FHN Q4 In-Depth Analysis: Superior Results Fueled by Lending Expansion and Prudent Deposit Management

First Horizon Surpasses Q4 2025 Expectations

First Horizon (NYSE:FHN), a regional banking institution, reported fourth-quarter 2025 results that exceeded analyst forecasts. The company posted $888 million in revenue, marking a 7.8% increase from the previous year and outpacing Wall Street projections. Adjusted earnings per share reached $0.52, coming in 12.1% above consensus estimates.

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Q4 2025 Performance Highlights

• Total Revenue: $888 million, beating the $863.3 million analyst estimate (up 7.8% year-over-year, 2.9% above expectations)
• Adjusted Earnings Per Share: $0.52, surpassing the $0.46 consensus (12.1% above forecast)
• Market Value: $11.85 billion

StockStory’s Perspective

First Horizon’s strong fourth-quarter results were met with a favorable market reaction, thanks to both revenue and profit exceeding expectations. Company leadership attributed this success to effective management of deposit costs, increased lending to mortgage firms, and robust performance in commercial and industrial loans. CEO D. Bryan Jordan highlighted improvements in pre-provision net revenue and a 15% return on tangible common equity for 2025. The bank also saw a rise in fee income, driven by greater activity in equipment finance leasing. Throughout the quarter, First Horizon maintained high credit standards and continued to reward shareholders through stock buybacks and dividends.

Looking ahead to 2026, the company anticipates moderate loan growth, careful expense control, and ongoing investments in technology and client-facing staff. CFO Hope Dmuchowski emphasized the goal of keeping expenses steady, with any increases tied to higher revenue from incentive-based compensation. Management also sees opportunities for growth in treasury services, wealth management, and commercial lending, aiming to strengthen client relationships and leverage a diverse business model to navigate changing economic conditions.

Management’s Key Takeaways

Leadership credited the quarter’s achievements to lower deposit costs, expanded commercial lending, and strong results in fee-generating segments, while maintaining a focus on returning capital to shareholders and controlling expenses.

• Deposit Cost Reduction: The average interest rate paid on deposits fell, significantly boosting net interest income and margin stability. This was achieved through disciplined pricing and targeted growth in treasury management offerings.
• Loan Growth Acceleration: Loans to mortgage companies grew, fueled by increased refinancing and strong commercial and industrial loan originations. This momentum was observed across various regions and business lines.
• Increase in Fee Income: Higher service charges and equipment finance leasing contributed to fee growth, reflecting greater client engagement. Equipment finance, in particular, saw notable gains.
• Expense Control: Adjusted expenses remained in check, with higher personnel costs linked to incentive pay for meeting revenue goals. Investments in technology and marketing were balanced by savings in other areas.
• Stable Credit Quality: Net charge-offs aligned with expectations, and no additional provisions for credit losses were required. Improved credit trends allowed for a reduction in reserves, signaling progress in resolving non-performing loans.

Outlook for 2026 and Beyond

First Horizon’s guidance for 2026 is shaped by expectations for steady loan growth, disciplined expense management, and a continued focus on strengthening client relationships, all while remaining mindful of broader economic uncertainties.

• Emphasis on Loan and Deposit Growth: Management projects mid-single-digit loan growth, with potential upside if refinancing and commercial lending trends persist. Deposit growth will be supported by new treasury management products and expanded retail banking efforts.
• Balancing Expenses and Investments: While overall expenses are expected to remain flat, they may rise if commission-based revenue outpaces forecasts. The company will continue investing in technology and expanding its branch network to support future growth.
• Managing Credit and Margin Risks: Uncertainty around deposit costs and macroeconomic factors, such as Federal Reserve policy and banking system liquidity, are key risks. Credit quality is expected to stay strong, with reserves adjusted as needed based on loan growth and economic trends.

What to Watch in Upcoming Quarters

StockStory will be tracking several factors in the quarters ahead: sustained loan growth—especially in commercial and mortgage sectors, the bank’s ability to maintain deposit cost advantages and expand treasury management, and continued expense discipline amid ongoing investments. Progress in deepening client relationships and any changes in credit quality or the broader economy will also be important indicators of performance.

First Horizon’s shares are currently trading at $24.28, close to the pre-earnings price of $24.05. Is this a buying opportunity or time to sell?

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