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FH

FIRST HORIZON CORP (FHN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid profitability: diluted EPS $0.45, up $0.04 QoQ and $0.11 YoY; adjusted EPS $0.45, up $0.03 QoQ . Management cited strong NII from loan growth and disciplined expenses amid deposit competition .
  • EPS beat consensus; revenue was essentially in line: EPS $0.45 vs $0.416 consensus; total revenue $830mm vs $834mm consensus (modest miss). Drivers included mortgage warehouse strength (LMC) and fee headwinds in fixed income (ADR down 6%) . Consensus values from S&P Global.*
  • FY25 outlook refined: adjusted expense guidance reduced to flat–up 2% (from up 2%–4%), while revenue guide remained flat–up 4%; CET1 target 10.5%–11.0% unchanged .
  • Capital actions: CET1 11.0% (+7bps QoQ) with portfolio growth; announced full redemption of Series B preferred effective Aug 1 and declared $0.15 common dividend, reinforcing capital flexibility .

What Went Well and What Went Wrong

What Went Well

  • NII rose $10mm QoQ to $645mm (FTE) on loan portfolio growth; loan yields +3bps to 5.92% driven by mortgage warehouse balances .
  • Credit stable: provision $30mm (down $10mm QoQ), NPL ratio down 4bps QoQ to 0.94%, CET1 up to 11.0% (+7bps QoQ) .
  • Management tone constructive: “We are pleased with our strong performance… focus remains on safety and soundness, profitability and growth.” — Bryan Jordan (CEO) ; “Adjusted EPS of $0.45… NII growth benefited from seasonal loan growth” — Hope Dmuchowski (CFO) .

What Went Wrong

  • Net charge-offs increased to $34mm (22bps), up $5mm QoQ, with higher C&I and CRE contributions; fixed income ADR down 6% pressuring fee income .
  • Noninterest expense rose $3mm QoQ (adjusted +$14mm), including a $7mm increase in outside services for seasonal advertising; deposit costs rose 4bps QoQ to 2.76% as brokered CDs increased .
  • Revenue essentially matched consensus, but fee mix showed softness in fixed income amid curve/volatility headwinds (management flagged ADR weekly volatility) .

Financial Results

Income Statement and EPS

MetricQ2 2024Q1 2025Q2 2025
Total Revenue ($mm)$815 $812 $830
Net Interest Income ($mm, GAAP)$629 $631 $641
Noninterest Income ($mm)$186 $181 $189
Provision for Credit Losses ($mm)$55 $40 $30
Net Income Available to Common ($mm)$184 $213 $233
Diluted EPS ($)$0.34 $0.41 $0.45
Adjusted Diluted EPS ($)$0.36 $0.42 $0.45

Margins and Efficiency

MetricQ2 2024Q1 2025Q2 2025
Net Interest Margin (FTE) (%)3.38% 3.42% 3.40%
Efficiency Ratio (%)61.44% 60.06% 59.20%
Adjusted Efficiency Ratio (%)60.47% 59.09% 59.47%
ROTCE (%)11.29% 12.81% 13.85%
ROA (%)1.00% 1.11% 1.20%

Segment Results (Q2 2025 vs Q1 2025)

SegmentTotal Revenue ($mm) Q1 2025Total Revenue ($mm) Q2 2025Net Income ($mm) Q1 2025Net Income ($mm) Q2 2025
Commercial, Consumer & Wealth$734 $747 $269 $289
Wholesale$109 $111 $22 $22
Corporate$(30) $(28) $(69) $(67)

KPIs and Balance Sheet

MetricQ2 2024Q1 2025Q2 2025
CET1 Ratio (%)11.0% 10.9% 11.0%
Loans (Period-End, $bn)$62.8 $62.2 $63.3
Deposits (Period-End, $bn)$64.8 $64.2 $65.6
Loan-to-Deposit Ratio (Period-End, %)96.89% 96.90% 96.47%
ACL / Loans (%)1.41% 1.45% 1.42%
NPL Ratio (%)0.91% 0.98% 0.94%
Net Charge-off Ratio (%)0.22% 0.19% 0.22%
Interest-bearing Deposit Cost (%)3.30% 2.72% 2.76%

Estimates vs Actuals

MetricQ1 2025 ConsensusQ1 2025 ActualQ2 2025 ConsensusQ2 2025 Actual
EPS ($)0.3990.42 0.4160.45
Revenue ($mm)821.9812 834.1830
EPS – # of Estimates13—15—
Revenue – # of Estimates8—8—

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Revenue Growth (ex. deferred comp)FY25Flat–Up 4% Flat–Up 4% Maintained
Adjusted Expense Growth (ex. deferred comp)FY25Up 2%–4% Flat–Up 2% Lowered
Net Charge-offsFY250.15%–0.25% 0.15%–0.25% Maintained
Effective Tax RateFY2521%–23% 21%–23% Maintained
CET1 Ratio TargetNear-term10.5%–11.0% 10.5%–11.0% Maintained
Common DividendOngoing$0.15/sh (prior quarters) $0.15/sh declared payable Oct 1, 2025 Maintained
Preferred Capital Actions2025N/ARedeem all Series B preferred & depositary shares on Aug 1, 2025 Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24/Q1’25)Current Period (Q2’25)Trend
Deposit competition & pricingAchieved 38bps QoQ reduction in interest-bearing costs; strong retention (95%) of promo deposits Competition picked up; rate-paid +4bps QoQ to 2.76%; retention ~95% of repriced $23bn; brokered CDs up $1.6bn to fund LMC Increasing competitive pressure; disciplined repricing continues
Mortgage warehouse (LMC)Seasonal lows in Q1 but multi-year growth, added clients; natural hedge to rate cuts LMC up $689mm QoQ; management expects Q3 levels at or above Q2, contingent on mortgage volumes Positive momentum; seasonal tailwinds
Fixed income ADRADR down 11% in Q1, offset by non-ADR revenues ADR down 6% QoQ to $550k; weekly volatility noted (range $450k–$700k) Volatile; near-term headwinds from curve
Tariffs/macro outlookHeightened uncertainty; watch consumer-facing sectors; downside scenario weights increased (Moody’s) CEO sees optimism building as tariff clarity improves; monitoring multifamily supply absorption Improving confidence but cautious
Capital & buybacks$360mm repurchases in Q1; aim to lower CET1 over time CET1 11.0%; opportunistic buybacks depend on loan growth; Series B preferred redemption announced Steady capital; flexibility maintained
Technology investmentsNew general ledger; treasury management conversion; cloud/mainframe work in-flight GL completed; marketing/tech investments hitting run-rate; expense seasonality in advertising Execution progressing

Management Commentary

  • “Our balance sheet growth, credit, and profitability were all strong in the quarter… fundamentals in our southern footprint will remain good for the back half of 2025.” — Bryan Jordan (CEO) .
  • “NII growth benefited from seasonal loan growth, particularly mortgage warehouse… margin compression of 2bps was mostly driven by a 4bps increase to interest-bearing deposit costs and higher broker deposits.” — Hope Dmuchowski (CFO) .
  • “We retained approximately 95% of the $23 billion in balances associated with clients who had a repricing event in the quarter, while continuing to reduce our costs on those deposits.” — Hope Dmuchowski (CFO) .
  • “We see over $100 million in PPNR opportunity in our existing book through deepening client relationships and treasury management.” — Hope Dmuchowski (CFO) .

Q&A Highlights

  • Deposit pricing: management expects a “zigzag” path tied to the timing of Fed cuts and competitive promos; retention strategies remain effective .
  • Mortgage warehouse outlook: balances likely “at this level or higher” in Q3, contingent on industry volumes; share gains with existing customers noted .
  • Expense sensitivity: even at higher revenue ranges, management does not expect adjusted expenses to exceed +2% for FY25; advertising spend seasonal in Q3 .
  • Credit watch: more attention on consumer-facing C&I (trucking, auto finance); multifamily pressure from new supply viewed as transitory .
  • Capital: comfortable with repurchases but prioritizing organic loan growth; expect capital levels can trend lower over time depending on environment .

Estimates Context

  • EPS beat Q2: $0.45 vs $0.416 consensus; EPS beat Q1: $0.42 vs $0.399 consensus.*
  • Revenue essentially in line Q2: $830mm vs $834mm consensus; mild miss Q1: $812mm vs $822mm consensus.*
  • Street likely to mark up NII expectations near term given loan growth/LMC mix, while trimming fee forecasts for fixed income until curve conditions improve .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • NII momentum and loan growth (especially LMC and C&I) offset deposit cost pressure; modest NIM compression appears manageable .
  • Credit quality resilient with NPLs and ACL ratios improving QoQ; NCOs remain within guided range, reducing tail-risk .
  • Operating leverage intact: adjusted efficiency ~59.5%; expense guidance lowered (flat–up 2%) suggests further earnings durability .
  • Capital deployment balanced: CET1 at 11.0% with flexibility for buybacks and preferred redemption; dividend maintained .
  • Near-term trading implication: EPS beats with expense discipline can support multiple expansion; watch deposit competition and ADR volatility as stock narrative drivers .
  • Medium-term thesis: $100mm+ PPNR opportunity via treasury management and relationship depth, plus potential capital normalization to 10%–10.5% CET1 bolster ROTCE path to 15%+ .
  • Monitor macro catalysts: tariffs clarity, mortgage volumes, Fed rate path—each shifts revenue mix between NII and counter-cyclical businesses (fixed income/mortgage) .
* S&P Global disclaimer: Consensus/estimates values in the “Estimates vs Actuals” table are retrieved from S&P Global and may reflect differing revenue definitions (e.g., GAAP vs adjusted). Actuals are sourced from company filings above.