Primis Financial Corp.'s 2025 Q2 Earnings: A Strategic Turnaround and Path to Sustainable Earnings Growth

For long-term investors, Primis Financial Corp. (NASDAQ: FRST) has emerged as a compelling case study in strategic reinvention. The company's second-quarter 2025 earnings report, released on July 24, 2025, underscores a deliberate and effective restructuring effort that positions it for sustainable growth. By analyzing its operational restructuring, core business strengths, and forward-looking guidance, we can identify why Primis is poised to deliver value to patient investors.

Historical data from 2022 to the present reveals a strong pattern of performance following FRST's earnings releases. A simple buy-and-hold strategy executed after these events has demonstrated an 80% win rate over three days, 70% over 10 days, and 60% over 30 days. With an average return of 1.17% in the first three days alone, investors have historically benefited from the stock's positive momentum post-earnings, reinforcing its potential as a strategic holding.

Operational Restructuring: From Volatility to Stability

Primis' Q2 2025 results reflect a decisive shift away from high-risk strategies. A pivotal move was the sale of a portion of its ownership in Panacea Financial Holdings, Inc. (PFH), which generated $22.1 million in proceeds and a $7.5 million pre-tax gain. This transaction not only bolstered short-term earnings but also reduced exposure to volatile revenue streams. Additionally, the company has nearly eliminated the drag from its problematic Consumer Program portfolio. Promotional loans, which had caused earnings volatility, declined to $9.6 million at quarter-end from $77.2 million a year earlier. Management expects write-offs related to these loans to drop to less than $0.5 million in Q3 2025, signaling a clean break from past instability.

Cost discipline is another pillar of the restructuring. Renegotiated vendor contracts and vendor consolidation are projected to reduce quarterly expenses by $1.5 million starting in Q3 2025. These savings, combined with the end of core deposit amortization, demonstrate a disciplined approach to margin preservation. Noninterest expenses in Q2 2025 were $31.9 million, with management highlighting that $2.2 million of the sequential increase was due to one-time items (e.g., legal and audit costs). Adjusting for these, core operating expenses remain within the $20–21 million range, aligning with guidance.

Core Business Strength: A Diversified, Resilient Foundation

Primis' core community bank remains a cornerstone of its operations. With 24 banking offices in Virginia and Maryland, the core bank generated a cost of deposits of 1.79% in Q2 2025, down from 2.20% in the same period in 2024. This 41-basis-point improvement outperforms peers in the DC region and reflects strong deposit retention and pricing power. The bank's low concentration of investor commercial real estate (CRE) loans (39% of total loans) and a robust pipeline of new customers further insulate it from sector-specific risks.

Panacea Financial, the company's niche division targeting medical professionals, is another growth engine. Loans outstanding surged to $505 million in Q2 2025, a 34% year-over-year increase. Customer deposits in this segment grew 58% to $107 million, driven by its top-ranking as “Bank for Doctors” on Google. With a target of reaching 10,000 customers by year-end, Panacea's addressable market is expanding rapidly. Its proprietary technology, including the V1BE service, is being enhanced for potential licensing to other banks, unlocking a new revenue stream.

Mortgage operations also showed resilience. Primis Mortgage closed $323 million in loans in Q2 2025, a 52% increase from Q2 2024. While profitability was temporarily impacted by $1.2 million in support costs for new production teams, the division's weighted average yield of 7.57%—up from 7.25% in Q2 2024—highlights its pricing power. Management anticipates a return to profitability as construction-to-permanent loans mature.

Future Profitability: A Roadmap for Long-Term Investors

Primis' forward-looking guidance paints an optimistic picture. The company expects pre-tax pre-provision earnings of $10.5–$11 million in Q3 2025, excluding the benefits of balance sheet repricing and loan growth. With a net interest margin (NIM) of 3.15% (excluding Consumer Program impacts), up from 2.80% in Q2 2024, the path to margin expansion is clear.

Asset quality remains robust. The allowance for credit losses stood at 1.24% of loans held for investment at June 30, 2025, down from 1.56% a year earlier. Nonaccrual loans were 0.26% of total loans, with no other real estate owned. The company's loan portfolio grew to $3.13 billion by quarter-end, with a provision for loan losses of just $1.2 million—a 58% decline from Q2 2024.

Capital returns further reinforce the investment thesis. The company repurchased 80,000 shares at $10.00 each in Q2 2025 and declared its 55th consecutive quarterly dividend of $0.10 per share. With a tangible book value per share of $11.72—up 3% year-over-year—Primis is creating shareholder value through both earnings growth and disciplined capital deployment.

Strategic Risks and Mitigants

While the outlook is positive, investors should remain cognizant of risks. The Consumer Program's residual exposure, though minimalized, could pose a tail risk if borrower behavior deteriorates. Additionally, competition in the mortgage and Panacea markets may intensify as the company scales. However, Primis' focus on low-risk CRE, strong deposit discipline, and diversified revenue streams provide a buffer.

Conclusion: A Buy for Patient Capital

Primis Financial Corp.'s Q2 2025 earnings demonstrate a company that has successfully navigated a strategic overhaul. By exiting volatile segments, optimizing costs, and doubling down on high-quality growth areas, it has positioned itself for durable profitability. For long-term investors seeking a financial institution with a clear path to earnings growth and capital appreciation, Primis offers an attractive opportunity. Its disciplined approach to risk, coupled with a strong balance sheet and shareholder-friendly policies, makes it a compelling addition to a diversified portfolio. The historical performance of FRST following earnings releases—highlighted by an 80% win rate over three days—further supports its potential as a strategic holding for patient capital.

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