FIRST HORIZON CORP

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

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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)

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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)

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Net interest income of $627 million in third quarter 2024 decreased $2 million from second quarter 2024 and the net interest margin decreased 7 basis points to 3.31%, driven by increased deposit costs and higher levels of brokered deposits, partially offset by improvement in loan repricing. Loan yield increased 3 basis points and the cost of interest-bearing deposits increased 14 basis points.

Average earning assets of $76.1 billion in third quarter 2024 increased $878 million from second quarter 2024, largely due to a $384 million increase in average loans and leases, a $293 million increase in average interest-bearing deposits with banks, a $139 million increase in average investment securities and a $102 million increase in average trading securities, partially offset by a $38 million decrease in average securities purchased under agreements to resell. Average interest-bearing liabilities increased $1.1 billion, largely reflecting a $1.5 billion increase in average interest-bearing deposits, partially offset by a $383 million decrease in average other short-term borrowings.

Net interest income increased $22 million from third quarter 2023 and the net interest margin increased 14 basis points to 3.31% in third quarter 2024, driven by higher yields on earning assets, partially offset by higher funding costs. Yields on earning assets increased 24 basis points while funding costs increased 4 basis points.

Average earning assets decreased $185 million from third quarter 2023, largely attributable to a $1.1 billion decrease in average interest-bearing deposits with banks, partially offset by a $981 million increase in average loans and leases. Average interest-bearing liabilities increased $1.4 billion, largely driven by a $1.8 billion increase in average interest-bearing deposits and a $300 million increase in average trading liabilities, partially offset by a $906 million decrease in average other short-term borrowings.

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

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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)

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For the nine months ended September 30, 2024, net interest income of $1.9 billion decreased $42 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 $792 million in the first nine months of 2024, largely driven by average loan growth of $2.0 billion, partially offset by lower levels of investment securities and interest-bearing cash.

The year-to-date net interest margin of 3.35% decreased 12 basis points compared to 3.47% for the same period of 2023 as earning asset yields increased 42 basis points and the cost of interest-bearing liabilities increased 58 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 $200 million increased $14 million, or 8%, from second quarter 2024, largely driven by an increase in fixed income production as well as an increase in various other noninterest income items.

Fixed income of $47 million increased $7 million from the prior quarter, driven by higher production as the market anticipated the decline in interest rates. Fixed income average daily revenue of $593 thousand increased 22% from $488 thousand in second quarter 2024.

Mortgage banking income of $9 million decreased $1 million, moderating slightly from home-buying season highs.

Other income increased $7 million, largely driven by a $3 million increase in deferred compensation income, $2 million in gains on disposition of fixed assets and a $1 million increase in bank owned life insurance benefits.

Noninterest income for third quarter 2024 increased $27 million, or 16%, compared to third quarter 2023, primarily driven by higher fixed income and brokerage, management fees and commissions.

Fixed income of $47 million increased $19 million from third quarter 2023, largely reflecting more favorable market conditions. Fixed income average daily revenue of $593 thousand increased $292 thousand, or 97%, compared to the same quarter of 2023.

Brokerage, management fees and commissions of $27 million increased $6 million, or 29%, as strong market performance improved wealth management fees.

Mortgage banking income of $9 million increased $2 million, driven by higher secondary volume.

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

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Table I.2.5

NONINTEREST INCOME

For the nine months ended September 30, 2024, noninterest income of $581 million decreased $164 million, or 22%, compared to the same period in 2023, primarily from the gain on merger termination in 2023, partially offset by higher fixed income, mortgage banking income and brokerage, management fees and commissions in 2024.

Fixed income of $138 million increased $41 million, or 42% compared to the same period one year ago. Fixed income product revenue of $113 million increased $45 million, largely driven by more favorable market conditions. Revenue from other products of $25 million decreased $4

million, primarily driven by lower investment advisory fees due to the sale of the assets of FHN Financial Main Street Advisors in fourth quarter 2023 and lower derivative sales.

Brokerage, management fees and commissions of $76 million increased $10 million, or 15%, as strong market performance improved wealth management fees.

Mortgage banking income of $28 million increased $10 million, driven by higher secondary volume.

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

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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 $511 million increased $11 million, or 2%, compared with second quarter 2024, largely reflecting $15 million in Visa derivative valuation expense.

Personnel expense of $282 million increased $3 million from the linked quarter. Incentive-based compensation decreased $3 million despite higher fixed income revenue, primarily due to a decline in retention expense and lower incentives in other variable compensation businesses. Deferred compensation expense increased $3 million compared to the linked quarter, reflecting fluctuations in equity market valuations.

Deposit insurance expense declined $5 million, reflecting an expense credit of $2 million for the FDIC special assessment based on revised resolution loss totals received from the FDIC in third quarter 2024.

Noninterest expense of $511 million increased $37 million, or 8%, from third quarter 2023.

Personnel expense increased $16 million compared to third quarter 2023. Salaries and employee benefits increased $11 million, largely attributable to annual merit adjustments and higher medical insurance expense. Deferred compensation expense increased $7 million, reflecting fluctuations in equity market valuations relative to the prior year. Incentive-based compensation decreased $1 million, largely reflecting a decline from retention expense, partially offset by an increase in compensation tied to higher fixed income production.

Increases in occupancy, computer software, operations services and legal and professional fees were largely attributable to strategic investment initiatives in third quarter 2024.

Other expense increased $14 million, largely reflecting $15 million in Visa derivative valuation expense in third quarter 2024.

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

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Table I.2.7

NONINTEREST EXPENSE

For the nine months ended September 30, 2024, noninterest expense of $1.5 billion increased $19 million, or 1%, compared to the same period of 2023.

Contributions expense decreased $54 million, largely attributable to a $50 million contribution made to the First Horizon Foundation in 2023.

Personnel expense of $862 million increased $41 million, largely reflecting higher salaries and benefits expense as well as higher deferred compensation expense.

Legal and professional fees increased $14 million and computer software increased $7 million, largely attributable to strategic investments.

Deposit insurance expense of $51 million increased $11 million, reflecting the impact of the FDIC special assessment.

Advertising and public relations expense decreased $10 million, largely attributable to a new-to-bank deposit campaign and brand awareness initiatives that were launched during 2023.

There were no merger and integration related expenses in the first nine months of 2024 compared to $51 million for the same period of 2023. Restructuring expenses were $10 million for both year-to-date periods of 2024 and 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 decreased to $35 million for the third quarter 2024, compared to $55 million for the

second quarter 2024 and $110 million for third quarter 2023. For the nine months ended September 30, 2024, provision for credit losses was $140 million, compared to $210 million for the same period of 2023. The provision in 2023 reflected the impact of a $72 million credit loss from a single borrower in bankruptcy. 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 $58 million in third quarter 2024 compared to $56 million in second quarter 2024 and $52 million in third quarter 2023. For thenine

months ended September 30, 2024 and 2023, FHN recorded income taxexpense of $171 million and$223 million, respectively.

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

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The effective tax rate was approximately 20.6%, 21.5%, and 26.7% for the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively. The effective tax rate was approximately 21.5% and 23.5% for thenine months ended September 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 three months ended September 30, 2024, FHN recognized $5 million of net favorable discrete items, primarily attributable to the lapse of the statute of limitations for uncertain tax positions. The higher rates for the three and nine months ended September 30, 2023 were primarily attributable to net unfavorable discrete items related to the termination of bank owned life insurance (BOLI) policies in the third quarter of 2023 and

the gain on merger agreement termination in the second quarter of 2023.

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 September 30, 2024, FHN’s gross DTA and gross DTLwere $715 million and $529 million, respectively, resulting in a net DTA of $186 million at September 30, 2024, compared with a net DTA of $215 million at December 31, 2023.

As of September 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 net DTA is more likely than not. FHN monitors its net 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 to the Consolidated Financial Statements in Part I, Item 1 of this report for additional disclosures related to FHN's segments.

Regional Banking

The Regional Banking segment generated pre-tax income of $269 million for third quarter 2024, an increase of $28 million compared to second quarter 2024. Net interest income of $517 million decreased $5 million, driven by higher interest-bearing deposit costs, partially offset by improvement in loan repricing. Provision for credit losses of $33 million decreased $24 million from the prior quarter. Noninterest income increased $5 million compared to the prior quarter, largely driven by higher wealth management fees and deposit transaction and cash management fees. Noninterest expense decreased $4 million compared to second quarter 2024. largely due to a decline in other losses.

Pre-tax income for third quarter 2024 increased $28 million to $269 million, compared to $241 million for third quarter 2023. Net interest income decreased $41 million from third 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 decreased $80 million compared to third quarter 2023, largely reflecting a credit

loss on a single relationship in 2023. Noninterest expense increased $19 million compared to third quarter 2023, largely due to higher personnel expense and expenses related to strategic investments. Results also reflect an $8 million increase in noninterest income compared to third quarter 2023, largely driven by improvement in wealth management fees.

Pre-tax income of $795 million for the nine months ended September 30, 2024 decreased $105 million compared to the same period of 2023, largely from a $121 million decrease in revenue primarily driven by net interest income. Provision for credit losses decreased $65 million, largely reflecting a credit loss on a single relationship in 2023. Noninterest expense increased $49 million, largely attributable to higher personnel expense and expenses related to strategic investments.

Specialty Banking

Pre-tax income in the Specialty Banking segment of $126 million for third quarter 2024 increased $8 million compared to second quarter 2024, largely driven by higher fixed income production. Provision for credit losses increased $2 million and noninterest expense increased $1 million.

Fixed income of $47 million increased $7 million, driven by higher production as the market anticipated the decline in interest rates. Mortgage banking income of $8 million decreased $2 million, moderating slightly from home-buying season highs.

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

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Pre-tax income in the Specialty Banking segment increased $15 million compared to third quarter 2023. Revenue increased $24 million, primarily driven by higher fixed income production. Noninterest expense increased $8 million, largely driven by higher incentive-based compensation expense tied to the improvement in fixed income production.

Pre-tax income of $342 million for the nine months ended September 30, 2024 increased $46 million from the same period of 2023, largely reflecting a $47 million increase in noninterest income and a $9 million decrease in provision for credit losses, partially offset by a $19 million increase in noninterest expense. The increase in noninterest income was largely a result of higher fixed income and mortgage banking income. The increase in noninterest expense was largely attributable to higher personnel expense.

Corporate

Pre-tax loss for the Corporate segment was $114 million for third quarter 2024 compared to $99 million for second quarter 2024, largely reflecting a $14 million increase in noninterest expense. The increase in noninterest expense was largely attributable to $15 million in Visa derivative valuation expense. Results for third quarter 2024 also reflect $2 million in restructuring costs compared to $3 million in the prior quarter.

Pre-tax loss for the Corporate segment was $114 million compared to $158 million for third quarter 2023, largely reflecting a $57 million increase in net interest income, partially offset by a $10 million increase in noninterest expense. The increase in net interest income was tied to the impact of funds transfer pricing. The increase in noninterest expense was largely driven by $15 million in derivative valuation expense as well as higher personnel expense. The increase in personnel expense was largely driven by higher salaries and employee benefits and deferred compensation expense, partially offset by lower incentive-based compensation. These increases in noninterest expense were partially offset by a decline in deposit insurance expense compared to third quarter 2023.

Pre-tax loss of $342 million for the nine months ended September 30, 2024 compared to $246 million for the same period of 2023. The increase in loss was largely driven by the $225 million gain on merger termination in 2023, offset by the $50 million contribution to the First Horizon Foundation. Results in 2024 also reflect a $51 million decrease in merger and integration related expense and $10 million in net FDIC special assessment expense.