Good morning, and thank you for joining us for Primis Financial Corp.' s 2026 first 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.

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, primisbank.com. We undertake no obligation to update or revise forward-looking statements to reflect changes in 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. Thank you for all of you that have joined our first quarter conference call.

We're excited to report that in the first quarter we earned $7.3 million or 30 cents per share, which compares to $22.6 million and 92 cents per share in the same quarter of '25. As I'm reading that, excited to report earnings shrinking that much, the fact of the matter is, on an operating basis we earned 33 cents per share in the first quarter, which excluded a small tax adjustment related to 2025 results.

When you compare that to same quarter a year ago, it's up 126% operating earnings, where we reported 14 cents in the same quarter of '25. Matt may mention this, but the first quarter of '25 included a substantial gain on the deconsolidation of Panacea, which is what I'm excluding.

Our key operating ratios obviously improved alongside of that earnings number I just gave you. On an operating basis, our ROA improved to 84 basis points compared to 40 basis points in the same quarter of '25.

Driving that were a couple items: margin, mostly, and as well as operating expense control. Our net interest margin benefited from the securities restructure as well as the mix of earning assets and climbed to 3.43% in the first quarter compared to 3.15% in the same quarter of '25.

We continue to put up nice growth numbers that are manageable, but really distinguishes amongst our peer group. Loans ended at $3.4 billion, up 11.7% compared to the same quarter in '26.

That excludes about $40 million or so that Matt that we moved into loans held for sale related to a flow agreement with Panacea. Really, our growth was probably stronger than this.

Deposit growth over the same period is really what you should look at. That came in at just better than 8%, with very little of that from the digital platform, which is pretty steady state at about a billion dollars.

The growth in checking accounts at our company was even more notable, with non-interest-bearing checking accounts growing to $541 million, which is almost 19% higher than where we were in '25. Checking accounts continue to be a more meaningful element of our deposit mix and were 15.9% of total deposits compared to just 14.2% in the first quarter of '25.

Lastly, it's very important to note that we grew deposits in this strong a fashion and never once felt pressured in our core bank or on our digital platform to be more aggressive on rate. We're doing it with technology, with service, with people, with getting in front of folks, focusing on commercial deposits, and having real success.

All of the energy and momentum on our balance sheet really starts at our core bank. There's never been a time since I came to Primis that our core bank has had this opportunity on both sides of the balance sheet.

Honestly, we're winning business that several years ago we just wouldn't have been in the running for or maybe even had a conversation about. Virtually nothing that we're doing to win this business has to do with rates or fees.

We're leaning hard into our technology, our service, our people, our existing customers, who are turning out to be amazing centers of influence for us. For so long, it felt like all we were doing is working on our factory and stuff in the factory, but today stuff is rolling off that assembly line faster and faster, and I'm very encouraged by what our people are accomplishing.

Mortgage warehouse has fully replaced life premium finance at this point. It has been so well received in the marketplace.

We finished the quarter with about $460 million outstanding. For a few days in the quarter, near the end of March, we crested half a billion dollars outstanding.

This is before any refi boom, is before the busy spring and summer seasons for retail mortgage. Importantly, warehouse is still producing impressive yields and margins, efficiency ratios in the 20s.

The amount of scale and impact on our overall operating ratios from this business is not really something that's been fully baked or recognized in our current numbers, as really they've been just scaling the business so quickly over the past year. I believe we could probably double this business in the next 12 to 18 months, and I believe the incremental impact from that second double is going to be very meaningful.

Retail mortgage had an absolute blowout quarter. They'll tell you that it was impacted by some Middle East activities and had an impact on rates and fair value adjustments, and that's true.

We might have reported half a billion dollars, looking at Matt, half a billion dollars more had that, but regardless, pretax income in the mortgage group grew to $2.1 million in the first quarter compared to $766,000 same quarter a year ago. In the quarter, our earnings crept up to 57 basis points on closed volume compared to 46 in the same period a year ago.

On a profitability basis, we're up maybe 20, a little better than 20% on closed volume. Our recruiting pipeline has never been this strong, and consistently we double each month on apps, closed volume, new files.

We're very positive about what the second half of the year would look like. Right now, we believe Primis Mortgage is on track to be a top 50 mortgage company nationwide in 2026.

Lastly, before I turn it over to Matt, I want to emphasize what's really present mind for us in our desire to build this into a top-performing bank. In our day-to-day here, we are laser-focused on growing checking accounts, like I mentioned earlier, to about 20% of total deposits.

Secondly, we're determined to drive massive amounts of operating leverage from our consistent, reliable balance sheet growth, using steady to decreasing OpEx. I know I've been saying this for several quarters, and so as the quarter ended, I was pretty delighted to start playing with the numbers and see what I'm about to tell you here.

If you look at the last year, first quarter '25 to first from first quarter '25 all the way back to the first quarter '24, we're reporting core revenue of about 45, we're reporting core revenue of about $45.6 million, which is higher by 33.7%, call it 34%, over a year ago. Reported operating expenses straight off of Matt's income statement, no adjustments, came in at $33.8 million, which is only 4% higher than the same time a year ago.

That's 34% growth in revenue, only a 4% growth in OpEx. I had in my comments that I'd like to promise that we could do that for a couple more years, but I was afraid Matt would grimace, I took that out.

This is an extraordinary level of operating leverage, and really the driver of our results. Nobody at Primis thinks we're done in this area and that revenue may not be outpacing OpEx going forward.

We have several strategies, of course, to continue getting this result, and one of those is AI, and I don't want to steal Matt's comments or his hard work on this, and I know he's going to comment further on this, but AI for us is the same kind of opportunity and catalyst that you would expect me to report if we were doing an M&A transaction. We already have all the tools we need for this.

We expect hardly no additional investment except the deep training that we're going to give our staff to be effective with this, and we believe that in a year, we are going to be the undisputed leader amongst banks under $10 billion using AI to drive operating results, self-sufficiency, customer satisfaction and experience, and importantly, fraud prevention. When you combine that with our work towards converting our core bank to a fully digital core, we are on the edge of being a uniquely positioned bank with technology that has figured out how to keep our community bank feel.

With that, Matt, I will turn it over to you.

Thanks, Dennis. As a reminder, a discussion of our financial results can be found in our press release and investor presentation located on our website and in our 8-K filed with the SEC.

Beginning with the balance sheet, gross loans held for investment increased approximately 14% annualized from December 31 to March 31, led by growth in Panacea and mortgage warehouse. Average earning assets increased 6% annualized in the first quarter, with the slower growth rate versus period-end growth due to the ramp in mortgage warehouse later in the period.

Average deposits were up 4% annualized in the quarter, while average non-interest-bearing deposits were up 7% from year-end. Net interest income was approximately $32 million, a substantial improvement from $26 million a year ago.

Our net interest margin the first quarter was 3.43%, up from 3.28% last quarter and 3.15% in the year-ago period. We have expectations for further margin expansion as we progress through 2026.

We completed the redemption of $27 million of subordinated debt at the end of January, so that was only partially reflected in the quarter. We also have approximately $400 million of loans repricing in the second half of 2026 and early '27 with a weighted average yield of 4.81% that will add to loan yields.

Core bank cost of deposits remains very attractive at 159 basis points for the quarter, flat from the prior quarter. Cost of total deposits was 223 basis points in Q1, down 3 basis points linked quarter.

Our focus on growing NIB deposits is a key part of our strategy to continue to drive funding costs lower. Our provision this quarter was $1.5 million, partially driven by growth in the loan portfolio as described above.

Approximately $0.7 million of the provision was due to specific reserving on impaired loans, while another $0.4 million was tied to activity in the consumer portfolio. Core net charge-offs remained low at 6 basis points in the first quarter of 2026.

Non-interest income was $13.6 million in the quarter versus $12.8 million in the fourth quarter after adjusting for the sale-leaseback gain, investment portfolio restructuring, and Panacea loan pool sale in the fourth quarter. Mortgage revenue was solid in Q1 at $10.8 million versus $10 million in the fourth quarter and would have been even better in the first quarter if not for the impact of market volatility late in the quarter.

Year-over-year, retail mortgage production was 122% higher in the first quarter of '26 versus the first quarter of '25, showing strong momentum as we head into the busy homebuying season. Also included in that production was $26 million of attractive construction-to-permanent loans in the first quarter, up from $4 million in the first quarter last year.

On the expense side, when you exclude mortgage and Panacea division volatility and non-recurring items, our core expenses were $22 million in the first quarter versus $20.8 million a year ago. Absent the increased occupancy expense from our recent sale-leaseback transaction, core expenses on this basis would have actually been down year-over-year.

We've been focused on controlling expenses to maximize operating leverage and feel like we are in a good spot on that front so far in 2026. I would also like to take a moment to briefly touch on how we are thinking about AI.

As mentioned in the earnings release, we have canvassed the bank looking for opportunities to deploy AI tools to reduce repetitive and time-consuming tasks and generate efficiencies. Our first pass has identified hundreds of hours of opportunity, and there is almost certainly more that will be found as we start tackling these projects.

We view this as a key part of our strategy to keep expense growth to a minimum while maximizing operating leverage. Equally as exciting from where I sit, our in-house talent in this area, combined with the robust tools built into our existing products, such as Microsoft Copilot, should allow us to get the vast majority of these efficiencies without expensive consultants.

In summary, we are excited to report a solid first quarter in line with our expectations and believe we are still on track to hit our profitability goals in 2026. With that, operator, we can now open the line for Q&A.

Hey, good morning, guys.

Morning.

Hey, Woody.

Wanted to start on mortgage, and as you mentioned, it was a blowout quarter in what's typically a seasonally weaker quarter. We're now entering the stronger quarters ahead.

What are your expectations for production in the near term? Then also in the mortgage expenses, was there additional hiring that was done in 1Q '26 or elevated legal expenses, anything that sort of propped that up?

Nothing unusual on the expense side. Yeah.

I think maybe when we came into the year thinking we closed $1.2 billion last year, but had a lot of momentum in the fourth quarter, thought we'd probably have a $1.6, $1.7 billion mortgage company. Then through the first quarter, felt like it was a little higher, maybe $1.8, maybe even $2 billion.

We I feel like we'll probably still maybe around 100-- April's very strong, sort of reflecting what we thought. I think I'd say we're probably still somewhere in the $1.8 billion range on closed volume.

I think, Woody, what's important is, as we've been growing, what's important is we were at 46 basis points a year ago, we're at 57 basis points now on closed volume. What's impacting that is obviously a lot more scale on the fixed expenses as we get closer to $2 billion, a lot more focus on, Matt mentioned construction perm, we have a big construction perm focus here that's honestly very centered on government.

We'll get higher yields there. Really, we've been building that for the last year.

These are probably 6- to 9-month builds, so that's starting to flow. What's important, I think, is that we think we're going to do $1.8 billion or so this year as things look right now, and maybe trend somewhere closer to probably a touch over 60 basis points.

The Middle East event probably hit us for a few basis points, 5 or 6 basis points on profitability. We might have been over 60 had we not had the That's going to happen in mortgage, though, you can't really exclude it.

Yep, that's helpful color. Then maybe shifting over to the net interest margin outlook, Matt, you noted some of the loan repricing tailwinds through the remainder of the year.

Growth is expected to remain strong, you're going to have to fund that growth. Do you think you can continue to post strong growth and see margin expansion, or are we looking more at a flat margin with incremental growth?

I think we'll see a little bit more margin expansion because of the debt payoff I mentioned, and we also had a little bit of a drag in the margin in the quarter from moving those loans to held for sale. We reversed some deferred costs that ran through the margin.

It was only a basis point. We'll see some margin expansion next quarter and then probably inch up from there.

I would not expect margin to hit 3.60%, but would we hit high 3.40s to 3.50% as we go through the year? Most likely.

Got it. Then maybe just last for me on the credit, I appreciate the comments on the paydowns of those 90-day past due loans subsequent to quarter end, but just on some of those larger relationships that are still on MPA, any update on those and when we could see possible resolution?

That's funny you asked that. Matt looked straight at me, like, you answer that one.

[laughter] There's two commercial real estate deals, office, and we've had both had pretty good quarters on new leases. I think it's trending positive there.

I think the two things are trending positive: one, there is more leasing activity. Sales cycle on new leases in an office park like this is longer than we want it to be, but still, the fact that they're talking to a lot of folks and that there's a pathway is positive.

The second is cap rates are improving. They're not falling like we'd like them to, but they are improving, and so I think, every day that goes by, we're a little safer on value.

They're current, these are not could change at any time, but right now things are trending more positive there. That answer your question?

No, that's perfect. I appreciate you taking my questions.

Congrats on the good quarter.

Thanks,

Woody.

Hey, good morning, guys.

Morning. ): Hey,

morning, Dennis. Morning, Matt.

Maybe just a quick follow-up on the margin commentary. Appreciate the directional guides, but maybe some of the underpinning assumptions.

It would be helpful to get a sense for kind of where new commercial loan origination yields are today, and then Matt, within the guide, how are you thinking about deposit costs from here? Is there room to move those lower or is there kind of a flat to upward bias within your margin expectations?

I'll start with the last piece. I think on the deposit side, it's probably flat, up or down a couple basis points, but I don't expect any substantial moves in the cost of deposits in the near term.

On the production side, we're in the core bank probably low to mid-6s. We're probably regularly five-year.

We're probably close five-year 2.75%.

Low 6s,

yeah. Um Warehouse is probably better than that.

Mortgage warehouse is probably, with fees, one-month SOFR plus 315, 320. Panacea is outstanding.

The niche that they've established for themselves, their marketing, their profile, the opportunity to do business with them is reflected in the rates, and I think the rates they're getting on their production is exceptional, too. They're probably five-year Treasury plus 250, 260 on that kind of credit.

On funding, and Matt and Matt Matt and I regularly debate this. Across the bank right now, I feel like we could probably take digital down 25 or 30 basis points, probably not lose that much.

We could probably take the core bank down 5 or 10. It's already very low.

There's some savings that we could get on the deposit side. The problem is it puts us in a place where we're not very strong on the growth side.

Again, we're not leaning into rate on digital or anything else, but we also don't want to not be competitive. Right now, when we're looking at Panacea, Panacea could do $200 million for us this year, warehouse could grow $300, $400 million, the core bank is the best it's ever been, that could be a couple hundred million.

We don't want to go harvest 30 basis points of deposit costs and then just rely on Home Loan Bank advances. We don't want to be that bank.

):

All right. Thank you, guys.

Appreciate the color there, and Dennis, you kind of took my next question in terms of how that loan growth might shake out from a vertical perspective, I appreciate that. Maybe I would then switch gears to the expense front.

How are you guys thinking about directionally the overall expense base inclusive, if we could, of the kind of mortgage banking vertical as well?

Inclusive of mortgage, that's kind of hard to spit out, unfortunately, because it's so tied to volume. It's going to be a almost direct percentage of whatever they're planning to do in the next quarter.

I like to think of mortgage as kind of net non-interest income and non-interest expense for the year. Now that doesn't include spread income, which we also include in our profitability.

It's probably going to net us $5 or $6 million for the year. You can kind of take whatever your revenue assumption is in non-interest income for mortgage and kind of back into expenses from there.

Then Panacea Panacea adds some volatility to it as well, we really focus on that core expense number, which is around $22 million. I think we'll stay in that kind of $22 to $23 million range for the year.

):

Okay. No, understood.

Appreciate it, Matt. Thank you.

Then just last one for me, guys, would be an update on your kind of ROA glide path. Like you mentioned in your remarks, would expect to hit your targets, which I think are 1% ROA by the end of the year.

What aspirations do you guys have from there and sort of a timeline to achieve?

You want me to answer that before I boxing you into something?

No, please. [laughter] Move the goalposts again.

I can take it. Matt Matt sometimes doesn't like how aspirational I am, Russell.

):

Oh, I understand. Yep, I get that.

Yeah. 1%, 1%'s a good line for us because we've not consistently been there, but 1%'s, given our growth rates and our dividends, that will probably keep the bank's capital levels flat.

We want to build book, we want to build capital ratios, we want to position ourselves to be strategic, and so we've got to be higher than that. I think mortgage at scale, I've said it's 57 basis points.

Mortgage at scale probably is another 20% higher than that. That's going to be a big deal in the ROA.

That's probably another 10 basis points to the ROA. Warehouse is probably going to add another 10 basis points once it gets to scale.

The AI thing that Matt's working on and rest of our bank, over time, we're not looking at that if Russell is something that's going to reduce head count. What it's going to do is take the experts we have and just make them be able to manage twice as much, and we can manage like that when we have growth rates like we have.

I know I'm going to need these staff over time. Aspirationally, given these lines of business on top of our core bank, we ought to be 1.25% or better.

Probably are looking more ROTCE to be something that would get near 15%. I think if 15% ROTCE, you kind of can control your future.

If people don't like your stock, you can just buy it back. If they do like your stock, then you can do other strategic things.

Really, until you get to that point, all you're doing is working to get to that point. Did I box you in?

That's good. ):

All right, I appreciate it, guys. Appreciate your thoughts and for taking all my questions.

Thank you very much.

Thanks, Russell.

Hey, good morning. Dennis, the last couple days banks have talked about the competitiveness of digital deposits being more expensive than brokered funds, and I'm curious what you think about that.

It seems that you're in a much better place. You've been doing the digital banking much longer, and I'm just curious kind of how you look at that, and is that digital area going to grow less as a result of the rate environment?

I'm so glad you asked that question. I remember speaking on a panel somewhere, and I was talking about how we had these 25,000 or 30,000 digital customers all across the country that have never been in a branch, probably never seen one of our bankers.

I was talking about how that we sometimes peruse their social media or, in communications with them, we find out that they have a dog, a Cavapoo. We will do things that are very community banker-ish.

We will send them some swag, a dog collar band or we'll reach out to them. I've gone to see customers when I'm in Telluride.

I found a digital customer was out there and went and had breakfast with them. The reason that I'm not going to sit here and say that these deposits aren't more expensive.

Honestly, they should be. We have 25,000 or more digital customers that were banking with six people.

They should be more expensive. There's very little costs associated with it.

We have separated them from being just straight rate-driven by being community bankers. The same thing that we do in the bank to make our customers not be solely rate-focused, we're doing that on the digital platform.

I'm not going to sit here and say that we're the only people that are doing that, but I will tell you that we're probably more effective at that than our competition. We've been doing that for three years since we've got the real big slug of deposits in here.

Our average digital customer is probably down 150 basis points from where their peak was. Average digital customer's been here, probably more than 30 months, closer to 36.

Their average age is over 50, average deposits probably approaching $30,000 or $40,000. They have the cell phone numbers of the bankers that work them.

Everybody has talked to a banker. It's just things like that that have separated these customers from being solely rate-focused.

Now I will tell you, in the core bank, the core bank's cost of deposits is probably 180, 175, 150, 159. The digital is sitting there 375 or so.

Like I said, we could probably push that down 25 or 30. Let's just say we could get them to 3.50%, yeah, it's obviously more expensive, but it's growing at that level and yeah, I don't want to ramble about it, but I'm very proud of how our bankers pushed a community bank attitude and approach onto these 25,000 customers, and that's paid off.

Chris, that was a very long and rambling answer to your question.

That is A-OK. Thanks for sharing all that.

My other question just goes back to the mortgage business. As you continue to thrive in mortgage, both in terms of production and gains plus the mortgage warehouse, is there a natural cap that will happen to how much of that business you want for the whole company?

Will the bank just grow around it and kind of naturally cap how much mortgage will be down the road?

See, that's the kind of thing you don't worry about when you're starting out. Matt and I joke all the time that our claim to fame is that we find problems and we fix them so well that they create new problems.

[laughter] We don't want to be a mortgage company here. We want to run an amazing mortgage company, but we don't want just to be a mortgage company.

It really probably shouldn't be any more than 20% of our bottom line. Then some of it is that we have a dynamite team in mortgage and a dynamite leader.

We have that for the core bank as well, too, in Rick, but the core bank, we're still not fascinated with CRE. We're doing it, but that's not our hallmark.

We're in some not really fast growth areas in the core bank. Over time, we've got to find a way probably to grow the core bank faster so that mortgage, warehouse, Panacea, all of those stay as compliments to the bank and not the whole story.

We don't want to change the growth profiles or the growth dynamics. What our core bank right now is doing is amazing, and I don't want to step on the gas any harder and get a different kind of business.

Some strategy will open up to us. We've not been in an M&A strategy or a position to do that, maybe that'll open up one day.

That's probably the catalyst we need to build on the core bank and let these other items that we do that are so good and just run so well be a compliment to that.

Great. That's very helpful.

Thanks for that. Appreciate all the information today.

Thanks, Chris.

Thanks, y'all, for joining our first quarter conference call. If you have any questions, Matt and I are around, happy to get on the phone with you.

Otherwise, have a good weekend, and we'll talk to you soon.