What happened

First Horizon (FHN 0.23%) saw its stock price rise 13.7% this week, as of Friday's opening bell, according to S&P Global Market Intelligence. The stock had been up as much as 14.7% during the week. The stock remains down about 55% year to date as of Friday morning's open, trading at $11 per share.

The markets were up this week, as the S&P 500 gained 1.8%, the Dow Jones Industrial Average rose 0.7%, and the Nasdaq Composite surged 3.3% as of Friday at 9:30 a.m. ET.

So what

It has been a tough year so far for First Horizon, the holding company for Memphis-based First Horizon Bank. While it had decent first-quarter results, with year-over-year gains in revenue and earnings, it faced a double whammy of bad news in recent weeks. First the banking crisis hurt the bank, as it did most small and regional bank stocks, even though its deposits held up relatively well. Then, earlier this month, it was announced by both banks that the planned acquisition of First Horizon by TD Bank was off -- by mutual consent.

This news sent First Horizon over the cliff, as the stock dropped more than 40% following the announcement.

The market initially reacted negatively to the acquisition being called off as it had been in the works for quite some time and perhaps signaled bigger problems or concerns, it was assumed, with First Horizon. However, no reason was given, other than to say there was a lack of clarity on when regulatory approvals would be made. So, what changed?

Last week, The Wall Street Journal and Bloomberg reported that the issue that held up the merger may have been more related to TD Bank than First Horizon.

Now what

As was reported late last week, one of the reasons the deal fell apart was related to concerns by federal regulators over how TD Bank handles suspicious transactions, or its anti-money laundering controls. A spokesperson from the Office of the Comptroller of the Currency reportedly did not comment when asked about the reason.

A TD Bank spokesperson said the bank "works diligently to prevent criminals from using the bank for illegal activity, to strengthen its risk management programs on an ongoing basis, and to protect the interests of our customers, the bank, and the financial system," reported the Financial Post.

Whether this was the cause for the regulatory delay and ultimately scuttled the deal is not clear. But it appears the market reacted favorably toward First Horizon for not making the deal, perhaps in light of this information than it had initially.

It will be interesting to see where First Horizon goes from here and if it pursues other acquisition partners. The stock is cheap, but there are enough challenges for regional banks in this market to warrant investors sitting on the sidelines for now.