Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Primis Financial Corp (FRST, Financial) reported improvement in core bank's cost of deposits, which was 2.21% for the quarter, lower than community bank peers in the Mid Atlantic.
- The company is building new commercial relationships at a rapid pace, with the pipeline for new relationships being three times what it was a year ago.
- The Panacea division has seen significant growth, with endorsements from large national medical associations and an influx of new commercial deposits.
- The mortgage team achieved a milestone by locking $277 million of mortgage loans, marking a 67% increase compared to the same quarter in 2023.
- The company expects to improve its tangible common equity ratio by about 75 basis points and net interest margin by 6 to 7 basis points due to strategic moves in its life premium finance division.
Negative Points
- Primis Financial Corp (FRST) faced challenges due to an accounting error in the consumer loan portfolio, which has caused delays in SEC filings.
- The company is experiencing volatility in reported earnings due to the timing of interest recognition on promotional loans.
- There is an ongoing consultation with the SEC regarding the accounting for the consumer loan portfolio, with no predictable outcome.
- Non-interest expenses increased to $31 million, including $2.7 million of consolidated PFH expenses, compared to $27.4 million last quarter.
- The company downgraded a commercial real estate property due to slow lease-up and vacancies, although no loss is expected.
Q & A Highlights
Q: Could you provide guidance on your core expense outlook, considering the premium finance sale and new hires around mortgage warehouse?
A: The core expenses should remain relatively flat. β Dennis Zember, President and CEO
Q: Will you break out mortgage warehouse loans separately for modeling purposes?
A: Yes, similar to other segments, we will display it as an operating segment, especially for loan loss reserving or interest rate risk. It will become more material as we move through 2025. β Dennis Zember, President and CEO
Q: Can you discuss the timeline for achieving a sustainable 1% ROA?
A: We aim to reach a 1% ROA by the second half of 2025. This depends on accounting changes and replacing the life premium portfolio with higher-yielding mortgage warehouse loans. β Matthew Switzer, CFO
Q: Are the criticized loan numbers stable, and does the consumer portfolio impact them?
A: The criticized loan numbers are stable, and the consumer portfolio does not impact them. Consumer loans typically charge off after 90 days. β Matthew Switzer, CFO
Q: Has the cost of funds peaked, and what are your expectations for betas moving forward?
A: Yes, the cost of funds peaked in August. We expect to see improvements in cost of funds, especially with potential Fed rate cuts and adjustments in digital deposits. β Matthew Switzer, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
