Primis Financial Corp. Reports Strong Results for the Third Quarter of 2026

Primis Financial reported Q3 2026 net income available to common shareholders of $8.7 million, or $0.35 per diluted share, versus $6.8 million, or $0.28, a year earlier; operating income rose 27%. Net interest income increased 25% to $36.3 million and net interest margin expanded to 3.66% from 3.18%, while nonperforming assets excluding SBA-guaranteed portions fell to 1.43% of assets from 2.07%. Nine-month GAAP net income declined to $25.4 million from $31.9 million, reflecting prior-year investment gains; the board declared a quarterly dividend of $0.10 per share.

Analysis

The earnings signal is better than reported YTD EPS implies, but its durability is not yet proven. Core NIM expansion and lower deposit costs can compound into earnings if funding stays stable; however, a loan-to-deposit ratio above 100% and $220 million of FHLB advances mean incremental growth is not fully self-funded. Deposit mix and marginal funding costs—not headline NIM—are the key read-throughs for the next quarter.

Credit improvement is encouraging, but the lower provision partly reflects the prior-quarter comparison and management attributes most current-quarter provision to loan growth. Core charge-offs remain above year-ago levels, while allowance coverage has declined. Watch migration into criticized grades and subsequent charge-offs rather than relying on the lower NPA ratio alone. The 2026 risk-grade expansion also makes simple year-over-year grade comparisons unreliable.

Mortgage remains an earnings swing factor: management describes a sharp pipeline shock and a revenue shortfall, while closed volume was higher year over year. That divergence, plus mortgage losses versus year-ago profit, makes recovery dependent on pipeline conversion and expense flexibility. Panacea growth and loan-sale gains support fee income, but do not assume sale gains recur at the same pace.

Near term, the October 23 call is the catalyst for deposit pricing, mortgage pipeline and cost actions. Over 1–3 months, sustained core NIM and stable criticized loans could support a better earnings run rate; over 6–18 months, execution on cost savings and diversified loan growth matters. Contrarian risk: the market may over-credit adjusted earnings and underweight reliance on wholesale funding and volatile mortgage activity. Valuation and peer-relative expectations are not provided, so no unconditional long is warranted.

Key Decisions for Investors

• Do not chase FRST before the October 23 call. Treat it as a catalyst watch: seek confirmation that core NIM gains persist without further deterioration in deposit mix or higher marginal funding costs.
• Consider a conditional, modest FRST long only if management confirms stable-to-lower funding costs, mortgage pipeline stabilization, and no material rise in criticized credits; size against bank-stock credit and liquidity risk.
• Falsify the improving-earnings thesis if core NIM contracts, FHLB borrowing rises while deposits weaken, or core charge-offs and criticized loans trend higher. Reassess after the next quarter’s credit and funding disclosures.
• Avoid annualizing the 3Q earnings rate without separating recurring spread income from loan recoveries, loan-sale gains, and mortgage revenue volatility; verify the composition and repeatability of these items.