FIRST HORIZON CORPORATION

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

08/04/2022 | 04:43pm EDT
Item 2.   Management's Discussion and
Analysis of Financial Condition and Results of Operations

                             TABLE OF ITEM 2 TOPICS

  Introduction                                          75

  Executive Overview                                    75

  Results of Operations                                 77

  Analysis of Financial Condition                       87

  Capital                                               98

  Risk Management                                      101

  Repurchase Obligations                               105

  Market Uncertainties and Prospective Trends          106

  Critical Accounting Policies                         109

  Accounting Changes                                   109

  Non-GAAP Information                                 110


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

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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 regional banking, mortgage lending, title
insurance, specialized commercial lending, commercial leasing and equipment
financing, brokerage, wealth management, capital markets, and other financial
services to commercial, consumer, and governmental clients throughout the U.S.
At June 30, 2022, FHN had over 500

business locations in 22 states, including over 400 banking centers in 12 states, and employed more than 7,500 associates.


This MD&A should be read in conjunction with the accompanying unaudited
Consolidated Financial Statements and Notes to Consolidated Financial Statements
in Part I, Item 1, as well as other information contained in this document and
FHN's 2021 Annual Report on Form 10-K, as amended.

Executive Overview

Merger Agreement with Toronto-Dominion Bank


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"), TD Bank US Holding Company, a Delaware corporation and indirect, wholly
owned subsidiary of TD ("TD-US"), and Falcon Holdings Acquisition Co., a
Delaware corporation and wholly owned subsidiary of TD-US ("Merger Sub").

Pursuant to the TD Merger Agreement, FHN and Merger Sub will merge (the "First
Holding Company Merger"), with FHN continuing as the surviving entity in the
merger. Following the First Holding Company Merger, at the election of TD, FHN
and TD-US will merge (the "Second Holding Company Merger" and, together with the
First Holding Company Merger, the "Holding Company Mergers"), with TD-US
continuing as the surviving entity in the merger.

Upon the terms and subject to the conditions set forth in the TD Merger
Agreement, each share of FHN common stock, par value $0.625 per share, ("Company
Common Stock"), issued and outstanding immediately prior to the effective time
of the First Holding Company Merger (the "First Effective Time") will be
converted into the right to receive $25.00 (USD) per share in cash, without
interest. If the transaction does not close on or before November 27, 2022,
shareholders will receive an additional $0.65 per share of Company Common Stock
on an annualized basis (or approximately 5.4 cents per month) for the period
from November 27, 2022 through the day immediately prior to the closing. Each
outstanding share of FHN's preferred stock, series B, C, D, E and F, will remain
issued outstanding in connection with the First Holding Company Merger. If TD
elects to effect the Second Holding Company Merger, at the effective time of the
Second Holding Company Merger, each outstanding share of FHN's preferred stock
will be converted into a share of a newly created, corresponding series of TD-US
having terms as described in the Merger Agreement.

Following the completion of the First Holding Company Merger, at such time as
determined by TD, First Horizon Bank and TD Bank, N.A., a national banking
association ("TDBNA") will merge, with TDBNA surviving as a subsidiary of TD-US
(the "Bank Merger" and together with the Holding Company Mergers, the "Proposed
TD Merger").

In connection with the TD Merger Agreement, TD purchased from FHN shares of
non-voting Perpetual Convertible Preferred Stock, Series G, a new series of
preferred stock of FHN (the "Series G Convertible Preferred Stock") in a private
placement transaction having an aggregate liquidation preference and purchase
price of approximately $494 million, pursuant to a securities purchase agreement
between FHN and TD entered into concurrently with the execution and delivery of
the TD Merger Agreement. The Series G Convertible Preferred Stock is convertible
into up to 4.9% of the outstanding shares of Company Common Stock in certain
circumstances, including the closing of the Proposed TD Merger or the
termination of the TD Merger Agreement.


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

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Financial Performance Summary

Second Quarter 2022 Highlights


FHN reported second quarter 2022 net income available to common shareholders of
$166 million, or $0.29 per diluted share, compared to $187 million, or $0.34 per
diluted share, in first quarter 2022 and $295 million, or $0.53 per diluted
share, in second quarter 2021.

Net interest income of $542 million increased $63 million from first quarter
2022 reflecting the benefit of higher rates, loan growth, and higher investment
portfolio income, partially offset by higher funding costs. Compared to second
quarter 2021, net interest income increased $45 million, driven by higher
average investment portfolio balances and higher earning asset yields.

Provision for credit losses was $30 million in second quarter 2022 compared to a
benefit of $40 million in first quarter 2022 largely reflecting the impact of
loan growth and a revised macroeconomic outlook. The provision for credit losses
increased $145 million compared to a benefit of $115 million in second quarter
2021, as the benefit in the prior year reflected an improved macroeconomic
outlook, positive credit grade migration, and lower loan balances.

Noninterest income of $201 million decreased $28 million compared to first quarter 2022 and $84 million compared to second quarter 2021 largely driven by declines in fixed income and deferred compensation income.


Noninterest expense of $488 million decreased $5 million from first quarter
2022, largely reflecting decreases in personnel, contract employment and
outsourcing, and legal and professional expenses, partially offset by an
increase in other noninterest expense. Compared with second quarter 2021,
noninterest expense decreased $10 million largely reflecting a $41 million
decrease in personnel expense offset by a $26 million increase in other
noninterest expense. Merger and acquisition expenses related to the IBKC and
Proposed TD Mergers totaled $38 million for the second quarter of 2022 compared
to $37 million in first quarter 2022 and $32 million in second quarter 2021.

Year-to-Date and Period End Highlights

For the six months ended June 30, 2022, net income available to common shareholders was $352 million, or $0.63 per diluted share, compared to $519 million, or $0.93 per diluted share, for the six months ended June 30, 2021. The decrease was largely the result of a $150 million increase in the provision for credit losses.


Period-end loans and leases of $56.5 billion increased $1.7 billion from
December 31, 2021 largely driven by commercial loan growth which was partially
offset by a $663 million decrease in PPP loans. Average loans and leases of
$55.6 billion in second quarter 2022 decreased $1.2 billion from $56.8 billion
in second quarter 2021 largely driven by a decline in PPP loans partially offset
by non-PPP commercial loan growth.

Period-end deposits of $70.5 billion decreased $4.3 billion, or 6%, from
December 31, 2021 driven by a $3.6 billion decrease in interest-bearing deposits
and a $769 million decrease in noninterest-bearing deposits. Average deposits
decreased $1.2 billion from second quarter 2021 from higher deposit balances in
the prior year associated with elevated liquidity related to the COVID-19
pandemic.

Tier 1 risk-based capital and total risk-based capital ratios at June 30, 2022
were 11.62% and 12.96%, an improvement from 11.04% and 12.34% at December 31,
2021, respectively. The CET1 ratio was 9.81% at June 30, 2022 compared to 9.92%
at December 31, 2021.

The following portions of this MD&A focus in more detail on the results of
operations for the three and six months ended June 30, 2022, the three months
ended March 31, 2022, and the three and six months ended June 30, 2021 and on
information about FHN's financial condition, loan and lease portfolio,
liquidity, funding sources, capital and other matters.


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

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Table I.2.1
                           KEY PERFORMANCE INDICATORS

                                                As of or for the three months ended                     As of or for the six months ended
(Dollars in millions, except per
share data)                         June 30, 2022          March 31, 2022   

June 30, 2021 June 30, 2022 June 30, 2021 Pre-provision net revenue (a) $ 255

           $         215          $        284          $      469           $        545
Diluted earnings per common share  $       0.29           $        0.34          $       0.53          $     0.63           $       0.93
Return on average assets (b)               0.82   %                0.90  %               1.42  %             0.86   %               1.27  %
Return on average common equity
(c)                                        9.12   %                9.92  %              15.45  %             9.52   %              13.75  %
Return on average tangible common
equity (a) (d)                            12.07   %               12.98  %              20.36  %            12.54   %              18.16  %
Net interest margin (e)                    2.74   %                2.37  %               2.47  %             2.55   %               2.55  %
Noninterest income to total
revenue (f)                               27.06   %               31.75  %              35.49  %            29.34   %              36.26  %
Efficiency ratio (g)                      65.76   %               70.23  %              64.61  %            67.93   %              66.11  %
Allowance for loan and lease
losses to total loans and leases           1.10   %                1.13  %               1.44  %             1.10   %               1.44  %
Net charge-offs (recoveries) to
average loans and leases
(annualized)                               0.09   %                0.07  %              (0.07) %             0.08   %              (0.01) %
Total period-end equity to
period-end assets                         10.04   %                9.81  %               9.74  %            10.04   %               9.74  %
Tangible common equity to tangible
assets (a)                                 6.55   %                6.44  %               6.87  %             6.55   %               6.87  %
Cash dividends declared per common
share                              $       0.15           $        0.15          $       0.15          $     0.30           $       0.30
Book value per common share        $      13.50           $       13.82          $      14.07          $    13.50           $      14.07
Tangible book value per common
share (a)                          $      10.18           $       10.46          $      10.74          $    10.18           $      10.74
Common equity Tier 1                       9.81   %                9.97  %              10.28  %             9.81   %              10.28  %
Market capitalization              $     11,724           $      12,557          $      9,519          $   11,724           $      9,519


(a)  Represents a non-GAAP measure which is reconciled in the non-GAAP to GAAP
reconciliation in Table I.2.27.
(b)  Calculated using annualized net income divided by average assets.
(c)  Calculated using annualized net income available to common shareholders
divided by average common equity.
(d)  Calculated using annualized 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

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.

The following tables present the major components of net interest income and net interest margin:

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Table I.2.2

QUARTER-TO-DATE AVERAGE BALANCES, NET INTEREST INCOME & YIELDS/RATES

                                                                                                                                         Three Months Ended
(Dollars in millions)                                                 June 30, 2022                                                        March 31, 2022                                                         June 30, 2021
                                               Average                Interest                                       Average                Interest                                       Average                Interest
                                               Balance             Income/Expense             Yield/Rate             Balance             Income/Expense             Yield/Rate             Balance             Income/Expense             Yield/Rate
Assets:
Loans and leases:
Commercial loans and leases                  $  43,589          $             382                    3.52  %       $  42,444          $             339                    3.24  %       $  44,890          $             380                    3.39  %
Consumer loans                                  11,987                        112                    3.74             11,638                        108                    3.71             11,939                        118                    3.99
Total loans and leases                          55,576                        494                    3.57             54,082                        447                    3.34             56,829                        498                    3.52
Loans held for sale                              1,027                         10                    3.89              1,156                         10                    3.51                734                          7                    3.94

Investment securities                            9,781                         46                    1.87              9,668                         38                    1.59              8,401                         29                    1.39
Trading securities                               1,509                         13                    3.43              1,594                         11                    2.75              1,322                          7                    2.03

Federal funds sold                                 228                          1                    1.11                 81                          -                    0.19                 38                          -                    0.13
Securities purchased under agreements
to resell (a)                                      629                          1                    0.49                672                          -                   (0.07)               610                          -                   (0.07)
Interest-bearing deposits with banks            10,989                         21                    0.79             14,902                          7                    0.19             13,051                          3                    0.10

Total earning assets / Total interest
income                                       $  79,739          $             586                    2.95  %       $  82,155          $             513                    2.52  %       $  80,985          $             544                    2.70  %

Cash and due from banks                          1,281                                                                 1,226                                                                 1,267
Goodwill and other intangible assets,
net                                              1,789                                                                 1,802                                                                 1,843

Allowance for loan and lease losses               (621)                                                                 (658)                                                                 (884)
Other assets                                     4,138                                                                 4,062                                                                 4,348
Total assets                                 $  86,326                                                             $  88,587                                                             $  87,559

Liabilities and Shareholders' Equity:


Interest-bearing deposits:
Savings                                      $  24,841          $               5                    0.08  %       $  26,330          $               3                    0.05  %       $  27,238          $              11                    0.16  %
Other interest-bearing deposits                 16,273                          9                    0.22             16,557                          4                    0.09             16,029                          6                    0.15
Time deposits                                    3,040                          4                    0.50              3,343                          4                    0.51              4,487                          7                    0.65
Total interest-bearing deposits                 44,154                         18                    0.16             46,230                         11                    0.10             47,754                         24                    0.20
Federal funds purchased                            733                          1                    0.80                884                          -                    0.20              1,006                          -                    0.10
Securities sold under agreements to
repurchase                                         770                          1                    0.32              1,001                          -                    0.10              1,116                          1                    0.35
Trading liabilities                                585                          4                    2.52                614                          2                    1.69                560                          2                    1.17
Other short-term borrowings                        207                          -                    0.81                110                          1                    0.13                126                          -                    0.07
Term borrowings                                  1,597                         17                    4.38              1,591                         17                    4.29              1,672                         18                    4.38
Total interest-bearing liabilities /
Total interest expense                       $  48,046          $              41                    0.34  %       $  50,430          $              31                    0.25  %       $  52,234          $              45                    0.34  %

Noninterest-bearing liabilities:
Noninterest-bearing deposits                    27,791                                                                27,926                                                                25,404
Other liabilities                                1,875                                                                 1,613                                                                 1,462
Total liabilities                               77,712                                                                79,969                                                                79,100

Shareholders' equity                             8,319                                                                 8,323                                                                 8,164
Noncontrolling interest                            295                                                                   295                                                                   295
Total shareholders' equity                       8,614                                                                 8,618                                                                 8,459
Total liabilities and shareholders'
equity                                       $  86,326                                                             $  88,587                                                             $  87,559

Net earnings assets / Net interest
income (TE) / Net interest spread            $  31,693          $             545                    2.61  %       $  31,725          $             482                    2.27  %       $  28,751          $             499                    2.36  %
Taxable equivalent adjustment                                                  (3)                   0.13                                            (3)                   0.10                                            (2)                   0.11
Net interest income / Net interest
margin (b)                                                      $             542                    2.74  %                          $             479                    2.37  %                          $             497                    2.47  %


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

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Second Quarter 2022 versus First Quarter 2022


Net interest income of $542 million in second quarter 2022 increased $63 million
from first quarter 2022 driven by an increase in interest rates, higher average
loan balances, and greater investment portfolio income, partially offset by a $6
million reduction tied to net merger-related and PPP loan portfolio benefits and
higher funding costs.

The net interest margin of 2.74% in second quarter 2022 increased 37 basis points from first quarter 2022 primarily due to higher interest rates, lower interest-bearing cash balances, improved security yields, and loan growth, partially offset by an increase in funding costs.


Average earning assets of $79.7 billion in second quarter 2022 decreased $2.4
billion from first quarter 2022 largely due to a $3.9 billion decrease in
interest-bearing cash, offset by a $1.5 billion increase in loans and leases,
driven by a $1.1 billion increase in commercial loans and a $350 million
increase in consumer loans.

Second Quarter 2022 versus Second Quarter 2021

Net interest income increased $45 million from second quarter 2021 driven by both higher earning asset yields and higher investment portfolio balances.

Second quarter 2022 net interest margin increased 27 basis points from 2.47% in second quarter 2021, driven by the impact of higher yields on loans, interest-bearing cash and investments.

A $1.3 billion decrease in average loans and leases drove the $1.2 billion decrease in average earning assets from second quarter 2021, mostly due to forgiveness within the PPP program.

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Table I.2.3

       YEAR-TO-DATE AVERAGE BALANCES, NET INTEREST INCOME & YIELDS/RATES
                                                                                                               Six Months Ended
                                                                                June 30, 2022                                                     June 30, 2021
                                                           Average               Interest                                    Average               Interest
(Dollars in millions)                                      Balance            Income/Expense            Yield/Rate           Balance            Income/Expense            Yield/Rate
Assets:
Loans and leases:
Commercial loans and leases                              $  43,020          $            721                 3.38  %       $  45,294          $            762                 3.39  %
Consumer loans                                              11,813                       220                 3.72             12,227                       245                 4.06
Total loans and leases                                      54,833                       941                 3.45             57,521                     1,007                 3.53
Loans held for sale                                          1,091                        20                 3.69                788                        14                 3.52

Investment securities                                        9,725                        84                 1.73              8,361                        58                 1.40
Trading securities                                           1,552                        24                 3.07              1,370                        14                 2.00

Federal funds sold                                             155                         -                 0.87                 41                         -                 0.12
Securities purchased under agreements to resell
(a)                                                            650                         1                 0.21                582                         -                (0.10)
Interest-bearing deposits with banks                        12,934                        29                 0.45             11,170                         5                 0.10

Total earning assets / Total interest income             $  80,940          $          1,099                 2.73  %       $  79,833          $          1,098                 2.77  %

Cash and due from banks                                      1,254                                                             1,259
Goodwill and other intangible assets, net                    1,795                                                             1,850
Premises and equipment, net                                    650                                                               734
Allowance for loan and lease losses                           (639)                                                             (916)
Other assets                                                 3,450                                                             3,726
Total assets                                             $  87,450                                                         $  86,486

Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Savings                                                  $  25,581          $              8                 0.06  %       $  27,303          $             23                 0.17  %
Other interest-bearing deposits                             16,414                        13                 0.15             15,761                        12                 0.15
Time deposits                                                3,191                         8                 0.51              4,661                        13                 0.56
Total interest-bearing deposits                             45,186                        29                 0.13             47,725                        48                 0.18
Federal funds purchased                                        808                         2                 0.47              1,001                         -                 0.10
Securities sold under agreements to repurchase                 885                         1                 0.19              1,130                         2                 0.34
Trading liabilities                                            599                         6                 2.10                539                         3                 0.96
Other short-term borrowings                                    159                         -                 0.58                132                         1                 0.07
Term borrowings                                              1,594                        35                 4.33              1,671                        37                 4.38
Total interest-bearing liabilities / Total
interest expense                                         $  49,231          $             73                 0.30  %       $  52,198          $             91                 0.34  %

Noninterest-bearing liabilities:
Noninterest-bearing deposits                                27,859                                                            24,350
Other liabilities                                            1,744                                                             1,534
Total liabilities                                           78,834                                                            78,082

Shareholders' equity                                         8,321                                                             8,109
Noncontrolling interest                                        295                                                               295
Total shareholders' equity                                   8,616                                                             8,404
Total liabilities and shareholders' equity               $  87,450                                                         $  86,486

Net earnings assets / Net interest income (TE) /
Net interest spread                                      $  31,709          $          1,026                 2.43  %       $  27,635          $          1,007                 2.43  %
Taxable equivalent adjustment                                                             (5)                0.12                                           (3)                0.12
Net interest income / Net interest margin (b)                               $          1,021                 2.55  %                          $          1,004                 2.55  %


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

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For the six months ended June 30, 2022, net interest income of $1.0 billion increased $17 million from the same period one year ago largely driven by lower interest-bearing deposit costs and higher levels of interest-earning cash.


Despite the decrease in average loans and leases, total average earning assets
increased $1.1 billion in the first six months of 2022 from higher levels of
interest-bearing cash and investment securities.

The year-to-date net interest margin of 2.55% remained unchanged compared to the same period of 2021 as the decrease in earning asset yields was offset by a decrease in the cost of interest-bearing liabilities.

Provision for Credit Losses


The 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.

For the second quarter 2022, provision for credit losses was $30 million
compared to a benefit of $40 million in
first quarter 2022, largely reflecting the impact of non-PPP loan growth and a
revised macroeconomic outlook. The second quarter 2022 provision increased $145
million from second quarter 2021 and increased $150 million on a year-to-date
basis. The provision benefit in 2021 reflected an improved macroeconomic
outlook, positive credit grade migration, and lower loan balances.

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 I.2.4

                               NONINTEREST INCOME
                                                         Three Months Ended                                         2Q22 vs. 1Q22                              2Q22 vs. 2Q21
(Dollars in millions)              June 30, 2022          March 31, 2022           June 30, 2021            $ Change              % Change             $ Change              % Change
Noninterest income:
Fixed income                      $       51            $            73          $          102          $        (22)                 (30) %       $        (51)                 (50) %
Deposit transactions and cash
management                                42                         44                      44                    (2)                  (5)                   (2)                  (5)
Mortgage banking and title
income                                    34                         22                      38                    12                   55                    (4)                 (11)
Brokerage, management fees
and commissions                           24                         24                      21                     -                    -                     3                   14
Card and digital banking
fees                                      23                         20                      21                     3                   15                     2                   10
Other service charges and
fees                                      15                         13                      11                     2                   15                     4                   36
Trust services and
investment management                     12                         13                      14                    (1)                  (8)                   (2)                 (14)
Securities gains (losses),
net                                        -                          6                      11                    (6)                (100)                  (11)                (100)
Deferred compensation
income                                   (17)                        (4)                      7                   (13)                 325                   (24)                (343)
Other income                              17                         18                      16                    (1)                  (6)                    1                    6
Total noninterest income          $      201            $           229          $          285          $        (28)                 (12) %       $        (84)                 (29) %



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Second Quarter 2022 versus First Quarter 2022


Compared to first quarter 2022, noninterest income decreased $28 million, or
12%, largely reflecting lower fixed income and deferred compensation income
offset by an increase in mortgage banking and title fees. Noninterest income
results were also impacted by lower securities gains.

Fixed income of $51 million decreased $22 million reflecting the impact of higher long-term rates and macroeconomic uncertainty and volatility. Fixed income average daily revenue of $0.6 million compared with $1 million in first quarter 2022.

Mortgage banking and title income of $34 million increased $12 million driven by a gain recognized on the sale of mortgage servicing rights.

Second Quarter 2022 versus Second Quarter 2021

Noninterest income of $201 million for second quarter 2022 decreased $84 million, or 29%, compared to second

quarter 2021, primarily reflecting lower fixed income, deferred compensation income and securities gains.

Fixed income of $51 million decreased $51 million from second quarter 2021. Fixed income product revenue decreased $53 million, reflecting less favorable market conditions, while revenue from other products increased $2 million, largely driven by higher loans sales and portfolio advisory fees.

Deferred compensation income decreased $24 million reflecting fluctuations in equity market valuations relative to the prior year.


Table I.2.5

                               NONINTEREST INCOME
                                                             Six Months Ended
(Dollars in millions)                              June 30, 2022            June 30, 2021           $ Change             % Change
Noninterest income:
Fixed income                                    $               124       $             228       $      (104)                  (46) %
Deposit transactions and cash management                         86                      86                  -                    -  %
Mortgage banking and title income                                56                      91               (35)                  (38) %
Brokerage, management fees and
commissions                                                      48                      41                  7                   17  %
Card and digital banking fees                                    43                      38                  5                   13  %
Other service charges and fees                                   28                      21                  7                   33  %
Trust services and investment management                         25                      26                (1)                   (4) %
Securities gains (losses), net                                    6                      11                (5)                  (45) %
Deferred compensation income                                   (21)                       9               (30)                      NM
Other income                                                     35                      32                  3                    9  %
Total noninterest income                        $       430               $
         583          $    (153)                    (26) %


NM - Not meaningful

For the six months ended June 30, 2022, noninterest income of $430 million decreased $153 million, or 26%, compared to the same period in 2021, primarily from lower fixed income, mortgage banking and title income and deferred compensation income.


Fixed income product revenue of $99 million decreased $107 million largely
driven by less favorable market conditions. Revenue from other products of $25
million increased $3 million primarily driven by higher fees from loan and
derivative sales.
Mortgage banking and title income of $56 million decreased $35 million driven by
lower origination volume given the impact of higher long-term rates as well as a
continued mix shift toward portfolio loans, partially offset by the gain on sale
of mortgage servicing rights.

Deferred compensation income decreased $30 million for the year-to-date period of 2022 largely driven by equity market valuations relative to the prior year.

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Noninterest Expense

The following tables present the significant components of noninterest expense for each of the periods presented:

Table I.2.6
                              NONINTEREST EXPENSE
                                                         Three Months Ended                                         2Q22 vs. 1Q22                              2Q22 vs. 2Q21
(Dollars in millions)              June 30, 2022          March 31, 2022           June 30, 2021            $ Change              % Change             $ Change              % Change
Noninterest expense:
Personnel expense                 $      265            $           280          $          306          $        (15)                  (5) %       $        (41)                 (13) %
Net occupancy expense                     33                         32                      33                     1                    3                     -                    -
Computer software                         29                         29                      30                     -                    -                    (1)                  (3)
Operations services                       23                         20                      19                     3                   15                     4                   21
Legal and professional fees               17                         23                      16                    (6)                 (26)                    1                    6
Amortization of intangible
assets                                    13                         13                      14                     -                    -                    (1)                  (7)
Contract employment and
outsourcing                               12                         19                      13                    (7)                 (37)                   (1)                  (8)
Equipment expense                         11                         11                      12                     -                    -                    (1)                  (8)
Advertising and public
relations                                 10                         11                       5                    (1)                  (9)                    5                  100
Communications and delivery                9                         10                      10                    (1)                 (10)                   (1)                 (10)
Other expense                             66                         45                      40                    21                   47                    26                   65
Total noninterest expense         $      488            $           493          $          498          $         (5)                  (1) %       $        (10)                  (2) %


Second Quarter 2022 versus First Quarter 2022


Noninterest expense of $488 million decreased $5 million, or 1%, compared with
first quarter 2022. Personnel expense decreased $15 million reflecting lower
revenue-based incentives and commissions and deferred compensation expense,
partially offset by higher TD transaction-related expenses. Other noninterest
expense increased $21 million, primarily from $12 million in derivative
valuation adjustments on prior Visa Class-B share sales and increases in fraud
losses, FDIC insurance and customer relations. Results also reflect decreases in
contract employment and outsourcing expense and legal and professional fees
primarily attributable to lower IBKC merger-related and Proposed TD
Merger-related costs.

Second Quarter 2022 versus Second Quarter 2021

Noninterest expense of $488 million decreased $10 million, or 2%, from second quarter 2021 largely


reflecting a $41 million decrease in personnel expense offset by a $26 million
increase in other expense. The decrease in personnel expense was largely
attributable to lower deferred compensation and incentive-based compensation
costs. The increase in other expense was attributable to $12 million in
derivative valuation adjustments related to prior Visa Class-B share sales and
increases in fraud losses, travel and entertainment, FDIC insurance and customer
relations.




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Table I.2.7

                              NONINTEREST EXPENSE
                                                  Six Months Ended
(Dollars in millions)                     June 30, 2022      June 30, 2021       $ Change       % Change
Noninterest expense:
Personnel expense                        $     545          $          624      $     (79)         (13) %
Net occupancy expense                           64                      71             (7)         (10) %
Computer software                               58                      57              1            2  %
Operations services                             43                      35              8           23  %
Legal and professional fees                     40                      31              9           29  %
Amortization of intangible assets               26                      28             (2)          (7) %
Contract employment and outsourcing             31                      27              4           15  %
Equipment expense                               23                      23              -            -  %
Advertising and public relations                21                       9             12          133  %
Communications and delivery                     19                      19              -            -  %

Other expense                                  112                     118             (6)          (5) %
Total noninterest expense                $     982          $        1,042  

$ (60) (6) %



For the six months ended June 30, 2022, noninterest expense decreased $60
million, or 6%, largely attributable to decreases in personnel and occupancy
expense. Personnel expense decreased $79 million reflecting lower revenue-based
incentives and commissions and deferred compensation expense. Occupancy expense
decreased $7 million largely reflecting lower IBKC merger-related expenses.

Year-to-date results also reflect increases in advertising and public relations, legal and professional fees, and operations services.

Total merger and acquisition expense was $75 million for the first six months of 2022 compared to $102 million for the same period of 2021.

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Income Taxes

FHN recorded income tax expense of $48 million in second quarter 2022 compared
to $57 million in first quarter 2022 and $88 million in second quarter 2021. For
the six months ended June 30, 2022 and 2021, FHN recorded income tax expense of
$105 million and $159 million, respectively.
The effective tax rate was approximately 21.3%, 22.4%, and 22.0% for the three
months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively. The
effective tax rate was approximately 21.9% and 22.6% for the six months ended
June 30, 2022 and 2021, 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-deductibility of 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.

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. As of June 30, 2022, FHN's gross
DTA and gross DTL were $521 million and $406 million, respectively, resulting in
a net DTA of $115 million at June 30, 2022, compared with a net DTA of
$52 million at December 31, 2021.

As of June 30, 2022, FHN had deferred tax asset balances related to federal and state income tax carryforwards of $47 million and $3 million, respectively, which will expire at various dates.


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.


Business Segment Results

FHN's reportable segments include Regional Banking, Specialty Banking and Corporate. See Note 12 - Business Segment Information for additional disclosures related to FHN's segments.


Regional Banking

The Regional Banking segment generated pre-tax income of $230 million for second
quarter 2022, a decrease of $39 million compared to first quarter 2022, driven
by an $82 million increase in provision for credit losses partially offset by a
$39 million increase in net interest income and a $4 million decrease in
noninterest expense. The increase in provision largely reflects the impact of
loan growth and a revised macroeconomic outlook. The increase in net interest
income is reflective of higher interest rates, lower interest-bearing cash
balances, improved security yields, and loan growth, partially offset by an
increase in funding costs.

Pre-tax income for second quarter 2022 decreased $141 million compared to
$371 million for second quarter 2021 largely driven by a $140 million increase
in provision for credit losses. The provision benefit in the prior year
reflected an improved macroeconomic outlook, positive credit grade migration,
and lower loan balances. Net interest income of $465 million increased $21
million from second quarter 2021 driven by higher earning asset yields.
Noninterest expense increased $27 million largely attributable to increases in
personnel expense and fraud losses.

Pre-tax income of $499 million for the six months ended June 30, 2022 decreased
$158 million compared to the same period of 2021, largely from a $138 million
increase in provision for credit losses. Results also reflect a $33 million
increase in revenue and $53 million increase in noninterest expense.

Specialty Banking


Pre-tax income in the Specialty Banking segment of $139 million for second
quarter 2022 increased $23 million compared to first quarter 2022, driven by a
$20 million decline in noninterest expense and lower provision for credit losses
of $16 million, offset by a $13 million decline in revenue. Fixed income of $51
million decreased $22 million, reflecting the impact of higher long-term rates
and macroeconomic uncertainty and volatility. Mortgage banking and title income
of $34 million increased $12 million driven by a gain recognized on the sale of
mortgage servicing rights. The decline in noninterest expense was largely
reflective of lower personnel expense of $16 million.

Pre-tax income in the Specialty Banking segment decreased $39 million compared
to second quarter 2021 largely driven by lower revenue partially offset by lower
noninterest expense. The decline in revenue was primarily attributable to
declines in net interest income and fixed income.

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Pre-tax income of $255 million for the six months ended June 30, 2022 decreased
$117 million from the same period of 2021 largely reflecting a $134 million
decrease in noninterest income tied to lower fixed income and mortgage banking
and title fees.

Corporate

Pre-tax loss for the Corporate segment was $144 million for second quarter 2022
compared to $130 million for first quarter 2022, largely reflecting a $21
million increase in noninterest expense. Noninterest expense results for second
quarter 2022 reflect $12 million in derivative valuation adjustments on prior
Visa Class-B share sales. Merger and acquisition-related expenses were
relatively consistent with the prior quarter.

Pre-tax loss in the Corporate segment decreased $6 million compared to $150
million for second quarter 2021. Net interest expense decreased $36 million from
the impact of funds transfer pricing. Noninterest income decreased $36 million
compared to second quarter 2021, largely the result of lower deferred
compensation income and lower securities gains. The decline in deferred
compensation income was attributable to the impact of equity market valuations
relative to the prior year. Noninterest expense decreased $8 million from the
second quarter 2021, reflecting lower deferred compensation expense partially
offset by derivative valuation adjustments on prior Visa Class-B share sales in
second quarter 2022. Merger and acquisition-related expenses were $38 million
compared to $32 million in second quarter 2021.

Pre-tax loss of $275 million for the six months ended June 30, 2022 decreased
$49 million compared to the same period of 2021. Noninterest income of $2
million decreased $36 million reflecting lower deferred compensation income and
securities gains. Noninterest expense of $132 million decreased $62 million
reflecting lower deferred compensation expense and incentive-based compensation
costs in the current year, as well as the impact of impairments on long-lived
assets related to acquisition integration efforts in 2021.

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Analysis of Financial Condition


Total period-end assets were $85.1 billion as of June 30, 2022 compared to
$89.1 billion at December 31, 2021. The decrease in total assets during 2022 was
driven by a $5.4 billion decrease in interest-bearing deposits with banks from
lower customer deposits, offset by a $1.7 billion increase in loans and leases
and a $209 million increase in investment securities.

Earning assets consist of loans and leases, loans held for sale, investment securities, and other earning assets, such as trading securities and interest-bearing deposits with banks. A detailed discussion of the major components of earning assets is provided in the following sections.

Loans and Leases


Period-end loans and leases of $56.5 billion increased $1.7 billion as of
June 30, 2022 compared to December 31, 2021. Year-to-date loan growth included a
$1.0 billion increase in commercial loans and leases primarily from CRE growth
and a $629 million increase in consumer loans. Total loan growth was tempered by
a $663 million decrease in PPP loans. Average loans and leases of $55.6 billion
increased $1.5 billion from first quarter 2022 primarily from a $1.1 billion
increase in commercial loans.

Compared to second quarter 2021, average loans and leases decreased $1.2 billion, primarily from a decline in PPP loans and credit card and other non-real estate consumer loans, offset primarily by non-PPP commercial loan growth.

The following table provides detail regarding FHN's loans and leases as of June 30, 2022 and December 31, 2021.



Table I.2.8
                                 LOANS & LEASES
                                                      As of June 30, 2022                               As of December 31, 2021
(Dollars in millions)                       Amount               Percent of total               Amount               Percent of total               Growth Rate
Commercial:
Commercial, financial, and
industrial (a)                           $   31,276                              55  %       $   31,068                              57  %                     1  %
Commercial real estate                       12,942                              23              12,109                              22                        7
Total commercial                             44,218                              78              43,177                              79                        2
Consumer:
Consumer real estate                         11,441                              20              10,772                              20                        6
Credit card and other                           870                               2                 910                               1                       (4)
Total consumer                               12,311                              22              11,682                              21                        5
Total loans and leases                   $   56,529                             100  %       $   54,859                             100  %                     3  %

(a)Includes equipment financing loans and leases.



C&I loans are the largest component of the loan portfolio, comprising 55% of
total loans at the end of the second quarter 2022 and 57% at year-end 2021. C&I
loans increased 1% from December 31, 2021, largely driven by Regional Banking
growth partially offset by PPP loan run-off of $663 million. Commercial real
estate loans increased $833 million in 2022 driven by growth in both Regional
Banking and Specialty Banking loans.

Consumer loans of $12.3 billion increased $629 million from year-end 2021, largely driven by growth in real estate installment loans, primarily within the Regional Banking segment.


Loans Held for Sale

In 2020, FHN obtained IBKC's mortgage banking operations which 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 loans are primarily
sold to private companies that are unaffiliated with the GSEs on a
servicing-released basis. For further detail, see Note 5 - Mortgage Banking
Activity.

The legacy FHN loans HFS portfolio consists of small business, other consumer loans, mortgage warehouse, USDA, student, and home equity loans.


On June 30, 2022 and December 31, 2021, loans HFS were $870 million and $1.2
billion, respectively. Held-for-sale consumer mortgage loans secured by
residential real estate in process of foreclosure totaled $5 million at June 30,
2022 and $3 million at December 31, 2021.

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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 and leases are composed of C&I loans and leases 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 (20% of
total loans at both June 30, 2022 and

December 31, 2021). Industry concentrations are discussed under the C&I heading below.


Credit underwriting guidelines are outlined in Item 7 of FHN's Annual Report on
Form 10-K, as amended, for the year ended December 31, 2021 in the Asset Quality
Section within the Analysis of Financial Condition discussion. FHN's credit
underwriting guidelines and loan product offerings as of June 30, 2022 are
generally consistent with those reported and disclosed in FHN's Form 10-K, as
amended, for the year ended December 31, 2021.


Commercial Loan and Lease Portfolios

C&I

The C&I portfolio totaled $31.3 billion as of June 30, 2022 and $31.1 billion as of December 31, 2021 and is comprised of loans and leases used for general business purposes. Products offered in the C&I portfolio include term loan financing of owner-occupied real estate and fixed assets, PPP loans, direct financing and sales-type leases, working capital lines of credit, and trade credit enhancement through letters of credit.

The increase in C&I loans from December 31, 2021 was driven by Regional Banking growth, which exceeded a $663 million decrease in PPP loans. Excluding PPP loans, C&I loan growth was $871 million. The largest


geographical concentrations of balances in the C&I portfolio as of June 30, 2022
were in Tennessee (21%), Florida (13%), Texas (10%), North Carolina (7%),
Louisiana (7%), California (5%), and Georgia (5%). No other state represented
more than 5% of the portfolio.

The following table provides the composition of the C&I portfolio by industry as
of June 30, 2022, and December 31, 2021. For purposes of this disclosure,
industries are determined based on the North American Industry Classification
System (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 I.2.9

                           C&I PORTFOLIO BY INDUSTRY
                                                                       June 30, 2022                              December 31, 2021
(Dollars in millions)                                           Amount               Percent                 Amount                 Percent
Industry:
Finance and insurance                                      $       3,667                   12  %       $          3,483                   11  %
Loans to mortgage companies                                        3,441                   11                     4,518                   15

Real estate rental and leasing (a)                                 3,002                    9                     2,771                    9
Health care and social assistance                                  2,479                    8                     2,413                    8

Accommodation and food service                                     2,206                    7                     2,221                    7

Manufacturing                                                      2,119                    7                     1,950                    6
Wholesale trade                                                    2,087                    7                     1,845                    6

Retail trade                                                       1,657                    5                     1,532                    5
Energy                                                             1,337                    4                     1,325                    4

Other (professional, construction, transportation,
etc.) (b)                                                          9,281                   30                     9,010                   29
Total C&I loan portfolio                                   $      31,276                  100  %       $         31,068                  100  %

(a)Leasing, rental of real estate, equipment, and goods. (b)Industries in this category each comprise less than 5% as of June 30, 2022. [[Image Removed: fhn-20220630_g2.jpg]] 88 2Q22 FORM 10-Q REPORT

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Industry Concentrations

Loan concentrations exist 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 23% and 26% of FHN's C&I loan portfolio as of June 30,
2022 and December 31, 2021, respectively, and as a result could be affected by
items that uniquely impact the financial services industry. As of June 30, 2022,
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 11% of the C&I portfolio as of June 30, 2022
and 15% as of December 31, 2021. This portfolio generally fluctuates with
mortgage rates and seasonal factors and 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. Generally, new loan originations to mortgage lenders increase
when there is a decline in mortgage rates and decrease when rates rise. In
periods of economic uncertainty, this trend may not occur even if interest rates
are declining. In second quarter 2022, 76% of the loan originations were home
purchases and 24% were refinance transactions. On a year-to-date basis, home
purchases were approximately 67% of total loan originations.

Finance and Insurance


The finance and insurance component represented 12% of the C&I portfolio as of
June 30, 2022 and 11% as of December 31, 2021, 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 June 30, 2022, asset-based lending to consumer finance companies
represents approximately $1.5 billion of the finance and insurance component.

Paycheck Protection Program

In 2020, Congress created the Paycheck Protection Program (PPP) in response to the economic disruption


associated with the COVID-19 pandemic. Under the PPP, qualifying businesses
could receive loans from private lenders, such as FHN, that are fully guaranteed
by the Small Business Administration. These loans potentially are partly or
fully forgivable, depending upon the borrower's use of the funds and maintenance
of employment levels. To the extent forgiven, the borrower is relieved from
payment while the lender is still paid from the program.

The C&I portfolio as of June 30, 2022 includes 2,858 loans made under the PPP
with an aggregate principal balance of $375 million, which are fully government
guaranteed with the SBA. Due to the government guarantee and forgiveness
provisions, PPP loans are considered to have no credit risk and do not affect
the amount of provision and ALLL recorded. As a result, no ALLL is recorded for
PPP loans as of June 30, 2022, and FHN has assigned a risk weight of zero to PPP
loans for regulatory capital purposes.

For these loans, there are remaining net lender fees of approximately $2 million
to be paid to FHN as of June 30, 2022. During 2022, FHN continues to work with
its clients that have applied for and received PPP loan forgiveness. Through
June 30, 2022, over $5 billion of the original $6 billion in PPP loans
originated by FHN and IBERIABANK prior to acquisition have been forgiven by the
SBA.

Commercial Real Estate

The CRE portfolio totaled $12.9 billion as of June 30, 2022 and $12.1 billion as
of December 31, 2021. The CRE portfolio reflects financings for both commercial
construction and nonconstruction loans. The largest geographical concentrations
of CRE loan balances as of June 30, 2022 were in Florida (26%), North Carolina
(11%), Texas (12%), Louisiana (10%), Georgia (10%), and Tennessee (9%). No other
state represented more than 5% of the portfolio. 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.
Subcategories of the CRE portfolio consist of multi-family (26%), office (22%),
retail (19%), industrial (14%), hospitality (11%), land/land development (2%),
and other (6%).

Consumer Loan Portfolios

Consumer Real Estate

The consumer real estate portfolio totaled $11.4 billion and $10.8 billion as of
June 30, 2022 and December 31, 2021, respectively, and is primarily composed of
home equity lines and installment loans. The largest geographical concentrations
of balances as of June 30, 2022 were in Florida (31%), Tennessee (23%),
Louisiana

(9%), Texas (8%), North Carolina (7%), and New York (5%). No other state represented more than 5% of the portfolio.


As of June 30, 2022, approximately 88% of the consumer real estate portfolio was
in a first lien position. At origination, the weighted average FICO score of
this portfolio was 756 and the refreshed FICO scores averaged 753 as of June 30,
2022, no significant change from FICO scores of 755 and 754, respectively, as of
December 31,

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2021. Generally, performance of this portfolio is affected by life events that affect borrowers' finances, the level of unemployment, and home prices.


As of June 30, 2022 and December 31, 2021, FHN had held-for-investment consumer
mortgage loans secured by real estate that were in the process of foreclosure
totaling $29 million and $20 million, respectively.

HELOCs comprised $1.9 billion and $2.0 billion of the consumer real estate
portfolio as of June 30, 2022 and December 31, 2021, 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 ended, 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 June 30, 2022, approximately 90% of FHN's HELOCs were in the draw period
compared to 88% at December 31, 2021. It is expected that $459 million, or 26%,
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 presents HELOCs currently in the draw period, broken down by months remaining in the draw period.

Table I.2.10
                        HELOC DRAW TO REPAYMENT SCHEDULE

                                             June 30, 2022                  December 31, 2021
                                        Repayment                        Repayment
(Dollars in millions)                     Amount         Percent           Amount           Percent
Months remaining in draw period:
0-12                                  $         35           2  %    $             43           2  %
13-24                                           38           2                     42           2
25-36                                           76           4                     50           3
37-48                                          128           7                    136           8
49-60                                          182          11                    160           9
>60                                          1,278          74                  1,324          76
Total                                 $      1,737         100  %    $          1,755         100  %



Credit Card and Other

The credit card and other portfolio, which is primarily within the Regional Banking segment, totaled $870 million as of June 30, 2022 and $910 million as of December 31, 2021. This portfolio primarily consists of consumer-related


credits, including home equity and other personal consumer loans, credit card
receivables, and automobile loans. The $40 million decrease was driven by net
repayments of automobile loans, consumer construction loans, and credit cards.

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 Note 4 of this Report and "Critical
Accounting Policies and Estimates" and Note 5 in FHN's 2021 Form 10-K, as
amended.

The ALLL decreased to $624 million as of June 30, 2022 from $670 million as of
December 31, 2021. The ALLL balance as of June 30, 2022 reflects the continued
decrease in the unfavorable impact of COVID-19, offset by

potential economic instability projected in the macroeconomic forecasts
resulting from inflation and interest rate increases, as well as the impact of
loan growth. The ALLL to total loans and leases ratio decreased 12 basis points
to 1.10%. The ACL to total loans and leases ratio decreased to 1.24% as of
June 30, 2022 from 1.34% as of December 31, 2021.



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Consolidated Net Charge-offs

Net charge-offs in second quarter 2022 were $12 million, or an annualized 9 basis points of total loans and leases, compared to net recoveries of $10 million, or 7 basis points of total loans and leases, in second quarter 2021.

Net charge-offs in the commercial portfolio in second quarter 2022 were $10 million compared to recoveries of $4 million in second quarter 2021, with the increase attributable to both higher gross charge-offs and lower


gross recoveries compared to the prior year. Net charge-offs in the consumer
portfolio were $2 million in second quarter 2022 compared to $6 million in net
recoveries in second quarter 2021. The increase in net charge-offs from the
prior year was attributable to higher gross credit card charge-offs and lower
gross consumer real estate recoveries.


Table I.2.11

            ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES AND CHARGE-OFFS
(Dollars in millions)                                            June 30, 2022                December 31, 2021          June 30, 2021

Allowance for loan and lease losses

                     C&I                                       $          274                $            334          $          385
                     CRE                                                  141                             154                     210
                     Consumer real estate                                 183                             163                     203
                     Credit card and other                                 26                              19                      17
                     Total allowance for loan and lease
                     losses                                    $          624                $            670          $          815

Reserve for remaining unfunded commitments

                     C&I                                       $           53                $             46          $           57
                     CRE                                                   17                              12                       9
                     Consumer real estate                                  10                               8                       9
                     Credit card and other                                  -                               -                       -
                     Total reserve for remaining
                     unfunded commitments                      $           80                $             66          $           75

Allowance for credit losses
                     C&I                                       $          327                $            380          $          442
                     CRE                                                  158                             166                     219
                     Consumer real estate                                 193                             171                     212
                     Credit card and other                                 26                              19                      17
                     Total allowance for credit losses         $          704                $            736          $          890

Period-end loans and leases
                     C&I                                       $       31,276                $         31,068          $       32,528
                     CRE                                               12,942                          12,109                  12,292
                     Consumer real estate                              11,441                          10,772                  10,865
                     Credit card and other                                870                             910                   1,002
                     Total period-end loans and leases         $       56,529                $         54,859          $       56,687

ALLL / loans and leases %
                     C&I                                                 0.88  %                         1.07  %                 1.18  %
                     CRE                                                 1.09                            1.27                    1.71
                     Consumer real estate                                1.60                            1.51                    1.87
                     Credit card and other                               3.01                            2.14                    1.71
                     Total ALLL / loans and leases %                     1.10  %                         1.22  %                 1.44  %

ACL / loans and leases %
                     C&I                                                 1.04  %                         1.22  %                 1.37  %
                     CRE                                                 1.22                            1.37                    1.80
                     Consumer real estate                                1.69                            1.59                    1.94

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                   Credit card and other                       3.01                 2.09           1.71
                   Total ACL / loans and leases %              1.24  %              1.34  %        1.58  %

  Quarter-to-date net charge-offs (recoveries)
                   C&I                                     $     11             $      1       $     (3)
                   CRE                                           (1)                   -             (1)
                   Consumer real estate                          (4)                  (3)            (7)
                   Credit card and other                          6                    3              1
                   Total net charge-offs (recoveries)      $     12             $      1       $    (10)

  Average loans and leases
                   C&I                                     $ 30,963             $ 30,780       $ 32,540
                   CRE                                       12,626               12,221         12,350
                   Consumer real estate                      11,120               10,738         10,926
                   Credit card and other                        867                  943          1,013
                   Total average loans and leases          $ 55,576             $ 54,682       $ 56,829

  Charge-off % (annualized)
                   C&I                                         0.14  %              0.01  %       (0.04) %
                   CRE                                        (0.03)               (0.01)         (0.02)
                   Consumer real estate                       (0.12)               (0.10)         (0.28)
                   Credit card and other                       2.49                 1.26           0.51
                   Total charge-off %                          0.09  %              0.01  %       (0.07) %

  ALLL / annualized net charge-offs
                   C&I                                          616  %             7,238  %             NM
                   CRE                                              NM                   NM             NM
                   Consumer real estate                             NM                   NM             NM
                   Credit card and other                        121                  164            329  %
                   Total ALLL / net charge-offs               1,257  %            17,374  %             NM


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 nonaccruals 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 OREO (excluding OREO from government insured mortgages).

Total NPAs (including NPLs HFS) increased to $309 million as of June 30, 2022
from $285 million as of December 31, 2021, driven by higher nonaccrual loans in
the C&I and consumer real estate portfolios. The nonperforming loans and leases
ratio increased 3 basis points to 0.53% as of June 30, 2022.

Certain nonperforming loans in both the commercial and consumer portfolios are
deemed collateral-dependent and are charged down to an estimate of collateral
value less costs to sell. Because the estimated loss has been recognized through
a partial charge-off, typically an ALLL is not recorded.

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Table I.2.12

NONACCRUAL/NONPERFORMING LOANS, FORECLOSED ASSETS, & OTHER DISCLOSURES (Dollars in millions)


Nonperforming loans and leases                                               June 30, 2022                   December 31, 2021
                  C&I                                                     $             129                $             125
                  CRE                                                                    11                                9
                  Consumer real estate                                                  159                              138
                  Credit card and other                                                   2                                3
                  Total nonperforming loans and leases (a)                $             301                $             275

Nonperforming loans held for sale (a)                                     $               6                $               7
Foreclosed real estate and other assets (b)                                               2                                3
                  Total nonperforming assets (a) (b)                      $             309                $             285

Nonperforming loans and leases to total loans and leases

                  C&I                                                                  0.41  %                          0.40    %
                  CRE                                                                  0.08                             0.08
                  Consumer real estate                                                 1.39                             1.29
                  Credit card and other                                                0.29                             0.31
                  Total NPL %                                                          0.53  %                          0.50    %

ALLL / NPLs
                  C&I                                                                   213  %                           268    %
                  CRE                                                                 1,331                            1,671
                  Consumer real estate                                                  115                              118
                  Credit card and other                                               1,021                              699
                  Total ALLL / NPLs                                                     207  %                           244    %


(a)Excludes loans and leases that are 90 or more days past due and still
accruing interest.
(b)Balances do not include government-insured foreclosed real estate. Foreclosed
real estate from GNMA loans totaled $1 million as of both June 30, 2022 and
December 31, 2021.



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The following table provides nonperforming assets by business segment:

Table I.2.13

                        NONPERFORMING ASSETS BY SEGMENT
(Dollars in millions)
Nonperforming loans and leases (a) (b)                                         June 30, 2022                  December 31, 2021
            Regional Banking                                                $            202                $            163
            Specialty Banking                                                             65                              78
            Corporate                                                                     34                              34
            Consolidated                                                    $            301                $            275

Foreclosed real estate (c)

            Regional Banking                                                $              -                $              2
            Specialty Banking                                                              1                               -
            Corporate                                                                      1                               1
            Consolidated                                                    $              2                $              3

Nonperforming Assets (a) (b) (c)

            Regional Banking                                                $            202                $            165
            Specialty Banking                                                             66                              78
            Corporate                                                                     35                              35
            Consolidated                                                    $            303                $            278

Nonperforming loans and leases to loans and leases

            Regional Banking                                                            0.51  %                         0.43    %
            Specialty Banking                                                           0.40                            0.48
            Corporate                                                                   6.41                            5.39
            Consolidated                                                                0.53  %                         0.50    %
NPA % (d)
            Regional Banking                                                            0.51  %                         0.44    %
            Specialty Banking                                                           0.40                            0.48
            Corporate                                                                   6.55                            5.51
            Consolidated                                                                0.54  %                         0.51    %


(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 of $1 million as of both June 30, 2022 and December 31, 2021.
(d)Ratio is non-performing assets to total loans and leases plus foreclosed real
estate.


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Lending Assistance for Borrowers


In addition to PPP loans, other customer support initiatives in response to the
COVID-19 pandemic include incremental lending assistance for borrowers through
delayed payment programs and fee waivers.

The following table provides the UPB of loans related to deferrals granted to FHN's customers as of June 30, 2022 and December 31, 2021.


Table I.2.14

                               CUSTOMER DEFERRALS
   (Dollars in millions)                As of June 30, 2022       As of December 31, 2021
   Commercial:
   C&I                                 $                  -      $                      9

   CRE                                                    -                            26
   Total Commercial                    $                  -      $                     35
   Consumer:
   HELOC                               $                  4      $                      5
   Real estate installment loans                         19                            44
   Credit card and other                                  -                             -
   Total Consumer                      $                 23      $                     49
   Total                               $                 23      $                     84


To the extent that loans were past due as of June 30, 2022 or December 31, 2021 and had been granted a deferral, they were excluded from loans past due 30 to 89

days and loans past due 90 days or more in the table and discussion below.

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 $17 million as of June 30, 2022 compared
to $40 million as of December 31, 2021. Loans 30 to 89 days past due were $106
million as of June 30, 2022 compared to $108

million as of December 31, 2021. The decrease was driven by a $25 million decrease in C&I loans past due less than 90 days, partially offset by a $15 million increase in CRE loans and a $7 million increase in consumer real estate loans past due 30 to 89 days.

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Table I.2.15

               ACCRUING DELINQUENCIES & OTHER CREDIT DISCLOSURES
(Dollars in millions)
Accruing loans and leases 30+ days past due                  June 30, 2022                   December 31, 2021
         C&I                                              $              28                $              58
         CRE                                                             28                               13
         Consumer real estate                                            58                               70
         Credit card and other                                            9                                7
         Total accruing loans and leases 30+ days past
         due                                              $             123                $             148

Accruing loans and leases 30+ days past due %

         C&I                                                           0.09  %                          0.19    %
         CRE                                                           0.22                             0.11
         Consumer real estate                                          0.51                             0.65
         Credit card and other                                         0.96                             0.76
         Total accruing loans and leases 30+ days past
         due %                                                         0.22  %                          0.27    %

Accruing loans and leases 90+ days past due (a) (b) (c):

         C&I                                              $               -                $               5

         Consumer real Estate                                            14                               33
         Credit card and other                                            3                                2

         Total accruing loans and leases 90+ days past
         due                                              $              17                $              40

Loans held for sale
30 to 89 days past due                                    $               5                $               7
30 to 89 days past due - guaranteed portion (d)                           2                                2
90+ days past due                                                        14                               24
90+ days past due - guaranteed portion (d)                                5                               12


(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 Federal banking
regulators for

loans classified as substandard. Potential problem assets in the loan portfolio
were $491 million on June 30, 2022 and $597 million on December 31, 2021. 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.

Troubled Debt Restructurings and Loan Modifications


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. Extensions and 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. In a situation where an economic concession has been granted to a borrower that is experiencing [[Image Removed: fhn-20220630_g2.jpg]] 96 2Q22 FORM 10-Q REPORT

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financial difficulty, FHN identifies and reports that loan as a TDR.


For loan modifications that met the TDR relief provisions outlined in either the
CARES Act, as extended by the CAA, or revised Interagency Guidance, FHN has
excluded these modifications from consideration as a TDR and has excluded loans
with these qualifying modifications from designation as a TDR in the information
and discussion that follows. See Note 3 - Loans and Leases for further
discussion regarding TDRs and loan modifications.

On June 30, 2022 and December 31, 2021, FHN had $199 million and $206 million
portfolio loans classified as held-for-investment TDRs, respectively. For these
TDRs, including specific reserves, FHN had an allowance for loan and lease
losses of $6 million, or 3% of TDR balances as of June 30, 2022, and $12
million, or 6% of TDR balances, as of December 31, 2021. Additionally, FHN had
$32 million and $35 million of HFS loans classified as TDRs as of June 30, 2022
and December 31, 2021, respectively.

The following table provides a summary of TDRs for the periods ended June 30, 2022 and December 31, 2021:

Table I.2.16


                         TROUBLED DEBT RESTRUCTURINGS

      (Dollars in millions)                     June 30, 2022             December 31, 2021
      Held for investment:
        Commercial loans:
         Current                               $           28            $               53
         Delinquent                                         -                             -
         Non-accrual                                       25                            35
        Total commercial loans                 $           53            $               88
        Consumer real estate:
         Current                               $           78            $               60
         Delinquent                                         7                             4
         Non-accrual (a)                                   61                            53
        Total consumer real estate             $          146            $              117
        Credit card and other:
         Current                               $            -            $                1
         Delinquent                                         -                             -
         Non-accrual                                        -                             -
        Total credit card and other                         -                             1

      Total held for investment                $          199            $              206

      Held for sale:
         Current                               $           25            $               27
         Delinquent                                         6                             7
         Non-accrual                                        1                             1
      Total held for sale                                  32                            35
      Total troubled debt restructurings       $          231            $              241

(a) Balances as of both June 30, 2022 and December 31, 2021 include $12 million of discharged bankruptcies.

Investment Securities


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

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FHN is exposed. These evaluations may result in steps taken to adjust the overall balance sheet positioning.

Investment securities were $9.6 billion and $9.4 billion on June 30, 2022 and December 31, 2021, respectively,

representing approximately 11% of total assets at the end of both periods. See Note 2 - Investment Securities for more information about the securities portfolio.

Deposits

Total deposits of $70.5 billion as of June 30, 2022 decreased $4.3 billion from December 31, 2021 reflecting a continued downward trend from mid-2021 highs driven by excess liquidity associated with the COVID-19 pandemic. Interest-bearing deposits decreased $3.6 billion and noninterest-bearing deposits decreased $769 million.

See Tables I.2.2 and I.2.3 - Average Balances, Net Interest Income and Yields/Rates in this Report for information on average deposits including average rates paid. The following table summarizes the major components of deposits as of June 30, 2022 and December 31, 2021.


Table I.2.17

                                    DEPOSITS
                                                                 June 30, 2022                                          December 31, 2021
(Dollars in millions)                               Amount                 Percent of total                  Amount                   Percent of total              Change             Percent
Savings                                        $      24,376                               35  %       $         26,457                               35  %       $ (2,081)                  (8) %
Time deposits                                          2,888                                4                     3,500                                5              (612)                 (17)
Other interest-bearing deposits                       16,172                               23                    17,055                               23              (883)                  (5)

Total interest-bearing deposits                       43,436                               62                    47,012                               63            (3,576)                  (8)
Noninterest-bearing deposits                          27,114                               38                    27,883                               37              (769)                  (3)
Total deposits                                 $      70,550                              100  %       $         74,895                              100  %       $ (4,345)                  (6) %




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 $2.3 billion and $2.6 billion as of June 30,
2022 and December 31, 2021, 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.


Term Borrowings

Term borrowings include senior and subordinated borrowings with original maturities greater than one year.

Total term borrowings were $1.6 billion as of June 30, 2022 and December 31, 2021.

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 assure ready access to the capital markets. Total equity was
$8.6 billion at June 30, 2022 and $8.5 billion at December 31, 2021. Significant
changes included net income of $374 million and the issuance of $494 million in
Series G preferred stock, which were offset by $181

million in common and preferred dividends and a decrease in AOCI of $675 million.


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 I.2.18
                            REGULATORY CAPITAL DATA

(Dollars in millions)                                              June 30, 2022           December 31, 2021
Shareholders' equity                                             $        8,256          $            8,199
Modified CECL transitional amount (a)                                        85                         114
FHN non-cumulative perpetual preferred stock                             (1,014)                       (520)
Common equity tier 1 before regulatory adjustments               $        7,327          $            7,793
Regulatory adjustments:
Disallowed goodwill and other intangibles                                (1,687)                     (1,711)

Net unrealized (gains) losses on securities available for sale

                                                                        671                          36

Net unrealized (gains) losses on pension and other postretirement plans

                                                        252                         255
Net unrealized (gains) losses on cash flow hedges                            40                          (3)
Disallowed deferred tax assets                                                -                          (2)
Other deductions from common equity tier 1                                   (1)                         (1)
Common equity tier 1                                             $        6,602          $            6,367
FHN non-cumulative perpetual preferred stock (b)                            920                         426
Qualifying noncontrolling interest- First Horizon Bank
preferred stock                                                             295                         295

Tier 1 capital                                                   $        7,817          $            7,088
Tier 2 capital                                                              907                         830
Total regulatory capital                                         $        8,724          $            7,918
Risk-Weighted Assets
First Horizon Corporation                                        $       67,294          $           64,183
First Horizon Bank                                                       66,608                      63,601
Average Assets for Leverage
First Horizon Corporation                                                85,724                      87,683
First Horizon Bank                                                       85,022                      86,953



Table I.2.19
                          REGULATORY RATIOS & AMOUNTS
                                                                       June 30, 2022                        December 31, 2021
                                                                   Ratio             Amount               Ratio               Amount
Common Equity Tier 1
First Horizon Corporation                                            9.81  %       $ 6,602                    9.92  %       $ 6,367
First Horizon Bank                                                  10.47            6,972                   10.75            6,838
Tier 1
First Horizon Corporation                                           11.62            7,817                   11.04            7,088
First Horizon Bank                                                  10.91            7,267                   11.22            7,133
Total
First Horizon Corporation                                           12.96            8,724                   12.34            7,918
First Horizon Bank                                                  12.06            8,031                   12.41            7,893
Tier 1 Leverage
First Horizon Corporation                                            9.12            7,817                    8.08            7,088
First Horizon Bank                                                   8.55            7,267                    8.20            7,133
Other Capital Ratios
Total period-end equity to period-end assets                        10.04                                     9.53
Tangible common equity to tangible assets (c)                        6.55                                     6.73

Adjusted tangible common equity to risk-weighted assets (c)

                                                                  9.11                                     9.20


(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, 2021. For June 30, 2022, 25% of the full amount at
December 31, 2021 is phased out and not included in Common Equity Tier 1
capital.
(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, which was re-set to July 1, 2020 when the IBKC
merger closed.
(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 I.2.27.

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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 June 30, 2022, each of 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 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
second quarter 2022 relative to year-end 2021 primarily from the impact of net
income less dividends during the first six months of 2022. FHN's Tier 1 Capital
and Tier 1 Leverage ratios as of June 30, 2022 further benefited from the
issuance of its Series G preferred stock. FHN and First Horizon Bank's
risk-based regulatory capital ratios were negatively impacted in 2022 from an
increase in risk-weighted assets from December 31, 2021.

During 2022, capital ratios are expected to remain above well-capitalized standards plus the required capital conservation buffer.

Common Stock Purchase Programs

General Purchase Program


Pursuant to Board authority, 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 has not authorized a
preferred stock 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, replacing the 2018 program, which was terminated. On October 26, 2021, FHN
announced that the 2021 program had been increased by $500 million and extended
to October 31, 2023. Like the 2018 program, the 2021

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 will be subject to
various factors, including FHN's capital position, financial performance,
capital impacts of strategic initiatives, market conditions and regulatory
considerations.

As of June 30, 2022, $401 million in purchases had been made life-to-date under
the 2021 program at an average price per share of $16.60, or $16.58 excluding
commissions. Management does not currently anticipate purchasing additional
shares under this authority.

Table I.2.20

                     COMMON STOCK PURCHASES-GENERAL PROGRAM
                                                                                                  Total number of                Maximum approximate
(Dollar values and volume in             Total number                                             shares purchased              dollar value that may
thousands, except per share               of shares                Average price                as part of publicly            yet be purchased under
data)                                     purchased              paid per share (a)              announced programs                 the programs
2022
April 1 to April 30                              -                                N/A                         -                $            598,646
May 1 to May 31                                  -                                N/A                         -                             598,646
June 1 to June 30                                -                                N/A                         -                             598,646
Total                                            -                                N/A                         -

(a) Represents total costs including commissions paid.

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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 two
compensation plans for which the share purchase authority had expired.

The total amount authorized under this consolidated compensation plan share purchase program is 29.6 million shares calculated before adjusting for stock dividends distributed through January 1, 2011. The authorization has been reduced for that portion which relates to


compensation plans for which no stock option awards remain outstanding. The
shares may be purchased over the option exercise periods of the various
compensation plans on or before December 31, 2023. Purchases may be made in the
open market or through privately negotiated transactions and are subject to
various factors including FHN's capital position, financial performance, capital
impacts of strategic initiatives, market conditions and regulatory restrictions.
As of June 30, 2022, the maximum number of shares that may be purchased under
the program was 22.6 million shares. Management currently does not anticipate
purchasing a material number of shares under this authority during 2022.


Table I.2.21

               COMMON STOCK PURCHASES-COMPENSATION PLANS PROGRAM

                                                                                             Total number of                    Maximum number
                                         Total number                                        shares purchased                 of shares that may
(Volume in thousands, except              of shares              Average price             as part of publicly                 yet be purchased
per share data)                           purchased             paid per share              announced programs                under the programs
2022
April 1 to April 30                              9             $        23.31                            9                             22,955
May 1 to May 31                                238                      21.65                          238                             22,717
June 1 to June 30                               88                      22.35                           88                             22,629
Total                                          334             $        21.87                          334




Risk Management

There have been no significant changes to FHN's risk management practices as
described under "Risk Management" included in Item 7 of FHN's 2021 Annual Report
on Form 10-K, as amended.

Market Risk Management

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 the 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 I.2.22

                              VaR & SVaR MEASURES
                                     Three Months Ended                      Six Months Ended                  As of
                                       June 30, 2022                          June 30, 2022                June 30, 2022
 (Dollars in millions)            Mean            High      Low          Mean           High      Low
 1-day
 VaR                        $    2               $  2      $ 2      $    2             $  2      $ 2      $            2
 SVaR                            5                  6        4           5                7        4                   5
 10-day
 VaR                             8                 11        4           6               11        3                   8
 SVaR                           24                 28       20          24               34       18                  20

                                     Three Months Ended                      Six Months Ended                  As of
                                       June 30, 2021                          June 30, 2021                June 30, 2021
 (Dollars in millions)            Mean            High      Low         
Mean           High      Low
 1-day
 VaR                        $    1               $  2      $ 1      $    2             $  4      $ 1      $            1
 SVaR                            4                  6        2           4                6        2                   4
 10-day
 VaR                             3                  5        1           7               21        1                   2
 SVaR                           17                 23       11          16               23       11                  16


                                                 Year Ended                        As of
                                              December 31, 2021              December 31, 2021
          (Dollars in millions)            Mean           High      Low
          1-day
          VaR                        $    1              $  4      $ 1      $                2
          SVaR                            4                 7        2                       5
          10-day
          VaR                             5                21        1                       5
          SVaR                           18                27       11                      22


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


Table I.2.23

                       SCHEDULE OF RISKS INCLUDED IN VaR

                                          As of                                  As of                                       As of
                                      June 30, 2022                          June 30, 2021                             December 31, 2021
(Dollars in millions)            1-day              10-day              1-day              10-day                   1-day                   10-day
Interest rate risk           $        1          $       1          $        -          $       2          $        1                    $       1
Credit spread risk                    -                  1                   1                  1                   1                            1



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.

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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-


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

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 June 30, 2022, 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 I.2.24

                           INTEREST RATE SENSITIVITY
                  Shifts in Interest Rates      % Change in Projected
                          (in bps)               Net Interest Income
                            -100                       -15.4%
                            -50                         -7.6%
                            -25                         -3.7%
                            +25                         +3.0%
                            +50                         +5.9%
                            +100                       +11.8%
                            +200                       +20.5%


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
0.3%. 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 0.4%. 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.

FHN's net interest income had been impacted by the disruption from the COVID-19
pandemic and its variants as well as the low-rate environment. The impact of
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government stimulus programs and other developments continue to influence net interest income results, although the impacts from these programs have abated.


Interest rates have been increasing over the past two quarters as the Federal
Reserve has pivoted its monetary
policy actions to curb inflation pressures, with the expectation that rates will
increase further in the future.
FHN continues to monitor current economic trends and potential exposures
closely.

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. 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. Subject to
market conditions and compliance with applicable regulatory requirements from
time to time, funds are available from a number of sources, including the
available-for-sale securities portfolio, dealer and commercial customer
repurchase agreements, access to the overnight and term Federal Funds markets,
incremental borrowing capacity at the FHLB ($12.9 billion was available as of
June 30, 2022), brokered deposits, loan sales, syndications, and access to the
Federal Reserve Bank.

Core deposits are a significant source of funding and have historically been a
stable source of liquidity for banks. Generally, core deposits represent funding
from a financial institution's client base which provides inexpensive,
predictable pricing. The ratio of average loans, excluding loans HFS and
restricted real estate loans, to average core deposits was 76% for June 30, 2022
and 80% for December 31, 2021.

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. In February 2022, FHN issued and sold to TD 4,936 shares of Series
G Perpetual Convertible Preferred Stock in a private placement transaction for
$494 million. As of June 30, 2022, FHN had outstanding $1.3 billion in senior
and subordinated unsecured debt and $1.0 billion in non-cumulative perpetual
preferred stock. As of June 30, 2022, 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. 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 July 1, 2022.

In March 2022, FHN agreed to suspend the Dividend Reinvestment Plan in
connection with the TD acquisition. As a result of the suspension of the Plan,
participants in the Plan received their first quarter 2022 FHN dividend, paid on
April 1, 2022, in cash. During the suspension period, dividend payments of FHN
will not be automatically reinvested in additional shares of FHN common stock
and participants in the Plan will be unable 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 amounts of $180 million, $85 million, and $85 million in first, second and
third quarter 2022 and $770 million in 2021. First Horizon Bank declared and
paid preferred dividends in first and second quarter 2022 and in each quarter of
2021. Additionally, First Horizon Bank declared preferred dividends in third
quarter 2022, payable in October 2022.

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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.


FHN paid a cash dividend of $0.15 per common share on July 1, 2022. FHN paid
cash dividends of $1,625 per Series E preferred share and $1,175 per Series F
preferred share on July 11, 2022 and $331.25 per Series B preferred share and
$165 per Series C preferred share on August 1, 2022. In addition, in July 2022,
the Board approved cash dividends per share in the following amounts:

Table I.2.25
                                 CASH DIVIDENDS
                             APPROVED BUT NOT PAID
                      Dividend/Share       Record Date       Payment Date
Common Stock         $          0.15          09/09/2022        10/03/2022
Preferred Stock

Series C             $        165.00          10/17/2022        11/01/2022
Series D             $        305.00          10/17/2022        11/01/2022
Series E             $      1,625.00          09/23/2022        10/11/2022
Series F             $      1,175.00          09/23/2022        10/11/2022

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. Based on its available liquidity and available borrowing
capacity, FHN anticipates it will continue to have sufficient funds to meet its
current commitments.

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 10 - 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.

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Repurchase and Foreclosure Liability


FHN's repurchase and foreclosure liability, primarily related to its pre-2009
mortgage business, is comprised of accruals to cover estimated loss content in
the active pipeline (consisting of mortgage loan repurchase, make-whole,
foreclosure/servicing demands and certain related exposures), estimated future
inflows, and estimated loss content related to certain known claims not
currently included in the active pipeline. 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 repurchase and foreclosure liability was $17
million as of June 30, 2022 and December 31, 2021.



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 how the COVID-19 pandemic continues to affect FHN's
clients, 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.

Inflation, Recession, and Federal Reserve Policy


In March 2020, in response to the economic downturn associated with the COVID-19
pandemic along with societal and government reactions to it, the Federal Reserve
"eased" by lowering short-term interest rates and operating an asset purchase
program intended to lower longer-term interest rates and foster access to
credit. The effective yields of 10-year and 30-year U.S. Treasury securities
achieved record low rates. These changes in interest rates and the volatility in
the market negatively impacted FHN's net interest margin. Amortization of net
processing fees related to government relief programs associated with the
COVID-19 pandemic, including the Paycheck Protection Program, offset a portion
of the net interest margin decline. During 2021, easing policy continued.
Interest rates fluctuated but remained very low, continuing to adversely impact
FHN's net interest margin. Inflation in the U.S. rose significantly during 2021
but, in 2021, was viewed as transitory.

The first half of 2022 has been marked by: inflation continuing strongly; the
Federal Reserve reversing course to implement a "tightening" policy to contain
inflation by increasing short-term interest rates and ending asset

purchases; many broad indicators suggesting near-term recession, including
contractions in the U.S. economy during the first and second quarters;
continuing supply-chain difficulties impacting many industries; and low
unemployment rates. Historically, while it is common for unemployment to rise
only after a recession has begun, it is unusual for unemployment to remain low
in the context of the events in 2022 so far. The delayed reaction is likely to
be temporary, however: if recessionary pressures continue to grow, demand for
labor eventually will abate.

Amplifying inflationary pressures and general uncertainties this year, the
Russian military invaded Ukraine in February. Much of Europe and the rest of the
world, including the U.S., has imposed economic sanctions on Russia for its
attack, its ongoing military campaign resulting in substantial civilian
casualties, and the manner in which it has prosecuted the war which, reportedly,
has significantly violated several international conventions and treaties. The
war and sanctions resulted in global oil and gas prices rising precipitously in
early 2022, along with the prices of several other commodities exported by
Russia, Ukraine, or both, including certain grains and vegetable oils. Also,
several U.S. and European multi-national companies have pulled operations and
assets out

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of Russia and parts of Ukraine, compounding the economic impact of the war on the global economy.


The Federal Reserve's recent public comments indicate that short-term rates are
expected to be raised several more times during 2022, until inflation is judged
to be adequately controlled. Moreover, the Federal Reserve has expressed its
intent to bring inflation under control even at the risk of creating, or
deepening, an economic recession.

During this still-ongoing and still-volatile transition period, the yield curve
has flattened and modestly inverted at times. Unusual yield curve effects,
including inversion, may continue. A traditional measure of inversion occurs
when the two-year rate is higher than the ten-year rate. Inversion incidents
have been more frequent early in the third quarter. Traditional inversion
occurred briefly several times during the first two quarters of 2022, but has
not been sustained. Sustained traditional yield curve inversion is viewed, with
statistical support, as a harbinger of economic recession.

As a result of the prospects for recession, coupled with the uncertainties
associated with the war in eastern Europe, financial markets world-wide have
been volatile in 2022. Financial asset values broadly fell during the first half
of 2022, especially during the second quarter.

FHN cannot predict exactly when or how much short-term rates will be raised, nor how market-driven long-term

rates will behave, nor how those actions may affect financial markets, during the remainder of 2022.


In several respects FHN is likely to benefit from rising rates, as long as the
rise in lending rates outpaces the inevitable rise in deposit and other funding
rates. For instance, FHN's net interest margin widened significantly in the
second quarter of 2022. However, the general increase in interest rates this
year has pushed home mortgage rates in the U.S. higher. FHN's direct mortgage
lending, lending to mortgage companies, and title insurance activities have seen
business decline in 2022. If mortgage rates continue to rise, FHN's revenues and
earnings from those areas likely will continue to fall compared with 2021.

More generally, a recession accompanying rising rates likely would have a
significant negative impact on FHN's businesses overall. Demand for loans is
likely to fall, reserves for loan losses are likely to rise, many commercial
activities that generate fee income are likely to decline, and competition for
clients is likely to sharpen. FHN already has begun to experience some of these
impacts in 2022. The deeper or longer a recession lasts, the more significant
these negative impacts are likely to be for FHN.

LIBOR & Reference Rate Reform

LIBOR


The London Inter-Bank Offered Rate ("LIBOR") for many years was the most widely
used reference rate in the world. A large but declining portion of FHN's
floating rate loans use LIBOR, denominated in U.S. Dollars ("USD"), as the
reference rate to determine the interest rate paid by the client/borrower. In
addition, certain floating-rate securities issued by FHN use USD LIBOR as the
reference rate.

LIBOR is based on a mix of transaction-based data and expert judgment about market conditions. It is published in different tenors, which are time periods such as 1-week, 1-month, 12-month, etc.

LIBOR Discontinuance


About a decade ago, evidence emerged that some members of the panel that set
LIBOR may have manipulated the published LIBOR rates rather than using strictly
good-faith judgments. Several banks were fined.

In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority
(the "FCA")-the governmental regulator of LIBOR-announced that it intended to
halt persuading or compelling banks to submit rates for the calculation of LIBOR
after 2021. In 2021, the FCA announced that tenors of USD LIBOR would no longer
be published as follows:

•One week and 2-month USD LIBOR would not be published after December 31, 2021; and

•All other USD LIBOR tenors (e.g., overnight, 1-month, 3-month, 6-month and 12-month tenors) would not be published after June 30, 2023.

U.S. Regulatory Position

In 2020, the Federal Reserve, the OCC, and the FDIC jointly encouraged U.S. banks to transition away from LIBOR for new contracts as soon as practicable and, in any event, by December 31, 2021. They noted that entering into new contracts that use LIBOR as a reference rate after December 31, 2021 would create safety and soundness risks.

U.S. Federal Legislation


In March 2022, Congress passed the Adjustable Interest Rate (LIBOR) Act. The
legislation addresses loans that will remain on LIBOR as of the June 30, 2023,
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-

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selected replacement benchmark rate at the cessation of LIBOR.

Alternatives to LIBOR


LIBOR became the market-preferred reference rate because it was perceived by
lenders and borrowers as being superior to alternatives in a wide range of
circumstances. Now that the origination of LIBOR-indexed loans has ended, no
single alternative reference rate has replaced LIBOR for USD transactions.
Instead, a number of different reference rates are being used in different
circumstances. These include:

•Daily SOFR. The Alternative Reference Rates Committee ("ARRC") is a group of
private-market and financial regulator participants convened by the Federal
Reserve and the New York Federal Reserve Bank to help ensure a successful
transition from USD LIBOR to a more robust reference rate. The ARRC has
recommended the Secured Overnight Financing Rate ("SOFR") as its preferred
alternative. SOFR resets daily and is based on actual transaction data for the
U.S. Treasury repurchase market. Accordingly, SOFR represents a nearly risk-free
secured overnight rate.

•CME Term SOFR. Published by CME Group, Term SOFR is a forward-looking rate,
with 1-month, 3-month, 6-month and 12-month tenors, and is based on SOFR futures
contracts. The ARRC has recommended conventions for Term SOFR rates and has
recommended CME Group as the administrator for Term SOFR.

•AMERIBOR. The American Interbank Offered Rate ("AMERIBOR") Index is produced by
the American Financial Exchange. AMERIBOR is based on actual transaction data
involving credit decisions by many financial institutions, on an unsecured
basis.

•BSBY. The Bloomberg short-term bank yield index ("BSBY") is a proprietary rate index calculated and published by Bloomberg Index Services Limited. BSBY is based on actual transaction data involving unsecured credit.


•Prime. Although traditional prime rates (with each bank setting its own) are
not likely to regain the prominence they had decades ago when U.S. banks were
much smaller and the industry was more fragmented, for some clients and products
banks may increase their usage of prime rates.

The alternatives listed above were made available to the majority of FHN's
commercial clients starting in November 2021. In accordance with the U.S.
regulatory position, FHN ceased entering into new LIBOR based contracts as of
December 31, 2021. Other alternative reference rates are being developed and FHN
may consider them at a future time.

Each alternative reference rate has advantages and disadvantages compared with other alternatives in various


circumstances. Despite being supported by the ARRC, Daily SOFR has not gained
significant traction among middle market commercial borrowers. When assessing
Daily SOFR, some borrowers have observed that the adoption of a rate with a
daily reset introduces operational complexities, including changes to the loan's
interest calculation and billing cycle. By contrast, CME Term SOFR is a rate
that: 1) like LIBOR, has rate reset tenors of monthly or longer and 2) like
Daily SOFR, carries the endorsement of the ARRC. For these reasons, CME Term
SOFR has gained traction among many middle market commercial borrowers.

All of the alternative reference rates selected by FHN to date meet the
International Organization of Securities Commissions ("IOSCO") Principles for
Financial Benchmarks, as affirmed by the rate administrator and/or an
independent auditor. While banking regulators have stated that banks are free to
choose the index rates they offer clients, some public sector officials have
urged caution in using the new credit sensitive alternative reference rates (a
category that includes BSBY and AMERIBOR), primarily due to the robustness of
underlying data used to derive the rates. More specifically, there is concern of
an "inverted pyramid" effect where a large number of financial contracts could
be priced using an index derived from a relatively low volume of transactions.
In an interagency statement on October 20, 2021, U.S. banking regulatory
agencies noted that "supervised institutions should understand how their chosen
reference rate is constructed and be aware of any fragilities associated with
that rate and the markets that underlie it". IOSCO has also warned of the
potential for the "inverted pyramid" problem and will monitor how the IOSCO
label is used by administrators.

FHN is monitoring the credit sensitive reference rates and regulatory guidance
around use of such rates. FHN plans to limit use of credit sensitive rates to
commercial loans (approximately 2% of global USD LIBOR market) and related
customer swaps (pending development of derivatives markets for these rates).
Additionally, FHN expects that each financial contract will contain fallback
language to guide transition from a credit sensitive rate to an alternative
should that action be deemed necessary in the future.

FHN's Actions to Date & Transition Plans

Starting in 2019, FHN modernized the fallback language used in its loan documentation to better handle how floating rate loans would be re-set if LIBOR ceased to be published during the loan term.


In the fourth quarter of 2021, FHN ceased using USD LIBOR for new lending and
renegotiated terms with clients whose loans are based on 1-week or 2-month USD
LIBOR, which ceased publication at the end of 2021. Only a small portion of
FHN's clients had such loans.

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On the consumer side, FHN began transitioning from LIBOR-based adjustable rate
mortgages ("ARMS") to SOFR-based ARMs in November 2021, and no longer offers
LIBOR-based ARMs. SOFR has emerged as a market standard for ARMs in the U.S. and
is the conforming convention for Fannie Mae and Freddie Mac.

For all products, FHN developed a go-to-market strategy which included pricing
considerations, associate training, and client communications. All required
systems, processes, and reporting were updated to accommodate the transition.
FHN ceased origination of new contracts tied to LIBOR on December 31, 2021

In addition, FHN has established a LIBOR Transition Office to assist associates
in working with their clients to re-negotiate terms of loan and derivative
contracts that extend past the June 30, 2023 cessation date for the remaining
USD LIBOR tenors noted above. FHN bankers have begun amending the pricing of
existing LIBOR-based commercial loans via a rate change at the time of renewal
or via amendments to the loan documents to change the benchmark rate.
Additionally, FHN bankers have begun amending interest rate derivative contracts
whose tenors extend beyond the June 30, 2023 final cessation date of LIBOR.

While FHN has exposure to LIBOR in various contracts (e.g. securities, derivatives), FHN's primary exposure to LIBOR is in floating rate loans to customers and derivative contracts issued to customers through FHN Financial. Below is a summary of these exposures as of June 30, 2022:

Table I.2.26

                                LIBOR EXPOSURES
                                                Mature after
(Dollars in billions)    As of June 30, 2022     June 2023
Commercial loans (a)    $                 19   $         15
Consumer loans (a)                         3              3
Customer swaps (b)                         9              9

(a) Amounts represent outstanding loan balances as of June 30, 2022. (b) FHN has entered into offsetting upstream transactions with dealers to offset its market risk exposure.

Financial Accounting Aspects


In 2020, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference
Rate Reform on Financial Reporting," which provides several optional expedients
and exceptions to ease the potential burden in accounting for reference rate
reform. The scope of ASU 2020-04 was expanded in 2021 with ASU 2021-01, "Scope".
Refer to the Accounting Changes With Extended Transition Periods section of Note
1 - Basis of Presentation and Accounting Policies for additional information.

In April 2022, the FASB proposed to extend the relief under Topic 848 (Reference Rate Reform) by two years, from December 31, 2022 to December 31, 2024.

U.S. Tax Accommodation

On December 30, 2021, the IRS released final guidance that is intended to facilitate the transition of existing contracts from LIBOR to new reference rates without triggering modification accounting or taxable exchange treatment for those contracts. This guidance specifies what must be met in order to qualify for the beneficial transition approach and FHN is considering this guidance in its transition plans.

Critical Accounting Policies and Estimates

FHN has made no significant changes in its critical accounting policies and estimates from those disclosed in its 2021 Annual Report on Form 10-K, as amended.

Accounting Changes


Refer to Note 1 - Basis of Presentation and Accounting Policies for a detail of
accounting changes with extended transition periods and accounting changes
issued but not currently effective, which section is incorporated into MD&A by
this reference.
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Non-GAAP Information
Table I.2.27
                        NON-GAAP TO GAAP RECONCILIATION
                                                                Three Months Ended                              Six Months Ended

(Dollars in millions; shares in thousands) June 30, 2022 March 31, 2022

               June 30, 2021          June 30, 2022          June 30, 2021
Pre-provision Net Revenue (Non-GAAP)
Net interest income (GAAP)                       $         542          $         479                $         497          $       1,021          $   

1,004

Plus: Noninterest income (GAAP)                            201                    229                          285                    430                    583
Total revenues (GAAP)                                      743                    708                          782                  1,451                  1,587
Less: Noninterest expense (GAAP)                           488                    493                          498                    982              

1,042

Pre-provision net revenue (Non-GAAP)             $         255          $         215                $         284          $         469          $   

545


Average Tangible Common Equity (Non-GAAP)
Average total equity (GAAP)                      $       8,614          $       8,618                $       8,459          $       8,616          $   

8,404

Less: Average noncontrolling interest (a)                  295                    295                          295                    295              

295

Less: Average preferred stock (a)                        1,014                    695                          513                    855              

492

(A) Total average common equity                  $       7,305          $       7,628                $       7,651          $       7,466          $   

7,617

Less: Average goodwill and other
intangible assets (GAAP) (b)                             1,789                  1,802                        1,843                  1,795              

1,850

(B) Average tangible common equity
(Non-GAAP)                                       $       5,516          $       5,826                $       5,808          $       5,671          $   

5,767


Net Income Available to Common
Shareholders
(C) Net income available to common
shareholders (annualized) (GAAP)                 $         666          $         756                $       1,182          $         711          $   

1,047


Tangible Common Equity (Non-GAAP)
(D) Total equity (GAAP)                          $       8,551          $       8,696                $       8,565          $       8,551          $   

8,565

Less: Noncontrolling interest (a)                          295                    295                          295                    295                    295
Less: Preferred stock (a)                                1,014                  1,014                          520                  1,014                    520
(E) Total common equity                          $       7,242          $       7,387                $       7,750          $       7,242          $       7,750
Less: Goodwill and other intangible assets
(GAAP) (b)                                               1,783                  1,796                        1,836                  1,783              

1,836

(F) Tangible common equity (Non-GAAP)                    5,459                  5,591                        5,914                  5,459              

5,914

Less: Unrealized gains (losses) on AFS
securities, net of tax                                    (671)                  (440)                          43                   (671)             

43

(G) Adjusted tangible common equity
(Non-GAAP)                                       $       6,130          $       6,031                $       5,871          $       6,130          $       5,871

Tangible Assets (Non-GAAP)
(H) Total assets (GAAP)                          $      85,132          $      88,660                $      87,908          $      85,132          $      87,908
Less: Goodwill and other intangible assets
(GAAP) (b)                                               1,783                  1,796                        1,836                  1,783              

1,836

(I) Tangible assets (Non-GAAP)                   $      83,349          $      86,864                $      86,072          $      83,349          $    

86,072


Risk-Weighted Assets
(J) Risk-weighted assets (c)                     $      67,294          $      65,042                $      61,991          $      67,294          $    

61,991


Period-end Shares Outstanding
(K) Period-end shares outstanding                      536,333                534,587                      550,865                536,333               

550,865

Ratios

(C)/(A) Return on average common equity
(GAAP)                                                    9.12  %                9.92  %                     15.45  %                9.52  %               13.75  %
(C)/(B) Return on average tangible common
equity (Non-GAAP)                                        12.07                  12.98                        20.36                  12.54              

18.16

(D)/(H) Total period-end equity to
period-end assets (GAAP)                                 10.04                   9.81                         9.74                  10.04              

9.74

(F)/(I) Tangible common equity to tangible
assets (Non-GAAP)                                         6.55                   6.44                         6.87                   6.55              

6.87

(G)/(J) Adjusted tangible common equity to
risk-weighted assets (Non-GAAP)                           9.11                   9.27                         9.47                   9.11              

9.47

(E)/(K) Book value per common share (GAAP) $ 13.50 $

    13.82                $       14.07          $       13.50          $   

14.07

(F)/(K) Tangible book value per common
share (Non-GAAP)                                 $       10.18          $       10.46                $       10.74          $       10.18          $   

10.74


Loans and leases excluding PPP loans
(Non-GAAP)
Commercial loans and leases excluding PPP
loans                                            $      43,843          $      42,643                $      40,980          $      43,843          $      40,980
PPP loans                                                  375                    642                        3,840                    375                  3,840
Total commercial loans and leases                       44,218                 43,285                       44,820                 44,218                 44,820
Total consumer loans                                    12,311                 11,727                       11,867                 12,311                 11,867
Total loans and leases                           $      56,529          $      55,012                $      56,687          $      56,529          $      56,687


(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.
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