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Mortgage market victim First Horizon National (NYSE:FHN) raised loan reserves by $100 million recently, on top of a previous $50M writedown last year. That's considered conservative for its problematic $4 billion mortgage portfolio; analysts are now predicting a $0.21/share loss in 2007 from a previously predicted $0.86/share gain. Shares fell from $45 in 2007 to $17.25 currently, which has Barron's thinking they may have put in a bottom.

President Jerry Baker has decided to pull out of problem states like Florida and focus on home-state Tennessee's rising prosperity through community-level banking. FHN plans to raise its 23% market share of in-state banking to 30% this year. It closed 40 mortgage offices nationwide, fired 50% its mortgage staff (800) and cut $40M of expenses out of a $175M goal for Q1 cuts.

With $37B in assets and a strong franchise, FHN is valued below its book price at 13 times 2008's earnings forecast. Analysts' 2008 earnings estimates are down to $1.32/share from $1.71 previously, and if things get worse, the company's 10% dividend yield could suffer. FHN denies a dividend cut, but Barron's says that if it does cut back, it will serve to make First Horizon a better buyout candidate. Senior insider buying is also rising. Shares could eventually bounce back between $26-$38, if investors are patient.

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Source: First Horizon National is Headed Up - Barron's