Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primis Financial Corp First Quarter Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Matthew Switzer, Chief Financial Officer. Please go ahead. Good morning, and thank you for joining us. 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. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release. I will now turn the call over to our President and Chief Executive Officer, Dennis Zember. Thank you, Matt, and thank you to all of you that have joined our first quarter conference call. Matt asked me last night after our board meeting what part of the quarter I wanted to address on this call, and I told him, of course, all the good parts. Only one of us had a chuckle about it. He's still not laughing as much as I thought he would. Seriously, we're very encouraged about what happened here at the bank in the first quarter. With that said, I'm really mindful of what the industry is experiencing, especially banks, say, our size, maybe even a little larger. Our thesis for this bank and our future has played out very well this quarter, and I think maybe for the cycle that we could be close to entering. I'll cover all of that shortly, but first wanted to summarize net income. For the quarter, we're reporting $5.7 million of net income. The one-time kind of things were about $1 million of negative spread and DP costs associated with the digital success that unquestionably will not replay in the second quarter. About $450,000 of fraud expenses, all of which are at the core bank, none of which were individually significant. A mortgage run rate that I think is about $300,000 below our current run rate, even with no additional pickup in volumes or lock pipeline. All of that moves our ROA closer to, say, 75 or 80 basis points, which isn't good enough, but I think it's within striking distance given the momentum I see in several areas of the bank. I'm happy with the performance of the core bank this quarter. On the headline, it appears that non-interest-bearing deposits were down significantly. One chunky deposit associated with a mortgage servicing rights loan of about $54 million left this quarter. Excluding that, non-interest-bearing only dropped 5.8%, which I believe is a good result. Total deposits, even including this departure, were only down 0.2%, just $6 million. Our bankers on both sides of the balance sheet did a great job. Our margin at the core bank was at 3.38%, down obviously from the fourth quarter, but up materially in percentage terms from where we were a year ago when we reported 2.96%. In mortgage, we've been focused on two seemingly different strategies. Without sounding too Southern, it boils down to trimming and recruiting. We've been right-sizing support staff, commission rates, incentive plans, and everything we can to make our break-even production levels as low as possible. Given the performance in the last two months, I believe we are somewhere around, say, $40 million-$45 million a month to break even, which is remarkable for this industry. We've been recruiting as well, looking for lenders that like our culture, our speed to closing, our nearly nationwide capacity, that aren't looking for 2021 size signing bonuses. These combined efforts have moved production to somewhere around $700 million-$800 million a year and positioned us well for when rates fall and volumes return to pre-pandemic levels. In Panacea and Life Premium Finance, we see strong pipeline and honestly some resiliency to today's yields. Both units have very good pipelines, and their profitability and efficiency curves are directionally very nice. Panacea, in particular, has benefited from the attractiveness of their credit offering, and we're seeing more parties interested in this paper, which signals better non-interest income opportunities and a faster pathway to meaningful profitability. On top of that, Panacea continues to punch way above their weight, finding niches with larger and larger organizations and associations that build their brand and the balance sheet affordably. Lastly, Tyler, his partners, and the bank continue to tweak and build technology solutions, and at the LLC level have considered raising capital to turbocharge things on the technology build. I'm increasingly aware, though, that their earnings rate alone can fuel all of this investment that we collectively need to absolutely own this medical space in the next couple years. The digital platform and the deposit success. In short, we raised $1 billion nationwide with no more staff, no fraud losses, almost nothing on advertising spend, and virtually no impact at the core bank. Right now, we have over 12,000 customers on the digital platform. 54% of them came from the nation's 10 or 12 largest banks, where realistically, they were earning close to nothing. Another 21% came from smaller community banks or credit unions, where realistically, they appreciate customer service and personal relationships. The average age is just over 50, and the average deposit is a touch over $80,000. Daily, we have multiples more in deposits to existing accounts than we have withdrawals or account closures. We are still opening accounts. Last night, we opened about 53 accounts at a rate that's about 50 basis points below the national sweep rate. The obvious boost to our company safety with liquidity is obvious. Our liquidity ratios and our uninsured deposit levels are some of the best in the country. With the sweep in place, we'll have done all of this in a way that doesn't dent our capital ratios. That's so important in this environment to be confident on liquidity and capital. What may be lost on some is the opportunity with this platform. We're going to have the same success in the near future on checking accounts and lower cost deposits. Our app is more progressive and functional and safe with respect to fraud or bad actors. As we do that, especially with the sweep in place, I expect incremental spread to the rate we offer with very little impact on our earning asset levels. Hopefully in a way that could boost our margins by some amount. There's no playbook for banks our size, even banks 10 times our size, to build a national brand or image. The industry has been so awash in liquidity with really subpar technology, and it's just seemed nonsensical to focus a lot of strategic energy on being a deposit growth leader. Our strategy is to get as many customers on this app at rates that have positive spread to the swaps, surprise them with customer service and attention, surprise them with humanizing communications, smart technology, accessibility to our executive team, rates that are better than our competition that is stuck with incremental or branch or marketing costs, and over time build a significant national customer base that can fully fund our lines of business at costs that will push 3% margins or better. I absolutely love connecting with these customers, whether it's in text or email or telephone calls, or honestly, even in person as I travel across the country and seeing how pleased they are with the experience that Primis Bank has delivered. It isn't perfect yet, we aren't done tweaking things and making improvements either. Before I turn it back over to Matt, I want to thank our staff. I cannot say it loud enough or too many times. What we've rolled out here and succeeded with is not something you buy off the shelf. We built this. We engineered this solution. We dreamed up everything from the backroom systems, features on the app, security and fraud prevention, and the unbelievably affordable and effective marketing of this idea. This is not just fintech relationships that are pouring deposits onto our balance sheet. Beyond just the digital team, I'm so thankful for the rest of our bank that has stepped up this quarter, answering calls and working with customers to make this quarter and this effort successful, and it's great work for our team. All right, Matt, with that, I will turn it over to you. Thank you, Dennis. I will provide a brief overview of our results before we turn to Q&A. As a reminder, a full description of our first quarter results can be found in our earnings release and first quarter earnings presentation, both of which can be found on our website. Operating earnings for the first quarter were $5.8 million or $0.23 per diluted share versus a little less than $1 million or $0.03 per diluted share in the fourth quarter. Total assets were $4.2 billion at March 31 versus $3.6 billion at December 31. Excluding PPP loans and loans held for sale, loan balances grew 13% annualized, and that's after a $15 million Panacea loan sale in the first quarter. Growth was particularly strong in Life Premium Finance again in the first quarter. Given the current environment, we expect to see continued loan growth with an emphasis on quality. Deposits were up approximately 35% unannualized in Q1, bringing our loan-to-deposit ratio down to 83% at the end of the quarter from 108% at the end of the fourth quarter. As we discussed on last quarter's call, reducing that ratio was a singular focus in Q1, and the success of our digital offering has been a tremendous boost to our bank. As a result, we had excess cash of approximately $500 million at March 31 and excess average cash of approximately $300 million for the quarter. We're in the process of implementing a sweep program that will allow excess funds and deposits to be moved off balance sheet and expect that to be live by the end of the second quarter. Excluding accounting adjustments related to a third-party managed portfolio, net interest income was down slightly to $27.5 million from $28.2 million in the fourth quarter. The decrease was largely due to a temporary drag to earnings from building deposits in advance of the last Fed move, which is now abated. Net interest margin was 3.15%, down 52 basis points from 3.67% in the fourth quarter. Approximately 29 basis points of the decrease was due to the excess liquidity described earlier. Excluding accounting adjustments and a one-time gain in the fourth quarter, non-interest income was $6.6 million in the quarter versus $4.8 million last quarter. Mortgage originations were up 43% in the quarter in the face of substantial industry headwinds and on top of normal seasonal lows. The locked pipeline also ended the first quarter at $53 million, up 110% from the last quarter, suggesting strong momentum into the second quarter. Lastly, non-interest income included a gain of $427,000 from a $15 million loan sale from Panacea. Panacea has cultivated a number of relationships with other banks that will lead to increasing gain on sale revenue through the rest of this year. Core non-interest expense, excluding accounting adjustments and non-recurring items, was flat at twenty-six and a half million for the quarter, which includes approximately $5 million related to Primis Mortgage. Of note, marketing costs were down even with the increased deposit-raising activity, as we were particularly efficient with how we attracted funds to the digital platform. Of note, fraud losses were higher by $371,000 in the quarter, none was attributed to the digital platform activity. Digital activity did contribute most of the data processing expense increase of $549,000 due to application volumes, which is expected to subside in the second quarter. Efficiency ratio declined to 69% from 72% in the fourth quarter as our various business lines increased profitability. The provision for credit losses was $5.2 million in the quarter versus $7.9 million last quarter. The vast majority of the provision was due to accounting for a third-party managed portfolio, which is offset by non-interest income gains. Excluding these adjustments, the provision would have been approximately $500,000 for the quarter. Core net charge-offs were $2.1 million and were largely charge-offs of specific reserves established in prior quarters. The allowance for credit losses to gross loans, excluding PPP balances, was flat at 117 basis points for March 31 and December 31. Non-performing assets net of SBA guarantees decreased to $32.8 million in the quarter from $34.9 million last quarter. A little over 80% of our NPAs are comprised of two relationships that we've discussed previously, one of which was actually current as of March 31. The assisted living credits that we've described previously were impaired last quarter are currently being marketed by a receiver with bids expected in the next couple of weeks. We also have no OREO still. Pre-tax, pre-provision operating ROA was 131 basis points in the quarter, up from 99 basis points in Q4. Operating ROA was 60 basis points, up materially from 9 basis points last quarter. Without excess liquidity and the slight earnings drag from raising funds when we did, ROA would have been over 70 basis points in the quarter, as Dennis described. There are plenty of headwinds facing the industry right now, we see upcoming sweep capabilities, increasing gain on sale revenue, stronger mortgage activity, and general improvement in operating performance across our business lines in the core bank, all as reasons to believe we will continue driving that ROA higher this year. Operator, we can now open the line for Q&A. Thank you. At this time, I would like to remind everyone that in order to ask a question, press star then the number one on your telephone keypad. We'll take our first question from Casey Whitman at Piper Sandler. Hi, good morning. Good morning, Casey. Congrats on the success of the digital bank here. Wondering how should we think about how big on balance sheet you would run the digital bank versus, I guess, the core bank here? You know, how should we think about the size on balance sheet of that once you implement that sweep function? We ended the quarter with about $600 million in cash. Our rough math is we will probably drive that cash back down to about $100 million. It'd be about $500 million of balance sheet shrinkage in the second quarter. With that sweep, Casey, we can then manage that cash level at about that level, depending on overall balance sheet growth. Any incremental deposits we raise, we can immediately move off. Net-net, we'll stay around that $100 million in cash. Okay. Sticking with the digital bank, I would assume like the back office compliance costs have already been incurred. What about marketing costs from here? Is there any more, I guess, expenses there, or are you pretty set with what you've got here for expenses? I don't see any material increases in marketing expenses from here. I mean, at the margin maybe, but, I think our experience in the first quarter is we have a pretty good playbook for how we think we can grow these digital deposits without spending tons of dollars. It's largely digital advertising, which is much more efficient, as you can imagine, than radio and TV ads and other local advertising methods. Yeah. Okay. Just generally, just touching on sort of how you're thinking about profitability this year and next. Seems like you're on track for a lot of the things we were discussing last quarter. Has, I guess, some of the industry turmoil pushed any of your goals out a bit, or are we still, I guess, pretty on track from your guys' standpoint? I mean, we see good pipelines in Panacea and Life Premium Finance. I, you know, I think loan demand in, you know, the core bank is no different than I think what the industry. I think that's come in a little. I don't think there's just not as much demand there. I think we could grow both of those divisions profitably from here, especially with the gain on sale. I think we can grow net income, but still we're not gonna sell all of that business, so there's gonna be some balance sheet growth there. I mean, are there margin headwinds? There are. I don't think there's gonna be for us, especially when we have this much cash, I don't think we're gonna have as much margin headwinds as. Yeah ... as maybe our competition. But I still think there's a little bit of that out there. I mean, I still feel, I mean, assuming that we don't see anything in credit. I didn't make this. I wrote this, but I didn't say it in my prepared comments. I think the thesis about Primis Bank, you know, being diversified, we have about 35% in CRE. We have lines of business that drive C&I, good C&I volumes and a safe diversified. I think that thesis is gonna play out pretty well here. It's gonna allow us to keep growing, not at the pace we did last year, but I don't think you'll see us with a stagnant balance sheet. Yep. Okay. That one, large relationship seemed pretty big for you guys. Are there other, I guess, chunky non-interest bearing you might be, I don't know, worried about or looking at, or was that sort of just a unique situation? That was a unique situation. We don't have any other large non-interest-bearing accounts. Okay. Great. Just for modeling purposes, I guess, what's like a normal run rate for that credit enhancement fee line? I recognize there's an offset in the provisions, but would like the $5 million be a little large? The way it works, and I know this is somewhat complicated and noisy, the charge-offs on that portfolio flow through our provision, we get it back in non-interest income. There's an incremental spread that runs through net interest income that we give back in non-interest expense. You can see all those in the income statement on our in our tables in the press release. We had a allowance build on that portfolio in the first quarter that due to some modeling changes. I wouldn't expect that to occur again in the second quarter. The only thing running through the provision and non-interest income related to that portfolio will be losses, which we don't expect to be as high as they were. It was about $1.9 million in the first quarter, so that should be lower in the second quarter. In the net interest income and non-interest expense pieces, it was about $900,000 in the first quarter, and that's probably a reasonable number for the second quarter. Okay, great. Well, congrats you guys and thank you. All right. Thanks, Casey. We'll go next to Russell Gunther at Stephens. Hey, good morning, guys. Morning to you, Russell. Morning. I want just to stick with some of the balance sheet size a bit, just given some of the puts and takes here. On the loan growth side, I hear you in terms of where you expect it to come from, but from an order of magnitude perspective, do you guys have a view on overall organic loan growth? Similar question on the deposit side. you know, hear you on the sweeps, but kind of where do you think balances go from here? I think normally we would have expected $200 million, maybe a little more than that from Tyler's group. I think we'll probably end up seeing half of that, you know, some from sales and some from a little softer demand. Maybe $100 million or so, $125 million. I think Life Premium Finance, I think we would have normally seen $200 million there. I think that might still hit that number. At the core bank, I think just given demand, honestly, I think maybe just 1% or 2% growth at the core bank would be a good result, honestly. I think so maybe for the whole year, we're probably looking at, call it 10%-12%, 13%. Got it. Okay. Really helpful. From a deposit balance perspective, you know, in terms of where you expect that to trend and just trying to triangulate to the margin going forward, I think you mentioned, Dennis, in your remarks kind of that 3% bogey and an ability to remain kind of at or above that going forward. Yeah. I'm I think on the what we're just one bank here. Honestly, all of the people I say core bank and digital bank, you know, I try to say digital platform, but I mean, we're just one bank. Honestly, all of the people on the core side help us out tremendously on the digital side. I think that when we think about digital platform, I mean, we really think about those national deposits funding national lines of business and stuff like that. It's that I think we should be sort of eyeing about a 3% margin. I think when you look at the core bank side, I think it could be a little better than that. I do. I don't think seeing the margin at the core bank go to 3%, I don't think that's gonna happen. Is there some downward pressure? Absolutely. No question about it. If we're at 3.38% in the first quarter, I mean, probably 3.25%-ish or so at the core bank is I think a safe number. I think 3% or so long term on the digital platform is appropriate. I mean, I think we're probably three or four quarters from hitting the 3%, just given that everything is brand new. What may help us is that we'll have, you know, $1 billion. We have $1 billion on the digital platform right now. When we start sweeping things, we will be getting positive spreads with really no denominator, no earning asset, that could help boost the margin. As far as what could be on the digital platform, I mean, if we had the sweep in place right now, and we were confident that we weren't gonna see, ugly capital ratios, I mean, I hate to even say a number, but I mean, I think right now I think we're probably doing 30, probably $50 million a month. I think we could probably triple that. Russell just said- In terms of the balance sheet, we're at a 83% loan-to-deposit ratio at the end of the quarter. That sweep reduces cash, obviously, but it also reduces the deposits on balance sheet. You can assume that loan-to-deposit ratio goes back up to, call it, mid-90s or something around there. And that as we raise, as we attract new customers through some of these different initiatives, we'll be able to kind of manage that loan-to-deposit ratio by sweeping excess off the balance sheet if that helps. Yeah. That helps a lot. I appreciate it from both of you for the clarification and color there. Just last one for me. Could you help us with... excuse me. Could you help me with the non-interest expense outlook going forward, considering some of the puts and takes around fixed mortgage, variable with improvement in that fee line and just any other franchise investments and potential offsets? Well, as you can imagine, given, and you probably are hearing this a lot, given the challenges on the margin side, we're spending a lot of time thinking about non-interest expense and controlling that. I mean, we were, call it, $21.5 million ex mortgage in the first quarter. That included some expenses related to fraud and data processing with all the applications, a couple other things. We would like to see that number closer to $20 million run rate, maybe even a little bit below as we do some pruning and trimming, as Dennis Zember talked about earlier. Russell. That's on a core basis. Obviously, mortgage non-interest expense will fluctuate. I mean, it'll be higher the next couple of quarters because their production will be higher. On a core basis, that's what I'm referring to. Russell, I mean, given the environment, there's no energy around here to grow expenses anywhere. All our division leaders know that this just isn't the time to be thinking, you know, incrementally positive growth to that. We're also, Matt and I are not, just to assure you, we're not gonna be caught flat-footed if things turn worse. We're not gonna be caught flat-footed and stuck on non-interest expense. We'll have plans. I mean, we're already kind of developing plans. I don't think right now, given the momentum, some of the things that Matt finished with about the positive momentum here, I don't know that it's time to go hard at that, but it is time to have a plan, and I can assure you that that's in the works. Understood. Thank you guys very much for taking my question. All right. Thanks, Russell. We'll go next to Christopher Marinac at Janney Montgomery Scott. Hey, good morning. Dennis and Matt, just want to circle back on the deposit growth initiative in the checking in now accounts going forward. Is that going to pay down some of the savings, or is it gonna be complementary and therefore just have a lower blended rate? It'll be complementary, so hopefully, average down the cost of the, those deposits. As the Fed plays out over time, whether up or down, do you have to move those savings rates that you've established so far? I suppose, yeah, I suppose we would. there's, in our offering, there's no term on the rate we're offering. You know, I mean, Chris, initially, I would have thought, okay, I made a comment about this. I would have thought, oh, this is just all, you know, internet rate shoppers. I mean, it turns out that's exactly what it's not. You know, over half of it's come from, you know, money center banks, where I know they weren't being paid hardly anything. I think long term, I think if this could hover, say, maybe 10 or 15 below Fed Funds, I think that would be excellent. I'm pretty confident we could be there. I think we could probably. I think we could probably hold a lot of the funds with some of the other stuff that we're doing, sort of humanizing our company and establishing relationships. I think in a year, it might even be better than that. That's what the whole effort around here is. A lot of the concept that you just get digital customers in here and, you know, they use the app. Seriously, they 90% of them opened an account in 5 minutes, opened and funded an account in 5 minutes and never and just used the app. You know, for us to illustrate that they're not banking with bots, so to speak, is the term we use around here, and to humanize our company with emails, letters, phone calls, visits from me or the other executives, I mean, it means a lot. I think over time, the savings that we're going to get sort of from those qualitative or esoteric relationship-building things is you're going to see that in the yield here. I know it's early on the expense side, but your expenses overall are much cheaper than what you do in the branch. That's going to blend that whole experience and return as you get further along on this. Correct. Yeah. Exactly. The last question just related here is, you know, you mentioned about the fraud experience so far. Is there anything unique because you've built this from scratch compared to other deposit systems you've worked with in the past, Dennis? There is absolutely no question. Yes. The, I'll tell you, just anecdotally, when we turned this on, it was, what? October 1st. We turned this on on October 1st, we did some light marketing of it, sort of in our core markets, like mostly in the D.C. MSA. Every single morning, I would look at the balances at the accounts, and, you know, I would see 4 or 5 accounts. You know, I'd see the balances come through, and I would write personal notes and do all that. Then as it started catching on a little more, and you'd see 5 accounts, 10 accounts, 50 accounts. When we were doing 600 and 700 accounts a day, I mean, we had a moment around here we're like, "Oh my God, you know, I mean, are we gonna lose the bank?" Because fraud is so prevalent. I mean, I've talked to other bankers. Fraud at the core bank level is so prevalent and so massive right now. We just sort of as we were in the middle of that, Chris, we just went back and looked at all of our fraud measures. You know, what it takes to open account, how we identify who you are, how we know that these are your funds and not somebody else's that you're putting in these accounts, what we do after you put the money in the account. All of that we engineered ourselves. It's none, none of that we bought off the shelf. It has just... it's worked. It's worked fantastically. Honestly, it's protecting our customers as well. We've not figured out exactly how to communicate that back to the customers, but the ones that I'm meeting in person or talking to on the telephone recognize that this is a safer way to bank. Great. Thanks for all the background this morning and disclosures. Thanks, Chris. We have no further questions at this time. I'll turn the conference back over to management for any closing remarks. All right. Thank you again, for everybody that's joined the call. Matt and I are available if you want to call, text, or email. We'll answer any other questions you might have. Hope you have a good weekend. We'll talk to you soon. That does conclude today's conference. Again, thank you for your participation. You may now disconnect.