Primis Financial Corp. (NASDAQ: FRST) announced its fourth-quarter 2025 financial results, highlighted by a substantial expansion in profitability and a strengthened capital position. The McLean-based financial institution reported net income of $29.5 million, or $1.20 per diluted share, a 334% increase from the $6.8 million recorded in the preceding quarter. This performance marks a notable recovery from the $23.3 million loss reported in the fourth quarter of 2024.
Core Financial Performance and Key Metrics
The company’s fourth-quarter results were bolstered by several non-recurring items, most notably a $50.6 million gain from a sale-leaseback transaction. Despite these one-time gains, the bank demonstrated underlying operational momentum across its core metrics:
Total Assets: Reached $4.05 billion, a 10% year-over-year increase.
Net Interest Margin (NIM): Expanded to 3.28%, up from 3.18% in Q3 2025 and 2.90% in Q4 2024.
Tangible Book Value per Share: Rose to $13.34, representing a 14% linked-quarter increase and 28% growth year-over-year.
Non-Interest Bearing (NIB) Deposits: Grew to $554 million, up 13% quarter-over-quarter and 26% annually, now comprising 23% of core bank deposits.
Efficiency Ratio: While the consolidated efficiency ratio stood at 60.57% for the core bank, the mortgage warehouse division operated at a lean 35% efficiency.
Segment-Specific Growth Drivers
Primis’ specialized business lines significantly contributed to the quarter’s positive trajectory. The Mortgage Warehouse Lending division saw average loan balances grow 502% annually, ending the quarter with $1.23 billion in commitments across 125 customers. This segment achieved an average loan yield of 6.92% and a return on average assets (ROAA) exceeding 2%.
Panacea Financial, the bank’s medical-focused division, reported 25% annual loan growth and 39% deposit growth. Even after executing a $54 million commercial loan sale in December to enhance balance sheet flexibility, the division maintains relationships with over 7,500 healthcare professionals.
The Primis Mortgage segment also returned to profitability, posting pre-tax earnings of $1.4 million. Management attributed this to the recruitment of high-production teams in early 2025, which added over $500 million to the division’s annualized production capacity.
Asset Quality and Capital Management
Primis maintained stable asset quality with core net charge-offs (NCOs) holding at a nominal 0.05% of average loans. The bank has successfully managed the runoff of its legacy third-party consumer loan portfolio, which was reduced to $96.7 million from $172.6 million a year ago. Full-deferral promotional loans within this portfolio have dwindled to $1.6 million and are expected to be immaterial by mid-2026.
The company’s capital ratios showed significant improvement:
Common Equity Tier 1 (CET1) Ratio: 9.53%.
Tangible Common Equity to Tangible Assets (TCE/TA): 8.33%, up from 7.48% in the third quarter.
Operational Outlook and Executive Strategy
Management indicated that the current margin expansion is expected to continue into 2026, supported by the repricing of $331 million in loans with a weighted average coupon of 4.92% in the latter half of the year. Additionally, the bank plans to retire $27 million in debt by January 31, 2026, which is estimated to provide further margin relief.
Operating expenses were elevated at $42.2 million for the quarter, largely due to $4.5 million in compensation (primarily restricted stock expenses) and $1.1 million in legal fees related to mortgage recruiting litigation. However, management expects these costs to decline in the first quarter of 2026.
The board and executive team remain focused on reaching a 1.0% ROAA target for 2026, leveraging the proprietary “V1BE” delivery app which already manages 15% of commercial checking accounts. Relative to its peer group, which trades at an average of 1.31x tangible book value, Primis executives believe the company’s current valuation of 1.01x presents significant upside for shareholders as the profitability thesis matures.
Reasons to Pass on FRST
- Earnings skewed by one-time gains: Q4 results benefited materially from a $50.6 million sale-leaseback, obscuring underlying run-rate profitability.
- Expense base still elevated: Operating costs rose due to compensation and legal expenses, pressuring overall efficiency.
- Legal overhang in mortgage segment: Ongoing mortgage recruiting litigation adds execution and cost risk.
- Concentration in specialty lending: Rapid growth in mortgage warehouse and niche verticals increases sensitivity to credit and market cycles.
- Efficiency lags top peers: Core bank efficiency ratio above 60% remains weaker than best-in-class regional banks.
- Capital buffers only moderate: CET1 of 9.53% offers limited margin above regulatory requirements.
- Returns below target levels: Management’s 1.0% ROAA goal for 2026 highlights that sustainable profitability has yet to be achieved.
- Valuation discount may persist: Below-peer tangible book multiple reflects uncertainty around durability of earnings.