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EPS Up 42% At First Horizon

MEMPHIS, Tenn., April 19, 2013 (GLOBE NEWSWIRE) -- First Horizon National Corp. (NYSE:FHN) saw first-quarter diluted earnings per common share improve 42 percent from 2012 to 2013. The company has been able to put more energy into its long-term businesses of regional banking and capital markets as it improved credit quality and reduced expenses and the drag of its non-strategic businesses over the past several quarters. Today First Horizon announced first quarter diluted earnings per common share of $0.17 and net income available to common shareholders of $41.0 million.

"We're focusing on areas of our business where we can create value for the long term – winning new business, developing our people, smartly reducing expenses, investing in technology, streamlining the way we get things done," said Bryan Jordan, First Horizon chairman and CEO. "The strength of our regional banking business, First Tennessee, and our capital markets business, FTN Financial, is apparent as we've refocused where we know how to compete and create real value for our customers."

Financial results

  • Year over year the bankers at First Tennessee grew average loans 6 percent and average core deposits 4 percent while reducing expenses 8 percent.
  • FTN Financial continued to provide steady fee income and high returns, with fixed income average daily revenues of $1.1 million in the first quarter and an annualized return on assets of approximately 2 percent.  
  • The company's work to improve its efficiency ratio continued to yield results. Personnel costs are down following completion of the voluntary separation program on March 31 and earlier changes to the pension plan. Total expenses declined 25 percent from first quarter 2012 and 11 percent from fourth quarter 2012 to first quarter 2013. Since first quarter 2012 the efficiency ratio has improved 10 percentage points.                     
  • Seasonal factors, a shift in loan mix, pressure on yields on investments and loans and other factors weighed on results for the quarter. Net interest income and the net interest margin decreased from fourth quarter 2012. However, noninterest income increased and noninterest expense improved from fourth quarter to first quarter.

Credit quality trends

  • Asset quality trends continued to be favorable, and loan portfolios continue to improve. Non-performing assets continued to decline, while annualized net charge-offs decreased 49 basis points from a year ago.    

Capital

  • Capital ratios remained strong, well above well-capitalized levels.
  • First Horizon continued to strategically return capital to shareholders, increasing the quarterly dividend per common share to $0.05 and repurchasing $30.0 million in common shares in the first quarter through its $300 million common stock repurchase program. 
           
FHN CONSOLIDATED SUMMARY RESULTS          
Quarterly, Unaudited              
 
            1Q13 Changes vs.
(Dollars in thousands, except per share data) 1Q13 4Q12 3Q12 2Q12 1Q12  4Q12   1Q12 
Income Statement Highlights             
Net interest income  $ 161,382  $ 170,598  $ 173,465  $ 172,675  $ 171,929 (5)% (6)%
Noninterest income   156,403  151,143  163,538  153,842  202,113 3% (23)%
Securities gains/(losses), net  24  (4,700)  --  5,065  328 NM NM
Total revenue  317,809  317,041  337,003  331,582  374,370 * (15)%
Noninterest expense   240,540  271,361  263,169  527,177  321,994 (11)% (25)%
Provision for loan losses  15,000  15,000  40,000  15,000  8,000 * 88%
Income/(loss) before income taxes  62,269  30,680  33,834  (210,595)  44,376 NM 40%
Provision/(benefit) for income taxes  17,730  (12,914)  5,260  (88,178)  10,570 NM 68%
Income/(loss) from continuing operations  44,539  43,594  28,574  (122,417)  33,806 2% 32%
Income/(loss) from discontinued operations, net of tax  430  (12)  108  487  (435) NM NM
Net income/(loss)  44,969  43,582  28,682  (121,930)  33,371 3% 35%
Net income attributable to noncontrolling interest   2,813  2,901  2,875  2,844  2,844 (3)% (1)%
Net income/(loss) attributable to controlling interest  42,156  40,681  25,807  (124,774)  30,527 4% 38%
Preferred stock dividends  1,188  --  --  --  -- NM NM
Net income/(loss) available to common shareholders  $ 40,968  $ 40,681  $ 25,807  $ (124,774)  $ 30,527 1% 34%
Common Stock Data            
Diluted EPS from continuing operations  $ 0.17  $ 0.17  $ 0.10  $ (0.50)  $ 0.12 * 42%
Diluted EPS  $ 0.17  $ 0.17  $ 0.10  $ (0.50)  $ 0.12 * 42%
Diluted shares (thousands)  242,799  246,132  248,306  249,104  255,369 (1)% (5)%
Period-end shares outstanding (thousands)  241,225  243,598  247,134  248,810  252,667 (1)% (5)%
Cash dividends declared per share  $ 0.05  $ 0.01  $ 0.01  $ 0.01  $ 0.01 NM NM
Balance Sheet Highlights (Period-End)          
Total loans, net of unearned income (Restricted -- $.1 billion) (a)  $ 15,889,670  $ 16,708,582  $ 16,523,783  $ 16,185,763  $ 15,971,330 (5)% (1)%
Total deposits  16,204,467  16,629,709  16,228,111  16,117,443  16,935,170 (3)% (4)%
Total assets (Restricted -- $.1 billion) (a)  25,166,427  25,520,140  25,739,830  25,492,955  25,678,969 (1)% (2)%
Total liabilities (Restricted -- $.1 billion) (a)  22,566,700  23,010,934  23,207,942  22,978,549  23,004,796 (2)% (2)%
Total equity  2,599,727  2,509,206  2,531,888  2,514,406  2,674,173 4% (3)%
Asset Quality Highlights            
Allowance for loan losses (Restricted -- $3.7 million) (a)  $ 265,218  $ 276,963  $ 281,744  $ 321,051  $ 346,016 (4)% (23)%
Allowance / period-end loans 1.67% 1.66% 1.71% 1.98% 2.17%    
Net charge-offs   $ 26,745  $ 19,781  $ 79,307  $ 39,965  $ 46,335 35% (42)%
Net charge-offs (annualized) / average loans  0.67% 0.48% 1.92% 1.01% 1.16%    
Non-performing assets (NPA)   $ 418,385  $ 419,369  $ 450,391  $ 466,873  $ 511,320 * (18)%
NPA % (b) 1.81% 1.84% 2.15% 2.32% 2.56%    
Key Ratios & Other            
Return on average assets (annualized) (c) 0.73% 0.69% 0.45% (1.96)% 0.53%    
Return on average common equity (annualized) (d) 7.48% 7.20% 4.59% (21.06)% 5.15%    
Net interest margin (e) (f) 2.95% 3.09% 3.15% 3.16% 3.12%    
Fee income to total revenue (g) 49.22% 46.98% 48.53% 47.12% 54.03%    
Efficiency ratio (h) 75.69% 84.34% 78.09% 161.45% 86.08%    
Book value per common share  $ 9.16  $ 9.09  $ 9.05  $ 8.92  $ 9.42    
Tangible book value per common share (f)  $ 8.51  $ 8.44  $ 8.41  $ 8.28  $ 8.78    
Adjusted tangible common equity to risk weighted assets (f) (i) 9.88% 9.93% 10.03% 9.97% 10.88%    
Market capitalization (millions)  $ 2,576.3  $ 2,414.1  $ 2,379.9  $ 2,152.2  $ 2,622.7    
Full time equivalent employees  4,381  4,507  4,585  4,619  4,629    
NM - Not meaningful
* Amount is less than one percent.
(a) Restricted balances parenthetically presented are as of March 31, 2013.
(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) Net interest margin is computed using total net interest income adjusted for FTE. 
(f) Refer to the Non-GAAP to GAAP Reconciliation.
(g) Ratio excludes securities gains/(losses).
(h) Noninterest expense divided by total revenue excluding securities gains/(losses).
(i) 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) 1Q13 4Q12 3Q12 2Q12 1Q12
Tangible Common Equity (Non-GAAP)          
(A) Total equity (GAAP) $2,599,727 $2,509,206 $2,531,888 $2,514,406 $2,674,173
Less: Noncontrolling interest (a)  295,257  295,165  295,165  295,165  295,165
Less: Preferred stock  95,624  --   --   --   -- 
(B) Total common equity  2,208,846  2,214,041  2,236,723  2,219,241  2,379,008
Less: Intangible assets (GAAP) (b)  156,014  156,942  157,921  158,901  159,880
(C) Tangible common equity (Non-GAAP) 2,052,832 2,057,099 2,078,802 2,060,340 2,219,128
Less: Unrealized gains on AFS securities, net of tax 48,591 55,250 63,923 63,679 67,077
(D) Adjusted tangible common equity (Non-GAAP)  $2,004,241 $2,001,849 $2,014,879 $1,996,661 $2,152,051
           
Period-end Shares Outstanding          
(E) Period-end shares outstanding  241,225  243,598  247,134  248,810  252,667
           
Risk Weighted Assets          
(F) Risk weighted assets (c) (d)  $ 20,278,500  $ 20,153,430  $ 20,082,979  $ 20,022,430  $ 19,783,405
           
Ratios          
(D)/(F) Adjusted tangible common equity to risk weighted assets ("TCE/RWA") (Non-GAAP) (c) 9.88% 9.93% 10.03% 9.97% 10.88%
(C)/(E) Tangible book value per common share (Non-GAAP)  $8.51 $8.44 $8.41 $8.28 $8.78
           
Net interest income adjusted for impact of fully taxable equivalent ("FTE") (Non-GAAP)          
Net interest income (GAAP) $161,382 $170,598 $173,465 $172,675 $171,929
FTE adjustment  1,787  1,842  1,752  1,756  1,659
Net interest income adjusted for impact of FTE (Non-GAAP) $163,169 $172,440 $175,217 $174,431 $173,588
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. 

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.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 29081306.

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