First Horizon National (FHN) in Memphis said Friday that it lost close to $125 million in the second quarter after it bought back scores of soured mortgage loans from Fannie Mae and Freddie Mac.
The $25.5 billion-asset parent of First Tennessee Bank took a pre-tax charge of $272 million related to the mortgages, most of which were originated by its national mortgage-lending unit that it sold off in 2008. First Horizon, which disclosed plans to take the second-quarter charge in June, sold nearly $58 billion of loans to Fannie and Freddie between 2005 and 2008.
The charge reduced earnings per share by 67 cents, resulting in a per-share loss of 50 cents for the quarter, in line with estimates of analysts polled by Thomson Reuters. The company reported profits of $20 million in last year's second quarter and $30.5 million in the first quarter of this year.
Apart from the hefty charge, there were some positive signs in the second quarter. Revenue rose 3% from the prior quarter, due to an increase in period-end loans and increased fee income generated by its capital markets group.
The company also reported improvements in asset quality as chargeoffs declined 14% from the first quarter, to $40 million, and nonperforming assets fell 9%, to $467 million.
First Horizon's shares were trading at $8.14 early Friday, down almost 5% from Thursday's closing price.