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 table presents 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 $631 million in first quarter 2025 increased $1 million from fourth quarter 2024, and net interest margin increased 9 basis points to 3.42%, driven by lower interest-bearing deposit costs, partially offset by lower loan yields and loan volume. Loan yield decreased 20 basis points, and the cost of interest-bearing deposits decreased 38 basis points.

Average earning assets of $74.8 billion in first quarter 2025 decreased $949 million from fourth quarter 2024, largely due to a $773 million decrease in average loans and leases. Average interest-bearing liabilities decreased $244 million, largely reflecting a $1.0 billion decrease in average interest-bearing deposits, partially offset by a $630 million increase in average short-term borrowings and a $126 million increase in average term borrowings.

Net interest income increased $6 million from first quarter 2024 and the net interest margin increased 5 basis points

to 3.42% in first quarter 2025, driven by lower funding costs, partially offset by lower yields on earning assets. Yields on earning assets decreased 28 basis points while funding costs decreased 53 basis points.

Average earning assets increased $15 million from first quarter 2024, largely attributable to a $493 million increase in average loans and leases, a $235 million increase in average securities purchased under agreements to resell, and a $197 million increase in average trading securities, partially offset by a $528 million decrease in average interest-bearing deposits with banks and a $381 million decrease in average investment securities. Average interest-bearing liabilities increased $1.2 billion, largely driven by a $216 million increase in average interest-bearing deposits and an $840 million increase in average short-term borrowings.

Noninterest Income

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

Table I.2.3

NONINTEREST INCOME

Noninterest income of $181 million increased $82 million, or 83%, as fourth quarter 2024 included a $91 million loss associated with an opportunistic restructuring of a portion of the securities portfolio.

Fixed income of $49 million remained unchanged from the prior quarter. Fixed income average daily revenue of $586 thousand decreased 11% from $659 thousand in fourth

quarter 2024, offset by increased revenue associated with other products.

Other income decreased $8 million, largely driven by a $4 million decrease in deferred compensation income and a $3 million decrease in insurance commissions.

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

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Noninterest income for first quarter 2025 decreased $13 million, or 7%, compared to first quarter 2024, largely driven by an $11 million decline in deferred compensation income.

Fixed income of $49 million decreased $3 million from first quarter 2024, largely reflecting less favorable market conditions. Fixed income average daily revenue of $586

thousand decreased $145 thousand, or 20%, compared to the same quarter of 2024. Revenue from other products increased $7 million compared to first quarter 2024.

Deposit transactions and cash management fees of $40 million decreased $4 million, largely attributable to lower overdraft fees.

Noninterest Expense

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

Table I.2.4

NONINTEREST EXPENSE

Noninterest expense of $487 million decreased $21 million, or 4%, largely attributable to a decline in other expense which resulted from a $10 million contribution to the First Horizon Foundation and elevated checking account promotion expenses in fourth quarter 2024. Other expense also included $5 million in Visa derivative valuation expense in first quarter 2025.

Personnel expense of $279 million increased $3 million from the prior quarter, reflecting annual merit adjustments and incremental expense associated with performance award adjustments, partially offset by lower deferred compensation expense.

Decreases in operations services, legal and professional fees, and contract employment and outsourcing were largely attributable to the completion of technology projects which drove lower vendor costs.

Noninterest expense of $487 million decreased $28 million, or 5%, from first quarter 2024.

Personnel expense decreased $22 million compared to first quarter 2024, largely reflecting lower incentive-based compensation of $11 million and lower deferred compensation expense of $12 million.

Deposit insurance expense declined $11 million compared to the prior year quarter, largely attributable to lower FDIC special assessment expense.

The $2 million increase in other expense included $5 million in Visa derivative valuation expense in first quarter 2025.

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

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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 was $40 million for the first quarter 2025, compared to $10 million for the fourth quarter 2024 and $50 million for first quarter 2024. Net

charge-offs in first quarter 2025 were $29 million, or 19 basis points, compared to $13 million, or 8 basis points, in the prior quarter, and $40 million, or 27 basis points, in first quarter 2024. Reserve build was $11 million for first quarter 2025, compared to a reserve release of $3 million in the prior quarter. The ACL to total loans and leases ratio increased 2 basis points from year-end 2024 to 1.45%, driven by uncertainty in the macroeconomic outlook. 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 $63 million in first quarter 2025, compared to $41 million in fourth quarter 2024 and $57 million in first quarter 2024.

The effective tax rate was approximately 22.0%, 19.3%, and 22.5% for the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, 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 and executive compensation. 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.

A deferred tax asset ("DTA") or deferred tax liability ("DTL") 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 March 31, 2025, FHN’s gross DTA and gross DTLwere $728 million and $550 million, respectively, resulting in a net DTA of $178 million at March 31, 2025, compared with a net DTA of $227 million at December 31, 2024.

As of March 31, 2025, FHN had DTA balances related to federal and state income tax carryforwards of $25 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

During fourth quarter 2024, FHN reorganized its internal management structure and, accordingly, its segment reporting structure. Prior to the restructure, FHN's reportable segments were Regional Banking, Specialty Banking, and Corporate. As a result of the restructure, FHN revised its reportable segments to include: (1) Commercial, Consumer & Wealth, (2) Wholesale, and (3) Corporate. Segment results for periods prior to fourth quarter 2024 have been recast to adjust for the realignment of the segment reporting structure. 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.

Commercial, Consumer & Wealth

The Commercial, Consumer & Wealth segment generated pre-tax income of $353 million for first quarter 2025, a decrease of $22 million compared to fourth quarter 2024. Net interest income of $624 million decreased $11 million,

driven by lower loan yields, fewer days in the first quarter, and a decline in DDA balances, partially offset by lower deposit costs. Provision for credit losses of $38 million increased $23 million from the prior quarter. Noninterest income decreased $6 million compared to the prior quarter, largely driven by declines in insurance commissions, deposit transaction and cash management fees, and card and digital banking fees. Noninterest expense decreased $18 million compared to fourth quarter 2024, largely due to lower advertising and public relations expenses allocated to the Commercial, Consumer & Wealth segment compared to the previous quarter.

Pre-tax income for first quarter 2025 increased $9 million to $353 million, compared to $344 million for first quarter 2024. Net interest income decreased $1 million and noninterest income remained flat compared to first quarter 2024. The provision for credit losses decreased

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

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$6 million compared to first quarter 2024. Noninterest expense decreased $4 million compared to first quarter 2024, largely due to a decrease in personnel expense and other expense, partly offset by an increase in advertising and public relations costs allocated to the segment compared to the prior year.

Wholesale

Pre-tax income in the Wholesale segment of $29 million for first quarter 2025 decreased $7 million compared to fourth quarter 2024, largely driven by a $4 million decrease in revenue resulting from lower net interest income in first quarter 2025. Provision for credit losses increased $2 million and noninterest expense increased $1 million.

Fixed income of $49 million remained unchanged from the prior quarter, as a decline in average daily revenue was offset by an increase in other product revenue. Mortgage banking income of $8 million increased $1 million compared to the prior quarter.

Pre-tax income in the Wholesale segment increased $7 million compared to first quarter 2024. Revenue increased $5 million, primarily driven by higher net interest income compared to the previous year. Provision for credit losses was $3 million compared to $7 million in first quarter 2024. Noninterest expense increased $2 million, largely driven by higher personnel and outside services expense.

Corporate

Pre-tax loss for the Corporate segment was $97 million for first quarter 2025 compared to $200 million for fourth

quarter 2024. The lower pre-tax loss for first quarter 2025 largely reflected a $17 million increase in net interest income and an $87 million increase in noninterest income compared to fourth quarter 2024. The increase in noninterest income was largely attributable to lower securities losses in first quarter 2025 due to an opportunistic restructuring of a portion of the securities portfolio that occurred in fourth quarter 2024. Noninterest expense declined $3 million, largely driven by a $10 million contribution to the First Horizon Foundation in the prior quarter, partially offset by $5 million in Visa derivative valuation expense in the current quarter.

Pre-tax loss for the Corporate segment was $97 million for the first quarter 2025 compared to $112 million for first quarter 2024, largely reflecting a $10 million decline in noninterest income and a $26 million decrease in noninterest expense. The decrease in noninterest income was largely a result of lower deferred compensation income compared to first quarter 2024. The decrease in noninterest expense was largely driven by lower personnel and deposit insurance expense compared to first quarter 2024. The decrease in personnel expense was largely attributable to lower deferred compensation expense and incentive-based compensation. The decrease in deposit insurance expense was tied to lower FDIC special assessment of $1 million in first quarter 2025, compared to $10 million in first quarter 2024. These decreases in noninterest expense were partially offset by an increase in other expense, largely the result of $5 million in Visa derivative valuation expense in the current quarter.