First Horizon's Resilient Capital Position and Strategic Growth Levers in a Volatile Economic Climate

In an era marked by unpredictable interest rate cycles, inflationary pressures, and regional economic disparities, regional banks face a dual challenge: maintaining capital resilience while pursuing disciplined growth. First Horizon National Corporation (FHN) stands out as a rare combination of both, offering investors a compelling case for long-term value creation. With a fortress-like capital position, a diversified business model, and a strategic focus on risk-adjusted returns, First Horizon exemplifies how regional banks can thrive even in turbulent environments.

Capital Resilience: A Fortress Built to Weather Storms
First Horizon's recent 2025 stress test results underscore its exceptional ability to withstand severe economic downturns. Under the Federal Reserve's Severely Adverse Scenario—a stress scenario characterized by GDP contractions, unemployment spikes, and deep market turmoil—the bank's projected Common Equity Tier 1 (CET1) Capital ratio of 9.7% far exceeds the 4.5% regulatory minimum. This buffer translates to $4 billion in pre-tax loss absorption capacity, ensuring the bank can absorb shocks without jeopardizing solvency or dividend stability.

The bank's Tier 1 Risk-based Capital ratio of 10.7% (well above the 6.0% threshold) and Total Risk-based Capital ratio of 12.8% (surpassing the 8.0% requirement) further reinforce its robustness. Notably, First Horizon's Tier 1 Leverage ratio of 9.5% is nearly double the 4.0% floor, a testament to its conservative balance sheet management.

Even more impressive is First Horizon's loan portfolio stress loss rate of 2.3%, significantly below the 6.1% median of its peers. This suggests superior credit quality and risk management, particularly in its Southeast-focused commercial and industrial lending platforms. Meanwhile, its pre-provision net revenue (PPNR) of 4.7% of total assets—triple the peer median—highlights a business model that generates strong organic cash flow, even under pressure.

Strategic Growth: Diversification as a Catalyst for Stability
First Horizon's growth strategy is rooted in geographic and product diversification. Operating across 12 southeastern states—including economic powerhouses like Texas and Tennessee—the bank capitalizes on the region's resilience in tech, manufacturing, and logistics. This footprint reduces exposure to national downturns while enabling localized, relationship-based banking.

The bank's $63.3 billion loan portfolio (as of Q2 2025) is anchored by specialty commercial lending platforms, which offer secured, low-risk products tailored to niche markets. These platforms, combined with mortgage banking and commercial real estate expertise, create a diversified revenue stream that buffers against sector-specific volatility. For instance, while commercial real estate balances dipped slightly in 2025, growth in C&I lending and mortgage origination offset these declines, ensuring steady asset growth.

Risk Management: The Unsung Hero of Long-Term Value
First Horizon's disciplined risk management practices are a cornerstone of its strategy. With net charge-offs at 0.22% of loans and non-performing loans at 0.94%, the bank maintains one of the cleanest credit profiles in regional banking. Its $30 million provision for credit losses in Q2 2025—down from the previous quarter—reflects confidence in its underwriting standards without complacency.

The bank's liquidity and interest rate risk management further solidify its stability. A modestly asset-sensitive profile, with 56% of loans in variable-rate instruments, positions First Horizon to benefit from rising rates while avoiding excessive duration risk. Additionally, 66% of deposits are insured or collateralized, reducing reliance on volatile wholesale funding.

Investment Implications: A High-Conviction Play in Regional Banking
For investors seeking stability and long-term value, First Horizon offers a rare trifecta:
1. Capital resilience: A CET1 ratio of 11.0% (Q2 2025) and a $360 million share repurchase program signal confidence in its capital base.
2. Growth leverage: An intermediate-term target of 15% return on tangible common equity (ROTCE) is underpinned by geographic expansion and specialty lending.
3. Dividend security: Maintaining a $0.15 quarterly dividend through a nine-quarter stress scenario demonstrates fiscal discipline.

While the regional banking sector faces headwinds from rising interest rates and regulatory scrutiny, First Horizon's strategic focus on capital preservation, diversification, and risk management positions it as a standout. Its $82.1 billion asset base and disciplined expense growth (projected flat to 2% in 2025) suggest a path to consistent returns without sacrificing stability.

Conclusion
In a world where economic uncertainty is the norm, First Horizon's combination of fortress capital, diversified growth levers, and prudent risk management makes it a high-conviction investment. For those seeking exposure to the regional banking sector without the volatility of megabanks or smaller, high-risk peers, FHN represents a compelling opportunity to build long-term wealth through stability and strategic resilience.