First Horizon Corporation (NYSE:FHN) reported third-quarter 2026 adjusted earnings slightly above analysts’ expectations, although revenue fell short of forecasts and the bank recorded a net loss attributable to common shareholders following the reclassification of approximately $4.5 billion in consumer mortgages.
The US regional banking group reported adjusted earnings of $0.53 per share for the quarter ended 30 September 2026, exceeding the analyst consensus estimate of $0.52.
Revenue reached $883 million, compared with market expectations of $889.37 million.
However, on a generally accepted accounting principles (GAAP) basis, First Horizon reported a net loss available to common shareholders of $94 million, equivalent to a loss of $0.20 per share.
The reported loss was primarily associated with the bank’s decision to reclassify a portfolio of lower-yielding consumer mortgages as held for sale.
First Horizon shares declined 1.6% following the announcement, as investors assessed the revenue shortfall and financial impact of the planned portfolio disposal.
Adjusted Earnings Beat Forecasts Despite Revenue Shortfall
First Horizon’s adjusted earnings of $0.53 per share exceeded analysts’ expectations by $0.01.
The result represented a slight decline from the second quarter of 2026, when adjusted earnings were $0.54 per share.
However, adjusted earnings increased by $0.02 compared with the third quarter of 2025, when the bank reported $0.51 per share.
The figures indicated relatively stable underlying earnings performance despite the significant charges recognised in the reported quarterly results.
Revenue of $883 million was approximately $6.37 million below the consensus forecast of $889.37 million.
The modest revenue miss contributed to the negative share price reaction, although adjusted profitability remained ahead of expectations.
The difference between adjusted earnings and the reported GAAP loss reflected the impact of items excluded from the bank’s adjusted results, particularly those associated with its planned mortgage portfolio sale.
Mortgage Portfolio Reclassification Leads to Reported Loss
First Horizon reported a net loss available to common shareholders of $94 million, or $0.20 per share, under GAAP accounting.
The loss was primarily attributable to the reclassification of approximately $4.5 billion in selected lower-yielding consumer mortgages to assets held for sale.
The bank entered into an agreement to sell the mortgage portfolio in early October, with settlement expected during the early part of the fourth quarter of 2026.
The decision to dispose of the mortgages forms part of First Horizon’s efforts to reposition its balance sheet and improve the allocation of capital.
The company reported notable items totalling $347 million after tax, equivalent to $0.73 per share, primarily related to the pending transaction.
These charges accounted for the difference between the reported loss of $0.20 per share and adjusted earnings of $0.53 per share.
The reclassification of the mortgage assets resulted in a significant accounting impact during the third quarter, even though the transaction itself is expected to settle in the following reporting period.
Portfolio Sale Expected to Support Future Earnings
First Horizon said the planned mortgage portfolio disposal is expected to be accretive to earnings in future periods.
The bank also indicated that the transaction would provide additional balance sheet flexibility, allowing capital to be redirected towards future lending opportunities.
The portfolio consists of selected consumer mortgages with relatively low yields, making their disposal part of a broader strategy to improve the deployment of financial resources.
By selling these assets, First Horizon expects to create capacity to support loan growth and potentially improve its future earnings profile.
However, the financial benefits will depend on the completion of the transaction and the bank’s subsequent use of the capital released.
The company expects the sale to settle early in the fourth quarter, although the announcement did not provide detailed projections for the transaction’s contribution to future earnings.
The planned disposal represents a significant balance sheet adjustment, given the approximately $4.5 billion value of the mortgage portfolio.
Average Client Deposits Increase by $1.3 Billion
Despite the reported quarterly loss, First Horizon highlighted growth in client deposit balances as an important element of its operating performance.
Average client deposits increased by $1.3 billion during the third quarter.
The increase reflected continued growth in customer funding balances, which are an important source of liquidity for banking institutions.
Bryan Jordan, Chairman, President and Chief Executive Officer of First Horizon, emphasised the company’s strategic priorities and customer relationships.
“This quarter’s results are a testament to our disciplined approach and clear strategic priorities,” Jordan said. “Average client deposit balances increased $1.3 billion in the quarter, and we continue to focus on growing and maintaining full client relationships and deploying capital where it best serves long-term value creation.”
The comments reflected management’s focus on maintaining customer relationships while adjusting the bank’s balance sheet to support future business development.
Deposit growth can provide banks with additional funding capacity, although its contribution to profitability depends on factors including deposit costs, loan demand and interest rate conditions.
Total Assets Reach $84.3 Billion
First Horizon reported total assets of $84.3 billion as of 30 September 2026.
The figure provides a measure of the bank’s overall balance sheet size before the expected settlement of the mortgage portfolio sale.
The planned disposal of approximately $4.5 billion in mortgages represents a meaningful adjustment to the composition of the bank’s assets.
Management has indicated that the transaction is intended to improve balance sheet flexibility and support future lending activity.
The bank’s ability to translate the disposal into stronger earnings will depend partly on its success in redeploying capital into assets offering more favourable returns.
The transaction may also influence future net interest income and balance sheet composition, although the company has not provided detailed financial forecasts for those effects.
Investors Assess Mortgage Sale and Fourth-Quarter Outlook
First Horizon’s third-quarter results presented a contrast between its adjusted operating performance and reported profitability.
Adjusted earnings exceeded analysts’ forecasts and improved slightly from the corresponding period last year, while average client deposits increased.
However, revenue fell below expectations, and the bank recorded a GAAP net loss following charges associated with the planned mortgage portfolio sale.
The company’s shares declined 1.6% after the announcement, reflecting investor attention on the revenue shortfall and the impact of the balance sheet restructuring.
Looking ahead, the expected completion of the mortgage portfolio disposal early in the fourth quarter will be an important development.
Investors will be monitoring whether the transaction delivers the earnings benefits anticipated by management and provides additional capacity for profitable loan growth.
The bank’s subsequent results will offer further insight into the financial effects of the disposal and the performance of its underlying banking operations.