First Horizon's 2025 Capital Stress Test Results Highlight Resilience
First Horizon Corporation's 2025 Stress Test Overview
First Horizon Corporation (NYSE: FHN) has successfully completed its 2025 company-run capital stress test, revealing robust results that demonstrate the institution's resilience during severe economic downturns. The stress test, designed to evaluate a bank’s capacity to withstand hypothetical economic challenges, indicates that First Horizon would maintain capital ratios significantly above the required minimum thresholds.
Detailed Stress Test Results
The stress test findings show that First Horizon's risk management strategies and diversified business model allow for maintaining strong capital ratios even in challenging scenarios. The company's Common Equity Tier 1 (CET1) Capital ratio stands at an impressive 9.7%, surpassing the regulatory minimum of 4.5%. This positions the company with around $4 billion in pre-tax loss absorption capacity, underscoring its commitment to maintaining financial strength while supporting clients through various economic landscapes.
Capital Ratio Performance
In the context of the Federal Reserve's Severely Adverse Scenario, First Horizon showcased its competitive advantage with a Common Equity Tier 1 Capital ratio of 11.2% in the fourth quarter of the previous year, with projected stressed ratios also remaining strong. The table below demonstrates First Horizon's actual and projected stressed capital ratios:
Projected Stressed Capital Ratios
Common Equity Tier 1 Capital Ratio: 9.7% (Minimum Required: 4.5%)
Tier 1 Risk-based Capital Ratio: 10.7% (Minimum Required: 6.0%)
Total Risk-based Capital Ratio: 12.8% (Minimum Required: 8.0%)
Tier 1 Leverage Ratio: 9.5% (Minimum Required: 4.0%)
Risk Management Insights
First Horizon's performance metrics display a loan portfolio stressed loss rate of just 2.3%, which is well below the industry median of 6.1%. This exemplary rate is attributed to its strategic portfolio mix, which features lower-risk loans and limits exposure to higher-loss categories like credit cards. Furthermore, the company achieved a pre-provision net revenue ratio of 4.7% compared to a peer median of 2.3%, highlighting its efficient operational management.
Commitment to Shareholders
The outlook for First Horizon remains optimistic, with a commitment to maintaining a quarterly common stock dividend of $0.15 through the stressful nine-quarter scenario horizon. This stability not only reflects the bank's sound financial health but also reinforces its dedication to delivering value to shareholders.
About First Horizon Corporation
First Horizon Corporation, a recognized leader in regional financial services, operates with $82.1 billion in assets as of the mid-year mark. The company is devoted to empowering clients and communities through exceptional capital solutions. Headquartered in Memphis, TN, First Horizon serves a broad spectrum of clients with a diverse range of financial services that include commercial banking, wealth and trust management, retail brokerage, and mortgage banking, among others. Recognized for its workplace quality by Fortune and Forbes magazines, First Horizon remains a top choice for banking services across its operating regions.
Frequently Asked Questions
What is the main outcome of First Horizon's 2025 stress test?
The stress test results indicate that First Horizon would maintain capital ratios well above the required minimums during severe economic downturns.
How does First Horizon's capital ratio compare to regulatory requirements?
First Horizon's Common Equity Tier 1 Capital ratio of 9.7% is significantly above the regulatory minimum of 4.5%.
What factors contribute to First Horizon's low loan loss rate?
The company's loan portfolio mix, featuring lower-risk loans and minimal exposure to high-loss sectors, supports its low stress loss rate of 2.3%.
What is First Horizon's dividend policy amidst the stress test?
First Horizon plans to maintain a quarterly common stock dividend of $0.15 throughout the nine-quarter scenario of the stress test.
Where is First Horizon headquartered?
First Horizon is headquartered in Memphis, TN, and serves clients across 12 states in the southern U.S.
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