Primis Financial Corp.

Hello everyone, thank you for joining us and welcome to the Primus Financial Corp. second quarter earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference call over to Matthew Switzer, Chief Financial Officer. Matthew, please go ahead.

Good morning. Thank you for joining us for our second quarter webcast and conference call. Before we begin, please note that many of our comments during this fall 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 changed 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 Zember.

Thank you, Matt. And thank you to all of you that have joined our second quarter 2026 conference call. We're very pleased with our second quarter results and pretty excited about how things are moving going into the last half of 26. When I compare our current results to last year, I see strong growth in revenue, very, very contained operating expenses, increasing net interest margins, lower efficiency ratios, lower levels of non-performers, steady growth in earning assets, growing levels of non-interest-bearing checking accounts, and importantly, intangible book over 20% from last year. Lastly, It's really nice to see some stability, Matt, return to our operating results, which I believe is critical to making sure our work is appropriately valued. For the second quarter, we're reporting net earnings of $9.4 million, or 38 cents per share, compared to 2.4 million, or 10 cents, a year ago. During the current quarter, we did book a gain on the sale of an investment in an insurance agency. of about $5.9 million, and we fully offset that with a legal settlement and a reserve bill on our largest office CRE. Because these items washed, I believe our stated ROA for the quarter of 90 basis points is really the recurring level that we're working with, and I'm very pleased to see this kind of improvement. These results include a net interest margin of about 345, up a couple basis points over last quarter. but up almost 60 basis points over the same quarter a year ago. That margin growth comes alongside steady earning asset growth, which has happened for several years now. For the quarter, we averaged about 3.9 billion of earning assets, which is up about 11% compared to the same time a year ago. The increase in margins and earning assets combined with really strong performance from our mortgage company allowed us to have our first quarter ever with more than $50 million of core revenue. That level is 40% higher than it was a year ago. Making sure that that revenue moves to the bottom line is critical. And the recurring pitch we've had with investors is that operating leverage will be our main strategy. Matt can give you a lot more context, but I'm showing that our core OPEX is up about 16%. over the past year compared to the 40% growth in revenue I just talked about. Of that 16%, 7.3% is tied to the increase in mortgage revenue, and 4.7 is tied to the lease expense from the sale-leaseback. So, actual growth in OPEX, the real controllable part, is reliably less than 5%. This is outstanding work by our executive team and our staff. and it's totally reset the operating performance you can expect from our bank. In the quarter, we had a nice improvement in credit quality with non-performers moving down by 36% thanks to a single CNI loan that was refinanced elsewhere. And then additionally, we were able to upgrade a mixed use commercial project that finally reached stabilization. So collectively classified assets declined by about $53 million or 36%. and as we stated earlier, we built additional reserves on our largest office loan by about $5.3 million in the quarter. Lastly, before I turn it over to Matt, we announced in the press release a series of earnings improvements that are coming out of our court consolidation project. Altogether, we believe the impact on next year's results is about $7 million pre-tax, which includes zeroing out the amortization expense from the original bill of the court. This set of improvements is about 13 or 14 basis points in the ROA. It's about 22 cents per diluted share. That's important. But from a strategic standpoint, what is so special or noteworthy about this is that I firmly believe that this announcement, all that guarantees another year and a half of outside operating leverage is similar to what we've put up this year. That's very exciting for our team and our board, and we believe should meaningfully improve the kind of results we put up in 27.