Primis Financial Corp. (FRST): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at Primis Financial Corp., a $4.0 billion asset bank, and wondering how it stacks up against the market pressures of late 2025. Honestly, the picture is mixed: while Primis has a strong grip on its suppliers-core deposit costs were only 1.73% in Q3 2025-it's fighting hard against rivals for customer dollars, especially in the digital space where depositors hold significant power over that $1.0 billion in digital funds. So, we need to cut through the noise and see if their specialized lending, which helped them post a 3.15% Net Interest Margin that quarter, is enough to fend off the constant threat of substitutes and new entrants. Dive into the five forces analysis below; it maps out the near-term risks you need to watch.

Primis Financial Corp. (FRST) - Porter's Five Forces: Bargaining power of suppliers

When we look at the bargaining power of suppliers for Primis Financial Corp. (FRST), we are primarily focused on the providers of funding (deposits, wholesale sources) and the vendors that provide essential technology and processing infrastructure. Overall, the data from late 2025 suggests that Primis Financial Corp. has successfully managed to keep supplier power relatively low, especially in its critical funding segment.

The reliance on more expensive, market-sensitive wholesale funding sources is minimal. You can see this clearly in the funding mix as of the third quarter of 2025. Primis Financial Corp. reported zero brokered deposits, which is a key indicator of low reliance on this potentially volatile supplier group. Furthermore, the utilization of Federal Home Loan Bank (FHLB) borrowings was also noted as low, though FHLB advances did total $85 million outstanding at September 30, 2025, following a spike in mortgage activity. This low reliance on wholesale funding means that external funding providers have limited leverage over Primis Financial Corp.'s cost of capital.

The power of depositors, who are essentially suppliers of funding, is also constrained by the quality and cost of the core deposit base. For the core bank, the cost of deposits was impressively low at 1.73% in the third quarter of 2025, a significant drop from 2.29% in the same quarter in 2024. This low cost is supported by a better deposit mix, with noninterest-bearing demand deposits growing by 16% year-over-year as of September 30, 2025, which management noted helped reduce overall deposit costs by nearly 20%. This strong retention and growth in low-cost accounts directly limits the pricing power of the average depositor.

Here is a quick comparison of the cost of deposits across the key segments for context:

When it comes to technology suppliers, Primis Financial Corp. is actively working to reduce dependence on core processors. You saw evidence of this success in vendor management during 2025. The renegotiation of the core contract with a provider is expected to reduce expenses by $0.9 million in the third quarter and then by $1.5 million in the fourth quarter and beyond. Furthermore, the company is developing its proprietary V1BE technology. Management indicated they are implementing enhancements to make V1BE easier to license and expected to have its first external customer onboard before the end of 2025. This internal development and future licensing strategy directly counters the bargaining power of incumbent core processors.

The situation for Panacea Financial, Primis Financial Corp.'s niche division focused on healthcare professionals, presents a different dynamic with its specialized suppliers. While Primis Bank remains the exclusive banking partner for Panacea's loans and deposits, the division's niche focus on a specific professional segment means the number of truly specialized suppliers-such as industry associations for endorsements or specialized healthcare bankers-is inherently limited. Panacea's success, with customer deposits reaching $133 million at September 30, 2025 (up 47% year-over-year), shows they are effectively managing this specialized ecosystem. The power of these niche suppliers is somewhat mitigated by Panacea's strong brand recognition, being the number one ranked 'Bank for doctors' on Google, and their ongoing efforts to secure flow agreements to speed up customer acquisition without straining the balance sheet.

To summarize the supplier landscape for Primis Financial Corp. as of late 2025, you see a clear strategy at work:

• Secured low-cost funding with zero brokered deposits and a core deposit cost of 1.73% in Q3 2025.
• Actively reducing reliance on core technology vendors through contract renegotiations saving up to $1.5 million quarterly starting in Q4 2025.
• Developing proprietary technology (V1BE) with a goal to license it to external banks by the end of 2025.
• Managing a niche supplier base for Panacea Financial, which serves over 7,000 professionals and practices.

The bank's funding suppliers have very little leverage right now.

Primis Financial Corp. (FRST) - Porter's Five Forces: Bargaining power of customers

When you look at Primis Financial Corp. (FRST), the bargaining power of its customers is definitely not uniform; it shifts quite a bit depending on which segment you are analyzing. You have highly price-sensitive digital customers on one end, and stickier, specialized commercial clients on the other.

High power for digital depositors due to competition for over $1.0 billion in digital funds.

The digital deposit segment represents a clear area where customers hold significant leverage. Primis Financial Corp. has aggressively built out its digital platform to attract these funds, ending the third quarter of 2025 with over $1.0 billion in deposits on that platform. This scale means they are competing in a national market for these dollars, and customers are definitely shopping around. To keep these funds, the cost of deposits on the digital platform in September 2025 was reported at 4.07%. This is a direct measure of the price competition you face. To be fair, the core bank's low-cost deposit base is helping overall funding costs, with Noninterest bearing demand deposits reaching $490 million at September 30, 2025, which was a 16% year-over-year growth rate. Still, the digital side shows customers can demand competitive rates.

Here is a quick look at the deposit dynamics as of September 30, 2025:

Commercial Real Estate (CRE) borrowers, 26% of loans, have alternatives for large financing.

For the Commercial Real Estate (CRE) borrowers, the power dynamic is different. Investor CRE loans represented 26% of Primis Financial Corp.'s total loans at September 30, 2025. While this concentration is noted as low relative to regulatory capital-at 213% of regulatory capital-the sheer size of these financing needs means borrowers have options outside of Primis Bank. Large commercial borrowers can often shop between regional banks, national institutions, and debt funds, giving them negotiating leverage on pricing and terms, even if the bank is actively building a pipeline of new, higher-yielding customers.

Specialized Panacea customers (doctors) face higher switching costs due to tailored products.

On the other side of the spectrum, you have the specialized customers served by Panacea Financial, a division focused on physicians, dentists, and veterinarians. These clients are served with tailored products, which inherently raises their switching costs. The success of this specialization is clear in the growth figures: Panacea loans stood at $548 million at the end of Q3 2025, marking a 40% increase year-over-year. Furthermore, the deposits associated with these specialized clients are very low-cost, with Panacea customer deposits growing 50% year-over-year and carrying a weighted average cost of deposits at just 1.37% in Q3 2025. This suggests that for this group, the value of tailored service outweighs the friction of moving their accounts.

77% of consumer accounts have been with the bank over two years, suggesting moderate switching costs.

Looking at the broader consumer base, the stickiness is quite good, which dampens customer power. Data from the third quarter of 2025 indicated that approximately 77% of consumer accounts have been with Primis Financial Corp. for over two years. This tenure suggests that for the majority of these customers, the hassle of switching-updating direct deposits, automatic payments, and learning a new banking interface-is enough to keep them loyal, even if a competitor offers a slightly better rate. You can see this loyalty in the referral rate for digital accounts, where over 1,000 digital accounts came from customer referrals in Q3 2025. This indicates relationship strength, not just price shopping.

You should keep an eye on how the cost of digital deposits (4.07% in September 2025) compares to the cost of deposits from the highly loyal consumer base. Finance: draft a sensitivity analysis on deposit cost if digital deposits grow another 20% by Q1 2026.

Primis Financial Corp. (FRST) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive intensity Primis Financial Corp. faces in its primary operating footprint. Honestly, the rivalry in the regional banking space is always a tough fight, especially when you are trying to gain share against established players.

Primis Financial Corp. operates its core bank through twenty-four full-service branches strategically located across the regional markets of Virginia and Maryland. As of September 30, 2025, these 24 banking offices represented almost two thirds of the Company's total balance sheet. This physical presence puts Primis Financial Corp. directly in the path of larger regional and national banks vying for the same core deposits and loan demand.

The pressure for core deposits is evident when you look at the competitive landscape. Back at year-end 2024, Primis Financial Corp.'s core bank cost of deposits was 1.87%, which management noted was lower than most of its larger regional bank competitors and up to 100 basis points lower than equal-sized peers in the greater Washington, D.C. region. Still, management acknowledged that competitive pressures among financial institutions [were] increasing significantly as of late 2025.

To counter this rivalry, Primis Financial Corp. leans heavily on differentiation through specialized lending niches. This strategy helps them compete on more than just branch footprint or standard consumer rates. Here are the key specialized portfolios as of the third quarter of 2025:

• Panacea loans reached $548 million.
• Mortgage warehouse balances stood at $327 million.
• The mortgage warehouse segment showed massive growth, up 411% versus December 31, 2024.

This specialized focus translates directly into pricing power, which is a key metric for assessing rivalry impact. The Core Net Interest Margin (NIM) for the third quarter of 2025 hit 3.15%. To put that in perspective against the competition, the overall Net Interest Margin (NIM) was 3.18%, a notable increase from 2.80% in the same quarter a year prior. If you adjust for interest reversals on loans that moved to nonaccrual in the quarter, the core NIM would have been even higher at 3.23% for Q3 2025.

Here's a quick look at how these key performance indicators stack up, showing the results of their competitive positioning:

The growth in the specialized areas is helping offset the general competitive drag on the core business. For instance, the mortgage division's monthly production increased from $20 million to $100-120 million by Q3 2025, which is definitely a strong competitive response.

Primis Financial Corp. (FRST) - Porter's Five Forces: Threat of substitutes

The threat of substitutes for Primis Financial Corp. stems from non-bank entities offering similar financial services through more agile, technology-driven channels. This pressure is felt across lending, deposit gathering, and specialized financing areas.

Significant threat from non-bank FinTechs for consumer and small business lending.

FinTech platforms are rapidly capturing market share, especially in unsecured lending and small business financing, which directly competes with Primis Financial Corp.'s core banking activities. The speed and convenience offered by these digital-first competitors put pressure on traditional origination models. For instance, digital lending accounted for about 63% of personal loan origination in the U.S. in 2025. Furthermore, an estimated 55% of small businesses in selected developed regions, including the U.S., accessed loans via fintech platforms in 2025. This indicates a substantial portion of the addressable market for Primis Financial Corp.'s small business lending is already being served by substitutes. The global fintech lending market was valued at $590 billion in 2025, showing the sheer scale of the alternative capital available.

You're looking at a market where digital origination is the default for many borrowers, so Primis Financial Corp.'s ability to compete on speed is paramount.

Mortgage warehouse lending faces substitution from capital markets financing.

Primis Financial Corp.'s Mortgage Warehouse lending division, which saw outstanding loan balances grow to $185 million as of June 30, 2025, competes with direct access to capital markets for mortgage originators. Mortgage companies can bypass bank warehouse lines by accessing funding directly through capital markets, such as selling mortgage-backed securities or using other securitization avenues. While Primis Bank has aggressively grown its committed facilities to $804 million by the end of the second quarter of 2025, the availability of these non-bank funding sources provides a constant alternative, especially when market conditions favor securitization over traditional warehouse lines. The division's growth, however, shows it is successfully capturing market share from these alternatives, with balances up 189% from December 31, 2024.

Credit unions and mutual banks offer lower-cost deposit and loan substitutes regionally.

Within Primis Financial Corp.'s primary geographic footprint in Virginia and Maryland, local credit unions and mutual banks often serve as close substitutes for core banking relationships. These institutions frequently compete aggressively on deposit rates, sometimes offering slightly lower costs to attract relationship-based funding, and may offer more favorable loan terms to local small businesses and consumers based on community ties. While Primis Financial Corp. is successfully lowering its overall cost of deposits by nearly 20%, partly due to its digital platform growth, local, non-publicly traded competitors can use their tax-exempt status or mutual structure to undercut pricing on specific deposit or loan products regionally.

Digital-only banks are a direct substitute for the $1.0 billion digital deposit platform.

Digital-only banks, or neobanks, present a direct substitution threat to the funding side of Primis Financial Corp.'s business model. Primis Bank's digital platform ended the second quarter of 2025 with almost $1.1 billion in deposits, a figure that directly competes with the deposit bases of these online-only institutions. These digital substitutes often operate with lower overhead, allowing them to offer highly competitive rates or superior user experiences, directly challenging Primis Financial Corp.'s ability to maintain and grow this crucial funding source. The growth in noninterest-bearing checking accounts by 16% year-over-year shows Primis is fighting this trend effectively, but the substitute threat remains high.

Here's a quick look at how Primis Financial Corp.'s digital funding base stacks up against the broader digital market context as of mid-2025:

The pressure from substitutes is multifaceted, targeting both asset generation and liability gathering.

• FinTech personal loan origination in the U.S. reached 63% digital in 2025.
• Primis Financial Corp. grew noninterest-bearing checking accounts by 16% year-over-year (Q3 2025).
• The global fintech lending market size was estimated at $590 billion in 2025.
• Primis Mortgage closed $323 million in volume in Q2 2025, competing with capital markets.
• The Company's total deposits stood at $3.3 billion as of June 30, 2025.

Finance: draft 13-week cash view by Friday.

Primis Financial Corp. (FRST) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers to entry for a new bank trying to set up shop against Primis Financial Corp. Honestly, the deck is stacked heavily in favor of incumbents like Primis, primarily due to regulatory hurdles and the sheer scale of capital required to even start the conversation with regulators.

The threat of new full-service banks entering the US market is generally low because of the high regulatory and capital barriers. Starting a bank isn't like launching a software company; you need massive upfront commitment and flawless execution on compliance from day one. Regulators, including the OCC, FDIC, and the Federal Reserve, scrutinize leadership experience, governance, and risk management before a charter is even considered. While minimum capital requirements technically include a 4.5% Common Equity Tier 1 ratio, 6% Tier 1 capital, and 8% total capital, startups typically must raise significantly more-often in the range of $15 million to $30 million-just to cover initial operating needs and satisfy regulatory demands for a viable launch plan. Application and licensing expenses alone can easily run between $500,000 and $1 million before a single loan is made.

The financial scale of Primis Financial Corp. itself presents a significant hurdle for any potential entrant. Consider the numbers from late 2025:

The cost to entry is high; you're not just buying a building, you're buying regulatory confidence. That's a tough tab to pick up for a startup.

Niche entry is certainly a more plausible, though still difficult, path. Primis Financial Corp. has already established strong footholds in specialized lending areas, making direct competition in those segments challenging for a newcomer. For instance, the Panacea Financial division, focused on the medical sector, had loan balances reaching $530 million as of the third quarter of 2025. Furthermore, the mortgage warehouse lending operation was substantial, with outstandings hitting $327 million at the end of Q3 2025. A new entrant would need a highly differentiated value proposition to pull market share from these established, growing segments.

Primis Financial Corp. has developed proprietary technology that could act as a further deterrent to replication. The V1BE service, described as the world's first bank delivery service app, brings branch services like cash deposits and withdrawals directly to the customer via a driver. This level of operational innovation, baked into the core customer experience, creates a high technological barrier. If Primis Financial Corp. were to license this technology, or similar proprietary systems, to other non-competing financial institutions, it would reduce the incentive for a new bank to spend time and capital building a functionally equivalent, complex delivery platform from scratch.

The barriers to entry can be summarized by the required operational and technological sophistication:

• Chartering Complexity: Navigating state or national charter applications is time-consuming and expensive.
• Capital Depth: Need for multi-million dollar capital raises before operations begin.
• Specialized Scale: Competing against established niches like Panacea's $530 million loan book.
• Proprietary Tech: Replicating unique services like the V1BE delivery model requires significant R&D investment.