First Horizon faces rising deposit competition as peers offer longer guarantees and higher rates. Management expects spot rates below market average and forecasts slight deposit cost increases in Q2 and Q3 if policy rates remain unchanged. New-to-bank promotions are also anticipated to apply upward pressure on funding costs.

Fee income fell by $12 million quarter-over-quarter, largely driven by normal seasonality and fluctuations in the equipment finance business. Meanwhile, mortgage loan balances surged 35% year-over-year, and commercial and industrial pipelines remain as robust as in 2021-2022. Commercial real estate pipelines also mirror low-rate era levels, underscoring strong lending demand.

Credit performance remains stable with net charge-offs at 18 basis points. Management monitors consumer discretionary sectors like trucking and restaurants for energy-related risks, while private credit exposure stays below 1% of the loan book. The bank maintains a 10.5% CET1 target, evaluating any adjustments based on macro uncertainties such as oil prices and inflation.

First Horizon outlined a $100 million pre-provision net revenue opportunity focused on deepening client relationships and leveraging AI to scale revenue without inflating back-office costs. The flat expense outlook includes ongoing investments in technology and talent to support growth. Executives anticipate manageable NIM impact despite slight deposit cost increases and fixed asset repricing.