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VOL. 129 | NO. 139 | Friday, July 18, 2014

First Horizon Reports Positive Quarter

By Andy Meek

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For the second quarter of its 150th anniversary year, the Memphis-based parent company of First Tennessee Bank reported growth in profit as well as increases in loans, while continuing to reduce the drag of the mortgage business the company sold in 2008.

First Horizon National Corp. reported net income of $76.8 million, or 32 cents per share, during the quarter, up from 19 cents per share in the first quarter.

The company’s main business lines are a regional bank and a capital markets unit. Business at the former, First Tennessee Bank, was strong for the quarter, with pre-tax income rising to $72.9 million, up from $56 million during the first quarter.

Market conditions at the latter, meanwhile, contributed to fixed income revenue at FTN Financial falling to $40.5 million from almost $50 million in the first quarter. FTN Financial is a significant contributor of fee income to First Horizon, where it continues to be regarded as a key part of the company’s business mix.


“We’re focused on building First Tennessee and FTN Financial while improving our customer focus and the economic profitability in every area of the company,” said Bryan Jordan, First Horizon’s chairman and CEO.

Looking deeper into the results for the quarter, the mortgage business the company sold off six years ago is continuing to see its impact diminish, with non-strategic loans now making up less than 19 percent of the company’s loan portfolio.

During the second quarter, the company also cut its provision for loan losses in half, to $5 million in the second quarter from $10 million in the first quarter. At First Tennessee, which has the largest market share in the state, total loans were up 4 percent during the quarter, and the bank saw double-digit year-over-year loan growth in asset-based lending and commercial real estate.

The company’s loan team also has started to make loan commitments in the bank’s new markets of Houston, Charleston, S.C., and Jacksonville, Fla.

Kevin Reynolds, a bank analyst with Wunderlich Securities Inc., said the company enjoyed a good, but not strong, quarter. A number of one-time items, he wrote in an analyst commentary published after First Horizon’s earnings presentation Friday, reduced the company’s operating earnings per share to roughly 17 cents, one cent ahead of the consensus estimate.

“One-time items included litigation recoveries ($47.1 million), an upward valuation adjustment on held-for-sale loans ($8.2 million), securities losses ($1.9 million), a Visa volume incentive payment ($2.8 million), and an FDIC premium refund ($3.3 million).”

Meanwhile, during the second quarter, First Horizon’s so-called efficiency ratio fell to its lowest level in a while – a positive sign. That ratio basically reflects total expenses for the company divided by total revenue. So, for example, an efficiency ratio of 75 percent means First Horizon is spending 75 cents to make a dollar.

During the second quarter, that ratio was down to about 58 percent, from 75.3 percent in the first quarter. Among other metrics, the company had about 4,300 employees during the first quarter. That’s down now to 4,200.

This year, First Horizon has been celebrating its milestone anniversary a number of ways. Starting on March 25, for example, the bank kicked off an effort called 150 Days of Giving during which the First Tennessee Foundation will give away $5,000 a day, every day, to a different nonprofit.

Also from that day on through the end of the year, the company’s Downtown Memphis headquarters will glow in blue at night, the first time the building has been lit in a single color.

PROPERTY SALES 103 137 4,008
MORTGAGES 84 131 4,521
BUILDING PERMITS 178 368 9,636
BANKRUPTCIES 50 110 2,995