First Horizon National Corp. posted earnings per share of $0.17 for the second quarter – a “solid, but not great” period for the bank, in the words of one analyst.
The Memphis-based parent company of First Tennessee Bank, which has been racing to slim down and scouring the landscape for new revenue opportunities, came in short of analysts’ consensus expectations for earnings per share of $0.19. However, the company’s results were still an improvement over this time last year, when the company posted a loss of $0.50.
Profit available to common shareholders as a result of the second quarter performance was $41 million.
According to the bank, which swelled its assets by $433 million during the quarter because of an East Tennessee bank acquisition from the Federal Deposit Insurance Corp., reasons for its performance included positive trends at its First Tennessee regional banking unit. The company also is chasing any efficiencies it can find and continuing to wind down the mortgage business it sold in 2008.
Bryan Jordan, First Horizon’s chairman and CEO, said the bank’s two main businesses – First Tennessee and capital markets subsidiary FTN Financial – are delivering strong results for customers and shareholders.
“Our people continue to seize opportunities to earn our customers’ business with unparalleled service and product options,” he said. “We remain committed to operating efficiently throughout the company, building a strong foundation so we can take advantage of opportunities as the economy improves.”
Kevin Reynolds, a banking analyst with Wunderlich Securities Inc. in Memphis who covers First Horizon, said the main negative for the quarter was that fixed income commissions dropped as long-term interest rates surged late in the quarter. Separate from that, he said loan balances and the bank’s net interest margin were ahead of expectations, and, as he put it in an analyst note immediately following the bank’s earnings release, “long-term fundamentals point to an improving future.”
“Put it this way,” Reynolds said. “They missed (Wall Street’s estimate) by 2 cents. They missed (Wunderlich’s) by 3 cents. The drop in fixed-income commissions cost them 4 cents. In everything else during the quarter, they did better than expected. They did what they were supposed to, they just can’t control long-term interest rates.”
During the quarter, increased fee income helped First Tennessee grow revenue 2 percent, and the bank’s average loans and core deposits also climbed higher. FTN Financial saw fixed income average daily revenue of just shy of $1 million, and a company-wide focus on lower variable compensation and efficiency improvements led to a 5 percent expense reduction from the previous quarter.
Also during the quarter, First Horizon’s efficiency ratio came down slightly. It now stands at 75.05 percent, though that’s still a little higher than the bank would like.
An efficiency ratio of 75 percent essentially means the company spends 75 cents for every dollar it makes.
In other developments during the quarter, the bank rolled out new test locations for a concierge-type of service it’s developing. At the three centers were the project is now live, including one in Memphis, customers are greeted immediately upon walking in to the branch.
The person who greets them walks them to a workstation to help with their needs. When that’s done, the idea is for that same person to walk the customer back to the door.
Also in recent days, First Tennessee’s chief marketing officer left the company to accept a marketing executive position in Chicago.