FIRST HORIZON CORP

Investment Securities

The following table presents the carrying value of securities by category as of December 31 for the years indicated:

Table 7.6

COMPOSITION OF SECURITIES PORTFOLIO

(a) Includes securities issued by government sponsored entities which are not backed by the full faith and credit of the U.S. Government.

FHN’s investment securities portfolio consists principally of debt securities available for sale. FHN maintains a highly-rated securities portfolio consisting primarily of government agency issued mortgage-backed securities and collateralized mortgage obligations. The securities portfolio provides a source of income and liquidity and is an important tool used to balance the interest rate risk of the loan and deposit portfolios. The securities portfolio is periodically evaluated in light of established ALM objectives, changing market conditions that could affect the profitability of the portfolio, the regulatory environment, and the level of interest rate risk to which FHN is exposed. These evaluations may result in steps taken to adjust the overall balance sheet positioning.

Investment securities were $9.7 billion and $10.2 billion on December 31, 2023 and 2022, representing 12% and 13% of total assets, respectively. See Note 2 - Investment Securities for more information about the securities portfolio.

The following table presents an analysis of the amortized cost, remaining contractual maturities, and weighted-average yields by contractual maturity for the debt securities portfolio.

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Table 7.7

CONTRACTUAL MATURITIES OF INVESTMENT SECURITIES

(a) Represents government agency-issued mortgage-backed securities and collateralized mortgage obligations which, when adjusted for early paydowns, have an estimated average life of 5.6 years.

(b) Weighted average yields were calculated using amortized cost on a fully-taxable equivalent basis, assuming a 24% tax rate where applicable.

Loans and Leases

Period-end loans and leases increased $3.2 billion, or 5%, to $61.3 billion as of December 31, 2023, driven by a $1.8 billion increase in commercial loans and a $1.4 billion increase in consumer loans. Average loans and leases increased to $60.2 billion in 2023 compared to $56.0 billion in 2022, primarily driven by a $2.5 billion increase

in commercial loans and a $1.7 billion increase in consumer loans.

The following table provides detail regarding FHN's period-end loans and leases:

Table 7.8

LOANS AND LEASES

(a) Includes equipment financing loans and leases.

C&I loans increased 3%, or $852 million, from 2022, largely driven by growth in the real estate and rental and leasing and transportation and warehousing industry sectors, as well as diversified growth across multiple other industries. These increases were partially offset by a decline of $239 million in loans to mortgage companies.

Commercial real estate loans increased 7% to $14.2 billion in 2023, largely driven by growth in multi-family and industrial property loans. Consumer loans increased 10%, or $1.4 billion, from the end of 2022, largely driven by growth in real estate installment loans.

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The following table provides detail of the contractual maturities of loans and leases at December 31, 2023.

Table 7.9

CONTRACTUAL MATURITIES OF LOANS AND LEASES

Because of various factors, the contractual maturities of consumer loans are not indicative of the actual lives of such loans. A significant component of FHN’s loan portfolio consists of consumer real estate loans, a majority of which are home equity lines of credit and home equity installment loans. These loans have an initial period where the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of both principal and interest over the remaining term. Numerous factors can contribute to the actual life of a home equity line or installment loan. As a result, the actual average life of home equity lines and loans is difficult to predict and changes in any of these factors could result in changes in projections of average lives.

Loans Held for Sale

Loans held for sale primarily consists of government guaranteed loans under SBA and USDA lending programs.

Smaller amounts of other consumer and home equity loans are also included in loans HFS. Additionally, FHN's mortgage banking operations includes origination and servicing of residential first lien mortgages that conform to standards established by GSEs that are major investors in U.S. home mortgages but can also consist of junior lien and jumbo loans secured by residential property. These non-conforming loans are primarily sold to private companies that are unaffiliated with the GSEs on a servicing-released basis. For further detail, see Note 7 - Mortgage Banking Activity.

On December 31, 2023 and 2022, loans HFS were $502 million and $590 million, respectively. Held-for-sale consumer mortgage loans secured by residential real estate in process of foreclosure totaled $2 million and $3 million for December 31, 2023 and 2022, respectively.

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Asset Quality

Loan and Lease Portfolio Composition

FHN groups its loans into portfolio segments based on internal classifications reflecting the manner in which the ALLL is established and how credit risk is measured, monitored, and reported. From time to time, and if conditions are such that certain subsegments are uniquely affected by economic or market conditions or are experiencing greater deterioration than other components of the loan portfolio, management may

determine the ALLL at a more granular level. Commercial loans are composed of C&I loans and CRE loans. Consumer loans are composed of consumer real estate loans and credit card and other loans. FHN has a concentration of residential real estate loans of 23% and 21% of total loans in 2023 and 2022, respectively. Industry concentrations are discussed under the C&I heading below.

Underwriting Policies and Procedures

The following sections describe each portfolio as well as general underwriting procedures for each. As economic and real estate conditions develop, enhancements to underwriting and credit policies and procedures may be necessary or desirable. Loan policies and procedures for all portfolios are reviewed by credit risk working groups and management risk committees comprised of business line managers and credit administration professionals as well as by various other reviewing bodies within FHN. Policies and procedures are approved by key executives and/or senior managers leading the applicable credit risk working groups as well as by management risk committees.

The credit risk working groups and management risk committees strive to ensure that the approved policies and procedures address the associated risks and establish reasonable underwriting criteria that appropriately mitigate risk. Policies and procedures are reviewed, revised and re-issued periodically at established review dates or earlier if changes in the economic environment, portfolio performance, the size of portfolio or industry concentrations, or regulatory guidance warrant an earlier review.

Commercial Loan and Lease Portfolios

FHN’s commercial loan approval process grants lending authority based upon job description, experience, and performance. The lending authority is delegated to the business line (Market Managers, Departmental Managers, Regional Presidents, Relationship Managers (RM) and Portfolio Managers (PM)) and to Credit Risk Managers. While individual limits vary, the predominant amount of approval authority is vested with the Credit Risk Management function. Portfolio, industry, and borrower concentration limits for the various portfolios are established by executive management and approved by the Risk Committee of the Board.

FHN’s commercial lending process incorporates an RM and a PM for most commercial credits. The RM is primarily responsible for communications with the borrower and maintaining the relationship, while the PM is responsible for assessing the credit quality of the borrower, beginning with the initial underwriting and continuing through the servicing period. Other specialists and the assigned RM/PM are organized into units called deal teams. Deal teams are constructed with specific job attributes that facilitate FHN’s ability to identify, mitigate, document, and manage ongoing risk. PMs and credit analysts provide enhanced analytical support during loan origination and servicing, including monitoring of the financial condition of the borrower and tracking compliance with loan agreements. Loan closing officers and the construction loan

management unit specialize in loan documentation and the management of the construction lending process. FHN strives to identify problem assets early through comprehensive policies and guidelines, targeted portfolio reviews, more frequent servicing on lower rated borrowers, and an emphasis on frequent grading. For smaller commercial credits, generally $5 million or less, and income-producing CRE credits greater than $10 million to non-professional real estate developers and smaller professional real estate investors/developers, FHN utilizes a centralized underwriting unit in order to originate and grade small business loans more efficiently and consistently.

FHN may utilize availability of guarantors/sponsors to support commercial lending decisions during the credit underwriting process and when determining the assignment of internal loan grades. Reliance on the guaranty as a viable secondary source of repayment is a function of an analysis proving capability to pay, factoring in, among other things, liquidity and direct/indirect cash flows. FHN also considers the volume and amount of guaranties provided for all global indebtedness and the likelihood of realization. FHN presumes a guarantor’s willingness to perform until there is any current or prior indication or future expectation that the guarantor may not willingly and voluntarily perform under the terms of the guaranty. In FHN’s risk grading approach, it is deemed

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that financial support becomes necessary generally at a point when the loan would otherwise be graded substandard, reflecting a well-defined weakness. At that point, provided willingness and capacity to support are appropriately demonstrated, a strong, legally enforceable guaranty can mitigate the risk of default or loss, justify a less severe rating, and consequently reduce the level of allowance or charge-off that might otherwise be deemed appropriate.

C&I

C&I loans are the largest component of the loan and lease portfolio, comprising 53% and 55% of total loans and leases at December 31, 2023 and 2022, respectively. The C&I portfolio is comprised of loans used for general business purposes. Products offered in the C&I portfolio include term loan financing of owner-occupied real estate and fixed assets, direct financing and sales-type leases, working capital lines of credit, and trade credit enhancement through letters of credit.

Income-producing C&I loans are underwritten in accordance with a well-defined credit origination process. This process includes applying minimum underwriting standards as well as separation of origination and credit approval roles on transaction sizes over PM authorization limits. Underwriting typically includes due diligence of the borrower and the applicable industry of the borrower, analysis of the borrower’s available financial information, identification and analysis of the various sources of repayment and identification of the primary risk attributes. Stress testing the borrower’s financial capacity, adherence to loan documentation requirements, and assigning credit risk grades using internally developed scorecards are also used to help quantify the risk when

appropriate. Underwriting parameters also include loan-to-value ratios which vary depending on collateral type, use of guaranties, loan agreement requirements, and other recommended terms such as equity requirements, amortization, and maturity. Approval decisions also consider various financial ratios and performance measures of the borrowers, such as cash flow and balance sheet leverage, liquidity, coverage of fixed charges, and working capital. Additionally, approval decisions consider the capital structure of the borrower, sponsorship, and quality/value of collateral. Generally, guideline and policy exceptions are identified and mitigated during the approval process. Pricing of C&I loans is based upon the determined credit risk specific to the individual borrower. Historically, these loans typically have had variable rates tied to the LIBOR or prime rate of interest plus or minus the appropriate margin. However, with the cessation of LIBOR, FHN no longer references LIBOR in new loan contracts, and substantially all of the existing portfolio of loans tied to LIBOR has been repriced to alternative reference rates.

The largest geographical concentrations of balances as of December 31, 2023 were in Tennessee (21%), Florida (13%), Texas (11%), North Carolina (7%), Louisiana (6%), Georgia (5%), and California (5%) with no other state representing 5% or more of the portfolio.

The following table provides the composition of the C&I portfolio by industry as of December 31, 2023 and 2022. For purposes of this disclosure, industries are determined based on the NAICS industry codes used by Federal statistical agencies in classifying business establishments for the collection, analysis, and publication of statistical data related to the U.S. business economy.

Table 7.10a

C&I PORTFOLIO BY INDUSTRY

(a)Leasing, rental of real estate, equipment, and goods.

(b)Industries in this category each comprise less than 5% for 2023.

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Industry Concentrations

Loan concentrations are considered to exist for a financial institution when there are loans to numerous borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. Loans to mortgage companies and borrowers in the finance and insurance industry were 18% and 20% of FHN’s C&I loan portfolio as of December 31, 2023 and 2022, respectively, and as a result could be affected by items that uniquely impact the financial services industry. Loans to borrowers in the real estate and rental and leasing industry were 12% and 10% of FHN's C&I portfolio as of December 31, 2023 and 2022, respectively. As of December 31, 2023, FHN did not have any other concentrations of C&I loans in any single industry of 10% or more of total loans.

Loans to Mortgage Companies

Loans to mortgage companies were 6% of the C&I portfolio as of December 31, 2023 and 7% of the C&I portfolio as of December 31, 2022. This portfolio includes commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower's sale of those mortgage loans to third party investors. Balances in this portfolio generally fluctuate with mortgage rates and seasonal factors. Generally, new loan originations to mortgage lenders increase when there is a decline in mortgage rates and decrease when rates rise; in 2023, rates rose. In periods of economic uncertainty, this trend may not occur even if interest rates are declining. In 2023, approximately 90% of the loan originations were home purchases and 10% were refinance transactions.

Finance and Insurance

The finance and insurance component represented 12% of the C&I portfolio as of December 31, 2023 compared to 13% at the end of 2022 and includes TRUPs (i.e., long-term unsecured loans to bank and insurance-related businesses), loans to bank holding companies, and asset-based lending to consumer finance companies. As of December 31, 2023, asset-based lending to consumer finance companies represents approximately $2.0 billion of the finance and insurance component.

Real Estate and Rental and Leasing

Loans to borrowers in the real estate and rental and leasing industry were 12% and 10% of FHN's C&I portfolio as of December 31, 2023 and 2022, respectively. This portfolio primarily consists of equipment financing loans and leases to clients across FHN's footprint in a broad range of industries and asset types. This portfolio also includes a smaller balance of loans and leases for solar and wind generating facilities.

Commercial Real Estate

The CRE portfolio totaled $14.2 billion as of December 31, 2023, a $1.0 billion, or 7%, increase compared to December 31, 2022.

The CRE portfolio includes both financings for commercial construction and non-construction loans. This portfolio contains loans, draws on lines, and letters of credit to commercial real estate developers for the construction and mini-permanent financing of income-producing real estate.

Residential CRE loans include loans to residential builders and developers for the purpose of constructing single-family homes, condominiums, and town homes, and on a limited basis, for developing residential subdivisions. The residential CRE class is not currently an area of growth for the bank.

Income-producing CRE loans

Income-producing CRE loans are underwritten in accordance with credit policies and underwriting guidelines that are reviewed at least annually and revised as necessary based on market conditions. Loans are underwritten based upon project type, size, location, sponsorship, and other market-specific data. Generally, minimum requirements for equity, debt service coverage ratios, and level of pre-leasing activity are established based on perceived risk in each subcategory. Loan-to-value limits are set below regulatory prescribed ceilings and generally range between 50% and 80% depending on the underlying product set. Term and amortization requirements are set based on prudent standards for interim real estate lending. Equity requirements are established based on the quality and liquidity of the primary source of repayment. For example, more equity would be required for a speculative construction project or land loan than for a property fully leased to a credit tenant or a roster of tenants. Typically, a borrower must have at least 15% of cost invested in a project before FHN will provide loan funding. Income properties are generally required to achieve a debt service coverage ratio greater than or equal to 1.25x at inception or stabilization of the project based on loan amortization and a minimum underwriting interest rate. Some product types that possess a greater risk profile require a higher level of equity, as well as a higher debt service coverage ratio threshold. A proprietary minimum underwriting interest rate is used to calculate compliance with underwriting standards. Generally, specific levels of pre-leasing must be met for construction loans on income properties, where applicable. A global cash flow analysis is performed at the sponsor level.

The credit administration and ongoing monitoring consists of multiple internal control processes. Construction loans are closed by a centralized control unit and construction loan management is administered centrally for loans $3 million and over. Underwriters and credit approval

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personnel stress the borrower’s/project’s financial capacity utilizing numerous attributes such as interest rates, vacancy, capitalization rates, and debt service coverage ratios under various scenarios. Key information is captured from the various portfolios and then stressed at the aggregate level. Results are utilized to assist with the assessment of the adequacy of the ALLL and to steer portfolio management strategies.

The largest geographical concentrations of CRE balances as of December 31, 2023 were in Florida (27%), Texas (13%), North Carolina (12%), Georgia (9%), Tennessee (9%), and Louisiana (8%), with no other state representing more than 5% of the portfolio.

The following table represents subcategories of CRE loans by property type:

Table 7.10b

CRE PORTFOLIO BY PROPERTY TYPE

(a) Property types in this category each comprise less than 5% for 2023.

Consumer Loan Portfolios

Consumer Real Estate

The consumer real estate portfolio is primarily composed of home equity lines and installment loans. This portfolio totaled $13.7 billion and $12.3 billion as of December 31, 2023 and 2022, respectively. The largest geographical concentrations of balances in the consumer real estate portfolio as of December 31, 2023 were in Florida (29%), Tennessee (22%), Texas (11%), Louisiana (8%), North Carolina (7%), New York (5%), and Georgia (5%), with no other state representing 5% or more of the portfolio.

As of December 31, 2023, approximately 89% of the consumer real estate portfolio was in a first lien position. At origination, the weighted average FICO score of this portfolio was 759 and the refreshed FICO scores averaged 756 as of December 31, 2023, no significant change from FICO scores of 757 and 754, respectively, as of December 31, 2022. Generally, performance of this portfolio is affected by life events that affect borrowers’ finances, the level of unemployment, and home prices.

As of December 31, 2023 and 2022, FHN had held-to-maturity consumer mortgage loans secured by real estate totaling $29 million and $42 million, respectively, that were in the process of foreclosure.

HELOCs comprised $2.2 billion and $2.0 billion of the consumer real estate portfolio for December 31, 2023 and 2022, respectively. FHN’s HELOCs typically have a 5 or 10

year draw period followed by a 10 or 20 year repayment period, respectively. During the draw period, a borrower is able to draw on the line and is only required to make interest payments. The line is frozen if a borrower becomes past due on payments. Once the draw period has concluded, the line is closed and the borrower is required to make both principal and interest payments monthly until the loan matures. The principal payment generally is fully amortizing, but payment amounts will adjust when variable rates reset to reflect changes in the prime rate.

As of December 31, 2023, approximately 94% of FHN's HELOCs were in the draw period compared to 92% at the end of 2022. Based on when draw periods are scheduled to end per the line agreement, it is expected that $571 million, or 27%, of HELOCs currently in the draw period will enter the repayment period during the next 60 months, based on current terms. Generally, delinquencies for HELOCs that have entered the repayment period are initially higher than HELOCs still in the draw period because of the increased minimum payment requirement. However, over time, performance of these loans usually begins to stabilize. HELOCs nearing the end of the draw period are closely monitored.

The following table shows the HELOCs currently in the draw period and expected timing of conversion to the repayment period.

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Table 7.11

HELOC DRAW TO REPAYMENT SCHEDULE

Underwriting

For loans in this portfolio, underwriting decisions are made through a centralized loan underwriting center. To obtain a consumer real estate loan, the loan applicant(s) must first meet a minimum qualifying FICO score. Minimum FICO score requirements are established by management for both loans secured by real estate as well as non-real estate loans. Management also establishes maximum loan amounts, loan-to-value ratios, and debt-to-income ratios for each consumer real estate product. Applicants must have the financial capacity (or available income) to service the debt by not exceeding a calculated debt-to-income ratio. The amount of the loan is limited to a percentage of the lesser of the current appraised value or sales price of the collateral. Identified guideline and policy exceptions require established mitigating factors that have been approved for use by Credit Risk Management.

HELOC interest rates are variable and adjust with movements in the index rate stated in the loan agreement. Such loans can have elevated risks of default, particularly in a rising interest rate environment, potentially stressing borrower capacity to repay the loan at the higher interest rate. FHN’s current underwriting practice requires HELOC borrowers to qualify based on a sensitized interest rate (above the current note rate), fully amortized payment methodology. FHN’s underwriting

guidelines require borrowers to qualify at an interest rate that is 200 basis points above the note rate. This mitigates risk to FHN in the event of a sharp rise in interest rates over a relatively short time horizon.

HELOC Portfolio Risk Management

FHN performs continuous HELOC account reviews to identify higher-risk home equity lines and initiate preventative and corrective actions. The reviews consider a number of account activity patterns and characteristics such as the number of times delinquent within recent periods, changes in credit bureau score since origination, score degradation, performance of the first lien, and account utilization. In accordance with FHN’s interpretation of regulatory guidance, FHN may block future draws on accounts in order to mitigate risk of loss to FHN.

Credit Card and Other

The credit card and other consumer loan portfolio totaled $793 million as of December 31, 2023 and $840 million as of December 31, 2022. This portfolio primarily consists of consumer-related credits, including home equity and other personal consumer loans, credit card receivables, and automobile loans. The $47 million decrease was driven by net repayments, partially offset by an increase in consumer construction loans.

Allowance for Credit Losses

The ACL is maintained at a level sufficient to provide appropriate reserves to absorb estimated future credit losses in accordance with GAAP. For additional information regarding the ACL, see Notes 1 and 4 to the consolidated financial statements included as a part of this Report.

The ALLL increased to $773 million as of December 31, 2023, or 1.26% of total loans and leases, compared to

$685 million, or 1.18% of total loans and leases, at the end of 2022. The ACL to total loans and leases ratio increased to 1.40% as of December 31, 2023 from 1.33% as of December 31, 2022. The increase in the ALLL balance reflects the impact of loan growth, an evolving macroeconomic outlook, and modest grade migration.

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Consolidated Net Charge-offs

Net charge-offs were $170 million in 2023 compared to $59 million in 2022. As a percentage of average total loans and leases, net charge-offs increased 17 basis points from 2022.

Net charge-offs in the C&I portfolio were $142 million, an increase of $89 million from 2022, primarily driven by a $72 million idiosyncratic charge-off related to one client relationship.

Table 7.12

ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES AND CHARGE-OFFS

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NM - not meaningful

Nonperforming Assets

Nonperforming loans are loans placed on nonaccrual if it becomes evident that full collection of principal and interest is at risk, if impairment has been recognized as a partial charge-off of principal balance due to insufficient collateral value and past due status, or (on a case-by-case basis) if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccrual are loans for which FHN continues to receive payments, including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy. NPAs consist of nonperforming loans and

leases and OREO (excluding OREO from government-insured mortgages).

Total NPAs increased $142 million to $469 million as of December 31, 2023, largely driven by an increase in non-accrual CRE loans predominantly in the office sector. As remote work became more prevalent over the last few years, office vacancy rates have risen industry-wide, which in conjunction with a higher level of interest rates, increased pressure on cash flows and valuations. The ratio of nonperforming loans and leases to total loans and leases increased 21 basis points to 0.75%.

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Table 7.13

NONPERFORMING ASSETS

(a) Excludes loans and leases that are 90 or more days past due and still accruing interest.

(b) Excludes government-insured foreclosed real estate. Foreclosed real estate from GNMA loans were insignificant at December 31, 2023 and 2022 and were $1 million at December 31, 2021.

(c) Under the original terms of the loans, estimated interest income would have been approximately $35 million, $21 million, and $19 million during 2023, 2022 and 2021, respectively.

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The following table provides nonperforming assets by business segment:

Table 7.14

NONPERFORMING ASSETS BY SEGMENT

(a)Excludes loans and leases that are 90 or more days past due and still accruing interest.

(b)Excludes loans classified as held for sale.

(c)Excludes foreclosed real estate and receivables related to government-insured mortgages. Foreclosed real estate from GNMA loans were insignificant at December 31, 2023 and 2022 and were $1 million at December 31, 2021.

(d)Ratio is non-performing assets related to the loan and lease portfolio to total loans plus foreclosed real estate and other assets.

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Past Due Loans and Potential Problem Assets

Past due loans are loans contractually past due as to interest or principal payments, but which have not yet been put on nonaccrual status. Loans 90 days or more past due and still accruing were $21 million as of December 31, 2023 compared to $33 million as of

December 31, 2022. Loans 30 to 89 days past due and still accruing were $85 million as of December 31, 2023 compared to $105 million as of December 31, 2022, largely reflecting lower past due commercial loan balances.

Table 7.15

ACCRUING DELINQUENCIES & OTHER CREDIT DISCLOSURES

(a)Excludes loans classified as held for sale.

(b)Amounts are not included in nonperforming/nonaccrual loans.

(c)Amounts are also included in accruing loans and leases 30+ days past due.

(d)Guaranteed loans include FHA, VA, and GNMA loans repurchased through the GNMA buyout program.

Potential problem assets represent those assets where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms and includes loans past due 90 days or more and still accruing. This definition is believed to be substantially consistent with the standards established by the Federal banking regulators for loans classified as substandard. Potential problem assets in the loan portfolio increased $174 million to $666 million as of December 31, 2023.The current expectation of losses from potential problem

assets has been included in management’s analysis for assessing the adequacy of the allowance for loan and lease losses.

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Modifications to Borrowers Experiencing Financial Difficulty

As part of FHN’s ongoing risk management practices, FHN attempts to work with borrowers when appropriate to extend or modify loan terms to better align with their current ability to repay. Modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. See Note 1 - Significant Accounting Policies, Note 3 - Loans and Leases and Note 4 - Allowance for Credit Losses for further discussion regarding troubled loan modifications.

Commercial Loan Modifications

As part of FHN’s credit risk management governance processes, the Loan Rehab and Recovery Department (LRRD) is responsible for managing most commercial relationships with borrowers whose financial condition has deteriorated to such an extent that the credits are individually reviewed for expected credit losses, classified as substandard or worse, placed on nonaccrual status, foreclosed or in process of foreclosure, or in active or contemplated litigation. LRRD has the authority and responsibility to enter into workout and/or rehabilitation agreements with troubled commercial borrowers in order to mitigate and/or minimize the amount of credit losses recognized from these problem assets. While every circumstance is different, LRRD will generally use forbearance agreements (generally 6-12 months) as an element of commercial loan workouts, which might include reduced interest rates, reduced payments, release of guarantor, term extensions or entering into short sale agreements. Principal forgiveness may be granted in specific workout circumstances.

The individual expected credit loss assessments completed on commercial loans are used in evaluating the appropriateness of qualitative adjustments to quantitatively modeled loss expectations for loans that are not considered collateral dependent. If a loan is collateral dependent, the carrying amount of a loan is written down to the net realizable value of the collateral. Each assessment considers any modified terms and is comprehensive to ensure appropriate assessment of expected credit losses.

Consumer Loan Modifications

FHN does not currently participate in any of the loan modification programs sponsored by the U.S. government but does generally structure modified consumer loans using the parameters of the former Home Affordable Modification Program.

Within the HELOC and real estate installment loans classes of the consumer portfolio segment, troubled loans are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 1% for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years, the interest rate generally returns to the original interest rate prior to modification; for certain modifications, the modified interest rate increases 2% per year until the original interest rate prior to modification is achieved.

Permanent mortgage troubled loans are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 2% for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years, the interest rate steps up 1 percent every year until it reaches the Federal Home Loan Mortgage Corporation Weekly Survey Rate cap. Contractual maturities may be extended to 40 years on permanent mortgages and to 30 years for consumer real estate loans.

Within the credit card class of the consumer portfolio segment, troubled loans are typically modified through either a short-term credit card hardship program or a longer-term credit card workout program. In the credit card hardship program, borrowers may be granted rate and payment reductions for 6 months to 1 year. In the credit card workout program, clients are granted a rate reduction to 0% and term extensions for up to 5 years to pay off the remaining balance.

Consumer loans may also be modified through court-imposed principal reductions in bankruptcy proceedings, which FHN is required to honor unless a borrower reaffirms the related debt.

Deposits

Total deposits of $65.8 billion as of December 31, 2023 increased $2.3 billion from $63.5 billion as of December 31, 2022. Interest-bearing deposits increased $8.6 billion and noninterest-bearing deposits decreased $6.3 billion. Deposit growth in 2023 reflected the impact of FHN's deposit marketing campaigns launched in the second quarter. Promotional rates associated with these offerings moderated toward the end of the year, but overall were higher than prior periods contributing to an

increase in funding costs. The rate guarantees on money market deposits in the campaign were short-term and repriced in the back half of the fourth quarter. FHN continues to focus on building and deepening relationships to retain new clients from its promotional campaigns.

FHN continues to maintain a well-diversified and stable funding mix across its footprint:

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•At December 31, 2023, commercial deposits were $35.9 billion, or 55% of total deposits and consumer deposits were $29.9 billion, or 45% of total deposits. At December 31, 2022, commercial deposits were $34.4 billion, or 54% of total deposits and consumer deposits were $29.1 billion, or 46% of total deposits.

•At December 31, 2023, 38% of deposits were associated with Tennessee, 18% with Florida, 12% with Louisiana, and 12% with North Carolina, with no other state above 10%. These percentages were virtually unchanged from the previous year-end.

•Total estimated uninsured deposits were $26.8 billion, or 41% of total deposits, and

$30.3 billion, or 48% of total deposits, as of December 31, 2023 and 2022, respectively.

•Of the uninsured deposits at December 31, 2023, $5.3 billion, or 8% of total deposits, were collateralized. At December 31, 2022, collateralized deposits were $5.0 billion, or 8% of total deposits.

The following tables summarize the major components of FHN's total deposits and total estimated uninsured deposits for 2023, 2022, and 2021 and the maturities of FHN's uninsured time deposits as of December 31, 2023. See Table 7.2 - Average Balances, Net Interest Income and Yields/Rates in this Report for information on average deposits including average rates paid.

Table 7.16

DEPOSITS

Table 7.17

ESTIMATED UNINSURED DEPOSITS

Table 7.18

UNINSURED TIME DEPOSITS BY MATURITY

ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

Short-Term Borrowings

Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase, trading liabilities, and other short-term borrowings. Total short-term borrowings were $3.1 billion and $2.8 billion as of December 31, 2023 and December 31, 2022, respectively.

Short-term borrowings balances fluctuate largely based on the level of FHLB borrowing as a result of loan demand, deposit levels and balance sheet funding strategies. Trading liabilities fluctuate based on various factors,

including levels of trading securities and hedging strategies. Federal funds purchased fluctuates depending on the amount of excess funding of FHN's correspondent bank customers. Balances of securities sold under agreements to repurchase fluctuate based on cost attractiveness relative to FHLB borrowing levels and the ability to pledge securities toward such transactions. See Note 9 - Short-Term Borrowings for additional information.

Term Borrowings

Term borrowings include senior and subordinated borrowings with original maturities greater than one year. Total term borrowings were $1.2 billion and $1.6 billion as of December 31, 2023 and December 31, 2022,

respectively. The decrease in term borrowings was attributable to the retirement of $450 million in senior notes in May 2023. See Note 10 - Term Borrowings for additional information.