Press release from GlobeNewswire (a Nasdaq OMX company)
First Horizon Posts Solid Second Quarter
Friday, July 19, 2013
First Horizon Posts Solid Second Quarter04:00 EDT Friday, July 19, 2013
MEMPHIS, Tenn., July 19, 2013 (GLOBE NEWSWIRE) -- First Horizon National Corp. (NYSE:FHN) posted another round of steady earnings in the second quarter driven by its First Tennessee regional banking business, efficiency gains and the continued wind-down of the mortgage business the company sold in 2008. First Horizon announced second quarter diluted earnings per common share of $0.17 and net income available to common shareholders of $41 million.
"First Tennessee Bank and FTN Financial are delivering good results for our customers and shareholders," said Bryan Jordan, First Horizon chairman and CEO. "Our people continue to seize opportunities to earn our customers' business with unparalleled service and product options. We remain committed to operating efficiently throughout the company, building a strong foundation so we can take advantage of opportunities as the economy improves."
- First Tennessee, the company's regional banking arm, delivered 2 percent revenue growth from first quarter 2013 due to increased fee income. The bank's average loans and core deposits climbed 5 percent and 2 percent, respectively, on a year-over-year basis.
- During the quarter First Horizon added $433 million of assets related to an acquisition in East Tennessee from the FDIC. The 12 Mountain National Bank branches in Blount and Sevier Counties expand First Tennessee's presence in Tennessee, where it already has the leading combined market deposit share in the counties where it does business.
- FTN Financial, the capital markets group, continued to generate strong returns in the second quarter, with fixed income average daily revenue of $.9 million and annualized return on assets of approximately 1.3 percent.
- First Horizon's continued focus on efficiency and lower variable compensation from FTN Financial contributed to a 5 percent expense reduction from last quarter.
- First Horizon's asset quality remains strong, with net charge offs declining by 32 percent from first quarter and 54 percent year over year. The allowance to loans ended the quarter at 162 basis points, down 36 basis points year over year.
- Non-performing assets increased to $506.7 million in the second quarter from $418.4 million in the first quarter. A significant contributor to the increase was implementation of a regulatory change requiring placement of approximately $56 million of stand-alone second liens on non-accrual upon receipt of third party information about the performance status of non-FHN-serviced first liens.
- Ratios remain substantially above well-capitalized levels.
- Common shareholders received a dividend of $.05 per share on July 1, up from $.01 a year earlier.
- First Horizon repurchased $8 million in common shares in the second quarter, bringing the company's buyback total to $213 million since October 2011. First Horizon also entered into a $40 million repurchase arrangement that is expected to be completed in the third quarter.
|FHN CONSOLIDATED SUMMARY RESULTS|
|2Q13 Changes vs.|
|(Dollars in thousands, except per share data)||2Q13||1Q13||4Q12||3Q12||2Q12||1Q13||2Q12|
|Income Statement Highlights|
|Net interest income||$ 160,019||$ 161,382||$ 170,598||$ 173,465||$ 172,675||(1)%||(7)%|
|Securities gains/(losses), net||(351)||24||(4,700)||--||5,065||NM||NM|
|Provision for loan losses||15,000||15,000||15,000||40,000||15,000||*||*|
|Income/(loss) before income taxes||60,243||62,269||30,680||33,834||(210,595)||(3)%||NM|
|Provision/(benefit) for income taxes||15,008||17,730||(12,914)||5,260||(88,178)||(15)%||NM|
|Income/(loss) from continuing operations||45,235||44,539||43,594||28,574||(122,417)||2%||NM|
|Income/(loss) from discontinued operations, net of tax||1||430||(12)||108||487||NM||NM|
|Net income attributable to noncontrolling interest||2,843||2,813||2,901||2,875||2,844||1%||*|
|Net income/(loss) attributable to controlling interest||42,393||42,156||40,681||25,807||(124,774)||1%||NM|
|Preferred stock dividends||1,550||1,188||--||--||--||30%||NM|
|Net income/(loss) available to common shareholders||$ 40,843||$ 40,968||$ 40,681||$ 25,807||$ (124,774)||*||NM|
|Common Stock Data|
|Diluted EPS from continuing operations||$ 0.17||$ 0.17||$ 0.17||$ 0.10||$ (0.50)||*||NM|
|Diluted EPS||$ 0.17||$ 0.17||$ 0.17||$ 0.10||$ (0.50)||*||NM|
|Diluted shares (thousands)||240,891||242,799||246,132||248,306||249,104||(1)%||(3)%|
|Period-end shares outstanding (thousands)||240,555||241,225||243,598||247,134||248,810||*||(3)%|
|Cash dividends declared per share||$ 0.05||$ 0.05||$ 0.01||$ 0.01||$ 0.01||*||NM|
|Balance Sheet Highlights (Period-End)|
|Total loans, net of unearned income (Restricted - $.1 billion) (a)||$ 16,197,046||$ 15,889,670||$ 16,708,582||$ 16,523,783||$ 16,185,763||2%||*|
|Total assets (Restricted - $.1 billion) (a)||25,133,274||25,166,427||25,520,140||25,739,830||25,492,955||*||(1)%|
|Total liabilities (Restricted - $.1 billion) (a)||22,586,923||22,566,700||23,010,934||23,207,942||22,978,549||*||(2)%|
|Asset Quality Highlights|
|Allowance for loan losses (Restricted - $3.8 million) (a)||$ 261,934||$ 265,218||$ 276,963||$ 281,744||$ 321,051||(1)%||(18)%|
|Allowance / period-end loans||1.62%||1.67%||1.66%||1.71%||1.98%|
|Net charge-offs||$ 18,284||$ 26,745||$ 19,781||$ 79,307||$ 39,965||(32)%||(54)%|
|Net charge-offs (annualized) / average loans||0.46%||0.67%||0.48%||1.92%||1.01%|
|Non-performing assets (NPA) (b)||$ 506,732||$ 418,385||$ 419,369||$ 450,391||$ 466,873||21%||9%|
|NPA % (b) (c)||2.25%||1.81%||1.84%||2.15%||2.32%|
|Key Ratios & Other|
|Return on average assets (annualized) (d)||0.74%||0.73%||0.69%||0.45%||(1.96)%|
|Return on average common equity (annualized) (e)||7.46%||7.48%||7.20%||4.59%||(21.06)%|
|Net interest margin (f) (g)||2.96%||2.95%||3.09%||3.15%||3.16%|
|Fee income to total revenue (h)||47.19%||49.22%||46.98%||48.53%||47.12%|
|Efficiency ratio (i)||75.05%||75.69%||84.34%||78.09%||161.45%|
|Book value per common share (j)||$ 8.96||$ 9.16||$ 9.09||$ 9.05||$ 8.92|
|Tangible book value per common share (g) (j)||$ 8.25||$ 8.51||$ 8.44||$ 8.41||$ 8.28|
|Adjusted tangible common equity to risk weighted assets (g) (k)||9.61%||9.91%||9.93%||10.03%||9.97%|
|Market capitalization (millions)||$ 2,694.2||$ 2,576.3||$ 2,414.1||$ 2,379.9||$ 2,152.2|
|Full time equivalent employees||4,296||4,381||4,507||4,585||4,619|
|NM - Not meaningful|
|* Amount is less than one percent.|
|(a) Restricted balances parenthetically presented are as of June 30, 2013.|
|(b) 2Q13 increase includes approximately $56 million of second liens placed on nonaccrual based on information received from a third party on the performance status of non-FHN serviced first liens and approximately $23 million in foreclosed real estate associated with the MNB acquisition.|
|(c) NPAs related to the loan portfolio over period-end loans plus foreclosed real estate and other assets.|
|(d) Calculated using net income.|
|(e) Calculated using net income available to common shareholders.|
|(f) Net interest margin is computed using total net interest income adjusted to a fully taxable equivalent ("FTE") basis.|
|(g) Refer to the Non-GAAP to GAAP Reconciliation.|
|(h) Ratio excludes securities gains/(losses).|
|(i) Noninterest expense divided by total revenue excluding securities gains/(losses).|
|(j) 2Q13 decrease due to $40 million prepaid share repurchase agreement, shares will be delivered in 3Q13 when completed.|
|(k) Current quarter is an estimate.|
Use of non-GAAP measures
Certain measures are included in this release that are non-GAAP, meaning they are not presented in accordance with generally accepted accounting principles (GAAP) in the U.S. FHN's management believes such measures are relevant to understanding the capital position and results of the company. The non-GAAP items presented in this release are tangible book value per common share, adjusted tangible common equity to risk-weighted assets and net interest margin computed using net interest income adjusted for FTE. These measures are reported to FHN's management and board of directors through various internal reports. Additionally, disclosure of the non-GAAP capital ratios provides a meaningful base for comparability to other financial institutions as demonstrated by their use by the various banking regulators in reviewing the capital adequacy of financial institutions. 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 FHN. The reconciliation of non-GAAP to GAAP measures and presentation of the most comparable GAAP items can be found in this table:
|NON-GAAP to GAAP Reconciliation|
|(Period End, Dollars in Thousands except per share data) (Unaudited)||2Q13||1Q13||4Q12||3Q12||2Q12|
|Tangible Common Equity (Non-GAAP)|
|(A) Total equity (GAAP)||$2,546,351||$2,599,727||$2,509,206||$2,531,888||$2,514,406|
|Less: Noncontrolling interest (a)||295,374||295,257||295,165||295,165||295,165|
|Less: Preferred stock||95,624||95,624||--||--||--|
|(B) Total common equity||2,155,353||2,208,846||2,214,041||2,236,723||2,219,241|
|Less: Intangible assets (GAAP) (b)||170,906||156,014||156,942||157,921||158,901|
|(C) Tangible common equity (Non-GAAP)||1,984,447||2,052,832||2,057,099||2,078,802||2,060,340|
|Less: Unrealized gains on AFS securities, net of tax||9,439||48,591||55,250||63,923||63,679|
|(D) Adjusted tangible common equity (Non-GAAP)||$1,975,008||$2,004,241||$2,001,849||$2,014,879||$1,996,661|
|Period-end Shares Outstanding|
|(E) Period-end shares outstanding||240,555||241,225||243,598||247,134||248,810|
|Risk Weighted Assets|
|(F) Risk weighted assets (c) (d)||$ 20,550,720||$ 20,231,850||$ 20,153,430||$ 20,082,979||$ 20,022,430|
|(D)/(F) Adjusted tangible common equity to risk weighted assets ("TCE/RWA") (Non-GAAP) (c)||9.61%||9.91%||9.93%||10.03%||9.97%|
|(C)/(E) Tangible book value per common share (Non-GAAP)||$8.25||$8.51||$8.44||$8.41||$8.28|
|Net interest income adjusted for impact of fully taxable equivalent ("FTE") (Non-GAAP)|
|Net interest income (GAAP)||$160,019||$161,382||$170,598||$173,465||$172,675|
|Net interest income adjusted for impact of FTE (Non-GAAP)||$161,932||$163,169||$172,440||$175,217||$174,431|
|Certain previously reported amounts have been reclassified to agree with current presentation.|
|(a) Included in Total equity on the Consolidated Balance Sheet.|
|(b) Includes goodwill and other intangible assets, net of amortization.|
|(c) Current quarter is an estimate.|
|(d) Defined by and calculated in conformity with bank regulations.|
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.fhnc.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 877-303-6618. The number for international participants is 224-357-2205. The conference ID number is 96042715.
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 11:59 p.m. Aug. 2. To listen to the replay, dial 855-859-2056 or 404-537-3406. The passcode is 96042715. The event also will be archived and available by midnight Central Time on the website.
This 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 FHN's annual report on Form 10-K and other recent filings with the SEC. FHN 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.
About First Horizon
The 4,300 employees of First Horizon National Corp. (NYSE:FHN) provide financial services through more than 180 First Tennessee Bank locations in and around Tennessee and 21 FTN Financial group offices in the U.S. and abroad. First Tennessee has the leading combined market deposit share in the counties where it does business 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 clients in the U.S. and abroad. FHN has been recognized as one of the nation's best employers by AARP and Working Mother magazines. More information is available at www.fhnc.com.
CONTACT: Investor Relations, Aarti Bowman, (901) 523-4017 Media Relations, Jack Bradley, (901) 523-4813