Merger costs dent First Horizon profits

Merger expenses reduced second-quarter earnings at First Horizon National, though the Memphis, Tenn., company said its 2017 acquisition of Capital Bank will ultimately yield savings.

Net income at the $41.1 billion-asset company fell 10% from a year earlier to $81.6 million. Year-over-year comparisons are affected by First Horizon’s Nov. 30 acquisition of the $10.1 billion-asset Capital Bank Financial in Charlotte, N.C.

Bryan Jordan, chairman, president and CEO of First Horizon National Corp.

Earnings per share of 25 cents were 8 cents lower than the mean of analysts compiled by FactSet Research Systems. Excluding several one-item items, earnings per share were 36 cents. The one-time items include $43.2 million of expenses related to the Capital Bank acquisition and $4.1 million of valuation adjustments tied to derivatives related to previous sales of Visa shares.

First Horizon, the holding company for First Tennessee Bank, predicts the Capital Bank acquisition will generate $85 million of yearly savings by next year and produce strong revenue gains.

“We successfully completed the Capital Bank integration and systems conversion,” Chairman and CEO Bryan Jordan said in a press release Tuesday. “With the integration complete, our focus is on driving organic growth, strengthening our presence in attractive markets in the Southeast, achieving operational efficiencies and building on the momentum in our profitable specialty businesses.”

Net interest income rose 55% to $311 million. The net interest margin widened by 46 basis points to 3.53%. Total loans increased 39% to $27.7 billion.

Noninterest income was little changed, at $127 million, as lower income from fixed-income trading offset gains in deposit service changes and brokerage fees.

Noninterest expenses climbed 53% to $333 million, largely on costs associated with to the Capital Bank deal.

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