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.

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

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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 of that year, 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 each of September, October, and December of 2025, the Federal Reserve announced 25 basis point cuts in the Fed Funds rate, lowering the target range to 3.50% to 3.75%, but in January 2026 the Federal Reserve decided to hold the target range steady. In its statement announcing its January decision to maintain the target range, the Federal Reserve noted that economic activity had been expanding at a solid pace and the unemployment rate showed signs of stabilization, but inflation remained somewhat elevated. Looking ahead to 2026, market consensus points to the possibility of two additional 25 basis point cuts, contingent on inflation trends and broader economic conditions.

FHN continues to closely monitor economic developments and assess potential exposures. 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

Historically, the yield curve is usually upward sloping (higher rates for longer terms and lower rates for shorter terms). However, the yield curve can be relatively flat or inverted (downward sloping). Inversion normally is rare but has happened several times in the past, including most recently, from the summer of 2022 until September 2024. Since the fall of 2024, the yield curve has continued to modestly steepen.

Yield curve flattening and inversion generally reduce the profit FHN can make from lending by compressing FHN's net interest margin ("NIM"), and also generally reduce FHN's revenues from its fixed income bond trading. Both of those impacts occurred from 2022 through 2024, with fluctuations. During each quarter of 2025, net interest margin consistently exceeded the level of the comparable quarter in 2024, as the yield curve maintained its more typical upward slope, while fixed income bond trading revenues fluctuated during the year due to changing

market conditions with revenue from bond trading and related activities showing improvement in the first, third and fourth quarters, but declining in the second quarter due to less favorable market conditions. While NIM for 2025 as a whole expanded as compared with 2024, quarterly results for 2025 varied with strong quarter-to-quarter expansions of NIM in the first and third quarters and small quarter-to-quarter declines in the second and fourth quarters.

FHN cannot predict whether these trends will continue.

Other Impacts on FHN of Rate Actions

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. Changes in interest rates and interest rate policy could have a material impact on our business and financial results.

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, but recession still remains possible.

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 in 2025 and could continue throughout the remainder of 2026.

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

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

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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." 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. FHN does not expect a significant impact from provisions that sunset certain Section 48E Clean Electricity Tax Credits on its future financial results. 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. 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 February 2026, 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.

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

Regulatory Proposals

Several states have enacted or proposed statutes or regulations addressing climate-related issues. For example, in 2023, California enacted two laws which, taken together, will require most larger companies doing business in California to report annually their greenhouse gas (GHG) emissions and to report biennially their climate-related financial risks and risk-mitigation measures. The California laws have been challenged in court and certain of those challenges remain pending.

In addition, in March 2024, the SEC adopted final rules which 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. There is considerable uncertainty as to whether these rules will be implemented as adopted, both because the SEC has suspended effectiveness of those rules while legal challenges are pending and because shifts in 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 those rules nor has the legal challenge to those rules been dismissed. 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 rules through formal notice-and-comment rulemaking or renews its defense of the rules.

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).

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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 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 substantially. 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.