Primis Financial Q1 Earnings Call Highlights

Key Points

• Primis reported Q1 net income of $7.3 million ($0.30), down from $22.6 million a year ago largely due to a prior‑year one‑time deconsolidation gain, but on an operating basis earnings rose 126% to $0.33 per share and net interest margin expanded to 3.43%.
• Balance‑sheet growth and mortgage businesses drove performance: loans rose about 11.7% year‑over‑year to $3.4 billion, deposits were up just over 8%, the mortgage warehouse business reached roughly $460 million with potential to double in 12–18 months, and retail mortgage closed‑volume run‑rates are around $1.8–2.0 billion.
• Management expects further margin expansion (targeting high 3.4%–3.5%), kept core expenses near $22 million while recording a $1.5 million credit provision, is deploying AI to boost efficiency, and says the company is on track for its 2026 profitability goal and longer‑term return targets (around 12.5%+ and roughly 15% on tangible common equity).

Primis Financial NASDAQ: FRST reported first-quarter 2026 net income of $7.3 million, or $0.30 per share, compared with $22.6 million, or $0.92 per share, in the year-ago quarter. President and CEO Dennis Zember told investors that the year-over-year comparison was affected by items that distorted the prior-year period, including a “substantial gain on the deconsolidation of Panacea” in the first quarter of 2025.

On an operating basis, Zember said the company earned $0.33 per share in the first quarter of 2026, excluding “a small tax adjustment related to 2025 results.” He said operating earnings were up 126% versus $0.14 per share in the first quarter of 2025, and operating return on assets improved to 84 basis points from 40 basis points in the year-ago period.

Margin expands as revenue rises and expenses stay restrained

Net interest income rose to approximately $32 million from $26 million a year ago, according to EVP and CFO Matthew Switzer. The net interest margin increased to 3.43% in the quarter, up from 3.28% in the fourth quarter and 3.15% a year earlier. Zember attributed the improvement to a securities restructuring and changes in the mix of earning assets.

Switzer said the company expects “further margin expansion as we progress through 2026,” citing several tailwinds:

• The redemption of $27 million of subordinate debt at the end of January (only partially reflected in first-quarter results).
• Roughly $400 million of loans repricing in the second half of 2026 and early 2027, with a weighted-average yield of 4.81%.

During the Q&A, Switzer said he expects net interest margin to “inch up” over time, though he added he would not expect the margin to reach 3.6%. “Would we hit high 3.4%s-3.5% as we go through the year? Most likely,” he said.

Funding costs were stable. Switzer said core bank cost of deposits was 159 basis points for the quarter, flat from the fourth quarter, while the cost of total deposits was 223 basis points, down three basis points from the prior quarter. He emphasized that growing non-interest-bearing deposits is a key strategy to drive funding costs lower.

Loan and deposit growth led by key verticals

Switzer said gross loans held for investment increased about 14% annualized from Dec. 31 to March 31, led by growth in Panacea and mortgage warehouse lending. Zember said loans ended the quarter at $3.4 billion, up 11.7% from the first quarter of 2025, excluding approximately $40 million that was moved into loans held for sale related to a floor agreement with Panacea.

On the deposit side, Zember highlighted growth “just better than 8%” year over year, with “very little” coming from the digital platform, which he described as steady at about $1 billion. He also pointed to faster growth in non-interest-bearing checking accounts, which increased to $541 million, nearly 19% higher than the first quarter of 2025. Checking accounts represented 15.9% of total deposits versus 14.2% a year ago.

Zember said the company achieved that growth without “ever once” feeling pressure “to be more aggressive on rate,” crediting technology, service, and a focus on commercial deposits.

Mortgage warehouse and retail mortgage drive profitability gains

Zember said mortgage warehouse lending “has fully replaced Life Premium Finance” and ended the quarter with about $460 million outstanding, briefly exceeding $500 million near the end of March. He said the business is producing “impressive yields and margins” and “efficiency ratios in the 20s,” and he believes the company could double the mortgage warehouse business over the next 12 to 18 months.

Retail mortgage performance also improved. Zember said the mortgage group’s pre-tax income grew to $2.1 million in the first quarter, up from $766,000 a year earlier, and that earnings increased to 57 basis points on closed volume from 46 basis points in the year-ago quarter.

Switzer reported mortgage revenue of $10.8 million in the first quarter, up from $10 million in the fourth quarter, and said revenue “would have been even better” absent market volatility late in the quarter. He added that retail mortgage production was 122% higher year over year, and that the company originated $26 million of construction-to-permanent loans versus $4 million in the first quarter of 2025.

Asked about near-term production, Switzer said the company entered the year with expectations that implied a $1.6 billion to $1.7 billion mortgage platform based on momentum in the fourth quarter, but that recent performance suggested a higher run-rate. “Through the first quarter, felt like it was a little higher, maybe $1.8 billion, maybe even $2 billion,” he said, later adding that April was “very strong” and that the company was “still somewhere in the $1.8 billion range on closed volume.” Zember said a fair value adjustment tied to late-quarter volatility related to “Middle East” events reduced profitability by roughly 5 to 6 basis points.

In response to a question about concentration, Zember said the company does not want to become primarily a mortgage company. “It really probably shouldn’t be more than 20% of our bottom line,” he said, adding that management wants mortgage and other specialty lines to remain complements to the core bank over time.

Credit, expenses, and AI-driven efficiency efforts

Primis recorded a $1.5 million provision for credit losses in the quarter, which Switzer said was partly driven by loan growth. He said about $0.7 million was related to specific reserving on impaired loans, and another $0.4 million was tied to activity in the consumer portfolio. Core net charge-offs were six basis points.

On non-performing assets, Zember discussed two commercial real estate office credits, saying both had “pretty good quarters on new leases” and that trends were “more positive,” helped by improved leasing activity and cap rates that were “improving.”

On expenses, Switzer said core expenses were $22 million in the first quarter versus $20.8 million a year ago when excluding mortgage and Panacea volatility and non-recurring items. He said that absent higher occupancy expense from a recent sale-leaseback transaction, core expenses would have been down year over year. For 2026, he said management expects the core expense base to remain “in that kind of $22 million-$23 million range.” Zember emphasized operating leverage, saying core revenue increased about 34% over the past year while reported operating expenses increased about 4%.

Both executives also highlighted the company’s focus on deploying artificial intelligence to drive efficiencies. Switzer said Primis has canvassed the bank for opportunities to reduce repetitive tasks and has identified “hundreds of hours of opportunity,” adding that tools within existing products such as Microsoft Copilot could enable efficiencies “without expensive consultants.” Zember framed AI as a catalyst comparable to an M&A opportunity, saying the goal is to improve operating results, sales efficiency, customer experience, and fraud prevention.

Looking ahead, Switzer said the quarter was “in line with our expectations” and that Primis believes it remains on track to reach its profitability goal in 2026. Zember discussed longer-term targets beyond a 1% ROA objective, suggesting the company should “be 12.5% or better” and that return on tangible common equity could “get near 15%,” supported by scaling mortgage, mortgage warehouse, and efficiency initiatives.

About Primis Financial NASDAQ: FRST

Primis Financial Corporation is a bank holding company headquartered in Waycross, Georgia, operating through its wholly owned subsidiary, Primis Bank. The company offers a full suite of commercial and retail banking services tailored to meet the needs of individuals, small businesses, and agricultural clients across its service area. Primis Bank focuses on building relationships within the communities it serves, positioning itself as a local financial partner for deposit-taking, lending, and treasury management solutions.

Primis Bank maintains a network of branch offices throughout southeastern Georgia, serving a combination of rural and suburban markets.

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