First Horizon Q1 2025 slides: NIM expansion drives EPS beat amid economic uncertainty

Introduction & Market Context

First Horizon National Corporation (NYSE:FHN) reported its first quarter 2025 results on April 16, beating earnings expectations despite falling short on revenue targets. The regional bank posted adjusted earnings per share of $0.42, exceeding the forecasted $0.40, while revenue came in at $812 million, below the expected $823.88 million. Following the announcement, First Horizon’s stock experienced a slight decline of 0.51%, closing at $17.56.

The bank’s performance comes amid heightened economic uncertainty, with management citing concerns about potential tariffs and related policies contributing to a cautious outlook. Despite these challenges, First Horizon maintained its 2025 guidance, highlighting the strength of its diversified business model and Southeastern U.S. footprint.

Quarterly Performance Highlights

First Horizon delivered solid financial results in the first quarter, with adjusted pre-provision net revenue (PPNR) increasing by $16 million from the previous quarter. The bank’s net interest margin expanded by 9 basis points to 3.42%, while adjusted expenses decreased by $20 million, demonstrating management’s focus on operational efficiency.

As shown in the following financial summary, the bank reported net income of $222 million and GAAP EPS of $0.41 for Q1 2025:

On an adjusted basis, First Horizon achieved a return on tangible common equity (ROTCE) of 13.1% and maintained an efficiency ratio of 59.1%. The bank’s credit performance remained strong, with a net charge-off ratio of 0.19%, in line with 2024 quarterly averages.

The following slide highlights the key earnings takeaways for the quarter, including the expansion in net interest margin and the significant capital return to shareholders:

NIM Expansion & Deposit Strategy

A standout aspect of First Horizon’s Q1 performance was its successful deposit pricing discipline, which drove a 9 basis point expansion in net interest margin. The bank reduced average interest-bearing deposit costs by 38 basis points to 2.72%, more than offsetting a 20 basis point reduction in average loan yields.

The following chart illustrates how deposit pricing discipline contributed to NIM expansion and stable net interest income:

First Horizon maintained strong deposit retention while actively repricing its deposit base. The bank retained 95% of the $16 billion in deposits and CDs that repriced during the quarter, while achieving a 34 basis point reduction in the weighted average rate. Period-end deposits totaled $64.2 billion, down 2% from the previous quarter, primarily due to the payoff of $559 million in brokered CDs.

The composition of the bank’s deposit base over the past five quarters is shown in the following chart:

Loan Portfolio & Credit Quality

First Horizon’s period-end loans decreased by 1% from the previous quarter to $62.2 billion, primarily due to continued paydowns in commercial real estate. However, the bank saw modest growth in its commercial and industrial (C&I) portfolio, excluding loans to mortgage companies.

The following chart shows the diversification of the bank’s loan portfolio across its geographic footprint:

Credit quality remained strong, with net charge-offs of $29 million (0.19% of average loans) in line with 2024 quarterly averages. The allowance for credit losses (ACL) to loans ratio increased slightly to 1.45%, reflecting increased macroeconomic uncertainty. Management noted that the provision increase was driven by a more cautious economic outlook, with a higher probability assigned to potential recession scenarios.

The following slide illustrates the bank’s credit performance metrics:

Capital Management & Shareholder Returns

First Horizon continued its aggressive capital return strategy, repurchasing $360 million of stock during the quarter. Despite this significant capital deployment, the bank maintained a strong Common Equity Tier 1 (CET1) ratio of 10.9%, slightly below its target of 11%.

Tangible book value per share increased by $0.32 to $13.17, driven by net income accretion and lower mark-to-market impacts, partially offset by the $0.15 common dividend and share buybacks.

The following chart shows the bank’s capital ratios and tangible book value per share trends:

2025 Outlook & Strategic Focus

First Horizon maintained its 2025 guidance, projecting adjusted revenue growth (excluding deferred compensation) of flat to up 4% and adjusted expense growth of 2% to 4%. The bank expects net charge-offs to remain in the range of 15 to 25 basis points and aims to maintain a CET1 ratio between 10.5% and 11.0%.

The following slide outlines the bank’s 2025 outlook:

Management reiterated its intermediate-term objective of achieving a 15%+ return on tangible common equity, citing strategic capital management, geographic footprint advantages, a diversified business model, efficiency improvements, and a strong credit culture as key drivers.

Economic Uncertainty & Positioning

First Horizon is actively managing its balance sheet to navigate economic uncertainty and interest rate sensitivity. The bank disclosed that 65% of its deposits are insured or collateralized, providing a stable funding base. Its loan portfolio is 55% variable rate, creating a modestly asset-sensitive profile.

The following slide illustrates the bank’s approach to liquidity and interest rate risk management:

Management addressed concerns about potential tariffs and economic uncertainty during the earnings call, noting that while borrowers are taking a "wait and see" approach, there remains an inherent optimism in their customer base. The bank is closely monitoring sectors with potential exposure to tariffs, including retail trade, consumer finance, manufacturing, and construction.

CEO Brian Jordan emphasized the strength of First Horizon’s diversified business model, stating, "Our diversified business model provides us with a notable edge, offering countercyclical revenue support that allows us to maintain stability during economic fluctuations."

First Horizon’s track record of strong results through various economic cycles is supported by its stable, diversified business mix, as shown in the following chart:

Despite the current economic uncertainty, First Horizon appears well-positioned to navigate potential challenges through its disciplined approach to credit, deposit pricing, and capital management. The bank’s focus on operational efficiency and strategic capital deployment should continue to support its goal of delivering sustainable returns to shareholders.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.