First Horizon reported strong fourth quarter 2025 results, delivering earnings per share of $0.52 and achieving a 15% Return on Tangible Common Equity (ROTCE) for the full year. The Net Interest Margin (NIM) came in at 3.512%, compressing 4 basis points sequentially but expanding 2 basis points excluding specific items, driven by a 25 basis point decline in deposit costs. Loan growth remained solid with a 2% quarterly increase ($1.1 billion), led by mortgage warehouse lending and C&I, while period-end deposits grew by $2 billion. The company returned significant capital to shareholders, repurchasing nearly $900 million in stock and paying over $300 million in dividends during 2025. Looking ahead to 2026, management provided optimistic guidance for 3% to 7% revenue growth and mid-single-digit loan growth, supported by a $100 million PPNR improvement opportunity and a disciplined expense outlook.
| Metric | Value | Change |
|---|---|---|
| Earnings Per Share (EPS) | $0.52 | N/A |
| Net Interest Margin (NIM) | 3.512% | -4 bps QoQ |
| Return on Tangible Common Equity (ROTCE) | 15% | Achieved Target |
| Loan Growth | $1.1 Billion | +2% QoQ |
| Deposit Growth | $2 Billion | Increase QoQ |
| Net Charge-Off Ratio | 19 bps | In line with expectations |
| CET1 Ratio | 10.64% | N/A |
| Average Interest-Bearing Deposit Cost | 2.53% | -25 bps QoQ |
Management emphasized a robust capital return strategy, having repurchased nearly $900 million in stock in 2025 and announcing a new $1.2 billion authorization with approximately $1 billion remaining. This signals a shift toward aggressive shareholder yield enhancement as the bank sustains high profitability (15% ROTCE). The CFO stated, 'We will continue to have conversations with our board about potential timing for lowering that target further in line with our intermediate-term expectations of 10% to 10.5%,' indicating that excess capital will continue to be deployed to buybacks rather than M&A, reinforcing a 'self-help' investment thesis.
A key strategic driver identified is the '$100 million-plus PPNR improvement opportunity,' which management stated is 'embedded' in the 2026 outlook. This initiative focuses on deepening client relationships through treasury management and wealth management, improving pricing discipline, and leveraging the banker expertise within their footprint. CEO D. Bryan Jordan noted, 'We made early progress on this in 2025 and expect the impact to continue to grow in 2026 and 2027,' suggesting a multi-year earnings growth tailwind that is not fully priced into current consensus estimates.
First Horizon is experiencing a notable inflection in its Commercial Real Estate (CRE) portfolio, which had been a headwind. Chief Credit Officer Thomas Hung highlighted, 'For the first time in about two years, we had a net increase in our total CRE commitments,' and noted that the pipeline is 'up pretty meaningfully.' This stabilization, combined with 'mid-single-digit' C&I growth expectations and a resurgence in mortgage warehouse lending driven by the refinance market, indicates a broad-based recovery in loan momentum that supports the 3-7% revenue guidance.
The bank is successfully navigating the rate cycle through disciplined deposit management, achieving a 25 basis point decline in average interest-bearing deposit costs quarter-over-quarter. The CFO noted, 'We have maintained a cumulative deposit beta of 64% since rates started to fall,' demonstrating strong core deposit retention and pricing power. This operational discipline allows them to maintain a NIM outlook in the 'mid-340s' despite a flat yield curve, highlighting the resilience of their net interest income even in a lower-rate environment.
While management expressed optimism about the Net Interest Margin (NIM), there was a notable downgrade in the outlook compared to the previous quarter's guidance of 'high 330s, low 340s.' CFO Hope Dmuchowski clarified, 'I don't see 350 as the go-forward. I really think we're in the mid-340s.' This compression, driven by a 4 basis point decline in the quarter and the exclusion of prior accretion, suggests that margin expansion may be capped, posing a risk to earnings growth if loan growth slows.
Management acknowledged significant uncertainty regarding deposit pricing and liquidity, specifically citing the Federal Reserve's balance sheet reduction as a primary concern. CFO Dmuchowski stated, 'The number one thing that concerns me there outside of competition... is what happens with the Fed's balance sheet... I really think it's a macroeconomic question as to what is the liquidity in the system.' This dependency on external liquidity factors introduces volatility to the expense side of the ledger and could pressure NIM if deposit betas rise faster than anticipated.
Despite the positive outlook on CRE commitments, the portfolio continued to shrink, with period-end balances declining by $111 million during the quarter. While the pace of paydowns slowed, the fact that balances are still contracting implies that the anticipated 'inflection' to growth is not yet fully realized on the balance sheet. Additionally, the zero provision expense and reserve release of $30 million, while boosting current earnings, raise questions about the sustainability of net charge-offs remaining at the low end of the 15-25 basis point guidance range if economic conditions deteriorate.
Management maintained a cautious stance on M&A, reiterating that acquisitions are 'not a priority.' CEO D. Bryan Jordan stated, 'Our priority is delivering higher returns... if we have the opportunity to fill in our branch franchise or deposit base by doing something small, we would consider it.' While this discipline is prudent, it also removes a potential catalyst for accelerated earnings accretion or in-market consolidation that peers might utilize to drive growth, potentially limiting upside relative to a more aggressive M&A strategy.
Overall: Management exhibited a high level of confidence and discipline throughout the call, emphasizing the successful execution of their strategic plan and the sustainability of their 15% ROTCE. The tone shifted from detailing strong operational performance in prepared remarks to a pragmatic but optimistic defense of their 2026 guidance during the Q&A, particularly regarding NIM and loan growth drivers.
Confidence: HIGH - Management consistently used definitive language regarding their targets ('we delivered,' 'we expect') and provided specific metrics to back up their outlook. They expressed strong conviction in their credit quality and capital deployment strategies.
3% to 7% year over year
Mid-single-digit
Flattish (excluding incremental incentive expenses)
15 to 25 basis points
21% to 23%
Near-term 10.75% (fluctuating 10.5% - 10.75%)
Hedging & Uncertainty: Management employed a mix of confident assertions and probabilistic hedging to frame their guidance. While they used definitive language regarding past performance ('We delivered,' 'We hit'), they shifted to conditional language when discussing the 2026 outlook, utilizing ranges ('3% to 7% revenue growth') and qualifiers ('mid-single-digit,' 'flattish'). A notable example of hedging appeared in the discussion of economic models: 'All models are wrong, some are useful.' This phrase, used by the CEO to explain their revenue guidance philosophy, serves as a temporal hedge, acknowledging uncertainty while maintaining confidence in their strategic positioning. They also hedged on deposit costs, attributing future variability to macro factors like the Fed's balance sheet rather than competition, thereby externalizing the risk.
All models are wrong, some are useful. - D. Bryan Jordan, Chairman, President, and CEO
I think we've hit that sustained number on a go-forward basis. - Hope Dmuchowski, CFO
I don't see 350 as the go-forward. I really think we're in the mid-340s. - Hope Dmuchowski, CFO
It's easy to lend money, it's harder to get it back. - D. Bryan Jordan, Chairman, President, and CEO
The number one thing that concerns me there... is what happens with the Fed's balance sheet. - Hope Dmuchowski, CFO
We are traditionally a very disciplined lender. - Hope Dmuchowski, CFO
If we get commission-based expense growth in 2026, it will be a high-class problem. - D. Bryan Jordan, Chairman, President, and CEO
Analyst Sentiment: Analysts were generally inquisitive and focused on the sustainability of the NIM, the drivers behind the revenue guidance, and the specific mechanics of the loan growth (C&I vs. CRE vs. Mortgage Warehouse). There was a clear interest in the '$100 million PPNR opportunity' and the potential for M&A, with analysts pressing for details on the capital allocation strategy.
Management Responses: Management responses were detailed and direct, often using specific data points to support their narrative (e.g., citing specific basis point changes in deposit costs or dollar amounts in loan growth). They effectively deflected M&A concerns by reiterating the priority of organic returns and maintained a consistent narrative on credit quality, emphasizing the 'art' vs. 'science' of reserve modeling to explain low provisions.
Discussion on the 3-7% revenue guidance, with analysts asking for the 'base case' and 'wildcards.' Management clarified the base case is the forward curve, with upside coming from higher loan growth and countercyclical businesses like mortgage refinancing.
Deep dive into expense management, where analysts questioned the sustainability of 'flat' expenses. Management explained that normal inflation is 2.5-3%, but 'flattish' is achievable due to rolling off past tech investments and revenue offsetting commissions.
Detailed examination of the Commercial Real Estate (CRE) portfolio, specifically regarding the 'inflection point.' Management highlighted that while balances declined, commitments increased and the pipeline is up significantly, driven by construction starts.
Inquiries into the NDFI (Non-Depository Financial Institutions) exposure, particularly mortgage warehouse. Management reassured analysts by detailing their collateral control (physical possession of notes) and rigorous field examination processes.
First Horizon has successfully pivoted to a high-return model, achieving a sustainable 15% ROTCE driven by disciplined deposit pricing and a diversified loan portfolio. The 2026 guidance for 3-7% revenue growth appears conservative, given the momentum in C&I lending and the stabilization of CRE, alongside a significant $100M PPNR improvement opportunity embedded in the plan. The bank's aggressive capital return strategy, with nearly $1B in buybacks remaining and a clear path to lower CET1 ratios, provides a compelling floor for the stock. While NIM pressure remains a risk, the strength of the fee-based and counter-cyclical businesses positions FHN to outperform in a falling rate environment. The management team's confidence, backed by specific execution metrics, supports a positive view on the shares.
Management expects the forward curve to serve as the base case for 2026. They anticipate benefits from a falling rate environment, specifically citing a 'pickup in the refinance market' and increased 'construction starts' driven by rate decreases, which fuels loan growth in mortgage warehouse and CRE.
CEO D. Bryan Jordan expressed confidence that the regulatory window for M&A is open under the current administration, stating, 'During the duration of the Trump administration, you're likely to see the regulatory window open.' This reduces overhang on the sector, even if FHN chooses not to participate actively.
A primary concern cited by the CFO is the shrinking of the Fed's balance sheet. She noted, 'I really think it's a macroeconomic question as to what is the liquidity in the system in the coming year that will drive deposit prices much more than competition,' indicating that systemic liquidity could pressure deposit costs.
Management observed 'positive signs for growth' and 'pent-up demand' in the economy. They noted that customer pipelines are increasing across diverse business segments, suggesting a broad-based economic optimism rather than a sector-specific boom.