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Primis Financial Corp. (FRST)·Q3 2025 Earnings Summary

Executive Summary

  • FRST delivered a clean quarter with EPS of $0.28 and net income to common of $6.83M, reflecting rising NIM (3.18%) and improving operating leverage; management said normalized pre-tax earnings were ~$11M (≈0.90% ROA) when adjusting for non-recurring items and late-quarter rate actions, with line of sight to ≥$13M pre-tax and 1% ROA near term .
  • Against S&P Global consensus, FRST posted a solid beat: EPS $0.28 vs $0.22 and total revenue ~$41.05M vs $27.83M; strength came from higher spread income, robust mortgage revenue, and Panacea/Mortgage Warehouse scaling (values from S&P Global)*.
  • Mix and funding improved: non-interest-bearing DDA rose 16% YoY to $490M; cost of deposits fell to 2.46% (post late‑September Fed cut, digital rates were lowered 35 bps; ~70% beta expected to further reduce Q4 costs) .
  • Watch credit optics: nonperforming assets increased to 2.07% of assets (from 1.90% in Q2) due to a single C&I downgrade and a separate nonaccrual migration; management sees no impairment on the large C&I loan and expects resolution on at least one item by Q4, with the two NoVA office credits stabilizing into mid‑2026 .

What Went Well and What Went Wrong

  • What Went Well

    • Net interest margin and spread income improved: NIM rose to 3.18% (core 3.15%); adjusted for ~$0.7M interest reversals, NIM would have been ~3.23% .
    • Operating leverage: revenue (ex-Panacea stock gains) increased ~$5M QoQ while expenses rose ~$0.4M; mortgage banking income jumped to $8.89M and Primis Mortgage pre-tax earnings reached ~$1.9M (strongest yet) .
    • Deposit quality and mix: non-interest-bearing deposits up 16% YoY to $490M; digital platform cost of deposits declined (4.07% in Sep vs 4.91% a year ago); V1BE and digital channels continue to drive sticky, relationship deposits .

  • What Went Wrong

    • Credit optics deteriorated: NPAs rose to 2.07% of assets (from 1.90% in Q2), driven by one large C&I downgrade and a separate relationship moving to nonaccrual; nonaccrual loans increased by ~$32M .
    • Expense noise persists: $1.1M legal fees tied to mortgage recruiting and ~$0.3M one-time occupancy added to Opex; these are expected to normalize in Q4 and early 2026 .
    • Efficiency ratio elevated to 78.81% (up vs 73.37% in Q2) as growth investments continue; management is targeting further savings as new technology contracts fully ramp in Q4 .

Financial Results

  • Income statement trend and profitability
MetricQ3 2024Q1 2025Q2 2025Q3 2025
Diluted EPS ($)0.05 0.11 0.34 0.28
Net Income to Common ($M)1.23 2.68 8.43 6.83
Net Interest Income ($M)28.02 26.36 25.49 29.03
Noninterest Income ($M)8.93 7.76 18.03 11.97
Net Interest Margin (%)2.97 3.15 2.89 3.18
Cost of Deposits (%)3.04 2.52 2.52 2.46
Efficiency Ratio (%)82.82 95.30 73.37 78.81
  • Selected balance/funding KPIs (Q3 2025 snapshot)
KPIQ3 2025
Non-interest-bearing DDA ($M)490
Total Deposits ($B)3.34
Loans HFI ($B)3.20
Tangible Book Value/Share ($)11.71
TCE / TA (%)7.48
  • Business line snapshot (Q3 2025)
Line of BusinessKey Metrics
Primis MortgageClosed volume $308M; pre-tax earnings ~$1.9M
Mortgage WarehouseEnding balances $327M; average loans ~$210M; ~$2.1M NII; commitments $1.0B
Panacea FinancialLoans $548M; deposits $133M; continued banker recruitment; #1 “Bank for doctors” on Google
Digital Platform>$1.0B deposits; Sep cost of deposits 4.07% vs 4.91% YoY
Consumer ProgramLoans $101M; promo loans down to $4.8M (5% of gross)

Guidance Changes

Metric/TopicPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin trajectoryExit 2025 / Q1 2026Not explicit numeric in Q2; implied improvement with asset rebuild “Closer to 3.30% margin as we exit this year, probably first quarter next year.” New specificity (raised clarity)
Deposit costs (beta)Q4 2025Expected improvement from digital repricing Lowered digital rates 35 bps after 25 bp Fed cut; ~70% beta expected to reduce costs in Q4 Reinforced with timing update
Operating expensesQ3–Q4 2025+Core vendor savings: -$0.9M in Q3, -$1.5M in Q4 and beyond Data processing savings only 2/3 months in Q3 (~$0.4M/mo); legal fees ($1.1M) to normalize Q4/Q1’26 Timing/normalization update (maintained)
Non-interest-bearing deposits mix2025–2026Medium-term focus to increase NIB; ~20% in core bank Goal ~20% for full institution (vs ~20% in core today) Reiterated enterprise target
DividendQ4 2025$0.10 per share quarterly dividend $0.10 per share payable Nov 21, 2025 (record Nov 7) Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (prior)Q2 2025 (prior)Q3 2025 (current)Trend
Margin/NIMNIM rose to 3.15%; deposit costs down 28 bps QoQ Core NIM 3.15%; plan to rebuild earning assets; deposit cost 2.52% NIM 3.18% (core 3.15%); adjusted ~3.23% ex reversals; exit to ~3.30% by Q4/Q1 Improving
Digital funding & V1BE>$1B digital deposits; affinity brand launched ~$1.1B digital; cost 4.28% in June >$1.0B digital; cost 4.07% in Sep; strong stickiness even after rate cuts Scalable, stickier
Mortgage & WarehouseMortgage locks $257M; warehouse $115M balances Mortgage closed $323M; warehouse $185M Mortgage closed $308M; pre-tax $1.9M; warehouse $327M; commitments $1.0B Scaling up
PanaceaLoans +$40M QoQ; ~6k clients Loans $505M; deposits $107M; goal 10k clients Loans $548M; deposits $133M; banker hiring momentum Continued growth
Credit qualityNPAs 0.28% assets; consumer promo runoff underway NPAs 0.86% assets; low nonaccrual levels NPAs 2.07% assets on two relationships; no impairment indicated on large C&I; anticipated resolution path Mixed optics
OpEx/efficiencyCore Opex $20–21M guide; consolidation opportunities More vendor savings (-$0.9M Q3; -$1.5M Q4+) Elevated legal/occupancy in Q3; technology savings ramp in Q4; core burden $21.6M Normalizing

Management Commentary

  • “We are excited to see the profitability improvement… management estimates run-rate pre-tax earnings were $11 million in the third quarter which equates to an approximately 90 basis point return on assets.” – CEO Dennis Zember .
  • “We’re confident the growth in [Mortgage Warehouse] will far outpace the expected runoff in the other portfolios and that revenues and margins will continue to benefit from this strategic move.” – CEO Dennis Zember .
  • “We were aggressive after this last Fed cut… we actually cut [digital] rates a little bit more than the Fed cut… retention rates over 90%.” – CFO Matt Switzer .
  • “We see a core ROA closer to 90 basis points… puts us right in line to be successful reaching the 1% ROA that we’ve been targeting.” – CEO Dennis Zember .

Q&A Highlights

  • Loan growth trajectory: Management expects sustained Mortgage Warehouse balances (despite seasonal tendencies), Panacea growth with selective loan sales, and core bank growth; sees 10–12% growth by this time next year .
  • Margin path: CFO expects NIM ~3.30% exiting 2025/into Q1’26; strategic emphasis on raising institution-wide NIB to ~20% to sustain funding mix improvements .
  • Deposit cost dynamics and digital stickiness: Lowered digital rates more than the Fed cut with minimal runoff; >90% retention and high relationship intensity suggest sticky digital deposits .
  • Credit outlook: One C&I resolution possible in Q4; NoVA office credits expected to stabilize by mid‑2026; management does not anticipate additional losses on highlighted credits .

Estimates Context

  • Consensus vs actuals (S&P Global):
    • EPS: $0.22 est vs $0.28 actual – beat (27%)*.
    • Revenue: $27.83M est vs ~$41.05M actual – beat (~48%)*.
    • Coverage: 2 EPS and 2 revenue estimates; target price consensus $13.63; recommendation not available*.
      Values retrieved from S&P Global.
MetricQ3 2025 ConsensusQ3 2025 ActualSurprise
EPS ($)0.22*0.28 +0.06 (+27%)*
Revenue ($M)27.83*41.05*+13.22 (+47%)*
EPS – # of est2*——
Revenue – # of est2*——

Key Takeaways for Investors

  • Positive estimate revision risk: Clear beats on EPS and revenue with credible margin and OpEx tailwinds should bias estimates higher into Q4/2026 (NIM glide toward ~3.30%, legal costs normalizing, full-quarter tech savings) .
  • Funding advantage compounding: Deposit mix improving (NIB up 16% YoY) with sticky digital deposits and V1BE driving core relationships, supporting lower cost of funds through the rate-cut cycle .
  • Durable fee/interest engines: Mortgage (volume, C-to-P pipeline) and Mortgage Warehouse (commitments $1.0B) scale provide diversified revenue levers alongside Panacea’s relationship-led growth .
  • Watch credit headlines: Elevated NPAs tied to two relationships; management expects non-impairment outcome on the large C&I and improved coverage/leasing metrics on NoVA office by mid‑2026 .
  • Capital and TBV trend supportive: TBV/share up to $11.71; TCE/TA 7.48%; capacity to support growth while maintaining dividend .
  • Near-term trading lens: Narrative likely driven by NIM cadence into Q4, digital deposit betas, and resolution updates on highlighted credits; strong execution in Mortgage/Mortgage Warehouse can be catalysts .
  • Medium-term thesis: Path to ≥1% ROA hinges on sustaining earning asset rebuild, deposit remix to ~20% NIB institution-wide, and disciplined OpEx—management reiterated confidence .

Notes on non-GAAP and adjustments: Management discussed “core” metrics and adjustments (e.g., interest reversals, legal fees, tech contract savings) and provided reconciliations; Q3 core operating expense burden was ~$21.6M, with identified items expected to abate in Q4/Q1’26 -.