Will First Horizon’s impressive commercial loan growth be completely wiped out by the relentless rise in regional deposit costs?
How Did First Horizon Perform in the Second Quarter?
In its recently reported second quarter of 2026, First Horizon Corporation delivered a strong financial performance that caught the attention of Wall Street analysts. The regional lender posted adjusted earnings per share (EPS) of $0.54, representing a solid $0.01 increase from the prior quarter. More impressively, this figure reflects a substantial 20% surge compared to the same period last year, when adjusted EPS was $0.09 lower. The bank’s adjusted pre-provision net revenue (PPNR) also climbed 8% year-over-year to $364 million, demonstrating sustained operational momentum.
Chief Executive Officer Bryan Jordan attributed these positive results to disciplined execution and clear strategic objectives. Under his leadership, the bank has successfully expanded its footprint in high-growth Southeastern markets. The market responded to these developments with careful evaluation, as shares of the company closed at $25.15, down 2.22% in recent trading, reflecting broader macroeconomic volatility and sector-wide interest rate uncertainty rather than idiosyncratic operational weakness.
What Is Driving the First Horizon Earnings Momentum?
The primary engine behind the impressive First Horizon Earnings report was robust loan expansion. Period-end loan balances grew by approximately $2 billion compared to the second quarter of 2025. This growth was heavily concentrated in the commercial sector, which expanded by $1 billion quarter-over-quarter. Commercial and industrial loans led the charge with an increase of $710 million, while commercial real estate lending contributed an additional $175 million.
Furthermore, new loan commitments surged by more than 50% year-over-year. This massive pipeline, particularly in commercial real estate, provides a highly visible runway for future revenue. Chief Financial Officer Hope Dmuchowski noted that these commitments will fund over time, supporting flat to slightly higher period-end balances. This strong pipeline positions the bank favorably against larger competitors like JPMorgan Chase or regional rivals like PNC Financial Services, which have faced sluggish loan demand in certain commercial segments.
How Are Rising Deposit Costs Affecting Margins?
While lending remains a major growth driver, managing funding costs is the primary challenge for regional banks today. First Horizon reported a $1.6 billion quarter-over-quarter increase in period-end deposit balances, though this was largely driven by brokered deposits. The average rate paid on interest-bearing deposits rose by five basis points to 2.33% due to aggressive promotional campaigns and intense market competition.
Despite these headwinds, the bank has managed its net interest margin (NIM) effectively. The NIM compressed by a minor three basis points, settling in the high 340-basis-point range, which was entirely in line with previous guidance. The bank’s cumulative deposit beta has remained highly resilient at 66% since the Federal Reserve began its rate-cutting cycle. Management expects deposit costs to stabilize in the second half of the year, although seasonal competition for client funds remains active.
Can Fee Income Offset Fixed Income Volatility?
Non-interest income provided a mixed bag for the regional lender. Fee income rose by $14 million compared to the prior year, supported by steady wealth management inflows. However, fixed income revenue experienced a slight decline. This drop was primarily driven by macroeconomic volatility, geopolitical uncertainty, and fluctuating interest rate expectations, which temporarily reduced trading volumes.
These outcomes are the direct results of our clear objectives, disciplined execution, and the value we demonstrate to clients day in and day out.— Bryan Jordan
Nevertheless, credit quality remained exceptionally stable and well within historical averages. First Horizon ended the quarter with a very healthy Common Equity Tier 1 (CET1) ratio of 10.5%. This robust capital position allowed the bank to comfortably continue its share repurchase program, returning capital to shareholders while maintaining a strong balance sheet to absorb potential credit shocks.
