8-K: First Horizon Reports Strong Q1 2025 Earnings, Driven by Margin Expansion

First Horizon Corporation announced a solid start to 2025 with net income available to common shareholders reaching $213 million, or $0.41 per share, marking a $0.12 increase from the prior quarter.

Summary

• First Horizon Corporation reported first quarter net income available to common shareholders of $213 million, or $0.41 per share.
• This compares to $158 million, or $0.29 per share, in the fourth quarter of 2024.
• Adjusted net income available to common shareholders was $217 million, or $0.42 per share, compared to $228 million, or $0.43 per share, in the previous quarter.
• Net interest income increased by $1 million to $634 million, with a net interest margin of 3.42%, up 9 basis points.
• Noninterest income increased by $82 million to $181 million, primarily due to a $91 million loss in the prior quarter related to securities portfolio restructuring.
• Adjusted noninterest income decreased by $9 million from the prior quarter.
• Noninterest expense decreased by $21 million to $488 million.
• Adjusted noninterest expense decreased by $24 million to $482 million.
• Average loan and lease balances decreased by $773 million to $61.6 billion.
• Average deposits decreased by $1.6 billion to $64.5 billion.
• The CET1 ratio was 10.9%, slightly down from the previous quarter, as $360 million of excess capital was returned to shareholders through share repurchases.
• The effective tax rate was 22.0% compared to 19.3% in the prior quarter.
• The company returned $360 million of capital to shareholders through share repurchases.
• The net charge-off rate was 0.19%, and the ACL to loans ratio increased to 1.45% due to economic uncertainty.

Sentiment

Score: 7

Explanation: The sentiment is positive due to strong earnings, margin expansion, and capital return to shareholders. However, there are some concerns about loan and deposit declines and economic uncertainty.

Positives

• Net interest margin expanded by 9 basis points to 3.42% due to deposit repricing.
• Adjusted PPNR increased by $16 million to $334 million.
• Tangible book value per share increased to $13.17.
• The company returned $360 million to shareholders through share repurchases.
• Efficiency ratio improved to 60.1% from 62.0% in the prior quarter.

Negatives

• Adjusted EPS decreased slightly by $0.01 from the previous quarter to $0.42.
• Average loan and lease balances decreased by $773 million to $61.6 billion.
• Average deposits decreased by $1.6 billion to $64.5 billion.
• The CET1 ratio decreased slightly from 11.2% to 10.9%.

Risks

• The company acknowledges uncertainty in the economic outlook, which influenced the increase in the ACL to loans ratio.
• Lower loan yields impacted net interest income.
• Fluctuations in brokerage, trust, and insurance income can impact noninterest income.

Future Outlook

The 2025 outlook anticipates flat to up 4% adjusted revenue growth, 2% to 4% adjusted expense growth, a net charge-off range of 0.15% to 0.25%, a tax rate between 21% and 23%, and a CET1 ratio between 10.5% and 11.0%.

Management Comments

• 'We are pleased to report strong performance as we begin 2025.'
• 'Our commitment to delivering value to our shareholders through consistent returns is achieved by meeting client needs with tailored solutions, maintaining a strong associate culture, and supporting our communities with unwavering resolve,' said President and CEO Bryan Jordan.
• 'Our business model prioritizes safety and soundness, profitability, and growth, equipping us to manage uncertainties and adapt to economic changes.'
• 'For 161 years, First Horizon has demonstrated its ability to perform through diverse economic conditions and is well-positioned to achieve sustainable growth and continue delivering results that benefit our stakeholders for the long term.'

Industry Context

First Horizon's results reflect a broader trend in the regional banking sector, where institutions are focused on managing net interest margins in a changing rate environment and maintaining strong credit quality.

Comparison to Industry Standards

• First Horizon's CET1 ratio of 10.9% is comparable to other regional banks such as Truist Financial (11.4%) and Regions Financial (10.8%).
• The net charge-off ratio of 0.19% is below the average for the BKX Index, indicating a strong credit portfolio.
• The ROTCE of 12.8% is competitive with peers like Fifth Third Bancorp, which reported a ROTCE of 13.5%.

Stakeholder Impact

• Shareholders benefit from strong earnings and share repurchases.
• Customers benefit from tailored solutions and community support.
• Associates benefit from a strong company culture.

Next Steps

• The company will continue to focus on strategic capital management and deploying excess capital.
• First Horizon will maintain a prudent credit culture to minimize losses and maximize long-term returns.
• The company will actively manage liquidity and interest rate sensitivity.

Key Dates

Keywords

earnings, financial results, net income, net interest margin, deposits, loans, CET1 ratio, share repurchases, First Horizon, FHN