Forbright Inc (FRBT) 2026 Q3 法說會逐字稿

Good morning, and welcome to the third-quarter 2026 earnings call for Forbright, Inc. ( Operators Instructions )

It is now my pleasure to turn the call over to Ben McCanna, Chief Public Affairs and Investment Relations Officer at Forbright Bank.

Thanks, Andrew. Before we begin, I'll remind listeners that remarks on this call may contain forward-looking statements that are subject to risks and uncertainties. Please refer to the safe harbor statements found in today's earnings release and in our investor presentation for additional details. Management may also reference non-GAAP financial measures during the call. A reconciliation of non-GAAP measures can be found in our earnings release and investor presentation slides.

Finally, I'll identify the speakers on the call this morning. They are John Delaney, Chairman and Chief Executive Officer of Forbright Inc. Don Cole, President and Chief Operating Officer of Forbright Inc. And Chief Executive Officer of Forbright Bank and Chris Lynch, our Chief Financial Officer. We're also joined in the room by Aaron Judah, our Chief Strategy Officer, who will participate in the Q&A. With that, I'll turn it over to John.

Thanks, Ben, and good morning, everyone.

So I'll start by saying I'm somewhat superstitious by nature. So I'm always a little reluctant to call a quarter terrific. But this time, the facts certainly merit that description to my mind. Our loan growth was very strong. NIM was stable despite meaningfully higher liquidity. Our credit performance was very good.

We continue to build out what we view as a best-in-class digital deposit franchise and we made good progress on the efficiency metrics that will continue to improve as we scale the business.

At a high level, the quarter reinforced three key themes: first, our ability to drive good and disciplined loan growth from our six national lending businesses. Our loan book grew 24% year over year, up 9.5% this quarter alone. Healthcare, which is our most mature strategy to some extent, drove most of our growth this quarter, but all of our specialty credit delivery verticals performed very well. And we would expect different strategies to outperform. From quarter to quarter, there's a little bit of lumpiness. But again, I think the key theme here is that all of the strategies are seeing good opportunities with attractive structures and appropriate spreads. The second big theme was around our digital deposit platform, which raised over $1 billion in the last quarter, which represents a 24% increase from the prior quarter. The platform continues to provide a highly scalable source of funding as we grow the business. And I would describe our confidence as very high in terms of our ability to use this increasingly sophisticated platform to drive very precise deposit growth at optimal cost of funds and acquisition cost. We spoke last quarter about our new promotion engine.

Which launched and was very successful, and we expect this strategy to continue to work well for us in the future. And our upcoming checking product is on track for a phased launch to begin in the first quarter next year and then expect most of the promotion to the public to take place in the second quarter. And then finally, we view ourselves as very well positioned to improve operating efficiency as the business grows. We certainly remain on path to achieve the efficiency targets we've laid out for folks. Overall, we believe the business we've designed and built will perform very well in the banking and financial services environment of today and importantly, the one of tomorrow. In that regard, we're spending a lot of time thinking about how artificial intelligence will affect banking and trying to plan accordingly.

I co-wrote a piece in the Wall Street Journal a few weeks ago titled AI Will Be a Boon for Savers. As I laid out in that article, our view is that the banking system is moving toward a world in which technology makes it easier for consumers to evaluate financial products, compare rates, and move their money to institutions that offer the best value.

We view this trend as unambiguously good for consumers and therefore unstoppable.

The speed of that transition, however, is very difficult to predict, but we believe a significant percentage of legacy branch deposit resemble a slow melting iceberg.

Put another way, the move to digital deposits has been slow and steady, and that's exactly what the early part of an S-curve looks like. That's how every major technology is adopted. At some point, it accelerates, and when it does, it will happen faster than most people expect.

Anyone who thinks today's pace is tomorrow's pace is missing the boat.

We built our franchise for where deposits are going, not where they've been.

We believe we're well positioned to be the bank of the future, and that means having the technology, the operating model, and the deposit franchise that can compete as customer expectations change. And we feel very good about where we are, gathering deposits nationally through a digital platform, paying a fair rate, and delivering a user-friendly experience through the platform we've built. Deploying that funding through specialized lending businesses where expertise travels nationally and where our teams can create value through speed, flexibility, and insight elevates the confidence in our model.

As part of our digital first focus, this quarter, we announced the sale of our legacy Washington DC area branches and associated deposits to an institution called Trustar Bank. That transition is moving ahead nicely. We anticipate regulatory approval or TrustStar anticipates regulatory approval in the fourth quarter and closing will happen in the first quarter of 2027 based on the timing of lining up the two core service providers for that transition. And both teams have done a great job of planning a smooth transition for the customers.

So before concluding, I want to reiterate the four key metrics that made this, in my judgment, a very strong quarter. We had very strong loan growth. We expect that to continue, perhaps not at the level we saw this quarter, but we certainly expect strong loan growth in the fourth quarter into the first quarter. Credit was very strong, which is in many ways the most important metric for our business. We had disciplined deposit pricing and very strong deposit growth.

And we achieved solid execution on our expense management initiatives, which is now part of the culture of Forbright.

As we continue this work, we expect the machine we have built to become increasingly more productive and valuable. With that, I'll turn the call over to Don.

Thanks, John. First, I'll spend a few minutes on earnings and operating metrics for the quarter.

As John said, outstanding loan growth and credit quality really drove our strong performance this quarter.

Our net income was $20.6 million or $0.41 per share on a fully diluted basis. This represents an increase of $16.5 million or over 400% from the second quarter.

Our net interest income of $72 million grew about 14% compared to $63 million last quarter.

Our pre-provision net revenue was up almost 60% from the prior period as well.

Finally, our NIM was essentially flat, despite our expectation of some contraction in Q3, which we touched on during our last quarterly call.

That expectation was based on growing liquidity levels from our deposit promotion, as John described.

Those increased liquidity levels support the upcoming branch sale.

However, if you include those held for sale deposits in the calculation of the loan-to-deposit ratio, that went down, which put downward pressure on our overall NIM. However, we were able to maintain the steady NIM based on two key factors: first, as John indicated, we held our gross savings rate steady even as the Fed raised rates in September and second, our non-accruals were down again in Q3, which resulted in higher GAAP loan yields. Some of that impact is from the recapture of previously unrecognized interest from loans returning to accrual status.

These results reflect our continuing conviction that we can continue to grow our loan portfolio while being able to precisely fund that growth with our digital deposit platform, which will continue to result in improved economies of scale and better overall returns on equity.

Turning next to credit, we experienced just $1.2 million of net charge-offs this quarter, down from $2.7 million in the second quarter.

The core net charge-up rate on our six national lending strategies was only 3 basis points, down from 8 bps last quarter.

We expect these numbers to move around quarter to quarter, but our expertise in our specialized lending businesses and a disciplined culture position us to consistently manage credit effectively.

Moving to non-interest income, we saw strong growth from our FHA HUD business as we previewed on last quarter's call.

On solar servicing, it is worth noting that we continue to see artificially elevated expenses and revenues as these expenses are reimbursed by our clients.

You'll note in the investor presentation, we detail exactly how much those pass-throughs are, so analysts and investors can factor them into calculations around our efficiency.

On expenses, our core expenses were well managed during the quarter.

Our efficiency ratio improved to 69.6%, down about 8 percentage points or 10% from the second quarter.

Our operating model is designed to scale without proportional increases in headcount.

As we grow loans and deposits, we expect the fixed cost base to be absorbed across a larger and more productive franchise. As John said, we remain on track to achieve our efficiency targets in '27 and believe we are on a solid path to achieving our longer-term efficiency objectives.

Finally, I'll say a word about Fed positioning given yesterday's decision to keep rates unchanged.

As we have discussed before, we believe we are well positioned regardless of future rate movements.

About 90% of our loans and 85% of our deposits are floating rate.

We manage our investment portfolio to balance interest rate risk.

We built our business that way intentionally. We view our success tied to execution on our growth strategy, not tied to arbitraging Fed interest rate decisions.

In September, for example, we did not change the base rate on our growth savings product after that Fed hike because our strong funding levels and market positioning.

There will be times when we'll need to add deposits to maintain our liquidity and growth, and we expect to move deposit rates if there are future Fed hikes. But with our promotion engine, we are structured to remain competitive and have flexibility to manage our rates pragmatically.

Overall, the quarter's results demonstrate a strong and steadily growing business.

We believe we're continuing to execute against our core objectives, grow our specialty lending strategies, maintain strong credit, fund our business responsibly through our digital deposit platform, and achieve our expense efficiency and return objectives. With that, I'll turn it over to Chris, who will discuss capital, liquidity, and taxes.

Starting with capital, Q3 CET1 ratios were 12.9% for the parent and 13.7% for the bank.

Tier 1 leverage ratios were 9.8% for the parent and 10.4% for the bank.

These are lower than the prior quarter due to loan growth. Parent ratios declined less than the bank ratios as net proceeds of $17 million from the exercise of the overallotment option were retained as the parent.

The decline in the leverage ratio was larger versus the risk-based ratios due to the cash we're holding for the branch sale, which was $721 million at quarter end.

We announced in an 8-K last week that we'll be redeeming a $25 million subordinated debt series at par on December 1 with parent cash on hand. The series matures in December 29 and pays interest at a floating rate of three-month term SOFR plus 439 basis points or about 8.45% at current market rates.

Since that's within five years of maturity, $10 million of the debt balance would have qualified for Tier 2 capital treatment this December, reducing to zero by December 28.

With respect to liquidity, cash and AFS investments at quarter-end totaled $1.9 million, excluding the cash held for the branch sale.

And the loan-to-deposit ratio was 87.3%, up 4 percentage points from Q2 as excess liquidity was deployed into loans. This excludes the branch sale deposits of $744.

Turning to taxes, tax expense and the tax rate for the quarter were $8.5 million and 29% compared to $9.2 million and 69% in Q2.

Q3 tax expense includes a $2.7 million benefit from amortization of the deferred credit, which was offset by a purchase accounting adjustment that reversed $2.7 million of previously recognized benefit. As a result, no net benefit was reflected in tax expense for the quarter from the deferred credit.

The purchase accounting adjustment was related to completing the final tax return for the entity with the tax assets we acquired in Q3 25.

The adjustment reduced the deferred credit balance to $36 million in Q3 from $49 million in Q2.

For Q4 this year, we estimate the tax rate to be approximately 20%, which is net of a deferred credit amortization of approximately 9%.

For fiscal year '27, we estimate the tax rate to be approximately 19%, which is net of deferred credit amortization of approximately 9%. The deferred credit amortization in these estimates reflects the effect of the purchase accounting adjustment.

Estimated tax rates exclude discrete type effects such as vesting of restricted stock, option exercises, for tax returns, et cetera.

With that, operator, we'll open it up for questions.

( Operators Instructions )

Our first question comes from Moshe Orenbach from TG Cohen.

Your line is now open.

Great, thanks.

I guess maybe to start, on the deposit platform and promotions, it was good to hear about your pricing strength this quarter.

Is there anything you can tell us about kind of plans? I know you said that obviously you've got plenty of liquidity now, but how should we think about that?

The betas for subsequent hikes and what you're thinking about giving your loan growth plans for the potential for future promotions. Thanks, Moshe.

I'm going to let Aaron take that one. Sure.

In terms of I'll talk a little bit about strategically how we think about deposit gathering and the use of promotion. I think that you've seen it at least year-to-date, a strategy that we're going to look to continue to execute on. When we feel like we're in a position of strength to go and use a promotion to gather deposits and we're seeing and we spend a lot of time analyzing these promotions while they're alive, if we're seeing really efficient cost of acquisition, we will. Gather those deposits and then be disciplined off the back of that excess liquidity over those subsequent quarters. So that's what we're seeing play out here through the end of the year. I will say that I do think we will have our next promotion up potentially by the end of the year, which will be our refer a friend promotion, which is a thing that allows you to go out and send a link to a friend to start an account and get a promotion for that.

So it will come sooner, but look, I think that.

We, in terms of deposit pricing going forward, we've held aligned. We've not moved. All of our competitors at this point, I think, either on the base rate or on a promoted rate have moved.

If we do see another hike here coming up at some point, I do think that we will have to you will see our blended cost of that high-yield savings go up. But until we see the behavior of some of these promoted accounts over the next few quarters and into next year, I don't know that we have a hard line on how we plan to play that, whether we have to address when and if we have to address the base rate, whether we address it through a new promotion similar to the one we had or a version thereof.

I guess to your point, to your question, Moshe, if rates go up, I think you'll see the blended cost of funds on a higher savings goes up.

What tool we use to do that? What type of promotion are addressing the base rate is still to be determined.

And, John, you mentioned that, loan growth in the quarter was concentrated, in healthcare.

As you kind of look out at the verticals.

Do you see any sort of shift in that in the coming quarters like any of the others standing up to kind of pick up some of that growth?

Yes, I think healthcare is likely to have a bunch of payoffs this quarter, so I don't think healthcare will be the.

Largest contributor to loan growth in the fourth quarter. And again, we're seeing very strong loan growth in the fourth quarter. I would bet that healthcare would not be the biggest contributor in the fourth quarter, although I could be proven wrong because there's some timing issues here because we have a whole schedule of deals we expect to close, which.

People spend a lot of time focusing on, including Chris, because he wants to make sure we always have abundant liquidity. So a lot of time goes into focusing on when deals will close, but they tend to slide and then we have payoffs. I would not expect healthcare, I think healthcare will have a strong fourth quarter. I don't know if it'll be our largest grower, but I think the key is, Moshe, all of the businesses are seeing very attractive loan growth. In fact, I think we're at a point where we can explore some widening of.

Because the loan growth is so strong, I think we could potentially look to widen spreads on some new originations. And which would probably curtail loan growth a little bit, but it will curtail it to a level that is at or above our expectations. I think we're in that kind of position where we have a little bit of pricing power. I don't want to exaggerate that because we're in a very tight spread environment.

But in my judgment, there's some things kind of macro occurring that I could see spreads widening a little bit and we want to test that a little bit.

And I think we're in a position of strength to do it. So that's kind of the theme going into '27 when we talk to the teams that are running these lending strategies, which again are all doing a great job and have very full pipelines, is our originations are outperforming.

So why don't we try to.

Widen spreads a little bit on the margin because we feel like we have cushion to do that and meet our loan growth expectations. That's kind of how I would describe the position we're in all of these lending businesses.

Thanks very much.

Thank you.

Our next call comes from Jared Shaw of Barclays.

Your line is now open.

Good morning, thanks.

I guess, just sticking with that growth discussion, is that for the potential to widen spreads, is that if growth is starting to run sort of above that billion dollars a quarter level, or you feel that with a billion dollars, you think you can try to work on spreads and maybe we'd see that quarterly number drift a little bit lower if there's an opportunity for wider spreads?

Yeah, and remember the $1 billion was the gross originations, not the net loan growth, just for reference. Yeah, I think the point I'm trying to make is, as I look across the six lending businesses, again, which I think right now are very well managed and performing very well, I would describe them as outperforming our expectations around growth.

And so I think as we think about kind of like.

Dialing the knobs of the business, if you will. We talked about the digital deposit platform, which we think quite frankly has virtually limitless growth potential for us, certainly with the business plan we're executing against.

And now we're in a position, as we saw this quarter, we didn't have to follow the Fed's rate hike because our ability to kind of dial that up and down. And I think we're seeing a little bit of that on the loan origination side. The teams are performing really well. We can, in my judgment, meet our loan growth expectations and potentially, and again, I don't want to over-exaggerate this because we are in a competitive environment, but potentially widen spreads a little bit on the next quarters. Vintages of originations relative to what they were the last quarter, at least explore that, and that's what we intend to do.

Okay, all right, thanks. And then I think in the deck, you reference the Alliance platform and plans for working on increasing production from that. Can you give a little detail around what that entails and would there be expenses associated with that or how do you see that sort of dialing higher?

No, we actually see efficiencies associated with that. What we're doing, what we started this quarter is we, from kind of an operational and management perspective, moved Alliance Partners into the lending businesses more directly, where it was effectively operating as a standalone business. Because the history of that business, it was a separate business that was acquired by Forbright when it was called Congressional Bank.

And it operated somewhat independently, and now we've made the decision to integrate it more into the lending businesses and we plan on offering more of the loan products to the Bank Alliance membership as a result of that integration, where in the past we effectively just offered one product, our corporate finance or leveraged lending product.

So we're hoping that this new integration more closely with the lending teams and the ability to offer all of the loan originations that Forbright has and again, this comes back to my prior comment, I mean, our originations are so strong across the business, we want to find more outlets to distribute our originations.

And this is one approach we're taking, and we'll probably take others over time, because we do think we have kind of a singular portfolio of national lending strategies that are in fact outperforming from an origination perspective. And that allows us not only to potentially look at widening spreads, and again, I want to make sure I caveat that it will be very modest. But still impactful, but we also want to look at ways of distributing our origination because we think what we have is very valuable, people are looking for loans, we find a lot of good loans based on these six national lending strategies and we'd like to distribute more of them to Alliance partners and potentially to other partners who would pay us fees to do that.

Okay, thanks. If I could just sneak one more in.

Your commentary around AI, I think was really interesting. And do you feel like the regulatory environment is where it needs to be to sort of execute on that? Or is there an opportunity or a need for that to catch up a little bit?

Yeah, so putting on my prior public policy hat, I think there's a lot of opportunities for regulators here, and they should be thinking about this. In the same way, if you think about it, the regulators effectively regulate the core service providers, right? So when regulators go in to visit banks as part of their exams, they don't kind of re-examine FIS, for example, because they look at that FIS platform as part of them being a bank service provider. The same approach I think should apply to agents that are unleashed.

On the banking system. And again, I think these agents can be profoundly positive. I mean, we did some work on this. There's about $10 trillion of consumer savings accounts in the United States that are priced at 40 bits. And those people should be getting, 350 to 400 bits, right? So we're talking about hundreds of billions of dollars that could be delivered to consumers in the United States of America and in a world that's challenged with inflation and affordability. How do we not work hard to make that happen as banks and as policymakers? And so I think regulators should obviously be focused on the security aspect and they should be regulating it. But the other thing they can do, which I think is an enormous opportunity is the CFPB was created to make sure consumers are protected.

People have different views about the effectiveness of it. I'm not going to get into that. But what we ought to be able to do is, as part of regulating these agents, is effectively have them operate like fiduciaries.

And they could potentially accomplish many of the goals that the CFPB was designed to accomplish. So I think there's a huge opportunity for policymakers to work closely with technology companies and work closely with banks.

To have these tools integrated into the banking system for the good of consumers in lots of different ways, not only giving them a fair rate, but also protecting them from predatory practices. And I'm hopeful that the regulators will be forward leaning and the Congress will be forward leaning on this topic and have a comprehensive approach because I do think this is inevitable. I do think it is profoundly positive.

But there needs to be some regulatory oversight not only around security, data integrity, but also making sure that these agents are effectively become fiduciaries and do what's best for the consumers.

Our next call comes from Ryan Nash of Goldman Sachs.

Your line is now open.

Good morning, guys.

Maybe just to start off, so given the balance sheet is asset sensitive, combined with your comments about not moving on the first hike, maybe just talk a little bit about how you're thinking about margin expansion from here. And then on John's comments regarding spread winding, I know you said don't take them too far, but maybe just talk a little bit about how you're thinking about incremental margins, are they accretive from here and where do you think they could go to?

You want to start, Don?

I mean, I'll tee it up and then Don will give a more intelligent answer to your question, Ryan. So first of all, I want to put it in context. I mean, across the last 18 months, we have existed -- or maybe 24 months, we have existed in an environment of kind of consistent and persistent tightening of spreads.

And you've observed this in all your work, obviously, as well.

We think that's largely stabilized, at least that's what we're seeing. But there's no question the vintage of loans we've originated the last couple of quarters had a tighter spread than the vintages two years back, three years back, et cetera.

And that's fine for us because we have such efficiencies to gain with scale.

And we think with some of the new capabilities we're going to have in the digital bank, we'll be able to pick up some cost of funds improvement.

As it relates to spreads widening, again, I feel the need to caveat that in part because there's a lot of Fulbright folks listening to this and I want to make sure they understand what we're saying and what I've been saying to them, which is we think because our loan growth is so strong, we can just be a little more disciplined in some of these situations of negotiating spreads and at least explore whether we can in fact move them up a little bit. Now, that's going to have a very.

Modest impact on the whole loan book right because even if next quarter spread of new originations is five or 10 basis points wider on average That's not going to have a huge impact immediately on the loan book, but over time It will it will impact we're also very encouraged by what we're able to do with the digital deposit platform because again We built this platform invested a lot of time and money in building and it's very sophisticated It's all on modern tech and rails, but for most of its existence. We were effectively. Just growing deposits as quickly as we could because we're effectively changing our whole funding profile.

And with the launch of this promotion engine.

We really, for the first time, are able to start exploring strategies that allow us to continue to deliver good value to our customers, but also pick up a little margin on the cost of funds, which we were able to do by not following the Fed. And we were able to not follow the Fed because we had so much excess liquidity that we could actually afford a little runoff if it were to happen. And I would say less of it has happened than we would have thought.

So I think all that gives us some confidence that what we would like to do in '27 is pick up a little bit of spread on new originations and we'd actually like to continue to pick up a little bit of cost of funds relative to Fed funds by deploying some of these strategies. Don, would you add? Yeah, look, I will say.

Short-term forecasting is challenging because there's a lot of moving.

Parts in these things, but I'll go back to maybe what our original forecast was and why it matters for the long-term trajectory, which is echoing a lot of what John said.

John's point, which is true, is that we've been originating loans at tighter spreads than maybe the blended portfolio, and we've been forecasting that, but we think that's starting to stabilize because now that's been true for a couple of years.

Our long-term plan was to improve our net interest margin through a couple of things, which is one, being able to get a little bit better. Spread on our cost of funds relative to the indices and then to improving our loan-to-deposit ratio and both of those have been happening But as I said, there'll be these short-term blips for example this excess liquidity We have now to support the branch sale from the deposit promotion itself just on mixed depressed our NIM about 10 basis points 10 or 11 basis points this quarter Otherwise you would have seen widening thanks to some of the improvements in NIM coming from improvements and non-accruals So I think I just go back to I think we have the same long-term. Strategy here, which is keep originating loans, we forecast our loans at the spreads we're at today. So what John is talking about being a little bit more opportunistic could have some modest but impactful improvements on the upside, but really it's just that long-term strategy of continuing to increase the loan-to-deposit ratio.

And continue to originate loans and do good credit work. So I think that would lead to a slightly improving NIM over time, which will help us get to our full targets. But there will be these moves as we actually execute on that. As Aaron said, we'll be disciplined in deposit pricing. The next Fed raise will probably obviously see a higher beta than zero, but we have to follow the market. But we do think we've already started executing on what we said, which is taking a little rate on the deposit side, improving the loan-to-deposit ratio once these.

Once these branch sales occur. I will say that has a little bit of a depressing fact on them too, because we're eliminating a lot of expenses through the branch deposits. These are slightly higher cost of funds on the digital side, so there's some moving parts, but again, all accretive to our long-term goals in terms of returns and efficiencies.

And Ryan, this question is obviously a very important question, and it gets to the center of the center of the business model.

So I want to make sure, Aaron or Chris, do you guys have anything you want to add to this?

I guess, John, maybe a quick follow-up for Don. Don, given your comments regarding the loan-to-deposit ratio, obviously, it rose this quarter because you had very strong growth. But ideally, where do you want to run that? And when you think about the deposit gathering initiatives that Aaron laid out earlier, discuss maybe some more of the initiatives in terms of the ability to drive growth and how do you do it in a cost-efficient way?

So I think we've targeted sort of a 90, low 90s loan-to-deposit ratio, and we're not quite there yet. And in terms of, I mean, I'll let Eric have, in terms of growing deposits, I think there's a part that's pretty straightforward. We talked about the promotion engine and how successful that was. I will say also, obviously, growing $1 billion deposits in a quarter is not something we really will ever need to do from a pure growth rate. This level of origination of loans was very on the high end of where we'd expect it to be clearly on a quarterly basis, back to our goal of growing loans about 15% annually.

So this was a period where we tested it and we showed it could work incredibly effectively in a very compressed period of time, so we're very confident about our ability to raise and importantly, when you say efficiently, the cost of acquisition of these deposits was very attractive.

Based on doing it in this concentrated fashion with the promotion. So that's really the simple answer of why we can continue to grow deposits in sort of an efficient cost method. Our whole strategy on the digital business is designed to have a fixed cost base that we can lever up as we grow from where we are now, 6, 7, 8, 9, 10, and just add on the margins to support sort of operational servicing.

Yeah.

In my opinion, Brian, I think our ability to do the things we're describing here will just get better and better with each passing quarter. I mean, I think of us as having effectively a dashboard and on that dashboard are kind of four knobs, two of them around deposits, two of them around loan growth.

The deposit knobs are growth and pricing and with the investments we continue to make in that platform, those knobs become more sophisticated each quarter and our ability to dial up or down volume and.

And pricing gets better and better. And the same thing on the lending side with six high-performing businesses, we've basically got two dials, growth and spreads.

And I think with each quarter as we continue to add little tweaks and adjustments to the platform, I think our ability to get more sophisticated about being able to do those two things will grow and grow. So the more this business gets reduced down to this machine that we have tremendous control over on both sides of the balance sheet.

The better it's going to just perform quarter over quarter. And that's really what we're building here.

Awesome.

Thank you guys for all the color.

Thanks, Ron.

Thank you. Our next question comes from the line of Nathan Rice from Piper Chandler.

Your line is now open.

Hey, guys. Good morning. Thanks for taking the questions.

Just thinking about the forward fee income trajectory, I appreciate the breakdown and the release around some of the items that you deemed non-core, but I think there's some recurring nature to a few of those factors. And I appreciate you're seeing good momentum in the FHA sale business and Alliance Partners is kind of becoming more efficient going forward. So just curious if you can kind of unpack kind of where you see kind of the overall fee income. Run rate tracking over the next few quarters, particularly just given that maybe there's some recurring nature to some of the non-core items called out.

Yeah. So the FHA HUD business, which is mostly linked to our healthcare business, although we are increasingly working to link it to our national commercial real estate business because they're on the multifamily opportunities there. The team is great. They're doing a great job. We're one of the leaders in the business. Higher rates hurts that business, right, because refinance opportunities get pushed out a little bit.

So the business was up this quarter from prior quarter. It's a little bit lumpy the way that business unfolds. We feel 2027 will be better than 2026. But I think we're assuming some of that business gets pushed back a little bit because of the rate environment.

And it's pretty obvious why that would happen, which is if you're a borrower and you've got a bridge loan and you want to lock in long-term fixed-rate hub financing, last quarter didn't look particularly attractive to do it with what happened with the 10-year. So you could see some of those people making decisions to wait a few quarters to see if they can execute at a better level. And that's what you see in those type of businesses all the time. Now, on the flip side, in our solar servicing business, where we are master servicer to a very large $8 billion book of residential solar loans with a weighted average light that's tied to origination and it's tied to payoffs, obviously, to the extent we're in a rate environment that makes mortgage refinances.

Volume down, which is what we're in, we would expect the weighted average life of that portfolio to stretch out and give us a little more fee income. So we're a little bit hedged on these fee businesses, if you will. Higher long-term rates slows originations in HUD, but it also slows paydowns in the legacy book of loans that we service in solar servicing.

And so that's kind of the dynamic there.

Yeah, look, I just it's worth highlighting because you meant the non-core items. I mean, one of the things that unfortunately moves some of these numbers quite a bit are what we're calling these pass-through expenses in that solar servicing business, which are largely services that we kind of arrange on behalf of the loan portfolio holders and then bill them back dollar for dollar when those services are completed.

And so that's the largest portion of the non-core. So those move expenses and revenues up dollar for dollar each, and they're always going to unfortunately muddy some of the metrics here. And we try to help you understand what that is by showing you on the revenue side, we're not really for gap reasons allowed to deduct it from the expense side, even though it's a net zero. The other non-core, the building has some room for lease-ups, but now that we've had a full quarter, if you see what was in the building part, that should be relatively steady as we go forward.

And those are the two probably biggest pieces of the non-core revenue side.

It's important to our analyst friends when you're backing out some of these like the building revenues to make sure you back out the building's expenses as well.

So I'll just make that note for someone's benefit.

Got it. That's helpful. Thanks. And, just curious, just given the step-up in count costs in the quarter, was there any kind of true-up on accruals and just generally kind of how you're thinking about kind of the run rate in the fourth quarter and just relative to the expectations for next year that have been laid out previously?

Yeah, look, Nathan, I would say.

Obviously, with a 400% increase in your net income, when you run some of those through our comp models, there was a little bit of pickup just based on current performance. But I also say total comp and benefits, including incentive comp, are behind our forecast year-to-date through three quarters. So maybe that's a little bit of a catch-up just with the catch-up in earnings.

But otherwise, I wouldn't see any kind of real change in our forward thinking on comp and benefits.

Yeah, and we just went through a fairly comprehensive expense management initiative led by a. A business leader here who has a lot of experience in these matters.

And that was very productive. And we think that gives us even further cushion going into '27 based on savings that we identified.

Got it. That's helpful. And if I could just sneak one more for John, just going back to the previous discussions around.

Kind of low-cost deposit migration into higher yielding categories. I'm just curious, and I know it's difficult to predict with the velocity changes within that context, but just given that some of the larger institutions are implementing some cash sorting.

Tools in-house and given maybe some you know consumer custody and security concerns around some of these AI tools to that end just curious if you could maybe just Share your thoughts on just how the velocity could be impacted particularly some larger institutions try to get a little smarter on that front.

Yeah, well look at the migration from To digital if you will has been going on now for a couple of decades and it's been slow and steady.

But it hasn't been that slow because I think it's been the fast digital deposits, I think, have been the fastest growing part of the deposit market across the last several decades.

And so the question is, will that accelerate?

We think it will, although it's hard to predict when.

And as I mentioned in my comments, the S curve that you see in a lot of technological adoption, it's basically slow and steady for a while. And then for reasons that are sometimes hard to predict precisely, but you can predict directionally, it accelerates.

And that's what we think will happen. I mean, there's that famous, or I don't know how famous, well-known economist Herbert Stein, who had put out something called Stein's law that said if something cannot go on forever, it will stop.

And I think what can't go on forever is consumers leaving tremendous value on the table because moving their money was inconvenient and hard in the past.

And technology will eliminate that inconvenience.

Now I think you'll hear a lot of, or you'll see a lot of hand-wringing from the banking industry raising security concerns all over the place around this stuff because they fundamentally don't want it to happen.

And they want to ignore it and they want to put up as many roadblocks as possible.

But all of the concerns that are raised are ultimately manageable.

The security concerns can be managed. I mean, we see it in our business with the sophisticated platform we have, we think these things are imminently manageable. So I don't know when it will happen, but I think.

It will happen, and I think the security concerns will be addressed. I think the larger banks, places like JP Morgan, which are extraordinary institutions and very sophisticated and have lots of ways of funding their business and have lots of drivers of revenues and earnings, I think they will build tools.

To ensure that it doesn't happen to them by effectively unleashing the tools on their own customers, which will allow their customers to obtain more value. And it'll probably come with some higher cost of funds for JP Morgan in that part of their business. But I think most of us aren't concerned about their ability to manage that.

I think other institutions that don't have the breadth and sophistication are much more vulnerable.

They're either going to have to unleash the tools internally on their own institution, which will result in a higher cost of funds. And the question is, will they be able to manage that and drive profitability with that higher cost of funds? So I think this is inevitable. I think it's unstoppable. I think it will add tremendous value to consumers.

And to think it's not going to happen, I think is foolish. I think the question every institution has to ask themselves, do you have a business model that allows you to deliver a good return to shareholders when this happens? And that's why I feel so confident about Fulbright, of course, the long-term, because we've built that business.

So that's my view on that.

Got it. Agreed. That's really helpful, John. I appreciate all the color.

Thank you.

Our next question comes from the line of Terry McAvoy of Wells Fargo. Your line is now open.

Hi, thanks. Good morning. Really appreciate the broader discussion on the future of deposits, but just drilling into the virtual card for AI agents that you mentioned in your press release. Do you feel that by allowing users to set strict dollar limits and receive real-time updates, does that provide enough trust to your customers or is it simply because it is a separate card and separate from other banking accounts?

Yes, we do. I mean, and you highlighted some of the features. I would say the two things to keep in mind, I'll kind of walk through how this applies to the card and over time, how it'll apply to other AI capabilities over time here, which is granular authorization controls and especially early on keeping a human in the loop, right? So for the agentic card, like when we talk about controls, like if someone wanted to make sure that.

Their virtual card, which, as you pointed out, is different from their core debit card, which is just a control in and of itself. If they decided they wanted to jump on the bandwagon looking for a flight that was at a better price on a better day than they can sit online waiting for, they can go into the card. They can, number one, set a spend limit, right? So $500 maximum they can spend. It can list the number of transactions, one transaction. It can put in an industry code. So it could say only to be done by an airline.

And so all of those things, of course, just off the bat are examples of the granular authorization controls. And then early on, there will be a human in the loop. So all that's happening in the virtual card when they go to make the transaction and it goes now into our digital banking ecosystem, the digital banking ecosystem will second factor authorize that through a human to approve the spending of that transaction. So all of those capabilities. We will have serious walls in place.

We will have the ability to move those walls up and down over time, depending on what we think is sort of responsible and maintain the trust of our customers. And that will apply to the virtual card and we'll bring that same approach to...

Over time, as we think about having agents review bank accounts and it will begin read-only and it will begin with their ability to analyze how they're spending money, but not move money and it will apply over time if and when we get to a place where agents can act inside the ecosystem, but on the card itself, those two controls.

And human interaction, I think we believe and the research we've done with our customers will let them to kind of participate in this ecosystem in a responsible way.

Perfect. That's exactly what I was looking for.

Thank you. And then totally shifting gears, the three basis points of core net charge-offs probably likely or likely unsustainable, and you can disagree, but how do you think about more normalized losses over the next several years?

Well, we try to run the business so that it is sustainable, but, the world doesn't always cooperate.

Our forecast has always had 25 days of annualized charge-offs, and how much of that is core, Chris?

Yeah, on the core. So, we're going to stick with our forecast and hope to keep beating it, but that's where we run the business at with our gross expectations.

I mean, the only real, I mean, we've had.

Pristine credit performance in our healthcare business, in our lender finance, in our fund finance and in our newly launched, well I say newly launched in the last kind of three years, national commercial real estate business.

Where we've had credit issues is we had this legacy congressional bank.

What we call DMV, District Maryland and Virginia, Community Bank Portfolio. That was the old Congressional Bank before we reinvented its Forbright. Those legacy loans have been noisy, but those are increasingly running off, and they're a very small part of our balance sheet. And then our. Leveraged lending business, which is our corporate finance business, where we have a very granular portfolio. I think we have 180 loans in that portfolio, so it's super granular. Those are cash flow loans. Those are enterprise value loans. They're senior security and we have a security interest in all the assets of the company, but they're typically financing a leveraged buyout. So the loan is based on multiples of cash flow and it exceeds the liquidation value of the hard assets. In all of our other business, we are lending it at discount to the value of the hard asset. So even when you have a problem, you can liquidate out the collateral and you should have full recovery unless you're defrauded. And we spend a lot of time making sure we're never defrauded. So most of the businesses asset based, the corporate finance business, which is our smaller business and which is the business where we have the smallest hold sizes. Is where we're senior secured, but we're lending above the liquidation value of the collateral. And when you have a workout there, you can have losses, which we've had over time, and that will continue. That's part of that business.

We do our best to make sure they're as small as possible, but from a risk management standpoint, the best thing we can do is manage our hold sizes down. And we've done a very good job. That's the nice thing about the pairing with Bank Alliance because to be in that business, you have to originate loans at a certain size. And what we're able to do is originate those loans, keep a small hold on our balance sheet and distribute the rest to multiple Bank Alliance members and effectively spread the risk amongst all of us nicely. And so that's kind of how we think about charge-ups. I will say we just went through our quarterly credit review of the portfolio, and it continues to be very strong.

Thanks for taking my questions.

Sure.

Thank you. Our next question comes from the line of Anthony Elion of JP Morgan.

Your line is now open.

Great.

Thank you.

Thanks for all the color today. I'd like to follow-up on Ryan's question on margin. Could you put a finer point on how you're thinking about NIM or NII specifically for 4Q? It just seems like you're set up for material expansion because you've held a line on deposit costs after the September hike, but you'll still get the full quarter benefit of most of your loans repricing higher.

I think, Tony, your insight. Is a good one. And as we sit here today, we would expect our NIM in the fourth quarter to in fact be wider.

Okay.

And then on expense for 2027 in the release, you mentioned next year should trend largely flat.

Any finer points, John, our team on 4Q expense, and can you talk about some of the puts and takes for expenses into next year to keep it flat?

Thank you.

I would say the one thing I always call out, as I mentioned, these gross-up expenses.

So X those gross-up expenses, that's where we'll stay flat. And again, they gross-up revenue expense, so it's not really relevant to the bottom line. I'd say kind of the puts and takes. John mentioned some of the efficiency things we've been working on, which will help us keep sort of comp and vennies in the relative flat level while reallocating from some places that we're downsizing to things like the digital bank where we're continuing to grow.

The rest of the platform, there's the onesie, twosie things that you do that are new, whether it's relative to kind of EY expenses as we're before your public company, but that stuff doesn't move the needle too much.

So I think there's some savings from some of these efficiency efforts, and there'll be some savings obviously from the branch sale.

And then that can be redeployed into the digital deposit franchise.

That's how we end up net of these gross ups staying relatively in the flat range.

Thank you.

Okay, I'm showing no further questions right now. So I'm going to turn it back over to John Delaney.

Thank you, operator. And thank you everyone for joining us this morning.

We're always available should you want to chat and have additional questions and we'll answer them to the best of our ability.

But I'll conclude by saying we feel very good about how the business is positioned.

And we're excited with the performance of not only the lending business, but the lending side of the business, but the deposit strategy.

And we look forward to continue to grow the franchise and deliver on good results.

So thanks for joining us.

And we'll talk to you all soon.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good morning, and welcome to the third quarter 2026 earnings call for Forbright Incorporated. At this time, all participants are in listen-only mode. A question-and-answer session will follow the speaker's prepared remarks. As a reminder, this conference call is being recorded.

It is now my pleasure to turn the call over to Ben Wakana, Chief Public Affairs and Investment Relations Officer at Forbright Bank.

Thanks, Andrew. Before we begin, I'll remind listeners that remarks on this call may contain forward-looking statements that are subject to risks and uncertainties. Please refer to the safe harbor statements found in today's earnings release and in our investor presentation for additional details. Management may also reference non-GAAP financial measures during the call. A reconciliation of non-GAAP measures can be found in our earnings release and investor presentation slides.

Finally, I'll identify the speakers on the call this morning. They are John Delaney, Chairman and Chief Executive Officer of Forbright Inc. Don Cole, President and Chief Operating Officer of Forbright Inc. And Chief Executive Officer of Forbright Bank and Chris Lynch, our Chief Financial Officer. We are also joined in the room by Aaron Judah, our Chief Strategy Officer, who will participate in the Q&A. With that, I'll turn it over to John.

And good morning, everyone.

So I'll start by saying I'm somewhat superstitious by nature. So I'm always a little reluctant to call a quarter terrific. But this time, the facts certainly merit that description to my mind. Our loan growth was very strong. NIM was stable despite meaningfully higher liquidity. Our credit performance was very good.

We continue to build out what we view as a best-in-class digital deposit franchise, and we made good progress on the efficiency metrics that will continue to improve as we scale the business.

At a high level, the quarter reinforced three key themes. First, our ability to drive good and disciplined loan growth from our six national lending businesses. Our loan book grew 24% year over year, up 9.5% this quarter alone. Healthcare, which is our most mature strategy to some extent, drove most of our growth this quarter, but all of our specialty credit.

Delivery verticals performed very well. And we would expect different strategies to outperform from quarter to quarter. There's a little bit of lumpiness. But again, I think the key theme here is that all of the strategies are seeing good opportunities with attractive structures and appropriate spreads. The second big theme was around our digital deposit platform, which raised over $1 billion.

In the last quarter, which represents a 24% increase from the prior quarter. The platform continues to provide a highly scalable source of funding. As we grow the business. And I would describe our confidence as very high in terms of our ability to use this increasingly sophisticated platform to drive very precise deposit growth at optimal cost of funds and acquisition cost. We spoke last quarter about our new promotion engine.

Which launched and was very successful and we expect this strategy to continue to work well for us in the future and our upcoming checking product is on track for a phased launch to begin in the first quarter next year and then expect most of the promotion to the public to take place in the second quarter. And then finally, we view ourselves as very well positioned to improve operating efficiency as the business grows. We certainly remain on path to achieve the efficiency targets we've laid out for folks. Overall, we believe the business we've designed and built will perform very well in the banking and financial services environment of today and importantly, the one of tomorrow. In that regard, we're spending a lot of time thinking about how artificial intelligence will affect banking and trying to plan accordingly. I co-wrote a piece in the Wall Street Journal a few weeks ago titled AI Will Be a Boon for Savers. As I laid out in that article, our view is that the banking system is moving toward a world in which technology makes it easier for consumers to evaluate financial products, compare rates and move their money to institutions that offer the best value. We view this trend as unambiguously good for consumers and therefore unstoppable.

The speed of that transition, however, is very difficult to predict, but we believe a significant percentage of legacy branch deposit resemble a slow melting iceberg.

Put another way, the move to digital deposits has been slow and steady, and that's exactly what the early part of an S-curve looks like. That's how every major technology is adopted. At some point, it accelerates, and when it does, it will happen faster than most people expect.

Anyone who thinks today's pace is tomorrow's pace is missing the boat.

We built our franchise for where deposits are going, not where they've been.

We believe we're well positioned to be the bank of the future, and that means having the technology, the operating model, and the deposit franchise that can compete as customer expectations change. And we feel very good about where we are, gathering deposits nationally through a digital platform, paying a fair rate, and delivering a user-friendly experience through the platform we've built. Deploying that funding through specialized lending businesses where expertise travels nationally and where our teams can create value through speed, flexibility, and insight elevates the confidence in our model.

As part of our digital-first focus, this quarter we announced the sale of our legacy Washington, DC area branches and associated deposits to an institution called Trustar Bank. That transition is moving ahead nicely. We anticipate regulatory approval or TrustStar anticipates regulatory approval in the fourth quarter and closing will happen in the first quarter of 2027 based on the timing of lining up the two core service providers for that transition. And both teams have done a great job of planning a smooth transition for the customers.

So before concluding, I want to reiterate the four key metrics that made this, in my judgment, a very strong quarter. We had very strong loan growth. We expect that to continue, perhaps not at the level we saw this quarter, but we certainly expect strong loan growth in the fourth quarter into the first quarter. Credit was very strong, which is in many ways the most important metric for our business. We had disciplined deposit pricing and very strong deposit growth.

And we achieved solid execution on our expense management initiatives, which is now part of the culture of Forbright.

As we continue this work, we expect the machine we have built to become increasingly more productive and valuable. With that, I'll turn the call over to Don.

Thanks, John. First, I'll spend a few minutes on earnings and operating metrics for the quarter.

As John said, outstanding loan growth and credit quality really drove our strong performance this quarter.

Our net income was $20.6 million or $0.41 per share on a fully diluted basis. This represents an increase of $16.5 million or over 400% from the second quarter.

Our net interest income of $72 million grew about 14% compared to $63 million last quarter.

Our pre-provision net revenue was up almost 60% from the prior period as well.

Finally, our NIM was essentially flat, despite our expectation of some contraction in Q3, which we touched on during our last quarterly call.

That expectation was based on growing liquidity levels from our deposit promotion, as John described.

Those increased liquidity levels support the upcoming branch sale.

However, if you include those held for sale deposits in the calculation of the loan-to-deposit ratio, that went down. Which put downward pressure on our overall NIM. However, we were able to maintain the steady NIM based on two key factors. First, as John indicated, we held our gross savings rate steady even as the Fed raised rates in September. And second, our non-accruals were down again in Q3, which resulted in higher GAAP loan yields. Some of that impact is from the recapture of previously unrecognized interest from loans returning to accrual status.

These results reflect our continuing conviction that we can continue to grow our loan portfolio while being able to precisely fund that growth with our digital deposit platform, which will continue to result in improved economies of scale and better overall returns on equity.

Turning next to credit, we experienced just $1.2 million of net charge-offs this quarter, down from $2.7 million in the second quarter.

The core net charge-up rate on our six national lending strategies was only 3 basis points, down from 8/5 last quarter.

We expect these numbers to move around quarter to quarter, but our expertise in our specialized lending businesses and a disciplined culture position us to consistently manage credit effectively.

Moving to non-interest income, we saw strong growth from our FHA HUD business as we previewed on last quarter's call.

On solar servicing, it is worth noting that we continue to see artificially elevated expenses and revenues as these expenses are reimbursed by our clients.

You'll note in the investor presentation, we detail exactly how much those pass-throughs are, so analysts and investors can factor them into calculations around our efficiency.

On expenses, our core expenses were well managed during the quarter.

Our efficiency ratio improved to 69.6%, down about 8 percentage points or 10% from the second quarter.

Our operating model is designed to scale without proportional increases in headcount.

As we grow loans and deposits, we expect a fixed cost base to be absorbed across a larger and more productive franchise. As John said, we remain on track to achieve our efficiency targets in '27 and believe we are on a solid path to achieving our longer-term efficiency objectives.

Finally, I'll say a word about Fed positioning given yesterday's decision to keep rates unchanged. As we have discussed before, we believe we are well positioned regardless of future rate movements.

About 90% of our loans and 85% of our deposits are floating rate.

We manage our investment portfolio to balance interest rate risk.

We've built our business that way intentionally. We view our success tied to execution on our growth strategy, not tied to arbitraging Fed interest rate decisions.

In September, for example, we did not change the base rate on our growth savings product after that Fed hike because our strong funding levels and market positioning.

There will be times when we'll need to add deposits to maintain our liquidity and growth, and we expect to move deposit rates if there are future Fed hikes. But with our promotion engine, we are structured to remain competitive and have flexibility to manage our rates pragmatically.

Overall, the quarter's results demonstrate a strong and steadily growing business.

We believe we're continuing to execute against our core objectives, grow our specialty lending strategies, maintain strong credit, fund our business responsibly through our digital deposit platform and achieve our expense efficiency and return objectives. With that, I'll turn it over to Chris, who will discuss capital, liquidity and taxes.

Starting with capital, Q3 CET1 ratios were 12.9% for the parent and 13.7% for the bank.

Tier 1 leverage ratios were 9.8% for the parent and 10.4% for the bank.

These are lower than the prior quarter due to loan growth. Parent ratios declined less than the bank ratios as net proceeds of $17 million from the exercise of the overallotment option were retained at the parent.

The decline in the leverage ratio was larger versus the risk-based ratios due to the cash we're holding for the branch sale, which was $721 million at quarter end.

We announced in an 8-K last week that we'll be redeeming a $25 million subordinated debt series at par on December 1 with parent cash on hand. The series matures in December '29 and pays interest at a floating rate of three-month term SOFR plus 439 basis points or about 8.45% at current market rates.

Since that's within five years of maturity, $10 million of the debt balance would have qualified for Tier 2 capital treatment this December, reducing to zero by December 28.

With respect to liquidity, cash and AFS investments at quarter-end totaled $1.9 million, excluding the cash held for the branch sale.

And the loan-to-deposit ratio was 87.3%, up 4 percentage points from Q2 as excess liquidity was deployed in the loans. This excludes the branch sale deposits of $744.

Turning to taxes. Tax expense and the tax rate for the quarter were $8.5 million and 29% compared to $9.2 million and 69% in Q2.

Q3 tax expense includes a $2.7 million benefit from amortization of the deferred credit, which was offset by a purchase accounting adjustment that reversed $2.7 million of previously recognized benefit. As a result, no net benefit was reflected in tax expense for the quarter from the deferred credit.

The purchase accounting adjustment was related to completing the final tax return for the entity with the tax assets we acquired in Q3 25.

The adjustment reduced the deferred credit balance to $36 million in Q3 from $49 million in Q2.

For Q4 this year, we estimate the tax rate to be approximately 20%, which is net of a deferred credit amortization of approximately 9%. For fiscal year '27, we estimate the tax rate to be approximately 19%, which is net of deferred credit amortization of approximately 9%. The deferred credit amortization in these estimates reflects the effect of the purchase accounting adjustment.

Estimated tax rates exclude discrete type effects, such as vesting of restricted stock, option exercises, for tax returns, et cetera.

With that, operator, we'll open it up for questions.

( Operators Instructions )

Our first question comes from Moshe Orenbach from TG Cohen.

Your line is now open.

Great, thanks.

I guess maybe to start on the deposit platform and promotions, it was good to hear about your pricing strength this quarter.

Is there anything you can tell us about kind of plans? I know you said that obviously you've got plenty of liquidity now, but how should we think about that?

The betas for subsequent hikes and what you're thinking about giving your loan growth plans for the potential for future promotions. Thanks, Moshe.

I'm going to let Aaron take that one. Sure. So I mean, I guess.

In terms of, I'll talk a little bit about strategically how we think about deposit gathering and the use of promotion. I think that you've seen it at least year to date, a strategy that we're going to look to continue to execute on. When we feel like we're in a position of strength to go and use a promotion to gather deposits and we're seeing and we spend a lot of time analyzing these promotions while they're alive, if we're seeing really efficient cost of acquisition, we will. Gather those deposits and then be disciplined off the back of that excess liquidity over those subsequent quarters. So that's what you're seeing play out here through the end of the year. I will say that I do think we will have our next promotion up potentially by the end of the year, which will be our refer a friend promotion, which is a thing that allows you to go out and send a link to a friend to start an account and get a promotion for that.

So it will come sooner, but look, I think that.

In terms of deposit pricing going forward, we've held the line. We've not moved. All of our competitors at this point, I think, either on the base rate or on a promoted rate have moved.

If we do see another hike here coming up at some point, I do think that we will have to -- you will see our blended cost of that high-yield savings go up. But until we see the behavior of some of these promoted accounts over the next few quarters and into next year, I don't know that we have a hard line on how we plan to play that, whether we have to address when and if. If we have to address the base rate, whether we address it through a new promotion similar to the one we had or a version thereof. So, I guess to your point, to your question, Moshe, if rates go up, I think you'll see the blended cost of funds and higher savings goes up.

What tool we use to do that? What type of promotion are addressing the base rate is still to be determined.

And John, you mentioned that loan growth in the quarter was concentrated in healthcare. As you kind of look out at the verticals, do you see any sort of shift in that in the coming quarters like any of the others standing up to kind of pick up some of that growth?

Yeah, I think healthcare is likely to have a bunch of payoffs this quarter. So I don't think healthcare will be the largest contributor to loan growth in the fourth quarter. And again, we're seeing very strong loan growth in the fourth quarter. I would bet that healthcare would not be the biggest contributor in the fourth quarter, although I could be proven wrong because there's some timing issues here because we have a whole schedule of deals we expect to close, which.

People spend a lot of time focusing on, including Chris, because he wants to make sure we always have abundant liquidity. So a lot of time goes into focusing on when deals will close, but they tend to slide and then we have payoffs. I would not expect healthcare, I think healthcare will have a strong fourth quarter. I don't know if it'll be our largest grower, but I think the key is, Moshe, all of the businesses are seeing very attractive loan growth. In fact, I think we're at a point where we can explore some widening of.

Because the loan growth is so strong, I think we could potentially look to widen spreads on some new originations. And which would probably curtail loan growth a little bit, but it will curtail it to a level that is at or above our expectations. I think we're in that kind of position where we have a little bit of pricing power. I don't want to exaggerate that because we're in a very tight spread environment.

But in my judgment, there's some things kind of macro occurring that I could see spreads widening a little bit and we want to test that a little bit.

And I think we're in a position of strength to do it. So that's kind of the theme going into '27 when we talk to the teams that are running these lending strategies, which again are all doing a great job and have very full pipelines, is our originations are outperforming.

So why don't we try to.

Widen spreads a little bit on the margin because we feel like we have cushion to do that and meet our loan growth expectations. That's kind of how I would describe the position we're in all of these lending businesses.

Thanks very much.

Thank you.

Our next call comes from Jared Shaw of Barclays.

Your line is now open.

Good morning. Thanks.

I guess, just sticking with that growth discussion, is that for the potential to widen spreads, is that if growth is starting to run sort of above that billion dollars a quarter level or you feel that with a billion dollars you think you can try to work on spreads and maybe we'd see that quarterly number drift a little bit lower if there's an opportunity for wider spreads?

Yeah, and remember the billion was the gross originations, not the net loan growth, just for reference. Yeah, I think the point I'm trying to make is, as I look across the six lending businesses, again, which I think right now are very well managed and performing very well, I would describe them as outperforming our expectations around growth.

And so I think as we think about kind of like.

Dialing the knobs of the business, if you will. We talked about the digital deposit platform, which we think quite frankly has virtually limitless growth potential for us, certainly with the business plan we're executing against.

And now we're in a position, as we saw this quarter, we didn't have to follow the Fed's rate hike because our ability to kind of dial that up and down. And I think we're seeing a little bit of that on the loan origination side. The teams are performing really well. We can, in my judgment, meet our loan growth expectations and potentially, and again, I don't want to over-exaggerate this because we are in a competitive environment, but potentially widen spreads a little bit on the next quarters. Vintages of originations relative to what they were the last quarter, at least explore that, and that's what we intend to do.

Okay, all right, thanks. And then I think in the deck you reference the Alliance platform and plans for working on increasing production from that. Can you give a little detail around what that entails and would there be expenses associated with that or how do you see that sort of dialing higher?

No, we actually see efficiencies associated with that. What we're doing, what we started this quarter is we, from kind of an operational and management perspective, moved Alliance Partners into the lending businesses more directly, where it was effectively operating as a standalone business because the history of that business was a separate business that was acquired by Forbright when it was called Congressional Bank.

And it operated somewhat independently, and now we've made the decision to integrate it more into the lending businesses and we plan on offering more of the loan products to the Bank Alliance membership as a result of that integration, where in the past we effectively just offered one product, our corporate finance or leveraged lending product.

So we're hoping that this new integration more closely with the lending teams and the ability to offer all of the loan originations that Forbright has, and again, this comes back to my prior comment, I mean our originations are so strong across the business, we want to find more outlets to distribute our originations.

And this is one approach we're taking, and we'll probably take others over time, because we do think we have kind of a singular portfolio of national lending strategies that are in fact outperforming from an origination perspective. And that allows us not only to potentially look at widening spreads, and again, I want to make sure I caveat that it will be very modest. But still impactful, but we also want to look at ways of distributing our origination because we think what we have is very valuable, people are looking for loans, we find a lot of good loans based on these six national lending strategies and we'd like to distribute more of them to Alliance partners and potentially to other partners who would pay us fees to do that.

Okay, thanks. If I could just sneak one more in your commentary around AI, I think was really interesting. And do you feel like the regulatory environment is where it needs to be to sort of execute on that? Or is there an opportunity or a need for that to catch up a little bit?

Yeah, so putting on my prior public policy hat, I think there's a lot of opportunities for regulators here, and they should be thinking about this. In the same way, if you think about it, the regulators effectively regulate the core service providers, right? So when regulators go in to visit banks as part of their exams, they don't kind of re-examine FIS, for example, because they look at that FIS platform as part of them being a bank service provider. The same approach I think should apply to agents that are unleashed.

On the banking system. And again, I think these agents can be profoundly positive. I mean, we did some work on this. There's about $10 trillion of consumer savings accounts in the United States that are priced at.

40 bits, and those people should be getting 350 to 400 bits, right? So we're talking about hundreds of billions of dollars that could be delivered to consumers in the United States of America. And in a world that's challenged with inflation and affordability, how do we not work hard to make that happen as banks and as policymakers? And so I think regulators should obviously be focused on the security aspect.

And they should be regulating it. But the other thing they can do, which I think is an enormous opportunity, is the CFPB was created to make sure consumers are protected.

People have different views about the effectiveness of it. I'm not going to get into that. But what we ought to be able to do is, as part of regulating these agents, is effectively have them operate like fiduciaries.

And they could potentially accomplish many of the goals that the CFPB was designed to accomplish. So I think there's a huge opportunity for policymakers to work closely with technology companies and work closely with banks to have these tools integrated into the banking system for the good of consumers in lots of different ways, not only giving them a fair rate, but also protecting them from predatory practices. And I'm hopeful that the regulators.

Will be forward leaning and the Congress will be forward leaning on this topic and have a comprehensive approach. Because I do think this is inevitable. I do think it is profoundly positive, but there needs to be some regulatory oversight, not only around security, data integrity, but also making sure that these agents are effectively become fiduciaries.

And do what's best for the consumers.

Thanks.

Thank you.

Our next call comes from Ryan Nash of Goldman Sachs. Your line is now open.

Hey, good morning, guys.

Maybe just to start off, so given the balance sheet is asset sensitive, combined with your comments about not moving on the first hike, maybe just talk a little bit about how you're thinking about margin expansion from here. And then on John's comments regarding spread winding, I know you said don't take them too far, but maybe just talk a little bit about how you're thinking about incremental margins. Are they accretive from here, and where do you think they could go to?

Thank you.

You want to start, John, or you won't be here?

I mean, I'll tee it up and then Don will give a more intelligent answer to your question, Ryan. So first of all, I want to put it in context. I mean, across the last 18 months or maybe 24 months, we have existed in an environment of kind of consistent and persistent tightening of spreads. And you've observed this in all your work, obviously, as well.

We think that's largely stabilized, at least that's what we're seeing. But there's no question the vintage of loans we've originated the last couple of quarters had a tighter spread than the vintages two years back, three years back, et cetera. And that's fine for us because we have such efficiencies to gain with scale.

And we think with some of the new capabilities we're going to have in the digital bank, we'll be able to pick up some cost of funds improvement.

As it relates to spreads widening, again, I feel the need to caveat that in part because there's a lot of Fulbright folks listening to this and I want to make sure they understand what we're saying and what I've been saying to them, which is we think because our loan growth is so strong, we can just be a little more disciplined in some of these situations of negotiating spreads and at least explore whether we can in fact move them up a little bit. Now, that's going to have a very.

Modest impact on the whole loan book right because even if next quarter spread of new originations is five or 10 basis points wider on average That's not going to have a huge impact immediately on the loan book, but over time It will it will impact we're also very encouraged by what we're able to do with the digital deposit platform because again We built this platform invested a lot of time and money in building and it's very sophisticated It's all on modern tech and rails, but for most of its existence. We were effectively. Just growing deposits as quickly as we could because we're effectively changing our whole funding profile.

And with the launch of this promotion engine.

We really, for the first time, are able to start exploring strategies that allow us to continue to deliver good value to our customers, but also pick up a little margin on the cost of funds, which we were able to do by not following the Fed. And we were able to not follow the Fed because we had so much excess liquidity that we could actually afford a little runoff if it were to happen. And I would say less of it has happened than we would have thought.

So I think all that. Gives us some confidence that what we would like to do in '27 is pick up a little bit of spread on new originations, and we'd actually like to continue to pick up a little bit of cost of funds relative to Fed funds by deploying some of these strategies.

Don, would you add?

Short-term forecasting is challenging because there's a lot of moving parts in these things, but I'll go back to maybe what our original forecast was and why it matters for the long-term trajectory, which is echoing a lot of what John said.

John's point, which is true, is that we've been originating loans at tighter spreads than maybe the blended portfolio, and we've been forecasting that. But we think that's starting to stabilize because now that's been true for a couple of years.

Our long-term plan was to improve our net interest margin through a couple of things, which is one, being able to get a little bit better. Spread on our cost of funds relative to the indices, and then two, improving our loan-to-deposit ratio. And both of those have been happening, but as I said, there'll be these short-term blips. For example, this excess liquidity we have now to support the branch sale from the deposit promotion itself just on mix depressed our NIM about 10 basis points, 10 or 11 basis points this quarter. Otherwise, you would have seen widening thanks to some of the improvements in NIM coming from improvements in non-accruals. So I think I just go back to, I think we have the same long-term. Strategy here, which is keep originating loans, we forecast our loans at the spreads we're at today. So what John is talking about being a little bit more opportunistic could have some modest but impactful improvements on the upside, but really it's just that long-term strategy of continuing to increase the loan-to-deposit ratio.

And continue to originate loans and do good credit work. So I think that would lead to a slightly improving NIM over time, which will help us get to our full targets. But there will be these moves as we actually execute on that. As Aaron said, we'll be disciplined in deposit pricing. The next Fed raise will probably obviously see a higher beta than zero, but we have to kind of follow the market. But we do think. We've already started executing on what we said, which is taking a little rate on the deposit side, improving the loan-to-deposit ratio once these branch sales occur. I will say that has a little bit of a depressing fact on them too, because we're eliminating a lot of expenses through the branch deposits. These are slightly higher cost of funds on the digital side. So there's some moving parts, but again, all accretive to our long-term goals in terms of returns and efficiencies.

And, Ryan, this question is obviously a very important question and it gets to the center of the center of the business model, so I want to make sure Aaron or Chris, do you guys have anything you want to add to this?

Okay.

I guess, John, maybe a quick follow-up for Don.

Given your comments regarding the loan-to-deposit ratio, obviously it rose this quarter because you had very strong growth. But ideally, where do you want to run that? And when you think about the deposit gathering initiatives that Aaron laid out earlier, discuss maybe some more of the initiatives in terms of the ability to drive growth and how do you do it in a cost-efficient way?

Thank you.

So I think we've targeted sort of a 90, low 90s loan-to-deposit ratio, and we're not quite there yet. And in terms of, I mean, I'll let air time, in terms of growing deposits, I think there's a part that's pretty straightforward. We talked about the promotion engine and how successful that was. I will say also, obviously, growing $1 billion deposits in a quarter is not something we really will ever need to do from a pure growth rate. This level of origination of loans was very on the high end of where we'd expect it to be clearly on a quarterly basis, back to our goal of growing loans about 15% annually.

So this was a period where we tested it and we showed it could work incredibly effectively in a very compressed period of time. So we're very confident about our ability to raise and importantly, when you say efficiently, the cost of acquisition of these deposits was very attractive.

Based on doing it in this concentrated fashion with the promotion. So that's really the simple answer of why we can continue to grow deposits in sort of an efficient cost method. Our whole strategy on the digital business is designed to have a fixed cost base that we can lever up as we grow from where we are now, 6, 7, 8, 9, 10, and just add on the margins to support sort of operational servicing.

Yeah. And so, I mean.

In my opinion, Ryan, I think our ability to do the things we're describing here will just get better and better with each passing quarter. I mean, I think of us as having effectively a dashboard and on that dashboard are kind of four knobs, two of them around deposits, two of them around loan growth.

The deposit knobs are growth and pricing and with the investments we continue to make in that platform, those knobs become more sophisticated each quarter and our ability to dial up or down volume and.

And pricing gets better and better. And the same thing on the lending side with six high-performing businesses, we've basically got two dials, growth and spreads.

And I think with each quarter as we continue to add little tweaks and adjustments to the platform, I think our ability to get more sophisticated about being able to do those two things will grow and grow. So the more this business gets reduced down to this machine that we have tremendous control over on both sides of the balance sheet.

The better it's going to just perform quarter over quarter. And that's really what we're building here.

Awesome.

Thank you guys for all the color.

Excellent.

Thank you. Our next question comes from the line of Nathan Rice from Piper Chandler.

Your line is now open.

Hey, guys. Good morning. Thanks for taking the questions.

Just thinking about the forward fee income trajectory, I appreciate the breakdown and the release around some of the items that you deemed non-core, but I think there's some recurring nature to a few of those factors, and I appreciate you seeing good momentum in the FHA sale business and Alliance Partners is kind of becoming more efficient going forward. So just curious if you can kind of unpack kind of where you see kind of the overall fee income. Run rate tracking over the next few quarters, particularly just give that maybe there's some recurring nature to some of the non-core items called out.

Yeah. So the FHA HUD business, which is mostly linked to our healthcare business, although we are increasingly working to link it to our national commercial real estate business because they're all multifamily opportunities there. The team is great. They're doing a great job. We're one of the leaders in the business. Higher rates hurts that business, right, because refinance opportunities get pushed out a little bit.

So the business was up this quarter from prior quarter. It's a little bit lumpy the way that business unfolds. We feel 2027 will be better than 2026, but I think we're assuming some of that business gets pushed back a little bit because of the rate environment. And it's pretty obvious why that would happen, which is if you're a borrower and you've got a bridge loan and you want to lock in long-term fixed-rate HUD financing, last quarter didn't look particularly attractive. To do it with what happened with the 10 year. So you could see some of those people making decisions to wait a few quarters to see if they can execute at a better level. And that's what you see in those type of businesses all the time. Now, on the flip side, in our solar servicing business, where we are master servicer to a very large $8 billion book of residential solar loans with a weighted average light that's tied to origination, it's tied to payoffs.

Obviously, to the extent we're in a rate environment that makes mortgage refinances volume down, which is what we're in, we would expect the weighted average life of that portfolio to stretch out and give us a little more fee income. So we're a little bit hedged on these fee businesses, if you will. Higher long-term rates slows originations in HUD, but it also slows paydowns in the legacy book of loans that we service. In solar servicing.

And so that's kind of the dynamic there.

Yeah, look, it's worth highlighting because you meant the non-core items. I mean, one of the things that unfortunately moves some of these numbers quite a bit are what we're calling these pass-through expenses in that solar servicing business, which are largely services that we kind of arrange on behalf of the loan portfolio holders and then bill them back dollar for dollar when those services are completed.

And so that's the largest portion of the non-core. So those move expenses and revenues up dollar for dollar each, and they're always going to unfortunately muddy some of the metrics here. And we try to help you understand what that is by showing you on the revenue side, we're not really for GAAP reasons allowed to deduct it from the expense side, even though it's a net zero. The other non-core, the building has some room for lease-ups, but now that we've had a full quarter, if you see what was in the building part, that should be relatively steady as we go forward.

And those are the two probably biggest pieces of the non-core revenue.

It's important to our analyst friends when you're backing out some of these, like the building revenues, to make sure you back out the building's expenses as well.

So we'll just make that note for someone's benefit.

Got it. That's helpful. Thanks. And just curious, just given the step up in town costs in the quarter, was there any kind of true-up on. Rules and just generally kind of how you're thinking about kind of the run rate in the fourth quarter and just relative to the expectations for next year that have been laid out previously?

Yeah, look, Nathan, I would say...

Obviously, with a 400% increase in your net income, when you run some of those through our comp models, there was a little bit of pickup just based on current performance. But I also say total comp and benefits, including incentive comp, are behind our forecast year-to-date through three quarters. So maybe that's a little bit of a catch-up just with the catch-up in earnings.

But otherwise, I wouldn't see any kind of real change in our forward thinking on comp and benefits.

And we just went through a fairly comprehensive expense management initiative led by a. A business leader here who has a lot of experience in these matters, and that was very productive. And we think that gives us even further cushion going into '27 based on savings that we identified.

Got it. That's helpful. And if I could just speak one more for John, just going back to the previous discussions around.

Kind of low-cost deposit migration into higher yielding categories. I'm just curious, and I know it's difficult to predict with the velocity changes within that context, but just given that some of the larger institutions are implementing some cash sorting.

Tools in-house and given maybe some, consumer custody and security concerns around some of these AI tools to that end. Just curious if you could maybe just share your thoughts on just how the velocity could be impacted, particularly as in large institutions, try to get a little smarter on that front?

Yeah.

Well, look, the migration from to digital, if you will, has been going on now for a couple of decades, and it's been slow and steady.

But it hasn't been that slow because I think it's been the fast digital deposits, I think, have been the fastest growing part of the deposit market across the last several decades.

And so the question is, will that accelerate?

We think it will, although it's hard to predict when.

And as I mentioned in my comments, the S curve that you see in a lot of technological adoption, it's basically slow and steady for a while. And then for reasons that are sometimes hard to predict precisely, but you can predict directionally, it accelerates.

And that's what we think will happen. I mean, there's that famous, or I don't know how famous, well-known economist Herbert Stein, who had put out something called Stein's law that said if something cannot go on forever, it will stop.

And I think what can't go on forever is consumers leaving tremendous value on the table because moving their money was inconvenient and hard in the past and technology will eliminate that inconvenience.

Now I think you'll hear a lot of or you'll see a lot of hand-wringing from the banking industry raising security concerns all over the place around this stuff because they fundamentally don't want it to happen.

And they want to ignore it and they want to put up as many roadblocks as possible.

But all of the concerns that are raised are ultimately manageable.

The security concerns can be managed. I mean, we see it in our business with the sophisticated platform we have. We think these things are imminently manageable. So I don't know when it'll happen, but I think.

It will happen, and I think the security concerns will be addressed. I think the larger banks, places like JP Morgan, which are extraordinary institutions and very sophisticated and have lots of ways of funding their business and have lots of drivers of revenues and earnings, I think they will build tools to ensure that it doesn't happen to them by effectively unleashing the tools on their own customers.

Which will allow their customers to obtain more value, and it'll probably come with some higher cost of funds for JP Morgan in that part of their business. But I think most of us aren't concerned about their ability to manage that.

I think other institutions that don't have the breadth and sophistication are much more vulnerable.

They're either going to have to unleash the tools internally on their own institution, which will result in a higher cost of funds. And the question is, will they be able to manage that and drive profitability with that higher cost of funds? So I think this is inevitable. I think it's unstoppable. I think it will add tremendous value to consumers.

And to think it's not going to happen, I think is foolish. I think the question every institution has to ask themselves, do you have a business model that allows you to deliver a good return to shareholders when this happens? And that's why I feel so confident about Forbright across the long-term, because we've built that business. So that's my view on that.

Yeah, I agree. That's really helpful, John. I appreciate all the color.

Thank you.

Our next question comes to the line of Terry McAvoy of Wells Fargo. Your line is now open.

Hi, thanks. Good morning. Really appreciate the broader discussion on the future of deposits, but just drilling into the virtual card for AI agents that you mentioned in your press release. Do you feel that by allowing users to set strict dollar limits and receive real-time updates, does that provide enough trust to your customers, or is it simply because it is a separate card and separate from other banking accounts?

Yes, we do. I mean, and you highlighted some of the features. I would say the two things to keep in mind, I'll kind of walk through how this applies to the card and over time how it'll apply to other AI capabilities over time here, which is granular authorization controls and especially early on keeping a human in the loop, right? So for the agentic card, like when we talk about controls, like if someone wanted to make sure that.

Their virtual card, which, as you pointed out, is different from their core debit card, which is just a control in and of itself. If they decided they wanted to jump on the bandwagon of looking for a flight that was at a better price on a better day than they can sit online waiting for, they can go into the card. They can, number one, set a spend limit, right? So $500 maximum you can spend. It can list the number of transactions, one transaction. It can put in an industry code. So it could say only to be done by an airline.

And so all of those things, of course, just off the bat are examples of the granular authorization controls. And then early on, there will be a human in the loop. So all that's happening in the virtual card when they go to make the transaction and it goes now into our digital banking ecosystem, the digital banking ecosystem will second factor authorize that through a human to approve the spending of that transaction. So all of those capabilities. We will have serious walls in place.

We will have the ability to move those walls up and down over time depending on what we think is sort of responsible and maintain the trust of our customers. And that'll apply to the virtual card and we'll bring that same approach to over time as we think about having agents review bank accounts and it'll begin read-only and it'll begin with their ability to analyze how they're spending money but not move money and it'll apply over time. If and when we get to a place where agents can act inside the ecosystem, but on the card itself, those two controls and human interaction I think will we believe and the research we've done with our customers will let them to kind of participate in this ecosystem in a responsible way.

Well, we try to run the business so that it is sustainable, but the world doesn't always cooperate.

Our forecast has always had 25 days of annualized charge-offs. And how much of that is core, Chris? Yeah, on the core. So we're going to stick with our forecast and hope to keep beating it.

But that's where we run the business at with our gross expectations.

The only real I mean, we've had pristine credit performance in our health care business, in our lender finance, in our fund finance.

And in our newly launched, or when I say newly launched in the last kind of three years, national commercial real estate business, where we've had credit issues is we had this legacy congressional bank, what we call DMV, District Maryland and Virginia, community bank portfolio. That was the old congressional bank before we reinvented this Forbright. Those legacy loans have been noisy, but those are.

Increasingly running off, and they're a very small part of our balance sheet. And then our leveraged lending business, which is our corporate finance business, where we have a very granular portfolio. I think we have 180 loans in that portfolio, so it's super granular. Those are cash flow loans. Those are enterprise value loans. They're senior secured, and we have a security interest in all the assets of the company, but they're typically financing a leveraged buyout. So the loan is based on multiples of cash flow, and it exceeds the liquidation value of the hard. Assets. In all of our other business, we are lending it at discount to the value of the hard asset. So even when you have a problem, you can liquidate out the collateral and you should have full recovery unless you're defrauded. And we spend a lot of time making sure we're never defrauded. So most of the businesses asset based, the corporate finance business, which is our smaller business and which is the business where we have the smallest hold sizes. Is where we're senior secured, but we're lending above the liquidation value of the collateral. And when you have a workout there, you can have losses, which we've had over time, and that will continue. That's part of that business.

We do our best to make sure they're as small as possible, but from a risk management standpoint, the best thing we can do is manage our hold sizes down.

And we've done a very good job. That's the nice thing about the pairing with Bank Alliance because to be in that business, you have to originate loans at a certain size. And what we're able to do is originate those loans, keep a small hold on our balance sheet and distribute the rest to multiple Bank Alliance members and effectively spread the risk amongst all of us nicely. And so that's kind of how we think about charge-ups. I will say we just went through our quarterly credit review, the portfolio, and it continues to be very strong.

Thank you. Our next question comes from the line of Anthony Elion of JP Morgan.

Your line is now open.

Great.

Thank you. Thanks for all the color today. I'd like to follow-up on Ryan's question on margin. Could you put a finer point on how you're thinking about NIM or NII specifically for 4Q? It just seems like you're set up for material expansion because you've held a line on deposit costs after the September hike, but you'll still get the full quarter benefit of most of your loans refricing higher.

I think, Tony, your insight. Is a good one. And as we sit here today, we would expect our NIM in the fourth quarter to in fact be wider.

And then on expense for 2027 in the release, you mentioned next year should trend largely flat.

Any finer point, John, our team on 4Q expense, and can you talk about some of the puts and takes for expenses into next year to keep it flat?

Thank you.

I would say the one thing that I always call out, and I mentioned these gross up expenses. So X those gross up expenses, that's where we'll stay flat. And again, they gross up revenue expense. So it's not really relevant to the bottom line. I'd say kind of the puts and takes, John mentioned some of the efficiency things we've been working on, which will help us keep sort of comp and vennies in the relative flat level while reallocating from some places that we're downsizing to things like the digital bank where we're continuing to grow.

The rest of the platform, there's the onesie, twosie things that you do that are new, whether it's relative to kind of EY expenses as we're a full year public company, but that stuff doesn't move the needle too much.

So I think there's some savings from some of these efficiency efforts, and there'll be some savings, obviously, from the branch sale.

And then that can be redeployed into the digital deposit franchise.

That's how we end up net of these gross-ups staying relatively in the flat range.

Thank you.

Okay, I'm showing no further questions right now, so I'm going to turn it back over to John Delaney.

Thank you, operator, and thank you everyone for joining us this morning.

We're always available should you want to chat and have additional questions and we'll answer them to the best of our ability.

But I'll conclude by saying we feel very good about how the business is positioned and we're excited with the performance of not only the lending business, but the lending side of the business, but the deposit strategy.

And we look forward to continue to grow the franchise and deliver on good results.

So thanks for joining us.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.