First Horizon reports Q1 results amid delayed TD Bank Group deal

It's unclear at this time when First Horizon's agreement with Toronto's TD Bank Group is expected to close. For now, First Horizon Corp. is a Memphis-based, stand-alone institution.

It's only just finished recording the results for its first quarter.

First Horizon starts the fiscal year

First Horizon's Q1 2023 results were released amid uncertainty over the TD deal. Total revenue was $859 million. This is a drop from $882 million in Q4 2022 and an increase from $707 million in Q1 2020. Net income was $256 million, down from $270 million last quarter but up from $198 million a year earlier. Earnings per share (EPS), however, were 43 cents. This is a slight decrease from Q4's 45 cents and an increase from Q1 2022's 34 cents.

In the release of Q1 results, President and CEO Bryan Jordan stated that despite macroeconomic uncertainty we continue to build deep client relationships in all 12 states and our specialty businesses.

The average loan increased from $54.1 billion to $57.6 in Q4 of 2022, and $58.1 billion to $58.1 in Q1 of 2023. The growth in the quarter was partly due to an increase of 2% in consumer loans as well as a 1% in commercial real estate, but it was offset by a drop of $424 million in mortgage loans.

In Q1 2020, this number was $74.2 Billion, while last quarter it was $64.9 Billion. The quarterly decline was driven by a fall of $2.7 Billion in Demand Deposit Accounts (DDAs) as well as other non-interest bearing deposits. The decline was offset in part by an increase of $95 million in interest-bearing deposit.

First Horizon's first 'new-to-bank deposit' campaign launched in February generated $250 million of new deposits.

The TD Deal

First Horizon did not provide much information in its earnings announcement about the TD transaction, other than to note that the company had incurred costs of $21 million related to the deal during Q1. In Q4, it had spent $31 million on the deal.

First Horizon announced that it would be purchased by TD late in February 2022. The transaction was expected close in the first fiscal quarter of TD, which runs from Nov. 1, 2020, to Jan. 31, 2023.

When TD announced its earnings on December 1, it stated that it expected to complete the transaction during the first half year of the fiscal year 2023, which ends April 30 2023. On Feb. 10, TD, First Horizon and the parties to the agreement agreed to extend to May 27, the date for the external termination of the transaction.

It's unlikely that the deal will be finalized by May 27. According to First Horizon's March 1 annual report, TD informed First Horizon it does not expect 'the required regulatory approvals will arrive in time for the pending TD merge by May 27, 2023' and that TD is unable to provide a new estimated closing date.

First Horizon's share price has dropped dramatically due to the uncertainty surrounding the completion of the transaction, as well as other factors, such as the failures of Silicon Valley Bank and Signature Bank.

The original purchase price per share was $25. First Horizon's shares closed at $24.77 on Feb. 28, 2023, a year after the announcement of the deal. On March 1, the day First Horizon announced that the deal may not be completed by the May 27th deadline, its stock closed at a price of $22.14. On March 15, the share price was $15.68, which is below the $18.25 price it closed Friday, February 25, 2022 -- the last trading day before the announcement of the First Horizon deal.

TD may renegotiate terms of the deal, according to speculation. First Horizon and TD have not confirmed this. First Horizon's share price has increased significantly since mid-March. It closed at $18.35 on April 18.