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VOL. 132 | NO. 119 | Thursday, June 15, 2017

First Horizon CFO Talks Capital Bank Merger

By Andy Meek

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First Tennessee Bank’s parent company is a $30 billion financial institution that’s put its cash to work the last few years by buying back almost 10 percent of its shares and pursuing smaller mergers and acquisitions.

And then came the opportunity for First Horizon National Corp. to buy North Carolina-based Capital Bank Financial Corp. in a $2.2 billion deal closing later this year that will create the fourth-largest regional bank in the Southeast.

First Horizon’s chief financial officer William “BJ” Losch told attendees at any industry conference this week the bank “feels pretty good about where we sit today.” And its merger with Capital Bank – a $10 billion institution – is one reason why.

Our Capital Bank deal is a great way to put capital to work,” Losch said during the Morgan Stanley Financial Services Conference in New York City. “We think it gives us a lot of strategic optionality, it was well priced in our opinion, and it gives us a nice platform for growth.”

One way is by bringing a large number of new customers into the First Tennessee orbit. Losch said it also “orients” the Memphis-based bank more toward the North and South Carolina markets, as well as introducing the company to the Florida market, another area where Capital Bank operates.

While publicly traded First Horizon’s stock is down about 10 percent since the Capital Bank deal was announced in May, Losch attributes that more to a “general downdraft” in bank stocks over the last several weeks.

“We want to create a very unique value proposition in the Southeast,” he said. “One that has big bank capabilities but delivered with a smaller bank look and feel. And we think if we do that with the balance sheet that we’ll have and the breadth of products that we’ll have, we will be unique in the industry.”

His comments – about the merger still in progress, but also the company’s general footing, its approach to technology enhancements and more – offered a look into the approach and roadmap at the biggest bank based in both Memphis and in Tennessee. Two months earlier, the bank had reported a busy, profitable first quarter, with Losch saying this week the bank continues to see double-digit loan and deposit growth and has multiple lines of business that are growing, “not just one or two.”

As has become the wont of moderators and the interest of audiences at industry gatherings like this one, First Horizon executives tend to find themselves addressing questions about possible M&A deals the bank might pursue in the future. When First Horizon CEO Bryan Jordan, for example, addressed the Barclays Global Financial Services Conference toward the end of 2016, most respondents to a poll of his crowd said they suspect First Horizon will either sell itself to a larger bank or enter into a merger of equals over the next few years.

For the bank’s part, Jordan said, “We think we’ve got the ability to continue to grow the business.” And M&A activity could be one way of doing that.

Losch said as much this week, stressing that the bank is focused on the current transaction in front of it – the Capital Bank merger that’s expected to close in the fourth quarter.

“Of course,” he added, “we’d like to continue to see if it makes sense for us to grow via acquisition.”

First Tennessee Bank is the largest piece of First Horizon’s operation, which also includes a capital markets unit. Its loan pipelines are strong, and Losch said it’s seeing growth potential in areas that include commercial real estate, among other areas.

The bank, he said, also understands it needs to invest in technology, but judiciously. And to not necessarily try and keep pace with the biggest banks in the country for its own sake.

“Incrementally, from a technology perspective, scale helps,” Losch said. “But quite frankly, we’re not one of the largest banks in the country and so will never be able to compete with them apples to apples from a technology perspective. So what we try to do is really understand what is most important to our customers and most important to driving revenue opportunities first.

“We look a lot more for partnerships and leveraging technology that’s out there than necessarily building proprietary (technology). We have to be smarter about how we use our dollars there.”

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 133 1,342
MORTGAGES 0 131 1,047
FORECLOSURE NOTICES 0 19 170
BUILDING PERMITS 0 305 3,056
BANKRUPTCIES 20 118 736
BUSINESS LICENSES 27 53 329
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0