First Horizon in Memphis, Tenn., reported a third-quarter net loss after deciding to sell a large portion of its mortgage portfolio.
The $84.3 billion-asset company said in a press release that it had a $79 million net loss after arranging the sale of $4.5 billion of “select lower-yielding consumer mortgages.”
First Horizon said it began evaluating the sale during the third quarter and signed an agreement in early October with an unnamed buyer. After moving the loans to held-for-sale status, it recognized a $473 million pretax loss in noninterest income that addressed valuation adjustments and transaction costs.
A $45 million provision reversal offset part of the loss, leaving a net pretax hit of $436 million.
The company said the move will be accretive to future earnings, including $45 million in after-tax benefits in 2027, and provide balance sheet flexibility to support future loan growth.
Stripping out notable items, adjusted earnings and revenue were relatively flat from a year earlier. The quarter included $3 million of severance expense tied to business line restructuring.
Period-end loans fell $5.5 billion to $59.8 billion, largely reflecting the loan sale. Consumer real estate fell by $4.6 billion to $9.2 billion, and loans held for sale jumped to $4.4 billion. The loan-to-deposit ratio fell from 96% to 88.3%.
Capital took a modest hit. The estimated CET1 ratio fell to 10.3% from 10.5%. Tangible common equity to tangible assets decreased to 7.93% from 8.31%, and tangible book value dropped to $13.84 a share from $14.53.