First Horizon agreed to sell $4.5 billion of low-yielding mortgage loans.
Management projects 4% earnings per share accretion from the transaction in 2027.
New customer deposits increased by more than $1.5 billion in the third quarter.
On its third quarter of 2026 earnings call, held on Oct. 15, 2026, First Horizon (NYSE:FHN) announced an agreement to sell approximately $4.5 billion of low-yielding residential mortgage loans as part of a balance sheet repositioning. The transaction frees up balance sheet capacity by removing non-relationship assets. This move allows the bank to reinvest capital into higher-yielding commercial client lending. Three key takeaways from management explain how this operational shift creates shareholder value.
First Horizon is shedding lower-yielding single-product residential loans that carry minimal customer deposits. Replacing these assets creates balance sheet capacity for profitable commercial client relationships.
"This transaction, along with the business line restructuring, is aligned with the strategy we have discussed consistently throughout the past year of prioritizing full client relationships, enhancing the profitability of our balance sheet, and driving improved earnings and returns through the cycle," said
D. Bryan Jordan, Chairman, President and Chief Executive Officer.
Management expects the portfolio sale to boost earnings per share (EPS) by around 4% in 2027. The company is maintaining its common equity tier 1 (CET1) ratio, a key measure of capital strength, enabling it to resume buying back shares.
Excluding further upside of yields from incremental lending, we expect the transaction to be accretive going forward with 2027 earnings per share benefit of around 4% and improved ROTCE of approximately 150 basis points. Share buybacks will resume in Q4 in line with our CET1 target ratios for the year.
-- Hope Dmuchowski, Executive Vice President and Chief Financial Officer
Customer deposits grew by more than $1 billion during the quarter, helping offset expensive wholesale funding. This deposit growth supports net interest margin (NIM), which measures the difference between interest earned on loans and interest paid on deposits.
We continue to see momentum with our strategic focus on relationship banking with client deposits up more than $1 billion this quarter and NIM remaining in line with our expectations at 3.48%.
-- Hope Dmuchowski, Executive Vice President and Chief Financial Officer
Commercial loan demand is holding steady, and recent actions increase asset sensitivity for a rising interest rate environment.
The results in the third quarter position First Horizon for continued success. Meaningful upside opportunities, and deepening strategic alignment.
-- D. Bryan Jordan, Chairman, President and Chief Executive Officer
First Horizon relies on national specialty lending niches, wealth management partnerships, and treasury management growth to expand pre-provision net revenue (PPNR), which measures profit before taxes and credit losses. Leadership is strategically monitoring deposit pricing discipline.
Reinvesting cash into higher-yielding assets drives long-term returns.
Deployment into incremental lending in the coming quarters and years will further improve these results.
-- Hope Dmuchowski, Executive Vice President and Chief Financial Officer
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