First Horizon National Signals Growing Earnings Momentum
First Horizon National ((FHN)) has held its Q2 earnings call. Read on for the main highlights of the call.
TipRanks Welcomes a New ETF – NYSE:RANK
- TipRanks has entered a new arena in the investing world, powering the index of an ETF based on its unique data now trading under the ticker RANK on the NYSE.
- RANK tracks the performance of the TipRanks US Momentum Analysts Index, a rules-based index of 50 large U.S. companies.
First Horizon National’s latest earnings call struck an overall upbeat tone, as management highlighted robust earnings momentum, stronger profitability metrics, and disciplined capital deployment. While acknowledging funding pressure and macro volatility, executives emphasized double‑digit adjusted EPS growth, expanding PPNR, healthier credit trends, and a clear line of sight to a sizable profitability uplift.
Strong Earnings and PPNR Expansion
Adjusted EPS climbed to $0.54, up about $0.09 year over year, translating to roughly 20% growth and underscoring improved operating leverage. Adjusted pre‑provision net revenue reached $364 million, up 1% sequentially and 8% versus the first half of 2025, signaling steady core earnings power despite modest margin pressure.
Loan Growth and Production Momentum
Period‑end loan balances expanded by about $2.0 billion from a year ago and rose $953 million sequentially, reflecting broad‑based demand. The quarter delivered roughly $1.0 billion of commercial loan growth, led by $710 million of C&I balances excluding mortgage companies and $175 million of CRE, plus $118 million of loans to mortgage firms and sharply higher new commitments.
Capital Strength and Shareholder Returns
Common Equity Tier 1 finished the quarter at 10.5%, aligning with the bank’s near‑term target and providing flexibility for both growth and capital return. Management continued to lean into buybacks, repurchasing 4 million shares, or $100 million, this quarter for $807 million year to date, while lifting tangible book value per share 7% year over year to $14.53.
Credit Metrics Trending Favorably
Net charge‑offs totaled $33 million, just $4 million higher than the prior quarter, for a net charge‑off ratio of 20 basis points that remained within expectations. The allowance for credit losses fell to 1.24% of loans as nonperforming loans improved by 13 basis points to 0.81%, reflecting positive resolutions and continued tight credit oversight.
Fee Income and Wealth Business Momentum
Fee income increased by $14 million year over year, even after a small sequential decline when excluding deferred compensation, illustrating diversified revenue support. Wealth‑related lines such as brokerage, trust, and insurance benefited from the LPL platform migration and ongoing advisor hiring, with management tying this momentum directly to a more than $100 million PPNR uplift opportunity.
Securities Reinvestment Boosts Yields
Roughly $1.2 billion of securities running off at about 2.8% are being redeployed into instruments yielding 4% or better, providing a tailwind to net interest income as the book reprices. With securities representing around 11% of total assets and being managed down as liquidity allows, the reinvestment strategy is helping offset some of the drag from rising funding costs.
Operational Discipline and Expense Control
Adjusted expenses excluding deferred compensation rose $6 million quarter over quarter, largely due to seasonal factors and targeted hiring in growth areas. Even so, leadership reiterated a flat expense trajectory over the next two quarters and framed spending as tightly controlled, balancing cost discipline with selective investment to support the bank’s growth agenda.
Margin Compression and Funding Competition
Net interest margin slipped by about 3 basis points, ending in the high‑3.40% range as competition for deposits pushed funding costs higher. The average rate on interest‑bearing deposits increased 5 basis points to 2.33%, and management cautioned that intense deposit competition in the second half could keep upward pressure on deposit costs and sustain a relatively high deposit beta.
Brokered Deposits and Funding Mix
Period‑end deposits grew by $1.6 billion versus the prior quarter, but the lift came largely from brokered balances, highlighting a greater reliance on less sticky funding. Executives acknowledged this mix shift as a by‑product of seasonal campaigns and competitive dynamics, suggesting it remains a watch point even as core balances and lending activity grow.
Fixed Income ADR Volatility Weighs on Revenue
Fixed income average daily revenues fell sequentially to about $594,000 as macro and geopolitical volatility dampened client trading and issuance activity. Despite ADRs remaining roughly 8% above last year’s level, the quarter’s pressure contributed to a $1 million fee income decline excluding deferred compensation, underscoring the sensitivity of this business to market swings.
Higher Outside Services and Expense Pickup
Outside services expense jumped by $10 million quarter over quarter, driven mainly by seasonal marketing and campaign spending, while personnel costs increased by $4 million. Together these items produced the $6 million rise in adjusted expenses excluding deferred compensation, though management framed the bump as temporary and consistent with planned initiatives.
Allowance Decline and Potential Vulnerability
The ACL‑to‑loan ratio’s move down to 1.24% reflects better portfolio mix and successful problem credit resolutions, lowering apparent credit risk. However, management acknowledged that external shocks such as higher rates, weaker employment, or geopolitical stresses could necessitate rebuilding reserves, leaving the current lower coverage ratio vulnerable if conditions turn.
Macroeconomic and Geopolitical Uncertainty
Executives repeatedly flagged uncertainty around the Federal Reserve’s rate path and developments in the Middle East and oil markets as key wildcards for the back half of the year. These factors could influence loan and deposit pricing, fixed income ADRs, and overall revenue consistency, making active balance sheet and risk management crucial to sustaining momentum.
Guidance and Outlook
Management reaffirmed full‑year guidance and pointed to tangible progress on all major metrics, from $0.54 of adjusted EPS and $364 million of PPNR to higher loans, stable NIM in the high‑3.40% range, and CET1 at about 10.5%. They reiterated confidence in a $100 million‑plus PPNR opportunity, an essentially flat near‑term expense base, and mid‑ to potentially high‑single‑digit loan growth scenarios, even against a volatile macro backdrop.
First Horizon’s earnings call painted a picture of a bank with building earnings power, stronger capital returns, and cleaner credit, offset by manageable funding and market headwinds. For investors, the key takeaway is a story of steady progress and disciplined execution, with upside tied to delivering on the PPNR opportunity while navigating deposit competition and macro‑driven volatility.
