Image source: The Motley Fool.

DATE

Friday, Oct. 23, 2026

CALL PARTICIPANTS

• Chief Financial Officer - Matthew Alan Switzer
• President and Chief Executive Officer - Dennis J. Zember Jr.

TAKEAWAYS

• Net Income -- $8.7 million, representing a 28% increase over the same quarter a year ago.
• Diluted EPS -- $0.35, compared to $0.28 in the prior year period.
• Net Interest Margin -- 3.66%, driven by disciplined loan repricing and a valuable deposit portfolio.
• Core Net Interest Margin -- 3.59%, excluding a $700,000 recovery from a previously charged-off loan.
• Annual Net Interest Income -- Increased by approximately $28 million over the last 12 months, reflecting balance sheet restructuring and loan repricing.
• Total Loans Held for Investment -- $3.5 billion at quarter end, up 9.3% from a year ago.
• Total Deposits -- $3.47 billion, an increase of 4% year over year.
• Core Bank Loan Growth -- 11% annualized in the third quarter, supported by a $160 million pipeline.
• Panacea Loans Held for Investment -- $603 million, up 14% annualized from the second quarter.
• Mortgage Warehouse Balances -- $501 million, representing a 53% increase from Sept. 30, 2025.
• Mortgage Closed Volume -- $347 million, up 12.5% year over year despite market disruptions.
• Mortgage Division Loss -- Approximately $200,000, reflecting a $2.5 million reset in open pipeline values due to rising interest rates.
• Mortgage Volume Guidance -- Expected to decrease from $1.6 billion to $1.1 billion annually if elevated interest rates persist.
• Fixed Cost Reductions -- $4 million per year in the mortgage division through support and vendor rightsizing.
• Operating Return on Average Assets -- 0.80%, compared to 0.70% in the third quarter of 2025.
• Tangible Book Value Per Share -- $13.81, up 18% from the prior year.
• Tangible Common Equity Ratio -- 8.14%, improved from the mid-7% range a year ago.
• Core Operating Expense Burden -- $24.2 million, after adjusting for division volatility and nonrecurring items.
• Nonperforming Assets -- 1.43% of total assets (excluding SBA guarantees), down from 2.07% a year ago.
• Provision for Credit Losses -- $1.1 million, primarily driven by loan growth.
• Digital Platform Deposits -- $1 billion, with a cost of deposits of 3.80%.
• FHLB Advances -- $220 million, up from $85 million on Sept. 30, 2025.
• Expected Year-End Balance Sheet Growth -- 8% to 8.5%, based on current mortgage and warehouse trends.
• Projected Annual Savings -- $3 million from vendor consolidation and statement services starting in early 2027.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

• Zember noted that if current high interest rates persist, the company expects annual mortgage volume to decrease from $1.6 billion to $1.1 billion.
• Switzer stated, "The third quarter included approximately $700,000 of recoveries from a previously charged off loan," which inflated the reported net interest margin.

SUMMARY

Primis Financial Corp. (FRST -4.14%) reported third quarter results showing margin expansion and growth in its core banking and specialized lending divisions. Management stated that the company is harvesting the benefits of prior strategic investments while adjusting the mortgage division to a higher interest rate environment. The company reported improvements in capital levels, with tangible book value increasing 18% year over year. Zember indicated that the core bank and digital platform continue to grow deposits profitably, and the company intends to maintain a disciplined approach to balance sheet growth to further increase its tangible common equity ratio.

• CEO Zember stated, "Staying disciplined on both sides of the balance sheet and with loan repricing has been the real driver" of the $28 million growth in annual net interest income.
• The mortgage division reduced fixed costs by $4 million annually to align with lower volumes resulting from the 10-year treasury increase of nearly 100 basis points in the quarter.
• Management expects tangible common equity to exceed 8.5% in the coming quarters through earnings improvement and managed balance sheet growth.
• The rebranded Banking Valet service serves as an enhancement to the physical branch network, with approximately 87% of users being commercial customers with average balances near $1 million.
• CFO Switzer projected that loan repricing from five years ago will continue to provide incremental margin expansion of 4 basis points to 5 basis points over the next two to three quarters.
• The digital platform has achieved high customer retention, with 76% of digital deposits coming from customers who have been with the bank for at least three years.

INDUSTRY GLOSSARY

• Banking Valet: A proprietary app providing mobile banking services directly to commercial and consumer customers.
• Panacea Financial: A specialized division focused on providing financial services to doctors and medical professionals.
• Mortgage Warehouse: A line of credit provided to mortgage lenders to fund loans until they are sold in the secondary market.
• Tangible Common Equity (TCE) Ratio: A measure of a bank's capital adequacy that excludes intangible assets like goodwill.
• Net Interest Margin (NIM): The difference between interest income generated and the amount of interest paid out to lenders, relative to the amount of interest-earning assets.
• FHLB: Federal Home Loan Bank, a source of wholesale funding for financial institutions.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to Primis Financial Corp. Third quarter earnings call. After today's prepared remarks, we will host a Q&A session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Matthew Alan Switzer, Chief Financial Officer. Matthew? Please go ahead.

Matthew Alan Switzer: Good morning. Before we begin, please note that many of our comments during this call will be forward looking statements which involve risks 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, 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 Zember.

Dennis J. Zember Jr.: Thank you, Matthew. Thank you for everyone that is joined our third quarter earnings call. For the quarter, we are reporting $8.7 million of net earnings or about $0.35 per share which is a healthy increase of 28%. Over the same quarter a year ago. A couple notable items had a real outsized impact on the quarter's results. First was our net interest margin coming out of the community bank, which increased to about 3.66% in the current quarter compared to a year. Compared to the same quarter a year ago, that is about a 15% improvement. When we 3.18%.

We continue to benefit from a very valuable deposit portfolio with long term loyal customers, and we pair that with loan production levels. Loan production, and loan repricing opportunities that have delivered real results. Putting that steady quarter over quarter improvement in perspective, we have grown annual net interest income by about $28 million over the last 12 months. The balance sheet restructuring we did at the end of 25 definitely helped, but staying disciplined on both sides of the balance sheet and with loan repricing has been the real driver. Our core bank and our digital platform combined quarter after quarter growing deposits at a healthy and profitable level.

And our bank loan engines focus on higher quality customers with yields and rates that I am pretty. That I know are at a win level. there is real competition out there right now on the loan side, and customers are shopping very hard. So having a valuable deposit side of the balance sheet is critical to being competitive and profitable. On the negative side, we had a falloff in revenue in the mortgage company, that corresponded to a pretty steep rise in rates. The 10 year treasury increased almost 100-basis-points in the third quarter. And it moved Freddie Mac's average 30 year mortgage from 6.43% at the end of June to 28 at the end of September.

Our mortgage CEO, Tyler Briggs, volume based on these rates. And if these higher rates were to persist, we think annual volume would decrease from about $1.6 billion a year to about $1.1 billion a year. Knowing this might be a new normal, we have been rightsizing costs mostly in support and vendor categories. Since mid September and have reduced fixed costs by about $4 million a year. These fixed cost reductions are augmented by the fact that virtually none of our commission based sales team have regular salaries. And so we know that a notable reduction in compensation will occur as volumes fall.

In the third quarter, the mortgage company lost about $200 thousand which included the $2.5 million reset in the open pipeline values. And about $300 thousand of provision for growth in portfolio and construction loans. This performance with these headwinds I am sorry. This performance with those headwinds combined with the restructuring work that our mortgage team has undertaken give us confidence in this division as we adjust to what might be a new norm in rates. On the balance sheet, we ended the quarter with about $3.5 billion in loans, up 9.3% from a year ago. But only up about $30 million from the end of the second quarter.

Production in our core bank was very good, with very good rates, and we supported that with mostly steady balances in warehouse and higher balances in Panacea. I would expect balances to come in a little in the fourth quarter just given the mortgage backdrop and how that is going to affect warehouse. I expect that we can probably finish the year with total growth in the balance sheet of about 8% to 8.5%. on year-end balances. Deposits have grown slower over the past year as we have been unsure about where rates were headed. I know that our loan pricing and our sensitivity allow us to be would allow us to be more aggressive on rates.

For deposits, but we did want to outrun the Fed And so we stood still waiting to know which direction rates will be going and rely more heavily on the Federal Home Loan Bank. Still today, we do not have any wholesale or broker deposits and we have a pipeline of large deposit opportunities that should move our year end balances materially at very attractive rates. Lastly, capital levels are creeping up like we believe they would. For the quarter, tangible book value and tangible common equity to total assets improved. Tangible book value ended at $13.81, which is 18% higher. Than a year ago.

And our TCE ratio improved to 8.14%, which is materially higher than a year ago when we were in the mid-7s. Matthew and I really would like for TCE to be north of 8.5% And we expect that a continued improvement in earnings and cost balance sheet growth will get us there. in a few quarters. 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 in our 8 ks filed with the SEC. As Dennis mentioned, Primis reported earnings of $8.7 million or diluted earnings per share of $0.35 in the third quarter compared to $9.4 million or $0.38 per share in the second quarter and $6.8 million or $0.28 per share a year ago. Operating earnings were $0.35 per share this quarter, up from $0.23 in the second quarter and $0.28 a year ago.

Operating return on average assets was 80 basis points versus 53 basis points in the second quarter and 70 basis points a year ago. Pretax pre provision operating net income was $12 million in the third quarter, up 38% From $8.7 million in the second quarter. Loan balances grew 4% annualized from June 30 to September 30, and we are up 9% year-over-year.

Core bank loan growth was approximately 11% annualized in the quarter, and Panacea loans held for investment increased $20 million to $63 million partially offset by a $43 million decline in period end mortgage warehouse balances, while on a $51 million average earning assets were approximately $3.94 billion up slightly linked quarter but up 9% compared to the year ago quarter. Total deposits ended the quarter at $3.47 billion, up $26 million linked quarter and 4% year-over-year, while FHLB advances were up $80 million to $220 million. Net interest income was approximately $36.3 million up from $33.8 million last quarter and $29 million a year ago.

The third quarter included approximately $700 thousand of recoveries from a previously charged off loan. Excluding that recovery, net interest income was $35.6 million up 5.5% linked quarter. Our reported net interest margin was 3.66%, up 21 basis points linked quarter and 48 basis points year over year.

Excluding this interest recovery, core net interest margin was 3.59% up a healthy 14 basis points from the second quarter While earning asset yields continue to increase, we have benefited from a stable funding base with cost of total deposits up 28 basis points in the third quarter up 3 basis points linked quarter and down 18 basis points year over year while total cost of funds was 2.47%, up 1 basis point linked quarter and down 15 basis points year over year. Our provision this quarter was $1.1 million compared $5 million in the second quarter and a recovery of $449 thousand a year ago.

The majority of the provision this quarter was driven by loan growth as described above. Asset quality remained stable with nonperforming assets excluding portions guaranteed by the SBA, improving to 1.43% of total assets at quarter end from 1.45% at June 30. and 2.07% a year ago. Core net charge offs were 17 basis points in the third quarter, down 53 basis points in the second quarter and up from 3 basis points a year ago. With the year over year increase largely driven by 1 credit that had previously been reserved for. Noninterest income was $12.9 million in the third quarter compared to $22 million last quarter, which also included a $5.9 million investment gain.

Mortgage banking revenue was $8 million, down from $11.4 million last quarter and $8.9 million a year ago, reflecting the significant market disruption during the quarter. Primis Mortgage still closed $347 million of volume, which was a 12.5% increase year over year. We also reported $1.5 million of gain on sale income related to Panacea loans and the guaranteed portion of SBA loans this quarter. Other income included approximately $900 thousand of recoveries on a previously charged off loan reflected in the third quarter.

On the expense side, reported noninterest expense was $37.2 million down $38.2 million in the second quarter and up from $32.3 million a year ago Excluding mortgage and Panacea division volatility and nonrecurring items, our core operating expense burden was approximately $24.2 million versus $24.9 million in the second quarter and $21.6 million a year ago. Included in the third quarter numbers are approximately $1.4 million of loan related expenses and $400 thousand of professional fees and other third party expenses incurred in the quarter.

Excluding these items, the core operating expense burn was essentially flat with the run rate we discussed last quarter and down slightly from the year ago period when adjusting for the lease expense associated with our sale leaseback in the fourth quarter of 25. We continue to expect approximately $3 million of annualized savings from vendor consolidation and statement services beginning early in 2027. These savings are an important part of our effort to drive continued operating leverage through 2027. In summary, the third quarter demonstrated continued strength in the core banking franchise, further margin expansion, stable credit costs, and meaningful year over year improvement in operating earnings.

Break even on debt overhead for mortgage, which would still be lower than normal for a typical third quarter, would have had us at a 1% ROA for the third quarter as we have been targeting. We cannot control the environment, but we are taking steps to align costs with current volumes while preserving our ability to benefit when the market recovers. We like how we are positioned right now and we could not be more confident that profitability is going to continue to improve as planned. With that, operator, we can now open the line for Q&A.

Operator: We will now begin the Q&A session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Russell Gunther. From Stevens. Your line is now open. Please go ahead.

Russell Gunther: Hey. Good morning, guys.

Matthew Alan Switzer: Hey, Russell.

Dennis J. Zember Jr.: Russell, good morning.

Russell Gunther: Wanted hey, Dennis. Hey, Matthew. Guys, wanted to start out on the margin. So great score result this quarter. You are well through kind of where you thought you might end the year, I think, in that 3.50%, 3.55% range. So it would be helpful to get a sense for where you see the margin trajectory from here. Into the fourth quarter and next year. Would you guys expect to see continued expansion, or has the rate environment or competitive landscape kind of shifted your view on where that margin ultimately shakes out?

Matthew Alan Switzer: Yeah. I think we will continue to see some incremental margin expansion Russell. it is probably not gonna be quite as dramatic as it was this quarter, but we have got loan repricing still in front of us from loans we put on 5 years ago. And that is gonna still play out over the next call it, 2 to 3 quarters. So we do. I mean, we have we have strongly benefited from our core deposit base, and I do not have the beta in front of me, but our beta on this last rate move was very low. We have been selectively adjusting rates as customers have raised their hand.

We have not been aggressively moving rates up across the board or going after a hot money which is including on the digital platform. We did not adjust rate on the digital platform after the last rate move. So we are gonna continue to see. You know, after the Fed move, we are gonna continue to see people raise their hand or ask for concessions, and we will match through that. But we do not expect a big move in cost of funds. It will be more incremental. And then loan yields will continue to tick up.

So I think that when you put all that together, we will have incremental margin expansion 4 or 5 basis points over time, but not quite what we saw this quarter.

Dennis J. Zember Jr.: Big moves are kind of behind us to get us here.

Russell Gunther: Well, still an excellent result, sounds like some forward progress to. Still to come. So appreciate the color. Very helpful. Switching gears onto the expense side of things. I hear you on how the mortgage revenue impact. Will impact comp and the step down there. Outside of that, I mean, how are you thinking about kind of core trends in the fourth quarter? And then do we see more of a kind of step down in 2027 as some of those efficiency initiatives pull through? Just be helpful to get I hear you on, positive operating leverage, but maybe just a finer point on kind of core expense trends.

Matthew Alan Switzer: Yeah. I think last quarter, we talked about a kind of run-rate expense of call it, $22 million to $22.5 million quarterly when you take out mortgage and panacea and nonrecurring noise. We are basically in that same ballpark this quarter. We take out those couple of expenses that I highlighted and mortgage and Panacea And I still think that is you know, around that $22.5 million number is still, a good spot for the fourth quarter as we go into next year. Next year, it will be kinda midway through the first quarter. We will start to see those savings from our contracts around the statements and other vendor consolidation the $3 million number I highlighted.

So in our mind, that is incrementally bringing down that $22.5 million number. Now we will see. You know, we adjust salaries and things like that late in the first quarter So that will put some pressure up, but we are we are looking for offsets to that to keep us in that low-$22 million range. Or less after those statement savings.

Russell Gunther: Okay. Thanks, Matthew. And then, guys, just last 1 for me if I could. The deck had suggested the 2024 estimates are achievable. I see consensus near $2, that puts you firmly in that a sustainable ROA north of 1. Do you have a goalpost in mind beyond that and a timing you would hope to achieve it?

Dennis J. Zember Jr.: Oh, man. It would not be normal for me to tell you the next goal before we get to this goal. That Russell. But I mean, our peer group's better than that. And you know, the. Some of the things that we have been doing over the years in and building stuff around here, we are done with that. We are simply harvesting the good that all of our efforts have provided. So I think we would be higher than that. And the mortgage, investment sort of requires it. So I think adjusting mortgage even in this at this level, if these rates persist, then we are really somewhere in the $1.1 billion to $1.2 billion.

I still think mortgage would add 10 basis points to the ROA. Over a year. I think if it was higher, if we were sort of in the $1.7, $1.8, probably be closer to 15 basis points. But at 10 basis points, given where the margin is and some of the OpEx, things that Matthew was mentioning that are I mean, we are a month away. From some of these things happening. 1% is definitely insight. We would have been there this quarter if, just sort of steady on mortgage. Beyond that, we really just got to sort of get to and get above peer level. Which is probably another 15 basis points.

Russell Gunther: Got it. Okay. Very good, guys. Thanks so much for taking my questions.

Dennis J. Zember Jr.: Alright. Thanks, Russell.

Operator: Your next question comes from the line of Steve Moss with Raymond James. Your line is now open. Please go ahead.

Analyst: Hey, guys. Good morning. This is Chase on for Steve.

Matthew Alan Switzer: Hey. Good morning.

Dennis J. Zember Jr.: Hey. So good core bank loan growth this quarter, and I saw the pipeline number in the release. So thank you for that. Can you just give a sense where you are seeing the best opportunities today and maybe how to think about growth in 4Q into 2027? I mean, I think 4Q loan growth I think the core bank will probably continue with well, actually, the core bank may be flat in the fourth quarter. We have 1 big loan payoff. Disappointing that it is paying off, but that is probably gonna keep us flat on the core bank. I mean, mortgage warehouse had a strong third quarter despite where rates went.

But, I mean, it is the fourth quarter. I could. I would expect it to sag a little. I think for the year, we are gonna end up with loan growth in probably the 8% category. You know, we have got several good drivers. We have the core bank. We have Panacea. We got mortgage warehouse. We can kind of lean on any of them in a quarter to sort of keep earning assets moving. But I think we end the year somewhere around 8%, which I think is right in line with where Matthew and I wanted to go. It allows us to have earnings grow in TCE. It does not pressure that, Matthew.

I do not wanna get back into sevens. We really wanna be kinda closer to 8.5 or 9. And so I think 8% loan growth is good. And I would tell you, I think 8% given those loan drivers, those businesses, I think we could probably sustain that for a couple more years. I think we are gonna have, on the deposit side, I think we can fund the majority of that with core deposit growth, not using broker, not using wholesale We are going to have-- I am pretty sure we are gonna have a dynamite fourth quarter on deposits. Just given some of what I know is gonna close and show up here.

So I think for the year, we will probably be call it, 3%, 4%, 5% on deposit. But next year, I think we would be stronger than that. So, yeah, I am saying we are probably gonna settle back from 9% right now to probably around 8% for the whole year. And I would probably call for that same thing next year.

Matthew Alan Switzer: Yeah. I mean, the core bank had a really good third quarter. But for the year, will not be at an 11% rate. And we think about the core bank more about 5% to 7%, year in and year out. And then, you know, we could manage the panacea growth. We can manage the mortgage portfolio. So something mid to high single digits is comfortable for next year. And not having to push is a real it is a real luxury not having to push hard on the core bank. You know? I mean, keep it on sort of in the 5%-6% growth rate. Because, I mean, 1, we focus on better deposits.

We focus on better, less rate sensitive, that are less rate shopper and we can really focus on the best loan opportunities, whether that is the loan rate or the yield or structure, credit quality. So we are able to be a little more picky and then lean harder on you know, whether it is panacea, warehouse, or even digital. To sort of get us to where we wanna be. I think it is a real luxury.

Analyst: Appreciate all that color there. And just, staying on loans here, where are new loans pricing at now today?

Dennis J. Zember Jr.: Warehouse. Well, the core bank probably comfortably. I mean, all blended comfortably you know, either you know, prime plus a little bit. Panacea is probably, you know, 5-year plus 225-250 basis points, maybe. But probably, I mean, it is with 5 year moving up, it is probably tightened that spread a little. And warehouses, generally like SOFR with fees, generally like SOFR plus 275 to 300 basis points. Got that. Appreciate that. And just 1 more for me here. I believe I heard you say $1.1 billion to $1.6 billion of mortgage production at current rates.

And I know it is a bit tough to answer, but mortgage rates, you know, came down another 50 to 100 basis points, and I know we are down a lot in the 10-year this week, How much upside could there be to that range, you think? Yep. I keep my. I have found that I cannot accurately predict anything with mortgage outside of tomorrow. But that is a good question. And I will tell you, we have got a lot of. Matthew has got a massive amount of algorithms and you know, r squareds on mortgage.

I will tell you that if you know, at our current level, if, you know, with rates sort of at 7%, 7% to 7.25%, we are about $1.1 billion mortgage shopping. At that level, we are probably about 30 to 35 basis points of pretax on volume. So maybe $3.5 million, $4 million at the high end. Pretax. At $1.6 billion, if rates were, like, in the mid-6% range, like we were at the end of the second quarter, I mean, we were on track to do $1.6 billion, $1.7 billion maybe a little more. And at that level, we are probably comfortably over 50 basis points of profitability.

So it $1.6 billion, you know, you are doing somewhere closer to $8 million of pretax. You know, we. Again, our mortgage company does not have the luxury of nothing's boosting our mortgage company's profitability with servicing. Or servicing revenues or recurring any of that, we do all service relief. Type sales. We hedge a good bit. But, I mean, there is a lot of upside I will tell you this. I. And I am reluctant to say this because I do not want anybody to hear us thinking that we are just hoping for higher rates. We are not.

We are like, adjusting to today's rate with cost saves that will make us more efficient if rates sort of fall. But, we are sort of presuming that these rates will be persistent. I mean, inflation is I mean, the economy is a lot hotter and stronger. Than we wanna believe it is. At least what the results say. And so we are sort of pretending that this is not pretending. We are acting like this is our new norm. I say that I do watch the 10-year every day, and I celebrate every time it is in the red. You know? Anyway, go ahead. Alright. No. I will just. I will say I appreciate all the color, guys.

I will step back here. Thank you. Appreciate it.

Operator: Your next question comes from the line of Christopher William Marinac from Brean Capital. Your line is now open. Please go ahead.

Christopher Marinac: Hey. Good morning. Dennis, can you brag a little bit on the Banking Valet business that you have rebranded and maybe talk about the opportunities and more deposit growth from that channel?

Dennis J. Zember Jr.: Yeah. Banking Valet was what we used to call Vibe. For those on the call, and that is basically our proprietary app where we deliver banking services to mostly commercial customers, but commercial and consumer customers. Basically, any service you can get in the branch you can use our app and we will bring that service to you. So, we have thousands of customers using it of all the customers that have downloaded it and used it, maybe 1 or 2 have quit using it or deleted it. So it is very popular. Virtually, none of these customers have closed their accounts.

If probably the leading-- 1 of the leading things are commercial and treasury people lead with when they are in front of a new customer? Virtually, every commercial deposit relationship we have that did not come because of a loan. Came because of this service. You know? it is very, very valuable, very, useful. Probably half of our checking accounts. Are rooted with this app.

So I would tell you probably. that. and that is very important because especially in a rising rate environment where deposits, checking accounts, seem to sag a little bit, I think this is something that is gonna keep us pretty steady or potentially increasing We have beta-tested this in a faraway market to see what would how we could deliver services. We found COIs salespeople, and had some success. We have not I am not gonna go out on a limb and say that is the future here.

Really, what we do is we just use this to expand the power of our branch beyond 5 miles and we are selling probably up to 20-25 miles of each of our branches. It just makes our branches it is not a branch replacement tool. it is sort of a branch enhancement tool. You know, we changed the name from V1BE to Banking Valet just to be a little more progressive and sort of fit with the rest of the bank as well.

Operator: So I do not know, Christopher, if that answers your question, but So, Dennis, my impression is that you can lean more into this and as sort of with a weak mortgage environment that you can lean more into banking and certainly that may be a blessing in disguise.

Christopher Marinac: Just curious if you think that is gonna help you get more core deposits continue to have this low cost funding engine that can drive earnings while you manage expenses and hopefully get a turn in the mortgage business later.

Dennis J. Zember Jr.: Yeah. Christopher, I mean, I. The numbers you cannot look at the balances in our numbers and sort of if you look at the balances, you cannot really see the success of this over the last 3 or 4 years because I mean, really, you have had so much shift mix going on as rates have moved up. But what you can see is the stability in deposits as our betas have shrunk. To rising rates. And here we are with an extremely attractive cost of deposit. And I would tell you a lot of it is because of this. it is rooted in this plus you know, long term loyalty.

So what we have we are growing deposits aggressively with this. it is just not as visible because of shift mix. But I think as rates. If rates were to sort of stabilize I think you would. I do not think. I know you would see stronger results in noninterest bearing deposit. Noninterest bearing to total. Got it.

Christopher Marinac: that is helpful. And then, Matthew, just a quick 1 for you. The operating expenses, should we see a small downtick in Q4 and then the more bigger change as the systems and other changes that you have already announced kick in Q1?

Matthew Alan Switzer: I think we will be flattish in the fourth quarter and then start to tick down in Q1.

Christopher Marinac: Okay. So the $3 million adjustment, we should see a lot of that in Q1.

Matthew Alan Switzer: Yeah. Perfect.

Christopher Marinac: Okay. Then anything on the credit side, you had success lowering charge offs. And criticized backed off a little bit. Anything in the pipeline in terms of where that could go further from here?

Matthew Alan Switzer: Yeah. I mean, not at the moment. We did not have any migration in the quarter. it is really focused on working through the months we already have.

Christopher Marinac: More curious if losses would be the same or if it is possible that they could grind. Lower. Oh, net charge offs? Correct.

Matthew Alan Switzer: I mean, we yeah, we have we have some pretty substantial specifics specific reserves on a few of the classified assets. I mean, we have debated or are debating and mostly from an accounting standpoint if we should you know, charge those off. As opposed to just carrying them into specifics. And so that the NPA ratio is not as inflated But and that we may do that before the end of the quarter, but that is I think that is it. I do not think we see any. But aside from that, I do not think we see anything that would move that number. Not right now that would generate incremental provisioning. You will be charging off existing reserves.

Got it.

Christopher Marinac: Okay. that is great. Thank you, both. I appreciate it.

Dennis J. Zember Jr.: Thanks, Christopher.

Operator: This concludes the Q&A session. I will now turn the call back to Dennis Zember closing remarks.

Dennis J. Zember Jr.: Thank you all again for joining us on our third quarter call. Hope everybody has a good weekend, and a good fourth quarter, and we will talk to you soon.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.