First Horizon National Corp. sustained the pace of quarterly production, but annual originations sank. The company is tightening its origination operation to prepare for further contraction -- although mortgage acquisitions aren't out of the question.
In the last quarter of 2006, first lien production amounted to $6.4 billion, edging up 1 percent from the third quarter, First Horizon reported. However, the total is down 20 percent from the same period a year prior.
Full-year volume of $27.1 billion fell $8.6 billion from the level in 2005.
Refinance originations represented 44 percent of the quarter's volume, and the share of adjustable-rate mortgages was 21 percent.
The servicing portfolio ended the year at a size of $101.4 billion.
In the three months ending Dec. 31, 2006, the sales force trimmed down by 55 employees to 2,440.
The $3.1 billion pipeline of locked loans was $0.3 billion lower than at the end of the third quarter.
Net income decreased on a quarterly and annual basis to $76.5 million, First Horizon said, noting that results continued to "reflect the negative impact of the interest rate environment and housing slow-down on the mortgage segment."
For 2007, "we, like most in the industry, believe that the yield curve will remain inverted near its current levels, the housing market and mortgage industry will continue their current contraction, and certain elements of the industry will continue to experience deterioration as the economy slows,' Chairman and Chief Executive Ken Glass said in an announcement.
To position itself for growth this year, First Horizon said it reduced support costs in the mortgage origination platform in the fourth quarter to better align the business with the anticipated lower level of activity. Potential revenue opportunities include the acquisition of mortgage originators.