- Increased Shareholder Returns $900M in stock repurchases and $300M in dividends returned in 2025, with a $1B buyback program remaining.
- Strong Loan Growth $1.1 billion (2% QoQ) period-end loan growth in Q4 2025, driven by mortgage warehouse, C&I, and CRE sectors.
- Profitability Targets Achieved 15% return on tangible common equity (ROTCE) in 2025, with guidance for sustained 15%+ ROTCE and mid-single-digit PPNR growth in 2026.
- Net Interest Margin Expansion Q4 NIM of 3.512% with an outlook of mid-340s in 2026, supported by pricing trends and balance sheet growth.
- Capital Management Maintains CET1 ratio target of 10.75%–10.5%, with $30M reserve release despite 11% sequential increase in criticized assets.
Revenue Growth and Expense Management
The company expects 2026 to bring year-over-year PPNR growth, with mid-single-digit balance sheet growth and positive operating leverage. Total revenue expectations range from 3% to 7% growth year over year. Expenses are expected to remain flat, with a focus on investments in technology, personnel additions, and new branches. The company's revenue guidance includes a growth trajectory for net interest income (NII) and fee income, driven by initiatives such as treasury management and consumer franchise growth.
Loan Growth and Credit Quality
Loan growth is expected to be driven by mortgage warehouse, commercial and industrial (C&I), and commercial real estate (CRE) segments. The company has a robust risk management framework in place for its non-mortgage warehouse non-bank financial institution (NBFI) book. The net charge-off expectation is 15 to 25 basis points, and the company believes it has done the "building phase" and is now at the right reserve level. The CRE business is expected to inflect this year, driven by a pick-up in construction starts and rate cuts.
Capital Management and Valuation
The company's near-term CET1 target remains at 10.75%, and it has a $1 billion buyback authorization. The current P/TBV ratio is 1.36, and the dividend yield is 2.45%. With a ROTCE of 15%, the company is well-positioned to deliver sustainable returns. The current valuation multiples imply that the market has priced in a certain level of growth and profitability. With a P/E ratio of 12.22 and an EV/EBITDA of 11.7, the company's valuation is reasonable compared to its peers.
Outlook and Expectations
The company expects continued momentum in mortgage warehouse, with a possible upside. Fee income and refinance activity may also pick up. Expenses are expected to follow normal seasonality. Analysts estimate next year's revenue growth at 4.1%, which is within the company's guidance range. Overall, First Horizon's strong financial performance and growth prospects make it an attractive investment opportunity in the banking sector.