First Horizon (NYSE:FHN) demonstrated strong first
quarter 2018 results, driven by year-over-year loan and deposit
growth, higher revenues, improvement in the efficiency ratio and
good asset quality trends. Reported earnings per share (EPS) were
$0.27, up 17 percent from first quarter 2017; on an adjusted
basis1, earnings per share were $0.34. First Horizon enhanced
profitability with an increase in return on tangible common equity
and return on assets.
The Capital Bank merger, which resulted in a $40 billion
organization with more than 300 branches throughout the Southeast,
is contributing to overall earnings. The merger is on track with
cost savings and revenue synergies, and the systems conversion is
scheduled for later this quarter.
“I am pleased with our strong first quarter results and am
optimistic about our outlook for the remainder of the year,” said
Bryan Jordan, First Horizon’s chairman and CEO. “First Tennessee
and Capital Bank employees continue to deliver exceptional
differentiated services and solutions to our customers and our
preparations remain on track for the integration of Capital Bank in
the second quarter.”
First Quarter 2018 Financial Highlights (all
comparisons vs first quarter 2017)
| |
|
|
|
|
|
|
| |
Diluted EPS/ |
|
ROTCE1/ |
|
ROA/ |
|
| |
Adjusted Diluted EPS1 |
|
Adjusted ROTCE1 |
|
Adjusted ROA1 |
|
| |
$0.27 / $0.34 |
|
14.1% / 17.4% |
|
0.95% / 1.2% |
|
| |
|
|
|
|
|
|
Regional Banking Highlights
- The First Tennessee/Capital Bank franchise showed solid
fundamentals, driven by the Capital Bank (CBF) merger in November,
better interest rate spreads, and organic loan and deposit
growth
- Pre-tax income up 66 percent
- Revenue up 50 percent from increased net interest income and
higher fee income
- Net interest income up 55 percent and fee income up 34
percent
- Efficiency ratio improved to 54 percent from 59 percent
- Average loans up 50 percent and average deposits up 38
percent
Other Highlights
- Net interest margin expanded to 3.43 percent from 2.92
percent
- Asset Quality remains stable
- Total average assets of $40 billion
1These are non-GAAP numbers that are reconciled to reported GAAP
numbers in the non-GAAP table that follows
CONSOLIDATED SUMMARY
RESULTS Quarterly, Unaudited
| |
1Q18 Changes vs |
| (Dollars
in thousands, except per share data) |
|
1Q18 |
|
|
|
4Q17 |
|
|
|
1Q17 |
|
|
4Q17 |
|
1Q17 |
| Income
Statement Highlights |
|
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
| Net interest
income |
$ |
301,173 |
|
|
$ |
242,088 |
|
|
$ |
189,708 |
|
|
24 |
|
% |
|
59 |
|
% |
| Noninterest income |
135,931 |
|
|
133,053 |
|
|
116,895 |
|
|
2 |
|
% |
|
16 |
|
% |
|
Securities gains/(losses), net |
86 |
|
|
137 |
|
|
44 |
|
|
(37 |
) |
% |
|
95 |
|
% |
|
Total revenue |
437,190 |
|
|
375,278 |
|
|
306,647 |
|
|
16 |
|
% |
|
43 |
|
% |
| Noninterest
expense |
313,265 |
|
|
346,670 |
|
|
222,205 |
|
|
(10 |
) |
% |
|
41 |
|
% |
|
Provision/(provision credit) for loan losses |
(1,000 |
) |
|
3,000 |
|
|
(1,000 |
) |
|
NM |
|
* |
|
|
Income before income taxes |
124,925 |
|
|
25,608 |
|
|
85,442 |
|
|
NM |
|
|
46 |
|
% |
| Provision
for income taxes |
29,931 |
|
|
73,989 |
|
|
27,054 |
|
|
(60 |
) |
% |
|
11 |
|
% |
|
Net income/(loss) |
94,994 |
|
|
(48,381 |
) |
|
58,388 |
|
|
NM |
|
|
63 |
|
% |
| Net
income attributable to noncontrolling interest |
2,820 |
|
|
2,910 |
|
|
2,820 |
|
|
(3 |
) |
% |
* |
|
| Net income/(loss)
attributable to controlling interest |
92,174 |
|
|
(51,291 |
) |
|
55,568 |
|
|
NM |
|
|
66 |
|
% |
| Preferred
stock dividends |
1,550 |
|
|
1,550 |
|
|
1,550 |
|
|
* |
|
* |
|
| Net
income/(loss) available to common shareholders |
$ |
90,624 |
|
|
$ |
(52,841 |
) |
|
$ |
54,018 |
|
|
NM |
|
|
68 |
|
% |
| Common Stock
Data |
|
|
|
|
|
|
|
|
|
|
| EPS |
$ |
0.28 |
|
|
$ |
(0.20 |
) |
|
$ |
0.23 |
|
|
NM |
|
|
22 |
|
% |
| Basic shares
(thousands) |
326,489 |
|
|
265,169 |
|
|
233,076 |
|
|
23 |
|
% |
|
40 |
|
% |
| Diluted EPS |
$ |
0.27 |
|
|
$ |
(0.20 |
) |
|
$ |
0.23 |
|
|
NM |
|
|
17 |
|
% |
| Diluted shares
(thousands) |
330,344 |
|
|
265,169 |
|
|
236,855 |
|
|
25 |
|
% |
|
39 |
|
% |
| Period-end shares
outstanding (thousands) |
327,194 |
|
|
326,736 |
|
|
233,883 |
|
|
* |
|
|
40 |
|
% |
| Cash dividends declared
per share |
$ |
0.12 |
|
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
33 |
|
% |
|
33 |
|
% |
|
Balance Sheet Highlights (Period-End) |
|
|
|
|
|
|
|
|
|
|
| Total loans, net of
unearned income |
$ |
27,249,793 |
|
|
$ |
27,658,929 |
|
|
$ |
19,090,074 |
|
|
(1 |
) |
% |
|
43 |
|
% |
| Total deposits |
30,818,951 |
|
|
30,620,362 |
|
|
23,479,841 |
|
|
1 |
|
% |
|
31 |
|
% |
| Total assets |
40,463,195 |
|
|
41,423,388 |
|
|
29,618,600 |
|
|
(2 |
) |
% |
|
37 |
|
% |
| Total liabilities |
35,890,667 |
|
|
36,842,900 |
|
|
26,878,140 |
|
|
(3 |
) |
% |
|
34 |
|
% |
| Total equity |
4,572,528 |
|
|
4,580,488 |
|
|
2,740,460 |
|
|
* |
|
|
67 |
|
% |
|
Asset Quality Highlights |
|
|
|
|
|
|
|
|
|
|
| Allowance for loan
losses |
$ |
187,194 |
|
|
$ |
189,555 |
|
|
$ |
201,968 |
|
|
(1 |
) |
% |
|
(7 |
) |
% |
| Allowance / period-end
loans |
0.69 |
|
% |
0.69 |
|
% |
1.06 |
|
% |
|
|
|
|
| Net
charge-offs/(recoveries) |
$ |
1,361 |
|
|
$ |
8,312 |
|
|
$ |
(900 |
) |
|
(84 |
) |
% |
NM |
|
| Net charge-offs
(annualized) / average loans |
0.02 |
|
% |
0.15 |
|
% |
NM |
|
|
|
|
|
| Non-performing assets
(NPA) |
$ |
172,664 |
|
|
$ |
177,156 |
|
|
$ |
161,284 |
|
|
(3 |
) |
% |
|
7 |
|
% |
| NPA % (b) |
0.60 |
|
% |
0.61 |
|
% |
0.80 |
|
% |
|
|
|
|
|
Key Ratios & Other |
|
|
|
|
|
|
|
|
|
|
| Return on average
assets ("ROA") (annualized) (c) |
0.95 |
|
% |
(0.58 |
) |
% |
0.82 |
|
% |
|
|
|
|
| Return on average
common equity ("ROE") (annualized) (d) |
8.79 |
|
% |
(6.73 |
) |
% |
9.40 |
|
% |
|
|
|
|
| Return on average
tangible common equity ("ROTCE") (annualized) (e) |
14.06 |
|
% |
(8.78 |
) |
% |
10.33 |
|
% |
|
|
|
|
| Net interest margin
(f) |
3.43 |
|
% |
3.27 |
|
% |
2.92 |
|
% |
|
|
|
|
| Efficiency ratio
(g) |
71.67 |
|
% |
92.41 |
|
% |
72.47 |
|
% |
|
|
|
|
| Common equity tier 1
ratio ("CET1") (h) |
8.98 |
|
% |
8.88 |
|
% |
10.20 |
|
% |
|
|
|
|
| Tier 1 ratio (h) |
9.98 |
|
% |
9.83 |
|
% |
11.35 |
|
% |
|
|
|
|
| Market
capitalization (millions) |
$ |
6,161.1 |
|
|
$ |
6,531.5 |
|
|
$ |
4,326.8 |
|
|
|
|
|
|
Certain previously reported amounts have been reclassified to
agree with current presentation.NM - Not meaningful* Amount is less
than one percent.(a) 1Q18 includes three months of activity
related to the CBF acquisition compared to one month of activity in
4Q17.(b) NPAs related to the loan portfolio over period-end
loans plus foreclosed real estate and other assets.(c)
Calculated using net income.(d) Calculated using net income
available to common shareholders.(e) This non-GAAP measure is
reconciled to ROE in the non-GAAP to GAAP
reconciliation.(f) 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 21
percent and, where applicable, state income taxes.(g)
Noninterest expense divided by total revenue excluding securities
gains/(losses).(h) Current quarter is an estimate.
Use of Non-GAAP Measures
Several financial measures in this release are non-GAAP, meaning
they are not presented in accordance with generally accepted
accounting principles (GAAP) in the U.S. The non-GAAP items
presented in this release are adjusted earnings per share ("EPS"),
return on tangible common equity ("ROTCE"), adjusted ROTCE, and
adjusted return on average assets ("ROA"). These profitability
measures are reported to First Horizon’s management and directors
through various internal reports. First Horizon’s management
believes these measures are relevant to understanding the financial
results of First Horizon 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 each of these measures to a comparable GAAP measure
below:
FHN NON-GAAP TO GAAP RECONCILIATION
Quarterly, Unaudited
| |
| (Dollars
and shares in thousands, except per share data) |
|
1Q18 |
|
|
|
|
4Q17 |
|
|
|
|
1Q17 |
|
|
|
Average Tangible Common Equity (Non-GAAP) |
| Average total equity
(GAAP) |
$ |
4,573,706 |
|
|
|
$ |
3,506,165 |
|
|
|
$ |
2,722,668 |
|
|
| 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 |
4,182,651 |
|
|
|
3,115,110 |
|
|
|
2,331,613 |
|
|
| Less: Average
intangible assets (GAAP) (b) |
1,568,029 |
|
|
|
726,958 |
|
|
|
211,757 |
|
|
|
(B) Average tangible common equity (Non-GAAP) |
$ |
2,614,622 |
|
|
|
$ |
2,388,152 |
|
|
|
$ |
2,119,856 |
|
|
| |
|
|
|
|
|
|
|
|
| Annualized Net
Income Available to Common Shareholders |
|
|
|
|
|
|
|
|
| (C) Net income
available to common shareholders (annualized ) (GAAP) |
$ |
367,531 |
|
|
|
$ |
(209,641 |
) |
|
|
$ |
219,073 |
|
|
| |
|
|
|
|
|
|
|
|
|
Ratios |
|
|
|
|
|
|
|
|
| (C)/(A) Return on
average common equity ("ROE") (GAAP) |
8.79 |
|
% |
|
(6.73 |
) |
% |
|
9.40 |
|
% |
| (C)/(B) Return on
average tangible common equity ("ROTCE") (Non-GAAP) |
14.06 |
|
% |
|
(8.78 |
) |
% |
|
10.33 |
|
% |
| |
|
|
|
|
|
|
|
|
|
Adjusted Net Income (Non-GAAP) |
|
|
|
|
| (D) Net income
(GAAP) |
$ |
94,994 |
|
|
|
|
|
|
|
|
| Less: After-tax
impact of notable items (GAAP) (c) |
(21,472 |
) |
|
|
|
|
|
|
|
|
(E) Adjusted net income (Non-GAAP) |
116,466 |
|
|
|
|
|
|
|
|
| (F) Annualized net
income (GAAP) |
385,253 |
|
|
|
|
|
|
|
| (G) Annualized adjusted
net income (Non-GAAP) |
472,334 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Adjusted Net
Income Available to Common Shareholders (Non-GAAP) |
|
|
|
|
|
|
|
|
| (H) Net income
available to common shareholders (GAAP) |
$ |
90,624 |
|
|
|
|
|
|
|
|
|
Less: After-tax impact of notable items (GAAP) (c) |
(21,472 |
) |
|
|
|
|
|
|
|
| (I) Adjusted net income
available to common shareholders (Non-GAAP) |
112,096 |
|
|
|
|
|
|
|
|
| (J) Annualized adjusted
net income available to common shareholders (Non-GAAP) |
454,612 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Average Assets
(GAAP) |
|
|
|
|
|
|
|
|
| (K) Average assets |
$ |
40,350,724 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Diluted
Shares |
|
|
|
|
|
|
|
|
| (L) Diluted shares |
330,344 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Adjusted Ratios
& EPS Impacts |
|
|
|
|
|
|
|
|
| (C)/(B) ROTCE
(Non-GAAP) |
14.06 |
|
% |
|
|
|
|
|
|
| (J)/(B) Adjusted ROTCE
(Non-GAAP) |
17.39 |
|
% |
|
|
|
|
|
|
| (F)/(K) Return on
average assets ("ROA") (GAAP) |
0.95 |
|
% |
|
|
|
|
|
|
| (G)/(K) Adjusted ROA
(GAAP) |
1.17 |
|
% |
|
|
|
|
|
|
| (H)/(L) Diluted
earnings per share ("EPS") (GAAP) |
$ |
0.27 |
|
|
|
|
|
|
|
|
| (I)/(L) Adjusted
diluted EPS (Non-GAAP) |
$ |
0.34 |
|
|
|
|
|
|
|
|
(a) Included in Total equity on the Consolidated Balance
Sheet.(b) Includes goodwill and other intangible assets, net of
amortization.(c) Includes $31.4 million of pre-tax
acquisition-related expenses primarily associated with the Capital
Bank Financial Corp. ("CBF") acquisition and a $3.3 million gain on
the sale of a building adjusted using an incremental tax rate of
approximately 24 percent.
Conference call
Management 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.
Callers wishing to participate may call toll-free starting at
8:15 a.m. CT on April 13 by dialing 888-317-6003 and entering
access code 1851911. 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 CT on
April 13 until midnight CT on April 27. To listen to the replay,
dial 877-344-7529 or 412-317-0088. The access code is 10118763. The
event also will be archived and available beginning April 14 by
midnight CT in the events and presentations section of
http://ir.fhnc.com.
Debt Investor Materials
First Horizon expects to post additional materials for debt
investors on April 30 in the investor relations section of
www.FirstHorizon.com First Horizon will also provide these
materials to analysts at upcoming meetings.
Disclaimers and Other Information
This communication contains, and the debt investor materials
above may contain, forward-looking statements, including guidance,
involving significant risks and uncertainties. Forward-looking
statements are 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 important factors could cause actual results to
differ materially from those in the forward-looking statements.
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.
About First Horizon
First Horizon National Corp. (NYSE:FHN) provides financial
services through its First Tennessee, Capital Bank, FTB Advisors,
and FTN Financial businesses. First Horizon operates more than 300
bank locations across the southern U.S. and 28 FTN Financial
offices across the entire U.S. Our banking subsidiary was founded
in 1864 and has the 14th oldest national bank charter in the
country. Our First Tennessee and Capital Bank brands have the
largest deposit market share in Tennessee and one of the highest
customer retention rates of any bank in the country. We have been
ranked by American Banker as No. 5 among the Top 10 Most Reputable
U.S. Banks. Our FTB Advisors wealth management group has more than
300 financial advisors and about $30 billion in assets under
administration. FTN Financial is a capital markets industry leader
in fixed income sales, trading and strategies for institutional
customers in the U.S. and abroad. We have been recognized as one of
the nation’s best employers by Working Mother and American Banker
magazines and the National Association for Female Executives. More
information is available at www.FirstHorizon.com.
FHN-G
CONTACT: First Horizon Investor Relations,
Aarti Bowman, (901) 523-4017First Horizon Media Relations, James
Dowd, (901) 523-4305
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