Primis Financial Q2 2026 Earnings Call Transcript

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Provided by Quartr
July 24, 2026

Key Takeaways

  • Positive Sentiment: Primis posted strong second-quarter results with net earnings of $9.4 million, or $0.38 per share, up sharply from a year ago as ROA improved to 90 basis points and pre-tax, pre-provision operating income jumped.
  • Positive Sentiment: Revenue and margin trends improved meaningfully, as net interest margin rose to 3.45% and core revenue topped $50 million for the first time, supported by 11% year-over-year earning asset growth.
  • Positive Sentiment: Deposit mix remained a strength, with non-interest-bearing deposits growing and total funding costs staying relatively low, which management says should help defend margins even if loan pricing gets more competitive.
  • Neutral Sentiment: Credit quality improved overall, but one office CRE loan remains a watch item; nonperformers and classified assets declined, yet the company added about $5.3 million of specific reserves to a large nonaccrual office loan and now has more than $11 million reserved against it.
  • Positive Sentiment: Management highlighted additional earnings upside from its core conversion and AI initiatives, estimating about $7 million of pre-tax benefit next year from the consolidation project, with further expense and productivity gains expected into 2027.
AI Generated. May Contain Errors.
Earnings Conference Call
Primis Financial Q2 2026
00:00 / 00:00

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Operator

Hello, everyone. Thank you for joining us, and welcome to the Primis Financial Corp Second Quarter Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference call over to Matthew Switzer, Chief Financial Officer. Matthew, please go ahead.

Matthew Switzer
CFO at Primis Financial Corp

Good morning. Thank you for joining us for our second quarter webcast and conference call. Before we begin, please note that many of our comments during this call will be forward-looking statements which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Further discussion of the company's risk factors and other important information regarding our forward-looking statements are part of our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has also been posted to the investor relations section of our corporate site, primisbank.com. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time.

Matthew Switzer
CFO at Primis Financial Corp

In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. How a non-GAAP measure relates to the most comparable GAAP measure will be discussed when the non-GAAP measure is used, if not readily apparent. I will now turn the call over to our President and Chief Executive Officer, Dennis Zember.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Thanks, Matt, and thank you to all of you that have joined our second quarter 2026 conference call. We are very pleased with our second quarter results and pretty excited about how things are moving going into the last half of 2026. When I compare our current results to last year, I see strong growth in revenue, very contained operating expenses, increasing net interest margins, lower efficiency ratios, lower levels of non-performers, steady growth in earning assets, growing levels of non-interest-bearing checking accounts, and importantly, tangible book up over 20% from last year. Lastly, really nice to see some stability, Matt, return to our operating results, which I believe is critical to making sure our work is appropriately valued.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

For the second quarter, we're reporting net earnings of $9.4 million or $0.38 per share compared to $2.4 million or $0.10 a year ago. During the current quarter, we did book a gain on the sale of an investment in an insurance agency of about $5.9 million, and we fully offset that with a legal settlement and a reserve build on our largest office CRE. Because these items wash, I believe our stated ROA for the quarter of 90 basis points is really the recurring level that we're working with, and I'm very pleased to see this kind of improvement. These results include a net interest margin of about 3.45, up a couple basis points over last quarter, but up almost 60 basis points over the same quarter a year ago.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

That margin growth comes alongside steady earning asset growth, which has happened for several years now. For the quarter, we averaged about $3.9 billion of earning assets, which is up about 11% compared to the same time a year ago. The increase in margins and earning assets, combined with really strong performance from our mortgage company, allowed us to have our first quarter ever with more than $50 million of core revenue. That level is 40% higher than it was a year ago. Making sure that that revenue moves to the bottom line is critical, and the recurring case we've had with investors is that operating leverage will be our main strategy.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Matt can give you a lot more context, but I'm showing that our core OpEx is up about 16% over the past year compared to the 40% growth in revenue I just talked about. Of that 16%, 7.3% is tied to the increase in mortgage revenue, and 4.7% is tied to the lease expense from the sale-leaseback. Actual growth in OpEx, the real controllable part, is reliably less than 5%. This is outstanding work by our executive team and our staff, and it has totally reset the operating performance you can expect from our bank. In the quarter, we had nice improvement in credit quality, with non-performers moving down by 36% thanks to a single C&I loan that was refinanced elsewhere. Additionally, we were able to upgrade a mixed-use commercial project that finally reached stabilization.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Collectively, classified assets declined by about $53 million or 36%. As we stated earlier, we built additional reserves on our largest office loan by about $5.3 million in the quarter. Lastly, before I turn it over to Matt, we announced in the press release a series of earnings improvements that are coming out of our core consolidation project. Altogether, we believe the impact on next year's results is about $7 million pre-tax, which includes zeroing out the amortization expense from the original build of the core. This set of improvements is about 13 or 14 basis points in the ROA, about $0.22 per diluted share. That's important.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

From a strategic standpoint, what is so special or noteworthy about this is that I firmly believe that this announcement all but guarantees another year and a half of outsized operating leverage similar to what we've put up this year. That's very exciting for our team and our board, and we believe should meaningfully improve the kind of results we put up in 2027. Matt, with that, I will turn it over to you.

Matthew Switzer
CFO at Primis Financial Corp

Thank you, Dennis. As a reminder, a discussion of our financial results can be found in our press release and investor presentation located on our website and in our 8-K filed with the SEC. As Dennis mentioned, Primis reported earnings of $9.4 million, or diluted earnings per share of $0.38 in the second quarter, compared to $7.3 million, or $0.30 per share in the first quarter of 2026, and $2.4 million or $0.10 per share a year ago. Return on average assets was 90 basis points versus 76 basis points in the first quarter and 26 basis points a year ago.

Matthew Switzer
CFO at Primis Financial Corp

There were a few notable pluses and takes in the quarter that we'll review in more detail later in my remarks, on balance, it was a quarter of solid operating results with pre-tax, pre-provision operating net income of $11.7 million, up 185% from $4.1 million a year ago. Turning to the balance sheet, gross loans held for investment increased approximately 80% annualized from March 31st to June 30th, and were 11% year-over-year, led by continued growth in Panacea and Mortgage Warehouse. Average earning assets increased approximately 14% annualized in the second quarter and were up 11% compared to the year-ago quarter. Average deposits were up approximately 12% annualized in the quarter, and average non-interest-bearing deposits were up approximately 24% annualized, with average non-interest-bearing deposits representing 16.3% of average total deposits in the second quarter versus 14.3% a year ago.

Matthew Switzer
CFO at Primis Financial Corp

Net interest income was approximately $33.8 million, up from $32.1 million last quarter and $25.2 million a year ago. Our net interest margin in the second quarter was 3.45%, up from 3.43% last quarter and 2.86% in the year-ago period. The improvement reflected robust earning asset growth funded at attractive incremental margins, with 3 basis points of linked quarter expansion in yield on earning assets. Core bank cost of deposits remains very attractive at 1.6% for the quarter, compared to 1.79% in the same quarter last year. Cost of total deposits was 2.25% in the second quarter, up one basis point linked quarter, and down 28 basis points year-over-year. Cost of interest-bearing deposits was 2.69%, down 25 basis points from the same quarter last year, and total cost of funds was 2.46%, flat with the first quarter and down 21 basis points year-over-year.

Matthew Switzer
CFO at Primis Financial Corp

Our focus on growing non-interest-bearing deposits remains a key part of our strategy to continue controlling funding costs as we grow the balance sheet. Our provision this quarter was $5.5 million, compared to $1.5 million in the first quarter and $8.3 million a year ago. Approximately $5.3 million of the second quarter provision was related to specific reserve additions for one non-accrual credit. Absent this item, improvements in specific reserve amounts largely offset provision amounts related to portfolio growth and the consumer loan program. Non-performing assets, excluding portions guaranteed by the SBA, improved to 1.45% of total assets at quarter end from 2.35% in March 31 and 1.9% a year ago. Core net charge-offs were 53 basis points in the second quarter, up from 6 basis points in the first quarter and 15 basis points a year ago, driven by one non-accrual loan that was resolved in the quarter.

Matthew Switzer
CFO at Primis Financial Corp

Non-interest income was $22 million in the quarter versus $13.6 million in the first quarter and $18 million a year ago. Second quarter included a $5.9 million pre-tax gain from the liquidation of an insurance agency investment, while the year-ago quarter included a $7.5 million gain on the company's investment in Panacea Financial Holdings. Mortgage-related non-interest income grew 44% year-over-year to $11.4 million in the second quarter. Primis Mortgage closed volume was $421 million, up 30% compared to the second quarter of 2025. We also reported $1.6 million of gain on sale income related to the sale of Panacea loans and guaranteed portion of SBA loans, including approximately $237,000 attributable to the core bank.

Matthew Switzer
CFO at Primis Financial Corp

On the expense side, when you exclude mortgage of the Panacea division volatility and non-recurring items, our core operating expense burden was approximately $25 million versus $22 million in both the first quarter of this year and the second quarter of last year. As previously disclosed, the first and second quarters of 2026 include a full quarter of lease expense, net of reduced depreciation of approximately $1.4 million from the sale leaseback transaction executed in the fourth quarter of 2025. The second quarter also included several discrete expenses, including $1.1 million related to the settlement of a previously disclosed mortgage lawsuit, a $0.4 million increase in loan-related expenses, and $0.2 million of higher marketing costs. There was also approximately $900,000 cumulatively of small expenses related to the company's recent shelf filing, vol exchange fees, and the core conversion project.

Matthew Switzer
CFO at Primis Financial Corp

We expect the non-interest expense burden, excluding mortgage and Panacea, to return to the $22 million-$22.5 million range in the third quarter of this year. I would also like to briefly add to Dennis' comments on how we are thinking about operating leverage from our core consolidation initiative and artificial intelligence. During the last six months of planning for the core conversion, we have identified $6.1 million of expected earnings improvements from fully converting the core bank and all divisions onto our real-time, fully digital core. These improvements are equally centered on revenue and expense opportunities, with $3 million of revenue improvements as we rationalize products and fees, and $3.1 million from contracts and vendor consolidation, and will largely be in place in early 2027. These amounts are real, and we believe highly achievable in the timeframe highlighted.

Matthew Switzer
CFO at Primis Financial Corp

This also does not include the amortization expense related to capitalized platform development costs from $0.8 million per quarter that will end in the third quarter of 2027. Lastly, we are also in the beginning stages of deploying AI tools and agents to drive ongoing productivity improvements that we believe will allow us to limit expense growth to maintain strong operating leverage for the foreseeable future. In summary, we're excited to report another solid quarter with continued year-over-year improvement in profitability, net interest income, margin, asset quality, and tangible book value per share. We believe the balance sheet momentum, core consolidation work, and ongoing productivity initiatives keep us on track to hit our profitability goals and put us on a path to superior returns. With that, operator, we can now open the line for Q&A.

Operator

We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from Woody Lay with KBW. Your line is now open. Please go ahead.

Woody Lay
Woody Lay
Analyst at KBW

Hey, good morning, guys.

Matthew Switzer
CFO at Primis Financial Corp

Morning.

Woody Lay
Woody Lay
Analyst at KBW

Wanted to start on the net interest margin. It feels like we're in a higher for longer and feels like a general theme this earnings period has just been the magnitude of competition, both on the loan and deposit side and what that's meaning for pricing. I'd love to just get your thoughts on how you see the NIM outlook from here.

Matthew Switzer
CFO at Primis Financial Corp

Similar to what we discussed on previous quarters, we think where we are right now, plus or minus a basis point or two, is probably where we'll be for the foreseeable future. We are seeing some pressure on the earning asset side. Maybe a little less so on the funding side, but certainly some pressures in the loan pricing. We have some levers there. A notable one is we have some subordinated debt that's available for refinance that we think we're going to be able to do at some point in the next quarter or two, and will save us probably between 200 and 250 basis points on the cost of that debt. That'll should more than offset any incremental pressures on the margin from the balance sheet.

Woody Lay
Woody Lay
Analyst at KBW

Got it. That's helpful color. Maybe shifting over to credit, it was great to see the quarter-over-quarter NPA improvement. I was just hoping to get an update on that larger office CRE credit that's still on the books. Can you just remind us what the total specific reserve you have against that credit is now?

Matthew Switzer
CFO at Primis Financial Corp

It's a little over $11 million in reserve. The credit, that borrower is still working with us and investing in C&I and commissions to lease it up. We did have a relatively large lease, at least the LOI for it, signed in the second quarter. There is activity and the borrower's working hard to get it leased up. We're working with them as best we can. We do have a pretty healthy reserve on it at this point. Got a couple million dollars of cash reserves, almost $2 million of cash reserves. The borrower is making payments, so it's in non-accrual, but not 90 days past due. The borrower does, and Mike Matchett did invest. We just want to keep batting reserves there whenever we can to reduce whatever kind of earnings volatility might come out of that Woody.

Woody Lay
Woody Lay
Analyst at KBW

That makes total sense. Last for me, in regards to the core conversion, those additional impacts you're planning that could begin in the run rate in 2027, are there any larger one-time costs remaining with the core conversion that we should expect?

Matthew Switzer
CFO at Primis Financial Corp

Not overly significant. We may have smaller implementation fees here and there in the next couple of quarters, but we're talking like a few hundred grand, nothing even really noticeable. Yeah.

Woody Lay
Woody Lay
Analyst at KBW

All right. Perfect. That's all for me. Thanks for taking my questions.

Operator

Your next question comes from the line of Russell Gunther with Stephens. Please go ahead.

Russell Gunther
Russell Gunther
Analyst at Stephens

Hey, good morning, guys. Wanted to start on the loan growth outlook. Really strong first half of the year. Good 2Q. I think Matthew mentioned even a larger C&I. Pay off in the quarter, and growing through that. Would be helpful to get a sense for how you're thinking about loan growth in the back half of the year, both from an order of magnitude and asset class perspective.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

I'll start backing. We've not had a lot of Panacea growth this year. We've been selling most of that. Tyler's got a good flow agreement. I think we'll see more growth on that side of the balance sheet in the second half of the year. Mortgage Warehouse, we keep rates up as tremendously as they are. Thought that that might slow down. Actually, new customer acquisition and sales efforts there have countered that trend. So I still think there's a little bit of risk on growing Mortgage Warehouse. I think we can probably hold something close to the levels that we're at. I think maybe even go up. If you asked Ray, I think he'd say we can go up from here, just given the pipeline. I don't think it will be as tremendous as what you've seen for the first half of the year.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

The core bank's got a great pipeline. I think all three together, I think the back half of the year probably will look a little bit like the first half of the year. Yield wise, I think they're definitely incremental to where our loan book is right now, and I don't see really, just back to Woody's question about margin. I don't see anything incrementally with growth that would be diluted to the current margin. If you see where we're growing deposits, the core bank, warehouse, Digital Bank, versus earning asset growth, I still think it's positive and incremental to the margin.

Matthew Switzer
CFO at Primis Financial Corp

Yeah, I agree with all that.

Russell Gunther
Russell Gunther
Analyst at Stephens

That's helpful, guys. Thank you. Yeah, the debt calls out with some nice fixed repricing over the next few quarters as well. Good to see. Matt, you mentioned with regard to the margin, more pressure on the average earning asset side incrementally relative to deposits. I think as we're wrapping up the end of earnings season here, a lot of focus has been on just incremental deposit costs as a headwind to margin. How are you guys defending against that?

Matthew Switzer
CFO at Primis Financial Corp

The nice thing is, a lot of that growth in the first half of the year has been Mortgage Warehouse, and they fund about 10% of their growth themselves with essentially pretty close to non-interest-bearing. They have a little bit of interest expense, but it's by and large all non-interest-bearing. It's been very additive from a mix standpoint. Digital Bank has shown some nice growth at similar rates to where they've been the last quarter or two, and some of that's actually been small business driven, which has been nice to see. The core bank has done a really good job growing in footprint. I'm not saying we're immune to pressures on deposit costs, but arguably, we have a few more levers that we can pull than a lot of other banks that are helping us stay pretty consistent to where we've been.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Adding to that, I think our digital advantage, our national advantage just continues to pay dividends. I think even with rates being up a little, I guess on the short-term side, maybe not, but with the attitude of higher rates, it's really not affected what we're doing on digital. I think we're still at a competitive level. There are a lot of banks, I've seen that, Russell, reporting a little more pressure on the deposit side, and maybe the margin build that the industry's seen has kind of reached an end because a lot of it has been sort of funding driven. For us, we probably never harvested all of the deposit opportunity anyhow because we had so much earning asset growth. I think we're probably in a better position on the deposit side to take advantage.

Russell Gunther
Russell Gunther
Analyst at Stephens

Understood. Okay. Helpful context, guys. Thank you. Just last one from me on the expense side of things. Matt, thanks for level setting us in terms of where that kind of core expense run rate should hit 3Q. I just wanted to clarify, in terms of the incremental expense initiatives, that that $3.1 million is really incremental to anything you've called out in the past. If so, that looks like it's an early 2027 event. How you would expect that kind of core expense run rate to maybe exit 4Q or trend over the course of next year.

Matthew Switzer
CFO at Primis Financial Corp

I think that our expectation is that 22-22.5, 23, whatever you want, somewhere in that range is kind of our baseline for the next few quarters. The savings from the consolidation will be incremental to that down.

Russell Gunther
Russell Gunther
Analyst at Stephens

Okay.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

It's nothing we've called out before.

Russell Gunther
Russell Gunther
Analyst at Stephens

Got it.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

We've never talked about these savings on the revenue or the expense side.

Russell Gunther
Russell Gunther
Analyst at Stephens

All right. Very good. I appreciate it, guys. Thanks for all the help.

Matthew Switzer
CFO at Primis Financial Corp

Thanks, Russell.

Operator

Your next question will be from the line of Steve Moss with Raymond James. Please go ahead.

Steve Moss
Steve Moss
Analyst at Raymond James

Good morning, guys. Most of my questions have been asked and answered here, maybe just want to follow up on the office non-accrual here. Just curious in terms of just thinking about the drivers of the additional provision. I hear you in terms of the gain, but with the borrower leasing up or having an LOI, at least I guess I should say, how are you thinking about the potential timing of resolution and did you get a new appraisal to drive some of this provision?

Matthew Switzer
CFO at Primis Financial Corp

The driver of the provision was really while there's leasing activity, we did get a pretty essential LOI signed in that quarter. We've gone 12 months since we put this thing on non-accrual, and vacancy's only moved a little bit at the margin. So just with the passage of time, as we do our valuation work, we had to add to that specific impairment to account for the fact that we had not made as much progress on vacancy as we should have over the last 12 months.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

We're accounting for this on a DCF versus the appraisal because the borrower is not collateral dependent, yet making payments and still investing. We're accounting for it on a DCF, and Matt just got more aggressive with the DCF and with some assumptions. We've sort of been telegraphing that we want to keep building reserves here, and so we were able to do that in a quarter.

Steve Moss
Steve Moss
Analyst at Raymond James

Okay. That's helpful. Just in terms of the Mortgage Warehouse business, I hear you guys in terms of obviously a tougher environment to grow, but good customer pipeline. Just kind of curious, where are the spreads these days for that business?

Matthew Switzer
CFO at Primis Financial Corp

Which one? Spreads?

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Spreads. I mean, it depends. If you're talking to a mortgage company that does a couple billion a year, you're probably somewhere SOFR 200 all-in with fees. If you're talking to a smaller, non-delegated customer, you're probably maybe SOFR 3+ with fees. It just depends.

Matthew Switzer
CFO at Primis Financial Corp

I think it's worth noting rate, which mortgage rates are 6.5%.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Yeah.

Matthew Switzer
CFO at Primis Financial Corp

We're at 25-50 basis points fees on that. There's some customers who are still probably paying 7%.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Yeah. It just all depends. I mean, all in for us, we're booking margins there that are pretty comparable. Our all-in margin on that business is very close to where our entire company's margin is. The efficiency ratio there is really the play. The efficiency ratio in that group is right now probably just over 20%, 21%, 22%. We could probably double the portfolio, double the client base, double the throughput with very little increase in OpEx other than maybe incentives, and probably push efficiency ratio down to 15%. That's really the ROA play. Month in, month out in the second quarter, it was over 2% ROA after tax. I mean, it's really good business for us.

Steve Moss
Steve Moss
Analyst at Raymond James

Great. I appreciate all that color. Thank you very much, guys.

Matthew Switzer
CFO at Primis Financial Corp

Thanks, Steve.

Operator

Your next question is from the line of Christopher Marinac with Brean Capital. Please go ahead.

Christopher Marinac
Christopher Marinac
Analyst at Brean Capital

Hey, thanks. Good morning. Dennis and Matt, I wanted to go back to the core bank, and I guess I just want to get a little more background on sort of the margin change this quarter. Is that something that can go back and then as you continue to work on the expense side, would that lead to even better returns in the core bank next year?

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Yeah. When you say the core bank, Chris, you're sort of excluding what warehouse, Panacea, is that? Just the core bank sort of without the mortgage company?

Christopher Marinac
Christopher Marinac
Analyst at Brean Capital

Well, I'm really looking at slide six and just kind of leveraging off of kind of the details there and the margin that you cited there, and then I guess the strong PPNR ROA.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

I see what you're saying. I think the core banks, Panacea and Mortgage Warehouse and obviously mortgage are all big contributors to the ROA. The incremental business there is great. It's interesting, the core bank's incremental ROA on new business is better than all of that because they drive a lot of their ROA and margin with checking accounts. The core bank's cost of deposits is remarkably low. Really, when you look at our cost of deposits, our cost of funds is balanced by about $1 billion of the national stuff that fuels the Funds the national stuff like Panacea Warehouse. When you exclude that, the core bank incremental margins are outstanding. The core bank's growth rate is not as tremendous as the rest of the bank. I think the core bank's growth rate, I would probably put at 5% or 6%.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

It's nice to not have to push our folks hard there. We're able to focus on the things that we're focused on, owner-occupied CRE, C&I, residential builders, strong residential builders, really to support the mortgage company. We're really not focused at all on investor CRE. It very rarely even gets in our pipeline. The margins on what we're bringing in, we don't have to compete all the way to the very bottom, to the unprofitable level. I think if we were relying only on the core bank for all of our growth, I think it would definitely impact the margins. If you look at where we are right now, and Matt, I don't know if this includes. It probably includes the sub-debt and margin.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

I think if you look at where we reported this quarter at 3.45% for the margin, you'd probably add seven, eight basis points on this balance sheet for the sub debt refinance. I think when you look at where rates are right now, say with the five and the 10-year, Chris, I think the upside on repricing for the existing commercial book is pretty strong. I would say there's probably 10 basis points upside over the next year on this margin. The efficiency, when you look at the core bank here, and you talk about the earnings enhancements that were coming out of the core project. The one area that our core bank has sort of been a laggard on, it has been non-interest income. We've sort of built the bank not really focusing on fees.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

I think this look in the core project of looking at products and services and right-sizing those fees is pretty important. There's no chance that there's any kind of expense build in the forecast that would exhaust all the savings we came up with. Not even close. We're definitely out looking for new lenders and new teams, but there's 0% chance that that could exhaust these savings. I would say between the margin build and revenue there and the savings, you're probably looking at taking another five, six points off the efficiency ratio.

Christopher Marinac
Christopher Marinac
Analyst at Brean Capital

Okay. Great. That's all very helpful. Thank you for sharing all that. I guess kind of a related question, as you execute the systems change and kind of realize those cost savings, it would seem to me that you have a competitive advantage at that point that might be correlated to other relationships with banks you look at or other opportunities down the road because you could get more out of it. I was curious how you sort of think about that.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

I wish I had pixie dust and I could just make all of these savings and another year of earning asset growth happen because I just see us reaching efficiencies in the 50s and the ROA. The margin is going to continue to inch up a little bit with repricings, we are absolutely, I think, unquestionably the most balanced bank from an interest rate risk standpoint, given our position. I know what the next, call it six quarters are. I just really want to get to that point. On the competitive advantage, we're going to finish next year. We're going to have the entire bank on the most modern real-time core out there, unquestionably. We will be the most flexible bank in front of the customer, that's a competitive advantage.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

That contract, you think with that advantage that we would be paying out the nose for that. Actually, our contract, given that we're an early adopter and are helping build it, our contract is going to be probably half of what a bank our size would be paying for that. It's fixed. If we grow the bank to $8 billion or $10 billion, that doesn't scale. It's fixed, it just accrues to the bottom line to our shareholder. I think really the competitive advantage we need is just six more quarters of continued improvement. Let all these results happen and just sort of over time prove that our model is as valuable as we think it is.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

There is a slide in there, Chris, that talks about where we are price to earnings and price to book, Matt and I understand that. Absolutely believe we're going to erase that discount, over the next, call it four to six quarters as we prove this really present an opportunity for our investors. I'm sorry if I rambled there. I did ramble. I'm sorry.

Christopher Marinac
Christopher Marinac
Analyst at Brean Capital

Oh, no. No problem at all. I appreciate that color. I guess last question from me is if the mortgage market is still in the same kind of zone of sort of sluggish a year from now, do you just continue to tough it out knowing that at some point it will shift back?

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Definitely. Our mortgage companies just keep surprising us. I think we had the best quarter we've ever had in mortgage. Closed the most loans, had the highest level of profitability. I'm not going to sit here and act like rates are not dampening the profitability and the upside opportunity. Absolutely is. We should probably be 20% or 30% better in this summer season. Our folks are just dynamite on the sales side and on the OpEx side. These are managed so tight. They're so profit-oriented. Yeah. Our folks are pretty offensive, too. When rates are like this right now, you can probably recruit really good mortgage loan officers. When you're selling a 5.5% 30-year, it's hard to move a mortgage loan officer. Our folks are definitely on the street looking to add to the ranks.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

Over time, we definitely believe rates will probably ease back a little once there's a little less volatility on the other side of the world. Yeah, we're pleased with what mortgage company's done. On top of it, probably 8%-10% of their volume is portfolio product, and a lot of that is construction to perm, which is only with us for a short period of time before it gets refined away. While it's with us, the spreads on that are very good. Most of their construction book is probably new originations, probably in the mid-7s, and comes with nice fees. There's the retail piece of it, but there's also what they do for the portfolio.

Christopher Marinac
Christopher Marinac
Analyst at Brean Capital

Great. We'll leave it there. Thank you all for your questions, if there's any to my questions, and thanks for hosting us.

Operator

This concludes the question and answer session. I will now turn the call back to Dennis Zember for closing remarks. Please go ahead.

Dennis Zember
Dennis Zember
President and CEO at Primis Financial Corp

All right. Thanks you all for joining our call. Hope everybody has a good weekend and a good summer. Matt and I are available for calls if you want to reach out to us. All right, thanks. Have a great day.

Operator

This concludes today's call. Thank you for attending, and you may now disconnect.

Executives
    • Dennis Zember
      Dennis Zember
      President and CEO
Analysts
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