First Horizon sees profit boost and higher costs from Capital Bank deal
First Horizon National in Memphis, Tenn., swung to a first-quarter profit, as lending and fee collection were boosted by its 2017 deal for Capital Bank in North Carolina.
Net income at the $40 billion-asset holding company for First Tennessee Bank was $90.6 million, compared with a $51.3 million loss a year earlier. Earnings per share of 27 cents were a penny lower than the mean estimate of analysts compiled by FactSet Research Systems.
Yearly comparisons were affected by First Horizon’s $2.2 billion acquisition of Capital Bank Financial in Charlotte, N.C., in November. First Horizon said on Friday that it remains on track for its cost-cutting target of trimming $85 million in annual expenses through the acquisition.
“First Tennessee and Capital Bank employees continue to deliver exceptional differentiated services and solutions to our customers and our preparations remain on track for the integration of Capital Bank in the second quarter,” Chairman and CEO Bryan Jordan said in a news release.
Still, the Capital Bank deal increased costs in the short term. Noninterest expense jumped 41% to $313 million. First Horizon attributed the increase to $17 million of Capital Bank-related acquisition expenses, as well as higher salaries and occupancy costs.
Net interest income increased 59% to $301.2 million on higher average balances of commercial loans, the largest loan category at First Tennessee Bank, and the positive impact of higher interest rates. Average commercial and industrial loans held on the balance sheet rose 47% to $15.5 billion. The average yield on commercial loans climbed 67 basis points to 4.53%.
Noninterest income rose 16% to $135.9 million through higher deposit service charges and bankcard income. First Tennessee also recorded a $3.3 million gain from the sale of a building during the quarter.