First Horizon National Corp., parent company of First Tennessee Bank, reported that profit fell in the third quarter to $25.8 million, or 10 cents a share, from $36.1 million, or 14 cents a share in the third quarter of 2011.
Revenue fell 15 percent to $337 million from $397 million a year earlier, in line with expectations.
The bank attributed the drop in earnings to a $40 million regulatory change that forced it to measure a group of healthy loans as if they were worth no more than the loan's collateral, said B.J. Losch, chief financial officer.
The charge cost shareholders about 7 cents per share in terms of earnings, which would have still missed Wall Street's expectations of 19 cents per share.
"We're just focused on controlling what we can control," Losch said. "We'll continue take expense out of the back office to make us more profitable."
Losch expects that about 80 percent of the recently charged-down loans will continue to pay out, and the company will eventually recover much of the charge, he said.
In fact, overall nonperforming assets fell 23 percent year-over-year to $450 million, Losch said.
"Our nonperforming assets are down, our charge-offs continue to come down and our portfolios continue to be of higher credit quality," he said.
Keith Sanford, market president at First Tennessee Bank in Chattatnooga, said local deposits have increased 10 percent over the year, and loans area beginning to grow as well.
"We've made new commitments on the commercial side which will be probably close to a 10 percent increase," Sanford said.
Refinancing activity has increased locally as well, he said, which benefits the bank because consumers often bundle in other debt and add it to their mortgage. That's helped bump up consumer loans about three percent, he said.
"I think we're a stable bank with good service, good capital and long-term employees who are able to bring in good business," Sanford said.