First Horizon (NYSE:FHN) reported higher adjusted earnings and continued loan growth in the second quarter of 2026, with management saying the bank remains on track with its full-year expectations despite deposit competition, rate uncertainty and volatility affecting fixed income revenue.
Chairman, President and Chief Executive Officer Bryan Jordan said adjusted earnings per share rose $0.09, or 20%, from a year earlier, while adjusted pre-provision net revenue increased 8%. Period-end loan balances grew by about $2 billion compared with the second quarter of 2025.
Earnings, margin and loan growth
Chief Financial Officer Hope Dmuchowski said adjusted EPS increased $0.01 from the prior quarter to $0.54, while adjusted PPNR rose 1% to $364 million. Average loan balances increased by $1.5 billion during the quarter. Compared with the first half of 2025, adjusted return on common equity rose by more than 180 basis points, adjusted PPNR increased 8%, and adjusted EPS was up $0.21.
Net interest income rose by $9 million from the prior quarter, reflecting loan growth. Net interest margin compressed by three basis points, settling in the high 340-basis-point range, which Dmuchowski said was in line with expectations given the interest rate environment.
Period-end loans increased $953 million from the prior quarter, driven by $1 billion in commercial loan growth. That included $710 million in commercial and industrial growth, excluding loans to mortgage companies, and $175 million in commercial real estate growth. Loans to mortgage companies rose $118 million, reflecting normal home-buying seasonality, though management noted some headwinds from the rate environment.
Dmuchowski said new commitments were up more than 50% year over year, driven by commercial real estate activity, creating an opportunity for flat to slightly higher period-end balances as construction projects fund over time. She said loan pipelines remained strong across business lines and the company’s footprint, while commercial loan spreads remained generally consistent with prior quarters in a competitive market.
Deposits and funding costs remain a focus
Period-end deposit balances increased $1.6 billion from the prior quarter, primarily due to growth in brokered deposits. The average rate paid on interest-bearing deposits increased five basis points to 2.33%.
Dmuchowski said deposit costs increased due to competition and portfolio mix, but the company’s cumulative deposit beta remained “strong” at 66% since rates began falling in September 2024. She said average costs on client interest-bearing deposits were roughly flat in the quarter.
During the question-and-answer portion of the call, Dmuchowski said she expects deposit costs in the third quarter and the rest of the year to look similar to 2025 if the current rate trajectory continues. She said competition typically increases in the second and third quarters because of deposit offers and acquisition campaigns.
Jordan said the market appears to be moving through a “secular change” in which deposit costs are drifting toward wholesale funding costs, aided by greater transparency around interest rates. He said rates could “drift up a little bit” over the next quarter, though he emphasized the uncertainty around the rate outlook.
Fee income, fixed income volatility and wealth momentum
Fee income decreased $1 million from the prior quarter, excluding deferred compensation, but was up $14 million from a year earlier. Dmuchowski said fixed income revenue declined as ADRs fell to 594,000, though that was still an 8% increase year over year. She attributed the decline to macroeconomic volatility, a changing geopolitical environment and uncertainty over interest rates.
The fixed income decline was partly offset by higher brokerage, trust and insurance income, which management attributed to continued momentum in wealth management and increased client activity. Dmuchowski said the company’s move to the LPL platform in the third quarter of 2025 helped deepen product penetration with existing clients and bring new clients onto the platform.
Jordan said volatility in rates would continue to have a real-time effect on the fixed income business. He said the back half of 2026 did not feel likely to be as strong as the back half of 2025, though he noted positive signs, including a strong week in the business shortly before the call.
Expenses, credit and capital
Adjusted expenses, excluding deferred compensation, increased $6 million from the prior quarter. Personnel expenses rose $1 million, driven by a $4 million increase in salaries and benefits tied to hiring and higher day count. Outside services increased $10 million, primarily due to seasonal marketing expenses, partly offset by lower client cash incentive payouts in other noninterest expenses.
Dmuchowski said the company expects expenses to be flat over the next two quarters. She said some movement may occur between outside services and other expense categories as marketing campaigns shift from acquisition costs to cash incentive payouts.
Credit metrics remained within management’s expectations. Net charge-offs increased $4 million to $33 million, and the net charge-off ratio was 20 basis points. The provision for credit losses was $15 million. The allowance for credit losses-to-loans ratio declined to 1.24%, driven by portfolio mix changes and credit resolutions, while nonperforming loans declined 13 basis points to 81 basis points.
Chief Credit Officer Thomas Hunt said the company continued to focus on minimizing losses and maximizing recoveries rather than pursuing quick resolutions. He said non-depository financial institution exposure remained steady with no major concerns, and consumer-sensitive sectors such as retail, restaurants and trucking remained areas to monitor, though they had been “surprisingly resilient.”
First Horizon ended the quarter with a common equity tier 1 ratio of 10.5%, in line with its near-term target. The company repurchased 4 million shares for $100 million during the quarter. Tangible book value per share ended at $14.53, up 7% year over year, which Dmuchowski said included $857 million of buybacks and an increase to the dividend.
Dmuchowski said First Horizon continues to analyze the potential impact of Basel III and currently expects about a 10% reduction in risk-weighted assets under the standardized approach as proposed. She said capital allocation priorities remain organic loan growth, dividends and then share repurchases.
Jordan said the company remains focused on building full client relationships, improving profitability and maintaining expense discipline while investing in talent, technology and tools. “Our job is to stack one good quarter on top of the next by serving clients well and staying disciplined, rather than reacting to economic volatility and market changes,” he said.
About First Horizon (NYSE:FHN)
First Horizon Corporation, headquartered in Memphis, Tennessee, is a diversified financial services company providing an array of retail, commercial and wealth management solutions. As the largest bank-based financial services firm in Tennessee, First Horizon operates through a network of branches and digital platforms across the Southeastern United States, offering personal and business banking, mortgage origination and servicing, payment solutions and treasury management services.
Tracing its origins to the First National Bank of Memphis established in 1864, First Horizon has grown through strategic acquisitions and organic expansion to serve customers in Tennessee, Texas, North Carolina, South Carolina, Georgia and Florida.
