FIRST HORIZON CORP

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

Results of Operations

Net Interest Income

Net interest income is FHN's largest source of revenue and is the difference between the interest earned on interest-earning assets (generally loans, leases and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (generally deposits and borrowed funds). The level of net interest income is primarily a function of the difference between the effective yield on average interest-earning assets and the effective cost of interest-bearing liabilities. These factors are influenced by the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as local economic conditions, competition for loans and deposits, the monetary policy of the FRB and market interest rates.

The following tables present the major components of net interest income and net interest margin:

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

Table I.2.2

QUARTER-TO-DATE AVERAGE BALANCES, NET INTEREST INCOME & YIELDS/RATES

(a) Calculated using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 21% and, where applicable, state income taxes.

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

Net interest income of $629 million in second quarter 2024 increased $4 million from first quarter 2024 and the net interest margin increased 1 basis point to 3.38% from the benefit of higher loan volumes and yields, partially offset by continued mix shift within interest-bearing deposit products, increased use of wholesale funds, and seasonally lower public fund DDA. Loan yield increased 6 basis points and the cost of interest-bearing deposits increased 2 basis points.

Average earning assets of $75.2 billion in second quarter 2024 increased $465 million from first quarter 2024 largely due to an $877 million increase in average loans and leases, a $150 million increase in average securities purchased under agreements to resell and a $122 million increase in average trading securities, partially offset by a $345 million decrease in average interest-bearing deposits with banks and a $329 million decrease in average investment securities. Average interest-bearing liabilities increased $957 million largely reflecting a $730 million

increase in other short-term borrowings and a $192 million increase in federal funds purchased.

Net interest income decreased $1 million from second quarter 2023 and the net interest margin remained unchanged at 3.38% in second quarter 2024, driven by the impact of higher funding costs partially offset by higher yields on earning assets. Funding costs increased 46 basis points while yields on earning assets increased 44 basis points.

Average earning assets decreased $103 million from second quarter 2023 largely attributable to a $2.1 billion increase in average loans and leases offset by a $1.7 billion decrease in average interest-bearing deposits with banks and a $931 million decrease in average investment securities. Average interest-bearing liabilities increased $2.5 billion largely driven by a $6.8 billion increase in average interest-bearing deposits partially offset by a $5.1 billion decrease in average other short-term borrowings.

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

Table I.2.3

YEAR-TO-DATE AVERAGE BALANCES, NET INTEREST INCOME & YIELDS/RATES

(a) Calculated using total net interest income adjusted for FTE assuming a statutory federal income tax rate of 21% and, where applicable, state income taxes.

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

For the six months ended June 30, 2024, net interest income of $1.3 billion decreased $65 million from the same period one year ago largely driven by higher funding costs partially offset by higher earning asset yields and loan growth.

Total average earning assets increased $1.3 billion in the first six months of 2024 largely driven by average loan growth of $2.6 billion partially offset by lower levels of investment securities and interest-bearing cash.

The year-to-date net interest margin of 3.38% decreased 24 basis points compared to 3.62% for the same period of 2023 as earning asset yields increased 52 basis points and the cost of interest-bearing liabilities increased 87 basis points.

Noninterest Income

The following table presents the significant components of noninterest income for each of the periods presented:

Table I.2.4

NONINTEREST INCOME

Noninterest income of $186 million decreased $8 million, or 4%, from first quarter 2024, largely driven by a decrease in fixed income production partially offset by higher traditional banking fees.

Fixed income of $40 million decreased $12 million from the prior quarter driven by a reduction in the market's rate cut expectations and lower portfolio restructuring activity. Fixed income average daily revenue of $488 thousand decreased 33% from $731 thousand in first quarter 2024.

Mortgage banking income of $10 million increased $1 million driven by higher origination volume during the spring home-buying season.

Other income decreased $2 million largely driven by a $6 million decrease in deferred compensation income partially offset by an increase in swap fees.

Noninterest income for second quarter 2024 decreased $214 million, or 54%, compared to second quarter 2023, primarily driven by the gain on merger termination in 2023.

Fixed income of $40 million increased $10 million from second quarter 2023, largely reflecting more favorable market conditions. Fixed income average daily revenue of $488 thousand increased $140 thousand, or 40%, compared to the same quarter of 2023.

Mortgage banking income of $10 million increased $4 million driven by higher origination volume and improvement in gain-on-sale spreads.

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

Table I.2.5

NONINTEREST INCOME

For the six months ended June 30, 2024, noninterest income of $381 million decreased $190 million, or 33%, compared to the same period in 2023, primarily from the gain on merger termination in 2023, partially offset by higher fixed income and mortgage banking income.

Fixed income product revenue of $76 million increased $27 million largely driven by more favorable market conditions. Revenue from other products of $16 million decreased $4 million primarily driven by lower investment

advisory fees, reflecting the sale of the assets of FHN Financial Main Street Advisors, and lower derivative sales.

Mortgage banking income of $19 million increased $8 million driven by higher origination volume and gain-on-sale spreads.

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

Noninterest Expense

The following tables present the significant components of noninterest expense for each of the periods presented:

Table I.2.6

NONINTEREST EXPENSE

Noninterest expense of $500 million decreased $15 million, or 3%, compared with first quarter 2024.

Personnel expense of $279 million decreased $22 million compared to the linked quarter. Incentive-based compensation decreased $13 million, largely due to lower fixed income revenue and a decline in merger retention expense, partially offset by a true-up to long-term performance awards. Deferred compensation expense decreased $6 million reflecting fluctuations in equity market valuations relative to the linked quarter.

Deposit insurance expense declined $8 million reflecting a reduction in the impact of the FDIC special assessment compared to first quarter 2024.

Advertising and public relations expense increased $6 million largely attributable to elevated levels of expense from the launch of new marketing campaigns for checking accounts in second quarter 2024.

Noninterest expense of $500 million decreased $55 million, or 10%, from second quarter 2023, largely reflecting a decline related to the $50 million contribution to the First Horizon Foundation in second quarter 2023.

Personnel expense decreased $6 million compared to second quarter 2023. Incentive-based compensation decreased $8 million largely reflecting a decline from 2023 merger-related expense, partially offset by an increase in compensation tied to higher fixed income and mortgage banking revenue. Deferred compensation expense decreased $5 million reflecting fluctuations in equity market valuations relative to the prior year. These decreases were partially offset by an increase of $7 million in salaries and benefits largely attributable to annual merit adjustments.

Legal and professional fees increased $6 million largely attributable to strategic investment initiatives in second quarter 2024.

Advertising and public relations expense decreased $3 million largely attributable to strategy and timing differences for various advertising campaigns when comparing the periods.

Other expense decreased $7 million largely from derivative valuation adjustments related to prior Visa Class-B share sales in second quarter 2023.

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

Table I.2.7

NONINTEREST EXPENSE

For the six months ended June 30, 2024, noninterest expense of $1.0 billion decreased $18 million, or 2%, compared to the same period of 2023.

Contributions expense declined $55 million largely attributable to the $50 million contribution made to the First Horizon Foundation in 2023.

Personnel expense of $580 million increased $24 million largely reflecting higher salaries and benefits expense.

Deposit insurance expense of $40 million increased $14 million reflecting the impact of the FDIC special assessment.

Advertising and public relations expense decreased $9 million largely attributable to a new-to-bank deposit

campaign and brand awareness initiatives that were launched during the first half of 2023.

Legal and professional fees increased $13 million largely attributable to third party services for strategic investments.

Other expense decreased $12 million largely driven by $15 million in Visa Class B share derivative valuation expense during 2023.

There were no merger and integration related expenses in the first six months of 2024 compared to $51 million for the same period of 2023.

Provision for Credit Losses

Provision for credit losses includes the provision for loan and lease losses and the provision for unfunded lending commitments. The provision for credit losses is the expense necessary to maintain the ALLL and the accrual for unfunded lending commitments at levels appropriate to absorb management’s estimate of credit losses expected over the life of the loan and lease portfolio and the portfolio of unfunded loan commitments.

Provision for credit losses increased to $55 million for the second quarter 2024 compared to $50 million for both

first quarter 2024 and second quarter 2023. For the six months ended June 30, 2024, provision for credit losses was $105 million compared to $100 million for the same period of 2023. The increase in provision was largely tied to modest grade migration and an evolving macroeconomic forecast. For additional information about general asset quality trends, refer to the Asset Quality section in this MD&A.

Income Taxes

FHN recorded income tax expense of $56 million in second quarter 2024 compared to $57 million in first quarter 2024

and $96 million in second quarter 2023. For the six months ended June 30, 2024 and 2023, FHN recorded

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

income taxexpense of $113 million and$171 million, respectively.

The effective tax rate was approximately 21.5%, 22.5%, and 22.6% for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively. The effective tax rate was approximately 22.0% and 22.7% for the six months ended June 30, 2024 and 2023, respectively.

FHN’s effec tive tax rate is favorably affected by recurring items such as tax credits and other tax benefits from tax credit investments, tax-exempt income, and bank-owned life insurance. The effective rate is unfavorably affected by the non-deductible portions of FDIC premium, executive compensation and merger expenses. FHN’s effective tax rate also may be affected by items that may occur in any given period but are not consistent from period to period, such as changes in unrecognized tax benefits. The rate also may be affected by items resulting from business combinations. For the six months ended June 30, 2023, the increase in the rate was primarily related to the gain on merger termination.

A deferred tax asset or deferred tax liability is recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax consequence is calculated by applying current enacted statutory tax rates to these temporary differences in future years. As of June 30, 2024, FHN’s gross DTA and gross DTLwere $776 million and $499 million, respectively, resulting in a net DTA of $277 million at June 30, 2024, compared with a net DTA of $215 million at December 31, 2023.

As of June 30, 2024, FHN had deferred tax asset balances related to federal and state income tax carryforwards of $29 million and $3 million, respectively, which will expire at various dates.

Based on current analysis, FHN believes that its ability to realize the DTA is more likely than not. FHN monitors its DTA and the need for a valuation allowance on a quarterly basis. A significant adverse change in FHN’s taxable earnings outlook could result in the need for a valuation allowance.

Business Segment Results

FHN's reportable segments include Regional Banking, Specialty Banking and Corporate. See Note 12 - Business Segment Information for additional disclosures related to FHN's segments.

Regional Banking

The Regional Banking segment generated pre-tax income of $241 million for second quarter 2024, a decrease of $44 million compared to first quarter 2024. Net interest income of $522 million decreased $10 million driven by a decline in average noninterest-bearing deposits and thus lower earnings credit under the funds transfer pricing methodology, as well as higher interest-bearing deposit costs, partially offset by higher loan balances and yields. Provision for credit losses of $57 million increased $29 million from the prior quarter. Noninterest income increased $4 million compared to the prior quarter. Noninterest expense increased $9 million compared to first quarter 2024 largely from an increase in outside services.

Pre-tax income for second quarter 2024 decreased $101 million compared to $342 million for second quarter 2023. Net interest income decreased $63 million from second quarter 2023 driven by a decline in average noninterest-bearing deposits and thus lower earnings credit under the funds transfer pricing methodology, as well as higher interest-bearing deposit costs, partially offset by higher loan balances and yields. The provision for credit losses increased $21 million. Noninterest expense increased $20 million compared to second quarter 2023 largely due to higher personnel expense and other losses.

Results also reflect a $3 million increase in noninterest income compared to second quarter 2023.

Pre-tax income of $525 million for the six months ended June 30, 2024 decreased $133 million compared to the same period of 2023, largely from a $88 million decrease in revenue primarily driven by lower net interest income. Provision for credit losses increased $14 million. Noninterest expense increased $31 million largely attributable to higher personnel expense, legal and professional fees, and other losses.

Specialty Banking

Pre-tax income in the Specialty Banking segment of $118 million for second quarter 2024 increased $20 million compared to first quarter 2024 largely driven by a $22 million decrease in provision for credit losses. Revenue declined $3 million and noninterest expense declined $1 million.

Fixed income of $40 million decreased $12 million driven by a reduction in the number of rate cuts expected by the market and lower portfolio restructuring activity. Mortgage banking income of $10 million increased $1 million driven by higher origination volume during the spring home-buying season.

Pre-tax income in the Specialty Banking segment increased $25 million compared to second quarter 2023. Revenue increased $16 million primarily driven by higher fixed income and mortgage banking income. Provision for credit losses declined $17 million. Noninterest expense increased $8 million largely driven by higher incentive-

PART I, ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

Table of Contents

based compensation expense tied to the improvement in fixed income and mortgage income.

Pre-tax income of $217 million for the six months ended June 30, 2024 increased $32 million from the same period of 2023 largely reflecting a $31 million increase in noninterest income and a $10 million decrease in provision for credit losses partially offset by a $12 million increase in noninterest expense. The increase in noninterest expense was largely attributable to higher personnel expense. Noninterest income increased largely as a result of higher fixed income and mortgage banking income.

Corporate

Pre-tax loss for the Corporate segment was $99 million for second quarter 2024 compared to $129 million for first quarter 2024, largely reflecting a $5 million increase in revenue and a $23 million decrease in noninterest expense. The increase in revenue was largely driven by a $9 million increase in net interest income. The decline in noninterest expense was largely attributable to lower personnel and deposit insurance expense. Results for second quarter 2024 also reflect $3 million in restructuring costs compared to $5 million in the prior quarter.

Pre-tax loss for the Corporate segment was $99 million compared to $10 million for second quarter 2023, largely reflecting a $231 million decline in noninterest income tied to the gain on merger termination in 2023 offset by an $83 million decrease in noninterest expense and a $60 million increase in net interest income. The increase in net interest income was tied to the impact of funds transfer pricing. The decrease in noninterest expense was largely driven by the $50 million contribution to the First Horizon Foundation and $15 million in derivative valuation adjustments from prior Visa Class B share sales in 2023 as well as lower personnel expense of $14 million. The decline in personnel expense reflected lower incentive-based compensation and deferred compensation expense.

Pre-tax loss of $228 million for the six months ended June 30, 2024 compared to $87 million for the same period of 2023 largely driven by the $225 million gain on merger termination offset by the $50 million contribution to the First Horizon Foundation. Results also reflect a $51 million decrease in merger and integration related expense, $12 million in FDIC special assessment expense and $8 million in restructuring expense.