A month after replacing the “Tennessee” in its name, First Horizon National Corp. of Memphis is moving ahead with its national ambitions by creating a new commercial lending unit and opening more retail branches in northern Virginia.
On Monday the $22 billion-asset regional banking company unveiled First Horizon Corporate Financial Services in Winston-Salem, N.C.
The unit will go after commercial banking business in the Southeast outside Tennessee. It will target companies with annual revenue of $20 million or more in Georgia, the Carolinas, Virginia, and West Virginia.
In northern Virginia the company has also recently opened half a dozen branches — including two this month — of its “First Horizon Bank,” the brand it launched last year for out-of-state retail branches of its First Tennessee Bank. That is the first stage of a five-year plan to expand to a dozen major U.S. cities.
The division now has branches in the Washington suburbs of Tysons Corner, Arlington, Centreville, Fairfax, Falls Church, and McLean, Va. (A local banking veteran, Terrie G. Spiro, was hired as First Horizon Bank’s regional president.)
The expansion is part of First Horizon’s effort to diversify at a time when interest rates are expected to start rising and two of its major revenue sources — mortgages and bond trading and underwriting — are falling.
First-quarter fee income fell 16% from a year earlier, in part because of a 55% decline in mortgage refinancings. Overall profit was flat, at $119 million.
The company is building its retail banking operations on the back of its national mortgage business, which operates in 41 states. As originations slow, First Horizon Home Loans is selling mortgage customers additional products, including home equity loans, checking and savings accounts, and other banking services.
The invigorated cross-selling produced $58 million in revenues in the first quarter — up 81% from a year before. First Horizon said most of the gains came from consumer and construction lending.
In the first-quarter financial report filed with the Securities and Exchange Commission, the company said: “The national expansion strategy continues to produce results from cross-sell efforts, expansion of the sales force, and the recent opening of financial centers have successfully created revenue growth from banking products sold outside of Tennessee.”
Right now the expansion “is not a huge event,” said Charles Ernst, an analyst with Keefe, Bruyette & Woods Inc. in New York. But “I think they have a decent beginning due to the mortgage business,” he said. “If you look at the numbers they’ve put out there, they have gained some traction.”
The unveiling of the commercial loan operation was another step. First Horizon actually launched the business in March by hiring a four-person team in Winston-Salem. It is led by John C. Fox, who was joined by longtime colleagues Stewart Holmes, Helen Lowder, and Alec Turner.
The four worked together at Wachovia Corp., where Mr. Fox spent 20 years, and later Woodfield Capital, a private commercial-lending firm he founded last year. (First Horizon bought Woodfield’s assets in March.) He had retired from Wachovia in 2003 as a managing director and the head of the forest products, metals, and mining banking group.
In an interview, Mr. Fox said First Horizon is pursuing the same strategy that he did at Woodfield Capital: helping companies raise senior debt at a time when the number of lenders has shrunk in many industries. But now, he said, his team will not have to raise a pool of loan capital as it arranges loans.
The division has so far closed one loan with a customer, which he would not name.
At this point there are no plans for other commercial loan offices. Mr. Fox acknowledged that his team is targeting a wide territory, but because it is focusing on midsize companies “we’ve got something of a finite universe,” he said.
Mr. Ernst said First Horizon may also hope to take advantage of fallout from bank mergers in the Southeast. Two of its rivals in Memphis are selling out to larger banks: National Commerce Financial Corp. to SunTrust Banks Inc. of Atlanta and Union Planters Corp. to Regions Financial Corp. of Birmingham, Ala. The deals are expected to close by yearend and June 30, respectively.
“First Horizon might be in a position to capitalize on that. They’re being a little opportunistic,” Mr. Ernst said.
