FRST - Earnings call transcript Q3 2024

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Operator

Thank you for standing by. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primis Financial Corp.

Third Quarter Earnings Call.

[Operator Instructions] I'd like to hand the call over to Matt Switzer, Chief Financial Officer.

conference. your begin may You

Matthew Switzer

Good morning, Financial Call. us Primis for thank XXXX Third you Corp's. Conference joining Quarter for and Webcast and

Before to forward-looking expectations forward-looking that this we many or factors and note other our cause are from begin, during actual statements. the could comments results results uncertainty. many There the call materially which expressed statements, of be in that involve differ risk will please anticipated

reflect our and Further or Relations Investor operating undertake and are forward-looking to discussion recently revise the regarding time. changed no the changes which important of posted to filings results occurrence Exchange Securities also release, over obligation has to our statements or factors of assumptions, unanticipated the of other to of recent primisbank.com. the our risk future events corporate site, including our filed update We statements part section earnings been information forward-looking company's with Commission,

the we measure used will non-GAAP readily when financial the not GAAP measure comparable In a addition, non-GAAP measure most the measures relates How apparent. this some may morning be non-GAAP measures. that if of to financial are is discuss discussed

Executive to the Dennis turn will and I now our President Zember. Chief call over Officer,

Dennis Zember

morning, you, call. that have to Thank joined Good and all Matt. our you thank of you

method. portfolio accounting this results multiunit impacts the and for loan error quarter using accounting consumer the Our reflect this the our accounting correction the on for portfolio of

the they of and which life upfront portfolio. support impacts generally credit As are a Matt of will discuss reserve until half the the this second is not credit more in the received, recognized of in are with recognizes average detail, full CECL method costs the

revenue while period. is is the a the all promotional loan particularly not Additionally, in recognized,

middle XX-Qs We are the to current SEC on of in our gear up targeting filings our catch by November. working of be all to and fully on high

Accountants an Lastly, the open this NP as SEC regarding the have accounting still for filings, ] Chief consultation office [ we've at our with portfolio. we stated the in

the year we unfortunate filings, near results of compared First, the just X.XX% this on while strategy. for And portfolio continues these we've say in bank's -- lot the predict a cannot made of consumer that I to was our contribution X.XX% The outside to loans and from unfortunate our really X% few for deposits, of we outcome. future, our And loans. is because total cost because portfolio The A improve. this delayed on expect are some to only core represent a progress X% compared resolution ago. to examples bank's the these: of core instance, quarter to noise

that rate deposits the steady. the income adjustments of we the we But margin immediately have are we in net quarter. going to quarter, $X.X Alongside know necessary made adjust further billion and coming recent interest the keep into the to cut,

Our our deposits noticeable, deliver our to have with and use have leverage because to current commercial the basis to we bank bank is peers platform. community the that's core convenience bank's cost we customer base, of points of digital lower -- excuse that our me, XX technology like with and the we relationships in than the lifetime the Mid-Atlantic, XX consistently VXBE customers our

at a is pace. the new Secondly, core pipelines building on bank relationships very impressive

ability the us new growth the push with to to in is year new them, finally operating and what the was relationships and with of While community bank. to bank to majority that noticeable year. Xx on -- pipeline The continue relationships commercial relationships to is our we the pace hard grow focused and almost the this in of incentive results and half our do all is bank's it ago be the present. momentum leads and a second This believe driver the clients dollars work new existing our of

A loan continued the Tyler's activity. as equally this quarter we the a quarter comment be deposits wins unique several, and digital of had and concept division, focus capabilities built really was model the consumer well fully from funded. When on $XX in really endorsements that to up started to a tweak built loan just X big that date, accounts this or million of that. large as to flurry new mean associations and moved vertical commercial have balances the probably with To about and national we medical loan the noninterest-bearing Panacea. commercial will team vertical at deposits at continued a once are end

signs alongside development all that and real services experienced relationships and early our We mortgage good. gear team. deposit the with The in about ancillary momentum our the adoption of sell financial we are are loan high can

we which results loans, annual $X locked In is of XX% rate against XXXX. locked of -- million this Our we the on in loans, quarter billion $X loans billion eclipsed was quarter, run same our of for mortgage the $XXX time. production first quarter up the locked

to While production we quarter, about, second obviously, a what recruiting our expect us in says third momentum in having we're gives launched provides. And we we the per had that lot this that we this our that have share to the expansion year-over-year have the XXXX. best recruiting the pipeline success; combining confidence industry. we that first, the ROA quarter, now, in real had going a contribution see industry second, slower growth than momentum earnings Right and that and and in fourth division since this is with platform rate in

amount and very in that positive, total probably this it recruited to XX%. deposits the us who entire but ambition, a similar my XXXX, by home and needed came of Premium Life a platform We'll Finance in really remarkable and we reputation sheet, The announced. with sweep off of division the shrink is positive one a bigger industry lot who similar in deepened built about a for probably a opportunity Our balance level. gentlemen just X announcement to immediately very relationships and It's than bittersweet. about their to is their we assets

XX common our by improve net to ratio this basis tangible move X immediately about improve points. by We by equity X margin interest basis and to itself points expect

another run expect regards remaining basis some points of base. exiting The the and the acquisition, mortgage warehouse. we their real over lift recruited to are off. alongside with team assets next as onboard that margin X our quarters is space to bank lift an the sprinting client of a large several We with was We from a announcement

small only Life over assets. engineering are our in basis so was that we if XX has that almost our that selling right Fortunately, Life XXX had software in a with the pickup build margin about replace we our quarters. with and warehouse return base. But yields. we what of the warehouse holds now current assume relationships Premium points team we few about or points as the their had we pickup can in the higher talking vision. on done next pickup Conservatively, that or we're are XX than team basis didn't I'm XX% Premium significant have the basis and this And capacity, client points and yields entire portfolio leadership already we the confident

similar. quarter materially of few the Premium, last and our what after in company assets, Matt opportunity quality, The had This division quarters, On move. operating finished a the different my isn't really only really line was we the which sight baseline for believe good of points but ratios Life much credit we is are OpEx I basis was in and and want will credit than of steady to this very clearer it for XX XXXX. be that this with half what third we the quarter nonperforming in of costs

had migration real between the have estate and We any grades. little still have don't other

During close one commercial had the estate downgrade been up by slow adjacent or vacancies quarter, really we lease property properties. did real in that and affected to conservatively

this rates or collateral expect into have this CRE small the shortfall and funded overruns, as appraisals has peaking. so don't origination and loss provision has never doubled on pledged might from and we believe migration a nonperforming Our also on missed downgraded asset right booked borrower the for asset payment additional date, I in our cap we were But cost of almost the rate a a values. collateral. cap all

comments. All right. turn over you some it for to will Matt, I With that,

Matthew Switzer

Thanks, Dennis.

As investor presentation, of and press a our the of both SEC summary placed found in reminder, financial release found can a our results in last and website. be on can filed which be with our corporate evening X-K our

to those I'm changes of sources, found attempt impacts to the through to going recent trends This in accounting of quarter, our some underlying walk help results. highlight the in of in order repeating instead information

loan consumer include corrected third-party the portfolio. Dennis current As accounting of for our the impact period periods a originated mentioned, for prior results and

As features over following: time. recently Deferred until loans that subset recognized promotional these promotional once don't phase accrue interest XX-K, exit detailed period. loans The in promotional of changes that our is these largely modest end accreted at with the a the the filed on interest discount with all is of the require

under off income early in Third-party reimbursement pay on fee is interest waived that income. promotional for our agreement recorded instead loans interest of

changes the interest derivative losses as earnings found received. period in are CECL, earnings enhancements while reimbursements consolidation a pre-provision from and are fully credit potential of Panacea And income. includes in be our life-of-loan program of value value with recognized record value effects periods. the credit recognized, the previous each recognized under in release We all Holdings the noninterest Financial as consumer including fair Reported mark-to-market through estimated expected can representing pretax costs that

$XX consolidation investor the second the items third accounting in and effects press in PFH were release our $X.X for in nonrecurring Adjustment and for amounts quarter. preprovision changes this pretax consolidation before in of the quarter million nonrecurring change both both can found items, Adjusting and earnings versus core presentation. be for million

earnings we've in the various income to for million of a the contributed previously quarter, $X.X items expense quarter consumer versus pretax the million discussed second $X.X pre-provision program This interest third in the net quarter. and

Under $X.X differences, from million would $XXX,XXX than $X.X core last reported. our portfolio quarter. contribution higher in Last the previous $X.X or pretax were than pre-provision earnings million quarter $X.X been or that $XX.X this been for quarter. quarter, have would million million reported this less versus these Adjusting million accounting, third have

to reported promotional required end We substantial from began the that of second period timing amortizing, portion where defer loans interest the recognized interest catch-up in the up of is for due promotion. earnings the volatility recognition quarter. of are third in in $X to promotional the we exited million substantially on loans the the quarter of and A million to $X.X

reported our X.XX% in quarter. second from was quarter, the margin result, the in a up As X.XX% third

our of from X only quarter. Adjusting down the the quarter, third the have margin effects basis in timing differences, second X.XX% would for points been the

that loans promotional which noninterest $X.X of off income margin. the We million last from or paid in million reflected in our income from of interest recognized third-party for $X.X reimbursement up all and quarter, also quarter, early not interest in partner third is

at million of XX have quarter loans million quarter We with September and of their the $XX respectively. of $XX XXXX, deferring end million in promotional first periods the promotional and reaching fourth interest $XX

to want do expense. I minute Lastly, on spend a noninterest

we or to $XX.X million release noninterest presentation, in $X.X investor quarter. which million, and consolidated last As included our net was reported compared million highlighted expenses million earnings of $XX.X expense $XX PFH

million Mortgage expenses higher quarter, up $X.X the volume. million last were third quarter $X.X on in from

from nonrecurring X-quarter items, in core expenses $XX.X were million average. and bank million, Excluding last as our quarter down well with these expenses line as $XX.X

look past controlling XXXX. on and meaningfully laser-focused expenses our leverage are we move generating accounting grow in noise We operating as to and revenue

questions. With now that, can for the we line open operator,

Operator

first [Operator with the Our Stephens Russell of line Gunther question from Instructions] comes Inc.

Nicholas Lorenzoni

you for guidance on a This that just is filling with and Gunther. give to your takes off start Nick the and hires Russell expense I core around Premium warehouse? given sale Finance little puts new the Could mortgage outlook. wanted in of

Matthew Switzer

Should flat, be Nick. relatively

Nicholas Lorenzoni

warehouse, And break separately Okay. do loans modeling perspective? out -- a that going plan those to mortgage on then from you

Dennis Zember

we mean you Modeling, for I or you like maybe risk... for When we've think display everything say probably rate reserving operating to we similar loss interest it loan -- an else segment. would modeling, of done, kind

Matthew Switzer

margin? or

Nicholas Lorenzoni

loan mean I what loss reserves. that's Yes,

Matthew Switzer

going on for the couple as you how trends. be move we fourth material through to possible weeks sense break depending as we of out I the as information 'XX, get quarter, much mean a so not will Yes. can the it's in that go. next certainly But

Nicholas Lorenzoni

was sense. remember makes I be XQ just said if had on XQ of correctly, believe I or 'XX. was you deck guys rate will a those it And if of Okay. there in be good 'XX to warehouse going growth either the mortgage And -- I loans. That curious if

Matthew Switzer

to referring in what first or you quarter What the are was fourth -- quarter?

Nicholas Lorenzoni

loans. warehouse mortgage the disclosing and what out That's breaking I... start you When

Dennis Zember

mortgage I I generally. and add to the would fourth sprinting first in the -- tell you that are I know mean, customers. slower I the quarter of quarter we're think their sort industry

this really So is contacting customers. to be good the time a

former customers. bank about I here think weeks. their X employed XXX with about they left They've for been

close the year. to we're customers get now. to of the We're think maybe end XX XX I to trying by

I to we'll so probably we And we're year. And off $XXX add. that. then Premium of again, the think continue to of Life maybe just moving middle of or the through million get first next so runs off be sprinting there's We think sort we into the to mean, or year, part that I another loans. million going of $XX as

the think of replace, for call Premium think we're $XXX average really, comfortable say, these whole for year. think warehouse next mortgage I million And for book, I year, warehouse mortgage the I $XXX to million feel loans the to Life at million with let's I So looking it, -- $XXX loans.

Nicholas Lorenzoni

Okay. Great. now to That on sense. makes And ROA.

laid a think walk or X% So Can walk guys target get are when us to you a to for you going glide ROA. previously sustainable you path through out there? the you me

Matthew Switzer

going to a of got more loans volatility to get we're second that get shot either next volatility, -- to these fast is X half change XXXX there half the really because Part going we're some tied we've we're through to of to to of that, reasonable late XXXX. and the experiencing off second be the of only out potentially accounting the promotional Otherwise, take and for -- -- they to pretty the volatility. largely going going a X think be in is most we're bleed quarters. hoping for in I couple in quarters, but Nick,

dollar So think portfolio, rates aside, it middle we setting moving be all the by of a better and for but pretty at going almost dollar that we're to and good-sized incrementally 'XX, replacing profitability. higher off

some expect the the or our some see projecting bank that we're with next So to expense mortgage margin basis. decent normal contribute next on ] and [ save core better we you more year expansion do operation, to combine retail And cost controls, that core year. to

that X%. all at puts that basis how look us points up. to mean those lay combines, we contribution I I to the can't are So as takes out at we But add all of and that going all of think gets kind least

Dennis Zember

moving side our XX the mean, for rates going more -- opportunity, in margin is to no in more points. probably Premium momentum falling, with can't repriced the to you X said, and mean There's bank, is this I the that's many warehouse falling revenues and in basis mortgage, sensitivity another rates Life still I power Life liability have The that but year, mean, quarter. there talking I doubt of -- points. to I that. left XX -- the we $X are like like trading quarter-over-quarter X said, no mortgage we ROA. so holds into parts, about on or that deposits billion question, growth next core if be to and locked Premium basis all probably loans

was leave have really again, that. of saying, I'll or you're -- mean, energy enthusiasm we I good. So for the to the the talking sight it is anyway, like line about and better I at It's numbers

Operator

with Marinac Janney Montgomery line next Christopher question of from comes the Your Scott.

Christopher Marinac

quick Matt, just housekeeping a question.

are we to the the numbers reflect -- quarterlies, press once be the have of the those new of see and I verified and that sort So those kind will the that going filed. in information Do right? release Qs are

Matthew Switzer

change the all restated are for those accounting. And in the quarters Yes.

been pushed all backwards. it's So

Christopher Marinac

I Perfect. thought. That's what

stable the loan from And numbers at see those were movement be great. just to that? the you consumer XXX% Okay, quarter. behave that all? Do any does sure. way The wanted this criticized I portfolio impact

Matthew Switzer

loans No. not in they those days are consumer Those reflected are they loans, off. -- and those. XX get typical to charge It's

Christopher Marinac

That's what I thought.

-- commercial and criticized the Okay. then and or general coming goings trends on substandard? special And on just

Matthew Switzer

not the I we're outside that and whole from for much a lot one one smaller seeing And watching been a a in special of quarter while. -- more substandard, the mention both still these of X significant credits, mean, we've of not the to credits, inflows. went

with the pay. it's rely of we maybe reserve think loan had but the and a So a was very blue when came the the not out on some bigger that bit we of we customers put to like to this but continue valuation surprise, on that's very, the little surprise, conservative,

in. risk risk a use we you or already it started have moved otherwise, appraisal when -- unfortunately, comes watching. curve have I to think creep the their of aware or that can't So bucket rating into still of have credits up problem weren't to been any But curve that

Christopher Marinac

Great. Should terms sort of this a another do X a cost the to question forward that quarter and then funds. betas looking the rate how itself in And thought, peak then And of next to it just play of may see back works out have we guess, quarters? be I X that goes down? you

Matthew Switzer

first the funds For I your September. ticked mean, yes, part of cost in question, saw of down we

basically peaked August. it So in

end some rates, for rate to feels think, Fed the to, It bank competitors betas, it's we of core structure. depend particularly in of the going have higher stuff next have been of the happens on, cut. to kind As I the that with lower and have like cost the what upper

were We down. moving aggressive those pretty some of

have -- get Fed overall maybe keep is first down on and beta opportunity I our we'll the the an incrementally what seem Not somewhat continue some move. their doesn't cut. have for cut, to stuff to they're that moving last do beta aggressive XX% rates. after with many after cutting still more think dictated we're actually and first people bank to environment the some the it the core they move. probably I been by If think If of competitive to doing as but Fed cut is going cut, again,

Dennis Zember

a and been there's and not on did There's deposits, on digital or coming, of adjustments of about a rate million lot experience a we I we're in the -- another $XXX Chris, one them want coming we of sort digital we paying we're to our customer side. is doing And make generally, -- deposits. But move doing One, did aggressively. watching upgrade/conversion thing. on digital think there or the make little a did more Matt a small we another the have few moves if not rate $XXX month. here there. a move million bit be

So I on have mean billion this that up Fed just going cut going rate little more our coming of past that to in of to mean, deposits want is balance there's that's we really last are and deposits what got that plus on that some sheet that never conversion. broker $X our moved line this December. are quarter, sight into the move a we I do get

peaked, I -- about question mean, mean question we no I I your peaked. know So have there's we

we of smart be just of to I warehouse, funds. opportunity to ahead out want that having improvement get cautious to earning think we much and noticeable maybe see of we're going -- going an cost in can you're asset mortgage with But some how no, there.

Matthew Switzer

those we've appropriately and referring money digital did measured to, Dennis And newer on in rates bank, money still and but that, coming at lower even for in, with we on is new deposits we're we rates. existing the deal been were like how attracting we what --

averaging down real cost digital the of the for ones. we're being existing platform even So without aggressive

Christopher Marinac

versus that of more it's is sort Okay. that. you the and addressed core few on difference new today, if the that like going sounds to talk hard back quarters there ask is. of Great. beta inflows you it really versus about bank, a how circle Yes, on saw, And give digital the sort a I about to was experience

Matthew Switzer

Yes.

Operator

Zember, further remarks. no some questions CEO, Dennis final are things hand I'll this time. There at over back to for

Dennis Zember

you your and All right. for interest. Thank participation your again

Matt around are or I any of have questions you comments, and course, all time. the If

or text and weekend. a you. just to So Have great e-mail, give get you. call, Thank a we'll us back

Operator

call. you. concludes today's conference This Thank

disconnect. now may You

Primis Financial (FRST) 25 Oct 242024 Q3 Earnings call transcript