First Horizon demonstrated strong first quarter 2018 results, driven by year-over-year loan and deposit growth, higher revenues, improvement in the efficiency ratio and good asset quality trends, said officials on Friday. Reported earnings per share were $0.27, up 17 percent from first quarter 2017; on an adjusted basis1, earnings per share were $0.34. First Horizon enhanced profitability with an increase in return on tangible common equity and return on assets.
The Capital Bank merger, which resulted in a $40 billion organization with more than 300 branches throughout the Southeast, is contributing to overall earnings. The merger is on track with cost savings and revenue synergies, and the systems conversion is scheduled for later this quarter.
Chattanooga Market President Jeff Jackson said, “This is an exciting time for First Tennessee and we continue to be so grateful for the trust our customers have placed in us. We know that loyalty is earned thru each and every transaction and interaction with our customers. Because of this, our employees are the most important key to our success in Chattanooga.”
“I am pleased with our strong first quarter results and am optimistic about our outlook for the remainder of the year,” said Bryan Jordan, First Horizon’s chairman and CEO. “First Tennessee and Capital Bank employees continue to deliver exceptional differentiated services and solutions to our customers and our preparations remain on track for the integration of Capital Bank in the second quarter.”
First Quarter 2018 Financial Highlights (all comparisons vs first quarter 2017)
Diluted EPS/ ROTCE1/ ROA/
Adjusted Diluted EPS1 Adjusted ROTCE1 Adjusted ROA1
$0.27 / $0.34 14.1% / 17.4% 0.95% / 1.2%
Regional Banking Highlights
The First Tennessee/Capital Bank franchise showed solid fundamentals, driven by the Capital Bank merger in November, better interest rate spreads, and organic loan and deposit growth
Pre-tax income up 66 percent
Revenue up 50 percent from increased net interest income and higher fee income
Net interest income up 55 percent and fee income up 34 percent
Efficiency ratio improved to 54 percent from 59 percent
Average loans up 50 percent and average deposits up 38 percent
Other Highlights
Net interest margin expanded to 3.43 percent from 2.92 percent
Asset Quality remains stable
Total average assets of $40 billion
1These are non-GAAP numbers that are reconciled to reported GAAP numbers in the non-GAAP table that follows
CONSOLIDATED SUMMARY RESULTS
Quarterly, Unaudited
|
1Q18 Changes vs |
| (Dollars in thousands, except per share data) |
|
1Q18 |
|
|
|
4Q17 |
|
|
|
1Q17 |
|
|
4Q17 |
|
1Q17 |
| Income Statement Highlights |
|
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
| Net interest income |
$ |
301,173 |
|
|
$ |
242,088 |
|
|
$ |
189,708 |
|
|
24 |
|
% |
|
59 |
|
% |
| Noninterest income |
135,931 |
|
|
133,053 |
|
|
116,895 |
|
|
2 |
|
% |
|
16 |
|
% |
| Securities gains/(losses), net |
86 |
|
|
137 |
|
|
44 |
|
|
(37 |
) |
% |
|
95 |
|
% |
| Total revenue |
437,190 |
|
|
375,278 |
|
|
306,647 |
|
|
16 |
|
% |
|
43 |
|
% |
| Noninterest expense |
313,265 |
|
|
346,670 |
|
|
222,205 |
|
|
(10 |
) |
% |
|
41 |
|
% |
| Provision/(provision credit) for loan losses |
(1,000 |
) |
|
3,000 |
|
|
(1,000 |
) |
|
NM |
|
* |
|
| Income before income taxes |
124,925 |
|
|
25,608 |
|
|
85,442 |
|
|
NM |
|
|
46 |
|
% |
| Provision for income taxes |
29,931 |
|
|
73,989 |
|
|
27,054 |
|
|
(60 |
) |
% |
|
11 |
|
% |
| Net income/(loss) |
94,994 |
|
|
(48,381 |
) |
|
58,388 |
|
|
NM |
|
|
63 |
|
% |
| Net income attributable to noncontrolling interest |
2,820 |
|
|
2,910 |
|
|
2,820 |
|
|
(3 |
) |
% |
* |
|
| Net income/(loss) attributable to controlling interest |
92,174 |
|
|
(51,291 |
) |
|
55,568 |
|
|
NM |
|
|
66 |
|
% |
| Preferred stock dividends |
1,550 |
|
|
1,550 |
|
|
1,550 |
|
|
* |
|
* |
|
| Net income/(loss) available to common shareholders |
$ |
90,624 |
|
|
$ |
(52,841 |
) |
|
$ |
54,018 |
|
|
NM |
|
|
68 |
|
% |
| Common Stock Data |
|
|
|
|
|
|
|
|
|
|
| EPS |
$ |
0.28 |
|
|
$ |
(0.20 |
) |
|
$ |
0.23 |
|
|
NM |
|
|
22 |
|
% |
| Basic shares (thousands) |
326,489 |
|
|
265,169 |
|
|
233,076 |
|
|
23 |
|
% |
|
40 |
|
% |
| Diluted EPS |
$ |
0.27 |
|
|
$ |
(0.20 |
) |
|
$ |
0.23 |
|
|
NM |
|
|
17 |
|
% |
| Diluted shares (thousands) |
330,344 |
|
|
265,169 |
|
|
236,855 |
|
|
25 |
|
% |
|
39 |
|
% |
| Period-end shares outstanding (thousands) |
327,194 |
|
|
326,736 |
|
|
233,883 |
|
|
* |
|
|
40 |
|
% |
| Cash dividends declared per share |
$ |
0.12 |
|
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
33 |
|
% |
|
33 |
|
% |
| Balance Sheet Highlights (Period-End) |
|
|
|
|
|
|
|
|
|
|
| Total loans, net of unearned income |
$ |
27,249,793 |
|
|
$ |
27,658,929 |
|
|
$ |
19,090,074 |
|
|
(1 |
) |
% |
|
43 |
|
% |
| Total deposits |
30,818,951 |
|
|
30,620,362 |
|
|
23,479,841 |
|
|
1 |
|
% |
|
31 |
|
% |
| Total assets |
40,463,195 |
|
|
41,423,388 |
|
|
29,618,600 |
|
|
(2 |
) |
% |
|
37 |
|
% |
| Total liabilities |
35,890,667 |
|
|
36,842,900 |
|
|
26,878,140 |
|
|
(3 |
) |
% |
|
34 |
|
% |
| Total equity |
4,572,528 |
|
|
4,580,488 |
|
|
2,740,460 |
|
|
* |
|
|
67 |
|
% |
| Asset Quality Highlights |
|
|
|
|
|
|
|
|
|
|
| Allowance for loan losses |
$ |
187,194 |
|
|
$ |
189,555 |
|
|
$ |
201,968 |
|
|
(1 |
) |
% |
|
(7 |
) |
% |
| Allowance / period-end loans |
0.69 |
|
% |
0.69 |
|
% |
1.06 |
|
% |
|
|
|
|
| Net charge-offs/(recoveries) |
$ |
1,361 |
|
|
$ |
8,312 |
|
|
$ |
(900 |
) |
|
(84 |
) |
% |
NM |
|
| Net charge-offs (annualized) / average loans |
0.02 |
|
% |
0.15 |
|
% |
NM |
|
|
|
|
|
| Non-performing assets (NPA) |
$ |
172,664 |
|
|
$ |
177,156 |
|
|
$ |
161,284 |
|
|
(3 |
) |
% |
|
7 |
|
% |
| NPA % (b) |
0.60 |
|
% |
0.61 |
|
% |
0.80 |
|
% |
|
|
|
|
| Key Ratios & Other |
|
|
|
|
|
|
|
|
|
|
| Return on average assets ("ROA") (annualized) (c) |
0.95 |
|
% |
(0.58 |
) |
% |
0.82 |
|
% |
|
|
|
|
| Return on average common equity ("ROE") (annualized) (d) |
8.79 |
|
% |
(6.73 |
) |
% |
9.40 |
|
% |
|
|
|
|
| Return on average tangible common equity ("ROTCE") (annualized) (e) |
14.06 |
|
% |
(8.78 |
) |
% |
10.33 |
|
% |
|
|
|
|
| Net interest margin (f) |
3.43 |
|
% |
3.27 |
|
% |
2.92 |
|
% |
|
|
|
|
| Efficiency ratio (g) |
71.67 |
|
% |
92.41 |
|
% |
72.47 |
|
% |
|
|
|
|
| Common equity tier 1 ratio ("CET1") (h) |
8.98 |
|
% |
8.88 |
|
% |
10.20 |
|
% |
|
|
|
|
| Tier 1 ratio (h) |
9.98 |
|
% |
9.83 |
|
% |
11.35 |
|
% |
|
|
|
|
| Market capitalization (millions) |
$ |
6,161.1 |
|
|
$ |
6,531.5 |
|
|
$ |
4,326.8 |
|
|
|
|
|
|
Certain previously reported amounts have been reclassified to agree with current presentation.
NM - Not meaningful
* Amount is less than one percent.
(a) 1Q18 includes three months of activity related to the CBF acquisition compared to one month of activity in 4Q17.
(b) NPAs related to the loan portfolio over period-end loans plus foreclosed real estate and other assets.
(c) Calculated using net income.
(d) Calculated using net income available to common shareholders.
(e) This non-GAAP measure is reconciled to ROE in the non-GAAP to GAAP reconciliation.
(f) Net interest margin is computed using net interest income adjusted to a fully taxable equivalent ('FTE") basis assuming a statutory federal income tax rate of 21 percent and, where applicable, state income taxes.
(g) Noninterest expense divided by total revenue excluding securities gains/(losses).
(h) Current quarter is an estimate.
Use of Non-GAAP Measures
Several financial measures in this release are non-GAAP, meaning they are not presented in accordance with generally accepted accounting principles (GAAP) in the U.S. The non-GAAP items presented in this release are adjusted earnings per share ("EPS"), return on tangible common equity ("ROTCE"), adjusted ROTCE, and adjusted return on average assets ("ROA"). These profitability measures are reported to First Horizon’s management and directors through various internal reports. First Horizon’s management believes these measures are relevant to understanding the financial results of First Horizon and its business segments. 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 First Horizon. First Horizon has reconciled each of these measures to a comparable GAAP measure below:
FHN NON-GAAP TO GAAP RECONCILIATION
Quarterly, Unaudited
|
| (Dollars and shares in thousands, except per share data) |
|
1Q18 |
|
|
|
|
4Q17 |
|
|
|
|
1Q17 |
|
|
| Average Tangible Common Equity (Non-GAAP) |
| Average total equity (GAAP) |
$ |
4,573,706 |
|
|
|
$ |
3,506,165 |
|
|
|
$ |
2,722,668 |
|
|
| Less: Average noncontrolling interest (a) |
295,431 |
|
|
|
295,431 |
|
|
|
295,431 |
|
|
| Less: Average preferred stock (a) |
95,624 |
|
|
|
95,624 |
|
|
|
95,624 |
|
|
| (A) Total average common equity |
4,182,651 |
|
|
|
3,115,110 |
|
|
|
2,331,613 |
|
|
| Less: Average intangible assets (GAAP) (b) |
1,568,029 |
|
|
|
726,958 |
|
|
|
211,757 |
|
|
| (B) Average tangible common equity (Non-GAAP) |
$ |
2,614,622 |
|
|
|
$ |
2,388,152 |
|
|
|
$ |
2,119,856 |
|
|
|
|
|
|
|
|
|
|
|
| Annualized Net Income Available to Common Shareholders |
|
|
|
|
|
|
|
|
| (C) Net income available to common shareholders (annualized ) (GAAP) |
$ |
367,531 |
|
|
|
$ |
(209,641 |
) |
|
|
$ |
219,073 |
|
|
|
|
|
|
|
|
|
|
|
| Ratios |
|
|
|
|
|
|
|
|
| (C)/(A) Return on average common equity ("ROE") (GAAP) |
8.79 |
|
% |
|
(6.73 |
) |
% |
|
9.40 |
|
% |
| (C)/(B) Return on average tangible common equity ("ROTCE") (Non-GAAP) |
14.06 |
|
% |
|
(8.78 |
) |
% |
|
10.33 |
|
% |
|
|
|
|
|
|
|
|
|
| Adjusted Net Income (Non-GAAP) |
|
|
|
|
| (D) Net income (GAAP) |
$ |
94,994 |
|
|
|
|
|
|
|
|
| Less: After-tax impact of notable items (GAAP) (c) |
(21,472 |
) |
|
|
|
|
|
|
|
| (E) Adjusted net income (Non-GAAP) |
116,466 |
|
|
|
|
|
|
|
|
| (F) Annualized net income (GAAP) |
385,253 |
|
|
|
|
|
|
|
| (G) Annualized adjusted net income (Non-GAAP) |
472,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted Net Income Available to Common Shareholders (Non-GAAP) |
|
|
|
|
|
|
|
|
| (H) Net income available to common shareholders (GAAP) |
$ |
90,624 |
|
|
|
|
|
|
|
|
| Less: After-tax impact of notable items (GAAP) (c) |
(21,472 |
) |
|
|
|
|
|
|
|
| (I) Adjusted net income available to common shareholders (Non-GAAP) |
112,096 |
|
|
|
|
|
|
|
|
| (J) Annualized adjusted net income available to common shareholders (Non-GAAP) |
454,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average Assets (GAAP) |
|
|
|
|
|
|
|
|
| (K) Average assets |
$ |
40,350,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted Shares |
|
|
|
|
|
|
|
|
| (L) Diluted shares |
330,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted Ratios & EPS Impacts |
|
|
|
|
|
|
|
|
| (C)/(B) ROTCE (Non-GAAP) |
14.06 |
|
% |
|
|
|
|
|
|
| (J)/(B) Adjusted ROTCE (Non-GAAP) |
17.39 |
|
% |
|
|
|
|
|
|
| (F)/(K) Return on average assets ("ROA") (GAAP) |
0.95 |
|
% |
|
|
|
|
|
|
| (G)/(K) Adjusted ROA (GAAP) |
1.17 |
|
% |
|
|
|
|
|
|
| (H)/(L) Diluted earnings per share ("EPS") (GAAP) |
$ |
0.27 |
|
|
|
|
|
|
|
|
| (I)/(L) Adjusted diluted EPS (Non-GAAP) |
$ |
0.34 |
|
|
|
|
|
|
|
|
(a) Included in Total equity on the Consolidated Balance Sheet.
(b) Includes goodwill and other intangible assets, net of amortization.
(c) Includes $31.4 million of pre-tax acquisition-related expenses primarily associated with the Capital Bank Financial Corp. ("CBF") acquisition and a $3.3 million gain on the sale of a building adjusted using an incremental tax rate of approximately 24 percent.