Financial Data and Key Metrics Changes - Watsco Inc. reported a total sales decline of 4% and a 3% decline in the U.S. market, with unit volumes remaining subdued [4][5] - Gross margins improved by 130 basis points to 27.5%, with ongoing initiatives aimed at exceeding 30% in the long term [4][5] - Record cash flow of $355 million was generated in the third quarter, with a strong balance sheet and no debt [5][6] Business Line Data and Key Metrics Changes - Non-equipment sales showed growth, with double-digit pricing gains on new products, while commercial refrigeration products also experienced sales growth [4][5] - The non-equipment segment, which includes parts and supplies, constitutes over 20% of Watsco's revenues, with parts alone accounting for 8% [15][16] Market Data and Key Metrics Changes - E-commerce penetration continues to grow, accounting for 34% of total sales, with certain U.S. markets seeing penetration rates of 60% to 70% [7] - The number of contractors and technicians using the mobile app reached 72,000, reflecting an 18% increase [7] Company Strategy and Development Direction - The company is focused on innovation and technology investments to enhance competitive positioning, including the development of new technology for institutional customers and the use of AI for operational efficiency [8] - Watsco aims to improve inventory turns and cash flow, targeting a reduction of $500 million in inventory by year-end [55][57] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term fundamentals of the industry despite current volatility, indicating that the transition to next-generation equipment is largely complete [4][5] - The company acknowledged the challenges posed by low consumer confidence and a slowdown in housing activity, but remains committed to strengthening its operations and capabilities [127][148] Other Important Information - The company is exploring potential acquisition opportunities due to its strong financial position, with a focus on expanding its distributor network [45] - Management emphasized the importance of controlling factors within their influence, such as customer service and margin improvement, amidst external market challenges [27] Q&A Session Summary Question: What is the dynamic between repair and replace in the current market? - Management clarified that the market is seeing both repair and replacement, with geographic differences influencing consumer behavior [12][14] Question: How does the company view the recent distributor movement reported by Carrier? - Management acknowledged the softness in the market but indicated that their own revenue decline is in the mid-single digits, not as severe as reported by others [31][33] Question: What are the expectations for inventory levels by year-end? - Management aims to improve inventory turns and expects to end the year with inventories near historical levels, targeting a reduction of $500 million [55][57] Question: How is the company addressing pricing pressures from OEMs? - Management stated that they are good customers to OEMs and are in discussions to manage pricing effectively, but specifics on future price increases remain uncertain [70][73] Question: What trends are being observed in contractor sales and inventory? - Management noted that contractor experiences vary widely, with some performing well while others face challenges, indicating a fragmented market [103][104] Question: How does the company view the impact of the A2L transition on customer behavior? - Management believes that while the transition to A2L products has increased costs, broader macroeconomic factors are more significantly impacting consumer spending and confidence [127][128]

Financial Data and Key Metrics Changes - Same property NOI for the quarter was $44.3 million, representing a 6.4% increase year-over-year, driven by embedded rent escalations, occupancy gains, and positive rent spreads [10] - NAREIT FFO was $38.4 million, or $0.49 per diluted share, reflecting an 8.9% increase compared to the same quarter last year [10] - Year-to-date NAREIT FFO totaled $111.1 million, or $1.42 per diluted share, a 6% year-over-year increase [11] - Total liquidity stood at $571 million, including $71 million in cash and a full $500 million available under a revolving credit facility [12] Business Line Data and Key Metrics Changes - The company reported a same property NOI growth of over 6%, with healthy rent spreads and positive leasing activity across both anchors and small shops [4] - New leases for the third quarter achieved a 25.6% spread, while renewals averaged at 10.4%, resulting in a blended leasing spread of 11.5% [17] - Retention rate year-to-date was 82%, with a higher rate of 89% when excluding a single anchor space undergoing redevelopment [18] Market Data and Key Metrics Changes - Census data indicated retail sales are up year-over-year, with sustained strength in suburban centers across the Sunbelt [6] - The company noted that nine of the top 10 U.S. retail metros are in the Sunbelt, where it is heavily concentrated [6] - The limited level of new open-air retail development is seen as a competitive advantage, with rising costs and restrictive zoning keeping new supply muted [7] Company Strategy and Development Direction - The company maintains a hub-and-spoke operating model to manage a broad network of top-tier assets across Sunbelt markets efficiently [5] - The capital allocation strategy remains measured and disciplined, targeting opportunities that align with strict return thresholds [8] - Approximately 70% of the portfolio consists of neighborhood and community centers, with a focus on high-quality tenant bases and financial flexibility [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver solid total returns for shareholders, supported by favorable strip center fundamentals [9] - While household debt levels are rising and consumer confidence has weakened, day-to-day consumer behavior in the company's centers remains resilient [6] - The company raised its full-year same property NOI growth guidance to a range of 4.75% to 5.25% [14] Other Important Information - The company completed four acquisitions totaling $250 million during the quarter, funded primarily with cash on hand [13] - An annualized dividend of $0.95 per share was declared [13] Q&A Session Summary Question: Thoughts on tenants in discretionary categories, including restaurants - Management noted strong demand from quick service and sit-down dining, with most restaurants performing well in the portfolio [22][23] Question: Percentage of core grocery versus power and lifestyle in acquisition pipeline - The pipeline remains robust, with over $1 billion in assets being considered, primarily grocery-anchored [25][26] Question: Trajectory of occupancy over the next couple of quarters - Management expects a slight decline in small shop occupancy but anticipates a reacceleration in 2026 [32][33] Question: Confidence level to grow creatively from acquisitions moving into 2026 - Management emphasized the importance of responsible and creative growth strategies, focusing on high-quality assets [41][42] Question: Remaining budgeted bad debt expense for the year - The forecast includes visibility into the lower end of the bad debt range, with some assumptions for unforeseen fallout [46] Question: Lease-to-economic occupancy spread and its future - Management indicated that the spread is influenced by timing and expects it to stabilize between 150 to 200 basis points [53][54] Question: Balance between grocery sector strength and dining out trends - Management observed that both sectors have been complements rather than substitutes, with strong performance in both areas [56][57] Question: Comfort with increasing share of tertiary markets in the portfolio - Management is open to secondary and tertiary markets as long as the quality of assets remains high [62][63]

Financial Data and Key Metrics Changes - Overall net sales decreased 5% year-over-year to $1.11 billion from $1.17 billion [5][25] - Residential net sales declined 13% to $627 million compared to $723 million in the prior year [25] - Commercial and industrial (C&I) product sales increased 9% to $358 million from $328 million in the prior year [25] - Adjusted EBITDA margin decreased to 17.3% from 19.8% in the prior year [28] - GAAP net income was $66 million, down from $114 million in the prior year [30] - Diluted net income per share decreased to $1.12 from $1.89 in the prior year [32] Business Line Data and Key Metrics Changes - Home standby and portable generator shipments grew sequentially but were below seasonal expectations, with a mid-teens decline year-over-year [5][6] - Sales of residential energy technology solutions grew significantly, driven by energy storage systems in Puerto Rico [13] - C&I product sales growth was led by domestic telecom and industrial distributor channels, with international sales increasing 11% [19][26] Market Data and Key Metrics Changes - The power outage environment was significantly below long-term averages, resulting in lower demand for home standby and portable generators [5][6] - International sales benefited from favorable foreign currency impacts, contributing to an 11% increase in total international sales [19][30] Company Strategy and Development Direction - The company is focused on expanding its presence in the data center market, with a backlog for large megawatt generators doubling to over $300 million [6][20] - New product rollouts include next-generation home standby generators and energy storage systems, aimed at enhancing market share and sales growth [12][15] - The company plans to recalibrate investment levels in response to a contracting market environment expected in 2026 due to reduced federal incentives [16][34] Management's Comments on Operating Environment and Future Outlook - Management noted that the low outage environment is temporary and expects a return to normal conditions, which will support growth in residential products [53][54] - The company anticipates a contraction in the solar and storage market in 2026 but remains optimistic about long-term growth driven by rising electricity prices and declining technology costs [16][56] - Management emphasized the importance of aggressive capacity expansion and investment in the C&I business to capitalize on unique market opportunities [24][76] Other Important Information - The company expects free cash flow for fiscal 2025 to be approximately $300 million, providing flexibility for future investments [36] - Total debt outstanding at the end of the quarter was $1.4 billion, with a gross debt leverage ratio of 1.8 times [33] Q&A Session Summary Question: What have you learned about the data center market opportunity? - Management highlighted a structural deficit in backup power supply for data centers and ongoing productive conversations with hyperscalers, indicating optimism for future orders [43][45] Question: How should we think about 2026 with the current moving parts? - Management acknowledged the weak outage environment but expressed confidence in a return to growth in residential products, supported by an expanding dealer network and improved close rates [51][54] Question: What are the biggest challenges in adding capacity quickly? - Management noted successful rapid product line integration in Wisconsin and ongoing upgrades to facilities to support increased capacity, emphasizing a strong financial position to support these efforts [79][81]

Financial Data and Key Metrics Changes - The company reported third quarter GAAP net income attributable to common stockholders of $1 million or $0.01 per share, distributable earnings of $3.3 million or $0.03 per share, and adjusted distributable earnings of $21.2 million or $0.16 per share [3][16] - Current liquidity stands at $280 million, with $87 million in unrestricted cash [4][18] - GAAP net book value decreased to $7.53 per share from $7.65 in the previous quarter, while undepreciated book value decreased to $8.68 from $8.75 per share [17] Business Line Data and Key Metrics Changes - The loan portfolio currently stands at $2.4 billion across 85 loans, with an average loan balance of $28 million [11] - The watchlist portion of the loan portfolio is 8%, totaling $182 million, down from $411 million at the start of 2024 [11][8] - The company achieved net positive loan originations for the second consecutive quarter, originating 10 loans totaling $224 million during the third quarter [6][10] Market Data and Key Metrics Changes - The commercial real estate markets are showing continued improvements, with credit and lending spreads tightening [6] - The CMBS and CLO markets remain highly active, contributing to solid new issuance growth [6] Company Strategy and Development Direction - The company aims to grow its loan book to approximately $3.5 billion, with a focus on resolving watchlist loans and increasing loan originations [8][9] - The strategy includes preparing for a new CLO securitization and generating liquidity through the sale of real estate owned assets [8][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the trajectory of the business, citing improvements in loan inquiries and a favorable interest rate environment [6][9] - The company anticipates that the coming quarters will be among the most productive, driven by new loan originations and progress on watchlist loans [9][42] Other Important Information - The company recorded a specific CECL reserve of approximately $18 million related to the Oregon office loan, which was resolved during the quarter [16] - The office loan portfolio has decreased to $653 million from $769 million at the start of 2025 [9] Q&A Session Summary Question: Update on liquidity position post-quarter date originations - Management indicated liquidity is around $100 million in cash, with future originations expected from asset resolutions [21] Question: Pace of Q4 originations - Management expects a similarly active pace in Q4 due to an increasing pipeline and loan inquiries [22] Question: Thoughts on net lease portfolio - Management is satisfied with current assets and has no plans to enter the triple net market [25] Question: Impact of potential Fed rate cuts on demand - Management noted that a dovish Fed is improving market conditions, leading to increased transaction sales volume [26][28] Question: Growth of loan book and REO impact - Management believes they are at a point to grow the loan book, with increased momentum in loan originations [32] Question: Contribution of San Jose Hotel to distributable earnings - Management anticipates a sub-$10 million NOI for the hotel, with significant events planned for 2026 [34] Question: Details on new CLO issuance - Management could not provide specifics on the size and timing of the expected CLO issuance [38] Question: Second office property for sale - The second property is one of the Long Island City properties, currently soliciting offers [39]

Financial Data and Key Metrics Changes - Consolidated reported sales growth was 8%, with 3% organic growth, and adjusted earnings per share were $1.94 [5][13] - GAAP gross margins declined to 46.5%, down 140 basis points from last year, reflecting inflation, tariffs, and transactional FX increases [13] - GAAP operating margin was 20.1%, with an adjusted operating margin of 22.1%, down 50 basis points year-over-year [14] Business Line Data and Key Metrics Changes - Detection's organic growth was 6%, driven by strength in both fixed and portable instruments, with more than half of the growth in portables coming from connected devices [5][6] - Organic sales in fire service declined 3% year-over-year, while industrial PPE increased 7% [6][15] - The Americas segment saw sales increase by 5% year-over-year, while the international segment experienced a 16% increase [15][16] Market Data and Key Metrics Changes - Order pace across product categories was mixed, with detection orders up double digits and industrial PPE orders increasing mid-single digits, while fire service orders declined [6][11] - The backlog declined in the third quarter due to timing in the fire service, but overall backlog remains within normalized levels [6][11] Company Strategy and Development Direction - The company continues to strengthen its leadership in industrial safety technology through customer-driven new product development [7] - The M&A pipeline remains active, with a strong balance sheet positioning the company well for growth-oriented deployment and cash returns to shareholders [9][17] - The company is targeting price cost neutrality in the first half of 2026 as part of its tariff mitigation programs [8] Management's Comments on Operating Environment and Future Outlook - Management expects a near-term negative impact from the fire service order pace in the Americas due to the U.S. government shutdown [11][20] - The timing of AFG funds and NFPA certification processes are key variables affecting future performance [10][19] - Despite challenges, management remains confident in the business's fundamentals and ability to navigate macro uncertainties [20] Other Important Information - The company delivered robust free cash flow of $100 million, representing 144% of earnings, and year-to-date free cash flow is $189 million [16][17] - The company repaid $50 million of debt in the quarter, ending with net leverage of one time [17] Q&A Session Summary Question: Will there be much of the normal seasonal uplift in the fourth quarter? - Management confirmed that there will not be much seasonal uplift due to the fire service [25] Question: Does the timing of AFG funds affect customer orders? - Management explained that customers typically wait until they have the funds in hand before placing orders, which has been delayed due to the government shutdown [28] Question: What is the outlook for the fire service business going into 2026? - Management expressed optimism for the fire service business in 2026, expecting consistent demand year-over-year [41][42] Question: Are there any major restructuring plans for the next few quarters? - Management confirmed there are no major restructurings planned [51] Question: How is the integration of M&C going? - Management reported positive integration progress and identified growth opportunities in the U.S. market [66] Question: What is the current status of the MSA+ subscriptions? - Management indicated that MSA+ continues to perform well, contributing significantly to growth in portable instruments [48]

Financial Data and Key Metrics Changes - Consolidated sales decreased by 19% to $131 million compared to the prior year [20] - Adjusted EBITDA declined by 29% to $32 million, primarily due to lower gross profit [22] - Basic earnings per share decreased to $0.71, while adjusted basic earnings per share decreased 34% to $0.85 [23] - Year-to-date operating cash flows increased by 26% to $93 million [23] - Full-year adjusted EBITDA guidance raised to the range of $110 to $115 million, and adjusted earnings per share guidance raised to $2.60 to $2.75 [25] Business Line Data and Key Metrics Changes - Branded spirits segment sales decreased by 3%, with premium plus sales showing growth driven by Penelope Bourbon [20] - Distilling solutions segment sales declined by 43%, with brown goods sales down by 50% [20] - Ingredient solutions segment sales increased by 9%, primarily due to higher specialty and commodity wheat protein sales [21] - Gross profits in the ingredient solutions segment declined by 36% due to equipment outages and operational reliability issues [21] Market Data and Key Metrics Changes - Total U.S. whiskey production is down 19% over the prior 12 months, down 28% over the prior six months, and down 32% over the prior three months [14] - The broader domestic whiskey industry is recalibrating to the current environment, which is seen as a positive signal for future supply and demand dynamics [14] Company Strategy and Development Direction - The company is conducting a strategic review to improve clarity and focus on high-potential brands while trimming underperformers [6][7] - New appointments in leadership aim to strengthen operational execution and brand growth [7] - The company is focusing on five key initiatives for 2025: sharpen commercial focus, strengthen customer relationships, improve operational execution, fortify the balance sheet, and drive productivity [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges in the industry but expresses confidence in the company's long-term potential and the strength of its brands [9] - The company is optimistic about the future, with a focus on building a resilient business model that can weather industry cycles [27] Other Important Information - The company is experiencing a transition period, with a focus on operational excellence and customer engagement [26] - The distilling solutions segment is crucial, with a notable shift in customer purchasing behavior from just-in-case to just-in-time [45] Q&A Session Summary Question: Industry trends and channel inventory - Management noted that customers are eager to communicate and maintain relationships amid changes in the industry, with elevated inventory levels still present [31] Question: Gross margin performance - The strong gross margins were attributed to higher-than-expected aged whiskey sales and effective cost management [33] Question: Portfolio management of branded spirits - Management discussed the pros and cons of trimming lower-performing brands while focusing on premium brands that show growth potential [38] Question: Customer purchasing behavior - Management confirmed that large multinationals have paused purchases, but they expect to hear more about 2026 plans in the spring [44] Question: Ingredient solutions segment performance - Management acknowledged operational challenges but emphasized that demand for their products remains strong [48] Question: Biofuel facility and cost offsets - The biofuel facility is expected to offset disposal costs over time, with initial shipments already made [53] Question: Tariff impacts - Management indicated that while there is some tariff pressure, it is not as significant as for some peers, and the impact on customers with international business is being monitored [80]

Financial Data and Key Metrics Changes - The company reported net income of $61.1 million and core net income of $63.3 million for Q3 2025, with core earnings per share at $1.51 and a core return on average tangible common equity of 25.5% [5][18] - Net interest margin increased by 9 basis points to 2.73% from the prior quarter, while the cost of deposits fell by 9 basis points to 1.47% [5][6] - Net interest income before provision for credit losses was $92.7 million, an increase of $3.3 million or 3.7% from the previous quarter [12] Business Line Data and Key Metrics Changes - Non-interest income totaled $61.2 million, an increase of $4.2 million over the last quarter, driven by higher banking fees and increased foreign exchange revenues [13] - Core non-interest expenses decreased due to lower performance-based incentive accruals and reduced property expenses [14] Market Data and Key Metrics Changes - Bermuda's business environment remains stable with signs of growth in the local economy, including a forecasted budget surplus and increased corporate income tax revenue [8][9] - The Cayman Islands is expected to see a 2.5% GDP increase in 2025, with financial services and tourism being key economic pillars [11] Company Strategy and Development Direction - The company aims to enhance operational efficiency and maintain prudent expense discipline while focusing on capital management [19][20] - The strategy includes pursuing disciplined M&A and organic business development, with a focus on capital-efficient fee-based businesses [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term value creation and highlighted the positive outlook for Bermuda's fiscal position and the growth in the international business sector [4][9] - The company remains conservative in its underwriting approach, focusing on high-quality residential lending across its markets [16] Other Important Information - The company announced a quarterly cash dividend of $0.50 per share and continued its share repurchase program, buying back 700,000 shares at a cost of $30.3 million [6][7] - The tangible book value per share improved by 5.4% to $25.06 as unrealized losses on investments improved [18] Q&A Session Summary Question: Margin trajectory outlook - Management indicated that deposit costs have decreased and there is potential for margin stability or slight expansion due to asset repricing [25][27] Question: Interest in crypto or stablecoin initiatives - Management described a cautious approach, monitoring developments in digital assets but not feeling pressure from clients to lead in this area [29][30] Question: Future expense management initiatives - Management discussed ongoing efforts to manage expenses, including moving back-office functions to Halifax and cloud migration of core banking systems [31][33] Question: Drivers of fee income growth - Management noted strong performance in banking driven by increased transaction volumes and tourism-related card services fees [41][42] Question: Growth expectations in loans and deposits - Management highlighted Bermuda as a key area for deposit growth and noted a conservative approach to loan growth, with encouraging signs in the loan pipeline particularly in Cayman [43][45]

Community Healthcare Trust (NYSE:CHCT) Q3 2025 Earnings Call October 29, 2025 10:00 AM ET Company ParticipantsBill Monroe - CFODave Dupuy - CEORob Stevenson - Managing Director and Head of Real Estate ResearchConference Call ParticipantsJim Kammert - Managing Director and REIT AnalystAlexander Goldfarb - Managing Director and Senior REIT Equity Research AnalystNone - Analyst 2OperatorWelcome to Community Healthcare Trust Incorporated 2025 third quarter earnings release conference call. On the call today, th ...

Financial Data and Key Metrics Changes - The company reported bookings of $1.2 billion for the quarter, representing a 1% increase year-over-year and a sequential improvement of over $130 million [4][3] - Revenue grew by 4% year-over-year, with adjusted gross margins increasing by 240 basis points to 34.8% and adjusted operating margins rising to 14.8% [3][14] - Adjusted earnings per share (EPS) was $0.90, a 45% increase compared to the prior year [3] - The company raised its adjusted EPS guidance range for 2025 to $3.40-$3.50, reflecting a 31% increase from the previous year and over 60% from 2023 [2][24] Business Line Data and Key Metrics Changes - The aftermarket segment continued to perform strongly, with bookings exceeding $600 million for the sixth consecutive quarter [4] - Excluding engineered pump original equipment bookings, overall bookings growth was 9% across the remaining portfolio [6] - The FTD segment saw bookings growth of 24% and sales growth of 7%, with adjusted operating margins expanding by 230 basis points [15][16] Market Data and Key Metrics Changes - The power market, particularly nuclear, showed strong growth, with over $140 million in nuclear bookings, a record for the company [5] - Mining project activity increased over 60% year-over-year, indicating a recovery in that sector [7] - The company reported a year-to-date book-to-bill ratio of 1.0 times, with expectations for a full-year book-to-bill of approximately 1.0 times [7] Company Strategy and Development Direction - The company is focused on driving sustainable growth, expanding margins, and enhancing cash flow, with a commitment to capital allocation that supports growth opportunities [12][26] - The Flowserve business system is being leveraged to improve operational excellence and margin expansion, with the 80/20 complexity reduction program showing early benefits [19][25] - The company is strategically positioned to capitalize on the growing nuclear market, with expectations of significant opportunities in the next decade [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the aftermarket business, citing strong refinery and chemical plant utilization as key growth drivers [31] - The project environment is viewed as constructive, with expectations for continued growth in power and nuclear sectors [33][35] - The geopolitical and macro environment needs to stabilize for operators to gain confidence in project investments, but overall sentiment for 2026 and beyond is positive [35] Other Important Information - The company announced a divestment of legacy asbestos liabilities, which is expected to simplify capital structure and enhance cash flow by $15 million to $20 million annually [23][62] - Cash from operations for the quarter was $402 million, with free cash flow conversion at an impressive 174% when excluding the merger termination payment [22] Q&A Session Summary Question: Can you provide context on the operating environment and pipeline? - Management highlighted strong aftermarket performance and a shift in focus from large engineered projects to a more resilient business model, with aftermarket growth expected to continue [31][32] Question: What is the outlook on pricing and competitive dynamics? - Pricing has remained sticky in the aftermarket business, with the company confident in maintaining a price-cost neutral or slightly positive position moving forward [36][39] Question: Can you elaborate on the margin improvements in the FTD segment? - The FTD segment achieved a 410 basis point sequential improvement in operating margins, driven by operational excellence and the integration of MOGAS [48][49] Question: What is the expected market share for the nuclear flow control opportunity? - The company has content in 75% of the existing nuclear reactors and is well-positioned to capture a significant share of the projected $10 billion opportunity over the next decade [52][54]

Financial Data and Key Metrics Changes - The company reported a net income of $22.5 million, with a net interest margin (NIM) of 4.59%, return on equity (ROE) of 17.64%, and return on assets (ROA) of 2.13% [3][13] - Diluted earnings per share (EPS) stood at $2.67, with tangible book value just under $60 at $59.98 [3][4] - Total assets decreased slightly to $4.17 billion from $4.28 billion at the end of the previous quarter [13] Business Line Data and Key Metrics Changes - Loan purchases amounted to $145 million, while originations were $134 million, with the loan book remaining flat overall [13][14] - The company funded $42 million in SBA loans and sold $58 million, resulting in gains of $4.2 million, down from $8.2 million in the previous quarter [15][16] - The average loan balances decreased by $92 million compared to the previous quarter due to timing of transactions [7] Market Data and Key Metrics Changes - The company noted a robust purchase pipeline driven by M&A activity and repositioning of commercial real estate loans [4][10] - The SBA activity was impacted by a government shutdown, which halted new originations since October 1 [8][9] Company Strategy and Development Direction - The company is optimistic about its new insured small business loan product with NUITY, which has seen about $10 million closed since its launch [9] - The management emphasized a disciplined approach to credit while expecting strong growth in both purchased and originated loans [10][53] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future loan growth despite challenges posed by the government shutdown affecting SBA loans [25][52] - The company anticipates a ramp-up in SBA activity once the government reopens, with continued strong demand expected [25][26] Other Important Information - The company is experiencing a change in its cost structure with NUITY, moving from a gain-sharing model to a flat fee per loan submitted [21][22] - The effective tax rate for the quarter was lower due to state law changes, with expectations for the rest of the year to be around 31% to 32% [55] Q&A Session Summary Question: Change in cost structure with NUITY - The cost structure changed to a flat fee per loan submitted instead of a split in the gain on sale [21] Question: Expectations for SBA loan gains in the fourth quarter - Management indicated uncertainty due to variables like the duration of the government shutdown but expressed optimism for a return to previous volume levels once reopened [25] Question: Increase in professional fees - The increase was attributed to temporary employees and heightened legal fees related to new products [26] Question: Quality of lender finance portfolio amid industry concerns - Management reassured that they have robust monitoring and verification processes in place to mitigate fraud risks [44] Question: Visibility on loan payoffs this quarter - There were larger payoffs than typical, with expectations that this could continue in a declining interest rate environment [51] Question: Lower tax rate explanation - The lower tax rate was due to state law changes and stock vesting impacts, with expectations for a higher effective tax rate moving forward [55]