Primis Financial Corp. Earnings Call Highlights Growth and Challenges

Primis Financial Corp. ((FRST)) has held its Q1 earnings call. Read on for the main highlights of the call.

Primis Financial Corp.’s latest earnings call presented a mixed sentiment, highlighting both growth strategies and challenges. The company showcased significant improvements in key segments such as the Core Community Bank and Mortgage division, while also addressing issues like consumer loan volatility, the impact of Panacea consolidation, and high digital core costs.

Core Community Bank Growth

The Core Community Bank experienced remarkable growth, with its customer pipeline tripling compared to the previous year. Loans increased by $25 million in April, and loan repricings were in the mid-7% range. Additionally, new deposit accounts were maintained under 2%, showcasing effective cost management.

Mortgage Division Expansion

The Mortgage division reported a substantial 50% increase in pre-tax income per closed volume compared to 2024. This growth was supported by the addition of new teams, which boosted production capacity by $500 million, indicating a strategic expansion in this segment.

Earning Assets Growth Strategy

Primis Financial outlined a robust strategy to grow earning assets by $375 million, aiming to reach previous levels. The growth is expected to come from the core bank, Warehouse, and Panacea, contributing $100 million, $150 million, and $125 million respectively.

Margin Improvement

The company’s net interest margin improved to 3.15%, with the core bank’s cost of deposits at 183 basis points and new loan yields exceeding 7%. This improvement reflects effective financial management and strategic pricing.

Digital Platform Strategy

Primis Financial’s digital platform plays a crucial role in funding Panacea’s excess lending and Mortgage Warehouse, with expected after-tax ROI of 1.5% and over 2% respectively. This strategy underscores the company’s focus on leveraging digital solutions for financial growth.

Consumer Loan Volatility

The consumer loan portfolio introduced volatility, with promotional loans declining significantly from $90 million to $17 million. An additional provision was booked following a CECL model evaluation, highlighting the challenges in managing this segment.

Panacea Consolidation Impact

The consolidation of Panacea had a negative impact, reducing operating ROA by 10 basis points due to reporting a share of non-tax affected operating loss. This consolidation presents both challenges and opportunities for the company.

Non-Interest Income Decline

Non-interest income saw a decrease to $7.8 million, primarily due to a $1.2 million negative swing in fee income related to the consumer program. This decline indicates areas where the company needs to focus on improving revenue streams.

High Digital Core Costs

The high cost of running the digital core has impacted profitability, emphasizing the need for core consolidation to achieve better financial efficiency. This remains a critical area for the company to address moving forward.

Forward-Looking Guidance

Primis Financial provided significant guidance on enhancing key financial metrics. The company aims to improve return on assets (ROA) by 20 to 25 basis points through growth in earning assets, expansion of the Mortgage division, and consolidation of core processing contracts. Despite challenges, the company maintains tight control over operating expenses and projects a stable exit rate by year-end. Additionally, net interest margin is expected to expand by 10 to 15 basis points, supported by favorable loan repricing and deposit cost management.

In conclusion, Primis Financial Corp.’s earnings call reflected a balanced sentiment, with notable growth strategies and challenges. Key takeaways include the expansion of the Core Community Bank and Mortgage division, strategic asset growth, and a focus on digital platform efficiency. The company remains committed to improving financial metrics and navigating challenges to achieve sustainable growth.