The parent company of First Tennessee Bank and Regions Financial Corp. both said Friday they would sell the maximum amount of stock they can to the U.S. Treasury under the government's plan to inject $250 billion into the banking system.
Birmingham, Ala.-based Regions, the Nashville area's largest bank, said it has preliminary approval to sell $3.5 billion worth of preferred stock.
Memphis-based First Horizon National Corp., the parent company of First Tennessee, said it has preliminary approval to sell $866 million worth of preferred stock to the government.
"It's a very attractive program,'' said First Horizon's CEO, Bryan Jordan. "It will allow us to grow our banking business and continue to support our commitment to customers in Tennessee."
The Treasury wants to avoid further economic misery by providing more capital for the U.S. financial system, which has been hobbled by risky bets placed on mortgages and declining real estate values in much of the country.
First Horizon's profits have been hurt by mortgage and residential real estate development loans outside the state of Tennessee that now are going bad. It reported a $118 million loss during the third quarter and has outsourced, sold or closed much of its mortgage business.
But the bank is continuing to expand retail bank branches in Tennessee. Jordan said the bank would use the federal money to increase loans to consumers and other businesses.
Dowd Ritter, Regions' chairman, president and chief executive officer, said in a statement the capital would "enable us to expand lending and step up acquisitions."
Regions will pay the government a 5 percent dividend, or $175 million annually, for each of the first five years of the investment, and 9 percent thereafter unless Regions redeems the shares, the company said.
The government will also receive warrants for common stock, giving it the opportunity to benefit from an increase in the common stock price in the future.
Analysts expect the top 50 banking companies in the country to benefit from the stock sales, rather than any smaller, community banks. Bank of America already has agreed to sell $25 billion worth of stock to the government, among other top banks that have participated such as J.P. Morgan and Citigroup.
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