10-Q: First Horizon Corp Reports Q1 2025 Results: Earnings Rise Amid Deposit Decline

First Horizon Corp's Q1 2025 earnings increased to $0.41 per diluted share, despite a decrease in deposits and a mixed performance across its business segments.

Summary

• First Horizon Corporation (FHN) reported a net income available to common shareholders of $213 million, or $0.41 per diluted share, for the first quarter of 2025.
• This compares to $158 million, or $0.29 per diluted share, in the fourth quarter of 2024, and $184 million, or $0.33 per diluted share, in the first quarter of 2024.
• Net interest income increased slightly to $631 million, driven by lower interest-bearing deposit costs, but offset by lower loan yields and volume.
• The provision for credit losses was $40 million, compared to $10 million in the previous quarter and $50 million in the first quarter of the previous year.
• Noninterest income decreased to $181 million, primarily due to lower deferred compensation income.
• Noninterest expense decreased to $487 million, mainly due to lower personnel expense and FDIC special assessment expense.
• Period-end loans and leases decreased slightly to $62.2 billion, while period-end deposits decreased to $64.2 billion.
• The Common Equity Tier 1 ratio was 10.93% at the end of the quarter.
• On March 7, 2025, FHN issued $500 million of Fixed Rate/Floating Rate Senior Notes due March 7, 2031.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While earnings increased, there are concerns about deposit declines and increased credit loss provisions. The company is navigating a challenging economic environment.

Positives

• Net interest income increased due to lower funding costs.
• Noninterest expense decreased, driven by lower personnel and FDIC special assessment expenses.
• The company maintains a well-diversified and stable funding mix.
• Capital ratios remain above well-capitalized standards plus the required capital conservation buffer.

Negatives

• Period-end loans and leases decreased slightly.
• Period-end deposits decreased, driven by the pay-off of brokered CDs.
• Noninterest income decreased, primarily due to lower deferred compensation income.
• Provision for credit losses increased compared to the previous quarter.

Risks

• Changes in U.S. and global economic conditions could affect future results.
• Government actions affecting interest rates could impact profitability.
• Political uncertainty and changes in federal policies could have positive or negative impacts.
• Severe weather events in the company's markets could disrupt business and increase costs.
• Instability in property insurance markets could increase risks of loan loss and business downturn.

Future Outlook

Management expects capital ratios to remain above well-capitalized standards plus the required capital conservation buffer during 2025.

Industry Context

The report reflects the ongoing challenges and adjustments within the banking sector, including managing interest rate risk, deposit competition, and economic uncertainty. The results are indicative of a financial institution navigating a complex economic environment with a focus on maintaining capital strength and managing credit quality.

Comparison to Industry Standards

• While specific competitor data isn't provided, the report's focus on capital ratios, asset quality, and efficiency aligns with key metrics used to evaluate bank performance against industry benchmarks.
• Comparable companies like Regions Financial, Truist Financial, and KeyCorp are also navigating similar challenges related to interest rate risk and credit quality.
• The report's discussion of mortgage banking and fixed income activities suggests a business mix similar to regional banks with capital markets operations, such as Raymond James Financial or Stephens Inc.

Stakeholder Impact

• Shareholders will see increased earnings per share, but may be concerned about deposit declines.
• Employees may be affected by cost-cutting measures to manage noninterest expenses.
• Customers may experience changes in deposit rates and loan terms due to the changing interest rate environment.
• The company's financial stability and capital strength benefit creditors.

Next Steps

• The company will continue to monitor economic trends and potential exposures.
• Management will focus on maintaining capital strength and managing credit quality.
• FHN will continue to evaluate and adjust its securities portfolio in light of established ALM objectives.

Key Dates

Keywords

First Horizon, Financial Results, Net Income, Deposits, Loans, Capital Ratios, Interest Income, Noninterest Income, Credit Quality, Senior Notes