On Mar 10, 2014, we issued an updated research report on
First Horizon National Corporation
). This Southeast bank recently reported impressive
fourth-quarter 2013 results. Results were aided by lower
operating expenses, increased deposit balances and strong capital
ratios, partially offset by a declining top line and lower loan
balance. Though the company shows stability in its fundamentals,
we remain cautious due to the current economic uncertainty across
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First Horizon reported fourth-quarter 2013 earnings of 21 cents
per share, beating the Zacks Consensus Estimate by 23.5%. Net
income available to common shareholders was up 21% year over year
to $49.1 million.
First Horizon exhibited a decent performance in 2013 as evident
from its earnings history. In 2013, the company posted in-line
earnings in 2 quarters, delivered a positive earnings surprise in
1 quarter and missed in the remaining quarter.
Adversely affected by the disappointing mortgage market, First
Horizon intends to exit from national mortgage and construction
lending business and is focused on driving earnings from its core
Tennessee banking franchise. We believe such repositioning
activities will be beneficial for the company in the long run.
Further, First Horizon's cost control measures have helped
improve operating efficiencies. Notably in 2013, the company
recorded a 16% year-over-year decline in non-interest expenses
and management expects annualized expenses to be below $900
million in 2014.
Despite strong fundamentals, we believe there are certain issues
that may pose threats to the company's financials in the near
term. These include absence of credible improvement in the
mortgage market, declining net interest margin due to low
interest rate environment and the prevailing stringent regulatory
Further, the Zacks Consensus Estimate over the past 60 days
declined 5.5% to 69 cents per share for 2014. Also, for 2015 it
declined 7.6% to 85 cents per share, over the same time frame.
First Horizon currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Stocks that are worth considering in the sector include
Access National Corporation
Bank of Kentucky Financial Corp.
SY Bancorp Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).