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VOL. 133 | NO. 16 | Monday, January 22, 2018

First Tennessee Parent Company Caps Busy Fourth Quarter and 2017

By Andy Meek

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Investors and analysts who cover the Memphis-based publicly traded parent company of First Tennessee Bank had a lot of news to digest during the bank’s fourth quarter.

Bryan Jordan, chairman and CEO of First Horizon National Corp., said during a conference call Friday, Jan. 19, the final three months of 2017 closed the book on an “outstanding and transformative” year for the company.

On the regional banking side, pre-tax income was up 36 percent, revenue was up 12 percent as a result of increased net interest income and higher fee income, and average loans and deposits were up 13 percent and 11 percent, respectively.

The company is now a $41 billion institution thanks to the completion during the fourth quarter of its merger with Capital Bank Financial Corp., a deal announced last May that added more than 350 branches serving the Southeast. First Horizon also in recent weeks raised its expectations of revenue and cost synergies as a result of the merger, which closed late in the quarter.

“We closed our merger with Capital Bank, the largest in our company’s history, significantly expanding our balance sheet, customers, markets and opportunities, all as we identified greater cost savings and revenue opportunities than originally announced,” Jordan said of the bank’s year-end performance.

The company also kicked off 2018 with confidence in its ability to “create value” for customers, shareholders and the communities where it operates, he said.

At the local level, First Tennessee president for West Tennessee Bo Allen said the company saw growth in loan and deposit balances in the Memphis area during 2017, making the year overall a strong one and setting the bank up for solid performance going into 2018 as well.

In terms of the fourth quarter, earnings per share for the quarter were 20 cents, down slightly from 23 cents a share in the year-ago period. The bank’s net income was more or less flat during the quarter, at almost $53 million.

Reflected in the fourth quarter numbers are First Horizon’s previously announced $1,000 bonuses to about 70 percent of its employees, as well as a contribution of $16.5 million to the company’s foundation. The bonuses, announced during the quarter and paid on Jan. 8, were the bank’s response to the recently enacted federal tax reform legislation.

In a regulatory filing a few days ago, First Horizon disclosed that it estimated a reduction to its fourth quarter earnings of about $95 million, “related to the effects of tax reform primarily associated with a decrease in the valuation of the net deferred tax asset balance. This disclosure relates only to the estimated impact of tax reform on First Horizon's operating results for fourth quarter 2017.”

The slide presentation First Horizon executives led analysts through on Friday included highlights that touted the company’s “solid performance” driven by strong fundamentals, balance sheet growth and stable credit quality.

As a result of the tax legislation, the bank’s estimated tax rate for 2018 is 23 percent, down from 32 percent in the third quarter of 2017.

Also, the company told analysts half of the $85 million in expected cost savings from the Capital Bank merger are expected to come in 2018, with a systems conversion midway through the year.

PROPERTY SALES 76 133 1,342
MORTGAGES 83 131 1,047
BUILDING PERMITS 190 277 3,028