Primis Financial Corp

Primis reported second-quarter net earnings of $9.4 million, or diluted EPS of $0.38, versus $2.4 million, or $0.10 per share, a year ago. Return on average assets was 90 basis points versus 26 basis points a year ago, and pretax pre-provision operating net income was $11.7 million, up 185% from $4.1 million a year ago. Net interest income was $33.8 million versus $25.2 million a year ago, and net interest margin was 3.45% versus 2.86% a year ago. Noninterest income was $22 million versus $18 million a year ago, including a $5.9 million gain from the liquidation of an insurance agency investment; mortgage-related noninterest income rose 44% year over year to $11.4 million, and Primis Mortgage closed volume was $421 million, up 30% year over year. On the balance sheet, gross loans held for investment were up 11% year over year, average earning assets were up 11% year over year, and average noninterest-bearing deposits were 16.3% of average total deposits versus 14.3% a year ago. Provision expense was $5 million versus $8.3 million a year ago, with about $5.3 million tied to one nonaccrual credit, while core net charge-offs were 53 basis points versus 15 basis points a year ago. For guidance, management said NIM is likely to stay around current levels, plus or minus 1 to 2 basis points, and expects noninterest expense excluding Mortgage and Panacea to return to the $22 million to $22.5 million range in the third quarter. They also said the sub debt refinance could save about 200 to 250 basis points on that debt cost, and that the core consolidation project should contribute about $6.1 million of expected earnings improvements, largely in place in early 2027.

Dennis Zember said he was “very pleased” with the quarter and emphasized that the bank is seeing strong growth in revenue, contained expenses, higher margins, lower efficiency, better credit, and tangible book value up over 20% year over year. He framed operating leverage as the main strategy and said the core conversion, along with future AI tools, should extend the company’s ability to improve returns into 2027. His tone was upbeat and confident, while also stressing that the market has not yet fully valued the improved operating model.

Matthew Switzer focused on the mechanics behind the quarter: NII of $33.8 million, NIM of 3.45%, provision of $5 million, and nonperforming assets at 1.45% of total assets. He said the core operating expense burden, excluding Mortgage and Panacea and nonrecurring items, was about $25 million, and expects that to fall back to $22 million to $22.5 million in the third quarter. He also quantified the core conversion benefits at $6.1 million of expected earnings improvement, including $3 million of revenue upside and $3.1 million of expense savings, and noted an additional $800 thousand per quarter of platform amortization will end in the third quarter of 2027.

Analysts pressed on NIM, deposit competition, loan growth, and the office CRE nonperformer. Management said NIM should remain around current levels and pointed to a planned sub debt refinance that could reduce that debt cost by 200 to 250 basis points, helping offset margin pressure. On the office loan, management said the reserve now stands at a little over $11 million, with the borrower still paying, a lease LOI signed in the quarter, and the additional provision driven by passage of time and limited improvement in vacancy rather than a new appraisal. They also said the mortgage warehouse business remains profitable with spreads varying by customer type, and that the business is still generating very strong returns despite a tougher rate backdrop.