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First Horizon (FHN) Closes $535M Loan Acquisition from GE


Fortifying its restaurant franchise finance business, First Horizon National Corporation FHN completed the acquisition of $535 million loans from GE Capital Franchise Finance, a subsidiary of General Electric Company GE. The acquisition is anticipated to be immediately accretive to First Horizon’s earnings per share.

First Horizon acquired the Southeast and Southwest regional loan portfolios from GE Capital’s restaurant franchise finance business, through its subsidiary First Tennessee Bank. Notably, the current amount of total loans acquired is less than $637 million, the amount earlier stated by the company in Jun, 2016. Management stated in its latest release that the reduced amount was “due to amortization and additional principal payments related to normal course of business activity.”

First Tennessee will combine the acquired loans with its existing loans to set up a restaurant franchise finance specialty lending business. The new business will have outstanding loans of around $750 million.

For GE, the move is in line with its efforts to trim down its financial wing and focus more on its core industrial business.

First Horizon has executed several strategic repositioning efforts to boost its long-term profitability. The company was severely affected due to its exposure to national mortgage and construction lending. Hence, it decided to exit these business lines and concentrate on growing its core Tennessee banking franchise. The latest transaction further complements First Horizon’s expansion strategy. Last year, the company strengthened its North Carolina footprint with the acquisition of Raleigh, NC-based TrustAtlantic Financial Corp.

However, the company continues to face several issues which remain near-term concerns. These include margin pressure amid the slow rise in interest rates, high legal expenses and stringent regulatory landscape.

Currently, the company carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the finance space include Hancock Holding Co. HBHC and LPL Financial Holdings Inc. LPLA, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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