First Horizon shares jump on outlook

Shares jumped $1.75, or 24.1 percent, to $9 in morning trading. Shares, which are down 60 percent for the year, tumbled nearly 36 percent on Monday after the government's proposed $700 billion financial bailout plan was defeated in the House.

"The banking landscape has changed dramatically in recent weeks, but our capital position remains strong, our liquidity profile is improving and our core businesses, including First Tennessee and FTN Financial, remain solid," said Chief Executive Bryan Jordan in a statement.

The bank reiterated certain expectations expressed earlier this month. Namely, First Horizon expects its tier-1 capital ratio of 10.5 percent to improve by the end of 2008. A company's capital ratio is essentially a measure of its cash versus debt.

Full-year net charge-offs, or loans written off as unpaid, are expected to be toward the upper end of the company's forecast of between $485 million and $585 million.

Additionally, First Horizon expects its balance sheet to shrink by more than $2 billion by the end of the third quarter, and by $4 billion by the end of the year, due in part to the sale of its national mortgage platform.

SunTrust Robinson Humphrey analyst Mac Hodgson on Tuesday upgraded First Horizon's shares to "Buy," noting that the bank has sufficient capital to cushion any future losses.

"Management has made significant strides in exiting the bank's national businesses and refocusing the company on its core Tennessee footprint," Hodgson wrote in a note to clients. "The bank has enough capital to support its balance sheet through this credit cycle. Further, we think First Horizon has an attractive regional banking franchise that would be appealing to potential acquirers looking to enter the state."

The Memphis, Tenn., bank plans to release third-quarter results prior to the market's open on Oct. 17.