First Horizon Posts Adjusted Earnings of $42 Million and Adjusted EPS of $.18 for First Quarter(1)
April 17 2015 - 7:20AM
In the first quarter of 2015 First Horizon National Corp.
(NYSE:FHN) saw solid loan and deposit growth at its First Tennessee
regional bank, a rebound at its FTN Financial capital markets group
and a settlement of a key issue related to the mortgage business
the company sold in 2008. Capital levels remain very strong at
First Horizon, and the company continued to smartly deploy capital
through loan growth, share buybacks and dividend payments during
the quarter.
"Our people continued to demonstrate strong performance across
the board in the first quarter," said First Horizon Chairman and
CEO Bryan Jordan. "They partnered with our customers to deepen
relationships and did a great job of winning new customers. And
they did it all with an eye on prudently managing expenses and
investing in what matters to our customers."
Financial highlights
1Denotes non-GAAP information reconciled in the table below
- During the first quarter First Horizon reached an agreement in
principle with the Department of Justice and the Department of
Housing and Urban Development to settle potential claims related to
underwriting and origination of FHA-insured mortgage loans. That
agreement resulted in a $162.5 million pre-tax charge for the
quarter, driving a net loss available to common shareholders of
$76.7 million, or $.33 per diluted share. Excluding the litigation
charge, net income available to common shareholders in the first
quarter would have been $41.8 million1, or $.18 per diluted
share1.
- First Tennessee, the regional bank, had a very strong start to
2015. Average loans were up 14 percent, average core deposits were
up 9 percent and net income was up 31 percent year over year. Loans
were up by double-digit percentages year over year in commercial,
asset-based lending and commercial real estate.
- FTN Financial, the capital markets group, capitalized on its
broad-based delivery system and product capabilities to improve
average daily fixed income revenues 8 percent year over year and
increase net income 47 percent.
- Asset quality trends continued to be favorable, with
nonperforming assets down 31 percent and net charge-offs down 45
percent year over year.
- First Horizon is committed to improving its efficiency ratio,
or what it costs the company to earn each dollar, while continuing
to make strategic investments to improve its businesses. While
consolidated expenses as reported were up compared to a year ago,
they were down 2 percent1 year over year excluding the litigation
charge.
- Capital levels remain very strong, with a common equity tier 1
ratio of 10.3 percent estimated for the quarter.
Consolidated Summary Results
|
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|
|
|
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|
1Q15 Changes vs. |
(Dollars in thousands, except per share
data) |
1Q15 |
4Q14 |
1Q14 |
4Q14 |
1Q14 |
Income Statement
Highlights |
|
|
|
|
Net interest income |
$156,866 |
$159,050 |
$152,359 |
(1)% |
3 % |
Noninterest income |
129,413 |
119,598 |
140,073 |
8 % |
(8)% |
Securities gains/(losses), net |
276 |
-- |
5,657 |
NM |
(95)% |
Total revenue |
286,555 |
278,648 |
298,089 |
3 % |
(4)% |
Noninterest expense |
376,221 |
207,309 |
218,044 |
81 % |
73 % |
Provision for loan losses |
5,000 |
6,000 |
10,000 |
(17)% |
(50)% |
Income/(loss) before income
taxes |
(94,666) |
65,339 |
70,045 |
NM |
NM |
Provision/(benefit) for income
taxes |
(22,261) |
13,699 |
20,066 |
NM |
NM |
Net income/(loss) |
(72,405) |
51,640 |
49,979 |
NM |
NM |
Net income attributable to
noncontrolling interest |
2,758 |
2,980 |
2,813 |
(7)% |
(2)% |
Net income/(loss) attributable to controlling
interest |
(75,163) |
48,660 |
47,166 |
NM |
NM |
Preferred stock dividends |
1,550 |
1,550 |
1,550 |
* |
* |
Net income/(loss)
available to common shareholders |
$(76,713) |
$47,110 |
$45,616 |
NM |
NM |
Common Stock
Data |
|
|
|
|
Diluted EPS |
$(0.33) |
$0.20 |
$0.19 |
NM |
NM |
Diluted shares (thousands) |
232,816 |
235,448 |
237,401 |
(1)% |
(2)% |
Period-end shares outstanding
(thousands) |
233,499 |
234,220 |
236,586 |
* |
(1)% |
Balance Sheet
Highlights (Period-End) |
|
|
|
Total loans, net of unearned income |
$16,732,123 |
$16,230,166 |
$15,119,461 |
3 % |
11 % |
Total deposits |
18,638,554 |
18,068,939 |
16,672,743 |
3 % |
12 % |
Total assets |
25,715,888 |
25,668,187 |
23,946,116 |
* |
7 % |
Total liabilities |
23,216,631 |
23,086,597 |
21,404,324 |
1 % |
8 % |
Total equity |
2,499,257 |
2,581,590 |
2,541,792 |
(3)% |
(2)% |
Asset Quality
Highlights |
|
|
|
|
Allowance for loan losses |
$228,328 |
$232,448 |
$247,246 |
(2)% |
(8)% |
Allowance / period-end loans |
1.36 % |
1.43 % |
1.64 % |
|
|
Net charge-offs |
$9,120 |
$12,193 |
$16,563 |
(25)% |
(45)% |
Net charge-offs (annualized) / average
loans |
0.23 % |
0.30 % |
0.45 % |
|
|
Non-performing assets (NPA) |
$236,798 |
$241,512 |
$345,520 |
(2)% |
(31)% |
NPA % (a) |
1.37 % |
1.44 % |
1.87 % |
|
|
Key Ratios &
Other |
|
|
|
|
Return on average assets
(annualized) (b) |
(1.15)% |
0.83 % |
0.85 % |
|
|
Return on average common equity
(annualized) (c) |
(14.04)% |
8.26 % |
8.63 % |
|
|
Net interest margin (d) |
2.74 % |
2.86 % |
2.88 % |
|
|
Efficiency ratio (e) |
NM |
74.40% |
74.56% |
|
|
Tier 1 ratio (f) |
11.79% |
14.46% |
14.26% |
|
|
Market capitalization (millions) |
$3,336.7 |
$3,180.7 |
$2,919.5 |
|
|
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. |
|
|
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|
|
(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. |
|
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|
(e) Noninterest expense divided
by total revenue excluding securities gains/(losses). |
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(f) Current quarter is an
estimate. |
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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. First
Horizon's management believes such measures are relevant to
understanding the results of the company. The non-GAAP items
presented in this release are net income available to common
shareholders excluding the litigation charge, diluted earnings per
share excluding the litigation charge and noninterest expense
excluding the litigation charge. These measures are reported to
First Horizon's management and board of directors through various
internal reports. 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. 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
Quarterly, Unaudited |
|
|
|
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|
|
|
(Dollars and shares in thousands,
except per share data) |
1Q15 |
1Q14 |
1Q15 vs 1Q14 |
|
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|
Net Income Available to
Common Excluding Litigation Charges (Non-GAAP) |
Income/(loss) before income taxes (GAAP) |
$ (94,666) |
|
|
Less: Litigation and regulatory matters
expense (GAAP) |
(162,500) |
|
|
Adjusted income/(loss) before income taxes
(Non-GAAP) |
67,834 |
|
|
Adjusted provision/(benefit) for income
taxes (Non-GAAP) (a) |
21,754 |
|
|
Adjusted net income/(loss) (Non-GAAP) |
46,080 |
|
|
Net income attributable to noncontrolling
interest (GAAP) |
2,758 |
|
|
Preferred stock dividends (GAAP) |
1,550 |
|
|
Adjusted net income/(loss) available to
common shareholders (Non-GAAP) |
$ 41,772 |
|
|
|
|
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|
Adjusted diluted shares (thousands)
(Non-GAAP) (b) |
235,120 |
|
|
Adjusted diluted EPS (Non-GAAP) |
$ 0.18 |
|
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Noninterest Expense
Excluding Litigation Charges (Non-GAAP) |
Noninterest Expense (GAAP) |
$ 376,221 |
$ 218,044 |
|
Less: Litigation and regulatory matters
expense (GAAP) |
162,500 |
90 |
|
Adjusted Noninterest Expense
(Non-GAAP) |
$ 213,721 |
$ 217,954 |
(2)% |
(a) Calculated using an effective
tax rate of 32.07 percent. |
|
(b) Because FHN recognized a net
loss available to common shareholders in first quarter 2015,
potentially issuable shares are excluded from diluted shares
because they are antidilutive. Excluding the litigation charge, FHN
would have recognized net income available to common shareholders.
As a result, adjusted shares are presented in order to include the
dilutive impact of potentially issuable shares. |
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.
Participants can call toll-free starting at 8:15 a.m. by dialing
888-317-6003 and entering pin number 3675257. 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 8:00 a.m. May 4. To listen to the replay, dial
877-344-7529 or 412-317-0088. The access code is 10063966. The
event also will be archived and available on the website by
midnight Central Time tomorrow.
Other information
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 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.
Fixed Income Materials
First Horizon will post additional materials for fixed income
analysts May 1 in the investor relations section of
www.FirstHorizon.com First Horizon will also provide these
materials to analysts at upcoming meetings. The fixed income
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 Horizon
The 4,300 employees of First Horizon National Corp. (NYSE:FHN)
provide financial services through more than 170 First Tennessee
Bank locations in and around Tennessee and 26 FTN Financial offices
in the U.S. and abroad. The company was founded during the
Civil War in 1864 and has the 14th oldest national bank charter in
the country. First Tennessee has one of the highest customer
retention rates of any bank in the country, and FTN Financial is a
capital markets industry leader in fixed income sales, trading and
strategies for institutional customers. First Horizon has been
recognized as one of the nation's best employers by Forbes,
American Banker and Working Mother 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, Kim Cherry, (901) 523-4380
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