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First Horizon (FHN) Posts In-Line Q1 Earnings, Revenues Lag
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On Apr 13, First Horizon National Corporation (FHN - Free Report) reported first-quarter 2017 earnings per share of 23 cents, in line with the Zacks Consensus Estimate. However, the figure represents an increase of 15% over the year-ago quarter.
Shares of First Horizon declined 2.8% following its earnings release owing to the negative market sentiments and investors’ concerns over its decline in non-interest income and loans. However, growth in deposits and higher net interest income supported the results. Further, improving credit quality acted as a tailwind.
Net income for the quarter amounted to approximately $58.4 million, up 12% from the prior-year quarter.
Segment-wise, quarterly net income at Regional Banking jumped 40% year over year to $64.6 million. Meanwhile, net income for Fixed Income amounted to $2.3 million, down 69% from the prior-year quarter. However, net loss at the Corporate segment totaled $12.4 million compared with a net loss of $10.9 million in the prior-year quarter. Also, the Non-Strategic segment recorded net income of $4 million, down 60% from the year-ago period.
Revenues Stable, Expenses Decline Slightly
Total revenue for the quarter came in at $306.6 million, stable on a year-over-year basis. However, the tally lagged the Zacks Consensus Estimate of $325.1 million.
Net interest income for the quarter increased 10% year over year to $189.7 million. Net interest margin of 2.92% was up 4 basis points (bps) from the prior-year quarter figure of 2.88%. However, non-interest income decreased 12% year over year to $116.9 million, primarily due to lower income in the Fixed Income and Corporate segments.
On the other hand, non-interest expenses decreased 2% year over year to $222.2 million, mainly due to lower advertising and public relations, expenses for computer software, professional fees and other items.
Efficiency ratio came in at 72.3% compared with 74.5% in the year-ago quarter. A decline in the efficiency ratio indicates an improvement in profitability.
Total period-end loans, net of unearned income, came in at $19.1 billion, down 3% from the previous quarter. Further, total period-end deposits amounted to $23.5 billion, up 4% sequentially.
Credit Quality Improved
During the quarter, the company recorded a decline of $1 million in provision for loan losses as against an increase in provision of $3 million recorded in the prior-year quarter.
Further, allowance for loan losses was down 1% year over year to $202 million. As a percentage of period-end loans on an annualized basis, allowance for loan losses was 1.06%, down 10 bps year over year.
Also, the quarter witnessed net recoveries of $0.9 million as against net charge-offs of $9.2 million in the prior-year quarter. Non-performing assets dropped 27% year over year to $16.3 million.
Capital Position Weakens
Tier 1 common equity ratio was 10.15%, down from 10.33% at the end of the prior-year quarter.
Our Viewpoint
First Horizon remains focused on various strategic initiatives like restructuring, expansion and cost control. These efforts are expected to boost profitability going forward. Further, appreciable growth in deposits, along with improvement in the company’s credit quality, will likely supplement its financial strength.
First Horizon National Corporation Price and EPS Surprise
Among other Southeast banks, Hancock Holding Co. and Regions Financial Corp. (RF - Free Report) are scheduled to release first-quarter earnings on Apr 18 while Trustmark Corp. (TRMK - Free Report) will release its earnings on Apr 25.
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First Horizon (FHN) Posts In-Line Q1 Earnings, Revenues Lag
On Apr 13, First Horizon National Corporation (FHN - Free Report) reported first-quarter 2017 earnings per share of 23 cents, in line with the Zacks Consensus Estimate. However, the figure represents an increase of 15% over the year-ago quarter.
Shares of First Horizon declined 2.8% following its earnings release owing to the negative market sentiments and investors’ concerns over its decline in non-interest income and loans. However, growth in deposits and higher net interest income supported the results. Further, improving credit quality acted as a tailwind.
Net income for the quarter amounted to approximately $58.4 million, up 12% from the prior-year quarter.
Segment-wise, quarterly net income at Regional Banking jumped 40% year over year to $64.6 million. Meanwhile, net income for Fixed Income amounted to $2.3 million, down 69% from the prior-year quarter. However, net loss at the Corporate segment totaled $12.4 million compared with a net loss of $10.9 million in the prior-year quarter. Also, the Non-Strategic segment recorded net income of $4 million, down 60% from the year-ago period.
Revenues Stable, Expenses Decline Slightly
Total revenue for the quarter came in at $306.6 million, stable on a year-over-year basis. However, the tally lagged the Zacks Consensus Estimate of $325.1 million.
Net interest income for the quarter increased 10% year over year to $189.7 million. Net interest margin of 2.92% was up 4 basis points (bps) from the prior-year quarter figure of 2.88%. However, non-interest income decreased 12% year over year to $116.9 million, primarily due to lower income in the Fixed Income and Corporate segments.
On the other hand, non-interest expenses decreased 2% year over year to $222.2 million, mainly due to lower advertising and public relations, expenses for computer software, professional fees and other items.
Efficiency ratio came in at 72.3% compared with 74.5% in the year-ago quarter. A decline in the efficiency ratio indicates an improvement in profitability.
Total period-end loans, net of unearned income, came in at $19.1 billion, down 3% from the previous quarter. Further, total period-end deposits amounted to $23.5 billion, up 4% sequentially.
Credit Quality Improved
During the quarter, the company recorded a decline of $1 million in provision for loan losses as against an increase in provision of $3 million recorded in the prior-year quarter.
Further, allowance for loan losses was down 1% year over year to $202 million. As a percentage of period-end loans on an annualized basis, allowance for loan losses was 1.06%, down 10 bps year over year.
Also, the quarter witnessed net recoveries of $0.9 million as against net charge-offs of $9.2 million in the prior-year quarter. Non-performing assets dropped 27% year over year to $16.3 million.
Capital Position Weakens
Tier 1 common equity ratio was 10.15%, down from 10.33% at the end of the prior-year quarter.
Our Viewpoint
First Horizon remains focused on various strategic initiatives like restructuring, expansion and cost control. These efforts are expected to boost profitability going forward. Further, appreciable growth in deposits, along with improvement in the company’s credit quality, will likely supplement its financial strength.
First Horizon National Corporation Price and EPS Surprise
First Horizon National Corporation Price and EPS Surprise | First Horizon National Corporation Quote
At present, First Horizon has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other Southeast banks, Hancock Holding Co. and Regions Financial Corp. (RF - Free Report) are scheduled to release first-quarter earnings on Apr 18 while Trustmark Corp. (TRMK - Free Report) will release its earnings on Apr 25.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500. See today's Zacks "Strong Sells" absolutely free >>.