Results reflect focus on building leading
Southeast bank
First Horizon (NYSE:FHN) today announced second quarter 2018
results with reported earnings per share (EPS) of $0.25; on an
adjusted basis, earnings per share were $0.36.1
“Our second quarter results demonstrate continued progress
towards our goal of building a strong, differentiated and leading
bank in the Southeast,” said Bryan Jordan, First Horizon’s chairman
and CEO. “The current operating environment remains favorable, and
we’re pleased with the strong momentum and customer activity we
have seen across our portfolio, especially in our attractive high
return specialty businesses. We believe First Horizon is
well-positioned to deliver sustainable top-quartile returns and
capitalize on our compelling growth and savings opportunities.”
Compelling growth opportunities following successful
merger and systems conversion
In the second quarter, First Horizon completed its systems
integration with Capital Bank, creating the fourth largest regional
bank in the Southeast with approximately 300 branches and $40
billion in assets. The deal economics have improved since first
announced in 2017, with 2019 EPS accretion estimated to be 17
percent, more than double original assumptions. The Company also
expects to achieve $25 to $30 million of revenue synergies and $85
million of annual run-rate cost savings by 2019.
“We successfully completed the Capital Bank integration and
systems conversion and appreciate our hardworking employees and
loyal customers who have helped drive our success,” Jordan said.
“With the integration complete, our focus is on driving organic
growth, strengthening our presence in attractive markets in the
Southeast, achieving operational efficiencies and building on the
momentum in our profitable specialty businesses.”
Second Quarter 2018 Financial Highlights (all
comparisons vs second quarter 2017)
Reported EPS / Adjusted EPS:$0.25 / $0.361 |
|
Reported ROTCE /Adjusted ROTCE:12.6%1 / 18.2%1 |
|
Reported ROA /Adjusted ROA:0.86% / 1.22%1 |
Regional Banking Highlights
- Pre-tax income up 49 percent
- Revenue up 45 percent from increased net interest income and
higher fee income
- Net interest income up 53 percent and fee income up 21
percent
- Efficiency ratio improved to 55 percent from 57 percent
- Average loans up 47 percent and average deposits up 36
percent
Other Highlights
- Net interest margin expanded to 3.53 percent from 3.07
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 to GAAP Reconciliation table
CONSOLIDATED SUMMARY RESULTS |
Quarterly,
Unaudited |
|
|
2Q18 Changes vs |
(Dollars
in thousands, except per share data) |
2Q18 |
|
|
1Q18 |
|
|
2Q17 |
|
|
1Q18 |
2Q17 |
Income
Statement Highlights |
|
|
|
|
|
|
|
|
|
|
Net interest
income |
$ |
310,932 |
|
|
$ |
301,173 |
|
|
$ |
200,701 |
|
|
3 |
|
|
55 |
% |
|
Noninterest income |
127,494 |
|
|
135,931 |
|
|
127,268 |
|
|
(6 |
)% |
|
* |
|
|
Securities gains/(losses), net |
31 |
|
|
86 |
|
|
405 |
|
|
(64 |
)% |
|
(92 |
)% |
|
Total revenue |
438,457 |
|
|
437,190 |
|
|
328,374 |
|
|
* |
|
|
34 |
% |
|
Noninterest
expense |
332,768 |
|
|
313,265 |
|
|
217,917 |
|
|
6 |
% |
|
53 |
% |
|
Provision/(provision credit) for loan losses |
— |
|
|
(1,000 |
) |
|
(2,000 |
) |
|
NM |
|
|
NM |
|
|
Income before
income taxes |
105,689 |
|
|
124,925 |
|
|
112,457 |
|
|
(15 |
)% |
|
(6 |
)% |
|
Provision
for income taxes |
19,697 |
|
|
29,931 |
|
|
17,253 |
|
|
(34 |
)% |
|
14 |
|
|
Net
income/(loss) |
85,992 |
|
|
94,994 |
|
|
95,204 |
|
|
(9 |
)% |
|
(10 |
)% |
|
Net
income attributable to noncontrolling interest |
2,852 |
|
|
2,820 |
|
|
2,852 |
|
|
1 |
|
|
* |
|
|
Net income/(loss)
attributable to controlling interest |
83,140 |
|
|
92,174 |
|
|
92,352 |
|
|
(10 |
)% |
|
(10 |
)% |
|
Preferred
stock dividends |
1,550 |
|
|
1,550 |
|
|
1,550 |
|
|
* |
|
|
* |
|
|
Net
income/(loss) available to common shareholders |
$ |
81,590 |
|
|
$ |
90,624 |
|
|
$ |
90,802 |
|
|
(10 |
)% |
|
(10 |
)% |
|
Common Stock
Data |
|
|
|
|
|
|
|
|
|
|
EPS |
$ |
0.25 |
|
|
$ |
0.28 |
|
|
$ |
0.39 |
|
|
(11 |
)% |
|
(36 |
)% |
|
Basic shares
(thousands) |
325,153 |
|
|
326,489 |
|
|
233,482 |
|
|
* |
|
|
39 |
% |
|
Diluted EPS |
$ |
0.25 |
|
|
$ |
0.27 |
|
|
$ |
0.38 |
|
|
(7 |
)% |
|
(34 |
)% |
|
Diluted shares
(thousands) |
328,426 |
|
|
330,344 |
|
|
236,263 |
|
|
(1 |
)% |
|
39 |
% |
|
Period-end shares
outstanding (thousands) |
325,003 |
|
|
327,194 |
|
|
234,135 |
|
|
(1 |
)% |
|
39 |
% |
|
Cash dividends declared
per share |
$ |
0.12 |
|
|
$ |
0.12 |
|
|
$ |
0.09 |
|
|
* |
|
|
33 |
% |
|
Balance Sheet Highlights (Period-End) |
|
|
|
|
|
|
|
|
|
|
Total loans, net of
unearned income |
$ |
27,701,740 |
|
|
$ |
27,249,793 |
|
|
$ |
19,989,319 |
|
|
2 |
% |
|
39 |
% |
|
Total deposits |
30,977,867 |
|
|
30,818,951 |
|
|
22,333,349 |
|
|
1 |
% |
|
39 |
% |
|
Total assets |
41,076,795 |
|
|
40,463,195 |
|
|
29,369,956 |
|
|
2 |
% |
|
40 |
% |
|
Total liabilities |
36,527,046 |
|
|
35,890,667 |
|
|
26,543,068 |
|
|
2 |
% |
|
38 |
% |
|
Total equity |
4,549,749 |
|
|
4,572,528 |
|
|
2,826,888 |
|
|
* |
|
|
61 |
% |
|
Asset Quality Highlights |
|
|
|
|
|
|
|
|
|
|
Allowance for loan
losses |
$ |
185,462 |
|
|
$ |
187,194 |
|
|
$ |
197,257 |
|
|
(1 |
)% |
|
(6 |
)% |
|
Allowance / period-end
loans |
0.67 |
% |
|
0.69 |
% |
|
0.99 |
% |
|
|
|
|
|
Net
charge-offs/(recoveries) |
$ |
1,732 |
|
|
$ |
1,361 |
|
|
$ |
2,711 |
|
|
27 |
% |
|
(36 |
)% |
|
Net charge-offs
(annualized) / average loans |
0.03 |
% |
|
0.02 |
% |
|
0.06 |
% |
|
|
|
|
|
Non-performing assets
(NPA) |
$ |
157,017 |
|
|
$ |
172,664 |
|
|
$ |
144,149 |
|
|
(9 |
)% |
|
9 |
% |
|
NPA % (a) |
0.55 |
% |
|
0.60 |
% |
|
0.68 |
% |
|
|
|
|
|
Key Ratios & Other |
|
|
|
|
|
|
|
|
|
|
Return on average
assets ("ROA") (annualized) (b) |
0.86 |
% |
|
0.95 |
% |
|
1.32 |
% |
|
|
|
|
|
Return on average
common equity ("ROE") (annualized) (c) |
7.86 |
% |
|
8.79 |
% |
|
15.26 |
% |
|
|
|
|
|
Return on average
tangible common equity ("ROTCE") (annualized) (d) |
12.63 |
% |
|
14.06 |
% |
|
17.30 |
% |
|
|
|
|
|
Net interest margin
(e) |
3.53 |
% |
|
3.43 |
% |
|
3.07 |
% |
|
|
|
|
|
Efficiency ratio
(f) |
75.90 |
% |
|
71.67 |
% |
|
66.44 |
% |
|
|
|
|
|
Common equity tier 1
ratio ("CET1") (g) |
8.95 |
% |
|
8.98 |
% |
|
9.85 |
% |
|
|
|
|
|
Tier 1 ratio (g) |
9.95 |
% |
|
9.98 |
% |
|
10.99 |
% |
|
|
|
|
|
Market
capitalization (millions) |
$ |
5,798.1 |
|
|
$ |
6,161.1 |
|
|
$ |
4,078.6 |
|
|
|
|
|
|
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 FHN Non-GAAP to GAAP
Reconciliation table.(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 21
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 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) |
2Q18 |
|
|
|
1Q18 |
|
|
|
2Q17 |
|
|
Average Tangible Common Equity (Non-GAAP) |
Average total equity
(GAAP) |
$ |
4,552,546 |
|
|
|
$ |
4,573,916 |
|
|
|
$ |
2,778,169 |
|
|
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 |
4,161,491 |
|
|
|
4,182,861 |
|
|
|
2,387,114 |
|
|
Less: Average
intangible assets (GAAP) (b) |
1,569,449 |
|
|
|
1,568,029 |
|
|
|
281,326 |
|
|
(B) Average tangible common equity (Non-GAAP) |
$ |
2,592,042 |
|
|
|
$ |
2,614,832 |
|
|
|
$ |
2,105,788 |
|
|
|
|
|
|
|
|
|
|
|
Annualized Net
Income Available to Common Shareholders |
|
|
|
|
|
|
|
|
(C) Net income
available to common shareholders (annualized ) (GAAP) |
$ |
327,257 |
|
|
|
$ |
367,531 |
|
|
|
$ |
364,206 |
|
|
|
|
|
|
|
|
|
|
|
Ratios |
|
|
|
|
|
|
|
|
(C)/(A) Return on
average common equity ("ROE") (GAAP) |
7.86 |
% |
|
|
8.79 |
% |
|
|
15.26 |
% |
|
(C)/(B) Return on
average tangible common equity ("ROTCE") (Non-GAAP) |
12.63 |
% |
|
|
14.06 |
% |
|
|
17.30 |
% |
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income (Non-GAAP) |
|
|
|
|
(D) Net income
(GAAP) |
$ |
85,992 |
|
|
|
|
|
|
|
|
Less: After-tax
impact of notable items (GAAP) (c) |
(36,255 |
) |
|
|
|
|
|
|
|
(E) Adjusted net income (Non-GAAP) |
122,247 |
|
|
|
|
|
|
|
|
(F) Annualized net
income (GAAP) |
344,913 |
|
|
|
|
|
|
|
|
(G) Annualized adjusted
net income (Non-GAAP) |
490,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income Available to Common Shareholders (Non-GAAP) |
|
|
|
|
|
|
|
|
(H) Net income
available to common shareholders (GAAP) |
$ |
81,590 |
|
|
|
|
|
|
|
|
Less: After-tax impact of notable items (GAAP) (c) |
(36,255 |
) |
|
|
|
|
|
|
|
(I) Adjusted net income
available to common shareholders (Non-GAAP) |
117,845 |
|
|
|
|
|
|
|
|
(J) Annualized adjusted
net income available to common shareholders (Non-GAAP) |
472,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Assets
(GAAP) |
|
|
|
|
|
|
|
|
(K) Average assets |
$ |
40,173,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Shares |
|
|
|
|
|
|
|
|
(L) Diluted shares |
328,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Ratios
& EPS Impacts |
|
|
|
|
|
|
|
|
(C)/(B) ROTCE
(Non-GAAP) |
12.63 |
% |
|
|
|
|
|
|
|
(J)/(B) Adjusted ROTCE
(Non-GAAP) |
18.24 |
% |
|
|
|
|
|
|
|
(F)/(K) Return on
average assets ("ROA") (GAAP) |
0.86 |
% |
|
|
|
|
|
|
|
(G)/(K) Adjusted ROA
(GAAP) |
1.22 |
% |
|
|
|
|
|
|
|
(H)/(L) Diluted
earnings per share ("EPS") (GAAP) |
$ |
0.25 |
|
|
|
|
|
|
|
|
(I)/(L)
Adjusted diluted EPS (Non-GAAP) |
$ |
0.36 |
|
|
|
|
|
|
|
|
(a) Included in Total equity on the Consolidated Balance
Sheet.(b) Includes goodwill and other intangible assets, net of
amortization.(c) Includes $43.2 million of pre-tax acquisition- and
integration-related expenses primarily associated with the Capital
Bank Financial Corp. ("CBF") acquisition and $4.1 million of
valuation adjustments associated with derivatives related to prior
sales of Visa Class B shares, adjusted using an incremental tax
rate of approximately 23 percent.
Conference call
Management will hold a conference call at 8:30 a.m. CT 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 July 17 by dialing 888-317-6003 and entering access
code 9883832. 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
July 17 until midnight CT on July 31. To listen to the replay, dial
877-344-7529 or 412-317-0088. The access code is 10121768. The
event also will be archived and available beginning July 18 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 August 3, 2018 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 approximately
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 professionals and provides services to about $30
billion in assets. 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
A PDF accompanying this announcement is available
at http://resource.globenewswire.com/Resource/Download/5a1f5330-a38a-4eda-b106-54bb438cd6a3
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