First Horizon Reports Q2 EPS of $0.45

Regional banking giant First Horizon (NYSE:FHN) posted its second-quarter 2025 earnings on Wednesday, July 16, 2025, reporting adjusted EPS of $0.45, loan and deposit growth of 2% quarter over quarter, and a charge-off ratio of 22 basis points. Key discussions during the earnings conference call that followed the release included granular NII drivers, evolving capital deployment flexibility, and operational leverage supported by targeted technology investment. Management also provided updated full-year guidance for flat to up 2% expenses and an unchanged revenue outlook for 2025.

Disciplined Capital Management Enables Flexible Growth and Return Strategies

The quarter’s CET1 (Common Equity Tier 1) capital ratio was maintained in line with the near-term target of 11%, with $9 million in share repurchases executed early in the quarter and a remaining share repurchase authorization of just over half of the $1 billion program after $9 million was used, creating room for opportunistic allocation as business conditions evolve. Regulatory developments around capital relief for mid-tier banks and anticipated balance sheet growth were cited as influencing factors in capital deployment decisions.

"We think we start with a very strong capital position, and we think it gives us tremendous flexibility as we look at the back half of 2025 and into 2026."
— Bryan Jordan, Chairman, President and CEO

Ample capital headroom supports ongoing organic growth and opportunistic buybacks.

Business Mix and Market Positioning Sustain NII and Mitigate Rate-Sensitive Headwinds

Net interest income rose $10 million quarter over quarter, driven by seasonal and structurally higher-yielding mortgage warehouse balances and modest C&I (commercial and industrial) expansion, partially offset by a four basis point increase in deposit costs. Despite margin contraction to 3.4% (non-GAAP), management noted a 72% deposit beta since the Federal Reserve rate cuts began in Q3 2024 and highlighted rising competition for both loans and deposits across the Southern U.S. footprint.

"Our strong pricing discipline through this interest rate cycle has achieved a 72% interest-bearing deposit beta since the Fed rate cuts began in the third quarter of 2024."
— Hope Dmuchowski, Chief Financial Officer

Successfully managing interest-bearing deposit pricing amidst industry-wide competition and rate volatility preserves spread resilience and allows for balance sheet growth even in a fast-changing macro environment.

Strategic Investments and Client Penetration Drive $100 Million+ Multi-Year PPNR Opportunity

The company continues executing a three-year technology and client-facing capability investment roadmap, with notable progress on a new general ledger system and treasury management platform. Management identified a $100 million-plus pretax pre-provision net revenue (PPNR) uplift opportunity from deepening relationships and product penetration, especially by leveraging new tech capabilities, targeted over the next two to three years without depending on inorganic expansion.

"The majority, if not all of that hundred million PPNR is deepening our relationships with our clients. So that is increasing our loans to them, getting more deposits from them. We have a big focus. We have talked about many times on our treasury management program. We converted our systems at the beginning of this year. We have invested in that business and we are continuing to look at our current client base that we do not have treasury management deep in that relationship."
— Hope Dmuchowski, Chief Financial Officer

By focusing on organic growth through technology-driven client engagement and deeper product penetration, First Horizon aims to achieve sustainable, high-quality earnings growth without relying on acquisitions.

Looking Ahead

Management maintained flat to up 2% full-year non-GAAP expense guidance and an unchanged revenue target for 2025, expressing confidence in achieving targeted PPNR growth. Achieving a 15%-plus return on average tangible common equity (ROTCE) over the next two to three years remains the core profitability objective, underpinned by deep client penetration and operational discipline. The company did not provide additional explicit numeric forward guidance on loan growth or margin for the second half of 2025 beyond what was included in its Q2 2025 presentation and earnings release.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,059%* — a market-crushing outperformance compared to 180% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of July 14, 2025

This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.