FIRST HORIZON CORP

FHN’s future results could be affected both positively and negatively by several known trends. Key among those are changes in the U.S. and global economy and outlook, government actions affecting interest rates, and government actions and proposals which could have positive or negative impacts on the economy at large or on certain businesses, industries, or sectors, including changes in fiscal policy and changes in trade policy, such as the imposition of tariffs and related retaliatory responses. Additional risks relate to political uncertainty,

changes in federal policies (including those publicly discussed, formally proposed, or recently implemented) and the potential impacts of those changes on our businesses and clients, and whether FHN’s strategic initiatives will succeed.

In addition to trends and events noted elsewhere in this MD&A, FHN believes the following trends and events are noteworthy at this time.

Federal Reserve Policy, the Yield Curve, Recession, Fiscal & Trade Policy, Other Events

Federal Reserve and Rates

The Federal Reserve raised short-term rates several times in 2022 and 2023 to contain strong inflation which began in 2021 and peaked in 2022. The rise in short-term interest rates by the Federal Reserve in 2022 was both rapid and substantial, taking the overnight Fed Funds rate from 0.20% in March 2022 to 5.33% by the fall of 2023. As a result of Federal Reserve rate cuts of 50 basis points in September 2024 and cuts of 25 basis points in both November and December, the overnight Fed Funds fell back to 4.33% by the end of 2024. But despite the Federal Reserve's rapid and vigorous tightening of monetary policy in 2022 and 2023 and limited rate cuts in 2024, measures of inflation still generally remain higher than the Federal Reserve's stated goal of 2%.

In both September and October of 2025, the Federal Reserve announced 25 basis point cuts in the Fed Funds rate, lowering the target range to 3.75% to 4.00%. In its statement announcing the October rate cut, the Federal Reserve noted that inflation has moved up since earlier in the year and remains elevated, but it cited downside risks to employment and uncertainty about the economic outlook as reasons for the cut. FHN cannot predict when or how much short-term rates will be changed, how market-driven long-term rates will behave, or how those actions may affect economic or business conditions or financial markets.

Yield Curve

Unusual yield curve effects, including inversion, are common when monetary policy changes. A traditional

measure of inversion occurs when the two-year U.S. Treasury rate is higher than the ten-year rate. Traditional inversion was sustained continuously from the summer of 2022 until September 2024, an unusually long period. The degree of inversion varied during that period, but often was much deeper than is typical. Sustained traditional yield curve inversion is viewed, with statistical support, as a harbinger of economic recession, but recession did not occur.

Since the fall of 2024, the yield curve has continued to modestly steepen as declines in short-term rates have outpaced declines in longer-term rates. FHN cannot predict whether this trend will continue.

Yield curve flattening and inversion generally reduce the profit FHN can make from lending by compressing FHN's net interest margin, and also generally reduce FHN's revenues from its fixed income bond trading. Both of those impacts occurred over the last three calendar years, with fluctuations. During each of the first three quarters of 2025, net interest margin has consistently exceeded 2024 levels, as the yield curve has maintained its more typical upward slope, while fixed income bond trading revenues have fluctuated with changing market conditions. For the third quarter of 2025, net interest margin expanded by 15 basis points compared to the second quarter, driven in part by the steepening yield curve, and fixed income bond trading revenues increased due to improved market conditions. Refer to Interest Rate & Yield Curve Risks, located in Item 1A. Risk Factors of FHN's Annual Report on Form 10-K for the year ended December 31, 2024, for a

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discussion of the risks to FHN associated with flattening and inversion.

Recession

The U.S. economy contracted (experienced negative growth) during the first two quarters of 2022, in both cases modestly. Although the occurrence of two consecutive quarters of contraction often coincides with recession, in 2022, it did not. The economy has expanded in each quarter since then, except for a slight decline in the first quarter of 2025 before expansion resumed in the second quarter of 2025. The expansion rate has varied without a sustained trend.

Recession expectations have moderated significantly since 2023, before reemerging in early 2025 due to uncertainties with respect to anticipated changes in trade and fiscal policies.

Fiscal Policy

Fiscal policy (spending and taxation) directly affects U.S. government annual deficits or surpluses, along with the size and trajectory of the national debt. Fiscal policy often has a significant impact on the U.S. economy. The changes in the executive and legislative branches of government in 2025 have resulted in significant changes in U.S. fiscal policy, including through the enactment on July 4, 2025 of federal legislation commonly referred to as the "One Big Beautiful Bill Act." This legislation may have a significant impact on general economic and business conditions and, accordingly, could materially affect FHN's financial condition and results of operations. Refer to the Income Taxes section of this MD&A for additional information regarding the impact of this legislation on FHN.

Trade Policy

In 2025, the U.S. government announced new tariffs on a variety of goods and services. As of early November 2025, the timing, scope and duration of tariffs, as well as the timing, scope and duration of any retaliatory measures by foreign governments, remain uncertain, as does the impact of tariffs on economic growth, inflation rates, and employment rates. Any significant change in economic conditions related to tariffs could materially affect our financial condition and results of operations.

2023 Banking Crisis

In 2023, three large regional U.S. banks failed after sudden large deposit outflows. In the aftermath of these failures, bank investors and clients across the U.S. became more focused on deposit mix, funding risk management, and other safety-soundness concerns. Most U.S. banks saw abrupt net outflows of deposits in the spring of 2023 following the failures. Most have since recouped those deposits, mainly by offering higher interest rates. In 2024, competition for deposits was quite intense. Increased competition for deposits has continued during the first three quarters of 2025 and could continue throughout the remainder of 2025 and in 2026.

October 2025 Government Shutdown

On October 1, 2025, the U.S. federal government began a shutdown as a result of congressional failure to pass appropriations legislation for the 2026 fiscal year. As of early November 2025, the government shutdown remains ongoing. The shutdown has resulted in the furlough of hundreds of thousands of U.S. government employees and the interruption or impairment of numerous government functions. Especially if prolonged, the shutdown could have a significant impact on general economic and business conditions and, accordingly, could materially affect FHN's financial condition and results of operations.

Impacts on FHN

In 2022, FHN benefited significantly from rising rates as the rise in lending rates outpaced the rise in deposit and other funding rates. In the first quarter of 2023, that outpacing ended, and FHN's net interest margin ("NIM") started to compress. FHN was able to somewhat relieve the compression during 2023, in part by using increased deposits and capital to reduce more-expensive borrowings, so that NIM in 2023 improved over 2022. NIM for the entire year 2024 was flat, declining very modestly from 2023, as improvements in loan yields were largely offset by higher funding costs, especially for deposits. However, during the first quarter of 2025 NIM expanded, with declines in deposit rates more than offsetting declines in loan yields. NIM expansion over 2024 levels continued in the second and third quarters of 2025, though NIM declined in the second quarter by 2 basis points as compared with the first quarter of 2025, as increased deposit rates exceeded increases in loan yields. NIM expansion resumed in the third quarter of 2025.

In addition, some of FHN's businesses were negatively impacted by rate actions in 2022, 2023, and 2024 and by the unusual yield curve. Rate increases pushed home mortgage rates in the U.S. much higher in 2022 and 2023, reducing demand. FHN's direct mortgage lending and lending to mortgage companies saw business decline significantly in 2022 and 2023. Mortgage rates have modestly abated since 2023 and FHN's mortgage business has seen improvement, but rates have remained elevated. However, the negative impacts of these higher rates have been offset by gains in market share. Similarly, FHN's revenues from bond trading and related activities fell significantly in 2022 and 2023 due to rising rates coupled with elevated market volatility. In 2024, bond trading revenues improved markedly, but with significant volatility quarter-to-quarter due to changing market expectations about rate moves, among other things. The quarter-to-quarter volatility in bond trading revenue that marked 2024 has continued in 2025. For the first and third quarters of 2025 revenues from bond trading and related activities continued to show the improvement that marked 2024, but those revenues declined in second quarter due to less favorable market conditions.

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Other Regulatory Proposals

In 2023, the Board of Governors of the Federal Reserve and other regulators proposed regulatory changes that would, if implemented, significantly increase regulatory constraints and costs on all U.S. banks with assets over $100 billion, but those regulations appear unlikely to be adopted in the form originally proposed. A few new requirements would apply to banks, like FHN, with assets over $50 billion, but by far the main impacts would fall on banks greater than $100 billion in assets.

The proposals touch upon many regulatory requirements, including debt and equity capital requirements, credit risk standards, and asset risk-weighting. The increased requirements also would entail additional compliance costs.

Greenhouse Gas (GHG) Reporting Regimes

In October 2023, the state of California enacted laws which, taken together, will require most larger companies doing business in California to annually report their greenhouse gas ("GHG") emissions, with an external assurance requirement, and to biennially report their climate-related financial risks and risk-mitigation measures. The California laws include multi-year phase in periods and encompass Scope 1, Scope 2, and Scope 3 GHG emissions. As currently enacted, the laws require reporting for Scopes 1 and 2 GHG emissions to begin in 2026 for the 2025 fiscal year. The California laws, especially the application of those laws to companies outside of California, have been challenged in court. While the federal court overseeing the principal litigation contesting California's climate disclosure laws has dismissed certain challenges, others remain pending and, with appeals, these challenges could take many years to resolve. A motion for a preliminary injunction barring implementation of California's GHG regulations was denied in August 2025, but the plaintiffs have appealed the denial to the U.S. Court of Appeals for the Ninth Circuit. Pending resolution of the appeal, as well as other litigation challenging California's GHG laws, those laws remain on track for reporting to begin in 2026. Other states, including New York, New Jersey, and Illinois, are considering climate-related reporting measures similar to California's.

In March 2024, the U.S. Securities and Exchange Commission ("SEC") adopted final rules, “The Enhancement and Standardization of Climate-Related Disclosures for Investors” (the “SEC Climate Disclosures Rules”). These Rules would require all U.S. companies with publicly-traded securities to report annually their Scope 1 and 2 GHG emissions and related risk management processes and would include a related financial statement and audit requirement, among other things. Refer to "Accounting Changes" below for additional information. The SEC Climate Disclosures Rules also have a lengthy phase-in period. There is considerable uncertainty as to

whether the SEC's Climate Disclosures Rules will be implemented as adopted, both because the SEC has suspended effectiveness of those rules while legal challenges are pending and because the shifts in the executive and legislative branches of government could lead the SEC to withdraw or significantly alter those rules. In March 2025, the SEC voted to end its defense of its Climate Disclosure Rules in the pending legal action, but the SEC has not withdrawn or modified its Climate Disclosure Rules nor has the legal challenge to those rules been dismissed. In a July 23, 2025 court filing, the SEC stated it did not intend to review or reconsider its Climate Disclosure Rules prior to the court ruling on the pending petitions challenging those rules. On September 12, 2025, the U.S. Court of Appeals for the Eighth Circuit ordered the litigation to be held in abeyance until the SEC reconsiders its Climate Disclosures Rules through formal notice-and-comment rulemaking or renews its defense of the rules. As a result of the SEC's and the Court's actions, the actual timing of any implementation of the Climate Disclosures Rules, and the form of the rules if implemented, remains uncertain.

Potential Business Impacts

Direct compliance costs related to the SEC's and California's GHG reporting regimes, if implemented, will include creating systems to measure or estimate and capture relevant data, staffing, and engagement of vendors, including a firm to provide required assurances (somewhat analogous to a financial statement auditor).

In addition, if FHN is required to support Scope 3 reporting by obtaining GHG-related information from customers, effectively FHN would be required to impose costs and/or inconveniences on its customers. Other banks in FHN's markets, particularly those that are private and not doing business in California, could provide financial services without those requirements, putting FHN at a competitive disadvantage.

Market Growth and Weather Events

FHN's principal markets are in the southern and southeastern United States, including most of the major gulf coast markets and several markets on the southern

Atlantic seacoast. Many of FHN's markets, both coastal and non-coastal, have experienced significant population growth over at least the past twenty years, outpacing the

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growth rate for the U.S. as a whole. That population growth generally has been accompanied by economic growth.

Many of FHN's fastest growing markets, including most significantly those in Florida, can be impacted significantly by hurricanes and other severe coastal weather events. As those markets grow, FHN's economic commitment to them grows, as does FHN's financial exposure to those events.

Especially since 2022, it has been widely reported that the economic costs of hurricane and other severe weather events in the southeastern U.S. have been rising significantly. This reported increase in casualty risks and costs is being reflected in property insurance practices which currently are in significant flux. The insurance industry and insurance regulators are being forced to revise their risk assessment and premium pricing policies

in coastal and other impacted areas as loss experience has deviated from earlier predictions, sometimes badly. In Florida, for example, some smaller carriers failed, some larger carriers left markets, and other carriers significantly increased the premiums of hurricane-related insurance, narrowed coverage, or both, resulting in numerous proposals for legislative and regulatory reform.

The availability, reliability, and cost of adequate property insurance is a significant concern for FHN as well as FHN's clients in affected markets. Instability in property insurance has made, and continues to make, FHN's business decisions more difficult. That instability increases FHN's risks of loan loss and business downturn.

More fundamentally, elevated insurance and casualty costs blunt a key factor driving growth in many of these high-growth markets: lower costs of living. If market growth slows, FHN's business could be impacted.