8-K: Primis Financial Reports Strong Q3 2025 Earnings Growth

Primis Financial Corp. announced a significant increase in net income and diluted EPS for Q3 2025, driven by improved net interest margin and strong performance across key business lines.

Summary

• Net income available to common shareholders for Q3 2025 was $7 million, or $0.28 per diluted share, a substantial increase from $1 million, or $0.05 per diluted share, in Q3 2024.
• For the nine months ended September 30, 2025, net income available to common shareholders reached $32 million, or $1.29 per diluted share, up from $7 million, or $0.29 per diluted share, for the same period in 2024.
• The net interest margin (NIM) improved to 3.18% in Q3 2025, compared to 2.97% in Q3 2024, with core NIM at 3.15% (up from 2.80%).
• Adjusted run-rate pre-tax earnings were estimated at $11 million for Q3 2025, equating to an approximately 90 basis point return on assets.
• Total revenue, excluding gains on PFH stock sale, increased by $5 million during the linked quarter, while expenses rose by only $400 thousand, demonstrating significant operating leverage.
• Non-interest bearing checking accounts grew by 16% year-over-year, supported by national lines of business and the V1BE service.
• The consumer loan book continued to shrink, ending at $101 million as of September 30, 2025, a 44% decline from the prior year.
• Primis Mortgage closed $308 million in mortgage volume in Q3 2025, a 34% increase year-over-year, with pre-tax earnings of $1.9 million.
• Mortgage Warehouse outstanding loan balances surged to $327 million, up 411% from December 31, 2024, with committed facilities reaching $1 billion.
• Panacea Financial's loans outstanding grew 40% to $548 million, and customer deposits increased 47% to $133 million year-over-year.
• The digital platform's deposits exceeded $1.0 billion, with the cost of deposits decreasing to 4.07% in September 2025 from 4.91% a year ago.
• Nonperforming assets, excluding SBA guarantees, increased to 2.07% of total assets from 1.90% in the prior quarter, primarily due to two commercial loans.
• Tangible book value per common share increased by 12% to $11.71 at the end of Q3 2025 from December 31, 2024.
• The Board of Directors declared a quarterly cash dividend of $0.10 per share, marking the fifty-sixth consecutive quarterly dividend.

Sentiment

Score: 8

Explanation: The filing reports substantial improvements in key financial metrics, including net income, EPS, and net interest margin. Strong growth in strategic business lines like mortgage warehouse and Panacea Financial, coupled with effective expense management and a positive future outlook, indicates robust performance and positive momentum, despite a slight increase in nonperforming assets.

Positives

• Net income available to common shareholders increased significantly to $7 million ($0.28 diluted EPS) in Q3 2025 from $1 million ($0.05 diluted EPS) in Q3 2024.
• Net interest margin (NIM) improved to 3.18% in Q3 2025 from 2.97% in Q3 2024, with core NIM rising to 3.15% from 2.80%.
• Management estimates run-rate pre-tax earnings of $11 million for Q3 2025, indicating an approximately 90 basis point return on assets.
• Operating leverage improved, with total revenue (excluding PFH stock gains) increasing by $5 million linked quarter while expenses rose by only $400 thousand.
• Non-interest bearing checking accounts grew by 16% year-over-year, contributing to favorable deposit mix.
• Mortgage volume increased 34% year-over-year to $308 million in Q3 2025, and pre-tax earnings for Primis Mortgage rose substantially to $1.9 million from $0.1 million in Q2 2025.
• Mortgage Warehouse outstanding loan balances grew 411% year-over-year to $327 million, with committed facilities expanding to $1 billion.
• Panacea Financial demonstrated strong growth, with loans outstanding up 40% to $548 million and customer deposits up 47% to $133 million year-over-year.
• The digital platform's cost of deposits decreased to 4.07% in September 2025 from 4.91% a year prior, while deposits grew to over $1.0 billion.
• Cost of interest-bearing deposits decreased to 2.88% in Q3 2025 from 3.48% in Q3 2024.
• A recovery of credit losses of $49 thousand was recorded for Q3 2025, compared to a provision of $8 million in Q3 2024.
• Tangible book value per common share increased by 12% to $11.71 at September 30, 2025, from December 31, 2024.
• The company declared its fifty-sixth consecutive quarterly dividend of $0.10 per share.

Negatives

• Nonperforming assets, excluding SBA guarantees, increased to 2.07% of total assets at September 30, 2025, from 1.90% at June 30, 2025, largely due to two commercial loans.
• Noninterest expense increased to $32 million for Q3 2025 from $31 million for Q3 2024, including $1.1 million in legal fees associated with mortgage recruiting, which management expects to normalize.
• Occupancy expense was higher by approximately $0.3 million related to branch expenses not expected to continue in Q4.
• Net expense attributable to the Panacea division was approximately $1.7 million higher in Q3 2025 than both Q2 2025 and Q3 2024, though offset by higher revenue and recovery of provision for credit losses.

Risks

• Instability in global economic conditions and geopolitical matters.
• Impact of current and future economic and market conditions, including seasonality, and conditions in the financial services industry.
• 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, potentially leading to reduced consumer spending, lower economic growth, or recession.
• Ability to implement various strategic and growth initiatives, including the Panacea Financial Division, digital banking platform, V1BE fulfillment service, Mortgage Warehouse division, and Primis Mortgage Company.
• 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, such as high-profile bank failures, affecting customer confidence, deposit outflows, liquidity, and regulatory response.
• 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 that may not be prevented, detected, or mitigated.
• Acts of God or of war or other conflicts, acts of terrorism, pandemics, or other catastrophic events affecting general economic conditions.
• Action or inaction by the federal government, including as a result of any prolonged government shutdown.
• Other general competitive, economic, political, and market factors affecting business, operations, pricing, products, or services.

Future Outlook

Management expects further improvement in the net interest margin in the fourth quarter of 2025 due to rate cuts experienced late in Q3 2025. Profitability is anticipated to drive higher into 2026, supported by tremendous momentum in all business lines and strong operating leverage. The V1BE service is expected to launch nationally in Q4 2025, starting in Houston, TX. Panacea Financial is undertaking efforts to secure flow agreements and build capital market strategies for faster customer acquisition without straining the balance sheet, with these expected to be in place shortly. Mortgage production is anticipated to exit 2025 without any seasonal volume decrease. Loan and deposit scheduled maturities/repricing are projected to add 10-12 basis points to the margin by year-end 2025 and approximately 35 basis points by year-end 2026. The company's focus on earning asset growth is expected to carry the margin to the 3.30% range, followed by continued shifts in deposit mix and costs.

Management Comments

• "We are excited to see the profitability improvement we have been driving towards finally bear fruit this quarter."
• "The tremendous momentum in all of our business lines combined with strong operating leverage will drive this profitability higher into 2026."
• "We have spent the last year divesting the consumer loan book and the life premium finance book and building scale and revenues in mortgage warehouse. We had conviction in the timing on warehouse and in our team and through three quarters of this strategy, it is increasingly clear that this was the right move."
• "We are confident that the growth in warehouse will far outpace the expected runoff in the other portfolios and that revenues and margins will continue to benefit from this strategic move."
• "Collectively, we believe the management of staff and related costs over the twelve month period described here evidences managements successful approach at operating leverage."

Industry Context

Primis Financial Corp.'s strong Q3 2025 results, particularly the significant improvement in net income and net interest margin, suggest effective navigation of the current interest rate environment. The growth in specialized lending divisions like Mortgage Warehouse and Panacea Financial (healthcare banking) indicates successful diversification and focus on niche markets, which can provide higher yields and customer loyalty compared to traditional community banking. The emphasis on digital platforms and non-interest bearing deposits aligns with broader industry trends towards digital transformation and efficient funding strategies. The reported increase in nonperforming assets, while noted, appears to be isolated to specific commercial loans rather than a systemic issue, which is a key differentiator in a potentially challenging credit cycle for the banking sector.

Comparison to Industry Standards

• The company's tangible book value per share shows a 41% upside to the peer group average valuation of 1.24x, indicating potential undervaluation relative to its peers.
• Peer group companies for comparison include BCBP, MNSB, FRST, CCNE, SFST, MPB, FRBA, CFFI, JMSB, CARE, MVBF, SHBI, BWFG, CBAN, PFIS, HTB, SMBK, ORRF, MCBS, ACNB, CCBG, FCBC, CHCO.

Stakeholder Impact

• Shareholders: Benefit from significantly increased net income, diluted EPS, and a consistent quarterly dividend of $0.10 per share, along with a 12% increase in tangible book value per common share.
• Employees: Growth in divisions like Primis Mortgage and Mortgage Warehouse suggests opportunities and stability, though overall compensation costs outside the mortgage company saw a slight decline.
• Customers: Benefit from enhanced digital services like V1BE and specialized offerings from Panacea Financial, with a focus on low-cost and non-interest bearing deposit options.
• Investors: Provided with a positive outlook for continued profitability and margin expansion, along with a valuation that suggests significant upside compared to peers.

Next Steps

• Management intends to use the Investor Presentation from time to time in presentations to current and potential investors, analysts, lenders, business partners, acquisition candidates, customers, employees, and others.
• Further improvement in net interest margin is expected in Q4 2025 due to recent rate cuts.
• Profitability is expected to drive higher into 2026.
• Enhancements to the V1BE service are being implemented to make it easier to license to other banks, with the first customer expected onboard in the near future.
• The V1BE service is launching nationally in Q4 2025, starting in Houston, TX.
• Efforts to secure flow agreements and build capital market strategies for Panacea Financial are underway and expected to be in place shortly.
• Management expects non-interest expense items, such as legal fees related to mortgage recruiting and certain occupancy expenses, to normalize in Q4 2025 and Q1 2026.
• Continued decline in data processing expenses is expected in the coming quarter due to new contract terms.

Key Dates

Recommendation

The company demonstrated exceptional financial performance in Q3 2025, with substantial year-over-year growth in net income and EPS. Key strategic initiatives, such as the expansion of Mortgage Warehouse and Panacea Financial, are yielding strong results and contributing to improved net interest margin and operating leverage. Management's forward-looking statements indicate continued positive momentum, including further margin expansion and national rollout of digital services. While there was a slight increase in nonperforming assets, it appears contained. The significant increase in tangible book value per share and the reported upside to peer group valuations suggest the stock may be undervalued, making it an attractive 'buy' for investors seeking growth in the financial sector.

Keywords

Financial Services, Banking, Regional Bank, Community Bank, Mortgage Lending, Mortgage Warehouse, Digital Banking, Panacea Financial, V1BE, Net Interest Margin, Earnings Per Share, Credit Quality, Deposits, Loans, Financial Results, SEC Filing, FRST