Primis Financial Corp.

Previous wording

Management’s discussion and analysis (“MD&A”) is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Primis. This discussion and analysis should be read in conjunction with the condensed consolidated financial statements, the footnotes thereto, and the other financial data included in this report and in our Annual Report on Form 10-K for the year ended December 31, 2024. Results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of results that may be achieved for any other period. The emphasis of this discussion will be on the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 for the consolidated income statements. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 2025 compared to December 31, 2024. This discussion and analysis contains statements that may be considered “forward-looking statements” as defined in, and subject to the protections of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. See the following section for additional information regarding forward-looking statements.

Current wording

Management’s discussion and analysis (“MD&A”) is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Primis. This discussion and analysis should be read in conjunction with the condensed consolidated financial statements, the footnotes thereto, and the other financial data included in this report and in our Annual Report on Form 10-K for the year ended December 31, 2024. Results of operations for the three and nine months ended September 30, 2025, are not necessarily indicative of results that may be achieved for any other period. The emphasis of this discussion will be on the three and nine months ended September 30, 2025, compared to the three and nine months ended September 30, 2024 for the consolidated income statements. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of September 30, 2025 compared to December 31, 2024. This discussion and analysis contain statements that may be considered “forward-looking statements” as defined in, and subject to the protections of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. See the following section for additional information regarding forward-looking statements.

Previous wording

Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements. In addition to the Risk Factors contained in this Quarterly Report on Form 10-Q, as well as the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, and the other reports we file with the Securities and Exchange Commission, factors that could contribute to those differences include, but are not limited to:

Current wording

Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements. In addition to the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, and the other reports we file with the Securities and Exchange Commission, factors that could contribute to those differences include, but are not limited to:

Previous wording

Primis Financial Corp. (NASDAQ: FRST) is the bank holding company for Primis 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. As of June 30, 2025, Primis Bank had 24 full-service branches in Virginia and Maryland and also provided 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 Company is headquartered in McLean, Virginia and has an administrative office in Glen Allen, Virginia and an operations center in Atlee, Virginia. PMC, a residential mortgage lender headquartered in Wilmington, North Carolina, is a consolidated subsidiary of Primis Bank. PFH 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 through the Panacea Financial Division of the Bank. PFH was a consolidated subsidiary of Primis until March 31, 2025, when it was deconsolidated in accordance with applicable accounting guidance.

Current wording

Primis Financial Corp. (NASDAQ: FRST) is the bank holding company for Primis 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. As of September 30, 2025, Primis Bank had 24 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 Company is headquartered in McLean, Virginia and has an administrative office in Glen Allen, Virginia and an operations center in Atlee, Virginia. PMC, a residential mortgage lender headquartered in Wilmington, North Carolina, is a consolidated subsidiary of Primis Bank. PFH 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 through the Panacea Financial Division of the Bank. PFH was a consolidated subsidiary of Primis until March 31, 2025, when it was deconsolidated in accordance with applicable accounting guidance.

Previous wording

While Primis Bank offers a wide range of commercial banking services, it focuses on making loans secured primarily by commercial real estate and other types of secured and unsecured commercial loans to small and medium-sized businesses in number of industries, as well as loans to individuals for a variety of purposes. Primis Bank invests in real estate-related securities, including collateralized mortgage obligations and agency mortgage-backed securities. Primis Bank’s principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings. Primis Bank offers a broad range of deposit products, including checking, savings, money market accounts and certificates of deposit. 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.

Current wording

While Primis Bank offers a wide range of commercial banking services, it focuses on making loans secured primarily by commercial real estate and other types of secured and unsecured commercial loans to small and medium-sized businesses in a number of industries, as well as loans to individuals for a variety of purposes. Primis Bank invests in real estate-related securities, including collateralized mortgage obligations and agency mortgage-backed securities. Primis Bank’s principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings. Primis Bank offers a broad range of deposit products, including checking, savings, money market accounts and certificates of deposit. 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.

Previous wording

In 2024, we focused on organizing the core bank and lines of business that drive premium operating results. The second quarter of 2025 demonstrated progress in key areas that are expected to continue and build through the rest of the year and into 2026. Our strategy centers on growing earning assets back to previous levels after the sale of our Life Premium Finance division and achieving higher production and profitability in our retail mortgage business. We continued to execute successfully during the first half of 2025 on these strategies including the following:

Current wording

In 2024, we focused on organizing the core bank and lines of business that we believe drive premium operating results. The third quarter of 2025 demonstrated progress in key areas that are expected to continue and build through the rest of the year and into 2026. Our strategy centers on growing earning assets back to previous levels after the sale of our Life Premium Finance division and achieving higher production and profitability in our retail mortgage business. We continued to execute successfully during the first nine months of 2025 on these strategies, which included the following:

Previous wording

Changes in the relationship between PFH and Primis during the first quarter of 2025 resulted in a determination to deconsolidate PFH from Primis as of March 31, 2025. The deconsolidation resulted in recognition of a $24.6 million gain for Primis during the six months ended June 30, 2025, as a result of recording the fair value of our retained interest in common stock of PFH. The deconsolidation resulted in us no longer including PFH’s financial results in our financial results after March 31, 2025. PFH continues to work with the Panacea Division of the Bank to originate loans, some of which the Bank will retain, and others will be sold to investors and other financial institutions.

Current wording

Changes in the relationship between PFH and Primis during the first quarter of 2025 resulted in a determination to deconsolidate PFH from Primis as of March 31, 2025. The deconsolidation resulted in recognition of a $25 million gain for Primis during the nine months ended September 30, 2025, as a result of recording the fair value of our retained interest in common stock of PFH. The deconsolidation resulted in us no longer including PFH’s financial results in our financial results after March 31, 2025. PFH continues to work with the Panacea Division of the Bank to originate loans, some of which the Bank will retain, and others will be sold to investors and other financial institutions.

Previous wording

On June 12, 2025, we signed a non-binding term sheet to sell a portion of our retained ownership in PFH common shares after the deconsolidation that generated proceeds of $22.1 million for us. Following the sale of these shares, we continued to hold approximately 467 thousand shares in PFH as of June 30, 2025. For the three months ended June 30, 2025 we recorded a gain of $7.5 million in the income statement in “Gain on Panacea Financial Holdings investment” within noninterest income related to the sale of PFH common shares and fair value adjustments on our remaining investment.

Current wording

On June 12, 2025, we signed a non-binding term sheet to sell a portion of our retained ownership in PFH common shares after the deconsolidation and the sale of the shares generated proceeds of $22 million. Following the sale of these shares, we continued to hold approximately 467 thousand shares in PFH as of September 30, 2025. For the nine months ended September 30, 2025, we recorded a gain of $7 million in the income statement in “Gain on Panacea Financial Holdings investment” within noninterest income related to the sale of PFH common shares and fair value adjustments on our remaining investment.

Previous wording

Three-Month Comparison. Net income available to common shareholders for the three months ended June 30, 2025 totaled $2.4 million, or $0.10 basic and diluted earnings per share, compared to $3.4 million, or $0.14 basic and diluted earnings per share for the three months ended June 30, 2024. The results reflect an increase in noninterest income of $7.2 million, primarily due to $7.5 million gain on sale of a portion of the Company’s ownership in PFH in the second quarter of 2025 and an increase in fair value of the remaining PFH common share investment, a $0.3 million increase in net interest income, and a $0.7 million decrease in our income tax provision. These are offset by an increase in provision for credit losses of $5.2 million, an increase in noninterest expense of $2.1 million driven by personnel expenses and data processing costs, and a decrease in noncontrolling interest income of $1.9 million. Additional details of the changes in net income will be discussed in the remaining sections of thisResults of Operations section.

Current wording

Three-Month Comparison Net income available to common shareholders for the three months ended September 30, 2025 totaled $7 million, or $0.28 basic and diluted earnings per share, compared to $1 million, or $0.05 basic and diluted earnings per share, for the three months ended September 30, 2024. The results reflect a decrease in provision for credit losses of $7 million driven by less provision required on the Consumer Program portfolio, the changing mix of the Bank’s loan portfolio to loan categories with lower reserve requirements and the move of approximately $53 million of commercial loans to held for sale. The results also reflect an increase in noninterest income of $3 million primarily due to higher mortgage banking income in the third quarter driven by growth of PMC and higher loan sales and related gains and a $1 million increase in net interest income driven by lower interest expenses on deposits and borrowings. These are partially offset by an increase in noninterest expense of $1 million driven by personnel expenses due to growth in PMC and Mortgage Warehouse, a $2 million increase in our income tax provision and a decrease in noncontrolling interest income of $2 million. Additional details of the changes in net income will be discussed in the remaining sections of thisResults of Operations section.

Previous wording

Six-Month Comparison. Net income available to common shareholders for the six months ended June 30, 2025 totaled $25.1 million, or $1.01 basic and diluted earnings per share, compared to $5.9 million, or $0.24 basic and diluted earnings per share for the six months ended June 30, 2024. The results reflect an increase in noninterest income of $29.2 million, primarily due to the $32.0 million gain on deconsolidation of PFH and the sale and fair value gains on PFH described above and a $1.4 million increase in our net interest income driven by lower interest expenses. These increases were partially offset by an increase in noninterest expense of $7.1 million driven by personnel costs and data processing expenses and an increase in income tax provisions of $4.1 million from higher pre-tax earnings. Additional details of the changes in net income will be discussed in the remaining sections of thisResults of Operations section.

Current wording

Nine-Month Comparison Net income available to common shareholders for the nine months ended September 30, 2025 totaled $32 million, or $1.29 basic and diluted earnings per share, compared to $7 million, or $0.29 basic and diluted earnings per share, for the nine months ended September 30, 2024. The results reflect an increase in noninterest income of $32 million, primarily due to a gain on the deconsolidation of PFH in the first quarter of 2025 and gains from the sale of a portion of our remaining investment in PFH common share investment in 2025. A $2 million increase in our net interest income was driven by lower interest expenses in the current year on both deposits and borrowings due to lower average balances and lower interest rates. These increases were partially offset by an increase in noninterest expense of $8 million driven primarily by higher personnel costs due to growth in PMC, Mortgage Warehouse, and the Panacea Division of the Bank and an increase in income tax provisions of $6 million from higher pre-tax earnings. Additional details of the changes in net income will be discussed in the remaining sections of thisResults of Operations section.

Previous wording

Net interest income was $25.2 million for the three months ended June 30, 2025, compared to $24.9 million for the three months ended June 30, 2024. Net interest income increased as a result of interest-bearing liability costs declining more than the declines in interest-earning asset income. Our net interest margin for the three months ended June 30, 2025 was 2.86%, compared to 2.72% for the three months ended June 30, 2024. Margin increased by 14 basis points primarily as a result of lower average interest-earning asset balances and slightly higher net interest income when comparing the three months ended June 30, 2025 to the three months ended June 30, 2024.

Current wording

Net interest income was $29 million for the three months ended September 30, 2025, compared to $28 million for the three months ended September 30, 2024. Net interest income increased as a result of interest-bearing liability costs declining more than the declines in interest-earning asset income. Net interest income for the third quarter of 2025 included $1 million of interest reversals on loans that were moved to nonaccrual in the quarter. Our net interest margin for the three months ended September 30, 2025 was 3.18%, compared to 2.97% for the three months ended September 30, 2024. Continued rebuilding of earning asset levels coupled with favorable deposit pricing was responsible for the improvement during the third quarter of 2025. Margin increased by 21 basis points primarily as a result of lower average interest-earning asset balances and slightly higher net interest income when comparing the three months ended September 30, 2025 to the three months ended September 30, 2024.

Previous wording

Our net interest income and margin were negatively impacted during the three months ended June 30, 2025 by the Consumer Program loans. During the quarter we had significant charge-offs related to these loans, most of which had promotional interest features, which resulted in significant reversal of interest income. The Company recognizes interest income on the promotional loans when promotional features expire and which generally includes a substantial amount of deferred interest accumulated to that point. If the loan subsequently defaults, that previously recognized interest is reversed against interest income. The Bank recognized substantial interest income on loans exiting their promotional periods beginning in the third quarter of 2024 with a roughly one quarter lag of subsequent reversals primarily due to high first payment defaults on full deferral promotional loans. Net interest margin excluding the Consumer Program portfolio impact entirely, including loan balances, was 3.12%(+)in the second quarter of 2025 compared to actual net interest margin of 2.89%, an increase of 26 basis points. The interest recognized on promotional loan expirations was insignificant in the second quarter of 2025 which is expected to lead to substantially lower interest income reversals going forward.

Current wording

Our net interest income and margin were positively impacted during the three months ended September 30, 2025 compared to the same period in 2024 by the Consumer Program loans. During the third quarter, we had lower charge-offs related to these loans, most of which had promotional interest features, which resulted in less reversal of interest income. The Company recognizes interest income on the promotional loans when promotional features expire and which generally includes a substantial amount of deferred interest accumulated to that date. If the loan subsequently defaults, that previously recognized interest is reversed against interest income. The Bank recognized substantial interest income on loans exiting their promotional periods beginning in the third quarter of 2024, with a roughly one quarter lag of subsequent reversals primarily due to high first payment defaults on full deferral promotional loans. The interest recognized on promotional loan expirations was insignificant in the third quarter of 2025, which is expected to lead to substantially lower interest income reversals going forward.

Previous wording

Net interest income was $51.5 million for the six months ended June 30, 2025, compared to $50.1 million for the six months ended June 30, 2024. Net interest income increased as a result of interest-bearing liability costs declining more than the declines in interest-earning asset income. Our net interest margin for the six months ended June 30, 2025 was 3.00%, compared to 2.78% for the six months ended June 30, 2024. Margin increased by 22 basis points primarily from lower average interest-earning asset balances and higher net interest income over those periods. Similar to the discussion above in the three months ended June 30, 2025, Consumer Program loan income reversals had a significant impact on the six months ended June 30, 2025. The net interest margin excluding the Consumer Program portfolio impact entirely, including balances, was 3.12%(+) in the six months ended June 30, 2025, compared to actual net interest margin of 3.00%, an increase of 12 basis points.

Current wording

Net interest income was $80 million for the nine months ended September 30, 2025, compared to $78 million for the nine months ended September 30, 2024. Net interest income increased as a result of interest-bearing liability costs declining more than the declines in interest-earning asset income. Our net interest margin for the nine months ended September 30, 2024 was 3.06%, compared to 2.85% for the nine months ended September 30, 2024. Margin increased by 21 basis points primarily from higher net interest income on lower average interest-earning assets over those periods. Consumer Program loan income reversals had a significant impact on the nine months ended September 30, 2025 and no impact on the same period in 2024.

Previous wording

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. Our allowance for credit losses is calculated by segmenting the loan portfolio by loan type and applying risk factors to each segment. The risk factors are determined by considering historical loss data, peer data, as well as applying management’s judgment.

Current wording

The provision for (recovery of) 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. Our allowance for credit losses is calculated by segmenting the loan portfolio by loan type and applying risk factors to each segment. The risk factors are determined by considering historical loss data, peer data, as well as applying management’s judgment.

Previous wording

When excluding the provision on the commercial real estate loan, overall provision expense declined $1.9 million and $6.8 million in the three and six months ended June 30, 2025 compared to 2024, respectively. This decline was due to higher provisions in the 2024 periods primarily related to the Consumer Program loans. Credit losses were concentrated in the promotional portion of that portfolio that were largely originated between the third quarter of 2022 and first quarter of 2023. As loans ended their promotional periods in large numbers in the third quarter of 2024 through the first quarter of 2025 we observed high initial default rates on these loans in the first month after the promotional period ends leading to eventual charge-offs. We have incorporated this loss experience into our allowance calculations during 2024 and the first six months of 2025, which drove higher provisions corelated to the volume of loans ending their promotional period. Due to the majority of these promotional loans having ended promotions in 2024 and coupled with our loss mitigation efforts in 2025, our provisioning for this portfolio has been much less in the first six months of 2025 with no provision and $1.9 million recorded in the three and six months ended June 30, 2025, respectively.

Current wording

For the nine months ended September 30, 2025 and 2024, we had a provision for credit losses of $10 million and $17 million, respectively. Decline in provision for credit losses for the nine months ended September 30, 2025 compared to September 30, 2024 was driven by higher provisions in the 2024 periods primarily related to the Consumer Program loans. Credit losses were concentrated in the promotional portion of that portfolio that were largely originated between the third quarter of 2022 and first quarter of 2023. Due to the majority of these promotional loans ending their promotions in 2024 or the first quarter of 2025, coupled with our loss mitigation efforts in 2025, our provisioning for this portfolio was only $2 million during the nine months ended September 30, 2025, compared to $13 million during the nine months ended September 30, 2024.

Previous wording

The provision for credit losses was $8.3 million and $3.1 million for the three months ended June 30, 2025 and 2024, respectively, and $9.9 million compared to $9.6 million for the six months ended June 30, 2025 and 2024, respectively. Provision expense in the second quarter and first six months of 2025 was driven primarily by $7.1 million of provisions on an individually evaluated commercial real estate loan that was placed on nonaccrual as of June 30, 2025, due to certain weaknesses in the credit. See additional discussion of this loan in theAsset Quality section of this MD&A. Our provision also increased in the 2025 periods compared to the 2024 periods due to growth in the loan portfolio and moderate charge-off activity.

Current wording

The decline in provision during the nine months ended September 30, 2025 compared to the same period of 2024 was also driven by the lower provisioning for Consumer Program loans, the change in portfolio mix, and transfer to held for sale of commercial loans in the three months ended September 30, 2025. Partially offsetting the decline in provision during the nine months ended September 30, 2025 was $7 million of provisions on an individually evaluated commercial real estate loan that was placed on nonaccrual during the period, due to certain weaknesses in the credit. See additional discussion of this loan in theAsset Quality section of this MD&A.

Previous wording

Noninterest income increased 66% to $18.0 million for the three months ended June 30, 2025, compared to $10.9 million for the three months ended June 30, 2024. The increase in noninterest income was primarily driven by the $7.5 million gain on sale of a portion of our ownership in PFH and fair value adjustments to the remaining common share investment retained. The increase was also a result of $1.5 million of higher income from mortgage banking activity in the second quarter of 2025 compared to the second quarter of 2024. The increase in mortgage banking income was due to higher gain on sale income driven by $85.0 million higher loan sales during the three months ended June 30, 2025 compared to 2024 and higher fair value gains in marking the mortgage HFS loan portfolio to fair value.

Current wording

Noninterest income increased 29% to $12 million for the three months ended September 30, 2025, compared to $9 million for the three months ended September 30, 2024. The increase was primarily driven by $2 million of higher income from mortgage banking activity during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The 31% increase in mortgage banking income was due to higher gain on sale income driven by an increase of $62 million, or 27%, in loan sales during the three months ended September 30, 2025 compared to 2024 as well as higher fair value gains in marking the mortgage HFS loan portfolio to fair value. The increase in noninterest income was also a result of $330 thousand of gains from returns on other investments and a $294 thousand gain due to fair value adjustments to the remaining common share investment retained in PFH.

Previous wording

Noninterest income increased 138% to $50.4 million for the six months ended June 30, 2025, compared to $21.2 million for the six months ended June 30, 2024. The increase in noninterest income was primarily driven by the $32.0 million gain on our PFH investment, which was comprised of the gain on deconsolidation of PFH in the first quarter of 2025 and gain on sale of a portion of our ownership in PFH and fair value adjustments to the remaining common share investment retained in the second quarter of 2025. The increase was also driven partially by $1.5 million of higher income from mortgage banking activity during 2025 compared to 2024. The increase in mortgage banking income was due to higher gain on sale income driven by $124.1 million higher loan sales during the six months ended June 30, 2025 compared to 2024.

Current wording

Noninterest income increased 105% to $62 million for the nine months ended September 30, 2025, compared to $30 million for the nine months ended September 30, 2024. The increase in noninterest income was primarily driven by the $32 million gain on our PFH investment, which comprised the gain on deconsolidation of PFH in the first quarter of 2025 and gain on the sale of a portion of our ownership in PFH and fair value adjustments to the remaining common share investment retained in the second and third quarter of 2025. The increase was also driven partially by $4 million of higher income from mortgage banking activity during 2025 compared to 2024. The increase in mortgage banking income was due to higher gain on sale income driven by $194 million, or 36%, higher loan sales during the nine months ended September 30, 2025 compared to 2024. The increases were partially offset by declines in Consumer Program derivative income and income from bank-owned life insurance held as a result of several one-time death benefit gains in 2024 that did not re-occur in 2025

Previous wording

The increases in income were partially offset by declines in income from bank owned life insurance, losses on other investments, and Consumer Program derivative income. The decline in bank-owned life insurance income was driven by a one-time death benefit gain in the second quarter of 2024 that did not re-occur in 2025 and the decline in other investment income was due to losses on other investments held during the quarter. The Consumer Program income decline was primarily driven by a combination of less income earned from the third-party on origination of loans, which ended in January of 2025, and less promotional income due to us when borrowers paid off their promotional loans before the end of the promotional period. These two items resulted in a combined decline of $1.0 million in income when comparing the three months ended June 30, 2025 to the same period in 2024. This was partially offset by lower derivative fair value losses during the three months ended June 30, 2025 compared to 2024 because the promotional loan population expected to prepay early was significantly less and declined at a smaller pace during the three months ended June 30, 2025 compared to 2024. The fair value losses on the derivative were $0.4 million and $0.8 million during the three months ended June 30, 2025 and 2024, respectively.

Current wording

The decline in Consumer Program related income included higher derivative fair value losses during the nine months ended September 30, 2025 compared to 2024 because the promotional loan population declined at a faster pace during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The fair value losses on the derivative were $443 thousand higher during the nine months ended September 30, 2025 compared to the same period in 2024. The remaining decline in the Consumer Program derivative income was a combination of less income earned from the third-party on origination of loans, which ended in January of 2025, and less reimbursement due to us when borrowers paid off their promotional loans before the end of the promotional period. These two items resulted in a combined decline of $2 million in income when comparing the nine months ended September 30, 2025 to the same period in 2024. Noninterest income from the Consumer Program is expected to be increasingly immaterial going forward as promotional loans have declined to only $7 million at the end of the third quarter of 2025 and the derivative value is immaterial at September 30, 2025.

Previous wording

Noninterest expenses increased 7% to $31.9 million during the three months ended June 30, 2025, compared to $29.8 million during the three months ended June 30, 2024. The increase was primarily driven by higher salaries and benefits expenses, data processing expense, FDIC insurance expense, and miscellaneous lending expenses, partially offset by lower professional fees

Current wording

Noninterest expenses increased 4% to $32 million during the three months ended September 30, 2025, compared to $31 million during the three months ended September 30, 2024. The increase was primarily driven by higher salaries and benefits expenses, FDIC insurance expense, and occupancy expenses, partially offset by lower miscellaneous lending expenses, professional fees, and amortization of core deposit intangibles. Our core deposit intangible fully amortized in the second quarter of 2025.

Previous wording

Noninterest expenses increased 12% to $64.4 million during the six months ended June 30, 2025, compared to $57.3 million during the six months ended June 30, 2024. The increase was primarily driven by higher salaries and benefits expenses, data processing expense, and miscellaneous lending expenses in 2025 compared to 2024.

Current wording

Noninterest expenses increased 10% to $96 million during the nine months ended September 30, 2025, compared to $88 million during the nine months ended September 30, 2024. The increase was primarily driven by higher salaries and benefits expenses, data processing expense, and FDIC insurance expenses in 2025 compared to 2024. These increases were partially offset by less core deposit intangible amortization that fully amortized by June 30, 2025.

Previous wording

Salaries and benefits expenses increased $1.0 million in the three months ended June 30, 2025 compared to the same period in 2024. The higher salaries and benefits expense was driven primarily due to additions of several lending teams at PMC, one is the top mortgage originator in the Nashville, TN market and the other is the fourth ranked VA lender in the country. These teams drove the salaries and benefits expense in the second quarter of 2025 due to salary draws while they rebuilt their portfolios, but are expected to generate production in 2025 that will exceed these initial salary draws.

Current wording

The higher salaries and benefits expense of $5 million for the nine months ended September 30, 2025 compared to the same period in 2024 was driven primarily due to additions of several lending teams at PMC, one of which is the top mortgage originator in the Nashville, TN market and the other is the fourth ranked VA lender in the country. These teams drove the salaries and benefits expense in 2025 due to salary draws while they rebuilt their portfolios. These teams are expected to generate production in 2025 that will exceed these initial salary draws, which should help to generate income that offsets the salary expenses in later periods. Increase in salaries and benefits was also from the growth in salaries and benefit expenses in the Panacea and Mortgage Warehouse lines of business, each increasing $1 million when comparing the year-to-date periods in 2025 to 2024.

Previous wording

FDIC insurance expense was higher by $0.4 million during the three months ended June 30, 2025 compared to the same period in 2024 primarily due to an increase in our assessment base as a result of the financial restatements in 2024. Miscellaneous lending expenses were higher by $0.6 million in the second quarter of 2025 compared to the second quarter of 2024 due to higher servicing fees paid to the third-party servicer of our Consumer Program loan portfolio and also due to higher unfunded commitment provisions on our unfunded loans and lines which was driven by the growth in the mortgage warehouse business.

Current wording

FDIC insurance expense increased $1 million during the nine months ended September 30, 2025 compared to the same period in 2024 primarily due to an increase in our assessment base as a result of the financial restatements in 2024 and the changes in asset quality in 2025.

Previous wording

Data processing increased $0.7 million when comparing the three months ended June 30, 2025 to 2024, which is due to higher processing volume and also a result of our continued use of two core operating systems. We are in negotiations with our current core provider to consolidate into one core and are reevaluating other vendor relationships. We expect to have resolution with our core processing vendor of our path forward to a consolidated core environment in the second half of 2025 that will begin to provide significant reductions in data processing expense in the future.

Current wording

Data processing expense increased $1 million comparing the nine months ended September 30, 2025 to 2024, which was due to higher processing volume and was also a result of our continued use of two core operating systems. We have negotiated a new contract with our core data provider with contract terms that began to provide significant reductions in data processing expense in August of 2025.

Previous wording

Loans held for sale declined $120.2 million from December 31, 2024 primarily due to the sale of $50.7 million of LPF loans, paydowns of Consumer Program loans HFS, and the transfer back to Net loans (HFI) of $101.7 million of Consumer Program loans in 2025 after the decision to retain these for the foreseeable future or until maturity. These declines were partially offset by increased originations of PMC loans held for sale at fair value.

Current wording

LHFS declined $45 million from December 31, 2024 primarily due to the sale of $51 million of LPF loans, paydowns of Consumer Program LHFS, and the transfer back to net loans of $102 million of Consumer Program loans in 2025 after the decision to retain these for the foreseeable future or until maturity. These declines were partially offset by increased originations of PMC loans held for sale at fair value and the transfer to held for sale, at the lower of cost or market, of commercial loans in the Panacea Division that we intend to sell in the fourth quarter to another financial institution.

Previous wording

Gross loans HFI were $3.1 billion and $2.9 billion as of June 30, 2025 and December 31, 2024, respectively. The increase in loans was driven by the transfer back from HFS into the consumer loans category in the HFI portfolio of Consumer Program loans along with growth of mortgage warehouse loans and Panacea Division commercial loans, both of which were the primary driver of the $202.9 million increase in commercial loans seen below. The growth was partially offset by loan paydowns during the six months ended June 30, 2025 of loans secured by real estate. As of June 30, 2025 and December 31, 2024, a majority of our loans were to customers located in Virginia and Maryland. We are not dependent on any single customer or group of customers whose insolvency would have a material adverse effect on our operations.

Current wording

Gross LHFI were $3.2 billion and $2.9 billion as of September 30, 2025 and December 31, 2024, respectively. The increase in loans was driven by the transfer back from LHFS into the consumer loans category in LHFI of Consumer Program loans along with growth of mortgage warehouse loans and Panacea Division commercial loans, both of which were the primary driver of the $307 million increase in commercial loans seen below. The growth was partially offset by loan paydowns during the nine months ended September 30, 2025 of loans secured by real estate. As of September 30, 2025 and December 31, 2024, a majority of our loans were to customers located in Virginia and Maryland. We are not dependent on any single customer or group of customers whose insolvency would have a material adverse effect on our operations.

Previous wording

The following table sets forth the contractual maturity ranges of our loans HFI portfolio and the amount of those loans with fixed and floating interest rates in each maturity range as of June 30, 2025 ($ in thousands):

Current wording

The following table sets forth the contractual maturity ranges of our LHFI portfolio and the amount of those loans with fixed and floating interest rates in each maturity range as of September 30, 2025 ($ in thousands):

Previous wording

Our highest concentration of credit by loan type is in commercial real estate. As of June 30, 2025, 39% of our loan portfolio was comprised of loans secured by commercial real estate, including multi-family residential loans and loans secured by farmland. Commercial real estate loans are generally viewed as having a higher risk of default than residential real estate loans and depend on cash flows from the owner’s business or the property’s tenants to service the debt. The borrower’s cash flows may be affected significantly by general economic conditions, a downturn in the local economy, or in occupancy rates in the market where the property is located, any of which could increase the likelihood of default.

Current wording

Our highest concentration of credit by loan type is in commercial real estate. As of September 30, 2025, 38% of our loan portfolio was comprised of loans secured by commercial real estate, including multi-family residential loans and loans secured by farmland. Commercial real estate loans are generally viewed as having a higher risk of default than residential real estate loans and depend on cash flows from the owner’s business or the property’s tenants to service the debt. The borrower’s cash flows may be affected significantly by general economic conditions, a downturn in the local economy, or in occupancy rates in the market where the property is located, any of which could increase the likelihood of default.

Previous wording

We seek to mitigate risks attributable to our most highly concentrated portfolios and our portfolios that pose unique risks to our balance sheet through our credit underwriting and monitoring processes, including oversight by a centralized credit administration function, approval process, credit policy, and risk management committee, as well as through our seasoned bankers that focus on lending to borrowers with proven track records in markets that we are familiar with..

Current wording

We seek to mitigate risks attributable to our most highly concentrated portfolios and our portfolios that pose unique risks to our balance sheet through our credit underwriting and monitoring processes, including oversight by a centralized credit administration function, approval process, credit policy, and risk management committee, as well as through our seasoned bankers that focus on lending to borrowers with proven track records in markets with which we are familiar.

Previous wording

The following table sets forth the contractual maturity ranges of our Consumer Program loan portfolio as of June 30, 2025, which is only originated at fixed rates. The amounts do not include the $11.0 million of remaining fair market value adjustments related to the original $20.0 million write-down of the portfolio when transferred to HFS as of December 31, 2024 ($ in thousands):

Current wording

The following table sets forth the contractual maturity ranges of our Consumer Program loan portfolio as of September 30, 2025, which is only originated at fixed rates ($ in thousands):

Previous wording

(1) Does not include $11.0 million of remaining fair market value adjustments related to the original $20.0 million write-down of the portfolio when transferred to HFS as of December 31, 2024.

Current wording

(1) Does not include $9 million of remaining fair market value adjustments related to the original $20 million write-down of the portfolio when transferred to LHFS as of December 31, 2024.

Previous wording

During the three and six months ended June 30, 2025, $5.2 million and $26.3 million, respectively, of Consumer Program loans either paid off during the no interest promotional period or converted to amortizing at the end of the promotional period.

Current wording

During the three and nine months ended September 30, 2025, $8 million and $34 million, respectively, of Consumer Program loans either paid off during the no interest promotional period or converted to amortizing at the end of the promotional period.

Previous wording

Nonperforming assets increased $61.5 million as of June 30, 2025 compared to December 31, 2024, which was driven by an increase in both nonaccrual loans and loans past due 90 days and accruing interest. The increase in nonaccrual was due to the addition of one commercial real estate loan with a $40.1 million amortized cost balance that was past due over 30 days as of June 30, 2025. Despite only being 30-59 days past due, the credit has exhibited certain weaknesses that warranted placing it on nonaccrual including a decline in occupancy of the underlying office building leading to reduced lease income. We have a lien on the underlying collateral which is Class A office space in a desirable location in northern Virginia. The borrower is actively seeking new tenants for vacant office space in the building. We assess expected credit losses on this loan individually and have a $7.5 million individual reserve against the loan, or 19% of its amortized cost balance, as of June 30, 2025.

Current wording

Nonperforming assets increased $70 million, or 418%, as of September 30, 2025 compared to December 31, 2024, which was driven by an increase in nonaccrual loans. The increase in nonaccrual was primarily due to the addition of one commercial real estate loans with a $40 million amortized cost balance that was past due over 30 days as of September 30, 2025 and one commercial relationship comprised of two loans totaling $24 million in amortized cost that was past due over 90 days as of September 30, 2025. Despite the commercial real estate loan only being 30-59 days past due, the credit has exhibited certain weaknesses that warranted placing it on nonaccrual, including a decline in occupancy of the underlying office building leading to reduced lease income. We have a lien on the underlying collateral which is

Previous wording

Our allowance for credit losses was $46.0 million as of June 30, 2025 compared to $53.7 million as of December 31, 2024. The $7.7 million decline was driven by $17.6 million in net charge-offs during the six months of 2025, primarily a result of Consumer Program loans, partially offset by $9.9 million of provision for expected credit losses that was driven by the $7.1 million of provision on the individually evaluated commercial real estate loan that was 30-59 days past due and proactively placed on nonaccrual during the six months ended June 30, 2025.

Current wording

Our allowance for credit losses was $45 million as of September 30, 2025, compared to $54 million as of December 31, 2024. The $8 million decrease was driven by $19 million in net charge-offs during the nine months ended September 30, 2025, primarily a result of Consumer Program loans, and less provision for credit losses. Our provision for credit losses decreased $8 million and $7 million during the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively, primarily related to improved performance in the Consumer Program portfolio driven by the significant decline in promotional loans that drove prior credit losses, a changing mix of the Bank’s loan portfolio to loan categories with lower reserve requirements, and the $53 million of commercial loans moved to LHFS as of September 30, 2025 due to our intent to sell the loans. Partially offsetting these declines was specific provisions for expected credit losses of $7 million on the individually evaluated commercial real estate loan that was 30-59 days past due and proactively placed on nonaccrual during the nine months ended September 30, 2025.

Previous wording

Net charge-offs were primarily related to the Consumer Program portfolio during the three and six months ended June 30, 2025 and 2024. During the three and six months ended June 30, 2025, we charged-off $5.1 million and $15.9 million, respectively, net of recoveries, in the Consumer Program portfolio. Comparatively, during the three and six months ended June 30, 2024, we charged-off $4.3 million and $8.7 million, respectively, net of recoveries. A majority of these charge-offs related to loans originated from the third quarter of 2022 through the first quarter of 2023 where we experienced significant credit weaknesses. When excluding the Consumer Program net charge-offs, we had net charge-offs of $1.2 million and $1.6 million during the three and six months ended June 30, 2025, respectively, and net charge-offs of $0.7 million and $1.6 million during the three and six months ended June 30, 2024, respectively.

Current wording

Net charge-offs were primarily related to the Consumer Program portfolio during the three and nine months ended September 30, 2025 and 2024. During the three and nine months ended September 30, 2025, we charged-off $1 million and $17 million, respectively, net of recoveries, in the Consumer Program portfolio. Comparatively, during the three and nine months ended September 30, 2024, we charged-off $8 million and $18 million, respectively, net of recoveries. A majority of these charge-offs related to loans originated from the third quarter of 2022 through the first quarter of 2023 where we experienced significant credit weaknesses. When excluding the Consumer Program net charge-offs, we had net charge-offs of $300 thousand and $2 million during the three and nine months ended September 30, 2025, respectively, and net charge-offs of $4 million and $6 million during the three and nine months ended September 30, 2024, respectively.

Previous wording

Excluding the provision for the commercial real estate loan described above, the provision for loans declined during the three and six months ended June 30, 2025 primarily due to a decline in provision on Consumer Program loans. We did not require a provision for the Consumer Program portfolio in the second quarter of 2025 and only $1.9 million during the six months ended June 30, 2025, because the earlier vintage promotional loans that have resulted in a majority of our previous credit losses have mostly converted to amortizing prior to the second quarter of 2025. We believe that any remaining loans in these older vintages along with newer vintage promotional loans that end their promotional period over the next three quarters have been considered in our reserving methodology based on our loss experience from 2024 to the first quarter of 2025 with the earlier vintage promotional loans. Specifically, our methodology was updated to consider promotional loan maturity and amount of first payment defaults with eventual charge-off, which was a key driver to charge-offs of these loans in 2024 and first quarter of 2025. We have also implemented loss mitigation efforts that include working with promotional loan borrowers both prior to end of the promotional period and once a borrower defaults so that we can maximize collectability. A combination of these factors along with the remaining balance of promotional loans of only $12.6 million resulted in our lower provisioning for the three and six months ending June 30, 2025 and lower ending allowance balance at June 30, 2025.

Current wording

Provision for the Consumer Program portfolio has subsided significantly since 2024 and was $274 thousand in the third quarter of 2025 and $2 million during the nine months ended September 30, 2025, because the earlier vintage promotional loans that have resulted in a majority of our previous credit losses have mostly converted to amortizing in 2024 or early 2025. We believe that any remaining loans in these older vintages, along with newer vintage promotional loans that end their promotional period over the next two quarters have been considered in our reserving methodology based on our loss experience from 2024 to the first quarter of 2025 with the earlier vintage promotional loans. Specifically, our methodology was updated to consider promotional loan maturity and amount of first payment defaults with eventual charge-off, which was a key driver to charge-offs of these loans in 2024 and the first quarter of 2025. We have also implemented loss mitigation efforts that include working with promotional loan borrowers both prior to the end of the promotional period and once a borrower defaults in order to maximize collectability. A combination of these factors, along with the remaining balance of promotional loans of only $7 million, resulted in our lower provisioning for the three and nine months ended September 30, 2025 and lower ending allowance balance at September 30, 2025.

Previous wording

As of June 30, 2025, the principal balance outstanding of Consumer Program loans was $124.1 million, excluding a $11.0 million discount as a result of our prior decision to market a majority of the portfolio for sale, which has since been moved back to HFI and will be run-off over time. These loans are accounted for like our other consumer loans and are not placed on nonaccrual because they are charged off when they become 90 days past due. The allowance on this portfolio plus the discount results in a reduction of the outstanding principal balance of $13.3 million or 10.7%. As of June 30, 2025, 93% of the outstanding principal balance was current, resulting in 150% coverage by the aggregate allowance and discount of the non-current principal balances.

Current wording

As of September 30, 2025, the principal balance outstanding of Consumer Program loans was $110 million, excluding a $9 million discount as a result of our prior decision to market a majority of the portfolio for sale, which has since been moved back to LHFI and will be run-off over time. These loans are accounted for like our other consumer loans and are not placed on nonaccrual because they are charged off when they become 90 days past due. The allowance on this portfolio plus the discount resulted in a reduction of the outstanding principal balance of $11 million, or 10%. As of September 30, 2025, 93% of the outstanding principal balance was current, resulting in 135% coverage by the aggregate allowance and discount of the non-current principal balances.

Previous wording

Available-for-sale and held-to-maturity investment securities totaled $250.9 million as of June 30, 2025, an increase of 2.3% from $245.4 million as of December 31, 2024, primarily due to changes in unrealized gains or losses on available-for-sale securities and purchases of available-for-sale securities, partially offset by paydowns, maturities, and calls of the investments over the past six months. We recognized no credit impairment charges related to credit losses on our held-to-maturity investment securities during the three and six months ended June 30, 2025.

Current wording

AFS and HTM investment securities totaled $243 million as of September 30, 2025, a decrease of 1% from $245 million as of December 31, 2024, primarily due to improvement in unrealized losses on AFS securities and paydowns, maturities, and calls of the AFS and HTM investments over the past nine months, partially offset by purchases of AFS securities during that time. We recognized no credit impairment charges related to credit losses on our HTM investment securities during the three and nine months ended September 30, 2025.

Previous wording

The following table sets forth a summary of the investment securities portfolio as of the dates indicated. Available-for-sale investment securities are reported at fair value, and held-to-maturity investment securities are reported at amortized cost ($ in thousands).

Current wording

The following table sets forth a summary of the investment securities portfolio as of the dates indicated. AFS investment securities are reported at fair value, and HTM investment securities are reported at amortized cost ($ in thousands).

Previous wording

Debt investment securities that we have the positive intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost. Investment securities classified as available-for-sale are those debt securities that may be sold in response to changes in interest rates, liquidity needs or other similar factors. 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. We intend to hold these securities until maturity or recovery of the value and do not anticipate realizing any losses on the investments.

Current wording

Debt investment securities that we have the positive intent and ability to hold to maturity are classified as HTM and are carried at amortized cost. Investment securities classified as AFS are those debt securities that may be sold in response to changes in interest rates, liquidity needs or other similar factors. Investment securities AFS 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 AFS 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. We intend to hold these securities until maturity or recovery of the value and do not anticipate realizing any losses on the investments.

Previous wording

Total deposits increased by $0.1 billion to $3.3 billion as of June 30, 2025 from $3.2 billion at December 31, 2024. The mix of deposits changed during the six months ended June 30, 2025, including an increase in lower-cost demand, NOW deposit balances and savings balances of $159.8 million, offset by a decline in money market and time deposit account balances. Our deposits are diversified in type and by underlying customers and lack significant concentrations to any type of customer (i.e. commercial, consumer, government) or industry. Deposits are net of excess amounts we sweep off balance sheet to manage liquidity. Deposits swept off balance sheet were $36.9 million as of June 30, 2025, compared to $137 million as of December 31, 2024. The decline since year end was driven by the growth in our loan portfolio, which required us to retain more deposits on balance sheet. The Company has no wholesale funding and is 100% funded with customer deposits at June 30, 2025.

Current wording

Our deposits are diversified in type and by underlying customers and lack significant concentrations to any type of customer (i.e. commercial, consumer, government) or industry. Deposits are net of excess amounts we sweep off balance sheet to manage liquidity. Deposits swept off our balance sheet were zero as of September 30, 2025, compared to $137 million as of December 31, 2024. The decline since year end was driven by the growth in our loan portfolio, which required us to retain more deposits on our balance sheet.