Primis Financial (FRST) Q2 Earnings call transcript Jul 26, 2024
AInvestSaturday, Jul 27, 2024 12:45 pm ET
2min read
FRST --

Primis Financial Corp., a leading financial services provider, recently held its second quarter earnings call, highlighting significant improvements in its financial performance and strategic initiatives to drive future growth. The call, led by President and CEO Dennis Zember and CFO Matt Switzer, revealed a focus on digital expansion, operational efficiency, and strategic acquisitions, underlining the company's commitment to enhancing its market position and capitalizing on emerging opportunities.

Strong Earnings and Operational Highlights

Primis Financial Corp. reported a substantial increase in earnings for the second quarter, with a net income of $7.8 million, marking a significant turnaround from a net loss of $311,000 in the same period last year. This performance, excluding one-time items and adjustments, revealed pretax earnings of approximately $11.7 million, underscoring the company's operational strength and strategic focus.

A key contributor to these results was the core bank, which reported steady margins and operating expense controls, enabling the company to maintain a net interest margin of 3.03% and a core margin of 3.25% on a standalone basis. This performance, coupled with the digital platform's support, allowed Primis to focus on more profitable deposit relationships and avoid excessive funding costs. The legacy franchise, particularly in the core bank, shone through the industry's challenges and consolidation efforts.

Digital Transformation and Strategic Initiatives

The second quarter also marked significant strides in Primis Financial Corp.'s digital expansion, with the digital platform contributing approximately 25% of the total loans and 29% of the total deposits. This shift towards digital services has been a strategic priority, with incremental loan yields in the high 7% to 8% range for higher-quality lending strategies. The company aims to recruit more aggressively in the mortgage sector, targeting volumes closer to $2 billion annually, recognizing the potential for growth in this area.

Financial Metrics and Future Outlook

Financial metrics for the second quarter showed a slight increase in total assets to $4 billion and loans held for income by 2.5%. Deposits were also up slightly, with a decline in average noninterest-bearing deposits due to remixing. Core net interest income decreased slightly, but the net interest margin remained strong at 2.94%, excluding accounting noise. Noninterest income saw a modest increase, driven by mortgage activity, while noninterest expense remained stable.

Looking ahead, Primis Financial Corp. expects to continue its focus on deposit growth, commercial lending, and operational efficiency, leveraging its digital capabilities and strategic acquisitions. The company anticipates high single-digit to low double-digit loan growth for the remainder of 2023 and into 2025, with potential loan sales for Panacea and Life Premium Finance. The balance sheet growth strategy is centered on high single-digit to low double-digit growth, assuming a challenging yield curve and rate environment.

Investor and Analyst Insights

During the call, key investors and analysts posed questions on various aspects, including expense management, provisions, and digital account openings. CFO Matt Switzer provided insights into the company's strategic direction, emphasizing the need for balance between operational efficiency and capital ratios. He also addressed the potential for continued growth in net interest income, despite challenges in the market.

Investor Chris Marinac of Janney Montgomery Scott inquired about the company's digital account openings and deposit gathering, highlighting the potential for cost savings and operational efficiencies. CEO Dennis Zember shared his perspective on the company's digital strategy, emphasizing the importance of focusing on lower-cost, higher-value deposit relationships and expanding service offerings to become a more complete community bank.

Conclusion

Primis Financial Corp.'s second quarter earnings call underscored the company's robust financial performance and strategic focus on digital expansion, operational efficiency, and growth opportunities. Despite challenges in the market, Primis remains optimistic about its future prospects, with a clear vision to capitalize on emerging trends and enhance its market position. The company's commitment to innovation, operational efficiency, and strategic investments positions it well for continued growth and success in the evolving financial services landscape.

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