January 20, 2012

First Horizon's Execution Leads to Strong Showing in 2011

MEMPHIS, Tenn., Jan. 20, 2012 (GLOBE NEWSWIRE) -- Fundamentals in First Horizon National Corp.'s (NYSE:FHN) core businesses in the fourth quarter of 2011 continued to be strong, headwinds from the company's legacy businesses continued to diminish and credit trends continued to improve as the company returned to profitability for the year. In 2011 deposit market share, loans and deposits grew in the First Tennessee regional banking business, and the unique business model in the FTN Financial capital markets business continued to make that group a strong contributor.  

"2011 was another year of significant progress for First Horizon, and we're well-positioned to continue that trend this year," said Bryan Jordan, First Horizon chairman and CEO. "We're ready to meet the continuing challenges of a slow economic recovery and a low interest rate environment. The dedicated professionals throughout our company are working hard to deepen relationships with our customers, earn new business and successfully execute our long-term strategic plan."  

Financial results

  • Net income available to common shareholders was $34.9 million for the fourth quarter of 2011, compared to $36.1 million in third quarter 2011. Net income available to common shareholders was $131.2 million for all of 2011, compared to a loss of $57.8 million for 2010.   
  • Pre-tax income in the core business segments of regional banking, capital markets and corporate grew 28 percent in 2011 compared to 2010. Consolidated pre-tax income improved to $149.8 million in 2011 from $51.8 million in 2010.     
  • Diluted earnings per share for the fourth quarter were $0.13, nearly matching the $0.14 EPS from the third quarter of 2011, and diluted EPS for full-year 2011 was $0.50 compared to a loss of $0.25 for 2010. 
Key Performance Ratios & Other Data        4Q11 Change vs.
(Shares in thousands)/(Unaudited) 4Q11 3Q11 4Q10  3Q11   4Q10 
Diluted EPS $0.13 $0.14 $(0.20)  (7)% NM
Diluted shares  260,372  262,803  239,095  (1)% 9 %
Period-end shares outstanding  257,468  263,619  263,366  (2)%  (2)%
Return on average assets (annualized) (a) 0.60% 0.62% 0.27%    
Return on average common equity (annualized) (b) 5.69% 5.90%  (8.59)%    
Net interest margin (c) 3.23% 3.23% 3.18%    
Efficiency ratio (d)  86.71% 89.13% 88.32%    
Full time equivalent employees  4,728  4,748  5,435 *  (13)%
NM - Not meaningful
* Amount is less than one percent.
(a) Calculated using net income.
(b) Calculated using net income available to common shareholders.
(c) Net interest margin is computed using total net interest income adjusted for fully taxable equivalent ("FTE"). Refer to the Non-GAAP to GAAP Reconciliation at the end of this release.
(d) Noninterest expense divided by total revenue excluding securities gains/(losses).

Segment highlights led by core business strength

  • The regional bank generated improvement in core deposits, loans, net interest margin, revenues, expenses, the efficiency ratio and pre-tax, pre-provision income in the fourth quarter.   
  • Capital markets' fixed income average daily revenue for the fourth quarter remained strong at $1.3 million, and noninterest expense improved because of lower variable compensation and legal costs.   
  • First Horizon's efforts to reduce loans in the non-strategic segment resulted in a 19 percent decline for 2011 compared to 2010.
Income Statement Highlights         4Q11 Change vs.
(Thousands)/(Unaudited) 4Q11 3Q11 4Q10  3Q11   4Q10 
Net interest income $178,877 $176,340 $182,236 1 %  (2)%
Noninterest income  180,993  185,725  189,483  (3)%  (4)%
Securities gains/(losses), net  203  35,162  15,681 NM NM
Total revenue  360,073  397,227  387,400  (9)%  (7)%
Noninterest expense  312,036  322,708  328,294  (3)%  (5)%
Provision for loan losses  10,000  32,000  45,000  (69)%  (78)%
Income before income taxes  38,037  42,519  14,106  (11)% NM
Provision/(benefit) for income taxes  (526)  8,367  (6,637) NM NM
Income from continuing operations  38,563  34,152  20,743 13 % 86 %
Income/(loss) from discontinued operations, net of tax  (752)  4,828  (3,435) NM 78 %
Net income  37,811  38,980  17,308  (3)% NM
Net income attributable to noncontrolling interest  2,871  2,875  2,840 * 1 %
Net income attributable to controlling interest  34,940  36,105  14,468  (3)% NM
Preferred stock dividends  --   --   63,154 NM NM
Net income available to common shareholders $34,940 $36,105 $(48,686)  (3)% NM
NM - Not meaningful
* Amount is less than one percent.

Continued improvement in credit quality

  • Credit quality and related costs continued to improve through the end of 2011.
  • Non-performing assets in the fourth quarter improved 38 percent from 2010 to 2011.   
  • Full-year net charge-offs improved 38 percent and reserves decreased 42 percent from 2010 to 2011. 
  • The non-performing assets ratio for the fourth quarter improved to 2.57 percent in 2011 from 4.48 percent in 2010.   
Asset Quality Highlights        4Q11 Change vs.
(Dollars in Thousands)/(Unaudited) 4Q11 3Q11 4Q10  3Q11   4Q10 
Allowance for loan losses $384,351 $449,645 $664,799  (15)%  (42)%
Allowance / period-end loans 2.34% 2.77% 3.96%    
Net charge-offs $75,294 $106,446 $100,100  (29)%  (25)%
Net charge-offs (annualized) / average loans 1.84% 2.65% 2.36%    
Non-performing assets (NPA) $521,161 $582,572 $836,502  (11)%  (38)%
NPA % (a) 2.57% 3.02% 4.48%    
(a) NPAs related to the loan portfolio over period-end loans plus foreclosed real estate and other assets.

Capital deployment

  • First Horizon continued to strategically manage its excess capital in the fourth quarter, using $44 million to buy back stock under its repurchase program.   
Balance Sheet Highlights & Capital Ratios         4Q11 Change vs.
(Period-End, Dollars in Thousands)/(Unaudited) 4Q11 3Q11 4Q10  3Q11   4Q10 
Total loans, net of unearned income $16,397,127 $16,241,402 $16,782,572 1 %  (2)%
Total deposits 16,213,009 15,698,255 15,208,231 3 % 7 %
Total assets 24,789,384 25,571,469 24,698,952  (3)% *
Total liabilities 22,104,747 22,828,239 22,020,947  (3)% *
Total equity 2,684,637 2,743,230 2,678,005  (2)% *
Book value per common share $9.28 $9.29 $9.05    
Tangible book value per common share (a) $8.66 $8.68 $8.31    
Tangible common equity/tangible assets (a) 9.05% 9.00% 8.93%    
Tier 1 capital ratio (b) 14.16% 14.44% 13.99%    
* Amount is less than one percent.
(a) Refer to the Non-GAAP to GAAP Reconciliation at the end of this release.
(b) Current quarter is an estimate.

Use of non-GAAP measures

Certain measures are included in the text and tables of this release that are non-GAAP, meaning they are not presented in accordance with generally accepted accounting principles (GAAP) in the U.S. FHN's management believes such measures are relevant to understanding the capital position and results of the company. The non-GAAP items presented in this release are pre-tax income related to core businesses, tangible common equity to tangible assets, tangible book value per common share and net interest margin computed using net interest income adjusted for FTE (fully taxable equivalent). These measures are reported to FHN's management and board of directors through various internal reports. Additionally, disclosure of the non-GAAP capital ratios provides a meaningful base for comparability to other financial institutions as these ratios have become an important measure of the capital strength of banks as demonstrated by the inclusion in the stress tests administered by the United States Treasury Department under the Capital Assistance Program. Non-GAAP measures are not formally defined by GAAP or codified in the federal banking regulations, and other entities may use calculation methods that differ from those used by FHN. The reconciliation of non-GAAP to GAAP measures and presentation of the most comparable GAAP items is contained in the following table.

NON-GAAP to GAAP Reconciliation
(Period End, Dollars in Thousands) (Unaudited) 4Q11 3Q11 4Q10
Tangible Common Equity (Non-GAAP)      
(A) Total equity (GAAP) $2,684,637 $2,743,230 $2,678,005
Less: Noncontrolling interest (a)  295,165  295,165  295,165
(B) Total common equity  2,389,472  2,448,065  2,382,840
Less: Intangible assets (GAAP) (b)  159,902  160,902  195,061
(C) Tangible common equity (Non-GAAP) $2,229,570 $2,287,163 $2,187,779
       
Tangible Assets (Non-GAAP)      
(D) Total assets (GAAP) $24,789,384 $25,571,469 $24,698,952
Less: Intangible assets (GAAP) (b)  159,902  160,902  195,061
(E) Tangible assets (Non-GAAP) $24,629,482 $25,410,567 $24,503,891
       
Period-end Shares Outstanding      
(F) Period-end shares outstanding  257,468  263,619  263,366
       
Ratios      
(C)/(E) Tangible common equity to tangible assets (TCE/TA) (Non-GAAP) 9.05% 9.00% 8.93%
(A)/(D) Total equity to total assets (GAAP) 10.83% 10.73% 10.84%
(C)/(F) Tangible book value per common share (Non-GAAP) $8.66 $8.68 $8.31
(B)/(F) Book value per common share (GAAP) $9.28 $9.29 $9.05
       
Net interest income adjusted for impact of fully taxable equivalent ("FTE") (Non-GAAP)      
Total Consolidated:      
Net interest income (GAAP) $178,877 $176,340 $182,236
FTE adjustment  1,650  1,555  1,048
Net interest income adjusted for impact of FTE (Non-GAAP) $180,527 $177,895 $183,284
       
Income before income taxes in core businesses (Non-GAAP)      
Regional Banking - Income before income taxes $90,765 $93,968 $63,211
Capital Markets - Income before income taxes  27,034  27,889  23,620
Corporate - Income/(loss) before income taxes  (23,005)  18,552  5,147
Income before income taxes in core businesses (Non-GAAP) $94,794 $140,409 $91,978
Non-Strategic - Loss before income taxes  (56,757)  (97,890)  (77,872)
Income before income taxes (GAAP) $38,037 $42,519 $14,106
(a) Included in total equity on the consolidated condensed balance sheet.
(b) Includes goodwill and other intangible assets, net of amortization.

Conference call

First Horizon executives will host a conference call starting at 8:30 Central Time this morning where they will review earnings and performance trends. There will also be a live webcast accompanied by a slide presentation. The call and slide presentation, which are available in the events and presentations section of http://ir.fhnc.com, may involve forward-looking information, including guidance. Callers who wish to participate can call toll-free starting at 8:15 a.m. by dialing 877-303-6618. The number for international participants is 224-357-2205. The conference ID number is 36864074. Participants can also listen to the live audio webcast with the accompanying slide presentation through the investor relations section of www.fhnc.com. A replay will be available from noon Central Time today until 11:59 p.m. on Jan. 27. To listen to the replay, dial 855-859-2056 or 404-537-3406. The passcode is 36864074. The event also will be archived and available by midnight tonight in the events and presentations section of http://ir.fhnc.com.

Other information

This press release contains forward-looking statements involving significant risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking information. Those factors include general economic and financial market conditions, including expectations of and actual timing and amount of interest rate movements including the slope of the yield curve, competition, ability to execute business plans, geopolitical developments, recent and future legislative and regulatory developments, inflation or deflation, market (particularly real estate market) and monetary fluctuations, natural disasters, customer, investor and regulatory responses to these conditions and items already mentioned in this press release, as well as critical accounting estimates and other factors described in FHN's annual report on Form 10-K and other recent filings with the SEC. FHN disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements included herein or therein to reflect future events or developments.

About First Horizon

The 4,700 employees of First Horizon National Corp. (NYSE:FHN) provide financial services through more than 170 First Tennessee Bank locations in and around Tennessee and 18 FTN Financial Group offices in the U.S. and abroad. First Tennessee has the leading combined market deposit share in the counties where it does business and one of the highest customer retention rates of any bank in the country. FTN Financial is a capital markets industry leader in fixed income sales, trading and strategies for institutional clients in the U.S. and abroad. FHN has been recognized as one of the nation's best employers by AARP and Working Mother magazines. More information is available at www.fhnc.com.

FHN-G

CONTACT: Jack Bradley

         Media Relations

         (901)523-4813

         JLBradley@FirstHorizon.com

         Aarti Bowman

         Investor Relations

         (901)523-4017

         AAGoorha@FirstHorizon.com

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Source: First Horizon National Corporation

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