8-K: Primis Financial Corp. Reports Q1 2025 Earnings and Declares Quarterly Dividend

Primis Financial Corp. announces net income of $2.7 million, or $0.11 per share, for the first quarter of 2025 and declares a quarterly cash dividend of $0.10 per share.

Summary

• Primis Financial Corp. reported net income available to common shareholders of $2.7 million, or $0.11 earnings per basic and diluted share, for the quarter ended March 31, 2025.
• This compares to a net loss of $23.3 million, or $0.94 loss per share, for the previous quarter and net income of $2.5 million, or $0.10 per share, for the same quarter last year.
• The company's consumer loan book was moved back to held for investment, resulting in an additional $1.9 million provision.
• The company incurred unusually high professional fees associated with transitioning to a new auditor.
• Excluding these items, the company earned $5.1 million, resulting in a normalized return on assets of 0.56%.
• The core bank has $2.2 billion of low-cost customer deposits and a cost of deposits of 1.83%.
• Primis Mortgage earned approximately $0.8 million pre-tax, compared to a loss of $0.4 million in the previous quarter.
• Locked loans in the mortgage division totaled $257 million, up 27% from the previous quarter.
• Mortgage warehouse lending outstanding loan balances were $115 million, up 80% from the previous quarter.
• Panacea Financial's loans outstanding increased by $40 million from the previous quarter.
• The Board of Directors declared a dividend of $0.10 per share payable on May 28, 2025.
• The company expects to rebuild earning assets to levels seen in mid-2024 before the sale of Life Premium Finance.
• Management expects expense growth in 2025 to be very low.
• The company believes savings from consolidating core systems could be approximately $6 million to $7 million per year.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The company has returned to profitability, is focused on cost savings, and is experiencing growth in key areas. However, there are still some challenges and uncertainties ahead.

Positives

• The company returned to profitability in Q1 2025 with net income of $2.7 million.
• The declared dividend of $0.10 per share marks the company's fifty-fourth consecutive quarterly dividend.
• The core bank boasts a low cost of deposits at 1.83%.
• The mortgage division is showing signs of improvement with a pre-tax profit of $0.8 million and increased loan volume.
• Mortgage warehouse lending is experiencing significant growth.
• Panacea Financial continues to expand its loan portfolio.
• The company is focused on cost savings and efficiency improvements.
• The loan pipeline has almost doubled since December 31, 2024.

Negatives

• The company incurred $1.9 million in provision for loan losses due to reclassifying the consumer loan book.
• Unusually high professional fees were incurred due to a change in auditors.
• Noninterest income decreased due to issues with the consumer loan program.
• Net charge-offs were $11.3 million for the first quarter of 2025.
• Total deposits decreased slightly to $3.16 billion from $3.17 billion at December 31, 2024.

Risks

• The company's ability to achieve projected cost savings from core system consolidation is uncertain.
• The success of the new affinity brand launched on the digital platform is not guaranteed.
• The company's growth strategy relies heavily on the performance of its core bank, mortgage division, and Panacea Financial.
• The company's forward-looking statements are subject to various economic, market, and regulatory risks.
• The company's ability to rebuild earning assets to levels seen in mid-2024 before the sale of Life Premium Finance is not guaranteed.

Future Outlook

The company expects to rebuild earning assets, improve profitability through expense management, and benefit from recruiting success in mortgage. Management expects expense growth in 2025 to be very low and anticipates significant savings from consolidating core systems, potentially improving ROA by another 15 basis points. The company aims to double its return on assets by implementing these initiatives and addressing losses from Panacea Financial Holdings.

Management Comments

• We believe our normalized operations show material improvement over the recent quarters and believe that our pathway to more meaningful results is much clearer.
• Our focus is on measured earning asset growth back to the $3.75 billion level of 2024, harvesting cost savings from our operations and IT systems and enjoying the earnings lift from 2024s and 2025s recruiting success in mortgage.
• Collectively, from our starting point in the current quarter, we believe the Company is positioned well.
• Despite a material decrease in earning assets from the sale of the Life Premium Finance business, the Companys profitability has improved.

Industry Context

The report highlights Primis' efforts to improve profitability and efficiency in a competitive banking environment. The focus on low-cost deposits and growth in specific lending areas like mortgage warehouse and Panacea Financial reflects a strategy to differentiate and capitalize on niche markets. The emphasis on digital banking and technology consolidation aligns with broader industry trends towards digital transformation and cost optimization.

Comparison to Industry Standards

• The core bank's cost of deposits at 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.
• Approximately 20% of the core banks deposit base are noninterest bearing deposits, supported with the regions best and most unique technology including the Banks proprietary V1BE service which directly supports approximately $200 million of mostly commercial clients in the Banks footprint.
• Panacea is the number one ranked Bank for doctors on Google and banks approximately 6,000 professionals and practices nationwide with a goal of reaching 10,000 customers by the end of 2025.

Stakeholder Impact

• Shareholders will benefit from the declared dividend and the company's return to profitability.
• Employees may be affected by the company's cost-saving initiatives and core system consolidation.
• Customers will benefit from the company's focus on improving its digital platform and customer experience.

Next Steps

• The company will host a conference call on April 30, 2025, to discuss the first quarter results.
• The company expects to complete the analysis of consolidating its traditional core and its digital core in the second quarter of 2025.
• The company aims to reach 10,000 Panacea customers by the end of 2025.

Key Dates

Keywords

financial results, earnings, dividend, mortgage, deposits, loans, Primis Financial, FRST, Panacea Financial, mortgage warehouse lending, V1BE