FIRST HORIZON CORP

Significant Events and Transactions

TD Merger Termination

On February 27, 2022, FHN entered into an Agreement and Plan of Merger (the TD Merger Agreement) with The Toronto-Dominion Bank, a Canadian chartered bank (TD), and certain TD subsidiaries. On May 4, 2023, FHN and TD mutually terminated the TD Merger Agreement. Under the terms of the termination agreement, TD made a $200 million cash payment to FHN, in addition to the $25 million fee reimbursement due to FHN pursuant to the TD Merger Agreement. Of the $200 million cash payment, FHN contributed $50 million to the First Horizon Foundation.

FDIC Special Assessment

In November 2023, the FDIC approved a final rule to implement a special assessment on banks to replenish the deposit insurance fund in connection with the three large bank failures in 2023. The special assessment will be 13.4 basis points per year imposed on certain deposits over eight quarters, starting with the first quarterly assessment period of 2024. FHN recognized an estimated expense of $68 million for the entire assessment in the fourth quarter of 2023.

2023 Financial Performance Summary

FHN reported net income available to common shareholders of $865 million, or $1.54 per diluted share, compared to net income of $868 million, or $1.53 per diluted share in 2022.

Net interest income of $2.5 billion increased $148 million from 2022 largely driven by higher earning asset yields and loan growth, partially offset by higher funding costs. The net interest margin increased 32 basis points to 3.42% compared to 3.10% in 2022.

Provision for credit losses increased to $260 million compared to of $95 million in 2022, largely driven by loan growth, an uncertain macroeconomic outlook, and modest grade migration. Net charge-offs were $170 million compared to $59 million in 2022, largely reflecting the impact of an idiosyncratic credit loss on a single relationship.

Noninterest income of $927 million increased $112 million from 2022, largely driven by the gain on merger termination partially offset by lower fixed income and mortgage banking and title income.

Noninterest expense of $2.1 billion increased $126 million from 2022, largely attributable to the FDIC special assessment and the contribution to the First Horizon Foundation discussed above.

Period-end loans and leases of $61.3 billion increased $3.2 billion from December 31, 2022 reflecting commercial loan growth of $1.8 billion, or 4%, and consumer loan growth of $1.4 billion, or 10%.

Period-end deposits of $65.8 billion increased $2.3 billion, or 4%, from December 31, 2022 driven by an $8.6 billion increase in interest-bearing deposits offset by a $6.3 billion decrease in noninterest-bearing deposits.

Tier 1 risk-based capital and total risk-based capital ratios at December 31, 2023 were 12.42% and 13.96%, respectively, compared to 11.92% and 13.33% at December 31, 2022. The CET1 ratio was 11.40% at December 31, 2023 compared to 10.17% at December 31, 2022.

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

Table of Contents

Table 7.1

KEY PERFORMANCE INDICATORS

(a)Represents a non-GAAP measure which is reconciled in the non-GAAP to GAAP reconciliation in Table 7.28.

(b)Calculated using net income divided by average assets.

(c)Calculated using net income available to common shareholders divided by average common equity.

(d)Calculated using net income available to common shareholders divided by average tangible common equity.

(e)Net interest margin is computed using total net interest income adjusted to an FTE basis assuming a statutory federal income tax rate of 21% and, where applicable, state income taxes.

(f)Ratio is noninterest income excluding securities gains (losses) to total revenue excluding securities gains (losses).

(g)Ratio is noninterest expense to total revenue excluding securities gains (losses).