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First Horizon (FHN) Tops Q2 Earnings Despite High Provision
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First Horizon National Corporation (FHN - Free Report) posted earnings per share of 24 cents for second-quarter 2016, surpassing the Zacks Consensus Estimate by a penny. Moreover, the figure represents an increase of 9.1% over the year-ago quarter.
Better-than-expected results were aided by an increase in both net interest income and non-interest income, while rising operating expenses acting as a headwind. Although provisions for loan losses doubled during the quarter, strong growth in loans and deposits supported the top line.
Net income for the quarter amounted to $56.5, up 12% from the prior-year quarter.
Segment-wise, net income at Regional Banking dropped 8% year over year to $41.9 million. Meanwhile, net income for Fixed Income rose 97% year over year to $11.6 million. Further, net loss at the Corporate segment narrowed 23% year over year to $14.2 million; while the Non-Strategic segment recorded a 45% increase in net income to $21.6 million.
Rising Revenues Offset Mounting Expenses
Total revenue for the quarter came in at $321.8 million, up 8% year over year. The rise was attributable to an increase in net interest income as well as non-interest income. Moreover, revenues surpassed the Zacks Consensus Estimate of $314.1 million.
Net interest income increased 6% year over year to $176.3 million. However, net interest margin was in line with the prior-year quarter’s figure of 2.92%.
Non-interest income jumped 11.6% year over year to $145.4 million. Non-interest expense rose 4% year over year to $226.8 million.
Efficiency ratio came in at 70.51%, down 3.04% year over year. A decline in efficiency ratio indicates improvement in profitability.
Both period-end loans, net of unearned income, and total deposits increased 10% year over year to $18.6 billion and $20.6 billion, respectively.
Credit Quality: Shows Improvement
Allowance for loan losses was down 10% year over year to $199.8 million. As a percentage of period-end loans on an annualized basis, allowance for loan losses was 1.07%, down 24 basis points (bps) year over year.
Net charge-offs declined 8% on a year-over-year basis to $8.2 million. As a percentage of average loans and on an annualized basis, net charge-off was 0.19%, down 2 bps on a year-over-year basis. Moreover, non-performing assets dropped 17% year over year to $198.9 million.
However, the company’s provision for loan losses increased substantially year over year to $4 million.
Deterioration in Capital Ratios
Tangible common equity to tangible assets (non-GAAP) was 7.63% as of Jun 30, 2016, compared with 7.80% as of Jun 30, 2015. Tier 1 common equity ratio was 10.07% down from 10.41% at the end of the prior-year quarter.
Efficient Capital Deployment
During the quarter, First Horizon repurchased shares worth $11.4 million. Since its inception, the company has repurchased shares worth $416 million at a volume weighted average price of $10.30 per share. Further, the company had $196.8 million remaining authorization under its current share repurchase program, as of Jun 30, 2016.
Our Viewpoint
First Horizon’s continued focus on restructuring, expansion and cost control will likely boost the company’s profitability. Also, steady capital deployment will help enhance shareholder value. At the same time, appreciable growth in loans and deposits, along with improvement in the company’s credit quality, will likely supplement its financial strength.
However, regulatory pressure, mortgage repurchase issues and a low interest rate environment are expected to pose near-term headwinds.
At present, First Horizon carries a Zacks Rank #2 (Buy).
Among other Southeast banks, Regions Financial Corporation (RF - Free Report) is scheduled to announce its second-quarter 2016 earnings on Jul 19 while Trustmark Corporation (TRMK - Free Report) and Popular, Inc. (BPOP - Free Report) are expected to report on Jul 26.
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First Horizon (FHN) Tops Q2 Earnings Despite High Provision
First Horizon National Corporation (FHN - Free Report) posted earnings per share of 24 cents for second-quarter 2016, surpassing the Zacks Consensus Estimate by a penny. Moreover, the figure represents an increase of 9.1% over the year-ago quarter.
Better-than-expected results were aided by an increase in both net interest income and non-interest income, while rising operating expenses acting as a headwind. Although provisions for loan losses doubled during the quarter, strong growth in loans and deposits supported the top line.
Net income for the quarter amounted to $56.5, up 12% from the prior-year quarter.
Segment-wise, net income at Regional Banking dropped 8% year over year to $41.9 million. Meanwhile, net income for Fixed Income rose 97% year over year to $11.6 million. Further, net loss at the Corporate segment narrowed 23% year over year to $14.2 million; while the Non-Strategic segment recorded a 45% increase in net income to $21.6 million.
Rising Revenues Offset Mounting Expenses
Total revenue for the quarter came in at $321.8 million, up 8% year over year. The rise was attributable to an increase in net interest income as well as non-interest income. Moreover, revenues surpassed the Zacks Consensus Estimate of $314.1 million.
Net interest income increased 6% year over year to $176.3 million. However, net interest margin was in line with the prior-year quarter’s figure of 2.92%.
Non-interest income jumped 11.6% year over year to $145.4 million. Non-interest expense rose 4% year over year to $226.8 million.
Efficiency ratio came in at 70.51%, down 3.04% year over year. A decline in efficiency ratio indicates improvement in profitability.
Both period-end loans, net of unearned income, and total deposits increased 10% year over year to $18.6 billion and $20.6 billion, respectively.
Credit Quality: Shows Improvement
Allowance for loan losses was down 10% year over year to $199.8 million. As a percentage of period-end loans on an annualized basis, allowance for loan losses was 1.07%, down 24 basis points (bps) year over year.
Net charge-offs declined 8% on a year-over-year basis to $8.2 million. As a percentage of average loans and on an annualized basis, net charge-off was 0.19%, down 2 bps on a year-over-year basis. Moreover, non-performing assets dropped 17% year over year to $198.9 million.
However, the company’s provision for loan losses increased substantially year over year to $4 million.
Deterioration in Capital Ratios
Tangible common equity to tangible assets (non-GAAP) was 7.63% as of Jun 30, 2016, compared with 7.80% as of Jun 30, 2015. Tier 1 common equity ratio was 10.07% down from 10.41% at the end of the prior-year quarter.
Efficient Capital Deployment
During the quarter, First Horizon repurchased shares worth $11.4 million. Since its inception, the company has repurchased shares worth $416 million at a volume weighted average price of $10.30 per share. Further, the company had $196.8 million remaining authorization under its current share repurchase program, as of Jun 30, 2016.
Our Viewpoint
First Horizon’s continued focus on restructuring, expansion and cost control will likely boost the company’s profitability. Also, steady capital deployment will help enhance shareholder value. At the same time, appreciable growth in loans and deposits, along with improvement in the company’s credit quality, will likely supplement its financial strength.
However, regulatory pressure, mortgage repurchase issues and a low interest rate environment are expected to pose near-term headwinds.
FIRST HRZN NATL Price, Consensus and EPS Surprise
FIRST HRZN NATL Price, Consensus and EPS Surprise | FIRST HRZN NATL Quote
At present, First Horizon carries a Zacks Rank #2 (Buy).
Among other Southeast banks, Regions Financial Corporation (RF - Free Report) is scheduled to announce its second-quarter 2016 earnings on Jul 19 while Trustmark Corporation (TRMK - Free Report) and Popular, Inc. (BPOP - Free Report) are expected to report on Jul 26.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>