Primis Financial Corp. (NASDAQ: FRST) has reported strong financial performance in the second quarter, with earnings of $7.8 million, a significant improvement from a net loss of $311,000 in the same period last year. The company’s core banking operations have shown resilience, with steady margins and effective cost controls, contributing to one of their strongest quarters to date.
Key Takeaways
- Net income for the second quarter was $7.8 million.
- Pretax earnings, excluding non-recurring items, stood at around $11.7 million.
- Steady margins of just over 3% were maintained, benefiting from operating expense controls and branch consolidations.
- Total loans reached $835 million, with total deposits just shy of $1 billion across all lines of business.
- The mortgage division reported over $1 million in net income.
- The company anticipates continued strength in operating results, focusing on deposit growth, commercial lending, and digital capabilities.
- Tangible book value per share increased by 8.8% year-over-year to $12.59.
- Plans are underway to deconsolidate PFH, expected to enhance tangible book value and capital ratios.
Company Outlook
- Primis Financial anticipates sustained progress in operating results.
- The focus will be on enhancing deposit growth, commercial lending, and expanding digital capabilities.
- The company aims to pivot towards lower-cost, higher-value deposit relationships.
- Loan growth is expected to be in the high single digits to 10% for the year.
Bearish Highlights
- The company is cautious about maintaining capital ratios while growing net interest income.
- Awareness of potential net interest margin compression in the current rate environment.
Bullish Highlights
- Strong quarters with core banking operations performing well.
- Success in the mortgage division contributing to positive earnings.
- Confidence in maintaining a net interest margin above 3%.
- Potential growth opportunities from loan portfolio sales for Panacea and Life Premium Finance.
Misses
- No significant misses were reported in the earnings call.
Q&A Highlights
- Expenses expected to be around the mid-$19 million range in future quarters.
- The provision, excluding third-party portfolios, anticipated to stabilize soon.
- Completing the first step of a multistep process to resolve issues, with filings expected by the end of August.
- Success in digital account openings and deposit gathering highlighted, with a focus on business accounts for core market strength.
- Lower cost of funds for digital deposits compared to community bank, with plans to further reduce for profitability.
Primis Financial Corp. has demonstrated a strong financial performance in the second quarter, with significant earnings growth. The company’s strategic focus on digital transformation and operational efficiency has paid off, leading to a positive outlook for future growth and profitability. With plans to deconsolidate PFH and a commitment to maintaining healthy capital ratios, Primis Financial is positioning itself for sustained success in the dynamic banking landscape.
InvestingPro Insights
Primis Financial Corp. (ticker: FRST) has shown robust performance and resilience, as evidenced by their impressive second-quarter earnings. To provide a deeper understanding of the company’s financial health and stock performance, let’s look at some key insights from InvestingPro.
InvestingPro Data indicates that Primis Financial Corp. has a market capitalization of $326.79 million, underscoring its substantial presence in the banking sector. The company’s Price to Earnings (P/E) ratio stands at a high 32.9, indicating investors’ high expectations of future earnings growth. This is further supported by the adjusted P/E ratio of 15.42 over the last twelve months, reflecting recent profitability.
The company’s revenue growth is notable, with a 19.1% increase over the last twelve months as of Q4 2023, showing a solid trend of expanding business activities. Additionally, Primis has maintained a healthy operating income margin of 17.43% during the same period, showcasing effective cost management and operational efficiency.
InvestingPro Tips suggest analysts are optimistic about Primis Financial’s prospects. Net income is expected to grow this year, with two analysts revising their earnings expectations upwards. This aligns with the company’s positive outlook and initiatives focused on deposit growth and commercial lending.
Furthermore, Primis Financial has sustained dividend payments for 13 consecutive years, indicating a commitment to shareholder value and financial stability. This consistency in dividend payouts may be particularly attractive to income-focused investors.
For more insights and tips on Primis Financial Corp., InvestingPro offers additional in-depth analysis. Using the coupon code PRONEWS24 provides up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering access to a total of 13 InvestingPro Tips to inform investment decisions.
In conclusion, Primis Financial’s recent performance and positive indicators from InvestingPro suggest the company is well-positioned for continued growth and profitability, making it an appealing option for potential investors.
Full transcript – Southern National Bancorp (FRST) Q2 2024:
Operator: Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primis Financial Corp. Second Quarter Earnings Call. [Operator Instructions]. I will now turn the call over to Matt Switzer, CFO. You may begin.
Matthew Switzer: Good morning, and thank you for joining us. Before we begin, please note that many of our comments during this call will be forward-looking statements, which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Further discussion of the company’s risk factors and other important information regarding our forward-looking statements are part of our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has also been posted to the Investor Relations section of our corporate site, primisbank.com. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. How a non-GAAP measure relates to the most comparable GAAP measure will be discussed when the non-GAAP measures used if not readily apparent.
I would like to now pass the call over to our President and Chief Executive Officer, Dennis Zember.
Dennis Zember: Thank you, Matt, and thank you to all those who have joined our call today. Our earnings for the quarter have improved to $7.8 million compared to a net loss of $311,000 for the same quarter last year. When excluding the noise, we are showing pretax earnings of approximately $11.7 million for the current quarter, making it one of our strongest quarters to date. These results are attributed to steady margins, operating expense controls, and seizing loan yield opportunities. Our core bank has shown improvement in net interest margin and profitability, while our lines of business have also had a great quarter. Mortgage operations reported strong net income, and our tangible book value has improved to $12.59 per share. Looking ahead, we expect continued strength and progress in our operating results. The falling rate environment will benefit us, and we will continue to focus on deposit growth, commercial lending, and digital capabilities. We are staying focused on our existing strategies and opportunities and making our offerings more complete and community-focused. Now, over to you, Matt.
Matthew Switzer: Thank you, Dennis. I will provide an overview of our results before we move on to Q&A. Please note that the financial information we will discuss is preliminary and subject to our SEC process. These results include adjustments related to a third-party managed portfolio, which impact various line items. In the second quarter, $577,000 related to this portfolio is included in interest income, with an offset in noninterest expense. Additionally, $4.6 million of the provision for credit losses related to this portfolio is included in noninterest income. In the following discussion, references to core items will exclude the amounts related to PFH. Earnings available to common and earnings per diluted share for the second quarter were $7.8 million and $0.32, respectively. Adjusting for PFH and certain one-time items, core earnings were $9.3 million or $0.38 per share, up substantially from $0.03 in the year ago period. Total assets were $4 billion at June 30, up slightly from March 31. Loans held for income increased by 2.5% from the end of Q1, primarily driven by Panacea and Life Premium Finance activity. Deposits were $3.3 billion, slightly up from last quarter. Average noninterest-bearing deposits declined by 5% versus the first quarter due to remixing. Core net interest income decreased slightly to $27.1 million in Q2, with growth in earning assets offsetting margin pressure. Core net interest margin was 2.94%, compared to 3.03% last quarter. Core yield on loans held for income increased slightly to 6.14%, while core yield on earning assets increased to 5.92%. Cost of deposits increased to 2.98%, while cost of funds increased to 3.16% in the quarter. Noninterest income was $9.9 million in Q2, up from $8.3 million last quarter, largely driven by increased mortgage activity. Noninterest expense was $27.8 million, excluding the impact of PFH. Core provision for credit losses was a release of $600,000 versus a core provision of $1.6 million in the first quarter. Operating ROA was 90 basis points in the second quarter, up from 70 basis points linked quarter. The core profitability continues to be solid, and the company is optimistic about improving core returns in the future. We are implementing several strategies that won’t incur additional costs but will enhance our offerings. Currently, our focus is on innovative deposit products, but as we expand to include other traditional community bank services, we will strengthen our presence in our core market as Primis bank, both digitally and locally. This will improve our standing in all our local markets and beyond. We are optimistic about the opportunities ahead, but until we can demonstrate the ability to open lower-cost accounts, we won’t maximize shareholder value. That’s our primary focus at the moment.
In terms of our Net Interest Margin (NIM), we believe we can maintain it above 3% even in the current rate environment. With new production coming in and our incremental earning assets aligning closely with three, we expect to continue growing Net Interest Income (NII) while balancing capital considerations.
Looking ahead, we aim for high single-digit to 10% loan growth for the remainder of this year and into 2025. We are exploring options for potential outlets for Panacea and Life Premium Finance, which may involve selling portfolios. However, even if portfolios are sold, they will likely be replaced quickly, allowing both entities to continue growing their earning assets.
Overall, we anticipate similar loan growth for 2025, assuming the rate environment remains stable. Our goal is to achieve high single-digit to low double-digit growth in the coming years. Thank you for joining the call today, and feel free to reach out to Matt and me with any further questions. Have a great weekend.
This concludes today’s conference call. You may now disconnect. given sentence in a different way:
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