First Horizon National (NYSE:FHN) Faces Many Challenges in 2011

While First Horizon National (NYSE:FHN) has removed the yoke of the TARP payment from their neck, they face a number of challenges in 2011, including $5.9 billion in non-strategic loans pressuring its earning asset growth.

Barclays noted, "Our rating on First Horizon National reflects our concern over the potential for its $5.9 billion in "non-strategic" loans (35% of loans) to pressure its earning asset growth as well as its above average mortgage repurchase exposure. However, its strong capital levels (T1C of 11.7%) post TARP repayment should offer support for the shares in anticipation of eventual redeployment...We expect FHN to report 4Q10 EPS of $0.08 versus our prior $0.09 forecast and consensus of ($0.02)."

Barclays maintains an "Equalweight" rating on First Horizon National, which closed Tuesday at $12.11, up $0.10, or 0.83 percent. Barclays has a price target on them of $15.

Regions Financial (NYSE:RF), First Horizon (NYSE:FHN), SunTrust Banks (NYSE:STI), Zions (Nasdaq:ZION), Fifth Third Bancorp (Nasdaq:FITB) Up on M&A Activity

Investors have been drawn to regional banks, as merger-and-acquisition activity in the sector has attracted the interest of investors and pushed up the share prices of banks like Regions Financial (NYSE:RF), First Horizon (NYSE:FHN), SunTrust Banks (NYSE:STI), Zions (Nasdaq:ZION) and Fifth Third Bancorp (Nasdaq:FITB).

Recent M&A deals stirring up interest include Hancock Holding's (Nasdaq:HBHC) announcement it was going to acquire Whitney Holding (Nasdaq:WTNY) for about $1.5 billion. Whitney surged to close Wednesday at $14.00, up $3.13, or 28.79 percent.

Berkshire Hills Bancorp Inc. (Nasdaq:BHLB) said it was going to acquire Legacy Bancorp Inc. (Nasdaq:LEGC) for $110 million. Legacy soared to close Wednesday at $12.65, gaining $4.05, or 47.09 percent.

These followed on the announcement by the Bank Of Montreal (NYSE:BMO) they were going to acquire Marshall & Ilsley for $4.1 billion.

Regions Financial closed Wednesday at $6.91, up $0.46, or 7.13 percent. First Horizon closed the session at $11.75, up $0.47, or 4.17 percent. SunTrust Banks closed at $28.85, gaining $0.99, or 3.55 percent. Zions Bancorporation closed at $23.68, up $0.66, or 2.87 percent. Fifth Third Bancorp closed the day at $14.71, up $0.41, or 2.87 percent.

First Horizon's (NYSE:FHN) Earnings Power Concern in Weak Economy

First Horizon National (NYSE:FHN) has attracted more attention than usual lately on the news they're raising capital to pay back TARP, and concerns over whether or not they have strong enough earnings in an ongoing weak economy.

FBR noted, "We reiterate our rating and maintain our $11 price target following FHN's announcement of a $250M common stock offering and a $400M subordinated debt offering. Recall that FHN has approximately $866M of TARP remaining, and the company plans to repay TARP with the proceeds from the offering. FHN completed the equity offering at $10.50, which is a favorable price. We also point out that FHN is raising far less capital than expected to repay TARP. While we believe that management is taking the right steps, we remain concerned about First Horizon's earnings power given a weak macro economy and the company's legacy liabilities. Until we get more clarity on the details surrounding the debt offering, we are maintaining our FY10 GAAP EPS estimate of ($0.04) and our FY11 EPS estimate of $0.35."

FBR Capital maintains a "Market Perform" rating on First Horizon National, which closed Tuesday at $10.45, down $0.47, or 4.30 percent. Volume was over 5 times the 3-month daily average.

Huntington (Nasdaq:HBAN), First Horizon (NYSE:FHN) Shares Plunge on Discounted Offering

Shares of Huntington Bancshares Inc. (Nasdaq:HBAN) and First Horizon National Corp. (NYSE:FHN) plummeted Tuesday after their stock sales to raise capital to pay back TARP were discounted from the closing prices on Monday.

Huntington, which was attempting to raise about $1.2 billion, had their offer priced at $6.30 a share, while First Horizon, which was attempting to raise $250 million from the share sale, had them priced at $10.50, a discount of 3.8 percent.

Huntington was trying to raise $920 million in equity and the remainder through debt.

Both plans from the companies were disappointing to shareholders, who were hoping they wouldn't have to raise that much capital to repay their obligations to TARP.

First Horizon was trading at $10.62, down $0.30, or 2.75 percent, as of 1:57 PM EST. Huntington was trading at $6.40, down $0.2575, or 3.87 percent.