First Horizon National Corp. (FHN) said Monday morning that it will sell up to $600 million in common stock, and that it will shift dividend payments to stock as the Tennessee-based lender looks to shore up its cash position. In a press statement, the bank gave no reason for the stock sale or the dividend cut, although the move comes on the heels of a 90 percent drop in quarterly profit and a 78 percent quarterly increase in non-performing assets. The moves at First Horizon underscore the financial stress now being felt even by smaller financial firms, and mark a stark reversal in expansion for a bank that built its fortunes largely on the residential mortgage market. First Horizon said that after its July dividend, it expects to pay future dividends in shares of common stock “for the foreseeable future” at a rate equivalent to $.20/share. “The Board currently intends to reinstate a cash dividend at an appropriate and prudent level once earnings and other conditions improve sufficiently,” the company said in its press statement. The bank began an aggressive national expansion around mortgages in the late 1990s, a strategy that led to strong profits during the boom years through 2005. As the housing downturn has gone on, First Horizon has been hit hard, with the banking saying in January that it would discontinue national home builder and commercial real estate lending via its First Horizon Construction Lending offices, and backing a plan to reduce its real estate exposure by $2 billion. Since then, bank executives have talked openly about potentially even exiting the mortgage business altogether, although no known suitors for the company’s operations in this area are known to be in negotiations with the lender. Shareholders clearly approved the bank’s move to bolster and preserve capital, with shares trading up nearly 7 percent at $11.46 in afternoon trading on the New York Stock Exchange. Disclosure: The author held no positions in FHN when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.