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Date
Oct. 24, 2025 at 10 a.m. ET
Call participants
President and Chief Executive Officer — Dennis J. Zember
Chief Financial Officer — Matthew Alan Switzer
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Takeaways
Net Earnings -- $6.8 million, or $0.28 per share, up from $2 million, or $0.08 per share, in the same quarter of 2024.
ROA and ROTCE -- Return on assets reached 70 basis points for Q3 2025, and return on tangible common equity was 9.45%.
Core Net Interest Margin -- 3.15%, an increase from 3.12% in the prior quarter and about 35 basis points higher than a year ago.
Incremental Loan Yields -- Newly originated and renewed loans booked at an average 7.16% this quarter, compared to 7.57% in the second quarter.
Noninterest-Bearing Deposits -- Grew approximately 616% year-over-year, reaching about 20% of total deposits in the core bank and improving the deposit mix.
Deposit Costs -- now at 1.73% in the core bank, and Panacea deposits at 1.37%, down from 2.28% in Q3 2024.
Panacea Loan and Deposit Growth -- Panacea average loans grew to $530 million from $385 million compared to Q3 2024, while deposits reached $132 million, up roughly 50% year-over-year.
Mortgage Division Production -- Monthly production scaled from about $20 million to $100 million–$120 million a month over the past few years, with annual production increasing by about 10% from the start to the end of Q3 2025.
Mortgage Warehouse -- Average balances were $210 million and ended the quarter at $327 million, with over $1 billion in approved but unfunded capacity and a $300 million pipeline.
Net Interest Margin (Reported) -- 3.18% for the quarter, compared to 2.86% in the previous quarter and 2.97% year-over-year; adjusted for interest reversals, would have been 3.23%.
Noninterest Income -- $12 million in noninterest income, compared with $10.6 million in Q2 2025 after excluding PFH stock sale-related gains, driven primarily by higher mortgage revenue.
Expense Control -- Core noninterest expenses, when normalized for one-time items, totaled approximately $19.8 million, only slightly higher than the year-ago quarter despite inflationary pressures.
Provision for Credit Losses -- Small release this quarter, driven by loan growth in lower-reserve segments, low charge-off activity, and release of reserves tied to Panacea loan sales.
Loan Growth -- Gross loans held for investment increased at a nearly 9% annualized rate from the prior quarter; including Panacea held-for-sale reclassification, growth would have been approximately 15% annualized.
Guidance -- Management expressed confidence in achieving 1% ROA in the near term with pretax earnings guidance of over $13 million, referencing recent performance and forward-looking statements, citing tailwinds from loan repricing and deposit mix momentum.
Summary
Management presented detailed drivers behind margin expansion, outlining that much of the recent margin improvement stems from higher-yielding new and replacement loan activity supported by a successful deposit remix strategy. They described the residential mortgage and mortgage warehouse divisions as sources of sustainable revenue diversification, citing meaningful increases in both volume and profitability. Operational leverage was maintained, as indicated by muted core expense growth despite ongoing investments and expansion, and further cost discipline is projected. Credit quality commentary focused on limited exposure to stressed segments, with management reporting specific actions and timelines for resolution but expressing low expectation of additional loss from identified non-accrual loans. Projections were made for further margin expansion and earnings lift as deposit cost reductions and loan repricing flow through results in coming quarters, supported by digital and franchise growth initiatives.
Management disclosed that normalized core ROA “would have been approximately 90 basis points” after adjusting for nonrecurring expense items, with reported ROA at 70 basis points.
Leadership cited new deposit business at 2.51% and an incremental spread of 4.65% across new balances, directly referencing attractive funding and earning asset dynamics.
Chief Financial Officer Matthew Alan Switzer stated, “We are still booking new loans with yields near 7%,” and noted that loans will continue to reprice upward later this year and next, as discussed in the most recent earnings call.
Core bank checking account growth was 16%, significantly outpacing the peer group average of 5%.
CEO Dennis J. Zember noted that retention rates remain above 90% after recent rate moves, indicating unexpected “these are stickier than what the industry believes.”
Management clarified that Panacea’s cost of deposits is “lower than most established community banks,” and the division is producing “dynamite credit results focused on C and I, and owner-occupied CRE.”
Focus remains on bringing the net interest margin toward 3.30% by year-end 2025, with a medium-term goal of reaching 20% noninterest-bearing deposits institution-wide.
Credit commentary specified that two Northern Virginia office properties are in nonaccrual or substandard status due to tenant improvement and leasing commission strain, but both had improving net operating income and strong leasing activity, with expectations for further improvement by mid-2025.
Chief Financial Officer Matthew Alan Switzer highlighted, “We had limited impacts on the net interest margin and marked this quarter from the consumer program and expect that to be the norm from here.”
Industry glossary
Panacea: Primis Financial (NASDAQ: FRST)'s nationwide, technology-first banking division, specializing in C&I and owner-occupied commercial real estate loans, leveraging a fintech approach within a regulated banking platform.
Mortgage Warehouse: A lending facility allowing mortgage originators to fund home loans which are later sold into the secondary market, with balances and revenue scaling as production ramps.
Life Premium Finance: A specialized lending program previously operated by Primis Financial, involving loans secured by cash values of life insurance policies, subsequently sold to reallocate capital into higher-yielding assets.
Full Conference Call Transcript
Matthew Alan Switzer: Good morning, and thank you for joining us for Primis Financial Corp's 2025 Third Quarter Webcast and Conference Call. Before we begin, please note that many of our comments during this call will be forward-looking statements which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Further discussion of the company's risk factors and other important information regarding our forward statements are part of our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has also been posted to the Investor Relations section of our corporate site, primisbank.com.
We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. How a non-GAAP measure relates to the most comparable GAAP measure will be discussed when the non-GAAP measure is used, if not readily apparent. I will now turn the call over to our President and Chief Executive Officer, Dennis J. Zember.
Dennis J. Zember: Thank you, Matthew, for that introduction, and thank you to everybody that has joined our conference call this morning. We believe our third quarter results reflect much of what we have been about in recent quarters, and we are excited to see the improvement and the lack of noise honestly in the current quarter. For the current quarter, we are reporting $6.8 million in net earnings at about $0.28 per share, which compares to core income of $2 million and $0.08 per share in the same quarter in 2024. Our ROA and ROTCE in the current quarter improved to 70 basis points and 9.45%, respectively.
We mentioned this in the press release, and I know Matthew is going to give more color. But our current profitability levels are higher than what we are reporting. When we adjust for some certain items that we know are not permanent, we see a core ROA that is closer to the 90 basis points. Puts us right in line to be successful reaching the 1% ROA that we have been targeting. I know Matthew is going to give more details on that. But from a high level, I want to recap some of the impactful things that happened this quarter and that give us the confidence that a 1% ROA is within reach.
First, we are reporting our core margin in the quarter at 3.15%, which is up from 3.12% in the second quarter of this year, but up about 35 basis points compared to a year ago. At this point, we have replaced about half of the loans that we sold with the life premium business a year ago at yields that are at least 200 basis points higher. Importantly, we have the pipeline and the momentum to get the remaining portfolio replaced. And with current levels and margins that we see across our business, we expect that to add another six to eight basis points of margin and improve pretax earnings by about $1.6 million per quarter.
We have also driven results on the deposit side. Compared to a year ago, we have grown noninterest-bearing checking accounts by about 616%, which has materially improved our deposit mix and taken our cost of deposits down by almost 20%. At the end of the quarter, alongside the rate cut by the FOMC, we were able to move lower again on the deposit side across our footprint, both digital and in our core business. And thanks to our focus on core relationships, we have experienced very strong retention across the bank.
Very little of this last move is reflected in our results due to the timing at the end of the quarter, but we expect this to be meaningfully positive to our margin and our results in the fourth quarter. When I look through the improvement in margin, I see new asset yields holding in strong, being funded incrementally at very attractive levels. Matthew, I know, has more details on this, but in the current quarter, our new and renewed loans came in at about 7.16%, compared to 7.57% in the second quarter of this year. New deposit business is a mix of us competing hard on new businesses, commercial businesses, and driving down the overall cost with new checking accounts.
New deposit business came in at around 2.51%. So taken together, our new activity across the entire bank, all of our divisions, produced spreads of about 4.65%. These kinds of incremental margins on balance sheet growth are important because we are still relying on operating leverage to drive our results to where we know they should be. Our table in the press release reflects how steady we have been on operating expenses, showing that we came in at just $100,000 or so from our five-quarter average.
Looking ahead, we are confident that we can continue to hold growth in OpEx to a very minimal level, managing very tight in this environment and letting the investment that we have made in past quarters pay dividends with growth at the attractive levels we talked about. On our operating divisions, real quickly, I am getting pretty excited about the investments we have made that are tied to residential mortgage. We have built our mortgage division from about $20 million a month of production to about $100 million to $120 million a month over the past few years. We have done this profitably too, slowly reinvesting enough of our earnings to build our production staff to what it is today.
We have focused on culture and service as well as just products and pricing, and all of this work continues to pay dividends. In the third quarter, we had continued recruiting success that built annual production by about another $120 million or 10% of where we stood at the beginning of the quarter. Core results for the quarter showed pretax earnings of about $1.9 million, which is 58 basis points on closed volume, our strongest quarter yet. For core results in mortgage, we are excluding some legal fees associated with some recent hires that totaled about $900,000, and we expect this to moderate back to normal levels very rapidly.
Mortgage warehouse continued to grow nicely and shows real promise for the bank and for our earnings. To illustrate this, we had average balances in the quarter of about $210 million but ending balances of about $327 million. Today, we have over $1 billion of uncommitted approved and in place and a pipeline of new opportunities working through the system of about $300 million. For the quarter, the warehouse group showed pretax earnings of about $1.6 million and moved their efficiency ratio down to about 27%. Long term and at scale, this business can be two to three times its current size on our balance sheet with operating ratios that are accretive across the board.
And taken together with our mortgage company, we have ideal and sustainable exposure to residential mortgage that produces fee income and balance sheet growth that nicely augments what our core bank is doing.
Matthew Alan Switzer: TANACIA continues to gain steam and momentum. Loan balances moved higher in the current quarter to $530 million on average compared to $385 million in the same quarter a year ago. Deposits, what is really impressive, growing at a faster rate, ending at about $132 million in the current quarter, which is about 50% higher than a year ago. Importantly, Tennessee's cost of deposits reflects a blend of technology, customer service, and deep brand endorsement. For the current quarter, their cost of deposits came in at 1.37%, lower than our core banks and compares very nicely to 2.28% in the same quarter a year ago.
I have a lot of conviction about the kind of value that we are creating here because the industry deeply values traditional community and commercial banking and honestly, rightfully so. And while panacea and what we are doing here does have somewhat of a fintech flair to it, operating nationwide with deep embedded technology versus physical branches, it is producing dynamite credit results focused on C and I, and owner-occupied CRE, with excellent yields to one of the most, if not the most coveted customers out there. And it is funding the balance sheet at extremely attractive levels lower than most established community banks.
Strategies like this in the past did not garner meaningful value because they focused on real easy credit and funded with flimsy or expensive solutions like CDs or institutional borrowings. But Tyler and his team are focused on relationships and technology and a customer experience that is proven to be more meaningful. And lastly, before I turn it to Matthew for some more details, a few comments on credit. We noted in the last quarter that we have had a few downgrades that were centered on loans that were not delinquent but did have weaker prospects and weaker guarantor support.
Our negative exposure to two office real estate properties in the Northern Virginia market is reflected in our quality numbers with both being in substandard and one being in non-accrual. Both properties have improving NOI and strong leasing activity, but tenant improvements, leasing commissions, and rent abatement have stressed the borrower's cash levels and their ability to support the property. These properties are ideally situated outside of the district in very desirable locations, and it is important to note that the market here is stable to slightly improving compared to areas inside the District Of Columbia. The remainder of our non-accruals are centered in two loans. One is a $7.5 million loan to a private equity-backed company with proven value.
Recent capital raises for the company indicate a strong enterprise value that puts us at about 35% loan to value. MAPS impairment testing on the company using pretty deeply discounted cash flows continues to show no impairment on this loan. The other loan is a nationwide operating business with positive debt coverage that is working several strategic opportunities to either be recapitalized or sold. On both of these loans, the bank is working with the borrowers to exit the relationships through sales or refinance. And at this point, we do not believe there are additional losses or costs to be incurred.
Outside of these properties, we really have virtually no exposure to office in any of our markets, but especially the DC Metro Area that is still not operating ideally. I do not want to minimize or gloss over any credit issue, but I do not believe we have exposures that should be causing problems or costs going forward. Okay. With that, Matthew, I will turn it to you.
Matthew Alan Switzer: Thank you, Dennis. As a reminder, a discussion of our financial results can be found in our press release and investor presentation located on our website and our 8-Ks filed with the SEC. Beginning with the balance sheet, gross loans held for investment increased almost 9% annualized from June 30 to September 30. Including the Panacea loans reclassified to held for sale, gross loans would have increased approximately 15% annualized led by growth in Panacea and Mortgage Warehouse. Importantly, average earning assets increased 10% annualized in the third quarter, positioning us to fully replace the earning assets sold a year ago with the Life Premium Finance sale.
Deposits were flat in Q3 due to limited runoff at the end of the quarter after the Fed rate cut, but we are still up 7% annualized using average balances for the quarter. Even more impressive, non-interest-bearing deposits increased 10% annualized in the quarter with a strong contribution from the core bank and mortgage warehouse. As Dennis discussed, our focus has been making sure we are on the strategies that drive the ROA higher from here, which we have done. Our net interest margin in the third quarter was 3.18%, up from a reported 2.86% last quarter and 2.97% in the year-ago period.
We had limited impacts on the net interest margin and marked this quarter from the consumer program and expect that to be the norm from here. The margin was impacted by interest reversals on loans moving to non-accrual in the quarter and would have been 3.23% on an adjusted basis without those reversals. We are still booking new loans with yields near 7%, and we have a substantial amount of loans repricing later this year and next that will continue to move yields higher and help the margin. The core bank cost of deposits remains very attractive, at 173 basis points in the quarter, down six basis points linked quarter.
In addition, we used the Fed cut in late September as an opportunity to move digital rates down more aggressively by lowering rates 35 basis points at that time. This should benefit us meaningfully in the fourth quarter. Our provision this quarter was a small release driven by growth in the loan portfolio tied to categories with lower reserve requirements, low core charge-off activity, and the release of reserves for moving a portion of the Panacea loans to held for sale. Noninterest income was $12 million in the quarter versus $10.6 million in the second quarter when excluding PFH stock sale-related gains, with increased mortgage revenue as the primary driver.
Mortgage revenue and profitability bounced back in Q3 with pretax income of approximately $1.9 million versus $100,000 in the second quarter, which had been impacted by costs tied to new teams onboarded at the March. To give you a sense of the scale we are building in mortgage, we funded 59% more loans in September 2025 than we did in September 2024. We also closed $26 million of construction of perm loans in the quarter where we will not see material profitability at closing, generating attractive gain on sale revenue in a couple of quarters.
On the expense side, when you exclude mortgage and Panacea division volatility and nonrecurring items, our core expenses were $21.6 million versus $23 million in the second quarter. There are a handful of items described in the earnings release that are one-time in nature but do not rise to the definition of nonrecurring for reporting purposes and totaled approximately $1.8 million, including one more month of technology contract savings. Normalizing for these items, core noninterest expense was approximately $19.8 million, putting us only slightly higher than the year-ago quarter. We are laser-focused on driving that number down further even in the face of inflationary pressures that would otherwise move it higher.
In summary, as we detailed in the earnings release and investor presentation, our reported ROA was 70 basis points in the third quarter. Adjusting for the expense items we just highlighted, pretax earnings were closer to $11 million and ROA would have been approximately 90 basis points in Q3. With growth and repricing of earning assets, pretax earnings will grow to over $13 million in the near term, which equates to our 1% ROA goal with upside still from there. We are pleased that the third quarter showed meaningful progress on profitability with much fewer one-time items that had masked our core earnings power before.
As I stated last quarter, we have substantial tailwinds from here that get us to strong profitability ratios without herculean efforts, just straightforward blocking and tackling. We recognize that one quarter is not considered a trend, but we firmly believe that we are seeing that trend play out and look forward to demonstrating our earnings power from here. With that, operator, we can now open the line for Q&A.
Operator: Thank you. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is star one if you would like to join the queue. And our first question comes from the line of Russell Gunther with Stephens.
Russell Gunther: Hey, good morning, guys.
Matthew Alan Switzer: Hey, Russell. Good morning.
Dennis J. Zember: Morning. I wanted to begin on loan growth, please. And it would be helpful to get your thoughts about how you are thinking about overall growth for the fourth quarter, given maybe some potential mortgage warehouse seasonality, continued consumer runoff, and then thinking ahead into '26 as well in terms of order of magnitude and mix. This is Russell. I will start, and Matthew can correct me, probably. I think on mortgage warehouse, we have got so much potential and so much still kind of maturing there. That I think what is probably at scale we would have more runoff in the fourth quarter. I do not know that we are going to have the same kind of runoff.
I do not again, we only average $200 million or so I think $210 million in the second quarter. Excuse me, third quarter. I think we can sustain those levels maybe where we ended the quarter we might not sustain that. Matthew may have a little deeper understanding there. I think for Panacea, honestly, we could probably take the Panacea loans to whatever level we want. I think an annual production capacity there is probably about what their balance sheet is. We have got some other parties that are going to take some of that production.
And Matthew and I do not really want Panacea to take over the whole balance sheet, but I think we are ending at $550 million. I think we may sell a little bit of those loans in the fourth quarter to sort of get into some of the flow agreements with the larger bank, the third party. But I think for next year, $150 million or so, I think, is definitely possible there. And on the core bank, I think we probably could squeeze out 6%, 7%, 8% growth there. I think for all of next year, if you are asking me, I think this point in time next year, we could be comfortably up, call it, 10% to 12%.
Matthew, what is your thought?
Matthew Alan Switzer: I agree with all that. And, I mean, a lot of our growth this quarter was more warehouse-related. We would normally expect some seasonality, but as Dennis mentioned, I mean, they are still on the growth path in terms of adding customers and lines. So even though utilization may drop some in the fourth quarter, the additional lines they are bringing on is going to offset some of that growth. So they will probably be up some on an average basis in the fourth quarter.
Russell Gunther: Okay. That is great color, guys. Thank you. And then my next question was in regard to slide 11 of the deck. Kind of two parts. One, the timing of when you would expect to get to that 3.30 margin that you say is average earning asset driven. I think maybe just expand upon what you are referring to when you talk about continued shifts in deposit mix will then become a focus. Go ahead, Matthew.
Matthew Alan Switzer: Yeah. I mean, we will I think we will be closer to 3.30 margin as we exit this year. So probably 100% focused on increasing our proportion of non-interest-bearing deposits. We have all I would not say long-term goal, more of a medium-term goal. To have that number closer to 20% of total deposits. It is about 20% in the core bank, but we wanted to 20% for the entire institution. So you know, '26, that is a focus of ours, just like it has been in '25, getting noninterest-bearing percentages up. So that is really the remixing we are talking about.
Dennis J. Zember: Russell, I would add that if you look at the bank as a whole, I mean, we probably got we have there is no probably. We have more technology and more strategies focused on driving low-cost deposits at a pretty fast clip than we do on the loan side. And we have got pretty notable loan strategies between warehouse and Panacea and the life business life premium business that we sold. But Vibe in and around our markets is driving massive pipelines and massive success. I mean, we have looked our peer group is up 5% in checking accounts, we are up 16%.
And I would attribute some of that to, you know, what we are getting in the lines of business versus as well as you know, in the core footprint. So we really believe that our long-term value here sort of being as being unique is centered more on the deposit side than the loan side. Right now, we are driving real success in the margin and with replacing the earning assets as Matthew is showing you here in this graph.
But I think as soon as we sort of tap out on replacing all those assets, the thing that will drive it is what Matthew was saying, getting the deposit mix situated right, thanks to some of the technologies that we got at play. Got it. Okay. Very helpful. Dennis, Matthew, that is it for me. Thanks for taking my question.
Matthew Alan Switzer: Alright. Thanks, Russell.
Operator: And our next question comes from the line of Christopher William Marinac with Janney Montgomery Scott. Your line is open.
Christopher William Marinac: Thank you very much. Thanks for hosting us, Matthew and Dennis. I wanted to ask about the deposits. And Dennis, the point you made on deposit costs incrementally with interest rates going down, does that get harder to do? Or does it get more easier or flexible for you to drive more deposits in at kind of the appropriate rate to push up margin? I guess it really could go either way. I think the you look at our universe or our competition, Chris, I mean, a lot of them are sort of looking at falling rates, you know, the Fed cuts.
They are looking at that to be mean, the whole industry honestly has been looking at that to be the sort of driver to get some of our margins back. So we suppose Matthew and I both suppose that the competition is going to be using most of that to get the biggest beta possible. I think the fact that we are driving as many checking accounts into the bank lets us be sort of more aggressive on, you know, business money markets, business checking, consumer even CDs. And still sort of maintain a cost of deposits that is at or below our peer group.
And I mean, we are more of a growth bank, so we have to sort of balance you know, where we are bringing in or where we have things priced versus just straight for profitability. So that checking account growth is absolutely key to us keeping you know, deposit flows at the right level. Matthew and I do not want to fund the balance sheet with broker CDs and institutional borrowings like Federal Home Loan Bank. We want to be core funded. And we do not want that to you know, eat into the margins or the operating leverage we want. The only thing we can do to stay competitive and be very competitive is are those checking accounts.
And as long as we are driving checking accounts in at sort of better than 10%, I think we can be very competitive on the rate-oriented products, Chris. And still punch out good growth and good profitability.
Matthew Alan Switzer: Got it. That is helpful.
Christopher William Marinac: Dennis. Thank you. And guess just kind of another point because you have now been doing the digital bank process for several quarters, couple of years now, are you finding evidence that these are more sticky customers which is really differentiating Primis Financial Corp from the rest of the pack?
Dennis J. Zember: 100%. And Matthew can give you more color here. But, I mean, our average customer has over $50,000. The average customer, I think we are right maybe a month from having average customer's deposit relationship for two years. Over 90% of our customers have either more than one deposit account with us or more than one product or they have referred a customer. Unquestionably, these are stickier than what the industry believes Chris, I would still caution you that you know, these are not customers that are in the branch. These are customers using a digital experience that is by far better than what most banks are rolling out. Still, they are more rate sensitive than the traditional community banks.
So community bank customers. So we are not going to get ahead of ourselves and push try to push these rates down to, you know, Fed funds minus. You know, a 150. That is not going to be these customers. But we have moved rates three or four times now. Matthew can correct me. And we have got retention rates over 90%. Matthew, why give help me make sure I am right on most of that.
Matthew Alan Switzer: You are 100% right. And, as I have mentioned in my remarks, Chris, we were aggressive after this last Fed cut because we were seeing, you know, still growth and balances without any advertising. And you know, based on our read of the deposit base, like we were probably a little bit high relative to the rest of the market. So we actually had we cut rates a little bit more than the Fed cut in September. We did see a little bit of runoff, but nowhere near runoff you would have expected from a deposit base that was truly hot money based or rate sensitive.
I mean, there were some rate-sensitive customers in there, but frankly no more than we would have in the core franchise. So we are pleasantly surprised with how sticky these deposits have been as we have lowered rates with the Fed and it has been a very valuable funding source for us. And as we have talked about in previous quarters, allowed us to protect the core bank deposit base, which is still very low cost and very sticky.
Dennis J. Zember: Chris, I would add one more thing. I was speaking on a panel a few weeks ago, and people were asking about digital. And you know, the industry and, I mean, I will be honest. I had this too. The industry believes that kind of digital customers that you never see or touch you know, have some sort of hotness to them. You know, hot money. Honestly, every we have 20,000 customers, maybe 25,000 when you include you know, all the lines of business. Every single one of those customers has a banker. And every single banker's cell phone is in the hands of every single customer. You know, we are available to them twenty-four seven is what we pitch.
You know, our bankers and our call center, we offer you know, we offer premium banking products. We offer the full suite of banking products. I mean, yes, the digital products are deposit-oriented, but if any of those customers needed anything, loans, deposit loans, mortgages, he locked anything. We are ready to do this. That is the reason, honestly, that they are sticky. I do not think that the industry is wrong about whether these customers are sticky or not. Or rate sensitive or not or how rate sensitive.
I think we just sort of neutralize that by working hard to just to build relationships with these customers and sort of I guess, hate to say it, but sort of community bank style. And I think that has been successful, and really we are proving it out. With what Matthew just said.
Christopher William Marinac: Understood. I had an asset quality question, which is the thanks for the information you gave on a couple of loans. Do you see any of those getting resolved in the next two, three, four quarters? And even though it is only a few basis points of margin difference, do you see any of that helping you in the next few quarters?
Dennis J. Zember: The larger C and I property that is sort of the operating business I think there is a chance that could be resolved. Sold. Potentially, the business sold or recapped. In the fourth quarter. That would improve the margin because that one is on nonaccrual and was for the whole quarter. The others are still sort of we are still sort of receiving payments and working with the borrowers. I think the real estate deals in Alexandria are not going to be resolved in the current quarter. Although, I think if you gave us probably a couple quarters or maybe to the midpoint of the year, given the leasing activity.
And Matthew and I are personally involved in these loans and in the leasing activity and just to have very relevant right now data. I think by June, given the leasing activity we are seeing, those properties could be strong enough to be and have strong enough debt coverage to at least not be on nonaccrual. Both of the properties right now are at one-time debt coverage. On interest only on PNI. One is above debt one is above one. One is at, like, one zero five and the other is not. But the leasing activity on the one that is on nonaccrual I think by June, we could have it above one times debt coverage on a PNI basis.
So I would tell you, really, we just got one that could be resolved the current quarter and the others you know, I do not I mean, I hate them being in nonaccrual and substandard all, but I believe we are you know, in the best possible place we could be with those.
Christopher William Marinac: Great. That is good background. Thank you. And then just last question, just to connect that what was said at the beginning of the call, that the expense numbers should continue to get better given the operating difference as you outlined in the lease and we will just see that quarter to quarter. I suspect it is not just the fourth quarter phenomenon, but go over the next few quarters.
Matthew Alan Switzer: Yes.
Dennis J. Zember: Yeah.
Christopher William Marinac: Super. Thank you for taking my questions, and we appreciate it.
Matthew Alan Switzer: Alright. Thanks, Chris.
Operator: And with no further questions, I will now turn the conference back over to Mr. Dennis J. Zember for closing remarks.
Dennis J. Zember: Okay. Thank you, everybody, that has joined our call. Matthew and I are available if you have any further comments or questions. And if you do not, I hope everyone has a safe and happy weekend, and we will talk to you soon. Thank you.
Operator: And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.