• Core Deposits: $2.1 billion with a cost of deposits at 1.87% as of December 31, 2024.
• Branch Consolidation: Reduced from 42 to 24 branches with a 95% customer retention rate.
• Mortgage Division Growth: Production increased from $250 million to over $1 billion.
• Panacea Division Loans: Grew to just under $435 million with nearly $100 million in low-cost funding.
• Net Interest Income Improvement: $5.5 million better annualized, expected to reach $17 million annually once warehouses are at scale in 2025.
• Pre-Tax Income: Core profitability closer to $10 million pre-tax income, excluding Panacea holdings loss.
• Reported Loss: $17.4 million pre-tax loss, including $20.8 million provision for consumer loan book.
• Non-Recurring Items Impact: $4.7 million net gain from Life Premium Finance business sale, $1.8 million legal and accounting expenses, and $2 million other expenses.
• Digital Platform Rate Adjustments: Lagged adjustments cost approximately $1 million in interest carry in Q4.

• Warning! GuruFocus has detected 4 Warning Signs with FRST.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Primis Financial Corp (NASDAQ:FRST) successfully moved a portfolio into held for sale, which helped neutralize $20 million in credit costs and improved the company's strategic positioning.
• The core bank has $2.1 billion in core deposits with a cost of deposits at 1.87%, significantly lower than larger peers and community bank competition.
• The company has consolidated its branch footprint from 42 to 24 branches while maintaining a 95% customer retention rate.
• The digital banking platform has grown to 18,000 customers, offering one of the nation's only fully-digital, full-service checking accounts.
• The Panacea division, focused on doctors and dentists, has grown to $435 million in total loans and nearly $100 million in low-cost funding, with growth rates accelerating.

Negative Points

• Primis Financial Corp (NASDAQ:FRST) reported a pre-tax loss of $17.4 million, largely due to the consumer loan book's cleanup and associated provisions.
• The company faced $1.25 million in fraud losses on consumer loans and $2.5 million in interest reversals related to charged-off consumer loans.
• The Life Premium Finance business was sold, resulting in a temporary loss of spread until the Mortgage Warehouse reaches scale.
• The digital platform lagged in rate adjustments due to a planned technology change, costing approximately $1 million in interest carry for the fourth quarter.
• Retail mortgage operations were seasonally slow in the fourth quarter, contributing to a pre-tax earnings drag of roughly $0.5 million.

Q & A Highlights

Q: Can you provide an outlook on loan growth for 2025, considering the exit from certain verticals and new entrants like construction-perm? A: Dennis Zember, CEO, stated that the bank's loan pipeline is double what it was a year ago, with expected growth between $125 million and $175 million, focusing on owner-occupied CRE and C&I. Mortgage Warehouse is expected to grow to scale, replacing the Life Premium Finance portfolio, with potential for further growth in Panacea through capital market activities.

Q: What is the expected trajectory for net interest margin (NIM) in 2025? A: Matthew Switzer, CFO, indicated that the NIM should be closer to the upper end of the 325-350 basis points range. The margin expansion will be driven by the replacement of the Life Premium Finance book with higher-yielding assets like Mortgage Warehouse and construction-perm, alongside continued reduction in deposit rates.

Q: What are the anticipated core net charge-off and provision levels following the consumer exit? A: Matthew Switzer mentioned that core charge-offs are expected to remain low, around 5 to 10 basis points. Provisioning levels will also be modest, with the largest volume growth coming from Mortgage Warehouse, which has a low reserve burden.

Q: Can you elaborate on the potential deconsolidation of Panacea and its impact on tangible book value? A: Dennis Zember explained that while they cannot provide a specific number, the value of Panacea has grown significantly. The strategy involves developing comprehensive financial solutions for doctor-clients, and deconsolidation would involve transferring some employees and services to Panacea, enhancing its standalone value.

Q: What is the strategic focus for deposit growth and mix over the next few years? A: Dennis Zember aims for core bank deposits to grow to $2.5 billion, focusing on core relationships. The digital side will focus on changing the mix to include more lower-cost funding, rather than increasing total deposits significantly.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.