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 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 $674 million in third quarter 2025 increased $33 million from second quarter 2025, and the net interest margin increased 15 basis points to 3.55%. Interest income and net interest margin benefited from increased accretion of $12 million related to the Main Street Lending Program. In addition, loan yields improved due to average balance growth in higher yielding portfolios and cash basis income. Loan yield increased 14 basis points, and the cost of interest-bearing deposits increased 2 basis points.

Average earning assets of $76.0 billion in third quarter 2025 increased $145 million from second quarter 2025, largely driven by a $236 million increase in average loans and leases. Average interest-bearing liabilities increased $5 million, reflecting a $1.2 billion increase in average interest-bearing deposits, partially offset by a $946 million decrease in average short-term borrowings and a $221 million decrease in average term borrowings.

Net interest income increased $47 million from third quarter 2024 and the net interest margin increased 24 basis points to 3.55% in third quarter 2025. Interest income and net interest margin benefited from increased accretion of $15 million related to the Main Street Lending Program. Increases were also largely 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 23 basis points while funding costs decreased 65 basis points.

Average earning assets decreased $89 million from third quarter 2024, largely driven by a $469 million decrease in average interest-bearing deposits with banks, partially offset by a $374 million increase in average loans and leases. Average interest-bearing liabilities increased $34 million, driven by a $147 million increase in average term borrowings, partially offset by a $89 million decrease in average interest-bearing deposits and a $24 million decrease in average 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, 2025, net interest income of $1.9 billion increased $65 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. Interest income and net interest margin also benefited from increased accretion of $18 million related to the Main Street Lending Program.

Total average earning assets increased $192 million for the nine months ended September 30, 2025 compared to the same period in 2024, largely driven by average loan growth of $465 million and higher average trading securities balances of $198 million, partially offset by declines of $396 million in interest-bearing cash and $130 million in investment securities.

The year-to-date net interest margin of 3.46% increased 11 basis points compared to 3.35% for the same period of 2024 as improvements in the rate paid on interest-bearing deposits and yields on the investment portfolio were partially offset by lower loan yields. The cost of interest-bearing liabilities decreased 57 basis points and earning asset yields decreased 28 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 $215 million increased $26 million, or 14%, compared to the prior quarter.

Fixed income of $57 million increased $15 million from the prior quarter as average daily revenue improved 40% to $771 thousand, reflecting more favorable market conditions.

Mortgage banking income of $15 million increased $5 million, largely driven by a $5 million pre-tax gain from a sale of mortgage servicing rights during the quarter.

Other income increased $4 million, in line with normal quarterly fluctuations.

Noninterest income for third quarter 2025 increased $15 million, or 8%, compared to third quarter 2024.

Fixed income of $57 million increased $10 million compared to third quarter 2024. Fixed income average daily revenue of $771 thousand increased $178 thousand, or 30%, compared to the same quarter of 2024, reflecting more favorable market conditions.

Mortgage banking income of $15 million increased $6 million, largely driven by a $5 million pre-tax gain from a sale of mortgage servicing rights during the quarter.

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 nine months ended September 30, 2025 and 2024.

Table I.2.5

NONINTEREST INCOME

For the nine months ended September 30, 2025, noninterest income of $585 million increased $4 million, or 1%, compared to the same period of 2024.

Fixed income increased $11 million for the nine months ended September 30, 2025, compared to the same period of 2024. Fixed income product revenue of $119 million increased $6 million largely driven by more favorable market conditions. Revenue from other products of $30 million increased $5 million primarily driven by increases in revenues from loan sales.

Deposit transactions and cash management fees decreased $9 million, largely attributable to lower overdraft fees.

Mortgage banking income of $33 million increased $5 million, largely driven by a $5 million pre-tax gain from a sale of mortgage servicing rights during the third quarter.

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 $550 million increased $59 million, or 12%, compared to the prior quarter.

Personnel expense of $296 million increased $14 million from the prior quarter, largely reflecting higher incentive-based compensation expense of $6 million and higher deferred compensation expense of $5 million. The increase in incentive-based compensation was driven by higher variable compensation within the fixed income business. The increase in deferred compensation expense reflects the impact of a $4 million expense credit in the second quarter for an accrual release related to a business unit divested over a decade ago.

Legal and professional fees and contract employment and outsourcing increased $7 million and $3 million, respectively, largely reflecting project expenses in technology and risk.

Contributions expense increased $22 million, largely driven by a $20 million contribution to the First Horizon Foundation in the third quarter.

Advertising and public relations expense decreased $2 million compared to the prior quarter, largely from seasonal declines in advertising campaign costs.

Other expense increased $15 million, largely attributable to $10 million in Visa derivative valuation expense in the third quarter.

Noninterest expense of $550 million increased $39 million, or 8%, compared to third quarter 2024.

Personnel expense increased $14 million compared to third quarter 2024, largely reflecting higher salaries and benefits of $10 million and higher incentive-based compensation expense of $3 million.

Computer software expense increased $4 million, largely attributable to increased spend related to technology projects.

Legal and professional fees increased $9 million, largely reflecting project expenses in technology and risk.

Contributions expense increased $19 million, largely driven by a $20 million contribution to the First Horizon Foundation during the third quarter of 2025.

The $4 million decline in other expense was largely attributable to lower Visa derivative valuation expense of $5 million when comparing the periods.

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 nine months ended September 30, 2025 and 2024.

Table I.2.7

NONINTEREST EXPENSE

For the nine months ended September 30, 2025, noninterest expense increased $2 million compared to the same period of 2024.

Personnel expense of $856 million decreased $6 million, reflecting lower deferred compensation expense and incentive-based compensation expense, partially offset by higher salaries expense.

Net occupancy expense increased $10 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 $11 million for the year-to-date period, largely from increased spending related to technology projects.

Legal and professional fees increased $7 million, largely reflecting project expenses in technology and risk.

Deposit insurance expense of $36 million decreased $15 million, largely attributable to lower FDIC special assessment expense.

Contract employment and outsourcing decreased $13 million, primarily due to expense reductions related to recently completed technology projects.

Contributions expense increased $19 million, largely driven by a $20 million contribution to the First Horizon Foundation in the third quarter of 2025.

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 a $5 million credit for the third quarter 2025, compared to a $30 million expense for the second quarter 2025 and a $35 million expense for

third quarter 2024. Net charge-offs in third quarter 2025 were $26 million, or 17 basis points, compared to $34 million, or 22 basis points, in the prior quarter, and $24 million, or 15 basis points, in third quarter 2024.

The ACL to total loans and leases ratio decreased 5 basis points from second quarter 2025 to 1.38%, largely driven by reductions in criticized and classified graded credits and favorable portfolio mix. For additional information about the allowance for credit losses and general asset quality trends, refer to the Asset Quality section in this MD&A.

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

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Income Taxes

FHN recorded income tax expense of $78 million in third quarter 2025, compared to $64 million in second quarter 2025 and $58 million in third quarter 2024. For thenine months ended September 30, 2025 and 2024, FHN recorded income tax expense of $205 million and $171 million, respectively.

The effective tax rate was approximately 22.7%, 20.8%, and 20.6% for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, respectively. The effective tax rate was approximately 21.8% and 21.5% for thenine months ended September 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 September 30, 2025, FHN’s gross DTA and gross DTLwere $637 million and $552 million, respectively, resulting in a net DTA of $85 million at September 30, 2025, compared with a net DTA of $227 million at December 31, 2024.

As of September 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 does not expect a significant impact from 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. Provisions limiting the deductibility of annual corporate charitable deductions to amounts in excess of 1% of taxable income may affect the timing and amount of charitable donations.

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 $410 million for third quarter 2025, an

increase of $31 million compared to second quarter 2025. Net interest income of $660 million increased $27 million, driven in part by the benefit of increased accretion of $12 million related to the Main Street Lending Program. Provision for credit losses of $2 million decreased $11 million from the prior quarter. Noninterest income increased $4 million compared to the prior quarter, largely driven by increases in deposit transactions and cash management and trust services and investment management. Noninterest expense increased $11 million compared to second quarter 2025, largely due to increased personnel expense and higher marketing and technology expenses allocated to the Commercial, Consumer & Wealth segment compared to the previous quarter.

Pre-tax income for third quarter 2025 increased $51 million to $410 million, compared to $359 million for

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

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third quarter 2024, driven by a $24 million increase in total revenue and a $40 million decrease in the provision for credit losses, partly offset by a $13 million increase in noninterest expense. Total revenue increased $24 million as net interest income increased $26 million and noninterest income decreased $2 million compared to third quarter 2024. The increase in net interest income was largely driven by lower rates paid on interest-bearing deposits. Noninterest expense increased $13 million compared to third quarter 2024, largely due to higher operations expenses and technology expenses allocated to the segment compared to the prior year.

Pre-tax income of $1.1 billion for the nine months ended September 30, 2025 increased $98 million compared to the same period of 2024, largely from a $91 million decrease in the provision for credit losses. Total revenue increased $14 million, largely driven by a $19 million increase in net interest income. The increase in net interest income was largely driven by improvement in the cost of interest-bearing deposits. Noninterest expense increased $7 million, largely attributable to higher operations and marketing expenses allocated to the segment in the current year, partially offset by lower other expenses.

Wholesale

Pre-tax income in the Wholesale segment of $51 million for third quarter 2025 increased $22 million compared to second quarter 2025, reflecting a $22 million increase in revenue and a $7 million decrease in the provision for credit losses, offset by a $7 million increase in noninterest expense.

The increase in revenue was primarily driven by a $20 million increase in noninterest income. Fixed income of $57 million increased $15 million from the prior quarter, as average daily revenue improved 40% reflecting more favorable market conditions. Mortgage banking income of $15 million increased $5 million compared to the prior quarter, largely driven by a $5 million pre-tax gain from a sale of mortgage servicing rights.

The increase in noninterest expense was largely attributable to higher personnel expense of $5 million tied to higher incentive-based compensation from the fixed income increase.

Pre-tax income in the Wholesale segment increased $11 million compared to third quarter 2024. Revenue increased $25 million, as net interest income increased $8 million and noninterest income increased $17 million compared to the same quarter of 2024. The increase in noninterest income was largely driven by a $10 million increase in fixed income and a $7 million increase in mortgage banking income. Provision for credit losses increased $6 million compared to third quarter 2024. Noninterest expense increased $8 million, largely driven by higher personnel expense tied to the increase in incentive-based compensation.

Pre-tax income of $111 million for the nine months ended September 30, 2025 increased $24 million from the same period of 2024, largely reflecting a $44 million increase in revenue partially offset by a $12 million increase in noninterest expense and an $8 million increase in the provision for credit losses. The increase in revenue was largely a result of higher net interest income of $29 million, largely driven by growth in loans to mortgage companies. Noninterest income also increased $15 million, driven by higher fixed income of $11 million and higher mortgage banking income of $6 million. The increase in noninterest expense was largely attributable to higher personnel expense tied to the increase in incentive-based compensation from the improvement in fixed income.

Corporate

Pre-tax loss for the Corporate segment was $117 million for third quarter 2025 compared to $99 million for second quarter 2025. The higher pre-tax loss for third quarter 2025 largely reflected a $41 million increase in noninterest expense, partially offset by a $17 million decrease in the provision for credit losses and a $4 million decrease in net interest expense compared to second quarter 2025. The increase in noninterest expense was largely attributable to a $20 million contribution to the First Horizon Foundation and $10 million in Visa derivative valuation expense.

Pre-tax loss for the Corporate segment was $117 million for third quarter 2025 compared to $118 million for third quarter 2024, largely reflecting a $13 million decrease in net interest expense, a $18 million increase in noninterest expense, and a $6 million decrease in the provision for credit losses. The increase in noninterest expense was largely attributable to a $20 million contribution to the First Horizon Foundation in third quarter 2025.

Pre-tax loss of $315 million for the nine months ended September 30, 2025 compared to $335 million for the same period of 2024. The decrease in loss was driven by lower noninterest expense of $17 million and lower net interest expense of $17 million, partially offset by an increase in provision for credit losses of $8 million. The decline in noninterest expense was largely attributable to an FDIC special assessment of $12 million in the prior year, lower contract employment and outsourcing expense of $13 million, and $10 million in restructuring costs incurred during the prior year, partially offset by a $20 million contribution to the First Horizon Foundation in the current year. The increase in revenue was driven by higher net interest income of $17 million offset by lower noninterest income of $6 million.