Execution, discipline drive 1Q17 progress at First Horizon
April 13 2017 - 6:55AM
Progress toward long-term “bonefish” financial goals continued in
the first quarter at First Horizon National Corp. (NYSE:FHN).
Net interest income, deposits and loans were up significantly year
over year, with strong performance in growth markets and commercial
loans, particularly specialty banking areas. Credit quality
reflected continued excellent underwriting discipline. With
revenue stable and expenses down, the efficiency ratio improved
from the same period last year. The company increased its
quarterly common dividend by 29 percent during the quarter and
closed its acquisition of Coastal Securities on April 3, just after
the quarter ended.
“I am pleased with the continued progress we made
in the first quarter toward our long-term profitability goals,”
said Bryan Jordan, First Horizon’s chairman and CEO. “Loan
pipelines and commitments remain strong as our bankers focus on
quality opportunities, credit quality remains excellent, our
relationships with current and new customers continue to grow, and
the closing of the Coastal acquisition adds talented people, new
products and new customers to enhance our fixed income
business. I am pleased to report continued execution of our
key strategic priorities.”
1Q17 Financial Highlights (all
comparisons vs 1Q16)
Diluted EPS $0.23 |
|
ROA1
0.82% |
|
ROE1
9.4% |
|
ROTCE1
10.3% |
|
CET1210.2% |
|
|
|
|
Regional Bank |
|
-- Total
revenue growth of 9% significantly outpaced expense growth of 2%,
improving the efficiency ratio 411 basis points |
|
|
-- Net
interest income up 12%, benefitting from 13% average loan growth
and 9% increase in average deposits |
|
|
-- ROA at
1.46%; ROE at 23% |
|
|
|
Fixed Income |
|
-- Fixed
income product average daily revenue at $689,000 |
|
|
--
Acquisition of Coastal Securities, a national leader in trading,
securitization and analysis of Small Business Administration loans,
expands existing SBA trading activities and
establishes a fifth major trading desk. |
|
|
|
Consolidated |
|
-- Net
income available to common shareholders up 13%, diluted EPS up
15% |
|
|
-- Net
interest income up 10% |
|
|
-- Average
loans up 9%; average deposits up 14% |
|
|
--
Efficiency ratio improved 198 basis points |
|
|
--
Nonperforming assets down 27% |
|
|
|
Capital Deployment |
|
--
Consolidated ROTCE at 10.3%, up 89 basis points |
|
|
--
Increased quarterly common dividend 29%, to $0.09 per share |
|
|
|
1ROA and ROTCE are annualized numbers. ROTCE is
non-GAAP and reconciled to ROE in the table below. Business
segment revenue, expense, asset and equity levels reflect those
that are specifically identifiable or are allocated based on an
internal allocation method. 2Current estimate |
|
Consolidated summary results |
|
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Quarterly,
Unaudited |
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1Q17 Changes vs. |
|
(Dollars in thousands, except per share data) |
1Q17 |
|
4Q16 |
|
1Q16 |
|
4Q16 |
|
1Q16 |
|
Income Statement
Highlights |
|
|
|
|
|
|
|
|
|
|
|
Net
interest income |
$ |
189,708 |
|
|
$ |
195,551 |
|
|
$ |
172,074 |
|
(3 |
) |
% |
|
10 |
|
% |
|
Noninterest
income |
|
116,895 |
|
|
|
124,209 |
|
|
|
132,731 |
|
(6 |
) |
% |
|
(12 |
) |
% |
|
Securities gains/(losses), net |
|
44 |
|
|
|
(132 |
) |
|
|
1,574 |
|
NM |
|
|
(97 |
) |
% |
|
Total revenue |
|
306,647 |
|
|
|
319,628 |
|
|
|
306,379 |
|
(4 |
) |
% |
|
* |
|
|
Noninterest expense |
|
222,205 |
|
|
|
237,897 |
|
|
|
226,927 |
|
(7 |
) |
% |
|
(2 |
) |
% |
|
Provision for loan losses |
|
(1,000 |
) |
|
|
- |
|
|
|
3,000 |
|
NM |
|
|
NM |
|
|
Income before income taxes |
|
85,442 |
|
|
|
81,731 |
|
|
|
76,452 |
|
5 |
|
% |
|
12 |
|
% |
|
Provision for income taxes |
|
27,054 |
|
|
|
24,008 |
|
|
|
24,239 |
|
13 |
|
% |
|
12 |
|
% |
|
Net income |
|
58,388 |
|
|
|
57,723 |
|
|
|
52,213 |
|
1 |
|
% |
|
12 |
|
% |
|
Net income attributable to noncontrolling interest |
|
2,820 |
|
|
|
2,879 |
|
|
|
2,851 |
|
(2 |
) |
% |
|
(1 |
) |
% |
|
Net income attributable to controlling interest |
|
55,568 |
|
|
|
54,844 |
|
|
|
49,362 |
|
1 |
|
% |
|
13 |
|
% |
|
Preferred stock dividends |
|
1,550 |
|
|
|
1,550 |
|
|
|
1,550 |
|
* |
|
|
* |
|
|
|
Net
income available to common shareholders |
$ |
54,018 |
|
|
$ |
53,294 |
|
|
$ |
47,812 |
|
1 |
|
% |
|
13 |
|
% |
|
Common Stock Data |
|
|
|
|
|
|
|
|
|
|
|
EPS |
$ |
0.23 |
|
|
$ |
0.23 |
|
|
$ |
0.20 |
|
* |
|
|
15 |
|
% |
|
Basic
shares (thousands) |
|
233,076 |
|
|
|
232,731 |
|
|
|
234,651 |
|
* |
|
|
(1 |
) |
% |
|
Diluted
EPS |
$ |
0.23 |
|
|
$ |
0.23 |
|
|
$ |
0.20 |
|
* |
|
|
15 |
|
% |
|
Diluted
shares (thousands) |
|
236,855 |
|
|
|
235,590 |
|
|
|
236,666 |
|
1 |
|
% |
|
* |
|
|
|
Period-end
shares outstanding (thousands) |
|
233,883 |
|
|
|
233,624 |
|
|
|
232,547 |
|
* |
|
|
1 |
|
% |
|
Balance Sheet Highlights
(Period-End) |
|
|
|
|
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|
Total
loans, net of unearned income |
$ |
19,090,074 |
|
|
$ |
19,589,520 |
|
|
$ |
17,574,994 |
|
(3 |
) |
% |
|
9 |
|
% |
|
Total
deposits |
|
23,479,841 |
|
|
|
22,672,363 |
|
|
|
20,327,834 |
|
4 |
|
% |
|
16 |
|
% |
|
Total
assets |
|
29,618,600 |
|
|
|
28,555,231 |
|
|
|
26,963,682 |
|
4 |
|
% |
|
10 |
|
% |
|
Total
liabilities |
|
26,878,140 |
|
|
|
25,850,147 |
|
|
|
24,320,734 |
|
4 |
|
% |
|
11 |
|
% |
|
Total equity |
|
2,740,460 |
|
|
|
2,705,084 |
|
|
|
2,642,948 |
|
1 |
|
% |
|
4 |
|
% |
|
Asset Quality Highlights |
|
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|
|
|
Allowance for loan losses |
$ |
201,968 |
|
|
$ |
202,068 |
|
|
$ |
204,034 |
|
* |
|
|
(1 |
) |
% |
|
Allowance /
period-end loans |
|
1.06 |
|
% |
|
1.03 |
|
% |
|
1.16 |
% |
|
|
|
|
|
|
Net
charge-offs |
$ |
(900 |
) |
|
$ |
(511 |
) |
|
$ |
9,208 |
|
(76 |
) |
% |
|
NM |
|
|
|
Net
charge-offs (annualized) / average loans |
|
NM |
|
|
|
NM |
|
|
|
0.21 |
% |
|
|
|
|
|
|
Non-performing assets (NPA) |
$ |
161,284 |
|
|
$ |
164,623 |
|
|
$ |
219,613 |
|
(2 |
) |
% |
|
(27 |
) |
% |
|
NPA % (a) |
|
0.80 |
|
% |
|
0.80 |
|
% |
|
1.20 |
% |
|
|
|
|
|
|
Key Ratios & Other |
|
|
|
|
|
|
|
|
|
|
|
Return on
average assets ("ROA") (annualized) (b) |
|
0.82 |
|
% |
|
0.80 |
|
% |
|
0.79 |
% |
|
|
|
|
|
|
Return on
average common equity ("ROE") (annualized) (c) |
|
9.40 |
|
% |
|
9.00 |
|
% |
|
8.53 |
% |
|
|
|
|
|
|
Return on
tangible common equity ("ROTCE") (annualized) (d) |
|
10.33 |
|
% |
|
9.89 |
|
% |
|
9.44 |
% |
|
|
|
|
|
|
Net interest margin (e) |
|
2.92 |
|
% |
|
3.00 |
|
% |
|
2.88 |
% |
|
|
|
|
|
|
Efficiency
ratio (f) |
|
72.47 |
|
% |
|
74.40 |
|
% |
|
74.45 |
% |
|
|
|
|
|
|
Common
equity tier 1 ratio ("CET1") (g) |
|
10.15 |
|
% |
|
9.94 |
|
% |
|
10.33 |
% |
|
|
|
|
|
|
Tier 1
ratio (g) |
|
11.30 |
|
% |
|
11.17 |
|
% |
|
11.56 |
% |
|
|
|
|
|
|
Market capitalization (millions) |
$ |
4,326.8 |
|
|
$ |
4,674.8 |
|
|
$ |
3,046.4 |
|
|
|
|
|
|
|
Certain previously reported amounts have been
reclassified to agree with current presentation. |
|
NM - Not
meaningful |
|
* Amount
is less than one percent. |
|
(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) |
This non-GAAP measure is reconciled to ROE in the non-GAAP to
GAAP reconciliation. |
(e) |
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. |
(f) |
Noninterest expense divided by total revenue excluding
securities gains/(losses). |
(g) |
Current quarter is an estimate. |
|
|
Use of Non-GAAP MeasuresA 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 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:
Non-GAAP to GAAP Reconciliation |
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Quarterly,
Unaudited |
|
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|
1Q17 Changes vs. |
|
(Thousands) |
1Q17 |
|
|
4Q16 |
|
|
1Q16 |
|
|
4Q16 |
|
1Q16 |
|
Average Tangible Common Equity
(Non-GAAP) |
|
|
|
|
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|
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|
Average
total equity (GAAP) |
$ |
2,722,668 |
|
|
$ |
2,746,828 |
|
|
$ |
2,644,374 |
|
|
|
|
|
|
|
|
Less:
Average noncontrolling interest (a) |
|
295,431 |
|
|
|
295,431 |
|
|
|
295,431 |
|
|
|
|
|
|
|
|
Less: Average preferred stock (a) |
|
95,624 |
|
|
|
95,624 |
|
|
|
95,624 |
|
|
|
|
|
|
|
|
(A) Total average common equity |
$ |
2,331,613 |
|
|
$ |
2,355,773 |
|
|
$ |
2,253,319 |
|
|
|
|
|
|
|
|
Less: Average intangible assets (GAAP) (b) |
|
211,757 |
|
|
|
213,019 |
|
|
|
216,855 |
|
|
|
|
|
|
|
|
(B) Average tangible common equity (Non-GAAP) |
$ |
2,119,856 |
|
|
$ |
2,142,754 |
|
|
$ |
2,036,464 |
|
|
|
|
|
|
|
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|
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|
Annualized Net Income Available to Common
Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(C) Net income available to common shareholders
(annualized) (GAAP) |
$ |
219,073 |
|
|
$ |
212,017 |
|
|
$ |
192,299 |
|
|
|
|
|
|
|
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Ratios |
|
|
|
|
|
|
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|
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|
|
(C)/(A)
Return on average common equity ("ROE") (GAAP) |
|
9.40 |
% |
|
|
9.00 |
% |
|
|
8.53 |
% |
|
0.40 |
% |
|
0.86 |
% |
|
(C)/(B) Return on average tangible common equity
("ROTCE") (Non-GAAP) |
|
10.33 |
% |
|
|
9.89 |
% |
|
|
9.44 |
% |
|
0.44 |
% |
|
0.89 |
% |
|
(a) |
Included
in Total equity on the Consolidated Balance Sheet. |
|
|
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|
(b) |
Includes goodwill and other intangible assets, net of
amortization. |
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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. at
888-317-6003 and entering access code 2645251. 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 investor relations section
of www.fhnc.com. A replay will be available
from noon April 13 until midnight April 28. To listen to the
replay, dial 877-344-7529 or 412-317-0088. The access code is
10103873. The event will be archived and available by midnight
April 14 in the events and presentations section
of http://ir.fhnc.com.
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.
Debt Investor MaterialsFirst Horizon expects to
post additional materials for debt investors April 26 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 160 bank locations across Tennessee and the
southern U.S. and 28 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 Working Mother and
American Banker. 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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