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Primis Financial Corp. (FRST)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 GAAP diluted EPS was $0.11, down from $0.14 in Q4 2024 operating EPS; EPS missed Wall Street consensus of $0.25, while operating EPS of $0.14 also fell short of estimates *. Values retrieved from S&P Global.
  • Net interest margin expanded to 3.15% from 2.90% in Q4 2024 and 2.84% in Q1 2024, driven by lower deposit costs (2.52% vs. 2.80% in Q4) and loan repricing yields >7% .
  • Management outlined a path to >1% ROA via rebuilding earning assets to ~$3.75B (+21 bps ROA), mortgage contribution (+15 bps), and technology core consolidation savings of $6–$7M annually (+~15 bps ROA), with expected 5–10 bps NIM expansion in Q2 2025 .
  • Mortgage and warehouse momentum accelerated: mortgage locks $257M (+27% q/q); March locks $110M (+53% y/y); warehouse outstandings $115M (+80% q/q) and commitments $487M .
  • A $0.10 dividend was declared (54th consecutive), and consumer program risk continued to abate (promo loans down to $17.2M; reserves on consumer portfolio 16% of gross), reducing volatility .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin improved 25 bps q/q to 3.15% as deposit costs fell 28 bps to 2.52%, with new loan production at ~7.20% yields and additional repricing ahead .
  • Mortgage business inflected: ~$0.8M pre-tax profit vs. a ~$0.4M loss in Q4; locks $257M (+27% q/q) with March locks $110M (+53% y/y); new teams in Nashville, Wilmington, Raleigh, Austin add ~$500M annual production potential .
  • Warehouse lending scaled rapidly: balances $115M (+80% q/q); commitments $487M (vs. $349M in Q4); noninterest-bearing deposits tied to warehouse at $11M .
  • Management expects technology core consolidation to save $6–$7M per year and add ~15 bps to ROA; normalized run-rate ROA was 0.56% in Q1 .
  • Nonperforming assets remained low at 0.28% of total assets and no OREO; noninterest-bearing deposits edged up to $446M .

Quotes:

  • “We believe our normalized operations show material improvement... positioned well.” — CEO Dennis J. Zember, Jr.
  • “Net interest margin in the first quarter was 3.15%... Core bank cost of deposits remained very attractive at 183 basis points.” — CFO Matthew Switzer

What Went Wrong

  • Reported EPS $0.11 missed consensus; nonrecurring professional fees and a $1.9M CECL reserve related to consumer portfolio pressured results *. Values retrieved from S&P Global.
  • Consumer program drove elevated net charge-offs ($11.3M, with $10.8M from consumer) despite lower provision ($1.6M); charge-offs expected to remain high as portfolio runs off, albeit with adequate reserves .
  • Core operating expense burden, while improved, remains elevated; core expenses were ~$20.3M (down $3.2M q/q), with management targeting ~$18–$18.5M post-tech consolidation but most savings likely impacting 2026 .

Financial Results

EPS vs Prior Periods and Estimates

MetricQ1 2024Q3 2024Q4 2024Q1 2025Consensus (Q1 2025)
Diluted EPS ($)0.10 0.05 (0.59) 0.11 0.25*
Operating Diluted EPS ($)0.11 0.08 (0.65) 0.14 N/A

Notes: *Values retrieved from S&P Global.

Highlights:

  • EPS missed by 0.14 vs consensus (0.11 vs 0.25); operating EPS 0.14 also below 0.25. Values retrieved from S&P Global.

Revenue Components vs Prior Periods

Metric ($USD Millions)Q1 2024Q3 2024Q4 2024Q1 2025
Net Interest Income25.269 28.023 26.140 26.364
Noninterest Income10.307 9.283 13.162 7.757

S&P Global Revenue vs Estimates (for context)

MetricQ1 2025
Revenue Consensus Mean ($USD)26.882M*
Actual Revenue ($USD)56.997M*

Notes: *Values retrieved from S&P Global.

Margins and Efficiency

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Net Interest Margin (%)2.84 2.97 2.91 3.15
Cost of Deposits (%)2.82 3.04 2.80 2.52
Efficiency Ratio (%)77.41 83.22 94.59 95.30
ROAA (%)0.26 0.12 (1.53) 0.30

KPIs and Balance Sheet

KPIQ4 2024Q1 2025
Mortgage locks ($)N/A$257M; March $110M (+53% y/y)
Mortgage pre-tax profit ($)(0.4M) ~0.8M
Mortgage warehouse outstandings ($)$64M $115M (+80% q/q)
Warehouse commitments ($)$349M $487M
Panacea loans outstanding change+$41M in Q4 +$40M (9% unannualized)
Consumer promo loans ($)$39M at 12/31 $17.2M at 3/31
Consumer reserves & discounts~16% of gross principal 16%
Noninterest-bearing deposits ($)$439M $446M
Total deposits ($)$3.171B $3.159B
Digital platform deposits ($)~$981M just over $1B
Loans HFI ($)$2.91B $3.04B (incl. reclass)
NPA (% assets)0.29% 0.28%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin expansionQ2 2025N/A+5–10 bps expected New
Net Interest Margin expansion (FY)2025 YEN/A+10–15 bps (10–20 bps range cited) New
ROA run-rateQ1 2025N/A0.56% normalized run-rate New
ROA pathway (earning assets rebuild)2025+21 bps ROA +21 bps ROA Maintained
ROA pathway (mortgage contribution)2025+0.15% ROA (vs. 0.05% in 2024) +0.15% ROA Maintained
Tech core consolidation savingsAnnualN/A$6–$7M per year; ~15 bps ROA New
Core operating expense burden2025$21–$22M/quarter projected (Jan guidance) $20–$21M/quarter projected Lowered
Core opex (post-consolidation)Exit rateN/A~$18–$18.5M/quarter target New
Dividend per shareQ1/Q2 2025$0.10 $0.10 (payable May 28) Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Prior)Q4 2024 (Prior)Q1 2025 (Current)Trend
Technology/core consolidationNot highlightedProject work referenced (higher data processing costs) Consolidate traditional and digital cores; expected $6–$7M annual savings; +15–18 bps ROA Improving (execution underway)
Mortgage performancePre-tax profit $1.0M; locks ~+$4.1M/mo avg Seasonally slower; set up for 2025 Pre-tax ~$0.8M; locks $257M (+27% q/q); recruiting adds ~$500M capacity Momentum accelerating
Mortgage warehouseTeam expansion; attractive yields Commitments >$400M by Jan 2025 Outstandings $115M (+80% q/q); commitments $487M Scaling rapidly
Consumer programPromo balances $60M at 9/30; end-of-promo reimbursements Moved $133M to HFS; $20.0M mark; cease new originations 1/31/25 Reclassified back to HFI; $1.9M CECL reserve build; promo loans now $17.2M; reserves/discounts 16% De-risking (run-off)
Panacea FinancialLoans $392M; deposits $90M Loans $434M (+11% q/q) Loans +$40M; deposits $94M; pursuing deconsolidation; possible fair value gain Growth and potential accounting catalyst
Deposits/digital platformDigital deposits $911M; brokered CDs and FHLB Digital deposits ~$981M; repriced lower cost Digital >$1B; cost ~Fed Funds; new affinity brand launched Lower-cost growth
Margin outlookNIM 2.97% NIM 2.91% (ex reversals 3.18%) NIM 3.15%; +5–10 bps expected Q2; +10–15 bps by YE Expanding

Management Commentary

  • “Our focus is on measured earning asset growth back to the $3.75 billion level of 2024... harvesting cost savings... and enjoying the earnings lift from 2024’s and 2025’s recruiting success in mortgage.” — CEO Dennis J. Zember, Jr.
  • “We expect to complete the analysis in the second quarter of 2025 and believe the savings could be approximately $6 million to 7 million per year or another 15 basis points improvement in ROA.” — CEO
  • “Net interest margin in the first quarter was 3.15%... Core bank cost of deposits remained very attractive at 183 basis points... new loans with yields well over 7%.” — CFO Matthew Switzer
  • “We believe we’ve neutralized the noise and volatility [in the consumer portfolio]... the remaining portfolio of promotional loans are reserved at 75% of principal... additional provision booked.” — CEO
  • “Collectively, that puts us on track to exceed the 1% ROA goal we've set out for ourselves.” — CFO

Q&A Highlights

  • Profitability cadence: Management sees Q2 improvement across core bank, mortgage, and warehouse; average earning assets already up ~$60M in April; professional fees to recede; Panacea deconsolidation targeted .
  • Margin guide: +5–10 bps NIM in Q2; +10–15 bps by year-end, supported by loan repricing +100 bps vs book and stable core deposit costs (~1.83%) .
  • Expense trajectory: Core noninterest expense around ~$20.3M; exit rate targeted at ~$18–$18.5M post core consolidation; most savings likely in 2026 .
  • Credit/consumer runoff: Charge-offs to remain elevated but provisions expected to be modest given 16% reserves/discounts on consumer portfolio; promo book projected ~$4–$5M EOY; standard book 20–30% paydown in 2025 .
  • Panacea deconsolidation: Possible effective date 3/31; fair value election with third-party valuation; prior reference point just under $20M pre-tax at 2023 capital raise; timing contingent on GAAP analysis .

Estimates Context

  • EPS: GAAP diluted EPS $0.11 vs. S&P Global consensus $0.25 — miss; operating diluted EPS $0.14 also below consensus *. Values retrieved from S&P Global.
  • Revenue: S&P Global “Revenue” actual $56.997M vs. consensus $26.882M — beat*. Note company-reported net interest income $26.364M and noninterest income $7.757M, with NIM expansion and lower deposit costs driving improved spread income *. Values retrieved from S&P Global.
  • Revisions risk: Street likely to lower near-term EPS given nonrecurring costs and consumer runoff yet maintain improving margin trajectory and fee income from mortgage/warehouse, while raising revenue outlook tied to earning-asset rebuild and mortgage momentum .

Key Takeaways for Investors

  • Margin expansion is the near-term catalyst: deposit costs down, loan repricing >7% yields, and warehouse growth support NIM; management guides to +5–10 bps in Q2 and +10–15 bps by YE .
  • Earnings power rebuilding: Concrete pathway to >1% ROA via earning-asset growth back to ~$3.75B (+~21 bps), mortgage mix/profitability (+~15 bps), and core consolidation savings (+~15 bps) .
  • Mortgage businesses are inflecting: stronger locks, recruiting capacity (~$500M), and seasonal tailwinds should lift fee income and ROA contribution in 2025 .
  • Consumer credit overhang is diminishing: promo loans down to ~$17.2M; reserves/discounts at 16% to absorb elevated charge-offs without outsized provisions; volatility should fade over 2025 .
  • Potential accounting catalyst: Panacea deconsolidation could add a material fair value gain and reduce quarterly operating drag (~10 bps ROA improvement), pending GAAP analysis and valuation .
  • Expense discipline offers leverage: core opex targeted ~$20–$21M/quarter in 2025; tech consolidation aims for ~$18–$18.5M exit run-rate, driving operating leverage as assets grow .
  • Dividend steady: $0.10 declared; capital and TCE ratios stable, with book value per share at $14.38 and tangible book $10.59 .

Notes: Any values marked with * are retrieved from S&P Global.