FHN Q4 Deep Dive: Loan Growth and Deposit Discipline Drive Outperformance

Regional banking company First Horizon (NYSE:FHN) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 7.8% year on year to $888 million. Its non-GAAP profit of $0.52 per share was 12.1% above analysts’ consensus estimates.

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StockStory’s Take

First Horizon’s fourth quarter results were marked by notable revenue and profit outperformance compared to Wall Street expectations, prompting a positive market response. Management credited the quarter’s momentum to disciplined deposit cost management, expanded lending to mortgage companies, and robust performance across the commercial and industrial loan portfolio. CEO D. Bryan Jordan noted, “We delivered increased pre-provision net revenue and return on tangible common equity, hitting 15% in 2025.” Fee income also rose, supported by higher activity in equipment finance leasing. Meanwhile, the bank maintained tight control of credit quality and continued to return capital to shareholders through share repurchases and dividends.

Looking to 2026, First Horizon’s guidance is underpinned by anticipated mid-single-digit loan growth, prudent expense management, and continued investment in technology and client-facing talent. CFO Hope Dmuchowski emphasized the importance of balancing revenue growth with stable expenses, stating, “Our expense outlook remains flattish, with incremental incentive expenses tied to higher countercyclical revenue.” Management highlighted opportunities in treasury management, wealth management, and commercial lending as key drivers for sustained profitability. The company remains focused on deepening client relationships and leveraging a diversified business model to navigate a range of economic scenarios.

Key Insights from Management’s Remarks

Management attributed quarterly performance to lower deposit costs, increased commercial lending activity, and strong execution in fee-earning businesses, while emphasizing continued capital returns and expense discipline.

• Deposit cost improvement: The average rate paid on interest-bearing deposits declined, which management described as the largest contributor to net interest income and margin stability. This was achieved through disciplined pricing and targeted growth in treasury management products.
• Loan growth momentum: The bank achieved notable growth in loans to mortgage companies, driven by increased refinancing activity and strong originations in commercial and industrial lending. Management noted this momentum was broad-based across regions and specialty business lines.
• Fee income uplift: Higher service charges and equipment finance lease income contributed to fee growth, reflecting increased client activity. Management specifically highlighted an uptick in equipment finance as a supporting factor.
• Expense discipline maintained: Adjusted expenses remained controlled, with higher personnel costs tied to incentive compensation from meeting revenue targets. Technology and marketing investments were offset by reductions in other categories.
• Credit quality stability: Net charge-offs remained in line with expectations, and management recorded no provision for credit losses in the quarter. Improved credit trends allowed for a reduction in reserves, reflecting progress in resolving non-pass credits.

Drivers of Future Performance

First Horizon’s 2026 outlook is shaped by expectations for healthy loan growth, expense control, and further deepening of client relationships, balanced against potential macroeconomic uncertainties.

• Loan and deposit growth focus: Management expects mid-single-digit loan growth, with upside potential if refinancing and commercial lending momentum continue. Deposit growth will be supported by new treasury management products and expanded retail banking initiatives.
• Expense and investment balance: While expenses are projected to remain flat, increases may occur if revenue from commission-based businesses exceeds expectations. Ongoing investments in technology and branch network expansion are prioritized to support growth.
• Credit and margin risks: Management identified uncertainty around deposit costs and macroeconomic factors, such as Federal Reserve policy and liquidity in the banking system, as key risks. Credit quality is expected to remain strong, but reserves will be managed dynamically based on loan growth and economic outlook.

Catalysts in Upcoming Quarters

Moving forward, the StockStory team will monitor (1) sustained momentum in loan growth—particularly in commercial and mortgage-related segments, (2) the ability to maintain deposit cost advantages and expand treasury management penetration, and (3) disciplined expense management amid ongoing technology and branch investments. Progress on deepening client relationships and any shifts in credit quality or macroeconomic conditions will also be important signposts for execution.

First Horizon currently trades at $24.28, in line with $24.05 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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