Primis Financial Corp.

Good morning and welcome to the Premise Financial Corporation third quarter 2021 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Matt Switzer, Chief Financial Officer. Please go ahead.

Thank you and good morning. Before we begin, please note that many of our comments during this call will be forward-looking statements which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Factors include but are not limited to our ability to implement various strategic and growth initiatives, competitive pressures, economic and political conditions, interest rate fluctuations, regulatory changes, asset values, and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has been posted to the investor relations section of our corporate site, premisebank.com. We undertake no obligation to update or revise forward-looking statements to reflect change assumptions, the occurrence of unanticipated events or changes to future operating results over time. We may discuss during this call our non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release. I will now turn the call over to our President and Chief Executive Officer, Dennis Ember.

Thank you, Matt. And thank you to all of you who have joined our call today or will listen to it on replay. I apologize in advance for my voice. I have a cold, but I'm feeling fine besides that. Several things I want to highlight before Matt fills you in on some details with the financials. The most important item to note, I think, in our quarter is the amount of loan growth we have. For the last year or so, we've been working to permanently changed the company's deposit mix, which was undoubtedly the biggest overhang on our franchise value going into the pandemic. We've accomplished that, and now our biggest opportunity is to deploy this rather large amount of excess liquidity that resulted from the deposit success. During the quarter, we had about $122 million in total loan growth, which is about 24% annualized growth rate. We are delighted with that growth rate for sure, but our target growth rate is still more mid-teens for the second half of this year and really through 2022. The growth this quarter was mostly in our core bank, augmented by some purchases of mortgage loans and some growth in Panacea. As we roll into 2022, we believe the growth will be equal parts core bank, Panacea, and production from our newest effort in life insurance premium finance. Collectively, we feel pretty confident that this combination will permanently change the trajectory on our loan growth, which for several years has really at best been unremarkable. In my mind, knowing that we can grow both sides of this balance sheet organically with noticeable operating leverage is the critical foundation for building franchise value. Obviously, this is just one quarter of loan growth, but I believe the signs are here for for the coming quarters. I mentioned it here, but our newest effort on building niche lines of business is the life insurance premium finance business. We've recruited several individuals that collectively know the credit, operations, technology, and sales side of this business, and we intend to be offering this niche product starting this quarter. These individuals have substantial experience in the industry. and their incentives are all based on profitability and return on assets from the division. I'm particularly excited about this because in my career of hiring producers and building lines of business, it seems like our batting average is the highest when we recruit doers versus the managers. When we recruit doers, people who actually deal with the customers, people who actually get their hands dirty, people, and then honestly, people who negotiate harder on their incentives than they do their base salaries. These individuals were just that, and they firmly believe they can move the needle for us in this business. During the quarter, we also announced that we were selling our ownership interest in Southern Trust Mortgage back to the principals of the business for a discount of almost $3 million. Our relationship with Southern Trust has been very fruitful and profitable for the bank We have a great relationship with the principals over there and we'll continue to portfolio some of their loans and offer warehousing services. Long term for premise, it just made sense to exit the ownership part of our relationship and to better position us for a solution that can be 100% under our umbrella. I don't think anybody expects us to be able to exit this relationship and find a new opportunity all in one quarter. And so we're not guiding that there is another mortgage solution around the corner. I obviously believe in this business and its impact on profitability, but short term, we will be without this kind of income. Let me make a comment or two about our digital bank effort. And in doing so, I'd like to give a lot of credit to our CIO, Cody Shefflett, and his wonderful team for having us this close to a launch. On November 15th of this year, we're going to pilot the new digital core to friends and family, offering full service checking and savings accounts. I hope you can appreciate the choreography that is required with all of our excellent vendors and every department in our organization to make this happen. Mostly on time and with the product set we had initially planned. As we finish this launch on the consumer side, we are already visioning and starting to work on the commercial side. And in our pilot and market research, business account customers were more interested in our unique offerings, which really excites us given the relative size of commercial versus consumer checking accounts. Last thing before I turn it back to Matt, I wanted to make a comment about profitability. On this call, I've highlighted how loans are up, how deposits are up, how momentum is up, honestly, on both that can really sustain us for the next quarter. I've mentioned a digital bank effort that is, quote, up, that is on time and doing well. What isn't up enough is our overall profitability. A 72 basis point ROA is not enough by a long stretch for anybody on this executive team or our board. And I know we're doing all the right things and doing them quickly. building a company with momentum, with rock-solid infrastructure, depth and expertise in risk management teams and processes, niche lines of business that support our overall growth rate. Our pathway to a top-tier ROA is simple, and that is our goal. The near-term pathway is investing this excess liquidity. That's only earning us eight basis points. and doing so with very limited incremental operating expense. I know that that's what lies ahead. I know that our incremental operating leverage on this growth is significant. And, you know, and speaking for Matt, we believe that that kind of operating leverage and operating ratios are right around the corner. So now that I've spoken for him, I'll turn it over to Matt.