First Horizon National said its merger with Iberiabank remains on track to close on time, but its deal to buy 30 branches from Truist Financial is being delayed by the coronavirus outbreak.
The $47 billion-asset First Horizon capped 2019 by announcing the $3.9 billion deal with Iberiabank and an agreement to buy branches in Georgia, North Carolina and Virginia that Truist had to divest as part of the BB&T-SunTrust merger.
Postponing the branch acquisition “will alleviate customer disruption … and allow us to comply with social distancing guidelines,” Bryan Jordan, the Memphis, Tenn., company’s chairman and CEO, said during a Tuesday conference call to discuss first-quarter earnings.
The branch deal is now expected to be completed later in the third quarter. First Horizon has already received regulatory approval to close the transaction.
The proposed merger with the $32.2 billion-asset Iberiabank is still expected to close this quarter, Jordan said. Shareholders are scheduled to vote on the deal Friday.
“We have made a great deal of progress planning the integration,” Jordan said.
The deal would create a nearly $80 billion-asset banking company spanning most Southeast markets. Executives have said the larger company will have the necessary scale to efficiently deliver more technology-driven services, which should improve profits.
Jordan, who would remain CEO, said he still expects to wring out the $170 million in annual expenses that were projected when the deal was announced last fall. He said lower costs should be an important “tailwind” during what could be a slow, drawn-out economic recovery.
First Horizon earned $16.6 million in the first quarter, down sharply from $112.7 million a year earlier. The company set aside $145 million, reflecting a decision to adopt the Current Expected Credit Losses standard and fallout from COVID-19.
The added reserves should provide a “healthy” safeguard against substantially weaker economic conditions that have set in, Chief Financial Officer B.J. Losch said during Tuesday’s call.
While net charge-offs were up modestly from a year earlier, totaling 0.10% of loans on March 31, executives noted that the impact of business shutdowns and stay-at-home orders only started to take root late in the quarter. Conditions worsened meaningfully in April and remain challenging, they said.
“Clearly our losses will go up — as everybody’s will,” Jordan said, though he expressed confidence that First Horizon’s loan book, as well as the combined portfolio with Iberiabank, “will hold up” during the downturn.
Iberiabank last week reported that its quarterly profit fell 66% from a year earlier to $32.8 million. The company’s loan-loss provision increased by more than 400% to $69 million, reflecting preparation for pandemic challenges and CECL implementation.
“We continue to diligently work on the merger planning process,” Daryl Byrd, Iberiabank’s president and CEO, said in his company’s earnings release. “Our employees remain engaged and committed to creating a top-tier regional banking institution.”