Memphis-based First Horizon National Corp. announced Wednesday a quarterly dividend increase to 5 cents from 1 cent per share of common stock and a $100 million increase in its stock buyback program.
The cash dividend is payable April 1 to common shareholders of record on March 15.
First Horizon (Ticker: FHN) ended trading Wednesday at $10.02, down 7 cents per share.
"Returning capital to our shareholders is an important part of our plan to create shareholder value," Bryan Jordan, First Horizon chairman and CEO, said in a release. "This is a good way to start 2013, by rewarding our shareholders for their investment in us."
The $100 million addition increases the total for the stock buyback program the company initiated in October 2011 to $300 million, and the program has been extended through January 2014.
By the end of 2012, First Horizon, the parent of First Tennessee Bank, had purchased $175 million of common stock through the program, and with the addition, the company has $125 million for future purchases. Under the program First Horizon is repurchasing the company's common stock in the open market, privately negotiated transactions or otherwise, subject to market conditions.
Mike Turner at Compass Point Research has downgraded shares of three of the biggest banking names in Middle Tennessee, saying they are fully valued given the broader economic environment and the specific issues each faces. Turner lowered Regions Financial and SunTrust Banks to 'neutral' from 'buy' and First Horizon National to 'sell' from 'neutral.' Investors in Regions will need faster loan growth, he writes, while SunTrust needs to get a better relationship between its costs and revenues. First Horizon gets a 'sell' rating because it faces higher litigation risk in the next few quarters and because "revenue growth will continue to underwhelm."
Shares of SunTrust are fighting off the downgrade in Monday morning trading while Regions and First Horizon are solidly in the red.
Marty Mosby at Guggenheim Securities says First Horizon National, the parent of First Tennessee Bank, remains on track with a multi-year cost-cutting program that is repositioning the Memphis-based company to a more appropriate post-housing boom size. A big part of that, he says, is squeezing out another $50 million in expenses in 2013, $30 million of which will come from lower pension costs.
Thus, the two tactical improvements to core earnings continue to make progress and we believe are still moving FHN to an earnings power around $1 in 2013.
First Horizon National has told investors it is taking a charge of $272 million to cover extra costs it expects to incur by having to buy back mortgages from Freddie Mac and Fannie Mae. As of March 31, the bank holding company's reserve against putbacks was just $161 million. The news prompted analyst Paul Miller at FBR Capital to lower his price target to $6.50 from $8. Miller has an 'underperform' rating on First Horizon (Ticker: FHN), which closed Monday at $7.91.
During a conference call late on Monday, First Horizon National CFO William Losch expressed confidence that the company wouldn't see further unexpected rises in mortgage loan putback demands from Fannie Mae, as the GSE had given "a view of how they've historically selected loans for repurchase requests, how they anticipate to select loans, both liquidated and delinquent, in the future, and gave us a lot of insight into how they come up with that."
SEE ALSO: The company's 8-K filing detailing the charge
The post-Great Recession recovery of First Horizon National has been one of the quieter stories of the regional banking sector. But in an update to its investor presentation, the parent of First Tennessee Bank details its steady progress on a number of fronts — even if the stock (Ticker FHN) hasn't yet reflected those improvements. One of the cleanest up-up-and-away charts in the deck? The one that shows First Horizon's book with mortgage lenders more than tripling last year.
First Horizon National, the parent company of First Tennessee Bank, said Wednesday afternoon it has bought a Nevada investment manager that specializes in working with states and municipalities. The deal gives First Horizon a company with more than $5 billion in assets under management and services it can cross-sell to clients across Tennessee and other parts of the Mid-South.
"FTN Financial already has a significant presence in the public funds sector through our fixed income sales activities. The addition of Main Street enables us to respond to the growing demand for portfolio advisory services among this customer segment."
Analysts and investors have been eagerly waiting for First Horizon to put to use some of the excess capital it has amassed in the wake of cleaning up its mortgage-related problems. Some market watchers expect the company to expand further in Middle Tennessee, where it ranks fifth in market share. It is No. 1 in all other Tennessee cities.
First Tennessee Bank was the recipient of more than $45 billion of emergency loans during the darkest days of the financial crisis that reached its peak in the fall of 2008. That's the biggest Tennessee data point in public-interest journalism group ProPublica's compilation of thousands of documents released last week by the Federal Reserve after Bloomberg won an open-records court case centered on the agency's issuance of secret loans. Another lender active in the Nashville area that also features on the list is The Bank of Nashville, which received a single $25 million shot in the arm.
The Bloomberg report on "the largest bailout in U.S. history" is available here and discusses how borrowings under the so-called Term Auction Facility and other programs helped keep afloat hundreds of lenders — the leaders of which didn't disclose the scale of the help they were getting.
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
Click here for the full and searchable data set from ProPublica
First Horizon National Corp. this morning posted second-quarter profits of $45.4 million, more than double its year-ago number. The news appears to good all around for the parent of First Tennessee Bank: Nonperforming assets fell 46 basis points to 4.09 percent, return on assets ticked up a bit and net interest margin held steady.
"As the economy continues to recover there are many things we can control, and that's where our employees are focused: winning more business from our current and new customers, investing in technology, improving processes, controlling expenses and providing outstanding customer service," said Bryan Jordan, First Horizon's CEO. "We are building First Horizon for long-term success and to create strong returns for our shareholders."
Shares of First Horizon (Ticker: FHN) are up about 3 percent in early trading. Year to date, they're down about 15 percent.
The banking team at Guggenheim Securities has taken a look ahead to the upcoming bank earnings season and see relatively good things in store for regional players Pinnacle Financial Partners and First Horizon. David Darst, Jeff Davis and Marty Mosby expect Nashville-based Pinnacle (Ticker: PNFP) to lift its net interest margin to 3.4 percent — which would be the bank's highest since late 2007 — and post earnings per share of 10 cents versus the consensus estimate of just 3 cents. The analysts say that continued high levels of loan loss provisions will offset that improvement, at least in terms of sentiment.
They see First Horizon (Ticker: FHN) posting a profit of 8 cents per share, double the Street's estimate, but "we don’t believe this quarter’s extra profits will be perceived too favorably, since revenues should be relatively flat as a $14 million increase in mortgage banking fees is offset by a decline in net interest income."
More broadly, Darst, Davis and Mosby say investors looking for strong loan growth will be disappointed. Yes, commercial lending will lead the consumer sector into the next up cycle, but don't look for it this quarter.
We look for management commentary to note some stirrings of commercial loan growth, which may drive net growth late in the year for some, as we expect the reduction in C&D and CRE loans should run its course sometime during 2012.