诺斯波因特 (NPB) 2026财年第三季度业绩电话会议：退出抵押贷款业务，MPP增长及2027财年业绩指引

核心要点

• 诺斯波因特在2026年第三季度实现净利润1390万美元，即摊薄后每股收益0.39美元，低于2026年第二季度的2130万美元（每股0.60美元）。
• 该公司已与CMG Financial及其关联公司签署了一份无约束力的意向书，拟出售其分布式零售及直接面向消费者的抵押贷款发放渠道。管理层预计拟议交易将于2026年第四季度完成。
• 第三季度业绩包含三项利率敏感型资产总计430万美元的公允价值下降，以及与一起孤立的外部存款诈骗事件相关的310万美元运营损失。
• 期末抵押贷款购买计划（MPP）余额环比增加2.627亿美元。管理层预计，到2026年底MPP余额将达到41亿美元至43亿美元，到2027年底将达到47亿美元至50亿美元。
• 第三季度净利息收益率为2.32%。管理层维持了2.3%至2.4%的2026全年指引，并预计2027年将提升至2.4%–2.6%。
• 退出抵押贷款发放渠道预计每年可节省5000万至5500万美元的年化费用。管理层表示，节省的费用应超过相关的收入损失，从而对盈利产生净收益。

关键财务数据

业务与运营表现

战略性退出抵押贷款发放业务

诺斯波因特表示，当前的经济和运营压力、抵押贷款分销渠道的演变，以及不足以支撑该渠道固定基础设施的业务量，促成了本次拟议交易。该安排主要涉及抵押贷款团队的出售与过渡，不包含贷款、服务权或其他重大资产。

该公司将把资源重新投向MPP、特种金融、关系型存款、组合资产生成以及特种服务。出售收益预计将在2026年第四季度大幅下降，并在2027年基本消除。

抵押贷款购买计划

MPP平均余额环比增加2.372亿美元，带来额外的370万美元季度利息收入。诺斯波因特新增了4家客户（对应1.85亿美元的额度），并为3家现有客户扩大了1亿美元的授信额度。现有客户的平均利用率为58%。

截至2026年9月30日，诺斯波因特向合作银行参贷的MPP余额为3.683亿美元，低于6月30日的4.890亿美元。管理层将平均收益率较低归因于价格竞争（尤其是大型抵押贷款发放机构之间的竞争）。MPP设施的定价存在一个月的滞后期。

存款与特种服务

本季度末存款达到54亿美元，环比增加2.104亿美元。无息和有息活期存款有所增加，部分反映了托管余额的正常季节性变化。该公司有意让部分定期存款、储蓄存款和货币市场存款余额下降，转而采用经纪存款和联邦住房贷款银行融资。

诺斯波因特为第三方管理1.74万笔贷款，未偿还本金余额为60亿美元，其中包括由次级服务商处理的贷款。在退出抵押贷款发放业务后，该公司将不再为其自身资产负债表将新的抵押贷款服务权资本化，但将继续寻求特种服务合作关系。

组合资产生成

9月30日，诺斯波因特购买了8540万美元的成熟综合贷款（All-in-one，简称AIO），资产负债表净额为6990万美元。这些贷款发放于2005年至2008年间。管理层表示，其贷款价值比（LTV）极低，信用风险有限。其平均票面收益率约为5%，在按月计提预期折价摊销后升至约7.5%。

管理层计划通过现有的抵押贷款行业关系以及选择性的贷款或组合资产收购，来开拓更多组合资产。

管理层业绩指引

2026年的支出展望包括与拟议出售相关的预计600万至700万美元重组费用（主要是裁员补偿和其他员工成本），以及约80万美元的减值损失。管理层预计每年可节省5000万至5500万美元的年化费用，主要来自佣金、薪酬和福利。

2027年的收益率展望建立在以下假设之上：持有至投资贷款结构持续改善、存款结构无重大变化，以及2027年初联邦基金利率再加息25个基点。

风险与重点关注领域

• 该出售事项仍取决于无约束力的意向书，不过管理层预计将于2026年第四季度完成。
• 随着抵押贷款利率上升，抵押贷款发放量、锁价量和申请量有所下降，同时在争夺业务量的竞争中出售收益率有所收窄。
• 较高的平均存款成本对第三季度收益率构成压力，而9月加息带来的收益受时点因素及MPP设施一个月重定价滞后期的限制。
• 一起孤立的外部存款诈骗事件造成了310万美元的运营损失。包括联邦调查局（FBI）在内的执法部门已介入，保险理赔正在办理中。
• 不良资产增加了890万美元，但管理层表示其中过半增加额来自两位借款人，预计不会产生重大损失。
• 2027年拨备展望未包含信用迁移、经济预测变化或进一步信用模型更新的潜在影响。

分析师问答环节要点

管理层表示，退出抵押贷款发放业务应能改善长期盈利，因为预期节省的费用超过了被消除的收入。即使再融资活动复苏，诺斯波因特目前也不打算重新进入分布式零售抵押贷款发放业务。

该公司预计将随着待售贷款组合的缩减而释放出的资金，重新配置到MPP和其他组合资产中。管理层预计该组合到2026年底将降至微不足道的水平。

诺斯波因特目前没有股票回购计划，但首席财务官布拉德利·豪斯（Bradley Howes）表示公司正在制定一项计划，并预计将在未来几周内提供更多信息。尽管如此，管理层仍预计大部分可用资金将用于支持业务增长。

针对2026年第四季度，管理层表明额外的税收抵免额度购买可能会使有效税率保持在约22%–23%，具体取决于购买规模及其他税收项目。

业绩电话会议完整文字记录

完整财报电话会议逐字稿

管理层陈述

Operator

Thank you. Welcome to the NorthPoint Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. Questions may be placed in the question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0 on your telephone keypad. It's now my pleasure to turn the call over to Brad Howes, CFO. Please go ahead, sir.

Bradley Howes

Good morning and welcome to NorthPoint's third quarter 2026 earnings call. My name is Brad Howes and I'm the Chief Financial Officer. With me today are Chuck Williams, our Chairman and CEO, and Kevin Comps, our President. Additional earnings materials, including the presentation slides that we will refer to on today's call, are available on NorthPoint's Investor Relations website, ir.northpoint.com. As a reminder, during today's call, we may make forward-looking statements, which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP and encourage you to review the non-GAAP reconciliations provided in both our earnings release and presentation slides. The agenda for today's call will include prepared remarks, followed by a question and answer session.

Bradley Howes

I'll turn the call over to Chuck.

Charles Williams

Thank you, Brad. Good morning, everyone, and thank you for joining. This quarter was an important one for NorthPoint and marks a significant step in the continued evolution of our business model. Last night we announced that we are entering into a non-binding letter of intent with CMG Financial and its affiliates to sell the distributed retail and consumer direct mortgage origination channels. This decision was not a reflection of the management or supporting teams in the residential lending division, which has helped contribute to NorthPoint's success over the years, but with today's economic and operating headwinds, and with the continued evolution of mortgage distribution channels, we have reached an inflection point that no longer made the business channel viable. Because of this, management and the board have made the difficult strategic decision to sell the channels. This allows us to refocus our strategic priorities towards businesses where we believe NorthPoint has the strongest competitive advantage and the greatest opportunity to create sustained long-term growth and sustainable franchise value for all stakeholders.

We have built a unique national platform that combines specialty finance and relationship-based banking across a broad mortgage ecosystem. As we evaluated the opportunities available across the franchise, it became increasingly clear that our greatest opportunities lie in expanding our MPP and specialty finance capabilities, client relationships, growing relationship-based deposits, and generating attractive portfolio assets in a more efficient manner. Importantly, we remain committed to the mortgage banking industry and we will continue to be a growth-oriented and customer-centric banking franchise, serving clients and communities across our national footprint. While the mortgage industry remains very challenging, we continue to take market share and demonstrate strong growth in our Mortgage Purchase Program or MPP business. We've increased total MPP balances by $2.5 billion from the end of 2024, and we believe our program remains an attractive alternative to traditional warehouse lending. I will cover the financial projections on this transaction and the current period results in more detail.

For the third quarter, we earned $13.9 million or $0.39 per diluted share. We have three significant fair value assets, which in aggregate move up or down based on a movement in long-term interest rates. Our results this quarter included a combined decrease in fair value of $4.3 million for those three assets based on the significant rate movements during the quarter. In addition, we had a $3.1 million operational loss related to an isolated external deposit fraud incident within our retail banking center, which we promptly addressed through strengthening procedures and additional controls. As we look ahead, our vision is clear. NorthPoint's future is centered on MPP specialty finance through strategic asset generation, relationship-driven banking, and deposit growth and specialty servicing. As we focus resources on the businesses where we are most differentiated, we believe we can expand client relationships and generate a more robust and stable earnings profile.

I'd like to turn the call over to Kevin to provide more details on our business lines.

Kevin Comps

Thanks, Chuck, and good morning, everyone. Let's start with the MPP business on slide 7. Compared to the prior quarter, period-ending MPP balances increased by $262.7 million and average balances increased by $237.2 million, resulting in $3.7 million quarterly increase in interest income within the channel. Let me break down the third quarter 2026 growth a bit further. First, we brought in four new clients, which totaled $185 million in additional capacity. Second, we increased facility size for three existing clients, which totaled $100 million in additional capacity. And third, the overall utilization of our existing clients remained strong, averaging 58% in the third quarter.

As discussed on prior calls, our MPP balances are net of any balances that we have participated of. At September 30, 2026, we have participated $368.3 million to our partner banks, which is down from $489.0 million at June 30, 2026. As we continue to optimize the balance sheet within our existing capital framework, average MPP yields were 6.27% and fee-adjusted yields were 6.49% during the third quarter of 2026. The quarterly decrease in average yield continues to reflect competitive pricing within the industry, especially with larger mortgage originators. Also, keep in mind that our yields in our MPP business reprice at a 1-month lag, so the benefit from the increase in SOFR is not reflected in our third quarter results. Turning now to retail banking, on slide 8, I'd like to highlight the results of the businesses within that segment. With the increase in mortgage rates, total residential mortgage originations decreased by 26% from the prior quarter level, and we saw a similar decline in locks and application volume. Gain on sale margins are also tightening given the competition for volume across the industry.

In the middle of slide 8, we look at our digital deposit banking channel, where we feature our direct-to-customer platform and competitive product suite. We ended the third quarter with $5.4 billion in total deposits, an increase of $210.4 million from the prior quarter. The record of these deposits is detailed in the appendix on slide 14. During the quarter, we saw a nice increase in non-interest-bearing demand deposits along with higher interest-bearing demand deposits driven by normal seasonality in our custodial deposit balances. These were partially offset by lower time and savings and money market deposits as we intentionally let some balances run down in favor of more attractive brokered and FHLB funding sources. Over the last year and a half, we've been successful in adding new funding partner relationships to help bolster core deposits and fund our planned growth. We have similar smaller relationships in the pipeline and will continue to look for more of these types of omnibus accounts.

On the right side of slide 8, we highlight our specialty mortgage servicing channel, where we focus on servicing first lien home equity lines tied seamlessly to demand deposit sweep accounts, including what we commonly refer to as AIO loans. Excluding the adjustment for the change in fair value of MSRs, we earned $2.6 million in loan servicing fees for Q3, up from the prior quarter. Including loans we outsourced to a subservicer, we serviced 17,400 loans for others with a total UPB of $6.0 billion as of the third quarter 2026, both up from the prior quarter level. With the planned sale of our residential lending mortgage origination channels, we will no longer be capitalizing new MSRs for our own balance sheet. We've had success adding new specialty servicing relationships and increased their portfolio over the past year, and that will remain our strategic focus. Turning lastly to asset quality on slide 9, net charge off decreased slightly to $429,000 in the third quarter of 2026. This represents an annualized net charge off ratio to average loan of 2 basis points, remaining well below long-term historical averages.

Non-performing assets increased by $8.9 million from the prior quarter, of which over half was from two borrowers, which we do not expect to incur any material losses on. Early-stage delinquent loans improved, with loans past due 31 to 89 days, down $5.7 million from the prior quarter level. I'd now like to turn the call over to Brad to cover the financials. All right. Thanks, Kevin.

Bradley Howes

I'd like to make two important points today before I begin. First, as I go through today's slide presentation, I will be incorporating full year 2026 and 2027 guidance into my commentary. And second, my guidance for both 2026 and 2027 includes the projected financial impact of the proposed sale of the distributed retail and consumer direct mortgage origination channels. The arrangement is primarily for the sale and transition of those teams and does not involve the sale or transfer of loans, servicing rights, or other material assets. I'll start with the income statement on slide 10. For the third quarter of 2026, we had net income to common stockholders of $13.9 million or $0.39 per diluted share. This compares to $21.3 million or $0.60 per diluted share for the second quarter of 2026. Our results in the third quarter included two notable items Chuck discussed, which had total pre-tax negative impact of $6.75 million. Net interest income increased by $1.2 million from the prior quarter, reflecting an increase in average interest earning assets of $157 million and a 1 basis point decrease in net interest margin. The linked quarter decrease in margin was primarily driven by higher average deposit costs, partially offset by higher average yields on loans, and an improvement in the funding mix. The 25 basis point increase in the federal funds rate occurred in mid-September, so we only received a limited yield benefit in the third quarter. Our two growth portfolios, MPP and AIO, both reprice on the short end of the yield curve.

However, MPP facilities do so on a 1-month lag, as Kevin highlighted. Brokered CD rates tend to reprice in advance of potential rate movements, which is what we saw this quarter. So we experience higher funding costs with limited yield benefit from the Federal Reserve rate increase. Since any additional rate changes, I'd expect to see a larger portion of the net interest margin benefit in the fourth quarter. Our third quarter net interest margin was 2.32%, and year-to-date, 2026, was 2.36%. I expect full year 2026 net interest margin to remain in the range of 2.3% to 2.4%, no change from my prior guidance. For full year 2027, I expect net interest margin to improve to between 2.4% and 2.6%. Guidance assumes continued improvement in the mix of loans within the held for investment portfolio and no significant changes to the current mix of deposits.

I also assume one additional 25 basis point Fed funds rate increase early in 2027. Turning to the loan portfolio, average interest earning assets increased nicely over the prior quarter level. That was driven by continued success and growth in MPP facilities, along with the purchase of $85.4 million in seasoned AIO loans which closed on September 30, 2026. We purchased these loans at a discount, resulting in net balances of $69.9 million on balance sheet. Loans were originated between 2005 and 2008, so they carry very low LTVs and extremely limited credit risk. Average coupon yield is around 5%, but when you factor in the baseline expected monthly discount accretion, that yield increases to around 7.5%. With the sale of the mortgage origination channels, we now shift our focus on generating attractive portfolio assets through existing client relationships and select opportunistic purchases.

The AIO pool is a great example of this. By shifting away from heavy fixed cost infrastructure, we believe we can generate loans with similar yields and credit risk at a lower overall cost. For 2026 loan guidance, I'd expect MPP balances to remain in the range of $4.1 billion to $4.3 billion by year end, although at the higher end of the range, as we have additional capital to leverage with the loans held for sale portfolio winding down. I'd also expect period-ending AIO and other consumer loan balances to remain in the range of $900 million to $1.0 billion by year-end. I'd expect the remainder of the loan portfolio to continue to decrease in the range of $1.7 billion to $1.8 billion by year end. This category includes loans held for sale balances, which should be insignificant by end of year.

For 2027 loan growth guidance, I'd expect MPP balances in the range of $4.7 billion to $5.0 billion by year end. This estimate is net of any balances we participate out, which remains an important part of our overall balance sheet and capital optimization strategy. I'd expect period-ending AIO and other consumer loan balances in the range of $1.3 billion to $1.5 billion by year-end. And I'd expect the remainder of the loan portfolio to continue to decrease through normal amortization in the range of $1.5 billion to $1.7 billion by year-end. Kevin provided details on our asset quality trends this quarter, which remained stable. We had total provision expense of $845,000 in the third quarter. This reflected net charge-offs of $429,000 and an increase in the allowance for credit losses, which was primarily attributable to higher forecasted loss rates resulting from an update to the credit models, partially offset by lower allowance from an improvement in qualitative factors. I'd expect total provision expense in the range of $1.1 million to $2 million for 2026.

For 2027, I'd expect total provision expense in the range of $5 million to $6 million, reflecting additional provisions related to stronger AIO and consumer loan growth. Additional provision expense or benefit related to credit migration trends, changes in the economic forecast, or other changes to the credit models are not part of my guidance. Non-interest income decreased by $9.6 million from the prior quarter and includes the impact from our three fair value assets. On the top of slide 15, we break out those three assets and their associated quarterly increases or decreases in fair value. As a reminder, these tend to move up or down with interest rates and are not part of my revenue guidance each quarter. On the bottom of slide 15 and in our earnings release tables, we provide further details on the components of our net gain on sale of loans. As you can see from the chart, third quarter net gain on the sale of loans included a $7.7 million decrease in fair value of the loans held for investment, and a $1.6 million decrease in fair value on the lender risk account with the Federal Home Loan Bank.

Excluding these items, net gain on the sale of loans would have been $11.5 million, which is down from $16.4 million on a comparable basis in the prior quarter. The decrease was driven primarily by lower saleable mortgage origination volume during the quarter. With the sale of the mortgage origination channels, there would be significantly lower gain on sale revenue in the fourth quarter of 2026 and virtually no revenue in 2027. I'd expect MPP fees in the range of $8 million to $9 million for the full year 2026. This is down slightly from prior guidance as we plan to add more balance sheet in the fourth quarter, resulting in lower participation balances and associated fees. For 2027, I'd expect MPP fees in the range of $8 million to $10 million for the full year. Excluding MSR fair value changes, loan servicing fees were $2.6 million for the quarter, up from the prior quarter. I'd expect loan servicing fees in the range of $9 million to $11 million for 2026, decreasing to $8 million to $10 million in 2027.

Non-interest expense was up $0.8 million from the prior quarter. Third quarter 2026 expense included $3.2 million related to the deposit fraud in our retail banking center. This was partially offset by lower salaries and benefits, primarily from lower variable compensation on mortgage production, along with lower bonus and incentive compensation. For full year 2026, I'd expect total non-interest expense in the range of $140 million to $146 million. This includes the projected $6 million to $7 million in restructuring charges related to the sale of the mortgage origination channels, permanently comprised of severance and other employee related expenses, along with an impairment charge of approximately $800,000 on the remaining intangible asset associated with the previous mortgage team acquisition. I project these restructuring charges will be partially offset by lower variable mortgage commission and bonus and incentive compensation expense. Turning to the expense guidance for 2027, we expect to complete the proposed transaction with CMG during the fourth quarter of 2026 and anticipate meaningful reductions to the expense base and approved operating leverage going forward.

I'd expect annualized expense savings in the range of $50 million to $55 million, with the bulk of which comprised of commissions, salaries, and benefits. The remainder would be made up of occupancy, technology, professional fees, marketing, and other expenses. For full year 2027, I'd expect total non-interest expense in the range of $80 million to $95 million, a significant decrease from 2026 levels, as we realized the majority of the expected expense savings from the sale of the mortgage origination channels. Turning to the balance sheet on slide 11, total assets increased to $7.7 billion at September 30, 2026, based on the growth in MPP and AIO balances during the quarter. Our wholesale funding ratio was 63.94% at September 30, 2026, up slightly from the prior quarter. We expect deposits to grow through a combination of brokered CDs, retail deposits, and other sources of non-brokered deposits where possible. Our effective tax rate was 24.43% for the third quarter of 2026, down from the prior quarter level.

During the quarter, we purchased $7.6 million in investment tax credits, which helped reduce our overall effective rate by roughly $600,000 in the quarter. That was mostly offset by higher estimated state taxes. We plan to buy additional tax credits in the fourth quarter of 2026 and in 2027, which should help lower the overall effective tax rate in both periods. Lastly, on slide 12, we outline our regulatory capital ratios, which are estimates pending completion of regulatory reports. The Board of Directors increased the regular quarterly cash dividend to $0.03 per share from $0.025 per share in the prior quarter. Looking forward, we have a significant opportunity to add new assets at a very attractive point in the yield curve. I'd expect we will continue to leverage any additional capital generated through retained earnings to grow our held for investment loan portfolio.

With that, we're happy to now take questions. Kevin, please open the line for Q&A.

Operator

Certainly. We will now be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment please while we poll for questions. Our first question today is coming from Crispin Love from Piper Sandler. Your line is now live.

分析师问答

Crispin Love

Thank you. Good morning, everyone. First, Chuck, I hear you on focusing on other areas where you have competitive advantages, but just on the consumer mortgage sale, can you share why you believe right now is the right time to sell the business? It could be at the trough or near the trough of the mortgage environment, and also just what you gain from selling today.

Charles Williams

Yeah, I can answer that. This is Chuck. It's hard to predict whether we're in the trough or not. We've been at this business since the end of COVID, which some could argue has been in a trough for 4 years. And our team has been incredibly efficient over the last 4 years in making, you know, the business work in a very tough environment. And in the third quarter of this year, again, as I said in my opening statement, it's just an inflection point to where the volumes could no longer carry the infrastructure overhead. And I've said on many calls that we've been tremendously efficient, you know, over the last 4 years in, um, you know, the unit remaining profitable. But we, you know, could no longer see a path forward for the profitability on the base level overhead that it takes to run an efficient distributed retail operation.

Crispin Love

No, that's helpful. So do you think this is going to have a positive long-term impact to the earnings power of the full company from the sale?

Bradley Howes

Hey, Crispin, this is Brad. Yes, when you run the numbers that I just provided on my guidance, you know, we do believe there's a positive financial benefit. You know, we have the, you know, we kind of talk through the revenue items that will go away as well as the expense savings and the expense savings, you know, will be greater than the revenue losses. So that will result in a net overall P&L benefit. And as Chuck mentioned, you know, refocusing capital and resources on other divisions that are, really have the scale and leverage go a long way, I think longer term in generating additional, shareholder value and capital and earnings.

Crispin Love

Okay, great. Appreciate that, Brad. And then just one quick one for me. On the deposit fraud, can you share how many customers were impacted here and just confidence in getting that $3 million plus back?

Kevin Comps

Yes, this is Kevin. Um, we can't say too much on this topic, Crispin. We do have law enforcement involved, including the FBI, researching this. Um, and we also have a pending insurance claim. So we really can't say more than what we put in our release and said during our prepared remarks.

Crispin Love

Okay, I get that. I appreciate you taking the questions. Thank you.

Kevin Comps

Thanks, Crispin.

Operator

Thank you. Next question is coming from Damon DelMonte from KBW. Your line is now live.

Damon Del Monte

Hey, good morning guys. Thanks for taking my questions. Just hoping to kind of pull out a little bit more, follow around some of the strategic efforts to replace the lost income kind of over time. Sounds like, you know, you feel good about the MPP kind of line of sight going forward and that continuing to grow. Kind of curious on the AIO loans. I think those are generated from the retail division. And I know you did a purchase this quarter. So does that, like, book of business grow more from opportunistic purchases or does that, you know, is that something that you can still originate from the ongoing operations?

Bradley Howes

Yes, thanks Damon. This is Brad. So what I'd say, you know, we step back. We have, you know, the lost volume of the AIO business, which did generate from our retail channel to replace. We've also got, you know, capital associated with the loans held for sale portfolio. So our goal for 2026 and what is included in my prepared remarks and guidance is that we will replace both of those and potentially more. We're still very bullish on the asset class. I think the question really gets to the point of where are we going to source these.

And I point back to my remarks. We have relationships with a lot of mortgage lenders through our existing pipeline and MPP and relationships we've built through the years of being in the mortgage business. We've got a big Rolodex of investors, you know, places where we could source assets and I think it'll turn to, you know, our focus will be on exactly what you mentioned, you know, sourcing deals through existing client relationships. Um, as well as opportunistic acquisitions of loans or portfolios like you saw with the AIO purchase that we did. So it'll be through a combination of both of them. And we believe, you know, over time, this is a very cost-effective way to source very similar credit risk and yield profile. And, you know, again, low interest rate risk assets, similar to the way we do it today.

Damon Del Monte

Got it. That's helpful. Thank you. And then you kind of touched on capital associated with the held for sale portfolio. You maybe just give us a broader thought on capital management. I mean, is the excess capital going to continue to be allocated to supporting the MPP business or kind of, you know, would you consider doing a buyback kind of given where valuation is on the stock below tangible book value? Kind of curious on your thoughts around that. Yes.

Bradley Howes

Yes, I'll take this, Damon. This is Brad. So, you know, we look at all potential uses of capital when we evaluate these kinds of decisions. We have growth, you know, dividends and repurchases. And what I point out is our projections and where we sit today, we leverage most of that capital for growth. We don't have a ton of excess capital we're sitting on, but we do run internal models and we look at what's the best use of the overall capital and depending on where we trade, you know, with the stock as a percentage of a tangible book, the model could suggest, you know, or the other is is the route to go. So we evaluate all those. And what I'll tell you is that we are, we do not have a share repurchase plan today, but we are in the process of putting one together and we look forward to sharing more information on that over the next couple of weeks.

Damon Del Monte

The coming periods. Great. Okay. Uh, helpful. And then I guess the last question, um, you guys, you noted that you guys did, um, uh, purchase some, um, some tax credits this quarter, and it sounds like you might be doing more of that in the fourth quarter and in '27. Uh, just wondering if we get a little guidance on what you think, uh, reasonable effective tax rate would be as we look out in the coming quarters.

Bradley Howes

Yes, so I'll take that one, Damon, again, Brad. We did purchase $7.6 million this quarter, which I commented in my remarks, helped lower the overall effective rate. The value of that was about $600,000 that got offset by some increases in state taxes as we finished returns for last year. Going forward, I'd say I would expect in the fourth quarter we'll look at similar level if not more of tax credits and I, you know, I don't believe there should be any material offsets to that so I don't have an exact guidance for you, but if you look at the number we did in the third quarter and you take that and apply a little bit of an additional purchase on there, you know, that should get you to kind of a 22%, 23% effective tax rate, I think that's what we can provide today. And as we look out into next year, you know, we'll evaluate, you know, the potential earnings that we have in 2027, along with, you know, any possible carrybacks that we want to do and I'll provide more guidance on that I think in the coming quarters but we'll continue to do this and we find it a, you know, it's a very efficient use of liquidity there's no capital use and something we'll continue to look at.

Damon Del Monte

Great. Appreciate you taking and answering my questions. Thank you.

Bradley Howes

Thanks, Damon.

Operator

Thank you. As a reminder, that's star 1 to be placed into question queue. Our next question is coming from Christopher Marinac from Breen Capital. Your line is now live.

Christopher Marinac

Hey, thanks. Good morning. Just want to continue the capital question one more round. Um, what does capital look like at the end of, um, fourth quarter with the transaction, um, completed and I presume that you'll still incrementally grow just because of retained earnings as well.

Bradley Howes

Correct. Yes, we'll continue to grow through retained earnings. Really the only capital impact from the transaction that we discussed would be the wind down of the loans held for sale portfolio, which is sitting, you know, somewhere in the couple hundred million dollar range that'll wind down relatively over the quarter as we stop taking locks, uh, you know, midway through, um, I expect it to be insignificant at year end so we would generate, uh, that additional capital that we plan to leverage through, could be any part of our balance sheet, but we do plan to redeploy that capital into MPP or other existing assets that we can grow by year end.

Christopher Marinac

So if we use the capital ratios that are in the slides as a guidepost, can you run the business at a lower capital ratio because the risk is changing and because you're changing the structure of the company? Is that something that you're considering or kind of what should we think about that?

Bradley Howes

So I'd say we reevaluate our capital plan every year. That will be something we look at, whether it translates to additional, it's not a very risky measure, the loans held for sale book probably was a very small piece of the overall balance sheet, so I don't expect any material changes to what capital levels we can operate at. I'd expect us to continue to operate at similar levels to where you see us at today. There's not a ton of additional room. We leverage most of the capital that we have allocated to growth, and that's what I'd expect.

Christopher Marinac

2026 and then 2027 next year. Okay, great. That's helpful. Thank you for that. And then just back to the fraud issue. When you take this one, one issue out, how often do you have small operational losses that are small frauds that you just deal with it under normal course of business and kind of, is that number changing as we go forward? Yes.

Kevin Comps

Yes, so the industry always has some small level of operational losses. It's been insignificant historically, and I would expect it to be insignificant going forward. It's a simple answer.

Christopher Marinac

Okay, very well. And would you imagine that we'll get clarification on your insurance carriers in a couple quarters or would it take longer than that, do you think?

Kevin Comps

I can't anticipate the timeline there, but I would think it's reasonable to say we'd have that within a couple quarters.

Christopher Marinac

Great. And then back to selling the production arms, if we look out a couple of years and interest rates are different and perhaps the refinance opportunities come back, do you revisit this decision at a future date? And just curious from a strategic standpoint, would you circle back once again?

Charles Williams

Yes, one can never say never, but the plan would be, I mean, this has been a very, very thought has gone into this but it, we're, we're looking at turning our capital efforts and everything into a growing model. And that is in the MPP specialty servicing areas where we traditionally have, were growth areas for us. So, I would say that we wouldn't anticipate being in distributed retail in the future.

Christopher Marinac

Great, Chuck. Thank you for that. I appreciate it. And thanks for hosting us this morning.

Charles Williams

Thanks, Chris.

Operator

We've reached the end of our question and answer session. Ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

This live transcript is auto-generated without human intervention or review.