Primis Financial Corp

Consumer Loan Program Winddown

As disclosed previously, the Company has originated consumer loans through a third-party (the “Consumer Program”) since the second half of 2021. A subset of the Consumer Program has promotional characteristics where interest is deferred during the promotional period and is waived if the customer pays off the loan prior to the period end. In that event, the third-party reimburses the Bank for the waived interest. Until the end of the promotional period, the Company is unable to accrue interest on the loan under GAAP but does record a derivative representing the fair value of expected interest reimbursements from the third-party. Credit costs are also included in the Company’s results, including estimated life of loan losses required by ASC 326 while potential credit enhancements from the Consumer Program are only reflected as received. Outstanding balances in the Consumer Program before fair value marks were $173 million as of December 31, 2024 with $39 million of balances in a promotional period versus $180 million and $60 million, respectively, at September 30, 2024.

In the fourth quarter of 2024, the Company made the decision to cease originating new loans under the Consumer Program effective January 31, 2025 and moved a large portion of the portfolio, with an amortized cost of $133 million, to loans held for sale and marked them to fair market value. The adjustment to fair market value resulted in additional provision expense and charge-offs of $20.0 million in the fourth quarter of 2024. The remaining portion of the portfolio still classified as held for investment of approximately $39 million at December 31, 2024 has an associated allowance for credit losses of approximately $10 million and is expected to run off substantially in 2025. The table below highlights the drag on 2024 profitability from the program: