Primis(US:FRST)2025-10-24 15:02Financial Data and Key Metrics Changes - The company reported net earnings of $6.8 million and earnings per share of $0.28 for the third quarter, compared to core income of $2 million and $0.08 per share in the same quarter of 2024 [4] - Return on Assets (ROA) improved to 70 basis points, and Return on Tangible Common Equity (ROTCE) improved to 9.45% [4] - Core ROA adjusted for certain non-permanent items is closer to 90 basis points, aligning with the target of 1% ROA [5] - Net interest margin for the third quarter was 3.18%, up from 2.86% in the previous quarter and 2.97% in the same period last year [19] Business Line Data and Key Metrics Changes - The mortgage division's production increased from approximately $20 million per month to $100-$120 million per month, with pre-tax earnings of about $1.9 million for the quarter [10] - The Mortgage Warehouse division showed average balances of $210 million, ending balances of $327 million, and pre-tax earnings of about $1.6 million [11] - Panacea Financial Division's loan balances increased to $530 million, with deposits growing to $132 million, a 50% increase year-over-year [12] Market Data and Key Metrics Changes - Non-interest-bearing checking accounts grew by about 16% compared to a year ago, improving the deposit mix and reducing the cost of deposits by almost 20% [7] - Average earning assets increased by 10% annualized in the third quarter, positioning the company to replace earning assets sold a year ago [18] - Non-interest income was $12 million in the quarter, up from $10.6 million in the previous quarter, driven primarily by increased mortgage revenue [21] Company Strategy and Development Direction - The company is focused on increasing the proportion of non-interest-bearing deposits to around 20% of total deposits, which is currently about 20% in the core bank [34] - The strategy emphasizes core funding through checking accounts rather than relying on brokered CDs or institutional borrowings [42] - The company aims to maintain a competitive edge by driving checking account growth at rates better than 10% [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 1% ROA target, citing strong margins and a favorable deposit mix [5][23] - The company anticipates continued growth in profitability with minimal operating expense increases, despite inflationary pressures [22] - Management noted that the current quarter's results reflect a trend towards improved profitability, with fewer one-time items affecting core earnings [23] Other Important Information - The company has a pipeline of new opportunities in the Mortgage Warehouse division, with over $1 billion of uncommitted lines approved [11] - The company is actively managing credit quality, with a focus on resolving non-accrual loans and maintaining strong debt coverage ratios [15][50] Q&A Session Summary Question: Thoughts on overall loan growth for the fourth quarter and into 2026 - Management indicated potential runoff in the Mortgage Warehouse division but expressed confidence in sustaining levels and achieving 6-8% growth in the core bank [30][31] Question: Timing for reaching a 3.30% margin - Management expects to reach a 3.30% margin by the first quarter of next year, focusing on increasing non-interest-bearing deposits [32][34] Question: Impact of interest rates on deposit costs - Management noted that while competition may drive rates down, their growth in checking accounts allows for competitive positioning on deposit rates [41][42] Question: Evidence of customer stickiness in digital banking - Management confirmed that digital customers are stickier than expected, with over 90% having multiple accounts or referrals [43][44] Question: Resolution of asset quality issues - Management indicated that some loans may be resolved in the near term, potentially improving margins [49][50]