8-K/A: Primis Financial Corp. Amends Earnings Release to Reflect Panacea Financial Holdings Deconsolidation, Reports Q1 2025 Earnings

Primis Financial Corp. amends its original Q1 2025 earnings release to account for the deconsolidation of Panacea Financial Holdings (PFH), resulting in a pre-tax gain of $24.6 million.

Summary

• Primis Financial Corp. filed an amended report to correct financial information in its original Q1 2025 earnings release.
• The amendment is due to the deconsolidation of Panacea Financial Holding Inc. (PFH) as of March 31, 2025.
• This deconsolidation resulted in a pre-tax gain of $24.6 million for Primis, including a $21.2 million remeasurement of the company's retained interest in PFH common stock.
• The company reported net income available to common shareholders of $22.6 million, or $0.92 earnings per basic and diluted share, for the quarter ended March 31, 2025.
• This compares to a net loss available to common shareholders of $23.3 million, or $0.94 loss per basic and diluted share, for the three months ended December 31, 2024 and net income available to common shareholders of $2.5 million, or $0.10 earnings per basic and diluted share, for the quarter ended March 31, 2024.
• The core bank's cost of deposits was 1.83% in Q1 2025.
• Primis Mortgage earned approximately $0.8 million pre-tax in Q1 2025, compared to a loss of $0.4 million in Q4 2024.
• Mortgage warehouse lending outstanding loan balances were $115 million at March 31, 2025, up 80% from $64 million at December 31, 2024.
• Panacea Financial's loans outstanding were up $40 million from Q4 2024.
• The company expects expense growth in 2025 to be very low.
• Net interest income increased slightly to $26.4 million during the first quarter of 2025 compared to $26.1 million in the fourth quarter of 2024.
• The net interest margin was 3.15% in the first quarter of 2025 compared to 2.90% and 2.84% in the fourth quarter of 2024 and first quarter of 2024, respectively.
• Noninterest income was $32.3 million in the first quarter of 2025 versus $13.2 million in the fourth quarter of 2024.
• Noninterest expense was $32.5 million for the first quarter of 2025, compared to $37.8 million for the fourth quarter of 2024.
• Loans held for investment increased to $3.04 billion at March 31, 2025, compared to $2.89 billion at December 31, 2024.
• Nonperforming assets, excluding portions guaranteed by the SBA, were only 0.28% of total assets, or $10.4 million at March 31, 2025.
• Total deposits at March 31, 2025 decreased slightly to $3.16 billion from $3.17 billion at December 31, 2024.
• Book value per common share as of March 31, 2025 was $15.19, an increase of $0.96 from December 31, 2024.
• The Board of Directors declared a dividend of $0.10 per share payable on May 28, 2025.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The company reported improved earnings, deconsolidated a subsidiary which simplifies financials and improves ratios, and is focusing on core business lines. However, there are still some challenges related to past strategic decisions and the overall economic environment.

Positives

• The deconsolidation of PFH simplifies the financial statement presentation and positively impacts reported operating ratios.
• The company's ROA will improve by ten basis points and the operating efficiency ratio will decrease by approximately 14 points due to the deconsolidation of PFH.
• The core bank's cost of deposits is lower than most of its larger regional bank competitors.
• Primis Mortgage is showing significant improvement, with pre-tax earnings of $0.8 million in Q1 2025 compared to a loss in the previous quarter.
• Mortgage warehouse lending is experiencing substantial growth.
• Nonperforming assets remain low at 0.28% of total assets.
• Book value per common share increased by $0.96 from the previous quarter.

Negatives

• The company incurred unusually high professional fees associated with the transition to a new auditor.
• The company moved its consumer loan book back to held for investment out of held for sale after the efforts to consummate the sale were not successful.
• Net charge-offs were $11.3 million for the first quarter of 2025, down from $30.9 million for the fourth quarter of 2024.

Risks

• The company's ability to implement its various strategic and growth initiatives, including its recently established Panacea Financial Division, digital banking platform, V1BE fulfillment service, Mortgage Warehouse division and Primis Mortgage Company.
• The risks associated with the Life Premium Finance sale, including failure to achieve the expected impact to our operating results.
• Potential impacts of adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto.
• Potential increases in the provision for credit losses.
• The company's ability to identify and address increased cybersecurity risks, including those impacting vendors and other third parties.
• Fraud or misconduct by internal or external actors, which we may not be able to prevent, detect or mitigate.
• Acts of God or of war or other conflicts, including the current Ukraine/Russia conflict and Israel/Hamas conflict, acts of terrorism, pandemics or other catastrophic events that may affect general economic conditions.
• Other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services.

Future Outlook

Management expects the company's profitability to improve, with core bank, Mortgage Warehouse, and Panacea building earning assets back to previous levels, which they believe will add 21 basis points to the ROA. Primis mortgage has substantial momentum compared to 2024 that is not rate related and they expect their results to add 0.15% to our ROA in 2025 compared to 0.05% in 2024. The company also anticipates significant cost savings from consolidating its traditional core and digital core, potentially saving $6 million to $7 million per year.

Management Comments

• Dennis J. Zember, Jr., President and Chief Executive Officer, stated, 'We believe our normalized operations show material improvement over the recent quarters and believe that our pathway to more meaningful results is much clearer.'
• Mr. Zember commented, 'Despite a material decrease in earning assets from the sale of the Life Premium Finance business, the Companys profitability has improved.'
• Commenting on the deconsolidation of PFH, Dennis J. Zember, Jr., President and CEO said, 'Deconsolidating PFH is a welcome step in our path forward. The boost to capital levels and tangible book value is welcome, but importantly, it simplifies our financial statement presentation and positively impacts our reported operating ratios.'

Industry Context

The report highlights Primis' efforts to focus on its core bank and lines of business that drive premium operating results, which is a common strategy among regional banks seeking to improve efficiency and profitability. The company's emphasis on digital banking and unique technology offerings like V1BE also reflects the industry's ongoing shift towards digital solutions to attract and retain customers.

Comparison to Industry Standards

• The core bank's cost of deposits of 1.83% is lower than most of its larger regional bank competitors and up to 100 basis points lower than equal sized peers in the greater Washington, D.C. region, indicating a competitive advantage in deposit gathering.
• The company's nonperforming assets ratio of 0.28% is relatively low, suggesting strong asset quality compared to industry averages.
• Comparing Primis to regional banks like Atlantic Union Bankshares Corporation (AUBK) or Southern National Corporation (SONA) in terms of efficiency ratio, Primis' operating efficiency ratio of 91.97% indicates room for improvement, as many well-managed regional banks target efficiency ratios below 60%.

Stakeholder Impact

• Shareholders will benefit from the increased book value per share and the continued payment of quarterly dividends.
• Employees may be affected by the company's focus on cost savings and efficiency improvements.
• Customers will continue to receive financial services through the company's branches and online platforms.

Next Steps

• The company expects to complete the analysis of consolidating its two cores in the second quarter of 2025.
• Management expects expense growth in 2025 to be very low.
• The company intends to rebuild earning assets to levels seen in mid-2024 before the sale of Life Premium Finance.

Key Dates

Keywords

Primis Financial Corp, Panacea Financial Holdings, Deconsolidation, Earnings, Mortgage, Net Income, Deposits, Loans, FRST, Bank