Chattanooga's biggest bank cut costs and boosted profits in the first quarter, beating Wall Street estimates by 4 cents per share.
The Scenic City remained a bright spot for First Horizon, the holding company for First Tennessee Bank, which this year celebrates its 150th year in the banking business.
But much like at the height of the U.S. Civil War when the bank was founded, executives today are fighting a battle against economic malaise and heavy regulations, which combined in the first quarter of 2014 to generate an overall revenue decline of 6 percent.
"The environment continues to be pretty tough in terms of growth," said BJ Losch, executive vice president and chief financial officer at Memphis-based First Horizon, this week. "We, along with other banks, are finding it more difficult to hold that line."
First Horizon cut expenses by 8 percent or $20 million year over year to achieve earnings available to common stockholders of $44.8 million, or 19 cents per share. Those earnings beat analyst expectations and also topped first-quarter 2013's earnings haul of $40.1 million, or 17 cents per share.
Revenue declined during the quarter to $298 million from $317 million in the first quarter of 2013, driven by a drop in both interest income and non-interest income, but offset slightly by $5.6 million in securities gains.
"We're trying to control things we can control," Losch said. "The revenue declines we've seen year over year are in line with expense reductions we've made, and we're trying to be very disciplined about those two things and make them work in tandem."
First Horizon was bolstered by increasing fee income from FTN Financial, its fixed-income business, as well as from the bank's Chattanooga operation. Led by 34-year bank veteran Keith Sanford, the bank's Chattanooga market actually grew in size and set new records for the bank.
"We hit our highest-ever deposits this quarter, which is good, and grew loans even more," Sanford said.
Deposits in the Chattanooga market grew to $2.4 billion and loans during the year grew nearly $100 million to $1.5 billion.
The key to winning customers has been working to make sure that all costs are slashed behind the scenes, preventing cuts from affecting customer service, officials said.
Like many other banks, First Tennessee has reduced its branch footprint by 17 percent over the last five years to just over 170 locations, with new staffing levels set at 4,300 workers. Back office operations have also been trimmed and automated. In some cases, reducing the number of desks a loan application has to pass over has actually made the bank more responsive.
But at the same time, the bank has spent more on incentives for employees, customer promotions and other investments in raising community awareness and supporting front line employees. With the availability of mobile check cashing and banking, the reductions haven't affected customer satisfaction, Sanford said, while customers appreciate the new technology and ability to do their banking in bed.
"People use the bank in different ways than they used to," Sanford said. "If not as many people are coming in, you don't need quite as many people."
First Horizon is also investing in technology such as automatic bill counters that allow employees to spend time with customers instead of manually counting out bills.
"That's an example of where we're investing to get something better for customers," said Kim Cherry, executive vice president of corporate communications at First Horizon. "Employees would much rather be talking to customers than counting money."
Contact staff writer Ellis Smith at 423-757-6315 or firstname.lastname@example.org.