FIRST HORIZON CORP (FHN): what the price assumes

Generated: 2026-07-25 · Exported: 2026-07-26 · Source: https://boothcheck.com/report/FHN

Headline

Field	Value
Ticker	FHN
Company	FIRST HORIZON CORP
Sector / Industry	Financial Services
Current price	$25.52/sh

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	financials
Return on equity needed	11.7%
Return on equity now	11.2%
ROE gap	+0.5pp
Price-to-book	1.44x

Solve inputs: computed at a 9.4% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~1.4pp.

How unusual the bet is: within-range

Reference	Value
vs own history	+1.02σ
cohort percentile (of 165 peers)	63
sustained it ~10 years at this level	71%
implied end-window share	0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	1.02x	3	expensive
Earnings	0.79x	2	justifies
Relative	0.37x	3	justifies
Growth	0.85x	1	justifies

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.9%); the inversion above states its own rate.

Per-Model Detail (n=9)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	—	—	no	—
Bank Fair Value (P/TBV)	—	$21.08	1.21x	yes	TBVPS $15.53 × 1.36x (ROE (TTM) 11.2% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 1.15% allowance/loans → ×0.93)
Relative Valuation	Relative	$23.00	1.11x	yes	P/E 10x (static sector reference · 2026-04), scenarios: 8.3x / 10.0x / 11.7x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$22.78	1.12x	yes	BV/sh $18.83, ROE (TTM) 11.2%, ke 9.3%
Two-Stage Excess Return	Asset	$24.96	1.02x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$29.99	0.85x	yes	Rev $3.5B, growth 9% (input: historical growth; tapered), Terminal P/S: 3.0x / 3.6x / 4.2x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$69.65	0.37x	yes	EPS $1.99, growth 35% (input: historical EPS growth), PEG=0.35 (Undervalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	—	—	no	—
Residual Income	Asset	—	—	no	—
Graham Number	Asset	$29.04	0.88x	yes	√(22.5 × EPS $1.99 × BVPS $18.83) — Graham's conservative floor
EV/EBITDA Relative	Relative	—	—	no	—
FCF Yield	Earnings	—	—	no	—
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	$64.21	0.40x	yes	EPS $1.99 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	—	—	no	—
PEG Fair Value	Relative	$74.63	0.34x	yes	EPS $1.99 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$21.51	1.19x	yes	EPS $1.99 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Share count CAGR (buyback)	-3.0%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

• Almost a quarter of revenue comes from fees rather than lending, and the largest fee line is a fixed-income dealer that the company says tends to perform better when rates decline or markets are moderately volatile, which tends to partially offset net interest margin compression.
• The near-term pressure point is funding: the June quarter's lending margin slipped three basis points because deposit costs rose on increased brokered deposits, the most expensive and least loyal money a bank can buy.
• Diluted share count is down 7% from a year earlier after another 100 million dollars of repurchases in the June quarter, so earnings per share are climbing faster than earnings.

Bull Case

Regional banks get valued off book value, and for most of them that is fair, because a bank is a pile of loans funded by deposits and the book is a decent proxy for the pile. First Horizon does not entirely fit. In the June quarter, noninterest income was 211 million dollars of 887 million dollars in total revenue, 23.73% of the whole, up from 22.63% in the March quarter and 22.73% a year earlier. A multiple of book prices the loan book. It has no way to price the rest.

The rest is mostly a fixed-income securities business, and its economics run against the bank's. The 10-K states the mechanism directly: our fixed income business tends to perform better when rates decline or markets are moderately volatile, which tends to partially offset net interest margin compression. Work through why. When rates fall, loans reprice downward faster than deposits do, and the lending spread narrows. At that same moment banks and insurers step in to buy bonds before yields drop further, and the dealer selling them those bonds gets busier. Two businesses under one roof, pulling opposite ways, with no derivative required to arrange it.

That dealer is not a retail operation. Its clients are depositories (including banks, thrifts, and credit unions) and non-depositories (including money managers, insurance companies, governmental units and agencies, public funds, pension funds, and hedge funds). It is a wholesale distribution franchise with a regional bank attached, which is a different animal from a regional bank with a brokerage desk.

The lending half is meanwhile doing what it is supposed to. Net income available to common shareholders was 260 million dollars in the June quarter, or 54 cents a share, against 233 million dollars and 45 cents a year earlier, with first-half profit up 16% year over year on 3% loan growth. Return on average tangible common equity reached 15.2% and return on average assets 1.31%. Credit moved the right way too: nonperforming loans fell 75 million dollars to 531 million, and the allowance for credit losses eased to 1.24% of loans from 1.28%.

And unlike banks that have run into a legal ceiling at home, this one has room. The 10-K notes that As of June 30, 2025, the FDIC reports that the Bank held approximately 13% of such deposits in Tennessee, well short of the 30% threshold that would block further in-state bank acquisitions. Growth by purchase is still on the table. In the meantime the company is buying its own shares: diluted count of 480 million in the June quarter against 514 million a year earlier, with 100 million dollars retired in the quarter and common equity tier 1 capital held at 10.5%.

Bear Case

Look at which valuation approaches reach highest here, and then at how they got there. The ones landing furthest above the current quote arrive by taking a historical earnings growth rate drawn from a recovery period and projecting it forward as though it were a run rate. A bank cannot compound earnings faster than it can build capital, so that extrapolation is not describing a business, it is describing a rebound that already happened. The conservative approaches tell a different story. The methods that start from book equity and the excess return earned on it put the price about 2% above the asset-value methods, essentially level. And the one method built specifically for banks, which values tangible equity and then discounts for credit reserves, reads the price as higher than its own estimate. When the careful methods cluster at the price and the generous ones need an extrapolation to get above it, the careful ones are the ones to believe.

That lines up with what the price is asking for. It embeds a sustained return on common equity of about 11.7%. The trailing return has been about 11.2%, so the ask is barely a stretch against recent performance. Measured against the full record the calculation draws on, though, the average was about 6.3%. The bear case is not that the bank is performing badly. It is that a good stretch is being treated as the permanent condition, and only about 71% of firms that reach this level of return have held it for a decade.

The funding side is where the strain shows first. The June quarter's net interest margin fell three basis points to 3.49%, and the company named the cause: higher deposit costs tied to increased brokered deposits. The cost of interest-bearing deposits rose five basis points to 2.33%, with a spot rate of roughly 2.43% at quarter end. Brokered money is rate-shopping money. The 10-K is candid that the price of such funding depends on marketplace perceptions of the financial soundness of FHN, which include such factors as capital levels, asset quality, and reputation, which is to say it gets expensive exactly when it is most needed.

Then there is the correlation nobody puts on a slide. Commercial loans run about 49 billion dollars of a 64 billion dollar book, commercial real estate is roughly a fifth of all lending, and the 10-K discloses that Taken together, approximately 25% of the C&I portfolio was sensitive to impacts on the financial services industry. So a quarter of the largest lending portfolio is exposed to financial firms, while the fixed-income business sells bonds to banks, thrifts and credit unions. Two large revenue sources, one underlying customer base. That is concentration wearing the costume of diversification.

The offsetting hedge also has a specific failure mode, and the company names it: A flat or inverted yield curve may reduce our net interest margin and adversely affect our lending and fixed income businesses. Falling rates help the dealer and hurt the lender. A flat curve hurts both at once. Credit quality is genuinely improving right now, with net charge-offs of 20 basis points and nonperforming loans down in the quarter, so the bear here is not a credit call. It is that the earnings being capitalized depend on a rate environment that is neither guaranteed nor controllable.

Valuation

Banks are priced on the return they earn against the capital they hold, which is why the useful ratio is the one against book value rather than against earnings. The shares trade near 1.44 times book, and that embeds a sustained return on common equity of about 11.7%. Trailing performance has been about 11.2%, so the market is asking for a modest improvement rather than a transformation. Of the firms that have reached this level of return, only about 71% have held it for a decade.

The methods spread out in a lopsided way. Only the asset-value methods sit close to the current quote, with the price about 2% above them. Every other approach lands higher. Nothing in the set calls the shares expensive. But the size of those gaps is not evenly earned, because the widest of them come from approaches that multiply today's earnings by a growth rate borrowed from the past few years, and bank earnings are bounded by the capital behind them in a way that industrial earnings are not.

Tangible equity is where the sharpest read comes from. Tangible book value per common share was 14.53 dollars at the end of June, up 7% from a year earlier. The difference between that and total book is goodwill and other intangibles left over from acquisitions, and the bank-specific approach both declines to pay for them and applies a further discount for the credit reserve carried against the loan book. That method reads today's quote as ahead of its own estimate, which makes it the one dissenting voice in an otherwise supportive set.

The balance-sheet question for a lender is capital and payout, not coverage or net debt. Common equity tier 1 stood at 10.5% in the June quarter, unchanged from March, with total capital of 13.4% and a loans-to-deposits ratio just under 96%. The share count has come down about 3% a year since early 2022, and faster than that recently: 480 million diluted shares in the June quarter against 514 million a year earlier. Retiring stock at that pace is a real lever on earnings per share even if the underlying return goes nowhere.

Which leaves the question the ratios cannot settle. Fee income was 23.73% of total revenue in the June quarter, against 22.63% in March and 22.73% a year before. If that share holds or grows, a book-value multiple is the wrong instrument for measuring this company. If it slips back toward the lending business, the multiple is exactly right and the price already reflects it.

Catalysts

Second-quarter results landed on July 15, 2026. Net income available to common shareholders was 260 million dollars, or 54 cents a share, against 257 million dollars and 53 cents in the March quarter and 233 million dollars and 45 cents a year earlier. Return on average common equity was 12.3% for the quarter and return on average tangible common equity 15.2%. Net interest income on a taxable-equivalent basis rose 9 million dollars to 679 million, while the margin slipped to 3.49%. Noninterest income rose 16 million dollars to 211 million, helped by an 18 million dollar increase in deferred compensation income and 3 million dollars more in brokerage, trust and insurance, and held back by a 7 million dollar decline in fixed income. Noninterest expense rose 26 million dollars to 531 million. The effective tax rate fell to 19.5% from 22.2%.

Capital actions ran alongside. The company repurchased 100 million dollars of stock during the quarter while holding common equity tier 1 at 10.5%, and it redeemed a series of preferred stock, which produced a 3 million dollar deemed dividend charge in the quarter. The depositary shares tied to that series were removed from listing on the New York Stock Exchange on May 1, 2026.

Two lines are worth following into the next print. The first is deposit cost: the average cost of interest-bearing deposits was 2.33% for the quarter but the spot rate at quarter end was roughly 2.43%, so the reported average is behind where the book actually sits. The second is fixed income, which fell 7 million dollars in the quarter and is the piece of the business that behaves least like the rest of it.

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

second-quarter 2026 earnings release, July 15, 2026 · Form 25-NSE, filed May 1, 2026