Fitch Affirms First Horizon National Corp. at 'BBB+'; Outlook Stable

Fitch Ratings has affirmed the ratings of First Horizon National Corporation (FHN) and lead bank First Tennessee Bank, N.A. (FTBNA), including the companies' 'BBB+' Issuer Default Ratings (IDRs). The Rating Outlook is Stable. A complete list of ratings follows at the end of this release.

Fitch has affirmed FHN's ratings given its strong capital ratios and improving credit trends. Further, the strength of FHN's Tennessee-based franchise, improved funding profile, and revenue diversity offered by its capital markets business provide support for the affirmation of the IDRs at their current levels.

Somewhat offsetting this, FHN's earnings profile remains weaker than similarly rated peers. Fitch's affirmation of FHN's ratings at their current levels reflects a forward-looking view of FHN's earnings profile under a more normalized environment. With moderating credit-related charges and efficiency gains, Fitch expects could return to peer earning levels over the medium to long term. However, Fitch anticipates that FHN may be subject to unexpected mortgage-related litigation charges as well, but the ratings assume that any potential charges would be manageable in light of FHN's capital base. If FHN were to report an outsized charge or fails to improve profitability metrics under a more normalized environment, the company's ratings would likely be downgraded.

FHN has reported quarterly profitability, albeit at modest levels, since June 30, 2010. Most of the year-over-year improvement stems from a drastic reduction in provision expenses. With just $2 million in provision expense in 1H'11, Fitch expects provision expenses will increase over the long-term from their currently artificially low levels. Fitch also assumes under a more normalized operating environment, elevated credit-related and large one-time items would abate, helping to offset projected higher provision expenses.

Providing support to FHN's ratings at their current levels, capital ratios remain strong. Tier 1 common totaled nearly 12% as of June 30, 2011. The company is targeting a long-term Tier 1 common ratio between 8% and 9%. Given the uncertain economic environment, Fitch expects that FHN will maintain elevated levels of capital, over and above its target, over the near term. Failure to manage capital in a measured approach would apply downward pressure on FHN's ratings.

FHN continues to report broad-based improvement among many asset quality metrics, including NPAs, loans 90 days or more past due, and net charge-offs. FHN built reserves to very high levels at the outset of the recent credit downturn, reaching a high of 5.10% of loans in September 2009. Given moderating credit trends, FHN has been releasing reserves. FHN's credit profile also benefits from an improving funding profile. Wholesale funding now represents 27% of total funding, significantly down from 46% as of June 30, 2009. FHN's funding profile is also aided by its large non-interest bearing deposit base, at 30% of total deposits at June 30, 2011.

Fitch anticipates that lifetime mortgage repurchase losses will be manageable for FHN. Fitch anticipates that the pipeline may reverse its current two quarter improving trend and increase somewhat. However, a key mitigating factor for FHN is the timing of its exit from the mortgage business. FHN sold its mortgage origination platform in August 2008, ceasing originations at that point. Additionally, FHN has a strong capital base to absorb unexpected losses, with approximately $2.4 billion in Tier 1 common as of June 30, 2011.

A failure to reach profitability metrics in line with similarly-rated peers, combined with a material decline in capital levels, would apply downward pressure on FHN's ratings. Under a less likely scenario, FHN's IDR and Viability Rating could be upgraded if it achieves sustainable profitability ratios more in line with peer averages at the 'A-' rating category. Upward momentum in ratings would also occur in conjunction with a continued decline in nonperforming assets and sustained strong capital levels.

FHN is a Tennessee-based regional bank with approximately 180 branches and conducts capital markets activities through FTN Financial. Through its lead bank, First Tennessee Bank, N.A., it offers deposit products, loans, investments, insurance, financial planning, trusts, asset management and cash management services. FTN Financial offers fixed-income sales, trading, and strategies for institutional clients in the U.S. and abroad, as well as investment services and balance sheet management solutions.

Fitch affirms the following ratings with a Stable Outlook:

First Horizon National Corporation

--Long-term IDR at 'BBB+';

--Short-term IDR at 'F2';

--Viability at 'bbb+';

--Individual at 'C';

--Subordinated debt at 'BBB';

--Senior at 'BBB+';

--Support at '5';

--Support Floor at 'NF'.

First Tennessee Bank, N.A.

--Long-term IDR at 'BBB+';

--Short-term IDR at 'F2';

--Viability at 'bbb+';

--Individual at 'C';

--Long-term deposits at 'A-';

--Short-term deposits at 'F1';

--Subordinated debt at 'BBB';

--Short-term debt at 'F2';

--Preferred stock at 'BBB-';

--Support at '5';

--Support Floor at 'NF'.

First Tennessee Capital II

--Preferred stock at 'BBB-'.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 16, 2011);

--'Bank Holding Companies' (Aug. 16, 2011).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

Bank Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648612

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