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 geopolitical instability

and conflict, 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 the success or failure of FHN’s strategic initiatives.

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, Trade Policy, Other Events

Federal Reserve and Rates

The Federal Reserve began to reduce short-term rates in the third quarter of 2024. 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 a target range of 4.25% - 4.50% by the end of 2024 after peaking at a range of 5.25% to 5.50% in the summer and fall of 2023.

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% – 3.75%, but throughout 2026 the Federal Reserve has held the target range steady. In its statement announcing its July 2026 decision to maintain the target range of 3.50% –

3.75%, the Federal Reserve noted that, while economic activity has been expanding at a solid pace despite elevated uncertainty due, in part, to conflict in the Middle East, inflation remains elevated relative to the Federal Reserve's 2% goal, in part reflecting price shocks in certain sectors, including energy.

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.

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

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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 exhibit a positive, upward slope.

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 from 2022 through 2024, with fluctuations. Since the first quarter of 2025, net interest margin has, in each quarter, exceeded the level of the comparable quarter in 2024, as the yield curve has maintained its more typical upward slope, while fixed income bond trading revenues have fluctuated due to changing market conditions.

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 market share gains in lending to mortgage companies. Changes in interest rates and interest rate policy could continue to have a material impact on our mortgage lending and lending to mortgage companies.

Trade Policy

In 2025, the U.S. government announced new tariffs on a variety of goods and services. Subsequently, in February

2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act ("IEEPA"), which the U.S. administration relied on to impose certain tariffs, does not authorize the administration to impose tariffs. In March 2026, the U.S. Court of International Trade ordered the U.S. Customs and Border Protection ("CBP") to process refunds of the IEEPA tariffs, although this order has been partially stayed while the CBP develops and implements a refund process. In response to the U.S. Supreme Court ruling mentioned above, the U.S. administration announced new tariffs under alternative sources of statutory authority, including sections 122 and 301 of the Trade Act of 1974. As of early August 2026, the full impact of the U.S. Supreme Court's ruling and the administration's response; the timing, scope and duration of tariffs; and 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.

Conflict in the Middle East

During the first half of 2026, military conflict involving Iran and the United States, together with related disruptions in the Middle East, contributed to increased volatility in global energy markets, commodity prices and financial markets. While energy prices have moderated during periods of de-escalation, geopolitical tensions remain elevated, and additional disruptions could contribute to higher inflation, slower economic growth, continued market volatility and changes in monetary policy expectations. These conditions could result in higher funding costs, reduced loan demand, increased credit stress in certain industries and continued uncertainty regarding the path of interest rates. FHN continues to monitor these developments, although the ultimate magnitude and duration of any economic effects remain uncertain.

Other Regulatory Proposals

In 2023, the Board of Governors of the Federal Reserve and other U.S. banking regulators issued a proposal to implement the final components of the Basel III framework ("Basel III Endgame"), which, if implemented, would have created some new requirements for banks, like FHN, with assets over $50 billion, but also created significantly increased regulatory constraints and compliance costs on all U.S. banks with assets over $100 billion.

In March 2026, the U.S. banking agencies rescinded the 2023 proposal and issued a revised proposal to implement

the Basel III Endgame, which would revise certain capital requirements, including risk-weighted asset calculations and the treatment of specific exposures. The notice-and-comment period for the 2026 proposal closed on June 18, 2026, and regulators are now reviewing the comments received. FHN is currently evaluating the potential impact of these proposed changes on its regulatory capital ratios and overall capital management strategy.

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

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Greenhouse Gas (GHG) Reporting Regimes

Regulatory Enactments and 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, with the first reports of Scope 1 and Scope 2 GHG emissions required by November 10, 2026. The California laws have been challenged in court and certain of those challenges remain pending.

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. Those rules, however, have yet to come into effect because the SEC suspended their effectiveness in April 2024 pending the resolution of legal challenges. In May 2026, the SEC issued a proposed rule to rescind its Climate Disclosure Rules. The SEC has not yet taken final action on that proposal.

Potential Business Impacts

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

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 hurricanes and other severe coastal 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 are significant concerns for FHN and FHN's clients in affected markets. Although legislative reforms

and other developments in insurance markets have stabilized market conditions compared to recent years, instability in property insurance markets 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.