Driven by prudent expense management,
First Horizon National Corp.
) reported first-quarter 2014 earnings per share of 19 cents,
outpacing the Zacks Consensus Estimate by 4 cents. Moreover,
results compared favorably with the year-ago figure of 17 cents
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Shares of First Horizon increased more than 1% in the pre-market
session, indicating that investors have been bullish on the
results. The price reaction during the full trading session will
give a better idea about whether First Horizon has been able to
Our proven model predicted that First Horizon will post an
earnings beat as it has the right combination of two key
ingredients - positive
and a Zacks Rank #3 (Hold).
First Horizon's results reflected lower-than-anticipated
expenses. Moreover, improvement in the credit quality was
recorded. However, reduced revenues were a concern.
Net income available to common shareholders was $44.9 million, up
10% from the prior-year quarter.
Quarter in Detail
Total revenue came in at $298.1 million, down 6% from the
year-ago quarter, due to lower net interest as well as
non-interest income. However, revenues surpassed the Zacks
Consensus Estimate of $290.0 million.
On a fully taxable equivalent basis, net interest income declined
5.5% year over year to $154.3 million. Net interest margin
decreased 7 basis points year over year to 2.88%.
Non-interest income slipped 10% from the prior-year quarter to
$140.1 million. Non-interest expense declined 8% from the
prior-year quarter to $220.2 million.
Period-end loans, net of unearned income declined 5% year over
year to $15.1 billion. However, total deposits rose 3% to $16.7
billion compared with the prior-year quarter.
Overall, First Horizon's credit quality metrics improved in the
reported quarter. Allowance for loan losses were down 7% year
over year to $247.2 million. As a percentage of period-end loans
on an annualized basis, allowance for loan losses was 1.64%, down
3 basis points year over year.
Further, the company's provision for loan losses declined 33%
year over year to $10 million. Net charge-offs fell 38% on a
year-over-year basis to $16.6 million. As a percentage of average
loans and on an annualized basis, net charge-offs was 0.45%, down
22 basis points on a year-over-year basis. Moreover,
nonperforming assets dipped 1% year over year to $345.5 million.
Evaluation of Capital
First Horizon's capital ratios remained at strong levels.
Adjusted tangible common equity ratio to risk weighted assets was
10.61% versus 9.93% as of Mar 31, 2013. Moreover, book value per
share came in at $9.10, compared with $9.16 in the prior-year
quarter. Tier 1 ratio was 14.20% compared with 13.56% in the
First Horizon's endeavors to lower its exposure to problem loans
are impressive. It also aims to control costs and improve
long-term profitability by focusing on strengthening its core
Tennessee banking franchise.
However, though winding down of the non-strategic part of First
Horizon's loan portfolio bodes well, it will remain a drag on the
company earnings going forward. In addition to a shrinking
revenue base, regulatory issues, a tepid economic recovery and
low interest rate environment will challenge its performance.
First Horizon currently carries a Zacks Rank #3 (Hold). Among
other Southeast banks,
) is scheduled to announce first-quarter results on Apr 21, while
Regions Financial Corporation
) will announce on Apr 22.