First Horizon's Loss Narrows

First Horizon Friday reported a narrower than expected loss for its first quarter.
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MEMPHIS, Tenn. (

TheStreet

) --

First Horizon National

(FHN) - Get Report

Friday reported a first-quarter net loss to common shareholders of $9.9 million or 12 cents a share, narrower than the average estimate of analysts polled by

Thomson Reuters

for a loss of 16 cents a share in the period.

The performance was better than losses of $70.6 million, or 32 cents a share, in the previous quarter, and $82.8 million, or 37 cents a share, in the first quarter of 2009, as the company was able to reduce its quarterly provision for loan loss reserves.

The company is reporting net income attributed to common shareholders because it still owes the government $867 million in bailout money received via the Troubled Assets Relief Program, and paid preferred stock dividends and amortization on government-held preferred shares of $14.9 million during the first quarter.

Elevated provisions for loan loss reserves have been the main factor in the company's loss over the past year, but First Horizon was able to reduce its quarterly provision to $105 million, from $135 million the previous quarter and $300 million a year earlier.

While net charge-offs (actual loan losses) of $182 million for the first quarter exceeded the loan loss provision, the company's loan loss reserves covered 4.83% of its loan portfolio, "keeping ahead of the pace" of loan losses, since the annualized ratio of net charge-offs to average loans for the first quarter was 4.13%. The charge-off ratio increased slightly from 4.00% the previous quarter and 3.97% a year earlier. While an industry aggregate for the first quarter will not be available for several weeks, the national aggregate charge-off ratio was 2.89% according to the Federal Deposit Insurance Corporation.

First Horizon emphasized that nonperforming loans had declined for the fourth straight quarter as the company continued winding down its construction loan portfolio.

Total assets continued to decline, to $25.9 billion from $31.2 billion a year earlier, as the company continued winding-down its national retail and wholesale mortgage businesses, along with other "non-strategic" assets.

First Horizon's net interest margin -- the difference between the average yield on loans and investments and the average cost of funds -- was 3.19%, the same as the previous quarter but up from 2.89% a year earlier.

First Horizon's shares have returned 16% year-to-date through Thursday's close at $15.32.

CEO Bryan Jordan said the company was moving toward "sustained profitability," as the company's aggressive approach in reserving earlier in the credit crisis was paying off with declining credit costs.

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Written by Philip van Doorn in Jupiter Fla.

Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.