Dennis Zember: Matt and I, I mean, we come on these calls and obviously, we’ve built some engines that can grow the balance sheet. And so we’re real, real cognizant of capital and capital levels and capital opportunities. And especially when the stock is trading at or even for a lot of ’23 below tangible book, we are even more determined to see capital levels moving higher. We just don’t have the flexibility to go grab new capital. So that being said, yes, Matt and I are pretty confident in where operating ratios are going, where earnings per share is going, where our capital build is about to start coming in. So if we were to be able to deconsolidate and get the gain that we — and the stock has not moved off of tangible book.
We anticipate getting pretty active with that capital. I think our story is starting to get a little bit of obvious legs to it. So Matt and I are thinking that it might end up being capital that lets us grow a little more, Russell, but if not, we’re prepared to own a lot more of our stock.
Russell Gunther: Understood. All right, Dennis, thanks for the thoughts. Thank you both for taking my questions.
Dennis Zember: All right.
Operator: [Operator Instructions] and your next question will come from the line of Christopher Marinac with Janney Montgomery Scott. Please go ahead.
Christopher Marinac: Hey, thanks, good morning. Dennis and Matt, you may have kind of partially answered this in previous callers, but I wanted to understand, is the pretax pre-provision that we talk about on an operating basis this quarter, can we further adjust that back for the operating expenses, the $18.7 million that you called out, is the PPNR kind of higher than it appears because of that operating expense change?
Dennis Zember: Yeah. It is a touch higher given what Matt was saying. So you probably need to add — Matt was saying $19% million to $19.5 million. And I would guide to the lower end of that range, Matt might guide to the higher end. But — so yeah, you probably could add $300,000, $400,000 to that, Chris.
Christopher Marinac: Okay. And that’s on expenses. Would there be any adjustments on the revenue side to kind of get a true apples and apples?
Dennis Zember: No.
Christopher Marinac: Because all the third party is netting against each other, so we don’t have to be too concerned about that.
Matt Switzer: On the pretax pre-provision. Well, I take that back. In pretax pre-provision, there is a third-party effect through noninterest income that if you wanted to take all the third-party, I would come out. And there’s a line item on customer…
Christopher Marinac: Okay. So you use that to kind of net that, which would therefore be a reduction to get to kind of a run rate?
Matt Switzer: Yeah. But if you’re using the noninterest expense above the line, obviously, that’s got the Panacea consolidated expenses in there. So you got to adjust that out as well. So if you use the table for our noninterest expense, that’s adjusting out the consolidated expenses from Panacea.
Christopher Marinac: Yep. Understood. Okay. Thank you for walking us through that. And then when we talk about deposit costs, and I appreciate the angles that you’ve got in the release, what is the most important one that you’re focusing on as you manage this business quarter-to-quarter?
Dennis Zember: On incremental — on deposit cost as a whole or…
Christopher Marinac: Correct. And should — yeah. Thinking going forward, should we be focused on that core bank number? Or are you looking at all three and trying to turn dials on each of them?
Dennis Zember: All three. All three for sure. I mean the fact that our — I mean we — I think coming into this rate cycle, this inverted yield curve, Chris, people did not think about Primis as having the strongest core bank deposit portfolio. So it’s remarkable that we’ve moved all the way through this. And really in our region, we have one of the lower core bank deposit costs. And part of the reason is, I mean, we’re just not as desperate for every single dollar because we have so much flexibility on the digital platform. I mean I remember the digital platform, it was for like 30 days, it seemed like pretty expensive money. And then for the next 11 months, it seemed different. I think some of the things that we’re doing now on the platform, whereas we had a lot of sort of rapid growth.
I feel like right now we’re really getting into a sweet spot where the growth on the digital platform is really at the right level for, say, a $4 billion balance sheet. It’s not anything that’s really accelerated by remarkable rates. It’s really leveraging the technology and leveraging referrals and so I think the growth there is a little muted, and it really is letting the core banks advantages shine through. That’s really why we — why and how we get to such a remarkable level of incremental deposit costs.
Christopher Marinac: Got it. And then incrementally, would we expect to just all things being equal that the digital costs would come down quarter-over-quarter again in Q1?
Dennis Zember: I mean I think the cost — probably 90% of the balances on the digital platform, I think, are probably have a pretty high beta to Fed funds versus our core bank that Matt and I are saying, probably has a pretty low beta on the first couple rate moves. So I think falling rates might affect the digital platform faster, which you’d expect given the higher cost. I think what’s going to bring the weighted average cost on the digital platform down are some of the new incremental products that we’re selling, have lower betas — or excuse me, lower spreads to Fed funds and/or are just noninterest-bearing sort of on the business side.
