2. First Horizon National Corp.
Shares of First Horizon National Corp. (FHN) of Memphis, Tenn., closed at $6.35 Monday, down 46% year-to-date. The shares trade for 0.8 times their tangible book value of $8.43, according to SNL Financial.
First Horizon had $25.1 billion in total assets as of June 30. The company reported second-quarter net income of $43 million, or 16 cents a share, improving from $2.7 million, or a penny a share, in the second quarter of 2010. The second-quarter provision for loan losses was just $1 million, declining from $70 million a year earlier. During the second quarter, the company made a $24.6 million provision for mortgage repurchases and foreclosures, declining from $56.2 million a year earlier, but still placing a major drag on earnings.A $ 65 million release of loan loss reserves directly boosted second-quarter earnings. The second-quarter net interest margin was 3.20%, expanding slightly from 3.19% a year earlier. Nonperforming assets made up 4.09% of total assets as of June 30, improving from 4.92% a year earlier. The second-quarter net charge-off ratio was 1.67%, and loan loss reserves covered 3.26% of total loans as of June 30. Guggenheim Securities analyst Marty Mosby has a neutral rating on First Horizon, saying after the company announced its second-quarter results that "it is becoming evident that the mortgage repurchase overhang is becoming less of an issue for FHN and that any further losses should be covered by earnings power and excess capital without pressuring the company any further." The shares trade for eight times the consensus 2012 earnings estimate of 77 cents a share, among analysts polled by FactSet. Out of 23 analysts covering First Horizon, nine rate the shares a buy, while the remaining analysts all have neutral ratings. The discount to book value reflects in part the company's reliance on the reserve release for a positive bottom line during the second quarter, but with strong reserve coverage, we are likely to see additional major releases of reserves over coming quarters, and investors can take comfort in a strong Tier 1 common equity ratio, which SNL says was 11.86% as of June 30.
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