# FIRST HORIZON CORP (FHN) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from FIRST HORIZON CORP's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/36966/000003696624000015/fhn-20231231.htm
Accession: 0000036966-24-000015
Filing date: 2024-02-23
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/FHN/
All MD&A years: /company/FHN/mda/
Previous year: /company/FHN/mda/fy2022/ (FY 2022)
Next year: /company/FHN/mda/fy2024/ (FY 2024)

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

TABLE OF ITEM 7 TOPICS

[[GREPCENT_TABLE]]
[["Introduction","55"],["Executive Overview","55"],["Results of Operations","56"],["Analysis of Financial Condition","62"],["Capital","77"],["Risk Management","81"],["Repurchase Obligations","91"],["Market Uncertainties and Prospective Trends","92"],["Critical Accounting Policies & Estimates","96"],["Accounting Changes","98"],["Non-GAAP Information","98"]]
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[["ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)"],["Table of Contents"]]
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Introduction

First Horizon Corporation (NYSE common stock trading symbol “FHN”) is a financial holding company headquartered in Memphis, Tennessee. FHN’s principal subsidiary, and only banking subsidiary, is First Horizon Bank. Through the Bank and other subsidiaries, FHN offers commercial, private banking, consumer, small business, wealth and trust management, retail brokerage, capital markets, fixed income, and mortgage banking services.

At December 31, 2023, FHN had over 450 business locations in 24 states, including over 400 banking centers

in 12 states, and employed approximately 7,300 associates.

This MD&A should be read in conjunction with the accompanying audited Consolidated Financial Statements and Notes to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K, as well as with the other information contained in this report.

Executive Overview

Significant Events and Transactions

TD Merger Termination

On February 27, 2022, FHN entered into an Agreement and Plan of Merger (the TD Merger Agreement) with The Toronto-Dominion Bank, a Canadian chartered bank (TD), and certain TD subsidiaries. On May 4, 2023, FHN and TD mutually terminated the TD Merger Agreement. Under the terms of the termination agreement, TD made a $200 million cash payment to FHN, in addition to the $25 million fee reimbursement due to FHN pursuant to the TD Merger Agreement. Of the $200 million cash payment, FHN contributed $50 million to the First Horizon Foundation.

FDIC Special Assessment

In November 2023, the FDIC approved a final rule to implement a special assessment on banks to replenish the deposit insurance fund in connection with the three large bank failures in 2023. The special assessment will be 13.4 basis points per year imposed on certain deposits over eight quarters, starting with the first quarterly assessment period of 2024. FHN recognized an estimated expense of $68 million for the entire assessment in the fourth quarter of 2023.

2023 Financial Performance Summary

FHN reported net income available to common shareholders of $865 million, or $1.54 per diluted share, compared to net income of $868 million, or $1.53 per diluted share in 2022.

Net interest income of $2.5 billion increased $148 million from 2022 largely driven by higher earning asset yields and loan growth, partially offset by higher funding costs. The net interest margin increased 32 basis points to 3.42% compared to 3.10% in 2022.

Provision for credit losses increased to $260 million compared to of $95 million in 2022, largely driven by loan growth, an uncertain macroeconomic outlook, and modest grade migration. Net charge-offs were $170 million compared to $59 million in 2022, largely reflecting the impact of an idiosyncratic credit loss on a single relationship.

Noninterest income of $927 million increased $112 million from 2022, largely driven by the gain on merger termination partially offset by lower fixed income and mortgage banking and title income.

Noninterest expense of $2.1 billion increased $126 million from 2022, largely attributable to the FDIC special assessment and the contribution to the First Horizon Foundation discussed above.

Period-end loans and leases of $61.3 billion increased $3.2 billion from December 31, 2022 reflecting commercial loan growth of $1.8 billion, or 4%, and consumer loan growth of $1.4 billion, or 10%.

Period-end deposits of $65.8 billion increased $2.3 billion, or 4%, from December 31, 2022 driven by an $8.6 billion increase in interest-bearing deposits offset by a $6.3 billion decrease in noninterest-bearing deposits.

Tier 1 risk-based capital and total risk-based capital ratios at December 31, 2023 were 12.42% and 13.96%, respectively, compared to 11.92% and 13.33% at December 31, 2022. The CET1 ratio was 11.40% at December 31, 2023 compared to 10.17% at December 31, 2022.

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Table 7.1

KEY PERFORMANCE INDICATORS

[[GREPCENT_TABLE]]
[["","For the years ended December 31,"],["(Dollars in millions, except per share data)","2023","","2022","","2021"],["Pre-provision net revenue (a)","$","1,388","","","$","1,254","","","$","974"],["Diluted earnings per common share","$","1.54","","","$","1.53","","","$","1.74"],["Return on average assets (b)","1.12","%","","1.08","%","","1.15","%"],["Return on average common equity (c)","11.01","%","","11.81","%","","12.53","%"],["Return on average tangible common equity (a) (d)","14.11","%","","15.58","%","","16.46","%"],["Net interest margin (e)","3.42","%","","3.10","%","","2.48","%"],["Noninterest income to total revenue (f)","26.82","%","","24.99","%","","34.77","%"],["Efficiency ratio (g)","59.90","%","","61.24","%","","68.56","%"],["Allowance for loan and lease losses to total loans and leases","1.26","%","","1.18","%","","1.22","%"],["Net charge-offs (recoveries) to average loans and leases","0.28","%","","0.11","%","","\u2014","%"],["Total period-end equity to period-end assets","11.38","%","","10.83","%","","9.53","%"],["Tangible common equity to tangible assets (a)","8.48","%","","7.12","%","","6.73","%"],["Cash dividends declared per common share","$","0.60","","","$","0.60","","","$","0.60"],["Book value per common share","$","15.17","","","$","13.48","","","$","14.39"],["Tangible book value per common share (a)","$","12.13","","","$","10.23","","","$","11.00"],["Common equity Tier 1","11.40","%","","10.17","%","","9.92","%"],["Market capitalization","$","7,913","","","$","13,159","","","$","8,713"]]
[[/GREPCENT_TABLE]]

(a)Represents a non-GAAP measure which is reconciled in the non-GAAP to GAAP reconciliation in Table 7.28.

(b)Calculated using net income divided by average assets.

(c)Calculated using net income available to common shareholders divided by average common equity.

(d)Calculated using net income available to common shareholders divided by average tangible common equity.

(e)Net interest margin is computed using total net interest income adjusted to an FTE basis assuming a statutory federal income tax rate of 21% and, where applicable, state income taxes.

(f)Ratio is noninterest income excluding securities gains (losses) to total revenue excluding securities gains (losses).

(g)Ratio is noninterest expense to total revenue excluding securities gains (losses).

Results of Operations—2023 compared to 2022

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 $2.5 billion in 2023 increased $148 million, or 6%, from 2022. The increase was largely driven by higher earning asset yields and loan growth partially offset by higher funding costs.

FHN's net interest margin increased 32 basis points to 3.42% in 2023 compared to 2022 while the net interest spread decreased 41 basis points to 2.44% over the same period. The net interest margin was favorably impacted by a 203 basis point increase in earning asset yields, largely reflecting the impact of higher interest rates and lower levels of excess cash. In addition, the tax-equivalent adjustment was favorably impacted by higher rates on floating rate tax-free commercial loans. The cost of interest-bearing liabilities increased 244 basis points largely driven by higher deposit costs.

Total average earning assets decreased $2.8 billion in 2023 largely from a decrease in interest-bearing deposits with banks partially offset by an increase in loans and leases. Total average interest-bearing liabilities increased $4.3 billion driven by increases in short-term borrowings and interest-bearing deposits.

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

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Table 7.2

AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS/RATES

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","2023","","2022","","2021"],["Assets:","","Average Balance","","Interest Income/Expense","","Yield/Rate","","Average Balance","","Interest Income/Expense","","Yield/Rate","","Average Balance","","Interest Income/Expense","","Yield/Rate"],["Loans and leases:"],["Commercial loans and leases","","$","46,175","","","$","2,958","","","6.41","%","","$","43,691","","","$","1,823","","","4.18","%","","$","44,325","","","$","1,498","","","3.38","%"],["Consumer loans","","13,994","","","630","","","4.48","","","12,261","","","479","","","3.89","","","11,973","","","469","","","3.92"],["Total loans and leases","","60,169","","","3,588","","","5.96","","","55,952","","","2,302","","","4.11","","","56,298","","","1,967","","","3.49"],["Loans held for sale","","664","","","51","","","7.71","","","884","","","39","","","4.41","","","956","","","33","","","3.44"],["Investment securities","","9,912","","","250","","","2.52","","","9,976","","","200","","","2.01","","","8,623","","","123","","","1.43"],["Trading securities","","1,179","","","78","","","6.62","","","1,438","","","58","","","4.04","","","1,366","","","30","","","2.17"],["Federal funds sold","","61","","","4","","","5.56","","","191","","","4","","","2.09","","","37","","","\u2014","","","0.15"],["Securities purchased under agreements to resell (a)","","318","","","15","","","4.81","","","522","","","6","","","1.12","","","584","","","\u2014","","","(0.09)"],["Interest-bearing deposits with banks","","2,504","","","130","","","5.20","","","8,672","","","87","","","1.00","","","13,123","","","17","","","0.13"],["Total earning assets / Total interest income","","$","74,807","","","$","4,116","","","5.50","%","","$","77,635","","","$","2,696","","","3.47","%","","$","80,987","","","$","2,170","","","2.68","%"],["Cash and due from banks","","1,012","","","","","","","1,217","","","","","","","1,261"],["Goodwill and other intangible assets, net","","1,720","","","","","","","1,777","","","","","","","1,836"],["Premises and equipment, net","","596","","","","","","","636","","","","","","","712"],["Allowance for loan and lease losses","","(740)","","","","","","","(648)","","","","","","","(834)"],["Other assets","","4,288","","","","","","","3,600","","","","","","","3,647"],["Total assets","","$","81,683","","","","","","","$","84,217","","","","","","","$","87,609"],["Liabilities and Shareholders' Equity:"],["Interest-bearing deposits:"],["Savings","","$","23,547","","","$","679","","","2.88","%","","$","24,292","","","$","94","","","0.39","%","","$","27,283","","","$","36","","","0.13","%"],["Other interest-bearing deposits","","15,300","","","351","","","2.30","","","15,641","","","72","","","0.47","","","15,688","","","20","","","0.13"],["Time deposits","","6,095","","","236","","","3.87","","","2,963","","","18","","","0.60","","","4,281","","","25","","","0.57"],["Total interest-bearing deposits","","44,942","","","1,266","","","2.82","","","42,896","","","184","","","0.43","","","47,252","","","81","","","0.17"],["Federal funds purchased","","349","","","18","","","5.12","","","699","","","11","","","1.56","","","949","","","1","","","0.12"],["Securities sold under agreements to repurchase","","1,426","","","52","","","3.66","","","881","","","7","","","0.77","","","1,235","","","4","","","0.30"],["Trading liabilities","","301","","","12","","","4.16","","","480","","","12","","","2.56","","","540","","","6","","","1.11"],["Other short-term borrowings","","2,688","","","140","","","5.19","","","229","","","5","","","2.26","","","124","","","\u2014","","","0.09"],["Term borrowings","","1,335","","","72","","","5.39","","","1,596","","","72","","","4.51","","","1,645","","","72","","","4.37"],["Total interest-bearing liabilities / Total interest expense","","$","51,041","","","$","1,560","","","3.06","%","","$","46,781","","","$","291","","","0.62","%","","$","51,745","","","$","164","","","0.32","%"],["Noninterest-bearing deposits","","19,341","","","","","","","26,851","","","","","","","25,879"],["Other liabilities","","2,396","","","","","","","2,006","","","","","","","1,506"],["Total liabilities","","72,778","","","","","","","75,638","","","","","","","79,130"],["Shareholders' equity","","8,610","","","","","","","8,284","","","","","","","8,184"],["Noncontrolling interest","","295","","","","","","","295","","","","","","","295"],["Total shareholders' equity","","8,905","","","","","","","8,579","","","","","","","8,479"],["Total liabilities and shareholders' equity","","$","81,683","","","","","","","$","84,217","","","","","","","$","87,609"],["Net earnings assets / Net interest income (TE) / Net interest spread","","$","23,766","","","$","2,556","","","2.44","%","","$","30,854","","","$","2,405","","","2.85","%","","$","29,242","","","$","2,006","","","2.36","%"],["Taxable equivalent adjustment","","","","(16)","","","0.98","","","","","(13)","","","0.25","","","","","(12)","","","0.12"],["Net interest income / Net interest margin (b)","","","","$","2,540","","","3.42","%","","","","$","2,392","","","3.10","%","","","","$","1,994","","","2.48","%"]]
[[/GREPCENT_TABLE]]

(a) Negative yield is driven by negative market rates on reverse repurchase agreements.

(b) 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 change in interest income and interest expense due to changes in both average volume and average rate.

Table 7.3

ANALYSIS OF CHANGES IN NET INTEREST INCOME

[[GREPCENT_TABLE]]
[["","","2023 Compared to 2022","","2022 Compared to 2021"],["","","Increase (Decrease) Due to (a)","","Increase (Decrease) Due to (a)"],["(Dollars in millions)","","Rate (b)","","Volume (b)","","Total","","Rate (b)","","Volume (b)","","Total"],["Interest income:"],["Loans and leases (c)","","$","1,101","","","$","185","","","$","1,286","","","$","347","","","$","(12)","","","$","335"],["Loans held for sale","","24","","","(12)","","","12","","","9","","","(3)","","","6"],["Investment securities (c)","","51","","","(1)","","","50","","","56","","","21","","","77"],["Trading securities","","32","","","(12)","","","20","","","27","","","1","","","28"],["Other earning assets:"],["Federal funds sold","","3","","","(3)","","","\u2014","","","3","","","1","","","4"],["Securities purchased under agreements to resell","","13","","","(4)","","","9","","","6","","","\u2014","","","6"],["Interest-bearing deposits with banks","","143","","","(100)","","","43","","","77","","","(8)","","","69"],["Total other earning assets","","159","","","(107)","","","52","","","86","","","(7)","","","79"],["Total change in interest income - earning assets","","$","1,367","","","$","53","","","$","1,420","","","$","525","","","$","\u2014","","","$","525"],["Interest expense:"],["Interest-bearing deposits:"],["Savings","","$","588","","","$","(3)","","","$","585","","","$","63","","","$","(5)","","","$","58"],["Other interest-bearing deposits","","280","","","(1)","","","279","","","53","","","(1)","","","52"],["Time deposits","","183","","","35","","","218","","","1","","","(8)","","","(7)"],["Total interest-bearing deposits","","1,051","","","31","","","1,082","","","117","","","(14)","","","103"],["Federal funds purchased","","15","","","(8)","","","7","","","10","","","\u2014","","","10"],["Securities sold under agreements to repurchase","","39","","","6","","","45","","","4","","","(1)","","","3"],["Trading liabilities","","6","","","(6)","","","\u2014","","","7","","","(1)","","","6"],["Other short-term borrowings","","15","","","120","","","135","","","5","","","\u2014","","","5"],["Term borrowings","","13","","","(13)","","","\u2014","","","2","","","(2)","","","\u2014"],["Total change in interest expense - interest-bearing liabilities","","1,139","","","130","","","1,269","","","145","","","(18)","","","127"],["Net interest income, taxable-equivalent","","$","228","","","$","(77)","","","$","151","","","$","380","","","$","18","","","$","398"]]
[[/GREPCENT_TABLE]]

(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.

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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 increased to $260 million in 2023, compared to $95 million in 2022. The increase in

provision during 2023 was reflective of loan growth, macroeconomic uncertainty, and modest grade migration. Net charge-offs were $170 million in 2023 compared to $59 million in 2022. The higher level of net charge-offs in 2023 largely reflects the impact of a $72 million idiosyncratic credit loss on a single relationship in the third quarter.

For additional information about general asset quality trends refer to the Asset Quality section 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

[[GREPCENT_TABLE]]
[["","","","","","","","","2023 vs. 2022","","2022 vs. 2021"],["(Dollars in millions)","","2023","","2022","","2021","","$ Change","","% Change","","$ Change","","% Change"],["Noninterest income"],["Deposit transactions and cash management","","$","179","","","$","171","","","$","175","","","$","8","","","5","%","","$","(4)","","","(2)","%"],["Fixed income","","133","","","205","","","406","","","(72)","","","(35)","","","(201)","","","(50)"],["Brokerage, management fees and commissions","","90","","","92","","","88","","","(2)","","","(2)","","","4","","","5"],["Card and digital banking fees","","77","","","84","","","78","","","(7)","","","(8)","","","6","","","8"],["Other service charges and fees","","54","","","54","","","44","","","\u2014","","","\u2014","","","10","","","23"],["Trust services and investment management","","47","","","48","","","51","","","(1)","","","(2)","","","(3)","","","(6)"],["Mortgage banking and title income","","23","","","68","","","154","","","(45)","","","(66)","","","(86)","","","(56)"],["Gain on merger termination","","225","","","\u2014","","","\u2014","","","225","","","100","","","\u2014","","","\u2014"],["Securities gains (losses), net","","(4)","","","18","","","13","","","(22)","","","(122)","","","5","","","38"],["Other income","","103","","","75","","","67","","","28","","","37","","","8","","","12"],["Total noninterest income","","$","927","","","$","815","","","$","1,076","","","$","112","","","14","%","","$","(261)","","","(24)","%"]]
[[/GREPCENT_TABLE]]

NM – Not meaningful

Noninterest income of $927 million increased $112 million from $815 million in 2022, largely driven by the gain on merger termination partially offset by declines in fixed income and mortgage banking and title income. Noninterest income represented 27% and 25% of total revenue for 2023 and 2022, respectively.

Fixed income declined $72 million, or 35%, for 2023 compared to 2022. Fixed income product revenue decreased $62 million, largely driven by less favorable market conditions. Revenue from other products decreased $10 million, largely driven by lower fees from loan and derivative sales in addition to lower fees from investment advisory services.

Mortgage banking and title income of $23 million decreased $45 million from $68 million in 2022 largely driven by the divestiture of the title services business in

third quarter 2022 and lower origination volume given the impact of higher long-term rates. Results in 2022 also reflected a $12 million gain on sale of mortgage servicing rights.

Deferred compensation income (included in other income) increased $35 million in 2023, reflecting fluctuations in equity market valuations relative to the prior year. This increase is largely offset in noninterest expense.

In addition, other income included a gain of $9 million on the disposition of FHN Financial Main Street Advisors assets in 2023 and a gain of $22 million from the sale of the title services business in 2022.

Noninterest income results also reflect securities losses of $4 million in 2023 compared to gains of $18 million in 2022.

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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

[[GREPCENT_TABLE]]
[["","","","","","","","","2023 vs. 2022","","2022 vs. 2021"],["(Dollars in millions)","","2023","","2022","","2021","","$ Change","","% Change","","$ Change","","% Change"],["Noninterest expense"],["Personnel expense","","$","1,100","","","$","1,101","","","$","1,210","","","$","(1)","","","\u2014","%","","$","(109)","","","(9)","%"],["Net occupancy expense","","123","","","128","","","137","","","(5)","","","(4)","","","(9)","","","(7)"],["Deposit insurance expense","","122","","","32","","","24","","","90","","281","","","8","","33"],["Computer software","","111","","","113","","","116","","","(2)","","","(2)","","","(3)","","","(3)"],["Operations services","","87","","","87","","","80","","","\u2014","","","\u2014","","","7","","","9"],["Advertising and public relations","","71","","","50","","","37","","","21","","","42","","","13","","","35"],["Contributions","","61","","","7","","","14","","","54","","","771","","","(7)","","","(50)"],["Legal and professional fees","","49","","","62","","","68","","","(13)","","","(21)","","","(6)","","","(9)"],["Contract employment and outsourcing","","49","","","54","","","67","","","(5)","","","(9)","","","(13)","","","(19)"],["Amortization of intangible assets","","47","","","51","","","56","","","(4)","","","(8)","","","(5)","","","(9)"],["Equipment expense","","42","","","45","","","47","","","(3)","","","(7)","","","(2)","","","(4)"],["Communications and delivery","","35","","","37","","","37","","","(2)","","","(5)","","","\u2014","","","\u2014"],["Impairment of long-lived assets","","\u2014","","","\u2014","","","34","","","\u2014","","","\u2014","","","(34)","","","(100)"],["Other expense","","182","","","186","","","169","","","(4)","","","(2)","","","17","","","10"],["Total noninterest expense","","$","2,079","","","$","1,953","","","$","2,096","","","$","126","","","6","%","","$","(143)","","","(7)","%"]]
[[/GREPCENT_TABLE]]

NM - Not meaningful

Noninterest expense of $2.1 billion increased $126 million, or 6%, from 2022, largely driven by higher deposit insurance expense and contributions.

Personnel expense of $1.1 billion declined negligibly in 2023, reflecting lower incentive-based compensation expense offset by higher deferred compensation and regular salaries and benefits expense.

In November 2023, the FDIC approved a special assessment on banks to replenish the deposit insurance fund in connection with the three large bank failures in 2023. The special assessment will be collected at an annual rate of approximately 13.4 basis points imposed on certain deposits over an anticipated total of eight quarters, starting with the first quarterly assessment period of 2024. FHN recognized the entire assessment of

$68 million as an expense in the fourth quarter of 2023 when the FDIC published its final action.

The increase in contributions in 2023 was primarily related to the $50 million contribution made to the First Horizon Foundation from the $200 million cash payment received for the TD Merger termination.

Advertising and public relations expense increased $21 million from 2022, driven by a deposit campaign in the second quarter of 2023 and brand awareness initiatives.

The $13 million decline in legal and professional fees in 2023 was largely attributable to lower merger and integration related expense.

Total merger and integration expense was $51 million for 2023 compared to $136 million for 2022.

Income Taxes

FHN recorded income tax expense of $212 million in 2023 compared to $247 million in 2022, resulting in an effective tax rate of 18.8% and 21.3% respectively.

FHN’s effective tax rate is favorably affected by recurring items such as bank-owned life insurance, tax-exempt income, and tax credits and other tax benefits from tax credit investments. The effective rate is unfavorably affected by the non-deductible portions of: FDIC premium, executive compensation and merger expenses. 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. The reduction in the rate from 2022 was primarily related to the benefit from the settlement of uncertain tax positions related to prior merger related items which was partially offset by the additional tax expense from the surrender of bank-owned life insurance policies.

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A deferred tax asset or deferred tax liability 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. FHN’s net DTA were $215 million and $313 million at December 31, 2023 and 2022, respectively.

As of December 31, 2023, FHN had deferred tax asset balances related to federal and state income tax carryforwards of $32 million and $3 million, which will expire at various dates. Refer to Note 14 - Income Taxes for additional information.

FHN’s gross DTA after valuation allowance was $737 million and $761 million as of December 31, 2023 and 2022, respectively. Based on current analysis, FHN believes that its ability to realize the DTA is more likely than not. FHN monitors its 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 2020 through 2022. IBKC’s federal consolidated tax returns for 2016 – 2018 were audited by the IRS. The statute of limitations for those years was extended through October 2024 for purposes of an appeal which was settled in 2023. 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. See Note 14 - Income Taxes for additional information.

Business Segment Results

FHN's reportable segments include Regional Banking, Specialty Banking, and Corporate. See Note 19 - Business Segment Information for additional disclosures related to FHN's segments.

Regional Banking

The Regional Banking segment generated pre-tax income of $1.3 billion in 2023 compared to $1.1 billion in 2022, an increase of $185 million, largely from a $390 million increase in revenue driven by higher net interest income. The increase in revenue was partially offset by a $130 million increase in provision for credit losses and a $75 million increase in noninterest expense.

Net interest income of $2.4 billion increased $400 million reflecting the benefit of higher interest rates and average loan balances, partially offset by higher funding costs.

The increase in the provision for credit losses largely reflected loan growth, macroeconomic uncertainty, and modest grade migration.

The increase in noninterest expense was largely driven by higher personnel, deposit insurance, advertising and public relations, and technology-related expenses.

Specialty Banking

Pre-tax income of $313 million in the Specialty Banking segment decreased $96 million compared to 2022 largely reflecting a $142 million decrease in revenue tied to lower fixed income, mortgage banking and title income, and net interest income. The decrease in revenue was partially offset by a decrease in noninterest expense.

Fixed income of $133 million decreased $72 million, largely driven by less favorable market conditions.

Mortgage banking and title income of $23 million decreased $45 million largely driven by the divestiture of the title services business in third quarter 2022 and lower origination volume given the impact of higher long-term rates. Results in 2022 also reflected a $12 million gain on sale of mortgage servicing rights.

Noninterest expense of $364 million decreased $82 million largely due to lower incentive-based compensation expense tied to the decline in fixed income and mortgage banking and title income.

Corporate

Pre-tax loss for the Corporate segment was $447 million for 2023 compared to $327 million for 2022.

Noninterest income increased $225 million largely driven by the gain on merger termination. Noninterest income results also reflect an increase of $35 million in deferred compensation income, lower securities gains of $22 million, and a $22 million gain on sale of the title business in 2022.

Noninterest expense of $414 million for 2023 increased $133 million compared to 2022 largely driven by higher deposit insurance expense, a $50 million contribution to the First Horizon Foundation, and higher personnel expense. Merger and integration expense was $51 million in 2023 compared to $136 million in 2022.

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Results of Operations—2022 compared to 2021

For a description of FHN's results of operations for 2022, see Results of Operations - 2022 compared to 2021 in Item 7 in the 2022 Form 10-K which is incorporated herein by reference.

Analysis of Financial Condition

Investment Securities

The following table presents the carrying value of securities by category as of December 31 for the years indicated:

Table 7.6

COMPOSITION OF SECURITIES PORTFOLIO

[[GREPCENT_TABLE]]
[["","2023","","2022"],["(Dollars in millions)","Balance","","Mix","","Balance","","Mix"],["Securities available for sale at fair value:"],["Government agency issued MBS and CMO","$","6,630","","","68","%","","$","7,076","","","69","%"],["Other U.S. government agencies (a)","1,172","","","12","","","1,163","","","12"],["States and municipalities","589","","","6","","","597","","","6"],["Total securities available for sale","$","8,391","","","86","%","","$","8,836","","","87","%"],["Securities held to maturity at amortized cost:"],["Government agency issued MBS and CMO","$","1,323","","","14","%","","$","1,371","","","13","%"],["Total investment securities","$","9,714","","","100","%","","$","10,207","","","100","%"]]
[[/GREPCENT_TABLE]]

(a) Includes securities issued by government sponsored entities which are not backed by the full faith and credit of the U.S. Government.

FHN’s investment securities portfolio consists principally of debt securities available for sale. FHN maintains a highly-rated securities portfolio consisting primarily of government agency issued mortgage-backed securities and collateralized mortgage obligations. The securities portfolio provides a source of income and liquidity and is an important tool used to balance the interest rate risk of the loan and deposit portfolios. The securities portfolio is periodically evaluated in light of established ALM objectives, changing market conditions that could affect the profitability of the portfolio, the regulatory environment, and the level of interest rate risk to which FHN is exposed. These evaluations may result in steps taken to adjust the overall balance sheet positioning.

Investment securities were $9.7 billion and $10.2 billion on December 31, 2023 and 2022, representing 12% and 13% of total assets, respectively. See Note 2 - Investment Securities for more information about the securities portfolio.

The following table presents an analysis of the amortized cost, remaining contractual maturities, and weighted-average yields by contractual maturity for the debt securities portfolio.

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Table 7.7

CONTRACTUAL MATURITIES OF INVESTMENT SECURITIES

[[GREPCENT_TABLE]]
[["","As of December 31, 2023"],["","","","","","After 1 year","","After 5 years"],["","Within 1 year","","Within 5 years","","Within 10 years","","After 10 years","","Total"],["(Dollars in millions)","Amount","","Yield (b)","","Amount","","Yield (b)","","Amount","","Yield (b)","","Amount","","Yield (b)","","Amount","","Yield (b)"],["Securities available for sale:"],["Government agency issued MBS and CMO (a)","$","29","","","2.30","","%","$","980","","","1.86","","%","$","1,060","","","2.22","","%","$","5,479","","","2.07","","%","$","7,548","","","2.34","","%"],["Other U.S. government agencies","\u2014","","","\u2014","","","12","","","1.70","","","219","","","1.98","","","1,090","","","2.97","","","1,321","","","3.04"],["States and municipalities","36","","","2.38","","","87","","","0.73","","","178","","","1.72","","","326","","","2.74","","","627","","","2.66"],["Total securities available for sale","$","65","","","2.34","","%","$","1,079","","","1.77","","%","$","1,457","","","2.12","","%","$","6,895","","","2.24","","%","$","9,496","","","2.46","","%"],["Securities held to maturity:"],["Government agency issued MBS and CMO (a)","$","\u2014","","","\u2014","","%","$","148","","","3.56","","%","$","170","","","3.44","","%","$","1,005","","","2.73","","%","$","1,323","","","2.91","","%"],["Total securities held to maturity","$","\u2014","","","\u2014","","%","$","148","","","3.56","","%","$","170","","","3.44","","%","$","1,005","","","2.73","","%","$","1,323","","","2.91","","%"]]
[[/GREPCENT_TABLE]]

(a)    Represents government agency-issued mortgage-backed securities and collateralized mortgage obligations which, when adjusted for early paydowns, have an estimated average life of 5.6 years.

(b)    Weighted average yields were calculated using amortized cost on a fully-taxable equivalent basis, assuming a 24% tax rate where applicable.

Loans and Leases

Period-end loans and leases increased $3.2 billion, or 5%, to $61.3 billion as of December 31, 2023, driven by a $1.8 billion increase in commercial loans and a $1.4 billion increase in consumer loans. Average loans and leases increased to $60.2 billion in 2023 compared to $56.0 billion in 2022, primarily driven by a $2.5 billion increase

in commercial loans and a $1.7 billion increase in consumer loans.

The following table provides detail regarding FHN's period-end loans and leases:

Table 7.8

 LOANS AND LEASES

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","2023","","Percent of total","","2023 Growth Rate","","2022","","Percent of total","","2022 Growth Rate","","2021","","Percent of total","","2021 Growth Rate"],["Commercial:"],["Commercial, financial, and industrial (a)","","$","32,633","","","53","%","","3","%","","$","31,781","","","55","%","","2","%","","$","31,068","","","57","%","","(6)","%"],["Commercial real estate","","14,216","","","23","","","7","","","13,228","","","23","","","9","","","12,109","","","22","","","(1)"],["Total commercial","","46,849","","","76","","","4","","","45,009","","","78","","","4","","","43,177","","","79","","","(5)"],["Consumer:"],["Consumer real estate","","13,650","","","23","","","11","","","12,253","","","21","","","14","","","10,772","","","20","","","(8)"],["Credit card and other","","793","","","1","","","(6)","","","840","","","1","","","(8)","","","910","","","1","","","(19)"],["Total consumer","","14,443","","","24","","","10","","","13,093","","","22","","","12","","","11,682","","","21","","","(9)"],["Total loans and leases","","$","61,292","","","100","%","","5","%","","$","58,102","","","100","%","","6","%","","$","54,859","","","100","%","","(6)","%"]]
[[/GREPCENT_TABLE]]

(a) Includes equipment financing loans and leases.

C&I loans increased 3%, or $852 million, from 2022, largely driven by growth in the real estate and rental and leasing and transportation and warehousing industry sectors, as well as diversified growth across multiple other industries. These increases were partially offset by a decline of $239 million in loans to mortgage companies.

Commercial real estate loans increased 7% to $14.2 billion in 2023, largely driven by growth in multi-family and industrial property loans. Consumer loans increased 10%, or $1.4 billion, from the end of 2022, largely driven by growth in real estate installment loans.

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The following table provides detail of the contractual maturities of loans and leases at December 31, 2023.

Table 7.9

CONTRACTUAL MATURITIES OF LOANS AND LEASES

[[GREPCENT_TABLE]]
[["(Dollars in millions)","Within 1 Year","","After 1 Year Within 5 Years","","After 5 Years Within 15 Years","","After 15 Years","","Total"],["Commercial, financial, and industrial","$","6,864","","","$","17,159","","","$","7,666","","","$","944","","","$","32,633"],["Commercial real estate","2,641","","","8,691","","","2,834","","","50","","","14,216"],["Consumer real estate","74","","","241","","","1,369","","","11,966","","","13,650"],["Credit card and other","208","","","313","","","75","","","197","","","793"],["Total loans and leases","$","9,787","","","$","26,404","","","$","11,944","","","$","13,157","","","$","61,292"],["For maturities over one year at fixed interest rates:"],["Commercial, financial, and industrial","","","$","4,492","","","$","5,211","","","$","734","","","$","10,437"],["Commercial real estate","","","2,441","","","1,129","","","36","","","3,606"],["Consumer real estate","","","181","","","1,180","","","3,325","","","4,686"],["Credit card and other","","","76","","","43","","","171","","","290"],["Total loans and leases at fixed interest rates","","","$","7,190","","","$","7,563","","","$","4,266","","","$","19,019"],["For maturities over one year at floating interest rates:"],["Commercial, financial, and industrial","","","$","12,666","","","$","2,456","","","$","209","","","$","15,331"],["Commercial real estate","","","6,250","","","1,705","","","15","","","7,970"],["Consumer real estate","","","60","","","188","","","8,641","","","8,889"],["Credit card and other","","","238","","","32","","","26","","","296"],["Total loans and leases at floating interest rates","","$","19,214","","","$","4,381","","","$","8,891","","","$","32,486"],["Total maturities over one year","","","$","26,404","","","$","11,944","","","$","13,157","","","$","51,505"]]
[[/GREPCENT_TABLE]]

Because of various factors, the contractual maturities of consumer loans are not indicative of the actual lives of such loans. A significant component of FHN’s loan portfolio consists of consumer real estate loans, a majority of which are home equity lines of credit and home equity installment loans. These loans have an initial period where the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of both principal and interest over the remaining term. Numerous factors can contribute to the actual life of a home equity line or installment loan. As a result, the actual average life of home equity lines and loans is difficult to predict and changes in any of these factors could result in changes in projections of average lives.

Loans Held for Sale

Loans held for sale primarily consists of government guaranteed loans under SBA and USDA lending programs.

Smaller amounts of other consumer and home equity loans are also included in loans HFS. Additionally, FHN's mortgage banking operations includes origination and servicing of residential first lien mortgages that conform to standards established by GSEs that are major investors in U.S. home mortgages but can also consist of junior lien and jumbo loans secured by residential property. These non-conforming loans are primarily sold to private companies that are unaffiliated with the GSEs on a servicing-released basis. For further detail, see Note 7 - Mortgage Banking Activity.

On December 31, 2023 and 2022, loans HFS were $502 million and $590 million, respectively. Held-for-sale consumer mortgage loans secured by residential real estate in process of foreclosure totaled $2 million and $3 million for December 31, 2023 and 2022, respectively.

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Asset Quality

Loan and Lease Portfolio Composition

FHN groups its loans into portfolio segments based on internal classifications reflecting the manner in which the ALLL is established and how credit risk is measured, monitored, and reported. From time to time, and if conditions are such that certain subsegments are uniquely affected by economic or market conditions or are experiencing greater deterioration than other components of the loan portfolio, management may

determine the ALLL at a more granular level. Commercial loans are composed of C&I loans and CRE loans. Consumer loans are composed of consumer real estate loans and credit card and other loans. FHN has a concentration of residential real estate loans of 23% and 21% of total loans in 2023 and 2022, respectively. Industry concentrations are discussed under the C&I heading below.

Underwriting Policies and Procedures

The following sections describe each portfolio as well as general underwriting procedures for each. As economic and real estate conditions develop, enhancements to underwriting and credit policies and procedures may be necessary or desirable. Loan policies and procedures for all portfolios are reviewed by credit risk working groups and management risk committees comprised of business line managers and credit administration professionals as well as by various other reviewing bodies within FHN. Policies and procedures are approved by key executives and/or senior managers leading the applicable credit risk working groups as well as by management risk committees.

The credit risk working groups and management risk committees strive to ensure that the approved policies and procedures address the associated risks and establish reasonable underwriting criteria that appropriately mitigate risk. Policies and procedures are reviewed, revised and re-issued periodically at established review dates or earlier if changes in the economic environment, portfolio performance, the size of portfolio or industry concentrations, or regulatory guidance warrant an earlier review.

Commercial Loan and Lease Portfolios

FHN’s commercial loan approval process grants lending authority based upon job description, experience, and performance. The lending authority is delegated to the business line (Market Managers, Departmental Managers, Regional Presidents, Relationship Managers (RM) and Portfolio Managers (PM)) and to Credit Risk Managers. While individual limits vary, the predominant amount of approval authority is vested with the Credit Risk Management function. Portfolio, industry, and borrower concentration limits for the various portfolios are established by executive management and approved by the Risk Committee of the Board.

FHN’s commercial lending process incorporates an RM and a PM for most commercial credits. The RM is primarily responsible for communications with the borrower and maintaining the relationship, while the PM is responsible for assessing the credit quality of the borrower, beginning with the initial underwriting and continuing through the servicing period. Other specialists and the assigned RM/PM are organized into units called deal teams. Deal teams are constructed with specific job attributes that facilitate FHN’s ability to identify, mitigate, document, and manage ongoing risk. PMs and credit analysts provide enhanced analytical support during loan origination and servicing, including monitoring of the financial condition of the borrower and tracking compliance with loan agreements. Loan closing officers and the construction loan

management unit specialize in loan documentation and the management of the construction lending process. FHN strives to identify problem assets early through comprehensive policies and guidelines, targeted portfolio reviews, more frequent servicing on lower rated borrowers, and an emphasis on frequent grading. For smaller commercial credits, generally $5 million or less, and income-producing CRE credits greater than $10 million to non-professional real estate developers and smaller professional real estate investors/developers, FHN utilizes a centralized underwriting unit in order to originate and grade small business loans more efficiently and consistently.

FHN may utilize availability of guarantors/sponsors to support commercial lending decisions during the credit underwriting process and when determining the assignment of internal loan grades. Reliance on the guaranty as a viable secondary source of repayment is a function of an analysis proving capability to pay, factoring in, among other things, liquidity and direct/indirect cash flows. FHN also considers the volume and amount of guaranties provided for all global indebtedness and the likelihood of realization. FHN presumes a guarantor’s willingness to perform until there is any current or prior indication or future expectation that the guarantor may not willingly and voluntarily perform under the terms of the guaranty. In FHN’s risk grading approach, it is deemed

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that financial support becomes necessary generally at a point when the loan would otherwise be graded substandard, reflecting a well-defined weakness. At that point, provided willingness and capacity to support are appropriately demonstrated, a strong, legally enforceable guaranty can mitigate the risk of default or loss, justify a less severe rating, and consequently reduce the level of allowance or charge-off that might otherwise be deemed appropriate.

C&I

C&I loans are the largest component of the loan and lease portfolio, comprising 53% and 55% of total loans and leases at December 31, 2023 and 2022, respectively. The C&I portfolio is comprised of loans used for general business purposes. Products offered in the C&I portfolio include term loan financing of owner-occupied real estate and fixed assets, direct financing and sales-type leases, working capital lines of credit, and trade credit enhancement through letters of credit.

Income-producing C&I loans are underwritten in accordance with a well-defined credit origination process. This process includes applying minimum underwriting standards as well as separation of origination and credit approval roles on transaction sizes over PM authorization limits. Underwriting typically includes due diligence of the borrower and the applicable industry of the borrower, analysis of the borrower’s available financial information, identification and analysis of the various sources of repayment and identification of the primary risk attributes. Stress testing the borrower’s financial capacity, adherence to loan documentation requirements, and assigning credit risk grades using internally developed scorecards are also used to help quantify the risk when

appropriate. Underwriting parameters also include loan-to-value ratios which vary depending on collateral type, use of guaranties, loan agreement requirements, and other recommended terms such as equity requirements, amortization, and maturity. Approval decisions also consider various financial ratios and performance measures of the borrowers, such as cash flow and balance sheet leverage, liquidity, coverage of fixed charges, and working capital. Additionally, approval decisions consider the capital structure of the borrower, sponsorship, and quality/value of collateral. Generally, guideline and policy exceptions are identified and mitigated during the approval process. Pricing of C&I loans is based upon the determined credit risk specific to the individual borrower. Historically, these loans typically have had variable rates tied to the LIBOR or prime rate of interest plus or minus the appropriate margin. However, with the cessation of LIBOR, FHN no longer references LIBOR in new loan contracts, and substantially all of the existing portfolio of loans tied to LIBOR has been repriced to alternative reference rates.

The largest geographical concentrations of balances as of December 31, 2023 were in Tennessee (21%), Florida (13%), Texas (11%), North Carolina (7%), Louisiana (6%), Georgia (5%), and California (5%) with no other state representing 5% or more of the portfolio.

The following table provides the composition of the C&I portfolio by industry as of December 31, 2023 and 2022. For purposes of this disclosure, industries are determined based on the NAICS industry codes used by Federal statistical agencies in classifying business establishments for the collection, analysis, and publication of statistical data related to the U.S. business economy.

Table 7.10a

C&I PORTFOLIO BY INDUSTRY

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["(Dollars in millions)","","Amount","","Percent","","Amount","","Percent"],["Industry:"],["Finance and insurance","","$","4,083","","","12","%","","$","4,120","","","13","%"],["Real estate and rental and leasing (a)","","3,858","","","12","","","3,277","","","10"],["Health care and social assistance","","2,676","","","8","","","2,657","","","8"],["Accommodation and food service","","2,288","","","7","","","2,238","","","7"],["Manufacturing","","2,267","","","7","","","2,206","","","7"],["Wholesale trade","","2,147","","","7","","","2,212","","","7"],["Loans to mortgage companies","","2,019","","","6","","","2,258","","","7"],["Retail trade","","1,866","","","6","","","1,835","","","6"],["Transportation and warehousing","","1,580","","","5","","","1,432","","","4"],["Energy","","1,293","","","4","","","1,364","","","4"],["Other (professional, construction, education, etc.) (b)","","8,556","","","26","","","8,182","","","27"],["Total C&I loan portfolio","","$","32,633","","","100","%","","$","31,781","","","100","%"]]
[[/GREPCENT_TABLE]]

(a)Leasing, rental of real estate, equipment, and goods.

(b)Industries in this category each comprise less than 5% for 2023.

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Industry Concentrations

Loan concentrations are considered to exist for a financial institution when there are loans to numerous borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. Loans to mortgage companies and borrowers in the finance and insurance industry were 18% and 20% of FHN’s C&I loan portfolio as of December 31, 2023 and 2022, respectively, and as a result could be affected by items that uniquely impact the financial services industry. Loans to borrowers in the real estate and rental and leasing industry were 12% and 10% of FHN's C&I portfolio as of December 31, 2023 and 2022, respectively. As of December 31, 2023, FHN did not have any other concentrations of C&I loans in any single industry of 10% or more of total loans.

Loans to Mortgage Companies

Loans to mortgage companies were 6% of the C&I portfolio as of December 31, 2023 and 7% of the C&I portfolio as of December 31, 2022. This portfolio includes commercial lines of credit to qualified mortgage companies primarily for the temporary warehousing of eligible mortgage loans prior to the borrower's sale of those mortgage loans to third party investors. Balances in this portfolio generally fluctuate with mortgage rates and seasonal factors. Generally, new loan originations to mortgage lenders increase when there is a decline in mortgage rates and decrease when rates rise; in 2023, rates rose. In periods of economic uncertainty, this trend may not occur even if interest rates are declining. In 2023, approximately 90% of the loan originations were home purchases and 10% were refinance transactions.

Finance and Insurance

The finance and insurance component represented 12% of the C&I portfolio as of December 31, 2023 compared to 13% at the end of 2022 and includes TRUPs (i.e., long-term unsecured loans to bank and insurance-related businesses), loans to bank holding companies, and asset-based lending to consumer finance companies. As of December 31, 2023, asset-based lending to consumer finance companies represents approximately $2.0 billion of the finance and insurance component.

Real Estate and Rental and Leasing

Loans to borrowers in the real estate and rental and leasing industry were 12% and 10% of FHN's C&I portfolio as of December 31, 2023 and 2022, respectively. This portfolio primarily consists of equipment financing loans and leases to clients across FHN's footprint in a broad range of industries and asset types. This portfolio also includes a smaller balance of loans and leases for solar and wind generating facilities.

Commercial Real Estate

The CRE portfolio totaled $14.2 billion as of December 31, 2023, a $1.0 billion, or 7%, increase compared to December 31, 2022.

The CRE portfolio includes both financings for commercial construction and non-construction loans. This portfolio contains loans, draws on lines, and letters of credit to commercial real estate developers for the construction and mini-permanent financing of income-producing real estate.

Residential CRE loans include loans to residential builders and developers for the purpose of constructing single-family homes, condominiums, and town homes, and on a limited basis, for developing residential subdivisions. The residential CRE class is not currently an area of growth for the bank.

Income-producing CRE loans

Income-producing CRE loans are underwritten in accordance with credit policies and underwriting guidelines that are reviewed at least annually and revised as necessary based on market conditions. Loans are underwritten based upon project type, size, location, sponsorship, and other market-specific data. Generally, minimum requirements for equity, debt service coverage ratios, and level of pre-leasing activity are established based on perceived risk in each subcategory. Loan-to-value limits are set below regulatory prescribed ceilings and generally range between 50% and 80% depending on the underlying product set. Term and amortization requirements are set based on prudent standards for interim real estate lending. Equity requirements are established based on the quality and liquidity of the primary source of repayment. For example, more equity would be required for a speculative construction project or land loan than for a property fully leased to a credit tenant or a roster of tenants. Typically, a borrower must have at least 15% of cost invested in a project before FHN will provide loan funding. Income properties are generally required to achieve a debt service coverage ratio greater than or equal to 1.25x at inception or stabilization of the project based on loan amortization and a minimum underwriting interest rate. Some product types that possess a greater risk profile require a higher level of equity, as well as a higher debt service coverage ratio threshold. A proprietary minimum underwriting interest rate is used to calculate compliance with underwriting standards. Generally, specific levels of pre-leasing must be met for construction loans on income properties, where applicable. A global cash flow analysis is performed at the sponsor level.

The credit administration and ongoing monitoring consists of multiple internal control processes. Construction loans are closed by a centralized control unit and construction loan management is administered centrally for loans $3 million and over. Underwriters and credit approval

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personnel stress the borrower’s/project’s financial capacity utilizing numerous attributes such as interest rates, vacancy, capitalization rates, and debt service coverage ratios under various scenarios. Key information is captured from the various portfolios and then stressed at the aggregate level. Results are utilized to assist with the assessment of the adequacy of the ALLL and to steer portfolio management strategies.

The largest geographical concentrations of CRE balances as of December 31, 2023 were in Florida (27%), Texas (13%), North Carolina (12%), Georgia (9%), Tennessee (9%), and Louisiana (8%), with no other state representing more than 5% of the portfolio.

The following table represents subcategories of CRE loans by property type:

Table 7.10b

CRE PORTFOLIO BY PROPERTY TYPE

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["","","Amount","","Percent","","Amount","","Percent"],["Property Type:"],["Multi-family","","$","4,409","","","31","%","","$","3,484","","","27","%"],["Office","","2,782","","","20","","","2,814","","","21"],["Retail","","2,310","","","16","","","2,331","","","18"],["Industrial","","2,236","","","16","","","2,076","","","16"],["Hospitality","","1,467","","","10","","","1,418","","","11"],["Land/land development","","307","","","2","","","309","","","2"],["Other CRE (a)","","705","","","5","","","796","","","5"],["Total CRE loan portfolio","","$","14,216","","","100","%","","$","13,228","","","100","%"]]
[[/GREPCENT_TABLE]]
(a) Property types in this category each comprise less than 5% for 2023.

Consumer Loan Portfolios

Consumer Real Estate

The consumer real estate portfolio is primarily composed of home equity lines and installment loans. This portfolio totaled $13.7 billion and $12.3 billion as of December 31, 2023 and 2022, respectively. The largest geographical concentrations of balances in the consumer real estate portfolio as of December 31, 2023 were in Florida (29%), Tennessee (22%), Texas (11%), Louisiana (8%), North Carolina (7%), New York (5%), and Georgia (5%), with no other state representing 5% or more of the portfolio.

As of December 31, 2023, approximately 89% of the consumer real estate portfolio was in a first lien position. At origination, the weighted average FICO score of this portfolio was 759 and the refreshed FICO scores averaged 756 as of December 31, 2023, no significant change from FICO scores of 757 and 754, respectively, as of December 31, 2022. Generally, performance of this portfolio is affected by life events that affect borrowers’ finances, the level of unemployment, and home prices.

As of December 31, 2023 and 2022, FHN had held-to-maturity consumer mortgage loans secured by real estate totaling $29 million and $42 million, respectively, that were in the process of foreclosure.

HELOCs comprised $2.2 billion and $2.0 billion of the consumer real estate portfolio for December 31, 2023 and 2022, respectively. FHN’s HELOCs typically have a 5 or 10

year draw period followed by a 10 or 20 year repayment period, respectively. During the draw period, a borrower is able to draw on the line and is only required to make interest payments. The line is frozen if a borrower becomes past due on payments. Once the draw period has concluded, the line is closed and the borrower is required to make both principal and interest payments monthly until the loan matures. The principal payment generally is fully amortizing, but payment amounts will adjust when variable rates reset to reflect changes in the prime rate.

As of December 31, 2023, approximately 94% of FHN's HELOCs were in the draw period compared to 92% at the end of 2022. Based on when draw periods are scheduled to end per the line agreement, it is expected that $571 million, or 27%, of HELOCs currently in the draw period will enter the repayment period during the next 60 months, based on current terms. Generally, delinquencies for HELOCs that have entered the repayment period are initially higher than HELOCs still in the draw period because of the increased minimum payment requirement. However, over time, performance of these loans usually begins to stabilize. HELOCs nearing the end of the draw period are closely monitored.

The following table shows the HELOCs currently in the draw period and expected timing of conversion to the repayment period.

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Table 7.11

HELOC DRAW TO REPAYMENT SCHEDULE

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["(Dollars in millions)","","Repayment Amount","","Percent","","Repayment Amount","","Percent"],["Months remaining in draw period:"],["0-12","","$","30","","","1","%","","$","31","","","2","%"],["13-24","","90","","","4","","","40","","","2"],["25-36","","110","","","5","","","109","","","6"],["37-48","","163","","","8","","","135","","","7"],["49-60","","178","","","9","","","204","","","11"],["60","","1,530","","","73","","","1,356","","","72"],["Total","","$","2,101","","","100","%","","$","1,875","","","100","%"]]
[[/GREPCENT_TABLE]]

Underwriting

For loans in this portfolio, underwriting decisions are made through a centralized loan underwriting center. To obtain a consumer real estate loan, the loan applicant(s) must first meet a minimum qualifying FICO score. Minimum FICO score requirements are established by management for both loans secured by real estate as well as non-real estate loans. Management also establishes maximum loan amounts, loan-to-value ratios, and debt-to-income ratios for each consumer real estate product. Applicants must have the financial capacity (or available income) to service the debt by not exceeding a calculated debt-to-income ratio. The amount of the loan is limited to a percentage of the lesser of the current appraised value or sales price of the collateral. Identified guideline and policy exceptions require established mitigating factors that have been approved for use by Credit Risk Management.

HELOC interest rates are variable and adjust with movements in the index rate stated in the loan agreement. Such loans can have elevated risks of default, particularly in a rising interest rate environment, potentially stressing borrower capacity to repay the loan at the higher interest rate. FHN’s current underwriting practice requires HELOC borrowers to qualify based on a sensitized interest rate (above the current note rate), fully amortized payment methodology. FHN’s underwriting

guidelines require borrowers to qualify at an interest rate that is 200 basis points above the note rate. This mitigates risk to FHN in the event of a sharp rise in interest rates over a relatively short time horizon.

HELOC Portfolio Risk Management

FHN performs continuous HELOC account reviews to identify higher-risk home equity lines and initiate preventative and corrective actions. The reviews consider a number of account activity patterns and characteristics such as the number of times delinquent within recent periods, changes in credit bureau score since origination, score degradation, performance of the first lien, and account utilization. In accordance with FHN’s interpretation of regulatory guidance, FHN may block future draws on accounts in order to mitigate risk of loss to FHN.

Credit Card and Other

The credit card and other consumer loan portfolio totaled $793 million as of December 31, 2023 and $840 million as of December 31, 2022. This portfolio primarily consists of consumer-related credits, including home equity and other personal consumer loans, credit card receivables, and automobile loans. The $47 million decrease was driven by net repayments, partially offset by an increase in consumer construction loans.

Allowance for Credit Losses

The ACL is maintained at a level sufficient to provide appropriate reserves to absorb estimated future credit losses in accordance with GAAP. For additional information regarding the ACL, see Notes 1 and 4 to the consolidated financial statements included as a part of this Report.

The ALLL increased to $773 million as of December 31, 2023, or 1.26% of total loans and leases, compared to

$685 million, or 1.18% of total loans and leases, at the end of 2022. The ACL to total loans and leases ratio increased to 1.40% as of December 31, 2023 from 1.33% as of December 31, 2022. The increase in the ALLL balance reflects the impact of loan growth, an evolving macroeconomic outlook, and modest grade migration.

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Consolidated Net Charge-offs

Net charge-offs were $170 million in 2023 compared to $59 million in 2022. As a percentage of average total loans and leases, net charge-offs increased 17 basis points from 2022.

Net charge-offs in the C&I portfolio were $142 million, an increase of $89 million from 2022, primarily driven by a $72 million idiosyncratic charge-off related to one client relationship.

Table 7.12

ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES AND CHARGE-OFFS

[[GREPCENT_TABLE]]
[["","","","December 31,"],["(Dollars in millions)","","2023","","2022","","2021"],["Allowance for loan and lease losses"],["","C&I","","$","339","","","$","308","","","$","334"],["","CRE","","172","","","146","","","154"],["","Consumer real estate","","233","","","200","","","163"],["","Credit card and other","","29","","","31","","","19"],["","Total allowance for loan and lease losses","","$","773","","","$","685","","","$","670"],["Reserve for remaining unfunded commitments"],["","C&I","","$","49","","","$","55","","","$","46"],["","CRE","","22","","","22","","","12"],["","Consumer real estate","","12","","","10","","","8"],["","Credit card and other","","\u2014","","","\u2014","","","\u2014"],["","Total reserve for remaining unfunded commitments","","$","83","","","$","87","","","$","66"],["Allowance for credit losses"],["","C&I","","$","388","","","$","363","","","$","380"],["","CRE","","194","","","168","","","166"],["","Consumer real estate","","245","","","210","","","171"],["","Credit card and other","","29","","","31","","","19"],["","Total allowance for credit losses","","$","856","","","$","772","","","$","736"],["Period-end loans and leases"],["","C&I","","$","32,633","","","$","31,781","","","$","31,068"],["","CRE","","14,216","","","13,228","","","12,109"],["","Consumer real estate","","13,650","","","12,253","","","10,772"],["","Credit card and other","","793","","","840","","","910"],["","Total period-end loans and leases","","$","61,292","","","$","58,102","","","$","54,859"],["ALLL / loans and leases %"],["","C&I","","1.04","%","","0.97","%","","1.07","%"],["","CRE","","1.21","","","1.10","","","1.27"],["","Consumer real estate","","1.71","","","1.63","","","1.51"],["","Credit card and other","","3.63","","","3.72","","","2.14"],["","Total ALLL / loans and leases %","","1.26","%","","1.18","%","","1.22","%"]]
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[[GREPCENT_TABLE]]
[["ACL / loans and leases %"],["","C&I","","1.19","%","","1.14","%","","1.22","%"],["","CRE","","1.36","","","1.27","","","1.37"],["","Consumer real estate","","1.79","","","1.71","","","1.59"],["","Credit card and other","","3.63","","","3.72","","","2.09"],["","Total ACL / loans and leases %","","1.40","%","","1.33","%","","1.34","%"],["Net charge-offs (recoveries)"],["","C&I","","$","142","","","$","53","","","$","13"],["","CRE","","15","","","\u2014","","","\u2014"],["","Consumer real estate","","(5)","","","(14)","","","(22)"],["","Credit card and other","","18","","","20","","","11"],["","Total net charge-offs","","$","170","","","$","59","","","$","2"],["Average loans and leases"],["","C&I","","$","32,390","","","$","30,969","","","$","32,010"],["","CRE","","13,785","","","12,722","","","12,314"],["","Consumer real estate","","13,179","","","11,397","","","10,969"],["","Credit card and other","","815","","","864","","","1,005"],["","Total average loans and leases","","$","60,169","","","$","55,952","","","$","56,298"],["Charge-off %"],["","C&I","","0.44","%","","0.17","%","","0.04","%"],["","CRE","","0.10","","","\u2014","","","0.01"],["","Consumer real estate","","NM","","NM","","NM"],["","Credit card and other","","2.18","","","2.39","","","1.05"],["","Total charge-off %","","0.28","%","","0.11","%","","\u2014","%"],["ALLL / net charge-offs"],["","C&I","","239","%","","578","%","","2,645","%"],["","CRE","","1,097","","","NM","","13,189"],["","Consumer real estate","","NM","","NM","","NM"],["","Credit card and other","","162","","","151","","","185"],["","Total ALLL / net charge-offs","","455","%","","1,155","%","","30,641","%"]]
[[/GREPCENT_TABLE]]

NM - not meaningful

Nonperforming Assets

Nonperforming loans are loans placed on nonaccrual if it becomes evident that full collection of principal and interest is at risk, if impairment has been recognized as a partial charge-off of principal balance due to insufficient collateral value and past due status, or (on a case-by-case basis) if FHN continues to receive payments but there are other borrower-specific issues. Included in nonaccrual are loans for which FHN continues to receive payments, including residential real estate loans where the borrower has been discharged of personal obligation through bankruptcy. NPAs consist of nonperforming loans and

leases and OREO (excluding OREO from government-insured mortgages).

Total NPAs increased $142 million to $469 million as of December 31, 2023, largely driven by an increase in non-accrual CRE loans predominantly in the office sector. As remote work became more prevalent over the last few years, office vacancy rates have risen industry-wide, which in conjunction with a higher level of interest rates, increased pressure on cash flows and valuations. The ratio of nonperforming loans and leases to total loans and leases increased 21 basis points to 0.75%.

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Table 7.13

NONPERFORMING ASSETS

[[GREPCENT_TABLE]]
[["","","","December 31,"],["(Dollars in millions)","","2023","","2022","","2021"],["Nonperforming loans and leases"],["","C&I","","$","184","","","$","153","","","$","125"],["","CRE","","136","","","9","","","9"],["","Consumer real estate","","140","","","152","","","138"],["","Credit card and other","","2","","","2","","","3"],["","Total nonperforming loans and leases (a) (c)","","$","462","","","$","316","","","$","275"],["Nonperforming loans held for sale (a)","","$","3","","","$","8","","","$","7"],["Foreclosed real estate and other assets (b)","","4","","","3","","","3"],["","Total nonperforming assets (a) (b)","","$","469","","","$","327","","","$","285"],["Nonperforming loans and leases to total loans and leases"],["","C&I","","0.57","%","","0.48","%","","0.40","%"],["","CRE","","0.96","","","0.07","","","0.08"],["","Consumer real estate","","1.02","","","1.24","","","1.29"],["","Credit card and other","","0.30","","","0.27","","","0.31"],["","Total NPL %","","0.75","%","","0.54","%","","0.50","%"],["ALLL / NPLs"],["","C&I","","184","%","","202","%","","268","%"],["","CRE","","126","","","1,554","","","1,671"],["","Consumer real estate","","167","","","131","","","118"],["","Credit card and other","","1,202","","","1,364","","","699"],["","Total ALLL / NPLs","","167","%","","217","%","","244","%"]]
[[/GREPCENT_TABLE]]

(a) Excludes loans and leases that are 90 or more days past due and still accruing interest.

(b) Excludes government-insured foreclosed real estate. Foreclosed real estate from GNMA loans were insignificant at December 31, 2023 and 2022 and were $1 million at December 31, 2021.

(c) Under the original terms of the loans, estimated interest income would have been approximately $35 million, $21 million, and $19 million during 2023, 2022 and 2021, respectively.

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The following table provides nonperforming assets by business segment:

Table 7.14

NONPERFORMING ASSETS BY SEGMENT

[[GREPCENT_TABLE]]
[["","","December 31,"],["(Dollars in millions)","","2023","","2022","","2021"],["Nonperforming loans and leases (a) (b)"],["","Regional Banking","","$","323","","","$","227","","","$","163"],["","Specialty Banking","","116","","","60","","","78"],["","Corporate","","23","","","29","","","34"],["","Consolidated","","$","462","","","$","316","","","$","275"],["Foreclosed real estate (c)"],["","Regional Banking","","$","1","","","$","\u2014","","","$","2"],["","Specialty Banking","","3","","","2","","","\u2014"],["","Corporate","","\u2014","","","1","","","1"],["","Consolidated","","$","4","","","$","3","","","$","3"],["Nonperforming Assets (a) (b) (c)"],["","Regional Banking","","$","324","","","$","227","","","$","165"],["","Specialty Banking","","119","","","62","","","78"],["","Corporate","","23","","","30","","","35"],["","Consolidated","","$","466","","","$","319","","","$","278"],["Nonperforming loans and leases to total loans and leases"],["","Regional Banking","","0.74","%","","0.54","%","","0.43","%"],["","Specialty Banking","","0.68","","","0.37","","","0.48"],["","Corporate","","4.87","","","6.28","","","5.39"],["","Consolidated","","0.75","%","","0.54","%","","0.50","%"],["NPA % (d)"],["","Regional Banking","","0.74","%","","0.55","%","","0.44","%"],["","Specialty Banking","","0.70","","","0.39","","","0.48"],["","Corporate","","4.96","","","6.54","","","5.51"],["","Consolidated","","0.76","%","","0.55","%","","0.51","%"]]
[[/GREPCENT_TABLE]]

(a)Excludes loans and leases that are 90 or more days past due and still accruing interest.

(b)Excludes loans classified as held for sale.

(c)Excludes foreclosed real estate and receivables related to government-insured mortgages. Foreclosed real estate from GNMA loans were insignificant at December 31, 2023 and 2022 and were $1 million at December 31, 2021.

(d)Ratio is non-performing assets related to the loan and lease portfolio to total loans plus foreclosed real estate and other assets.

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Past Due Loans and Potential Problem Assets

Past due loans are loans contractually past due as to interest or principal payments, but which have not yet been put on nonaccrual status. Loans 90 days or more past due and still accruing were $21 million as of December 31, 2023 compared to $33 million as of

December 31, 2022. Loans 30 to 89 days past due and still accruing were $85 million as of December 31, 2023 compared to $105 million as of December 31, 2022, largely reflecting lower past due commercial loan balances.

Table 7.15

ACCRUING DELINQUENCIES & OTHER CREDIT DISCLOSURES

[[GREPCENT_TABLE]]
[["","","December 31,"],["(Dollars in millions)","","2023","","2022","","2021"],["Accruing loans and leases 30+ days past due"],["","C&I","","$","32","","","$","61","","","$","58"],["","CRE","","8","","","11","","","13"],["","Consumer real estate","","57","","","55","","","70"],["","Credit card and other","","8","","","11","","","7"],["","Total accruing loans and leases 30+ days past due","","$","105","","","$","138","","","$","148"],["Accruing loans and leases 30+ days past due %"],["","C&I","","0.10","%","","0.19","%","","0.19","%"],["","CRE","","0.06","","","0.08","","","0.11"],["","Consumer real estate","","0.42","","","0.44","","","0.65"],["","Credit card and other","","1.03","","","1.28","","","0.76"],["","Total accruing loans and leases 30+ days past due %","","0.17","%","","0.24","%","","0.27","%"],["Accruing loans and leases 90+ days past due (a) (b) (c)"],["","C&I","","$","1","","","$","11","","","$","5"],["","CRE","","\u2014","","","\u2014","","","\u2014"],["","Consumer real estate","","17","","","18","","","33"],["","Credit card and other","","3","","","4","","","2"],["","Total accruing loans and leases 90+ days past due","","$","21","","","$","33","","","$","40"],["Loans held for sale"],["","30 to 89 days past due (b)","","$","12","","","$","10","","","$","7"],["","30 to 89 days past due - guaranteed portion (b) (d)","","8","","","7","","","2"],["","90+ days past due (b)","","9","","","16","","","24"],["","90+ days past due - guaranteed portion (b) (d)","","4","","","6","","","12"]]
[[/GREPCENT_TABLE]]

(a)Excludes loans classified as held for sale.

(b)Amounts are not included in nonperforming/nonaccrual loans.

(c)Amounts are also included in accruing loans and leases 30+ days past due.

(d)Guaranteed loans include FHA, VA, and GNMA loans repurchased through the GNMA buyout program.

Potential problem assets represent those assets where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms and includes loans past due 90 days or more and still accruing. This definition is believed to be substantially consistent with the standards established by the Federal banking regulators for loans classified as substandard. Potential problem assets in the loan portfolio increased $174 million to $666 million as of December 31, 2023.The current expectation of losses from potential problem

assets has been included in management’s analysis for assessing the adequacy of the allowance for loan and lease losses.

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Modifications to Borrowers Experiencing Financial Difficulty

As part of FHN’s ongoing risk management practices, FHN attempts to work with borrowers when appropriate to extend or modify loan terms to better align with their current ability to repay. Modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. See Note 1 - Significant Accounting Policies, Note 3 - Loans and Leases and Note 4 - Allowance for Credit Losses for further discussion regarding troubled loan modifications.

Commercial Loan Modifications

As part of FHN’s credit risk management governance processes, the Loan Rehab and Recovery Department (LRRD) is responsible for managing most commercial relationships with borrowers whose financial condition has deteriorated to such an extent that the credits are individually reviewed for expected credit losses, classified as substandard or worse, placed on nonaccrual status, foreclosed or in process of foreclosure, or in active or contemplated litigation. LRRD has the authority and responsibility to enter into workout and/or rehabilitation agreements with troubled commercial borrowers in order to mitigate and/or minimize the amount of credit losses recognized from these problem assets. While every circumstance is different, LRRD will generally use forbearance agreements (generally 6-12 months) as an element of commercial loan workouts, which might include reduced interest rates, reduced payments, release of guarantor, term extensions or entering into short sale agreements. Principal forgiveness may be granted in specific workout circumstances.

The individual expected credit loss assessments completed on commercial loans are used in evaluating the appropriateness of qualitative adjustments to quantitatively modeled loss expectations for loans that are not considered collateral dependent. If a loan is collateral dependent, the carrying amount of a loan is written down to the net realizable value of the collateral. Each assessment considers any modified terms and is comprehensive to ensure appropriate assessment of expected credit losses.

Consumer Loan Modifications

FHN does not currently participate in any of the loan modification programs sponsored by the U.S. government but does generally structure modified consumer loans using the parameters of the former Home Affordable Modification Program.

Within the HELOC and real estate installment loans classes of the consumer portfolio segment, troubled loans are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 1% for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years, the interest rate generally returns to the original interest rate prior to modification; for certain modifications, the modified interest rate increases 2% per year until the original interest rate prior to modification is achieved.

Permanent mortgage troubled loans are typically modified by reducing the interest rate (in increments of 25 basis points to a minimum of 2% for up to 5 years) and a possible maturity date extension to reach an affordable housing debt-to-income ratio. After 5 years, the interest rate steps up 1 percent every year until it reaches the Federal Home Loan Mortgage Corporation Weekly Survey Rate cap. Contractual maturities may be extended to 40 years on permanent mortgages and to 30 years for consumer real estate loans.

Within the credit card class of the consumer portfolio segment, troubled loans are typically modified through either a short-term credit card hardship program or a longer-term credit card workout program. In the credit card hardship program, borrowers may be granted rate and payment reductions for 6 months to 1 year. In the credit card workout program, clients are granted a rate reduction to 0% and term extensions for up to 5 years to pay off the remaining balance.

Consumer loans may also be modified through court-imposed principal reductions in bankruptcy proceedings, which FHN is required to honor unless a borrower reaffirms the related debt.

Deposits

Total deposits of $65.8 billion as of December 31, 2023 increased $2.3 billion from $63.5 billion as of December 31, 2022. Interest-bearing deposits increased $8.6 billion and noninterest-bearing deposits decreased $6.3 billion. Deposit growth in 2023 reflected the impact of FHN's deposit marketing campaigns launched in the second quarter. Promotional rates associated with these offerings moderated toward the end of the year, but overall were higher than prior periods contributing to an

increase in funding costs. The rate guarantees on money market deposits in the campaign were short-term and repriced in the back half of the fourth quarter. FHN continues to focus on building and deepening relationships to retain new clients from its promotional campaigns.

FHN continues to maintain a well-diversified and stable funding mix across its footprint:

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•At December 31, 2023, commercial deposits were $35.9 billion, or 55% of total deposits and consumer deposits were $29.9 billion, or 45% of total deposits. At December 31, 2022, commercial deposits were $34.4 billion, or 54% of total deposits and consumer deposits were $29.1 billion, or 46% of total deposits.

•At December 31, 2023, 38% of deposits were associated with Tennessee, 18% with Florida, 12% with Louisiana, and 12% with North Carolina, with no other state above 10%. These percentages were virtually unchanged from the previous year-end.

•Total estimated uninsured deposits were $26.8 billion, or 41% of total deposits, and

$30.3 billion, or 48% of total deposits, as of December 31, 2023 and 2022, respectively.

•Of the uninsured deposits at December 31, 2023, $5.3 billion, or 8% of total deposits, were collateralized. At December 31, 2022, collateralized deposits were $5.0 billion, or 8% of total deposits.

The following tables summarize the major components of FHN's total deposits and total estimated uninsured deposits for 2023, 2022, and 2021 and the maturities of FHN's uninsured time deposits as of December 31, 2023. See Table 7.2 - Average Balances, Net Interest Income and Yields/Rates in this Report for information on average deposits including average rates paid.

Table 7.16

DEPOSITS

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","2023","","Percent of Total","","2023 Growth Rate","","2022","","Percent of Total","","2022 Growth Rate"],["Savings","","$","25,082","","","38","%","","14","%","","$","21,971","","","35","%","","(17)","%"],["Time deposits","","6,804","","","10","","","136","","","2,887","","","4","","","(18)"],["Other interest-bearing deposits","","16,690","","","26","","","10","","","15,165","","","24","","","(11)"],["Total interest-bearing deposits","","48,576","","","74","","","21","","","40,023","","","63","","","(15)"],["Noninterest-bearing deposits","","17,204","","","26","","","(27)","","","23,466","","","37","","","(16)"],["Total deposits","","$","65,780","","","100","%","","4","%","","$","63,489","","","100","%","","(15)","%"]]
[[/GREPCENT_TABLE]]

Table 7.17

ESTIMATED UNINSURED DEPOSITS

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,"],["(Dollars in millions)","","2023","","2022"],["Uninsured deposits","","$","26,752","","","$","30,304"]]
[[/GREPCENT_TABLE]]

Table 7.18

UNINSURED TIME DEPOSITS BY MATURITY

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","December 31, 2023","","December 31, 2022"],["Portion of U.S. time deposits in excess of insurance limit","","$","1,143","","","$","643"],["Time deposits otherwise uninsured with a maturity of:"],["3 months or less","","304","","","198"],["Over 3 months through 6 months","","519","","","147"],["Over 6 months through 12 months","","282","","","225"],["Over 12 months","","38","","","73"]]
[[/GREPCENT_TABLE]]

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Short-Term Borrowings

Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase, trading liabilities, and other short-term borrowings. Total short-term borrowings were $3.1 billion and $2.8 billion as of December 31, 2023 and December 31, 2022, respectively.

Short-term borrowings balances fluctuate largely based on the level of FHLB borrowing as a result of loan demand, deposit levels and balance sheet funding strategies. Trading liabilities fluctuate based on various factors,

including levels of trading securities and hedging strategies. Federal funds purchased fluctuates depending on the amount of excess funding of FHN's correspondent bank customers. Balances of securities sold under agreements to repurchase fluctuate based on cost attractiveness relative to FHLB borrowing levels and the ability to pledge securities toward such transactions. See Note 9 - Short-Term Borrowings for additional information.

Term Borrowings

Term borrowings include senior and subordinated borrowings with original maturities greater than one year. Total term borrowings were $1.2 billion and $1.6 billion as of December 31, 2023 and December 31, 2022,

respectively. The decrease in term borrowings was attributable to the retirement of $450 million in senior notes in May 2023. See Note 10 - Term Borrowings for additional information.

Capital

Management’s objectives are to provide capital sufficient to cover the risks inherent in FHN’s businesses, to maintain excess capital to well-capitalized standards, and to ensure ready access to the capital markets.

Total equity of $9.3 billion increased $744 million compared to December 31, 2022. Significant changes included net income of $916 million and a $180 million increase in AOCI offset by $367 million in common and preferred dividends.

The following tables provide a reconciliation of shareholders’ equity from the Consolidated Balance Sheets to Common Equity Tier 1, Tier 1 and Total Regulatory Capital as well as certain selected capital ratios:

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Table 7.19a

REGULATORY CAPITAL DATA

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","December 31, 2023","","December 31, 2022"],["FHN shareholders\u2019 equity","","$","8,996","","","$","8,252"],["Modified CECL transitional amount (a)","","57","","","85"],["FHN non-cumulative perpetual preferred","","(520)","","","(1,014)"],["Common equity tier 1 before regulatory adjustments","","$","8,533","","","$","7,323"],["Regulatory adjustments:"],["Disallowed goodwill and other intangibles","","$","(1,617)","","","$","(1,658)"],["Net unrealized (gains) losses on securities available for sale","","836","","","972"],["Net unrealized (gains) losses on pension and other postretirement plans","","273","","","269"],["Net unrealized (gains) losses on cash flow hedges","","79","","","126"],["Common equity tier 1","","$","8,104","","","$","7,032"],["FHN non-cumulative perpetual preferred (b)","","426","","","920"],["Qualifying noncontrolling interest\u2014First Horizon Bank preferred stock","","295","","","295"],["Tier 1 capital","","$","8,825","","","$","8,247"],["Tier 2 capital","","1,097","","","975"],["Total regulatory capital","","$","9,922","","","$","9,222"],["Risk-Weighted Assets"],["First Horizon Corporation","","$","71,074","","","$","69,163"],["First Horizon Bank","","70,635","","","68,728"],["Average Assets for Leverage"],["First Horizon Corporation","","$","82,540","","","$","79,583"],["First Horizon Bank","","81,898","","","78,923"]]
[[/GREPCENT_TABLE]]

Table 7.19b

REGULATORY RATIOS & AMOUNTS

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["(Dollars in millions)","","Ratio","","Amount","","Ratio","","Amount"],["Common Equity Tier 1"],["First Horizon Corporation","","11.40","%","","$","8,104","","","10.17","%","","$","7,032"],["First Horizon Bank","","11.40","","","8,055","","","10.77","","","7,405"],["Tier 1"],["First Horizon Corporation","","12.42","","","8,825","","","11.92","","","8,247"],["First Horizon Bank","","11.82","","","8,350","","","11.20","","","7,700"],["Total"],["First Horizon Corporation","","13.96","","","9,922","","","13.33","","","9,222"],["First Horizon Bank","","13.17","","","9,303","","","12.41","","","8,532"],["Tier 1 Leverage"],["First Horizon Corporation","","10.69","","","8,825","","","10.36","","","8,247"],["First Horizon Bank","","10.20","","","8,350","","","9.76","","","7,700"],["Other Capital Ratios"],["Total period-end equity to period-end assets","","11.38","","","","","10.83"],["Tangible common equity to tangible assets (c)","","8.48","","","","","7.12"],["Adjusted tangible common equity to risk weighted assets (c)","","10.72","","","","","9.35"]]
[[/GREPCENT_TABLE]]

(a)    The modified CECL transitional amount includes the impact to retained earnings from the initial adoption of CECL plus 25% of the change in the adjusted allowance for credit losses since FHN’s initial adoption of CECL through December 31, 2023.

(b)    The $94 million carrying value of the Series D preferred stock does not qualify as Tier 1 capital because the earliest redemption date is less than five years from the issuance date.

(c)    Tangible common equity to tangible assets and adjusted tangible common equity to risk-weighted assets are non-GAAP measures and are reconciled to total equity to total assets (GAAP) in the Non-GAAP to GAAP Reconciliation - Table 7.28.

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Banking regulators define minimum capital ratios for bank holding companies and their bank subsidiaries. Based on the capital rules and definitions prescribed by the banking regulators, should any depository institution’s capital ratios decline below predetermined levels, it would become subject to a series of increasingly restrictive regulatory actions.

The system categorizes a depository institution’s capital position into one of five categories ranging from well-capitalized to critically under-capitalized. For an institution the size of FHN to qualify as well-capitalized, Common Equity Tier 1, Tier 1 Capital, Total Capital, and Leverage capital ratios must be at least 6.50%, 8.00%, 10.00%, and 5.00%, respectively. Furthermore, a capital conservation buffer of 50 basis points above these levels must be maintained on the Common Equity Tier 1, Tier 1 Capital and Total Capital ratios to avoid restrictions on dividends, share repurchases and certain discretionary bonuses.

As of December 31, 2023, both FHN and First Horizon Bank had sufficient capital to qualify as well-capitalized institutions and to meet the capital conservation buffer requirement. Capital ratios for both FHN and First Horizon Bank as of December 31, 2023 are calculated under the final rule issued by the banking regulators in 2020 to delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period.

For FHN, the Tier 1 and Total risk-based regulatory capital ratios increased in 2023 relative to 2022 primarily from the impact of net income less dividends. The increase in the Common Equity Tier 1 ratio for FHN was largely driven by the conversion of the Series G Preferred Stock to common stock.

During 2024, capital ratios are expected to remain above well-capitalized standards plus the required capital conservation buffer.

Stress Testing

The Economic Growth, Regulatory Relief, and Consumer Protection Act, along with an interagency regulatory statement effectively exempted both FHN and First Horizon Bank from Dodd-Frank Act stress testing requirements starting in 2018.

For 2023, FHN and First Horizon Bank completed a company run stress test using the Comprehensive Capital Analysis and Review (CCAR) scenarios published in February 2023. Results of these tests indicate that both FHN and First Horizon Bank would be able to maintain capital well in excess of Basel III Adequately Capitalized standards under the hypothetical severe global recession of the 2023 CCAR Severely Adverse scenario. A summary of those results was posted in the “Fixed Income - Stress

Test Results” section on FHN’s investor relations website on September 29, 2023. Neither FHN’s stress test posting, nor any other material found on FHN’s website generally, is part of this report or incorporated herein.

FHN anticipates that it will continue performing an annual enterprise-wide stress test as part of its capital and risk management process. Results of this test will be presented to executive management and the Board.

The disclosures in this “Stress Testing” section include forward-looking statements. Please refer to “Forward-Looking Statements” for additional information concerning the characteristics and limitations of statements of that type.

Common Stock Purchase Programs

If and as authorized by its Board of Directors, FHN may repurchase shares of its common stock from time to time and will evaluate the level of capital and take action designed to generate or use capital, as appropriate, for the interests of the shareholders, subject to legal and regulatory restrictions. FHN's Board authorized two common stock purchase programs, described below, that operated and expired during the fourth quarter of 2023. In 2024, FHN's Board replaced one of those programs. FHN’s Board has not authorized a preferred stock purchase program.

2021 General Purchase Program

On January 27, 2021, FHN announced that its Board of Directors approved a new $500 million common share purchase program that was to expire on January 31, 2023. On October 26, 2021, FHN announced that the 2021 program had been increased by $500 million and

extended to October 31, 2023. The 2021 program was not further extended.

The 2021 program was not tied to any compensation plan. Purchases could be made in the open market or through privately negotiated transactions, including under Rule 10b5-1 plans as well as accelerated share repurchase and other structured transactions. The timing and exact amount of common share repurchases were subject to various factors, including FHN's capital position, financial performance, expected capital impacts of strategic initiatives, market conditions, business conditions, and regulatory considerations. FHN did not purchase shares under this program during blackout periods when senior executives were prohibited from purchasing FHN stock on the open market.

As of expiration at October 31, 2023, $401 million in purchases had been made under the 2021 program at an average price per share of $16.60, or $16.58 excluding

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commissions. The pendency of the TD Transaction resulted in no purchases under the 2021 program since the Transaction was announced in 2022. No additional

purchases were made under the 2021 program in 2023 before it expired.

Table 7.20a

COMMON STOCK PURCHASES—2021 GENERAL PROGRAM

[[GREPCENT_TABLE]]
[["(Dollar values and volume in thousands, except per share data)","","Total number of shares purchased","","Average price paid per share (a)","","Total number of shares purchased as part of publicly announced programs","","Maximum approximate dollar value that may yet be purchased under the programs (b)"],["2023"],["October 1 to October 31","","\u2014","","","N/A","","\u2014","","","$","598,646"],["November 1 to November 30","","\u2014","","","N/A","","\u2014","","","\u2014"],["December 1 to December 31","","\u2014","","","N/A","","\u2014","","","\u2014"],["Total","","\u2014","","","N/A","","\u2014"]]
[[/GREPCENT_TABLE]]

(a)    Represents total costs including commissions paid

(b)    For October, value given as of immediately prior to program expiration on October 31, 2023.

2024 General Purchase Program

On January 23, 2024, FHN announced that its Board of Directors approved a new $650 million common share purchase program that is scheduled to expire on January 31, 2025. The 2024 program is not tied to any compensation plan. Purchases may be made in the open market or through privately negotiated transactions, including under Rule 10b5-1 plans as well as accelerated share repurchase and other structured transactions. The timing and exact amount of common share repurchases are subject to various factors, including FHN's capital position, financial performance, expected capital impacts of strategic initiatives, market conditions, business conditions, and regulatory considerations. FHN does not purchase shares under this program during blackout periods when senior executives are prohibited from purchasing FHN stock on the open market.

2004 Compensation Plans Purchase Program

A consolidated compensation plan share purchase program was announced on August 6, 2004. This program consolidated into a single share purchase program all of the previously authorized compensation plan share programs as well as the renewal of the authorization to purchase shares for use in connection with compensation plans for which the share purchase authority had expired. The primary objectives of this program were to mitigate dilution resulting from shares issued in connection with

FHN's various stock-based compensation plans, and to implement automatic stock purchases related to tax withholding obligations associated with stock-based awards. For many years, the program was used entirely for the second objective.

The total amount authorized under this consolidated compensation plan share purchase program was 29.6 million shares calculated before adjusting for stock dividends distributed through January 1, 2011. The authorization was reduced for that portion which related to compensation plans for which no stock option awards remain outstanding. The program expired on December 31, 2023. Prior to expiration, purchases could have been made in the open market or through privately negotiated transactions and were subject to various factors including FHN's capital position, financial performance, capital impacts of strategic initiatives, market conditions and regulatory considerations. However, as mentioned above, even though general repurchases were authorized, for many years FHN's use of this program was limited to automatically withholding shares associated with vested stock awards to cover tax obligations.

As of December 31, 2023, immediately prior to expiration, the maximum number of shares that could be purchased under the program was 22 million shares.

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Table 7.20b

COMMON STOCK PURCHASES—2004 COMPENSATION PLANS PROGRAM

[[GREPCENT_TABLE]]
[["(Volume in thousands, except per share data)","","Total number of shares purchased","","Average price paid per share","","Total number of shares purchased as part of publicly announced programs","","Maximum number of shares that may yet be purchased under the programs (a)"],["2023"],["October 1 to October 31","","31","","","$","10.71","","","31","","","21,724"],["November 1 to November 30","","1","","","11.74","","","1","","","21,723"],["December 1 to December 31","","23","","","13.35","","","23","","","21,700"],["Total","","55","","","$","11.82","","","55"]]
[[/GREPCENT_TABLE]]

(a)    For December, number given as of immediately prior to program expiration on December 31, 2023.

Automatic Off-Market Tax Withholding Purchases

The 2004 compensation plans program has not been renewed or replaced with a formal program. After 2023, as authorized by FHN's Board and the Board's Compensation Committee, FHN will continue to make automatic stock purchases by withholding shares associated with stock-based awards to cover tax

obligations associated with those awards. Those limited, off-market purchases no longer will be connected to a traditional, announced purchase program. As has been true in the past, automatic tax withholding purchases are not subject to trading blackouts which affect senior executives or the general purchase program.

Risk Management

FHN derives revenue from providing services and, in many cases, assuming and managing risk for profit which exposes FHN to strategic, reputational, liquidity, market, capital adequacy, operational, compliance, legal, and credit risks that require ongoing oversight and management. FHN has an enterprise-wide approach to risk governance, measurement, management, and reporting including an economic capital allocation process that is tied to risk profiles used to measure risk-adjusted returns. Through an enterprise-wide risk governance structure and a Risk Appetite Statement approved by the Board, management continually evaluates the balance of risk/return and earnings volatility with shareholder value.

FHN’s enterprise-wide risk governance structure begins with the Board. The Board, working with the Risk Committee of the Board, establishes FHN’s risk appetite by approving policies and limits that provide standards for the nature and the level of risk FHN is willing to assume. The Board regularly receives reports on management’s performance against FHN’s risk appetite primarily through the Board’s Risk and Audit Committees.

To further support the risk governance provided by the Board, FHN has established accountabilities, control processes, procedures, and a management governance structure designed to align risk management with risk-taking throughout FHN. The control procedures are aligned with FHN’s four components of risk governance: (1) Specific Risk Committees; (2) the Risk Management Organization; (3) Business Unit Risk Management; and (4) Independent Assurance Functions.

1.Specific Risk Committees: The Board has delegated authority to the Chief Executive Officer to manage Strategic Risk and Reputational Risk, and the general business affairs of FHN under the Board’s oversight. The CEO utilizes the executive management team and the Management Risk Committee to carry out these duties and to analyze existing and emerging strategic and reputational risks and determines the appropriate course of action. The Management Risk Committee is comprised of the CEO and certain officers designated by the CEO. The Management Risk Committee is supported by a set of specific risk committees focused on unique risk types (e.g. liquidity, credit, operational, etc.). These risk committees provide a mechanism that assembles the necessary expertise and perspectives of the management team to discuss emerging risk issues, monitor FHN’s risk-taking activities, and evaluate specific transactions and exposures. These committees also monitor the direction and trend of risks relative to business strategies and market conditions and direct management to respond to risk issues.

2.The Risk Management Organization: FHN’s risk management organization, led by the Chief Risk Officer and Chief Credit Officer, provides objective oversight of risk-taking activities. The risk management organization translates FHN’s overall risk appetite into approved limits and formal policies and is supported by corporate staff functions, including the Corporate Secretary, Legal, Finance, Human Resources, and Technology. Risk management also works with business units and functional experts to establish appropriate operating standards and monitor business

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practices in relation to those standards. Additionally, risk management proactively works with business units and senior management to focus management on key risks in FHN and emerging trends that may change FHN’s risk profile. The Chief Risk Officer has overall responsibility and accountability for enterprise risk management and aggregate risk reporting.

3.Business Unit Risk Management: FHN’s business units are responsible for identifying, acknowledging, quantifying, mitigating, and managing all risks arising within their respective units. They determine and execute their business strategies, which puts them closest to the changing nature of risks and they are best able to take the needed actions to manage and mitigate those risks. The business units are supported by the risk management organization that helps identify and consider risks when making business decisions. Management processes, structure, and policies are designed to help ensure compliance with laws and regulations as well as provide organizational clarity for authority, decision-making, and accountability. Business units have designated control processes to help mitigate their identified risks and business units attest to the effectiveness of those

controls. The risk governance structure supports and promotes the escalation of material items to executive management and the Board.

4.Independent Assurance Functions: Internal Audit, Credit Assurance Services (CAS), Compliance Testing, and Model Validation provide an independent and objective assessment of the design and execution of FHN’s internal control system, including management processes, risk governance, and policies and procedures. These groups’ activities are designed to provide reasonable assurance that risks are appropriately identified and communicated; resources are safeguarded; significant financial, managerial, and operating information is complete, accurate, and reliable; and employee actions are in compliance with FHN’s policies and applicable laws and regulations. Internal Audit and CAS report to the Chief Audit Executive, who is appointed by and reports to the Audit Committee of the Board. Internal Audit reports quarterly to the Audit Committee of the Board, while CAS reports quarterly to the Risk Committee of the Board. Compliance Testing and Model Validation report to the Chief Risk Officer and report annually to the Audit Committee of the Board.

Market Risk Management

Market risk is the risk that changes in market conditions will adversely impact the value of assets or liabilities, or otherwise negatively impact FHN’s earnings. Market risk is inherent in the financial instruments associated with FHN’s operations, primarily trading activities within FHN Financial, but also through non-trading activities which are primarily affected by interest rate risk that is managed by the ALCO within FHN.

FHN is exposed to market risk related to the trading securities inventory and loans held for sale maintained by FHN Financial in connection with its fixed income distribution activities. Various types of securities inventory positions are procured for distribution to clients by the sales staff. When these securities settle on a delayed basis, they are considered forward contracts. Refer to the "Determination of Fair Value - Trading securities and trading liabilities" section of Note 23 - Fair Value of Assets and Liabilities, which section is incorporated into this MD&A by this reference.

FHN’s market risk appetite is approved by the Risk Committee of the Board of Directors and executed through management policies and procedures of ALCO and the FHN Financial Risk Committee. These policies contain various market risk limits including, for example,

VaR limits for the trading securities inventory, and individual position limits and sector limits for products with credit risk, among others. Risk measures are computed and reviewed on a daily basis to ensure compliance with market risk management policies.

Value-at-Risk and Stress Testing

VaR is a statistical risk measure used to estimate the potential loss in value from adverse market movements over an assumed fixed holding period within a stated confidence level. FHN employs a model to compute daily VaR measures for its trading securities inventory. FHN computes VaR using historical simulation with a 1-year lookback period at a 99% confidence level with 1-day and 10-day time horizons. Additionally, FHN computes a Stressed VaR measure. The SVaR computation uses the same model but with model inputs reflecting historical data from a continuous 12-month period that reflects a period of significant financial stress appropriate for our trading securities portfolio.

A summary of FHN's VaR and SVaR measures for 1-day and 10-day time horizons is presented in the following table:

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Table 7.21

VaR & SVaR MEASURES

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2023","","As of December 31, 2023"],["(Dollars in millions)","","Mean","","High","","Low"],["1-day"],["VaR","","$","3","","","$","4","","","$","2","","","$","3"],["SVaR","","6","","","8","","","3","","","6"],["10-day"],["VaR","","8","","","11","","","4","","","10"],["SVaR","","24","","","34","","","12","","","28"],["","","Year Ended December 31, 2022","","As of December 31, 2022"],["(Dollars in millions)","","Mean","","High","","Low"],["1-day"],["VaR","","$","2","","","$","4","","","$","2","","","$","3"],["SVaR","","5","","","7","","","4","","","6"],["10-day"],["VaR","","8","","","11","","","3","","","10"],["SVaR","","24","","","34","","","18","","","29"]]
[[/GREPCENT_TABLE]]

FHN’s overall VaR measure includes both interest rate risk and credit spread risk. Separate measures of these component risks are as follows:

Table 7.22

SCHEDULE OF RISKS INCLUDED IN VaR

[[GREPCENT_TABLE]]
[["","","As of December 31, 2023","","As of December 31, 2022"],["(Dollars in millions)","","1-day","","10-day","","1-day","","10-day"],["Interest rate risk","","$","1","","","$","2","","","$","1","","","$","3"],["Credit spread risk","","1","","","1","","","1","","","2"]]
[[/GREPCENT_TABLE]]

The potential risk of loss reflected by FHN’s VaR measures assumes the trading securities inventory is static. Because FHN Financial procures fixed income securities for purposes of distribution to clients, its trading securities inventory turns over regularly. Additionally, FHNF traders actively manage the trading securities inventory continuously throughout each trading day. Accordingly, FHNF’s trading securities inventory is highly dynamic, rather than static. As a result, it would be rare for FHNF to incur a negative revenue day in its fixed income activities at the levels indicated by its VaR measures.

In addition to being used in FHN’s daily market risk management process, the VaR and SVaR measures are also used by FHN in computing its regulatory market risk capital requirements in accordance with the Market Risk Capital rules. For additional information regarding FHN's capital adequacy refer to the Capital section of this MD&A.

FHN also performs stress tests on its trading securities portfolio to calculate the potential loss under various

assumed market scenarios. Key assumed stresses used in those tests are:

Down 25 bps - assumes an instantaneous downward move in interest rates of 25 basis points at all points on the interest rate yield curve.

Up 25 bps - assumes an instantaneous upward move in interest rates of 25 basis points at all points on the interest rate yield curve.

Curve flattening - assumes an instantaneous flattening of the interest rate yield curve through an increase in short-term rates and a decrease in long-term rates. The 2-year point on the Treasury yield curve is assumed to increase 15 basis points and the 10-year point on the Treasury yield curve is assumed to decrease 15 basis points. Shifts in other points on the yield curve are predicted based on their correlation to the 2-year and 10-year points.

Curve steepening - assumes an instantaneous steepening of the interest rate yield curve through a decrease in short-term rates and an increase in long-

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term rates. The 2-year point on the Treasury yield curve is assumed to decrease 15 basis points and the 10-year point on the Treasury yield curve is assumed to increase 15 basis points. Shifts in other points on the yield curve are predicted based on their correlation to the 2-year and 10-year points.

Credit spread widening - assumes an instantaneous increase in credit spreads (the difference between yields on Treasury securities and non-Treasury securities) of 25 basis points.

Model Validation

Trading risk management personnel within FHN Financial have primary responsibility for model risk management

with respect to the model used by FHN to compute its VaR measures and perform stress testing on the trading inventory. Among other procedures, these personnel monitor model results and perform periodic backtesting as part of an ongoing process of validating the accuracy of the model. These model risk management activities are subject to annual review by FHN’s Model Validation Group, an independent assurance group charged with oversight responsibility for FHN’s model risk management.

Interest Rate Risk Management

Interest rate risk is the risk to earnings or capital arising from movement in interest rates. ALCO is responsible for overseeing the management of existing and emerging interest rate risk for the company within risk tolerances established by the Board. FHN primarily manages interest rate risk by structuring the balance sheet to maintain a desired level of associated earnings and to protect the economic value of FHN’s capital.

Net interest income and the value of equity are affected by changes in the level of market interest rates because of the differing repricing characteristics of assets and liabilities, the exercise of prepayment options held by loan clients, the early withdrawal options held by deposit clients, and changes in the basis between and changing shapes of the various yield curves used to price assets and liabilities. To isolate the repricing, basis, option, and yield curve components of overall interest rate risk, FHN employs Gap, Net Interest Income at Risk, and Economic Value of Equity analyses generated by a balance sheet simulation model.

Net Interest Income Simulation Analysis

The information provided in this section, including the discussion regarding the outcomes of simulation analysis and rate shock analysis, is forward-looking. Actual results, if the assumed scenarios were to occur, could differ because of interest rate movements, the ability of management to execute its business plans, and other factors, including those presented in the Forward-Looking Statements section of this Report.

Management uses a simulation model to measure interest rate risk and to formulate strategies to improve balance sheet positioning, earnings, or both, within FHN’s interest rate risk, liquidity, and capital guidelines. Interest rate exposure is measured by forecasting 12 months of NII under various interest rate scenarios and comparing the percentage change in NII for each scenario to a base case scenario where interest rates remain unchanged. Assumptions are made regarding future balance sheet composition, interest rate movements, and loan and

deposit pricing. In addition, assumptions are made about the magnitude of asset prepayments and earlier than anticipated deposit withdrawals. The results of these scenarios help FHN develop strategies for managing exposure to interest rate risk. While management believes the assumptions used and scenarios selected in its simulations are reasonable, simulation modeling provides only an estimate, not a precise calculation, of exposure to any given change in interest rates.

Based on a static balance sheet as of December 31, 2023, NII exposures over the next 12 months assuming rate shocks of plus/minus 25 basis points, plus/minus 50 basis points, plus/minus 100 basis points, and plus 200 basis points are estimated to have variances as shown in the table below.

Table 7.23

INTEREST RATE SENSITIVITY

[[GREPCENT_TABLE]]
[["Shifts in Interest Rates (in bps)","","% Change in Projected Net Interest Income"],["-100","","(3.6)%"],["-50","","(1.7)%"],["-25","","(0.9)%"],["+25","","0.7%"],["+50","","1.4%"],["+100","","2.6%"],["+200","","3.3%"]]
[[/GREPCENT_TABLE]]

A steepening yield curve scenario, where long-term rates increase by 50 basis points and short-term rates are static, results in a favorable NII variance of 0.4%. A flattening yield curve scenario where long-term rates decrease by 50 basis points and short-term rates are static, results in an unfavorable NII variance of 0.5%. These hypothetical scenarios are used to create a risk measurement framework, and do not necessarily represent management’s current view of future interest rates or market developments.

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Short-term interest rates have reached their highest levels in 15 years, which coupled with market disruption from recent high profile bank failures, has increased competitive pressures on deposit costs.

The yield curve was inverted for much of the last half of 2022, and throughout 2023. The inverted yield curve indicates market expectations that short-term rates have likely peaked and then could decline in future periods. Market participants are now projecting multiple rate cuts in 2024 while the December 2023 Fed Dot plot has indicated three 25 basis point cuts in 2024. FHN continues to monitor current economic trends and potential exposures closely. For additional information, see Yield Curve within Market Uncertainties and Prospective Trends below.

Fair Value Shock Analysis

Interest rate risk and the slope of the yield curve also affect the fair value of FHN's trading inventory that is reflected in noninterest income.

Generally, low or declining interest rates with a positively sloped yield curve tend to increase income through higher demand for fixed income products. Additionally, the fair value of FHN's trading inventory can fluctuate as a result of differences between current interest rates and the interest rates of fixed income securities in the trading inventory.

Derivatives

In the normal course of business, FHN utilizes various financial instruments (including derivative contracts and credit-related agreements) to manage the risk of loss arising from adverse changes in the fair value of certain financial instruments generally caused by changes in interest rates, including FHN's securities inventory, certain term borrowings, and certain loans. Additionally, FHN may enter into derivative contracts in order to meet clients'

needs. However, such derivative contracts are typically offset with a derivative contract entered into with an upstream counterparty in order to mitigate risk associated with changes in interest rates.

The simulation models and related hedging strategies discussed above exclude the dynamics related to how fee income and noninterest expense may be affected by actual changes in interest rates or expectations of changes. See Note 21 - Derivatives for additional discussion of these instruments.

LIBOR & Reference Rate Reform

In March 2022, Congress passed the Adjustable Interest Rate (LIBOR) Act. The legislation addresses loans that remained on LIBOR as of the June 30, 2023 cessation date, and that either have no fallback provisions or that contain fallback provisions that do not identify a specific benchmark replacement. Per the legislation, at the final cessation of USD LIBOR, banks may cause such loans to fall back to a SOFR-based benchmark rate, with such rate to be selected by the Federal Reserve Board. The LIBOR Act also provides safe harbor from liability for banks that select the Board-selected replacement benchmark rate at the cessation of LIBOR.

In December 2022, the Federal Reserve Board issued Regulation ZZ, its final rule to implement the Adjustable Interest Rate (LIBOR) Act.

FHN has complied with the terms of the LIBOR Act and Regulation ZZ and amended substantially all of its contracts away from LIBOR as of June 30, 2023. For most financial products, the most common alternative reference rates have been SOFR-based benchmarks. This is true for both new originations and legacy LIBOR contracts that were subject to amendment or a transition by their terms.

Capital Risk Management & Adequacy

The capital management objectives of FHN are to provide capital sufficient to cover the risks inherent in FHN’s businesses, to maintain excess capital to well-capitalized standards and Board policy, and to assure ready access to the capital markets. The Capital & Stress Testing Committee, chaired by the Corporate Treasurer, reports to ALCO and is responsible for capital management oversight and provides a forum for addressing management issues related to capital adequacy. This

committee reviews sources and uses of capital, key capital ratios, segment economic capital allocation methodologies, coordinates the annual enterprise-wide stress testing process, and considers other factors in monitoring and managing current capital levels, as well as potential future sources and uses of capital. The Capital & Stress Testing Committee also recommends capital management policies, which are submitted for approval to ALCO and the Risk Committee of the Board as necessary.

Operational Risk Management

Operational risk is the risk of loss from inadequate or failed internal processes, people, or systems or from external events including data or network security breaches of FHN or of third parties affecting FHN or its clients. This risk is inherent in all businesses. Operational

risk is divided into the following risk areas, which have been established at the corporate level to address these risks across the entire organization:

•Business Resilience

•Records Management

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•Compliance/Legal (including Bank Secrecy Act)

•Program Governance

•Fiduciary

•Security/Fraud

•Financial (including disclosure controls and procedures)

•Information Technology (including cybersecurity; see the next section below)

•Model

•Vendor

•Insurance

Management, measurement, and reporting of operational risk are overseen by the Operational Risk, Fiduciary,

Financial Governance, FHN Financial Risk, and Strategic Investment Board Committees. Key representatives from the business segments, operating units, and supporting units are represented on these committees as appropriate. These governance committees manage the individual operational risk types across FHN by setting standards, monitoring activity, initiating actions, and reporting exposures and results. Key Committee activities and decisions are reported to the appropriate governance committee or included in the Enterprise Risk Report, a quarterly analysis of risk within the organization that is provided to the Risk Committee. Emphasis is dedicated to refinement of processes and tools to aid in measuring and managing material operational risks and providing for a culture of awareness and accountability.

Cybersecurity Risk Management

Overview

As mentioned immediately above, FHN's operational risk function is divided into several risk areas. Each area has been established at the corporate level to address risks in that area across the entire organization. One of those areas—information technology ("IT") risk—includes cybersecurity risk management.

As FHN manages it, IT risk includes cybersecurity risk, which in turn includes the risks from cyber fraud, cyber theft, cyber vandalism, cyber ransom, data and system security, and other unauthorized incursions into FHN's IT systems. IT risk management also includes IT system reliability, data integrity, IT aspects of regulatory compliance, and risks associated with the use of artificial intelligence tools and systems. The discussion in this section focuses on cybersecurity. Additional information on this topic is presented in Cybersecurity Risks within Item 1A beginning on page 33.

Key Cybersecurity Risk Management Goals

Cybersecurity risk management has two primary goals: defend FHN and its clients from fraudulent and other unauthorized incursions; and, when an incursion happens, detect and respond as soon as practical. The optimal cybersecurity program will defend as much as is practical while also detecting rapidly those incursions that get through.

Management Structure & Key Processes

Operational risk is managed by FHN's Operational Risk ("Op Risk") Committee. Members of the Op Risk Committee include senior-level representatives from these teams or departments: Enterprise Risk Management, Operations, Model Risk, Enterprise Data, Enterprise Technology, Enterprise Technology Risk Management, Credit and Credit Risk Management, Legal, Security, Internal Audit, Deposit & Loan Operations, Retail and Digital Banking, Regional Bank Products, Mortgage Banking, Accounting, and Fixed Income/Bond Trading. The

Op Risk Committee reports to FHN's Management Risk Committee, which is headed by FHN's Chief Risk Officer, who reports to FHN's Chief Executive Officer.

IT risk is managed by the IT Risk Working Group, overseen by the Op Risk Committee. The IT Risk Working Group meets quarterly to discuss emerging cyber risks, regulatory changes, vendor risk, audits, and outstanding-issue resolution. The Group also provides updates to the Op Risk Committee on IT aspects of compliance, policies, and security standards. Members of the IT Risk Working Group include the head of Enterprise Technology along with personnel from nearly all of the teams and departments represented in Op Risk.

FHN also has a Cybersecurity Working Group. The Cybersecurity Working Group, which is outside of the risk management hierarchy, meets quarterly. Its primary functions are to provide cybersecurity awareness to the executive leadership team and to provide high-level support if a significant cybersecurity event occurs. In connection with awareness, (a) external vendors, consultants, law enforcement, and other persons are invited to speak on industry-wide cybersecurity topics to provide an independent view of external threats facing the industry; and (b) members of the Enterprise Technology team provide updates regarding how FHN is addressing current risks and threats. The Cybersecurity Working Group includes: FHN's CEO; the heads of FHN's banking segments; the heads of Risk Management, Enterprise Technology, Security, Operations, and Legal; and senior personnel in the other teams and departments represented in the IT Risk Working Group.

Key leaders within these committees and groups and for these processes are FHN's Chief Information Officer and Chief Information Security Officer. The Chief Information Officer has substantial banking, IT, and related experience: had roles at FHN since 2009 related to IT and data systems culminating in CIO since 2020; prior to joining FHN, had roles at a large regional bank, including technology leader of the bank's electronic payments platform related to

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treasury management and enterprise IT architect; and, earned an MS in computer science as well as an MBA. The Chief Information Security Officer has over twenty years of banking, IT, and related experience: oversees information security and many related systems and processes; has established risk-based security programs to meet regulatory requirements and align with business needs; and has implemented numerous data protection, data access, and identity management systems.

FHN has a written Computer Security Incident Response Plan ("CSIRP") outlining FHN's incident response and communication processes. FHN's Chief Information Security Officer or certain other managers have the authority to initiate the execution of the CSIRP if an incident occurs. A working group called the Computer Security Incident Response Team has primary responsibility to implement or coordinate many of the CSIRP actions, along with FHN's IT Risk Working Group. Key goals of the CSIRP are to: contain, remediate, and recover; mitigate impact on FHN and clients; report findings to Op Risk and other senior management; and manage external communications. The Cybersecurity Working Group is informed of incidents that appear to have a significant risk of becoming material.

FHN engages third party vendors to conduct several periodic cybersecurity reviews: Network Penetration testing; Cyber Security Maturity Assessment; Red Team (simulated cyber attack) testing; SOX (financial reporting controls and data integrity) testing; and, PCI-DSS (proprietary data security standard for payment systems) attestation of compliance and SOC 1 Type II reports (attesting to the design and operation of cybersecurity systems) for lockbox and electronic bill pay. The frequency of these reviews ranges from several times per year to every three years. FHN also has a cybersecurity incident specialty firm on retainer for incident response, as needed.

FHN has a dedicated Third-Party Risk Management (TPRM) department reporting to the Chief Risk Officer. TPRM engages the IT Risk Working Group to perform cybersecurity assessments for new vendors during onboarding, re-assessments of existing vendors on a risk-based cadence, and continuous monitoring of critical third-parties.

Board Oversight

The Board's Risk Committee oversees all risk management functions for the enterprise, including op risk, IT risk, and cybersecurity risk. The Board's Information Technology Committee oversees management of FHN's IT systems, including their adequacy now and in the future, and their security. In relation to cybersecurity risk management, the functions of the two Committees overlap to an extent.

The Risk Committee, as well as the full Board, each quarter receive a risk management update from FHN's Chief Risk Officer. Each update includes a written presentation covering all major risk areas, including op risk, and each is supported by a detailed Enterprise Risk Report which is available to all directors. Major topics in the op risk portion of the Enterprise Risk Report each quarter include fraud and related incidents; process management, which includes many processes related to cybersecurity defenses; and information security, which addresses core cybersecurity processes and incidents.

Tactical, Operational & Other Impacts

The measures FHN takes to manage cybersecurity risk affect how associates and clients use FHN's platforms and systems. For every safeguard considered or implemented, FHN must weigh potential and actual inconveniences against security concerns. Practical realities make it impossible to maximize security and ignore resulting restrictions on the ability of associates and clients to conduct banking and financial business. Primarily for that reason, cybersecurity risks are and will be a major risk management concern, and losses from incursions will be impossible to avoid. As mentioned above, FHN's goals are to prevent what can be prevented, and detect and respond to incursions that get through as quickly as possible.

For those incursions that are not blocked, FHN's processes are designed to detect them quickly enough so that the financial and operational impact on FHN is zero or modest. But the risk of a major incursion occurring cannot be reduced to zero. A major incursion could have a material financial impact on FHN's business operations and earnings.

Compliance Risk Management

Compliance risk is the risk of legal or regulatory sanctions, material financial loss, or loss to reputation as a result of failure to comply with laws, regulations, rules, self-regulatory organization standards, and codes of conduct applicable to FHN’s activities. Management, measurement, and reporting of compliance risk are overseen by the Operational Risk Committee and other key Corporate Governance Committees. Key executives

from the business segments, legal, compliance, risk management, and service functions are represented on the Committees. Summary reports of Committee activities and decisions are provided to the appropriate governance committees. Reports include the status of regulatory activities, internal compliance program initiatives, compliance testing and internal audit results and evaluation of emerging compliance risk areas.

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Credit Risk Management

Credit risk is the risk of loss due to adverse changes in a borrower’s or counterparty’s ability to meet its financial obligations under agreed upon terms. FHN is subject to credit risk in lending, trading, investing, liquidity/funding, and asset management activities although lending activities have the most exposure to credit risk. The nature and amount of credit risk depends on the types of transactions, the structure of those transactions, collateral received, the use of guarantors and the parties involved.

FHN assesses and manages credit risk through a series of policies, processes, measurement systems, and controls. The Credit Risk Management Committee (CRMC) is responsible for overseeing the management of existing and emerging credit risks in the company within the broad risk tolerances established by the Board. The CRMC reports through the Management Risk Committee. The Credit Risk Management function, led by the Chief Credit Officer, provides strategic and tactical credit leadership by maintaining policies, overseeing credit approval, assessing new credit products, strategies and processes, and managing portfolio composition and performance.

While the Credit Risk function oversees FHN’s credit risk management, there is significant coordination between the business lines and the Credit Risk function in order to manage FHN’s credit risk and maintain strong asset quality. The Credit Risk function recommends portfolio, industry/sector, and individual client limits to the Risk Committee of the Board for approval. Adherence to these approved limits is vigorously monitored by Credit Risk which provides recommendations to slow or cease lending to the business lines as commitments near established lending limits. Credit Risk also ensures subject matter

experts are providing oversight, support and credit approvals, particularly in the specialty lending areas where industry-specific knowledge is required. Management emphasizes general portfolio servicing such that emerging risks are able to be spotted early enough to correct potential deficiencies, prevent further credit deterioration, and mitigate credit losses.

The Credit Risk Management function assesses the asset quality trends and results, as well as lending processes, adherence to underwriting guidelines (portfolio-specific underwriting guidelines are discussed further in the Asset Quality Trends section), and utilizes this information to inform management regarding the current state of credit quality and as a factor of the estimation process for determining the allowance for credit losses. The CRMC reviews on a periodic basis various reports issued by assurance functions which provide an independent assessment of the adequacy of loan servicing, grading accuracy, and other key functions. Additionally, CRMC is presented with and discusses various portfolios, lending activity and lending-related projects.

All of the above activities are subject to independent review by FHN’s Credit Assurance Services Group. CAS reports to the Chief Audit Executive, who is appointed by and reports to the Audit Committee of the Board, and provides quarterly reports to the Risk Committee of the Board. CAS is charged with providing the Risk Committee of the Board and executive management with independent, objective, and timely assessments of FHN’s portfolio quality, credit policies, and credit risk management processes.

Liquidity Risk Management

Among other things, ALCO is responsible for liquidity management: the funding of assets with liabilities of appropriate duration, while mitigating the risk of unexpected cash needs. ALCO and the Board of Directors have adopted a Liquidity Policy of which the objective is to ensure that FHN meets its cash and collateral obligations promptly, in a cost-effective manner and with the highest degree of reliability. After the banking crisis in the first half of 2023, ALCO and the Board examined the liquidity risk management framework and policies to ensure alignment with evolving regulatory expectations, industry best practices, and the company’s risk appetite. The maintenance of adequate levels of asset and liability liquidity should provide FHN with the ability to meet both expected and unexpected cash and collateral needs. Key liquidity ratios, asset liquidity levels, and the amount available from funding sources are reported to ALCO on a regular basis. FHN’s Liquidity Policy establishes liquidity limits that are deemed appropriate for FHN’s risk profile.

In accordance with the Liquidity Policy, ALCO manages FHN’s exposure to liquidity risk through a dynamic, real time forecasting methodology. Base liquidity forecasts are reviewed by ALCO and are updated as financial conditions dictate. In addition to the baseline liquidity reports, robust stress testing of assumptions and funds availability are periodically reviewed. FHN maintains a contingency funding plan that may be executed should unexpected difficulties arise in accessing funding that affects FHN, the industry, or both. As of December 31, 2023, available liquidity sources included cash, incremental borrowing capacity at the FHLB, access to Federal Reserve Bank borrowings through the discount window and the Bank Term Funding Program, and unencumbered securities. Additional sources of liquidity included dealer and commercial customer repurchase agreements, access to the overnight and term Federal Funds markets, brokered deposits, loan sales, and syndications. The FRB Bank Term Funding Program will expire on March 11, 2024. The table

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below details FHN’s sources of available liquidity at December 31, 2023.

Table 7.24

AVAILABLE LIQUIDITY

as of December 31, 2023

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Total Capacity","","Outstanding Borrowings","","Available Liquidity"],["Cash on deposit with FRB (a)","","$","1,201","","","$","\u2014","","","$","1,201"],["FHLB","","9,352","","","\u2014","","","9,352"],["FRB:"],["Discount Window","","23,417","","","\u2014","","","23,417"],["BTFP","","834","","","\u2014","","","834"],["Unencumbered securities (b)","","812","","","\u2014","","","812"],["Total Available Liquidity","","","","$","35,616"]]
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(a) Included in interest-bearing deposits with banks on the Consolidated Balance Sheets.

(b) Subject to market haircuts on collateral.

Generally, a primary source of funding for a bank is core deposits from the bank's client base. The period-end loans-to-deposits ratio was 93% and 92% as of December 31, 2023 and December 31, 2022, respectively.

FHN may also use unsecured short-term borrowings as a source of liquidity. Federal funds purchased from correspondent bank clients are considered to be substantially more stable than funds purchased in the national broker markets for federal funds due to the long, historical, and reciprocal nature of banking services provided by FHN to these correspondent banks. The remainder of FHN’s wholesale short-term borrowings consists of securities sold under agreements to repurchase transactions accounted for as secured borrowings with business clients or broker dealer counterparties.

Both FHN and First Horizon Bank have the ability to generate liquidity by issuing senior or subordinated unsecured debt, preferred equity, and common equity, subject to market conditions and compliance with applicable regulatory requirements. As of December 31, 2023, FHN had outstanding $797 million in senior and subordinated unsecured debt and $520 million in non-cumulative perpetual preferred stock. As of December 31, 2023, First Horizon Bank and subsidiaries had outstanding preferred shares of $295 million, which are reflected as noncontrolling interest on the Consolidated Balance Sheets.

Parent company liquidity is primarily provided by cash flows stemming from dividends and interest payments collected from subsidiaries. These sources of cash represent the primary sources of funds to pay cash dividends to shareholders and principal and interest to

debt holders of FHN. The amount paid to the parent company through First Horizon Bank common dividends is managed as part of FHN’s overall cash management process, subject to applicable regulatory restrictions. Certain regulatory restrictions exist regarding the ability of First Horizon Bank to transfer funds to FHN in the form of cash, common dividends, loans, or advances. At any given time, the pertinent portions of those regulatory restrictions allow First Horizon Bank to declare preferred or common dividends without prior regulatory approval in an aggregate amount equal to First Horizon Bank’s retained net income for the two most recently completed years plus the current year-to-date period. For any period, First Horizon Bank’s "retained net income" generally is equal to First Horizon Bank’s regulatory net income reduced by the preferred and common dividends declared by First Horizon Bank. Applying the dividend restrictions imposed under applicable federal and state rules as outlined above, the Bank’s total amount available for dividends was $1.2 billion as of January 1, 2024. Consequently, on that date the Bank could pay common dividends up to that amount to its sole common shareholder, FHN, or to its preferred shareholders without prior regulatory approval. Additionally, a capital conservation buffer must be maintained (as described in the Capital section of this Report) to avoid restrictions on dividends.

In March 2022, FHN agreed to suspend the Dividend Reinvestment Plan in connection with the TD Transaction. During the suspension period, dividend payments of FHN are not automatically reinvested in additional shares of FHN common stock and participants in the Plan are not able to purchase shares of FHN common stock through optional cash investments under the Plan.

First Horizon Bank declared and paid common dividends to the parent company in the amount of $220 million in 2023 and $435 million in 2022. In January 2024, First Horizon Bank declared and paid a common dividend to the parent company in the amount of $310 million. First Horizon Bank declared and paid preferred dividends in each quarter of 2023 and 2022. Additionally, First Horizon Bank declared preferred dividends in first quarter 2024, payable in April 2024.

Payment of a dividend to shareholders of FHN is dependent on several factors which are considered by the Board. These factors include FHN’s current and prospective capital, liquidity, and other needs, applicable regulatory restrictions (including capital conservation buffer requirements) and availability of funds to FHN through a dividend from First Horizon Bank. Additionally, banking regulators generally require insured banks and bank holding companies to pay cash dividends only out of current operating earnings. Consequently, the decision of whether FHN will pay future dividends and the amount of dividends will be affected by current operating results.

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FHN paid a cash dividend of $0.15 per common share on January 2, 2024. FHN paid cash dividends of $1,625 per Series E preferred share and $1,175 per Series F preferred share on January 10, 2024 and $331.25 per Series B preferred share and $165 per Series C preferred share on February 1, 2024. In addition, in January 2024, the Board approved cash dividends per share in the following amounts:

Table 7.25

CASH DIVIDENDS APPROVED BUT NOT PAID

[[GREPCENT_TABLE]]
[["","","Dividend/Share","","Record Date","","Payment Date"],["Common Stock","","$","0.15","","","3/15/2024","","4/1/2024"],["Preferred Stock"],["Series C","","$","165.00","","","4/16/2024","","5/1/2024"],["Series D","","$","305.00","","","4/16/2024","","5/1/2024"],["Series E","","$","1,625.00","","","3/26/2024","","4/10/2024"],["Series F","","$","1,175.00","","","3/26/2024","","4/10/2024"]]
[[/GREPCENT_TABLE]]

Off-Balance Sheet Arrangements

In the normal course of business, FHN is a party to a number of activities that contain credit, market and operational risk that are not reflected in whole or in part

in the consolidated financial statements. Such activities include traditional off-balance sheet credit-related financial instruments. FHN enters into commitments to extend credit to borrowers, including loan commitments, lines of credit, standby letters of credit, and commercial letters of credit. Many of the commitments are expected to expire unused or be only partially used; therefore, the total amount of commitments does not necessarily represent future cash requirements and are not included in the table below. Based on its available liquidity and available borrowing capacity, FHN anticipates it will continue to have sufficient funds to meet its current commitments. See Note 16 - Contingencies and Other Disclosures for more information.

Contractual Obligations

The following table sets forth contractual obligations representing required and potential cash outflows as of December 31, 2023. Purchase obligations represent obligations under agreements to purchase goods or services that are enforceable and legally binding on FHN and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction.

Table 7.26

CONTRACTUAL OBLIGATIONS

as of December 31, 2023

[[GREPCENT_TABLE]]
[["","","Payments due by period (a)"],["","","Less than","","1 year -","","3 years -","","After 5"],["(Dollars in millions)","","1 year",""," 3 years",""," 5 years","","years","","Total"],["Contractual obligations:"],["Time deposit maturities (b) (c)","$","6,528","","","$","194","","","$","75","","","$","7","","","$","6,804"],["Short-term borrowings (b) (d)","3,058","","","\u2014","","","\u2014","","","\u2014","","","3,058"],["Term borrowings (b) (e)","6","","","350","","","\u2014","","","812","","","1,168"],["Annual rental commitments under noncancelable leases (b) (f)","44","","","85","","","76","","","204","","","409"],["Purchase obligations","224","","","120","","","30","","","3","","","377"],["Total contractual obligations","$","9,860","","","$","749","","","$","181","","","$","1,026","","","$","11,816"]]
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(a)Excludes a $15 million liability for unrecognized tax benefits as the timing of payment cannot be reasonably estimated.

(b)Amounts do not include interest.

(c)See Note 8 - Deposits for further details.

(d)See Note 9 - Short-Term Borrowings for further details.

(e)See Note 10 - Term Borrowings for further details.

(f)See Note 5 - Premises, Equipment, and Leases for further details.

Credit Ratings

FHN is currently able to fund a majority of the balance sheet through core deposits, which are generally not directly tied to FHN’s credit ratings as are other types of funding. However, maintaining adequate credit ratings on debt issues and preferred stock is critical to liquidity should FHN need to access funding from other sources,

including from long-term debt issuances and certain brokered deposits, at an attractive rate. The availability and cost of funds other than core deposits is also dependent upon marketplace perceptions of the financial soundness of FHN, which include such factors as capital levels, asset quality, and reputation. The availability of

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core deposit funding is stabilized by federal deposit insurance, which can be removed only in extraordinary circumstances, but may also be influenced to some extent by the same factors that affect other funding sources. FHN’s credit ratings are also referenced in various respects

in agreements with certain derivative counterparties as discussed in Note 21 - Derivatives.

The following table provides FHN’s most recent credit ratings:

Table 7.27

CREDIT RATINGS

[[GREPCENT_TABLE]]
[["","","Moody's (a)","","Fitch (b)"],["First Horizon Corporation"],["","Overall credit rating: Long-term/Short-term/Outlook","Baa3/--/NEG","","BBB/F2/Stable"],["","Long-term senior debt","Baa3","","BBB"],["","Subordinated debt (c)","Baa3","","BBB-"],["","Junior subordinated debt (c)","Ba1","","BB-"],["","Preferred stock","Ba2","","BB-"],["First Horizon Bank"],["","Overall credit rating: Long-term/Short-term/Outlook","Baa3/P-2/NEG","","BBB/F2/Stable"],["","Long-term/short-term deposits","A3/P-2","","BBB+/F2"],["","Long-term/short-term senior debt (c)","Baa3/P-2","","BBB/F2"],["","Subordinated debt","Baa3","","BBB-"],["","Preferred stock","Ba2","","BB-"],["FT Real Estate Securities Company, Inc."],["","Preferred stock","Ba1"]]
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A rating is not a recommendation to buy, sell, or hold securities and is subject to revision or withdrawal at any time and should be evaluated independently of any other rating.

(a)    Last change in ratings was on May 14, 2015. Outlook changed to negative (“NEG”) and ratings affirmed on May 5, 2023.

(b)    Last change in ratings was on May 6, 2020. Outlook changed to stable (“Stable”) and ratings affirmed on May 5, 2023.

(c)    Ratings are preliminary/implied.

Repurchase Obligations

Prior to September 2008, legacy First Horizon originated loans through its pre-2009 mortgage business, primarily first lien home loans, with the intention of selling them. As discussed in Note 16 - Contingencies and Other Disclosures, FHN's principal remaining exposures for those activities relate to (i) indemnification claims by underwriters, loan purchasers, and other parties which assert that FHN-originated loans caused or contributed to losses which FHN is legally obliged to indemnify, and (ii) indemnification or other claims related to FHN's servicing of pre-2009 mortgage loans.

FHN’s approach for determining the adequacy of the repurchase and foreclosure reserve has evolved, sometimes substantially, based on changes in information available. Repurchase/make-whole rates vary based on purchaser, vintage, and claim type. For those loans repurchased or covered by a make-whole payment, cumulative average loss severities range between 50 and 60 percent of the UPB.

Repurchase Accrual Approach

In determining potential loss content, claims are analyzed by purchaser, vintage, and claim type. FHN considers various inputs including claim rate estimates, historical average repurchase and loss severity rates, mortgage insurance cancellations, and mortgage insurance curtailment requests. Inputs are applied to claims in the

active pipeline, as well as to historical average inflows to estimate loss content related to potential future inflows. Management also evaluates the nature of claims from purchasers and/or servicers of loans sold to determine if qualitative adjustments are appropriate.

Repurchase and Foreclosure Liability

As discussed in Note 16 - Contingencies and Other Disclosures, FHN's repurchase and foreclosure liability,

primarily related to its pre-2009 mortgage origination, sale, securitization, and servicing businesses, is comprised

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of accruals to cover estimated loss content in the active pipeline, estimated future inflows, and estimated loss content related to certain known claims not currently included in the active pipeline. The active pipeline consists of mortgage loan repurchase and make-whole demands from loan purchasers or securitization participants, foreclosure/servicing demands from borrowers, and certain related exposures. The liability contemplates repurchase/make-whole and damages obligations and estimates for probable incurred losses associated with loan populations excluded from the settlements with the GSEs, as well as other whole loans sold, mortgage

insurance cancellation rescissions, and loans included in bulk servicing sales effected prior to the settlements with the GSEs. FHN compares the estimated probable incurred losses determined under the applicable loss estimation approaches for the respective periods with current reserve levels. Changes in the estimated required liability levels are recorded as necessary through the repurchase and foreclosure provision. The total repurchase and foreclosure liability, which includes both the legacy pre-2009 business and the current mortgage business, was $16 million as of both December 31, 2023 and 2022.

Market Uncertainties and Prospective Trends

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. 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.

Inflation, Recession, and Federal Reserve Policy

Economic Overview

The post-COVID economy in the U.S. has been marked by: strong inflation, which began in 2021, peaked in 2022, and abated, though not fully, in 2023; the Federal Reserve implementing a "tightening" policy in 2022 to contain inflation by rapidly increasing short-term interest rates and ending asset purchases; low unemployment rates; moderate economic growth; and a profoundly inverted yield curve in 2022 and 2023. Key aspects were:

•Although the U.S. economy flirted with recession in 2022, it did not officially enter one. In 2023 recession expectations moderated significantly. Early in 2024, recession expectations for the rest of this year generally are low.

•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 4.65% a year later. Hikes after that were much more modest and infrequent.

•In response to 2022's extremely rapid and vigorous tightening of monetary policy, the inflation rate in the U.S. now is well below 2022's levels. However, many measures of inflation remain higher than the Federal Reserve's stated long-term goal of 2%.

•Early in 2024 the Federal Reserve has signaled that hikes have ended and that a short term rate cut might become appropriate. No policy or timing commitments have been made. Future actions continue to depend upon future data. Some concern remains that recent

inflation data, which has been good, may prove to be transitory.

•Monetary tightening often creates yield curve inversion for a time. In the current cycle, traditional inversion (when ten-year treasury rates are below two-year rates) has been both very deep and unusually sustained, with the current inversion having begun in the summer of 2022.

•Many factors likely contributed to the current sustained inversion. The immediate cause, of course, was that demand for long-term treasury debt remained high, depressing yields, even though short yields were higher. FHN believes that a significant factor behind that demand preference in 2023 was continuing market expectations that the Federal Reserve would start to reduce short-term rates "soon" in order to avoid or mitigate a recession. Early in 2024, Federal Reserve communications suggest that no rate-cut action is likely "soon".

•A short-term rate cut by the Federal Reserve should lessen inversion, but only if long-term rates do not likewise drop.

Key events and circumstances are noted in the following discussions.

Federal Reserve and Rates

The Federal Reserve raised short-term rates several times in 2022 and in the first part of 2023. All but one of the raises in 2022 were 75 and 50 basis points each—

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aggressive by historical standards—while the 2023 raises were the more-typical 25 basis points each. The Federal Reserve has expressed its intent to bring inflation under control even at the risk of creating or deepening an economic recession. The Federal Reserve has indicated that future decisions will be heavily impacted by economic data, especially inflation-rate and -trend data, available at each decision point. Most recently the Federal Reserve has indicated, based on late-2023 data, an expectation that its next action, at an unspecified future point, will be a rate cut.

FHN cannot predict exactly when or how much short-term rates will be changed, how market-driven long-term rates will behave, nor how those actions may affect financial markets, during 2024.

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 has been sustained continuously since the summer of 2022, an unusually long period. The degree of inversion has varied during that period, but generally has been much deeper than is typical. Sustained traditional yield curve inversion is viewed, with statistical support, as a harbinger of economic recession, but recession has not yet occurred and the U.S. economy currently does not appear close to entering one.

The most recent period with deep and longer-lasting inversion was over 40 years ago. That 4-5 year period was marked by stagflation (low economic growth coupled with high inflation), followed by extremely robust interest rate hikes and a severe recession.

Yield curve flattening and inversion generally reduces the profit FHN can make from lending by compressing FHN's net interest margin, and also generally reduces FHN's revenues from bond trading. These impacts have occurred and are continuing during the current inversion. Refer to Interest Rate & Yield Curve Risks, located in Item 1A. Risk Factors beginning on page 44, for a 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 two consecutive quarters of contraction often coincides with recession, in 2022 it did not. The economy expanded in each quarter since then.

Recession expectations in the U.S. were high in 2022 and first quarter 2023. They moderated significantly after that. Current recession expectations generally are low.

Banking Crisis

In March 2023, two large regional U.S. banks failed after sudden large deposit outflows, and a major Swiss bank was acquired by another bank at the behest of regulators. In the aftermath of the two U.S. failures, bank investors and clients across the U.S. became more focused on deposit mix, funding risk management, and other safety-soundness concerns. The market values of virtually all U.S. bank stocks fell quickly and strongly in March, with a few falling about 90%.

Following these failures, the media published stories about actual and possible bank runs by depositors. Most U.S. banks saw net outflows of deposits in 2022 and early 2023 as the impacts of COVID-19 crisis programs faded and rates available from non-bank-account investments improved. According to Federal Reserve data, starting in mid-March, the two failures triggered an abrupt and substantial net deposit outflow from all but the largest U.S. banks. The March crisis shock was short-lived, however. During the final week of March both large and small U.S. banks collectively experienced net inflows of deposits, roughly mirroring the first week of March, before the crisis emerged.

The two U.S. bank failures resulted in Congressional calls for higher regulation of mid-sized regional banks, especially for those with $100 billion or more of assets.

In early May a third large regional U.S. bank failed after experiencing very large deposit outflows in March. Although this failure was widely anticipated, volatility in regional bank stocks reappeared in May. By June bank-stock volatility had abated again, but with regional bank prices well below pre-crisis levels.

The three failed U.S. banks had a few characteristics that FHN believes were significant negative factors contributing to loss of confidence by depositors, in addition to having an unusual customer mix: well-above-median levels of deposits not covered by FDIC insurance; significant portions of the 2020-21 pandemic deposit inflows invested in longer-term fixed-rate debt securities; and very high (in relation to regulatory capital) market value losses on those investments when rates rose in 2022 and early 2023. These factors made those banks unusually susceptible to a cascade of negative effects when deposit levels diminished, for the entire industry, starting in 2022 as customers sought better returns in the rising rate environment.

Market Volatility & Valuations

As a result of the prospects for recession, coupled with the uncertainties associated with war in eastern Europe, financial markets world-wide were volatile during much of 2022. Volatility overall has moderated somewhat in 2023, but volatile episodes have continued. War in the Middle East that started in October 2023 had a much more muted financial impact than was true in 2022.

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Financial asset values broadly fell in 2022, especially during the second and third quarters. By mid-year 2023, broad stock indices largely had recovered from 2022's low points, but longer-term fixed-rate debt investments remained well below previous values. By year-end 2023, stock values in most (but not all) sectors had recouped much of their earlier losses, and debt investment values generally improved somewhat from their lows when long-term rates fell in anticipation of possible short-term rate cuts in 2024 by the Federal Reserve.

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 started to compress. FHN was able to reverse the compression during the year fueled in part by using increased deposits and capital to reduce borrowings. Going forward, although net interest margin levels may improve modestly while short term rates remain steady, margins are not likely to improve appreciably until the yield curve inversion mentioned above has ended and the curve takes at least a moderately steep slope.

In 2022 and early 2023, FHN experienced a normalization of deposit levels since first quarter 2020 as it allowed surge deposits resulting from COVID-driven stimulus programs to move off its balance sheet. Net deposit outflows ranged from roughly $2.0 to $4.0 billion in each of the last three quarters of 2022, and fell again by roughly $2.5 billion in first quarter 2023. That outflow trend ended in second quarter as FHN had net deposit inflows of $4.0 billion. For the year 2023, net deposits

increased over $2 billion. However, FHN increased deposit rates appreciably in 2023, particularly in May and June.

The May and June 2023 deposit inflows mainly consisted of ordinary accounts with "promo" rates, and of certificates of deposit, or CDs, with very attractive fixed rates. The promo rates ended late in 2023, and a large group of those CDs matured during that time. A challenge for FHN is to retain as many of those deposit dollars, and depositor customers, as is reasonably practical while moderating the rates FHN pays.

In addition, some of FHN's businesses have been negatively impacted by rising rates. Rate increases have pushed home mortgage rates in the U.S. much higher than in early 2022, reducing demand. FHN's direct mortgage lending and lending to mortgage companies saw business decline significantly in 2022 and 2023. Moreover, FHN's revenues from bond trading and related activities fell significantly in 2022 and 2023 due to rising rates coupled with elevated market volatility.

A recession, if one were to occur, likely would have a negative impact on FHN's businesses overall. Demand for loans likely would fall, loan losses and provision expense likely would rise, many commercial activities that generate fee income likely would decline, and competition for clients likely would sharpen. FHN already has experienced some of these impacts. The deeper or longer a recession lasts, the more significant these negative impacts are likely to be for FHN. As mentioned above, recessionary expectations have abated substantially since early 2023. However, just as expectations in early 2023 proved to be wrong, current expectations may be just as incorrect.

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. 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, asset risk-weighting, and resolution planning. The increased requirements also would entail additional compliance costs.

The triggering of significant cost increases based on a single threshold financial measure—$100 billion in assets—has been in place for many years and has impacted the U.S. banking industry. Compliance restrictions and costs increase as the threshold is approached but a step-up

pattern remains. Banks near the threshold may be likely to slow or even halt asset growth, at least for a period, and start to implement the higher-level compliance systems. Banks modestly over the threshold, in contrast, may be likely to expand their asset base as quickly as possible to generate additional revenues to cover those costs. Those effects have added to the incentives for banks to consolidate, and the proposed new rules are likely to enhance that.

It appears likely that, if adopted as proposed, significant parts of the proposals will be challenged in court as being inconsistent with legislation enacted by Congress in 2018. Such a challenge would be technical and complex, and likely would take many years to resolve. Moreover, even if a challenge of that sort were successful, many parts of the proposals likely would remain intact and others might be modified without being rescinded.

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Greenhouse Gas (GHG) Reporting Regimes

In October 2023 the state of California enacted two laws which, taken together, will require most larger companies doing business in California to report annually their greenhouse gas ("GHG") emissions, with an external assurance requirement, and to report biennially their climate-related financial risks and risk-mitigation measures. The U.S. Securities and Exchange Commission ("SEC") has proposed, but not yet adopted, rules that would require all U.S. companies with publicly-traded securities to report annually their GHG emissions. The California laws include multi-year phase in periods and encompass Scope 1, Scope 2, and Scope 3 GHG emissions. The SEC proposal has Scope 1 and 2 reporting requirements, along with Scope 3 requirements in certain situations. The California governor stated in 2023 that the new laws are likely to be subjected to technical amendments in the next year or so. The SEC proposal is not final and could change, perhaps substantially, when adopted.

Three GHG Scopes

Scope 1 GHG emissions are those from a source the company owns or controls directly, such as a manufacturing plant. Scope 2 emissions are indirect emissions from company activities, such as from power consumed by company operations. Scope 1 and 2 emissions generally can be measured or estimated using information a company normally can obtain without significant external inquiry.

Scope 3 GHG emissions are those from sources and activities that a company neither owns nor controls. Scope 3 emissions are from a wide range of sources that touch upon a company, such as: vendors; employees (commuting, business travel, etc.); and customers. Scope 3 information generally is unknown to a company without significant external inquiry and/or estimation.

Potential Business Impacts

Direct compliance costs 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).

Potentially of more significance: California may require inquiry of customers rather than merely estimation about them. If FHN is allowed merely to estimate emissions from customers, that process may be costly but would not interfere with our business relationships. If, however, FHN is required to support Scope 3 reporting by obtaining GHG-related information from customers, including customers that are not public companies and that do no business in California, then the California disclosure laws could interfere with FHN's business. In that case, 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.

Potential & Actual Legal Challenges

The application of the California laws to companies outside of California has been challenged in court, and other challenges may be brought. Challenges from outside the state have or may assert that the laws: unconstitutionally burden interstate commerce, unconstitutionally compel speech, or possibly violate another constitutional protection or limitation. Current and potential future challenges could take many years to resolve. A key practical question will be whether the courts impose a legal stay (a moratorium) on these laws while challenges are pending.

Assuming the SEC adopts final regulations similar to those proposed, it appears very likely that legal challenges will be made based mainly on the fact that the SEC lacks explicit Congressional authorization to create a regulatory reporting regime pertaining to GHG emissions. As with the California laws, a key question will be whether the courts impose a stay on the rules while challenges are pending.

Assuming the SEC adopts final regulations similar to those proposed, and further assuming that any legal challenge leaves those rules entirely or largely intact, the California laws might be challenged by public companies as having been pre-empted by the SEC rules.

Coastal Market Growth and Rising Costs

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 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.

In 2023 and this year it has been widely reported that the economic costs of hurricane events in the U.S. gulf and southern Atlantic coastal areas have been rising

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significantly. FHN believes that rising costs are directly related to growth in those areas.

For example, much of the growth in Florida has been along the coast moving out from older cities. A gulf coast hurricane 50 or 60 years ago had a fair chance of making landfall in a relatively unpopulated area. Now, the chances of directly hitting a population center are much higher, the average population in that center is much higher, and the average value per building is much higher.

The reported significant increase in casualty risks and costs is being reflected in property insurance practices which currently are in significant flux. The insurance industry is being forced to revise its risk assessment and premium pricing practices in coastal areas as loss experience has deviated from earlier predictions, sometimes badly. In Florida, for example, some smaller carriers have failed, some larger carriers have left markets, and remaining carriers have significantly increased the premiums of hurricane-related insurance, narrowed coverage, or both.

Coastal states such as Florida and Louisiana have created last-resort insurance pools for residents who cannot

obtain or afford private property insurance. However, as the costs borne by those pools increase, either the premiums will have to rise or general taxation will have to cover the difference. In addition, those programs generally do not help business clients.

State and local building and water-control codes are being revised, but often unevenly and often not retroactive to pre-existing structures and developments. The current transition period could be lengthy.

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 will be impacted.

Critical Accounting Policies & Estimates

Allowance for Loan and Lease Losses

Management’s policy is to maintain the ALLL at a level sufficient to absorb expected credit losses in the loan and lease portfolio. Management performs periodic and systematic detailed reviews of its loan and lease portfolio to identify trends and to assess the overall collectability of the portfolio. Management believes the accounting estimate related to the ALLL is a “critical accounting estimate” as: (1) changes in it can materially affect the provision for loan and lease losses and net income, (2) it requires management to predict borrowers’ likelihood or capacity to repay, including evaluation of inherently uncertain future economic conditions, (3) prepayment activity must be projected to estimate the life of loans that often are shorter than contractual terms, (4) it requires estimation of a reasonable and supportable forecast period for credit losses for loan portfolio segments before reversion to historical loss levels over the remaining life of a loan and (5) expected future recoveries of amounts previously charged off must be estimated. Accordingly, this is a highly subjective process and requires significant judgment since it is difficult to evaluate current and future economic conditions in relation to an overall credit cycle and estimate the timing and extent of loss events that are expected to occur prior to the end of a loan’s and lease's estimated life.

FHN believes that the principal assumptions underlying the accounting estimates made by management include: (1) the commercial loan portfolio has been properly risk

graded based on information about borrowers in specific industries and specific issues with respect to single borrowers; (2) borrower specific information made available to FHN is current and accurate; (3) the loan portfolio has been segmented properly and individual loans have similar credit risk characteristics and will behave similarly; (4) the lives for loan portfolio pools have been estimated properly, including consideration of expected prepayments; (5) the economic forecasts utilized and associated weighting selected by management in the modeling of expected credit losses are reflective of future economic conditions; (6) entity-specific historical loss information has been properly assessed for all loan portfolio segments as the initial basis for estimating expected credit losses; (7) the reasonable and supportable periods for loan portfolio segments have been properly determined; (8) the reversion methodologies and timeframes for migration from the reasonable and supportable period to the use of historical loss rates are reasonable; (9) expected recoveries of prior charge off amounts have been properly estimated; and (10) qualitative adjustments to modeled loss results reasonably reflect expected future credit losses as of the date of the financial statements.

While management uses the best information available to establish the ALLL, future adjustments to the ALLL and methodology may be necessary if economic or other conditions differ substantially from the assumptions used

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in making the estimates. Such adjustments to prior estimates, as necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels vary from previous estimates.

Selection and weighting of macroeconomic forecasts are the most significant inputs in quantitative ALLL calculations. Due to the sensitivity of the ALLL determination to macroeconomic forecasts, changes in those forecasts can result in materially different results between reporting periods. In the determination of the ALLL as of December 31, 2023, FHN utilized Moody's Baseline and S3 (adverse) scenarios for the calculation of the ALLL. FHN placed the most weight on the Moody's Baseline scenario but included the S3 scenario to reflect the uncertainty of macroeconomic forecasts related to ongoing economic conditions.

Due to the dynamic relationship of macroeconomic inputs in modeling calculations, quantifying the effects of

changing individual inputs is highly challenging. Additionally, management applies judgment in developing qualitative adjustments that are considered necessary to appropriately reflect elements of credit risk that are not captured in the quantitative model results. To provide some hypothetical sensitivity analysis, FHN prepared two alternate quantitative calculations, applying 100% weighting to Moody's Baseline and S3 (adverse) scenarios. These hypothetical calculations resulted in an 8% reduction and 24% increase, respectively, in ALLL in comparison to the ALLL recorded at December 31, 2023, inclusive of qualitative adjustments that are affected by the weighting of forecast scenarios.

See Note 1 - Significant Accounting Policies and Note 4 - Allowance for Credit Losses for detail regarding FHN’s processes, models, and methodology for determining the ALLL.

Income Taxes

FHN is subject to the income tax laws of the U.S. and the states and jurisdictions in which it operates. FHN accounts for income taxes in accordance with ASC 740, "Income Taxes". Significant judgments and estimates are required in the determination of the consolidated income tax expense. FHN income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid.

Income tax expense consists of both current and deferred taxes. Current income tax expense is an estimate of taxes to be paid or refunded for the current period and includes income tax expense related to uncertain tax positions. A DTA or a 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. Deferred taxes can be affected by changes in tax rates applicable to future years, either as a result of statutory changes or business changes that may change the jurisdictions in which taxes are paid. Additionally, DTAs are subject to a “more likely than not” test to determine whether the full amount of the DTAs should be realized in the financial statements. FHN evaluates the likelihood of realization of the DTA based on both positive and negative evidence available at the time, including (as appropriate) scheduled reversals of DTLs, projected future taxable income, tax planning strategies, and recent financial performance. Realization is dependent on generating sufficient taxable income prior to the expiration of the carryforwards attributable to or generated with respect to the DTA. In projecting future taxable income, FHN incorporates assumptions including the amount of future state and federal pre-tax operating income, the reversal of temporary differences, and the

implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates used to manage the underlying business. If the “more likely than not” test is not met, a valuation allowance must be established against the DTA.

The income tax laws of the jurisdictions in which FHN operate are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. In determining if a tax position should be recognized and in establishing a provision for income tax expense, FHN must make judgments and interpretations about the application of these inherently complex tax laws. Interpretations may be subjected to review during examination by taxing authorities and disputes may arise over the respective tax positions. FHN attempts to resolve disputes that may arise during the tax examination and audit process. However, certain disputes may ultimately be resolved through the federal and state court systems.

FHN monitors relevant tax authorities and revises estimates of accrued income taxes on a quarterly basis. Changes in estimates may occur due to changes in income tax laws and their interpretation by the courts and regulatory authorities. Revisions of estimates may also result from income tax planning and from the resolution of income tax controversies. Revisions in estimates may be material to operating results for any given period.

See Note 14 - Income Taxes for additional information including discussion of valuation allowances related to deferred tax assets and the potential impact of unrecognized tax benefits on future earnings.

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Contingent Liabilities

A liability is contingent if the amount or outcome is not presently known, but may become known in the future as a result of the occurrence of some uncertain future event. FHN estimates its contingent liabilities based on management’s estimates about the probability of outcomes and their ability to estimate the range of exposure. Accounting standards require that a liability be recorded if management determines that it is probable that a loss has occurred and the loss can be reasonably estimated. In addition, it must be probable that the loss will be confirmed by some future event. As part of the estimation process, management is required to make assumptions about matters that are by their nature highly uncertain and difficult to estimate.

The assessment of contingent liabilities, including legal contingencies, involves the use of critical estimates, assumptions, and judgments. Management’s estimates are based on their belief that future events will validate

the current assumptions regarding the ultimate outcome of these exposures. However, there can be no assurance that future events, such as court decisions or decisions of arbitrators, will not differ from management’s assessments. Whenever practicable, management consults with third-party experts (e.g., attorneys, accountants, claims administrators, etc.) to assist with the gathering and evaluation of information related to contingent liabilities. Based on internally and/or externally prepared evaluations, management makes a determination whether the potential exposure requires accrual in the financial statements.

See Note 16 - Contingencies and Other Disclosures for additional information regarding FHN's existing material contingent liabilities, including those with and without loss accruals, and discussion of reasonably possible loss amounts for pending litigation matters.

Accounting Changes

Refer to Note 1 – Significant Accounting Policies for a detail of accounting changes with extended transition periods, a summary of accounting changes, and

accounting changes issued but not currently effective, which section is incorporated into this MD&A by this reference.

Non-GAAP Information

Certain measures are included in this report are “non-GAAP”, meaning they are not presented in accordance with U.S. GAAP and also are not codified in U.S. banking regulations currently applicable to FHN. Although other entities may use calculation methods that differ from those used by FHN for non-GAAP measures, FHN’s management believes such measures are relevant to understanding the capital position or financial results of FHN and its business segments. Non-GAAP measures are reported to FHN’s management and Board of Directors through various internal reports.

The non-GAAP measures presented in this report are: pre-provision net revenue, return on average tangible common equity, tangible common equity to tangible assets, adjusted tangible common equity to risk-weighted assets, and tangible book value per common share. Table 7.28 appearing in the MD&A (Item 7 of Part II) of this report provides a reconciliation of non-GAAP items presented in this report to the most comparable GAAP presentation.

Presentation of regulatory measures, even those which are not GAAP, provide a meaningful base for

comparability to other financial institutions subject to the same regulations as FHN, as demonstrated by their use by banking regulators in reviewing capital adequacy of financial institutions. Although not GAAP terms, these regulatory measures are not considered “non-GAAP” under U.S. financial reporting rules as long as their presentation conforms to regulatory standards. Regulatory measures used in this MD&A include: common equity tier 1 capital, generally defined as common equity less goodwill, other intangibles, and certain other required regulatory deductions; tier 1 capital, generally defined as the sum of core capital (including common equity and instruments that cannot be redeemed at the option of the holder) adjusted for certain items under risk based capital regulations; and risk-weighted assets, which is a measure of total on- and off-balance sheet assets adjusted for credit and market risk, used to determine regulatory capital ratios.

The following table provides a reconciliation of non-GAAP items presented in this MD&A to the most comparable GAAP presentation:

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Table 7.28

NON-GAAP TO GAAP RECONCILIATION

[[GREPCENT_TABLE]]
[["(Dollars in millions; shares in thousands)","","2023","","2022","","2021"],["Pre-provision Net Revenue (Non-GAAP)"],["Net interest income (GAAP)","","$","2,540","","","$","2,392","","","$","1,994"],["Plus: Noninterest income (GAAP)","","927","","","815","","","1,076"],["Total Revenues (GAAP)","","3,467","","","3,207","","","3,070"],["Less: Noninterest expense (GAAP)","","2,079","","","1,953","","","2,096"],["Pre-provision Net Revenue (Non-GAAP)","","$","1,388","","","$","1,254","","","$","974"],["Tangible Common Equity (Non-GAAP)"],["(A) Total equity (GAAP)","","$","9,291","","","$","8,547","","","$","8,494"],["Less: Noncontrolling interest (a)","","295","","","295","","","295"],["Less: Preferred stock (a)","","520","","","1,014","","","520"],["(B) Total common equity","","8,476","","","7,238","","","7,679"],["Less: Goodwill and other intangible assets (GAAP) (b)","","1,696","","","1,745","","","1,809"],["(C) Tangible common equity (Non-GAAP)","","6,780","","","5,493","","","5,870"],["Less: Unrealized gains (losses) on AFS securities, net of tax","","(836)","","","(972)","","","(36)"],["(D) Adjusted tangible common equity (Non-GAAP)","","$","7,616","","","$","6,465","","","$","5,906"],["Tangible Assets (Non-GAAP)"],["(E) Total assets (GAAP)","","$","81,661","","","$","78,953","","","$","89,092"],["Less: Goodwill and other intangible assets (GAAP) (b)","","1,696","","","1,745","","","1,809"],["(F) Tangible assets (Non-GAAP)","","$","79,965","","","$","77,208","","","$","87,283"],["Average Tangible Common Equity (Non-GAAP)"],["Average total equity (GAAP)","","$","8,905","","","$","8,579","","","$","8,479"],["Less: Average noncontrolling interest (a)","","295","","","295","","","295"],["Less: Average preferred stock (a)","","758","","","935","","","506"],["(G) Total average common equity","","7,852","","","7,349","","","7,678"],["Less: Average goodwill and other intangible assets (GAAP) (b)","","1,720","","","1,777","","","1,836"],["(H) Average tangible common equity (Non-GAAP)","","$","6,132","","","$","5,572","","","$","5,842"],["Net Income Available to Common Shareholders"],["(I) Net income available to common shareholders","","$","865","","","$","868","","","$","962"],["Risk Weighted Assets"],["(J) Risk weighted assets (c)","","$","71,074","","","$","69,163","","","$","64,183"],["Period-end shares outstanding"],["(K) Period-end shares outstanding","","558,839","","","537,101","","","533,577"],["Ratios"],["(A)/(E) Total period-end equity to period-end assets (GAAP)","","11.38","%","","10.83","%","","9.53","%"],["(C)/(F) Tangible common equity to tangible assets (Non-GAAP)","","8.48","","","7.12","","","6.73"],["(D)/(J) Adjusted tangible common equity to risk weighted assets (Non-GAAP)","","10.72","","","9.35","","","9.20"],["(I)/(G) Return on average common equity (GAAP)","","11.01","","","11.81","","","12.53"],["(I)/(H) Return on average tangible common equity (Non-GAAP)","","14.11","","","15.58","","","16.46"],["(B)/(K) Book value per common share (GAAP)","","$","15.17","","","$","13.48","","","$","14.39"],["(C)/(K) Tangible book value per common share (Non-GAAP)","","$","12.13","","","$","10.23","","","$","11.00"]]
[[/GREPCENT_TABLE]]

(a)Included in total equity on the Consolidated Balance Sheets.

(b)Includes goodwill and other intangible assets, net of amortization.

(c)Defined by and calculated in conformity with bank regulations applicable to FHN.

[[GREPCENT_TABLE]]
[["","99","2023 FORM 10-K ANNUAL REPORT"]]
[[/GREPCENT_TABLE]]