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 $641 million in second quarter 2025 increased $10 million from first quarter 2025, and the net interest margin decreased 2 basis points to 3.40%. The increase in net interest income was driven by loan growth, primarily in loans to mortgage companies. The decline in the net interest margin was attributable to higher deposit costs associated with increased brokered deposit balances. Loan yield increased 3 basis points, and the cost of interest-bearing deposits increased 4 basis points.

Average earning assets of $75.9 billion in second quarter 2025 increased $1.1 billion from first quarter 2025, largely due to a $906 million increase in average loans and leases. Average interest-bearing liabilities increased $806 million, reflecting a $660 million increase in average short-term borrowings and a $224 million increase in average term borrowings, partially offset by a $78 million decrease in average interest-bearing deposits.

Net interest income increased $12 million from second quarter 2024 and the net interest margin increased 2 basis points to 3.40% in second quarter 2025, driven by lower interest-bearing deposit costs and the impact of the investment portfolio repositioning in fourth quarter 2024, partially offset by lower loan yields. Yields on earning assets decreased 33 basis points while funding costs decreased 52 basis points.

Average earning assets increased $644 million from second quarter 2024, largely driven by a $522 million increase in average loans and leases, a $242 million increase in average trading securities, and a $69 million increase in average investment securities, partially offset by a $189 million decrease in average interest-bearing deposits with banks. Average interest-bearing liabilities increased $1.1 billion, driven by a $262 million increase in average interest-bearing deposits, a $433 million increase in average short-term borrowings, and a $386 million increase in average 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 six months ended June 30, 2025, net interest income of $1.3 billion increased $19 million from the same period one year ago, largely driven by lower funding costs and the impact of the investment portfolio repositioning in fourth quarter 2024, partially offset by lower loan yields.

Total average earning assets increased $333 million in the first six months of 2025, largely driven by average loan growth of $510 million and higher average trading securities balances, partially offset by lower levels of investment securities and interest-bearing cash.

The year-to-date net interest margin of 3.41% increased 3 basis points compared to 3.38% for the same period of 2024 as earning asset yields decreased 31 basis points and the cost of interest-bearing liabilities decreased 53 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

NM - not meaningful

Noninterest income of $189 million increased $8 million, or 4%, compared to the prior quarter.

Fixed income of $42 million declined $7 million from the prior quarter as average daily revenue decreased 6% to $550 thousand as a result of less favorable market conditions, and revenue from other products also decreased.

Other income increased $8 million, largely driven by a $10 million increase in deferred compensation income.

Noninterest income for second quarter 2025 increased $3 million, or 2%, compared to second quarter 2024.

Fixed income of $42 million increased $2 million compared to second quarter 2024. Fixed income average

daily revenue of $550 thousand increased $62 thousand, or 13%, compared to the same quarter of 2024. Revenue from other products decreased $1 million compared to second quarter 2024.

Deposit transactions and cash management fees of $41 million decreased $3 million, largely attributable to lower overdraft fees.

Other income increased $4 million, largely driven by a $5 million increase in deferred compensation income.

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

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The following table presents the significant components of noninterest income for the six months ended June 30, 2025 and 2024.

Table I.2.5

NONINTEREST INCOME

For the six months ended June 30, 2025, noninterest income of $370 million decreased $11 million, or 3%, compared to the same period of 2024.

Fixed income remained relatively unchanged for the six months ended June 30, 2025, compared to the same period of 2024. Fixed income product revenue of $70 million decreased $6 million largely driven by less favorable market conditions. Revenue from other products of $21 million increased $5 million primarily driven by increases in revenues from loan sales.

Deposit transactions and cash management fees decreased $7 million, largely attributable to lower overdraft fees.

Brokerage, management fees and commissions increased $3 million, largely driven by higher wealth management fees.

Other income decreased $3 million, largely the result of a $6 million decline in deferred compensation income, partially offset by a $3 million increase in bank owned life insurance.

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

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Noninterest Expense

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

Table I.2.6

NONINTEREST EXPENSE

Noninterest expense of $491 million increased $4 million, or 1%, compared to the prior quarter.

Personnel expense of $282 million increased $3 million from the prior quarter, reflecting higher deferred compensation expense of $6 million and higher salaries and benefits of $5 million, partially offset by lower incentive-based compensation expense of $8 million. Deferred compensation expense for the second quarter reflects the impact of a $4 million expense credit for an accrual release related to a business unit divested over a decade ago. The increase in salaries and benefits was primarily due to higher day count, seasonality in benefits, and strategic investments in personnel. The decrease in incentive-based compensation primarily reflects a reduction from first quarter adjustments and lower retention expense.

Advertising and public relations expense increased $4 million compared to the prior quarter, largely from a seasonal increase in advertising spend.

Other expense declined $7 million, largely attributable to $5 million in Visa derivative valuation expense in the prior quarter.

Noninterest expense of $491 million decreased $9 million, or 2%, compared to second quarter 2024.

Personnel expense increased $3 million compared to second quarter 2024, reflecting higher salaries and benefits of $9 million, partially offset by lower incentive-based compensation expense of $6 million.

Computer software expense increased $5 million, largely attributable to increased spend related to technology projects.

Deposit insurance expense declined $4 million and included a $1 million expense credit for the FDIC special assessment compared to an expense of $2 million in second quarter 2024.

Contract employment and outsourcing declined $6 million, largely attributable to the completion of recent technology projects.

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

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The following table presents the significant components of noninterest expense for the six months ended June 30, 2025 and 2024.

Table I.2.7

NONINTEREST EXPENSE

For the six months ended June 30, 2025, noninterest expense decreased $37 million, or 4%, compared to the same period of 2024.

Personnel expense of $561 million decreased $19 million, reflecting lower deferred compensation expense and incentive-based compensation expense, partially offset by higher salaries expense.

Net occupancy expense increased $7 million for the year-to-date period, largely attributable to increased spending tied to property management services as well as various other maintenance projects.

Computer software expense increased $7 million for the year-to-date period, largely from increased spending related to technology projects.

Deposit insurance expense of $25 million decreased $15 million, largely attributable to lower FDIC special assessment expense.

Contract employment and outsourcing decreased $12 million, primarily due to expense reductions related to recently completed technology projects.

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 $30 million for the second quarter 2025, compared to $40 million for the first quarter 2025 and $55 million for second quarter 2024. Net charge-

offs in second quarter 2025 were $34 million, or 22 basis points, compared to $29 million, or 19 basis points, in the prior quarter, and $34 million, or 22 basis points, in second quarter 2024.

The ACL to total loans and leases ratio decreased 3 basis points from first quarter 2025 to 1.42%, largely driven by growth in loans to mortgage companies, which have a lower loss history, a $17 million decline in NPLs, and lower classified loan balances. 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 $64 million in second quarter 2025, compared to $63 million in first quarter

2025 and $56 million in second quarter 2024. For thesix months ended June 30, 2025 and 2024, FHN recorded

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

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income tax expense of $127 million and $113 million, respectively.

The effective tax rate was approximately 20.8%, 22.0%, and 21.5% for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. The effective tax rate was approximately 21.3% and 22.0% for thesix months ended June 30, 2025 and 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 June 30, 2025, FHN’s gross DTA and gross DTLwere $691 million and $551 million, respectively, resulting in a net DTA of $140 million at June 30, 2025, compared with a net DTA of $227 million at December 31, 2024.

As of June 30, 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.

Federal Tax Legislation

On July 4, 2025, federal legislation commonly referred to as the “One Big Beautiful Bill Act” was enacted, resulting in changes to U.S. federal income tax law. The legislation includes several provisions that may impact the timing and magnitude of certain tax deductions and tax credits. FHN anticipates that the accelerated federal tax deductions for bonus depreciation and research or experimental expenditures will reduce its federal tax liability starting in 2025. Since these provisions solely reflect differences in timing for tax deductions they will not affect the recorded amounts of income tax expense. FHN is currently assessing the impact of provisions that sunset certain Section 48E Clean Electricity Tax Credits on its future financial results. FHN applies the deferral method to all Section 48E credits, resulting in offset of the credit amount against the related loan/lease and amortization of the credit to interest income over the life of the loan/lease, which typically have long-durations.

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 $379 million for second quarter 2025, an increase of $26 million compared to first quarter 2025. Net interest income of $633 million increased $9 million, largely driven by loan growth and higher loan yield. Provision for credit losses of $13 million decreased $25 million from the prior quarter. Noninterest income increased $3 million compared to the prior quarter, largely

driven by increases in deposit transactions and cash management and other service charges and fees. Noninterest expense increased $11 million compared to first quarter 2025, largely due to higher operations expenses, advertising and public relations expenses, and technology expenses allocated to the Commercial, Consumer & Wealth segment compared to the previous quarter.

Pre-tax income for second quarter 2025 increased $40 million to $379 million, compared to $339 million for second quarter 2024, largely driven by a $43 million decrease in the provision for credit losses. Total revenue decreased $6 million as net interest income decreased $4 million and noninterest income decreased $2 million compared to second quarter 2024. Noninterest expense decreased $3 million compared to second quarter 2024, largely due to a decrease in other expense, partly offset by an increase in operations expenses allocated to the segment compared to the prior year.

Pre-tax income of $732 million for the six months ended June 30, 2025 increased $48 million compared to the same period of 2024, largely from a $49 million decrease

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

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in the provision for credit losses. Noninterest expense decreased $6 million, largely attributable to lower personnel expense and other expense, partially offset by higher operations expenses and advertising and public relations expenses allocated to the segment in the current year.

Wholesale

Pre-tax income in the Wholesale segment of $29 million for second quarter 2025 remained flat compared to first quarter 2025, with a $3 million increase in the provision for credit losses offsetting a $2 million increase in revenue and $1 million decline in noninterest expense. Net interest income increased $8 million compared to the first quarter, largely driven by growth in loans to mortgage companies.

Fixed income of $42 million decreased $7 million from the prior quarter, as average daily revenue declined 6% and revenue from other products also decreased. Mortgage banking income of $10 million increased $2 million compared to the prior quarter as home purchase seasonality picked up slightly.

Pre-tax income in the Wholesale segment increased $3 million compared to second quarter 2024. Revenue increased $11 million, primarily driven by higher net interest income compared to the same quarter of 2024. The increase in net interest income was largely driven by loan growth, primarily in loans to mortgage companies. Provision for credit losses was $6 million compared to $1 million in second quarter 2024. Noninterest expense increased $3 million, largely driven by higher personnel expense.

Pre-tax income of $59 million for the six months ended June 30, 2025 increased $12 million from the same period of 2024, largely reflecting a $16 million increase in revenue partially offset by a $3 million increase in noninterest expense and a $1 million increase in the provision for credit losses. The increase in revenue was largely a result of higher net interest income driven by loan growth, primarily in loans to mortgage companies. The increase in noninterest expense was largely attributable to higher personnel expense.

Corporate

Pre-tax loss for the Corporate segment was $99 million for second quarter 2025 compared to $97 million for first quarter 2025. The higher pre-tax loss for second quarter 2025 largely reflected a $12 million increase in the provision for credit losses, partly offset by a $4 million increase in revenue and $6 million decrease in noninterest expense compared to first quarter 2025. The decrease in noninterest expense was largely attributable to lower deposit insurance expense tied to a $1 million FDIC special assessment expense credit in the current quarter and a decrease in other expense due to $5 million in Visa derivative valuation expense in the prior quarter.

Pre-tax loss for the Corporate segment was $99 million for second quarter 2025 compared to $105 million for second quarter 2024, largely reflecting a $5 million increase in net interest income, a $5 million increase in noninterest income and $9 million decrease in noninterest expense, partially offset by a $13 million increase in the provision for credit losses. The increase in noninterest income was largely a result of higher deferred compensation income compared to second quarter 2024. The decrease in noninterest expense reflects a $4 million expense credit related to an accrual release in deferred compensation during the current quarter, lower deposit insurance expense tied to an FDIC special assessment of $2 million in the prior year, and $3 million in restructuring costs incurred in second quarter 2024.

Pre-tax loss of $197 million for the six months ended June 30, 2025 compared to $217 million for the same period of 2024. The decrease in loss was largely driven by lower noninterest expense in the current year due to an FDIC special assessment of $12 million in the prior year, $9 million in restructuring costs incurred during the prior year, and a $4 million expense credit related to an accrual release in deferred compensation in the current year. These decreases were partially offset by $5 million in Visa derivative valuation expense in the current year.