been very diligent in how we manage our portfolio. So, what you've seen is a continual decrease in our special mention and substandard assets. We've been very diligent in our underwriting and how we resolve those credits. And so, that 18 basis points is a combination of improving portfolio credit quality. It's also got all the positive resolutions you've mentioned, especially in the NPLs in the last quarter. It also reflects just economic outlook as well. There are internal factors we control. There are also external factors around economic factors, but you add all of that together, and I missed a major one, which is obviously our very consistent and low net charge-off performance. All of that put together is why we've had the decrease in ACL. You know, I would point to the $124 that we ended this quarter at is still over six times our average net charge-offs over the last year and more than seven times over the last two years, so I would be well-reserved relative to. As I look out ahead, where does ACL go? I think that's something that I would not speculate on because, as I mentioned, there are internal things that we absolutely can control. And I continue, our whole team, our whole bank continues to prioritize minimizing losses and maximizing recoveries as opposed to, say, timely resolutions. But I think we control the things we can control. But there are external factors such as unemployment, interest rates, economic outlook, consumer spending power, inflation, geopolitical risks. There's so many things that can influence ACL going forward that I wouldn't speculate on kind of where that can go. The last piece you mentioned, NPLs, you know, I think that's a real highlight for credit this quarter, down 13 basis points. Once again, that's a combination of a lot of different things. We've been working very diligently on focusing on our NPLs, and we had a number of positive resolutions this quarter. What you're seeing there is a combination of upgrades, payoffs, restructurings, and as I mentioned, our focus continues to be on minimizing losses and maximizing recoveries as opposed to timeliness. So we will absolutely focus on continuing to reduce that number, but like I said, I take a long-term view on all of this rather than trying to get quick resolutions.

Great, thank you.

Your next question comes from Abraham Poonawalla with Bank of America. Please go ahead.

Hey, good morning. Just have two follow-up questions. I guess I hope, Brian, for you. One on capital, if I heard you correctly, I hope you mentioned risk-related assets down about 10% under the standardized approach. that's roughly 100, 110 basis points of CET1. Just talk to us in terms of as we think about capital allocation given where your CET1, arguably at the higher end when we think about the 10.5, just how are you thinking about where you could deploy that capital? Would buybacks be attractive once we get some finality on these rules? Or just, yeah, in terms of beyond organic growth because it doesn't feel like organic growth is going to absorb all that excess capital. Thanks.

Abraham, thanks for the question. Yes, it is a combination of those, and it depends on the outlook. As Brian and I have talked about multiple times, when we look at capital, we look at it when we do our annual stress test. Although we're not required to do it, we do do it. We review it with our board, and we look through the next one to two years for capital, which is what do we believe we're going to need to fund loan growth. Loan growth being the priority for how we want to use capital. Second is what is the right level of dividend for a company. And third is share buyback. And so when we look out towards that 10% reduction, we will look at not just this quarter, how do we get, how do we put that all to work, but what do we reserve so that we have it to grow our balance sheet? It's hard for me to know when it'll all go into place, Ibrahim, and what the economic environment could be. We came into this year expecting a load of mid-single-digit loan growth. I do see an environment where we can get back into the high single digits and 10% loan growth as an economy, especially in the Southeast as quickly as our markets are growing. I just don't know when that market starts to turn in timing with when Basel III endgame will be implemented and approved.

Got it. And then I give this separately, so I appreciate you outlining the $100 million PPNR opportunity ahead of the bank. But just talk to us. We are seeing competitors either acquiring banks, adding branches, acquiring bankers. Just talk to us. If you think about the top three areas where investment spend is going from a growth standpoint, how would you sort of characterize that in terms of either banker hiring, are you opening branches in new markets?

If you can talk through that. yeah we're we're investing across a number of fronts and and one you didn't mention very much was technology we continue to invest in technology we're building branches not so much in new markets we're building branches in existing markets where we think we have tremendous opportunity to improve our density our 24 by 7 always on advertising and commitments to those. As I mentioned earlier, I feel good about the hiring we're doing across the organization. We've hired in markets, broadly speaking, to go deeper and broader, mostly commercial and wealth. And we will continue to do that as well. And then technology. We made a huge push in technology following the termination of the merger agreement. That work is largely, if not fully completed, but we continue to invest in our mobile banking system and how we deploy AI. So we are looking to, I thought, and that's the one part of the fourth of the week. And that's the one thing that we can control with a how to continue these investment franchise and invest, manage expenses.

Got it. Thank you.

Thank you. your next question comes from ben gerlinger with city please go ahead hey good morning good morning i hate to belay this point but uh it's clear that people are pretty focused on your uh funding mix it's not interesting positive cost given that you guys have a pretty seasonal balance sheet like is there any reason why 4q26 should have a materially different overall kind of percentages of funding than for relative to like 4Q25, i.e. like broker comes down and like I'm just trying to get a sense of like you do have seasonal. Is there anything to assume that seasonal doesn't really play itself out again?

Ben, no, there's nothing to say that we expect the seasonality and Brian mentioned that in a pair of remarks and I mentioned my first question. This year deposit costs and deposit growth is trending just as we've seen in the last two years following rate cuts that um then stop abruptly and you don't know what when or what the next uh rate movement will be uh you know the only thing that would move that is if we saw it late in the year mortgage warehouse uh spike we saw a mortgage uh refinance late year that would be the only thing that would change that materially but no we do not expect a material change got it okay that's helpful uh that's pretty much all i had i appreciate it thank you thank you your next Next question comes from Anthony Elian with J.P.

Morgan. Please go ahead.

Hope, good morning. Another one on deposit costs. Last quarter, you pointed to a slight tick up in deposit costs and you saw a five basis point increase on average in 2Q. Would the pace of deposit cost increases in the second half be higher than the increase you saw in 2Q given where the spot rate is now and your earlier comments on 3Q and 4Q being the most competitive for deposit offers?

You know, one basis point, the biggest piece is how much loan growth we get. We talked about having another great quarter of originations that we'll fund up. And so how do we fund growth? What does the growth on the balance sheet look like? As Ben just pointed out well, mortgage warehouse seasonally is higher in the summer. That is a traditional home buying season. We've already seen that. We do match fund mortgage warehouse with wholesale funding traditionally. So I think you've really got to look through the cycle and not just quarter to quarter with the seasonality. But it really is hard for me to tell you exactly where we're going to be within a couple of basis points, you know, 75 days from now. But we're trending, you know, consistently, as we just said, and we're continuing to manage customer costs.

I will add to Hope's comment. And my instincts are that what I see in the marketplace and anecdotally, I think in the near term with the uncertainty around interest rate, people are trying to lock in funds today. So I think that's changing the mix a little bit. You're seeing more CD competitive and money market rates in the marketplace. and and at the end of the day so my gut tells me that you could see rates drift up a little bit over the next quarter or so but I think the seasonality affects you know the driver from us and get paid and and we look at all of it in the context of a market that is moving a good bit so at the end of the day my gut is maybe it's hard to know given all the moving parts in the more.

Thank you. And then on the NIM, so last quarter's call, you gave us a range hope of high 340s for 2Q. If I look at consensus, it has you hovering at that level over the next couple of quarters. I'm wondering how you're thinking about NIM for 3Q, given, again, your earlier comments on deposit costs. Thank you.

You know, NIM, we expected to settle in this year in the mid 3-4s to high 3-4s. That'll vary. You know, a basis point or two on NIM for us is really about fixed, not just deposit costs, mortgage warehouses, our highest spread business. So as that funds up, you know, you can see some margin compression there, but it's positive to NII. And I think the really important thing when we talk about NIM compression is our deposit growth is, our deposit increase and our deposit growth is to fund loan growth. So it's still driving positive NII with slight NIM compression. We've been saying for about three quarters now. We think a normalized for 2026 is the mid to low 3.4s and we're at the mid to high 3.40s and we're at 3.49s. That gives us a lot of room to come in and that full year guidance we've given on NIM and feel confident on the full year we will. But to Brian's point, there's a lot of moving parts right now, but I don't want to disconnect the deposit growth is tied to loan growth, which is positive for NII right now.

What I would say is you can't spend a them, which is a ratio you spend in which is.

Thank you.

Thank you.

Your next question comes from Timur Braziller with UBS. Please go ahead.

Hi, good morning. Hope, on the seasonal deposit campaigns that you guys are running, can you just maybe talk through the magnitude of those and where you're pricing for those seasonal campaigns?

I've said this a few times. The one-size headline rate is not how deposits are working now. One of you on this call actually calls branches and puts a report out saying, in this city, here's the offers. We have gotten to the point in our industry and us as well where we do have different rate specials in different cities. We hear lower-end deposits versus higher, Their jumbo CDs are back with a much more premium rate. So unlike 2023, where I could tell you, you know, we were offering $525,000 to everybody in all states above $25,000, that's not how we're doing deposit competition anymore. It's not how we're doing promos. So it is a mixed issue of how do you grow with where the market is. The Southeast is a very competitive market for deposits that continue to have migration in and additional competitors, either grow their footprint or enter, but it's not equal in all states and all cities. And so we're getting much more intentional about where we can grow at what rate, which is how we're able to manage that deposit cost more consistently through the cycle than we were back in 22 and 23, not just for us, but as an industry.

And as you mentioned earlier, Hope, we've invested in cash offers for non-interest bearing deposits. We're starting to see very positive traction there. And essentially, it depends on market. It depends on the part of the curve we're trying to go at.

And I guess in that same light, if we do get a 25 basis point hike, if the forward curve actually does play out, I guess, what does the margin trajectory look like with one hike?

You know, just like the opposite, it's going to be the opposite of what we saw with decreases, which is the loan side reprices up first. What we've seen in a decreasing environment is the loan yield comes down first, and then the deposits lag. So, you'll have some margin expansion in that first quarter, and then you'll see it compress back as the deposits repriced. We have anywhere from three-month to 13-month commitments on something like a jumbo CD. So, you've got to let that play through in either a rate increase or a rate decrease. So, there is a lag quarter to quarter, but over the full year or over a 12-month period, we expect it to be matched.

Our business model is very balanced through the cycle. Given where fixed income ADRs are, would it be incrementally more positive because ADRs have already been at a relatively low level? So, if the bid were to move up 25 bases, more like the interest as opposed to…

Brian, if I can speak one more, and for you, just would love to get your thoughts on broader M&A in the environment. Are the conversations as dead as the deal activity has been more recently? I guess, what are you seeing from your seat in terms of, you know, books coming across your desk or broader conversations had?

In this business, I would say, given the significant amount of M&A activity that occurred in the middle part to the end of 2025, and the relative absence of that and the uncertainty about, but it does feel 12 months ago.

Thank you.

Your next question comes from David Chiaverini with Jeffries. Please go ahead.

Hey, good morning, guys. Brooks Stutton on for David Chiaverini. You guys have mentioned in reference the $100 million plus revenue opportunities several times today across initiatives like treasury management, CRE pricing, wealth management, and the regional specialty partnership model. As you sit here today, which of those initiatives do you think has the longest runway for growth and where are you seeing the strongest client adoption?

I think they all have ways. I think maybe the most significant in terms of ability to create or drive value is deeper, much deeper penetration of relationship alone only or near alone only. are making significantly more calls with their relationship managers, and that I think is probably number one that I would list. Second is introducing our private client, our wealth management teams to those relationships, but essentially it has to be executed or client, and not to repeat a point I made earlier, but you see it in the balance sheet when you look at the improvement in ppnr versus the the growth and the balance sheet you can assume underneath that that there's a relationship we've traded out some on the whole we didn't expect this to occur overnight we've been focused on it now for 18 to 24 months and and we're seeing very positive built into the expectations that this year but we feel very good about our great thank you very much thank you Your next question comes from Christopher Maranak with Breen Capital.

Please go ahead.

Hey, good morning. How do you think about the return on tangible common equity as it relates to kind of matching charge-offs with provision or having provision slightly less? I know Tom talked about this earlier on the call, but just kind of curious how you think about ROTC from that framework?

Yeah, I think, you know, I start with the bias that creating the maximum return we can on the capital we have deployed in the business is ideal. I think it's harder to think about provision and charge-offs vis-a-vis return on capital because I've been in recovery as a CPA for a long time now, but as I understand basic framework of CECL, for every loan that's on the balance sheet, we think the life of loans or what happens with the economy, presumably new provision is driven by changes in the economy. I think our industry-driven net reduction in MPAs over the course. Content continues to, you know, maybe embedded in your, but I'm not sure our biases to continue to improve. And if we can do those things, we will continue to drive improved and improving.

There, Brian, thank you very much for your perspective, and thanks for taking all of our questions this morning.

Yeah, thanks, Chris. Appreciate it.

Your next question comes from Chris McGrady with KBW. Please go ahead.

Oh, great. Thanks for squeezing me in. I just want to go to slide 16 for just a moment. I like the lower quadrant, right quadrant of what you've accomplished towards that 100 million PPNR. I just want to get a clarification. Is the message here that you're roughly 15 to 20 percent of the way to that 100? That's question one and point two is when do you think you'll get that full 100?

When I originally brought it up and put a $100 million estimate. And we have continued to make progress. And I've referred to it in this and profitability that's been embedded in 86. I said at the time, and I think we're in progress on that, but that's not intended to signal that we're at any percentage point of completion at this point, that we're continuing to work on it. And we continue to focus on drives that initial hundred million i'll be disappointed if we're not continuing to work on the plus part of it so i think there's a lot of opportunity in our existing book of business on slide 16 we say here's a couple examples that's not meant to be an inclusive list got it okay thank you your next question comes from john pancari with evercore please go ahead hey good morning this is

gerard sweeney here for john just want to follow up on credit sound pretty healthy there on last Last quarter's call, you mentioned keeping an eye on the consumer-sensitive areas like trucking, auto, and restaurants. Would you say these are performing better than you expected so far in 2Q and 3Q? Or are these still areas that you're watching, and if not, any other areas to keep an eye Yeah, happy to answer that.

Those are the sectors we continue to watch closely. I will say they have proven to be very resilient so far. So we need to continue to monitor it, because I do believe there is increasing pressure on especially lowering consumers and their spending power. But all of that said, within the sectors that you mentioned, retail, restaurants, things that are close to the end consumer, it's been surprisingly resilient. And so we'll continue to monitor it. But those do remain elevated in terms of credit risk relative to other industries. And so we'll continue to monitor closely. You can't.

Thank you.

Yeah, I was just going to add that, you know, you see, I'm not going to put in some of these consumers spending. They are still spending less. And I think more than anything, that is tight employment trends and employment trends.

And last one for me, just on all the hiring comments that we fit on in this call. What do you think has been a bigger driver of attracting talent to First Horizon? And then, you know, have you seen opportunities from M&A in your markets where it could create, you know, relationship managers getting dislodged or, you know, otherwise creating nutrition?

Yeah, I think clearly the drivers in our attractiveness as a platform is somehow embedded in our big bank muscle and small bank hustle. And it really is giving relationship bankers and teams the ability to understand a big bank product set and have confidence that they can deliver that big bank product set and at the same time be able to personalize those services in the way that a community bank would. So I think as much as anything, it is the ability to have the autonomy to look and feel like a very connected.

Great. Thank you very much.

Thank you.

There are no further questions at this time. I will now turn the call back to Brian Jordan, Chairman, President, and CEO, for closing remarks.

Rebecca, thank you all for joining us this morning. And thank you again to our associates and our shareholders for all that you do for the organization. Please reach out if you have any further questions. Hope everyone has a great day.

This concludes today's call. Thank you for attending. You may now disconnect.