First Horizon Soars After Loss Narrows

First Horizon National (FHN Quote) shares soared more than 27% Friday after easily beating Wall Street's dim expectations for the fourth quarter.

First Horizon reported a fourth-quarter net loss of $55.7 million, or 27 cents per share, compared to a net loss of $125.1 million in the third quarter and a net loss of $248.6 million in the fourth quarter of 2007.

With results beating the Thomson Reuters analyst consensus of a net loss of 34 cents, shares jumped as much as 27.2% in early morning trading, riding along the overall bounce from the announcement of another $20 billion capital infusion for Bank of America (BAC Quote) and clarification of plans by Citigroup (C Quote) to break up the company. More recently the stock was up 17.8% to $8.79.

First Horizon's net loss narrowed in the fourth quarter because the company lowered its quarterly provision for loan losses to $280 million from $340 million. At the same time, net loan charge-offs (actual loan losses) increased to $191 million from $155 million in the third quarter.

First Horizon's Asset Quality ($ Millions) First Horizon's 4th Quarter 2008

At first glance, the company's decision to lower its quarterly provision for loan loss reserves while nonperforming loans and charge-offs continued to increase raises concern. But the company stayed ahead of the pace of charge-offs. The annualized ratio of net charge-offs to loan loss reserves for the fourth quarter was 3.61%, while the ratio of loan loss reserves to total loans was 3.99% as of Dec. 31.

First Horizon received an $867 million capital infusion through the Treasury's Troubled Assets Relief Program (TARP) during the fourth quarter. Lawmakers have been critical that banks receiving investments from TARP were not using the money to make new loans, one of its original intentions.