First Horizon National Earnings Call Insights: HUD Update and Capital Markets
First Horizon National Corp (NYSE:FHN) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Steve Alexopoulos – JP Morgan: Bryan, I’d like to start. Regarding the commentary in the 10-Q for potential update on HUD this quarter, is there anything you could share with us? I did see in the slides that you said that you met with them during the quarter and any initial thoughts on potential for settlement here?
D. Bryan Jordan – Chairman, President and CEO: There is enough data in one of the slides on mortgage repurchase. You will remember that’s a matter that’s been out there for about a year. I think (indiscernible) investigation or file request was about a year or so ago. As you noted, we mentioned on that slide that we have had we (weren’t) meeting at this point. We have exchanged some information that they provided us to review they looked at a small sample. It will take us a while to evaluate that. As we noted on that slide, we don’t have the ability at this point to estimate any range of losses or provide any estimates around reserves. My guess is at this point given the time that it is taking to get to this point in their investigation what we need to do in terms of evaluating the loan files and so on and so forth, it is going to take quite a while before we have any real information that is helpful in providing the estimates around potential impact.
Steve Alexopoulos – JP Morgan: And I just had one other question on the buy back. Why was it so light this quarter at 8 million and then why step it up to 40 million and then accelerated in 3Q are you just making up for being a bit light in 2Q or is this a new run rate given the updated capital rules?
D. Bryan Jordan – Chairman, President and CEO: If you look at – it is an accounting thing more than anything. We bought back in the open markets 8 million shares, the shares and the capital came out the prepaid repurchase. They actually saw the capital come out, but not to shares. It started in the middle of the quarter and it is running across quarter end. So, it will take some time to complete it but that’s sort of a continuation. So, the actual buying under the $40 million program will occur throughout the latter half of the second quarter, end of the third quarter. So, it’s just a timing thing in terms of the way we account for it, but the capital has already been reduced.
Steve Alexopoulos – JP Morgan: So, we think of $40 million as a good quarterly run rate to buybacks?
D. Bryan Jordan – Chairman, President and CEO: Well, if you look back on the last couple of quarters, that’s where we’ve been. But as we look forward, we’ll do as we always have. We’ll look for opportunities to invest capital in organic growth. We’ll continue to evaluate transactions like Mountain National and things that are going on the economy and otherwise, and we’ll evaluate the opportunity to put capital back. As in the past to the extent, we have excess capital we’ll be using the dividend and the buyback is a way to return that to shareholder.
Nicholas Karzon – Credit Suisse: I guess first on the capital markets business, just a couple questions. I think that capital market expenses were down around $2 million quarter-over-quarter and trading revenues were down about $10 million. If we stay in this rate environment, are there additional costs that can come out of that business?
William C. Losch III – EVP and CFO: It is BJ. That business out there is very efficient from a fixed cost versus variable. I’d probably tell you that two-thirds or more variable versus fixed. So, it does actually look good proportion if you will the revenues versus the expense decline. We did mention that there were some legal and professional fee costs that offset the decline in the variable comp. But you should generally see something like 40% to 50% variable to the fluctuation in the revenue.
Nicholas Karzon – Credit Suisse: Then within the mortgage company balances. Can you give us an idea of the mix between refi and purchase in that portfolio and how that changed quarter-over-quarter?
William C. Losch III – EVP and CFO: Yeah I think we’ve had been running in the 70%, 75% refi range. I think we are still positive, but it’s come down, it’s more in the 60/40 range refi. I think if we go out we think that it’ll start to continually shift more toward purchase volume than refi. I can’t sit here today and tell you when that’s actually going to cross over, but we certainly have started to see that mix shift.