First Horizon (FHN) Q1 2026 Earnings Transcript

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Date

Wednesday, April 15, 2026 at 9:30 a.m. ET

Call participants

• Chairman, President, and Chief Executive Officer — D. Bryan Jordan
• Senior Executive Vice President and Chief Financial Officer — Hope Dmuchowski
• Executive Vice President and Chief Credit Officer — Thomas Hung

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Takeaways

• Adjusted ROTCE -- 15.1%, up over 200 basis points year over year, representing the third consecutive quarter above 15%.
• Return on average assets -- 1.3%, a 19 basis point increase from the first quarter a year ago.
• Net interest income (NII) -- Grew 6% year over year, outpacing the 3% loan portfolio growth in the same period.
• Earnings per share -- $0.53, a $0.11 increase over the comparable prior-year period.
• C&I portfolio growth (excluding mortgage companies) -- $624 million increase in the quarter, compared to approximately flat growth in the prior year.
• Adjusted pre-provision net revenue (PPNR) -- Improved 8% year over year.
• Net interest margin (NIM) -- Expanded by 1 basis point quarter over quarter; management noted the expectation to remain in the high 3.40% range in the near term.
• Interest-bearing deposit costs -- Average rate declined to 2.28% from 2.53% in the prior quarter; spot rate landed at 2.27%.
• Deposit balances -- Period-end balances declined by $1 billion from the prior quarter, primarily due to a reduction in brokered deposits.
• Loan balances -- Period-end total loans rose by $21 million sequentially; consumer loans declined by $198 million, and loans to mortgage companies decreased by $62 million due to seasonality.
• Fee income -- Decreased by $12 million quarter over quarter, but increased by $13 million year over year; primary decreases due to seasonality and lower service charges, treasury fees, and equipment finance volumes.
• Fixed income revenues -- Quarter-end ADR of 742,000, reflecting a 27% year-over-year increase but a slight decline from the previous quarter.
• Adjusted expenses (ex. deferred compensation) -- Declined by $32 million from the prior quarter, including an $8 million decrease in incentives and commissions and a $26 million reduction in outside services.
• Net charge-offs -- $29 million with a net charge-off ratio of 0.18%, in line with company expectations.
• Provision for credit losses -- $15 million recorded; ACL-to-loan ratio at 1.28%, down slightly due to portfolio mix shift.
• CET1 capital ratio -- 10.53% at quarter-end, reflecting share buybacks and loan growth; management updated its near-term CET1 target to 10.5%.
• Share repurchases -- $230 million of common stock repurchased during the quarter, with $765 million remaining under current authorization.
• Preferred stock issuance -- $400 million of Series H preferred issued, driving a 44 basis point increase in the Tier 1 capital ratio to 11.95%.
• Tangible book value per share -- $14.34, up 9% year over year, factoring in $766 million of buybacks and a dividend increase.
• Revenue guidance -- Management reaffirmed a full-year revenue growth range of 3%-7%.
• Expense outlook -- Management guided to flat expenses year over year, with some quarterly variability expected due to marketing and technology initiatives.
• C&I loan growth outlook -- Management described C&I pipelines as "very, very good" and cited both deepening of existing relationships and new client acquisitions.
• Loans to mortgage companies -- Grew approximately 35% year over year; management expects a seasonal increase in Q2 but anticipates overall mortgage origination activity to remain low absent a refinancing wave.
• CRE loan activity -- CRE remains a headwind for loan growth but management noted pipelines are the strongest since 2021–2022, with payoffs decelerating.
• Private credit exposure -- Less than 1% of the loan book, and substantially all of that is backed by tangible assets like real estate, inventory, equipment, or accounts receivable, per Chief Credit Officer Thomas Hung.
• PPNR opportunity -- Management reiterated a $100 million plus pre-provision net revenue opportunity, driven mostly by relationship deepening and margin enhancement, excluding expense reduction effects.
• Deposit beta -- Cumulative beta at 69% since rates began declining in September 2024.

Summary

First Horizon (NYSE:FHN) delivered sustained profitability improvements, with C&I loan and deposit pricing strategies generating notable gains in several earnings metrics. Strategic balance sheet initiatives and updated CET1 targets position the bank for disciplined capital management, while explicit guidance on flat expenses supports planned margin stability. Management emphasized the role of relationship banking, countercyclical business segments, and opportunistic capital deployment, all within a context of robust lending pipelines and affirmed revenue growth expectations despite ongoing competitive pressures and macroeconomic unpredictability.

• Management said, In fact, we still see a continuation of what we saw building in 2025, which is business owners and leaders looking to grow, invest, and build. That has been positive. In addition, I mentioned, and I think Hope did as well, that CRE pipelines have continued to build. As you know, that is a business for us where loans originate and fund up over about a three-, four-, five-year period and then pay off all at once. We have not seen pipelines this strong since the 2021–2022 time frame when rates were essentially zero, so those pipelines are building. This highlights expectations for improved commercial real estate contributions later in the year.
• Quarterly fee income performance reflected both year-over-year growth and typical seasonal decline, driven by service charges and variable equipment finance activity.
• Share repurchases remain an active capital allocation lever, with management signaling comfort in deploying capital opportunistically even as CET1 approaches the 10.5% target, particularly when mortgage warehouse lending temporarily lowers reported ratios.
• Thomas Hung noted very minimal exposure to private credit and reinforced that any direct exposure is less than 1% of the loan book, mitigating sector-specific concerns amid heightened industry scrutiny.
• Hope Dmuchowski stated, there is nothing in there about expenses. That is all deepening relationships and about revenue. This clarifies that the $100 million-plus PPNR improvement is not driven by cost-cutting assumptions but by growth in relationship profitability and revenue mix.
• Expense projections incorporate ongoing investments in technology and new hires, as well as branch consolidation, with management reaffirming that these are already included in the flat expense guidance for the year.
• Management affirmed confidence in reserve adequacy, stating the current ACL is approximately seven times our average net charge-offs over the last two years.
• Fee income guidance reflects volatility linked to the macroenvironment, with business lines such as fixed income and countercyclical revenues explicitly modeled to offset changes in net interest income depending on rate moves and market trends.

Industry glossary

• Adjusted ROTCE: Return on average tangible common equity adjusted for significant nonrecurring items; used to evaluate core profitability in relation to capital attributable to common shareholders.
• CET1: Common Equity Tier 1 capital ratio—a key regulatory measure of a bank’s core equity capital compared with its risk-weighted assets.
• CRE: Commercial real estate lending—a major segment affected by headwinds and pipeline dynamics specifically discussed by management.
• PPNR: Pre-provision net revenue; measures income before loan loss provisions, highlighting revenue generation from core operations.
• ADR: Average daily revenue; in this context, relates to fixed income trading revenues and volatility sensitivity.
• NDFI: Non-Depository Financial Institutions—industry classification that includes sectors such as mortgage warehouse lending and specialty finance, with unique risk characteristics noted by management.
• Deposit beta: The sensitivity of deposit rates paid to movements in market interest rates, indicating deposit cost discipline relative to rate shifts.

Full Conference Call Transcript

D. Bryan Jordan: Good morning, everyone. We started 2026 with strong momentum. In the first quarter, we delivered our third straight quarter of 15% or greater adjusted ROTCE, in line with our expectations, fueled by strong C&I client growth and relationship-focused client activity across our markets. Through our differentiated business model, we continue to successfully execute by providing tailored solutions to meet client needs and turning insights into profitable outcomes. We are focused on building true client relationships, staying disciplined on price and structure, and supporting our clients with the full capabilities of our franchise. Our diversified business model with countercyclical businesses positions us well as the operating environment evolves.

I will now turn the call over to Hope to walk through our first quarter results. I will provide some closing comments at the end of the call. Hope?

Hope Dmuchowski: Thank you, D. Bryan Jordan. Good morning, everyone, and thank you for joining us today. Over the last year, we have talked a lot about our efforts to improve the profitability of the balance sheet and how we laid out our strategy for the entire organization. That work is evidenced in our results this quarter, which include a return on average assets of 1.3%, up 19 basis points from the first quarter last year. Amidst rate decreases over the last year, we have grown net interest income 6% year over year, which outpaced our loan portfolio growth of 3% in that same time, demonstrating our continued focus on profitable growth.

We started 2026 with great momentum, including earnings per share of $0.53, which is an increase of $0.11 over 2025. Excluding loans to mortgage companies, our C&I portfolio grew $624 million in the quarter compared to approximately flat growth in 2025. Our performance also includes an 8% improvement in adjusted pre-provision net revenue compared to 2025. Our adjusted ROTCE of 15.1% increased over 200 basis points year over year. Starting on slide seven, we walk through our net interest income and margin performance in the first quarter, which saw NII consistent with the fourth quarter absent day count impact.

Our margin expanded by 1 basis point on continued strong performance in managing deposit costs following the Fed’s last rate cut in December 2025. While our variable loan portfolio experienced yield declines in the quarter, our deposit pricing discipline offset this impact. On slide eight, we cover details around our deposit performance in the quarter. Period-end balances decreased by $1 billion compared to the prior quarter, driven primarily by reductions in brokered deposits. The average rate paid on interest-bearing deposits decreased to 2.28%, coming down from the fourth quarter average of 2.53%. We maintain a cumulative deposit beta of 69% since rates started to fall in September 2024. Our interest-bearing spot rate ended the quarter at 2.27%.

On slide nine, we cover our quarterly loan growth. Period-end loans increased slightly by $21 million from the prior quarter. This quarter’s results include an impressive start to the year for our core C&I business, which saw $624 million in loan balance growth. This builds on momentum we saw in 2025 and is supported by continued strong pipelines in 2026. Loans to mortgage companies experienced typical seasonality in the first quarter and ended down $62 million versus year-end. This business continues to have momentum as a source of strength for our company. Commercial real estate continues to be a headwind for loan balance growth as stabilized loans move to permanent markets and non-pass loan resolutions reduce balances.

Encouragingly, our CRE pipelines are strong and present notable opportunities to stabilize CRE balances in the future. I will also note that our consumer loan portfolio declined $198 million in the quarter, which is in line with normal fluctuations. Our goal for consumer lending is to focus on relationship expansion and profitability. While competition in the market is strong, commercial loan spreads remain generally in the mid-100 to upper-200 basis points. Turning to slide 10, we detail our fee income performance for the quarter, which decreased $12 million from the prior quarter excluding deferred compensation, and is up $13 million year over year.

The largest decreases for fee income come from our service charges and fee lines, which were driven by the impact of day count and normal seasonality in other service charges like treasury management fees, interchange income, and NSF fees, and by quarter-over-quarter fluctuations in our equipment finance business. We saw a slight quarter-over-quarter decline in fixed income revenues due to the decrease in ADR to 742 thousand, though this is still a 27% increase year over year. We saw slightly lower ADRs at quarter-end as market volatility increased. On slide 11, we cover our adjusted expenses that, excluding deferred compensation, decreased $32 million from the prior quarter.

Personnel expenses, excluding deferred comp, decreased by $10 million from last quarter, driven by an $8 million decline in incentives and commissions, which followed higher incentive accruals last quarter. Outside services decreased by $26 million, which includes reduced expenses related to technology initiatives from last quarter and decreased marketing expenses in the quarter. Turning to credit on slide 12, net charge-offs decreased by $1 million to $29 million. Our net charge-off ratio of 18 basis points remains in line with our expectations. We recorded a provision for credit losses of $15 million in the quarter and our ACL-to-loans ratio declined slightly to 1.28%. This was driven by mix change in the portfolio.

On slide 13, we ended the quarter with a CET1 of 10.53%, driven by buyback activity and loan growth in the quarter. During the quarter, we bought back approximately $230 million of common shares. We have approximately $765 million in our current board authorization remaining. During the quarter, we successfully issued $400 million of Series H preferred stock, which drove the 44 basis point increase to our Tier 1 capital ratio of 11.95%. Our tangible book value per share is $14.34, which is up 9% year over year. This includes buybacks of $766 million during that period and an increase to our dividend. I will wrap up on slide 15.

I am proud of the momentum we have to start 2026. We continue to maintain our full-year outlook and updated our near-term CET1 target to 10.5% during the first quarter. For the third consecutive quarter, we achieved 15% plus adjusted ROTCE, reflecting our focused execution on our business priorities. We continue focusing on deepening our client relationships, fully delivering our products and services across our excellent footprint, and enhancing our capabilities to create value for clients and shareholders. All of this moves us towards achieving the $100 million plus PPNR we noted last year as our opportunity in the next couple of years. We made initial progress on this objective last year and continued doing so in 2026.

Our revenue expectations reflect continued capture of this profitability throughout the year. Expense discipline and underwriting consistency continue to be central to our company, and disciplined capital deployment continues moving us towards our intermediate-term CET1 targets. I will now turn it back over to D. Bryan Jordan.

D. Bryan Jordan: Thank you, Hope. On the whole, we feel very good about how we started the year. We are seeing strong client activity in our commercial pipelines as well as business owners planning for growth. Relationship banking remains our priority, focusing on primary relationships, deepening treasury and wealth management, and making sure our solutions match client needs. In the first quarter, we saw strong production essentially evenly balanced between our regional banking and specialty verticals. C&I loan commitments reflected both deepening of existing relationships and new client acquisitions. And our CRE pipelines are as strong as they have been in years.

We manage our business with three priorities: safety and soundness, profitability, and growth, which is evident in our results again this quarter. Competition is active, but our associates are protecting our base and winning with exceptional service and value. We expect that discipline, along with healthy C&I demand and the strength of our markets, to drive revenue growth as the year progresses. Our diversified model gives us a balance as the macro and geopolitical backdrop evolves. If the rate path is choppy or sentiment shifts, our countercyclical businesses are positioned to contribute. If confidence builds, our core banking engine benefits from client growth.

Credit remains in line with our expectations, and we continue to approach opportunities selectively on price and structure. Our footprint is a real advantage. The Southeast and Texas remain growth corridors. We deliver big bank capabilities with the personalized touch of a community bank across our entire footprint. That combination allows us to serve clients locally while bringing the resources of the entire bank when they need them. We remain focused on expense discipline while strategically investing in talent, technology, and tools that make our associates more effective for their clients. We will stay thoughtful on capital management and we will be opportunistic with share repurchases.

While the macroeconomic environment changes and creates new headwinds and uncertainties, I remain optimistic about our outlook for the year. Our job is to stack one good quarter on top of the next by effectively serving our clients and communities. Thank you to our associates for their hard work, and to our clients and shareholders for their continued confidence in First Horizon Corporation. Operator, with that, we can now open it up for questions.

Operator: We will now open the call for questions. Thank you. The first question today is from Jon Glenn Arfstrom of RBC Capital Markets. Your line is now open. Please go ahead.

Jon Glenn Arfstrom: Good morning. D. Bryan Jordan, you touched on some of this, but you seem a little more optimistic on the lending environment. If you could touch a little bit more on the pipelines in C&I and whether or not you have seen any impact on pipelines from the macro uncertainty?

D. Bryan Jordan: Yes, happy to, Jon Glenn Arfstrom. The pipelines in C&I continue to be very, very good. And while the short-term effects of the disturbance or the trouble in the Middle East has people asking questions, it really has not had a significant downward impact on C&I pipelines at this point. In fact, we still see a continuation of what we saw building in 2025, which is business owners and leaders looking to grow, invest, and build. That has been positive. In addition, I mentioned, and I think Hope did as well, that CRE pipelines have continued to build.

As you know, that is a business for us where loans originate and fund up over about a three-, four-, five-year period and then pay off all at once. We have not seen pipelines this strong since the 2021–2022 time frame when rates were essentially zero, so those pipelines are building. We are very optimistic about the outlook for lending growth over the course of this year. You will see in our results, and it is somewhat evident in the way that we have transformed our balance sheet over the last 18 months, we have continued to focus on profitable growth.

We have repositioned the business to align around our consolidated strategy, and with that, we are seeing an improvement in the profitability of the lending that we are doing. We are focused very much on relationship lending; for things that are not relationship-oriented, we are being very disciplined. So we look at the year and are very optimistic. I said in my closing comments that the market is still very competitive, and without a doubt, the markets are still very competitive. Very good loan transactions have a lot of competition, and our bankers are doing a very nice job of not only getting our fair share, but maybe a little bit more.

Jon Glenn Arfstrom: That is helpful. And then maybe one more on lending. I think, Hope, usually you handle this one. But on the loans to mortgage companies, despite the fact it has been maybe a choppy environment, you are still up like 35% year over year. Do you expect a typical seasonal bounce in warehouse balances? And since it is a bigger category for you, maybe you can size it for us and give us an idea of what we could see in Q2 and Q3.

Hope Dmuchowski: Thanks, Jon Glenn Arfstrom. I will say we do expect to see a seasonal increase in Q2. We are already starting to see some of that fund up at the end of March and beginning of April. Now whether it is typical, I cannot say what typical is anymore. The last two years have been some of the lowest mortgage origination years in the last 20 years. I think the way rates have been going the first part of the year, we are probably going to see low mortgage origination and a low refinance rate. But we do expect that it will trend consistently with Q1 to Q2 and Q3 of the last two years.

We have picked up market share, and that has shown and continued to show in our strong loans to mortgage company balances even at the end of Q4 and Q1. I have said before, I think one of the biggest upsides to our guidance would be if we saw a refi wave. I think it gets less likely the further that the 30-year rate goes up, but in the back half of the year that is still a possibility, although that is not built into our outlook today.

Jon Glenn Arfstrom: Okay. Fair enough. Thank you very much. Appreciate it.

Operator: Thank you. The next question comes from Michael Edward Rose of Raymond James. Your line is now open. Please go ahead.

Michael Edward Rose: Good morning. Thanks for taking my questions. Maybe I will take the other side of the balance sheet from Jon Glenn Arfstrom. On deposit competition, I noticed that the interest-bearing spot rate was 2.27% versus the full-quarter average of 2.28%. Can you talk to us about deposit competition? It seems like anecdotally over the past month, it has definitely increased. What can we expect in terms of what you have modeled for rate scenarios for the year, and what is a more optimal environment for deposit pricing at this point?

Hope Dmuchowski: Thanks for the question. I think this year is shaping up to look a lot like last year in the seasonality of deposit rates. As we expected more rate cuts, competitors brought in their terms and their rate guarantees. We are starting to see that shift to longer guarantees and higher rates for longer in competition. As you saw, our spot rate is still below our average, and we are generally there. I do think that deposit costs will slightly trend up in Q2 and Q3 if we do not see a rate cut. Additionally, I mentioned in my expense comments that marketing was down in Q1. We tend to do a lot more new-to-bank acquisitions in Q2.

It is the time that consumers start thinking about moving their checking account, savings account. They have gotten tax refunds. With that new-to-bank promotion out there, we will see a little bit of uptake, and then we will walk it back just like we have the last two years. And that is in our guidance.

Michael Edward Rose: Perfect. Really appreciate that. Then, there is a lot of focus separately on private credit and things like that. I appreciate some of the color that was in the deck. Looks like generally credit appears to be good. Maybe for Thomas Hung, anything you are seeing on the credit front? I noticed that you did not put any commentary on criticized/classified this quarter. Any updates there?

Thomas Hung: Good morning, Michael Edward Rose. Happy to address those. Overall, I remain pleased with our very consistent credit performance, headlined by the 18 basis points net charge-off rate, which is slightly below the median of the range. That said, there are always things that we want to watch carefully. For me in particular, I am still carefully watching anything that is most closely tied to consumer discretionary spending, especially with recent increases in energy prices. That certainly affects discretionary spending. Sectors like trucking, auto, and restaurants are things that I want to watch more closely.

On private credit, that is something that we are certainly monitoring as well, but I would point out we have very minimal exposure to that segment. In terms of direct exposure to private credit, it is less than 1% of our loan book, and substantially all of that is backed by tangible assets like real estate, inventory, equipment, or accounts receivable. There is very, very little enterprise value lending exposure.

Michael Edward Rose: Very helpful. Thanks for taking my questions. I will step back.

Operator: Thank you. The next question comes from Jared David Shaw of Barclays. Your line is now open. Please go ahead.

Jared David Shaw: Good morning. On the $100 million of incremental PPNR, what are any of the assumptions behind that for cost savings and/or potentially slower hiring driven by AI implementation? If there is nothing included in there, is AI a positive or a negative to that $100 million?

Hope Dmuchowski: Jared David Shaw, there is nothing in there about expenses. That is all deepening relationships and about revenue. In my prepared remarks, we talked about 6% more NII year over year with 3% balance growth in a decreasing rate environment. You can see the profitability of the existing relationships at renewal or new-to-bank additionally creating more value for us. There are no expense assumptions embedded. As far as AI, we do have a flat expense outlook excluding countercyclical commissions. We have said that is coming from the technology investments we have made over the years and continue to make so that we can scale revenue without having to scale the back office.

It is less about cost savings right now in our outlook and more about being able to scale, invest in new hires, and grow our market share without having to add all of that support infrastructure.

Jared David Shaw: Great. Thank you. And then on capital, what would cause you to lower that 10.5% target? You did some work on the capital stack this quarter. Could you feel comfortable with lower than 10.5%?

D. Bryan Jordan: I will take that. Right now, we are comfortable with the 10.5%. As I have said in the past, this is something that we talk with our board continuously about, and we will continue to do that. Given the near-term uncertainty about what is happening with respect to oil prices and what that means to inflation in the economy, it is probably not a bad idea to see a few more cards here. Overall, we are very optimistic that the economy is still in a pretty good place and that over the next several weeks to months, we will start to see some of this uncertainty settle down.

At that point, we will continue to evaluate whether we bring those ratios down. As we have said, we believe that we can operate the organization at a lower CET1 ratio than 10.5%, and over time, we will get there.

Operator: Thank you. The next question comes from Casey Haire of Autonomous. Your line is now open. Please go ahead.

Casey Haire: Yes, great. Good morning, guys. Wanted to revisit the NII outlook. Hope, you mentioned that deposit costs were going to feel some pressure going forward. Can you shed some light on loan yields and bond yields given the fixed-rate asset repricing benefits and, overall, what does that do for NIM?

Hope Dmuchowski: Thanks for the question, Casey Haire. On the deposit side, what I said was slight pickup. I do not expect that to put a ton of pressure on NIM or NII. It is really the mix that you bring new-to-bank. I see that in the low to mid-single digits, and that is manageable for us in our current outlook. As far as bond prices and the outlook there, it is really hard to predict what is going to happen, as D. Bryan Jordan mentioned earlier. We saw a lot of volatility that impacted FHN Financial at the end of March, and April has started off slow.

We have a slide in the back of our deck about where the market is for FHN Financial today, and we have it in red and green, and all but one factor is in red for them as of today. That does not mean it could not change going into the back half of the year, but we do see some risk there. We do not see any risk to our outlook of our guidance on total revenue. So NII would have come down with rate cuts, so we saw some stability. We could see FHN Financial pick up, maybe some additional refi.

We feel that we are really balanced in the back half of the year to hit that revenue guide.

D. Bryan Jordan: Casey Haire, you asked about fixed asset repricing. We have something like a little more than $1 billion of investment securities that reprice over the course of this year. And then on the fixed-rate loan side, whether it is a long-term ARM, etc., it is a little over $5 billion that reprices in 2026. In total, we have about $6 to $7 billion of assets that will reprice, principally at higher rates.

Casey Haire: Thanks. I was wondering if the asset yields could offset some of the modest deposit pressure that you are feeling to keep the NIM stable?

D. Bryan Jordan: The fixed-rate asset repricing will have some impact, clearly. But as Hope has alluded to in a couple of different ways, we are working to improve the profitability of the balance sheet, and so there is some offset there as well. We have talked in the past, for example, in our market investor CRE we have improved the yield significantly in that business on a year-over-year basis. We think we have lots of levers that allow us to continue to navigate through the deposit trends that are occurring in the market in the near term.

Over the long term, we feel very good about the balance and the balance sheet and that we can navigate changing interest rate environments with as much or more stability than most.

Casey Haire: Great. Just one more on the credit side. The ACL ratio has come down nicely. We got some mix shift and some credit resolution. I know it is difficult with the CECL modeling, but all else equal, what is a good landing spot for the ACL ratio versus that 1.28% level?

Thomas Hung: It is hard to say because things evolve on a quarter-to-quarter basis. Depending on what happens with loan growth, grade migration, and classified resolutions, all of that can change the result quarter to quarter. But we feel like we are very adequately reserved at this current time. At our current ACL, that is approximately seven times our average net charge-offs over the last two years. I believe where we are currently is a very well-reserved position relative to our very steady net charge-off performance.

Hope Dmuchowski: To add to that, I have said this in prior quarters: two or three basis points in the CECL model is not material. If you look at the last six quarters, we have gone down three one quarter, up two another. That is essentially flat in coverage with a portfolio that moves as much as ours does.

Operator: The next question comes from Bernard Von Gazzicchi of Deutsche Bank. Your line is now open. Please go ahead.

Bernard Von Gazzicchi: Hi, good morning. On the $100 million plus PPNR opportunity, you highlighted some progress made since mid-2025 on slide 15 of the deck. Could you walk us through these examples on the CRE pricing, the deeper ties between regional and specialty, and the treasury management and wealth management initiatives?

Hope Dmuchowski: Absolutely. I will start with the note that this is in no way a holistic list of all the things. As we keep getting asked for points that we can show, we put a couple on slide 15. CRE pricing is one that D. Bryan Jordan has talked a lot about as we have been speaking with investors, which is the benefit of having a specialty model and a market-centric model. We have a strong CRE business with long-tenured bankers who are focused on exactly what is happening in the CRE industry across the country by sector and subsector.

About a year and a half ago, we brought that specialty to every deal with a market banker who is doing a CRE deal. We have been able to see additional fee income come out of that partnership—origination fees, unused line fees—as well as increased margins as the appetite for CRE in our industry really shrunk over the last three years. Those spreads increased. It is really the benefit of a market-centric model with a specialty partnership.

You are bringing the best of both to the client, and in addition to the financial benefits, we continue to hear from our clients how much they appreciate having somebody who can talk to exactly what is happening in the industry alongside a banker that knows exactly what is happening in the market. It has been a great enhancement for us. We have that in a lot of places—we have highlighted CRE—but we also have it in franchise finance, ABL, equipment finance. That partnership is paying additional dividends for us and is a big part of our $100 million PPNR opportunity that we are already realizing.

D. Bryan Jordan: This is something that we have built into our expectations for 2026. It is really hard to highlight how much work goes into this. We have hundreds, thousands of bankers working on aspects of this every day. It really comes from the ability that our teams have created to see with a lot of granularity relationships and understand the interconnectedness of deposit or fee-based service and lending relationships. Those tools have helped us navigate opportunities for bringing new products and capabilities to customer relationships, making sure where we have underpriced a spread here or there that we are asking for appropriate spread—on the credit, the treasury service, the wealth, or whatever it happens to be.

It is a work in progress. It is not completed in 2025 or 2026. It will continue, but it is part of the discipline that the organization is oriented around: building deep, broad, long-term relationships and creating win-win solutions for our customers that essentially create partnerships that are win-win for both sides.

Bernard Von Gazzicchi: Great. Thanks for that color. Just a follow-up on loan growth. You reiterated expectations for mid-single-digit growth, but are contributors changing? Maybe stronger C&I than originally expected? Maybe a bit less CRE? You noted the headwinds, but pipelines remain strong. Do you think CRE will still be a positive contributor for loan growth this year?

Thomas Hung: I am happy to tackle that one. I will start on the C&I side where you saw very strong continued momentum in Q1. What I am most pleased about in those results is how evenly spread that is between both our regional bank regions and our specialty lines of business. We saw momentum on both sides. On the CRE side, we have talked about the headwinds in terms of project starts over the last several years going into the perm market.

We have started to really see the pace of our payoffs decelerate, and with a very, very strong pipeline, especially now compared to a year ago, we should start to see some very good net growth on the CRE side later this year as well. Overall, there is very good momentum up and down the balance sheet.

Operator: The next question comes from Andrew Steven Leischner of KBW, on for Christopher McGratty. Your line is now open. Please go ahead.

Andrew Steven Leischner: Thanks. On the 3% to 7% revenue guide, can you walk through the scenarios or assumptions that would get us to the higher end or lower end of that range?

Hope Dmuchowski: Thanks. As I said, we are pretty balanced. The question is not how do we get to the higher or lower end of the range; it is whether it comes from fee income and countercyclical businesses or from NII and higher loan growth. One item not built into our outlook is a pickup in mortgage refi. As I said earlier, I do not expect it in the near term as 30-year rates keep moving up and there is uncertainty for the consumer, but that is the one item not built here. We are starting the year with 3% loan growth year over year and roughly 6.5% revenue growth year over year, so we have a strong start to that momentum.

D. Bryan Jordan: I think the other driver is likely to be an acceleration of economic growth. The economy today is growing pretty steadily, probably in that 2.5% to 3% area. Given what we know today, there is probably greater downside risk than upside opportunity. If that gets resolved and the pace of growth in the economy picks up, loan growth will naturally pick up, and we could get to the higher end of that range. So it will be a combination of how interest rates play out and, more importantly, what that means in terms of economic growth overall.

Andrew Steven Leischner: Great. Thank you. On the expense outlook, annualizing this quarter gets you a little lower than flat expenses. Outside of the lower marketing in the quarter, is this a good run rate from here, or were there some other items that were lower than usual?

Hope Dmuchowski: There will be some movement throughout the quarters as it relates to marketing spend. We always have an issue with the way we do our income statement where marketing spend hits first and then the cash offer hits in other, so you will see some volatility there. Technology projects can also vary quarter to quarter. At the end of the year, we had a lot of projects complete, and they went from the expense part of their project to capitalization, which is more stable. But to your point, it is a good glide path on average. We do expect to be flat year over year with some variability quarter to quarter.

D. Bryan Jordan: One thing I am excited about on the expense side is we have had very good success in hiring new revenue producers. If you look at the stream of press releases over the last several weeks, you will see we are having very good success recruiting bankers across our franchise. The point is that not only are we bringing good people into the organization, we are controlling cost while still continuing to invest in growth and driving the business forward. That combination is very positive for the long term.

Operator: Thank you. The next question comes from Ben Gurlinger of Citi. Your line is now open. Please go ahead.

Ben Gurlinger: Hi. Good morning.

Hope Dmuchowski: Morning.

Ben Gurlinger: You talked through CET1 and the appetite to potentially go lower, but as of now it is 10.5%. With the outlook for loan pipelines sounding robust, and considering seasonality where your balance sheet balloons a little bit with mortgage, how should we think about buybacks for the next couple of quarters given you are fairly close to 10.5%? Is it more opportunistic, or does capital need to go to growth?

D. Bryan Jordan: We will be opportunistic as we always are. We have said that to the extent mortgage warehouse lending pushes down on a temporary basis our CET1 ratio, we are not uncomfortable with that. Our mortgage warehouse lending business has low credit losses historically. We see it as more of an operational risk, and our team does a very good job of controlling risk in that business. To the extent that pushed us down a little bit here and there, that does not cause us concern in the near term.

Against that backdrop, we will continue to be opportunistic to take the excess capital that we believe we have and that we generate and use that in share repurchases or repatriation of capital to our shareholders.

Hope Dmuchowski: And just to add on to D. Bryan Jordan’s comments, as noted in our presentation, over the last 10 years our mortgage warehouse business has averaged about 1 basis point annual net charge-offs.

Ben Gurlinger: That is great. I was not worried about the credit, more so the usage of capital over the next couple of quarters, but that is a great answer. Appreciate the time. That is all I had.

Operator: The next question comes from Timur Braziler of UBS. Your line is now open. Please go ahead.

Timur Braziler: Hi, good morning.

D. Bryan Jordan: Morning.

Timur Braziler: Looking at the expense guide relative to revenue, the revenue guide is still pretty wide versus a pretty tight expectation on expenses. How agnostic is the expense base toward the different ranges of the revenue guide, and what is embedded on the baseline for the flat year-on-year expense?

Hope Dmuchowski: It is agnostic to the revenue guide with the exception of the countercyclical businesses. If we hit the higher end of the range and more of it comes year over year from the countercyclical businesses, you can assume a 60% commission on that delta. What is built in is flat countercyclical year over year to that flat guidance. New hires were built into our expense guide. Branches were built into our guide. The consolidation into a new hub in Charlotte is in our expense guide. All of the investments are already in there, and we believe expenses are flat. On the range of the revenue guide, every CFO will tell you it is easier to control expenses than revenue.

The range for the guide is really the uncertainty of the economy right now. As D. Bryan Jordan mentioned earlier, could we see the economy start to rebound with consumer confidence, more spending, and loan growth? That is what is driving our larger range—not our internal understanding of where we think our businesses are going. It is just really hard right now to figure out what type of economy we are going to be lending into and what is going to happen in the wealth business over the next three quarters.

Timur Braziler: Great. Thanks. As a follow-up, there is some increased conjecture this week surrounding M&A given all the volatility in the market. Can you give a reminder on both sides of M&A—your updated stance?

D. Bryan Jordan: Nothing has changed with respect to M&A. Our number one priority is continuing to focus on the profitability of our business and driving the benefits that we can realize by investing in our core franchise. We have said that opportunistically, if we have the opportunity to do fill-ins in our existing footprint, we will evaluate them. As always, we will take an approach that we are going to maximize return on capital for our shareholders, and we are going to evaluate any opportunity that presents itself, but nothing has changed in our stance around M&A.

Operator: Thank you. The next question comes from Anthony Albert Elian of JPMorgan. Your line is now open. Please go ahead.

Anthony Albert Elian: Hi, everyone. Hope, to put a finer point on NIM, last quarter you pointed to a range in the mid-3.40s, but you have clearly outperformed that for a couple of quarters now. Given the earlier comments on loan yields and deposit costs picking up slightly, how are you thinking about NIM here? Thank you.

Hope Dmuchowski: The mid-3.40s comment was about stabilization when we saw a flat rate environment and more consistent spreads. Near term, we do expect to be in the high 3.40s, within a few basis points of where we are right now.

Anthony Albert Elian: Thank you. And then on capital, given the recent proposals, have you quantified any of the estimated impact or benefits you would see from the recent proposals?

Hope Dmuchowski: Thanks, Anthony Albert Elian. We have calculated, and every consultant out there has sent us a deck and wants to meet with us on how to optimize it. It is clear that it is positive for everybody. It will definitely be a pickup for us, especially in some of the proposals for mortgage and some of the proposals for our fixed income business inventory. But we have not put a fine pen to say exactly what it is. There are still a lot of uncertainties out there in the model, as well as how we might react to some of those—how you change term of a loan, for example, gives you different capital treatment. But net positive for sure.

Operator: Thank you. The next question comes from Christopher William Marinac of Brean Capital Research. Your line is now open. Please go ahead.

Christopher William Marinac: Thanks. Good morning. Thomas Hung, I wanted to ask about the reserve as it pertains to both mortgage warehouse and any other NDFI. Should we see that grow over time, or how do you think about that?

Thomas Hung: Mortgage warehouse and NDFI are all part of our ACL for the C&I business. I do not have it broken out in front of me in terms of specific lines of business. Overall, as you saw, we did add a little bit to our C&I reserves this quarter. That is more a reflection of some overall economic uncertainty around the conflict in the Middle East as well as how that is impacting discretionary consumer spend. Overall, I would say, as I mentioned earlier, we are well reserved from both a C&I basis as well as an overall ACL basis. Specific to NDFI, it may be helpful to break down the components a bit.

From the call report, you will see we have a total of $8.6 billion of total NDFI. However, about 55% is the mortgage warehouse business that we have talked about, with very low charge-offs and very short tenure with an average dwell of under 20 days. Of the remaining $3.9 billion of non-mortgage-warehouse NDFI, about a third of that is categories that are NDFI in the call report but are really more akin to traditional C&I structuring and risk. Therefore, what is left—the remaining two-thirds—is really only about 4% of our overall loan book.

The performance in that business has some pockets with elevated C&Cs we have to watch, as you would expect, but the overall performance of that remaining book is actually not too dissimilar from our overall C&I book. NPLs are slightly lower relative to our overall book; net charge-offs are slightly higher, but all very close to being in line. From my position, I do not think there is any specific reason to have outsized results tied to our NDFI book.

Hope Dmuchowski: On your comment about mortgage warehouse and NDFI, I want to point out that for us, the way we do mortgage warehouse, we do not really consider it NDFI, although the call report does. We hold the underlying collateral. We take each note at closing. We have discussed that we had 1 basis point of charge-offs in the last 10-plus years on average annually. That comes down to operational risk. Should the company that we are lending to have an issue and can no longer be in business, we have the notes. We have worked through that and then pledge them and sell them or put them on our balance sheet. For us, NDFI is an operational risk.

On the fraud piece of it, we have seen collateral double pledged elsewhere. We do not have that situation. We actually maintain the notes until they are sold. That is something that is different than how some others do mortgage warehouse in the industry.

Thomas Hung: And just to make sure we are clear, the 1 basis point is the average annual charge-offs in that business.

Christopher William Marinac: Great. Thanks, Hope, and thank you, Thomas Hung, for that additional detail—that is very helpful. Just to clarify, you mentioned there are some charge-offs in the other NDFI, that smaller component. Are these normal charge-offs, or have these changed at all in recent quarters?

Thomas Hung: I would say it is relatively normal. I mentioned it is slightly higher than our overall net charge-off rate, but it is not anything alarming.

Operator: The next question comes from David Chiaverini of Jefferies. Your line is now open. Please go ahead.

Max Astaris: Hi. Good morning. Max Astaris on for David Chiaverini. A quick question around capital markets. Given recent yield curve volatility, I wanted your thoughts specifically around fixed income. How sensitive is the fixed income trading desk to the current shifting expectations around Fed easing?

D. Bryan Jordan: The business has had its ups and downs, and volatility in interest rates over the longer term is good for the business. In the short term, it can be difficult. The uncertainty and the way rates have been moving have created some volatility from week to week. On the whole, we are pretty encouraged by the positioning of the business. Our ADR for the quarter was down slightly from the fourth quarter but up significantly from a year ago. All in all, we look at the business as a very strong contributor and our outlook is optimistic for the foreseeable future, recognizing that there are going to be potential events that can push rates up or bring rates down rapidly.

We think we are well positioned and in a good place to benefit from that volatility over time.

Max Astaris: Great. Thank you.

Operator: The next question comes from John Pancari of Evercore. Your line is now open. Please go ahead.

Gerard Sweeney: Hi. This is Gerard Sweeney on for John Pancari. You highlighted that this is the third straight quarter of 15% plus ROTCE. How should we think about ROTCE trajectory going forward? Do you see a path closer to high teens, or is maintaining the current level more your priority? If you were to get to a high teens level, what are the few steps that will get you there?

D. Bryan Jordan: We are making progress, and Hope pointed out our ROTCE is up a couple hundred basis points from a year ago. We set 15% plus as a target; we did not set it as a destination. We will continue to build ROTCE. To the extent that you combine a few things—the improved profitability that we are driving with our existing balance sheet; the ability to leverage our balance sheet either through capital return or growth in the balance sheet and the combination thereof; and the regulatory guidance of bringing CET1 ratios down—we think we have the ability to push ROTCE higher over time. I am not going to try to put a fine point on it today.

We are confident with the progress that we are making. We are focused on driving those returns higher, and I feel good about the work the organization is achieving every single day in that regard.

Gerard Sweeney: Great. Thank you. And maybe going back to the prior question on the fixed income business, is there an ADR range embedded in your revenue guidance? I know there is a countercyclical side of it, but just how to size up from a modeling standpoint the rest of the year?

Hope Dmuchowski: There are multiple ranges embedded in our guidance because, as I have said before, we trade NII for fee income or mortgage warehouse balances in a decreasing rate environment. We do not have a single outlook to hit our guidance regardless of whether rates increase, stay flat, or decrease. You will just see the revenue come from different places.

Operator: We have no further questions at this time. I would like to hand it back to D. Bryan Jordan for closing remarks.

D. Bryan Jordan: Thank you, Operator. Thank you all for joining our call this morning. Please reach out if you have any further questions. We appreciate your interest. Hope everyone has a wonderful day.

Operator: This concludes today’s call. Thank you all for joining. You may now disconnect your line.

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