Primis Financial Corp.

good morning my name is Audra and I will be your conference operator today at this time I would like to welcome everyone to the premise financial court first quarter earnings call today's conference is being recorded all lines have been placed on mute to prevent any background noise after the speaker's remarks there will be a question and answer session if you would like to ask a question during this time simply press the star key followed by the number one on your telephone keypad if you would like to withdraw your question press star one again At this time, I would like to turn the conference over to Matthew Schweitzer, Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining us. 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. Further discussion of the company's risk factors and other important information regarding our forward-looking statements are part of our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has also 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. 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 release. I will now turn the call over to our President and Chief Executive Officer, Dennis Sember.

Thank you, Matt, and thank you to all of you that have joined our first quarter conference call. Matt asked me last night after our board meeting what part of the quarter I wanted to address on this call. I told him, of course, all the good parts. Only one of us had a chuckle about it. He's still not laughing as much as I thought he would. But seriously, we're very encouraged about what happened here at the bank in the first quarter. With that said, I'm really mindful of what the industry is experiencing, especially banks, say, our size, maybe even a little larger. But our thesis for this bank and our future has played out very well this quarter. And I think maybe for the cycle that we could be close to entering. I'll cover all of that shortly, but first I wanted to summarize net income. For the quarter, we're reporting $5.7 million of net income. The one-time kind of things were about $1 million of negative spread and DP costs associated with the digital success that unquestionably will not replay in the second quarter, about $450,000 of fraud expenses, all of which are at the core bank, none of which were individually significant, and a mortgage run rate that I think is about 300,000 below our current run rate, even with no additional pickup in volumes or locked pipeline. All of that moves our ROA closer to, say, 75 or 80 basis points, which isn't good enough, but I think it's within striking distance, given the momentum I see in several areas of the bank. I'm happy with the performance of the core bank this quarter. On the headline, it appears that noninterest-bearing deposits were down significantly, but one chunky deposit associated with a mortgage servicing rights loan of about $54 million left this quarter, and excluding that, noninterest-bearing only dropped 5.8%, which I believe is a good result. Total deposits, even including this departure, were only down 0.2%, just $6 million. Our bankers on both sides of the balance sheet did a great job. Our margin at the core bank was at 3.38%, down obviously from the fourth quarter, but up materially in percentage terms from where we were a year ago when we reported 2.96%. In mortgage, we've been focused on two seemingly different strategies. And without sounding too southern, it boils down to trimming and recruiting. We've been right-sizing support staff, commission rates, incentive plans, and everything we can to make our break-even production levels as low as possible. Given the performance in the last two months, I believe we are somewhere around, say, $40 million to $45 million a month to break even, which is remarkable for this industry. We've been recruiting as well, looking for lenders that like our culture, our speed to closing, our nearly nationwide capacity, that aren't looking for 2021-size signing bonuses. These combined efforts have moved production to somewhere around $700 million to $800 million a year and positioned us well for when rates fall and volumes return to pre-pandemic levels. In panacea and light premium finance, we see strong pipelines and honestly some resiliency to today's yields. Both units have very good pipelines and their profitability and efficiency curves are directionally very nice. Panacea in particular has benefited from the attractiveness of their credit offering, and we're seeing more parties interested in this paper, which signals better non-interest income opportunities and a faster pathway to meaningful profitability. On top of that, Panacea continues to punch way above their weight, finding niches with larger and larger organizations and associations that build their brand and the balance sheet affordably. Lastly, Tyler, his partners, and the bank continue to tweak and build technology solutions, and at the LLC level have considered raising capital to turbocharge things on the technology bill. I'm increasingly aware, though, that their earnings rate alone can fuel all of this investment that we collectively need to absolutely own this medical space in the next couple years. Lastly, the digital platform and the deposit success. In short, we raised $1 billion nationwide with no more staff, no fraud losses, almost nothing on advertising spend, and virtually no impact at the core bank. Right now, we have over 12,000 customers on the digital platform. Fifty-four percent of them came from the nation's 10 or 12 largest banks, where realistically they were earning close to nothing. Another 21% came from smaller community banks or credit unions, where realistically they appreciate customer service and personal relationships. The average age is just over 50, and the average deposit is a touch over $80,000. Daily, we have multiples more in deposits to existing accounts than we have withdrawals or account closures. We are still opening accounts. Last night, we opened about 53 accounts at a rate that's about 50 basis points below the national sweep rate. And the obvious boost to our company's safety with liquidity is obvious. Our liquidity ratios and our uninsured deposit levels are some of the best in the country. And with the sweep in place, we'll have done all of this in a way that doesn't dent our capital ratios. That's so important in this environment to be confident on liquidity and capital. But what may be lost on some is the opportunity with this platform. We're going to have the same success in the near future on checking accounts and lower cost deposits. Our app is more progressive and functional and safe with respect to fraud or bad actors. And as we do that, especially with the sweep in place, I expect incremental spread to the rate we offer with very little impact on our earning asset levels. So hopefully in a way that could boost our margins by some amount. There's no playbook for banks our size, even banks 10 times our size. to build a national brand or image. The industry has been so awash in liquidity with really subpar technology, and it's just seemed nonsensical to focus a lot of strategic energy on being a deposit growth leader. Our strategy is to get as many customers on this app at rates that have positive spread to the swaps, surprise them with customer service and attention, surprise them with humanizing communications, smart technology, accessibility to our executive team, rates that are better than our competition, that is stuck with incremental or branch or marketing costs, and over time build a significant national customer base that can fully fund our lines of business at costs that will push 3% margins or better. I absolutely love connecting with these customers, whether it's in text or email or telephone calls or honestly even in person as I travel across the country and seeing how pleased they are with the experience that Primus Bank has delivered. It isn't perfect yet, but we aren't done tweaking things and making improvements either. Before I turn it back over to Matt, I want to thank our staff. I cannot say it loud enough or too many times. What we've rolled out here and succeeded with is not something you buy off the shelf. We built this. We engineered this solution. We dreamed up everything from the background systems, features on the app, security and fraud prevention, and the unbelievably affordable and effective marketing of this idea. This is not just fintech relationships that are pouring deposits onto our balance sheet. Beyond just the digital team, I'm so thankful for the rest of our bank that has stepped up this quarter, answering calls and working with customers to make this quarter and this effort successful. And it's great work for our team. All right, Matt, with that, I will turn it over to you.