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VOL. 126 | NO. 14 | Friday, January 21, 2011

First Horizon Swings to Q4 Loss Related to TARP Repayment

By Andy Meek

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First Tennessee Bank’s parent company swung to a loss in the fourth quarter, a reversal the company attributed to its exit from the federal government’s emergency bank industry rescue program established in 2008.

Memphis-based First Horizon National Corp. reported a loss of $48.7 million, which included a negative hit of $63 million in costs related to its repayment of Troubled

Asset Relief Program funds in December. The Q4 loss equated to 20 cents a share, compared with a prior-year loss of $70.6 million, or 30 cents a share.

Analysts had expected the parent company of the largest bank based in Tennessee to report a loss of about 3 cents per share for the quarter.

Repayment of First Horizon’s nearly $867 million in TARP funds came after a capital raise completed at the end of 2010. That and a return to profitability were two important milestones the company aimed for – and then achieved – in 2010.

The Q4 results, however, mark a reversal for the banking company that returned to profitability in Q2 2010 after posting more than two years’ worth of quarterly red ink.

Amid a continuing repositioning and shift in focus for the company, accompanying the quarterly results released Friday were charts of significant items for the quarter, which included $3.1 million associated with approved branch closures and $2.3 million in severance costs.

Nevertheless, the company put the quarter’s results in a positive light, saying they set up First Horizon for a strong 2011.

“We are excited about our progress in 2010,” said First Horizon CEO Bryan Jordan. “We reached a number of milestones, and we see momentum building as we enter 2011. We returned to profitability. We retired TARP while keeping our capital position strong. We significantly improved credit quality. We invested in technology that will improve the experience of our customers and employees as well as improve productivity and efficiency.”

Jordan said the priorities for 2011 include “developing and deepening” relationships with customers, improving credit quality and staying “nimble and fast.” He also noted the company’s efficiency ratio that it’s working intensely to improve.

Chief financial officer B.J. Losch told The Daily News recently the company still spends too much money for each dollar it takes in and that a significant amount of costs need to come out of the organization for the company to reach its goals.

First Horizon’s expense ratio of 88.7 percent in Q4 reflects noninterest expense divided by total revenue.

Among First Horizon’s other highlights of the quarter, pre-tax income for the company’s core segments of regional banking, capital markets and corporate was $89 million, and quarterly consolidated pre-tax income was $13 million.

Full-year pre-tax income for the core segments was $257 million, up 76 percent from 2009’s pre-tax income for those segments of $146 million. Annual consolidated pre-tax income was $49 million for 2010.

The company’s regional banking efforts saw average core deposits up 15 percent in 2010 compared to 2009. Loans were down 1 percent year over year, but new consumer loan production was up 5 percent.

In an analyst note sent out Jan. 3, Memphis-based Wunderlich Securities Inc. included First Horizon on a bank industry list of “our top picks heading into 2011.”

And First Tennessee Bank commands more than 30 percent of the customer deposit share in the Memphis area, according to the latest numbers from the Federal Deposit Insurance Corp.

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