10-Q: First Horizon Q3 2025 Earnings Rise, NIM Expands

First Horizon Corporation reported a significant increase in third-quarter 2025 net income and an expanded net interest margin, driven by higher yielding assets and lower funding costs.

Summary

• Net income available to common shareholders for Q3 2025 was $254 million, or $0.50 per diluted share, compared to $213 million, or $0.40 per diluted share, in Q3 2024.
• Net interest income increased $47 million to $674 million in Q3 2025 compared to Q3 2024, benefiting from increased accretion of $15 million related to the Main Street Lending Program.
• Net interest margin expanded by 24 basis points to 3.55% in Q3 2025 from 3.31% in Q3 2024.
• The provision for credit losses was a credit of $5 million for Q3 2025, a significant improvement from an expense of $35 million in Q3 2024.
• Net charge-offs were $26 million, or 17 basis points, in Q3 2025, compared to $24 million, or 15 basis points, in Q3 2024.
• Noninterest income increased $15 million to $215 million in Q3 2025 compared to Q3 2024, primarily due to higher fixed income and mortgage banking revenues.
• Noninterest expense increased $39 million to $550 million in Q3 2025 compared to Q3 2024, largely driven by a $20 million contribution to the First Horizon Foundation and higher personnel expense.
• Period-end loans and leases totaled $63.1 billion, a 1% increase from December 31, 2024, with commercial loans up $227 million and consumer loans up $266 million.
• Period-end deposits were $65.5 billion, a slight decrease from $65.6 billion as of December 31, 2024.
• The Common Equity Tier 1 ratio was 10.96% at September 30, 2025, down from 11.20% at December 31, 2024, primarily due to common share repurchases and preferred stock redemption.
• FHN redeemed all outstanding shares of its Series B Preferred Stock, with a carrying value of $77 million, effective August 1, 2025.
• A new $1.2 billion common share purchase program was approved on October 27, 2025, replacing the previous $1.0 billion program.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance in Q3 2025 with significant increases in net income, EPS, and NIM, coupled with a credit for provision for credit losses. Strategic capital management is evident with the approval of a new $1.2 billion share repurchase program. While noninterest expense increased and capital ratios slightly declined due to share repurchases, the overall financial health and strategic direction are positive. Risks related to economic conditions and regulatory changes are noted but do not overshadow the positive results.

Positives

• Net income available to common shareholders increased to $254 million ($0.50 diluted EPS) in Q3 2025, up from $213 million ($0.40 diluted EPS) in Q3 2024.
• Net interest income grew by $47 million year-over-year to $674 million in Q3 2025.
• Net interest margin expanded significantly by 24 basis points to 3.55% in Q3 2025 compared to Q3 2024.
• The provision for credit losses was a credit of $5 million in Q3 2025, indicating an improved credit quality outlook.
• Noninterest income increased by $15 million year-over-year, driven by strong performance in fixed income ($10 million increase) and mortgage banking ($6 million increase).
• Mortgage banking income included a $5 million pre-tax gain from the sale of mortgage servicing rights.
• Year-to-date net charge-offs declined by $9 million compared to the same period in 2024.
• The Allowance for Credit Losses (ACL) to total loans and leases ratio decreased by 5 basis points to 1.38%, reflecting favorable economic scenario weighting changes, lower specific reserves, and lower Commercial Real Estate (CRE) loan balances.
• FHN and First Horizon Bank maintained 'well-capitalized' status and met the capital conservation buffer requirements.
• A new $1.2 billion common share purchase program was approved, demonstrating commitment to shareholder returns.

Negatives

• Noninterest expense increased by $39 million year-over-year to $550 million in Q3 2025, partly due to a $20 million contribution to the First Horizon Foundation and $10 million in Visa derivative valuation expense.
• Period-end deposits slightly decreased from $65.6 billion at December 31, 2024, to $65.5 billion at September 30, 2025.
• The Common Equity Tier 1 ratio decreased to 10.96% at September 30, 2025, from 11.20% at December 31, 2024, primarily due to common share repurchases and preferred stock redemption.
• Loans to mortgage companies and finance and insurance companies constituted 22% of the C&I portfolio, making it sensitive to impacts on the financial services industry.
• Loans to borrowers in the real estate and rental and leasing industry represented 12% of the C&I portfolio.
• Nonperforming loans and leases (excluding HFS) increased by $3 million from December 31, 2024, largely driven by increases in nonaccrual C&I and consumer real estate loans.
• Accruing loans 30 to 89 days past due increased to $112 million as of September 30, 2025, compared to $89 million as of December 31, 2024.

Risks

• Global, national, and local economic and business conditions, including economic recession or depression.
• Stability or volatility of values and activity in the residential housing and commercial real estate markets.
• Expectations of and actual timing and amount of interest rate movements, including the slope and shape of the yield curve.
• Market and monetary fluctuations, including fluctuations in mortgage markets.
• The financial condition of borrowers and other counterparties.
• Competition within and outside the financial services industry.
• The occurrence of natural or man-made disasters, pandemics, conflicts, or terrorist attacks, or other adverse external events.
• Fraud, theft, or other incursions through conventional, electronic, or other means directly or indirectly affecting FHN or its clients.
• The ability to adapt products and services to changing industry standards and client preferences.
• Risks inherent in originating, selling, servicing, and holding loans and loan-based assets, including prepayment risks, pricing concessions, fluctuation in U.S. housing and other real estate prices, fluctuation of collateral values, and changes in client profiles.
• Changes in the regulation of the U.S. financial services industry, laws, regulations, and administrative actions, including executive orders, whether or not specific to the financial services industry.
• Changes in trade policies, including the imposition of tariffs and retaliatory responses.
• Potential claims alleging mortgage servicing failures, individually, on a class basis, or as master servicer of securitized loans.
• Potential claims relating to participation in government programs, especially lending or other financial services programs.
• Potential requirements for FHN to repurchase, or compensate for losses from, previously sold or securitized mortgages or securities based on such mortgages.
• Changes in accounting policies, standards, and interpretations.
• Evolving capital and liquidity standards under applicable regulatory rules.
• Accounting policies and processes that require management to make estimates about matters that are uncertain.
• Reputational risk and potential adverse reactions or changes to business or associate relationships.
• Uncertainty regarding the actual timing of any implementation of the SEC Climate Disclosures Rules and California's GHG reporting regimes, and the form of the rules if implemented.
• Increased competition for client deposits, which could continue throughout the remainder of 2025 and in 2026.
• The ongoing U.S. federal government shutdown, if prolonged, could have a significant impact on general economic and business conditions and, accordingly, could materially affect FHN's financial condition and results of operations.
• Rising economic costs of hurricane and other severe weather events in the southeastern U.S. are impacting property insurance practices, increasing FHN's risks of loan loss and business downturn, and potentially slowing market growth.

Future Outlook

FHN anticipates that its capital ratios will remain above well-capitalized standards plus the required capital conservation buffer for the remainder of 2025 and in 2026. The market consensus projects one additional Federal Reserve rate reduction over the remainder of 2025. The ongoing U.S. federal government shutdown, if prolonged, could significantly impact general economic and business conditions. Increased competition for client deposits is expected to persist.

Management Comments

• Management believes non-GAAP measures are relevant to understanding the financial condition, capital position, and financial results of FHN and its business segments.
• Management is of the opinion that loss contingencies related to threatened or pending litigation matters should not have a material adverse effect on the consolidated financial condition of FHN but may be material to FHNs operating results for any particular reporting period.
• Management does not currently anticipate that FHN will make a contribution to the qualified pension plan in 2025.
• Management made qualitative adjustments to reflect estimated recoveries based on a review of prior charge-off and recovery levels, for default risk associated with large balances with individual borrowers, for estimated loss amounts not reflected in historical factors due to specific portfolio risk or identified model limitations, and for instances where limited data for acquired loans is considered to affect modeled results.
• Based on current analysis, FHN believes that its ability to realize the net Deferred Tax Asset (DTA) is more likely than not.

Industry Context

The banking industry continues to navigate an environment of increased competition for client deposits, a trend exacerbated by elevated interest rates and market disruptions from 2023 bank failures. Federal Reserve rate cuts in late 2024 and 2025 have contributed to a modest steepening of the yield curve, generally favoring net interest margins, although volatility in bond trading revenues persists. New federal legislation ('One Big Beautiful Bill Act') and potential climate-related disclosure rules (from the SEC and California) introduce new regulatory and compliance costs, which could create competitive disadvantages for banks subject to these requirements. The ongoing U.S. government shutdown further adds to economic uncertainty.

Comparison to Industry Standards

• FHN and First Horizon Bank maintained sufficient capital to qualify as well-capitalized institutions and to meet the capital conservation buffer requirement, aligning with regulatory standards for financial institutions.

Corporate Governance

Legal Proceedings

• Various litigation matters are threatened or pending against FHN and its subsidiaries in the ordinary course of business.
• FHN receives requests for information, subpoenas, or other inquiries from federal, state, and local regulators and other government authorities.
• The aggregate amount of liabilities established for all loss contingency matters was $3 million as of September 30, 2025.
• Estimable reasonably possible losses in future periods in excess of currently established liabilities could aggregate in a range from zero to less than $1 million.
• FHN's repurchase and foreclosure liability, primarily related to its pre-2009 mortgage origination, sale, securitization, and servicing businesses, was $14 million as of September 30, 2025.
• Legal challenges remain pending regarding California's GHG laws and the SEC Climate Disclosures Rules, creating uncertainty about their implementation.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, EPS, and a new $1.2 billion share repurchase program. Cash dividends declared for common and preferred stock.
• Employees: The interest rate for the Directors and Executives Deferred Compensation Plan increased to 12.80% for the 2026 plan year.
• Customers: Increased competition for deposits could lead to higher interest rates for depositors. Potential inconvenience or costs if FHN is required to obtain GHG-related information from customers for Scope 3 reporting.
• Creditors: Redemption of Series B Preferred Stock and net issuance of senior notes impact the debt structure.
• Community: A $20 million contribution was made to the First Horizon Foundation.

Next Steps

• FHN will provide a full retrospective presentation of its income tax disclosures in accordance with ASU 2023-09 within its annual Form 10-K filing.
• FHN is currently assessing the effects of adopting ASU 2024-03 on its financial statement disclosures.
• FHN is currently assessing the effects of adopting ASU 2025-06 on its Consolidated Financial Statements and related disclosures.
• FHN is currently in the process of performing its annual goodwill impairment analysis as of October 1, 2025.
• The market consensus anticipates one additional Federal Reserve rate reduction over the remainder of 2025.
• FHN's Board approved cash dividends for common and preferred stock payable in January and February 2026.

Key Dates

Recommendation

The company demonstrated strong financial performance in Q3 2025 with significant increases in net income and diluted EPS, coupled with a notable expansion in net interest margin. The provision for credit losses being a credit rather than an expense indicates improving asset quality. Strategic capital management is evident with the approval of a new $1.2 billion share repurchase program. While there are some headwinds from increased noninterest expenses and regulatory uncertainties, the core banking operations show robust health and growth, making it an attractive investment.

Keywords

Banking, Financial Services, Regional Bank, Commercial Lending, Consumer Lending, Wealth Management, Mortgage Banking, Fixed Income, SEC Filing, 10-Q, Earnings, Net Interest Income, Net Interest Margin, Credit Quality, Capital Ratios, Share Repurchase, Regulatory Risk, Interest Rate Risk, Economic Outlook, Climate Disclosure, Government Shutdown