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First Horizon (FHN) Q3 Earnings Match Estimates, Costs Up
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First Horizon National Corporation (FHN - Free Report) reported third-quarter 2018 adjusted earnings per share of 36 cents, in line with the Zacks Consensus Estimate. The bottom line reflects an increase of 13% from the year-ago quarter. It excluded the effect of gain from sale of Visa shares and various expenses related to the Capital Bank acquisition.
Shares of First Horizon fell 2.5% post third-quarter earnings release. Revenues improved year over year supported by an expanded net interest margin. Efficiency ratio also rose during the quarter, signalling increased profitability. However, substantial rise in expenses and weakening of capital position were the key undermining factors.
Net adjusted income available to common shareholders for the quarter was $118 million, up 57.3% from the prior-year period. The $118-million-figure was arrived after excluding gain from sale of Visa shares and various expenses related to the Capital Bank acquisition amounting to around $153 million after tax.
Segment wise, quarterly net income in the regional banking segment surged 74% year over year to $127.6 million. Also, net income for corporate segment increased 97% to $133.4 million from the year-ago quarter mostly due to a $161.8 million pre-tax gain on sale of Visa shares recognised in the quarter. Furthermore, fixed income and non-strategic segments reported net income of $2.3 million and $11.5 million, respectively.
Increase in Revenues Offset by Elevated Expenses
Excluding gain on sale of Visa shares, total revenues for the quarter came in at $441.8 million, up 37.1% on a year-over-year basis. However, the top line lagged the Zacks Consensus Estimate of $448.6 million.
Net interest income for the quarter increased 46% year over year to $305.7 million. Net interest margin expanded 25 basis points (bps) to 3.44%. Non-interest income came in at $349 million, up 210% year over year, largely due to $212.9 million gain from the sale of Visa shares.
Non-interest expenses flared up 24% to $294 million due to rise in almost all the components, except other costs.
Efficiency ratio came in at 66.55% compared with 73.51% reported in the year-ago quarter. It should be noted that a fall in the efficiency ratio indicates increase in profitability.
Total period-end loans, net of unearned income, came in at $27.4 billion, down 1% from the previous quarter. However, total period-end deposits remained stable at $31 billion.
Credit Quality
Allowance for loan losses was down 5% year over year to $186 million. The quarter witnessed net charge-offs of $1.5 million compared with $2.4 million recorded in prior-year quarter. Also, as a percentage of period-end loans on an annualized basis, allowance for loan losses was 0.68%, down 29 bps year over year.
However, non-performing assets increased 27% year over year to $177.8 million. Also, during the quarter, the company recorded $2 million in provision for loan losses compared with no provision in the prior-year quarter.
Capital Position Weakens
Tier 1 common equity ratio was 9.86%, down from 10.04% at the end of the year-earlier quarter. Additionally, total capital ratio was 12.04%, down from 12.18% in year-ago quarter.
Our Viewpoint
Expansion of net interest margin along with growth in deposits will likely supplement First Horizon’s top line. Furthermore, improvement in efficiency ratio is expected to support its profitability. Nevertheless, elevated expenses continue to dampen the company’s financials.
First Horizon National Corporation Price, Consensus and EPS Surprise
Among other Southeast banks, BancorpSouth Bank is scheduled to release third-quarter earnings on Oct 18, while Regions Financial Corp. (RF - Free Report) and Trustmark Corp. (TRMK - Free Report) will release quarterly numbers on Oct 23.
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Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
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First Horizon (FHN) Q3 Earnings Match Estimates, Costs Up
First Horizon National Corporation (FHN - Free Report) reported third-quarter 2018 adjusted earnings per share of 36 cents, in line with the Zacks Consensus Estimate. The bottom line reflects an increase of 13% from the year-ago quarter. It excluded the effect of gain from sale of Visa shares and various expenses related to the Capital Bank acquisition.
Shares of First Horizon fell 2.5% post third-quarter earnings release. Revenues improved year over year supported by an expanded net interest margin. Efficiency ratio also rose during the quarter, signalling increased profitability. However, substantial rise in expenses and weakening of capital position were the key undermining factors.
Net adjusted income available to common shareholders for the quarter was $118 million, up 57.3% from the prior-year period. The $118-million-figure was arrived after excluding gain from sale of Visa shares and various expenses related to the Capital Bank acquisition amounting to around $153 million after tax.
Segment wise, quarterly net income in the regional banking segment surged 74% year over year to $127.6 million. Also, net income for corporate segment increased 97% to $133.4 million from the year-ago quarter mostly due to a $161.8 million pre-tax gain on sale of Visa shares recognised in the quarter. Furthermore, fixed income and non-strategic segments reported net income of $2.3 million and $11.5 million, respectively.
Increase in Revenues Offset by Elevated Expenses
Excluding gain on sale of Visa shares, total revenues for the quarter came in at $441.8 million, up 37.1% on a year-over-year basis. However, the top line lagged the Zacks Consensus Estimate of $448.6 million.
Net interest income for the quarter increased 46% year over year to $305.7 million. Net interest margin expanded 25 basis points (bps) to 3.44%. Non-interest income came in at $349 million, up 210% year over year, largely due to $212.9 million gain from the sale of Visa shares.
Non-interest expenses flared up 24% to $294 million due to rise in almost all the components, except other costs.
Efficiency ratio came in at 66.55% compared with 73.51% reported in the year-ago quarter. It should be noted that a fall in the efficiency ratio indicates increase in profitability.
Total period-end loans, net of unearned income, came in at $27.4 billion, down 1% from the previous quarter. However, total period-end deposits remained stable at $31 billion.
Credit Quality
Allowance for loan losses was down 5% year over year to $186 million. The quarter witnessed net charge-offs of $1.5 million compared with $2.4 million recorded in prior-year quarter. Also, as a percentage of period-end loans on an annualized basis, allowance for loan losses was 0.68%, down 29 bps year over year.
However, non-performing assets increased 27% year over year to $177.8 million. Also, during the quarter, the company recorded $2 million in provision for loan losses compared with no provision in the prior-year quarter.
Capital Position Weakens
Tier 1 common equity ratio was 9.86%, down from 10.04% at the end of the year-earlier quarter. Additionally, total capital ratio was 12.04%, down from 12.18% in year-ago quarter.
Our Viewpoint
Expansion of net interest margin along with growth in deposits will likely supplement First Horizon’s top line. Furthermore, improvement in efficiency ratio is expected to support its profitability. Nevertheless, elevated expenses continue to dampen the company’s financials.
First Horizon National Corporation Price, Consensus and EPS Surprise
First Horizon National Corporation price-consensus-eps-surprise-chart | First Horizon National Corporation Quote
First Horizon currently 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, BancorpSouth Bank is scheduled to release third-quarter earnings on Oct 18, while Regions Financial Corp. (RF - Free Report) and Trustmark Corp. (TRMK - Free Report) will release quarterly numbers on Oct 23.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>