Primis(FRST) - 2025 Q2 - Quarterly Results

Earnings Announcement & Dividend Declaration Q2 2025 Financial Highlights Primis Financial Corp. reported a significant increase in net income available to common shareholders and diluted earnings per share for the second quarter and first six months of 2025 compared to the same periods in 2024 Net Income Available to Common Shareholders | Period | 2025 (Millions) | 2024 (Millions) | YoY Change | | :----- | :-------------- | :-------------- | :--------- | | Q2 | $8.4 | $3.4 | +147.1% | | YTD | $31.1 | $5.9 | +427.1% | Diluted Earnings Per Share (EPS) | Period | 2025 | 2024 | YoY Change | | :----- | :--- | :--- | :--------- | | Q2 | $0.34 | $0.14 | +142.9% | | YTD | $1.26 | $0.24 | +425.0% | Quarterly Cash Dividend The Board of Directors declared a quarterly cash dividend of $0.10 per share, marking the company's fifty-fifth consecutive quarterly dividend - Primis Financial Corp. declared a quarterly cash dividend of $0.10 per share, payable on August 22, 2025, to shareholders of record on August 8, 2025. This is the company's fifty-fifth consecutive quarterly dividend[1][29] Operating Results & Management Commentary Management Commentary President and CEO Dennis J. Zember, Jr. expressed satisfaction with progress in rebuilding the balance sheet for higher sustained earnings, emphasizing the core bank's profitability and the growth potential of mortgage warehouse and Panacea, while non-core portfolios are being run off - Management is pleased with progress in rebuilding the balance sheet for higher sustained earnings in the second half of 2025[4] - The core bank is maximizing profitability with its core deposit base while pursuing moderate growth[4] - Mortgage warehouse and Panacea are executing on their growth potential as non-core portfolios run off[4] Significant Items Impacting the Quarter The second quarter included both positive and negative items, such as a gain from the sale of a portion of Panacea Financial Holdings, a substantial increase in Primis Mortgage loan closings, and a significant reduction in promotional loans. Management anticipates future expense reductions from core contract renegotiations and vendor consolidation - Completed the sale of a portion of ownership in Panacea Financial Holdings, Inc. (PFH), generating $22.1 million in proceeds and a $7.5 million pre-tax gain[5] - Promotional loans driving volatility finished the quarter at only $9.6 million, with write-offs of accrued interest expected to decline to less than $0.5 million in Q3 2025[5] - Primis Mortgage closed $323 million in loans, up 52% from the same quarter in 2024, with a substantial portion from construction-to-permanent products[5] - Expected expense reductions of $0.9 million in Q3 and $1.5 million in Q4 and beyond due to core contract renegotiation and vendor consolidation[5] Run-Rate Pre-Tax Pre-Provision Earnings Outlook Adjusting for non-recurring items, the company's run-rate pre-tax pre-provision earnings were approximately $8.4 million in Q2 2025. Management projects future pre-tax pre-provision earnings of $10.5 to $11 million, driven by anticipated technology cost savings and the end of core deposit amortization - Run-rate pre-tax pre-provision earnings were approximately $8.4 million in Q2 2025, after adjusting for Consumer Program interest reversals and PFH gain[6] - Management has visibility to pre-tax pre-provision earnings of $10.5 to $11 million, before benefits of profitable growth and balance sheet repricing[6] - Expected reduction in quarterly expenses of approximately $1.5 million due to technology cost savings starting late Q3 2025 and the end of core deposit amortization in June[6] Divisional Performance Core Community Bank The Core Community Bank, comprising 70% of the Company's balance sheet, boasts a strong deposit base with 19% noninterest-bearing deposits. Its proprietary V1BE service supports over $200 million in commercial clients, and the bank plans to license this technology to other institutions by year-end 2025. The cost of deposits for the core bank was 1.79% in Q2 2025, significantly lower than peers - Core bank represents approximately 70% of the Company's total balance sheet[7] - Approximately 19% of the core bank's deposit base are noninterest-bearing deposits[7] - The V1BE service directly supports more than $200 million of mostly commercial clients, with plans to license the technology to other banks before the end of 2025[7] - Cost of deposits for the core bank was 1.79% in Q2 2025, compared to 2.20% in Q2 2024, up to 100 basis points lower than similar sized peers[12] Primis Mortgage Primis Mortgage closed $323 million in loans in Q2 2025, a 52% increase compared to Q2 2024. Earnings were temporarily reduced by approximately $1.2 million due to support for new production teams - Primis Mortgage closed mortgage volume of $323 million in Q2 2025, up 52% compared to Q2 2024[8] - Earnings for Primis Mortgage were depressed by approximately $1.2 million related to support for new production teams[8] National Strategies (Mortgage Warehouse & Digital Platform) Mortgage warehouse lending activity saw significant growth, with outstanding loan balances increasing 60% QoQ and 189% YoY. Committed facilities also grew substantially. The Bank's digital platform, which exclusively funds national strategies, ended Q2 2025 with almost $1.1 billion of deposits at a cost of 4.28% in June 2025, down from 5.05% in June 2024 Mortgage Warehouse Lending Growth | Metric | June 30, 2025 | March 31, 2025 | Dec 31, 2024 | YoY Change (vs. 2Q24) | | :-------------------- | :------------ | :------------- | :----------- | :-------------------- | | Outstanding Loan Balances | $185 million | $115 million | $64 million | +189% (vs. $14M) | | Committed Facilities | $804 million | $487 million | $349 million | +65% (QoQ) | | Associated Customer Noninterest Bearing Deposit Balances | $21 million | - | - | +80% (QoQ) | - The Bank's digital platform provides funding exclusively for national strategies, with no pressure on the core bank[10] - Digital platform deposits reached almost $1.1 billion at the end of Q2 2025, with a cost of deposits of 4.28% in June 2025, down from $0.9 billion and 5.05% at June 30, 2024[13] Panacea Financial Panacea Financial maintained strong growth in Q2 2025, with loans outstanding increasing 34% YoY to $505 million and customer deposits growing 58% YoY to $107 million. The division aims to reach 10,000 customers by the end of 2025 and is developing a sophisticated suite of technology products for the medical, dental, and veterinary sectors Panacea Financial Growth | Metric | Q2 2025 | Q2 2024 | YoY Change | | :---------------- | :------ | :------ | :--------- | | Loans Outstanding | $505 million | - | +34% | | Customer Deposits | $107 million | - | +58% | - Panacea is the number one ranked 'Bank for doctors' on Google, serving over 7,000 professionals and practices nationwide, with a goal of reaching 10,000 customers by the end of 2025[15] - Panacea is developing an initial phase of sophisticated technology products and services targeting the medical, dental, and veterinary space[15] Financial Performance Analysis Net Interest Income & Margin Reported net interest income decreased slightly to $25.5 million in Q2 2025 due to a final significant write-off of accrued interest on the consumer loan portfolio. However, excluding the Consumer Program impacts, net interest income increased by 10.4% YoY to $27.5 million, and the net interest margin improved to 3.15% (excluding Consumer Program) from 2.80% YoY. The cost of deposits decreased to 2.52% in Q2 2025 from 2.98% YoY Net Interest Income & Margin | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YoY Change (Q2) | | :------------------------------------ | :------ | :------ | :------ | :-------------- | | Net Interest Income (Reported) | $25.5M | $26.4M | $24.9M | +2.4% | | Net Interest Margin (Reported) | 2.89% | - | 2.72% | +17 bps | | Net Interest Income (Excl. Consumer Program) | $27.5M | - | $24.9M | +10.4% | | Net Interest Margin (Excl. Consumer Program) | 3.15% | 3.13% | 2.80% | +35 bps | | Cost of Deposits | 2.52% | - | 2.98% | -46 bps | - New and renewed loan production in Q2 2025 had a weighted average yield of 7.57%, up from 7.25% in Q2 2024[19] - Total maturities of loans over the five quarters beginning Q4 2025 total $574 million with weighted average yields of 5.71%, indicating opportunity for higher yields[19] Noninterest Income Noninterest income was $18.0 million in Q2 2025, significantly lower than Q1 2025 ($32.3 million) due to a large gain from PFH deconsolidation in Q1, but higher than Q2 2024 ($10.7 million). Q2 2025 included a $7.4 million gain from the sale of PFH shares and remeasurement. Mortgage banking income increased to $7.9 million Noninterest Income | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | Total Noninterest Income | $18.0M | $32.3M | $10.7M | | Gain from PFH sale and remeasurement | $7.4M | $24.6M (deconsolidation gain) | - | | Mortgage Banking Activity Income | $7.9M | $5.6M | - | | Consumer Program Derivative Income | $0.6M | $(0.3M) | - | Noninterest Expense Reported noninterest expense decreased slightly to $31.9 million for Q2 2025 from $32.5 million in Q1 2025, with Q1 including consolidated PFH expenses. The core operating expense burden increased QoQ but would have been less than $21 million if adjusted for non-recurring items like consulting, FDIC insurance, audit, and legal expenses Noninterest Expense ($ thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | Reported Noninterest Expense | $31,927 | $32,516 | $29,662 | | Core Operating Expense Burden | $22,661 | $20,414 | $20,136 | - Q2 2025 core expense burden included approximately $0.5 million of consulting, $0.4 million of additional FDIC insurance, $0.4 million of remaining 2024 audit expense, and $0.2 million of legal expenses related to employee fraud recovery efforts, which are not expected to continue[23] Loan Portfolio and Asset Quality Loans held for investment increased to $3.13 billion at June 30, 2025, driven by growth in Panacea Financial loans (up 34% YoY to $505 million) and Mortgage Warehouse outstandings (up 189% YoY to $185 million). Nonaccrual loans remained low at 0.26% of total loans. The provision for loan losses decreased to $1.2 million in Q2 2025, and the allowance for credit losses as a percentage of loans held for investment was 1.24% Loan Portfolio Highlights | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :------------ | | Loans held for investment | $3.13 billion | $3.04 billion | $3.30 billion | | Panacea Financial loans | $505 million | $474 million | $376 million | | Mortgage Warehouse outstandings | $185 million | $115 million | $14 million | | Consumer loan program balances (net of discounts) | $113 million | - | $194 million | Asset Quality Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | Nonaccrual loans (% of total loans) | 0.26% | - | 0.24% | | Provision for loan losses | $1.2M | $1.6M | $3.1M | | Allowance for credit losses (% of loans HFI) | 1.24% | - | 1.56% | - The company had no other real estate owned at the end of Q2 2025[25] Deposits and Funding Total deposits at June 30, 2025, were essentially flat year-over-year. Noninterest-bearing demand deposits showed strong annualized growth of 18% compared to December 31, 2024, reaching $478 million. The company is 100% funded with customer deposits and has no wholesale funding Deposits and Funding | Metric | June 30, 2025 | June 30, 2024 | Annualized Growth (vs. Dec 31, 2024) | | :------------------------------------ | :------------ | :------------ | :----------------------------------- | | Total deposits | $3.3 billion | $3.3 billion | Flat YoY | | Noninterest bearing demand deposits | $478 million | - | +18% | | Deposits swept off balance sheet | $37 million | $4 million | - | - The Company is 100% funded with customer deposits and has no wholesale funding[27] Shareholders' Equity & Dividends Book value per common share increased 2% YoY to $15.52, and tangible book value per common share increased 3% YoY to $11.72. The company repurchased almost 80 thousand shares at a weighted average price of $10.00 per share and declared its fifty-fifth consecutive quarterly dividend of $0.10 per share Shareholders' Equity Metrics (June 30, 2025) | Metric | Amount | YoY Change (vs. June 30, 2024) | | :------------------------------------ | :----- | :----------------------------- | | Book value per common share | $15.52 | +2% ($0.30) | | Tangible book value per common share | $11.72 | +3% ($0.34) | | Common shareholders' equity | $382 million | - | | Tangible common equity | $289 million | - | - The Company repurchased almost 80 thousand shares of its common stock at a weighted average price of $10.00 per share during the quarter[28] - The Board of Directors declared a dividend of $0.10 per share, marking Primis' fifty-fifth consecutive quarterly dividend[29] Company Information & Disclosures About Primis Financial Corp. As of June 30, 2025, Primis Financial Corp. had $3.9 billion in total assets, $3.1 billion in total loans held for investment, and $3.3 billion in total deposits. Primis Bank provides a range of financial services through 24 full-service branches in Virginia and Maryland, complemented by online and mobile applications Primis Financial Corp. Snapshot (June 30, 2025) | Metric | Amount | | :------------------------------------ | :----- | | Total assets | $3.9 billion | | Total loans held for investment | $3.1 billion | | Total deposits | $3.3 billion | - Primis Bank operates twenty-four full-service branches in Virginia and Maryland, offering financial services to individuals and small- to medium-sized businesses, along with online and mobile applications[31] Contacts & Conference Call This section provides contact information for Primis Financial Corp.'s President and CEO, Dennis J. Zember, Jr., and EVP and CFO, Matthew A. Switzer. It also details the upcoming conference call for Q2 results on Friday, July 25, 2025, at 10:00 a.m. (ET), including webcast and dial-in information - Contact information for Dennis J. Zember, Jr. (President and CEO) and Matthew A. Switzer (EVP and CFO) is provided[32] - A conference call to discuss Q2 results will be held on Friday, July 25, 2025, at 10:00 a.m. (ET), with a live webcast available at https://events.q4inc.com/attendee/362488451[32](index=32&type=chunk) Non-GAAP Measures The press release includes non-GAAP financial measures, such as 'net income adjusted for nonrecurring income and expenses' and 'pre-tax pre-provision operating earnings,' which management uses to analyze performance and provide insights into ongoing operating results and trends. These measures are not recognized under GAAP and should be considered alongside GAAP figures, with reconciliations provided in the financial tables - Non-GAAP financial measures are used to analyze performance and provide a more indicative measure of forward-looking trends by excluding non-recurring income or expense[33][34] - Examples of non-GAAP measures include net income adjusted for nonrecurring income and expenses, pre-tax pre-provision operating earnings, operating return on average assets, and tangible book value per share[33] - Non-GAAP measures should not be considered an alternative to GAAP measures and may not be comparable with other companies due to lack of standardization[34][35] Forward-Looking Statements This section contains forward-looking statements regarding future operating and financial performance, growth strategies, expense management, capital management, profitability, and credit quality. It cautions investors that these statements are not guarantees of future performance and involve known and unknown risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements identifiable by words like 'may,' 'plan,' 'anticipate,' 'believe,' 'expect,' and 'project,' concerning future operating and financial performance, growth, and market conditions[36] - Forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties that may cause actual results to differ materially[39] - Risk factors include instability in global economic conditions, changes in interest rates, competitive pressures, regulatory changes, credit risk, cybersecurity risks, and other general competitive, economic, political, and market factors[39] Financial Tables (Unaudited) Selected Performance Ratios This section presents key financial performance ratios for Primis Financial Corp., including profitability, efficiency, asset quality, and capital ratios, across several quarters Selected Performance Ratios (Q2 2025 vs. Q2 2024) | Metric | 2Q 2025 | 2Q 2024 | | :------------------------------------ | :------ | :------ | | Return on average assets | 0.89% | 0.35% | | Operating return on average assets | 0.29% | 0.46% | | Pre-tax pre-provision return on average assets | 1.23% | 0.75% | | Net interest margin | 2.89% | 2.72% | | Core net interest margin | 3.15% | 2.85% | | Efficiency ratio | 73.37% | 83.36% | | Operating efficiency ratio | 87.88% | 79.56% | | Earnings per common share - Diluted | $0.34 | $0.14 | | Book value per common share | $15.52 | $15.22 | | Tangible book value per common share | $11.72 | $11.38 | | Non-performing assets as a percent of total assets, excluding SBA guarantees | 0.86% | 0.25% | | Allowance for credit losses to total loans | 1.24% | 1.56% | | Common equity to assets | 9.86% | 9.48% | | Tangible common equity to tangible assets | 7.63% | 7.27% | Condensed Consolidated Balance Sheets The condensed consolidated balance sheets provide a snapshot of the company's financial position, showing total assets increased to $3.88 billion at June 30, 2025, from $3.70 billion at March 31, 2025. Net loans and total deposits also saw increases Condensed Consolidated Balance Sheets (Selected Items, $ thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :------------ | | Total assets | $3,877,701 | $3,697,310 | $3,966,018 | | Loans receivable, net of deferred fees | $3,130,521 | $3,043,348 | $3,300,562 | | Allowance for credit losses | $(38,841) | $(44,021) | $(51,574) | | Net loans | $3,091,680 | $2,999,327 | $3,248,988 | | Total deposits | $3,342,673 | $3,168,872 | $3,335,463 | | Total Primis common stockholders' equity | $382,405 | $375,563 | $376,047 | | Tangible common equity | $288,897 | $281,759 | $281,279 | Condensed Consolidated Statement of Operations The condensed consolidated statement of operations details the company's revenues, expenses, and net income. For Q2 2025, net income available to common shareholders was $8.4 million, a significant increase from $3.4 million in Q2 2024. Net interest income was $25.5 million, and noninterest income was $18.0 million Condensed Consolidated Statement of Operations (Selected Items, $ thousands) | Metric | 2Q 2025 | 1Q 2025 | 2Q 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------ | :------- | :------- | | Interest and dividend income | $47,935 | $47,723 | $52,191 | $95,658 | $102,544 | | Interest expense | $22,447 | $21,359 | $27,338 | $43,806 | $52,422 | | Net interest income | $25,488 | $26,364 | $24,853 | $51,852 | $50,122 | | Provision for credit losses | $1,159 | $1,596 | $3,119 | $2,755 | $9,627 | | Noninterest income | $18,030 | $32,335 | $10,728 | $50,365 | $21,158 | | Noninterest expense | $31,927 | $32,516 | $29,662 | $64,443 | $57,323 | | Net income (loss) attributable to Primis' common shareholders | $8,427 | $22,636 | $3,436 | $31,063 | $5,902 | Loan Portfolio Composition This table details the composition of the loan portfolio by category and risk grade. Total loans receivable, net of deferred fees, stood at $3.13 billion in Q2 2025, with real estate and commercial loans forming the largest segments Loan Portfolio Composition (Selected Categories, $ thousands) | Loan Category | 2Q 2025 | 1Q 2025 | 2Q 2024 | | :------------------------------------ | :------ | :------ | :------ | | Loans held for sale | $126,869 | $74,439 | $94,644 | | Total real estate loans | $1,972,374 | $1,980,749 | $2,027,099 | | Commercial loans | $811,458 | $698,097 | $619,365 | | Consumer loans | $339,936 | $357,652 | $646,590 | | Total loans receivable, net of deferred fees | $3,130,521 | $3,043,348 | $3,300,562 | Loans by Risk Grade (2Q 2025, $ thousands) | Risk Grade | Amount | | :------------------------------------ | :----- | | Pass Grade 1 - Highest Quality | $667 | | Pass Grade 2 - Good Quality | $170,560 | | Pass Grade 3 - Satisfactory Quality | $1,737,153 | | Pass Grade 4 - Pass | $1,127,608 | | Pass Grade 5 - Special Mention | $25,459 | | Grade 6 - Substandard | $69,074 | Asset Quality Information This table provides detailed asset quality metrics, including the allowance for credit losses and non-performing assets. The allowance for credit losses decreased to $38.8 million in Q2 2025, while total non-performing assets increased to $38.2 million, primarily due to a rise in accruing loans delinquent 90 days or more Allowance for Credit Losses ($ thousands) | Metric | 2Q 2025 | 1Q 2025 | 2Q 2024 | | :------------------------------------ | :------ | :------ | :------ | | Balance at beginning of period | $(44,021) | $(53,724) | $(53,456) | | Provision for credit losses | $(1,159) | $(1,596) | $(3,119) | | Net charge-offs | $6,339 | $5,001 | $7,953 | | Ending balance | $(38,841) | $(44,021) | $(51,574) | Non-Performing Assets ($ thousands) | Metric | 2Q 2025 | 1Q 2025 | 2Q 2024 | | :------------------------------------ | :------ | :------ | :------ | | Nonaccrual loans | $12,983 | $12,956 | $11,289 | | Accruing loans delinquent 90 days or more | $25,188 | $1,897 | $1,714 | | Total non-performing assets | $38,171 | $14,669 | $13,186 | | SBA guaranteed portion of non-performing loans | $4,750 | $3,268 | $5,954 | Average Balance Sheet & Net Interest Income Analysis The average balance sheet provides a detailed breakdown of average earning assets, liabilities, and equity, along with a comprehensive analysis of interest income, interest expense, and net interest margin. Total earning assets averaged $3.53 billion in Q2 2025 Average Balance Sheet (Selected Items, $ thousands) | Metric | 2Q 2025 | 1Q 2025 | 2Q 2024 | | :------------------------------------ | :------ | :------ | :------ | | Total earning assets | $3,531,540 | $3,399,685 | $3,669,045 | | Total assets | $3,794,515 | $3,641,597 | $3,912,241 | | Total Deposits | $3,260,020 | $3,129,999 | $3,324,688 | | Total Funding | $3,377,721 | $3,246,954 | $3,483,607 | | Total liabilities | $3,414,370 | $3,285,234 | $3,518,101 | | Total stockholders' equity | $380,145 | $356,363 | $394,140 | Net Interest Income Analysis (Selected Items, $ thousands) | Metric | 2Q 2025 | 1Q 2025 | 2Q 2024 | | :------------------------------------ | :------ | :------ | :------ | | Total Earning Assets Income | $47,935 | $47,723 | $52,191 | | Total Deposit Costs | $20,497 | $19,392 | $24,622 | | Total Funding Costs | $22,447 | $21,359 | $27,338 | | Net Interest Income | $25,488 | $26,364 | $24,853 | | Net Interest Margin | 2.89% | 3.15% | 2.72% | | Net Interest Spread | 2.35% | 2.60% | 2.11% | Reconciliation of Non-GAAP Items This table provides a detailed reconciliation of various non-GAAP financial measures to their most comparable GAAP measures, including adjustments for non-recurring income and expenses, pre-tax pre-provision earnings, operating return on assets, operating return on equity, operating efficiency ratio, and tangible book value per common share Net Income Reconciliation (2Q 2025, $ thousands) | Metric | GAAP | Non-GAAP Adjustments | Adjusted Non-GAAP | | :------------------------------------ | :----- | :------------------- | :---------------- | | Net income (loss) attributable to Primis' common shareholders | $8,427 | $(5,659) | $2,768 | Pre-tax Pre-provision Earnings Reconciliation (2Q 2025, $ thousands) | Metric | GAAP | Non-GAAP Adjustments | Adjusted Non-GAAP | | :------------------------------------ | :----- | :------------------- | :---------------- | | Pre-tax pre-provision earnings | $11,593 | $(7,218) | $4,375 | Tangible Book Value per Common Share Reconciliation (2Q 2025) | Metric | GAAP | Non-GAAP Adjustments | Adjusted Non-GAAP | | :------------------------------------ | :----- | :------------------- | :---------------- | | Book value per common share | $15.52 | $(3.80) | $11.72 | Core Net Interest Margin Reconciliation (2Q 2025) | Metric | Reported | Effect of adjustment for Consumer Portfolio | Core | | :------------------------------------ | :------- | :--------------------------------------- | :--- | | Net interest margin | 2.89% | 0.26% | 3.15% |