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March Toward Long-Term Profitability Continues As First Horizon Enters 150th Year

Stocks in this article: FHN

MEMPHIS, Tenn., Jan. 17, 2014 (GLOBE NEWSWIRE) -- In 2013 First Horizon National Corp. (NYSE:FHN) continued making progress toward long-term profitability in its regional banking business through First Tennessee and its fixed income business through FTN Financial. The company also continued to unwind from the mortgage business it sold in 2008. 2013 net income available to common shareholders was $24 million, and earnings per common share were $0.10. In the fourth quarter, consolidated net income available to common shareholders was $49 million or $0.21 per share.

"In 2013 our bankers and FTN Financial team continued to build on our promise to be the best at serving our customers, one opportunity at a time. We earned the number one market share in Tennessee, grew loans in our regional bank and continued to wind down our non-strategic businesses," said Bryan Jordan, First Horizon's chairman and CEO. "As we prepare to celebrate our company's 150 th anniversary this year we're focused on building our business for generations to come, improving asset quality, controlling costs and managing our business to create long-term value for our shareholders."

Financial highlights

  • In the regional bank average loans grew 2 percent and average core deposits were up 2 percent from 2012 to 2013. Expenses declined 7 percent even as the bank continued to selectively invest in talent, products and technology.
  • The fixed income group remained an important part of First Horizon's business mix, making significant contributions to overall fee income in spite of uncertain market conditions that led to lower sales volumes.
  • Asset quality improved throughout the year, with net charge-offs down 58 percent and reserves down 8 percent from 2012 to 2013. The loan loss provision declined 29 percent year over year.
  • Capital ratios remain strong, with estimated Tier 1 capital at 14 percent at the end of 2013.
                 
FHN CONSOLIDATED SUMMARY RESULTS                
Quarterly, Unaudited                
 
              4Q13 Changes vs. Twelve months ended 2013 vs.
(Dollars in thousands, except per share data)   4Q13 3Q13 2Q13 1Q13 4Q12  3Q13   4Q12  2013 2012 2012
Income Statement Highlights                   
Net interest income    $ 157,135  $ 158,838  $ 160,019  $ 161,382  $ 170,598 (1)% (8)%  $ 637,374  $ 688,667 (7)%
Noninterest income     132,860  150,571  142,983  156,403  151,143 (12)% (12)%  582,817  670,636 (13)%
Securities gains/(losses), net    2,183  (96)  (351)  24  (4,700)  NM  NM  1,760  693 NM
Total revenue    292,178  309,313  302,651  317,809  317,041 (6)% (8)%  1,221,951  1,359,996 (10)%
Noninterest expense     260,097  433,556  227,408  240,540  271,361 (40)% (4)%  1,161,601  1,383,701 (16)%
Provision for loan losses    15,000  10,000  15,000  15,000  15,000 50% *  55,000  78,000 (29)%
Income/(loss) before income taxes    17,081  (134,243)  60,243  62,269  30,680 NM (44)%  5,350  (101,705) NM
Provision/(benefit) for income taxes    (36,555)  (31,094)  15,008  17,730  (12,914) (18)% NM  (34,911)  (85,262) 59%
Income/(loss) from continuing operations    53,636  (103,149)  45,235  44,539  43,594 NM 23%  40,261  (16,443) NM
Income/(loss) from discontinued operations, net of tax    (6)  123  1  430  (12) NM  50%  548  148 NM
Net income/(loss)    53,630  (103,026)  45,236  44,969  43,582 NM 23%  40,809  (16,295) NM
Net income attributable to noncontrolling interest     2,934  2,875  2,843  2,813  2,901 2%  1%  11,465  11,464 *
Net income/(loss) attributable to controlling interest    50,696  (105,901)  42,393  42,156  40,681 NM 25%  29,344  (27,759) NM
Preferred stock dividends    1,550  1,550  1,550  1,188  -- * NM  5,838  -- NM
Net income/(loss) available to common shareholders    $ 49,146  $ (107,451)  $ 40,843  $ 40,968  $ 40,681 NM 21%  $ 23,506  $ (27,759) NM
Common Stock Data                  
Diluted EPS from continuing operations    $ 0.21  $ (0.45)  $ 0.17  $ 0.17  $ 0.17 NM 24%  $ 0.10  $ (0.11) NM
Diluted EPS    $ 0.21  $ (0.45)  $ 0.17  $ 0.17  $ 0.17 NM 24%  $ 0.10  $ (0.11) NM
Diluted shares (thousands)    236,753  236,895  240,891  242,799  246,132 * (4)%  239,794  248,349 (3)%
Period-end shares outstanding (thousands)    236,370  236,328  240,555  241,225  243,598 * (3)%  236,370  243,598 (3)%
Cash dividends declared per share    $ 0.05  $ 0.05  $ 0.05  $ 0.05  $ 0.01 * NM  $ 0.20  $ 0.04 NM
Balance Sheet Highlights (Period-End)                
Total loans, net of unearned income (Restricted - $.1 billion)  (a)  $ 15,389,074  $ 15,408,556  $ 16,197,952  $ 15,889,670  $ 16,708,582 * (8)%      
Total deposits    16,734,956  16,283,909  17,011,884  16,204,467  16,629,709 3% 1%      
Total assets (Restricted - $.1 billion)  (a) (b)  23,792,576  23,858,753  24,852,800  24,803,048  25,334,019 * (6)%      
Total liabilities (Restricted - $.1 billion)  (a) (b)  21,292,083  21,425,460  22,306,392  22,203,321  22,824,813 (1)% (7)%      
Total equity     2,500,493  2,433,293  2,546,408  2,599,727  2,509,206 3% *      
Asset Quality Highlights                  
Allowance for loan losses (Restricted - $4.4 million)  (a)  $ 253,809  $ 255,710  $ 261,934  $ 265,218  $ 276,963 (1)% (8)%      
Allowance / period-end loans   1.65% 1.66% 1.62% 1.67% 1.66%          
Net charge-offs     $ 16,901  $ 16,224  $ 18,284  $ 26,745  $ 19,781 4% (15)%      
Net charge-offs (annualized) / average loans    0.44% 0.41% 0.46% 0.67% 0.48%          
Non-performing assets (NPA)  (c)  $ 434,988  $ 482,045  $ 506,265  $ 418,385  $ 419,369 (10)% 4%      
NPA %  (c) (d) 1.95% 2.19% 2.25% 1.81% 1.84%          
Key Ratios & Other                  
Return on average assets (annualized)  (e) 0.89% (1.69)% 0.74% 0.73% 0.69%          
Return on average common equity (annualized)  (f) 9.37% (20.39)% 7.46% 7.48% 7.20%          
Net interest margin  (g) (h) 2.98% 2.97% 2.96% 2.95% 3.09%          
Fee income to total revenue  (i) 45.81% 48.66% 47.19% 49.22% 46.98%          
Efficiency ratio  (j) 89.69% NM 75.05% 75.69% 84.34%          
Book value per common share  (k)  $ 8.92  $ 8.64  $ 8.96  $ 9.16  $ 9.09          
Tangible book value per common share  (h) (k)  $ 8.23  $ 7.95  $ 8.28  $ 8.51  $ 8.44          
Adjusted tangible common equity to risk weighted assets  (h) (l) 10.31% 9.69% 9.69% 9.91% 9.93%          
Market capitalization (millions)    $ 2,753.7  $ 2,597.2  $ 2,694.2  $ 2,576.3  $ 2,414.1          
Full time equivalent employees    4,309  4,338  4,296  4,381  4,507          
NM - Not meaningful      
* Amount is less than one percent.      
Certain previously reported amounts have been reclassified to agree with current presentation.      
(a) Restricted balances parenthetically presented are as of December 31, 2013.      
(b) Balances reflect the net presentation of certain capital markets receivables and payables. Prior periods have been revised for comparability.
(c) 2013 increase primarily relates to second liens placed on nonaccrual based on information received from a third-party on the performance status of non-FHN serviced first liens and acquired foreclosed real estate from the MNB acquisition.
(d) NPAs related to the loan portfolio over period-end loans plus foreclosed real estate and other assets.      
(e) Calculated using net income.      
(f) Calculated using net income available to common shareholders.      
(g) Net interest margin is computed using net interest income adjusted to a fully taxable equivalent ("FTE") basis.      
(h) Refer to the Non-GAAP to GAAP Reconciliation.      
(i) Ratio excludes securities gains/(losses).      
(j) Noninterest expense divided by total revenue excluding securities gains/(losses).      
(k) 2Q13 decrease due to $40 million prepaid share repurchase agreement, shares were delivered in 3Q13.      
(l) Current quarter is an estimate.      

Certain measures in this release 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 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 First Horizon'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 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
(Period End, Dollars in Thousands except per share data) (Unaudited) 4Q13 3Q13 2Q13 1Q13 4Q12
Tangible Common Equity (Non-GAAP)          
(A) Total equity (GAAP)  $ 2,500,493 $ 2,433,293 $ 2,546,408 $ 2,599,727 $ 2,509,206
Less: Noncontrolling interest (a)  295,431  295,431  295,431  295,257  295,165
Less: Preferred stock  95,624  95,624  95,624  95,624  -- 
(B) Total common equity  2,109,438  2,042,238  2,155,353  2,208,846  2,214,041
Less: Intangible assets (GAAP) (b)   163,931  162,695  163,623  156,014  156,942
(C) Tangible common equity (Non-GAAP) 1,945,507 1,879,543 1,991,730 2,052,832 2,057,099
Less: Unrealized gains on AFS securities, net of tax (11,241) 11,153 9,439 48,591 55,250
(D) Adjusted tangible common equity (Non-GAAP) $ 1,956,748 $ 1,868,390 $ 1,982,291 $ 2,004,241 $ 2,001,849
           
Period-end Shares Outstanding          
(E) Period-end shares outstanding  236,370  236,328  240,555  241,225  243,598
           
Risk Weighted Assets          
(F) Risk weighted assets (c) (d)  $ 18,971,300  $ 19,275,526  $ 20,460,353  $ 20,231,850  $ 20,153,430
           
Ratios          
(D)/(F) Adjusted tangible common equity to risk weighted assets ("TCE/RWA") (Non-GAAP) (c)  10.31% 9.69% 9.69% 9.91% 9.93%
(C)/(E) Tangible book value per common share (Non-GAAP)  $ 8.23 $ 7.95 $ 8.28 $ 8.51 $ 8.44
           
Net interest income adjusted for impact of fully taxable equivalent ("FTE") (Non-GAAP)        
Net interest income (GAAP) $ 157,135 $ 158,838 $ 160,019 $ 161,382 $ 170,598
FTE adjustment  2,044  1,894  1,913  1,787  1,842
Net interest income adjusted for impact of FTE (Non-GAAP) $ 159,179 $ 160,732 $ 161,932 $ 163,169 $ 172,440
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) Included in total equity on the Consolidated Balnce 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.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 877-303-6618. The number for international participants is 224-357-2205. The conference ID number is 30344741. 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. Jan. 31. To listen to the replay, dial 855-859-2056 or 404-537-3406. The passcode is 30344741. The event also will be archived and available by midnight Central Time on the website.

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