Q1 2026 Primis Financial Corp Earnings Call

April 24, 2026

Speaker #1: Ladies and gentlemen , thank you for standing by . My name is Colby , and I'll be your conference operator today At this time , I would like to welcome you to the Primis Financial Corp.

Operator: Ladies and gentlemen, thank you for standing by. My name is Colby and I'll be your conference operator today. At this time, I would like to welcome you to the Primis Financial Corp. Q1 Earnings Call. All lines have been placed on mute to prevent any background noise, and after the speakers' remarks, we will conduct a question and answer session. If you would like to ask a question at that time, please press star then the number one on your telephone keypad to raise your hand and enter the queue. If you'd like to withdraw your question at any time, you can press star one again. I will now turn the call over to Matthew Switzer. You may begin.

Speaker #1: first quarter earnings call . All lines have been placed on mute to prevent any background noise . And after the speakers remarks , we will conduct a question and answer session .

Speaker #1: If you would like to ask a question at that time, please press star, then the number one on your telephone keypad to raise your hand and enter the queue.

Speaker #1: If you'd like to withdraw your question at any time , you can press star one again . I will now turn the call over to Matthew Switzer .

Speaker #1: You may begin .

Speaker #2: Good morning , and thank you for joining us for Primis Financial Corp. 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 risks and uncertainty .

Matthew Switzer: Good morning and thank you for joining us for Primis Financial Corp.'s 2026 Q1 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 changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time.

Speaker #2: 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 .

Speaker #2: 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 .

Speaker #2: Promise bank.com . We undertake no obligation to update or revise forward looking statements to reflect changes , assumptions , the occurrence of unanticipated events or changes to future operating results over time .

Speaker #2: 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 .

Matthew Switzer: 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 used is not readily apparent. I will now turn the call over to our President and Chief Executive Officer, Dennis J. Zember, Jr.

Speaker #2: I will now turn the call over to our President and Chief Executive Officer, Dennis Zember. Thank you, Matt. Thank you to all of you that have joined our first quarter conference call.

Dennis J. Zember, Jr.: Thank you, Matt. Thank you for all of you that have joined our Q1 conference call. We're excited to report that in Q1, we earned $7.3 million, or $0.30 per share, which compares to $22.6 million and $0.92 per share in the same quarter of 2025. As I'm reading that, excited to report earnings shrinking that much. The fact of the matter is, on an operating basis, we earned $0.33 per share in Q1, which excluded a small tax adjustment related to 2025 results. When you compare that to the same quarter a year ago, it's up 126% operating earnings, where we reported $0.14 in the same quarter of 2025. Matt may mention this, but Q1 2025 included a substantial gain on the deconsolidation of Panacea, which is what I'm excluding.

Dennis Zember: Thank you, Matt. Thank you for all of you that have joined our Q1 conference call. We're excited to report that in Q1, we earned $7.3 million, or $0.30 per share, which compares to $22.6 million and $0.92 per share in the same quarter of 2025. As I'm reading that, excited to report earnings shrinking that much. The fact of the matter is, on an operating basis, we earned $0.33 per share in Q1, which excluded a small tax adjustment related to 2025 results. When you compare that to the same quarter a year ago, it's up 126% operating earnings, where we reported $0.14 in the same quarter of 2025. Matt may mention this, but Q1 2025 included a substantial gain on the deconsolidation of Panacea, which is what I'm excluding.

Speaker #2: We're excited to report that in the first quarter, we earned $7.3 million, or $0.30 per share, which compares to $22.6 million and $0.92 per share in the same quarter of '25.

Speaker #2: And as I'm reading that , excited to report earnings shrink in that much . The fact of the matter is , on an operating basis , we earned $0.33 per share in the first quarter , which excluded a small tax adjustment related to 2025 results .

Speaker #2: And when you compare that to same quarter a year ago , it's up 126% operating earnings , where we reported $0.14 in the same quarter of 25 .

Speaker #2: And Matt May mentioned this , but the first quarter of 25 included a substantial gain on the deconsolidation of panacea , which is the which is what I'm excluding our key operating ratio is obviously improved .

Dennis J. Zember, Jr.: 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 2025. Driving that were a couple items, margin mostly, and as well as operating expense control. On net interest margin, excuse me, benefited from the securities restructure as well as the mix of earning assets and climbed to 3.43% in Q1 compared to 3.15% in the same quarter of 2025. We continue to put up nice growth numbers that are manageable but really distinguish us among our peer group. Loans ended at $3.4 billion, up 11.7% compared to the same quarter in 2026. That excludes about $40 million or so, Matt, that we moved into loans held for sale related to a flow agreement with Panacea.

Dennis Zember: 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 2025. Driving that were a couple items, margin mostly, and as well as operating expense control. On net interest margin, excuse me, benefited from the securities restructure as well as the mix of earning assets and climbed to 3.43% in Q1 compared to 3.15% in the same quarter of 2025. We continue to put up nice growth numbers that are manageable but really distinguish us among our peer group. Loans ended at $3.4 billion, up 11.7% compared to the same quarter in 2026. That excludes about $40 million or so, Matt, that we moved into loans held for sale related to a flow agreement with Panacea.

Speaker #2: Alongside 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 .

Speaker #2: And as well as operating expense control on net interest margin . Our net interest margin , excuse me , benefited from the securities restructure as well as the mix of earning assets and climb to 3.43% in the first quarter , compared to 3.15 in the same quarter of 25 .

Speaker #2: We continue to put up nice growth numbers that are manageable , but really distinguish us amongst our peer group Loans ended at $3.4 billion , up 11.7% compared to the same quarter in 26 .

Speaker #2: That excludes about $40 million or so that , Matt , that we moved into loans held for sale related to a flow agreement with panacea .

Speaker #2: So 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 $1 billion .

Dennis J. Zember, Jr.: 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 $1 billion. The growth in checking accounts in 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 2025. 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 Q1 2025. 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.

Dennis Zember: 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 $1 billion. The growth in checking accounts in 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 2025. 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 Q1 2025. 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.

Speaker #2: The growth in checking accounts in our company was even more notable , with noninterest bearing checking accounts growing to 541 million , which is almost 19% higher than where we were in 25 .

Speaker #2: Checking accounts continue to be a more meaningful element of our deposit mix , and we're 15.9% of total deposits compared to just 14.2% in the first quarter of 25 .

Speaker #2: And lastly , it's very important to note that we grew deposits in this strong of fashion and never once felt pressured in our core bank or on our digital platform to be more aggressive on rate .

Speaker #2: We're doing it with technology , with service , with people , with getting in front of folks , focusing on commercial deposits and having real success .

Dennis J. Zember, Jr.: 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. It's 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.

Dennis Zember: 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. It's 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.

Speaker #2: 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 premise that our core bank has had this opportunity on both sides of the balance sheet .

Speaker #2: 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.

Speaker #2: It's 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 we were that all we were doing here is working on our factory .

Dennis J. Zember, Jr.: For so long it felt like all we were doing here is working on our factory and stuff in the factory. 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 and 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. It's before the busy spring and summer seasons for retail mortgage. Importantly, Warehouse is still producing impressive yields and margins, efficiency ratios in the 20s.

Dennis Zember: For so long it felt like all we were doing here is working on our factory and stuff in the factory. 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 and 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. It's before the busy spring and summer seasons for retail mortgage. Importantly, Warehouse is still producing impressive yields and margins, efficiency ratios in the 20s.

Speaker #2: 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.

Speaker #2: Mortgage warehouse is fully replaced . Life premium finance at this point . And it's been so well received in the marketplace . We finished the quarter with about 460 million outstanding .

Speaker #2: And for a few days in the quarter at the end , near the end of March , we crested half $1 billion outstanding .

Speaker #2: This is before any refi boom , it's before the busy spring and summer seasons for retail mortgage . Importantly , warehouse is still producing important , 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 .

Dennis J. Zember, Jr.: 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 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. Regardless, pre-tax income in the mortgage group grew to $2.1 million in Q1, compared to $766,000 same quarter a year ago.

Dennis Zember: 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 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. Regardless, pre-tax income in the mortgage group grew to $2.1 million in Q1, compared to $766,000 same quarter a year ago.

Speaker #2: But as we 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 .

Speaker #2: Retail mortgage had an absolute blowout for . They'll tell you that it was impacted by some Middle East activities and an impact on rates and fair value adjustments .

Speaker #2: And that's true . We might have reported half $1 billion . Looking at half $1 billion more had that . But regardless , pre-tax income and mortgage group grew to $2.1 million in the first quarter , compared to 766,000 same quarter a year ago .

Speaker #2: In the quarter , our earnings crept up to 57 basis points on closed volume , compared to 46 in the same period a year ago .

Dennis J. Zember, Jr.: 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 H2 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.

Dennis Zember: 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 H2 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.

Speaker #2: So, on a profitability basis, we're up maybe a little better than 20% on closed volume. Our recruiting pipeline has never been this strong.

Speaker #2: And we're consistently we doubled each month on apps , closed volume , new files . So we have real . So we're very positive about what the second half of the year would look like .

Speaker #2: Right now . We believe premise Mortgage is on track to be a top 50 mortgage company nationwide in 2026 , and lastly , before I turn it over to Matt , I want to emphasize what's really present mind for us and our desire to build this into a top performing bank in our day to day .

Speaker #2: 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 .

Dennis J. Zember, Jr.: 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, 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, Q1 2025, all the way back to Q1 2024, we're reporting core revenue of about $45.6 million, which is higher, about 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.

Dennis Zember: 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, 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, Q1 2025, all the way back to Q1 2024, we're reporting core revenue of about $45.6 million, which is higher, about 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.

Speaker #2: And 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.

Speaker #2: If you look at the last year , first quarter , 25 to from first quarter of 25 , all the way back to the first quarter of 24 , we're reporting growth in core revenue of about 45 .

Speaker #2: Excuse me . We're reporting core revenue of about $45.6 million , which is higher about 33.7% , call it 34% . Over a year ago , reported operating expenses straight off of mapped income statement .

Speaker #2: 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 .

Dennis J. Zember, Jr.: 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, so 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. 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. 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.

Dennis Zember: 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, so 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. 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. 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.

Speaker #2: 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, so I took that out.

Speaker #2: But this is an an extraordinary level of operating leverage . And really the driver of our results . Nobody at premise thinks we're done in this area , and that revenue may not be outpacing opex going forward .

Speaker #2: 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 .

Speaker #2: 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 .

Speaker #2: We already have all the tools we need for this . We expect hardly no additional investment except short except the deep training that we're going to give our staff to be effective with this .

Dennis J. Zember, Jr.: 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. 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, sales efficiency, 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.

Dennis Zember: 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. 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, sales efficiency, 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.

Speaker #2: 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 , sales efficiency , customer satisfaction and experience , and importantly , fraud prevention .

Speaker #2: When you combine that with our work towards converting our core bank to a fully digital core, we're on the edge of being a uniquely positioned bank with technology that has figured out how to keep our community bank feeling that map.

Speaker #2: I'll turn it over to you . Thank you . 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 .

Matthew Switzer: Thank you, 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 file 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 Q1, with a slower growth rate versus period end growth due to the ramp in Mortgage Warehouse later in the period. Average deposits were up 4% annualized to Q1, 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 in Q1 was 3.43%, up from 3.28% last quarter and 3.15% in the year ago period.

Speaker #2: Beginning with the balance sheet, gross loans held for investment increased approximately 14% annualized from December 31st to March 31st, led by growth in Panacea and Mortgage Warehouse.

Speaker #2: 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 noninterest bearing deposits were up 7% from year end .

Speaker #2: Net interest income was approximately 32 million . A substantial improvement from 26 million a year ago . Our net interest margin in the first quarter was 3.43% , up from 3.28% last quarter and 3.15% in the year ago period .

Speaker #2: And 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.

Matthew Switzer: 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 H2 of 2026 and early 2027, with a weighted average yield of 4.81% that will add to loan yields. The core bank's cost of deposits remains very attractive at 159 basis points for the quarter, flat from Q4. Cost of total deposits was 223 basis points in Q1, down three basis points linked quarter. Our focus on growing NIB deposits is a key part of our strategy to continue driving funding costs lower. Our provision this quarter was $1.5 million, partially driven by growth in the loan portfolio described above.

Speaker #2: 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% .

Speaker #2: That will add to loan yields . The core bank deposits remains a very attractive at 159 basis points for the quarter , flat from the fourth quarter cost of total deposits was 223 basis points in Q1 , down three basis points linked quarter .

Speaker #2: Our focus on growing nib deposits is a key part of our strategy to continue driving funding costs , lower our provision this quarter was 1.5 million , partially driven by growth in the loan portfolio described above .

Speaker #2: 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.

Matthew Switzer: 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 six basis points in Q1 2026. Non-interest income was $13.6 million in the quarter versus $12.8 million in Q4, after adjusting for the sale leaseback gain, investment portfolio restructuring, and Panacea loan pool sale in Q4. Mortgage revenue was solid in Q1 at $10.8 million versus $10 million in Q4, and would have been even better in Q1 if not for the impact of market volatility late in the quarter. Year over year, retail mortgage production was 122% higher in Q1 2026 versus Q1 2025, showing strong momentum as we head into the busy home buying season.

Speaker #2: Core net charge-offs remained low at six basis points in the first quarter of 2026. Noninterest income was $13.6 million in the quarter, versus $12.8 million in the fourth quarter.

Speaker #2: 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 .

Speaker #2: 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 home buying season .

Speaker #2: Also included in that production was $26 million of attractive construction and permanent loans in the first quarter, up from $4 million in the first quarter of last year.

Matthew Switzer: Also included in that production was $26 million of attractive construction to permanent loans in Q1, up from $4 million in Q1 last year. On the expense side, when you exclude mortgage, Panacea division volatility, and non-recurring items, our core expenses were $22 million in Q1 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.

Speaker #2: 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 .

Speaker #2: Absent the increased occupancy expense from our recent sale-leaseback transaction, core expenses on this basis would have actually been down year over year.

Speaker #2: We have 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.

Speaker #2: 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.

Matthew Switzer: 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 Q1 in line with our expectations and believe we are still on track to hit our profitability goal in 2026.

Speaker #2: Our first pass is identified hundreds of hours of opportunity , and there is almost certainly more that will be found as we start tackling these projects .

Speaker #2: We view this as a key part of our strategy to keep expense growth to a minimum while maximizing operating leverage. Equally as exciting.

Speaker #2: 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.

Speaker #2: 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 26 .

Speaker #2: With that, operator, we can now open the line for Q&A.

Matthew Switzer: With that, operator, we can now open the line for Q&A.

Speaker #1: Thank you . We will now begin the question and answer session . Again , if you'd like to ask a question , please press star .

Matthew Switzer: Thank you. We will now begin the question and answer session. Again, if you would like to ask a question, please press star then the number one on your telephone keypad to raise your hand to queue. If you would like to withdraw your question at any time, you can press star one again. We'll pause just for a moment to compile the roster. Your first question comes from Woody Lay with KBW. Your line is open.

Operator: Thank you. We will now begin the question and answer session. Again, if you would like to ask a question, please press star then the number one on your telephone keypad to raise your hand to queue. If you would like to withdraw your question at any time, you can press star one again. We'll pause just for a moment to compile the roster. Your first question comes from Woody Lay with KBW. Your line is open.

Speaker #1: Then the number one on your telephone keypad . Raise your hand , to if you'd like to withdraw your question at any time , you can press star one again .

Speaker #1: We'll pause just for a moment to compile the roster, and your first question comes from Woody Lei with KBW. Your line is open.

Speaker #3: Hey , good morning guys .

Woody Lay: Hey, good morning, guys.

Matthew Switzer: Good morning.

Speaker #2: Woody . Woody

Matthew Switzer: Hey, Woody.

Speaker #3: Wanted to start on mortgage . And as you mentioned , it was a blowout quarter . And what's typically a seasonally up weaker quarter .

Woody Lay: 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? Also in the mortgage expenses, was there additional hiring that was done in Q1 2026 or elevated legal expenses, anything that sort of propped that up?

Speaker #3: We're now entering the the , the stronger quarters ahead . What are your expectations for production in the near term ? And then also in the mortgage expenses ?

Speaker #3: Was there additional hiring that was done in one queue, Q2, or elevated legal expenses? Anything that sort of propped that up?

Speaker #2: Nothing unusual on the expense side Yeah . I think what I think we probably I think maybe we came into the year thinking we might have we closed 1.2 billion last year , but had a lot of momentum in the fourth quarter .

Dennis J. Zember, Jr.: Nothing unusual on the expense side.

Dennis Zember: Nothing unusual on the expense side.

Matthew Switzer: No.

Dennis J. Zember, Jr.: I think maybe we came into the year thinking we might have. We closed $1.2 billion last year but had a lot of momentum in Q4. Thought we probably had like a $1.6, $1.7 billion mortgage company. Through Q1, felt like it was a little higher, maybe $1.8 billion, maybe even $2 billion. I feel like we're probably still maybe around $100 million. We're going to be April, very strong, sort of reflecting what we thought. I'd say we're probably still somewhere in the $1.8 billion range.

Dennis Zember: I think maybe we came into the year thinking we might have. We closed $1.2 billion last year but had a lot of momentum in Q4. Thought we probably had like a $1.6, $1.7 billion mortgage company. Through Q1, felt like it was a little higher, maybe $1.8 billion, maybe even $2 billion. I feel like we're probably still maybe around $100 million. We're going to be April, very strong, sort of reflecting what we thought. I'd say we're probably still somewhere in the $1.8 billion range.

Speaker #2: Thought we probably had like a $1.6 or $1.7 billion mortgage company. And then through the first quarter, felt like it was a little higher. Maybe $1.8, maybe even $2 billion.

Speaker #2: But we I feel like we're probably still maybe around 100 . I mean , we're going to be April very strong sort of reflecting what we thought , I think for the I'd say we're probably still somewhere in the one .

Speaker #2: Eight range . Yeah . On close volume . And I think Woody , what's important is , you know , as we've been growing , what's important is like we were at 46 basis points a year ago .

Woody Lay: Yeah

Dennis J. Zember, Jr.: ... on closed volume. I think what's important is, as we've been growing, what's important is like 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 $1 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're getting higher yields there. Really, we've been building that for the last year. These are probably six to nine-month deals, so that's starting to flow. What's important I think is that we think we're going to do $1.008 billion or so this year as things look right now, and maybe trend somewhere closer to probably a touch over 60 basis points.

Dennis Zember: ... on closed volume. I think what's important is, as we've been growing, what's important is like 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 $1 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're getting higher yields there. Really, we've been building that for the last year. These are probably six to nine-month deals, so that's starting to flow. What's important I think is that we think we're going to do $1.008 billion or so this year as things look right now, and maybe trend somewhere closer to probably a touch over 60 basis points.

Speaker #2: We're at 50 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 .

Speaker #2: We have a big construction perm focus here . That's honestly very centered on government or getting higher yields . There . And really , we've been building that for the last year .

Speaker #2: These are probably 6- to 9-month builds, and so that's starting to flow. So what's important, I think, is that we think we're going to do $1.8 billion or so this year.

Speaker #2: As things look right now . And maybe trend somewhere closer to probably a touch over 60 basis points , we , you know , the Middle East event probably hit us for a few basis points , 5 or 6 basis points on profitability .

Dennis J. Zember, Jr.: 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 fair value. That's going to happen in mortgage, so you can't really exclude it.

Dennis Zember: 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 fair value. That's going to happen in mortgage, so you can't really exclude it.

Speaker #2: So we might have been over 60 had we not had the fair value adjustment that's going to happen in mortgage. So you can't really exclude it.

Speaker #3: Yeah , that's helpful . Color . And 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 .

Woody Lay: Yeah. That's helpful color. 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? Are we looking more at a flat margin, with incremental growth?

Speaker #3: You know , growth is expected to remain strong . You're going to have to fund a fund that growth . So do you think you can continue to post strong growth and see margin expansion .

Speaker #3: Or will it be you know , are we looking more at a flat margin with incremental growth ?

Speaker #4: 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 quarter from moving those loans to help for sale .

Matthew Switzer: I think we'll see a little bit more margin expansion because of the debt payoff I mentioned. We also had a little bit of a drag in the margin quarter from moving those loans to held for sale. We reversed some deferred costs that ran through the margin. It was only like 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 3.6, but would we hit high 3.4s to 3.5 as we go through the year? Most likely.

Speaker #4: We reversed some deferred costs that ran through the margin. It was only like a basis point, so we'll see some margin expansion next quarter—a little.

Speaker #4: And then probably inch up from there . I mean , I , I would not expect , you know , margin to hit three six .

Speaker #4: But when we hit , you know , high three fours to three and a half as we go through the year , most likely

Speaker #3: Got it . And then maybe just last for me on the credit , I appreciate the comments on the paydowns of those 90 day past due loans past subsequent to quarter end , but just on some of those larger relationships that are still on N , P a and any update on those and when we could see possible resolution

Woody Lay: Got it. Maybe just last from me on the credit. I appreciate the comments on the pay downs of those 90-day past due loans subsequent to quarter end. Just on some of those larger relationships that are still on NPA, any update on those and when we could see possible resolution?

Speaker #2: It's funny you asked that , Matt . Look straight at me . Like you answered that one . I mean , the there's two real estate , commercial real estate deals office and Both , both had pretty good quarters on new leases So I mean , it's I think it's trending positive there .

Dennis J. Zember, Jr.: Matt, it's funny you ask that. Matt looks straight at me like, You answer that one. There's 2 commercial real estate deals, office, and both had pretty good quarters on new leases. I think it's trending positive there. I think two things are trending positive. One, there's more leasing activity. Sale 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 as 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, so these are not. It could change anytime, but right now things are trending more positive there. Does that answer your question?

Dennis Zember: Matt, it's funny you ask that. Matt looks straight at me like, You answer that one. There's 2 commercial real estate deals, office, and both had pretty good quarters on new leases. I think it's trending positive there. I think two things are trending positive. One, there's more leasing activity. Sale 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 as 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, so these are not. It could change anytime, but right now things are trending more positive there. Does that answer your question?

Speaker #2: I think the two things are trending positive. One, there's more leasing activity. The cycle on new leases in an office park like this is longer than we want it to be.

Speaker #2: 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 as they're not falling like we'd like them to , but they are improving .

Speaker #2: And so I think , you know , every day that goes by , we're a little safer on , on the value their current .

Speaker #2: So they're not these are not we're not I mean , it could change any time , but right now they're things are trending more positive .

Speaker #2: There, does that answer your question?

Speaker #3: Yeah . No that's that's perfect . I appreciate you taking my questions . Congrats on the good quarter .

Woody Lay: Yeah, no, that's perfect. I appreciate you taking my questions. Congrats on the good quarter.

Speaker #2: Thanks

Dennis J. Zember, Jr.: Thanks, Woody Lay.

Dennis Zember: Thanks, Woody Lay.

Speaker #1: Your next question comes from the line of Russell Gunther with Stephens Inc. Your line is open.

Dennis J. Zember, Jr.: Thank you.

Woody Lay: Thank you.

Dennis J. Zember, Jr.: Your next question comes from the line of Russell Gunther with Stephens Inc. Your line is open.

Operator: Your next question comes from the line of Russell Gunther with Stephens Inc. Your line is open.

Speaker #5: Hey , good morning guys . I wanted to start . Morning , Dennis . Morning , Matt . Maybe just a quick follow up on the margin commentary .

Russell Gunther: Hey, good morning, guys.

Matthew Switzer: Hi, Russell.

Russell Gunther: Morning, Dennis. Morning, Matt. Maybe just a quick follow-up on the margin commentary. Appreciate the directional guide. Maybe some of the underpinning assumptions 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?

Speaker #5: Appreciate the directional guide , but maybe some of the underpinning assumptions would be helpful to get a sense for kind of where new commercial loan origination yields are today .

Speaker #5: 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

Speaker #2: I'll start with the last piece .

Matthew Switzer: 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

Speaker #4: I think on the deposit side , it's probably flat . You know , up or down a couple basis points , but not I don't want to expect any substantial moves in the cost of deposits in the near term on the production side , we're in the core bank , probably mid sixes .

Dennis J. Zember, Jr.: In the near term. On the production side, we're in the core bank, probably low mid sixes. Yeah. We're still probably all in, we're probably close to 5-year 275. Okay. Yeah. Mortgage Warehouse is probably better than that. Mortgage Warehouse is probably, with fees, 1-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. I think the rates they're getting on their production is exceptional too. They're probably 5-year Treasury plus 250, 260 on that kind of credit. On funding, 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 and probably not lose that much.

Dennis Zember: In the near term. On the production side, we're in the core bank, probably low mid sixes. Yeah. We're still probably all in, we're probably close to 5-year 275. Okay. Yeah. Mortgage Warehouse is probably better than that. Mortgage Warehouse is probably, with fees, 1-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. I think the rates they're getting on their production is exceptional too. They're probably 5-year Treasury plus 250, 260 on that kind of credit. On funding, 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 and probably not lose that much.

Speaker #2: Yeah . We're probably regularly five year I mean we're still probably all in . We're probably close five year 275 . If

Speaker #4: Yeah .

Speaker #2: Warehouse .

Speaker #4: Is probably better than that .

Speaker #2: Mortgage warehouse is probably with fees is probably , you know , one month sofr plus 3153 20 Panaceas outstanding . I mean , they are , I mean , they really , I mean , the niche that they've established for themselves , their marketing , their profile , the opportunity to do business with them is reflected in the rates .

Speaker #2: And I think the rates they're getting on their production is exceptional to they're probably five year Treasury plus 250 to 60 on that kind of credit You know , on funding .

Speaker #2: And Matt , Matt , Matt and I regularly debate this . I mean , we could I mean , across the bank right now , I feel like we could probably take we could probably take digital down 25 or 30 basis points .

Speaker #2: Probably not lose that much . We could probably take the core bank down , you know , 5 or 10 . It's already very low , but there's some savings that we could get on the deposit side .

Dennis J. Zember, Jr.: We could probably take the core bank down 5 or 10. It's already very low, but 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. We also don't want to not be competitive. Right now, when we're looking at Panacea can do $200 million for us this year. Warehouse could grow $300 to 400 million. The core bank is the best it's ever been. That could be $200 million. We just don't want to get in a position. We don't want to go harvest 30 basis points of deposit cost and then just rely on Federal Home Loan Bank advances. We don't want to be that bank.

Dennis Zember: We could probably take the core bank down 5 or 10. It's already very low, but 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. We also don't want to not be competitive. Right now, when we're looking at Panacea can do $200 million for us this year. Warehouse could grow $300 to 400 million. The core bank is the best it's ever been. That could be $200 million. We just don't want to get in a position. We don't want to go harvest 30 basis points of deposit cost and then just rely on Federal Home Loan Bank advances. We don't want to be that bank.

Speaker #2: The problem is it puts us in a place where we're not Very strong on the on the growth side . And again , we're not leaning into rate on digital or anything else , but we also don't want to not be competitive .

Speaker #2: And right now , when we're looking at , you know , panacea , panacea could do 200 million for us this year . Warehouse could grow three 400 million .

Speaker #2: The core bank is the best it's ever been. That could be a couple of hundred million. We just don't want to get in a position.

Speaker #2: I mean, we don't want to go harvest 30 basis points of deposit cost and then just rely on home loan, bank advances.

Speaker #2: That's— we don't want to be that bank.

Speaker #5: All right . Thank you guys . I 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 .

Russell Gunther: All right. Thank you, guys. Appreciate the color there. Dennis, you took my next question in terms of how that loan growth might shake out from a vertical perspective, so 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 mortgage banking vertical as well?

Speaker #5: So, 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?

Speaker #5: If we could have a kind of mortgage banking vertical as well.

Speaker #4: Inclusive of mortgage , that was kind of hard to spit out . Unfortunately , because it's so tied to volume . I mean , if if you know , it's going to be a almost direct percentage of whatever they're buying is going to be in the next quarter .

Dennis J. Zember, Jr.: Inclusive of mortgage. That one's hard to spit out, unfortunately, because it's so tied to volume. As you know, it's going to be an almost direct percentage of whatever their volume's going to be in the next quarter. I like to think of mortgage as 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. So you can back into, take your whatever your revenue assumption is in non-interest income for a mortgage and back into expense from there. Otherwise, when we get up. Then Panacea's got some volatility to it as well, so we really focus on that core expense number, which hit around $22 million. I think we'll stay in that kind of $22 to $23 million range for the year.

Matthew Switzer: Inclusive of mortgage. That one's hard to spit out, unfortunately, because it's so tied to volume. As you know, it's going to be an almost direct percentage of whatever their volume's going to be in the next quarter. I like to think of mortgage as 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. So you can back into, take your whatever your revenue assumption is in non-interest income for a mortgage and back into expense from there. Otherwise, when we get up. Then Panacea's got some volatility to it as well, so we really focus on that core expense number, which hit around $22 million. I think we'll stay in that kind of $22 to $23 million range for the year.

Speaker #4: I mean, I like to think of mortgage as kind of, you net non-interest income and non-interest expense, you know, for the year.

Speaker #4: Now , that doesn't include like spread income , which we also include in our profitability . It's probably going to net us 5 or 6 million for the year .

Speaker #4: So you can kind of back into , you know , take your whatever your not your revenue assumption is and non-interest income for mortgage and kind of back into expense from there Otherwise , when we kind of , and then penicillin get some volatility to it as well .

Speaker #4: So we really focus on that core expense number , which at around 22 million , I think , I think we'll stay in that kind of 22 to $23 million range for the year .

Speaker #5: Okay . No . Understood . Appreciate it . Matt . Thank you . And then just last one for me , guys would be an update on your kind of ROA glide path .

Russell Gunther: Okay. No, understood. Appreciate it, Matt. Thank you. Just last one for me, guys, would be an update on your ROA glide path. You've 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 a timeline to achieve?

Speaker #5: You mentioned in your remarks you would expect to hit your targets, which I think are 1% ROA by the end of the year.

Speaker #5: What aspirations do you guys have from there, and sort of a timeline to achieve?

Speaker #2: You want to answer that before you.

Dennis J. Zember, Jr.: You want to answer that before I box you into something? No, please. Move the goalpost again. I can take it. Matt sometimes doesn't like how aspirational I am, Russell.

Dennis Zember: You want to answer that before I box you into something? No, please. Move the goalpost again. I can take it. Matt sometimes doesn't like how aspirational I am, Russell.

Speaker #4: No, please move the goalpost again.

Speaker #2: I can thank you , Matt . Matt , Matt sometimes doesn't like how aspirational I am . Russell .

Speaker #5: Oh, I understand. Yeah, I get that.

Russell Gunther: Oh, I understand. Yep. I get that.

Speaker #2: Yeah . I mean , 1% . I mean , 1% is a good line for us because we've not consistently been there . But 1% is not going to I mean , given our growth rate , that probably our growth rates and our dividend , that will probably keep the bank capital levels flat .

Dennis J. Zember, Jr.: Yeah. 1% is a good line for us because we've not consistently been there. 1%'s not going to. 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. 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 for 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 in the rest of our bank, over time, and we're not looking at that, Russell, as something that's going to reduce head count.

Dennis Zember: Yeah. 1% is a good line for us because we've not consistently been there. 1%'s not going to. 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. 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 for 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 in the rest of our bank, over time, and we're not looking at that, Russell, as something that's going to reduce head count.

Speaker #2: But I mean , we want to build book . We want to build capital ratios . We want to position ourselves to be strategic .

Speaker #2: 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 , you know , another 20% higher than that .

Speaker #2: That's going to be a big deal in the ROA. That's probably another ten basis points for the ROA. Warehouse is probably going to add another ten basis points once it gets to scale.

Speaker #2: The AI thing that Matt's working on and our rest of our bank , I mean , over time , and we're not looking at that at Russell is something that's going to reduce headcount .

Speaker #2: What it's going to do is take the experts we have and just make them be able to manage twice as much . And that's we can manage like that when we have growth rates like we have , we know , I know I'm going to need the staff , these staff over time .

Dennis J. Zember, Jr.: What it's going to do is take the experts we have and just make them be able to manage twice as much. 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, we ought to be given these lines of business on top of our core bank. We ought to be 125 or better. Probably are looking more ROTCE to be something that would get near 15. I think at 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?

Dennis Zember: What it's going to do is take the experts we have and just make them be able to manage twice as much. 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, we ought to be given these lines of business on top of our core bank. We ought to be 125 or better. Probably are looking more ROTCE to be something that would get near 15. I think at 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?

Speaker #2: I mean , Aspirationally we ought to be giving these lines of business on top of our core bank . We ought to be 125 or better and probably are looking more ROTC to be something that would get near 15 .

Speaker #2: I think, at 15% ROTC, you kind of can control your future. If people don't like your stock, you can just buy it back.

Speaker #2: If they do like your stock , then you can do other strategic things . But really , until you get to that point , you're are doing is working to get to that point in a boxing got that's .

Matthew Switzer: No.

Matthew Switzer: That was good.

Speaker #4: Good .

Speaker #5: All right . I appreciate it , guys . I appreciate your thoughts and for taking all my questions . Thank you very much .

Russell Gunther: All right. I appreciate it, guys. Appreciate your thoughts and for taking all my questions. Thank you very much.

Dennis J. Zember, Jr.: Great. Thanks, Russell.

Dennis Zember: Great. Thanks, Russell.

Speaker #4: Thanks , Russell

Speaker #1: Again , if you'd like to ask a question , please press star . Then the number one on your telephone keypad . Your next question comes from the line of Christopher Marinac with Bren Capital Research .

Dennis J. Zember, Jr.: Again, if you'd like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Christopher Marinac with Janney Montgomery Scott. Your line is open.

Operator: Again, if you'd like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Christopher Marinac with Janney Montgomery Scott. Your line is open.

Speaker #1: Your line is open .

Speaker #6: Hey , good morning Dennis . The last couple of days , banks have talked about the competitiveness of digital deposits being more expensive than than brokered funds .

Christopher Marinac: Hey, good morning. Dennis, the last couple of 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. Is that digital area going to grow less as a result of the rate environment?

Speaker #6: 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.

Speaker #6: 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?

Speaker #2: You know , 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 or 30 000 digital customers all across the country that have never been in a branch , probably never seen one of our bankers .

Dennis J. Zember, Jr.: 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 to 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 bankers. 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 digital customers that was out there and went and had breakfast with them. I'm not going to sit here and say that these deposits aren't more expensive. Honestly, they should be.

Dennis Zember: 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 to 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 bankers. 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 digital customers that was out there and went and had breakfast with them. I'm not going to sit here and say that these deposits aren't more expensive. Honestly, they should be.

Speaker #2: And I was talking about how that we sometimes peruse their social media or we , you know , in communications with them , we find out that they have a dog , you know , a cat poop , and we will do things that are very community banker ish .

Speaker #2: We will send them some swag , you know , a dog collar band or we'll reach out to them when we're in . You know , I've gone to see customers when I'm in Telluride , I found a digital customers that was out there and went and had breakfast with them .

Speaker #2: The reason that I'm not going to sit here and say that these deposits aren't more expensive , honestly , they should be . They we have 25000 or more digital customers that we're banking with six people , so they should be more comfortable .

Dennis J. Zember, Jr.: We have 25,000 or more digital customers that we're banking with 6 people. They should be more expensive. There's very little cost 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 now for 3 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. The average digital customer's been here probably more than 30 months, closer to 36.

Dennis Zember: We have 25,000 or more digital customers that we're banking with 6 people. They should be more expensive. There's very little cost 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 now for 3 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. The average digital customer's been here probably more than 30 months, closer to 36.

Speaker #2: I mean , more expensive . There's very little cost associated with it , but we have separated them from being just straight rate driven by being community bankers .

Speaker #2: 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.

Speaker #2: 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 .

Speaker #2: And we've been doing that for now , for three years since we've got the real big slug of deposits in here . Our average digital customer has average digital customer , has probably down 150 basis points from where their peak was .

Speaker #2: The average digital customer has been here , you know , probably more than 30 months closer to 36 . The average age is over 50 , average deposits , probably approaching 30 or 40 thousand dollars They have the cell phone numbers of the bankers that work them .

Dennis J. Zember, Jr.: Their average age is over 50. Average deposit's 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 would tell you, in the core bank, the core bank's cost of deposits is probably 180, 175, 159. The digital is sitting there at like 375 or so. Like I said, we could probably push that down 25 or 30. Let's just say we could get them to 3.5. Yes, obviously more expensive, but it's growing at that level and I don't know. I don't want to ramble about it. 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.

Dennis Zember: Their average age is over 50. Average deposit's 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 would tell you, in the core bank, the core bank's cost of deposits is probably 180, 175, 159. The digital is sitting there at like 375 or so. Like I said, we could probably push that down 25 or 30. Let's just say we could get them to 3.5. Yes, obviously more expensive, but it's growing at that level and I don't know. I don't want to ramble about it. 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.

Speaker #2: Everybody has talked to a banker I mean , it's just things like that that have separated these customers from being solely rate focused .

Speaker #2: Now , I would tell you , in the core bank , the core bank's cost of deposits is probably 18175 , 15159 . I mean , the digital is sitting there at like 375 or so .

Speaker #2: Like I said , we could probably push that down 25 or 30 . So let's just say we could get them to three and a half .

Speaker #2: So yes , obviously more expensive , but it's , it's growing at that level and yeah , I don't know . I don't want to ramble about it , but I'm very proud .

Speaker #2: 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.

Speaker #2: That was a very long and rambling answer to your question.

Dennis J. Zember, Jr.: Chris, that was a very long and rambling answer to your question.

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

Speaker #6: That is a okay , 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 ?

Christopher Marinac: That is A-okay. 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?

Speaker #6: Will the bank just grow around it and kind of naturally cap how much mortgage will be down the road?

Speaker #2: That that's See , that's the kind of thing you don't worry about when you're starting up . Matt and I joke all the time that we our claim to fame is that we find problems and we fix them so well that they create new problems .

Dennis J. Zember, Jr.: See, that's the kind of thing you don't worry about when you're starting up. 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. We don't want to be a mortgage company here. We want to run an amazing mortgage company, but we don't want to be just a mortgage company. It really probably shouldn't be more than 20% of our bottom line. No question about it. Some of it is, we have a dynamite team in mortgage, and a dynamite leader. We have that as for the core bank as well too, in Rick. The core bank, we're still not fascinated with CRE. We're doing it, but that's not our hallmark. We're in some non-growth, not really fast growth areas in the core bank.

Dennis Zember: See, that's the kind of thing you don't worry about when you're starting up. 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. We don't want to be a mortgage company here. We want to run an amazing mortgage company, but we don't want to be just a mortgage company. It really probably shouldn't be more than 20% of our bottom line. No question about it. Some of it is, we have a dynamite team in mortgage, and a dynamite leader. We have that as for the core bank as well too, in Rick. The core bank, we're still not fascinated with CRE. We're doing it, but that's not our hallmark. We're in some non-growth, not really fast growth areas in the core bank.

Speaker #2: I mean , mortgage really should not be . We don't want to be a mortgage company here . We want to run an amazing mortgage company , but we don't want to be just to be a mortgage company .

Speaker #2: It really probably shouldn't be any more than 20% of our bottom line No question about I mean , and then some of it is , you know , I mean , we have a dynamite team in mortgage and a dynamite leader , and we have that .

Speaker #2: As for the core bank as well , too , and Rick , but I mean , the core bank , we're a little we don't we're still not fascinated with CRE .

Speaker #2: We're doing it . But that's not our hallmark . You know , we're in some non-growth not really , not really fast growth areas in the core bank .

Speaker #2: So over time , we're we've got to find a way probably to grow the core bank faster so that mortgage warehouse panacea , all of those stay as complements to the bank and not the whole story .

Dennis J. Zember, Jr.: 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 complements 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, and 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 complement to that.

Dennis Zember: 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 complements 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, and 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 complement to that.

Speaker #2: I mean , we're not we don't want to change the growth profiles or the growth dynamics . I mean , our core bank is what our core bank right now is doing is amazing .

Speaker #2: 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.

Speaker #2: We've not been in an M&A strategy or a position to do that. Maybe that'll open up one day, and 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 the complement to that.

Speaker #6: Great . That's very helpful . Thanks for that . I appreciate all the information today .

Christopher Marinac: Great. That's very helpful. Thanks for that. I appreciate all the information today.

Speaker #4: All thanks , Chris

Dennis J. Zember, Jr.: Thanks, Chris.

Dennis Zember: Thanks, Chris.

Operator: Thank you. There are no further questions at this time. I'd like to turn the conference back over to Dennis Zember for any closing remarks.

Speaker #1: Thank you. And there are no further questions at this time. I'd like to turn the conference back over to Dennis Zember for any closing remarks.

Speaker #2: Thank you all for joining our first quarter conference call. If you have any questions, Matt and I are happy to get on the phone with you.

Dennis J. Zember, Jr.: Thank you all for joining our Q1 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. We'll talk to you soon.

Dennis Zember: Thank you all for joining our Q1 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. We'll talk to you soon.

Speaker #2: Otherwise, have a good weekend. We'll talk to you soon.

Operator: This concludes today's conference call. You may now disconnect.

Q1 2026 Primis Financial Corp Earnings Call

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