On Wednesday, Stephens, a financial analyst firm, revised its price target for Primis Financial Corp. (NASDAQ: FRST) to $14.00, down from $16.00, while retaining an Overweight rating on the stock. The adjustment follows Primis Financial's recent quarterly earnings report and the announcement of its Life Premium Finance division's sale to EverBank. This transaction is anticipated to result in a pre-tax gain of approximately $4.5 million for the fourth quarter of 2024.
The analyst from Stephens noted that the revenue lost from the sale would be more than compensated for by Primis Financial's new venture into the mortgage warehouse space. This move is supported by a seasoned team from IBTX, which is leaving the industry. The analyst expects that any decrease in volume will be offset by the second quarter of 2025, with an estimated increase of around 150 basis points in effective yield.
Additionally, the analyst pointed to a forecasted net interest margin (NIM) expansion of 20 basis points from current levels, bolstered by the acceleration of deposit down betas. Core asset quality remained relatively stable, with net charge-offs (NCOs) at 15 basis points and non-performing assets (NPAs) at 31 basis points. The analyst also projected improved earnings per share (EPS) visibility over the next few quarters.
In the report, the anticipated deconsolidation of Panacea and the related gain, estimated to be around $16 million after taxes, was mentioned as a likely event for the second half of 2025. The revised estimates suggest a return on assets (ROA) of 95 basis points in the fourth quarter of 2025. Primis Financial is currently trading at 7.5 times the estimated operating EPS for 2026 and 0.9 times the estimated tangible book value (TBV) for 2025, leading to the reaffirmation of the Overweight rating.
In other recent news, Primis Financial reported a mixed Q3 performance, marked by strategic shifts and an accounting correction for a consumer loan portfolio. The correction impacted the quarter's results, but the mortgage team's success and a reduction of total assets in the Life Premium Finance division indicate potential growth. The company targets a 1% ROA by late 2025 and aims to be current on SEC filings by mid-November 2024.
Primis Financial's mortgage team has reached a $1 billion annual production run rate, a 67% increase in locked loans from Q3 2023. Despite a decrease in core pretax pre-provision earnings from $10.6 million to $9.3 million, the company reported a margin increase to 2.97% from 2.72% in the previous quarter.
These are among the recent developments at Primis Financial. The company expects a margin lift from new mortgage warehouse activities and aims for revenue growth and controlled expenses in 2025. However, ongoing SEC consultations present a cautious outlook.
InvestingPro Insights
Recent data from InvestingPro provides additional context to Stephens' analysis of Primis Financial Corp. (NASDAQ: FRST). Despite the lowered price target, there are some positive indicators for the company's future performance.
An InvestingPro Tip highlights that net income is expected to grow this year, aligning with the analyst's projection of improved earnings visibility. This expectation is further supported by another InvestingPro Tip, which notes that three analysts have revised their earnings upwards for the upcoming period.
The company's market capitalization stands at $286.54 million, with a price-to-book ratio of 0.75 as of the last twelve months ending Q3 2024. This relatively low P/B ratio could suggest that the stock is undervalued, potentially supporting Stephens' Overweight rating.
Primis Financial's dividend yield is currently 3.45%, and the company has maintained dividend payments for 13 consecutive years, as per another InvestingPro Tip. This consistent dividend history may be attractive to income-focused investors, especially in light of the anticipated improvements in the company's financial performance.
For readers interested in a more comprehensive analysis, InvestingPro offers additional tips and metrics that could provide further insights into Primis Financial's prospects.
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