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VOL. 124 | NO. 139 | Friday, July 17, 2009

In ’08, TARP Thrown Over Finance Industry

By Andy Meek

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One of the storylines that emerged in late 2008 and grew to become a symbol of the financial industry’s excess and Washington’s newfound regulatory zeal is a four-letter word: TARP.

The acronym for the Troubled Asset Relief Program involved the U.S. Department of the Treasury taking equity stakes in banks around the country in the form of preferred shares. A little less than a year after he started buying those shares in banks last fall, Uncle Sam has reached deep into his purse to make the investments in almost every banking market in the country.

Through July, banks and other financial institutions in Tennessee had collectively received $1.22 billion in TARP money. Of the government’s five largest infusions of the emergency capital in Tennessee banks, the largest recipient was Memphis-based First Horizon National Corp., the parent company of First Tennessee Bank.

The next four of the state’s largest recipients of TARP dollars, in descending order, were mostly in Middle and East Tennessee. Their collective investment from the government is only about one-fourth of the amount sent to First Horizon, which reports second quarter earnings today.

The most recent Memphis-based bank to grab a share of TARP money is First Alliance Bank, according to the latest information from the Treasury. First Alliance this month sold a little more than $3.4 million in preferred stock with warrants.

The warrants give the Treasury the right to buy banks’ stock at a set price whenever it wants in the coming years.

‘Forward’ movement

The seemingly outsized investment in First Horizon seems more a reflection of its size than its need. In a prominently placed story in a recent edition of The Wall Street Journal, the financial paper gave the banking company a label its executives at 165 Madison Ave. have worked for more than a year to earn: survivor.

Executives at FHN last year started cleaning out the company’s financial garage of knickknacks and worthless junk accumulated over the years in the form of a national mortgage and banking business. FHN sold its national mortgage business, excluding its Tennessee operating, to MetLife Inc. for almost $400 million in early 2008.

FHN’s TARP infusion came in October.

Speaking for about 10 minutes at the company’s annual meeting in April, FHN president and CEO Bryan Jordan alluded to the recent challenges by reminding his audience about the front cover of the company’s annual report. On it is printed the word “Forward.”

“We chose that word because it describes our past progress and our future promise,” Jordan said. “In the face of largely unprecedented challenges for the financial services industry, First Horizon moved forward in 2008 and continues to do so this year.”

At the UBS Global Financial Services Conference in New York City in May, Jordan told analysts and other industry observers First Horizon remains particularly focused on Middle Tennessee for growth opportunities. The bank opened five branches there in 2008.

PROPERTY SALES 91 158 16,219
MORTGAGES 98 179 18,735
BUILDING PERMITS 136 349 33,738
BANKRUPTCIES 63 115 10,429