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When asked if the $30 billion First Horizon soon could join the ranks of Union Planters or National Commerce as an acquisition target, Glass is quick to dispel such a notion, saying the bank’s tradition of independence will carry on while he’s at the helm. If current efforts to grow the company are fruitful, not only will Glass succeed in keeping his financial institution headquartered in Memphis, but he also will have grown it into a far more valuable asset with a national presence.

Evidence of the Glass-led expansion appeared when First Horizon Bank opened commercial banking branches in Virginia a year ago. Then, in December, the company announced it would open financial centers in Texas, with the Atlanta market next on the list. Glass expects his company to open commercial operations in two or three new markets each year in a trailblazing effort that triggered a corporate re-branding in April 2004. Less than two years into his tenure as CEO, First Tennessee National Corp. changed its name to First Horizon to reflect the company’s national reach. The company’s ticker changed as well; First Horizon trades on the New York Stock Exchange as FHN. The First Tennessee brand remains in place for in-state operations.

Continuing its transformation into a sophisticated national player with diverse lines of business, First Horizon in January acquired the fixed-income business of Spear, Leeds & Kellogg, a division of Goldman Sachs & Co., in an estimated $150 million deal. The transaction added about 150 employees, bringing First Horizon’s fixed-income staff size to about 1,000 employees. The acquisition added electronic trading and corporate platforms to First Horizon’s product offerings. Also, the company has amassed a nearly 50% market share in pooled trust preferred securities that are underwritten for banks.

Much of this growth and diversification is a product of Glass’s leadership and continuation of the strategies established by those who preceded him. Glass joined First Horizon in 1974 as a corporate controller after working as an accountant at Arthur Andersen. He was “accurate to a fault,” according to Ron Terry, who served as chairman and CEO from 1973-1993. After Glass had moved up in the organization, Terry asked Glass to join the fast-changing retail group, which involved a high level of risk and decision-making. “It’s pretty hard to go from being a numbers man to being willing to take a risk,” Terry says. “But he did a magnificent job.”

Later, Glass was tapped to lead the company’s efforts to build its mortgage customer base. Today, First Horizon is among the nation’s top 20 mortgage originators and servicers, a credit to Glass’s work in that area. In the mid-’90s, Glass implemented a strategy to grow the company’s mortgage banking beyond Tennessee, making it one of the largest mortgage originators in the country. Growing that revenue stream kept the company independent, according to board members. Bill Sansom, who has served on First Horizon’s board for about 20 years, says Glass’s efforts to grow the mortgage business was a bigger gamble than his current expansion of commercial banking. “Part of the success of the bank is that he’s paid attention and knows all the parts of it,” says Sansom, chairman and CEO of Knoxville-based H.T. Hackney Co.

Glass’s expansion of the company’s mortgage banking guides the development of First Horizon’s retail banking, an approach that is unique in the banking industry. While other financial institutions expand by acquiring banks, First Horizon is building de novo branches in new markets, using its mortgage business as a litmus test. Once a single market establishes a customer base of about 30,000 people, it becomes a candidate for retail expansion. According to Glass, this strategy is less risky since less initial capital is required to enter a market when you’re not building bricks-and-mortar branches first.

This careful strategy has elicited some criticism. Company expansion in the Washington, D.C., area, places the company in a large market crowded with big league competitors—Bank of America, Wachovia, SunTrust and BB&T, for example. Arnold Danielson, chairman of a bank consulting firm near D.C., wonders, “Do they really think they can be successful?” Danielson says it’s not unusual to see a bank of First Horizon’s size come into the market and try to offer something different. “On the other hand, they’re so large, if they don’t do well, it won’t hurt them. They have been very good at going beyond their borders with products besides traditional banking,” he admits.

Another criticism of Glass’s plan is that his focus on First Horizon’s mortgage business as a guide for commercial expansion into new markets may fall flat as the refinancing trend dries up in the face of rising interest rates. Richard Tortoriello, an equity analyst at Standard & Poor’s Equity Research who has a “hold” on the stock, says while First Horizon’s expansion strategy seems to have worked, the company has high exposure to the mortgage market—a potential negative. Also, Tortoriello adds, the company’s mortgage servicing portfolio, a “hedge” to offset a decline in the mortgage business, appears to have not succeeded in recent quarters. According to Glass, the mortgage business may not grow as rapidly in the next few years as it did in 2003 and 2004, but it will grow. Glass reiterates that his strategy is attractive because it’s less risky than an acquisitive strategy.

The underlying mission for Glass is to grow the company and to continue providing double-digit returns to shareholders. Analyst Tortoriello notes First Horizon carries an “A+” earnings and dividend quality ranking as calculated by Standard & Poor’s, indicating long-term growth and consistency in earnings and dividends. “That [ranking] will allow us to remain independent,” Glass says.

In 2004, First Horizon’s return on equity was 23.9%, continuing a three-year trend of more than 20% returns each year. According to Joseph Stieven, a banking analyst and director of financial institutions research at Stifel, Nicolaus & Co., organic growth has always proven the best way to reward current stockholders, although the visible results take time to develop. Stieven, a 20-year veteran in his field, adds, “Glass is definitely taking a path much less traveled by other ‘super-regional’ banks, and I applaud him for that.”

Ranked by Golf Digest as having one of the ten best golf handicaps among CEOs, Glass says the sport provides metaphors for business: “A difficult thing on the golf course is managing your expectations because things are going to change,” he says.

One thing that doesn’t seem likely to change is First Horizon’s reputation as a good employer. Ralph Horn, who preceded Glass as company CEO, says Glass was knee-deep in working to create an “employees first” culture. “You’ve got to go beyond employee satisfaction to get employee loyalty,” Horn says. “And you’ve got to go beyond customer satisfaction to get customer loyalty. That gives you an advantage over your competition.” With almost 13,000 employees, the company frequently is recognized by outside groups as an excellent place to work. The company also has received awards for its corporate ethics, an area that is central to Glass’s leadership style. “I’ve never in my career here been asked to do anything wrong,” he says. “And no one in this organization should ever be put in such a position.”

As Glass leads First Horizon into new arenas, his roots and those of the company remain anchored in Tennessee, a foundation that has made the company’s expansion possible. First Tennessee Bank dominates the state with 17% market share and $15.6 billion in total deposits as of June 30, 2004. Also, Glass’s own power reaches beyond First Horizon into other businesses—he sits on the boards of Memphis corporate darlings FedEx and biotech company GTx. Recently, Glass was named to the Federal Advisory Council of the Federal Reserve System board of directors.

Much like First Horizon’s, Glass’s own reach is increasing. If he continues to balance risks with staying true to his vision, First Horizon’s own horizon should continue to expand.

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