First Horizon (FHN) Stock Down 1.8% on Q4 Earnings Miss

Shares of First Horizon National Corporation FHN have lost 1.8% post fourth-quarter earnings release. The company reported fourth-quarter 2018 adjusted earnings per share of 35 cents, which lagged the Zacks Consensus Estimate of 36 cents. The figure, however, compares favorably with loss of 20 cents reported in the year-ago quarter.

Revenues improved and expenses declined on a year-over-year basis. Efficiency ratio also decreased during the quarter, reflecting increased profitability. However, rise in net charge-offs and provision for loan losses were the key undermining factors.

After considering certain non-recurring items, net income available to common shareholders for the quarter came in at $96.3 million, significantly higher than the prior-year quarter.

Earnings per share for 2018 came in at $1.66, up from the year-earlier figure of 66 cents. Net income available to common shareholders was $538.8 million, significantly higher than the year-ago tally.

Segment wise, quarterly net income in regional banking segment surged 43.7% year over year to $118.5 million. Furthermore, fixed income and non-strategic segments reported net income of $1.4 million and $6.2 million, respectively. However, the corporate segment reported net loss of $25.3 million.

Revenues Rise, Expenses Decline

Total revenues for the quarter came in at $412.8 million, up 10% on a year-over-year basis. However, the top line missed the Zacks Consensus Estimate of $443 million.

Total revenues for 2018 came in at $1.94 billion, up 46% on a year-over-year basis. The full-year revenue figure also surpassed the Zacks Consensus Estimate of $1.78 billion.

Net interest income for the fourth quarter increased 30% year over year to $302.5 million. Net interest margin expanded 11 basis points (bps) to 3.38%. Non-interest income came in at $110.3 million, down 17.2% year over year.

Non-interest expenses decreased 18.7% year over year to $281.9 million.

Efficiency ratio came in at 68.3% compared with 92.41% 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 $27.5 billion, up marginally from the previous quarter. However, total period-end deposits were $32.7 billion, up 5% from the third quarter.

Credit Quality

Allowance for loan losses was down 5% year over year to $180 million. The quarter witnessed net charge-offs of $11.5 million compared with $8.3 million recorded in the prior-year quarter. However, as a percentage of period-end loans on an annualized basis, allowance for loan losses was 0.66%, down 3 bps year over year.

Further, non-performing assets edged down nearly 1% year over year to $175.4 million. However, during the quarter, the company recorded $6 million in provision for loan losses compared to $3 million recorded in the year-ago quarter.

Capital Position

Tier 1 common equity ratio was 9.75%, up from 8.88% at the end of the year-earlier quarter. Additionally, total capital ratio was 11.92%, up from 11.10% in the prior-year quarter.

Our Viewpoint

Expansion of net interest margin, along with growth in loans and deposits, will likely supplement First Horizon’s top line. Furthermore, improvement in the efficiency ratio is expected to support its profitability. Nevertheless, rising provision for loan losses remains a concern.

First Horizon National Corporation Price, Consensus and EPS Surprise

 

First Horizon National Corporation Price, Consensus and EPS Surprise | First Horizon National Corporation Quote

First Horizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Washington Federal’s WAFD first-quarter fiscal 2019 (ended Dec 31) earnings came in at 65 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.2%.

Synovus Financial’s SNV fourth-quarter earnings of 92 cents per share lagged the Zacks Consensus Estimate of 94 cents. However, the reported figure came in 27.8% higher than the prior-year tally.

Hancock Whitney Corporation’s HWC fourth-quarter 2018 operating earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.13. The reported figure, however, came in 30.2% higher than the year-ago tally.

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