First Horizon's Long Road Back

MEMPHIS ( TheStreet) -- As is fitting for a company headquartered in a town known for the blues, First Horizon National Corp. ( FHN) is standing at the crossroads.

The bank, whose assets total nearly $26 billion, reported its first quarterly profit in more than two years in mid-July but Wall Street is skeptical that it's out of the woods just yet.

Of the 27 analysts currently covering the stock, 18 have a hold rating. And while the median analysts' 12-month price target for the shares is $14, implying upside of more than 15% from current levels, the stock was sitting at a 52-week high of $15.86 as recently as mid-April.

The question is whether or not that pullback is emblematic of the broad weakness in the bank stocks due to financial reform and other well-documented headwinds since that time, or does it represent real skepticism about First Horizon's post-crisis prospects? The answer, as it so often is, seems to be a little bit of both.

Management's stance, unsurprisingly, is that the bank is ready to rise up and meet the challenges of the new world of banking. CFO William 'BJ' Losch says the First Horizon's relatively new leadership team is far from exhausted coming out of the crisis; rather, they're just getting started.

"We're certainly tired, but kind of energized about where we are for the future," Losch said in a recent interview with TheStreet. "We just returned to profitability this quarter Q2 and so we feel like we turned the corner on credit and we think our challenges now are much more exciting; which are how do we drive returns, how do we drive profitability, how do we get incremental growth above and beyond what everybody else has?"

The questions Losch poses are ones facing the entire banking industry, which has indicated topline growth will be a challenge in the post-FinReg/CARD Act business environment, especially if the economy doesn't cooperate. First Horizon has made a conscious decision to hunker down and concentrate on strengthening its presence in Tennessee while continuing to whittle away bad loans and it seems to be working so far, but doubters still exist.

Bob Phillips, managing partner and co-founder of Indianapolis-based Spectrum Management Group, a wealth management services firm owned by Raymond James Financial ( RJF), is underweight in the financial sector and does not see the value in First Horizon shares right now.

"I don't know where the growth comes from to be honest," Phillips says.

First, a little backstory. First Horizon essentially cut off its left arm to save its whole self by agreeing early in the crisis to sell its mortgage origination and servicing business outside of Tennessee to MetLife Bank, a subsidiary of MetLife ( MET), in June 2008. The bank no longer originates mortgage loans outside of Tennessee.

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