First Tennessee National Corp. is about to unfurl a bold new flag for its mortgage empire.

After amassing a coast-to-coast collection of small mortgage companies, the Memphis banking company is moving to unite them under a single name- First Horizon. And if the moniker proves a hit, the $18.7 billion-asset parent may go so far as to rename itself.

"We'll spend the next year talking about First Horizon and First Tennessee in the same sentences," says Ralph Horn, chairman and chief executive of the parent company. "If the brand is as strong as we think it will be, we'll probably come back and recommend changing the corporate name."

That would be no small step, as Mr. Horn is the first to point out.

"First Tennessee National Corp. has a lot of brand identity and loyalty in the investment community," he said in a recent interview. "We don't want to just blow that away."

The experiment underscores how important mortgage banking has become for First Tennessee, which plunged into the field with a series of acquisitions in the mid-1990s. The company, which now gets more than 20% of its earnings from mortgages, has come to see the business as a key to its future-and to its very identity.

At the same time, First Tennessee's experience with the new name could go a long way in identifying the power-and limitations-of "branding" in the mortgage industry.

Right now, First Tennessee runs nine mortgage banks, stretching from Baltimore to Seattle. There's HomeBanc, Atlantic Coast, Keystone, Emerald, Carl I. Brown, Maguire, Maryland National, Sunbelt, and of course First Tennessee Mortgage. Together they have made the bank the nation's 11th- largest mortgage originator and 20th-largest servicer, according to National Mortgage News.

None of the units, however, are exactly household names. And the parent company's own, decidedly provincial handle does little to help.

The problems come into sharp relief when one of the units-say, Sunbelt in Dallas-attempts to offer home buyers other services of the parent.

"You go try to sell them a First Tennessee credit card, and they say, 'Who?'" Mr. Horn says.

In searching for a unifying name, First Tennessee left no stone unturned. It spent two years and considered some 30,000 possible names before settling on First Horizon.

The word "Horizon," clearly less restrictive than "Tennessee," is meant to suggest a young, futuristic company. And "First" is intended to stress that the company is financial.

"There are only two entities that have a number-financial institutions and churches," said J. Kenneth Glass, the executive vice president who oversees the mortgage businesses.

Already, First Tennessee has given the First Horizon name to a home equity unit, formerly Gulf Pacific Mortgage, and to a consumer finance unit, formerly First Money Center.

Starting Oct. 15 the other mortgage companies will start to adopt the First Horizon moniker, Mr. Glass said. He expects to have most of the mortgage companies renamed by the end of the year.

In addition to the name, the units are getting a new slogan-"All Things Fin-ancial"-and a new logo, a close-up of the Tennessee flag.

The hope, of course, is that all this will increase consumer awareness of the mortgage businesses-and ultimately boost sales of other First Tennessee offerings, from checking accounts to insurance.

"We're building our nationwide strategy off that mortgage customer base out there," Mr. Horn says.

Mortgage lending, however, may prove to be a singularly tough arena for creating and exploiting a reputation. After all, consumers deal with mortgage lenders quite infrequently.

"I suspect that brand loyalty is lower with mortgage companies than with other financial institutions," said Alan Adamson, managing director at Landor Associates, a New York branding consulting firm. "Most people don't move every two years."

Even with its grab-bag of names, First Tennessee appears to be doing well on the cross-selling front. According to Mr. Glass, sales of additional services to mortgage customers grew to an average $30 per servicing account last year, from $12 in 1997. The industry average is $6.76, and the figure is $9.03 for the largest servicers, according to a 1997 survey by the Mortgage Bankers Association of America.

Indeed, mortgage lending has generally been good to First Tennessee.

The company got into home lending in a big way starting with its 1993 acquisitions of Maryland National Mortgage Corp. and Sunbelt National Mortgage Co. At the time, its stock price was trading at a discount to other banks.'

"We had to figure out a way to grow earnings faster than retail commercial banks' with something that has sustainable growth rates," Mr. Horn recalls.

Mr. Glass' research found that mortgages fit that bill. So the company began seeking out small local lenders with strong retail franchises.

"Even today, the strongest players in a city usually have 5% or 6% market share, and they're usually local players." Mr. Glass said. "They aren't the Norwests or the Chases and the Countrywides," he added, referring to three top mortgage companies.

Unlike many other banks, First Tennessee didn't purchase large portfolios of servicing rights as a quick entree into the business. A number of buyers paid large premiums for servicing, only to see the loans paid off early as interest rates fell. That caused big writeoffs and, in some cases, exits from the business.

First Tennessee emphasized building a big origination business so it could grow its own servicing business. Last year, helped by the refinance boom, the combined originations of its units increased 120% to $23 billion. And the servicing portfolio rose by 40%, to $40 billion.

That still leaves First Tennessee's business well below the $100 billion to $200 billion portfolios of the industry giants. Many experts say that companies below the megaservicers may be an endangered species.

"We think that's bunk," Mr. Horn replies. The cost savings from scale amount to "peanuts," he said. Mr. Horn and Mr. Glass argue that analysts today put too much emphasis on the cost of servicing, and not enough on the revenues.

First Tennessee's mortgage units have a lot of managerial autonomy, which the company says they will retain after the impending unification.

For example, each has its own profit and loss statement and compensates employees according to its own production. In some cities, they even compete with each other, though Mr. Glass says this will end soon.

Servicing and secondary marketing are centralized in Dallas at the umbrella organization, FT Mortgage Cos., but the local origination companies can deviate from the secondary market prices they are given.

First Tennessee generally likes to keep its nonbank businesses on long leashes.

"We're more decentralized today than we've ever been," Mr. Horn says. "And I suspect we'll be more decentralized five years from now than we are today."

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