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What changed in Primis Financial Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Primis Financial Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+387 added−304 removedSource: 10-K (2024-10-15) vs 10-K (2023-03-15)

Top changes in Primis Financial Corp.'s 2023 10-K

387 paragraphs added · 304 removed · 219 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

71 edited+19 added−12 removed128 unchanged
Biggest changeThe Company launched a division in the fourth quarter of 2021 focused on financing life insurance premiums for high net worth individuals across the United States. As of December 31, 2022, the Life Premium Finance Division had outstanding balances, net of deferred fees, of $193.8 million. Outstanding balances on these loans grow over three to five years.
Biggest changeAs of December 31, 2023, the Life Premium Finance Division had outstanding balances, net of deferred fees, of $382.1 million. Outstanding balances on these loans grow over three to five years. Consequently, the Company expects a sustainable growth rate in the division with each new loan originated. Primis Mortgage Company.
In November 2020, the Company launched the Panacea Financial division, which focuses on providing unique financial products and services for the medical, dental and veterinary communities. Panacea offers personal loans, student debt refinance and practice loans as well as deposit products nationally. Panacea has partnerships with fourteen national and state associations.
In November 2020, the Company launched the Panacea Financial division, which focuses on providing unique financial products and services for the medical, dental and veterinary communities. Panacea Financial offers personal loans, student debt refinance and practice loans as well as deposit products nationally. Panacea Financial has partnerships with fourteen national and state associations.
Principal sources of revenue are interest and fees on loans and investment securities as well as fee income derived from the maintenance of deposit accounts and income from bank-owned life insurance policies. Our principal expenses include interest paid on deposits, advances from the FHLB of Atlanta, junior subordinated debt, senior subordinated notes and other borrowings, and operating expenses.
Principal sources of revenue are interest and fees on loans and investment securities as well as fee income derived from the maintenance of deposit accounts and income from bank-owned life insurance policies. Our principal expenses include interest paid on deposits, advances from the FHLB, junior subordinated debt, senior subordinated notes and other borrowings, and other operating expenses.
SABL has the ability to track other offsets (liabilities, e.g. other loans the customer has with the Bank) to the line of credit. SABL serves to provide more stringent controls and supervision that this type of lending requires. SBA Lending. Primis has developed expertise in the federally guaranteed SBA programs.
SABL has the ability to track other offsets (e.g. other loans the customer has with the Bank) to the line of credit. SABL serves to provide more stringent controls and supervision that this type of lending requires. SBA Lending. Primis has developed expertise in the federally guaranteed SBA programs.
The terms of any such supervisory action could have a material negative effect on our business, reputation, operating flexibility, financial condition, and the value of our common stock and preferred stock. ​ 11 Table of Contents Supervision, regulation, and examination of Primis, the Bank, and our respective subsidiaries by the appropriate regulatory agencies, as described herein, are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund (“DIF”) of The Federal Deposit Insurance Corporation (“FDIC”) and the U.S. banking and financial system, rather than holders of our capital stock.
The terms of any such supervisory action could have a material negative effect on our business, reputation, operating flexibility, financial condition, and the value of our capital stock. 11 Table of Contents ​ Supervision, regulation, and examination of Primis, the Bank, and our respective subsidiaries by the appropriate regulatory agencies, as described herein, are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund (“DIF”) of The Federal Deposit Insurance Corporation (“FDIC”) and the U.S. banking and financial system, rather than holders of our capital stock.
Primis originates residential mortgage loans for its portfolio through Primis Mortgage Company. Primis also purchases originated residential mortgages from our Warehouse Line clients, as well as other loan pools. We have no sub-prime loans. Home Equity Lines of Credit. Primis offers credit lines secured by primary residential properties with maximum loan-to-values of 80%.
Primis originates residential mortgage loans for its portfolio through Primis Mortgage Company. Primis also purchases originated residential mortgages from our Warehouse Line clients, as well as other loan originators. We have no sub-prime loans. Home Equity Lines of Credit. Primis offers credit lines secured by primary residential properties with maximum loan-to-values of 80%.
Primis intends to continue its practice of developing a deposit relationship with each of its loan customers. ​ BANKING SERVICES ​ Our principal business is the acquisition of deposits from the general public through our branch offices and deposit intermediaries and the use of these deposits to fund our loan and investment security portfolios.
Primis intends to continue its practice of developing a deposit relationship with each of its loan customers. ​ BANKING SERVICES ​ Our principal business is the acquisition of deposits from the general public through our branch offices, digital platform, and deposit intermediaries and the use of these deposits to fund our loan and investment security portfolios.
In addition, the Federal Deposit Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company. ​ Insider Transactions.
In addition, the Federal Deposit Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company. ​ 17 Table of Contents Insider Transactions.
In addition to regulation by the Federal Reserve as a bank holding company, Primis is subject to supervision and regulation by the VBFI under the banking and general business corporation laws of the Commonwealth of Virginia. ​ Activity Limitations. Primis is registered with the Federal Reserve as a bank holding company.
In addition to regulation by the Federal Reserve as a bank holding company, Primis is subject to supervision and regulation by the VBFI under the banking and general business corporation laws of the Commonwealth of Virginia. ​ Activity Limitations.
If the Federal Reserve were to apply the same or a similar well-capitalized standard to bank holding companies as that applicable to the Bank, Primis’ capital ratios as of December 31, 2022 would exceed such revised well-capitalized standard.
If the Federal Reserve were to apply the same or a similar well-capitalized standard to bank holding companies as that applicable to the Bank, Primis’ capital ratios as of December 31, 2023 would exceed such revised well-capitalized standard.
Under the final rule, if a 15 Table of Contents qualifying community banking organization elects to use the CBLR framework, it will be considered “well-capitalized” so long as its CBLR is greater than 9%. Primis does not use the CBLR framework. Payment of Dividends Primis is a legal entity separate and distinct from the Bank and other subsidiaries.
Under the final rule, if a qualifying community banking organization elects to use the CBLR framework, it will be considered “well-capitalized” so long as its CBLR is greater than 9%. Primis does not use the CBLR framework. Payment of Dividends Primis is a legal entity separate and distinct from the Bank and other subsidiaries.
The product provides for a 10 year draw period followed by a 20 year repayment period. Secured Personal Loans. Primis offers secured personal loans for a variety of purposes including auto, motorcycle, boats, and recreational vehicles. Pledged collateral could also include marketable securities and certificates of deposits. Premium Life Finance. Primis offers life insurance premium financing.
The product provides for a 10 year draw period followed by a 20 year repayment period. 7 Table of Contents Secured Personal Loans. Primis offers secured personal loans for a variety of purposes including auto, motorcycle, boats, and recreational vehicles. Pledged collateral could also include marketable securities and certificates of deposits. Life Premium Finance. Primis offers life insurance premium financing.
The Dodd-Frank Act (1) granted shareholders of U.S. publicly traded companies an advisory vote on executive compensation; (2) enhanced independence 13 Table of Contents requirements for Compensation Committee members; and (3) required companies listed on national securities exchanges to adopt incentive-based compensation claw-back policies for executive officers. ​ Incentive Compensation.
The Dodd-Frank Act (1) granted shareholders of U.S. publicly traded companies an advisory vote on executive compensation; (2) enhanced independence requirements for Compensation Committee members; and (3) required companies listed on national securities exchanges to adopt incentive-based compensation claw-back policies for executive officers. ​ Incentive Compensation.
Commercial real estate lending typically involves higher loan principal amounts and the repayment of loans is dependent, in large part, 6 Table of Contents on sufficient income from the properties securing the loans to cover operating expenses and debt service. Owner occupied real estate is evaluated in conjunction with the operations of the business. Construction Lending.
Commercial real estate lending typically involves higher loan principal amounts and the repayment of loans is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Owner occupied real estate is evaluated in conjunction with the operations of the business. Construction Lending.
The Department of Justice, and the federal bank regulatory agencies have issued an Interagency Policy Statement on Discrimination in Lending that provides guidance to financial institutions in determining whether discrimination exists, 19 Table of Contents how the agencies will respond to lending discrimination, and what steps lenders might take to prevent discriminatory lending practices.
The Department of Justice, and the federal bank regulatory agencies have issued an Interagency Policy Statement on Discrimination in Lending that provides guidance to financial institutions in determining whether discrimination exists, how the agencies will respond to lending discrimination, and what steps lenders might take to prevent discriminatory lending practices.
In addition, the FDIC provides that any insured depository institution generally will be liable for any loss incurred by the FDIC in connection with the default of, or any assistance provided by the FDIC to, a commonly controlled insured depository institution. The Bank is an FDIC-insured depository institution and thus subject to these requirements. ​ Acquisitions.
In addition, the FDIC provides that any insured depository institution generally will be liable for any loss incurred by the FDIC in connection with the default of, or any assistance provided by the FDIC to, a commonly controlled insured depository institution. The Bank is an FDIC-insured depository institution and thus subject to these requirements. ​ 12 Table of Contents Acquisitions.
The Federal Deposit Insurance Act requires the federal prudential bank regulatory agencies, such as the Federal Reserve, to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (1) internal controls; (2) information systems and audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate risk exposure; and (6) asset quality.
The Federal Deposit Insurance Act requires the federal prudential bank regulatory agencies, such as the Federal Reserve, to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (1) internal controls; (2) information systems and audit systems; (3) loan documentation; 16 Table of Contents (4) credit underwriting; (5) interest rate risk exposure; and (6) asset quality.
The Federal Reserve also reviews any indebtedness to be incurred by a bank holding company in connection with a proposed acquisition 12 Table of Contents to ensure that the bank holding company can service such indebtedness without adversely affecting its ability to serve as a source of strength to its bank subsidiaries.
The Federal Reserve also reviews any indebtedness to be incurred by a bank holding company in connection with a proposed acquisition to ensure that the bank holding company can service such indebtedness without adversely affecting its ability to serve as a source of strength to its bank subsidiaries.
In particular, we are required to include management and independent registered public accounting firm reports on internal controls as part of our Annual Report on Form 10-K in order to comply with Section 404 of the Sarbanes-Oxley Act.
In particular, we are required to include management and independent registered public accounting firm reports on internal controls as part of our Annual Report 13 Table of Contents on Form 10-K in order to comply with Section 404 of the Sarbanes-Oxley Act.
The Bank is subject to regulation, reporting, and periodic examinations by the Federal Reserve and the VBFI. These regulatory authorities routinely examine the Bank’s reserves, loan and investment quality, consumer 16 Table of Contents compliance, management policies, procedures and practices and other aspects of operations.
The Bank is subject to regulation, reporting, and periodic examinations by the Federal Reserve and the VBFI. These regulatory authorities routinely examine the Bank’s reserves, loan and investment quality, consumer compliance, management policies, procedures and practices and other aspects of operations.
In addition to providing financial products built for the needs of our customers, the Company uses associate volunteerism and corporate philanthropy to build strong community partnerships. The employees volunteered for 125 hours in 2022. ​ SUPERVISION AND REGULATION Bank holding companies and banks are extensively regulated under federal and state law.
In addition to providing financial products built for the needs of our customers, the Company uses associate volunteerism and corporate philanthropy to build strong community partnerships. Our employees volunteered for 200 hours in 2023. ​ SUPERVISION AND REGULATION Bank holding companies and banks are extensively regulated under federal and state law.
The Bank is subject to Federal Reserve regulations that require the Bank to maintain reserves against transaction accounts (primarily checking accounts). These reserve requirements are subject to annual adjustment by the Federal Reserve. Effective March 26, 2020, reserve requirement ratios were reduced to zero percent. ​ 17 Table of Contents Anti-Money Laundering .
The Bank is subject to Federal Reserve regulations that require the Bank to maintain reserves against transaction accounts (primarily checking accounts). These reserve requirements are subject to annual adjustment by the Federal Reserve. Effective March 26, 2020, reserve requirement ratios were reduced to zero percent. ​ Anti-Money Laundering .
Benefits to Primis are low LTV commercial loans and government guarantees up to 80%. Panacea Practice Solutions. Primis, through its Panacea division, provides financing for medical, dental and veterinary businesses. Financing purposes cover a range of needs in this sector to include acquisition, start-up, expansion, real estate purchase and refinance, leasehold, equipment financing, as well as practice buy-ins.
Benefits to Primis are low LTV commercial loans and government guarantees up to 80%. Panacea Practice Solutions. Primis, through its Panacea Financial division, provides financing for medical, dental and veterinary businesses. Financing purposes cover a range of needs of the borrowers to include acquisition, start-up, expansion, real estate purchase and refinance, leasehold, equipment financing, as well as practice buy-ins.
The Guidance is triggered when CRE loan concentrations exceed either: ​ ● Total reported loans for construction, land development, and other land of 100% or more of a bank’s total risk based capital; or ● Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land of 300% or more of a bank’s total risk based capital. ​ The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by a particular property type.
The Guidance is triggered when CRE loan concentrations exceed either: ​ ● Total reported loans for construction, land development, and other land of 100% or more of a bank’s total risk based capital; or ● Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land of 300% or more of a bank’s total risk based capital. ​ The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by a particular property type. 18 Table of Contents Community Reinvestment Act.
Additionally, its In-Training Medical/Dental School Loan Refinance product allows physicians and dentists that are in training the opportunity to refinance their student debt at a lower interest rate, while benefiting from affordable monthly payments during training. As of December 31, 2022, Panacea had approximately $248.4 million in outstanding loans.
Additionally, its In-Training Medical/Dental School Loan Refinance product allows physicians and dentists that are in training the opportunity to refinance their student debt at a lower interest rate, while benefiting from affordable monthly payments during training. As of December 31, 2023, Panacea Financial had approximately $322.8 million in outstanding loans.
The required minimum leverage ratio for all banks is 4%. In addition, effective January 1, 2019, the capital rules require a capital conservation buffer of CET1 of 2.5% above each of the minimum capital ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress.
In addition, effective January 1, 2019, the capital rules require a capital conservation buffer of CET1 of 2.5% above each of the minimum capital ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress.
The Board of Directors has delegated assignment of individual credit authorities up to $10 million to the Chief Executive Officer and Chief Credit Officer. For loans less than $2.5 million, we have named Credit Officers and two Specialty Executive Credit Officers, each with extensive industry specific experience with individual credit authority to $4 million.
The Board of Directors has delegated assignment of individual credit authorities up to $10 million to the Chief Executive Officer and Chief Credit Officer. For loans up to $5.0 million, we have named Credit Officers. We also have two Specialty Executive Credit Officers, each with extensive industry specific experience with individual credit authority to $7.5 million.
Our Intranet houses the “Employee Voice,” which is a vehicle for employees to make suggestions, asks questions or voice opinions regarding the Company’s practices. ​ Recruitment. While the majority of our employees reside in Virginia, our recruitment efforts are both local and nationwide.
Fostering an inclusive environment requires that all employees are heard. Our Intranet houses the “Employee Voice,” which is a vehicle for employees to make suggestions, asks questions or voice opinions regarding the Company’s practices. ​ Recruitment. While the majority of our employees reside in Virginia, our recruitment efforts are both local and nationwide.
These reports are also available without charge on the SEC’s website at www.sec.gov. ​ Strategy ​ Primis is focused on building a new, innovative, and better banking experience for its consumers and small and medium-sized businesses. The bank intends to grow its business, expand its customer base and improve profitability. This is being achieved through a seven-pronged approach: 1.
These reports are also available without charge on the SEC’s website at www.sec.gov. ​ Strategy ​ Primis is focused on building a new, innovative, and better banking experience for its consumers and small and medium-sized businesses. The Bank intends to grow its business, expand its customer base and improve profitability by focusing on the following three areas: 1.
Community Reinvestment Act. The Bank is subject to the provisions of the CRA, which imposes a continuing and affirmative obligation, consistent with their safe and sound operation, to help meet the credit needs of entire communities where the bank accepts deposits, including low- and moderate-income neighborhoods.
The Bank is subject to the provisions of the CRA, which imposes a continuing and affirmative obligation, consistent with their safe and sound operation, to help meet the credit needs of entire communities where the bank accepts deposits, including low- and moderate-income neighborhoods. The Federal Reserve’s assessment of the Bank’s CRA record is made available to the public.
Item 1. Business Overview Primis Financial Corp. (“Primis,” “we,” “us,” “our” or the “Company”) is the bank holding company for Primis Bank (“Primis Bank” or the “Bank”), a Virginia state-chartered bank which commenced operations on April 14, 2005. Primis Bank provides a range of financial services to individuals and small and medium-sized businesses.
Item 1. Business Overview Primis Financial Corp. (“Primis,” “we,” “us,” “our” or the “Company”) is the bank holding company for Primis Bank (“Primis Bank” or the “Bank”), a Virginia state-chartered bank which commenced operations on April 14, 2005.
We are a Small Business Administration (“SBA”) lender with Preferred Lending Partner (“PLP”) status that allows us to offer this program nationwide. We also invest in real estate-related securities, including collateralized mortgage obligations and agency mortgage backed securities. Our principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings.
We are a Small Business Administration (“SBA”) lender with Preferred Lending Partner (“PLP”) status that allows us to offer this program nationwide. We also invest in real estate-related securities, including collateralized mortgage obligations and agency mortgage backed securities.
Zember, Jr. as the new president and chief executive officer, effective February 19, 2020, Mr. Zember has added several members to the executive management team. These additional members all bring strong expertise and years of experience. ​ ● Leveraging the Existing Foundation for Additional Growth.
Since the Company’s board of 5 Table of Contents directors appointed Mr. Dennis J. Zember, Jr. as the Chief Executive Officer, effective February 19, 2020, Mr. Zember has added several members to the executive management team. These additional members all bring strong expertise and years of experience. ​ ● Leveraging the Existing Foundation for Additional Growth.
Primis has adopted and implemented policies and procedures to comply with these privacy, information security, and cybersecurity requirements. On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” ​ Non-Discrimination Policies.
Primis has adopted and implemented policies and procedures to comply with these privacy, information security, and cybersecurity requirements. The federal banking 19 Table of Contents agencies require banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” ​ Non-Discrimination Policies.
Primis Bank also owns Primis Mortgage Company, a residential mortgage lender. ​ We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge on our website at www.primisbank.com as soon as reasonably practicable after we electronically file such material with the SEC.
Our deposits are insured, up to applicable limits, by the Federal Deposit Insurance Corporation (the “FDIC”). ​ We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge on our website at www.primisbank.com as soon as reasonably practicable after we electronically file such material with the SEC.
Primis’ investments in data processing, risk management infrastructure, 5 Table of Contents and the staff and branch network will support a much larger asset base. Primis is committed to controlling additional growth in a manner designed to minimize risk and to maintain strong capital ratios. ​ ● Continuing to Pursue Selective Acquisition Opportunities .
Primis’ investments in data processing, risk management infrastructure, and the staff and branch network will support a much larger asset base. Primis is committed to controlling additional growth in a manner designed to minimize risk and to maintain strong capital ratios. ​ ● Investing in Technology to Differentiate the Bank in the Marketplace.
Primis has a dedicated Special Assets team that provides oversight on credit collection activities, to include legal negotiations, forbearance agreements, collateral sale, foreclosures and management of other real estate owned (“OREO”). This coordinated approach to credit provides a high quality portfolio.
The responsible relationship manager in conjunction with credit administration will service loan credits through their life cycle. Primis has a dedicated Special Assets team that provides oversight on credit collection activities, to include legal negotiations, forbearance agreements, collateral sale, foreclosures and management of other real estate owned (“OREO”). This coordinated approach to credit provides a high quality portfolio.
We utilize a wide range of recruitment vehicles ranging from college recruitment sites such as “Handshake”, “V3” program to recruit veterans to posting on popular job boards and conducting nationwide profile searches to find diverse and qualified candidates. Primis realizes that great people know other great people so we also offer a referral bonus to our employees. ​ Benefits.
We utilize a wide range of recruitment vehicles ranging from college recruitment sites such as “Handshake”, a “V3” program to recruit veterans to posting on popular job boards and conducting nationwide profile searches to find diverse and qualified candidates.
Primis is continually investing in our workforce to further emphasize diversity and inclusion and to foster our employees' growth and career development. At December 31, 2022, we had 565 employees, nearly all of whom are full-time and of which approximately 66% were female and 21% were minorities. ​ Employee Feedback. Fostering an inclusive environment requires that all employees are heard.
Primis is continually investing in our workforce to further emphasize diversity, equity and inclusion (“DEI”) and to foster our employees' growth and career development. As of December 31, 2023, we had 528 employees, nearly all of whom are full-time and of which approximately 64% were female and 21% were minorities. ​ Employee Feedback.
Primis is committed to the communities we serve and to supporting our employees in their volunteerism. Beginning in 2021, each employee receives eight paid hours to volunteer in their community or charity of choice each year. We maintain a commitment to the prosperity of each community the Company serves, donating to community, civic and philanthropic organizations in 2022.
Each employee receives eight paid hours to volunteer in their community or charity of choice each year. We maintain a commitment to the prosperity of each community the Company serves, donating to community, civic and philanthropic organizations in 2023.
GAAP, management’s certifications concerning responsibility for the financial statements, internal controls and compliance with legal requirements designated by the FDIC, and an attestation by the independent auditor regarding the statements of management relating to the internal controls must be submitted.
For insured institutions with total assets of $1.0 billion or more, financial statements prepared in accordance with U.S. GAAP, management’s certifications concerning responsibility for the financial statements, internal controls and compliance with legal requirements designated by the FDIC, and an attestation by the independent auditor regarding the statements of management relating to the internal controls must be submitted.
Even with respect to permissible activities, however, the Federal Reserve has the power to order a holding company or its subsidiaries to terminate any activity or its control of any subsidiary when the Federal Reserve has reasonable cause to believe that continuation of such activity or control of such subsidiary would pose a serious risk to the financial safety, soundness or stability of any bank subsidiary of that holding company.
In addition, the Federal Reserve has the power to order a financial holding company or its subsidiaries to terminate any non-banking activity or terminate its ownership or control of any non-bank subsidiary, when it has reasonable cause to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that financial holding company.
In some instances, the audit report of the institution’s holding company can be used to satisfy this requirement. Independent auditors must receive examination reports, supervisory agreements and reports of enforcement actions. For insured institutions with total assets of $1.0 billion or more, financial statements prepared in accordance with U.S.
Insured institutions with total assets of $500 million or more must submit annual audit reports prepared by independent auditors to federal and state regulators. In some instances, the audit report of the institution’s holding company can be used to satisfy this requirement. Independent auditors must receive examination reports, supervisory agreements and reports of enforcement actions.
These loans consist of lines of credit, revolving credit facilities, demand loans, term loans, equipment loans, SBA loans, stand-by letters of credit, and unsecured loans.
Management’s Discussion and Analysis of Financial Condition.” Commercial Lending ​ Commercial Business Lending. These loans consist of lines of credit, revolving credit facilities, demand loans, term loans, equipment loans, SBA loans, stand-by letters of credit, and unsecured loans.
The division has successfully built a nationally-recognized brand and finished 2022 with a growing team of industry-leading commercial bankers experienced in providing financial services to its target communities across the United States. Life Premium Financing.
The division has successfully built a nationally-recognized brand with a growing team of industry-leading commercial bankers experienced in providing financial services to its target communities across the United States. Life Premium Financing. The Company launched a division in the fourth quarter of 2021 focused on financing life insurance premiums for high net worth individuals across the United States.
Primis offers unsecured personal loans up to $50,000 and overdraft protection loans up to $10,000, based on specified underwriting criteria. Panacea Consumer Loans. Panacea offers several unsecured consumer loan products to include student loan refinancing and pro re nata (“PRN’) loans. PRN loans may be utilized by graduating doctors to fund costs as they move into their chosen professions.
Panacea Financial offers several unsecured consumer loan products to include student loan refinancing and pro re nata (“PRN’) loans. PRN loans may be utilized by graduating doctors to fund costs as they move into their chosen professions. Strict criteria has been established around these products.
Both Primis and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer as of December 31, 2022. Based on current estimates, we believe that Primis and the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2023.
Based on current estimates, we believe that Primis and the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2024.
Following the effective date of the new listing standards, public companies will have 60 days to adopt the required clawback policy. ​ Shareholder Say-On-Pay Votes. The Dodd-Frank Act requires public companies to take shareholders’ votes on proposals addressing compensation (known as say-on-pay), the frequency of a say-on-pay vote, and the golden parachutes available to executives in connection with change-in-control transactions.
Our clawback policy was approved by the board in November 2023 and is filed herein as Exhibit 97. ​ Shareholder Say-On-Pay Votes. The Dodd-Frank Act requires public companies to take shareholders’ votes on proposals addressing compensation (known as say-on-pay), the frequency of a say-on-pay vote, and the golden parachutes available to executives in connection with change-in-control transactions.
The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities and equity holdings. 14 Table of Contents The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average total consolidated assets net of goodwill, certain other intangible assets, and certain required deduction items.
The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities and equity holdings.
Primis and the Bank are each subject to the following risk-based capital ratios: a common equity Tier 1 ("CET1") risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.
The following is a brief description of the relevant provisions of these capital rules and their potential impact on our capital levels. 14 Table of Contents Primis and the Bank are each subject to the following risk-based capital ratios: a common equity Tier 1 ("CET1") risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.
Failure to meet minimum capital requirements could also result in restrictions on Primis’ or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.
Failure to meet minimum capital requirements could also result in restrictions on Primis’ or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth. 15 Table of Contents Both Primis and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer as of December 31, 2023.
Our underwriting guidelines are tailored for particular credit types, including lines of credit, revolving credit facilities, demand loans, term loans, equipment loans, real estate loans, SBA loans, stand-by letters of credit and unsecured loans.
Because future loan losses are so closely intertwined with our underwriting policy, we have instituted what management believes is a stringent loan underwriting policy. Our underwriting guidelines are tailored for particular credit types, including lines of credit, revolving credit facilities, demand loans, term loans, equipment loans, real estate loans, SBA loans, stand-by letters of credit and unsecured loans.
New employees are also required to complete multiple learning modules that cover important compliance and regulatory requirements in the banking industry. Continuing education and advance training is offered to employees throughout their tenure at Primis. We encourage all employees to obtain job related training by covering the cost of the classes and/or learning materials and tests. ​ Volunteerism .
Continuing education and advanced training is offered to employees throughout their tenure at Primis. We encourage all employees to obtain job related training by covering the cost of the classes and/or learning materials and tests. ​ Volunteerism . Primis is committed to the communities we serve and to supporting our employees in their volunteerism.
These individual lending authorities are based on the individual’s technical ability and experience. All credits over $10 million are reviewed and approved by Executive Loan Committee, as defined in credit policy. All credit extensions in excess of 60% of the Bank’s legal lending limit are also reviewed and approved by the Board of Directors.
These individual lending authorities are based on the individual’s technical ability and experience. All credits over $10 million are reviewed and approved by Executive Loan Committee, as defined in credit policy. For approval of third-party originated loans, we have delegated authority within an approved framework.
The FDIC could further increase the deposit insurance assessments for certain insured depository institutions, including the Bank, if the DIF reserve ratio is not restored as projected. ​ Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a bank’s federal regulatory agency.
The increased assessment rate schedules will remain in effect until the reserve ratio meets or exceeds 2 percent, absent further action by the FDIC. ​ Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a bank’s federal regulatory agency.
Consequently, the Company expects a sustainable growth rate in the division with each new loan originated. Primis Mortgage Company. On May 31, 2022, Primis Bank acquired Primis Mortgage Company (previously SeaTrust Mortgage Company), a regional residential mortgage company headquartered in Wilmington, North Carolina. Primis Mortgage Company has since expanded to offer residential mortgages in the majority of the U.S.
In May 2022, Primis Bank acquired Primis Mortgage Company (previously SeaTrust Mortgage Company), a regional residential mortgage company headquartered in Wilmington, North Carolina. Primis Mortgage Company has since expanded to offer residential mortgages in the majority of the U.S. Residential mortgage loans originated through Primis Mortgage Company are primarily sold in the secondary market for fee income.
Primis offers a comprehensive and competitive benefits package to meet a variety of individual needs. We offer three different medical plans, two of which allow for the employee to make contributions and receive an employer 10 Table of Contents match on a Health Savings Account.
We offer three different medical plans, two of which allow for the employee to make contributions and receive an employer match on a Health Savings Account. In addition to dental insurance, supplemental insurance and a 401k, Primis offers employer paid short-term and long-term disability and life insurance.
The final rule identifies replacement benchmark rates based on SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts subject to the LIBOR Act. ​ Audit Reports . Insured institutions with total assets of $500 million or more must submit annual audit reports prepared by independent auditors to federal and state regulators.
The final rule identifies replacement benchmark rates based on SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts subject to the LIBOR Act. The Company has replaced LIBOR with SOFR in applicable contracts. ​ Audit Reports .
The following is a discussion of each of the major types of lending in which we engage. For more information on our lending activities, see “Item 7. Management’s Discussion and Analysis of Financial Condition.” Commercial Lending ​ Commercial Business Lending.
Our principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings. 6 Table of Contents The following is a discussion of each of the major types of lending in which we engage. For more information on our lending activities, see “Item 7.
As of December 31, 2022, Primis had $3.57 billion in total assets, $2.95 billion in total loans, $2.72 billion in total deposits and $394.4 million in total stockholders’ equity. At December 31, 2022, Primis Bank had thirty-two full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications.
As of December 31, 2023, Primis Bank had twenty-four full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications. Twenty-two full-service retail branches are in Virginia and two full-service retail branches are in Maryland.
On October 18, 2022, the FDIC adopted an amended restoration plan to increase the likelihood that the reserve ratio would be restored to at least 1.35 percent by September 30, 2028. The FDIC’s amended restoration plan increases the initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023.
On October 18, 2022, the FDIC adopted a final plan and increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023.
Source of Strength Obligations. A bank holding company is required to act as a source of financial and managerial strength to its subsidiary bank.
As further described below, each of Primis and the Bank is well-capitalized as of December 31, 2023, and Primis Bank achieved a rating of “Satisfactory” in its most recent CRA evaluation. Source of Strength Obligations. A bank holding company is required to act as a source of financial and managerial strength to its subsidiary bank.
The Federal Reserve’s assessment of the Bank’s CRA record is made available to the public. Further, a less than satisfactory CRA rating will slow, if not preclude, expansion of banking activities and prevent a company from becoming or remaining a financial holding company.
Further, a less than satisfactory CRA rating will slow, if not preclude, expansion of banking activities and prevent a company from becoming or remaining a financial holding company. Federal CRA regulations require, among other things, that evidence of discrimination against applicants on a prohibited basis, and illegal or abusive lending practices be considered in the CRA evaluation.
The platform includes an all-new mobile banking application that provides a quick and seamless account opening process all from within the app. Also in the fourth quarter of 2021, Primis launched its new V1BE service, the first bank delivery app for on-demand ordering of branch services.
During the year ended December 31, 2023, Primis Mortgage originated $592.3 million loans. Digital Banking ​ In 2022, Primis successfully launched its digital bank platform. The platform includes an all-new mobile banking application that provides a quick and seamless account opening process all from within the app.
In addition to dental insurance, supplemental insurance and a 401k, Primis offers employer paid short-term and long-term disability and life insurance. Our employees also enjoy a cash incentive for participating in our Wellness Program. ​ Development. All new employees benefit from training to learn how to utilize key Company systems.
Our employees also enjoy an incentive for participating in our Wellness Program. ​ Development. All new employees benefit from training to learn how to utilize key Company systems. New employees are also required to complete multiple learning modules that cover important compliance and regulatory requirements in the banking industry.
As of December 31, 2022, our legal lending limit was approximately $62.2 million. Portfolio management is an integral part of sound credit practices. The responsible relationship manager in conjunction with credit administration will service loan credits through their life cycle.
All credit extensions in excess of 60% of the Bank’s legal lending limit are also reviewed and approved by the Board of Directors. As of December 31, 2023, our legal lending limit was approximately $63.2 million. Portfolio management is an integral part of sound credit practices.
Providing Primis communities and the people within them purposeful and meaningful financial support and volunteerism. ​ Critical to executing this approach: ​ ● Utilizing the Primis Management Team’s Strength . The experience and market knowledge of the Bank’s management team is one of its greatest strengths and competitive advantages. Since the Company’s board of directors appointed Mr. Dennis J.
Perfecting enhanced digital offerings that allow Primis to attract new deposit customers at scale both in and out of our footprint. ​ Critical to executing this approach: ● Utilizing the Primis Management Team’s Strength . The experience and market knowledge of the Bank’s management team is one of its greatest strengths and competitive advantages.
The Dodd-Frank Act required the banking agencies and the SEC to establish joint rules or guidelines for financial institutions with more than $1.0 billion in assets, such as Primis and the Bank, which prohibit incentive compensation arrangements that the agencies determine to encourage inappropriate risks by the institution.
In addition, the Dodd-Frank Act requires the federal banking agencies and the SEC to issue regulations requiring covered financial institutions to prohibit incentive compensation arrangements that encourage inappropriate risks by providing compensation that is excessive or that could lead to material financial loss to the institution.
No final rule has been issued, but the rulemaking may affect the Bank’s CRA compliance obligations in the future. Consumer Regulation. Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers.
The final rules may make it more challenging and/or costly for the Bank to receive a rating of at least “satisfactory” on its CRA exam. Consumer Regulation. Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers.
The Bank Holding Company Act does not place geographic limits on permissible non-banking activities of bank holding companies.
The Bank Holding Company Act does not place geographic limits on permissible non-banking activities of bank holding companies. Financial holding companies, such as us, may also engage in activities that are considered to be financial in nature, as well as those incidental or, if so determined by the Federal Reserve, complementary to financial activities.
On October 26, 2022, the SEC adopted final rules to implement Section 954 of the Dodd-Frank Act that require public companies to adopt and disclose a policy for the recovery of incentive-based compensation received by current or former executive officers that is based on erroneously reported financial information in the event of a required accounting restatement.
In October 2022, the SEC adopted final rules implementing the incentive-based compensation recovery (“clawback”) provisions mandated by Section 954 of the Dodd-Frank Act.
Removed
Thirty full-service retail branches are in Virginia and two full-service retail branches are in Maryland. The Company is headquartered in McLean, Virginia and has administrative offices in Tysons Corner, Virginia and Glen Allen, Virginia and an operations center in Atlee, Virginia. Our deposits are insured, up to applicable limits, by the Federal Deposit Insurance Corporation (the “FDIC”).
Added
Primis Bank provides a range of financial services to individuals and small and medium-sized businesses. ​ As of December 31, 2023, Primis had $3.9 billion in total assets, $3.2 billion in total loans, $3.3 billion in total deposits and $397.6 million in total stockholders’ equity.
Removed
Ensuring deposit and lending products are competitive, easy to understand and readily accessible; 2. Developing business and cash management services that are robust and easy to use; 3. Supporting lines of business that offer differentiable value to consumers and businesses; 4.
Added
The Company is headquartered in McLean, Virginia and has an administrative office in Glen Allen, Virginia and an operations center in Atlee, Virginia. Primis Mortgage Company, a residential mortgage lender headquartered in Wilmington, North Carolina, is also a consolidated subsidiary of Primis Bank.
Removed
Executing intuitive, forward-thinking and pioneering electronic banking services that go beyond merely providing access to finances 24-hours a day, 7-days a week; 5. Maintaining a relationship-oriented and needs-based approach to banking; 6. Providing employees with resources for personal and professional development; and, 7.
Added
PFH, is a consolidated subsidiary of Primis and owns the rights to the Panacea Financial brand and its intellectual property and partners with the Bank to offer a suite of financial products and services for doctors, their practices, and ultimately the broader healthcare industry.
Removed
Strict criteria has been established around these products. 7 Table of Contents Because future loan losses are so closely intertwined with our underwriting policy, we have instituted what management believes is a stringent loan underwriting policy.
Added
Maintaining a strong and efficient community bank in core markets; 2. Supplementing core community bank growth and profitability with business lines that can generate above-average risk-adjusted returns such as the Panacea Financial Division, the Life Premium Finance Division and Primis Mortgage Company; and 3.
Removed
Residential mortgage loans originated through Primis Mortgage Company are primarily sold in the secondary market for fee income. As of December 31, 2022, Primis Mortgage originated $294.9 million loans. Digital Banking ​ In 2022, Primis successfully launched its new digital bank platform.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA significant amount of our loans are secured by real estate and any declines in real estate values in our primary markets could be detrimental to our financial condition and results of operations.
Biggest changeIf a high percentage of these loans repay at the end of their promotional period a large amount of interest reimbursement will be due in a short period of time from the third-party servicer and if they cannot perform then we may not be able to realize any income on a significant amount of loans in our portfolio, which may adversely impact the realization of the fair value of the derivative asset recognized. 23 Table of Contents ​ A significant amount of our loans are secured by real estate and any declines in real estate values in our primary markets could be detrimental to our financial condition and results of operations.
In certain cases, where the we have originated loans and sold them to investors, we may be required to repurchase loans or provide a financial settlement to investors if it is proven that the borrower failed to provide full and accurate information on, or related to, their loan application, if appraisals for such properties have not been acceptable or if the loan was not underwritten in accordance with the loan program specified by the loan investor.
In certain cases, where we have originated loans and sold them to investors, we may be required to repurchase loans or provide a financial settlement to investors if it is proven that the borrower failed to provide full and accurate information on, or related to, their loan application, if appraisals for such properties have not been acceptable or if the loan was not underwritten in accordance with the loan program specified by the loan investor.
Our stock price can fluctuate significantly in response to a variety of factors including, among other things: ● actual or anticipated variations in quarterly results of operations; ● recommendations by securities analysts; ● operating and stock price performance of other companies that investors deem comparable to us; ● news reports relating to trends, concerns and other issues in the financial services industry; ● perceptions in the marketplace regarding us and/or our competitors; 25 Table of Contents ● new technology used, or services offered, by competitors; ● significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; ● failure to integrate acquisitions or realize anticipated benefits from acquisitions; ● changes in valuations of Goodwill and other Intangible Assets; ● changes in government regulations; and ● geopolitical conditions such as acts or threats of terrorism, military conflicts or pandemics.
Our stock price can fluctuate significantly in response to a variety of factors including, among other things: ● actual or anticipated variations in quarterly results of operations; 27 Table of Contents ● recommendations by securities analysts; ● operating and stock price performance of other companies that investors deem comparable to us; ● news reports relating to trends, concerns and other issues in the financial services industry; ● perceptions in the marketplace regarding us and/or our competitors; ● new technology used, or services offered, by competitors; ● significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; ● failure to integrate acquisitions or realize anticipated benefits from acquisitions; ● changes in valuations of Goodwill and other Intangible Assets; ● changes in government regulations; and ● geopolitical conditions such as acts or threats of terrorism, military conflicts or pandemics.
We may incur meaningful costs with respect to our ESG efforts and if such efforts are negatively perceived, our reputation and stock price may suffer. ​ ​ ​ 26 Table of Contents Operational Risks Our business strategy includes strategic growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.
We may incur meaningful costs with respect to our ESG efforts and if such efforts are negatively perceived, our reputation and stock price may suffer. 28 Table of Contents ​ Operational Risks Our business strategy includes strategic growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.
Unlike larger banks that are more geographically diversified, we provide banking and financial services to clients primarily in these market areas. As of December 31, 2022, a significant portion of our commercial real estate, real estate construction and residential real estate loans were made to borrowers in our market area.
Unlike larger banks that are more geographically diversified, we provide banking and financial services to clients primarily in these market areas. As of December 31, 2023, a significant portion of our commercial real estate, real estate construction and residential real estate loans were made to borrowers in our market area.
Our practice, in the majority of instances, is to secure the personal guaranty of individuals in support of our real estate construction and land development loans which provides us with an additional source of repayment. As of December 31, 2022, we did not have any nonperforming construction and land development loans.
Our practice, in the majority of instances, is to secure the personal guaranty of individuals in support of our real estate construction and land development loans which provides us with an additional source of repayment. As of December 31, 2023, we did not have any nonperforming construction and land development loans.
Possible enforcement actions against us could include the issuance of a cease-and-desist order that could be judicially enforced, the imposition of civil monetary penalties, the issuance of directives to increase capital or enter into a strategic transaction, whether by merger or otherwise, with a third party, the appointment of a conservator or receiver, the 32 Table of Contents termination of insurance on deposits, the issuance of removal and prohibition orders against institution-affiliated parties, and the enforcement of such actions through injunctions or restraining orders.
Possible enforcement actions against us could include the issuance of a cease-and-desist order that could be judicially enforced, the imposition of civil monetary penalties, the issuance of directives to increase capital or enter into a strategic transaction, whether by merger or otherwise, with a third party, the appointment of a conservator or receiver, the termination of insurance on deposits, the issuance of removal and prohibition orders against institution-affiliated parties, and the enforcement of such actions through injunctions or restraining orders.
Further issuances of our common stock could be dilutive to holders of our common stock. We currently intend to pay dividends on our common stock; however, our future ability to pay dividends is subject to restrictions. We declared the first cash dividend on our common stock in February 2012, and each quarter thereafter through 2022.
Further issuances of our common stock could be dilutive to holders of our common stock. We currently intend to pay dividends on our common stock; however, our future ability to pay dividends is subject to restrictions. We declared the first cash dividend on our common stock in February 2012, and each quarter thereafter through 2023.
We must reserve for probable losses, which is established through a current period charge to the provision for credit losses as well as from time to time, as appropriate, a write down of the value of properties in our OREO portfolio to reflect changing market values.
We must reserve for expected losses, which is established through a current period charge to the provision for credit losses as well as from time to time, as appropriate, a write down of the value of properties in our OREO portfolio to reflect changing market values.
Although we maintain credit policies and credit underwriting, monitoring and 22 Table of Contents collection procedures, these policies and procedures may not prevent losses, particularly during periods in which the local, regional or national economy suffers a general decline. If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected.
Although we maintain credit policies and credit underwriting, monitoring and collection procedures, these policies and procedures may not prevent losses, particularly during periods in which the local, regional or national economy suffers a general decline. If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected.
Real estate construction and land development loans may involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan and also present risks of default in the event of declines in property values or volatility in the real estate market during the construction phase.
Real estate construction and land development loans may involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan and also present risks of default in the event of declines in property values or volatility in the real estate market during the 22 Table of Contents construction phase.
These factors could include, among others, events such as liquidity constraints or failures, the ability to perform our obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.
These factors could include, among others, 33 Table of Contents events such as liquidity constraints or failures, the ability to perform our obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.
As further described above under Supervision and Regulation—Capital Requirements, Primis and the Bank each are subject to various regulatory capital requirements administered by the FRB. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional, discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s and our consolidated financial statements.
As further described above under Supervision and Regulation—Capital Requirements, Primis and the Bank each are subject to various regulatory capital requirements administered by the FRB. 35 Table of Contents Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional, discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s and our consolidated financial statements.
Economic and market conditions are unstable, and although our nonperforming assets as a percentage of total loans and OREO remains manageable, we may incur losses if there is an increase in nonperforming assets in the future. Our nonperforming assets adversely affect our net income in various ways.
Economic and market conditions have been unstable, and although our nonperforming assets as a percentage of total loans and OREO remains manageable, we may incur losses if there is an increase in nonperforming assets in the future. Our nonperforming assets adversely affect our net income in various ways.
In addition, in order to raise additional capital, we may need to issue shares of our common stock that would 31 Table of Contents dilute the book value of our common stock and reduce our current shareholders’ percentage ownership interest to the extent they do not participate in future offerings.
In addition, in order to raise additional capital, we may need to issue shares of our common stock that would dilute the book value of our common stock and reduce our current shareholders’ percentage ownership interest to the extent they do not participate in future offerings.
Under FRB rules, if the Bank ceases to be a well-capitalized institution for bank regulatory purposes, the interest rates that it pays on deposits and its ability to accept, renew or rollover brokered deposits may be restricted. As of December 31, 2022, we had $100.0 million of brokered certificates of deposits.
Under FRB rules, if the Bank ceases to be a well-capitalized institution for bank regulatory purposes, the interest rates that it pays on deposits and its ability to accept, renew or rollover brokered deposits may be restricted. As of December 31, 2023, we had $75.0 million of brokered certificates of deposits.
Unresolved Staff Comments Primis Financial Corp. does not have any unresolved staff comments from the SEC to report for the year ended December 31, 2022.
Unresolved Staff Comments Primis Financial Corp. does not have any unresolved staff comments from the SEC to report for the year ended December 31, 2023. ​
Preferred shares and debt, if issued, have a preference on liquidating distributions or a preference on dividend or interest payments that could limit our ability to make a distribution to the holders of our common stock.
Preferred shares and debt, if issued, have a preference on liquidating distributions or a preference on dividend or interest payments that could limit our ability to make a distribution to the 34 Table of Contents holders of our common stock.
While our management team continually monitors market conditions and economic factors, throughout our footprint, we are unable to predict the duration or severity of such conditions or factors.
While our management team continually monitors market conditions and economic factors, throughout our footprint, we are unable to predict the duration or severity of such 26 Table of Contents conditions or factors.
Real estate lending (including commercial, construction, land development, and residential loans) is a large portion of our loan portfolio, constituting $2.01 billion, or approximately 68.2% of our total loan portfolio, as of December 31, 2022. Although residential and commercial real estate values are currently strong in our market area, such values may not remain elevated.
Real estate lending (including commercial, construction, land development, and residential loans) is a large portion of our loan portfolio, constituting $2.0 billion, or approximately 62.2% of our total loan portfolio, as of December 31, 2023. Although residential and commercial real estate values are currently strong in our market area, such values may not remain elevated.
To the extent that such an attack or breach relates to products or services provided by others, we seek to engage in due diligence and monitoring to limit the risk.
To the extent that such an attack or breach relates to products or services provided by others, we seek to engage in due diligence and monitoring to limit the 31 Table of Contents risk.
As of December 31, 2022, we had $148.7 million of construction and land development loans, or 5.0% of our loan portfolio. Construction and land development loans are subject to risks during the construction phase that are not present in standard residential real estate and commercial real estate loans.
As of December 31, 2023, we had $164.7 million of construction and land development loans, or 5.1% of our loan portfolio. Construction and land development loans are subject to risks during the construction phase that are not present in standard residential real estate and commercial real estate loans.
Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive.
Our stock price can be volatile. Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive.
We may not be able to effectively implement new technology driven products and services or be successful in marketing these products and services to our customers.
We may not be able to effectively implement new technology driven products and services 29 Table of Contents or be successful in marketing these products and services to our customers.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition. 33 Table of Contents ​ Item 1B.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.
As of December 31, 2022, we had $1.19 billion of commercial real estate loans outstanding, or 40.3% of our loan portfolio, including multi-family residential loans and loans secured by farmland.
As of December 31, 2023, we had $1.17 billion of commercial real estate loans outstanding, or 36.3% of our loan portfolio, including multi-family residential loans and loans secured by farmland.
The global credit and financial markets have experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence declines in economic growth, increases in unemployment rates, high rates of inflation, and uncertainty about economic stability and a potential recession.
We are operating in an uncertain economic environment. The global credit and financial markets have experienced extreme volatility and disruptions over the past few years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, high rates of inflation, and uncertainty about economic stability and a potential recession.
Our carrying value of goodwill and net amortizable intangibles were approximately $104.6 million and $3.3 million, respectively, at December 31, 2022. We rely on third-party vendors to provide key components of our business infrastructure.
Our carrying value of goodwill and net amortizable intangibles were approximately $93.5 million and $2.0 million, respectively, at December 31, 2023. We rely on third-party vendors to provide key components of our business infrastructure.
As of December 31, 2022, the Bank’s leverage, CET1 risk-based capital, Tier 1 risk-based capital and Total risk-based capital ratios were 11.39%, 12.64%, 12.64% and 13.84%, respectively. Many factors affect the calculation of Primis and the Bank’s risk-based assets and its ability to maintain the level of capital required to achieve acceptable capital ratios.
As of December 31, 2023, the Bank’s leverage, CET1 risk-based capital, Tier 1 risk-based capital and Total risk-based capital ratios were 9.80%, 10.88%, 10.88% and 12.12%, respectively. Many factors affect the calculation of Primis and the Bank’s risk-based assets and its ability to maintain the level of capital required to achieve acceptable capital ratios.
Any problems caused by these third parties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for any reason or poor performance of services, could adversely affect our ability 28 Table of Contents to deliver products and services to our customers and otherwise conduct our business.
While we have ongoing programs to review third-party vendors and assess risk, we do not control their actions. 30 Table of Contents Any problems caused by these third parties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for any reason or poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business.
In addition, our implementation of certain new technologies, such as those related to artificial intelligence, automation and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively.
In addition, our implementation of certain new technologies, such as those related to artificial intelligence, automation and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively. In addition, cloud technologies are also critical to the operation of our systems, and our reliance on cloud technologies is growing.
If loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then we may not be able to realize the full value of the collateral that we anticipated at the time of originating the loan, which could require us to increase our provision for credit losses and adversely affect our financial condition and results of operations. 21 Table of Contents As of December 31, 2022, 40.3% of our loan portfolio was comprised of loans secured by commercial real estate, including multi-family residential loans and loans secured by farmland.
If loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then we may not be able to realize the full value of the collateral that we anticipated at the time of originating the loan, which could require us to increase our provision for credit losses and adversely affect our financial condition and results of operations.
If in future periods we determine that a significant impairment has occurred, we would be required to charge against earnings the credit-related portion of the other-than-temporary impairment, which could have a material adverse effect on our results of operations in the periods in which the write-offs occur. Our stock price can be volatile.
If in future periods we determine that a significant impairment has occurred, we would be required to charge against earnings the credit-related portion of the impairment, which could have a material adverse effect on our financial condition and results of operations in the periods in which the impairments occur.
Market Risks Our profitability depends significantly on local economic conditions in the areas where our operations and loans are concentrated, and our geographic concentration makes us vulnerable to local weather catastrophes, public health issues, and other external events, which could adversely affect our results of operations and financial condition.
If such reserves were insufficient to cover claims from investors, such repurchases or settlements would adversely affect our financial condition and results of operations. ​ 25 Table of Contents Market Risks Our profitability depends significantly on local economic conditions in the areas where our operations and loans are concentrated, and our geographic concentration makes us vulnerable to local weather catastrophes, public health issues, and other external events, which could adversely affect our results of operations and financial condition.
The exercise of this regulatory discretion and power may have a negative impact on us. As a regulated entity, Primis and the Bank must maintain certain required levels of regulatory capital that may limit our operations and potential growth.
As a regulated entity, Primis and the Bank must maintain certain required levels of regulatory capital that may limit our operations and potential growth.
Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the U.S.
Similar impacts have occurred in the past, such as during the 2008-2010 financial crisis. Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the U.S.
As of December 31, 2022, Primis and the Bank exceeded the amounts required to be well capitalized with respect to all four required capital ratios. As of December 31, 2021, Primis’ leverage, CET1 risk-based capital, Tier 1 risk-based capital and Total risk-based capital ratios were 9.68%, 10.30%, 10.63%, and 14.57%, respectively.
As of December 31, 2023, Primis and the Bank exceeded the amounts required to be well capitalized with respect to all four required capital ratios. As of December 31, 2023, Primis’ leverage, CET1 risk-based capital, Tier 1 risk-based capital and Total risk-based capital ratios were 8.37%, 8.96%, 9.25%, and 13.44%, respectively.
Additionally, confidence in the safety and soundness of regional banks specifically or the banking system generally could impact where customers choose to maintain deposits, which could materially adversely impact our liquidity, loan funding capacity, ability to raise funds, and results of operations. Similar impacts have occurred in the past, such as during the 2008-2010 financial crisis.
Uncertainty remains over liquidity concerns in the broader financial services industry. Additionally, confidence in the safety and soundness of regional banks specifically or the banking system generally could impact where customers choose to maintain deposits, which could materially adversely impact our liquidity, loan funding capacity, ability to raise funds, and results of operations.
We anticipate that our retail and commercial deposits will be sufficient to meet our funding needs in the foreseeable future. We may rely on deposits obtained through intermediaries, FHLB advances, and other wholesale funding sources to obtain the funds necessary to implement our growth strategy.
We may rely on deposits obtained through intermediaries, FHLB advances, and other wholesale funding sources to obtain the funds necessary to implement our growth strategy.
At December 31, 2022, our nonperforming assets (which consist of nonaccrual loans, loans past due 90 days and accruing and OREO) totaled $38.8 million, or 1.32% of total loans and OREO, which is an increase of $22.4 million, or 135.8%, compared with nonperforming assets of $16.5 million, or 0.70% of total non-covered loans and OREO at December 31, 2021.
At December 31, 2023, our nonperforming assets (which consist of nonaccrual loans, loans past due 90 days and accruing and OREO) totaled $10.8 million, or 0.34% of total loans and OREO, which is a decrease of $28.0 million, or 72.2%, compared with nonperforming assets of $38.8 million, or 1.32% of total non-covered loans and OREO at December 31, 2022.
External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.
External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs. 29 Table of Contents We are dependent on key personnel and the loss of one or more of those key personnel could impair our relationship with our customers and adversely affect our business.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs.
In addition, federal regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further charge-offs, based on judgments different than those of our management.
Due to the relatively unseasoned nature of portions of our loan portfolio, we may experience an increase in delinquencies and losses as these loans continue to mature. 24 Table of Contents In addition, federal regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further charge-offs, based on judgments different than those of our management.
Any sustained period of decreased activity caused by fewer refinancing transactions, higher interest rates, housing price pressure, or loan underwriting restrictions would adversely 23 Table of Contents affect our mortgage originations and, consequently, could significantly reduce our income from mortgage activities. As a result, these conditions would also adversely affect the Company’s results of operations.
Loan production levels may suffer if we experience a slowdown in housing markets, tightening credit conditions or increasing interest rates. Any sustained period of decreased activity caused by fewer refinancing transactions, higher interest rates, housing price pressure, or loan underwriting restrictions would adversely affect our mortgage originations and, consequently, could significantly reduce our income from mortgage activities.
While it is expected that the FRB will continue to increase the target federal funds rate in 2023 to combat recent inflationary trends, we are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply, and other changes in financial markets. 24 Table of Contents Although our asset liability management strategy is designed to keep our risk within acceptable parameters, it may not be able to prevent changes in interest rates from having a material adverse effect on our results of operations and financial condition.
While it is not expected that the FRB will continue to increase the target federal funds rate in 2024 to combat recent inflationary trends as it did in 2023, we are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply, and other changes in financial markets.
Financial Reporting Risks Failure to maintain an effective system of disclosure controls and procedures could have a material adverse effect on our business, results of operations and financial condition and could impact the price of our common stock.
In some cases, we may be required to apply a new or revised standard retrospectively, resulting in us revising prior-period financial statements. 36 Table of Contents ​ Financial Reporting Risks Failure to maintain an effective system of disclosure controls and procedures could have a material adverse effect on our business, results of operations and financial condition and could impact the price of our common stock.
In the ordinary course of business, we record an indemnification reserve relating to mortgage loans previously sold based on historical statistics and loss rates. If such reserves were insufficient to cover claims from investors, such repurchases or settlements would adversely affect our results of operations.
In the ordinary course of business, we record an indemnification reserve relating to mortgage loans previously sold based on historical statistics and loss rates.
Furthermore, any new line of business, new product or service and/or new technology could have a significant impact on the effectiveness of our system of internal controls.
Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on our business, financial condition and results of operations. Furthermore, any new line of business, new product or service and/or new technology could have a significant impact on the effectiveness of our system of internal controls.
If housing prices in our market areas do not remain strong or deteriorate, we may experience an increase in nonperforming loans, provision for credit losses and charge-offs. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected.
If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected. If our nonperforming assets increase, our earnings will suffer.
We may be required to record additional impairment charges if our investment securities suffer a decline in value that is considered other-than-temporary. During the years ended December 31, 2022, 2021 and 2020, we incurred no other-than-temporary impairment charges related to credit losses or sales of securities.
We may be required to record impairment charges in our income statements through an allowance for credit losses if our investment securities suffer a decline in value below their amortized cost. During the years ended December 31, 2023, 2022 and 2021, we incurred an insignificant amount of impairment charges related to credit losses on our investment securities.
Our ability to implement our business strategy will depend on our ability to obtain funding for loan originations, working capital, possible acquisitions and other general corporate purposes. An inability to raise funds through deposits, borrowings, securities sold under agreements to repurchase, the sale of loans and other sources could have a substantial negative effect on our liquidity.
An inability to raise funds through deposits, borrowings, securities sold under agreements to repurchase, the sale of loans and other sources could have a substantial negative effect on our liquidity. We anticipate that our retail and commercial deposits will be sufficient to meet our funding needs in the foreseeable future.
Deteriorating economic conditions may also cause home buyers to default on their mortgages.
As a result, these conditions would also adversely affect our financial condition and results of operations. Deteriorating economic conditions may also cause home buyers to default on their mortgages.
Please refer to the section in this Form 10-K entitled “Special Cautionary Notice Regarding Forward-Looking Statements” for additional information regarding forward-looking statements. Credit Risks We are subject to risks related to our concentration of construction and land development and commercial real estate loans.
Please refer to the section in this Form 10-K entitled “Special Cautionary Notice Regarding Forward-Looking Statements” for additional information regarding forward-looking statements. Summary Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects.
As of December 31, 2022, $674.9 million, or approximately 22.9% of our total loans, were secured by single-family residential real estate. This includes $609.7 million in residential 1-4 family loans and $65.2 million in home equity lines of credit.
As of December 31, 2023, 36.3% of our loan portfolio was comprised of loans secured by commercial real estate, including multi-family residential loans and loans secured by farmland. As of December 31, 2023, $665.9 million, or approximately 20.7% of our total loans, were secured by single-family residential real estate.
Removed
If our nonperforming assets increase, our earnings will suffer.
Added
These risks are discussed more fully after the summary, and risks include, but are not limited to, the following: ● We are subject to risks related to our concentration of construction and land development and commercial real estate loans. ● We have a meaningful amount of consumer loans that are unsecured and if the borrower defaults on the loan we have no recourse to collateral in which to recover any potential losses. ● A portion of our consumer loan portfolio is originated and serviced by a third-party and includes a credit enhancement from that third-party which may not be realizable. ● A significant amount of our third-party serviced consumer loans were originated with a zero interest promotional period, exposing us to the credit risk of the third-party that is providing reimbursement to us for interest foregone. ● A significant amount of our loans are secured by real estate and any declines in real estate values in our primary markets could be detrimental to our financial condition and results of operations. ● If our nonperforming assets increase, our earnings will suffer. ● If our allowance for credit losses is not adequate to cover actual loan losses, our earnings will decrease. ● We are subject to credit quality risks and our credit policies may not be sufficient to avoid losses. ● The Company’s mortgage revenue is cyclical and is sensitive to the level of interest rates, changes in economic conditions, decreased economic activity, and slowdowns in the housing market, any of which could adversely impact our profits. ● Our geographic concentration makes us vulnerable to local weather catastrophes, public health issues, and other external events, which could adversely affect our results of operations and financial condition. ● Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance. ● Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations. ● Declines in asset values may result in impairment charges and adversely affect the value of our investment securities, financial performance and capital. ● The value of an estimated reimbursement due from a third-party that originated consumer loans with promotional features on our behalf is recorded in our balance sheet at fair value as a derivative and actual results and a significant decline in the third-party’s credit risk may impact the value of the derivative and our ability to realize that value. ● Our stock price can be volatile. ● The trading volume in our common stock is less than that of other larger financial services companies. ● Inflation could negatively impact our business, our profitability and our stock price. ● ESG risks could adversely affect our reputation and shareholder, employee, client, and third party relationships and may negatively affect our stock price. 21 Table of Contents ● Our business strategy includes strategic growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively. ● We must respond to rapid technological changes and these changes may be more difficult or expensive than anticipated. ● New lines of business, products or services and technological advancements may subject us to additional risks. ● We may not be able to successfully integrate our acquisitions or to realize the anticipated benefits of them. ● The carrying value of goodwill and other intangible assets may be adversely affected. ● We rely on third-party vendors to provide key components of our business infrastructure. ● We face significant cyber and data security risk that could result in the disclosure of confidential information, adversely affect our business or reputation and expose us to significant liabilities. ● Our business is susceptible to fraud. ● We are dependent on key personnel and the loss of one or more of those key personnel could impair our relationship with our customers and adversely affect our business. ● Deposit insurance premiums levied against banks may increase if the number of bank failures increase or the cost of resolving failed banks increases. ● Liquidity risk could impair our ability to fund operations and jeopardize our financial condition, results of operations and cash flows. ● Adverse developments affecting the financial services industry could adversely affect our current and projected business operations and its financial condition and results of operations. ● Future growth or operating results may require us to raise additional capital, but that capital may not be available, be available on unfavorable terms or may be dilutive. ● We may issue a new series of preferred stock or debt securities, which would be senior to our common stock and may cause the market price of our common stock to decline. ● We currently intend to pay dividends on our common stock; however, our future ability to pay dividends is subject to restrictions. ● Changes in applicable laws and regulations or failures to comply with such laws and regulations may adversely affect our operations and our financial results. ● Primis and the Bank must maintain certain required levels of regulatory capital that may limit our operations and potential growth. ● We are subject to commercial real estate lending guidance issued by the federal banking regulators that impacts our operations and capital requirements. ● Changes in accounting standards or assumptions in applying accounting policies could adversely affect us. ● Failure to maintain an effective system of disclosure controls and procedures could have a material adverse effect on our business, results of operations and financial condition and could impact the price of our common stock. ​ Credit Risks We are subject to risks related to our concentration of construction and land development and commercial real estate loans.
Removed
At December 31, 2020, our non-covered nonperforming assets (which consist of non-covered nonaccrual loans, loans past due 90 days and accruing and OREO) totaled $17.5 million, or 0.72% of total non-covered loans and OREO.
Added
We have a meaningful amount of consumer loans that are unsecured and if the borrower defaults on the loan we have no recourse to collateral in which to recover any potential losses. Our consumer loan portfolio that are unsecured is $328.0 million, or approximately 10.0% of our total loan portfolio, as of December 31, 2023.
Removed
Due to the relatively unseasoned nature of portions of our loan portfolio, we may experience an increase in delinquencies and losses as these loans continue to mature.
Added
Included in this portfolio is $199.3 million of loans sourced based on our credit underwriting criteria and managed by a third party. Consumer loan repayment is primarily driven by the borrower’s personal income which is impacted by various factors that are outside of the control of the borrower including macroeconomic conditions such as inflation and interest rates.
Removed
Interest rates on our outstanding financial instruments might be subject to change based on developments related to LIBOR, which could adversely affect our revenue, expense, and the value of our financial instruments. ​ On July 27, 2017, the FCA, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.
Added
Further, a downturn in the economy or other company-specific decisions that result in a borrower losing their job could cause the borrower’s primary source of income for repayment of the loan to decline.
Removed
On November 30, 2020, a joint announcement by the Board of Governors of the Federal Reserve, the FDIC, and the OCC was released and included a statement that the administrator of LIBOR has announced it will consult on its intention to cease the publication of the one week and two month USD LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publications on June 30, 2023.
Added
Each of these factors may cause a borrower to evaluate their debts and as a result they may prioritize payment of other debts above the consumer loan due to us. Although macroeconomic conditions and the economy are currently stable, such conditions can change relatively quick and may not remain at current levels.
Removed
In the U.S., the Alternative Reference Rates Committee has proposed SOFR as the preferred alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash in the overnight U.S. treasury repurchase market.
Added
If conditions change and macroeconomic conditions and the economy worsen borrowers may stop paying their loans and it could require us to increase our provision for credit losses and adversely affect our financial condition and results of operations.
Removed
On December 16, 2022, the FRB adopted a final rule that implements the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023.
Added
A portion of our consumer loan portfolio is originated and serviced by a third-party and includes a credit enhancement from that third-party which may not be realizable and the inability to utilize it could be detrimental to our financial condition and results of operations.
Removed
At this time, various iterations of the SOFR index are being used within the market, as are other indices such as the Bloomberg Short-Term Bank Yield index and the American Financial Exchange's AMERIBOR index.
Added
We receive a credit enhancement from the third-party managing $199.3 million of consumer loans that are recorded on our balance sheet as of December 31, 2023. The credit enhancement is primarily provided through cash flows derived from loan originations.
Removed
It is unclear as to the degree to which the market will adopt such non-LIBOR indices or how the industry may transition various products to an accepted alternative to LIBOR. ​ The uncertainty regarding the future of LIBOR as well as the transition from LIBOR to another benchmark rate or rates is complex and could have a range of adverse effects on our business, financial condition and results of operations.
Added
If lending slows or stops it would cause monthly cash receipts related to this credit enhancement to decline, which may adversely affect our financial condition and results of operations.
Removed
In particular, any such transition could: ● adversely affect the interest rates paid or received on, and the revenue and expense associated with, and the value of floating rate obligations, loans, deposits and other financial instruments tied to LIBOR rates, or other securities or financial arrangements given LIBOR’s role in determining market interest rates globally; ● prompt inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with an alternative reference rate; ● result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of certain fallback language, or the absence of such language, in LIBOR-based instruments, including securities and loans; ● result in customer uncertainty and disputes around how variable rates should be calculated in light of the foregoing, thereby damaging our reputation and resulting in a loss of customers and additional costs to us; and ● require the transition to or development of appropriate systems and analytics to effectively transition risk management processes from LIBOR-based products to those based on an applicable alternative pricing benchmark. ​ The manner and impact of this transition, as well as the effect of these developments on our funding costs, loan, and investment and trading securities portfolios, asset liability management and business are uncertain.
Added
A significant amount of our third-party serviced consumer loans were originated with a zero interest promotional period exposing us to the credit risk of the third-party that is providing reimbursement to us for interest foregone in the event of borrower prepayment and failure of the third-party to perform under its reimbursement obligation could be detrimental to our financial condition and results of operations.
Removed
Loan production levels may suffer if we experience a slowdown in housing markets, tightening credit conditions or increasing interest rates.
Added
Within the $199.3 million third-party originated and serviced consumer loan portfolio there is 45% of the portfolio that is in a promotional interest period as of December 31, 2023. The loans in these promotional interest periods legally accrue interest at the stated rate of the note agreement but the interest is not required to be paid during the promotional period.
Removed
Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations. We are operating in an uncertain economic environment.
Added
Further, if the borrower repays all of the principal on the note prior to the end of the promotional period the accrued interest is waived, but if there is any principal balance remaining at the end of the promotional period the borrower must repay all of the interest that has accrued.
Removed
In addition, cloud technologies 27 Table of Contents are also critical to the operation of our systems, and our reliance on cloud technologies is growing. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on our business, financial condition and results of operations.
Added
As of December 31, 2023, the amount of deferred interest on these loans was $12.2 million. Through an agreement with the third-party servicer, we are entitled to payment of all accrued interest that is waived on loans that repay all principal within the promotional period.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThirty full-service retail branches are in Virginia (Ashland, Burgess, Callao, Central Garage, Charlottesville, Chester, Colonial Heights, Courtland, Gloucester, Gloucester Point, Hampton, Hartfield, Heathsville, Kilmarnock, Leesburg, McLean, Mechanicsville (2), Middleburg, Midlothian, Newport News, Quinton, Richmond, Surry, Tappahannock (2), Urbanna, Warrenton, Waverly, and Williamsburg) and two full-service retail branches are in Maryland (Rockville, and Upper Marlboro). ​ Primis believes its facilities are in good operating condition, are suitable and adequate for its operational needs and are adequately insured.
Biggest changeTwenty-two full-service retail branches are in Virginia and two full-service retail branches are in Maryland. ​ Primis believes its facilities are in good operating condition, are suitable and adequate for its operational needs and are adequately insured.
At December 31, 2022, Primis Bank had thirty-two full-service branches in Virginia and Maryland and also provided services to customers through certain online and mobile applications.
Including these main locations, our bank owns 30 properties and leases 24 properties, all of which are used as branch locations or for housing operational units in Maryland and Virginia. As of December 31, 2023, Primis Bank had twenty-four full-service branches in Virginia and Maryland and also provided services to customers through certain online and mobile applications.
Item 2. Properties Primis Financial Corp.’s principal office is located at 6830 Old Dominion Drive, McLean, Virginia. The Company has administrative offices in Warrenton and Glen Allen, Virginia. Including these main locations, our bank owns 32 properties and leases 17 properties, all of which are used as branch locations or for housing operational units in Maryland and Virginia.
Item 2. Properties Primis Financial Corp.’s principal office is located at 1676 International Drive, McLean, Virginia. The Company has an administrative office in Glen Allen, Virginia and an operations center in Atlee, Virginia.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThere are no proceedings pending, or to management’s knowledge, threatened, that represent a significant risk against Primis or Primis Bank as of December 31, 2022. Item 4. Mine Safety Disclosures. Not applicable. ​ ​ 34 Table of Contents PART II
Biggest changeThere are no proceedings pending, or to management’s knowledge, threatened, that represent a significant risk against Primis or Primis Bank as of December 31, 2023. Item 4. Mine Safety Disclosures. Not applicable. PART II
While the ultimate resolution of these matters cannot be determined at this time, the Bank’s management presently believes that such matters, individually and in the aggregate, will not have a material adverse effect on the Bank’s financial condition or results of operations.
While the ultimate resolution of these matters cannot be determined at this time, the Bank’s management presently believes that such matters, individually and in the aggregate, will not have a material adverse effect on our financial condition or results of operations.
Item 3. Legal Proceedings Primis and Primis Bank are from time to time a party, as both plaintiff and defendant, to various claims and proceedings arising in the ordinary course of the Bank’s business, including administrative and/or legal proceedings that may include employment-related claims, as well as claims of lender liability, breach of contract, and other similar lending-related claims.
Item 3. Legal Proceedings Primis and Primis Bank are from time to time a party, as both plaintiff and defendant, to various claims and proceedings arising in the ordinary course of our business, including administrative and/or legal proceedings that may include employment-related claims, as well as claims of lender liability, breach of contract, and other similar lending-related claims.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company’s ability to pay dividends to stockholders is largely dependent upon the dividends it receives from the Bank, and the Bank is subject to regulatory limitations on the amount of cash dividends it may pay. ​ 35 Table of Contents Performance Graph The following chart compares the cumulative total shareholder return on Primis common stock during the five years ended December 31, 2022, with the cumulative total return of the Russell 2000 Index and the NASDAQ Bank Index for the same period.
Biggest changePerformance Graph The following chart compares the cumulative total shareholder return on Primis common stock during the five years ended December 31, 2023, with the cumulative total return of the Russell 2000 Index and the NASDAQ Bank Index for the same period. Dividend reinvestment has been assumed.
Securities Authorized for Issuance under Equity Compensation Plans As of December 31, 2022, Primis had outstanding stock options granted under the 2010 Stock Awards and Incentive Plan (the “2010 Plan”) and the 2017 Equity Compensation Plan (the “2017 Plan”), which were approved by its shareholders.
Securities Authorized for Issuance under Equity Compensation Plans As of December 31, 2023, Primis had outstanding stock options granted under the 2010 Stock Awards and Incentive Plan (the “2010 Plan”) and the 2017 Equity Compensation Plan (the “2017 Plan”), which were approved by its shareholders.
Dividends We declared the first cash dividend on our common stock in February 2012, and each quarter thereafter through 2022. There are a number of restrictions on our ability to pay dividends.
Dividends We declared the first cash dividend on our common stock in February 2012, and each quarter thereafter through 2023. There are a number of restrictions on our ability to pay dividends.
The following table provides information as of December 31, 2022 regarding Primis’ equity compensation plans under which our equity securities are authorized for issuance: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ ​ ​ ​ ​ ​ remaining available for ​ ​ ​ ​ ​ ​ ​ future issuance under ​ ​ Number of securities ​ Weighted average ​ equity compensation plans ​ ​ to be issued upon exercise ​ exercise price of ​ (excluding securities reflected ​ ​ of outstanding options ​ ​ outstanding options ​ in column A) Plan category A B C Equity compensation plans approved by security holders 203,300 ​ $ 11.41 333,032 Equity compensation plans not approved by security holders — ​ — — Total 203,300 ​ $ 11.41 333,032 ​ Issuer Purchases of Equity Securities None.
The following table provides information as of December 31, 2023 regarding Primis’ equity compensation plans under which our equity securities are authorized for issuance: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ ​ ​ ​ ​ ​ remaining available for ​ ​ ​ ​ ​ ​ ​ future issuance under ​ ​ Number of securities ​ Weighted average ​ equity compensation plans ​ ​ to be issued upon exercise ​ exercise price of ​ (excluding securities reflected ​ ​ of outstanding options ​ ​ outstanding options ​ in column A) Plan category A B C Equity compensation plans approved by security holders 54,800 ​ $ 11.49 370,582 Equity compensation plans not approved by security holders — ​ — — Total 54,800 ​ $ 11.49 370,582 ​ Issuer Purchases of Equity Securities None.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Market Prices Primis’ common stock is traded on the Nasdaq Global Market under the symbol “FRST”. There were 24,685,458 shares of our common stock outstanding at the close of business on March 6, 2023, which were held by 1,212 shareholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Market Prices Primis’ common stock is traded on the Nasdaq Global Market under the symbol “FRST”. There were 24,708,234 shares of our common stock outstanding at the close of business on September 16, 2024, which were held by 1,133 shareholders of record.
As of that date, the closing price of our common stock on the NASDAQ Global Market was $11.56. Recent Sales of Unregistered Securities None.
As of that date, the closing price of our common stock on the NASDAQ Global Market was $10.48. 39 Table of Contents Recent Sales of Unregistered Securities None.
Dividend reinvestment has been assumed. This comparison assumes $100 invested on December 31, 2017 in Primis common stock, the Russell 2000 Index and the NASDAQ Bank Index.
This comparison assumes $100 invested on December 31, 40 Table of Contents 2018 in Primis common stock, the Russell 2000 Index and the NASDAQ Bank Index.
The historical stock price performance for Primis common stock shown on the graph below is not necessarily indicative of future stock performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2017 2018 2019 2020 2021 2022 Primis Financial Corp. 100.00 ​ 84.09 ​ 106.48 ​ 81.85 ​ 104.47 ​ 84.77 Russell 2000 Index 100.00 ​ 88.99 ​ 111.70 ​ 134.00 ​ 153.85 ​ 122.41 NASDAQ Bank Index 100.00 ​ 83.60 ​ 137.18 ​ 87.20 ​ 137.31 ​ 115.65 ​ ​ ​ ​ ​
The historical stock price performance for Primis common stock shown on the graph below is not necessarily indicative of future stock performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2018 2019 2020 2021 2022 2023 Primis Financial Corp. 100.00 ​ 126.62 ​ 97.34 ​ 124.24 ​ 100.81 ​ 112.45 Russell 2000 Index 100.00 ​ 125.52 ​ 150.58 ​ 172.90 ​ 137.56 ​ 160.85 NASDAQ Bank Index 100.00 ​ 121.23 ​ 108.34 ​ 151.34 ​ 123.55 ​ 115.31 ​ ​ ​ Item 6. [Reserved] ​ ​ 41 Table of Contents
Added
The Company’s ability to pay dividends to stockholders is largely dependent upon the dividends it receives from the Bank, and the Bank is subject to regulatory limitations on the amount of cash dividends it may pay.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe Company’s loan growth over the past year and the improved asset mix has been the driver of positive movements in both margins and net interest income. ​ The following table details average balances of interest-earning assets and interest-bearing liabilities, the amount of interest earned/paid on such assets and liabilities, and the yield/rate for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Balance Sheets and Net Interest ​ ​ Analysis For the Year Ended ​ ​ December 31, 2022 ​ December 31, 2021 ​ December 31, 2020 ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ Average ​ Income/ ​ Yield/ ​ Average ​ Income/ ​ Yield/ ​ Average ​ Income/ ​ Yield/ ​ Balance Expense Rate Balance Expense Rate Balance Expense Rate ​ ​ (Dollar amounts in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale ​ $ 12,722 ​ $ 705 ​ 5.54 % $ - ​ $ - ​ - % $ - ​ $ - ​ - % Loans, net of deferred fees (1) (2) ​ ​ 2,592,801 ​ ​ 117,162 ​ 4.52 % ​ 2,342,802 ​ ​ 107,021 ​ 4.57 % ​ 2,400,896 ​ $ 111,647 ​ 4.65 % Investment securities ​ ​ 278,162 ​ ​ 5,964 ​ 2.14 % ​ 224,505 ​ ​ 4,440 ​ 1.98 % ​ 217,932 ​ ​ 4,730 ​ 2.17 % Other earning assets ​ ​ 200,828 ​ ​ 2,243 ​ 1.12 % ​ 560,994 ​ ​ 1,782 ​ 0.32 % ​ 114,275 ​ ​ 1,402 ​ 1.23 % Total earning assets ​ ​ 3,084,513 ​ ​ 126,074 ​ 4.09 % ​ 3,128,301 ​ ​ 113,243 ​ 3.62 % ​ 2,733,103 ​ ​ 117,779 ​ 4.31 % Allowance for credit losses ​ ​ (30,236) ​ ​ ​ ​ ​ ​ ​ (33,088) ​ ​ ​ ​ ​ ​ ​ (20,638) ​ ​ ​ ​ ​ Investments in mortgage company - held for sale ​ ​ — ​ ​ ​ ​ ​ ​ ​ 11,974 ​ ​ ​ ​ ​ ​ ​ 12,168 ​ ​ ​ ​ ​ ​ Total non-earning assets ​ ​ 264,333 ​ ​ ​ ​ ​ ​ ​ 261,791 ​ ​ ​ ​ ​ ​ ​ 261,505 ​ ​ ​ ​ ​ Total assets ​ $ 3,318,610 ​ ​ ​ ​ ​ ​ $ 3,368,978 ​ ​ ​ ​ ​ ​ $ 2,986,138 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and stockholders' equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW and other demand accounts ​ $ 698,907 ​ $ 2,303 ​ 0.33 % $ 860,482 ​ $ 4,010 ​ 0.47 % $ 481,470 ​ $ 3,505 ​ 0.73 % Money market accounts ​ ​ 807,330 ​ ​ 6,357 ​ 0.79 % ​ 726,059 ​ ​ 4,246 ​ 0.58 % ​ 508,260 ​ ​ 4,188 ​ 0.82 % Savings accounts ​ ​ 224,682 ​ ​ 737 ​ 0.33 % ​ 208,202 ​ ​ 618 ​ 0.30 % ​ 167,567 ​ ​ 490 ​ 0.29 % Time deposits ​ ​ 350,720 ​ ​ 3,884 ​ 1.11 % ​ 405,670 ​ ​ 4,238 ​ 1.04 % ​ 645,123 ​ ​ 12,149 ​ 1.88 % Total interest-bearing deposits ​ ​ 2,081,639 ​ ​ 13,281 ​ 0.64 % ​ 2,200,413 ​ ​ 13,112 ​ 0.60 % ​ 1,802,420 ​ ​ 20,332 ​ 1.13 % Borrowings ​ ​ 193,050 ​ ​ 8,306 ​ 4.30 % ​ 218,955 ​ ​ 5,928 ​ 2.71 % ​ 358,087 ​ ​ 5,807 ​ 1.62 % Total interest-bearing liabilities ​ ​ 2,274,689 ​ ​ 21,587 ​ 0.95 % ​ 2,419,368 ​ ​ 19,040 ​ 0.79 % ​ 2,160,507 ​ ​ 26,139 ​ 1.21 % Noninterest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ ​ 614,285 ​ ​ ​ ​ ​ ​ ​ 522,683 ​ ​ ​ ​ ​ ​ ​ 416,249 ​ ​ ​ ​ ​ Other liabilities ​ ​ 23,825 ​ ​ ​ ​ ​ ​ ​ 22,358 ​ ​ ​ ​ ​ ​ ​ 24,693 ​ ​ ​ ​ ​ Total liabilities ​ ​ 2,912,799 ​ ​ ​ ​ ​ ​ ​ 2,964,409 ​ ​ ​ ​ ​ ​ ​ 2,601,449 ​ ​ ​ ​ ​ Stockholders' equity ​ ​ 405,811 ​ ​ ​ ​ ​ ​ ​ 404,569 ​ ​ ​ ​ ​ ​ ​ 384,689 ​ ​ ​ ​ ​ Total liabilities and stockholders' equity ​ $ 3,318,610 ​ ​ ​ ​ ​ ​ $ 3,368,978 ​ ​ ​ ​ ​ ​ $ 2,986,138 ​ ​ ​ ​ ​ Net interest income ​ ​ ​ ​ $ 104,487 ​ ​ ​ ​ ​ ​ $ 94,203 ​ ​ ​ ​ ​ ​ $ 91,640 ​ ​ Interest rate spread ​ ​ ​ ​ ​ ​ ​ 3.14 % ​ ​ ​ ​ ​ ​ 2.97 % ​ ​ ​ ​ ​ ​ 3.10 % Net interest margin ​ ​ ​ ​ ​ ​ ​ 3.39 % ​ ​ ​ ​ ​ ​ 3.01 % ​ ​ ​ ​ ​ ​ 3.35 % (1) Includes loan fees in both interest income and the calculation of the yield on loans.
Biggest changeNet Interest Income Our operating results depend primarily on our net interest income, which is the difference between interest and dividend income on interest-earning assets such as loans and investments, and interest expense on interest-bearing liabilities such as deposits and borrowings. 46 Table of Contents The following table details average balances of interest-earning assets and interest-bearing liabilities, the amount of interest earned/paid on such assets and liabilities, and the yield/rate for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Balance Sheets and Net Interest Margin ​ ​ Analysis For the Year Ended ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ Average ​ Income/ ​ Yield/ ​ Average ​ Income/ ​ Yield/ ​ ​ Balance Expense Rate Balance Expense Rate ​ ​ (Dollar amounts in thousands) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale ​ $ 44,643 ​ $ 2,806 ​ 6.29 % $ 12,722 ​ $ 705 ​ 5.54 % Loans, net of deferred fees (1) (2) ​ ​ 3,126,717 ​ ​ 169,982 ​ 5.44 % ​ 2,590,635 ​ ​ 114,375 ​ 4.41 % Investment securities ​ ​ 237,452 ​ ​ 6,373 ​ 2.68 % ​ 278,162 ​ ​ 5,964 ​ 2.14 % Other earning assets ​ ​ 281,052 ​ ​ 13,457 ​ 4.79 % ​ 200,828 ​ ​ 2,243 ​ 1.12 % Total earning assets ​ ​ 3,689,864 ​ ​ 192,618 ​ 5.22 % ​ 3,082,347 ​ ​ 123,287 ​ 4.00 % Allowance for credit losses ​ ​ (35,382) ​ ​ ​ ​ ​ ​ ​ (30,236) ​ ​ ​ ​ ​ ​ Total non-earning assets ​ ​ 296,647 ​ ​ ​ ​ ​ ​ ​ 264,388 ​ ​ ​ ​ ​ ​ Total assets ​ $ 3,951,129 ​ ​ ​ ​ ​ ​ $ 3,316,499 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and stockholders' equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW and other demand accounts ​ $ 784,680 ​ $ 15,404 ​ 1.96 % $ 698,907 ​ $ 2,303 ​ 0.33 % Money market accounts ​ ​ 831,196 ​ ​ 23,717 ​ 2.85 % ​ 807,330 ​ ​ 6,357 ​ 0.79 % Savings accounts ​ ​ 777,143 ​ ​ 29,774 ​ 3.83 % ​ 224,755 ​ ​ 737 ​ 0.33 % Time deposits ​ ​ 474,178 ​ ​ 14,795 ​ 3.12 % ​ 350,720 ​ ​ 3,884 ​ 1.11 % Total interest-bearing deposits ​ ​ 2,867,197 ​ ​ 83,690 ​ 2.92 % ​ 2,081,712 ​ ​ 13,281 ​ 0.64 % Borrowings ​ ​ 159,442 ​ ​ 10,217 ​ 6.41 % ​ 193,050 ​ ​ 8,306 ​ 4.30 % Total interest-bearing liabilities ​ ​ 3,026,639 ​ ​ 93,907 ​ 3.10 % ​ 2,274,762 ​ ​ 21,587 ​ 0.95 % Noninterest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ ​ 495,107 ​ ​ ​ ​ ​ ​ ​ 614,285 ​ ​ ​ ​ ​ ​ Other liabilities ​ ​ 35,494 ​ ​ ​ ​ ​ ​ ​ 24,285 ​ ​ ​ ​ ​ ​ Total liabilities ​ ​ 3,557,240 ​ ​ ​ ​ ​ ​ ​ 2,913,332 ​ ​ ​ ​ ​ ​ Primis common stockholders' equity ​ ​ 393,302 ​ ​ ​ ​ ​ ​ ​ 403,167 ​ ​ ​ ​ ​ ​ Noncontrolling interest ​ ​ 587 ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ Total stockholders' equity ​ ​ 393,889 ​ ​ ​ ​ ​ ​ ​ 403,167 ​ ​ ​ ​ ​ ​ Total liabilities and stockholders' equity ​ $ 3,951,129 ​ ​ ​ ​ ​ ​ $ 3,316,499 ​ ​ ​ ​ ​ ​ Net interest income ​ ​ ​ ​ $ 98,711 ​ ​ ​ ​ ​ ​ $ 101,700 ​ ​ ​ Interest rate spread ​ ​ ​ ​ ​ ​ ​ 2.12 % ​ ​ ​ ​ ​ ​ 3.05 % Net interest margin ​ ​ ​ ​ ​ ​ ​ 2.68 % ​ ​ ​ ​ ​ ​ 3.30 % (1) Includes loan fees in both interest income and the calculation of the yield on loans.
Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Many factors impact interest rates, including the FRB, inflation, recession, changes in unemployment, the money supply, and international disorder and instability in domestic and foreign financial markets.
Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Many factors impact interest rates, including the decisions of the FRB, inflation, recession, changes in unemployment, the money supply, and international disorder and instability in domestic and foreign financial markets.
In this regard, the model assumes that the composition of our interest sensitive assets and liabilities existing at December 31, 2022 and 2021 remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities.
In this regard, the model assumes that the composition of our interest sensitive assets and liabilities existing at December 31, 2023 and 2022 remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities.
Loans will also be placed on nonaccrual status in cases where we are uncertain whether the borrower can satisfy the contractual 44 Table of Contents terms of the loan agreement. Cash payments received while a loan is categorized as nonaccrual will be recorded as a reduction of principal as long as doubt exists as to future collections.
Loans will also be placed on nonaccrual status in cases where we are uncertain whether the borrower can satisfy the contractual terms of the loan 53 Table of Contents agreement. Cash payments received while a loan is categorized as nonaccrual will be recorded as a reduction of principal as long as doubt exists as to future collections.
The following tables are based on an analysis of our interest rate risk as measured by the estimated change in EVE resulting from instantaneous and sustained parallel shifts in the yield curve (plus 400 basis points or minus 100 basis points, measured in 100 basis point increments) as of December 31, 2022 and 2021.
The following tables are based on an analysis of our interest rate risk as measured by the estimated change in EVE resulting from instantaneous and sustained parallel shifts in the yield curve (plus 400 basis points or minus 400 basis points, measured in 100 basis point increments) as of December 31, 2023 and 2022.
Commitments are made predominately for adjustable rate loans, and generally have fixed 57 Table of Contents expiration dates of up to three months or other termination clauses and usually require payment of a fee. Since many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Commitments are made predominately for adjustable rate loans, and generally have fixed expiration dates of up to three months or other termination clauses and usually require payment of a fee. Since many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years ended December 31, 2022 and 2021.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years ended December 31, 2023 and 2022.
The Basel III Capital Rules require Primis Financial Corp. and Primis Bank to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 4.5%, 56 Table of Contents plus a 2.5% “capital conservation buffer”, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer, (iii) a minimum ratio of Total capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer and (iv) a minimum leverage ratio of 4.0%.
The Basel III Capital Rules require Primis Financial Corp. and Primis Bank to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer”, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer, (iii) a minimum ratio of Total capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer and (iv) a minimum leverage ratio of 4.0%.
While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets.
While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward 42 Table of Contents classification of assets.
The CMOs are designed so that the mortgage collateral will generate a cash flow sufficient to provide for the timely repayment of the bonds. The mortgage collateral pool can be structured to accommodate various desired bond repayment schedules, provided that the collateral cash flow is adequate to meet scheduled bond payments.
The CMOs are designed so that the mortgage collateral will generate a cash flow sufficient to provide for the timely repayment of the bonds. The mortgage collateral 57 Table of Contents pool can be structured to accommodate various desired bond repayment schedules, provided that the collateral cash flow is adequate to meet scheduled bond payments.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.
In addition, bank regulatory authorities, as part of their periodic examination, may require additional charges to the provision for credit losses in future periods if the results of their reviews warrant additions to the allowance for credit losses.
In addition, bank regulatory authorities, as part 56 Table of Contents of their periodic examination, may require additional charges to the provision for credit losses in future periods if the results of their reviews warrant additions to the allowance for credit losses.
In addition, we maintain federal funds lines of credit with two correspondent banks and utilize securities sold under agreements to repurchase and reverse repurchase agreement borrowings from approved securities dealers. For additional information about borrowings and anticipated principal repayments refer to the discussion about Contractual Obligations below and “Item 8.
In addition, we maintain federal funds lines of credit with two correspondent banks, totaling $75 million, and utilize securities sold under agreements to repurchase and reverse repurchase agreement borrowings from approved securities dealers as needed. For additional information about borrowings and anticipated principal repayments refer to the discussion about Contractual Obligations below and “Item 8.
The allowance for credit losses is based on the CECL methodology and represents management’s estimate of an amount appropriate to provide for expected credit losses in the loan portfolio in the normal course of business.
The allowance for credit losses is based on the CECL methodology and represents management’s estimate of an amount appropriate to provide for expected credit losses in the loan portfolio.
Other borrowings can consist of FHLB convertible advances, FHLB overnight advances, other FHLB advances maturing within one year, federal funds purchased and securities sold under agreements to repurchase (“repo”) that mature within one year, which are secured transactions with customers.
Other borrowings can consist of FHLB convertible advances, FHLB overnight advances, other FHLB advances maturing within one year, federal funds purchased, secured borrowings due to failed loan sales, and securities sold under agreements to repurchase (“repo”) that mature within one year, which are secured transactions with customers.
In addition, on a quarterly basis our board of directors reviews our loan portfolio, evaluates credit quality, reviews the loan loss provision and the allowance for credit losses and makes changes as may be required.
In addition, on a quarterly basis our board of directors reviews our loan portfolio, evaluates credit quality, reviews the loan loss provision and the allowance for credit losses and requests management to make changes as may be required.
We have designed a credit matrix, which requires dual authority to approve any credit over $2.5 million. We have two specialty Executive Credit Officers with extensive industry experience in medical practice and life premium credit financing with authority up to $4.0 million and joint authority with the Chief Credit Officer up to $10.0 million.
We have designed a credit matrix, which requires dual authority to approve any credit over $5.0 million. We have two specialty Executive Credit Officers with extensive industry experience in medical practice and life premium credit financing with authority up to $7.5 million and 54 Table of Contents joint authority with the Chief Credit Officer up to $10.0 million.
At December 31, 2022, Primis Bank had thirty-two full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications. Thirty full-service retail branches are in Virginia and two full-service retail branches are in Maryland.
At December 31, 2023, Primis Bank had twenty-four full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications. Twenty-two full-service retail branches are in Virginia and two full-service retail branches are in Maryland.
The amount of each allowance account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts.
The amount of each allowance account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument.
The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. We had letters of credit outstanding totaling $10.7 million and $13.1 million as of December 31, 2022 and 2021, respectively.
The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. We had letters of credit outstanding totaling $9.6 million and $10.7 million as of December 31, 2023 and 2022, respectively.
CRITICAL ACCOUNTING POLICIES We follow accounting and reporting policies that conform, in all material respects, to accounting principles generally accepted in the United States and to general practices within the financial services industry.
CRITICAL ACCOUNTING ESTIMATES AND POLICIES We follow accounting and reporting policies that conform, in all material respects, to accounting principles generally accepted in the U.S. and to general practices within the financial services industry.
If our level of core deposits are not sufficient to fully fund our lending activities, we have access to funding from additional sources, including borrowing from the Federal Home Loan Bank of Atlanta, institutional certificates of deposit and the sale of available-for-sale investment securities.
If our level of core deposits are not sufficient to fully fund our lending activities, we have access to funding from additional sources, including but not limited to borrowing from the Federal Home Loan Bank of Atlanta and institutional certificates of deposits.
Allowance For Credit Losses - Off-Balance-Sheet Credit Exposures The allowance for credit losses on off-balance-sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which we are exposed to credit risk resulting from a contractual obligation to extend credit.
Financial Statements and Supplementary Data, Note 16 – Financial Instruments With Off-Balance-Sheet Risk.” Allowance For Credit Losses - Off-Balance-Sheet Credit Exposures The allowance for credit losses on off-balance-sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which we are exposed to credit risk resulting from a contractual obligation to extend credit.
Obligations of states and political subdivisions (municipal securities) are purchased with consideration of the current tax position of the Bank. Both taxable and tax-exempt municipal bonds may be purchased, but only after careful assessment of the market risk of the security.
Obligations of states and political subdivisions (municipal securities) are purchased with consideration of the current tax position of the Bank. Both taxable and tax-exempt municipal bonds may be purchased, but only after careful assessment of the market risk of the security. Appropriate credit evaluation must be performed prior to purchasing municipal bonds.
The amount of the allowance represents management's best estimate of expected credit losses on commitments expected to be funded over the contractual life of the commitment. Estimating credit losses on amounts expected to be funded uses the same methodology as described for loans in Note 4 - Loans and Allowance, as if such commitments were funded. ​
The amount of the allowance represents management's best estimate of expected credit losses on commitments expected to be funded over the contractual life of the commitment. Estimating credit losses on amounts expected to be funded uses the same methodology as described for loans in “Item 8.
Our interest rate risk management is the responsibility of the Bank’s Asset/Liability Management Committee (the “Asset/Liability Committee”). The Asset/Liability Committee has established policies and limits for management to monitor, measure and coordinate our sources, uses and pricing of funds. The Asset/Liability Committee makes reports to the board of directors on a quarterly basis.
Our interest rate risk management is the responsibility of the Bank’s Asset/Liability Management Committee (the “Asset/Liability Committee”). The Asset/Liability Committee has established policies and limits for management to monitor, measure and coordinate our sources, uses and pricing of funds.
These instruments involve elements of credit and funding risk in excess of the amount recognized in the consolidated balance sheet. Letters of credit are written conditional commitments issued by Primis to guarantee the performance of a customer to a third party.
These financial instruments include commitments to extend credit, standby letters of credit and guarantees of credit card accounts. These instruments involve elements of credit and funding risk in excess of the amount recognized in the consolidated balance sheets. Letters of credit are written conditional commitments issued by Primis to guarantee the performance of a customer to a third party.
Financial Statements and Supplementary Data, Note 10 – Securities Sold Under Agreements To Repurchase And Other Short-Term Borrowings and Note 11 – Junior Subordinated Debt and Senior Subordinated Notes.” 55 Table of Contents We prepare a cash flow forecast on a 30, 60 and 90 day basis along with a one and a two year basis.
Financial Statements and Supplementary Data, Note 11 – Securities Sold Under Agreements To Repurchase And Other Short-Term Borrowings, Note 12 – Junior Subordinated Debt and Senior Subordinated Notes, and Note 16 – Financial Instruments With Off-Balance-Sheet Risk.” We prepare a cash flow forecast on a 30, 60 and 90 day basis along with a one and two year basis.
Discussions of comparisons between 2021 and 2020 are not included in this Form10-K but can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form10-K for the year ended December 31, 2021.
Discussions of comparisons between 2022 and 2021 are not included in this Form10-K but can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our restated Annual Report on Form10-K/A for the year ended December 31, 2022 as filed with the SEC on October 4, 2024.
Modeling changes in EVE and NII sensitivity requires the making of certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.
Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE and NII sensitivity requires the making of certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.
Accordingly, although the EVE tables and NII tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net worth and NII.
Accordingly, although the EVE tables and NII tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net worth and NII. 64 Table of Contents Liquidity and Funds Management The objective of our liquidity management is to ensure the ability to meet our financial obligations.
Appropriate credit evaluation must be performed prior to purchasing municipal bonds. 48 Table of Contents Primis’ corporate bonds consist of senior and/or subordinated notes issued by banks. Bank subordinated debt, if rated, must be of investment grade and non-rated bonds are permissible if the credit-worthiness of the issuer has been properly analyzed.
Corporate bonds consist of senior and/or subordinated notes issued by banks. Bank subordinated debt, if rated, must be of investment grade and non-rated bonds are permissible if the credit-worthiness of the issuer has been properly analyzed.
Primis Bank actively pursues business relationships by utilizing the business contacts of its senior management, other bank officers and its directors, thereby capitalizing on its knowledge of its local market areas. ​ FINANCIAL HIGHLIGHTS ● Net income for the year ended December 31, 2022 totaled $17.7 million, or $0.72 per basic and per diluted share, compared to $31.2 million, or $1.28 per basic and $1.27 per diluted share for the year ended December 31, 2021 . ● Total assets as of December 31, 2022 were $3.57 billion, an increase of 4.8% compared to December 31, 2021. ● Total loans, excluding Paycheck Protection Program ( PPP) balances as of December 31, 2022, were $2.94 billion, an increase of $681.6 million, or 30.1%, from December 31, 2021. 38 Table of Contents ● Total deposits were $2.72 billion at December 31, 2022, a decrease of 1.5% compared to December 31, 2021 . ● Non-time deposits decreased to $2.26 billion at December 31, 2022, a decrease of $145.3 million compared to December 31, 2021 . ● Non-interest bearing demand deposits increased to $582.6 million, or 21.4% of total deposits, at December 31, 2022.
Primis Bank actively pursues business relationships by utilizing the business contacts of its senior management, other bank officers and its directors, thereby capitalizing on its knowledge of its local market areas. ​ FINANCIAL HIGHLIGHTS ● Net loss attributable to common shareholders for the year ended December 31, 2023 totaled $7.8 million, or $0.32 per basic and per diluted share, compared to net income of $14.1 million, or $0.57 per basic and diluted share for the year ended December 31, 2022 . ● Total assets as of December 31, 2023 were $3.9 billion, an increase of 8.1% compared to December 31, 2022. ● Total loans, excluding Paycheck Protection Program ( PPP) balances as of December 31, 2023, were $3.2 billion, an increase of $269.7 million, or 9.2%, from December 31, 2022. ● Total deposits were $3.3 billion at December 31, 2023, an increase of 20.1% compared to December 31, 2022 . ● Non-time deposits increased to $2.8 billion at December 31, 2023, an increase of $566.9 million compared to December 31, 2022 . ● Non-interest bearing demand deposits decreased to $472.9 million, or 14.5% of total deposits, at December 31, 2023.
Whether losses and delinquencies in our portfolio will increase significantly depends upon the value of the real estate securing the loans and economic factors, such as the overall economy in our market area, rising interest rates, historically high inflation, global supply chain issues and potential recession.
Whether losses and delinquencies in our portfolio will increase significantly depends upon the value of the real estate securing the loans and economic factors, such as the overall economy, rising or elevated interest rates, historically high or persistent inflation, and recessionary concerns.
We are required to collateralize our borrowings from the FHLB with our FHLB stock and other collateral acceptable to the FHLB. At December 31, 2022 and 2021, total FHLB borrowings were $325.0 million and $100.0 million, respectively. At December 31, 2022, we had $437.7 million of unused and available FHLB lines of credit.
We are required to collateralize our borrowings from the FHLB with purchases of FHLB stock and other collateral acceptable to the FHLB. At December 31, 2023 and 2022, total FHLB borrowings were $30.0 million and $325.0 million, respectively.
Capital Resources Capital management consists of providing equity to support both current and future operations. Primis Financial Corp. and its subsidiary bank are subject to various regulatory capital requirements administered by the federal banking agencies.
As of December 31, 2023, Primis has no material commitments or long-term debt for capital expenditures. Capital Resources Capital management consists of providing equity to support both current and future operations. Primis Financial Corp. and its subsidiary, Primis Bank, are subject to various regulatory capital requirements administered by the federal banking agencies.
While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors.
While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain.
The following table sets forth the maturities of certificates of deposit of $100 thousand and over as of December 31, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Within 3 to 6 6 to 12 Over 12 ​ 3 Months ​ Months ​ Months ​ Months ​ Total $ 41,151 ​ $ 44,163 ​ $ 80,824 ​ $ 83,736 ​ $ 249,874 ​ We use borrowed funds to support our liquidity needs and to temporarily satisfy our funding needs from increased loan demand and for other shorter term purposes.
The following table sets forth the maturities of certificates of deposit of $100 thousand and over as of December 31, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Within 3 to 6 6 to 12 Over 12 ​ 3 Months ​ Months ​ Months ​ Months ​ Total $ 86,150 ​ $ 65,848 ​ $ 81,485 ​ $ 24,122 ​ $ 257,605 ​ ​ 61 Table of Contents Other Borrowings We use other borrowed funds to support our liquidity needs and to temporarily satisfy our funding needs from increased loan demand and for other shorter term purposes.
The following table sets forth the average balance and average rate paid on each of the deposit categories for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ ​ Average Average Average Average ​ ​ Balance ​ Rate ​ Balance ​ Rate ​ ​ ​ (in thousands) Noninterest-bearing demand deposits ​ $ 614,285 ​ $ 522,683 ​ Interest-bearing deposits: ​ ​ ​ Savings accounts ​ 224,682 0.33 % 208,202 0.30 % Money market accounts ​ 807,330 0.79 % 726,059 0.58 % NOW and other demand accounts ​ 698,907 0.33 % 860,482 0.47 % Time deposits ​ 350,720 1.11 % 405,670 1.04 % Total interest-bearing deposits ​ 2,081,639 0.64 % 2,200,413 0.60 % Total deposits ​ $ 2,695,924 ​ $ 2,723,096 ​ ​ The variety of deposit accounts we offer allows us to be competitive in obtaining funds and in responding to the threat of disintermediation (the flow of funds away from depository institutions such as banking institutions into direct investment vehicles such as government and corporate securities).
The following table sets forth the average balance and average rate paid on each of the deposit categories for the years ended December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ ​ Average Average Average Average ​ ​ Balance ​ Rate ​ Balance ​ Rate ​ Noninterest-bearing demand deposits ​ $ 495,107 ​ $ 614,285 ​ Interest-bearing deposits: ​ ​ ​ Savings accounts ​ 777,143 3.83 % 224,755 0.33 % Money market accounts ​ 831,196 2.85 % 807,330 0.79 % NOW and other demand accounts ​ 784,680 1.96 % 698,907 0.33 % Time deposits ​ 474,178 3.12 % 350,720 1.11 % Total interest-bearing deposits ​ 2,867,197 2.92 % 2,081,712 0.64 % Total deposits ​ $ 3,362,304 ​ $ 2,695,997 ​ ​ The variety of deposit accounts we offer allows us to be competitive in obtaining funds and in responding to the threat of disintermediation (the flow of funds away from depository institutions such as banking institutions into direct investment vehicles such as government and corporate securities).
For our assessment of goodwill as of September 30, 2022, our annual test date, we performed a step one quantitative assessment to determine if the fair value of all our Bank reporting unit was less than its carrying amount.
For our assessment of goodwill as of September 30, 2023, we performed a step one quantitative assessment to determine if the fair value of the Primis Bank and the Primis Mortgage reporting units were less than their carrying amount.
Available-for-sale investment securities are reported at fair value, and held-to-maturity investment securities are reported at amortized cost (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2022 2021 Available-for-sale investment securities: ​ ​ Residential government-sponsored mortgage-backed securities ​ $ 102,881 ​ $ 122,610 Obligations of states and political subdivisions ​ 29,178 ​ 31,231 Corporate securities ​ 14,828 ​ 13,685 Collateralized loan obligations ​ 4,876 ​ 5,010 Residential government-sponsored collateralized mortgage obligations ​ 26,595 ​ 19,807 Government-sponsored agency securities ​ 14,616 ​ 17,488 Agency commercial mortgage-backed securities ​ 37,417 ​ 52,667 SBA pool securities ​ 5,924 ​ 8,834 Total ​ $ 236,315 ​ $ 271,332 ​ ​ ​ ​ ​ ​ ​ Held-to-maturity investment securities: ​ ​ Residential government-sponsored mortgage-backed securities ​ $ 10,522 ​ $ 13,616 Obligations of states and political subdivisions ​ 2,721 ​ 3,805 Residential government-sponsored collateralized mortgage obligations ​ 277 ​ 519 Government-sponsored agency securities ​ — ​ 5,000 Total ​ $ 13,520 ​ $ 22,940 ​ ​ 50 Table of Contents The following table sets forth the amortized cost, fair value, and weighted average yield of our investment securities by contractual maturity at December 31, 2022.
Available-for-sale investment securities are reported at fair value, and held-to-maturity investment securities are reported at amortized cost (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2023 2022 Available-for-sale investment securities: ​ ​ Residential government-sponsored mortgage-backed securities ​ $ 96,808 ​ $ 102,881 Obligations of states and political subdivisions ​ 30,080 ​ 29,178 Corporate securities ​ 14,048 ​ 14,828 Collateralized loan obligations ​ 4,982 ​ 4,876 Residential government-sponsored collateralized mortgage obligations ​ 34,471 ​ 26,595 Government-sponsored agency securities ​ 13,711 ​ 14,616 Agency commercial mortgage-backed securities ​ 30,110 ​ 37,417 SBA pool securities ​ 4,210 ​ 5,924 Total ​ $ 228,420 ​ $ 236,315 ​ ​ ​ ​ ​ ​ ​ Held-to-maturity investment securities: ​ ​ Residential government-sponsored mortgage-backed securities ​ $ 9,040 ​ $ 10,522 Obligations of states and political subdivisions ​ 2,391 ​ 2,721 Residential government-sponsored collateralized mortgage obligations ​ 219 ​ 277 Total ​ $ 11,650 ​ $ 13,520 ​ ​ 59 Table of Contents The following table sets forth the amortized cost, fair value, and weighted average yield of our investment securities by contractual maturity at December 31, 2023.
(2) Calculations include non-accruing loans in average loan amounts outstanding. ​ 40 Table of Contents The following table summarizes changes in net interest income attributable to changes in the volume of interest-earning assets and interest-bearing liabilities compared to changes in interest rates.
The following table summarizes changes in net interest income attributable to changes in the volume of interest-earning assets and interest-bearing liabilities compared to changes in interest rates.
Excluding PPP loans, loans outstanding increased $681.6 million, or 30.1%, since December 31, 2021. ​ As of December 31, 2022 and 2021, majority of our loans were to customers located in Virginia and Maryland.
PPP loans totaled $2.0 million and $4.6 million at December 31, 2023 and 2022, respectively. Excluding PPP loans, loans outstanding increased $269.7 million, or 9.2%, since December 31, 2022. As of December 31, 2023 and 2022, a majority of our loans were to customers located in Virginia and Maryland.
Seasonality and Cycles We do not consider our commercial banking business to be seasonal. Off-Balance Sheet Arrangements Primis is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and guarantees of credit card accounts.
The Asset/Liability Committee makes reports to the board of directors on a quarterly basis. 66 Table of Contents Seasonality and Cycles We do not consider our commercial banking business to be seasonal. Off-Balance Sheet Arrangements Primis is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.
Primis Financial Corp. and Primis Bank are required to meet minimum capital requirements set forth by regulatory authorities. Bank regulatory agencies have approved regulatory capital guidelines (“Basel III”) aimed at strengthening existing capital requirements for banking organizations.
Bank regulatory agencies have approved regulatory capital guidelines (“Basel III”) aimed at strengthening existing capital requirements for banking organizations.
Impact of Inflation and Changing Prices The financial statements and related financial data presented in this Annual Report on Form 10-K concerning Primis Financial Corp. have been prepared in accordance with U.S.
Primis Bank had a capital conservation buffer of 4.12% at December 31, 2023, which exceeded the 2.50% minimum requirement below which the regulators may impose limits on distributions. Impact of Inflation and Changing Prices The financial statements and related financial data presented in this Annual Report on Form 10-K concerning Primis Financial Corp. have been prepared in accordance with U.S.
All changes are within our Asset/Liability Risk Management Policy guidelines. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sensitivity of Economic Value of Equity ​ ​ As of December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic Value of ​ ​ Economic Value of Equity ​ Equity as a % of Change in Interest Rates ​ ​ ​ ​ $ Change ​ % Change ​ Total ​ Equity in Basis Points (Rate Shock) Amount From Base From Base Assets Book Value ​ ​ (dollar amounts in thousands) Up 400 ​ $ 481,135 ​ $ (63,410) (11.64) % 14.12 % 116.81 % Up 300 ​ 496,136 ​ (48,409) (8.89) % 14.56 % 120.46 % Up 200 ​ 510,807 ​ (33,738) (6.20) % 14.99 % 124.02 % Up 100 ​ 534,163 ​ (10,382) (1.91) % 15.68 % 129.69 % Base ​ 544,545 ​ — — % 15.98 % 132.21 % Down 100 ​ 539,297 ​ (5,248) (0.96) % 15.83 % 130.94 % Down 200 ​ 513,948 ​ (30,597) (5.62) % 15.08 % 124.78 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sensitivity of Economic Value of Equity ​ ​ As of December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic Value of ​ ​ Economic Value of Equity ​ Equity as a % of Change in Interest Rates ​ ​ ​ ​ $ Change ​ % Change ​ Total ​ Equity in Basis Points (Rate Shock) Amount From Base From Base Assets Book Value ​ ​ (dollar amounts in thousands) Up 400 ​ $ 419,520 ​ $ 10,937 2.68 % 12.31 % 101.85 % Up 300 ​ 419,238 ​ 10,655 2.61 % 12.30 % 101.79 % Up 200 ​ 417,156 ​ 8,573 2.10 % 12.24 % 101.28 % Up 100 ​ 418,107 ​ 9,524 2.33 % 12.27 % 101.51 % Base ​ 408,583 ​ — — % 11.99 % 99.20 % Down 100 ​ 341,573 ​ (67,010) (16.40) % 10.02 % 82.93 % ​ ​ 54 Table of Contents Our interest rate sensitivity is also monitored by management through the use of a model that generates estimates of the change in the net interest income (“NII”) over a range of interest rate scenarios.
All changes are within our Asset/Liability Risk Management Policy guidelines (amounts in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sensitivity of EVE ​ ​ As of December 31, 2023 ​ ​ EVE ​ EVE as a % of Change in Interest Rates ​ ​ ​ ​ $ Change ​ % Change ​ Total ​ Equity in Basis Points (Rate Shock) Amount From Base From Base Assets Book Value Up 400 ​ $ 428,175 ​ $ (54,019) (11.20) % 11.10 % 107.69 % Up 300 ​ 438,298 ​ (43,896) (9.10) % 11.37 % 110.24 % Up 200 ​ 447,711 ​ (34,483) (7.15) % 11.61 % 112.61 % Up 100 ​ 471,457 ​ (10,737) (2.23) % 12.22 % 118.58 % Base ​ 482,194 ​ — — % 12.50 % 121.28 % Down 100 ​ 486,399 ​ 4,205 0.87 % 12.61 % 122.34 % Down 200 ​ 477,430 ​ (4,764) (0.99) % 12.38 % 120.08 % Down 300 ​ 456,987 ​ (25,207) (5.23) % 11.85 % 114.94 % Down 400 ​ 417,079 ​ (65,115) (13.50) % 10.81 % 104.90 % ​ 63 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sensitivity of EVE ​ ​ As of December 31, 2022 ​ ​ EVE ​ EVE as a % of Change in Interest Rates ​ ​ ​ ​ $ Change ​ % Change ​ Total ​ Equity in Basis Points (Rate Shock) Amount From Base From Base Assets Book Value Up 400 ​ $ 481,135 ​ $ (63,410) (11.64) % 13.49 % 123.70 % Up 300 ​ 496,136 ​ (48,409) (8.89) % 13.91 % 127.55 % Up 200 ​ 510,807 ​ (33,738) (6.20) % 14.32 % 131.32 % Up 100 ​ 534,163 ​ (10,382) (1.91) % 14.98 % 137.33 % Base ​ 544,545 ​ — — % 15.27 % 140.00 % Down 100 ​ ​ 539,297 ​ (5,248) (0.96) % 15.12 % 138.65 % Down 200 ​ 513,948 ​ (30,597) (5.62) % 14.41 % 132.13 % Down 300 ​ ​ 475,536 ​ (69,009) (12.67) % 13.33 % 122.26 % Down 400 ​ 406,524 ​ (138,021) (25.35) % 11.40 % 104.51 % ​ Our interest rate sensitivity is also monitored by management through the use of a model that generates estimates of the change in net interest income (“NII”) over a range of interest rate scenarios.
The following table provides a comparison of the leverage and risk-weighted capital ratios of Primis Financial Corp. and Primis Bank at the periods indicated to the minimum and well-capitalized required regulatory standards: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum ​ ​ ​ ​ ​ ​ ​ ​ Required for ​ ​ ​ ​ ​ ​ ​ ​ Capital ​ To Be ​ Actual Ratio at ​ ​ Adequacy ​ Categorized as ​ December 31, ​ December 31, ​ ​ Purposes Well Capitalized (1) 2022 2021 Primis Financial Corp. ​ Leverage ratio 4.00 % n/a 9.68 % 9.41 % Common equity tier 1 capital ratio 4.50 % n/a 10.30 % 13.09 % Tier 1 risk-based capital ratio 6.00 % n/a 10.63 % 13.52 % Total risk-based capital ratio 8.00 % n/a 14.57 % 18.52 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Primis Bank ​ ​ ​ ​ ​ ​ Leverage ratio 4.00 % 5.00 % 11.39 % 11.14 % Common equity tier 1 capital ratio 7.00 % 6.50 % 12.64 % 16.18 % Tier 1 risk-based capital ratio 8.50 % 8.00 % 12.64 % 16.18 % Total risk-based capital ratio 10.50 % 10.00 % 13.84 % 17.43 % (1) Prompt corrective action provisions are not applicable at the bank holding company level.
These ratios were not impacted by the goodwill impairment charge incurred during 2023 because goodwill is not a component of the calculations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum ​ ​ ​ ​ ​ ​ ​ ​ Required for ​ ​ ​ ​ ​ ​ ​ ​ Capital ​ To Be ​ Actual Ratio at ​ ​ Adequacy ​ Categorized as ​ December 31, ​ December 31, ​ ​ Purposes Well Capitalized (1) 2023 2022 Primis Financial Corp. ​ ​ Leverage ratio 4.00 % n/a 8.37 % 9.52 % Common equity tier 1 capital ratio 4.50 % n/a 8.96 % 10.07 % Tier 1 risk-based capital ratio 6.00 % n/a 9.25 % 10.40 % Total risk-based capital ratio 8.00 % n/a 13.44 % 14.33 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Primis Bank ​ ​ ​ ​ ​ ​ ​ Leverage ratio 4.00 % 5.00 % 9.80 % 11.24 % Common equity tier 1 capital ratio 7.00 % 6.50 % 10.88 % 12.40 % Tier 1 risk-based capital ratio 8.50 % 8.00 % 10.88 % 12.40 % Total risk-based capital ratio 10.50 % 10.00 % 12.12 % 13.59 % (1) Prompt corrective action provisions are not applicable at the bank holding company level.
Investment Securities Our investment securities portfolio provides us with required liquidity and investment securities to pledge as collateral to secure public deposits, certain other deposits, advances from the FHLB of Atlanta, and repurchase agreements. Our investment securities portfolio is managed by our Treasurer, who has significant experience in this area, with the concurrence of our Asset/Liability Committee.
See additional discussion of the credit enhancement in Critical Accounting Estimates and Policies in this MD&A. Investment Securities Our investment securities portfolio provides us with required liquidity and collateral to pledge to secure public deposits, certain other deposits, advances from the FHLB of Atlanta, and repurchase agreements.
We offer a line of traditional deposit products that currently include noninterest-bearing and interest-bearing checking (or NOW accounts), commercial checking, money market accounts, savings accounts and certificates of deposit. We compete for deposits through our banking branches with competitive pricing, advertising and online banking.
Financial Statements and Supplementary Data, Note 3-Investment Securities.” 60 Table of Contents ​ Deposits and Other Borrowings Deposits The market for deposits is competitive. We offer a line of traditional deposit products that currently include noninterest-bearing and interest-bearing checking (or NOW accounts), commercial checking, money market accounts, savings accounts and certificates of deposit.
The 29.2% increase in noninterest expenses was primarily attributable to a $12.3 million increase in employee compensation driven by increased head count at the Bank, Primis Mortgage and Panacea and higher benefits expense mainly related to branch closures and consolidations in 2022.
The 34.1% increase in noninterest expenses was primarily attributable to $11.2 million of goodwill impairment recognized in the third quarter of 2023 and a $9.8 million increase in employee compensation and benefits expense mainly related to increased head count at the Bank that was driven by the Panacea Financial division and Primis Mortgage during the year ended December 31, 2023 compared to 2022.
In accordance with Credit Policy, the Bank’s Loan Review Program will utilize and incorporate both internal and 3rd party external resources in a complementary fashion to achieve the objectives of the Program. 46 Table of Contents The following table sets forth the allowance for credit losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ Percent of ​ ​ ​ ​ Percent of ​ ​ ​ Allowance ​ Loans by ​ Allowance ​ Loans by ​ ​ ​ for Credit ​ Category to ​ for Loan ​ Category to ​ ​ Losses Total Loans Losses Total Loans Commercial real estate - owner occupied ​ $ 5,558 ​ 15.6 % $ 4,562 ​ 16.6 % Commercial real estate - non-owner occupied ​ ​ 7,147 ​ 19.7 % ​ 9,028 ​ 25.1 % Secured by farmland ​ ​ 25 ​ 0.2 % ​ 56 ​ 0.4 % Construction and land development ​ ​ 1,373 ​ 5.0 % ​ 998 ​ 5.2 % Residential 1-4 family ​ ​ 4,091 ​ 20.7 % ​ 3,588 ​ 23.4 % Multi- family residential ​ ​ 2,201 ​ 4.8 % ​ 3,280 ​ 7.0 % Home equity lines of credit ​ ​ 329 ​ 2.2 % ​ 437 ​ 3.2 % Commercial loans ​ ​ 7,853 ​ 17.7 % ​ 4,088 ​ 12.9 % Paycheck Protection Program loans ​ ​ — ​ 0.2 % ​ — ​ 3.3 % Consumer loans ​ ​ 3,895 ​ 13.7 % ​ 787 ​ 2.6 % PCD loans ​ ​ 2,072 ​ 0.2 % ​ 2,281 ​ 0.4 % Total ​ ​ 34,544 ​ 100.0 % ​ 29,105 ​ 100.0 % Allowance for acquired loans ​ ​ — ​ ​ ​ ​ — ​ ​ ​ Total allocated allowance ​ ​ 34,544 ​ ​ ​ ​ 29,105 ​ ​ ​ Unallocated allowance ​ ​ — ​ ​ ​ — ​ ​ Total ​ $ 34,544 ​ ​ $ 29,105 ​ ​ ​ The following table presents an analysis of the allowance for credit losses for the periods indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2022 2021 Balance, beginning of period ​ $ 29,105 ​ $ 36,345 ​ Provision charged to operations: ​ ​ ​ ​ ​ ​ ​ Adoption of ASC 326 ​ ​ — ​ ​ — ​ Total provisions (recovery) ​ ​ 11,271 ​ ​ (5,801) ​ Recoveries credited to allowance: ​ ​ ​ ​ ​ Commercial real estate - non-owner occupied ​ ​ 502 ​ ​ — ​ Residential 1-4 family ​ 59 ​ 11 ​ Home equity lines of credit ​ 3 ​ 2 ​ Commercial loans ​ ​ 1,638 ​ ​ 1,005 ​ Consumer loans ​ ​ 35 ​ ​ 39 ​ Total recoveries ​ 2,237 ​ 1,057 ​ Loans charged off: ​ ​ ​ Commercial real estate - owner occupied ​ ​ 14 ​ ​ 176 ​ Commercial real estate - non-owner occupied ​ ​ 5,027 ​ ​ — ​ Residential 1-4 family ​ — ​ 469 ​ Home equity lines of credit ​ 14 ​ — ​ Commercial loans ​ ​ 1,040 ​ ​ 1,706 ​ Consumer loans ​ ​ 1,974 ​ ​ 145 ​ Total loans charged-off ​ 8,069 ​ 2,496 ​ Net charge-offs ​ 5,832 ​ 1,439 ​ Balance, end of period ​ $ 34,544 ​ $ 29,105 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs to average loans, net of unearned income ​ 0.22 % 0.07 % ​ We believe that the allowance for credit losses at December 31, 2022 is sufficient to absorb probable incurred credit losses in our loan portfolio based on our assessment of all known factors affecting the collectability of our loan portfolio. 47 Table of Contents Our assessment involves uncertainty and judgment; therefore, the adequacy of the allowance for credit losses cannot be determined with precision and may be subject to change in future periods.
Excluding the allowances each period on this portfolio, the allowance for credit losses would have declined $3.3 million, due to lower allowances on individually evaluated loans, lower default expectations observed in the models which resulted from our annual review and refinements to model, and improved economic forecasts, specifically in the House Price Index and Gross State Product factors, partially offset by the overall loan growth experienced in 2023. 55 Table of Contents The following table sets forth the allowance for credit losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ Percent of ​ ​ ​ ​ Percent of ​ ​ ​ Allowance ​ Loans by ​ Allowance ​ Loans by ​ ​ ​ for Credit ​ Category to ​ for Loan ​ Category to ​ ​ Losses Total Loans Losses Total Loans Commercial real estate - owner occupied ​ $ 4,255 ​ 14.1 % $ 5,558 ​ 15.6 % Commercial real estate - non-owner occupied ​ ​ 5,822 ​ 18.0 % ​ 7,147 ​ 19.7 % Secured by farmland ​ ​ 31 ​ 0.2 % ​ 25 ​ 0.2 % Construction and land development ​ ​ 1,129 ​ 5.1 % ​ 1,373 ​ 5.0 % Residential 1-4 family ​ ​ 4,938 ​ 18.8 % ​ 4,091 ​ 20.7 % Multi- family residential ​ ​ 1,590 ​ 4.0 % ​ 2,201 ​ 4.8 % Home equity lines of credit ​ ​ 364 ​ 1.9 % ​ 329 ​ 2.2 % Commercial loans ​ ​ 6,320 ​ 18.7 % ​ 7,853 ​ 17.7 % Paycheck Protection Program loans ​ ​ — ​ 0.1 % ​ — ​ 0.2 % Consumer loans ​ ​ 26,088 ​ 19.0 % ​ 3,895 ​ 13.7 % PCD loans ​ ​ 1,672 ​ 0.2 % ​ 2,072 ​ 0.2 % Total ​ ​ 52,209 ​ 100.0 % ​ 34,544 ​ 100.0 % ​ The following table presents an analysis of the allowance for credit losses for the periods indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2023 2022 Balance, beginning of period ​ $ 34,544 ​ $ 29,105 ​ Provision charged to operations: ​ ​ ​ ​ ​ ​ ​ Total provisions ​ ​ 32,540 ​ ​ 11,271 ​ Recoveries credited to allowance: ​ ​ ​ ​ ​ Commercial real estate - non-owner occupied ​ ​ 110 ​ ​ 502 ​ Construction and land development ​ 112 ​ — ​ Residential 1-4 family ​ 164 ​ 59 ​ Home equity lines of credit ​ 5 ​ 3 ​ Commercial loans ​ ​ 948 ​ ​ 1,638 ​ Consumer loans ​ ​ 480 ​ ​ 35 ​ Total recoveries ​ 1,819 ​ 2,237 ​ Loans charged off: ​ ​ ​ Commercial real estate - owner occupied ​ ​ — ​ ​ 14 ​ Commercial real estate - non-owner occupied ​ ​ 1,170 ​ ​ 5,027 ​ Construction and land development ​ 2 ​ — ​ Residential 1-4 family ​ 770 ​ — ​ Home equity lines of credit ​ 32 ​ 14 ​ Commercial loans ​ ​ 2,854 ​ ​ 1,040 ​ Consumer loans ​ ​ 11,866 ​ ​ 1,974 ​ Total loans charged-off ​ 16,694 ​ 8,069 ​ Net charge-offs ​ 14,875 ​ 5,832 ​ Balance, end of period ​ $ 52,209 ​ $ 34,544 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs to average loans, net of unearned income ​ 0.45 % 0.22 % ​ We believe that the allowance for credit losses at December 31, 2023 is sufficient to absorb future expected credit losses in our loan portfolio based on our assessment of all known factors affecting the collectability of our loan portfolio.
The Company is headquartered in McLean, Virginia and has administrative offices in Tysons Corner, Virginia and Glen Allen, Virginia and an operations center in Atlee, Virginia.
The Company is headquartered in McLean, Virginia and has an administrative office in Glen Allen, Virginia and an operations center in Atlee, Virginia. Primis Mortgage Company, a residential mortgage lender headquartered in Wilmington, North Carolina, is a consolidated subsidiary of Primis Bank.
Net charge-offs were $5.8 million for the year ended December 31, 2022, up from $1.4 million for the year ended December 31, 2021. Increase in net charge-offs were primarily related to an impaired relationship in the fourth quarter of 2022.
Net charge-offs were $14.9 million for the year ended December 31, 2023, up from $5.8 million for the year ended December 31, 2022. Included in net charge-offs is $8.4 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively, related to the Consumer Program loan portfolio.
At December 31, 2022, all of these notes qualified as Tier 2 capital. 53 Table of Contents Interest Rate Sensitivity and Market Risk We are engaged primarily in the business of investing funds obtained from deposits and borrowings into interest-earning loans and investments.
Financial Statements and Supplementary Data, Note 12 – Junior Subordinated Debt and Senior Subordinated Notes.” Interest Rate Sensitivity and Market Risk We are engaged primarily in the business of investing funds obtained from deposits and borrowings into interest-earning loans and investments.
At December 31, 2022 and 2021, the most recent regulatory notifications categorized the Bank as well capitalized under regulatory framework for PCA. Quantitative measures established by regulation to ensure capital adequacy require Primis to maintain minimum amounts and ratios of Total and Tier I capital (as defined in the regulations) to average assets (as defined).
Quantitative measures established by regulation to ensure capital adequacy require Primis to maintain minimum amounts and ratios of Total and Tier I capital (as defined in the regulations) to average assets (as defined). Management believes, as of December 31, 2023, that Primis meets all capital adequacy requirements to which it is subject. See “Item 1.
Investment securities available-for-sale are carried at fair value, with unrealized gains or losses net of deferred taxes, included in accumulated other comprehensive income (loss) in stockholders’ equity. Investment securities totaling $13.5 million were in the held-to-maturity portfolio at December 31, 2022, compared to $22.9 million at December 31, 2021.
Investment securities available-for-sale are carried at fair value, with unrealized gains or losses net of deferred taxes, included in accumulated other comprehensive income (loss) in stockholders’ equity. Our portfolio of available-for-sale securities currently contains a material amount of unrealized mark-to-market adjustments due to increases in market interest rates since the original purchase of many of these securities.
The Program’s annual goal is to have an overall review penetration rate of at least 50% of the Commercial Loan Portfolio outstanding as of December 31, 2022. The Program incorporates a robust risk-based approach review of the Bank’s Loan Portfolio that will include process, targeted portfolio and full-scope loan reviews.
The Program incorporates a robust risk-based approach review of the Bank’s loan portfolio that will include the loan origination process and targeted portfolio and full-scope loan reviews. The Program’s review goal remains well within regulatory standards and industry best practices.
In 2022, the Loan Review Program performed reviews on loan balances totaling $894.8 million or 56.0% of the commercial loan portfolio outstanding as of December 31, 2021.
In 2023, the loan review program resulted in reviews on loan balances totaling $936.1 million or 47.5% of the commercial loan portfolio outstanding as of December 31, 2022. Overall, the loan review program resulted in loan reviews performed on 30.0% of the commercial portfolio by our internal loan review function and 17.5% by an independent third party consultant.
All changes are within our ALM Policy guidelines at December 31, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ Sensitivity of Net Interest Income ​ ​ As of December 31, 2022 ​ ​ Adjusted Net Interest Income Change in Interest Rates ​ ​ ​ ​ $ Change in Basis Points (Rate Shock) Amount From Base ​ ​ (dollar amounts in thousands) Up 400 ​ $ 108,514 ​ $ (12,447) Up 300 ​ 111,127 ​ (9,834) Up 200 ​ 113,730 ​ (7,231) Up 100 ​ 117,811 ​ (3,150) Base ​ 120,961 ​ — Down 100 ​ 122,070 ​ 1,109 Down 200 ​ 120,687 ​ (1,383) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sensitivity of Net Interest Income ​ ​ As of December 31, 2021 ​ ​ Adjusted Net Interest Income Change in Interest Rates ​ ​ ​ ​ $ Change in Basis Points (Rate Shock) Amount From Base ​ ​ (dollar amounts in thousands) Up 400 ​ $ 88,531 ​ $ 2,341 Up 300 ​ 87,863 ​ 1,673 Up 200 ​ 87,127 ​ 937 Up 100 ​ 86,713 ​ 523 Base ​ 86,190 ​ — Down 100 ​ 82,670 ​ (3,520) ​ Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements.
All changes are within our ALM Policy guidelines at December 31, 2023 and 2022 (amounts in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sensitivity of NII ​ ​ As of December 31, 2023 ​ ​ Adjusted NII Change in Interest Rates ​ ​ ​ ​ $ Change in Basis Points (Rate Shock) Amount From Base Up 400 ​ $ 98,539 ​ $ (16,112) Up 300 ​ 101,939 ​ (12,712) Up 200 ​ 105,326 ​ (9,325) Up 100 ​ 110,513 ​ (4,138) Base ​ 114,651 ​ — Down 100 ​ 117,230 ​ 2,579 Down 200 ​ 118,099 ​ 3,448 Down 300 ​ 118,114 ​ 3,463 Down 400 ​ 119,065 ​ 4,414 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sensitivity of NII ​ ​ As of December 31, 2022 ​ ​ Adjusted NII Change in Interest Rates ​ ​ ​ ​ $ Change in Basis Points (Rate Shock) Amount From Base Up 400 ​ $ 108,514 ​ $ (12,447) Up 300 ​ 111,127 ​ (9,834) Up 200 ​ 113,730 ​ (7,231) Up 100 ​ 117,811 ​ (3,150) Base ​ 120,961 ​ — Down 100 ​ 122,070 ​ 1,109 Down 200 ​ 120,687 ​ (274) Down 300 ​ 117,272 ​ (3,689) Down 400 ​ 113,648 ​ (7,313) ​ Sensitivity of EVE and NII are modeled using different assumptions and approaches.
As of December 31, 2022, Primis was not aware of any known trends, events or uncertainties that have or are reasonably likely to have a material impact on our liquidity. As of December 31, 2022, Primis has no material commitments or long-term debt for capital expenditures.
These projections incorporate expected cash flows on loans, investment securities, and deposits based on data used to prepare our interest rate risk analyses. As of December 31, 2023, Primis was not aware of any known trends, events or uncertainties that have or are reasonably likely to have a material impact on our liquidity.
The yield on average interest-earning assets was 4.09% and 3.62% for the years ended December 31, 2022 and 2021, respectively. The increase was primarily driven by market conditions.
Total income on interest-earning assets was $192.6 million and $123.3 million for the year ended December 31, 2023 and 2022, respectively, driven by average interest-earning asset growth of $607.5 million. The yield on average interest-earning assets was 5.22% and 4.00% for the year ended December 31, 2023 and 2022, respectively.
Net interest income was $104.5 million for the year ended December 31, 2022, compared to $94.2 million for the year ended December 31, 2021. Primis’ net interest margin for the year ended December 31, 2022 was 3.39%, compared to 3.01% for the year ended December 31, 2021.
(2) Calculations include non-accruing loans in average loan amounts outstanding. ​ Net interest income was $98.7 million for the year ended December 31, 2023, compared to $101.7 million for the year ended December 31, 2022. Primis’ net interest margin for the year ended December 31, 2023 was 2.68%, compared to 3.30% for the year ended December 31, 2022.
The change in interest, due to both rate and volume, has been proportionately allocated between rate and volume. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ ​ December 31, 2022 vs. 2021 ​ December 31, 2021 vs. 2020 ​ ​ Increase (Decrease) ​ Increase (Decrease) ​ ​ Due to Change in: ​ Due to Change in: ​ ​ ​ ​ ​ ​ ​ ​ Net ​ ​ ​ ​ ​ ​ ​ Net ​ Volume Rate Change Volume Rate Change ​ ​ (in thousands) Interest-earning assets: ​ ​ ​ ​ ​ ​ Loans held for sale ​ $ 705 ​ $ — ​ $ 705 ​ $ — ​ $ — ​ $ — Loans, net of deferred fees ​ ​ 11,298 ​ ​ (1,157) ​ ​ 10,141 ​ ​ (2,725) ​ ​ (1,901) ​ ​ (4,626) Investment securities ​ 1,186 ​ 338 ​ 1,524 ​ 105 ​ (395) ​ (290) Other earning assets ​ (150) ​ 611 ​ 461 ​ 471 ​ (91) ​ 380 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-earning assets ​ 13,039 ​ (208) ​ 12,831 ​ (2,149) ​ (2,387) ​ (4,536) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ NOW and other demand accounts ​ (641) ​ ​ (1,066) ​ (1,707) ​ 943 ​ ​ (438) ​ 505 Money market accounts ​ 456 ​ ​ 1,655 ​ 2,111 ​ 152 ​ ​ (94) ​ 58 Savings accounts ​ 54 ​ ​ 65 ​ 119 ​ 111 ​ ​ 17 ​ 128 Time deposits ​ (676) ​ ​ 322 ​ (354) ​ (3,591) ​ ​ (4,320) ​ (7,911) Total interest-bearing deposits ​ (807) ​ 976 ​ 169 ​ (2,385) ​ (4,835) ​ (7,220) Borrowings ​ (587) ​ ​ 2,965 ​ 2,378 ​ (193) ​ ​ 314 ​ 121 Total interest-bearing liabilities ​ (1,394) ​ 3,941 ​ 2,547 ​ (2,578) ​ (4,521) ​ (7,099) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in net interest income ​ $ 14,433 ​ $ (4,149) ​ $ 10,284 ​ $ 429 ​ $ 2,134 ​ $ 2,563 ​ ​ Provision for Credit Losses The provision for credit losses is a current charge to earnings made in order to adjust the allowance for credit losses to an appropriate level for current expected losses in the loan portfolio based on an evaluation of the loan portfolio, current economic conditions, changes in the nature and volume of lending, historical loan experience and other known internal and external factors affecting loan collectability.
The change in interest, due to both rate and volume, has been proportionately allocated between rate and volume. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, 2023 vs. 2022 ​ ​ ​ Increase (Decrease) ​ ​ ​ Due to Change in: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net ​ ​ Volume Rate Change ​ ​ (in thousands) Interest-earning assets: ​ ​ ​ Loans held for sale ​ $ 2,006 ​ $ 95 ​ $ 2,101 ​ Loans, net of deferred fees ​ ​ 29,434 ​ ​ 26,173 ​ ​ 55,607 ​ Investment securities ​ (1,626) ​ 2,035 ​ 409 ​ Other earning assets ​ 1,225 ​ 9,989 ​ 11,214 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest-earning assets ​ 31,039 ​ 38,292 ​ 69,331 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ NOW and other demand accounts ​ 320 ​ ​ 12,781 ​ 13,101 ​ Money market accounts ​ 215 ​ ​ 17,145 ​ 17,360 ​ Savings accounts ​ 5,467 ​ ​ 23,570 ​ 29,037 ​ Time deposits ​ 1,783 ​ ​ 9,128 ​ 10,911 ​ Total interest-bearing deposits ​ 7,785 ​ 62,624 ​ 70,409 ​ Borrowings ​ (1,060) ​ ​ 2,971 ​ 1,911 ​ Total interest-bearing liabilities ​ 6,726 ​ 65,594 ​ 72,320 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in net interest income ​ $ 24,314 ​ $ (27,303) ​ $ (2,989) ​ ​ Provision for Credit Losses The provision for credit losses is a current charge to earnings made in order to adjust the allowance for credit losses for current expected losses in the loan portfolio based on an evaluation of the loan portfolio characteristics, current economic conditions, changes in the nature and volume of lending, historical loan experience and other known internal and external factors affecting loan collectability, and assessment of reasonable and supportable forecasts of future economic conditions that would impact collectability of the loans.
The balance in repo accounts at December 31, 2022 and 2021 was $6.4 million and $10.0 million, respectively. 52 Table of Contents Other borrowings consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 FHLB convertible advances maturing 3/1/2030 ​ $ — ​ $ 100,000 ​ Short-term FHLB advances maturing 6/27/2019 ​ ​ 50,000 ​ ​ — ​ Short-term FHLB advances maturing 6/18/2019 ​ ​ 100,000 ​ ​ — ​ Short-term FHLB advances maturing 6/12/2019 ​ ​ 50,000 ​ ​ — ​ Short-term FHLB advances maturing 6/11/2019 ​ ​ 125,000 ​ ​ — ​ Total FHLB advances ​ ​ 325,000 ​ ​ 100,000 ​ Securities sold under agreements to repurchase ​ 6,445 ​ 9,962 ​ Total ​ $ 331,445 ​ $ 109,962 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average interest rate at year end ​ 4.19 % 0.36 % ​ ​ ​ ​ ​ ​ ​ ​ For the periods ended December 31, 2022 and 2021: ​ ​ ​ Average outstanding balance ​ $ 97,795 ​ $ 114,580 ​ Average interest rate during the year ​ 2.72 % 0.39 % ​ ​ ​ ​ ​ ​ ​ ​ Maximum month-end outstanding balance ​ $ 331,445 ​ $ 116,445 ​ ​ Junior Subordinated Debt and Senior Subordinated Notes In 2017, the Company assumed $10.3 million of trust preferred securities that were issued on September 17, 2003 and placed through a trust in a pooled underwriting totaling approximately $650.0 million.
Other borrowings consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 FHLB convertible advances maturing 3/1/2030 ​ $ 30,000 ​ $ — ​ Short-term FHLB advances maturing 1/03/2023 ​ ​ — ​ ​ 50,000 ​ Short-term FHLB advances maturing 1/13/2023 ​ ​ — ​ ​ 100,000 ​ Short-term FHLB advances maturing 1/23/2023 ​ ​ — ​ ​ 50,000 ​ Short-term FHLB advances maturing 1/27/2023 ​ ​ — ​ ​ 125,000 ​ Total FHLB advances ​ ​ 30,000 ​ ​ 325,000 ​ Securities sold under agreements to repurchase ​ 3,044 ​ 6,445 ​ Total ​ $ 33,044 ​ $ 331,445 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average interest rate at year end ​ 5.57 % 4.19 % ​ ​ ​ ​ ​ ​ ​ ​ For the periods ended December 31, 2023 and 2022: ​ ​ ​ Average outstanding balance ​ $ 49,792 ​ $ 97,795 ​ Average interest rate during the year ​ 4.32 % 2.72 % ​ ​ ​ ​ ​ ​ ​ ​ Maximum month-end outstanding balance ​ $ 33,044 ​ $ 331,445 ​ ​ We had secured borrowings as of December 31, 2023 of $20.4 million related to loan transfers to another financial institution during 2023 that did not meet the criteria to be treated as a sale under relevant accounting guidance.
The cost of average interest-bearing deposits increased 4 basis points to 0.64% for the year ended December 31, 2022, compared to 0.60% cost on average interest-bearing deposits for the year ended December 31, 2021. Interest and fees on loans totaled $117.9 million and $107.0 million for the years ended December 31, 2022 and 2021, respectively.
The cost of average interest-bearing deposits increased 228 basis points to 2.92% for the year ended December 31, 2023, 47 Table of Contents compared to 0.64% for the year ended December 31, 2022 as average interest-bearing liabilities grew approximately $751.9 million and the rates paid on these liabilities grew significantly due to the consistent increases in benchmark interest rates during the year.
The Company expects to hold these securities until maturity or recovery of the value and does not anticipate realizing any losses on the investments. Loans Total loans were $2.95 billion and $2.34 billion at December 31, 2022 and 2021, respectively. PPP loans totaled $4.6 million and $77.0 million at December 31, 2022 and 2021, respectively.
We intend to hold these securities until maturity or recovery of the value and do not anticipate realizing any losses on the investments.
Time deposits also increased to 17.1% of total deposits at December 31, 2022. ● Cost of deposits increased to 0.49% for the year ended December 31, 2022, compared to 0.48% for the year ended December 31, 2021. ● Return on average assets from continuing operations totaled 0.53% for the year ended December 31, 2022, compared to 0.93% for the year ended December 31, 2021. ● Net interest margin increased to 3.39% for the year ended December 31, 2022, compared to 3.01% for the year ended December 31, 2021. ● Provision for credit losses were $11.3 million for the year ended December 31, 2022, compared to recovery of credit losses of $5.8 million for the year ended December 31, 2021. ● Allowance for credit losses to total loans (excluding PPP balances) were 1.17% at December 31, 2022, compared to 1.29% at December 31, 2021. ● Book value per share of $15.98 at December 31, 2022, representing a decrease of $0.78 from December 31, 2021 after $0.40 in dividends paid over the last twelve months. ​ ​ RESULTS OF OPERATIONS Net Income Net income from continuing operations for the year ended December 31, 2022 was $17.7 million, or $0.72 per basic and per diluted share, compared to $31.0 million, or $1.27 basic and $1.26 diluted earnings per share, for the year ended December 31, 2021.
Time deposits also decreased to 13.6% of total deposits at December 31, 2023 compared to 17.1% of total deposits at December 31, 2022. ● The ratio of gross loans to deposits declined to 98.3% at December 31, 2023, from 108.2% at December 31, 2022. ● Cost of deposits increased to 2.49% for the year ended December 31, 2023, compared to 0.49% for the year ended December 31, 2022. ● Return on average assets from continuing operations totaled (0.2%) for the year ended December 31, 2023, compared to 0.43% for the year ended December 31, 2022. ● Net interest margin decreased to 2.68% for the year ended December 31, 2023, compared to 3.30% for the year ended December 31, 2022. ● Provision for credit losses were $32.5 million for the year ended December 31, 2023, compared to $11.3 million for the year ended December 31, 2022. $20.9 million of the provision for the year ended December 31, 2023, was related to the Consumer Program loan portfolio. ● Allowance for credit losses to total loans were 1.62% at December 31, 2023, compared to 1.17% at December 31, 2022.
The allowance is also subject to regulatory examinations and determination by the regulatory agencies as to the appropriate level of the allowance. Loan Review Our loan review program is administrated by the Chief Risk Officer and the Loan Review Manager who reports the results directly to the Audit Committee of the Board of Directors.
The newer production represented approximately 19% of the portfolio at December 31, 2023 and is expected to improve the quality mix of the portfolio and result in lower realized net charge-offs in future periods. ​ Loan Review Our loan review program is administrated by the Chief Risk Officer and the Loan Review Manager who reports the results directly to the Audit Committee of the Board of Directors.
We define our potential problem loans as our substandard loans less total nonperforming loans noted above. At December 31, 2022, our potential problem loans totaled $2.2 million. Allowance for Credit Losses We are very focused on the asset quality of our loan portfolio, both before and after a loan is made.
We define our potential problem loans as internally rated as substandard loans less total nonperforming assets noted above. At December 31, 2023, our potential problem loans totaled $6.4 million. As of December 31, 2023, our total substandard loans were $17.2 million, compared to $41.0 million at December 31, 2022, a 58% decline.
The increase in noninterest expense during the year ended December 31, 2022 was also driven by a $2.2 million increase in data processing expense in 2022 driven by higher technology expenses in the current year.
The increase in noninterest expense during the year ended December 31, 2023 compared to 2022 was also due to a $3.5 million increase in data processing expense in 2023 driven by substantially higher application volume on the digital deposit platform as a result of a savings account rate promotion offered during 2023 that brought in approximately $1.0 billion of deposits.
The Financial Condition Section of Management’s Discussion and Analysis provides information on our loan portfolio, past due loans, nonperforming assets and the allowance for credit losses. 41 Table of Contents Noninterest Income The following tables present the major categories of noninterest income for the years ended December 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, (dollars in thousands) 2022 2021 Change Account maintenance and deposit service fees ​ $ 5,745 ​ $ 7,309 $ (1,564) Income from bank-owned life insurance ​ 1,994 ​ 1,687 ​ 307 Mortgage banking income ​ 5,054 ​ — ​ 5,054 Gain on debt extinguishment ​ ​ — ​ ​ 573 ​ ​ (573) Gain on sale of other investments ​ ​ 4,144 ​ ​ — ​ ​ 4,144 Credit enhancement income ​ ​ 3,042 ​ ​ — ​ ​ 3,042 Other noninterest income ​ 1,349 ​ 1,566 ​ (217) Total noninterest income ​ $ 21,328 ​ $ 11,135 $ 10,193 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest income increased 91.5% to $21.3 million for the year ended December 31, 2022, compared to $11.1 million for the year ended December 31, 2021.
Noninterest Income The following table presents the categories of noninterest income for the years ended December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, (dollars in thousands) 2023 2022 Change Account maintenance and deposit service fees ​ $ 5,733 ​ $ 5,745 $ (12) Income from bank-owned life insurance ​ 2,021 ​ 1,994 ​ 27 Mortgage banking income ​ 17,645 ​ 5,054 ​ 12,591 Gain on other investments ​ ​ 184 ​ ​ 4,709 ​ ​ (4,525) Consumer Program derivative ​ ​ 18,120 ​ ​ 65 ​ ​ 18,055 Other noninterest income ​ 1,547 ​ 785 ​ 762 Total noninterest income ​ $ 45,250 ​ $ 18,352 $ 26,898 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest income increased 147% to $45.3 million for the year ended December 31, 2023, compared to $18.4 million for the year ended December 31, 2022.
Noninterest Expense The following tables present the major categories of noninterest expense for the years ended December 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, (dollars in thousands) 2022 2021 Change Salaries and benefits ​ $ 49,005 ​ $ 36,741 ​ $ 12,264 Occupancy expenses ​ 5,628 ​ 5,956 ​ (328) Furniture and equipment expenses ​ 5,231 ​ 3,622 ​ 1,609 Amortization of core deposit intangible ​ 1,325 ​ 1,364 ​ (39) Virginia franchise tax expense ​ 3,254 ​ 2,899 ​ 355 Data processing expense ​ 6,013 ​ 3,850 ​ 2,163 Marketing expense ​ ​ 3,067 ​ ​ 1,726 ​ ​ 1,341 Telephone and communication expense ​ 1,433 ​ 1,790 ​ (357) Net (gain) loss on other real estate owned ​ 72 ​ 87 ​ (15) Net loss on bank premises and equipment ​ ​ 684 ​ ​ — ​ ​ 684 Professional fees ​ 4,787 ​ 5,467 ​ (680) Credit enhancement costs ​ ​ 1,369 ​ ​ — ​ ​ 1,369 Other operating expenses ​ 10,400 ​ 7,898 ​ 2,502 Total noninterest expenses ​ $ 92,268 ​ $ 71,400 ​ $ 20,868 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest expenses were $92.3 million during the year ended December 31, 2022, compared to $71.4 million during the year ended December 31, 2021.
The increase in noninterest income was partially offset by gains on the sale of an other equity investment in the prior year that did not reoccur in the current year. ​ 49 Table of Contents Noninterest Expense The following table present the major categories of noninterest expense for the years ended December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, (dollars in thousands) 2023 2022 Change Salaries and benefits ​ $ 58,765 ​ $ 49,005 ​ $ 9,760 Occupancy expenses ​ 6,239 ​ 5,628 ​ 611 Furniture and equipment expenses ​ 6,381 ​ 5,231 ​ 1,150 Amortization of core deposit intangible ​ 1,269 ​ 1,325 ​ (56) Virginia franchise tax expense ​ 3,395 ​ 3,254 ​ 141 FDIC insurance assessment ​ ​ 2,929 ​ ​ 890 ​ ​ 2,039 Data processing expense ​ 9,545 ​ 6,013 ​ 3,532 Marketing expense ​ ​ 1,819 ​ ​ 3,067 ​ ​ (1,248) Telephone and communication expense ​ 1,507 ​ 1,433 ​ 74 Loss on bank premises and equipment and assets held for sale ​ ​ 476 ​ ​ 684 ​ ​ (208) Professional fees ​ 4,641 ​ 4,787 ​ (146) Miscellaneous lending expenses ​ ​ 3,006 ​ ​ 1,710 ​ ​ 1,296 Goodwill impairment ​ ​ 11,150 ​ ​ — ​ ​ 11,150 Fraud losses ​ ​ 3,311 ​ ​ 108 ​ ​ 3,203 Other operating expenses ​ 8,167 ​ 8,313 ​ (146) Total noninterest expenses ​ $ 122,600 ​ $ 91,448 ​ $ 31,152 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest expenses were $122.6 million during the year ended December 31, 2023, compared to $91.4 million during the year ended December 31, 2022.
Average loans during the year ended December 31, 2022 were $2.61 billion compared to $2.34 billion during the year ended December 31, 2021.
Average loans during the year ended December 31, 2023 were $3.1 billion, compared to $2.6 billion during the year ended December 31, 2022. The $0.5 billion increase in average loans combined with the 103 basis point increase in yield on the loan portfolio drove the $55.6 million increase in income on loans.
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities Available-for-Sale ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Amortized ​ ​ ​ ​ Average ​ Cost Fair Value Yield Obligations of states and political subdivisions ​ ​ ​ Due after one year through five years ​ $ 3,152 ​ $ 3,038 2.98 % Due after five years through ten years ​ 15,200 ​ 12,809 2.16 % Due after ten years ​ 15,751 ​ 13,331 2.12 % ​ ​ 34,103 ​ 29,178 2.21 % Collateralized loan obligations ​ ​ ​ Due after ten years ​ 5,022 ​ 4,876 5.87 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate securities ​ ​ ​ ​ Due after five years through ten years ​ ​ 14,000 ​ ​ 13,100 ​ 4.50 % Due after ten years ​ 2,000 ​ 1,728 4.50 % ​ ​ ​ 16,000 ​ ​ 14,828 ​ 4.50 % Government-sponsored agency securities ​ ​ ​ Due less than one year ​ ​ 1,500 ​ ​ 1,484 ​ 0.02 % Due after one year through five years ​ 6,865 ​ 6,062 1.31 % Due after five years through ten years ​ ​ 4,866 ​ ​ 3,743 ​ 1.80 % Due after ten years ​ 4,488 ​ 3,327 2.09 % ​ ​ 17,719 ​ 14,616 1.70 % Residential government-sponsored mortgage-backed securities ​ ​ ​ Due after one year through five years ​ 4,138 ​ 3,966 2.49 % Due after five years through ten years ​ 20,117 ​ 17,236 1.56 % Due after ten years ​ 95,116 ​ 81,679 1.86 % ​ ​ 119,371 ​ 102,881 1.84 % Residential government-sponsored collateralized mortgage obligations ​ ​ ​ Due after one year through five years ​ ​ 435 ​ ​ 418 ​ 0.03 % Due after five years through ten years ​ 3,626 ​ 3,481 2.76 % Due after ten years ​ 24,582 ​ 22,696 2.99 % ​ ​ 28,643 ​ 26,595 2.96 % Agency commercial mortgage-backed securities ​ ​ ​ Due less than one year ​ ​ 6,357 ​ ​ 6,308 ​ 1.97 % Due after one year through five years ​ 7,045 ​ 6,723 2.46 % Due after five years through ten years ​ 21,846 ​ 18,431 1.49 % Due after ten years ​ ​ 6,932 ​ ​ 5,955 ​ 1.46 % ​ ​ 42,180 ​ 37,417 1.72 % SBA pool securities ​ ​ ​ Due after one year through five years ​ ​ 618 ​ ​ 580 ​ 2.68 % Due after five years through ten years ​ 1,422 ​ 1,426 5.38 % Due after ten years ​ 3,958 ​ 3,918 5.20 % ​ ​ 5,998 ​ 5,924 4.99 % ​ ​ $ 269,036 ​ $ 236,315 2.28 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities Held-to-Maturity ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Amortized ​ ​ ​ ​ Average ​ Cost Fair Value Yield Obligations of states and political subdivisions ​ ​ ​ Due after one year through five years ​ $ 867 ​ $ 865 2.62 % Due after five years through ten years ​ 1,519 ​ 1,477 2.63 % Due after ten years ​ 335 ​ 336 6.70 % ​ ​ 2,721 ​ 2,678 3.13 % Residential government-sponsored mortgage-backed securities ​ ​ ​ ​ Due after one year through five years ​ ​ 639 ​ ​ 611 ​ 2.12 % Due after five years through ten years ​ 686 ​ 649 2.83 % Due after ten years ​ 9,197 ​ 8,255 2.39 % ​ ​ 10,522 ​ 9,515 2.40 % Residential government-sponsored collateralized mortgage obligations ​ ​ ​ Due after ten years ​ 277 ​ 256 2.22 % ​ ​ 277 ​ 256 2.22 % ​ ​ $ 13,520 ​ $ 12,449 2.54 % ​ 51 Table of Contents Deposits and Other Borrowings The market for deposits is competitive.
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities Available-for-Sale ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Amortized ​ ​ ​ ​ Average ​ Cost Fair Value Yield Obligations of states and political subdivisions ​ ​ ​ Due after one year through five years ​ $ 3,132 ​ $ 3,056 2.99 % Due after five years through ten years ​ 17,859 ​ 15,502 2.18 % Due after ten years ​ 12,810 ​ 11,522 2.13 % ​ ​ 33,801 ​ 30,080 2.23 % Collateralized loan obligations ​ ​ ​ Due after ten years ​ 5,018 ​ 4,982 6.77 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate securities ​ ​ ​ ​ Due after five years through ten years ​ ​ 14,000 ​ ​ 12,672 ​ 4.50 % Due after ten years ​ 2,000 ​ 1,376 4.50 % ​ ​ ​ 16,000 ​ ​ 14,048 ​ 4.50 % Government-sponsored agency securities ​ ​ ​ Due less than one year ​ ​ — ​ ​ — ​ — % Due after one year through five years ​ 6,898 ​ 6,305 1.31 % Due after five years through ten years ​ ​ 4,879 ​ ​ 3,924 ​ 1.80 % Due after ten years ​ 4,490 ​ 3,482 2.09 % ​ ​ 16,267 ​ 13,711 1.67 % Residential government-sponsored mortgage-backed securities ​ ​ ​ Due after one year through five years ​ 2,009 ​ 1,947 2.40 % Due after five years through ten years ​ 20,618 ​ 18,287 1.97 % Due after ten years ​ 85,678 ​ 74,363 1.90 % ​ ​ 110,562 ​ 96,808 1.96 % Residential government-sponsored collateralized mortgage obligations ​ ​ ​ Due after one year through five years ​ ​ 1,368 ​ ​ 1,305 ​ 0.03 % Due after five years through ten years ​ 5,580 ​ 5,508 4.49 % Due after ten years ​ 28,979 ​ 27,658 3.77 % ​ ​ 35,927 ​ 34,471 3.85 % Agency commercial mortgage-backed securities ​ ​ ​ Due less than one year ​ ​ 4,973 ​ ​ 4,860 ​ 2.40 % Due after one year through five years ​ 2,003 ​ 1,928 2.58 % Due after five years through ten years ​ 20,402 ​ 17,501 1.49 % Due after ten years ​ ​ 6,681 ​ ​ 5,821 ​ 1.46 % ​ ​ 34,059 ​ 30,110 1.68 % SBA pool securities ​ ​ ​ Due after one year through five years ​ ​ 655 ​ ​ 638 ​ 4.79 % Due after five years through ten years ​ 709 ​ 707 7.75 % Due after ten years ​ 2,893 ​ 2,865 7.37 % ​ ​ 4,257 ​ 4,210 7.04 % ​ ​ $ 255,891 ​ $ 228,420 2.28 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment Securities Held-to-Maturity ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Amortized ​ ​ ​ ​ Average ​ Cost Fair Value Yield Obligations of states and political subdivisions ​ ​ ​ Due after one year through five years ​ $ 580 ​ $ 580 2.98 % Due after five years through ten years ​ 939 ​ 899 2.40 % ​ ​ 2,391 ​ 2,349 2.74 % Residential government-sponsored mortgage-backed securities ​ ​ ​ ​ Due after one year through five years ​ ​ 417 ​ ​ 402 ​ 2.18 % Due after five years through ten years ​ 950 ​ 896 2.80 % Due after ten years ​ 7,673 ​ 6,988 2.46 % ​ ​ 9,040 ​ 8,286 2.48 % Residential government-sponsored collateralized mortgage obligations ​ ​ ​ Due after ten years ​ 219 ​ 204 2.56 % ​ ​ $ 11,650 ​ $ 10,839 2.54 % ​ For additional information regarding investment securities refer to “Item 8.
We had charge-offs totaling $8.1 million during 2022, $2.5 million during 2021 and $2.3 million during 2020. There were recoveries totaling $2.2 million during 2022, $1.1 million during 2021 and $0.69 million during 2020.
We had charge-offs totaling $16.7 million and $8.1 million during the year ended December 31, 2023 and 2022, respectively.
Financial Statements and Supplementary Data, Note 3-Investment Securities.” 49 Table of Contents The following table sets forth a summary of the investment securities portfolio as of the dates indicated.
We recognized an immaterial amount of credit impairment charges related to credit losses on our held-to-maturity investment securities during 2023 and no credit losses during 2022. 58 Table of Contents The following table sets forth a summary of the investment securities portfolio as of the dates indicated.
We concluded that the fair value of all our Bank reporting unit exceeded their carrying amounts and no impairment was present based on management’s assessment. No impairment was indicated in 2022, 2021 or 2020. We determined that for Primis Mortgage, we did not need a quantitative assessment and performed a qualitative assessment.
The results of the quantitative assessment of the Primis Mortgage reporting unit indicated that its fair value was in excess of its carrying value, thus no goodwill impairment was necessary.
We use deposits as a principal source of funding for our lending, purchasing of investment securities and for other business purposes. Total deposits decreased 1.5% to $2.72 billion at December 31, 2022 from $2.76 billion at December 31, 2021. Noninterest-bearing demand deposits increased from $530.3 million as of December 31, 2021 to $582.6 million as of December 31, 2022.
We compete for deposits through our banking branches with competitive pricing, as well as nationally through advertising and online banking. We use deposits as a principal source of funding for our lending, purchasing of investment securities and for other business purposes.
For the year ended December 31, 2022, the Company recorded a provision for credit losses of $11.3 million, compared to a recovery for credit losses for the year ended December 31, 2021 of $5.8 million, primarily as a result of robust loan growth. The provision for credit losses for the year ended December 31, 2020 was $19.5 million.
The 155.3% decrease in the net income attributable to common shareholders during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily related to a $11.2 million goodwill impairment charge taken in the third quarter of 2023 and $20.9 million of provision for credit losses on the Consumer Program loan portfolio.

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