MVB Financial (MVBF) 2026年第三季度业绩电话会：金融科技存款增长，信贷拨备

MVB Financial Corp. (NASDAQ: MVBF) 公布2026年第三季度净利润为43.8万美元，合稀释后每股收益0.03美元。业绩受到990万美元信用损失计提的施压，其中包括与一笔收购及开发土地贷款以及数笔存量SBA和C&I贷款挂钩的准备金。

基础银行业务趋势有所改善。核心净息差扩大，金融科技支付存款大幅增长，非利息支出下降。管理层表示，大型土地贷款属于孤立事件，并不代表整体资产组合出现恶化。

核心要点

• 净利润从2026年第二季度的1,230万美元（合每股0.93美元）降至43.8万美元（合稀释后每股0.03美元）。这一降幅反映了更高的信用计提以及上季度1,000万美元税前金融科技投资收益不再重现。
• 在贷款增长、融资成本降低和资产负债表优化的支撑下，核心净息差环比上升15个基点至4.02%。总融资成本下降6个基点至2.07%。
• 金融科技支付存款环比增长28%，同比增长近55%至7.66亿美元，约占存款总额的25%。
• 信用损失计提从470万美元增加至990万美元。其中包括针对一笔收购及开发贷款设立的460万美元专项准备金，以及针对某些存量SBA和相关C&I贷款设立的320万美元准备金。
• 贷款总额增加4,400万美元至25.2亿美元，相当于年化增长率7.2%，标志着贷款规模连续第六个季度实现增长。
• 随着 MVB 继续实施成本控制并扩大人工智能和自动化的应用，非利息支出降至2,980万美元，环比下降约2%，同比下降10%。

关键财务数据

业务与经营业绩

金融科技存款改善融资结构

金融科技支付存款在该季度增长28%后达到7.66亿美元。MVB表示，这一增长使其能够减少高成本存款余额，避免进一步依赖定期存单。截至季末，贷存比为81.6%。

MVB在2026年前九个月新增了九家金融科技合作伙伴，而2025年全年为五家。管理层形容客户储备强劲，并表示公司有近50家潜在金融科技客户处于储备流程的不同阶段。

受正常的博彩季节性因素影响，支付卡和服务费收入环比下降至520万美元。然而，该指标同比增长近40%，且在2026年前九个月增长了约22%。

贷款增长与息差优化

贷款总额连续第六个季度增长，增至25.2亿美元。管理层强调，进入第四季度后，专业贷款储备强劲，并计划将资产组合转向收益率更高的法律及金融科技赞助贷款。

针对2027年，管理层将“息差优化”列为首要任务。公司旨在用收益率接近8.5%至9%的同等风险机会，替换收益率约为6.5%至7%的贷款。这是管理层的既定目标，而非实现的资产组合收益率预测。

费用与自动化

非利息支出降至3,000万美元以下，为2,980万美元。MVB已部署或正在开发100多个数字助手（“Digi”），并通过与 Anthropic 的合作拥有14名经过培训和认证的 Claude 工程师。

管理层表示，风险与合规人员的进一步削减可能仅限于大约五到七个岗位，因为在增加新的金融科技项目时，人工监督仍是必要的。

管理层业绩指引

• 管理层认为，在收益率更高的贷款以及低成本金融科技存款持续增长的支撑下，核心净息差有超越4%的空间。
• 公司预计在2026年第四季度再新增约8至11家金融科技客户，若执行顺利，全年总数将接近20家。
• 管理层预计金融科技存款近期将突破10亿美元，并预计在2027年继续增长。
• MVB计划优先考虑成熟的“无缝迁移”（lift and shift）金融科技客户，相比初创项目，这些客户能够更快带来收入。管理层表示，与较不成熟的项目最初仅确认约25%的预期收入相比，这些成熟客户在入驻后可能产生几乎所有预期收入。
• 管理层打算通过持续的自动化和流程改进，将费用大致维持在当前水平，尽管其承认存在工资通胀且进一步削减的空间有限。
• 公司表示，由于仍在处理已转入不良状态的贷款，第四季度净核销额可能会保持在接近第三季度的水平。

风险与关注领域

主要信用问题是一笔1,310万美元的收购及开发土地贷款。一份更新的评估报告显示的价值明显低于发放贷款时使用的价值，部分原因是房地产开发权利问题。MVB计提了460万美元的专项准备金，将该笔贷款降至当前评估价值减去估计销售费用后的金额。

公司正在调查最初尽职调查和评估过程中潜在的虚假陈述及缺乏透明度的行为。公司已聘请一家法证评估机构，并正在评估可行的补救措施。解决的时间节点仍存在不确定性。

截至9月30日，存量SBA资产组合总额不足2,300万美元，其中包括约300万美元的政府担保余额。该资产组合中约53%被归类为不良/关注类贷款，管理层表示，整个资产组合仍处于强化监控之下。

与抵押贷款相关的权益法投资收益仍面临高利率和抵押贷款活动疲软的影响。此外，部分带息金融科技存款与有效联邦基金利率挂钩，如果利率上升，将产生融资成本敏感性。

分析师问答要点

常态化信用计提：管理层表示，投资者可以通过扣除460万美元的土地贷款准备金以及与存量SBA和C&I贷款相关的320万美元准备金，来评估常态化的计提水平。未来的计提仍将取决于是否有新增贷款转入不良状态。

土地贷款解决进展：该笔贷款在临近到期并获得最新评估报告后，在该季度内被划为关注类贷款。管理层表示，当前的准备金反映了评估价值扣除销售费用后的净额，但尚无法提供具体的解决时间表。

存款结构：管理层预计金融科技存款在融资中的占比将不断增加，因为该平台在40个州拥有全国性布局，而CoRe银行的业务则集中在北弗吉尼亚州和西弗吉尼亚州。

利率敏感性：部分金融科技储备存款为无息存款，而规模较大的带息余额定价可能按有效联邦基金利率的一定比例确定。管理层表示，如果将无息余额计算在内，整体金融科技存款池属于较低贝塔系数的融资基础。

2027年优先事项：MVB确定了三项优先事项：通过更高收益的贷款优化息差、通过其“Prime Capture”策略加速推动成熟金融科技客户入驻，以及利用AI和自动化维持费用稳定或进一步降低费用。

业绩电话会议完整转录稿

完整财报电话会议逐字稿

管理层陈述

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.

分析师问答

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.