VOL. 10 | NO. 29 | Saturday, July 15, 2017
First Horizon Sees Growth in Second Quarter
By Andy Meek
First Tennessee Bank’s parent company saw net income climb 61 percent in the second quarter and First Tennessee itself announced the largest merger in its history, but company chairman and CEO Bryan Jordan characterized the period for analysts pretty much the way he always does during earnings presentations.
The company, he told analysts, is enjoying “good momentum.” It’s focused on controlling costs, he added, and growing value over the long-term.
Among the highlights for the period, net income grew from $57 million a year ago to $91 million during the second quarter of 2017. Earnings per share also jumped 58 percent, from 24 cents last year to 38 cents.
It was an outlier quarter in some respects thanks to factors like First Tennessee announcing its acquisition of Charlotte, North Carolina-based Capital Bank Financial Corp. The $2.2 billion deal will create the fourth-largest regional bank in the Southeast. First Horizon CFO BJ Losch said Friday, July 14, that the merger is expected to close in the fourth quarter.
First Tennessee’s capital markets division, FTN Financial, also said during the quarter it has finished its acquisition of Houston-based Coastal Securities Inc., a national leader in the trading, securitization and analysis of Small Business Administration loans.
In First Tennessee’s home market in Memphis, meanwhile, the bank’s West Tennessee president Bo Allen said the first half of 2017 has been strong overall for the bank. Loans and deposits are both up year-over-year, and “we continue to see strong pipeline activity in our commercial and private client lines of business.”
Jordan told analysts during the company’s previous earnings presentation the bank expects the economy to basically “chug along” this year in the absence of anything on the political or Fed-related fronts to interrupt that pace. And that’s still very much the company’s thesis at the moment, with Jordan noting the bank doesn’t see any reason to expect growth won’t continue – not only across Tennessee but the company’s entire franchise.
“While our customers are generally optimistic,” he said, “the economic backdrop hasn’t changed significantly over the last four, five, six years. The second quarter of 2017 could have been the second quarter of any year in the last five. And there’s still some optimism in the customer base that we’ll get some fiscal relief in taxes and regulatory costs through our legislative process in D.C., but those customers continue to be optimistic about the future and the business or operating environment.”
Among other results:
• Revenue at First Tennessee was up 11 percent during the quarter. That helped the bank improve its efficiency ratio, a key banking performance metric that’s calculated by dividing expenses by total revenue. During the quarter, that ratio for First Horizon was 66.4 percent, meaning the company spends about 66 cents to make a dollar – down from an efficiency ratio of almost 73 percent during the previous quarter.
• Average loans were up 11 percent during the quarter. The company grew its average deposits by 10 percent.
“Our focus for the rest of the year continues to be on execution in our core businesses – banking and FTN Financial,” Jordan said. “We continue to see good opportunities for loan growth. Our loan pipelines look strong, our customer activities and calling efforts continue to be good, and we continue to be focused on improving our returns and controlling our costs in the core business.”