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DATE

Apr. 24, 2026 at 10 a.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Dennis J. Zember
  • Executive Vice President and Chief Financial Officer — Matthew Alan Switzer

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TAKEAWAYS

  • Net Income -- $7.3 million, or $0.30 per share, compared to $22.6 million, or $0.92 per share, driven by the absence of prior-year one-time gains related to Panacea deconsolidation.
  • Operating Earnings Per Share -- $0.33, up 126% from $0.14, after adjusting for a tax item included in the prior-year period.
  • Operating Return on Assets (ROA) -- 0.84%, improved from 0.40%, attributed to margin gains and expense control.
  • Net Interest Margin -- 3.43%, rising from 3.28% in the prior quarter and 3.15% a year ago.
  • Loan Balances -- $3.4 billion at period end, up 11.7%, excluding ~$40 million moved to held-for-sale under a Panacea agreement.
  • Deposit Growth -- Over 8%, with minimal contribution from the digital platform, which maintains balances of roughly $1 billion.
  • Non–Interest-Bearing Checking Accounts -- $541 million, representing 19% growth; now 15.9% of total deposits versus 14.2% previously.
  • Mortgage Warehouse Balances -- $460 million at quarter end, scaling rapidly and occasionally exceeding $5 billion outstanding for short periods.
  • Mortgage Group Pretax Income -- $2.1 million, up from $766 thousand, with closed volume profitability increasing to 57 basis points from 46 basis points.
  • Core Revenue -- $45.6 million, up 33.7%, while operating expenses increased only 4%, highlighting significant operating leverage.
  • Net Interest Income -- $32 million, up from $26 million.
  • Core Bank Cost of Deposits -- 1.59%, flat from the prior quarter; cost of total deposits at 2.23%, down 3 basis points sequentially.
  • Provision Expense -- $1.5 million, including $700,000 for impaired loans and $400,000 connected to the consumer portfolio.
  • Core Net Charge-Offs -- 6 basis points, reflecting low credit losses.
  • Noninterest Income -- $13.6 million after adjusting for nonrecurring Q4 items.
  • Retail Mortgage Production -- 122% annual increase, with $26 million in construction-to-permanent loans booked.
  • Core Expenses (Excluding Mortgage Volatility and Nonrecurring) -- $22 million, up modestly from $20.8 million; would have declined year over year without sale-leaseback–related occupancy costs.
  • Loan Repricing Tailwind -- $400 million of loans to reprice in 2026 and early 2027 at a 4.81% yield, expected to advance loan yields.
  • Subordinated Debt Redemption -- $27 million redeemed in January, partially reflected in quarterly results.
  • AI Initiative -- Hundreds of hours in efficiency identified, with the goal to reduce repetitive work, limit future expense growth, and enhance customer and fraud management outcomes with mainly existing resources.
  • ROA and Profitability Targets -- Management aspires to reach and sustain 1% ROA, with "1.25% or better on ROA" and the potential for a ROTCE near 15% as scaled businesses mature.
  • Mortgage Business Scale Guidance -- Management anticipates $1.8 billion in closed volume for the year at over 60 basis points profitability, barring unusual market volatility.
  • New Commercial Loan Origination Yields -- Management cites "flat mid-6%" for core bank new loans, five-year Treasury plus 275 basis points for structure, and warehouse originations at one-month SOFR plus 315 to 320 basis points.
  • Digital Deposit Platform -- Digital deposits are "steady state at about $1 billion" and carry an estimated cost of about 3.75%, with an average digital customer balance of $30,000 to $40,000 and a tenure of 30 to 36 months.
  • Strategic Mix -- Management targets checking accounts at 20% of deposits, aims to maintain mortgage as less than 20% of bottom-line contribution, and stresses further growth for core banking.

SUMMARY

Primis (FRST +2.59%) management emphasized improvements in operating leverage by delivering 34% core revenue growth against only a 4% rise in operating expenses, pointing to sustainable profitability enhancements. Executives disclosed a clear focus on deposit mix improvement, with non–interest-bearing checking expansion and minimal reliance on rate-driven digital deposit strategies. Detailed guidance highlights expected loan yield tailwinds from upcoming repricing and an anticipated expansion in net interest margin, reinforced by strategic subordinated debt actions. Broad adoption of AI and technology-enabled process optimizations have begun limiting expense growth, with management stating they intend to become a leader among sub-$10 billion banks in this area. Significant scale advances in mortgage, warehouse, and specialty verticals remain central to management’s longer-term profitability goals and the potential for further gains in ROA and ROTCE. Ongoing commercial real estate office exposures are viewed as stable but remain under watch, as discussed in the Q&A.

  • The digital platform achieves operational efficiency with only six bankers covering over 25,000 customers nationwide, reducing headcount needs relative to deposit base size.
  • Core bank loan growth is described as outperforming the peer group, with technology and enhanced commercial relationships driving wins beyond rate competition.
  • Management’s strategic intention is to further digitize the core bank, maintaining a "community bank feel" while scaling technology benefits.
  • Executives describe plans for measured growth in key verticals, maintaining mortgage production as a complement—rather than majority—of earnings, and seeking future M&A or organic core bank expansion catalysts.

INDUSTRY GLOSSARY

  • Mortgage Warehouse: Short-term lending facility providing funding to mortgage originators for loans prior to their sale into the secondary market.
  • Panacea: Primis Financial’s specialty lending vertical focused on medical, dental, and veterinary business loans.
  • Retail Mortgage Production: Volume of funded mortgage loans originated directly to consumers through the bank’s mortgage platform.
  • Construction-to-Permanent Loans: Lending arrangements providing financing during construction that convert to permanent mortgage loans upon project completion.
  • Sale-Leaseback Transaction: A deal where the company sells an owned property and simultaneously leases it back, typically to unlock capital or adjust its operating structure.
  • ROTCE: Return on Tangible Common Equity; a measure of profitability expressed as net income available to common shareholders divided by average tangible common equity.
  • SOFR: Secured Overnight Financing Rate, the US dollar risk-free benchmark interest rate used for many variable-rate loans and derivatives.

Full Conference Call Transcript

Matthew Alan Switzer: Good morning. Thank you for joining us for Primis Financial Corp.’s 2026 First 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-looking 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, permsbank.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. Our non-GAAP measure relative 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, Matt. Thank you to all of you that have joined our first quarter call. We are excited to report that in the first quarter, we earned $7.3 million, or $0.30 per share, which compares to $22.6 million and $0.92 per share in the same quarter of 2025. I guess I am reading that, excited to report earnings shrinking that much. The fact of the matter is on an operating basis, we earned $0.33 per share in the first quarter, which excluded a small tax adjustment related to 2025 results. And when you compare that to the same quarter a year ago, it is up 126% on operating earnings, where we reported $0.14 in the same quarter of 2025.

And Matt may mention this, but the first quarter of 2025 included a substantial gain on the deconsolidation of Panacea, which is what I am excluding. Our key operating ratios obviously improved alongside that earnings number I just gave you. On an operating basis, our ROA improved to 0.84% compared to 0.40% in the same quarter of 2025. Driving that were a couple of items, mostly margin as well as operating expense control. Our net interest margin benefited from the securities restructure as well as the mix of earning assets and climbed to 3.43% in the first quarter compared to 3.15% in the same quarter of 2025.

We continue to put up nice growth numbers that are manageable but really distinguish us amongst our peer group. Loans ended at $3.4 billion, up 11.7% compared to the same quarter in 2026. That excludes about $40 million or so that Matt mentioned that we moved into loans held for sale related to a flow agreement with Panacea. So really, our growth was probably stronger than this. Deposit growth over the same period is really what you should look at. That came in at just better than 8% with very little of that from the digital platform, which is pretty steady state at about $1 billion.

The growth in checking accounts in our company was even more notable, with non–interest-bearing checking accounts growing to $541 million, which is almost 19% higher than where we were in 2025. Checking accounts continue to be a more meaningful element of our deposit mix and were 15.9% of total deposits compared to just 14.2% in 2025. And lastly, it is very important to note that we grew deposits in this strong a fashion and never once felt pressured in our core bank or on our digital platform to be more aggressive on rate. We are doing it with technology, with service, with people, with getting in front of folks, focusing on commercial deposits, and having real success.

All of the energy and momentum on our balance sheet really starts at the core bank. There has never been a time since I came to Primis that our core bank has had this opportunity on both sides of the balance sheet. Honestly, we are winning business that several years ago, we just would not have been in the running for, or maybe even had a conversation about. Virtually nothing that we are doing to win this business has to do with rates or fees. We are leaning hard into our technology, our service, our people. Our existing customers are turning out to be amazing centers of influence for us.

For so long, it felt like all we were doing here was working on our factory and stuff in the factory. But today, stuff is rolling off that assembly line faster and faster, and I am very encouraged by what our people are accomplishing. Mortgage warehouse has fully replaced Life Premium Finance at this point and has been so well received in the marketplace. We finished the quarter with about $460 million outstanding. For a few days near March, we crested $5 billion outstanding. This is before any refi boom. It is before the busy spring and summer seasons for retail mortgage. Importantly, warehouse is still producing impressive yields and margins, efficiency ratios in the 20s.

The amount of scale and impact on our overall operating ratios in this business is not really something that has been fully banked or recognized in our current numbers, as they have been scaling the business so quickly over the past year. But I believe we could probably double this business in the next 12 to 18 months, and I believe the incremental impact from that second double is going to be very meaningful. Retail mortgage had an absolute blowout quarter. They will tell you that it was impacted by some Middle East activities and an impact on rates and fair value adjustments, and that is true.

We might have reported half a million dollars more at that, but regardless, pretax income in the mortgage group grew to $2.1 million in the first quarter compared to $766 thousand in the same quarter a year ago. In the quarter, our earnings crept up to 57 basis points on closed volume compared to 46 in the same period a year ago. So on profitability, we are up maybe a little better than 20% on closed volume. Our recruiting pipeline has never been this strong, and consistently, we double each month on apps, closed volume, and new files, so we are very positive about what the second half of the year would look like.

Right now, we believe Primis Mortgage is on track to be a top 50 mortgage company nationwide in 2026. And lastly, before I turn it over to Matt, I want to emphasize what is really present-mind for us and our desire to build this into a top-performing bank. In our day to day here, we are laser focused on growing checking accounts, like I mentioned earlier, to about 20% of total deposits. Secondly, we are determined to drive massive amounts of operating leverage from our consistent, reliable balance sheet growth using steady to decreasing OpEx.

And I know I have been saying this for several quarters, and so as the quarter ended, I was pretty delighted to start playing with the numbers and see what I am about to tell you here. If you look at the last year, from first quarter 2025 all the way back to 2024, we are reporting core revenue of about $45.6 million, which is about 33.7% higher—call it 34%—over a year ago. Reported operating expenses straight off of the M&A income statement, no adjustments, came in at $33.8 million, which is only 4% higher than the same time a year ago. That is 34% growth in revenue and only a 4% growth in OpEx.

I had in my comments that I would like to prognosticate that we could do that for a couple more years, but I was afraid Matt would grimace, so I took that out. But this is an extraordinary level of operating leverage and really the driver of our results. Nobody at Primis thinks we are done in this area or that revenue may not be outpacing OpEx going forward. We have several strategies, of course, to continue getting this result, and one of those is AI.

I do not want to steal Matt’s comments or his hard work on this—I know he is going to comment further on this—but AI for us is the same kind of opportunity and catalyst that you would expect me to report if we were doing an M&A transaction. We already have all the tools we need for this. We expect hardly any additional investment except the deep training we are going to give our staff to be effective with this. And we believe that in a year, we are going to be the undisputed leader amongst banks under $10 billion using AI to drive operating results, sales efficiency, customer satisfaction and experience, and, importantly, fraud prevention.

When you combine that with our work towards converting our core bank to a fully digital core, we are on the edge of being a uniquely positioned bank with technology that has figured out how to keep our community bank feel. With that, Matt, I will turn it over 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 in our 8-Ks filed with the SEC. Beginning with the balance sheet, gross loans held for investment increased approximately 14% annualized from December 31 to March 31, led by growth in Panacea and Mortgage Warehouse. Average earning assets increased 6% annualized in the first quarter, with the slower growth rate versus period-end growth due to the ramp in mortgage warehouse later in the period. Average deposits were up 4% annualized in the quarter, while average non–interest-bearing were up 7% from year-end.

Net interest income was approximately $32 million, an improvement from $26 million a year ago. Our net interest margin in the first quarter was 3.43%, up from 3.28% last quarter and 3.15% in the year-ago period, and we have expectations for further margin expansion as we progress through 2026. We completed a redemption of $27 million of subordinated debt in January, so that was only partially reflected in the quarter. We also have approximately $400 million of loans repricing in 2026 and early 2027, with a weighted average yield of 4.81% that will add to loan yields. The core bank cost of deposits remains very attractive at 159 basis points for the quarter, flat from the fourth quarter.

Cost of total deposits was 2.23% in Q1, down 3 basis points linked quarter. Our focus on growing NIB deposits is a key part of our strategy to continue driving funding costs lower. Our provision this quarter was $1.5 million, partially driven by growth in the loan portfolio described above. Approximately $700 thousand of the provision was due to specific reserving on impaired loans, while another $400 thousand tied to activity in the consumer portfolio. Core net charge-offs remained low at 6 basis points in 2026. Noninterest income was $13.6 million in the quarter versus $12.8 million in the fourth quarter after adjusting for the sale-leaseback gain, investment portfolio restructuring, and the Panacea loan pool sale in the fourth quarter.

Mortgage revenue was solid in Q1 at $10.8 million versus $10 million in the fourth quarter and would have been even better in the first quarter if not for the impact of market volatility late in the quarter. Year over year, retail mortgage production was 122% higher in 2026 versus 2025, showing strong momentum as we head into the busy home buying season. Also included in that production was $26 million of attractive construction-to-permanent loans in the first quarter, up from $4 million in the first quarter last year. On the expense side, when you exclude mortgage and other division volatility and nonrecurring items, our core expenses were $22 million in the first quarter versus $20.8 million a year ago.

Absent the increased occupancy expense from our recent sale-leaseback transaction, core expenses on this basis would have actually been down year over year. We have been focused on controlling expenses to maximize operating leverage and feel like we are in a good spot on that front so far in 2026. I would also like to take a moment to briefly touch on how we are thinking about AI. As mentioned in the earnings release, we have canvassed the bank looking for opportunities to deploy AI tools to reduce repetitive and time-consuming tasks and generate efficiencies.

Our first pass has identified hundreds of hours of opportunity, and there is almost certainly more that can be found as we start tackling these projects. We view this as a key part of our strategy to keep expense growth to a minimum while maximizing operating leverage. Equally as exciting from where I sit, our in-house talent in this area, combined with the robust tools built into our existing products such as Microsoft Copilot, should allow us to get the vast majority of these efficiencies without expensive consultants. In summary, we are excited to report a solid first quarter in line with our expectations and believe we are still on track to hit our profitability goal in 2026.

With that, Operator, we will now open the call for questions.

Operator: We will now open the call for questions. If you would like to withdraw your question at any time, please press star-1 again. We will pause just for a moment to compile the roster. Your first question comes from Woody Lay with KBW. Your line is open.

Woody Lay: Hey, good morning, guys.

Dennis J. Zember: Good morning. Hi, Woody.

Woody Lay: Wanted to start on mortgage. As you mentioned, it was a blowout quarter in what is typically a seasonally weaker quarter. We are now entering the stronger quarters ahead. What are your expectations for production in the near term? And then also in the mortgage expenses, was there additional hiring that was done in Q1 2026, or elevated legal expenses—anything that sort of propped that up?

Dennis J. Zember: Nothing unusual on the expense side. I think maybe we came into the year thinking we closed $1.2 billion last year but had a lot of momentum in the fourth quarter. We thought we probably have a $1.6 to $1.7 billion mortgage company, and then through the first quarter, felt like it was a little higher, maybe $1.8, maybe even $2.0 billion. I feel like we are probably still around $1.8 billion. I mean, April is very strong, sort of reflecting what we thought. I think we are probably still somewhere in the $1.8 billion range in closed volume.

And I think, Woody, what is important is as we have been growing, what is important is we were at 46 basis points a year ago; we are at 57 basis points now on closed volume. What is impacting that is obviously a lot more scale on the fixed expenses as we get closer to $2.0 billion, a lot more focus on—Matt mentioned—construction-perm. We have a big construction-perm focus here that is honestly very centered on government; we get higher yields there. And really, we have been building that for the last year. These are probably six- to nine-month builds, and so that is starting to flow.

So what is important, I think, is that we think we are going to do about $1.8 billion or so this year as things look right now, and maybe trend somewhere closer to probably a touch over 60 basis points. The Middle East event probably hit us for a few basis points—five or six basis points—on profitability, so we might have been over 60 had we not had the fair value adjustments. That is going to happen in mortgage; I would say you cannot really exclude it.

Woody Lay: That is helpful color. And then maybe shifting over to the net interest margin outlook. Matt, you noted some of the loan repricing tailwinds through the remainder of the year. Growth is expected to remain strong; you are going to have to fund that growth. Do you think you can continue to post strong growth and see margin expansion, or are we looking more at a flat margin with incremental growth?

Matthew Alan Switzer: I think we will see a little bit more margin expansion because of the debt payoff I mentioned, and we also had a little bit of a drag in the margin from moving those loans to held for sale. We reversed some deferred costs that ran through the margin. It was only like a basis point, so we will see some margin expansion next quarter and then probably inch up from there. I would not expect margin to hit 3.60%, but would we hit high 3.40s to 3.50% as we go through the year? Most likely.

Woody Lay: And then maybe just last for me on the credit. I appreciate the comments on the paydowns of those 90-day past-due ones subsequent to quarter-end. But just on some of those larger that are still on NPA, any update on those and when we could see possible resolution?

Dennis J. Zember: Matt, it is funny you asked that—Matt looked straight at me, like, answer that one. I mean, there are two commercial real estate deals—office—and both had pretty good quarters on new leases. So I think it is trending positive there. I think two things are trending positive. One, there is more leasing activity. Sales cycle on new leases in an office park like this is longer than we want it to be, but still the fact that they are talking to a lot of folks and that there is a pathway is positive. The second is cap rates are improving. They are not falling like we would like them to, but they are improving.

And so I think every day that goes by, we are a little safer on the value. They are current, so these are not—[inaudible]—I mean, it could change anytime, but right now, things are trending more positive there. Does that answer your question?

Woody Lay: Yeah. No. That is perfect. I appreciate you taking my questions. Congrats on the good quarter.

Dennis J. Zember: Thanks, Woody.

Operator: Your next question comes from the line of Russell Elliott Gunther with Stephens Inc. Your line is open.

Russell Elliott Gunther: Hey. Good morning, guys. Morning, Dennis. Morning, Matt. Maybe just a quick follow-up on the margin commentary. Appreciate the directional guide, but maybe some of the underpinning assumptions. It would be helpful to get a sense for where new commercial loan origination yields are today. And then, Matt, within the guide, how are you thinking about deposit costs from here? Is there room to move those lower, or is there kind of a flat to upward bias within your margin expectations?

Matthew Alan Switzer: I will start with the last piece. I think on the deposit side, it is probably flat—up or down a couple of basis points—but I would not expect any substantial moves in the cost of deposits in the near term.

Dennis J. Zember: On the production side, in the core bank we are probably in the flat mid-6% range on new originations. For structure, we are randomly doing five-year; all-in we are probably close to five-year Treasury plus 275 basis points. Mortgage warehouse is probably better than that. Mortgage warehouse is probably one-month SOFR plus 315 to 320 basis points. Panacea is outstanding. I mean, the niche that they have established for themselves—their marketing, their profile, the opportunity to do business with them—is reflected in the price. I think the rates they are getting on their production are exceptional too. They are probably five-year Treasury plus 250 to 260 basis points on that kind of credit.

On funding, Matt and I regularly debate this. Across the bank right now, I feel like we could probably take digital down 25 or 30 basis points and probably not lose that much. Could probably take the core bank down 5 or 10. It is already very low, but there are some savings that we could get on the deposit side. The problem is it puts us in a place where we are not very strong on the growth side. Again, we are not leaning into rate on digital or anything else, but we also do not want to not be competitive. Right now, when we are looking at Panacea—Panacea could do $200 million for us this year.

Warehouse could grow $3 to $4 hundred million. The core bank is the best it has ever been. That could be a couple hundred million. We just do not want to get in a position where we go harvest 30 basis points of deposit cost and then just rely on Home Loan Bank advances. We do not want to be that bank.

Russell Elliott Gunther: Alright. Thank you, guys. Appreciate the color there. And, Dennis, you kind of took my next question in terms of how that loan growth might shake out from a vertical perspective, so I appreciate that. Maybe I would then switch gears to the expense front. How are you guys thinking about the overall expense base inclusive, if we could, of the mortgage banking vertical as well?

Matthew Alan Switzer: Inclusive of mortgage, that is kind of hard to spit out, unfortunately, because it is so tied to volume. It is going to be an almost direct percentage of whatever their volume is going to be in the next quarter. I like to think of mortgage as kind of net noninterest income and noninterest expense for the year. That does not include spread income, which we also include in our profitability. It is probably going to net us $5 to $6 million for the year. So you can kind of back into—take whatever your noninterest income assumption is for mortgage and back into expense from there. Otherwise, we focus on that core expense number, which is around $22 million.

I think we will stay in that $22 to $23 million range for the year.

Russell Elliott Gunther: Okay. Understood. Appreciate it, Matt. Thank you. And then just last one for me, guys, would be an update on your ROA glide path. You have mentioned in your remarks you would expect to hit your targets, which I think are 1% ROA by the end of the year. What aspirations do you guys have from there and a sort of timeline to achieve?

Dennis J. Zember: Let me answer that before Matt moves the goalpost again. I am trying—Matt sometimes does not like how aspirational I am, Russell. I understand. Yep, I get that. I mean, 1% is a good line for us because we have not consistently been there. But 1% is not going to—given our growth rates and our dividends, that will probably keep the bank capital levels flat. But we want to build book, we want to build capital ratios, we want to position ourselves to be strategic, and so we have to be higher than that. I think mortgage at scale—I have said it is 57 basis points—mortgage at scale is probably another 20% higher than that.

That is going to be a big deal in the ROA. That is probably another 10 basis points for the ROA. Warehouse is probably going to add another 10 basis points once it gets to scale. The AI thing that Matt is working on and the rest of our bank—over time, we are not looking at that as something that is going to reduce headcount. What it is going to do is take the experts we have and just make them able to manage twice as much, and we can manage like that when we have growth rates like we have. I know I am going to need this staff over time.

Aspirationally, we ought to be—given these lines of business on top of our core bank—at 1.25% or better on ROA, and probably are looking more at ROTCE to be something that would get near 15%. I think if 15% ROTCE, you kind of control your future. People do not like your stock, you can just buy it back. If they do like your stock, then you can do other strategic things. But, really, until you get to that point, all you are doing is working to get to that point. In a box, you know.

Russell Elliott Gunther: Alright. I appreciate it, guys. Appreciate your thoughts and for taking all my questions. Thank you very much.

Dennis J. Zember: Thanks, Russell.

Operator: Again, if you would like to ask a question, please press star-1. Your next question comes from the line of Christopher William Marinac with Janney Montgomery Scott. Your line is open.

Christopher William Marinac: Hey, good morning. Dennis, the last couple of days, banks have talked about the competitiveness of digital deposits being more expensive than brokered funds, and I am curious what you think about that. It seems that you are in a much better place. You have been doing the digital banking much longer, and I am just curious how you look at that. And is that digital area going to grow less as a result of the rate environment?

Dennis J. Zember: I am so glad you asked that question. I remember speaking on a panel somewhere, and I was talking about how we had these 25 thousand or 30 thousand digital customers all across the country that have never been in a branch—probably never seen one of our bankers. And I was talking about how we sometimes peruse their social media or we, in communications with them, find out that they have a dog—you know, a Cavapoo—and we will do things that are very community banker. We will send them some swag with a dog collar, or we will reach out to them when we are in their area. I have gone to see customers when I am in Telluride.

I found additional customers that were out there and went and had breakfast with them. I am not going to sit here and say that these deposits are not more expensive—honestly, they should be. We have 25 thousand or more digital customers that we are banking with six people. So they should be more expensive; there is very little cost associated with it. But we have separated them from being just straight rate-driven by being community bankers. The same thing that we do in the bank to make our customers not be solely rate-focused, we are doing that on the digital platform.

I am not going to say we are the only people doing that, but I will tell you that we are probably more effective at that than our competition. We have been doing that for now three years since we got the real big slug of the deposits in here. Our average digital customer is probably down 150 basis points from where their peak was. The average digital customer has been here probably more than 30 months, closer to 36. Their average age is over 50. Average deposit is probably $30 thousand to $40 thousand. They have the cell phone numbers of the bankers that work them. Everybody has talked to a banker.

It is things like that have separated these customers from being solely rate-focused. In the core bank, the core bank’s cost of deposits is probably 1.80%, 1.75%, 1.59%—the digital is sitting there at like 3.75% or so. Like I said, we could probably push that down 25 or 30 basis points—get them to 3.50%. So yes, obviously, more expensive, but it is growing at that level. I am very proud of how our bankers pushed a community bank attitude and approach onto these 25 thousand customers, and that has paid off. Chris, that was a very long and rambling answer to your question.

Christopher William Marinac: That is okay. Thanks for sharing all that. My other question just goes back to the mortgage business. As you continue to thrive in mortgage both in terms of production and gains plus the mortgage warehouse, is there a natural cap that will happen to how much of that business you want in the whole company? Will the bank just grow around it and kind of naturally cap how much mortgage will be down the road?

Dennis J. Zember: That is the kind of thing you do not worry about when you are starting. Matt and I chuckle all the time that our claim to fame is that we find problems and we fix them so well that they create new problems. Mortgage really should not be—we do not want to be a mortgage company here. We want to run an amazing mortgage company, but we do not want to be just a mortgage company. It really probably should not be more than 20% of our bottom line—no question about it. Some of it is we have a dynamite team in mortgage and a dynamite leader. We have that for the core bank as well, too, in Rick.

But in the core bank, we are still not fascinated with CRE. We are doing it, but that is not our hallmark. We are in some not really fast-growth areas in the core bank. So over time, we have got to find a way to grow the core bank faster so that mortgage, warehouse, Panacea—all of those stay as complements to the bank and not the whole story. We do not want to change the growth profiles or the growth dynamics. Our core bank—what our core bank right now is doing is amazing, and I do not want to step on the gas any harder and get a different kind of business. Some strategy will open up to us.

We have not been in an M&A position to do that. Maybe that will open up one day, and that is probably the catalyst we need to build on the core bank and let these other items that we do so well just run and feed them as a complement.

Christopher William Marinac: Great. That is very helpful. Thanks for that. I appreciate all the information today.

Dennis J. Zember: Thanks, Chris.

Operator: Thank you. There are no further questions at this time. I would like to turn the conference back over to Dennis J. Zember for any closing remarks.

Dennis J. Zember: Thank you all for joining our first quarter conference call. If you have any questions, Matt and I are very happy to get on the phone with you. Otherwise, have a good weekend. We will talk to you soon.

Operator: This concludes today’s conference call. You may now disconnect.