프리미스 파이낸셜(FRST) 2026년 3분기 실적 발표: 모기지 수익 감소 속 마진 확대

핵심 요약

• 프라이미스 파이낸셜(FRST)은 2026년 3분기 순이익이 870만 달러(희석 주당 0.35달러)를 기록해 전년 동기의 680만 달러(주당 0.28달러) 대비 증가했다고 발표했다.
• 순이자이익은 전년 동기 2,900만 달러에서 3,630만 달러로 증가했다. 보고된 순이자마진(NIM)은 48bp 확대된 3.66%를 기록했으며, 70만 달러의 이자 회수금을 제외한 핵심 마진은 3.59%였다.
• 투자 보유 대출은 전년 동기 대비 9% 증가한 약 35억 달러를 기록했다. 총예금은 4% 증가한 34억 7,000만 달러에 달한 반면, FHLB 차입금은 8,000만 달러 감소한 2억 2,000만 달러로 줄었다.
• 고금리로 인한 영업 위축으로 모기지 은행 수익은 2분기 1,140만 달러에서 800만 달러로 감소했다. 모기지 사업 부문은 250만 달러의 파이프라인 평가액 조정을 포함해 약 20만 달러의 손실을 기록했다.
• 자산 건전성은 안정적인 수준을 유지했다. 미국 소상공인청(SBA) 보증분을 제외한 부실채권(NPA) 비율은 총자산 대비 전년 동기 2.07%에서 1.43%로 개선되었으며, 핵심 순상각률은 17bp를 기록했다.
• 경영진은 점진적인 마진 확대와 연간 약 8%의 대출 성장, 그리고 2027년 초부터 벤더 및 명세서 서비스 비용에서 연간 300만 달러의 절감 효과가 나타날 것으로 예상하고 있다.

핵심 재무 데이터

사업 및 영업 실적

핵심 은행 부문이 실적 성장의 주된 동력이었다. 분기 중 핵심 은행의 대출 성장률은 연환산 약 11%를 기록했으며, 자산 수익률 상승과 안정적인 조달 기반이 마진 확대를 뒷받침했다. 총예금 이자비율은 전분기 대비 3bp 증가에 그쳤으며, 전년 동기 대비로는 18bp 하락한 2.28%를 기록했다.

투자 보유 목적의 파나시아(Panacea) 대출은 2,000만 달러 증가한 6억 300만 달러를 기록했다. 반면 모기지 창구 대출(Mortgage warehouse) 잔액은 4,300만 달러 감소한 5억 100만 달러로 줄어 핵심 은행 및 파나시아의 성장을 일부 상쇄했다.

모기지 사업 부문은 가파른 금리 상승 직격탄을 맞았다. 경영진은 분기 중 미국 10년물 국채 금리가 약 100bp 상승했고, 프레디맥(Freddie Mac)의 30년 만기 고정 모기지 평균 금리가 6월 말 6.43%에서 9월 말 7.28%로 올랐다고 밝혔다. 이에 따라 모기지 은행 수익은 800만 달러로 줄었으나, 실행 완료된 대출 취급액은 3억 4,700만 달러로 전년 동기 대비 12.5% 증가했다.

프라이미스는 주로 지원 부서 및 벤더 비용 절감을 통해 모기지 관련 고정비를 연간 약 400만 달러 감축했다. 경영진은 또한 모기지 영업 보수의 대부분이 수수료 기반으로 이루어져 취급량 감소에 따라 비용도 함께 줄어드는 구조라고 덧붙였다.

구 V1VE에서 명칭을 바꾼 '뱅킹 발렛(Banking Valet)' 플랫폼은 여전히 당행의 기업 예금 전략에서 핵심적인 역할을 담당하고 있다. 경영진은 당좌 예금 계좌의 약 절반이 이 앱에 연결되어 있으며, 예금 기반의 안정성과 낮은 금리 민감도는 상당 부분 이 서비스 덕분이라고 설명했다.

경영진 가이던스

• 경영진은 시간이 지남에 따라 순이자마진(NIM)이 약 4~5bp 정도 점진적으로 확대될 것으로 예상하고 있다. 향후 2~3분기 동안 대출 금리 재조정(repricing)이 이어질 예정이나, 가장 큰 폭의 마진 개선세는 이미 지난 것으로 보인다.
• 연간 대출 성장률은 기존 목표치였던 8%~8.5% 범위보다 다소 낮은 8% 안팎에서 마감될 것으로 예상된다. 경영진은 2027년 목표로 5%~7% 수준의 핵심 은행 성장을 기본 바탕으로 한 한 자릿수 중후반대 성장률 달성이 가능할 것으로 전망했다.
• 모기지, 파나시아 및 일회성 항목을 제외한 핵심 비용은 4분기에 2,250만 달러 안팎을 유지한 후 2027년 1분기부터 감소세로 돌아설 것으로 예상된다.
• 벤더 통합 및 명세서 서비스 개편을 통해 2027년 초부터 연간 약 300만 달러의 비용 절감 효과가 발생할 것으로 전망된다.
• 경영진은 중개 예금이나 도매 자금 조달보다는 핵심 예금을 중심으로 2026년 예금 성장률이 약 3%~5%를 기록하고 2027년에는 더욱 견조한 성장을 보일 것으로 기대하고 있다.
• 당사는 실적 개선과 신중한 대차대조표 확장을 통해 향후 수 분기 내에 유형보통주자본(TCE) 비율을 8.5% 이상으로 올리는 것을 목표로 하고 있다.
• 경영진은 모기지 금리가 7.0%~7.25% 수준일 경우 연간 모기지 공급 규모를 약 11억 달러, 세전이익을 350만~400만 달러로 추정했다. 금리가 6%대 중반으로 하락할 경우 취급액 16억~17억 달러와 800만 달러에 가까운 세전이익도 가능할 것으로 보았으나, 경영진은 모기지 시장 예측의 불확실성을 강조했다.

리스크 및 주요 점검 사항

지속적으로 높은 모기지 금리가 주된 영업 압박 요인으로 남아 있다. 부문 차원의 비용 절감 노력에도 불구하고 신규 대출 집행량 감소는 모기지 수익과 모기지 창구 대출 잔액을 감소시킬 수 있다.

고객들이 금리와 조건 비교에 적극적으로 나서면서 대출 경쟁이 심화되고 있다. 프라이미스는 수익성을 방어하기 위해 저비용 예금 기반과 선별적인 대출 심사에 의존하고 있다.

경영진은 단기적으로 조달 비용이 대폭 상승하지는 않을 것으로 보면서도, 고객들의 예금 금리 인상 요구가 지속될 수 있음을 인정했다.

이번 분기 동안 신용 등급 변동(건전성 악화)은 제한적이었다. 다만 경영진은 이미 상당한 수준의 대손충당금이 설정된 특정 건전성 분류 자산을 상각 처리할지 여부를 검토하고 있다. 이러한 조치는 보고되는 순상각률 및 부실채권(NPA) 비율에 영향을 미칠 수 있다.

애널리스트 Q&A 주요 내용

애널리스트들은 마진 확대의 지속 가능성에 주목했다. 경영진은 5년 전 실행된 대출의 금리 재조정 기회가 남아 있어 추가적인 마진 개선이 가능하다고 밝혔다. 아울러 제한적인 예금 베타(금리 반영률)와 고금리 예금 유치를 위한 과도한 경쟁 부재가 조달 비용 압박을 완화할 것이라고 덧붙였다.

비용 부문에서 경영진은 4분기 핵심 분기 경상 비용(run rate)을 2,250만 달러 안팎으로 유지했다. 급여 인상 효과로 일부 상쇄되겠으나, 벤더 및 명세서 서비스 비용 절감 효과가 본격화되는 2027년 1분기 중에 더 큰 폭의 비용 감소가 나타날 것으로 기대된다.

경영진은 핵심 은행, 파나시아, 모기지 창구 대출 영업 간의 균형을 유지함으로써 향후 몇 년간 약 8%의 대출 성장률을 지속할 수 있다고 밝혔다. 이러한 접근 방식은 유형보통주자본(TCE) 비율이 7%대로 떨어지지 않도록 유보이익을 통해 자본을 축적하기 위한 전략이다.

신규 핵심 은행 대출 금리는 일반적으로 기준금리(prime rate)에 소폭의 가산금리가 더해져 설정된다. 파나시아 대출 금리는 5년물 국채 금리에 약 225~250bp가 더해진 수준이며, 수수료를 포함한 모기지 창구 대출 금리는 보통 SOFR 금리에 275~300bp를 더한 수준이다.

경영진은 1% 이상의 지속 가능한 ROA 달성이 머지않았다고 재차 강조했다. 모기지 부문의 기여도가 정상화되면 대출 취급량이 낮은 수준이라도 ROA가 약 10bp 상승할 것이라 추정했으며, 장기적으로는 동종 업계 수준의 수익성을 확보하기 위해 추가로 약 15bp를 개선하는 것을 목표로 하고 있다.

실적발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

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.

질의응답

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.