• Third-quarter profit of 14 cents a share misses analysts' consensus estimate of 16 cents.
  • Adds $28 million in mortgage repurchase expenses.
  • Commences $100 million share repurchase.

MEMPHIS, Tenn. (


) --

First Horizon National

(FHN) - Get Report

on Monday reported third-quarter net income of $36.1 million, or 14 cents a share, missing the consensus estimate of 16 cents, among analysts polled by FactSet.

The results compared to a profit of $20 million, or eight cents a share, the previous quarter and earnings to common shareholders $15.9 million, or 64 cents a share a year earlier.

First Horizon National CEO Bryan Jordan

The quarter-over-quarter earnings improvement reflected a $36.7 million "loss accrual related to a litigation settlement," during the second quarter, along with significant restructuring charges during the second quarter and the third quarter of 2010.

The overall expense reduction was partially offset by an increase in mortgage repurchase and foreclosure provisions to $52.8 million in the third quarter, from $24.6 million the previous quarter and $44.7 million a year earlier.

The third-quarter provision for loan losses was $32 million, following two straight quarters of minimal $1 million provisions. A year earlier, the provision for loan losses was $50 million.

Third-quarter net interest income was $176.3 million, up slightly from $172.9 million in the second quarter, but down from $186.1 million in the third quarter of 2010. The net interest margin -- essentially the difference between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings -- was a tax-adjusted 3.23% during the third quarter, which matched the margin during the third quarter of 2010, while increasing slightly from 3.20% in the second quarter.

Total noninterest income was $220.1 million during the third quarter, increasing from $187.6 million during the second quarter, but declining from $242.7 million in the third quarter of 2010. The quarter-over-quarter improvement reflected a recovery of capital markets revenue to $99.6 million from $77.9 million the previous quarter. During the third quarter of 2010, capital markets revenue was $114 million. Third-quarter revenue also reflected $35.2 million in securities gains.

Mortgage banking income declined to $12.8 million in the third quarter from $32.1 million the previous quarter and $53.1 million a year earlier.

First Horizon reported nonperforming assets totaling $582.6 million as of Sept. 30, declining 22% quarter-over-quarter and 37% year-over-year. The ratio of nonperforming assets to total assets was 3.02% as of Sept. 30, improving from 4.09% the previous quarter and 5.00% in September 2010.

The annualized ratio of net charge-offs -- loan losses less recoveries -- to average loans was 2.65% and loan loss reserves covered 2.77% of total loans as of Sept. 30.

With a strong Tier 1 common capital ratio of 11.98% as of Sept. 30, First Horizon announced it had "launched a program to repurchase up to $100 million of its common stock in the open market or in privately negotiated transactions, subject to market conditions, by the end of August 2012."


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Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.