8-K: First Horizon Reports Strong Q3 2025 Earnings Growth

First Horizon Corporation announced a significant increase in third-quarter net income available to common shareholders, driven by robust net interest income and fee income growth.

Summary

• Net income available to common shareholders (NIAC) for Q3 2025 was $254 million, or $0.50 per diluted share, an increase from $233 million ($0.45 EPS) in Q2 2025.
• Adjusted NIAC, excluding notable items, reached $263 million, or $0.51 per diluted share, up from $229 million ($0.45 EPS) in the prior quarter.
• Net interest income (FTE) increased by $33 million to $678 million, with net interest margin expanding by 15 basis points to 3.55%.
• Noninterest income rose by $26 million to $215 million, primarily due to a $15 million increase in fixed income revenues and a $6 million increase in mortgage banking revenues, including a $4.7 million pre-tax gain from an MSR sale.
• Noninterest expense increased by $59 million to $551 million, with adjusted noninterest expense rising $47 million, largely due to a $20 million contribution to the First Horizon Foundation and increased project expenses in technology and risk.
• Average loan and lease balances grew by $236 million to $62.8 billion, while period-end balances slightly decreased by $202 million to $63.1 billion.
• Average deposits increased by $1.2 billion to $65.9 billion, though period-end deposits saw a minor decrease of $52 million to $65.5 billion, driven by a reduction in brokered deposits.
• The company reported a provision credit for credit losses of $5 million, a significant improvement from a $30 million expense in the previous quarter.
• Net charge-offs decreased to $26 million, or 17 basis points, down from $34 million or 22 basis points in Q2 2025.
• The Common Equity Tier 1 (CET1) ratio remained stable at 11.0%, consistent with the prior quarter, and tangible book value per share (TBVPS) increased by $0.37 to $13.94.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance across key metrics, including significant increases in net income, EPS, net interest income, and noninterest income. Credit quality remains robust with a provision credit and lower net charge-offs. The company's capital position is stable, and management's outlook is positive, reinforcing a strong operational quarter.

Positives

• Net income available to common shareholders (NIAC) increased by $21 million to $254 million, representing a 9% sequential growth.
• Adjusted diluted EPS rose by $0.06 to $0.51, reflecting a 13% increase from the prior quarter.
• Net interest income (FTE) grew by $33 million to $678 million, driven by higher yielding portfolios and increased accretion from the Main Street Lending Program.
• Net interest margin expanded by 15 basis points to 3.55%, indicating improved profitability from earning assets.
• Noninterest income increased by $26 million, with strong performance in fixed income revenues (up $15 million) and mortgage banking revenues (up $6 million).
• The company reported a provision credit of $5 million for credit losses, a substantial improvement from a $30 million expense in the previous quarter.
• Net charge-offs decreased to $26 million (0.17% of total loans), down from $34 million (0.22%) in Q2 2025, demonstrating strong credit quality.
• Tangible book value per share (TBVPS) increased by $0.37 to $13.94, primarily due to strong NIAC performance.
• Average deposits increased by $1.2 billion to $65.9 billion, and the company retained approximately 97% of promotional deposit/CD repricing events, reducing costs by 16 basis points.
• The CET1 ratio remained strong at 11.0%, in line with near-term targets, supported by share repurchases totaling $190 million.

Negatives

• Period-end loans and leases decreased by $202 million to $63.1 billion from Q2 2025, primarily due to seasonal declines in loans to mortgage companies (LMC).
• Period-end deposits slightly decreased by $52 million to $65.5 billion, driven by a $652 million decrease in brokered deposits.
• Nonperforming loans increased by $13 million to $605 million, with an increase in commercial real estate NPLs offsetting a decrease in C&I.
• The allowance for credit losses (ACL) to loans ratio decreased from 1.42% in Q2 2025 to 1.38%, although this was attributed to favorable portfolio mix and reductions in criticized credits.
• Noninterest expense increased by $59 million, with adjusted noninterest expense up $47 million, partly due to a $20 million contribution to the First Horizon Foundation and increased project expenses.

Risks

• Actual future results and outcomes could differ materially from forward-looking statements due to significant business, operational, economic, and competitive uncertainties and contingencies.
• Many uncertainties and contingencies are beyond the company's control and are subject to change, including future business decisions and actions (such as acquisitions and divestitures).
• Factors that could cause actual results to differ include those mentioned in the current report, the most recent Annual Report on Form 10-K, and Quarterly Report(s) on Form 10-Q.

Future Outlook

First Horizon Corporation maintains its 2025 guidance, expecting adjusted revenue (excluding deferred compensation) to be flat to up 4% compared to FY24. Adjusted expense (excluding deferred compensation) is projected to be flat to up 2%. Net charge-offs are anticipated to be between 0.15% and 0.25%, and the effective tax rate is expected to range from 21% to 23%. The CET1 ratio is targeted to be between 10.5% and 11.0%, with continued progress towards near-term targets.

Management Comments

• "We are pleased to report another strong quarter, a testament to the disciplined execution of our strategy and the expertise of our associates."
• "First Horizons diversified business model and attractive geographic footprint position us well amid a changing environment."
• "Our ongoing focus on safety and soundness, profitability, and growth enables us to meet our clients evolving needs with tailored solutions that create meaningful value."
• "Credit quality remains a strength, driven by prudent risk management and the dedicated efforts of our associates, who maintain high standards of service for our clients and communities."
• "As economic conditions evolve, our adaptability and solid performance, supported by continued investments in technology and community partnerships, position First Horizon to deliver consistent returns and foster long-term growth for our shareholders."

Industry Context

The company's performance reflects a strong regional banking model, leveraging a diversified business approach and an attractive geographic footprint in growth markets. Its asset-sensitive profile, with 56% variable rate loans, positions it well in a changing interest rate environment. The balance between asset sensitivity and counter-cyclical businesses (fixed income, mortgage warehouse lending) provides resilience across various economic cycles. The sustained focus on prudent credit management and technology investments aligns with broader industry trends emphasizing risk management and digital transformation.

Comparison to Industry Standards

• The net charge-off ratio of 0.17% is compared to the 'Average NCO% of BKX Index', indicating a benchmark against a broader banking index.
• FHN Financial's institutional client base includes approximately one third of all US banks and 50% of banks with portfolios over $100 million in size, demonstrating significant market penetration within the financial institution sector.

Stakeholder Impact

• Shareholders: Benefited from increased net income, EPS, and tangible book value per share, along with share repurchases totaling $190 million.
• Clients: The company aims to meet evolving needs with tailored solutions, supported by continued investments in technology and a diversified business model.
• Employees (Associates): Management highlighted the expertise and dedicated efforts of associates as key to the strong performance and maintaining high service standards.
• Communities: A $20 million contribution to the First Horizon Foundation was made, benefiting community partnerships.

Next Steps

• Continue strategic capital management to opportunistically deploy excess capital and target a CET1 ratio in the 10%-10.5% range.
• Drive loan and deposit growth within its highly attractive geographic footprint in growth markets.
• Leverage its diversified business model to deliver outperformance through various economic cycles.
• Maintain disciplined execution of strategy with a continuous focus on efficiency and profitability, including pursuing over $100 million in revenue-driven pre-provision net revenue (PPNR) opportunities.
• Uphold a prudent credit culture to minimize losses and maximize long-term returns.

Key Dates

Recommendation

The filing demonstrates strong financial performance with significant increases in net income, EPS, and net interest income, coupled with expanding margins. The company's credit quality remains robust, evidenced by a provision credit and reduced net charge-offs. A stable capital position, strategic share repurchases, and a positive future outlook, including a target for sustained 15%+ adjusted Return on Average Tangible Common Equity (ROTCE), suggest continued growth and value creation. The diversified business model and attractive geographic footprint further enhance its resilience and growth prospects, making it an attractive investment.

Keywords

Banking, Financial Services, Regional Bank, Earnings Report, Q3 2025, First Horizon, FHN, Net Interest Income, Deposits, Loans, Credit Quality, Capital Ratios, Asset Quality, Share Repurchases