First Horizon Corp. took a $473 million pre-tax loss in the third quarter to sell about $4.5 billion of residential mortgages, a move the Memphis, Tenn.-based regional bank says will lift future earnings by clearing lower-yielding home loans off its books. The charge swung the bank to a quarterly loss and offers a concrete price tag for what it costs a lender to exit mortgages written when rates were far lower than today’s.
In its third-quarter earnings release filed with the SEC on Oct. 15, 2026, First Horizon reported a net loss available to common shareholders of $94 million, or 20 cents a share. The bank said it began evaluating a sale of “select lower yielding consumer mortgages” during the quarter and, in early October, entered into an agreement to sell them. It did not identify the buyer or the sale price.
What the sale cost
The loss stems from moving the targeted loans into the held-for-sale category, which requires marking them to what a buyer would pay. The $473 million pre-tax hit, which the release says covers valuation adjustments and transaction costs, was partly offset by a $45 million release of loan-loss reserves the bank no longer needs for those loans. Together with smaller items, notable charges totaled $347 million after tax, or 73 cents a share.
Excluding those items, First Horizon earned an adjusted 53 cents a share, down a penny from the second quarter and up 2 cents from a year earlier. Reported noninterest income fell to a loss of $276 million, while adjusted fee income was $197 million.
The balance sheet shows the scale of the exit. Consumer real estate loans fell by $4.6 billion in the quarter as the mortgages were reclassified, and period-end loans dropped 8% from the second quarter to $59.8 billion. Total consumer loans fell to $9.8 billion at Sept. 30 from $14.4 billion three months earlier.
The release says the transaction “is expected to settle early in the fourth quarter,” while a footnote in its financial tables describes it as having closed early in the quarter.
Why the bank says it is worth it
In its investor presentation, First Horizon describes the sale as part of a “Mortgage Business Realignment” and says its broader mortgage strategy is being restructured in parallel. The bank projects the move will add about 4%, or $45 million after tax, to 2027 earnings, measured against analysts’ consensus as of Oct. 2, and improve 2027 return on tangible common equity by about 1.5 percentage points. It says those estimates come before any benefit from redeploying the freed-up capacity into higher-yielding loans.
The presentation says the sale exits “lower-yielding loans with limited relationship value,” improves the bank’s loan-to-deposit ratio by 7 percentage points to about 88%, and reduces asset duration. The cost shows up in capital: the bank’s common equity tier 1 ratio fell to 10.3%, a decline the release attributes primarily to the mortgage reclassification, and the presentation puts the sale’s effect at about 0.45 percentage point. First Horizon lowered its 2026 CET1 expectation to a range of 10.25% to 10.5%, from about 10.5%.
“This quarter’s results are a testament to our disciplined approach and clear strategic priorities,” Bryan Jordan, chairman, president and CEO, said in the release, pointing to a $1.3 billion rise in average client deposits.
What it signals for mortgage holders
First Horizon did not disclose the coupon on the loans it sold. But the logic it lays out, trading an upfront loss for better future earnings, is the arithmetic facing any lender still holding mortgages originated at rates below today’s market. The bank’s average consumer loan yield was 5.00% in the third quarter, according to its yield tables, while 30-year mortgage rates have climbed back above 7% this fall, as RealtyWire has reported in its coverage of rising rates and slumping refinance demand.
On our reading, the sale is notable less for its size, about 5% of the bank’s $84.3 billion in assets, than for what it shows about how banks are choosing to handle low-rate mortgage books. Low-rate borrowers have little reason to refinance, so those loans pay down slowly. Rather than wait, First Horizon chose to absorb the mark now and redeploy the capacity into what it calls higher-yielding loans; for comparison, its commercial loans yielded 5.94% in the quarter. Whether other regional banks follow is an open question; First Horizon’s case gives investors a data point on the cost. More mortgage and lending coverage is in RealtyWire’s Mortgage section, including our report on the Fed’s new approach to bank capital buffers.
