Business Context and Reporting Period
Primis Financial Corp. (NASDAQ: FRST) is a bank holding company for Primis Bank, a Virginia state-chartered bank with 24 full-service branches in Virginia and Maryland. The company operates two primary reportable segments: Primis Bank and Primis Mortgage Company (PMC). This Form 10-Q covers the quarterly period ended June 30, 2026, and the six months ended June 30, 2026.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Net Income (Attributable to Common Stockholders) | $9.4 million | $2.4 million | $16.7 million | $25.1 million |
| Earnings Per Share (Diluted) | $0.38 | $0.10 | $0.68 | $1.01 |
| Net Interest Income | $33.8 million | $25.2 million | $65.8 million | $51.5 million |
| Net Interest Margin | 3.45% | 2.86% | 3.44% | 3.00% |
| Provision for Credit Losses | $5.5 million | $8.3 million | $7.0 million | $9.9 million |
| Total Assets | $4.35 billion | $3.87 billion | $4.35 billion | $3.87 billion |
| Total Loans Held for Investment | $3.47 billion | $3.28 billion | $3.47 billion | $3.28 billion |
| Total Deposits | $3.45 billion | $3.40 billion | $3.45 billion | $3.40 billion |
| Allowance for Credit Losses | $46.0 million | $46.0 million | $46.0 million | $46.0 million |
| Nonperforming Loans | $67.7 million | $86.5 million | $67.7 million | $86.5 million |
Material Changes vs. Prior Period
- Net Income: Q2 2026 net income increased significantly compared to Q2 2025, driven by a $8.6 million increase in net interest income and a $2.9 million decrease in the provision for credit losses. However, YTD 2026 net income decreased compared to YTD 2025, primarily due to the absence of a $32 million one-time gain from the deconsolidation and sale of Panacea Financial Holdings (PFH) shares in the prior year.
- Net Interest Income: Increased in both the three and six-month periods due to higher average earning asset balances (driven by loan growth in the Mortgage Warehouse and Panacea Division) and favorable deposit pricing. The cost of deposits declined, while yields on loans increased.
- Noninterest Income: Q2 2026 noninterest income increased $4.0 million year-over-year, driven by higher mortgage banking income and a $6.0 million gain on the liquidation of an insurance agency investment. YTD 2026 noninterest income decreased $14.8 million compared to YTD 2025, largely due to the absence of the $32 million PFH-related gain in the current year.
- Noninterest Expenses: Increased in both periods due to higher salaries and benefits (driven by growth in PMC and Mortgage Warehouse) and occupancy expenses (due to a sale-leaseback transaction in late 2025). These increases were partially offset by lower data processing expenses.
- Asset Quality: Nonperforming assets decreased by $19 million (22%) from year-end 2025, primarily due to the resolution of a specific commercial relationship. The allowance for credit losses to total loans ratio improved to 1.33% from 1.40%.
Guidance, Outlook, and Risks
- Outlook: Management continues to focus on growing earning assets, non-interest bearing deposits, and profitability in the retail mortgage business. The digital banking platform continues to be a key funding source, with approximately $1.0 billion in deposits.
- Unusual Items: The financial results for the six months ended June 30, 2025, included a $32 million gain related to the deconsolidation of PFH and the sale of PFH shares. The six months ended June 30, 2026, included a $6 million gain on the liquidation of an insurance agency investment. Excluding these items, core income before taxes increased in 2026 compared to 2025.
- Risks: Key risks include interest rate volatility, credit quality deterioration in commercial real estate (particularly office and non-owner occupied), and the impact of economic conditions on loan demand and deposit costs. The company also faces risks related to cybersecurity and the implementation of new technologies.
- Controls: The company disclosed that its disclosure controls and procedures were not effective as of June 30, 2026, due to the continued remediation of a previously identified material weakness in internal controls over financial reporting. Management believes the financial statements fairly present the company's financial condition.
Key Facts for Investor Verification
- Verify the sustainability of the $6 million gain on the liquidation of the insurance agency investment and whether it is a recurring item.
- Monitor the resolution of the material weakness in internal controls over financial reporting and the timeline for its full remediation.
- Assess the credit quality of the commercial real estate portfolio, specifically the $522 million non-owner occupied segment, which includes significant exposure to office and hotel/motel properties.
- Review the growth trajectory of the Mortgage Warehouse and Panacea Division, which are driving loan growth but also increasing funding needs and potential interest rate risk.
- Confirm the stability of the digital banking platform deposits, which represent a significant portion of the funding base and are critical to the company's strategy.