Primis Financial Corp.

Good day and welcome to the Premise Financial Fourth Quarter Earnings 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 2. 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.

Good morning, and thank you for joining us for Premise Financial Corp's 2021 Fourth Quarter Webcast and Conference Call. 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, firmusbank.com. We undertake no obligation and specifically disclaim any obligation to update or revise forward-looking statements to reflect change assumptions, occurrence of unanticipated events, or changes to future operating results over time. In addition, Some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings relief. I will now turn the call over to our President and Chief Executive Officer, Dennis Emmer.

Thank you, Matt, and thank you to all of you who have joined our call today or who will listen to it on the replay. I'm delighted to be on the call today with each of you to talk about some significant accomplishments in the current quarter and for the full year of 2021. As we sit here today, I'm just a few weeks away from having my second anniversary at the company. When I first joined the company, our vision was to create several engines for growth that could reliably and organically produce, could organically grow both sides of our balance sheet. Granted, we didn't have the multiples to even be hoping for M&A or anything strategic, and further, we probably shouldn't have considered it anyhow as we worked to strengthen our culture and our platform. But here we are two years later, and I'm not calling victory yet with two quarters of good loan growth, but I will tell you it feels different around here. Given the results and the outlook for our core bank, our lines of business, and our digital bank, I'm starting to see the vision come together where we can sustain mid-teen or better growth in the balance sheet and even faster growth in our earnings. It's taken a lot of time and investment to get here, but I feel so optimistic about the future direction of our operating results. Specifically about loan growth, we saw loans excluding PPP balances in the year at $2.26 billion. While this is up only 6 percent from the end of 2020, it does represent annualized growth rate of about 20 percent in the second half of the year. I'm hopeful that another couple quarters of growth at this level, and we can start redefining ourselves as the growth-oriented company we hope for. Right now, we have three reliable sources of loan growth. Our core commercial teams are producing and growing in our core markets around Richmond, the D.C. metro area, and the Hampton Roads area. At the same time, our Panacea Division and our brand-new Life Premium Finance Division are using streamlined technology to identify, underwrite, and close loans in select industries very rapidly. Both of these divisions operate nationally, and I believe they're both going to have an exceptional 2022 and produce results that look good not only on our balance sheet, but more importantly, on our bottom line. The expected loan growth is great news. but long-term, I'll tell you, we don't have enough excess liquidity on the balance sheet to be lazy about deposit growth. We could expect continued growth like we saw this year out of our core bank, but for us to fund our expected loan growth, we're going to need a faster source, and the real engine for this is our digital bank. The digital bank is intuitive and modern, and importantly, it has no geographic fence. Success in the digital bank does not require $10 billion of deposits and hundreds of thousands of customers. We estimate that just $100 million of deposits in this nationwide strategy will produce enough revenue and spread to completely break even. Obviously, we believe the strategy has more potential than that. We believe it will provide all the funding necessary to produce outsized margins on our loan growth and keep a steady source of funding on our balance sheet for time to come. Lastly, on the growth potential around here, and importantly, I would say that occasionally I slip back to my office when Matt isn't looking, and I make pro formas and pretend to be CFO again. I mean, I keep trying to understand and document the cost to acquire business and build a bank using these lines of business funded by digital strategies. The incremental costs to grow the bank like this are so different that many times I just don't believe what I'm calculating. And I say this right now because we're in the building stage, and I promise you that I have a gut check every time we have a new expense. These strategies confidently have paybacks that are short and significant. Matt and I are both M&A-oriented people. Our whole career has been that, and it's so easy in that environment to – have a strategy or a transaction and expect something to be accretive on day one. And I understand that this is not that, but I believe in what we're doing wholeheartedly and I believe the results that are possible in the short term and long term are significant. Two more items and I'll turn it back over to Matt. We pride ourselves on being innovative in our core values and maybe I would suppose not many banks have this word in their core values, but we have in our core values the word imaginative. There's a slide in our deck on Vibe, which is an app that we conceived totally in our bank and developed completely from beginning to end. Vibe essentially takes the few remaining activities that are thought to absolutely require a branch transaction, an in-branch transaction, and allows the customer to order the service directly to their home or office or current location normally inside of 30 minutes. We rolled this out in a limited way in Richmond in the fourth quarter. The pilot's three or four months old, and we've received very good feedback from customers. We've opened about $20 million of mostly new checking accounts, all from super regional banks. Being a community banker myself, I know that many community banks tout their customer service, their customer experience relative to the super regionals as the differentiating factor, the the fact that we'll move business from one bank to another. But usually that customer experience is so nuanced, the difference is so nuanced, it doesn't actually move business. I believe this ViBAP changes that for us and puts us in a competitive place with lots of new customers. Lastly, premise was like every other employer in 2021 in a very tight labor market. Staffing was tight and hard to come by. While we continued our normal recruiting efforts, we stepped out and did something different. In August, we launched something called Premise Works. This program focuses on single mothers who are looking for job training and life skills that can put them in a much better position to care for their family. Our first class had five wonderful ladies who dedicated themselves to learning all the skills necessary for a job in our bank. In return, we paid a competitive wage along with childcare and healthcare costs. This last week, all five of these ladies that came into the program graduated, and I am unquestionably sure that we will now have loyal employees here constantly talking about our company and the difference we've made. We absolutely know that we run a for-profit company, and we absolutely know what distinguishes us in the industry and builds market value. But I'm so proud of our staff for finding alternative solutions to problems that make our bank better and serve the community like we did with premise work. Be watching our social media and our website for content about this program and the success we've had in the near future if you're interested. All right, with that, I will turn it back to Matt for his report. Thanks, guys.