First Horizon Corporation Barclays 24th Annual Global Financial Services Conference

Good morning. Thanks for staying with us. We are pleased to have First Horizon Corporation join us next, and Bryan Jordan, Chairman, President, CEO. Thanks very much for coming in, Bryan.

Thank you for having me.

Maybe just kicking it right off, we are now well into the third quarter. Really, what has changed most in your view of the operating environment since July? It has been a lot going on, macro and micro.

Yeah. Where things are tracking differently from what you expected in July.

I think, excuse me. It chokes me up to talk about it. I think first and foremost, it's sort of the volatility in prices, particularly oil and fuel, and how that has an impact on the economy. Given the significant volatility driven by the conflict in Iran, that has been interesting. Really, the significance of the backup in interest rates. We've seen interest rates back up fairly significantly over really the last 6-8 months, and most importantly, accelerating in the third quarter. So it will be interesting to see how the FOMC deals with the short-term rates this week. I think that's going to have an impact on the psychology that borrowers, both consumers and commercial customers, have going into the fourth quarter and into 2027.

How would you characterize, from speaking with commercial customers, how would you characterize the commercial pipelines, the expectation around line utilization, and funding needs today?

Commercial activity continues to be fairly good. Customers are very optimistic. I think some of it is that the footprint we serve is blessed with still very strong economic growth in migration, investment, building, and customers are still front-footed and optimistic. I think we hear more caution. I hear more caution when I talk to customers today than I heard maybe 4, 5, 6 months ago. But I'd say in general, people are still pretty optimistic, and pipelines have been reasonably strong. Utilization has drifted down a little bit, but at the end of the day, I think the economy is still ticking along at a very low but positive growth rate.

What would you say which parts of the franchise are providing the greatest subside right now?

I think just by virtue of the cycle that we've talked about a few times, commercial real estate has started to drift up or move up again. We see pretty good growth in commercial real estate lending. You'll remember that the way we fund construction lending, it funds up, and then it goes into the permanent markets and pays down. There was a little bit of a pause in there a couple of years ago. We saw commercial real estate drifting down. We said earlier in the year, pipelines have been strong, and that is sort of a spring-loaded effect on the balance sheet. That will continue to drive some growth.

I think on the other hand, it looks like our mortgage warehouse business probably peaked in the June, maybe July timeframe, as you've seen residential home sales dropping, mortgage originations due to higher rates, et cetera, slowing down a little bit. That's been a bit softer than we would have expected given the seasonality that exists in the business. In general, C&I has been pretty steady. Commercial real estate looks good, and we feel good about how the balance sheet is positioned, and that credit quality continues to look very good, and is holding up well.

You've increasingly been talking about the Five Flags framework. How does that framework help drive the company forward, and how does it influence decisions around bankers, technology investments, and resource allocation?

We have started over the last really 18 months, have worked internally on what we refer to, as you said, the Five Flags framework, and it is a reference to nautical signaling and the flags in the nautical world. It really is an effort to talk about internally where we think we play most effectively on the field. If you think about the financial services industry as a side-to-side line football game, we believe we play best between the hash marks. We set this Five Flags framework up, which is really a five or six-page summary of our strategic plan as a way for our decision-makers, and there are thousands of decision-makers when it comes to serving customers, to think about how we play best in that framework. It starts with how we measure our success.

Most importantly, it defines the customer set that we believe that we can do the best job of servicing small to midsize commercial businesses, as an example. Middle market banking, our specialty businesses, things of that nature, and is a way to really have a conversation. Over the last 18 months, we've talked to everybody in the organization. We've built the foundational support for that. As I look at the progress we've made, I think we're probably ahead of where I would've expected us to be when we started rolling this out in the spring of 2025.

When you're looking at that, how do you distinguish activity metrics from realized revenue and risk-adjusted profitability?