Momentum remains strong for First Horizon in second quarter
July 15 2016 - 6:50AM
The second quarter saw continued strength in First Horizon National
Corp.’s (NYSE:FHN) core businesses of regional banking, First
Tennessee Bank, and fixed income, FTN Financial. Loans and deposits
continued to grow, asset quality remains strong and the company
generated a 48 percent increase in average daily revenue from fixed
income products over 2015 levels.
“Our performance remained strong in the second quarter, with
good numbers across the board,” said Bryan Jordan, First Horizon’s
chairman and CEO. “The customer-focused work of our people
continues to drive strong loan growth, deposit growth and revenue
growth. Additionally, our team remains focused on controlling costs
and at the same time building and investing for the future. It is
rewarding to see that work paying off quarter after
quarter.”
Second Quarter Financial Highlights and
Accomplishments (all comparisons vs 2Q15)
Diluted EPS
$0.24 |
|
ROA 0.91%* |
|
ROE / ROTCE* 10.0% /
11.1%* |
|
CET1
10.1%* |
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Regional
Bank |
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-- Average loan growth of 11%, led by
increases in specialty lending |
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-- Average core deposits up 7% |
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-- Return on assets (ROA) at
1.02%* |
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-- Return on equity (ROE) at
16%* |
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Fixed
Income |
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-- Fixed income product average daily
revenue at $1.1 million, up 48% |
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-- ROA at 1.89%* |
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-- ROE at 33%* |
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Consolidated |
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-- Consolidated net income up 12% and
earnings per share (EPS) up 9% |
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-- Consolidated revenue grew faster
than expenses at 8% versus 4% |
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-- Consolidated net interest income
up 6%; net interest margin (NIM) steady at 2.92% |
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-- Consolidated average loans up 6%;
average deposits up 9% |
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Asset
Quality |
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-- Trends remain strong |
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-- Net charge-offs (NCOs) down 8%;
non-performing assets decreased 17% |
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Capital Deployment |
|
-- Repurchased $11 million, or
830,000 shares |
|
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-- Expanded restaurant franchise
finance business with agreement to purchase $637 million in
restaurant franchise loans from GE Capital; transaction expected to
close in the third quarter |
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|
-- Common equity tier 1 capital ratio
(CET1) above 10% |
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|
* Annualized. Business segment revenue, expense, asset and
equity levels reflect those that are specifically identifiable or
that are allocated based on an internal allocation method. ROTCE
(return on tangible common equity) is a non-GAAP financial measure
reconciled to ROE in the Non-GAAP to GAAP Reconciliation table
below.
CONSOLIDATED SUMMARY RESULTS |
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2Q16 Changes vs. |
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|
(Dollars in thousands, except per share data) |
2Q16 |
|
1Q16 |
|
2Q15 |
|
1Q16 |
|
2Q15 |
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|
Income Statement
Highlights |
|
|
|
|
|
|
|
|
|
|
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|
Net
interest income |
$ |
176,264 |
|
|
$ |
172,074 |
|
|
$ |
166,640 |
|
|
|
2 |
|
% |
|
|
6 |
|
% |
|
|
Noninterest
income |
|
145,415 |
|
|
|
132,731 |
|
|
|
130,293 |
|
|
|
10 |
|
% |
|
|
12 |
|
% |
|
|
Securities gains/(losses), net |
|
99 |
|
|
|
1,574 |
|
|
|
8 |
|
|
|
(94 |
) |
% |
|
|
NM |
|
|
|
|
Total revenue |
|
321,778 |
|
|
|
306,379 |
|
|
|
296,941 |
|
|
|
5 |
|
% |
|
|
8 |
|
% |
|
|
Noninterest expense |
|
226,822 |
|
|
|
226,927 |
|
|
|
218,394 |
|
|
|
* |
|
|
|
|
4 |
|
% |
|
|
Provision for loan losses |
|
4,000 |
|
|
|
3,000 |
|
|
|
2,000 |
|
|
|
33 |
|
% |
|
|
NM |
|
|
|
|
Income before income
taxes |
|
90,956 |
|
|
|
76,452 |
|
|
|
76,547 |
|
|
|
19 |
|
% |
|
|
19 |
|
% |
|
|
Provision for income taxes |
|
30,016 |
|
|
|
24,239 |
|
|
|
21,590 |
|
|
|
24 |
|
% |
|
|
39 |
|
% |
|
|
Net income |
|
60,940 |
|
|
|
52,213 |
|
|
|
54,957 |
|
|
|
17 |
|
% |
|
|
11 |
|
% |
|
|
Net income attributable to noncontrolling
interest |
|
2,852 |
|
|
|
2,851 |
|
|
|
2,851 |
|
|
|
* |
|
|
|
|
* |
|
|
|
|
Net income attributable to controlling interest |
|
58,088 |
|
|
|
49,362 |
|
|
|
52,106 |
|
|
|
18 |
|
% |
|
|
11 |
|
% |
|
|
Preferred stock dividends |
|
1,550 |
|
|
|
1,550 |
|
|
|
1,550 |
|
|
|
* |
|
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|
* |
|
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|
Net income available to
common shareholders |
$ |
56,538 |
|
|
$ |
47,812 |
|
|
$ |
50,556 |
|
|
|
18 |
|
% |
|
|
12 |
|
% |
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Common Stock Data |
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EPS |
$ |
0.24 |
|
|
$ |
0.20 |
|
|
$ |
0.22 |
|
|
|
20 |
|
% |
|
|
9 |
|
% |
|
|
Basic
shares (thousands) |
|
231,573 |
|
|
|
234,651 |
|
|
|
232,800 |
|
|
|
(1 |
) |
% |
|
|
(1 |
) |
% |
|
|
Diluted
EPS |
$ |
0.24 |
|
|
$ |
0.20 |
|
|
$ |
0.22 |
|
|
|
20 |
|
% |
|
|
9 |
|
% |
|
|
Diluted
shares (thousands) |
|
233,576 |
|
|
|
236,666 |
|
|
|
234,669 |
|
|
|
(1 |
) |
% |
|
|
* |
|
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|
Period-end
shares outstanding (thousands) |
|
232,019 |
|
|
|
232,547 |
|
|
|
234,021 |
|
|
|
* |
|
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|
(1 |
) |
% |
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Balance Sheet Highlights
(Period-End) |
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Total
loans, net of unearned income |
$ |
18,589,337 |
|
|
$ |
17,574,994 |
|
|
$ |
16,936,772 |
|
|
|
6 |
|
% |
|
|
10 |
|
% |
|
|
Total
deposits |
|
20,630,177 |
|
|
|
20,327,834 |
|
|
|
18,674,473 |
|
|
|
1 |
|
% |
|
|
10 |
|
% |
|
|
Total
assets |
|
27,541,070 |
|
|
|
26,963,682 |
|
|
|
25,237,392 |
|
|
|
2 |
|
% |
|
|
9 |
|
% |
|
|
Total
liabilities |
|
24,849,146 |
|
|
|
24,320,734 |
|
|
|
22,719,487 |
|
|
|
2 |
|
% |
|
|
9 |
|
% |
|
|
Total equity |
|
2,691,924 |
|
|
|
2,642,948 |
|
|
|
2,517,905 |
|
|
|
2 |
|
% |
|
|
7 |
|
% |
|
|
Asset Quality Highlights |
|
|
|
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Allowance for loan losses |
$ |
199,807 |
|
|
$ |
204,034 |
|
|
$ |
221,351 |
|
|
|
(2 |
) |
% |
|
|
(10 |
) |
% |
|
|
Allowance /
period-end loans |
|
1.07 |
|
% |
|
1.16 |
|
% |
|
1.31 |
|
% |
|
|
|
|
|
|
|
Net
charge-offs |
$ |
8,227 |
|
|
$ |
9,208 |
|
|
$ |
8,977 |
|
|
|
(11 |
) |
% |
|
|
(8 |
) |
% |
|
|
Net
charge-offs (annualized) / average loans |
|
0.19 |
|
% |
|
0.21 |
|
% |
|
0.21 |
|
% |
|
|
|
|
|
|
|
Non-performing assets (NPA) |
$ |
198,943 |
|
|
$ |
219,613 |
|
|
$ |
238,548 |
|
|
|
(9 |
) |
% |
|
|
(17 |
) |
% |
|
|
NPA % (a) |
|
1.03 |
|
% |
|
1.20 |
|
% |
|
1.37 |
|
% |
|
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Key Ratios & Other |
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Return on
average assets (annualized) (b) |
|
0.91 |
|
% |
|
0.79 |
|
% |
|
0.87 |
|
% |
|
|
|
|
|
|
|
Return on
average common equity (annualized) (c) |
|
10.04 |
|
% |
|
8.53 |
|
% |
|
9.56 |
|
% |
|
|
|
|
|
|
|
Net interest margin (d) |
|
2.92 |
|
% |
|
2.88 |
|
% |
|
2.92 |
|
% |
|
|
|
|
|
|
|
Efficiency
ratio (e) |
|
70.51 |
|
% |
|
74.45 |
|
% |
|
73.55 |
|
% |
|
|
|
|
|
|
|
Common
equity tier 1 ratio (f) |
|
10.07 |
|
% |
|
10.33 |
|
% |
|
10.41 |
|
% |
|
|
|
|
|
|
|
Tier 1
ratio (f) |
|
11.31 |
|
% |
|
11.56 |
|
% |
|
11.98 |
|
% |
|
|
|
|
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|
Market capitalization (millions) |
$ |
3,197.2 |
|
|
$ |
3,046.4 |
|
|
$ |
3,667.1 |
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Certain previously reported amounts have been
reclassified to agree with current presentation. |
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NM - Not
meaningful |
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* Amount
is less than one percent. |
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|
(a) NPAs related to the loan portfolio over period-end
loans plus foreclosed real estate and other assets. |
(b) Calculated using net income. |
(c) Calculated using net income available to common
shareholders. |
(d) Net interest margin is computed using net interest
income adjusted to a fully taxable equivalent ("FTE") basis
assuming a statutory federal income tax rate of 35 percent and,
where applicable, state income taxes. |
(e) Noninterest expense divided by total revenue
excluding securities gains/(losses). |
(f) Current quarter is an estimate. |
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Use of Non-GAAP Measures
A financial measure is included in this release that is
non-GAAP, meaning it is not presented in accordance with generally
accepted accounting principles (GAAP) in the U.S. The non-GAAP item
presented in this release is return on tangible common equity, or
ROTCE. This measure is reported to FHN’s management and Board of
Directors through various internal reports. FHN’s management
believes this measure is relevant to understanding the financial
condition, capital position, and financial results of FHN and its
business segments. Non-GAAP measures are not formally defined by
GAAP or codified in the federal banking regulations, and other
entities may use calculation methods that differ from those used by
First Horizon. First Horizon has reconciled ROTCE to a comparable
GAAP measure, ROE, below:
FHN NON-GAAP TO GAAP RECONCILIATION |
|
Quarterly,
Unaudited |
|
|
|
|
|
|
|
|
|
|
(Thousands) |
2Q16 |
|
Average Tangible Common Equity
(Non-GAAP) |
|
|
Average
total equity (GAAP) |
$ |
2,655,488 |
|
|
Less:
Average noncontrolling interest (a) |
|
295,431 |
|
|
Less: Average preferred stock |
|
95,624 |
|
|
(A) Total average common equity |
$ |
2,264,433 |
|
|
Less: Average intangible assets (GAAP) (b) |
|
215,556 |
|
|
(B) Average tangible common equity
(Non-GAAP) |
$ |
2,048,877 |
|
|
|
|
|
|
Annualized Net Income Available to Common
Shareholders |
|
|
(C) Net income available to common shareholders
(annualized) |
$ |
227,395 |
|
|
|
|
|
|
Ratios |
|
|
(C)/(A)
Return on common equity (GAAP) |
|
10.0 |
|
% |
(C)/(B) Return on average tangible common equity
("ROTCE") (Non-GAAP) |
|
11.1 |
|
% |
(a) Included in Total equity on the Consolidated Balance
Sheet. |
(b) Includes goodwill and other intangible assets, net of
amortization. |
|
|
Conference callManagement will hold a
conference call at 8:30 a.m. Central Time today to review earnings
and performance trends. There will also be a live webcast
accompanied by the slide presentation available in the investor
relations section of www.FirstHorizon.com. The call and slide
presentation may involve forward-looking information, including
guidance.
Participants can call toll-free starting at 8:15 a.m. by dialing
888-317-6003 and entering pin number 8464822. The number for
international participants is 412-317-6061. Participants can also
listen to the live audio webcast with the accompanying slide
presentation through the website. A replay will be available from
noon today until midnight July 30. To listen to the replay, dial
877-344-7529 or 412-317-0088. The access code is 10088721. The
event also will be archived and available on the website by
midnight Central Time.
Other informationThis press release contains
forward-looking statements involving significant risks and
uncertainties. A number of important factors could cause actual
results to differ materially from those in the forward-looking
information. Those factors include general economic and financial
market conditions, including expectations of and actual timing and
amount of interest rate movements including the slope of the yield
curve, competition, ability to execute business plans, geopolitical
developments, recent and future legislative and regulatory
developments, inflation or deflation, market (particularly real
estate market) and monetary fluctuations, natural disasters,
customer, investor and regulatory responses to these conditions and
items already mentioned in this press release, as well as critical
accounting estimates and other factors described in First Horizon's
annual report on Form 10-K and other recent filings with the SEC.
First Horizon disclaims any obligation to update any such factors
or to publicly announce the result of any revisions to any of the
forward-looking statements included herein or therein to reflect
future events or developments or changes in expectations.
Presentation of regulatory measures, some of which follow
regulatory definitions rather than GAAP, provides a meaningful base
for comparability to other financial institutions subject to the
same regulations as FHN. Such measures are used by the various
banking regulators in reviewing the performance, stability, and
capital adequacy of the financial institutions they regulate.
Debt Investor MaterialsFirst Horizon expects to
post additional materials for debt investors July 19 in the
investor relations section of www.FirstHorizon.com. First
Horizon will also provide these materials to analysts at upcoming
meetings. The debt investor materials posted may contain
forward-looking statements, including guidance, involving
significant risks and uncertainties, which will be identified by
words such as "believe," "expect," "anticipate," "intend,"
"estimate," "should," "is likely," "will," "going forward" and
other expressions that indicate future events and trends and may be
followed by or reference cautionary statements. A number of factors
could cause actual results to differ materially from those in the
forward-looking information. These factors are outlined in our most
recent earnings press release and in more detail in our most
current 10-Q and 10-K reports. First Horizon disclaims any
obligation to update any of the forward-looking statements that are
made from time to time to reflect future events or developments or
changes in expectations.
About First HorizonThe 4,300 employees of First
Horizon National Corp. (NYSE:FHN) provide financial services
through more than 170 bank locations across Tennessee and the
southern U.S. and 29 FTN Financial offices across the U.S. The
company was founded during the Civil War in 1864 and has the 14th
oldest national bank charter in the country. First Tennessee
has the largest deposit market share in Tennessee and one of the
highest customer retention rates of any bank in the
country. FTN Financial is a capital markets industry leader in
fixed income sales, trading and strategies for institutional
customers in the U.S. and abroad. First Horizon has been recognized
as one of the nation's best employers by Forbes, Working Mother and
American Banker magazines. More information is available
at www.FirstHorizon.com.
FHN-G
CONTACT:
First Horizon Investor Relations, Aarti Bowman, (901) 523-4017
First Horizon Media Relations, James Dowd, (901) 523-4305
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