Executive Summary

Q2 2025 delivered $0.34 diluted EPS and $8.4M net income to common, aided by a $7.4–$7.5M gain on Panacea shares, while consumer program interest reversals depressed reported NIM to 2.89%; core NIM was 3.15% .
Operating leverage improved: mortgage banking income rose to $7.9M and mortgage warehouse outstandings reached $185M, with noninterest expense down sequentially and core deposit costs at 2.52% vs 2.98% a year ago .
Management guided to run‑rate pre‑tax, pre‑provision earnings of ~$10.5–$11.0M and identified technology/data‑processing savings of ~$0.9M in Q3 and ~$1.5M per quarter starting Q4; dividend maintained at $0.10/share .
Stock reaction catalysts: visible OpEx reductions, core margin expansion pathway (mid‑3.20s to ~3.30% by year‑end) and consumer program wind‑down (full‑deferral promo loans down to $9.6M) .

What Went Well and What Went Wrong

What Went Well

Mortgage banking momentum: noninterest income from mortgage banking rose to $7.9M, with $323M closed volume, +52% YoY; construction‑to‑perm mix positions delayed but higher‑quality revenue streams .
Deposit cost and core funding: cost of deposits improved to 2.52% (vs 2.98% YoY); core bank cost of deposits at 1.79% and zero brokered/FHLB reliance underscore funding advantage .
Warehouse and Panacea scaling: warehouse outstandings grew to $185M (+60% QoQ), committed facilities to $804M; Panacea loans reached $505M (+34% YoY) with $107M deposits (+58% YoY) .

“Adjusting for [consumer interest reversals] and the PFH gain, our run‑rate pre‑tax pre‑provision earnings were approximately $8.4 million… we have visibility to pre‑tax pre‑provision earnings of $10.5 to $11 million” — Dennis J. Zember, Jr., CEO .

What Went Wrong

NIM pressure from consumer program: reported NIM fell to 2.89% driven by final significant write‑offs of accrued interest on consumer loans; net interest income declined to $25.5M QoQ .
Elevated operating items: core expense burden increased to $22.661M; consulting, FDIC, audit and legal added ~$1.5–$1.7M of items not expected to recur .
Asset quality noise: net charge‑offs annualized at 1.13% YTD (six months) and non‑performing assets rose to 0.86% of total assets driven by consumer program dynamics; allowance/loans at 1.24% (down YoY due to mix) .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Total Net Revenue ($USD Millions)	$39.30 (NII $26.14 + Noninterest $13.16 )	$34.12 (NII $26.36 + Noninterest $7.76 )	$43.52 (NII $25.49 + Noninterest $18.03 )
Diluted EPS ($USD)	$(0.59)	$0.11	$0.34
Net Interest Margin (%)	2.91%	3.15%	2.89%
Core Net Interest Margin (%)	2.91%	3.13%	3.15%
Efficiency Ratio (%)	96.41%	95.30%	73.37%
Return on Average Assets (%)	(2.43%)	0.30%	0.89%
Pre‑Tax, Pre‑Provision Operating Earnings ($USD Millions)	$3.19	$6.36	$4.38
Dividend per Share ($USD)	$0.10	$0.10	$0.10

Segment and operating KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Mortgage Locks ($USD Millions)	$205.7	$257.0	$323.5
Mortgage Closed Volume ($USD Millions)	—	—	$323.0
Mortgage Warehouse Outstandings ($USD Millions)	$64	$115	$185
Warehouse Committed Facilities ($USD Millions)	$349	$487	$804
Panacea Loans Outstanding ($USD Millions)	$434	$474	$505
Panacea Deposits ($USD Millions)	$92	$94	$107
Digital Platform Deposits ($USD Billions)	~$0.98	>$1.0	~$1.1
Digital Platform Cost of Deposits (%)	—	≈ Fed Funds	4.28% (June)
Noninterest‑Bearing Deposits ($USD Millions)	$439	$446	$478
Cost of Deposits (%) (Total Bank)	2.80%	2.52%	2.52%

Asset quality and capital

KPI	Q4 2024	Q1 2025	Q2 2025
Allowance for Credit Losses / Loans (%)	1.49%	1.45%	1.24%
Net Charge‑Offs (% of Avg Loans, annualized)	3.83%	1.47%	0.80% (quarter); 1.13% YTD
Non‑performing Assets / Total Assets (%)	0.29%	0.28%	0.86%
Book Value per Share ($)	$14.58	$14.38	$15.52
Tangible Book Value per Share ($)	$10.77	$10.59	$11.72
CET1 Ratio (%)	8.74%	8.88%	9.16%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Pre‑Tax, Pre‑Provision (Run‑Rate)	Near‑term 2025	—	~$10.5–$11.0M run‑rate (ex PFH gain, opt‑outs), visibility ahead of growth/repricing	New quantitative target
Core Operating Expense Burden	2025	$20–$21M/quarter (projected)	~<$21M in Q2 when normalizing items; further cost reductions targeted	Maintained, with execution savings
Technology/Data Processing Savings	Q3 2025; Q4 2025+	—	~$0.9M in Q3; ~$1.5M per quarter starting Q4 (core provider renegotiation, vendor consolidation)	Introduced reduction
Core Net Interest Margin Trajectory	2H 2025	—	Mid‑3.20s to ~3.30% by YE 2025, assuming no rate cuts	Introduced trajectory
Digital Platform Deposit Rates	2H 2025	—	Recently lowered 15 bps; scope to lower further	Lowering
Dividend	Ongoing	$0.10/share; consecutive dividend track	$0.10/share; 55th consecutive dividend	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Consumer Program wind‑down	Marked to HFS; heavy reversals and charge‑offs; promotional loans ~$39M HFI (Q4) and $17.2M (Q1)	Full‑deferral promo loans down to $9.6M; interest recognized on expirations only $0.321M; reversals expected to subside	Improving; noise abating
Technology/OpEx savings	Projected core OpEx $21–$22M (Q4) and $20–$21M (Q1)	~$0.9M savings in Q3, ~~$1.5M/quarter from Q4; CDI amortization ended (~~$0.29M)	Deflationary OpEx
Core funding & deposit costs	Core deposit cost 1.83% (Q1); zero wholesale funding	Core bank cost of deposits 1.79%; total cost 2.52%; lowered digital rates	Favorable mix, falling costs
Mortgage warehouse scaling	Team build and $115M outstandings; $487M commitments (Q1)	$185M outstandings; $804M commitments; NIB funding ~11%	Ramping
Panacea monetization & growth	Deconsolidated PFH; recognized $24.6M gain (Q1)	Additional $7.4–$7.5M gain; loans $505M, deposits $107M	Continued monetization and growth
Margin trajectory	NIM 2.97% (Q4), 3.15% (Q1)	Reported NIM 2.89%; core NIM 3.15%; path to mid‑3.20s–~3.30% by YE	Upward core margin path
CRE exposure & risk posture	Low CRE concentration and disciplined investor CRE stance	Investor CRE concentration 213% of capital; minimal investor CRE focus	Stable/Conservative

Management Commentary

“We are pleased with the progress we have made in rebuilding our balance sheet for higher sustained earnings… the core bank is maximizing profitability with its enviable core deposit base… mortgage warehouse and Panacea are executing… while non‑core portfolios run off.” — Dennis J. Zember, Jr., CEO .
“Adjusting for [consumer program] items and the PFH gain, our run‑rate pre‑tax pre‑provision earnings were approximately $8.4 million… we believe we have visibility to pre‑tax pre‑provision earnings of $10.5 to $11 million.” — Dennis J. Zember, Jr., CEO .
“Core bank cost of deposits remains very attractive at 179 basis points… we recently lowered rates on the digital platform 15 basis points and believe that we have an opportunity to lower further in the coming months.” — Matt Switzer, CFO .
“This is the first time in my banking career that I have not had deposit intangible amortization.” — Dennis J. Zember, Jr., CEO (CDI amortization ended; ~$0.29M in Q2) .

Q&A Highlights

Loan growth expectations: Warehouse averaging $250–$350M in 2026; Panacea growth partially off‑balance sheet; core bank ~5% growth with limited investor CRE; overall bank low‑to‑mid single‑digit growth back half of 2025 .
Margin: Core NIM expected to improve ~2 bps/month to mid‑3.20s by YE 2025, potentially ~3.30% absent rate cuts .
Deposits: Digital platform deposits likely flat in 2H25 as rates were lowered; core bank deposits expected to outgrow digital leveraging V1BE and treasury services .
Expenses: Targeting core OpEx ~$18–$18.5M per quarter by 2026 via tech savings and vendor consolidation; short‑term negative OpEx growth aimed .
Consumer program: Full‑deferral promo loans now ~$9.6M; reversals to decline; collections/servicing enhancements to reduce charge‑offs and pursue recoveries .

Estimates Context

Q2 2025: S&P Global consensus for EPS and revenue was not available; comparisons to estimates cannot be made.
Forward consensus snapshot (S&P Global):
- Q3 2025 EPS consensus mean: $0.22*; Revenue consensus mean: $27.83M*; # of EPS estimates: 2*; # of Revenue estimates: 2* [Values retrieved from S&P Global].
- Q4 2025 EPS consensus mean: $0.38*; Revenue consensus mean: $30.23M*; # of estimates: 1* [Values retrieved from S&P Global].
- Target price consensus: $13.63* (latest) [Values retrieved from S&P Global].
  Results trajectory (core margin expansion, lower deposit costs, OpEx cuts) suggests upward pressure on forward EPS/EBITDA estimates once consumer program noise fully subsides and warehouse/mortgage contributions scale .

Key Takeaways for Investors

Visible operating leverage: deposit costs falling and core NIM rising (mid‑3.20s–~3.30% targeted by YE), with warehouse and Panacea scaling — supportive of near‑term EPS momentum .
OpEx catalysts: ~$0.9M Q3 and ~$1.5M/quarter from Q4 in tech/vendor savings; CDI amortization ended — structurally lowers expense run‑rate .
Mortgage engine: locks and closed volume rebounding (Q2 locks $323.5M; closed $323M), with construction‑to‑perm mix smoothing seasonality — expect stronger mortgage revenue in 2H .
Consumer program overhang fading: promo expirations minimal in Q2; reversals expected to decline — reduces NIM noise and credit costs going forward .
Capital and TBV improving: TBV/share rose to $11.72; CET1 at 9.16% — capacity to modestly repurchase stock (80K shares at ~$10) while funding growth .
Funding advantage: zero brokered/FHLB; core bank deposits at 1.79% — differentiates FRST regionally, supports stable margin expansion .
Trading implication: As PFH gains normalize and OpEx savings accrue, the narrative shifts from cleanup to growth/operating leverage; catalysts include quarterly confirmation of margin expansion and expense declines, plus warehouse/Panacea volume milestones .

Primis Financial Corp. (FRST)·Q2 2025 Earnings Summary