Oct 30, 2026 earnings call — Home improvement growth and higher credit provisions
Provision for credit loss rose to $30.8 million this quarter, largely driven by consumer loans.
Revenue $0.1B (est $0.1B) · EPS $0.10 (est $0.32)
Key quotes
"Volumes in the Home Improvement segment were $146.3 million, an increase of $86.6 million over the prior year quarter."
"As expected, the vast majority of our provision, $29.8 million, is from our consumer loans."
"In the third quarter, we originated more non-brokered time deposits than we have in the past, the balance of which grew from $27.2 million in Q2 2026 to $117.5 million at Q3 2026."
Analyst Q&A 4
Why margin fell and new loan rates
Q (Kenneth Kohut · Raymond James): He asked why the net interest margin fell so much, whether any one-time items affected the quarter, and what the yield was on new originations. He also asked about the new finance partnership: the size of the opportunity, expected origination volumes, and how much they would keep on the balance sheet.
A: Management said the margin drop reflects a mix shift toward more super-prime home improvement loans with lower yields and that holding larger cash from a notes offering also hurt NIM this quarter. Home improvement originations carried a 9.14% coupon versus north of 10.5% a year ago. On the new finance product they cannot precisely quantify volumes yet but intend to retain some paper and would like to retain $10 million to $20 million a month when at full steam.
"Originations during the quarter for home improvement was 9.14% as a coupon." — Anthony Cutrone (CFO)
Loan growth, funding, reserves, and sales
Q (Manuel Navas · Piper Sandler): He asked how to think about loan pipelines and growth into Q4 and next year, and whether seasonality or the economy will change momentum. He also asked about sourcing non-brokered deposits (money markets and CDs), the reserve increase drivers, and details on loans sold in the quarter.
A: They said Q4 has normal seasonality; October originations are slightly ahead of last year but below the peak in Q2 and early Q3, and 2027 growth will depend on the economy. On funding, they source opportunistic non-brokered CDs via a third party marketplace that can be 10 to 15 basis points cheaper versus similar brokered instruments when available. For reserves, a quantitative model and macro inputs (unemployment, rates) drove increases; and they sold just below $40 million across 4 pools (about 75% home improvement, 25% rec) and netted around a 3% gain after deferred costs; they view loan sales as recurring depending on buyer appetite and timing.
"It was just around -- just below $40 million across 4 different pools of loans." — Anthony Cutrone (CFO)
Choosing growth over near-term earnings
Q (Christopher Nolan · Ladenburg Thalmann): He asked if the company is prioritizing balance sheet growth over earnings that cover the dividend and whether that growth strategy is wise given margin pressure, higher charge-offs, and balance sheet mismatches. He also asked whether regulators have given any feedback on lowering the 15% bank leverage ratio.
A: They acknowledged they are prioritizing growth despite a short-term earnings penalty, noting the GAAP day-1 provision impact and that the growth penalty was $0.18 last quarter and about $0.16 this quarter. Management described the growth as measured and focused on higher-quality home improvement loans (citing 760 FICO examples) and said they intend to ask regulators to lower the 15% requirement though the outcome is not guaranteed. They also said they can match fund largely with brokered CDs and believe the portfolio is strengthening.
"Yes, I think that's fair, particularly just given the type of assets we originate and that the GAAP impact to originating those with the day 1 provision immediately." — Anthony Cutrone (CFO)
NIM outlook, buybacks, costs, fees
Q (Manuel Navas · Piper Sandler): He asked whether cash deployment and growth will stabilize the NIM or if it will keep falling, and asked for updated thoughts on the buyback pace and its use. He also asked about OpEx trends and whether any equity investment gains are visible near term.
A: They said it's a wait-and-see but do not expect a large additional NIM step down in Q4, though rates, cost of borrowing, and deployment speed could affect it; adding more lower-rate home improvement loans can compress NIM a little but should raise profits. On buybacks, they said recent financings (about $130 million raised) put them in a strong position to pursue growth, dividends, and buybacks and they buy when the stock trades below tangible book (around $12 and change). For OpEx they expect Q4 similar to Q3 with only incremental increases in 2027, and fee gains remain lumpy with no anticipated Q4 exits.
"But I wouldn't expect to see a significant drop like you did in Q2 to Q3 in Q4." — Anthony Cutrone (CFO)