Primis Financial outlines path to 1% ROA and signals deposit cost improvements amid balance sheet growth

Earnings Call Insights: Primis Financial Corp. (FRST) Q3 2025

MANAGEMENT VIEW

* CEO Dennis Zember highlighted third quarter net earnings of $6.8 million and $0.28 per share, noting, "our ROA and ROTCE in the current quarter improved to 70 basis points and 9.45%, respectively." Zember indicated that core ROA approaches 90 basis points after adjusting for certain non-permanent items, stating, "a 1% ROA is within reach."
* The company reported a core margin of 3.15%, up from 3.12% in the prior quarter and 35 basis points higher than a year ago. Zember added, "we've replaced about half of the loans that we sold with the life premium business a year ago at yields that are at least 200 basis points higher."
* Noninterest-bearing checking accounts grew 16% year over year, improving the deposit mix and reducing deposit costs by almost 20%. Zember said, "thanks to our focus on core relationships, we've experienced very strong retention across the bank."
* Residential mortgage production expanded from $20 million to $100–$120 million per month over several years. Core mortgage pretax earnings reached $1.9 million in the quarter, with Zember noting, "continued recruiting success that built annual production by about another $120 million or 10% of where we stood at the beginning of the quarter."
* Panacea loan balances averaged $530 million, up from $385 million a year ago, with deposits ending the quarter at $132 million, about 50% higher than last year. Panacea's deposit cost dropped to 1.37% from 2.28% a year ago.
* "Gross loans held for investment increased almost 9% annualized from June 30 to September 30," CFO Matthew Switzer stated. "Average earning assets increased 10% annualized in the third quarter."
* Switzer noted, "our net interest margin in the third quarter was 3.18%, up from a reported 2.86% last quarter and 2.97% in the year ago period."

OUTLOOK

* Switzer stated, "with growth and repricing of earning assets, pretax earnings will grow to over $13 million in the near term, which equates to our 1% ROA goal with upside still from there."
* Zember indicated, "we expect this [deposit cost reduction] to be meaningfully positive to our margin and our results in the fourth quarter."
* Management expects continued growth in mortgage warehouse and Panacea, but may sell some Panacea loans in the fourth quarter. Zember stated, "for all of next year...we could be comfortably up, call it, 10% to 12%."
* Switzer added, "we'll be closer to 3.30% margin as we exit this year, so probably first quarter next year."

FINANCIAL RESULTS

* Noninterest income was $12 million in the quarter versus $10.6 million in the second quarter, with increased mortgage revenue as the primary driver.
* Mortgage revenue and profitability bounced back in Q3 with pretax income of approximately $1.9 million versus $0.1 million in the second quarter.
* Core expenses were $21.6 million versus $22.3 million in the prior quarter. Normalizing for certain items, core noninterest expense was approximately $19.8 million.
* Switzer reported, "provision this quarter was a small release driven by growth in the loan portfolio tied to categories with lower reserve requirements."
* Adjusted pretax earnings were close to $11 million, with ROA approximately 90 basis points in Q3 on an adjusted basis.

Q&A

* Russell Elliott Gunther, Stephens: Asked about loan growth expectations and mix for Q4 and 2026. Zember responded that mortgage warehouse levels could be sustained, Panacea could see annual production matching its balance sheet, and "for next year, $150 million or so, I think is definitely possible there."
* Gunther inquired about timing for achieving 3.30% margin and deposit mix. Switzer replied, "we'll be closer to 3.30% margin as we exit this year, so probably first quarter next year...we are 100% focused on increasing our proportion of noninterest-bearing deposits."
* Christopher Marinac, Janney Montgomery Scott: Asked about deposit costs and customer stickiness. Zember said, "checking account growth is absolutely key to us keeping deposit flows at the right level...as long as we're driving checking counts in a sort of better than 10%, I think we can be very competitive."
* Marinac asked about asset quality and resolution timelines. Zember stated, "the larger C&I property...could be resolved...in the fourth quarter...the real estate deals in Alexandria are not going to be resolved in the current quarter, although...by June of next year...those properties could be strong enough to...not be on nonaccrual."
* Marinac questioned the trajectory for operating expenses. Switzer confirmed, "the expense number should continue to get better given the operating difference...it's not just the fourth quarter phenomenon, but it will go over the next few quarters."

SENTIMENT ANALYSIS

* Analysts displayed a neutral to slightly positive tone, focusing on growth expectations, margin outlook, deposit strategy, and asset quality resolution timing.
* Management maintained a confident and optimistic tone throughout, with Zember emphasizing, "I have a lot of conviction about the kind of value that we're creating here."
* Compared to the previous quarter, management's tone was more confident and less focused on one-time items or noise, while analysts remained focused on fundamentals and clarity on growth levers.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted from "on track" to achieve targets in the prior quarter to a more confident assertion that 1% ROA is "within reach" in the current quarter.
* Strategic focus shifted to accelerating balance sheet growth, margin expansion, and stable or lower deposit costs, compared to ongoing remediation of non-core portfolios and technology savings in the prior quarter.
* Analysts continued to probe on growth and cost control but increased focus on margin timing and deposit mix.
* Key metrics showed higher noninterest income, lower normalized expenses, and improved net interest margin in Q3.
* Management’s confidence increased, supported by more stable core earnings and fewer one-time items.

RISKS AND CONCERNS

* Zember acknowledged exposure to two office real estate properties in Northern Virginia, one in nonaccrual, but with "improving NOI and strong leasing activity."
* Additional nonaccruals include a $7.5 million loan to a private equity-backed company and a nationwide business "working several strategic opportunities to either be recapitalized or sold."
* Management does not anticipate additional losses or costs from these exposures and believes there is "virtually no exposure to office in any of our markets, but especially the D.C. metro area that is still not operating ideally."

FINAL TAKEAWAY

Management emphasized that core profitability continues to improve with margin expansion, strong noninterest deposit growth, and disciplined cost control. The company sees further upside in the fourth quarter as lower deposit costs flow through, and management asserts that a 1% ROA is now firmly within reach, supported by a robust pipeline in mortgage and specialty banking divisions, stable asset quality, and continued focus on sustainable growth drivers.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/frst/earnings/transcripts]

MORE ON PRIMIS FINANCIAL

* Primis Financial Corp. (FRST) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4833153-primis-financial-corp-frst-q3-2025-earnings-call-transcript]
* Primis Financial Corp. 2025 Q3 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4833131-primis-financial-corp-2025-q3-results-earnings-call-presentation]
* Seeking Alpha’s Quant Rating on Primis Financial [https://seekingalpha.com/symbol/FRST/ratings/quant-ratings]
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