Primis Financial Q2 Earnings Call Highlights

Primis Financial (NASDAQ:FRST) reported second-quarter 2026 net income of $9.4 million, or $0.38 per diluted share, up from $7.3 million, or $0.30 per share, in the first quarter and $2.4 million, or $0.10 per share, a year earlier.

President and Chief Executive Officer Dennis Zember said the quarter reflected revenue growth, contained operating expenses, improved net interest margins, lower nonperforming assets and continued growth in earning assets. Return on average assets rose to 0.90%, from 0.76% in the prior quarter and 0.26% a year earlier.

The quarter included a $5.9 million gain from the sale of an insurance agency investment. Primis said it offset that gain with a legal settlement and a reserve build on its largest office commercial real estate credit. Zember said the company viewed its reported 0.90% return on assets as representative of its recurring operating level.

Revenue, Margin and Balance-Sheet Growth

Net interest income totaled approximately $33.8 million, compared with $32.1 million in the first quarter and $25.2 million in the year-ago period. Net interest margin was 3.45%, up two basis points sequentially and 59 basis points from 2.86% a year earlier.

Chief Financial Officer Matthew Switzer said the margin improvement reflected earning-asset growth funded at attractive incremental margins, including a three-basis-point sequential increase in the yield on earning assets. Average earning assets increased about 14% on an annualized basis during the quarter and 11% year over year.

Gross loans held for investment grew about 8% annualized from March 31 through June 30 and were 11% higher than a year earlier, led by continued growth in Panacea and Mortgage Warehouse. Average deposits increased about 12% annualized, while average noninterest-bearing deposits rose about 24% annualized. Noninterest-bearing deposits represented 16.3% of average deposits, compared with 14.3% a year earlier.

Core bank deposit costs were 1.60% during the quarter, down from 1.79% in the prior-year period. Total deposit costs were 2.25%, down 28 basis points year over year, while Total funding costs were 2.46%, flat sequentially and down 21 basis points from a year earlier.

Management said it expects net interest margin to remain near current levels, within roughly one or two basis points, as competitive pressures affect loan pricing. Switzer said Primis has subordinated debt that it expects to refinance within the next one or two quarters, potentially reducing the cost of that debt by 200 to 250 basis points and offsetting incremental margin pressure.

Mortgage Income and Operating Expenses

Noninterest income was $22 million, up from $13.6 million in the first quarter and $18 million a year ago. Beyond the insurance-investment gain, mortgage-related noninterest income increased 44% year over year to $11.4 million. Primis Mortgage closed $421 million in volume, a 30% increase from the second quarter of 2025.

The company also recorded $1.6 million in gain-on-sale income from sales of Panacea loans and guaranteed portions of Small Business Administration loans, including about $237,000 attributable to the core bank.

Zember said Primis generated more than $50 million in core revenue for the first time, a level 40% higher than a year earlier. He said core operating expenses rose about 16% over the past year, with 7.3% tied to higher mortgage revenue and 4.7% related to lease expense from the company’s sale-leaseback transaction. He characterized the controllable portion of expense growth as less than 5%.

Switzer said core operating expenses, excluding volatility in the mortgage and Panacea divisions and nonrecurring items, were approximately $25 million, compared with about $22 million in the first quarter and the year-ago quarter. Second-quarter expenses included $1.1 million related to a previously disclosed mortgage lawsuit settlement, $400,000 in higher loan-related costs, $200,000 in additional marketing expense, and roughly $900,000 in smaller costs associated with the company’s shelf filing, foreign exchange fees and core conversion project.

Primis expects noninterest expenses excluding mortgage and Panacea to return to a $22 million to $22.5 million range in the third quarter, Switzer said.

Credit Trends and Office Loan Reserve

Primis recorded a $5.5 million provision for credit losses, compared with $1.5 million in the first quarter and $8.3 million a year earlier. About $5.3 million of the second-quarter provision related to a specific reserve increase for one nonaccrual credit, the company’s largest office commercial real estate loan.

Nonperforming assets, excluding SBA-guaranteed portions, improved to 1.45% of total assets at quarter-end, from 2.35% at March 31 and 1.90% a year earlier. Zember said nonperformers declined 36%, aided by the refinancing of a commercial-and-industrial loan elsewhere and an upgrade of a mixed-use commercial project that reached stabilization. Classified assets declined by about $53 million, or 36%.

Management said the office loan has reserves of slightly more than $11 million. The borrower remains current on payments and continues to invest in tenant improvements and leasing commissions, though the loan remains on nonaccrual status. Switzer said the additional reserve reflected limited progress in reducing vacancy over the prior 12 months and was based on discounted cash flow assumptions rather than an appraisal.

Core Consolidation Initiative

Primis said its planned core consolidation is expected to produce $6.1 million of earnings improvements, largely in early 2027. The estimate includes $3 million of revenue improvements from product and fee changes and $3.1 million from vendor and contract consolidation.

In addition, the company expects $800,000 per quarter of amortization expense related to capitalized platform development costs to end in the third quarter of 2027. Zember said the overall effect of the initiative, including amortization, is expected to be about $7 million pretax next year, or approximately $0.22 per diluted share.

Switzer said Primis is also beginning to deploy artificial intelligence tools and agents intended to improve productivity and limit expense growth. Management said the company expects only smaller core-conversion implementation costs over the next several quarters.

About Primis Financial (NASDAQ:FRST)

Primis Financial Corporation is a bank holding company headquartered in Waycross, Georgia, operating through its wholly owned subsidiary, Primis Bank. The company offers a full suite of commercial and retail banking services tailored to meet the needs of individuals, small businesses, and agricultural clients across its service area. Primis Bank focuses on building relationships within the communities it serves, positioning itself as a local financial partner for deposit-taking, lending, and treasury management solutions.

Primis Bank maintains a network of branch offices throughout southeastern Georgia, serving a combination of rural and suburban markets.

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