First Horizon Q3 2026: A Painful Mortgage Sale Priced for a 2027 Payoff
As seen on the 24/7 Wall St. homepage on October 15, 2026.
A $473 million pre-tax loss on the pending sale of roughly $4.5 billion in low-yielding consumer mortgages gutted the headline numbers and flipped First Horizon to a GAAP loss, even as adjusted earnings came in beating expectations. Management says the swap adds roughly 4% to 2027 EPS, so the pain is priced for next year's payoff.
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Adjusted earnings of $0.53 per share edged past expectations, but a pre-tax loss tied to the pending sale of low-yielding consumer mortgages flipped First Horizon to a GAAP net loss of $0.20 per diluted share.
The mortgage portfolio sale is the central event of this quarter, with those loans reclassified to held-for-sale during Q3 and contracted to settle in early Q4 2026. The transaction and other notable items produced $347 million in after-tax charges, driving the GAAP loss and leaving reported revenue missing expectations.
Management is framing the pain as deliberate and temporary: shedding low-yield assets now frees up capacity for higher-returning loans. The sale is expected to add roughly 4% to 2027 EPS and about 150 basis points to 2027 return on tangible common equity.
Operating trends held up, with the adjusted efficiency ratio improving to 58.9% from 60.8% a year earlier. Nonperforming loans declined from the prior quarter, and brokerage, trust, and insurance revenue grew 17% year-over-year.
Management guided 2026 adjusted revenue growth to the low end of its 3% to 7% range, with expenses expected flat year-over-year. The company also declared a quarterly cash dividend of $0.17 per common share, with buybacks running light in the quarter.