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Primis(FRST) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Earnings for Q2 2021 were $10.3 million or $0.42 per share, a 10% increase from $9.4 million or $0.39 per share in the same quarter last year [7][20] - Total assets grew to approximately $3.4 billion, with total deposits reaching $2.8 billion, reflecting a significant increase in transaction accounts [8][20] - Non-interest income increased by $677,000, while non-interest expenses declined by $783,000 [28] Business Line Data and Key Metrics Changes - Gross loans decreased to $2.29 billion in Q2 from $2.39 billion in Q1, primarily due to a decline in PPP balances [20] - Non-interest bearing deposits accounted for over 19% of total deposits, while time deposits fell below 15% [21] - The company recognized $1.8 million of net PPPs in Q2 compared to $4.9 million in Q1, with $240 million of PPP loans remaining [23] Market Data and Key Metrics Changes - Credit quality remained stable, with non-accrual loans stable and OREO balances declining [24] - COVID-related loan deferrals decreased to $26 million from $113 million at the end of Q1, with expectations for all remaining loans to be off deferral by the end of Q3 [24] Company Strategy and Development Direction - The company is focused on launching a digital bank offering in Q4, targeting both commercial and consumer checking accounts [12][18] - The digital bank will complement the existing franchise rather than replace it, aiming to enhance future growth [15][18] - The company is exploring niche verticals and partnerships with fintech to leverage its existing capital and drive growth [59][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving loan growth in the second half of the year, projecting an annualized pace of 10% to 15% [35] - The company anticipates significant operating leverage as it deploys liquidity, with expectations for improved profitability as loan growth resumes [71] - Management acknowledged the challenges posed by high liquidity levels but remains optimistic about future growth opportunities [71][76] Other Important Information - The company closed one branch in April and plans to close another in August, while continuously evaluating its branch footprint [28][86] - The hospitality sector is showing signs of recovery, with a focus on managing exposure to hotels [83] Q&A Session Summary Question: What is the expected pace of loan growth for the second half of the year? - Management anticipates an annualized loan growth pace of around 10% to 15% [35] Question: What are the expectations for Panacea's contribution to growth? - Panacea is expected to become a meaningful contributor, especially with its recent move into commercial lending [37] Question: How will expenses be managed in relation to the digital bank launch? - Incremental expenses related to the digital bank are expected to begin in Q4, but overall expenses are projected to remain stable around $17.5 million [40] Question: What is the current status of the hotel portfolio? - The hotel portfolio has improved, with only 5% on deferral, and management does not plan to increase exposure in the short term [83] Question: Are there plans to close or relocate branches? - Management is not looking to leave any communities currently served but is evaluating the branch footprint [86]