First Horizon National in Memphis, Tenn., reported a significant increase in quarterly earnings as increased lending and cost control offset a decline in fee income.

The $29.4 billion-asset company said Friday that its second-quarter profit rose 61% from a year earlier to $90.8 million. First Horizon also announced during the quarter that it will buy the $10.1 billion-asset Capital Bank Financial in a deal that will substantially increase its operations in the Carolinas.

“Our bankers are expanding relationships and attracting new business in our growth markets in middle Tennessee and the Mid-Atlantic as well as in established markets,” Bryan Jordan, First Horizon’s chairman and CEO, said in a Friday press release.

Bryan Jordan, CEO of First Horizon National Corp.
First Horizon, led by CEO Bryan Jordan, will have roughly $40 billion in assets after it acquires Capital Bank Financial in Charlotte, N.C.

“Our planned merger with Capital Bank will help us more quickly achieve critical financial targets, and teams from both sides are preparing us to leverage the strengths of both banks, capitalize on growth opportunities in attractive, high-growth Southeast markets and enhance our strong presence in Tennessee,” Jordan said.

First Horizon agreed in May to buy Capital for $2.2 billion. Though the acquisition would bring First Horizon much closer to the $50 billion-asset threshold where added regulatory scrutiny kicks, management has expressed optimism that Washington will intervene before that happens.

Total revenue rose 2% to $328.4 million.

Net interest income climbed 14% to $200.7 million. Total loans rose 8%, to $19.2 billion, while the net interest margin widened by 15 basis points, to 3.07%. Commercial-and-industrial loans increased by 13%, to $11.8 billion, and commercial real estate rose 14%, to $2.2 billion.

Noninterest income fell 12%, $127.3 million. Bank card fees declined 15%, to $5.6 million, and fixed-income revenue fell 29%, to $55.1 million.

Noninterest expense fell 4%, to $217.9 million. Legal fees fell by 41%, to $3.5 million, and costs tied to advertising and public relations declined by 9%, to $4.1 million.

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Jackie Stewart

Jackie Stewart covers community banks and mergers and acquisitions for American Banker.