FIRST HORIZON CORP

Following is a discussion of FHN's results of operations for 2025 compared to 2024. For a description of FHN's results of operations for 2024, see Results of Operations - 2024 compared to 2023 in Item 7 in the 2024 Form 10-K which is incorporated herein by reference.

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.

Net interest income of $2.6 billion in 2025 increased $111 million, or 4%, from 2024. The increase was largely attributable to lower deposit pricing, partially offset by lower loan yields. Interest income decreased $166 million, largely driven by lower interest on loans and leases of $176 million. Interest expense decreased $277 million, largely due to lower interest expense on deposits of $281 million.

FHN's net interest margin increased 12 basis points to 3.47% in 2025 compared to 2024 and the net interest spread increased 31 basis points to 2.69% over the same period. The increase in the margin was attributable to a 57 basis point decrease in the cost of interest-bearing liabilities, partially offset by a 26 basis point decrease in earning asset yields.

Total average earning assets increased $469 million in 2025, largely driven by average loan growth of $605 million and a $220 million increase in average trading securities, partially offset by lower average interest-bearing deposits with banks of $351 million. Total average interest-bearing liabilities increased $937 million, largely driven by an increase of $514 million in federal funds purchased and securities sold under agreements to repurchase, $206 million in term borrowings, and average interest-bearing deposit growth of $224 million.

The following table presents the major components of net interest income and net interest margin.

ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)

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Table 7.2

AVERAGE BALANCES, NET INTEREST INCOME AND 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.

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The following table presents the changes in interest income and interest expense due to changes in both average rate and average volume.

Table 7.3

ANALYSIS OF CHANGES IN NET INTEREST INCOME

(a) The changes in interest due to both rate and volume have been allocated to change due to rate and change due to volume in proportion to the absolute amounts of the changes in each.

(b) Variances are computed on a line-by-line basis and are non-additive.

(c) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21% and, where applicable, state income taxes.

ITEM 7. 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 decreased to $65 million in 2025, compared to $150 million in 2024, largely reflecting declines in criticized and classified loans and a more favorable portfolio mix. Net charge-offs were $120 million in 2025 compared to $112 million in 2024.

For additional information about general asset quality trends, refer to the Allowance for Credit Losses and the Asset Quality sections in this MD&A.

Noninterest Income

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

Table 7.4

NONINTEREST INCOME

NM – Not meaningful

Noninterest income of $797 million increased $118 million from $679 million in 2024, largely driven by prior year securities losses of $91 million from a restructuring of the AFS portfolio, as well as increases in fixed income and mortgage banking income. Noninterest income represented 23% and 21% of total revenue for 2025 and 2024, respectively.

Fixed income improved $19 million, or 10%, for 2025 compared to 2024. Fixed income product revenue increased $13 million, largely driven by more favorable market conditions. Revenue from other products increased $6 million, largely driven by increases in revenues from loan sales.

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

Other service charges and fees increased $9 million, largely driven by elevated income related to the equipment finance lease business.

Mortgage banking income of $43 million increased $8 million from $35 million in 2024, largely driven by a $5 million gain from a sale of mortgage servicing rights.

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Noninterest Expense

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

Table 7.5

NONINTEREST EXPENSE

Noninterest expense of $2.1 billion increased $39 million, or 2%, compared to 2024.

Personnel expense of $1.2 billion increased $22 million compared to 2024, reflecting talent additions throughout the year, partially offset by a decline in deferred compensation expense.

Net occupancy expense increased $9 million, computer software expense increased $17 million and legal and professional fees increased $22 million in 2025, largely attributable to strategic investments in various technology, risk and product initiatives.

Deposit insurance expense declined $22 million, largely attributable to a $9 million special assessment expense credit in 2025, compared to $9 million in special assessment expense in 2024.

Contract employment and outsourcing decreased $13 million compared to 2024, as expenses related to recent technology projects were completed.

Contributions expense increased $8 million, largely driven by a $20 million contribution to the First Horizon Foundation in 2025, compared to a $10 million contribution in 2024.

Other expense included $25 million in Visa derivative valuation expense in 2025 compared to $15 million in 2024, offset by declines in other miscellaneous losses when comparing the periods.

FHN recorded income tax expense of $282 million in 2025 compared to $211 million in 2024, resulting in an effective tax rate of 22.1% and 21.0%, respectively.

FHN’s effective 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 December 31, 2025, FHN’s gross DTA after valuation allowance and gross DTL were $672 million and $580 million, respectively, resulting in a net DTA of $92 million at December 31, 2025,

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compared with a net DTA of $227 million at December 31, 2024.

As of December 31, 2025, FHN had DTA balances related to federal and state income tax carryforwards of $36 million and $4 million, respectively, which will expire at various dates. Refer to Note 14 - Income Taxes for additional information.

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.

FHN and its eligible subsidiaries are included in a consolidated federal income tax return. FHN files separate returns for subsidiaries that are not eligible to be included in a consolidated federal income tax return. Based on the laws of the applicable states where it conducts business operations, FHN either files consolidated, combined, or separate returns. The statute of limitations for FHN’s consolidated federal income tax returns remains open for tax years 2022 through 2024. Additionally, 2019-2021 could be subject to limited review related to refund claims and amended returns filed. With few exceptions, the statute of limitations for FHN's state income tax returns remains open for tax years 2021 through 2024. Most states have a three to four year limitation for assessments. On occasion, as federal or state auditors examine the tax returns of FHN and its subsidiaries, FHN

may extend the statute of limitations for a reasonable period. Otherwise, the statutes of limitations remain open only for tax years in accordance with federal and state statutes. The earliest year under state audit is 2016. See Note 14 - Income Taxesto the Consolidated Financial Statements in Part II, Item 8 of this Report for additional information.

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. The accelerated federal tax deductions for bonus depreciation and research or experimental expenditures will reduce FHN's federal tax liability starting in 2025. Since these provisions solely reflect differences in timing for tax deductions, they do 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

FHN's reportable segments include Commercial, Consumer & Wealth, Wholesale, and Corporate. See Note 19 - Business Segment Information to the Consolidated Financial Statements in Part II, Item 8 of this Report for additional disclosures related to FHN's segments.

Commercial, Consumer & Wealth

The Commercial, Consumer & Wealth segment generated pre-tax income of $1.5 billion in 2025 compared to $1.4 billion in 2024, an increase of $123 million.

Net interest income of $2.6 billion increased $38 million, reflecting lower deposit pricing, partially offset by the impact of lower loan yields.

Provision for credit losses decreased $108 million, largely reflecting the impact of reductions in criticized and classified loans and a more favorable portfolio mix.

Noninterest income increased $3 million, as increases in other service charges and fees and brokerage, management fees and commissions were offset by declines in deposit transactions and cash management income and insurance commissions.

Noninterest expense increased $26 million, largely driven by higher technology-related expenses and operations

expenses allocated to the segment in the current year, partially offset by a decline in other expenses.

Wholesale

Pre-tax income of $157 million in the Wholesale segment increased $35 million compared to 2024, largely reflecting a $65 million increase in revenue, partially offset by a $21 million increase in noninterest expense.

Net interest income increased $39 million, primarily attributable to higher income from growth in loans to mortgage companies. Fixed income of $206 million increased $19 million, largely driven by more favorable market conditions. Mortgage banking income of $41 million increased $8 million, largely reflecting a $5 million gain on mortgage servicing rights sold during 2025.

Noninterest expense of $320 million increased $21 million, largely due to an increase in incentive-based compensation expense tied to the improvement in fixed income and mortgage banking income.

Corporate

Pre-tax loss for the Corporate segment was $417 million for 2025 compared to $534 million for 2024.

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Net interest income (expense) improved $34 million compared to 2024, primarily driven by higher yields on investment securities and the impact of the funds transfer pricing methodology.

Noninterest income increased $89 million, largely attributable to $91 million in net securities losses in 2024 tied to an opportunistic restructuring of a portion of the AFS securities portfolio.

Noninterest expense of $311 million for 2025 decreased $8 million compared to 2024, as lower FDIC special assessment expense and contract employment and outsourcing expense were partially offset by increases in computer software, legal and professional fees, and Visa derivative valuation expense. Restructuring expenses were immaterial in 2025 and totaled $14 million in 2024.