The Memphis-based parent company of First Tennessee reported Friday that its losses are getting smaller, lifting its shares to their biggest gains in three months.
First Horizon National Corp. reported a net loss of $55.7 million, or 27 cents per share, for the fourth quarter that ended Dec. 31. That's less than the $125 million it had lost in the third quarter.
It was a rare positive signal from the banking company, which for most of last year struggled with credit problems, including losses from bad real estate loans. The narrower loss beat analysts' expectations and bucked huge losses reported by larger banks such as Citibank and Bank of America that surprised investors.
The average analyst polled by research firm Thomson Reuters had expected worse for First Horizon — a 32-cent per share loss for the recent quarter.
First Horizon's stock price rose 18 percent, or $1.36 per share, to $8.82 at the end of the trading day on the New York Stock Exchange. That was Friday's biggest gain on the S&P 500.
Despite the rebound, it was the third consecutive quarter of losses for First Horizon, which promised investors it was working hard to write down bad debt on commercial and real estate loans as the economy continues to sour.
"We were heartened,'' said Jefferson Harralson, an analyst who follows First Horizon at Keefe, Bruyette & Woods in Atlanta. "They have been very aggressive in dealing with problem credits."
First Horizon chief executive Bryan Jordan said the company's decisions last year to raise capital in a private sale, sell assets and exit the lending business outside of Tennessee "put us in a stronger position by the end of one of the worst years the financial services industry has faced."
He also said the banking company has written $900 million in new loans, mostly to businesses, in part with help from the federal government, which bought $866.5 million in First Horizon stock in the Treasury Department's banking rescue plan.
Tony Thompson, the Middle Tennessee regional president for the bank, said the local lending portfolio is up about 8 percent from the year before, despite an overall drop in the banking company's lending as it exits markets outside of the state.
Past-due loans riseProblem signs include an increase in past due loans as the bank's commercial loan portfolio deteriorates.
The recession has been rippling out to broad sectors of the economy, making loans sour outside of the residential real estate industry.
Jordan said he expected the economy and the loan portfolio to improve in the second half of the year, although he declined to say when he thought First Horizon would be profitable again.
"I can't pinpoint when that will be, but I think when the economy turns, we'll be the first beneficiaries," he said.
Analysts expect on average that First Horizon will lose a moderate amount of money in the first and second quarters compared to last year, with a slight recovery in the second half of 2009.
Other banks also are expected to face bad quarters ahead. Regions Financial Corp., which reports fourth quarter results next week, is expected to lose money in the fourth quarter and the first quarter of next year, according to analyst estimates at Thomson Financial.
SunTrust Banks is expected to make 19 cents per share in the fourth quarter and 16 cents in the first quarter, with bigger profits later in the year.
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