10-K: First Horizon Reports Strong 2025 Earnings Growth, Strategic Progress

First Horizon Corporation announced a significant increase in net income and diluted EPS for 2025, driven by lower deposit pricing, higher loan balances, and strategic technology investments.

Summary

• Net income available to common shareholders increased to $956 million in 2025, up $218 million from $738 million in 2024.
• Diluted earnings per common share rose to $1.87 in 2025 from $1.36 in 2024.
• Net interest income reached $2.6 billion in 2025, an increase of $111 million compared to 2024, primarily due to lower deposit pricing and higher loan balances, particularly in high-yielding loans to mortgage companies.
• The net interest margin expanded by 12 basis points to 3.47% in 2025 from 3.35% in 2024.
• Provision for credit losses decreased significantly to $65 million in 2025 from $150 million in 2024, reflecting improvements in criticized and classified loans and a more favorable portfolio mix.
• Net charge-offs were $120 million, or 0.19% of average loans and leases, in 2025, a slight increase from $112 million (0.18%) in 2024.
• The Allowance for Credit Losses (ACL) to loans ratio decreased to 1.31% in 2025 from 1.43% in 2024.
• Noninterest income increased by $118 million (17%) to $797 million in 2025, largely due to the absence of $91 million in net securities losses from 2024 and improved performance in fixed income and mortgage banking.
• Noninterest expense increased by $39 million (2%) to $2.1 billion in 2025, driven by higher personnel, occupancy, software, and legal fees, partially offset by lower deposit insurance expense.
• Period-end loans and leases grew by $1.6 billion to $64.2 billion, with commercial loan growth of $1.2 billion in mortgage companies and other C&I loans, partially offset by an $858 million decline in Commercial Real Estate (CRE) loans.
• Period-end deposits increased by $1.9 billion to $67.5 billion, with interest-bearing deposits rising by $2.1 billion and noninterest-bearing deposits decreasing by $198 million.
• Common Equity Tier 1 (CET1) ratio was 10.63% (2025) compared to 11.20% (2024), Tier 1 capital ratio was 11.51% (2025) compared to 12.22% (2024), and Total capital ratio was 13.35% (2025) compared to 14.25% (2024).
• The Board approved a new $1.2 billion common share purchase program on October 27, 2025, replacing the previous $1.0 billion program, with $203 million in purchases made by December 31, 2025.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with significant earnings growth and margin expansion, coupled with proactive risk management and strategic investments. While capital ratios saw a slight dip due to share repurchases and redemptions, they remain well above regulatory minimums, and the company is actively addressing future challenges like regulatory changes and market competition.

Positives

• Net income available to common shareholders increased significantly by $218 million to $956 million in 2025.
• Diluted EPS rose to $1.87 in 2025, demonstrating strong per-share profitability.
• Net interest income grew by $111 million, driven by effective deposit pricing and increased high-yielding loan balances.
• Net interest margin expanded by 12 basis points to 3.47%, indicating improved profitability from lending activities.
• Provision for credit losses decreased substantially to $65 million, reflecting improved asset quality and a favorable loan portfolio mix.
• The ACL to loans ratio decreased to 1.31%, suggesting a healthier loan book and successful loan resolutions.
• Noninterest income increased by 17%, benefiting from the absence of prior year securities losses and stronger performance in fixed income and mortgage banking.
• Commercial loan growth, particularly in loans to mortgage companies and other C&I loans, contributed $1.2 billion to the portfolio.
• Period-end deposits increased by $1.9 billion, indicating continued funding stability and client relationships.
• Both First Horizon Corporation and First Horizon Bank maintained 'well-capitalized' status, exceeding all regulatory minimums and capital conservation buffer requirements.
• Successful completion of company-run stress tests, demonstrating resilience under hypothetical severe economic scenarios.
• Strategic investments in technology, including an Enterprise Data Hub and enhancements to digital account opening, payments, and mobile experience, are underway to improve client experience and operational efficiency.
• Implementation of an enhanced performance management process and the launch of HorizonU platform for centralized learning, performance, and career development for associates.

Negatives

• Overall capital ratios (CET1, Tier 1, Total) decreased in 2025 compared to 2024, primarily due to common share repurchases and the Series B Preferred Stock redemption.
• Noninterest-bearing deposits decreased by $198 million, potentially increasing funding costs as interest-bearing deposits grew.
• Net charge-offs increased slightly to $120 million (0.19%) in 2025 from $112 million (0.18%) in 2024.
• Commercial Real Estate (CRE) loans declined by $858 million, and consumer loans decreased by $28 million, with specific declines in consumer construction loans and real estate installment loans.
• Nonaccrual C&I loans increased, driven by loans in the wholesale trade, finance and insurance, and manufacturing industries.

Risks

• Intense competition from traditional banks, savings and loan associations, credit unions, and non-traditional disruptive service providers (e.g., fintech firms, digital asset providers) for clients and talent.
• Inability to successfully implement organic growth strategies, including attracting and retaining clients, achieving earnings growth, maintaining high client service, and managing liquidity and capital requirements.
• Challenges in business acquisitions, including realizing strategic objectives, assessing risks, integrating acquired businesses, and retaining core clients and key associates.
• Risks associated with business dispositions or wind-downs, such as pricing, client/personnel transitions, loss of pre-tax income or synergies, and managing capital/liquidity challenges.
• Negative sentiment from stakeholders (clients, associates, investors, regulators, communities) could impact capital access, client/talent retention, stock value, and increase litigation risk, potentially jeopardizing safety and soundness.
• Technological innovations and new technologies (including AI) can create new competitive challenges, increase fraud risk, and require substantial, potentially non-immediately profitable, investments in IT systems.
• Operational risks from inadequate internal processes, human error, faulty technology systems, fraud, theft, security breaches, and other external events, with some level of fraud loss being unavoidable.
• Reliance on third-party service providers for critical functions exposes the company to disruptions, data security compromises, and regulatory violations if these providers fail.
• Competition for talent is substantial and increasing, potentially leading to higher costs for hiring and retention, and talent attrition if incentive programs are ineffective.
• Poorly designed incentive programs may lead to low motivation, high turnover, or unintended adverse consequences.
• Provision of diverse financial services may create claims of harm to clients or non-compliance with laws.
• Inability to successfully manage expenses due to adverse structural changes, market shifts, inflationary pressures, or errors in judgment, with potential for increased regulatory compliance costs as assets approach $100 billion.
• Cybersecurity breaches or similar incidents pose a major operational risk, potentially causing significant damage, theft of funds, loss of confidential information, business disruption, or adverse publicity.
• Economic downturns can lead to increased credit losses, decreased demand for products/services, and declining credit quality.
• Federal Reserve monetary policies and interest rate movements can significantly impact the business, including deposit levels and customer finances, with unpredictable effects.
• A flat or inverted yield curve may reduce net interest margin and adversely affect lending and fixed income businesses.
• Credit risks from clients defaulting on loans/leases, insufficient collateral value, and counterparty failures on obligations.
• Concentration of C&I loans (25%) in the financial services industry makes the portfolio sensitive to interest rate, monetary, and regulatory policy changes.
• Commercial Real Estate (CRE) portfolio is sensitive to the financial health of underlying assets and market values, with uncertainty regarding traditional office space demand post-pandemic.
• Geographic concentration of consumer real estate loans in Florida, Tennessee, and Texas increases sensitivity to regional economic impacts and residential real estate values.
• Volatility in the oil and gas industry (2% of total loans) due to global demand, supply, macroeconomic, and geopolitical risks.
• Changes in statutes, rules, regulations, and policies governing operations can adversely affect business, operations, and income, leading to increased costs or limitations on business opportunities.
• Pressures to maintain appropriate capital levels may lead to actions dilutive or adverse to shareholders, such as dividend reductions or equity issuances.
• Regulation of banks is tiered by asset size, and approaching $100 billion in assets could significantly increase regulatory compliance costs due to enhanced prudential standards.
• Legal disputes are an unavoidable part of business, with unpredictable outcomes and potential for material financial impact.
• Political volatility within the federal government creates potential for abrupt shifts in federal policy and government shutdowns, impacting business and clients.
• Heightened legislative and regulatory focus on data privacy may require alterations to systems or business practices.
• Public expectations and new state/federal disclosure rules concerning greenhouse gas (GHG) emissions could increase operating costs and curtail business aspects.
• Geographic concentration in the southeastern and south-central U.S. exposes the company to regional adversities.
• Cost increases and uncertainties in coastal markets (e.g., Florida) due to hurricanes and severe weather events may jeopardize growth trends and increase loan loss risks.
• Holding international assets creates risks related to taxes, fees, prohibitions, currency exchange rates, and limited legal recourse.
• Property and casualty insurance may not fully cover risks, and default by insurers is a concern.
• Liquidity risk from unexpected cash needs, increased funding costs, sudden deposit shifts, and dependence on FHLB/Federal Reserve funding.
• Credit ratings directly affect the availability and cost of unsecured funding, and reductions could lead to reduced liquidity or termination of derivative agreements.
• Accounting estimates (e.g., ALLL, DTA valuation) are subjective and complex, and changes can materially impact financial statements.
• Failure or circumvention of internal controls, disclosure controls, and corporate governance policies could materially affect business and financial results.
• Dependence on Bank dividends for parent company cash flow, which is subject to statutory and regulatory limitations.
• Shareholders may suffer dilution if capital is raised through public or private equity financings.
• Preferred dividends must be paid ahead of common dividends.
• Provisions of Tennessee law and company charter/bylaws could make it more difficult for a third party to acquire control.
• Legal rights of common stock and depositary share holders to pursue claims are limited by bylaws and deposit agreements, potentially discouraging lawsuits or increasing costs.

Future Outlook

Capital ratios are expected to remain above well-capitalized standards plus the required capital conservation buffer during 2026. Market consensus points to the possibility of two additional 25 basis point cuts in the Fed Funds rate in 2026, contingent on inflation trends and broader economic conditions. Competition for deposits is expected to continue throughout the remainder of 2026. The risk of additional U.S. government shutdowns and their potential impacts continues as of early 2026. Uncertainty remains regarding the implementation and form of SEC and California GHG reporting rules due to legal challenges and potential regulatory shifts. Instability in property insurance in coastal markets is expected to continue, making business decisions more difficult and increasing loan loss risks.

Management Comments

• "Continuing to thoughtfully develop new methods, processes, and systems for providing services for clients, while preserving the high level of service our associates bring to clients and fulfilling the promise of our marketing slogan: Big Bank Muscle, Small Bank Hustle."
• "Creating and filling a new senior executive role to lead strategic development and execution of a comprehensive client experience for our consumer segment."
• "Engaging in strategic hiring to add banker talent, enhance specific products and product groups and to better serve specific retail markets."
• "Developing and implementing a new framework to operationalize our strategic priorities for our associates and to ensure alignment of associate efforts with those priorities."
• "Continuing to implement our multi-year technology plan to transform our digital systems by: building an Enterprise Data Hub as the enterprise data backbone; improving client experiences by modernizing digital account opening, enhancing payments capabilities, strengthening authentication, improving fraud prevention, and elevating our mobile experience; setting up a scalable and modular future-state architecture to advance our cloud maturity and API-first approach; and introducing new product and banking capabilities to allow us to serve more complex business needs, attract new clients and position the bank for growth."
• "Management believes that, as of December 31, 2025, FHN and First Horizon Bank met all capital adequacy requirements to which they were subject."
• "Management believes that no events or changes have occurred subsequent to year-end that would change this designation [well-capitalized]."
• "Management does not currently anticipate that FHN will make a contribution to the qualified pension plan in 2026."

Industry Context

StockSavvy.ai notes that First Horizon's strong 2025 performance, particularly in net interest income and margin expansion, contrasts with the broader banking industry's challenges in a fluctuating interest rate environment. The company's strategic focus on digital transformation and client experience aligns with industry trends towards enhanced technology and relationship banking, aiming to differentiate itself from larger national banks and agile fintech competitors. The decrease in provision for credit losses and improved ACL ratio suggest effective risk management in a period where some regional banks faced asset quality concerns. The ongoing competition for deposits and the uncertainty surrounding regulatory changes, especially those related to climate disclosures and capital requirements for banks over $100 billion in assets, reflect systemic pressures across the financial sector.

Comparison to Industry Standards

• First Horizon's diluted EPS of $1.87 and Return on Average Assets (ROAA) of 1.22% for 2025 demonstrate solid profitability within the regional banking sector. For comparison, many regional banks in 2025 aimed for ROAA in the 1.0% to 1.3% range, placing First Horizon at the higher end of this target.
• The Net Interest Margin (NIM) of 3.47% for 2025 is competitive, especially given the declining interest rate environment in the latter half of 2024 and 2025. This compares favorably to peers like Regions Financial (RF) and Truist Financial (TFC), which often report NIMs in the 3.0-3.5% range, indicating effective balance sheet management and deposit cost control.
• The decrease in the Allowance for Credit Losses (ACL) to loans ratio to 1.31% from 1.43% in 2024, alongside a reduced provision for credit losses, suggests a more robust credit quality compared to some regional banks that experienced higher credit provisioning in 2024 due to economic uncertainties and specific loan portfolio stresses.
• The Common Equity Tier 1 (CET1) ratio of 10.63% for FHN and 10.98% for First Horizon Bank at December 31, 2025, comfortably exceeds the 'well-capitalized' threshold of 6.5% plus the 2.5% capital conservation buffer (total 9.0%). This positions FHN strongly relative to regulatory requirements and provides a buffer against potential economic shocks, similar to well-capitalized peers like Zions Bancorporation (ZION) or Comerica (CMA).
• The efficiency ratio of 60.66% in 2025, while an improvement from 62.06% in 2024, indicates ongoing efforts in expense management. This is generally in line with industry averages for regional banks, which often target efficiency ratios below 60% but frequently operate in the 60-65% range depending on investment cycles.

Management Changes

Corporate Governance

Legal Proceedings

• Various litigation matters are threatened or pending against First Horizon Corporation and its subsidiaries.
• First Horizon receives requests for information, subpoenas, or other inquiries from federal, state, and local regulators, and other government authorities.
• Management believes loss contingencies related to threatened or pending litigation matters should not have a material adverse effect on the consolidated financial condition, but may be material to operating results for any particular reporting period.
• The aggregate amount of liabilities established for all loss contingency matters was $1 million as of December 31, 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.

Stakeholder Impact

• Shareholders: Benefited from increased net income and EPS, continued cash dividends, and a new $1.2 billion share repurchase program. Potential for dilution from future equity financings remains a risk.
• Employees (Associates): Positively impacted by investments in talent, enhanced performance management, launch of HorizonU for development, competitive benefits, and additional executive benefits (e.g., disability, tax/financial counseling, home security).
• Customers (Clients): Expected to benefit from strategic focus on premium service, enhanced digital capabilities (account opening, payments, mobile experience), and new product/banking capabilities. Exposed to fraud and cybersecurity risks.
• Communities: Supported through tax credit investments in affordable housing and community development projects, and contributions to the First Horizon Foundation ($20 million in 2025).
• Creditors: Financial stability maintained through strong capital ratios, ensuring ability to meet obligations. Unsecured funding availability and cost are influenced by credit ratings.

Next Steps

• Continue focusing on strategic priorities and initiatives in 2026, including quality and execution, client service, and associate investment.
• Monitor economic developments and assess potential exposures related to Federal Reserve policy, interest rates, and inflation.
• Continue performing an annual enterprise-wide stress test as part of capital and risk management.
• The Bank's initial informational filing submission for resolution planning is due on or before April 1, 2026.
• FHN anticipates continued short-term rate reductions in 2026, contingent on inflation trends and broader economic conditions.
• FHN is currently assessing the effects of adopting ASU 2024-03, ASU 2025-06, and ASU 2025-11 on its financial statements and disclosures.
• FHN early adopted ASU 2025-08 and ASU 2025-09 beginning January 1, 2026.

Key Dates

Recommendation

First Horizon Corporation demonstrated robust financial performance in 2025 with significant increases in net income and diluted EPS, driven by effective balance sheet management and strategic growth initiatives. The expansion of net interest margin and a notable reduction in provision for credit losses highlight improving operational efficiency and asset quality. While capital ratios saw a slight decrease due to capital deployment, they remain comfortably above regulatory requirements, indicating financial strength. The company's commitment to digital transformation and client experience positions it well for future growth in a competitive landscape. The new $1.2 billion share repurchase program signals confidence in future earnings and is accretive to shareholder value. Despite ongoing industry-wide challenges like deposit competition and regulatory uncertainties, First Horizon's proactive risk management and strategic focus make it an attractive investment.

Keywords

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