Primis Financial Corp.

Thank you for standing by. My name is Kayla and I will be your conference operator today. At this time, I would like to welcome everyone to the Premise Financial Corp second quarter earnings call. 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star and one. I will now turn the call over to Matt Switzer, CFO. You may begin.

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, PermissBank.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. How a non-GAAP measure relates to the most comparable GAAP measure will be discussed when the non-GAAP measure is used, if not readily apparent. I will now turn the call over to our President and Chief Executive Officer, Dennis Embert.

Thank you, Matt, and thank you to all of you who have joined our call today. Starting at the top, earnings for the quarter improved to $7.8 million when compared to a net loss of $311,000 for the same quarter a year ago. Both quarters have some noise, and Matt will outline that shortly. But when you exclude the noise, we're showing pre-tax earnings of approximately $11.7 million for the current quarter, which would be one of our strongest quarters to date. These results are mostly across the board and come before we really, before we experience any real lift in net interest margin. Results from the core bank, our lines of business, steady margins, just over 3%. Operating expense controls from the initiatives that we undertook a year ago have all played a significant part in these results. Consolidated the company's reporting a net interest margin of 3.03%. On a standalone basis, excluding the lines of business and the digital platform, The community bank's margin improved to 3.25% in the current quarter of 24, compared to 2.82% the same quarter a year ago. These results against last year reflect the bank's dedication to seizing all of the loan yield opportunities we can at renewal periods, but more so the focus on deposit costs. Our core banks had the luxury of having the digital platform behind it, And that's provided an opportunity to focus on the more profitable deposit relationships at the community bank level and not let the cost of funds get away from us. The legacy franchise we have in the core bank has really shined in this past year through all the pressures the industry has faced, as well as our efforts on branch consolidation. Our lines of business also had a great quarter. On a combined basis, Panacea, Life Premium Finance, and our digital platform finished the quarter with $835 million in total loans and just under a billion in total deposits. This represents about 25% of our total loans and about 29% of our total deposits. Incremental loan yields are still very good with new production in the high sevens and even some in the 8% range for these higher quality lending strategies. Funding costs have been stable. over the past few periods at about 4.84% combined, which is high, but we still believe that or are confident that the beta here on this funding is high and that as rates begin to decline, these combined strategies will see a material profitability lift. Mortgage had a great quarter, reporting net income of pre-tax net income of just over $1 million compared to essentially a breakeven quarter a year ago. During the quarter, we took about $228 million in locks, which was up about 25% against last year's, against the same quarter last year. Our gain on sale margins came in at 3.1%, up from 2.8% a year ago. Given how we believe rates will be moving in the coming years, we really would like to recruit harder and maybe double our volume potential, closer to $2 billion annually. But recruiting right now in this industry is not easy. We're going to stay disciplined and offensive. We're going to look for opportunities where we can on the recruiting side. And we're going to make sure that our profitability continues to improve like we saw this quarter. Tangible book value improved to $12.59 per share, which is 8.8% higher against the same time last year. We still expect to deconsolidate PFH as soon as we can. and record the value of those shares, which would lift tangible book value by about 65%, excuse me, 65 cents per share and improve tangible capital ratios by about 40 basis points. Matt got pretty excited about 65%, but 65 cents per share. Lastly, as I close out, as we look forward, I believe we're going to see continued strength in the company and incremental progress on our operating results. The core bank's focus on deposit growth first and commercial lending with new and existing customers will continue to benefit from all of our digital capabilities and other advantages like Bob. Our lines of business, although pretty young, are going to continue to age well and improve quarter over quarter just like we've seen for more than a year. Collectively, our focus on holding the line on operating expense or potentially even seeing some net savings will make the results even more positive. I'm not going to sit here and say that I think we're wildly liability sensitive, but a falling or softer rate environment will be positive for us, both on spreads and on mortgage volumes. The rapid success we've had on our lines of business and the impressive adoption by customers has our phone ringing a lot with ideas and pitches, but we're staying focused on just our existing strategies and opportunities. As we tweak and improve our current offerings, we're going to continue to pivot on the digital platform to focus more on lower cost, higher value deposit relationships. and make our offering a more familiar and complete community bank rather than being singularly focused on only a handful of pretty innovative deposit accounts. All right, with that, Matt, I'll turn it to you.