January 21, 2011 / 12:33 PM / 7 years ago

UPDATE 2-Bailout repayment pushes First Horizon back into loss

* Q4 loss $0.20/shr vs loss $0.30/shr

* Q4 includes $63 mln cost from TARP exit

* Sees M&A activity in 2011 (Adds conference call details, analyst comments)

By Rachel Chitra

BANGALORE, Jan 21 (Reuters) - First Horizon National Corp (FHN.N) swung back to loss after two quarters of profit, as the bank repaid U.S. government's bailout funds.

The Memphis, Tennessee-based regional lender said it plans to redeploy capital on possible acquisitions in 2011.

"They still have not got clarity on dividend payout for 2011 from the regulators. So they are currently looking at expansion in the Tennessee market," Howe Barnes Hoefer & Arnett analyst William Wallace said.

Listing possible targets in Tennessee, North Carolina and Georgia, Wallace said Nashville, Tennessee-based Pinnacle Financial Partners (PNFP.O) could be the most meaningful acquisition from an earnings perspective.

First Horizon posted fourth-quarter net loss available to common shareholders of $48.7 million, or 20 cents a share, compared with a loss of $70.6 million, or 30 cents a share, a year ago. [ID:nASA01EVG]

The quarterly results included a negative impact of $63 million related to exiting the Troubled Asset Relief Program.

"We expect a slow economic recovery and low interest rates likely to persist in 2011, so we are looking at controlling costs and making investments more efficient," First Horizon Chief Executive Bryan Jordan said on a call with analysts.

The company expects expenses to be lower in 2011 and sees a continued decline in its credit costs. For October-December, non-interest expenses fell 14 percent to $334.8 million.

Non-interest income fell 21 percent to $195.2 million, pushing total revenue down 10 percent to $393.1 million despite higher gains made on securities this year.

"Revenue is under pressure. We see their loan balances declining in 2011, including residential loans and commercial real estate (CRE) loans. The only exception would be commercial and industrial loans (C&I) which could see growth in 2011," analyst Wallace said.

Shares of the company were trading at $11.99 on Friday afternoon on the New York Stock Exchange. Their value has gained 27 percent since December when it repaid $866.5 million to retire Treasury preferred shares. (Reporting by Sweta Singh & Rachel Chitra in Bangalore; Editing by Don Sebastian) ((sweta.singh@thomsonreuters.com ; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: sweta.singh.reuters.com@reuters.net))

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