First Horizon (FHN +0.09%), a regional banking group focused on retail and commercial lending in the Southeast, released its second quarter 2025 earnings on July 16, 2025. The most important news was a beat on non-GAAP EPS, at $0.45 versus the $0.42 estimate, while revenue slightly missed at $830 million, just under the $831.7 million consensus. Compared to the prior-year quarter, earnings and profitability showed improvement, driven by loan growth and stable credit costs. The quarter as a whole reflected steady core operating trends, modest margin pressure, and continued discipline on expenses.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.45 | $0.42 | $0.36 | 25.0 % |
| Revenue (GAAP) | $830 million | $831.7 million | $815 million | 1.8 % |
| Net Interest Income | $641 million | $629 million | 1.9 % | |
| Net Charge-Off Ratio | 0.22 % | 0.22 % | 0.0 pp | |
| Return on Average Tangible Common Equity (Non-GAAP) | 13.85 % | 11.29 % | 2.56 pp |
Source: Analyst estimates for the quarter provided by FactSet.
First Horizon’s Business and Strategic Focus
First Horizon is a banking company operating primarily in the Southeastern United States. It provides a mix of retail banking, commercial banking, and fee-based financial services. Loans, especially to commercial clients and mortgage companies, represent a major part of its balance sheet, while deposits form the main funding source.
The company has focused on balancing growth and profitability. Lately, First Horizon has emphasized managing the impact of interest rates on its net interest income, growing lending to mortgage companies and commercial clients, and controlling expenses. Key success factors include expanding core customer relationships, keeping credit quality stable, and investing in technology to improve service and efficiency.
Quarterly Highlights and Financial Performance
The second quarter showed improvement in earnings quality. Non-GAAP EPS exceeded expectations by $0.03. The revenue figure was up 1.8 % year over year but narrowly missed analyst expectations. Loan and lease balances rose, reaching $63.3 billion at period end, an increase of $1.0 billion from the first quarter. The main contributors were loans to mortgage companies, which grew seasonally by $689 million, and commercial and industrial (C&I) lending, which grew by $316 million. The bank funded much of this loan growth with brokered deposits, which increased by $1.6 billion. While this was effective short term, continued reliance on brokered deposits may raise funding costs and liquidity risk if not balanced by core deposit growth.
Net interest income, the difference between what the bank earns on loans and pays for deposits and other funding, grew to $641 million. However, the net interest margin (NIM), which expresses this income as a percentage of earning assets, fell by two basis points to 3.40%. This decline was due to increases in deposit costs, particularly as the bank took in more brokered deposits to support lending. The cost for interest-bearing deposits rose to 2.76 %, up slightly from the previous quarter. Management noted these pressures are likely to remain until the Federal Reserve cuts interest rates or core deposit growth accelerates.
Noninterest income, which includes fees from fixed income, mortgage banking, and service charges, increased by $7 million from the previous quarter. Mortgage banking fees, which reflect activity in originating and selling home loans, saw a $1 million rise thanks to seasonal increases in home purchases. Service charges and fees grew by $3 million, driven by higher client transactions. Fixed income revenue dropped $7 million, with the segment impacted by weaker trading conditions and lower client activity.
On the cost side, the company continued tight expense management. Total noninterest expense rose by $3 million to $491 million but declined year over year. Adjusted noninterest expense, which strips out certain items like deferred compensation changes, was flat compared to a year ago and up $14 million sequentially, mainly due to higher deferred compensation and a seasonal rise in advertising. Personnel expenses fell by $3 million, reflecting discipline with staff incentives. The efficiency ratio—a measure of cost as a percentage of revenue—improved to 59.20 %.
Credit quality remained stable, with the net charge-off ratio for uncollected loans holding at 0.22 %. A charge-off occurs when a bank writes off a loan as a loss. Nonperforming loans, which are loans where the borrower is not making payments as scheduled, declined by $17 million. The allowance for credit losses (ACL) to loans ratio dropped slightly to 1.42 % as loan balances increased, especially in low-loss portfolios like mortgage warehouse lending.
Capital levels stayed strong. The Common Equity Tier 1 (CET1) ratio—a key regulatory measure of capital adequacy—stood at 11.0 %. Return on average tangible common equity (ROTCE), a profitability metric focusing on the returns generated from shareholders’ invested money excluding intangible assets, reached 13.85 %, up from 11.29 % a year earlier. Tangible book value per share grew 11 % year over year to $13.57. Share repurchases reduced diluted shares outstanding to 514 million from 547 million last year.
One-time events included a $1 million credit from the Federal Deposit Insurance Corporation (FDIC) special assessment, a minor positive for results. No mergers or acquisitions were announced this quarter. The bank’s board declared a regular quarterly dividend of $0.15 per share, unchanged from prior periods.
Looking Ahead: Guidance and Investor Considerations
Management reaffirmed guidance for fiscal 2025, with targets unchanged for profitability and capital. Leaders continue to expect total revenue growth to fall within initial ranges, assuming three Federal Reserve rate cuts later in the year. The company’s net charge-off ratio guidance for the full year remains between 0.15 % and 0.25 %, with expense growth targeted between 2 % and 4 % over 2024 levels. No major changes to strategic direction or capital allocation policy were reported. The stated goal is to produce at least a 15 % return on tangible common equity in the intermediate term.
For the next few quarters, investors may want to watch deposit growth, especially the balance between brokered and core deposits, and the impact on funding costs and net interest margin. Credit normalization and loan quality also remain important, as do the effects of economic developments such as tariffs and inflation on loan demand and deposit flows.
FHN pays a quarterly dividend of $0.15 per share, which was unchanged in the quarter.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
