Primis Financial Corp: A Turnaround Tale in Q1 2025 – Profitability Gains or False Dawn?

The financial sector’s latest chapter of resilience unfolds with Primis Financial Corp’s Q1 2025 earnings report, a document that blends cautious optimism with stark reminders of lingering challenges. After a turbulent 2024, marked by a $23.3 million net loss in Q4, the company has clawed its way back to profitability with a $0.11 EPS in Q1 2025—a modest but critical rebound. This article dissects the drivers behind Primis’ recovery, evaluates the risks clouding its path, and assesses whether this quarter’s results signal a sustainable turnaround or a fleeting reprieve.

The Turnaround Engine: Margins, Costs, and Strategic Shifts

Primis’ Q1 performance hinges on three pillars: margin expansion, cost discipline, and strategic repositioning. Net interest margins rose to 3.15%, a 25-basis-point improvement over Q4 2024, driven by a 28-basis-point drop in deposit costs to 2.52%. This progress reflects aggressive rate management, even as the Federal Reserve’s uncertain stance on interest rates looms large.

Cost-cutting has been equally vital. Core expenses fell by $3.2 million quarter-over-quarter, with management targeting $20–21 million in quarterly expenses for 2025. The savings are amplified by plans to consolidate technology platforms, which could yield $6–7 million in annual efficiencies—a critical factor in sustaining the normalized 0.56% ROA (excluding one-time items).

The most transformative shift, however, is Primis’ exit from its troubled consumer loan portfolio. After abandoning sale efforts, the company moved the portfolio back to “held for investment,” incurring a $1.9 million provision and $10.8 million in net charge-offs. While this move clears the path for a strategic pivot, it underscores the cost of past missteps.

Growth Drivers: Mortgages, Healthcare, and Digital Deposits

Primis’ future hinges on its ability to capitalize on high-margin segments:

1. Mortgage and Warehouse Lending:
2. Primis Mortgage turned profitable in Q1, with a $0.8 million pre-tax gain versus a $0.4 million loss in Q4. Locked loans surged 27% to $257 million, fueled by new teams in expanding markets like Nashville and Austin. The mortgage warehouse division, now at $115 million in loans, targets $400 million in committed lines—a key metric for this quarter’s success.

4. Panacea Financial (Healthcare Lending):

5. Healthcare-focused loans grew 9% to $434 million, with a 10,000-client target by 2025. This division’s scalability is underpinned by low NPAs (0.28% of total assets) and a deposit base of $92 million, signaling investor confidence in its niche.

6. Digital Banking:

7. The digital platform now holds $1 billion in deposits across 18,000 accounts, averaging $55,000 per account—a testament to its appeal to high-value customers. New affinity brands and influencer partnerships aim to boost this segment further, leveraging low deposit costs (1.83%) to outcompete regional peers.

Risks and Regulatory Crossroads

Despite these positives, Primis faces hurdles that could derail its recovery:

• NASDAQ Delisting Threat: A May 15 hearing will decide whether Primis can appeal its delisting warning after delayed 2024 financial reporting. Filing its 10-K on time is non-negotiable; failure could trigger a liquidity crisis.
• Consumer Loan Legacy: The remaining $39 million in held-for-investment loans pose credit risks, even as origination has ceased. Provisions and charge-offs in this segment could eat into future earnings.
• Interest Rate Volatility: While $350 million in loans set to reprice in 2025 may cushion margin pressure, prolonged Fed hikes could strain the balance sheet.

Valuation and Investor Sentiment

Primis’ shares trade at 0.7x tangible book value ($10.77 per share), reflecting investor skepticism about execution risks. However, the dividend continuity—53 quarters paid—offers a floor of stability. The critical question is whether mortgage warehouse growth and cost discipline can push ROAA toward the 0.65% target.

Conclusion: A Make-or-Break Quarter

Primis Financial Corp’s Q1 2025 results are a mixed bag. On one hand, the return to profitability, margin expansion, and progress in mortgage/healthcare segments suggest management’s restructuring is bearing fruit. The $2.7 million net income, $6–7 million in annualized cost savings, and mortgage warehouse’s 80% growth all point to tangible momentum.

Yet the risks are acute. The NASDAQ delisting hearing, lingering consumer loan liabilities, and execution pressure on the $400 million mortgage warehouse target could unravel the narrative. Investors must weigh the potential upside of a $3.75 billion asset target and 0.65% ROAA against the very real possibility of further setbacks.

For now, the earnings call on April 30 will be pivotal. If management can demonstrate adherence to cost guidance, mortgage warehouse growth, and progress on delisting appeals, Primis may begin to rebuild its valuation. But with tangible book at $10.77 and shares trading at a discount, the market will demand proof—not just promises—to justify a sustained recovery.

In the end, Q1 2025 is less a false dawn and more a fork in the road. The path to profitability is clear, but the stakes—both financial and reputational—could not be higher.