GlobeNewswire
2012-07-20 Company Takes Major Step to Resolve Mortgage Problems,
Continues to Execute Strategic Plans
MEMPHIS, Tenn., July 20, 2012 (GLOBE NEWSWIRE) -- The regional bank and
capital markets posted solid performances in the second quarter at
First Horizon National Corp. (NYSE:FHN). Those results were
overshadowed by increased reserves for GSE mortgage repurchases, which
combined with litigation-related accruals for a negative impact on
earnings per share of approximately $.67 for the quarter. The second
quarter net loss to common shareholders was $124.8 million, or $.50 per
diluted share.
"Our company continues to generate solid results in our regional bank
through First Tennessee and our capital markets group through FTN
Financial, and our employees continue to win new business, improve the
way they serve our customers and work more efficiently at every turn,"
said Bryan Jordan, chairman, president and CEO of First Horizon. "We
are pleased with the progress our folks have made on our efforts to
position us for the future including technology investments and the
continued wind-down of our non-strategic businesses."
Financial results
-- Revenues at the regional bank, First Tennessee, grew 3 percent from
first to second quarter, driven by higher net interest income and fees.
Period-end loans and average deposits in the bank both grew 3 percent
from first to second quarter.
-- The capital markets group, FTN Financial, continues to be a major
contributor to fee income and provides significant returns for First
Horizon, with second quarter fixed income average daily revenue of $1.1
million.
-- The previously announced pre-tax charge of $272 million for GSE-related
mortgage repurchase and litigation reserves was the primary driver in
the second quarter pre-tax loss of $211 million.
-- First Horizon's efforts to continue to reduce loan balances in the
non-strategic segment coupled with increased loans in the regional bank
resulted in a 1 percent drop in consolidated average loans.
Continued improvement in credit quality
-- Asset quality metrics continued to improve, allowing a decline in the
allowance-as-a-percentage-of-loans ratio to 198 basis points from 217
basis points last quarter.
-- Credit trends continue to improve, but at a slower pace, yielding a
consolidated loan loss provision of $15.0 million for the second
quarter, up from $8.0 million in the first quarter.
-- Annualized net charge-offs improved from first to second quarter due to
lower consumer loan losses.
Capital
-- Ratios remain above well-capitalized levels.
-- A dividend of $.01 per share was paid July 1.
-- Repurchased $36.9 million in shares in the second quarter, leaving $74.5
million available under the company's $200 million stock repurchase
program.
CONSOLIDATED SUMMARY RESULTS
Quarterly, Unaudited
---------------------------------------------------------------------------------------------------
2Q12 Change
vs.
-------------
(Dollars in thousands, except per
share data) 2Q12 1Q12 2Q11 1Q12 2Q11
-------------------------------------- -------------- ------------- ------------- ------ -----
Income Statement Highlights
Net interest income $ 172,675 $ 171,929 $ 172,860 * *
Noninterest income 153,842 202,113 187,592 (24)% (18)%
Securities gains/(losses), net 5,065 328 1 NM NM
-------------------------------------- -------------- ------------- ------------- ------ -----
Total revenue 331,582 374,370 360,453 (11)% (8)%
-------------------------------------- -------------- ------------- ------------- ------ -----
Noninterest expense 527,177 321,994 344,455 64% 53%
Provision for loan losses 15,000 8,000 1,000 88% NM
-------------------------------------- -------------- ------------- ------------- ------ -----
Income/(loss) before income taxes (210,595) 44,376 14,998 NM NM
Provision/(benefit) for income taxes (88,178) 10,570 (4,167) NM NM
-------------------------------------- -------------- ------------- ------------- ------ -----
Income/(loss) from continuing
operations (122,417) 33,806 19,165 NM NM
Income/(loss) from discontinued
operations, net of tax 487 (435) 3,671 NM (87)%
-------------------------------------- -------------- ------------- ------------- ------ -----
Net income/(loss) (121,930) 33,371 22,836 NM NM
-------------------------------------- -------------- ------------- ------------- ------ -----
Net income attributable to
noncontrolling interest 2,844 2,844 2,844 * *
-------------------------------------- -------------- ------------- ------------- ------ -----
Net income/(loss) available to common
shareholders $ (124,774) $ 30,527 $ 19,992 NM NM
-------------------------------------- -------------- ------------- ------------- ------ -----
Common Stock Data
Diluted EPS from continuing operations $ (0.50) $ 0.12 $ 0.06 NM NM
Diluted EPS $ (0.50) $ 0.12 $ 0.08 NM NM
Diluted shares (thousands) 249,104 255,369 262,756 (2)% (5)%
Period-end shares outstanding
(thousands) 248,810 252,667 263,699 (2)% (6)%
Cash dividends declared per share $ 0.01 $ 0.01 $ 0.01
-------------------------------------- -------------- ------------- ------------- ------ -----
Balance Sheet Highlights (Period-End)
Total loans, net of unearned income
(Restricted -- $ .1
billion) (a) $ 16,185,763 $ 15,971,330 $ 16,061,646 1% 1%
Total deposits 16,117,443 16,935,170 15,896,027 (5)% 1%
Total assets (Restricted -- $ .1
billion) (a) 25,492,955 25,678,969 25,054,066 (1)% 2%
Total liabilities (Restricted -- $ .1
billion) (a) 22,978,549 23,004,796 22,372,684 * 3%
Total equity 2,514,406 2,674,173 2,681,382 (6)% (6)%
-------------------------------------- -------------- ------------- ------------- ------ -----
Asset Quality Highlights
Allowance for loan losses (Restricted
-- $ 6.0 million) (a) $ 321,051 $ 346,016 $ 524,091 (7)% (39)%
Allowance / period-end loans 1.98% 2.17% 3.26%
Net charge-offs $ 39,965 $ 46,335 $ 66,037 (14)% (39)%
Net charge-offs (annualized) / average
loans 1.01% 1.16% 1.67%
Non-performing assets (NPA) (b) $ 466,873 $ 511,320 $ 747,860 (9)% (38)%
NPA % (b) (c) 2.32% 2.56% 4.09%
-------------------------------------- -------------- ------------- ------------- ------ -----
Key Ratios & Other
Return on average assets (annualized)
(d) (1.96)% 0.53% 0.37%
Return on average common equity
(annualized) (e) (21.06)% 5.15% 3.36%
Net interest margin (f) (g) 3.16% 3.12% 3.20%
Fee income to total revenue (h) 47.12% 54.03% 52.04%
Efficiency ratio (i) 161.45% 86.08% 95.56%
Book value per common share $ 8.92 $ 9.42 $ 9.05
Tangible book value per common share
(g) $ 8.28 $ 8.78 $ 8.43
Adjusted tangible common equity to
risk weighted assets (g) 9.96% 10.79% 11.05%
Full time equivalent employees 4,619 4,629 5,036 * (8)%
-------------------------------------- -------------- ------------- ------------- ------ -----
NM - Not meaningful
* Amount is less than one percent.
Certain previously reported amounts have been reclassified to agree with current presentation.
(a) Restricted balances parenthetically presented are as of June 30, 2012.
(b) In 2Q12, the process for identifying current junior liens behind delinquent or modified first
liens for nonaccrual status was refined. Q1 consumer NPLs have been represented to agree with Q2
presentation.
(c) NPAs related to the loan portfolio over period-end loans plus foreclosed real estate and other
assets.
(d) Calculated using net income.
(e) Calculated using net income available to common shareholders.
(f) Net interest margin is computed using total net interest income adjusted for FTE.
(g) Refer to the Non-GAAP to GAAP Reconciliation at the end of this release.
(h) Ratio excludes securities gains/(losses).
(i) Noninterest expense divided by total revenue excluding securities gains/(losses).
Use of non-GAAP measures
Certain measures are included in this release that are non-GAAP,
meaning they are not presented in accordance with generally accepted
accounting principles (GAAP) in the U.S. FHN's management believes such
measures are relevant to understanding the capital position and results
of the company. The non-GAAP items presented in this release are
per-share impact of certain charges, tangible book value per common
share, adjusted tangible common equity to risk-weighted assets and net
interest margin computed using net interest income adjusted for FTE.
These measures are reported to FHN's management and board of directors
through various internal reports. Additionally, disclosure of the
non-GAAP capital ratios provides a meaningful base for comparability to
other financial institutions as demonstrated by their use by the
various banking regulators in reviewing the capital adequacy of
financial institutions. Non-GAAP measures are not formally defined by
GAAP or codified in the federal banking regulations, and other entities
may use calculation methods that differ from those used by FHN. The
reconciliation of non-GAAP to GAAP measures and presentation of the
most comparable GAAP items can be found in this table:
NON-GAAP to GAAP Reconciliation
----------------------------------------- ------------- ------------ ------------
(Period End, Dollars in Thousands except
per share data) (Unaudited) 2Q12 1Q12 2Q11
----------------------------------------- ------------- ------------ ------------
Tangible Common Equity (Non-GAAP)
(A) Total equity (GAAP) $2,514,406 $2,674,173 $2,681,382
Less: Noncontrolling interest (a) 295,165 295,165 295,165
----------------------------------------- ------------- ------------ ------------
(B) Total common equity 2,219,241 2,379,008 2,386,217
Less: Intangible assets (GAAP) (b) 158,901 159,880 164,067
----------------------------------------- ------------- ------------ ------------
(C) Tangible common equity (Non-GAAP) $2,060,340 $2,219,128 $2,222,150
Less: Unrealized gains on AFS securities,
net of tax $63,679 $67,077 $58,068
----------------------------------------- ------------- ------------ ------------
(D) Adjusted tangible common equity
(Non-GAAP) $1,996,661 $2,152,051 $2,164,082
----------------------------------------- ------------- ------------ ------------
Period-end Shares Outstanding
(E) Period-end shares outstanding 248,810 252,667 263,699
----------------------------------------- ------------- ------------ ------------
Risk weighted assets
(F) Risk weighted assets (c) (d) $20,055,000 $19,783,405 $19,589,310
----------------------------------------- ------------- ------------ ------------
Ratios
(D)/(F) Adjusted tangible common equity
to risk weighted assets ("TCE/RWA")
(Non-GAAP) (c) 9.96% 10.88% 11.05%
(C)/(E) Tangible book value per common
share (Non-GAAP) $8.28 $8.78 $8.43
----------------------------------------- ------------- ------------ ------------
Net interest income adjusted for impact
of fully taxable equivalent ("FTE")
(Non-GAAP)
Net interest income (GAAP) $172,675 $171,929 $172,860
FTE adjustment 1,756 1,659 1,497
----------------------------------------- ------------- ------------ ------------
Net interest income adjusted for impact
of FTE (Non-GAAP) $174,431 $173,588 $174,357
----------------------------------------- ------------- ------------ ------------
Earnings per share impact of certain
charges
Non-GAAP:
Pre-tax repurchase and litigation charges
(previously announced) $(272,000)
Tax benefit (38.40%) 104,448
----------------------------------------- -------------
After-tax impact of previously announced
repurchase and litigation charges $(167,552)
----------------------------------------- -------------
Diluted shares (GAAP) 249,104
Add: Effect of dilutive securities
(pro-forma) 1,480
----------------------------------------- -------------
Pro-forma diluted shares (e) 250,584
----------------------------------------- -------------
Per share impact of certain charges
(Non-GAAP) $(0.67)
----------------------------------------- -------------
GAAP - Diluted EPS:
Net income available to common
shareholders (124,774)
Diluted shares 249,104
Diluted earnings per share $(0.50)
----------------------------------------- -------------
Certain previously reported amounts have been reclassified to agree with current
presentation.
(a) Included in Total equity on the Consolidated Balance Sheet.
(b) Includes goodwill and other intangible assets, net of amortization.
(c) Current quarter is an estimate.
(d) Defined by and calculated in conformity with bank regulations.
(e) Because FHN recognized a net loss available to common shareholder in second
quarter 2012, potentially issuable shares are excluded from diluted shares because
they are antidilutive. Excluding the previously announced repurchase and litigation
charges, FHN would have recognized net income available to common shareholders. As
a result, pro-forma shares are presented in order to include the dilutive impact of
potentially issuable shares.
Conference call
Management will hold a conference call at 8:30 a.m. Central Time today
to review earnings and performance trends. There will also be a live
webcast accompanied by the slide presentation available in the investor
relations section of www.fhnc.com. The call and slide presentation may
involve forward-looking information, including guidance.
Participants can call toll-free starting at 8:15 a.m. by dialing
877-303-6618. The number for international participants is
224-357-2205. The conference ID number is 93925894.
Participants can also listen to the live audio webcast with the
accompanying slide presentation through the website. A replay will be
available from noon today until 11:59 p.m. Aug. 3. To listen to the
replay, dial 855-859-2056 or 404-537-3406. The passcode is 93925894.
The event also will be archived and available by midnight Central Time
on the website.
Other information
This press release contains forward-looking statements involving
significant risks and uncertainties. A number of important factors
could cause actual results to differ materially from those in the
forward-looking information. Those factors include general economic and
financial market conditions, including expectations of and actual
timing and amount of interest rate movements including the slope of the
yield curve, competition, ability to execute business plans,
geopolitical developments, recent and future legislative and regulatory
developments, inflation or deflation, market (particularly real estate
market) and monetary fluctuations, natural disasters, customer,
investor and regulatory responses to these conditions and items already
mentioned in this press release, as well as critical accounting
estimates and other factors described in FHN's annual report on Form
10-K and other recent filings with the SEC. FHN disclaims any
obligation to update any such factors or to publicly announce the
result of any revisions to any of the forward-looking statements
included herein or therein to reflect future events or developments.
About First Horizon
The 4,600 employees of First Horizon National Corp. (NYSE:FHN) provide
financial services through more than 170 First Tennessee Bank locations
in and around Tennessee and 18 FTN Financial Group offices in the U.S.
and abroad. First Tennessee has the leading combined market deposit
share in the counties where it does business and one of the highest
customer retention rates of any bank in the country. FTN Financial is a
capital markets industry leader in fixed income sales, trading and
strategies for institutional clients in the U.S. and abroad. FHN has
been recognized as one of the nation's best employers by AARP and
Working Mother magazines. More information is available at
www.fhnc.com.
FHN-G
CONTACT: First Horizon Investor Relations
Aarti Bowman
(901) 523-4017
First Horizon Media Relations
Jack Bradley
(901) 523-4813
