Business Context and Reporting Period
Company: First Horizon Corporation (FHN)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and six months ended June 30, 2025
Business Overview: FHN is a financial holding company headquartered in Memphis, Tennessee, with its principal subsidiary being First Horizon Bank. The company operates through three reportable segments: Commercial, Consumer & Wealth; Wholesale; and Corporate. As of June 30, 2025, FHN operated over 450 business locations in 24 states.
Key Financial Metrics
| Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 |
|---|---|---|---|---|
| Net Income (Attributable to Common) | $233 million | $184 million | $446 million | $368 million |
| Diluted EPS | $0.45 | $0.34 | $0.86 | $0.67 |
| Net Interest Income | $641 million | $629 million | $1,272 million | $1,253 million |
| Net Interest Margin (NIM) | 3.40% | 3.38% | 3.41% | 3.38% |
| Noninterest Income | $189 million | $186 million | $370 million | $381 million |
| Noninterest Expense | $491 million | $500 million | $978 million | $1,015 million |
| Provision for Credit Losses | $30 million | $55 million | $70 million | $105 million |
| Total Assets | $82.08 billion | $82.15 billion (Dec 2024) | N/A | N/A |
| Total Loans and Leases | $63.26 billion | $62.57 billion (Dec 2024) | N/A | N/A |
| Total Deposits | $65.58 billion | $65.58 billion (Dec 2024) | N/A | N/A |
| Common Equity Tier 1 Ratio | 10.99% | 11.20% (Dec 2024) | N/A | N/A |
| Return on Average Assets (ROAA) | 1.20% | 1.00% | 1.16% | 0.99% |
| Return on Average Tangible Common Equity | 13.85% | 11.29% | 13.33% | 11.12% |
Material Changes vs. Prior Period
- Profitability: Net income available to common shareholders increased 27% year-over-year (Q2 2025 vs. Q2 2024) and 21% year-to-date, driven by lower funding costs, reduced provision for credit losses, and loan growth.
- Net Interest Income: NII increased $12 million in Q2 compared to the prior year, primarily due to lower interest-bearing deposit costs and investment portfolio repositioning, partially offset by lower loan yields.
- Provision for Credit Losses: The provision decreased significantly to $30 million in Q2 2025 from $55 million in Q2 2024, reflecting improved asset quality and lower criticized balances in the Commercial Real Estate (CRE) portfolio.
- Loan Portfolio: Total loans increased 1% to $63.3 billion. Commercial loans grew $446 million, driven by a $587 million increase in loans to mortgage companies, partially offset by a $485 million decline in CRE loans. Consumer loans grew $249 million.
- Asset Quality: Nonperforming loans (NPLs) decreased to $593 million (0.94% of total loans) from $602 million at year-end 2024. Net charge-offs were $34 million (22 basis points) in Q2 2025, consistent with Q2 2024.
- Capital: The Common Equity Tier 1 ratio decreased slightly to 10.99% from 11.20% at year-end 2024, primarily due to common share repurchases, though the company remains well-capitalized.
Guidance, Outlook, Risks, and Unusual Items
- Capital Actions: FHN redeemed all outstanding shares of its Series B Preferred Stock ($77 million carrying value) on August 1, 2025. The company also retired $350 million in senior notes in May 2025. Under a $1 billion share repurchase program approved in October 2024, FHN repurchased approximately $392 million of common stock year-to-date.
- Outlook: Management anticipates capital ratios will remain above well-capitalized standards plus the required capital conservation buffer throughout 2025. The company expects continued competition for deposits and monitors the impact of Federal Reserve rate decisions.
- Risks and Uncertainties:
- Interest Rate Risk: FHN faces risks from yield curve flattening or inversion, which can compress net interest margins. The company uses derivatives to hedge interest rate risk.
- Economic Conditions: Potential recession risks, inflation trends, and changes in fiscal policy (including the "One Big Beautiful Bill Act" enacted July 2025) could impact financial results.
- Trade Policy: New tariffs announced in 2025 create uncertainty regarding economic growth and inflation.
- Climate and Weather: Significant exposure to severe weather events in the southeastern U.S. (e.g., hurricanes) and evolving climate-related reporting regulations (SEC and California) pose operational and financial risks.
- Legacy Mortgage Exposure: FHN maintains a repurchase and foreclosure liability of $15 million related to pre-2009 mortgage origination and servicing activities.
- Unusual Items: Q2 2025 noninterest expense included a $4 million expense credit related to an accrual release in deferred compensation. Q2 2024 included $3 million in restructuring costs and a $2 million FDIC special assessment, which were not present in the current quarter.
Investor Verification Checklist
- Loan Growth Drivers: Verify the sustainability of the $587 million growth in loans to mortgage companies, which is sensitive to interest rate fluctuations and housing market activity.
- Asset Quality Trends: Monitor the increase in nonaccrual Commercial & Industrial (C&I) loans, which offset declines in CRE nonaccruals, and watch for potential migration of criticized assets.
- Deposit Stability: Assess the impact of rising brokered certificate of deposit balances ($1.0 billion increase in time deposits) on future funding costs and net interest margin stability.
- Regulatory Capital: Confirm the impact of the Series B Preferred Stock redemption on Tier 1 capital ratios and ensure continued compliance with the capital conservation buffer.
- Legacy Liabilities: Review the adequacy of the $15 million repurchase and foreclosure reserve for pre-2009 mortgage loans given potential future claim inflows.
- Share Repurchases: Track the remaining capacity under the $1 billion share repurchase program and the company's commitment to returning capital to shareholders.