First Horizon Corp (FHN): 3Q26: Comments on NIM, Buybacks, & M&A Enough to Offset Less Encouraging Developments in 3Q; Neutral

While 3Q26 core EPS of $0.53 was in line with consensus and our estimate, there were a handful of developments during the quarter that we viewed as less encouraging than the in-line core EPS would suggest. The strategic sale of ~$4.5B of low-yielding consumer mortgages appears to have a decent 2027e financial impact (4% EPS accretion, ~150 bps ROTCE improvement, loan-to-deposit ratio improving ~700 bps to ~88%), but it also took a bite out of 3Q26 capital metrics: CET1 fell ~45 bps q/q to 10.3%, TCE declined ~40 bps q/q to 7.93%, and TBV dropped 5% q/q. Combined with very minimal buybacks during the quarter ($4mm versus $100-300mm+ in prior quarters, despite $661mm remaining authorized) and a 2026 revenue outlook now pointing to the low end of the prior +3-7% range with expenses unchanged, we would have expected FHN shares to underperform. However, management's encouraging comments — buybacks expected to resume in 4Q26 (with the stock "on sale"), NIM expected to improve into the 3.50s