MEMPHIS, Tenn. (AP) -- First Horizon National Corp. reported a larger-than-expected loss for its second quarter, weighed down by a big charge as the bank coped with the continued fallout of the housing crisis. The news sent its shares down more than 5 percent Friday.
Banks all over the country have been forced to buy back billions of dollars in mortgage securities over the past few years. They made loans that were bundled into mortgage-backed securities and sold to investors. Government-sponsored enterprises Fannie Mae and Freddie Mac claim the loans were made improperly and are requiring repayment.
First Horizon company warned investors in June that it would add $250 million to its mortgage repurchase reserve. It also allocated an additional $22 million to cover potential litigation costs tied to mortgages.
The company's CEO B.J. Losch said in a conference call with investors that at this point, the company expects the reserves should be enough to cover its risk tied to mortgage buyback demand. But the costs to bolster the reserve dragged down the company's results, breaking its streak of five consecutive profitable quarters.
First Horizon posted a loss of $124.8 million, or 50 cents per share, for the period. That compared with net income of $30.5 million, or 12 cents per share, earned in the prior year.
Analysts, on average, were anticipating a loss of 41 cents per share, according to FactSet.
The company's total revenue dipped to $331.6 million from $374.4 million. Analysts were expecting $359.3 million.
First Horizon said its net interest income, or money earned from deposits and loans, edged down slightly to $172.7 million, from $172.9 million last year. Noninterest income, or money earned from fees and other charges, dropped 18 percent to $153.8 million, from $187.6 million, pushed down by a decline in mortgage banking income and lower revenue from its capital markets division.
Net charge-offs, or loans written off as uncollectible, dropped 39 percent to $40 million, from $66 million in the year-ago quarter. Despite the improvements customers made in keeping their loans current, the bank increased the amount it set aside to cover souring loans to $15 million, from $1 million last year. That came despite a 38 percent drop in loans considered past due and in danger of default.
First Horizon, based in Memphis, Tenn., is the parent company of First Tennessee Bank. It also operates FTN Financial, a capital markets group.
Shares fell 46 cents, or 5.4 percent, to close at $8.09. Its shares have traded between $5.38 and $10.99 in the past 52 weeks.