First Horizon Announces Results of its 2026 Company-Run Stress Test

First Horizon passes its 2026 stress test with capital ratios well above regulatory minimums.

What the company is saying

First Horizon Corporation is presenting its 2026 company-run capital stress test results as evidence of its financial resilience and regulatory strength. The announcement highlights that, even under the Federal Reserve's Severely Adverse Scenario, all key capital ratios remain comfortably above required minimums. The company emphasizes a loan portfolio stressed loss rate of 2.3%, which it claims is far below the Federal Reserve-published median DFAST result of 6.7%. Management, through CFO Hope Dmuchowski, frames these results as validation of a prudent risk culture and diversified revenue streams, though no segment data is provided. The narrative stresses the ability to sustain a $0.17 quarterly dividend throughout the nine-quarter scenario. The tone is confident and positive, focusing on regulatory compliance and resilience, while omitting operational or profitability metrics.

What the data suggests

The disclosed numbers show First Horizon's projected Common Equity Tier 1 Capital ratio at 9.3% under stress, well above the 4.5% regulatory minimum. Tier 1 Risk-based, Total Risk-based, and Tier 1 Leverage ratios are also projected at 10.2%, 12.2%, and 9.1% respectively, each exceeding their respective minimums by at least 3 percentage points. The loan portfolio stressed loss rate of 2.3% is substantially lower than the 6.7% DFAST median, suggesting a lower-risk asset mix. Pre-provision net revenue as a percentage of assets is 5.1%, outperforming the peer median of 3.0%. The company assumes a $0.17 quarterly dividend can be maintained through the scenario. However, the data is limited to this stress test snapshot; there is no information on actual earnings, revenue, or historical capital ratios, making it impossible to assess financial trajectory or profitability. The evidence supports regulatory strength but does not address value creation or operational performance.

Analysis

The announcement is generally positive in tone, emphasizing First Horizon's strong projected capital ratios and low stressed loss rates under the 2026 Dodd-Frank Act Stress Test scenario. Most claims are supported by specific numerical disclosures (capital ratios, loss rates, dividend assumptions), and the results are presented as realised outputs of a completed stress test, not as aspirational targets. However, the narrative includes several qualitative statements about business strength, resilience, and future commitments that are not directly substantiated by the disclosed data. There is only one forward-looking claim, and it is generic rather than a specific projection. No large capital outlay or long-dated, uncertain returns are discussed. The absence of actual profitability metrics (net income, EBITDA, etc.) means the true_signal cannot exceed weak_positive, as investors cannot assess whether regulatory strength translates into value creation. The hype level is moderate due to the use of promotional language unsupported by additional evidence.

Risk flags

• ●The results are based on internally generated stress test projections rather than externally audited outcomes, introducing potential model risk or optimistic assumptions that may not fully capture real-world stress events.
• ●No actual profitability, revenue, or segment performance data is disclosed, so investors cannot determine whether strong capital ratios translate into earnings growth or shareholder value.
• ●Qualitative claims about diversified revenue streams and prudent risk culture are not substantiated with segment-level data or risk metrics, limiting transparency into the drivers of the favorable stress test results.

Bottom line

First Horizon's 2026 stress test results confirm that its capital ratios would remain well above regulatory minimums even in a severe downturn, and its projected loan loss rate is much lower than the industry median. The company frames this as evidence of resilience and prudent management, but provides no operational or profitability data to show whether this regulatory strength translates into actual value creation. The announcement is credible on regulatory compliance, but leaves key questions about earnings power and business performance unanswered. For investors, this is a positive but limited signal: First Horizon is unlikely to face near-term regulatory capital issues, but the lack of earnings or growth data means the investment case remains incomplete. The most important takeaway is that capital adequacy is strong, but further disclosure is needed to assess long-term value.

Announcement summary

(NYSE: FHN) First Horizon Corporation announced its 2026 company-run capital stress test results, showing that under the 2026 Dodd-Frank Act Stress Test Severely Adverse Scenario, the company would maintain capital ratios well above regulatory-required minimums. The Common Equity Tier 1 Capital ratio was 10.6% actual, 9.3% projected stressed, compared to a 4.5% minimum. The Tier 1 Risk-based Capital ratio was 11.5% actual, 10.2% projected stressed, versus a 6.0% minimum, and the Total Risk-based Capital ratio was 13.3% actual, 12.2% projected stressed, compared to an 8.0% minimum. The Tier 1 Leverage ratio was 10.2% actual, 9.1% projected stressed, versus a 4.0% minimum. The results include a $0.17 quarterly common stock dividend throughout the nine-quarter scenario horizon, and a loan portfolio stressed loss rate of 2.3%, significantly lower than the 6.7% loss rate from the Federal Reserve-published median DFAST result. The company projects it is well equipped to deliver on its commitments, sustain its dividend, and support economic opportunity in its communities, regardless of the environment.

Disagree with this article?