First Horizon Stock Up Nearly 36% in a Year: How to Approach Now?

Core Viewpoint - First Horizon Corporation (FHN) has outperformed the industry and its peers over the past year, with a share price increase of 36.2% compared to the industry's 10.1% growth [1][7]. Performance Drivers - Rising Loans & Deposit Balances: FHN has experienced solid loan and deposit growth, with a compound annual growth rate (CAGR) of 15% for loans and 15.1% for deposits from 2019 to 2024. As of Q2 2025, loan balances reached $63.3 billion, up 1.7% year over year, while deposit balances rose to $65.6 billion, an increase of 2.1% year over year [5][11]. - Net Interest Income (NII) Growth: Over the past five years, NII has expanded at a CAGR of 15.7%, with continued momentum into the first half of 2025. Anticipated Federal Reserve rate cuts are expected to further benefit NII by easing funding costs and boosting lending activity [12][13]. - Strong Liquidity and Capital Distribution: As of June 30, 2025, FHN had $3.86 billion in cash and cash equivalents, supporting its capital distribution plans, including a 7% increase in dividends and a $1 billion share repurchase plan [14][15][16]. Near-Term Challenges - Rising Expenses: Non-interest expenses have seen a CAGR of 10.6% from 2019 to 2024, with ongoing investments in technology and personnel likely to keep expenses elevated in the near term [17]. - Loan Concentration Risks: A significant portion of FHN's loan portfolio (76.3%) is concentrated in commercial and commercial real estate loans, which may pose risks if the economic environment deteriorates [20]. Earnings Outlook - Earnings estimates indicate a year-over-year growth of 12.26% for the current year and 8.54% for the next year, with consensus estimates for Q3 2025 at $0.44 and for Q4 2025 at $0.45 [22][23].