8-K: First Horizon Caps Strong 2025 with Robust Q4 Earnings

First Horizon Corporation reported a significant 29% increase in full-year 2025 net income available to common shareholders, reaching $956 million or $1.87 EPS, driven by revenue strength and credit performance.

Summary

• Full Year 2025 Net Income Available to Common Shareholders (NIAC) increased 29% to $956 million, compared to $738 million in 2024.
• Full Year 2025 Earnings Per Share (EPS) increased 38% to $1.87, up from $1.36 in 2024.
• Adjusted Full Year 2025 NIAC increased 15% to $968 million, and Adjusted EPS increased 22% to $1.89.
• Fourth Quarter 2025 NIAC was $257 million, or $0.52 EPS, representing a 1% increase in NIAC and 4% increase in EPS compared to Third Quarter 2025.
• Adjusted Fourth Quarter 2025 NIAC was $259 million, or $0.52 EPS, a 1% decrease in NIAC but a 2% increase in EPS compared to Third Quarter 2025.
• Full Year 2025 net interest income (FTE) increased $110 million, or 4%, to $2.6 billion.
• Net interest margin improved to 3.47% for the full year, up 12 basis points from 2024.
• Provision for credit losses expense for Full Year 2025 decreased to $65 million from $150 million in 2024.
• The Common Equity Tier 1 (CET1) ratio was 10.64% at year-end 2025, down from 11.20% at the end of 2024.
• Returned $894 million of capital to shareholders in 2025 through share repurchases at an average price of $21.16 per share.
• Period-end loans and leases were $64.2 billion, increasing $1.6 billion (3%) from year-end 2024.
• Period-end deposits were $67.5 billion, increasing $1.9 billion (3%) from year-end 2024.

Sentiment

Score: 8

Explanation: The filing reports strong financial performance for both the fourth quarter and the full year 2025, with significant increases in net income and EPS, improved net interest margin, and robust credit quality. Management expresses confidence in future growth and strategic execution, supported by a clear outlook and capital return strategy.

Positives

• Full Year 2025 Net Income Available to Common Shareholders (NIAC) increased significantly by 29% to $956 million.
• Full Year 2025 Earnings Per Share (EPS) saw a substantial 38% increase to $1.87.
• Net interest income (FTE) for Full Year 2025 grew by $110 million (4%) to $2.6 billion.
• Net interest margin improved by 12 basis points year-over-year to 3.47% for Full Year 2025.
• Noninterest income increased by $118 million (17%) for Full Year 2025, driven by prior year securities portfolio restructuring impacts and fixed income revenue.
• Provision for credit losses expense decreased significantly by 57% to $65 million in 2025 from $150 million in 2024.
• The Allowance for Credit Losses (ACL) to loans ratio decreased to 1.31% from 1.43% in the prior year, reflecting criticized and classified loan resolutions.
• The Nonperforming Loan (NPL) ratio decreased to 0.94% in Q4 2025 from 0.96% in Q4 2024.
• Returned $894 million of capital to shareholders in 2025 through share repurchases.
• Period-end loans and leases increased by $1.6 billion (3%) and period-end deposits increased by $1.9 billion (3%) compared to year-end 2024.
• Deposit costs decreased 42 basis points year-over-year, reflecting strong repricing performance.
• Adjusted Return on Average Tangible Common Equity (ROTCE) reached 15.0% in Q4 2025, up 169 basis points from Q4 2024.

Negatives

• The Common Equity Tier 1 (CET1) ratio decreased to 10.64% at year-end 2025 from 11.20% at year-end 2024.
• The total capital ratio decreased to 13.4% from 14.2% at year-end 2024.
• The Tier 1 leverage ratio decreased to 10.2% from 10.6% at year-end 2024.
• Adjusted Fourth Quarter 2025 NIAC decreased 1% to $259 million compared to Third Quarter 2025.
• Fourth Quarter 2025 net interest margin decreased 4 basis points to 3.51% from Third Quarter 2025.
• Fourth Quarter 2025 noninterest income decreased $3 million to $212 million from Third Quarter 2025.
• Full Year 2025 adjusted noninterest expense increased $63 million, driven by a $33 million increase in salaries and benefits and increases in occupancy & equipment and outside services.
• Average deposits were flat compared to 2024.
• Net charge-offs increased to $30 million or 19 basis points in Q4 2025, up from $26 million or 17 basis points in Q3 2025.

Risks

• Forward-looking statements are inherently subject to significant business, operational, economic, and competitive uncertainties and contingencies, many of which are beyond the company's control.
• Actual future results and outcomes could differ materially from those contemplated or implied by forward-looking statements due to various factors, including those mentioned in the company's 8-K, 10-K, and 10-Q filings.
• Capital ratios for the most recent quarter are estimates and are subject to change.
• Variability in deferred compensation may impact growth rates in noninterest income and noninterest expense, although it is expected to have an offsetting and immaterial impact on pretax income.
• Interest rate fluctuations could impact net interest income and net interest margin, as over half of the loan portfolio is indexed to short-term rates.
• Changes in loan balances and unfunded commitments can affect capital ratios.

Future Outlook

For 2026, First Horizon expects adjusted revenue (excluding deferred compensation) to grow by 3-7% and adjusted expenses (excluding deferred compensation) to remain flat (~0%), excluding bonuses/commissions from incremental counter-cyclical revenue. Net charge-offs are projected to be between 0.15% and 0.25%, with an effective tax rate of 21-23%. The near-term target for the CET1 ratio remains 10.75%, with an expected range of 10.5% to 10.75%. The company aims for mid-single digit balance sheet growth and positive operating leverage, focusing on deepening client relationships, maximizing revenue opportunities, and enhancing products and capabilities. The outlook is based on assumptions including 25 basis point Fed rate cuts in April 2026 and July 2026.

Management Comments

• "We are pleased to report a strong fourth quarter performance to close out an outstanding 2025 for First Horizon. Consistent execution of our strategy across the organization has driven tremendous earnings growth throughout the year, resulting in an earnings per share of $0.52 in the fourth quarter."
• "As we enter 2026, we remain focused on deepening client relationships, maximizing revenue opportunities, and enhancing our products and capabilities. I am grateful for the dedication of our associates and their commitment to success for our clients, shareholders, and each other."
• "Our disciplined risk management, resilient balance sheet, and operations in robust markets and businesses position us to deliver sustainable growth by building on the positive momentum generated in 2025."

Industry Context

The banking sector is currently navigating a dynamic interest rate environment, with First Horizon's 2026 outlook anticipating Fed rate cuts. The company's asset-sensitive profile, with 57% variable rate loans, positions it to adapt to rate changes, while strong deposit repricing performance has helped manage costs. First Horizon's focus on deepening client relationships and diversifying revenue streams aligns with broader industry efforts to enhance customer loyalty and generate stable income amidst competitive pressures. The robust credit performance, evidenced by decreasing ACL to loans and NPL ratios, suggests effective risk management, which is crucial in the current economic climate. The strategic deployment of capital through share repurchases is a common practice among well-capitalized banks to enhance shareholder value.

Comparison to Industry Standards

• The net charge-off ratio of 0.19% in Q4 2025 for First Horizon is significantly lower than the average NCO% of the BKX Index (0.58%), indicating superior credit quality and risk management compared to a broad index of banking peers.
• The Adjusted Return on Average Tangible Common Equity (ROTCE) of 15.0% in Q4 2025 is a strong performance metric, demonstrating efficient use of tangible capital and competitive returns within the banking industry.
• The CET1 ratio of 10.64% at year-end 2025, while slightly down from 2024, remains within healthy regulatory limits and aligns with the company's near-term target of 10.75%, suggesting a solid capital position relative to industry requirements.

Stakeholder Impact

• Shareholders benefited from significant earnings growth, $894 million in share repurchases, and $0.60 per share in dividends, indicating enhanced shareholder value.
• Employees are acknowledged by management for their dedication, and talent additions contributed to increased salaries and benefits.
• Customers are a focus for the company, with ongoing efforts to deepen relationships and enhance product offerings.

Next Steps

• Deepening client relationships.
• Maximizing revenue opportunities.
• Enhancing products and capabilities.
• Delivering sustainable growth by building on the positive momentum generated in 2025.
• Opportunistically deploying excess capital and lowering the CET1 ratio to the 10%-10.5% range.
• Maintaining a prudent credit culture that minimizes losses and maximizes long-term returns.

Key Dates

Recommendation

First Horizon delivered exceptional full-year 2025 results, with Net Income Available to Common Shareholders (NIAC) up 29% and EPS up 38%, significantly outperforming the prior year. The company demonstrated strong revenue growth, improved net interest margin, and robust credit quality with a low net charge-off ratio compared to industry averages. Despite a slight quarter-over-quarter dip in adjusted NIAC and net interest margin for Q4, the overall trend is positive, and management's 2026 outlook projects continued revenue growth and flat expenses, indicating positive operating leverage. The aggressive capital return strategy through share repurchases further enhances shareholder value. The company's disciplined risk management and diversified business model position it for sustainable growth, making it an attractive investment.

Keywords

First Horizon, FHN, earnings, financial results, Q4 2025, full year 2025, net income, EPS, banking, regional bank, net interest income, net interest margin, loans, deposits, capital ratios, credit quality, share repurchases, corporate governance, SEC filing