Banking Blues

A lament for cash dividends, stability, and elegant lobbies.



Bank on it. Take it to the bank. As safe as money in the bank. Keep your valuables in a safety deposit box at the bank.

That's how we used to talk about banks in the good old days when downtown Memphis was home to the Big Three. Their signs dominated the skyline — Union Planters, First Tennessee, National Bank of Commerce. The names have changed — Regions Financial, First Horizon, SunTrust — and the word "bank" no longer connotes steady growth, safety, and stability. If a bank is in the news these days, it's probably because of loan losses, sinking share price, cutbacks, or all three. Owning stock in a bank has been a speedway to financial ruin.

On Monday, First Horizon, the parent company of First Tennessee Bank, last of the Memphis-based Big Three, announced its second-quarter financial results. It lost $19 million, which the company said was "in line with expectations." Stockholders have been hammering First Horizon for over a year, driving the price down 87 percent to $5 and change. Competitors aren't doing much better. Regions is down 79 percent from a year ago, and SunTrust is down 68 percent.

Want to see what a dying institution looks like in a "mental recession," in John McCain adviser Phil Gramm's memorable phrase? Wander through the lobby of First Tennessee or SunTrust some afternoon after the stock market closes at 3 p.m. and the blood-letting mercifully ends for another day. For some reason, the banks stay open late — First Tennessee doesn't close until 6 p.m. on weekdays — and you won't find a quieter space this side of a church sanctuary.

The lobbies are relics of another era, with their high ceilings, marble columns, carpeted floors, leather chairs, and art collections. The annex of One Commerce Square, which SunTrust plans to vacate next January, is as elegant an office space as there is in Memphis. Across the street, First Tennessee's Heritage Collection of Tennessee art is a local treasure. Unfortunately, it's probably worth more than the loan portfolio in some of the 40 states where First Horizon does business.

Maybe some day these bank lobbies will be preserved as tourist attractions, like Sun Studio, Stax, and the Cotton Museum on Front Street. Former employees could sign up as tour guides at the Memphis Bank Museum and show schoolchildren and visitors the way things used to be in Old Memphis:

"Look over here, kids. This row of windows, these were called teller stations. People walked up and made deposits and withdrawals from an actual person instead of an ATM. And the people behind the partitions and the big desks and leather chairs over there were called loan officers. Loans and mortgages were actually repaid on time. And the bank paid interest of 5, 6, or even 7 percent on deposits, and for many years shareholders got cash dividends four times a year, which was sort of like an allowance without the chores."

I wish I could say I saw this coming, but I didn't. The 300 shares of FHN I've owned for 20 years, once pegged to pay a year's college tuition and room and board, will now buy a nice refrigerator if I sell them this week. I have a feeling the bank officers and insiders don't know what hit them either.

In January 2007, the bank announced the "retirement" of CEO Ken Glass, and the stock promptly went up from $40 to $44, fueling speculation of a takeover. What a fantasy. Just over a year later, the stock sank to $10, and directors announced that dividends would be paid in stock instead of cash after July 1st.

After I wrote that those dividends might be as worthless as Confederate scrip, I got a polite note from the media department protesting that the wisecrack was harsh and First Horizon was a "Top 30" bank with $37 billion in assets. On Monday, after the stock fell 25 percent in one day, the bank announced another new CEO and an expected $4 billion reduction in assets in 2008. In bank-speak, this is called "balance sheet shrinkage." As of noon Tuesday, the stock had gained back that 25 percent and then some and was trading above $6. Rally!

The developing local story will be what happens to all the Memphis employees of the Big Three banks after they downsize. SunTrust is moving a remnant to a smaller space in Brinkley Plaza. Leasing agents for One Commerce Square hope to replace SunTrust with Pinnacle Airlines, which has its own troubles. Maybe they can hang one of Pinnacle's regional jets from the lobby ceiling, like they do at the Smithsonian.

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