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Dear Mr. Berko:

Dear T.R.:

Don’t for a nanosecond think that you are the only living human to consider that idea. However, it’s apparent that most folks don’t think your idea is worth a plugged peso.

First Horizon National Corp. (formerly Tennessee National Bank) began taking deposits and making loans 40 years ago in Memphis, Tenn. First Horizon (FHN-$18.15) does almost everything that Wachovia or Bank of America does but on a greatly smaller scale.

FHN has more than 800 business locations in 44 states. Last year, retail and commercial banking contributed about 60 percent of revenues; mortgage banking put 22 percent of revenues on the books and capital markets were responsible for the remaining 18 percent. And this bank is one of the 80 or so public companies that have increased dividends for at least 26 consecutive years. Impressive that! Right?

Now I think you gotta be dumb as coal to empty your IRA and buy 4,300 shares of FHN. One mustn’t gamble with one’s IRA money; didn’t your momma ever tell you that? And although I believe there’s a 50 percent degree of probability that FHN “may not” cut its dividend, and I believe that FHN “may” move up to the $25-$28 level by 2009 (note the emphasis on “may”), I’m adamantly reluctant to make FHN the sole occupant of my IRA.

However, I would not object to a 500-share purchase as a “sit and wait” speculation. The shares are down 29 points from their 12-month-high of $47, 2007 earnings fell like a rock from a high alp; retail and commercial borrowing has shriveled like a prune, and the company’s mortgage business is moribund. I can’t locate a single brokerage that favors FHN, and I can count on the legs of a spider the number of sane folks who want to buy the stock. But the old axiom “when there’s blood in the gutters and no one wants to own the stock, that’s the time to buy” can’t be ignored. I suspect the current price anticipates a dividend cut.

Now the prestigious research department of Merrill rates FHN as a sell. Well, hallelujah! A real but rare sell! That takes courage, but where was that sell rating when FHN was $30? Perhaps Merrill doesn’t anticipate any investment banking business with FHN.

Standard & Poor’s thinks First Horizon will tumble to the $15-$16 level, and Value Line believes that FHN’s abnormally high price-earnings ratio reflects the possibility of a takeover play. I’ve checked eight other brokerages and perused four private research reports, and there isn’t a “buy” recommendation on the stock.

But I’m impressed with the changes new management has made in the past few months. Some 40 branches in Dallas, Atlanta and Baltimore are in the process of being sold, representing more than $500 million in loans. FHN is reducing its construction- and consumer-lending portfolio by $2.1 billion. It’s reducing the size of its mortgage sales force to increase productivity. Operating expenses were reduced by $53 million last year, and management expects to reduce costs by another $130 million this year. Then management sold a good portion of its weak loan portfolio in August, before the real garbage hit the fan.

All in all, it seems that this new team is mending its fences, polishing floors, cleaning closets, painting the trim and putting a shine on its sign. So perhaps management wants to look good for a potential suitor. If so, a dowry of maybe five points above its current price “may” be sufficient to encourage FHN to say “yes” to a white knight.

But hold your horses and your water — just buy 500 shares. You don’t want all your eggs in one basket, because they could still get scrambled.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service