1st Tennessee parent books quarterly loss for mortgage settlement
Loans, deposits improve in quarter
A $162.5 million payment to federal regulators in the first quarter to settle mortgage fraud charges from a former mortgage business pushed the parent company of First Tennessee Bank into the red during the first three months of 2015.
But First Horizon Corp., the Memphis-based parent of Chattanooga’s biggest bank, still beat analysts’ expectations for adjusted quarterly earnings. The bank- holding company said Friday that loans and deposits grew in the past year, boosting earnings adjusted for nonrecurring costs to 18 cents per share in the first quarter — well above the 14 cents per share average estimate among the analysts surveyed by Zacks Investment Research.
First Horizon posted revenue of $286.6 million in the period, also exceeding Street forecasts.
“Our people continued to demonstrate strong performance across the board in the first quarter,” First Horizon Chairman and CEO Bryan Jordan said in a statement.
Nonetheless, shares of First Horizon dropped by 27 cents per share, or nearly 1.9 percent, to close Friday at $14.28 after the quarterly earnings report.
First Horizon shares have climbed 6 percent since the beginning of the year. The stock has increased nearly 25 percent in the last 12 months despite the drop in shares on Friday.
During the first quarter, First Horizon reached an agreement in principle with the Department of Justice and the Department of Housing and Urban Development to settle potential claims related to underwriting and origination of FHA-insured mortgage loans. That agreement resulted in a $ 162.5 million pre-tax charge for the quarter, driving a net loss available to common shareholders of $76.7 million, or 33 cents per share.
Excluding the litigation charge, net income available to common shareholders in the first quarter would have been $ 41.8 million, or 18 cents per diluted share.
First Tennessee said average loans were up 14 percent, average core deposits were up 9 percent and net income was up 31 percent year over year. Loans were up by double-digit percentages year over year in commercial, asset-based lending and commercial real estate.