Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Primis Financial Corp (NASDAQ:FRST) has significantly increased its customer pipeline, tripling it compared to the previous year.
• The core bank's loan repricings are in the mid 7% range, while new deposit accounts are under 2%, indicating a favorable interest margin.
• The mortgage division is showing strong growth, with pre-tax income per closed volume 50% higher than the previous year.
• The company is working on consolidating core processing contracts, which is expected to improve ROA by 15 to 18 basis points.
• Primis Financial Corp (NASDAQ:FRST) is effectively managing operating expenses, maintaining them at the same level as the previous year, which enhances profitability.

Negative Points

• Loans were slightly down in the first quarter due to delays in closing, impacting immediate financial results.
• The cost to run the digital core is high, which affects overall profitability despite its strategic importance.
• The consumer loan portfolio has been volatile, with promotional loans causing significant risk and requiring substantial reserves.
• The company faces challenges in deconsolidating Panacea Holdings, which affects reported operating results.
• High charge-offs are expected to continue, particularly from the consumer loan portfolio, although provisions are not anticipated to increase.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Sign with FRST.

Q: Are there any potential obstacles in the second quarter that could hinder Primis Financial Corp's progress towards higher profitability? A: Dennis Emmer, CEO, stated that the company is on track with its strategies, including an increase in earning assets and strong performance in the mortgage sector. He does not foresee any significant issues that could derail their progress in the second quarter. The company is also working on deconsolidating Panacea, which should bring additional savings and improvements in book value.

Q: Can you provide an update on the consumer loans and their expected resolution timeline? A: Dennis Emmer, CEO, explained that the promotional loans are expected to be significantly reduced by the end of the year, with the remaining standard consumer loans expected to pay off at a rate of about 7% per quarter. The company anticipates the consumer loan book to decrease to around $70 million by the end of the year.

Q: What is the outlook for the net interest margin for the rest of the year? A: Matt Switzer, CFO, indicated that the net interest margin is expected to expand by 5 to 10 basis points in the second quarter and potentially by 10 to 20 basis points by the end of the year, depending on the broader rate environment. Loan repricing and growth in the mortgage warehouse are expected to contribute positively to the margin.

Q: How should we think about the core non-interest expense base for the rest of the year, especially with potential savings from Panacea deconsolidation? A: Matt Switzer, CFO, mentioned that the core non-interest expense is expected to remain consistent, with potential savings from core consolidation likely impacting 2026. The goal is to maintain operating expenses flat while leveraging growth in other areas to improve the bottom line.

Q: What is the expected trend for charge-offs throughout the year? A: Matt Switzer, CFO, expects charge-offs to remain high due to the consumer portfolio runoff, but they do not anticipate high provisions related to these charge-offs. The portfolio is well-reserved, and the company believes it has adequate allowances to absorb the charge-offs as the portfolio runs off.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.