Primis Financial Corp. Q2 2025 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2025. 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). A significant corporate development during the period was the deconsolidation of Panacea Financial Holdings, Inc. (PFH) as of March 31, 2025, following a change in the control relationship.
Key Financial Metrics
| Metric | Q2 2025 (3 Months) | Q2 2024 (3 Months) | YTD 2025 (6 Months) | YTD 2024 (6 Months) |
|---|---|---|---|---|
| Net Income (Attributable to Common) | $2.4 million | $3.4 million | $25.1 million | $5.9 million |
| Earnings Per Share (Diluted) | $0.10 | $0.14 | $1.01 | $0.24 |
| Net Interest Income | $25.2 million | $24.9 million | $51.5 million | $50.1 million |
| Net Interest Margin | 2.86% | 2.72% | 3.00% | 2.78% |
| Provision for Credit Losses | $8.3 million | $3.1 million | $9.9 million | $9.6 million |
| Total Assets | $3.87 billion | $3.97 billion (Q2 2024) | $3.87 billion | $3.69 billion (Dec 2024) |
| Total Loans Held for Investment | $3.13 billion | $3.27 billion (Q2 2024) | $3.13 billion | $2.89 billion (Dec 2024) |
| Total Deposits | $3.34 billion | $3.20 billion (Q2 2024) | $3.34 billion | $3.17 billion (Dec 2024) |
| Cash and Cash Equivalents | $94.1 million | $66.6 million (Q2 2024) | $94.1 million | $64.5 million (Dec 2024) |
Material Changes vs. Prior Period
- Noninterest Income Surge: Noninterest income increased significantly to $18.0 million in Q2 2025 (up from $10.9 million in Q2 2024) and $50.4 million YTD 2025 (up from $21.2 million YTD 2024). This was driven primarily by a $7.5 million gain in Q2 2025 from the sale of PFH shares and fair value adjustments, and a $24.6 million gain in Q1 2025 from the deconsolidation of PFH.
- Provision for Credit Losses: The provision increased to $8.3 million in Q2 2025 compared to $3.1 million in Q2 2024. This increase was primarily due to a $7.1 million specific provision for a commercial real estate loan placed on nonaccrual. Excluding this specific item, the provision would have declined due to improved performance in the Consumer Program portfolio.
- Asset Quality Deterioration: Nonperforming assets increased to $78.2 million (1.90% of total assets excluding SBA guarantees) from $16.7 million at year-end 2024. This was driven by two specific relationships: a $40.1 million commercial real estate loan placed on nonaccrual and a $23.5 million commercial loan relationship that became 90+ days past due (though payments were received in July 2025).
- Loan Portfolio Growth: Total loans held for investment grew 8% from December 2024, driven by growth in the Panacea Division and mortgage warehouse lending, partially offset by the runoff of the Life Premium Finance portfolio.
Guidance, Outlook, and Risks
- PFH Deconsolidation: PFH was deconsolidated as of March 31, 2025. Primis retains a 19% equity interest (approx. 467k shares as of June 30) and continues to originate loans for PFH. The Company does not have an obligation to provide future monetary support to PFH.
- Consumer Program Portfolio: The Company is running off the Consumer Program portfolio. While charge-offs have been significant, management notes that loss mitigation efforts and the aging of the portfolio (most promotional loans have exited the promotional period) have reduced provisioning needs in 2025.
- Operational Costs: Noninterest expenses increased due to personnel costs for new mortgage production teams and higher data processing expenses resulting from operating two core banking systems. Management expects to consolidate these systems in the second half of 2025 to reduce costs.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to the continued remediation of previously identified material weaknesses in internal controls over financial reporting.
- Interest Rate Risk: The Company's interest rate risk profile has shifted toward a more neutral position following modeling enhancements. However, increased floating-rate mortgage warehouse loans have increased asset sensitivity in downward rate shock scenarios.
Key Facts for Investor Verification
- One-Time Gains: Verify the sustainability of earnings by excluding the $32.0 million in total gains related to PFH (deconsolidation and share sales) from the YTD 2025 net income.
- Specific Credit Exposure: Review the status of the $40.1 million commercial real estate loan and the $23.5 million commercial loan relationship that drove the increase in nonperforming assets and the provision for credit losses.
- Internal Control Remediation: Monitor the progress of remediation for the material weaknesses in internal controls over financial reporting, which currently render disclosure controls ineffective.
- Core System Consolidation: Track the timeline and cost savings associated with the planned consolidation of the two core banking systems.
- Consumer Program Runoff: Assess the remaining balance and charge-off trends of the Consumer Program portfolio as it continues to run off.