8-K: Primis Financial Reports Strong Q2 Earnings Growth, Declares Quarterly Dividend

Primis Financial Corp. announced a significant increase in second-quarter net income and diluted earnings per share, driven by strategic asset sales and growth in key business segments, alongside a declared quarterly cash dividend.

Summary

• Net income available to common shareholders for Q2 2025 was $8.4 million, or $0.34 per diluted share, a substantial increase from $3.4 million, or $0.14 per diluted share, in Q2 2024.
• For the six months ended June 30, 2025, net income was $31.1 million, or $1.26 per diluted share, up from $5.9 million, or $0.24 per diluted share, in the same period of 2024.
• The company completed the sale of a portion of its ownership in Panacea Financial Holdings, Inc. (PFH), generating $22.1 million in proceeds and a pre-tax gain of $7.5 million.
• Primis Mortgage closed $323 million in loans, a 52% increase from Q2 2024.
• Mortgage warehouse outstanding loan balances grew to $185 million, up 60% from March 31, 2025, and 189% from December 31, 2024.
• Panacea Financial loans outstanding increased 34% to $505 million compared to Q2 2024, with customer deposits up 58% to $107 million.
• Net interest income for Q2 2025 was $25.5 million, a slight decrease from $26.4 million in Q1 2025 but an increase from $24.9 million in Q2 2024.
• The reported net interest margin was 2.89% in Q2 2025, up from 2.72% in Q2 2024. The core net interest margin was 3.15%.
• Cost of deposits decreased to 2.52% in Q2 2025 from 2.98% in Q2 2024.
• Noninterest income was $18.0 million in Q2 2025, including a $7.4 million gain from the sale and remeasurement of PFH shares.
• The company declared a quarterly cash dividend of $0.10 per share, marking its fifty-fifth consecutive quarterly dividend.
• Book value per common share increased 2% to $15.52, and tangible book value per common share increased 3% to $11.72 from Q2 2024.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance with significant year-over-year growth in net income and EPS. Strategic initiatives like Panacea Financial and Mortgage Warehouse are showing robust growth, and the company is effectively managing its cost of deposits and non-interest expenses. The reduction in promotional loan volatility and positive future outlook on earnings and margins contribute to a very positive sentiment, despite some non-recurring expense increases in the current quarter.

Positives

• Net income available to common shareholders increased significantly to $8.4 million ($0.34 diluted EPS) in Q2 2025 from $3.4 million ($0.14 diluted EPS) in Q2 2024.
• Six-month net income available to common shareholders rose to $31.1 million ($1.26 diluted EPS) in 2025 from $5.9 million ($0.24 diluted EPS) in 2024.
• Generated a pre-tax gain of $7.5 million from the sale of a portion of Panacea Financial Holdings, Inc. (PFH) ownership.
• Primis Mortgage closed loans increased 52% year-over-year to $323 million.
• Mortgage warehouse outstanding loan balances surged 189% year-over-year to $185 million.
• Panacea Financial loans grew 34% year-over-year to $505 million, with customer deposits up 58% to $107 million.
• Core bank cost of deposits decreased to 1.79% in Q2 2025 from 2.20% in Q2 2024, up to 100 basis points lower than similar sized peers in the greater DC region.
• Noninterest bearing demand deposits grew at an annualized rate of 18% since December 31, 2024, reaching $478 million.
• The company is 100% funded with customer deposits and has no wholesale funding or brokered deposits.
• Core net interest margin improved to 3.15% in Q2 2025 from 2.85% in Q2 2024.
• New and renewed loan production in Q2 2025 had a weighted average yield of 7.57%, favorably comparing to 7.25% in Q2 2024.
• Provision for loan losses decreased to $1.2 million in Q2 2025 from $3.1 million in Q2 2024.
• Book value per common share increased 2% to $15.52, and tangible book value per common share increased 3% to $11.72 from Q2 2024.
• Declared its fifty-fifth consecutive quarterly dividend of $0.10 per share.
• The company has nearly achieved the same level of loans with minimal credit risk as before the sale of the life premium finance portfolio in Q4 2024.

Negatives

• Net interest income decreased to $25.5 million in Q2 2025 from $26.4 million in Q1 2025, primarily due to the final significant write-off of accrued interest on the consumer loan portfolio.
• Mortgage profitability was lower by approximately $1.2 million due to pricing and draw support for new production teams, which substantially ended during the quarter.
• Core operating expense burden increased by $2.2 million in Q2 2025 from Q1 2025, driven by approximately $0.5 million in consulting expenses, $0.4 million in additional FDIC insurance expense, $0.4 million in remaining 2024 audit expense, and $0.2 million in legal expenses related to employee fraud recovery efforts.
• Promotional interest income, net, was negative $1,745 thousand in Q2 2025 due to significant reversals.
• Nonaccrual loans, excluding SBA guarantees, slightly increased to 0.26% of total loans at June 30, 2025, from 0.24% at June 30, 2024.

Risks

• Instability in global economic conditions and geopolitical matters.
• Impact of current and future economic and market conditions generally (including seasonality) and in the financial services industry, nationally and within primary market areas.
• Changes in interest rates, inflation, loan demand, real estate values, or competition, as well as labor shortages and supply chain disruptions.
• Impact of tariffs, trade policies, and trade wars (including reduced consumer spending, lower economic growth or recession, reduced demand for U.S. exports, disruptions to supply chains, and decreased demand for other banking products and services).
• 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 operating results.
• Competitive pressures among financial institutions increasing significantly.
• Changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices.
• Changes in management's plans for the future.
• Credit risk associated with lending activities.
• Changes in accounting principles, policies, or guidelines.
• Adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions.
• 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.
• 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 may not be prevented, detected or mitigated.
• 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 business, operations, pricing, products, or services.

Future Outlook

Management anticipates continued improvement in profitability and operating leverage through the end of 2026, driven by reduced expenses from core contract renegotiations and vendor consolidation, expected to save $0.9 million in Q3 2025 and $1.5 million in Q4 2025 and beyond. Run-rate pre-tax pre-provision earnings are projected to reach $10.5 million to $11 million before benefits from profitable growth and balance sheet repricing. The company expects to exit 2025 with $2 billion of run-rate mortgage production and aims for Panacea Financial to reach 10,000 customers by year-end 2025. Earning asset growth is expected to moderate by year-end, managing levels between $3.75 billion and $3.85 billion, with the margin potentially reaching the 3.20% range. Loan and deposit repricing is expected to add 10-12 basis points to the margin by year-end 2025 and approximately 35 basis points by year-end 2026. The company plans to launch its V1BE service nationally in Q3 2025 and expects its first customer onboard before the end of 2025.

Management Comments

• "We are pleased with the progress we have made in rebuilding our balance sheet for higher sustained earnings as we enter the second half of 2025."
• "The core bank is maximizing profitability with its enviable core deposit base while pursuing moderate growth. At the same time, mortgage warehouse and Panacea are executing on their tremendous growth potential while non-core portfolios run off."
• "Adjusting for those items and the PFH gain, our run-rate pre-tax pre-provision earnings were approximately $8.4 million in the second quarter."
• "Mortgage profitability was lower due to increasing construction to perm lending that is highly profitable but has a lag until revenue materializes. In the second quarter, the value of that production was approximately $0.9 million pre-tax assuming conservative gain on sale margins."
• "Lastly, we are close to executing on our plan to reduce technology costs and anticipate the savings to begin late in the third quarter of 2025. Along with the end of our core deposit amortization in June, our expected reduction in quarterly expenses is approximately $1.5 million."
• "In total, we believe we have visibility to pre-tax pre-provision earnings of $10.5 to $11 million before the benefits of the profitable growth and balance sheet repricing we have in front of us."
• "Management believes the core bank's value amongst its regional peers is undeniable given how well its balance sheet is positioned."
• "Management is slowly building earning asset levels back with substantial operating leverage to achieve ROA goals."
• "Will have slower growth rates in 2026 and beyond but drive profitability from improved deposit mix and operating expense levels."

Industry Context

The company's focus on growing its core community bank, expanding national strategies like mortgage warehouse lending and Panacea Financial, and leveraging digital platforms aligns with broader banking industry trends towards specialized lending, digital transformation, and efficient deposit gathering in a competitive interest rate environment. The emphasis on reducing core operating expenses through consolidation and renegotiation reflects a common industry effort to improve efficiency and operating leverage amidst economic uncertainties. The decline in promotional loan write-offs indicates a successful wind-down of a volatile portfolio, allowing for a clearer view of core profitability, a common goal for banks managing legacy assets.

Comparison to Industry Standards

• Core bank's cost of deposits at 1.79% in Q2 2025 is up to 100 basis points lower than similar sized peers in the greater DC region.
• The company's valuation at 1.02x Tangible Book Value (TBV) is presented as an "Attractive Entry Point" compared to a peer group average of 1.33x TBV, implying 31% upside to reach the peer average.
• Panacea Financial is ranked as the number one "Bank for Doctors" on Google, indicating strong market positioning within its niche.

Stakeholder Impact

• Shareholders: Positive impact due to significant increase in net income and EPS, declared quarterly dividend, and share repurchases. Increased book value and tangible book value per share. Potential for further share price appreciation given the attractive valuation compared to peers and positive future outlook.
• Employees: Positive impact from growth in key divisions like Primis Mortgage and Mortgage Warehouse, potentially leading to job stability or expansion.
• Customers (Core Bank): Benefit from low cost of deposits and proprietary technology like V1BE, enhancing banking experience.
• Customers (Panacea Financial): Benefit from specialized banking services for medical professionals and practices, with a goal of reaching 10,000 customers.
• Customers (Digital Platform): Benefit from a safe and functional deposit account with competitive rates.
• Lenders/Business Partners: Potential for increased engagement with mortgage warehouse lending and V1BE licensing opportunities.

Next Steps

• Reduce expenses by $0.9 million in Q3 2025 and $1.5 million in Q4 2025 and beyond through core contract renegotiation and vendor consolidation.
• Achieve run-rate pre-tax pre-provision earnings of $10.5 million to $11 million before benefits of profitable growth and balance sheet repricing.
• Continue consolidation of cores and other vendor relationships to provide downward pressure on operating expenses through the end of 2026.
• Primis Mortgage anticipates exiting 2025 with $2 billion of run-rate production.
• Panacea Financial aims to reach 10,000 customers by the end of 2025.
• Primis is implementing enhancements to make its V1BE technology easier to license to other banks and expects to have its first customer onboard before the end of 2025.
• Management expects earning asset growth to moderate by year-end 2025 and manage earning assets in the $3.75 billion to $3.85 billion range for coming quarters.
• Continued shifts in deposit mix and costs to be the company's focus.
• Loan and deposit scheduled maturities/repricing should add 10-12 basis points to margin by EOY 2025.
• 2026 loan maturities are expected to add approximately 35 basis points to margin by year-end 2026.
• Plan to augment mortgage warehouse growth with larger top-tier lines and MSR relationships through 2025 and 2026.
• Panacea is developing the initial phase of a sophisticated suite of technology products and services targeting the medical, dental, and veterinary space.
• The company will pursue additional recoveries on previous charge-offs from the Consumer Program.

Key Dates

Recommendation

The filing presents a compelling case for a "strong buy" recommendation. Primis Financial Corp. demonstrated exceptional year-over-year growth in net income and EPS, driven by strategic asset sales and robust performance in its key growth segments (Mortgage, Mortgage Warehouse, Panacea Financial). The company's core bank exhibits a significant competitive advantage with a cost of deposits up to 100 basis points lower than peers and a 100% customer-funded deposit base with no wholesale funding. Management's clear roadmap for expense reduction, margin expansion through loan repricing, and continued growth in high-yield, low-risk loan portfolios (Panacea, Mortgage Warehouse) provides strong visibility for future profitability. The current valuation at 1.02x tangible book value, significantly below the peer average of 1.33x, suggests substantial upside potential. The consistent quarterly dividend and share repurchases further enhance shareholder value. While there were some non-recurring expense increases in Q2, these are identified and not expected to continue, reinforcing the positive underlying operational trends.

Keywords

Primis Financial Corp, FRST, Banking, Financial Services, Q2 2025 Earnings, Net Income, EPS, Dividend, Panacea Financial, Mortgage Lending, Mortgage Warehouse, Digital Banking, Deposit Growth, Net Interest Margin, Loan Portfolio, Asset Quality, Share Repurchase, Community Bank, V1BE, Financial Results