Driven by prudent expense management,
First Horizon National Corp.
) reported second-quarter 2014 adjusted earnings per share of 19
cents, outpacing the Zacks Consensus Estimate of 16 cents.
Moreover, results compared favorably with the year-ago figure of 17
cents per share.
Including litigation expense recovery of after-tax $31.4 million or
13 cents per share, net income available to common shareholders was
$76.8 million or 32 cents per share.
Shares of First Horizon gained more than 1% in the pre-market
session, indicating that investors have been bullish on the
results. The price reaction during the trading session will give a
better idea about whether First Horizon has been able to meet
First Horizon's results reflected lower-than-anticipated expenses.
Moreover, improvement in the credit quality was recorded. However,
reduced revenues were a concern.
Quarter in Detail
Total revenue came in at $283.7 million, down 6% from the year-ago
quarter. The decline was due to lower net interest as well as
non-interest income. Moreover, results also lagged the Zacks
Consensus Estimate of $285.0 million.
Net interest income declined 2% year over year to $156.8 million.
Yet, net interest margin increased 1 basis point year over year to
Non-interest income slipped 10% from the prior-year quarter to
$128.8 million. Non-interest expense declined 27% from the
prior-year quarter to $165.3 million.
Period-end loans, net of unearned income declined 2% year over year
to $15.8 billion. Moreover, total deposits declined 5% to $16.2
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 $243.6 million. As a percentage of period-end loans on an
annualized basis, allowance for loan losses was 1.54%, down 8 basis
points year over year.
Further, the company's provision for loan losses declined 67% year
over year to $5 million. Net charge-offs fell 53% on a
year-over-year basis to $8.6 million. As a percentage of average
loans and on an annualized basis, net charge-offs was 0.22%, down
24 basis points on a year-over-year basis. Moreover, nonperforming
assets dipped 21% year over year to $340.0 million.
Evaluation of Capital
First Horizon's capital ratios remained at strong levels. Adjusted
tangible common equity ratio to risk weighted assets was 10.70%
versus 9.75% as of Jun 30, 2013. Tier 1 ratio was 14.20% compared
with 13.28% in the prior-year quarter. Adjusted Tier 1 common ratio
to risk weighted assets was 11.15% compared with 10.39 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
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.
Among other Southeast banks,
) is scheduled to announce second-quarter results on Jul 21, while
Regions Financial Corporation
) will announce on Jul 22 and
) on Jul 23.
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