First Horizon beat on Q2 earnings, drops expense outlook

Liam Kennedy/Bloomberg

First Horizon exceeded analysts' expectations for its second-quarter earnings on Wednesday, and executives shared an optimistic outlook for the second half of the year.

The Memphis, Tennessee-based bank reported $0.45 in diluted earnings per share, $0.03 better than the consensus analyst estimate and reflecting a 32.4% increase in diluted EPS year over year. Revenue came in at $830 million, only slightly missing analysts' estimates of $834 million and increasing by 1.3% year over year from $819 million.

Profits grew 19.6% year over year, with the bank reporting $244 million of net income in Wednesday's earnings report.

The bank kept its revenue outlook unchanged, even in the face of tariff changes, recession fears and general economic uncertainty.

"The borrower is remarkably resilient, and customers are in a very positive place right now," First Horizon CEO Bryan Jordan said during the company's earnings call.

He acknowledged that the outlook was less positive 90 days ago, shortly after President Trump's tariffs announcements shook markets. "But borrowers, process[ing] through some of the early impacts of tariffs and how that's going to affect business, are leaning in more and more to opportunities."

"We see increasing optimism," he continued. "We're likely to see, in our view, improved activity over the back half of this year, as some of these tariff questions get further settled over the next 30, 60, 90 days. We think borrowers are generally excited about the opportunities in front of them and will continue to invest."

In another positive sign, First Horizon lowered its expense outlook for the year. The bank now anticipates its 2025 expenses to be flat to up by 2%, instead of the prior outlook of up by between 2% and 4%. The bank attributed the adjustment to "strong expense management" and lower commissions in countercyclical businesses.

"I don't see us having to go above 2%," First Horizon Chief Financial Officer Hope Dmuchowkski said on the earnings call. "We did a lot of sensitivity analysis on what could our countercyclical businesses do and what would the commission be. If we were to hit the higher end of the revenue, I still believe that we will be under that 2%. If we're at the lower end, you'll be closer to that flat expense guidance that we're giving now."

Notable expenses in the second quarter included a $1 million expense credit for a Federal Deposit Insurance Corp. special assessment and a $4 million deferred compensation credit related to an unspecified business unit divested over a decade ago. Still, noninterest expenses fell by 1.8% year over year from $500 million to $491 million.

Investors responded positively to the bank's earnings report, with shares up 1.9% in midafternoon trading on Wednesday.

Analysts at Jefferies wrote in a research report Wednesday that First Horizon warrants a premium valuation, citing factors that included a stable credit outlook and the company's presence in the high-growth Southeast market.

Operating across 12 states in the southern U.S., First Horizon reported total assets of $82.1 billion as of June 30, 2025. The company had been preparing to consolidate with TD Bank before that deal was called off in 2023.

At the beginning of this year, the bank set aside $100 million to upgrade its technology over a three year period. Halfway into the tech upgrade initiative, some of the internal projects are complete and the bank is still planning to add more customer-facing innovation, such as improved mobile and online banking capabilities.