MVB 파이낸셜(MVBF) 2026년 3분기 실적 발표 콜: 핀테크 예금 성장, 대손충당금

MVB 파이낸셜(NASDAQ: MVBF)은 2026년 3분기 순이익이 43만 8,000달러(희석 주당순이익 0.03달러)를 기록했다고 발표했다. 실적은 인수 및 개발(A&D) 토지 대출 1건과 일부 기존 SBA 및 C&I 여신 관련 충당금을 포함해 총 990만 달러의 대손충당금 전입액이 발생하며 압박을 받았다.

은행 본업의 실적 흐름은 개선되었다. 핵심 순이자마진(NIM)이 확대되고 핀테크 결제 예금이 급증했으며 비이자비용은 감소했다. 경영진은 대규모 토지 관련 여신 부실은 단발성 이슈이며 전체 포트폴리오의 전반적인 악화를 의미하지는 않는다고 밝혔다.

핵심 요약

• 순이익은 2026년 2분기 1,230만 달러(주당 0.93달러)에서 43만 8,000달러(희석 주당 0.03달러)로 감소했다. 이 같은 감소는 대손충당금 전입액 증가와 전분기에 반영되었던 1,000만 달러 규모의 세전 핀테크 투자 이익이 사라진 점을 반영했다.
• 핵심 순이자마진(NIM)은 대출 성장, 조달비용 감소, 대차대조표 최적화에 힘입어 전분기 대비 15bp 상승한 4.02%를 기록했다. 총 조달비용은 6bp 하락한 2.07%를 나타냈다.
• 핀테크 결제 예금은 전분기 대비 28%, 전년 동기 대비 약 55% 증가한 7억 6,600만 달러를 기록해 전체 예금의 약 25%를 차지했다.
• 대손충당금 전입액은 470만 달러에서 990만 달러로 증가했다. 여기에는 인수 및 개발(A&D) 대출 1건에 대한 특정 충당금 460만 달러와 일부 기존 SBA 및 관련 C&I 여신에 대한 320만 달러가 포함되었다.
• 총대출은 4,400만 달러 증가한 25억 2,000만 달러를 기록하여 연율 7.2%의 성장률을 나타냈으며, 6분기 연속 대출 확대를 기록했다.
• 비이자비용은 MVB가 비용 통제를 지속하고 AI 및 자동화 활용을 확대함에 따라 전분기 대비 약 2%, 전년 동기 대비 10% 감소한 2,980만 달러를 나타냈다.

주요 재무 데이터

사업 및 영업 성과

핀테크 예금을 통한 조달 구조 강화

핀테크 결제 예금은 해당 분기 동안 28% 증가해 7억 6,600만 달러를 기록했다. MVB는 이러한 성장에 힘입어 고비용 예금 잔액을 줄이고 양도성예금증서(CD)에 대한 의존도 확대를 피할 수 있었다고 밝혔다. 예대율은 분기 말 기준 81.6%를 기록했다.

MVB는 2025년 한 해 동안 5개였던 핀테크 파트너 유치 실적에 비해 2026년 첫 9개월 동안 9개의 핀테크 파트너를 새롭게 유치했다. 경영진은 파이프라인이 견조하다고 설명하며, 다양한 단계에 있는 핀테크 잠재 고객사가 50개 가까이 된다고 밝혔다.

결제 카드 및 수수료 수익은 일반적인 게이밍 계절성으로 인해 전분기 대비 감소한 520만 달러를 기록했다. 그러나 이 지표는 전년 동기 대비 약 40%, 2026년 첫 9개월 동안 약 22% 증가했다.

대출 성장 및 마진 최적화

총대출은 6분기 연속 성장하여 25억 2,000만 달러로 증가했다. 경영진은 4분기에 진입하며 전문 대출 파이프라인이 견조하다고 강조했으며, 포트폴리오를 수익률이 더 높은 법률 및 핀테크 스폰서십 대출로 전환할 계획이라고 밝혔다.

경영진은 2027년 최우선 과제로 '마진 최적화'를 제시했다. 회사는 약 6.5%~7% 수익률의 대출을 동일 위험 수준이면서 8.5%~9%에 가까운 수익률을 내는 기회로 대체하는 것을 목표로 하고 있다. 이는 포트폴리오의 실현 수익률 전망이라기보다 경영진의 목표 수준이다.

비용 및 자동화

비이자비용은 3,000만 달러 미만인 2,980만 달러로 감소했다. MVB는 100개 이상의 디지털 어시스턴트('디지')를 도입했거나 개발 중에 있으며, 앤스로픽(Anthropic)과의 파트너십을 통해 교육 및 인증을 받은 클로드(Claude) 엔지니어 14명을 보유하고 있다.

경영진은 새로운 핀테크 프로그램이 추가됨에 따라 인적 감독이 계속 필요하기 때문에 리스크 및 컴플라이언스 인력의 추가 감축은 약 5~7개 직무로 제한될 수 있다고 밝혔다.

경영진 가이던스

• 경영진은 수익률이 더 높은 대출과 저비용 핀테크 예금의 지속적인 성장에 힘입어 핵심 순이자마진(NIM)이 4%를 상회할 여력이 있다고 판단하고 있다.
• 회사는 집행 상황에 따라 2026년 4분기에 약 8~11개의 핀테크 고객사를 추가 유치하여 연간 총계를 20개 가까이 늘릴 수 있을 것으로 예상한다.
• 경영진은 핀테크 예금이 가까운 미래에 10억 달러를 돌파할 것으로 예상하며 2027년에도 지속적인 성장을 전망하고 있다.
• MVB는 스타트업 프로그램보다 빠르게 매출에 기여할 수 있는 검증된 '리프트 앤 시프트(lift and shift)' 핀테크 고객사를 우선할 계획이다. 경영진은 성숙도가 낮은 프로그램에서 초기에 약 25%만 인식되는 것에 비해 이들 고객사는 유치 후 예상 매출의 거의 전부를 창출할 수 있다고 설명했다.
• 경영진은 임금 인상률과 추가 감축 여지의 한계를 인정하면서도, 지속적인 자동화 및 프로세스 개선을 통해 비용을 전반적으로 현재 수준으로 유지할 방침이다.
• 회사는 부실 상태로 전환된 대출 건들을 정리함에 따라 4분기 순상각액이 3분기 수준을 유지할 수 있다고 밝혔다.

리스크 및 주요 관전 포인트

주요 신용 리스크 문제는 1,310만 달러 규모의 인수 및 개발(A&D) 토지 대출이었다. 부분적으로 부동산 개발 인허가 문제로 인해 최신 감정평가액이 실행 당시 사용된 가치를 크게 하회했다. MVB는 460만 달러의 특정 충당금을 설정하여 대출 장부가액을 현재 감정평가액에서 추정 매각 비용을 뺀 수준으로 조정했다.

회사는 초기 실사 및 감정평가 과정에서 발생했을 가능성이 있는 허위 진술과 투명성 부족에 대해 조사 중이다. 포렌식 감정평가 법인을 고용했으며 이용 가능한 구제 수단을 검토하고 있다. 해결 시점은 여전히 불확실하다.

9월 30일 기준 기존 SBA 포트폴리오는 정부 보증 잔액 약 300만 달러를 포함해 총 2,300만 달러 미만이었다. 해당 포트폴리오의 약 53%가 요주의 이하로 분류되었으며, 경영진은 전체 포트폴리오에 대해 강화된 모니터링을 지속하고 있다고 밝혔다.

주택담보대출 관련 지분법 투자이익은 높은 금리와 모기지 활동 위축에 여전히 노출되어 있다. 또한 일부 이자부 핀테크 예금은 실효연방기금금리에 연동되어 있어 금리가 상승할 경우 조달비용 민감도가 높아진다.

애널리스트 Q&A 하이라이트

정상화된 대손충당금: 경영진은 투자자들이 토지 대출 충당금 460만 달러와 기존 SBA 및 C&I 여신 관련 충당금 320만 달러를 제외하고 정상화된 충당금을 평가하기 시작할 수 있다고 밝혔다. 향후 충당금은 여전히 부실 여신으로 전환되는 추가 여신에 따라 달라질 것이다.

토지 대출 해결: 해당 대출은 만기가 도래하고 최신 감정평가를 받으면서 이번 분기 중 요주의 여신으로 분류되었다. 경영진은 현재 충당금이 감정평가액에서 매각 비용을 뺀 가치를 반영하고 있으나, 구체적인 해결 일정을 제시할 수는 없다고 설명했다.

예금 구성: 경영진은 코어 은행(CoRe bank)이 노스버지니아와 웨스트버지니아에 집중되어 있는 반면, 핀테크 플랫폼은 40개 주에 걸친 전국적 거점을 확보하고 있기 때문에 핀테크 예금이 조달에서 차지하는 비중이 지속적으로 커질 것으로 예상한다.

금리 민감도: 일부 핀테크 지급준비금 예금은 무이자이며, 규모가 더 큰 이자부 잔액은 실효연방기금금리의 일정 비율로 금리가 결정될 수 있다. 경영진은 무이자 잔액을 포함할 경우 전체 핀테크 예금 풀을 로우 베타(lower-beta) 조달 기반으로 규정했다.

2027년 우선 과제: MVB는 고수익 대출을 통한 마진 최적화, '프라임 캡처(Prime Capture)' 전략을 통한 검증된 핀테크 고객사 유치 가속화, AI 및 자동화를 활용한 비용 동결 또는 잠재적 감축 등 세 가지 우선 과제를 제시했다.

실적발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Greetings. Welcome to the MVB Financial Corp. Third Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Amy Baker, VP, Corporate Communications and Marketing. Thank you, Amy, you may begin.

Amy Baker

Thank you, operator. Good afternoon, and thank you all for joining us today for MVB's Third Quarter 2026 Earnings Conference Call. The company issued its earnings press release earlier this afternoon, and it is available on the company's website at ir.mvbbanking.com. In addition, the company has included a slide presentation that you can refer to during the call, which is also available on the website.

Participating on today's call are MVB's President and CEO, Larry F. Mazza; CFO, Mike Sumbs; and Chief Credit Officer, Tony Eastman. Larry will provide an overview of our third quarter performance and business developments, and Michael will discuss the quarter's financial results in more detail. We will then open the call for your questions.

Before we begin, I would like to remind you that this conference call contains forward-looking statements regarding the future performance and financial condition of MVB Financial, which involve risks and uncertainties. Various factors could cause actual results to differ materially from those expressed or implied by such statements. These factors are discussed in the company's SEC filings, which are available on our website. The company disclaims any obligation to update forward-looking statements made during the call.

Additionally, management may refer to non-GAAP financial measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. The earnings release available on our website contains the financial and other quantitative information discussed today, along with the applicable non-GAAP reconciliations.

With that, I'd like to turn the call over to MVB's President and CEO, Larry Mazza.

Larry Mazza

Thank you, Amy. Good afternoon, everyone, and thank you for joining us. During the third quarter, we made significant progress on several important initiatives that are strengthening our underlying business and positioning MVB for continued improved financial performance. We continue to grow net interest income, expand our core net interest margin, diversify our funding base and build momentum across our fintech payments business. At the same time, we maintained expense discipline and addressed specific credit exposure.

Our reported earnings of $0.03 per diluted share do not fully reflect the strength of our underlying business or the operating progress we're making, largely because of the elevated provision for credit losses this quarter. I'll discuss credit in a few minutes. But first, I'd like to walk through the progress we've made across our strategic initiatives, which gives us confidence in the direction of the business.

For those who may be joining one of the earnings calls for the first time, MVB combines a traditional banking franchise with a growing fintech banking platform, serving clients across payments, Banking-as-a-Service and gaming. The combination provides us with multiple sources of funding and revenue and creates opportunities to improve the efficiency and profitability of our overall franchise.

Two of the most important developments this quarter were the continued progress in growing net interest income along with expanding our core net interest margin and the momentum in our fintech payments business. Net interest income increased approximately 18% through the first 9 months of this year compared to the same period last year. In the third quarter, our core net interest margin expanded another 15 basis points sequentially to 4.02%. Several factors contributed to that improvement, including continued loan growth and our effort to optimize the funding side of the balance sheet.

I want to spend a little time on one particular important contributor, the growth of our fintech payments deposit relationships. Fintech payment deposits increased 28% sequentially to $766 million, now representing nearly 1/4 of our total deposits and up nearly 55% from a year ago. These relationships matter more than the deposits themselves because they give us greater flexibility in managing our overall funding base. As we grow these deposits, we can reduce our reliance on more expensive sources of funding, improve our overall funding mix and further diversify our deposit base.

During the third quarter, that progress contributed to a 6 basis point sequential decline in our total cost of funds to 2.07%. We view that as particularly encouraging results given the interest rate environment, and it illustrates how growth in our fintech payment business translates into tangible improvements in the profitability of our CoRe banking operations. We are also encouraged by the continued execution of our fintech partner pipeline. We've now onboarded 9 new fintech partners through the first 9 months of 2026 compared to 5 during all 2025, and the overall pipeline remains robust.

Turning briefly to our lending. We grew total loans by approximately $44 million or 7.2% annualized during the quarter, marking our sixth consecutive quarter of loan growth. We're pleased with the consistency of the growth with opportunities across our lending business.

Now I'd like to spend a few minutes on credit. We took decisive action during the quarter to proactively address specific credit exposure, which contributed meaningfully to the elevated provision of credit losses of approximately $9.9 million. That provision had a significant impact on our reported earnings. It's important, however, to understand both the nature of the exposures involved and the broader trends across our loan portfolio.

Nearly 75% of the increase in nonperforming loans during the quarter was attributed to 1 acquisition and development land loan involving circumstances specific to the borrower and the property. That same credit accounted for almost half of our quarterly provision. We are investigating potential misrepresentations and lack of transparency in the due diligence and appraisal process associated with this loan. Subsequent to this development, we have taken additional broader review of our existing loan portfolio, and we believe this was an isolated case. Also, we have implemented additional steps to further enhance future underwriting standards. We believe the loan is adequately reserved based on our assessment as of September 30 and continue to work for full resolution.

Outside this specific isolated loan, the overall portfolio continues to perform in line with our expectations, and we have not seen broader credit deterioration. We also continue to work through our legacy SBA portfolio, which we began winding down in 2022. The outstanding balance of the SBA portfolio was less than $23 million as of September 30, which includes approximately $3 million in government-guaranteed balances. Approximately 53% of the SBA portfolio is classified and has been individually analyzed for collateral impairments representing 75% of the unguaranteed exposure, while the entire portfolio continues to receive enhanced monitoring and oversight. These are identifiable exposures, and we are actively managing.

I also want to put the current credit metrics in a broader perspective. Since early 2025, criticized loans have now declined approximately 45% from roughly $135 million to $74 million. Over the same period, our allowance for credit losses increased from $19 million to $36 million. Classified loans have also declined materially over that period. We believe these developments reflect meaningful progress in strengthening our overall credit risk profile.

Turning back to the growth in our fintech business. Beyond the benefits we're seeing from payment-related deposit growth, our payment business continues to generate encouraging fee income growth. Payment card and service charge income has increased approximately 22% through the first 9 months of the year and was up nearly 40% compared to the third quarter of 2025. The sequential decline during the quarter primarily reflected normal seasonality within our gaming-related business. We remain encouraged by the long-term growth in payments activity and the growing fintech relationships and pipeline.

Another important area of focus has been expense management. Noninterest expense declined below $30 million during the third quarter, down approximately 2% sequentially and approximately 10% from a year ago. We invested significantly over the past several years in our technology, people, compliance and risk management infrastructure. We're also increasingly using AI and automation to improve efficiency across the organization with more than 100 digital assistants, which we formally call Digis, either developed or in progress. These initiatives are helping us streamline workflows and create opportunities to operate more efficiently as the business grows.

Additionally, we deepened our relationship with Anthropic and now have 14 trained and certified Claude engineers on our team. As I step back and look at the quarter, there are 3 things I'd emphasize. First, the underlying banking business continues to improve. We're growing net interest income, expanding core margin and strengthening our funding base. Second, our fintech payment strategy is generating tangible results. We're onboarding new partners, growing payments-related deposits and building a large base of fee-generating activity.

And third, while the provision weighed on the reported earnings this quarter, we have made meaningful progress in addressing identified credit exposure early and strengthening our reserves. As I mentioned earlier, the primary driver of the elevated provision this quarter was a single isolated loan, and it's not representative of our broader portfolio. The overall loan book continues to perform in line with our expectations.

With that, I'll turn the call over to Mike Sumbs to walk through the quarter's financial results in more detail.

Michael Sumbs

Thank you, Larry, and good afternoon, everyone. I'll provide some additional detail on the third quarter financial performance, including net interest income and margin, balance sheet trends, noninterest income and expenses, credit quality and capital.

Starting with earnings. We reported net income of approximately $438,000 or $0.03 per diluted share compared with $12.3 million or $0.93 per diluted share in the second quarter. The sequential decline primarily reflected a higher provision for credit losses and the absence of a significant investment gain recognized in the prior quarter. As Larry discussed, we continue to see encouraging trends in the underlying net interest income, core margin and fintech payments business.

Net interest income on a fully tax equivalent basis increased to $32.7 million compared with $32.4 million in the second quarter despite the prior quarter, including approximately $2.3 million of nonrecurring interest income associated with the loan payoff. Our reported FTE net interest margin was 4.02% compared with 4.16% in the prior quarter. Excluding nonrecurring interest income in the prior quarter, core net interest margin expanded 15 basis points sequentially from 3.87% to 4.02%, reflecting continued loan growth, lower funding costs and ongoing balance sheet optimization.

Turning to the balance sheet. Total loans increased approximately $44 million or 7.2% annualized during the quarter to $2.52 billion. We are continuing to build out our specialty lending business, which offers opportunities to originate higher-yielding loans. The specialty lending pipeline is strong heading into the fourth quarter. As our portfolio mix gradually shifts towards these specialty lending opportunities, we believe we can continue to grow net interest income and improve the profitability and capital efficiency of our lending operations.

Total deposits were approximately $3.09 billion at September 30, down $24 million or less than 1% from the prior quarter, reflecting a seasonal decline in noninterest-bearing deposits, partially offset by growth in interest-bearing deposits. Importantly, fintech payment deposits increased 28% to $766 million, representing approximately 25% of total deposits compared with approximately 19% at June 30. While point-to-point noninterest-bearing deposits declined in the quarter, the average balance of noninterest-bearing deposits over the third quarter increased by approximately $71 million versus the prior quarter.

This growth allowed us to reduce reliance on higher cost deposit products, including balances we allowed to run off or move off the balance sheet. Together with our broader funding initiatives, these developments contributed to a 6 basis point reduction in our overall funding cost from 2.13% to 2.07%. We ended the quarter with a loan-to-deposit ratio of 81.6%, maintaining a solid on-balance sheet liquidity position.

Turning to noninterest income. We reported $7.8 million compared to $18.8 million in the second quarter, which included a $10 million pretax gain on an existing fintech investment. Excluding that gain, noninterest income declined approximately 10.5% sequentially, reflecting normal seasonality in payment-related fee income and lower contributions from our mortgage investment, which remains sensitive to interest rates and broader market conditions. Payment cards and service charge income totaled $5.2 million, down approximately 13% from the prior quarter, primarily reflecting normal seasonality in our gaming business. However, that revenue increased nearly 40% year-over-year and approximately 22% through the first 9 months of 2026.

On the expense side, noninterest expenses declined to $29.8 million compared to $30.4 million in the second quarter and $33.3 million a year ago, reflecting continued expense discipline and the benefit of the previously implemented cost containment initiatives.

Now turning to credit. The provision for credit losses totaled $9.9 million compared to $4.7 million in the prior quarter. The increase was driven primarily by reserves established against the limited number of identified credits. The provision included a $4.6 million specific reserve on 1 acquisition and development credit and a $3.2 million specific reserve on a small number of credits within our legacy SBA and associated C&I portfolio. Loan growth and adjustments to our allowance model also contributed to the elevated loan loss provision.

Nonperforming loans increased to $46.8 million at September 30 compared to $29.2 million at June 30. Of the approximately $17.6 million increase, $13.1 million was attributable to the single land loan that Larry referenced rather than a broad migration of loans into nonperforming. Looking at broader credit trends, criticized loans declined to approximately $74 million or 3% of total loans compared to $77 million or 3.1% at June 30. Since March 2025, criticized loans have declined approximately 45% from $135 million or 6.6% of loans.

Classified loans increased modestly during the quarter to approximately $50 million or 2% of loans from $47 million or 1.9%, but remain approximately 25% below their March 2025 level. At the same time, we've significantly strengthened our allowance for credit losses, which increased to $36.2 million or 1.44% of total loans compared to $28.2 million or 1.14% at June 30. Our allowance has nearly doubled since March 2025, while criticized loans have declined meaningfully. We believe these trends reflect progress in strengthening our overall credit risk profile. Net charge-offs were $2.5 million during the third quarter, representing 41 basis points annualized of average loans compared to $1.4 million or 23 basis points annualized during the second quarter.

Finally, turning to capital. Our tangible common equity ratio was 9.3% at September 30 compared to 9.7% at June 30. Tangible book value per share was $25.26 compared to $26.52 at the end of the prior quarter, with the decline primarily attributable to an increase in unrealized losses in our securities portfolio reflected through other accumulated comprehensive loss. We remain focused on maintaining a strong capital position while supporting the continued development of our banking and fintech businesses.

With that, operator, we're ready to open the line for questions.

Operator

[Operator Instructions] Our first question is from Joe Yanchunis with Raymond James.

질의응답

Joseph Yanchunis

So I guess to start off, in your prepared remarks, you referenced a few times how your allowance has increased while criticized assets have declined over the past couple of years and quarters. I guess assuming the broader credit environment remains stable, how should we think about a normalized provision expense from here?

Larry Mazza

Michael?

Michael Sumbs

Yes. Joe, thanks for the question. Yes, I think if you look at the components of the provision this quarter, you can see a significant portion of it was specific reserves really on 2 buckets. One was the land loan that we discussed in the prepared remarks, which is $4.6 million of specific reserves. And then as we discussed in the prepared remarks, we've seen some migration of the legacy SBA book into nonperforming, which was about 3.2% or $3.2 million of specific reserves. So if you strip that out, you can sort of get to what a normalized provision level is absent, specific reserves and go from there. And to the extent there are credits that move into nonperforming, we'll address those. But I think that's a good place to start as you think about a normalized provision level.

Joseph Yanchunis

Okay. That's helpful. And then I was through the updated presentation, it shows your risk and compliance staff declined to 81 from 116 last quarter, so well below your prior target of 90 by year-end. I guess I'm kind of wondering like how much left is there to cut on the risk and compliance front with you being down so much this quarter? I guess when did those cuts occur in the quarter? Should there be any wraparound benefit and cost saves to the fourth quarter? And just kind of how long can you keep noninterest expenses below $30 million kind of given wage inflation?

Larry Mazza

Joe, that's a deep question and an important question for us. We've been very -- our team has really embraced AI. You saw my earlier comments -- can you hear me okay?

Joseph Yanchunis

I hear just fine.

Larry Mazza

Okay. Great. So you saw earlier in my comments, the relationship with Anthropic. We now have 14 certified Anthropic Claude engineers. They've been working hard. We now have -- as you also heard me say, we now have 100 Digis either. And Digis is what we would call our digital workers, some would call bots. We now have 100 either working for us, working in the field or in the development of that. Our engineers, our 14 engineers have come so far where now the AI is starting to program the Digis. So they're coming along really, really nicely.

So our focus in Julie O'Connor's area, who has risk and compliance, has done a fantastic job of implementing AI in that area. And I do believe there -- obviously, expense cuts are finite, right? And revenue growth is infinite. We believe there is a floor there on the risk and compliance side. You may have 5 to 7 more in reduction there, but that's about it because we have -- as you also saw, we've onboarded 9 new programs, 9 new clients. And we continue to focus probably with another somewhere between 8 to 11 new clients here in the fourth quarter that we will onboard. So we still need to -- even though we have the technology and AI monitoring, we still need the human in the loop.

So as far as expense reduction, we feel comfortable on the level we are. We hope to keep around that $9.5 million, $10 million level into the rest of this year and only a small increase, maybe around $10 million -- $9 million a month versus $10 million a month, $9.5 million versus $10 million going into 2027. So as far as -- there's very few banks that I think that have cut expenses 10% year-over-year while they're growing. You saw excellent growth in the loan portfolio. You saw excellent growth on deposits in fintech. You're looking now at a fintech partnership in our payment side, nearly $1 billion. It's almost $800 million right now and continues to grow. You saw that our NIM was up 15 basis points. Our cost of funds were down 6 basis points. So the trends definitely our friend on the revenue side. And on the expense side, we continue to hold and believe that just holding steady and flat is a big win in this inflationary market.

Joseph Yanchunis

And in this inflationary market, you just kind of touched on it. One of the other big positives this quarter was the NIM expansion to 15 basis points. Given kind of the shape of the curve here, is that plus 4%, is that defendable kind of at current levels as you start to gain more of these noninterest-bearing deposits to replace higher funding costs? Or do you think there's kind of more room to move higher from here?

Larry Mazza

Joe, I do believe there's room to move higher. We now have a project inside the bank called margin optimization. We really want to optimize our margin. You know some of our lending programs on the legal lending side with John Madia, with some of our fintech lending, all those are the same level of risk but higher yields on our asset side. So we feel comfortable with that. You saw where our payment deposits are up 28%, and that will help us stay away from any fundraising of higher cost CDs, which will really position us well as far as our cost of funds at least staying steady while we believe our asset side can grow in yield.

Operator

Our next question is from Will Jones with KBW.

Larry Mazza

Will, welcome to the team. First call, glad to hear from you.

William Jones

Maybe just to close the loop on the NPA from this quarter. I guess, a, was that a criticized loan last quarter? How did you guys kind of go about identifying it? And as you kind of see the playing field as it is right now, is there any kind of defined path to resolution there? Or is it still too early to tell?

Larry Mazza

Michael, I'll let you take that. We also have Tony Eastman on the call as well, our Chief Credit Officer. We wanted to have him today here just for any clarifications or to dig deeper into questions like this. But we'll let Mike Sumbs kick it off. And if Tony needs to add, that would be wonderful. But Michael?

Michael Sumbs

Yes. Thanks for the question, Will. So yes, that loan was identified as a criticized loan in the quarter. And then as it approached maturity this quarter, we had an updated appraisal ordered on the property, and that appraisal came in significantly lower than the appraised value at the time of the origination. And a lot of that appraised -- the delta in the appraised value is related to entitlements that were associated with the property at the time of underwriting. So we're continuing to gather facts around the situation. We've engaged a forensic appraisal firm to assist in our review, and we're evaluating all available options and remedies as we continue to gather and assess the facts. We did record a $4.6 million specific reserve on it, which wrote the loan down to current appraised value less selling costs. So we're comfortable with where we've marked the loan, and we'll continue to work through options as it relates to resolving the credit as we go forward.

William Jones

Yes. Okay. I appreciate that color. And you guys gave great color in your prepared remarks as well. I wanted to go to -- in the slides, you guys kind of call out 45% fintech deposits now, 55% CoRe bank. That number has increased in favor of fintech. Larry, big picture question for you. When you fast forward a year, 2 years down the road, what is the right mix of deposits for MVB? Do you continue to see that migration in favor of fintech as you grow that platform and that part of the franchise? Or where could we ultimately see the fintech or how do you ultimately frame the deposit opportunity on the fintech side?

Michael Sumbs

Well, I can jump in.

Larry Mazza

I'm sorry. I got it now. I got it, Michael, sorry. So when you look at the CoRe bank, well, the CoRe bank is limited as far as its market. And what I mean by that is we have great markets in Northern Virginia, Reston, Fairfax, et cetera. Monica Tressler there is our Chief Deposit Officer and does a fantastic job with her team of growing deposits in that market. That's the thing, though. It is limited to Northern Virginia and West Virginia, which we value and honor those legacy markets.

The thing of it is in our fintech with Jeremy Kuiper, who leads that, he has a national footprint. We have clients in 40 different states. We have a pipeline of 50 fintechs coming on. It's been one of the best markets that we have been in as far as growth. We see that continuing to grow. We will -- I said we're kissing close to $1 billion in those deposits. I believe in the near future, we will be over $1 billion in fintech deposits and have a very robust 2027 in fintech deposits. Our core markets will do well, but you're competing in 2 states versus 40 states and a very robust pipeline. And it's been good, and I think it will continue to grow very positively over the next several years.

William Jones

That's great...

Larry Mazza

Low-cost deposits, Will, which are great low-cost deposits.

William Jones

That's a great segue to my next follow-up here, Mike, you can help us out. When we think -- as we familiarize ourselves with kind of the competitive dynamics on the fintech deposit side, what is the -- in a Fed hike scenario, what is the beta on the cohort of fintech deposits as opposed to the CoRe bank? We obviously saw deposit cost reduction this quarter. Maybe just help frame what you ultimately see interest-bearing deposit costs do over a Fed hike cycle.

Michael Sumbs

Yes. So a couple of pieces on that, Will. It really depends on the nature of the relationship in terms of how we price those deposits. But from a broad sort of a broad brush standpoint, typically, there's some level of deposits that are noninterest-bearing. If they're reserve deposits for some sort of money movement, those are typically noninterest-bearing. For the more sizable deposit opportunities, tends to get into an interest-bearing situation. Oftentimes, we'll index those into the effective Fed funds rate at some percentage. So on that interest-bearing portion of those fintech deposits, there's a 100% beta as it relates to Fed funds. But if it's at a 50% effective Fed funds, you essentially have a 50% beta on that relationship.

So as you think about the overall fintech pool, including noninterest-bearing, it tends to be -- yes, I would say, a lower beta deposit base, which I think you sort of are seeing in the numbers with cost of funds flat to even down this quarter. Some of that's attributable to the CD runoff and the work we've done in that portfolio running off higher cost CDs and remixing out of CDs. But overall, that hopefully gives you a general framework for how those fintech deposits interact with rate movements.

William Jones

Yes. No, that's great. That's very helpful. I appreciate that, Mike. And Larry, last question for me, big picture. As we kind of start to think about 2027, what the year looks like, what are really your kind of top 3 priorities, if you had to name them for what you would like to see MVB accomplish as we start to think about next year?

Larry Mazza

I love that question, Will, because we are already focused on 2027. We're really looking forward in a positive way based on the encouragement we have really this quarter. I don't want you to miss the doughnut for the hole. I mean the land loan is disappointing, don't get me wrong, but that is an aberration and a very unique circumstance, which -- this too shall pass. But when we look at 2027, the top 3 priorities, the first one is what I'll call margin optimization. I mentioned that earlier with Joe. Margin optimization is our ability to make higher-yielding equivalent risk loans in the legal lending market and in the fintech sponsorship lending markets. We believe that we will option out loans that are yielding anywhere between 6.5% to 7% with higher yields of closer to 8.5% to 9%. That's our first and most important project. We weight these projects. When I'm saying weight, it's weight, weight them in order of importance and how we focus our resources.

The second one is what we call Prime Capture. That's our second project name. And Prime Capture are these fintechs that we are onboarding. I mentioned earlier that we have nearly 50 fintech clients in the pipeline. There's no way, that's 2 years' worth of fintechs based on our current onboarding, which will be nearly 20 this year versus 5 last year. We've really improved, and I'm really happy with the team's progress on onboarding. We really have done a good job with that. But now we are weighting, weight, the onboarding prospects to -- when I'm saying Prime Capture, for example, I mentioned last month -- last quarter to Joe about our portfolios like wine it has to maturate. Well, as we look at the wine, we're accelerating this through what we call lift and shift. Lift and shift fintech clients are clients that are already in development, the clients that already have a strong fintech client base where the revenue as soon as they're onboarded, shifts immediately to us versus a start-up program that takes months and months and months to maturate and recognize that revenue.

So that's a high priority for us in 2027 is this Prime Capture, capturing these prime clients that are in our pipeline, putting them to the front of the list so that we can lift and shift their revenue to us much quicker than some of these ones that are coming on. If you remember from a previous quarter call, we said we really only recognize about 25% of the revenue because it takes time to maturate. With these lift and shifts, we recognize nearly 100% of the revenue once they're on board. So we're excited about that as 2027 nears and how we are onboarding clients.

The third one is what we mentioned earlier, we now have 14 certified Claude engineers, and that will continue to grow. Our team continues to educate and grow. We have a wonderful partnership with Anthropic. We believe will be a case study for them in the near future of how to use AI and banking. And with that, now with these 100 Digis, what we want to do when we talked about this 10% reduction in cost year-over-year in a growing inflationary market, we want to at least maintain these cost levels and not grow them. And that we do with our onboarding of our Digis, continue to improving our processes. So those are our big 3, 2 revenue drivers and including loans and our fintech, which will also drive lower cost deposits, that fintech onboarding. It's not only driving fee income, but it's driving lower cost deposits and holding our expenses steady to maybe even downward. Those are our big 3.

Operator

[Operator Instructions] Our next question is from Janet Lee with TD Cowen.

Sun Young Lee

If I recall correctly, in the last rising rate cycle, you guys went more defense and your balance sheet shrank a little bit as you were playing defense. If you get more rate hikes, is there any different in terms of your strategy? And how should we think about your loan and deposit growth in '27?

Larry Mazza

Michael, do you want to take that one?

Michael Sumbs

Yes. Janet, thanks for the question. Yes. I think it's a little different this go around. And I would say from a growth standpoint, we're still seeing good opportunities in the pipeline for loan growth, particularly excited about the specialty lending pipeline heading into Q4. And as Larry mentioned on the margin optimization effort, I think a lot of that work can be done in terms of remixing our loan portfolio into higher-yielding loans. Just this quarter, the core yield on loans was up about 20 basis points versus Q2. So while the average balance of loans wasn't up significantly over the quarter. We still saw nice growth in the interest income related to that enhanced yield in the loan portfolio.

And then on the deposit side, we're still seeing really strong opportunities for deposit growth. I think we've had about $300 million in new fintech-related deposits come on over the course of this year. And I don't really see that opportunity changing materially in a higher rate environment. So I think we're set up well as it relates to the balance sheet for continued growth, but also continued mixing of both the loan and earning asset side as well as the funding side.

Sun Young Lee

On the AD&C portfolio, the $13 million, so you took close to $5 million of specific reserves. How should we think about the loss content here realistically? And should we expect net charge-offs to remain sort of in the third quarter levels before trailing back to the 20 basis point range that you've typically experienced? How should we think about the path or the timing around getting back to the normalized levels?

Michael Sumbs

Yes, I'll take that one, Janet. So I would say from a charge-off standpoint, there could be a similar level in Q4 as to what you saw in Q3 as we continue to work through some of the loans that have migrated into the nonperformer. As it relates to the larger AD&C loan that we've discussed on the call, I feel good about where we reserved that loan based on the current appraised value and factoring in associated costs with resolving that or selling that property. It's hard to predict the exact timing of resolution on that particular credit. And as we mentioned, we're still collecting facts around the situation, but we're actively working through it and hopeful to remediate it and resolve it expeditiously.

Sun Young Lee

Okay. Got it. And on the fee income side, you've obviously been adding a lot of fintech partners and payment card and services income have been growing at a very strong pace. But that's been, I guess, somewhat masked by slower or declining equity method investment income. I believe that's somewhat tied to the mortgage performance, but it can only go so much lower. How should we think about the overall fee income for MVB from here versus that -- because it's been kind of range bound in the $7 million to $8 million range per quarter. How should we think about that inflection point?

Michael Sumbs

Yes. So as you mentioned, the payment card and service charge income line items has been growing nicely, and that's the line item we're really focused on continuing to grow and hopeful with all the new partners that we've been onboarding as they continue to mature on the platform, we can continue to support those growth rates. You're correct that the equity method investment is largely related to activity in the mortgage space. So I think the rate environment is certainly elevated, and that's having a direct impact on activity in the mortgage industry. A lot of that increase in the rate environment happened late in the quarter. So I expect there could be continued slow activity in mortgage as rates remain elevated. So we're really focused on continuing to grow the payment card, the service charge income and the equity method income will be largely tied to the overall mortgage market.

Operator

We have reached the end of the question-and-answer session. I would like to turn the floor back over to Larry Mazza for closing comments.

Larry Mazza

Thank you, Max. Thanks to everyone for joining us today. We're encouraged by the progress we're making in strengthening our CoRe banking operations. We've expanded our payment deposits. They're up 28%. Our payment and card service charges are up 40%. Our NIM is up 15 basis points to over 4%. Our cost of funds are down 6 basis points to 2.07%. Our expenses are down 10.5% year-over-year, and our loan loss reserve, we feel is adequate. We remain focused on building on that momentum and delivering stronger financial performance. We appreciate your continued interest and support in MVB and look forward to speaking to you next quarter. Have a wonderful evening.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.