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VOL. 128 | NO. 13 | Friday, January 18, 2013

First Horizon Posts $41 Million Profit

By Andy Meek

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Memphis-based First Horizon National Corp. booked a profit of $41 million in the fourth quarter and generated earnings in line with Wall Street expectations of 17 cents a share.

Those results closed the books on a year for the parent company of the largest bank based in Tennessee that included executing on a comprehensive set of efficiency goals for the year. Among those goals were streamlining bank operations, consolidating branches based on customer preferences and slimming down to reflect business needs.

Regarding the latter, First Horizon spent $17 million in the fourth quarter on a voluntary separation program. The company sent out letters in October offering a buyout package to about 400 employees who don’t have direct contact with customers, and as of Dec. 31 187 employees had chosen to participate.

The company is still working toward bringing down its expense ratio (basically, total expenses divided by total revenue), and viewed the buyouts as a creative way to get there. It’s an effort to demonstrate to several audiences, including analysts and investors, that First Horizon can successfully remake itself into a leaner, more focused banking operation instead of the sprawling, multi-state financial supermarket it was during the boom years.

In fact, looking at results for 2012 such as earning customer services honors, loaning more money to businesses and consumers, growing deposits, improving asset quality and returning capital to shareholders, First Horizon chairman and CEO Bryan Jordan told analysts Friday, Jan. 18, the company is “energized” as it moves into 2013.

“This should be a good year,” Jordan said.

In a note to clients after the bank made its quarterly earnings presentation to analysts Jan. 18, Wunderlich Securities Inc. bank analyst Kevin Reynolds said that First Horizon’s “core results reflected solid performance within the regional bank.”

During the just-ended fourth quarter, First Horizon chief financial officer William Losch pulled back the curtain a little at some of the things going on behind the scenes at First Horizon, such as the company making some $100 million in technology improvements.

It’s something that was sorely needed and hadn’t been touched for years, he said.

“When we started reinvesting in technology for our core banking business in earnest in 2009, we had not invested in it strongly since 2000,” Losch said.

First Horizon took a $250 million charge in the second quarter to address a mortgage repurchase issue, and that led to a loss of $28 million for 2012. However, it resulted in no mortgage repurchase provision in the third and fourth quarters.

In the company’s regional banking segment, average loans were up 10 percent, core deposits were up 11 percent and revenue was up 3 percent for 2012. The company repurchased $131 million worth of its stock during the year, and its First Tennessee unit remained the top bank in West and East Tennessee during the year, with opportunities to grow its standing still remaining in the Nashville area.

First Horizon’s capital markets group provided significant returns for the company in 2012, with average daily revenue for the group being $1.2 million.

“We executed on some tough actions in 2012 to position our company for long-term success,” Jordan said.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 67 67 10,289
MORTGAGES 107 107 13,434
FORECLOSURE NOTICES 24 24 2,668
BUILDING PERMITS 393 393 24,700
BANKRUPTCIES 60 60 9,952
BUSINESS LICENSES 16 16 3,752
UTILITY CONNECTIONS 149 149 14,706
MARRIAGE LICENSES 31 31 3,198

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