First Horizon National Corp. on Friday reported second quarter net income available to common shareholders of $52 million, or $0.17 per share, up from $12 million and $0.04 per share in first quarter 2020. Adjusted NIAC, excluding certain notable items, was $64 million, or $0.20 per share, compared with $17 million and $0.05 per share in first quarter 2020.
“In this quarter of significant pandemic-related and broad-based economic challenges, we delivered solid results as we continued to work diligently to support clients, communities and our associates while prudently managing risk,” said President and Chief Executive Officer Bryan Jordan. “Our second quarter results reflect the benefit of our diversified business model with strong pre-provision net revenue growth led by robust fee income and a modest increase in net interest income.”
Mr. Jordan continued, “We completed our merger of equals with IBERIABANK Corporation on July first, creating one of the largest banks in the South. With $83 billion in assets on a combined basis, the organization has significant scale with expanded capabilities and geographic reach that position us well to continue to deliver enhanced value for all our constituents. I believe our strong balance sheet, the diversification of our portfolio, expense management, as well as the experience and commitment of the combined team will deliver significant shareholder value.”
Chattanooga market president Jay Dale said, “Similar to the overall bank, in Chattanooga we have seen significant deposit growth, loan growth, and solid revenue growth. First Horizon customers should feel very confident about our strength and stability with capital and reserves that are adequate under the worst stress test scenarios.”
During the quarter, First Horizon secured $2 billion in loans through the Small Business Administration’s Paycheck Protection Program which provided aid to more than 300,000 employees of 15,000 customers.
20 percent of the PPP loans supported women- and minority-owned businesses or businesses in low-to-moderate income tracts.
First Horizon entered Phase 2 of reopening on June 4. Banking centers are open with occupancy limits and in-person appointments aren’t required but recommended.
First Horizon continues to prioritize health and safety and remains focused on executing the business continuity plan and proactive client outreach and communication.
The company continues to be prudent in its focus on risk management and credit oversight.
The acquisition of 30 branches from Truist Financial Corporation is scheduled to close Friday.
Consolidated highlights for the second quarter:
Total revenue of $512 million increased 7 percent linked quarter (“LQ” – compared to first quarter 2020) and 11 percent year over year (YoY – compared to second quarter 2019).
Net interest income was relatively stable up 1 percent LQ despite rate headwinds, reflecting strong balance sheet growth.
Net interest margin of 2.90 percent decreased 26 basis points driven by a significant decline in interest rates and excess cash balances, somewhat offset by loan growth, accretion and disciplined deposit pricing.
Noninterest income growth of 18 percent LQ and 31 percent YoY was driven by strong fixed income results and higher other income tied to deferred compensation.
Noninterest expense increased $21 million driven by deferred compensation and merger-related expense of $14 million, somewhat offset by lower advertising, travel and entertainment expenses.
Efficiency ratio improved to 64.74 percent from 65.19 percent in first quarter 2020 and 65.08 percent in second quarter 2019.
Provision for credit losses of $110 million decreased $35 million from first quarter 2020 and included a $93 million reserve build tied to COVID-19.
Adjusted pre-provision net revenue of $194 million rose 13 percent LQ and 2 percent YoY, reflecting strength in noninterest income and stable net interest income.
Loan loss reserves as a percentage of average loans as of June 30, 2020 increased to 1.64 percent from 1.33 percent as of March 31, 2020 and 0.65 percent as of June 30, 2019.
Average loans increased 11 percent LQ and 18 percent YoY driven by loans to mortgage companies and the PPP program portfolio.
Average deposits increased 14 percent LQ and 17 percent YoY driven by significant strength in demand deposits and savings; demand deposits represented 30 percent of total deposits as of June 30, 2020.
CET1 Ratio of 9.3 percent, up 72 basis points LQ.
Tangible book value per share of $9.99 increased slightly LQ and 5 percent YoY.
Regional Banking highlights include:
Revenue up 12 percent LQ and 13 percent YoY.
Net interest income up 17 percent LQ and 18 percent YoY, reflecting loan growth.
Average loans up 12 percent LQ and 20 percent YoY driven by loans to mortgage companies and PPP loans.
Average deposit growth of 10 percent LQ and 13 percent YoY.
Deposit costs trending down, reflecting lower rates and pricing discipline.
Provision expense of $108 million decreased $37 million LQ and increased $91 million YoY driven by the impact of changes in the macroeconomic forecast tied to current expected credit losses methodology.
Noninterest expense decreased 4 percent LQ largely reflecting lower personnel, advertising, and travel and entertainment expense and increased 5 percent YoY largely reflecting an increase in the reserve for unfunded commitments.
Fixed Income highlights include:
Total revenue of $127 million, up 19 percent LQ and 77 percent YoY reflecting robust sales activity across all trading desks.
Fixed income average daily revenue of $1.6 million, increased 26 percent LQ and 84 percent YoY, reflecting more favorable market conditions.
Noninterest expense increased 2 percent LQ and 50 percent YoY, reflecting an increase in variable compensation related to higher revenues.
Capital and Liquidity highlights include:
Declared $0.15 per common share quarterly dividend in 2Q20, which was paid on July 1, 2020.
No share repurchases in 2Q20.
CET 1 of 9.3 percent and total capital 12.5 percent as of June 30, 2020.
Asset Quality highlights include:
Allowance for loan losses increased to $538 million largely reflecting the impact of changes in macro-economic expectations given the COVID-19 pandemic and the implementation of current expected credit losses methodology.
Nonperforming loans increased $36 million from first quarter 2020 and $21 million from second quarter 2019.
Net charge-offs of $17 million increased $9 million from first quarter 2020 and $11 million from second quarter 2019 primarily driven by one energy credit and one restaurant credit.
The allowance for credit losses to loans ratio increased to 1.64 percent from 1.33 percent as of March 31, 2020 and 0.65 percent as of June 30, 2019.
30+ delinquencies decreased in the C&I and CRE portfolios.