First Horizon National ( FHN - Get Report) 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 - Get Report) and clarification of plans by Citigroup ( C - Get Report) 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.

First Horizon CEO Bryan Jordan said in a statement that the company was leveraging the new capital "to facilitate our consumer, small business and commercial customers," and that the company originated $900 million in new loans during the fourth quarter.

Despite the ongoing net losses and increasing problem loans, the company's overall capital position was greatly strengthened by the TARP money and the continued reduction of its balance sheet. First Horizon's leverage ratio was 12.12% as of Dec. 31, up from 8.84% in September and 6.64% in December 2007.

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.