First Horizon NYSE: FHN executives told investors they entered 2026 with “strong momentum,” highlighting a third consecutive quarter of 15% or better adjusted return on tangible common equity (ROTCE) and year-over-year gains in profitability metrics despite a lower-rate backdrop.
Chairman, President, and CEO Bryan Jordan said results were driven by “strong C&I client growth and relationship-focused client activity across our markets,” adding that the company remains focused on “staying disciplined on price and structure” while using its “diversified business model with counter-cyclical businesses” to navigate a changing operating environment.
Profitability and balance sheet performance
Chief Financial Officer Hope Dmuchowski said the quarter reflected work “to improve the profitability of the balance sheet,” noting return on average assets of 1.30%, up 19 basis points from the first quarter of last year. Dmuchowski also said net interest income rose 6% year-over-year even as rates decreased, outpacing 3% loan growth over the same period.
Earnings per share were $0.53, which Dmuchowski said was up $0.11 from the first quarter of 2025. She also cited an 8% improvement in adjusted pre-provision net revenue versus the year-ago quarter and an adjusted ROTCE of 15.1%, up more than 200 basis points year-over-year.
Net interest income was “consistent with the fourth quarter absent day count impacts,” according to Dmuchowski, while net interest margin expanded by one basis point. She said deposit pricing discipline following the Federal Reserve’s last rate cut in December 2025 helped offset variable loan yield declines during the quarter.
Deposits and funding costs
On deposits, Dmuchowski said period-end balances fell $1 billion from the prior quarter, “driven primarily by reductions in broker deposits.” The average rate paid on interest-bearing deposits declined to 2.28% from 2.53% in the fourth quarter, while the interest-bearing spot rate ended the quarter at 2.27%. She also reported a cumulative deposit beta of 69% since rates began falling in September 2024.
In response to a question about intensifying deposit competition, Dmuchowski said 2026 was “shaping up to look a lot like last year” in deposit rate seasonality. She said competitors had been shifting toward “longer guarantees and higher rates for longer” as expected rate cuts did not materialize, and she anticipated deposit costs would “slightly trend up in Q2 and Q3 if we don’t see a rate cut.”
Dmuchowski added that the company typically runs more new-to-bank promotions in the second quarter and expects some deposit cost movement tied to that activity, which she said was included in guidance.
Loan growth and pipelines: C&I strength, CRE headwinds and opportunity
Period-end loans increased $221 million from the prior quarter. Dmuchowski said the quarter included a strong start for core commercial and industrial (C&I) lending, with $624 million of growth excluding loans to mortgage companies. She contrasted that with “approximately flat growth” in the first quarter of 2025. Loans to mortgage companies declined $62 million from year-end, which she attributed to typical first-quarter seasonality.
Commercial real estate (CRE) remained “a headwind for loan balance growth,” Dmuchowski said, due to stabilized loans moving to permanent markets and non-performing loan resolutions reducing balances. However, she described CRE pipelines as “strong” and said they present opportunities to stabilize balances in the future. Consumer loans fell $198 million, which she characterized as “in line with normal fluctuations,” while the company’s consumer strategy remains focused on “relationship expansion and profitability.”
Jordan told analysts he was optimistic about lending growth for the year, saying C&I pipelines “continue to be very good” and that the “trouble in the Middle East” had not had a significant negative impact on pipelines so far. He also said CRE pipelines were “as strong as they’ve been in years,” comparing current activity to the 2021–2022 period when rates were near zero.
Chief Credit Officer Thomas Hung later added that C&I momentum in the quarter was “evenly spread” across regional banking and specialty lines of business. On CRE, he said payoff activity has started to decelerate and, with a stronger pipeline than a year ago, the company expects “some very good net growth on the CRE side later this year as well.”
On asset repricing, Jordan said the company expects roughly $1 billion or more of investment securities and a little over $5 billion of fixed-rate loans to reprice in 2026—about $6 billion to $7 billion of assets “principally at higher rates.” Asked whether this could help offset deposit pressure, Jordan said the bank has “lots of levers” to navigate deposit trends and pointed to improved yields in certain portfolios, including investor CRE, on a year-over-year basis.
Fees, expenses, and the $100 million+ PPNR opportunity
Dmuchowski said fee income fell $12 million from the prior quarter (excluding deferred compensation) but increased $13 million year-over-year. She attributed the quarter-over-quarter decline mainly to lower service charges and related fees due to day count impacts, seasonality, and movements in items such as treasury management fees, interchange income, and NSF fees, along with “quarter-over-quarter fluctuations” in equipment finance.
Fixed income revenues were slightly lower quarter-over-quarter as average daily revenue (ADR) fell to $742,000, though Dmuchowski said that level was still up 27% from a year earlier. She also said quarter-end ADRs were slightly lower as market volatility increased, and noted that April had “started off slow” for the fixed income unit. Still, executives said their full-year revenue outlook was not dependent on any single source, with Dmuchowski describing the company as “pretty balanced” between net interest income and fee-based and countercyclical businesses depending on the rate environment.
Adjusted expenses decreased $32 million from the prior quarter (excluding deferred compensation). Dmuchowski said personnel expenses (excluding deferred compensation) declined $10 million due largely to an $8 million reduction in incentives and commissions after higher accruals in the previous quarter. Outside services fell $26 million, which she attributed to reduced technology initiative spending and lower marketing expenses.
Management also reiterated a longer-term revenue-focused initiative. Dmuchowski said the company is working toward the “$100 million+ PPNR” opportunity discussed previously, emphasizing that the initiative is “all deepening relationships and about revenue,” with “nothing in there about expenses.” She said the bank’s flat expense outlook (excluding countercyclical commissions) reflects investments that should allow the firm to “scale revenue without having to scale the back office.”
In discussing examples of progress, Dmuchowski said CRE pricing has benefited from pairing a specialty CRE team with in-market bankers, leading to “additional fee income” and “increased margins” as industry appetite for CRE shrank and spreads widened. She said the model extends beyond CRE to areas such as franchise finance, asset-based lending, and equipment finance. Jordan added that tools providing greater relationship-level visibility have helped the company identify opportunities to add products and services and ensure appropriate pricing across credit, treasury services, and wealth management.
Credit trends and capital actions
On credit, Dmuchowski said net charge-offs declined $1 million to $29 million, with an 18 basis point net charge-off ratio “in line with our expectations.” The company recorded a $15 million provision for credit losses, and the allowance for credit losses (ACL) to loans ratio dipped slightly to 1.28%, which Dmuchowski said was driven by portfolio mix changes.
Hung said he remains pleased with “very consistent credit performance,” while flagging areas to watch that are closely tied to consumer discretionary spending—particularly given higher energy prices—including trucking, auto, and restaurants. He also addressed investor concerns about private credit, stating that direct exposure is “less than 1% of our loan book,” with most of that backed by tangible assets or receivables and “very little enterprise value lending exposure.”
On non-bank financial institution (NBFI) exposure, Hung said the company reported $8.6 billion of NBFI loans, with about 55% tied to mortgage warehouse lending, which he described as having very short duration (average “dwell” under 20 days). He said the remainder is relatively small compared to the overall loan book and performs broadly in line with the broader C&I portfolio. Dmuchowski added that First Horizon’s mortgage warehouse process includes holding the underlying notes as collateral, framing the risk as more operational than credit-related.
Capital levels and shareholder returns were also in focus. Dmuchowski said First Horizon ended the quarter with a common equity Tier 1 (CET1) ratio of 10.53%, reflecting buybacks and loan growth. The company repurchased about $230 million of common shares during the quarter and had approximately $765 million remaining under its board authorization. First Horizon also issued $400 million of Series H preferred stock, which Dmuchowski said lifted the Tier 1 capital ratio to 11.95%.
Management said it updated its near-term CET1 target to 10.5% during the quarter while maintaining the full-year outlook. Jordan told analysts the company has a “bias” toward operating at a lower CET1 ratio over time, but said near-term uncertainty—particularly around oil prices and inflation—supports a more cautious posture for now.
On buybacks, Jordan said the company will remain “opportunistic” and reiterated that temporary CET1 pressure from seasonal mortgage warehouse balances does not concern management, given the historically low losses in that portfolio.
About First Horizon NYSE: FHN
First Horizon Corporation, headquartered in Memphis, Tennessee, is a diversified financial services company providing an array of retail, commercial and wealth management solutions. As the largest bank-based financial services firm in Tennessee, First Horizon operates through a network of branches and digital platforms across the Southeastern United States, offering personal and business banking, mortgage origination and servicing, payment solutions and treasury management services.
Tracing its origins to the First National Bank of Memphis established in 1864, First Horizon has grown through strategic acquisitions and organic expansion to serve customers in Tennessee, Texas, North Carolina, South Carolina, Georgia and Florida.
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