Shares in Chattanooga's biggest banks fell Friday after their second quarter results and future forecasts disappointed investors.
The stock of First Horizon Corp., the parent company of First Tennessee Bank, fell nearly 5.4 percent, or 46 cents per share, on Friday when the company reported a second quarter loss of $124.8 million, or 50 cents per share.
SunTrust Bank, the nation's eighth-biggest bank, reported a 55 percent jump in second quarter profits to $270 million, or 50 cents per share. But shares of SunTrust still fell nearly 3 percent, or 72 cents per share, to $23.52 after the bank said it doesn't plan to boost its dividend this year.
SunTrust Chief Executive William Rogers said withholding the dividend increase that some analysts had expected "is the best course of action for the short-term.
"But it's not indicative of our long-term plans to return capital prudently to shareholders," Rogers said on a conference call following the release of second-quarter earnings.
SunTrust said it collected more interest on loans, wrote off fewer unpaid loans and wrote more new mortgages this spring.
"With a slightly improving economy, we expect to see continued loan growth, which would be additive to net interest income," SunTrust Chief Financial Officer Aleen Gillani said.
At First Horizon, Chief Financial Officer William "BJ" Losch III also said the economy is showing signs of recovery in First Tennessee's home territory in the Volunteer State.
"We're seeing good loan growth in markets like Chattanooga, but there is still a lot off cautiousness," he said.
First Horizon lost money in the second quarter because of a $272 million charge relating to the mortgage buyback demand from Fannie and Freddie.
The government-sponsored enterprises and their investors have been pressing U.S. banks like First Horizon to buy back soured home loans that were bundled into mortgage-backed securities, claiming the loans did not meet guarantees made by the banks when they were sold.
First Horizon expects the charge to cover its liability and avoid ongoing hits to its profits.
First Tennessee's banking operations continued to improve this spring, Losch said. Revenues at the regional bank grew 3 percent from the first to second quarter, driven by higher net interest income and fees.
In metropolitan Chattanooga, First Tennessee Bank is the biggest of 30 banks in the market with more than $1.8 billion of deposits at its 22 local offices. SunTrust Bank is No. 2 in the Chattanooga market with more than $1.5 billion in deposits at 30 local offices.