Primis Financial (FRST) Telefonkonferenz zum 3. Quartal 2026: Marge weitet sich bei rückläufigen Hypothekenerträgen aus

Wichtigste Erkenntnisse

• Die Primis Financial Corp. (FRST) wies für das 3. Quartal 2026 einen Nettogewinn von 8,7 Millionen US-Dollar bzw. 0,35 US-Dollar je verwässerter Aktie aus, verglichen mit 6,8 Millionen US-Dollar bzw. 0,28 US-Dollar je Aktie im Vorjahreszeitraum.
• Der Zinsüberschuss stieg im Jahresvergleich von 29,0 Millionen US-Dollar auf 36,3 Millionen US-Dollar. Die ausgewiesene Nettozinsspanne weitete sich um 48 Basispunkte auf 3,66 % aus; ohne eine Zinsrückerstattung von 700.000 US-Dollar lag die Kernspanne bei 3,59 %.
• Die zur Kapitalanlage gehaltenen Kredite stiegen im Jahresvergleich um 9 % auf rund 3,5 Milliarden US-Dollar. Die Einlagen erreichten 3,47 Milliarden US-Dollar (plus 4 %), während die FHLB-Vorschüsse um 80 Millionen US-Dollar auf 220 Millionen US-Dollar sanken.
• Die Erträge im Hypothekengeschäft fielen von 11,4 Millionen US-Dollar im zweiten Quartal auf 8,0 Millionen US-Dollar, da höhere Zinsen die Geschäftstätigkeit beeinträchtigten. Die Hypothekensparte verzeichnete einen Verlust von etwa 200.000 US-Dollar, worin eine Neubewertung der Geschäftspipeline um 2,5 Millionen US-Dollar enthalten ist.
• Die Qualität der Vermögenswerte blieb stabil. Die leistungsgestörten Vermögenswerte (Nonperforming Assets), ohne die von der SBA garantierten Anteile, verbesserten sich von 2,07 % im Vorjahr auf 1,43 % der Gesamtsumme der Vermögenswerte, während die Kern-Nettoabschreibungen bei 17 Basispunkten lagen.
• Das Management rechnet mit einer schrittweisen Ausweitung der Zinsspanne, einem Kreditwachstum von etwa 8 % im Gesamtjahr sowie ab Anfang 2027 mit jährlichen Einsparungen von 3 Millionen US-Dollar bei Dienstleistern und Kontoauszugsservices.

Wichtigste Finanzdaten

Geschäfts- und operative Entwicklung

Die Kernbank war der Hauptgewinntreiber. Das Kreditwachstum der Kernbank lag im Quartal auf das Jahr hochgerechnet bei rund 11 %, während höhere Vermögensrenditen und eine stabile Refinanzierungsbasis die Ausweitung der Zinsspanne stützten. Die Gesamteinlagenkosten stiegen gegenüber dem Vorquartal um lediglich 3 Basispunkte und sanken im Jahresvergleich um 18 Basispunkte auf 2,28 %.

Die zur Kapitalanlage gehaltenen Panacea-Kredite stiegen um 20 Millionen US-Dollar auf 603 Millionen US-Dollar. Die Bestände im Hypotheken-Warehouse-Geschäft gingen um 43 Millionen US-Dollar auf 501 Millionen US-Dollar zurück, was das Wachstum der Kernbank und von Panacea teilweise ausglich.

Das Hypothekengeschäft sah sich mit einem deutlichen Zinsanstieg konfrontiert. Laut Management stieg die Rendite 10-jähriger US-Staatsanleihen im Quartalsverlauf um fast 100 Basispunkte, während der durchschnittliche 30-jährige Hypothekenzins von Freddie Mac von 6,43 % Ende Juni auf 7,28 % Ende September anstieg. Die Erträge im Hypothekengeschäft fielen auf 8,0 Millionen US-Dollar, obwohl das geschlossene Volumen mit 347 Millionen US-Dollar um 12,5 % über dem Vorjahreswert lag.

Primis hat die hypothekenbezogenen Fixkosten um jährlich rund 4 Millionen US-Dollar gesenkt, hauptsächlich in den Bereichen Support und Dienstleister. Das Management wies zudem darauf hin, dass die Vergütung im Hypothekenvertrieb größtenteils provisionsbasiert ist, wodurch die Kosten mit sinkendem Volumen zurückgehen.

Die Plattform „Banking Valet“, ehemals V1VE, bleibt zentral für die Gewerbeeinlagen-Strategie der Bank. Das Management gab an, dass etwa die Hälfte der Girokonten mit der App verknüpft sei, und führte einen Teil der Stabilität sowie der geringen Zinssensitivität der Einlagenbasis auf diesen Service zurück.

Prognose des Managements

• Das Management rechnet im Laufe der Zeit mit einer schrittweisen Ausweitung der Nettozinsspanne um etwa 4 bis 5 Basispunkte. Es wird erwartet, dass sich die Neufestsetzung der Kreditzinsen in den nächsten zwei bis drei Quartalen fortsetzt, obwohl die größten Spannengewinne wahrscheinlich hinter dem Unternehmen liegen.
• Das Kreditwachstum für das Gesamtjahr dürfte bei knapp 8 % liegen, verglichen mit einer früheren Spanne von 8 % bis 8,5 %. Für 2027 bezeichnete das Management ein Wachstum im mittleren bis hohen einstelligen Prozentbereich als erreichbar, wobei für die Kernbank im Allgemeinen ein Wachstum von 5 % bis 7 % angestrebt wird.
• Es wird erwartet, dass die Kernaufwendungen ohne Hypothekengeschäft, Panacea und einmalige Effekte im vierten Quartal bei rund 22,5 Millionen US-Dollar bleiben, bevor sie im ersten Quartal 2027 zu sinken beginnen.
• Die Konsolidierung von Dienstleistern und Änderungen beim Kontoauszugsservice sollen ab Anfang 2027 zu jährlichen Einsparungen von rund 3 Millionen US-Dollar führen.
• Das Management erwartet für 2026 ein Einlagenwachstum von etwa 3 % bis 5 % und für 2027 ein stärkeres Wachstum, das in erster Linie von Kerneinlagen und nicht von vermittelten Einlagen oder Großhandelsfinanzierungen getragen wird.
• Das Unternehmen strebt innerhalb mehrerer Quartale durch verbesserte Erträge und ein vorsichtiges Bilanzwachstum eine TCE-Quote von über 8,5 % an.
• Bei Hypothekenzinsen von etwa 7,0 % bis 7,25 % schätzt das Management das jährliche Hypothekenvolumen auf rund 1,1 Milliarden US-Dollar und den Gewinn vor Steuern auf 3,5 Millionen bis 4,0 Millionen US-Dollar. Zinsen im mittleren 6-Prozent-Bereich könnten ein Volumen von 1,6 Milliarden bis 1,7 Milliarden US-Dollar und einen Vorsteuergewinn von nahezu 8 Millionen US-Dollar stützen, wobei das Management die Unsicherheit von Hypothekenprognosen betonte.

Risiken und Schwerpunkte

Anhaltend hohe Hypothekenzinsen bleiben der wesentliche operative Druckfaktor. Ein geringeres Neugeschäftsvolumen könnte trotz der Kostensenkungen der Sparte die Erträge im Hypothekengeschäft sowie die Bestände im Hypotheken-Warehouse belasten.

Der Wettbewerb im Kreditgeschäft ist hoch, da Kunden Konditionen und Zinssätze aktiv vergleichen. Primis setzt auf seine kostengünstigere Einlagenbasis und eine selektive Kreditvergabe, um die Profitabilität zu schützen.

Das Management rechnet kurzfristig nicht mit einem erheblichen Anstieg der Refinanzierungskosten, räumte jedoch ein, dass Kunden weiterhin Zugeständnisse bei den Einlagenzinsen fordern könnten.

Die Kreditverschlechterung war im Quartal gering. Das Management prüft jedoch, ob bestimmte eingestufte Vermögenswerte abgeschrieben werden sollen, für die bereits erhebliche Einzelwertberichtigungen gebildet wurden. Eine solche Maßnahme könnte sich auf die ausgewiesenen Abschreibungen und die Quoten leistungsgestörter Vermögenswerte auswirken.

Wichtigste Punkte aus der Analysten-Fragerunde

Die Analysten konzentrierten sich auf die Nachhaltigkeit der Spannen-Ausweitung. Laut Management dürften verbleibende Neufestsetzungschancen bei vor fünf Jahren vergebenen Krediten weitere Zugewinne stützen, während ein begrenztes Deposit Beta und das Fehlen eines aggressiven Wettbewerbs um hochverzinsliche Einlagen den Refinanzierungsdruck begrenzen sollten.

Bezüglich der Aufwendungen bekräftigte das Management für das vierte Quartal eine operative Kern-Run-Rate von nahezu 22,5 Millionen US-Dollar. Der größere Rückgang wird für das erste Quartal 2027 erwartet, wenn die Einsparungen bei Dienstleistern und Kontoauszugsservices greifen, was teilweise durch Gehaltsanpassungen ausgeglichen wird.

Das Management erklärte, dass ein Kreditwachstum von etwa 8 % für die nächsten Jahre aufrechterhalten werden könne, indem die Aktivitäten der Kernbank, von Panacea und des Hypotheken-Warehouse ausbalanciert werden. Dieser Ansatz soll es ermöglichen, über einbehaltene Gewinne Eigenkapital aufzubauen, ohne die TCE-Quote wieder in den 7-Prozent-Bereich zu drücken.

Neue Kredite der Kernbank werden in der Regel zum Prime-Satz zuzüglich einer geringen Marge verzinst. Panacea-Kredite werden mit dem Fünfjahressatz zuzüglich ca. 225 bis 250 Basispunkten verzinst, während Kredite im Hypotheken-Warehouse inklusive Gebühren meist bei SOFR plus 275 bis 300 Basispunkten liegen.

Das Management bekräftigte, dass eine nachhaltige Gesamtkapitalrendite (ROA) von über 1 % in Sicht sei. Es schätzte, dass ein normalisierter Beitrag des Hypothekengeschäfts selbst bei geringerem Produktionsniveau etwa 10 Basispunkte zur ROA beisteuern könnte, wobei das langfristige Ziel darin besteht, weitere rund 15 Basispunkte in Richtung der Profitabilität von Vergleichsunternehmen aufzuholen.

Vollständiges Transkript der Ergebnissekonferenz

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Hello, everyone. Thank you for joining us, and welcome to Primis Financial Corp. Third Quarter Earnings Call. I will now hand the conference over to Matthew Switzer, Chief Financial Officer. Matthew, please go ahead.

Matthew Switzer

Good morning. 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, 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 Zember

Thank you, Matt. Thank you for everyone that joined our third quarter earnings call. For the quarter, we're 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 of 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 the same quarter a year ago, that's about a 15% improvement when we reported 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've grown annual net interest income by about $28 million over the last 12 months. The balance sheet restructuring we did at the end of '22 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's loan engines focus on higher-quality customers with yields and rates that I know are at a win-win level. There's 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 7.28% at the end of September. Our mortgage CEO calibrates 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 $200,000, which included the $2.5 million reset in the open pipeline values and about $300,000 of provision for growth in portfolio and construction loans. This performance with those headwinds, combined with the restructuring work that our mortgage team is undertaking 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'd expect balances to come in a little in the fourth quarter, just given the mortgage backdrop and how that's going to affect warehouse. I expect that we probably finish the year with total growth in the balance sheet of about 8% to 8.5% on year-end balances.

Deposit has grown slower over the past year as we've 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 FHLB. Still today, we don't 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. Matt and I really would like for TCE to be north of 8.5%, and we expect that a continued improvement in earnings and cautious balance sheet growth will get us there in a few quarters. With that, Matt, I'll turn it to you.

Matthew 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-K 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 substantially 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 year ago period.

Turning to the balance sheet. Gross loans held for investment increased approximately 4% annualized from June 30 to September 30 and were 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 $603 million, partially offset by a $43 million decline in period-end mortgage warehouse balances of $501 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 declined $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 $700,000 of interest 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 of 228 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 247 basis points, up 1 basis point linked quarter and down 15 basis points year-over-year.

Our provision this quarter was $1.1 million compared to $5.5 million in the second quarter and a recovery of $49,000 a year ago. The majority of the provision this quarter was driven by loan growth as described above. Asset quality remains 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 versus $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 $900,000 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 from $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, approximately $1.4 million of loan-related expenses and $0.4 million of professional fees and other third-party expenses incurred in the quarter. Excluding these items, the core operating expense burden 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 2022.

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. Breakeven on net 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've been targeting. We can't 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 couldn't 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

Your first question comes from the line of Russell Gunther from Stephens.

Fragen und Antworten

Russell Elliott Gunther

Guys, I wanted to start out on the margin. So great core result this quarter. You're 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 Switzer

Yes. I think we'll continue to see some incremental margin expansion, Russell. It's probably not going to be quite as dramatic as it was this quarter, but we've got loan repricing still in front of us from loans we put on 5 years ago. And that's going to still play out over the next, call it, 2 to 3 quarters. So we do -- I mean, we have strongly benefited from our core deposit base. And I don't 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, but we have not been aggressively moving rates up across the board or going after hot money, which is including on the digital platform. We did not adjust rates on the digital platform after the last rate move. So we're going to continue to see -- absent the Fed move, we're going to continue to see people raise their hand or ask for concessions, and we'll manage through that. But we don't 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'll have some incremental margin expansion 4 or 5 basis points over time, but not quite what we saw this quarter. The big moves are kind of behind...

Russell Elliott Gunther

Well, still an excellent result and it sounds like some forward progress still to come. So I appreciate the color. Very helpful. Maybe switching gears on to the expense side of things. I hear you on how the mortgage revenue will impact comp and the step down there. Maybe outside of that, 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 Switzer

Yes. 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 were basically in that same ballpark this quarter when you take out those couple of expenses that I highlighted in mortgage and Panacea. And I still think that's 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 kind of midway through the first quarter. We'll start to see those savings from the -- our contracts around the statements and other vendor consolidation, the $3 million number I highlighted. So in our mind, that's incrementally bringing down that $22.5 million number. Now we will adjust salaries and things like that late in the first quarter. So that will put some pressure up. But we're looking for offsets to that to keep us in that low 22% range or less after those statement savings.

Russell Elliott Gunther

Okay. And then just last one for me, if I could. The deck had suggested that '27 estimates are achievable. I see consensus near $2 that puts you firmly in that sustainable ROA north of 1%. Do you have a goalpost in mind beyond that and the timing you'd hope to achieve it?

Dennis Zember

Matt, it wouldn't be normal for me to tell you the next goal before we get to this goal...

Matthew Switzer

Russell.

Dennis Zember

Russell. But I mean, our peer group is better than that. And some of the things that we've been doing over the years, investing and building stuff right here, we're done with that. We're simply harvesting the good that all of our efforts have provided. So I think we'd 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 and we're really somewhere in the $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. But at 10 basis points, given where the margin is and some of the OpEx things that Matt was mentioning that are -- I mean, we're a month away from some of these things happening. 1% is definitely in sight. 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.

Operator

Your next question comes from the line of Steve Moss with Raymond James.

Stephen Moss

This is Chase on for Steve. So good core bank loan growth this quarter, and I saw the pipeline number in the release. Can you just give a sense where you're seeing the best opportunities today and maybe how to think about growth in 4Q into 2027?

Dennis Zember

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 one big loan payoff, disappointing that it's paying off, but that's probably going to keep us flat on the core bank. I mean mortgage warehouse had a strong third quarter despite where rates went. But I mean, it's the fourth quarter, I'd expect it to stack a little. I think for the year, we're going to end up with loan growth in probably the 8% category. We've got several good drivers. We have the core bank, we have Panacea. We've 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 Matt and I wanted to go. It allows us to have earnings growing TCE. It doesn't pressure that. Matt and I don't want to get back into the 7s. We really want to be kind of 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 can probably sustain that for a couple of more years. I think we're going to 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're going to have -- I'm pretty sure we're going to have a dynamite fourth quarter on deposits, just given some of what I know is going to close and show up here. So I think for the year, we'll probably be, call it, 3%, 4%, 5% on deposits. But next year, I think we'd be stronger than that. So yes, I'd say we're probably going to settle back from 9% right now to probably around 8% for the whole year. And I'd probably call for that same thing next year.

Matthew Switzer

Yes. I mean the core bank had a really good third quarter, but for the year, it won't be at 11% rate. And we think about the core bank more kind of up 5% to 7% year in and year out. And then we can manage the Panacea growth, we can manage a mortgage portfolio. So something mid- to high single digits is comparable for next year.

Dennis Zember

And not having to push it's a real luxury not having to push hard on the core bank. I mean, keep it on sort of in the 5% to 6% growth rate because I mean, one, we focus on better deposits. We focus that are less rate sensitive, that are less rate shoppers. We -- and we can really focus on the best loan opportunities, whether that's the loan rate or the yield or structure, credit quality. So we're able to be a little more picky and then lean harder on whether it's Panacea, warehouse or even digital to sort of get us to where we want to be. I think it's a real luxury.

Stephen Moss

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

Matthew Switzer

Warehouse --...

Dennis Zember

Well, the core bank is probably comfortably -- I mean, all blended comfortably either prime plus a little bit. Panacea is probably 5-year plus 225, 250 maybe, but probably -- I mean, it's with 5-year moving up, it's probably tightened that spread a little. And warehouse is generally like with fees generally like SOFR plus 275, maybe 300.

Stephen Moss

Got it. Appreciate you. And just one more for me here. I believe I heard you say $1.1 billion, $1.6 billion of mortgage production at current rates. And I know it's a bit tough to answer, but if mortgage rates came down another 50 to 100 basis points, and I know we're down a lot in the 10-year this week, how much upside could there be to that range you think?

Dennis Zember

Yes. I keep my I found that I cannot accurately predict anything with mortgage outside of tomorrow. But that's a good question. And I will tell you, we've got a lot of -- have got a massive amount of algorithms and R-squareds on mortgage. I will tell you that at our current level, with rates sort of 7%, 7.25%, we're about $1.1 billion mortgage shop. And at that level, we're probably about 30 to 35 basis points of pretax on 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-6s 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're probably comfortably over 50 basis points of profitability. So at $1.6 billion, you're doing somewhere closer to $8 million of pretax. We -- again, our mortgage company does not have the luxury of nothing is boosting our mortgage company profitability with servicing or servicing revenues are recurring in that we do all servicing-released type sales. We hedge a good bit. But I mean, there's a lot of upside. I will tell you this. I'm reluctant to say this because I don't want anybody to hear us thinking that we're just hoping for higher rates. We're not. We're like adjusting to today's rate with cost saves. That will make us more efficient if rates sort of fall. But we're 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 want to believe it is, at least what the results say. And so we're sort of pretending that this is not pretending, we're acting like this is our new norm. I say that I do watch the 10-year every day, and I celebrate every time it's in the red. Anyway, go ahead.

Operator

Your next question comes from the line of Christopher Marinac from [ Green Capital ].

Christopher Marinac

Dennis, can you brag a little bit on the Banking Valet business that you rebranded and maybe talk about the opportunities and more deposit growth from that channel?

Dennis Zember

Yes. Banking Valet, which is what we used to call V1VE for those on the call, and that's 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 a 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's very popular. Virtually, none of these customers have closed their accounts. It's probably the leading -- one of the leading things our commercial and treasury people lead with when they are in front of a new customer. Virtually, every commercial deposit relationship we have that didn't come because of the loan came because of its service. It's very, very valuable, very useful. probably half of our checking accounts are rooted with this app. So I would tell you -- and that's very important because especially in a rising rate environment where deposits, checking accounts seem to stag a little bit. I think this is something that's going to 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'm not going to go out on a limb and say that that's the future here. Really, what we do is we just use this to expand the power of our branch beyond 5 miles, and we're selling probably out to 20, 25 miles of each of our branches. It just makes our branches -- it's not a branch replacement tool. It's sort of a branch enhancement tool. We changed the name from V1VE to Banking Valet just to be a little more progressive and sort of fit with the rest of the bank as well. So I don't know, Chris, if that answers your question, but...

Christopher Marinac

So Dennis, my impression is that you can lean more into this as well as sort of with a weak mortgage environment that you can lean more into banking. And certainly, that may be a blessing in the skies. So just curious if you think that's going to 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 churn in the mortgage business later.

Dennis Zember

Yes. Chris, I mean, the numbers -- you can't look at the balances in our numbers and sort of -- if you look at the balances, you can't really see the success of this over the last 3 or 4 years because I mean, really, you've 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 deposits. And I'd tell you a lot of it is because of this. It's rooted in this plus long-term loyalty. So what -- we are growing deposits aggressively with this. It's 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 don't think -- I know you would see stronger results in noninterest-bearing to deposit -- noninterest-bearing to total.

Christopher Marinac

Got it. That's helpful. And then, Matt, just a quick one for you. The operating expenses, should we see a small downtick in Q4 and then a more bigger change as the systems and other changes that you've already announced kick in, in Q1?

Matthew Switzer

I think we'll 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 Switzer

Yes.

Christopher Marinac

Perfect. Okay. And 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 Switzer

I mean not at the moment. We didn't have any migration in the quarter. It's really focused on working through the ones we already have.

Christopher Marinac

I was more curious if losses would be the same or if it's possible that they could grind lower.

Dennis Zember

Net charge-offs?

Christopher Marinac

Correct.

Dennis Zember

I mean, we have some pretty substantial specific reserves on a few of the classified assets. I mean, we've debated or are debating and mostly from an accounting standpoint, if we should charge those off as opposed to just carrying them into specifics. And so that the NPA ratio is not as inflated. But -- that we may do that before the end of the quarter, but that's -- I think that's it. I don't think we see any -- aside from that, I don't think we see anything that would move that number.

Christopher Marinac

Right now that would generate incremental provisioning charging off.

Operator

This concludes the question-and-answer session. I will now turn the call back to Dennis Zember for closing remarks.

Dennis Zember

Thank you all again for joining us on our third quarter call. I 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.