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VOL. 132 | NO. 247 | Thursday, December 14, 2017

First Horizon Foresees Bigger Savings from Capital Bank Deal

By Andy Meek

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The parent company of First Tennessee Bank thinks it will save even more money than originally thought after its acquisition of North Carolina-based Capital Bank Financial Corp.


Bryan Jordan, chairman and CEO of Memphis-based First Horizon National Corp., told attendees at this month’s 2017 Goldman Sachs Financial Services Conference in New York that the combination of the two companies will now yield 40 percent in cost savings, up from a planned 30 percent target. That increase, Jordan said, is essentially a move from $65 million in cost savings up to cutting $85 million in annual expenses.

The company also has even greater confidence in new revenue opportunities that will be available thanks to the merger, which creates the fourth largest regional bank in the Southeast.

Among other things, Jordan pointed to as much as $25 million to $30 million in “incremental revenue opportunities” as a result of the deal.

“Revenue synergies come from areas that come from ability to leverage our funding structure and to create better funding costs through our use of the balance sheet and the expanded deposit markets we have,” Jordan explained, adding that “product synergies” are part of that same picture.

Capital Bank, for example, has a mortgage product that First Horizon had been offering through an outsourced provider. That product can now be rolled back into the First Tennessee franchise.

The $2.2 billion deal that combines the two banks was made official Nov. 30. It gives the resulting entity about $40 billion in assets, $32 billion in deposits, $27 billion in loans and 350 branches in Tennessee, North and South Carolina, Florida, Mississippi, Georgia, Texas and Virginia.

Now that the deal is done, with the necessary approvals and formalities closed, the process of finishing the actual integration itself will take through the middle of 2018.

One thing that deal – the largest acquisition in First Horizon’s more than 150-year history – hasn’t changed is the broad strokes in the way Jordan talks about the company’s strengths. At the New York investor conference just a few days after closing the Capital Bank deal, for example, he presented the bank in the same “large-local” terms as always.

It may have the No. 1 deposit share in Tennessee and a $40 billion balance sheet, “but we approach the market much like a community banking organization, with local decision making and autonomy.”

It’s been a consequential year for the bank he leads, for sure, but Jordan also sees upside in the economy at large heading into the new year.

“We see the economy continuing to be fairly steady,” he said. “It looks to us like growth has picked up a little bit in the back half of the year.

“We’re optimistic about 2018. We think there’s been continued improvement in the regulatory dialogue. Loan competition is still very strong.”

The other thing in a strong position is the Memphis-based company itself, which plans to keep the First Tennessee Bank brand in Tennessee. Branches outside the Tennessee market will keep their Capital Bank name. Two Capital Bank board members have also joined the First Horizon board.

First Horizon’s share price has been hovering recently near its 52-week high of $20.84. Among its most recent results, the company reported a 7 percent increase in net income in the third quarter, from $63.2 million in 2016 to $67.3 million.

“We’re very pleased with the building out of the business,” Jordan said. “We think we’ve built a sustainable and high-value franchise. We’re very optimistic about the operating environment over the next several years.”

PROPERTY SALES 23 23 1,365
MORTGAGES 21 21 1,068
BUILDING PERMITS 117 117 3,173