Primis Financial Corp.

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 Switzer, Chief Financial Officer. Please go ahead.

Good morning, and thank you for joining us for Premise Financial Corp's 2024 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. For further discussion of the company's risk factors and other important information regarding our forward-looking statements, or part of our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has also been posted to the investment 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. How a non-GAAP measure relates to the most comparable GAAP measure will be discussed when the non-GAAP measures used have not readily apparent. I will now turn the call over to our President and Chief Executive Officer, Dennis Eber.

Thank you, Matt, and thank you to all of you that have joined our fourth quarter conference call. First off, let's start with a discussion about why we moved this portfolio into held for sale and what the impact of that decision was financially. Moving this portfolio into held for sale allowed us to market significantly enough that we can mostly neutralize the credit costs and position it to be moved off the balance sheet. We are serious about moving on a host of strategic options, like we said in the press release, that would realize the market value of our company. And no real strategic option is available to us until this book is in health for sale and or sold. I believe having it marked like this lets our company focus on all of the strategies that we've outlined and even more to succeed. Had we orchestrated this exit alongside the deconsolidation of Panacea, we would have improved tangible book value and our company's strategic future. And I really wish we could have orchestrated that in just one quarter. But the fact is, we could only do half of that this quarter, and we're working on the other half right now that we believe we can handle in the first half of 2025. So the decision here was either to slog through a couple more quarters with lower earnings or just take the hit, position us to shed this book as soon as we can, and push the kind of operating ratios that we believe would be noticeable. In the end, I believe we made the right decision so that 25 could be cleaner. I obviously see real value in our company that has not been recognized, partially because we haven't been selling as hard with last year's delayed filings. and some because of the noise of this consumer book. I want to go over some of these hidden values real quick. At December 31st, 24, our core bank had 2.1 billion of core deposits with a cost of deposits of only 187 at year end. That's 25 to 50 basis points lower than some of our larger $25 billion peers, and it's easily 100 basis points lower or more than our comparably sized community bank competition. Better yet, our core bank has very enviable levels of CRE, and we have very reliable credit quality. Over the last five years, we've grown core deposits slowly but surely, but we've only focused on core relationships, and the result is this significant pricing advantage. The digital strategy, of course, has higher rates. But if my community bank has a cost of deposit that's 100 basis points lower than my competition, you have to attribute some of that to a digital strategy that let us be this laser-focused in the bank. We've achieved all of this while consolidating our branch footprint from 42 to only 24 branches, rolling most of those customers into Vibe and achieving a 95% retention rate through all the consolidations. Even better, on the lending side, we ended the year with a pipeline that was twice as large as the prior year, and over 80% of that volume is coming from new customers to the bank. I don't mean new money to existing customers. I mean brand-new customers that have never banked with us. Our model in the bank is profitable and clean and positioned in very good markets. On the digital side, we have a remarkable offering with one of the nation's only fully digital full-service checking accounts. that's grown to about 18,000 customers. But if we can't drive the results, the margin, the operating ratio improvement, then really it's not valuable. Last year, our life premium book yielded 647 and our digital deposit cost 507. So we only had 140 basis points of margin. I mean, both of these are very efficient platforms, but collectively that just didn't provide a meaningful bottom line. If you fast forward to right now, We've reduced the rate on those deposits by 75 basis points, and we've moved higher on the asset side by about 200 basis points with mortgage warehouse. Essentially, we are positioned to push margins in the 325 to 350 range on this national strategy with efficient platforms and safe short-term asset strategies. The fact is this isn't fully at scale yet, but as we build the book on warehouse and construction firms, We will see progress and the results in 2025. Our mortgage division has been consistently growing production 30% to 40% when you compare any month to the prior year. Assuming no scenario where rates fall and volumes move higher, our mortgage company will still produce results that impact our ROA by 10 to 15 basis points. We've built this slowly over the last few years, moving from $250 million of production to over a billion. We could absolutely step on the gas here with recruiting. but we are cautious and stingy with signing bonuses and instead working organic strategies like the national construction term offering. Lastly, Panacea, our division focused on doctors, vets, and dentists. This division grew to just under $435 million in total loans and impressively reached almost $100 million in low-cost funding. These growth rates are around 30% to 40%. and are only accelerating as we move into the end of the year, where we believe we have a chance to reach 10,000 clients. The banking division is very profitable, with an ROA that's accretive to the bank's overall ROA, and the parent company, PFH, where we have significant unrealized value, continues to innovate solutions for doctors that have high adoption rates and make them customers for life. There are $100 billion banks in our country with fewer doctor clients than we have. And I dare say there isn't a bank in the U.S. with more innovative ways to capture the lifetime market value of a doctor client than Premise and Panacea have brought. Matt will discuss in more detail and give you his reconciliation, but I'd leave you with this. Our moves in the fourth quarter neutralized $20 million of credit costs. As of today, we're about $5.5 million better annualized in net interest income from the combination of lowering deposit costs and selling life premium. That number moves to about $17 million annual once Warehouse is at scale in 2025, and there's only $1.5 million more of incremental operating expense to achieve this. Mortgage values are strong and still growing, and most importantly, our core bank is our central focus for value and profitability. As I stated in the beginning, we are focused on all of the strategies that would realize the market value in our company. This starts with cutting out the noise and just posting the kind of results that we know the bank can achieve. It feels like a massive knife wound to have to have done this, but limping along, trying to outlast it was not a good strategy. I'd just rather take my licks like we did and find new ways to work even harder to succeed, and we are positioned to do that. Matt, with that, I will turn it over to you for your comments.