First Horizon Quits Subprime Mortgages

First Horizon National Corp. of Memphis said that because of reduced investor appetite for the loans, it will no longer originate or fund nonprime mortgages.

Gerald Baker, the $38.8 billion-asset banking company's president and chief executive, said Wednesday in a press release that it also plans to restructure itself "more aggressively" by consolidating more operations, cutting jobs, and closing unprofitable locations. Nonprime loans make up less than 2% of its mortgage originations, he said. The company is to hold a conference call today.

First Horizon's first-quarter earnings fell 7.8% from the fourth quarter and 67.2% from a year earlier, to $70.5 million. Earnings per share of 55 cents were down 5 cents from the fourth quarter and 3 cents from a year earlier. The first quarter included a $15 million loss from mortgage hedging, offset by $10.3 million in securities gains and a $7.5 million reduction in tax expense.

Net interest income fell 3.5% from the fourth quarter and 3.4% from a year earlier, to $237.4 million. The margin shrank by 2 basis points from the fourth quarter and 15 basis points from a year earlier, to 2.84%.

Net chargeoffs rose 97% from the fourth quarter and 79.7% from a year earlier, to $26.6 million, because of problematic residential real estate construction loans and "a few" commercial and industrial loans.

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