Primis Q3 2026 Earnings: Wider Net Interest Margin Lifts Profit

Primis Financial Corp. (NASDAQ: FRST) reported Q3 2026 net interest income of $36.3 million, up 25% year over year, while diluted EPS increased to $0.35 from $0.28. Net income available to common shareholders rose 27% to $8.7 million as a wider net interest margin and a larger earning-asset base offset weaker mortgage profitability and higher expenses.

Core Earnings Results

Net interest income provided the main earnings lift, increasing by $7.3 million from the prior-year quarter. That gain more than offset a $4.8 million increase in noninterest expense and a $1.1 million provision for credit losses, compared with a small recovery a year earlier.

Noninterest income rose about 8% despite a 10% decline in mortgage banking income. Higher gains from loan sales, recoveries on a previously charged-off loan, and a bank-owned life insurance payout helped compensate for the mortgage decline.

Operating net income, a non-GAAP measure, was also $8.7 million because Primis recorded no operating adjustments for the quarter.

Business and Division Performance

Growth remained concentrated in the Core Bank, mortgage warehouse, and Panacea operations, while Primis Mortgage faced lower profitability. The digital platform continued to provide approximately $1.0 billion of deposits at a lower cost than a year earlier.

Panacea also sold approximately $32 million of loans during the quarter. Loan sales by Panacea and the Core Bank contributed to $1.5 million of gain-on-sale income, up from $0.2 million a year earlier.

Margin Expansion Offset Mortgage Revenue Pressure

Reported net interest margin increased 48 basis points year over year and 21 basis points sequentially to 3.66%. The quarter included a $0.7 million interest recovery on a previously charged-off loan, which added approximately seven basis points to the margin. Excluding that recovery, non-GAAP core margin was 3.59%, up 14 basis points from Q2, and adjusted net interest income was $35.6 million, 23% above the prior-year period.

Average earning assets increased to $3.94 billion from $3.62 billion, while the cost of funds declined to 2.47% from 2.62%. Investment yields also benefited from the portfolio restructuring completed in Q4 2025. These factors allowed spread income to grow faster than the balance sheet.

Mortgage operations moved in the opposite direction. Management said retail mortgage headwinds reduced the pipeline by 37% and lowered revenue by $2.3 million from Q2. Although closed mortgage volume was higher than a year earlier, mortgage banking income declined to $8.0 million from $8.9 million, and the division moved from a $1.9 million pre-tax profit to a $0.3 million loss.

Profitability, Credit, and the Balance Sheet

Expenses and Operating Returns

Noninterest expense increased 15% year over year to $37.2 million. Employee compensation rose to $20.5 million from $18.5 million, occupancy and equipment costs increased to $5.0 million from $3.5 million, and miscellaneous lending expenses climbed to $2.1 million from $0.2 million.

Primis reported a non-GAAP core operating expense burden of $24.2 million, compared with $24.9 million in Q2 and $21.6 million a year earlier. Q3 included approximately $1.4 million of loan-related expenses and $0.4 million of professional and other third-party costs. Management said the normalized burden was essentially flat sequentially and continues to expect approximately $3.0 million of annualized savings from vendor consolidation and statement services beginning in early 2027.

The efficiency ratio improved to 75.47% from 78.81% a year earlier, although it was higher than Q2’s 68.48%. Return on average assets rose year over year but remained at 0.80%, below management’s 1.00% target.

Credit Quality, Funding, and Capital

Loans held for investment reached $3.50 billion, up 9% from a year earlier and broadly stable from Q2. Growth in Core Bank, Panacea, and mortgage portfolio loans was partly offset by lower mortgage warehouse balances and the continued decline of the consumer loan program.

Nonperforming assets excluding SBA-guaranteed portions declined to 1.43% of total assets from 2.07% a year earlier. The related balance fell to $61 million from $63 million in Q2. However, core net charge-offs increased to an annualized 17 basis points from three basis points a year earlier, largely because of one credit that had previously been reserved for. The allowance for credit losses equaled 1.30% of held-for-investment loans, down from 1.40%.

Total deposits increased 4% year over year to $3.47 billion. Average noninterest-bearing deposits rose 13% to $542 million, helping reduce the cost of deposits to 2.28% from 2.46%. The gross loan-to-deposit ratio nevertheless increased to 100.78% from 95.92%, and Federal Home Loan Bank advances stood at $220 million, up from $85 million a year earlier but down from $300 million in Q2.

Tangible book value per share, a non-GAAP measure, increased 18% to $13.81, while the tangible common equity-to-tangible assets ratio rose to 8.14% from 7.48%. Primis also declared a quarterly dividend of $0.10 per share, payable November 20, 2026, to shareholders of record on November 6.

Management Commentary

President and CEO Dennis J. Zember Jr. described the Core Bank as the company’s primary earnings engine, pointing to its loan growth, lower-cost deposits, and margin expansion. Management is adjusting expenses during the period of lower retail mortgage volumes while seeking to preserve operating capacity for a potential recovery in mortgage activity.

Recent Insider Transactions

The detailed transaction data supplied for FRST lists 10 recent direct purchases between May 29 and September 9, 2026. Their reported values total approximately $146,175; the transactions are presented without implying a view on the company’s valuation or outlook.

The separate six-month aggregate supplied with the transaction data showed zero purchases, which conflicts with the detailed records above. The individual transactions should therefore be checked against the corresponding regulatory filings.

Risks Investors Need to Watch

• Mortgage profitability: A 37% sequential reduction in the retail mortgage pipeline and the division’s move to a pre-tax loss could continue to pressure fee income and operating leverage if volumes remain low.
• Expense execution: Noninterest expense grew faster than noninterest income. The anticipated vendor savings do not begin until early 2027, making cost control important in the intervening quarters.
• Credit costs: Nonperforming assets improved, but the provision returned to an expense and core net charge-offs increased year over year. Further deterioration could offset gains from the wider margin.
• Funding requirements: The loan-to-deposit ratio exceeded 100%, and FHLB advances remained substantially above the prior-year level. Continued loan growth without comparable deposit growth could increase reliance on wholesale funding.

Conclusion

Primis produced higher Q3 2026 earnings primarily through net interest margin expansion, earning-asset growth, and lower deposit costs. Those gains outweighed higher operating expenses and a weaker mortgage contribution, while credit quality and tangible capital improved from the prior year. The next areas to monitor are mortgage revenue, execution of planned cost savings, credit costs, and the balance between loan growth and deposit funding.