First Horizon to Redeem High-Cost Preferred Stock, Signaling Shift in Capital Strategy

First Horizon National Corp. (NYSE: FHN) is set to fully redeem its 6.600% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, on May 1, 2026. The bank confirmed it will redeem all outstanding shares of the Series C preferred stock at $25.00 per depositary share, effectively removing this higher-cost capital layer from its balance sheet.

The decision arrives as regional banks navigate a complex landscape of regulatory scrutiny, evolving interest rates, and pressure to optimize capital structures. For income-focused shareholders, the redemption provides a definitive timeline for the cessation of the 6.6% coupon payments. For common equity investors, it signals management's intent to streamline the capital stack and potentially reduce future preferred dividend obligations.

"This isn't just a routine administrative move," said Michael Thorne, a banking analyst at Crestwood Advisors. "Redeeming a 6.6% perpetual preferred in this rate environment is a clear capital efficiency play. It suggests First Horizon is confident in its earnings power and may be paving the way for enhanced returns to common shareholders through buybacks or dividend growth post-2026."

The redemption is scheduled to coincide with a dividend payment date, ensuring a clean exit without accrued interest complications. Analysts note the action aligns with a broader trend where banks are reassessing legacy, high-cost preferred issues in favor of more flexible and cheaper capital sources.

"Finally, some sensible capital management!" exclaimed retail investor and popular finance forum contributor, David Riggs. "These preferred shares were a drag. Management is prioritizing common shareholders for a change. It's about time they stopped feeding that 6.6% beast and put that cash to better use."

However, some observers urge caution. "While strategically sound, the impact isn't immediate," noted Sarah Chen, a portfolio manager specializing in financials. "The 2026 date is two years out. The real test is what replaces this capital and how funding costs trend. Investors should watch if this presages a shift in the common dividend policy or if it's merely a one-off optimization."

The move places First Horizon alongside peers like Regions Financial and Truist, which have also actively managed their preferred stock portfolios. The coming quarters will likely see increased analyst focus on the bank's plans for the freed-up capital and its implications for overall shareholder returns.

This analysis is based on publicly available information and should not be construed as financial advice. Investors are encouraged to conduct their own due diligence.