Primis Financial Corp. (FRST) stock intrinsic value fair value estimate & owner earnings analysis

Primis Financial Corp. is the holding company for Primis Bank, a roughly $4.4 billion bank. It has 24 branches in Virginia, Maryland and the Greater Washington, D.C. area. Around that branch network it runs several specialty lines: a digital deposit platform (about $992 million of deposits at the end of 2025), the Panacea Financial division that lends to doctors, dentists and veterinarians ($544 million of loans), Primis Mortgage Company (about $1.2 billion of mortgages funded in 2025) and a mortgage warehouse lending unit ($318 million outstanding). Almost all of its profit comes from the gap between what it earns on loans and securities and what it pays depositors, less operating costs and credit losses. How we measured earnings. A bank's operating cash flow is swamped by mortgages it makes and then sells, so we measured owner earnings from reported profit. We counted credit-loss provisions and stock compensation as real costs. We added back only charges tied to old acquisitions: amortisation of acquired deposit relationships and an $11.2 million goodwill write-down in 2023. We stripped out one-time items: in 2025, a $51 million gain from selling 18 branch buildings and leasing them back, $32 million of gains on the Panacea Financial Holdings stake after that affiliate was separated from the bank, and a $15 million loss on selling low-yielding bonds. We did not add back the rest of the bank's depreciation and amortisation (about $6 to $7 million a year beyond branch depreciation). The filings do not fully break it down, so we treated it as the ongoing cost of the bank's technology. We also deducted the capital a bank must hold back to grow: roughly 8.5 cents of equity for each new dollar of assets. On that basis, owner earnings were about $1.42 to $1.45 per share in 2018 and 2019, when this was a plain community bank. Since the current chief executive took over in February 2020 and added the new business lines, they have been $1.32 (2021), $0.63 (2022), $0.19 (2023), a loss of $0.76 (2024) and $0.33 (2025). Most of the 2023 and 2024 damage came from a Consumer Program of promotional unsecured loans made mostly between mid-2022 and early 2023. When the promotions ended, many borrowers defaulted, and the bank set aside about $40 million for these loans in 2024 alone. That program no longer makes new loans. Only $3 million of promotional balances were left at the end of 2025, and 2025 provisions for it were $1 million. We therefore anchor on $0.63 per share, the median of 2021, 2022 and 2025. We left out 2023 and 2024 because of that program, but we carry the risk of a repeat in the bear case. Recent results support improvement. Net interest income in the first half of 2026 was $65.8 million, up 28% from the first half of 2025, following the late-2025 bond portfolio restructuring and $426 million of loan growth in 2025. Net income was $16.7 million. That included a $6.0 million pretax gain on selling an investment, so the underlying figure was about $0.50 per share for the half. The new branch rent (about $7.2 million a year) is already included in those numbers. Base case ($12.43 per share): owner earnings of $0.63 in the first year (well below the first-half 2026 pace) rise to $0.85 by year three as the program losses stay behind the bank and the bond restructuring keeps paying off. After that they grow about 3% a year with the balance sheet, which grew deposits about 5% a year from 2021 to 2025. After year ten we assume earnings hold flat but do not grow. The support for that is the deposit franchise: branch deposits averaged $100 million per branch at the end of 2025, and 82% of digital customers had stayed more than two years. Most of this value comes after year ten, because retaining capital to grow eats much of each year's profit. The base case is below the bank's book value of about $17 per share, since it earns only a thin return on its equity. Bear case ($6.32): earnings stay near the 2025 level of $0.33 to $0.50. The bank suffers another credit loss of about $0.60 per share in year four, in line with the 2024 loss, then stops growing. This case reflects the record of 2023 and 2024, the restatement of the 2020 to 2022 results, and the material weakness in controls over deposit-account processing that the auditor reported as of December 31, 2025. The company says that weakness caused no identified misstatement. Bull case ($21.69): earnings reach the first-half 2026 pace of about $1.00 at once and climb to $1.40 by year four, still no higher than what the bank earned per share in 2018 and 2019. The balance sheet grows 4% a year. All cases are discounted at 6%. They leave out the bank's remaining minority stake in Panacea Financial Holdings, which is carried at fair value, and would add modestly to value. Given the history of large losses, restated results and a control weakness still being fixed, the margin-of-safety price carries a wide discount: $7.00, close to the bear case.