Primis Financial Corp.

I would like to welcome everyone to the Premise Financial Corporation first quarter earnings call. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, we will have a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If at any point you would like to withdraw your question, just press star followed by the number one again. With that, I am pleased to turn the call over to Matt Switzer, Chief Financial Officer. Matt, you may now begin.

Thank you. Good morning. 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. 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 Emmer.

Thank you, Matt, and thank you to all of you that have joined our conference call this morning. For the quarter, we saw continued, we saw our performance continue track, excuse me, For the quarter, we saw our performance continuing to track to the levels that we have expected. We have three in-place strategies that will drive much higher ROAs that I'd like to discuss with you. But before I do that, I want to highlight our core community bank, which I believe is going to be a driver of our growth and results this year. We continue building pipelines of new customers in the current quarter, pushing today's pipeline to about three times what it was a year ago. For the first quarter, loans were down a touch because of some delayed closings. But in April, as of this morning, our core bank is up $25 million in loans over the quarter end, with plenty of pipeline to keep the numbers moving for the rest of the second quarter. Our loan repricings in the first quarter at the core bank were in the mid-7% range, and our new deposit accounts opened came in under 2%. All that and our core banks ended with essentially the same operating expense that they had a year ago, managing tight and letting our improvements have an outsized impact on the bottom line. The momentum at the core bank is encouraging and important when you consider the three in-place strategies we have to materially change our results. I'll give you a quick recap of these and some first quarter results realizing them. First is growth in earning assets, back to the level that we experienced before we sold the life premium book. In the second quarter of 2024, we had about $3.75 billion of earning assets, about $350 million higher than where we finished the first quarter of 2025. Growing earning assets hasn't been a problem for our bank. And as I look through the rest of this year, we expect about $100 million of growth from the core bank. about $150 million more in warehouse, and about $125 million more for panacea. None of these strategies need more operating expense to drive this growth. And so over the next few quarters, as we reach our target, I expect the spread on this growth to drop straight to pre-tax and lift the ROA by 20 to 25 basis points over our first quarter numbers. Second is our mortgage division. We need mortgage to add about 20 basis points to our return on assets compared to last year's contribution of about five basis points. We've been slowly and reliably building our mortgage division since we acquired it in 2022. And I know that that growth sounds insurmountable, but we closed $800 million of loans in 2024, but had about 1.2 billion of momentum as we exited the year. Our pre-tax income divided by closed volume in the first quarter of 25 was 50% higher than all of 24. And so we already have a higher volume and higher profitability to carry us very close to that goal. But to further support that and to highlight the opportunity here, we continue to recruit and brought on some of the best teams in the country. We added the top producing team in Nashville, Tennessee that likely will close somewhere between $150 and $175 million per year. And we added a family team in Wilmington, North Carolina. All are military veterans and expect that they will close $175 to $200 million per year of mostly FHA VA business. We also added teams in Austin, Texas and some other markets. And collectively, the first quarters recurring yielded increased production capacity of about $500 million. Lastly, we're working, and probably most importantly, we're working to simplify and consolidate our core processing contracts into one. We've built all the proprietary integrations and customer experiences, and we did so last year so that it would be core agnostic and allow for the kind of move that we need to make. Our customer experience, which is unquestionably leading the market, will not change, nor will our unique and reliable method for banking the entire country with proprietary concepts that weed out bad actors and fraudsters. What will change is the bottom line impact, and we think materially. We expect to have this announced in the second quarter of 25 with a clear path to what we think or are confident will be a 15 to 18 basis point pickup in our ROA. Before I leave this, I want to make a comment about the importance of the digital platform and why that core consolidation is so important. I had a question from an investor last night, and it sort of jogged me. It sort of made me think about this and put this together. Right now, we fund everything that isn't the core bank with our digital platform, meaning I'm not stressing my very profitable core community bank with having to stretch to fund national ideas. The digital platform funds all of Panacea's excess lending, which I believe will be around $500 million by the end of the year. With that funding and at our digital cost of funds, Panacea will earn the bank around a 1.5% after-tax ROA. The digital platform funds Mortgage Warehouse, which will bring in a lot of low-cost funds itself. But with its production, I suppose it will need about $200 to $250 billion throughout the rest of 25. At the digital cost of funds, Warehouse will earn the bank over a 2% return on assets. Collectively, this is an exceptional idea for growth and profitability. It augments and supports the community bank. and severely pants down the idea that we have to win every single loan and every single deposit in the marketplace in our core bank. Over time, that pressure in a community bank leads to poor credit decisions and higher costs of deposits. The only problem with realizing this dream scenario on almost $1 billion of balance sheet is the cost to run the digital core is pretty high. Our trailblazing idea was supported by something back then that the Corps couldn't do. But over time, the Corps have modernized and now accept outside APIs and integrations. And once we've resolved the higher cost of these two Corps, this safe and balanced strategy is going to be exceptionally profitable for the doctors. My last general comment about all this is about panacea and our efforts to deconsolidate. We have made some of the changes. We made what we think are most of the changes near the end of the first quarter to lessen our control over the parent company and believe we may be close to being able to illustrate a real case for deconsolidation. Given that the gain is large and the accounting is complex, we're working closely with our consultants and with Crow to know for sure if the changes are adequate. Consolidating panacea in the first quarter reduced our operating ROA by 10 basis points, simply from reporting our share of the non-tax-affected operating loss in our results. So consolidating this would have an additional impact improvement in our results. Last comment quickly about the consumer book that's driven all of the volatility in our results. It really covered up a lot of the progress and improvements we've made in the company. We moved the portfolio back to our held for investment portfolio as the prospects to sell the portfolio faded. Virtually all of the volatility and risk in this portfolio centered around the loans with promotional features that have declined from $90 million at June 30th of 24 to only $17 million at the end of the most recent quarter. The standard portfolio has good consumer performance, And the remaining portfolio of promotional loans are reserved at 75% of the principal balance that we expect to roll to amortization. We evaluated this book aggressively in the quarter as we moved it to help for investment in our CECL model, and we booked an additional provision related to that analysis. But going forward, we believe we've neutralized the noise and volatility here and are focused on earning back the hits we took on this as fast as possible. With that, Matt, I will turn it over to you.