Primis Financial Corp
For the period ended Jun 30, 2024. Filed Dec 11, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Dec 11, 2024
FRST$14.48-1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-10-25.
0001558370-24-013697
Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-12-11.
0001558370-24-016160
Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 76 previous paragraphs and 93 current paragraphs.
47 unchanged; 24 reworded; 13 added; 5 removed; 0 previous and 9 current paragraphs rearranged.
Tables are not compared: 63 previous and 69 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
Three-Month Comparison. Net income available to common shareholders for the three months ended June 30, 2024 totaled $3.4 million, or $0.14 basic and diluted earnings per share, compared to a net loss of $2.0 million, or $(0.08) basic and diluted earnings per share for the three months ended June 30, 2023. The increase in net income during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was driven primarily by $1.5 million higher net interest income, $1.9 million higher noninterest income, $0.7 million lower noninterest expense, and $1.2 million less provision for credit losses on loans. Additional details of each of these will be discussed in the remaining sections of this Results of Operations discussion.
Current report
Six-Month Comparison. Net income available to common shareholders for the six months ended June 30, 2024 totaled $5.9 million, or $0.24 basic and diluted earnings per share, compared to $6.4 million, or $0.26 basic and diluted earnings per share for the six months ended June 30, 2023. The results between the two periods were relatively unchanged due to an increase in net interest income of $1.5 million and noncontrolling interests of $3.6 million offset by a decline of $5.4 million in noninterest income. Noncontrolling interests related to losses attributable to other stockholders of an entity that we are required to consolidated under U.S. GAAP in which we own approximately 19%. Details of the other key areas comprising our net income during the six months will be discussed in the remaining sections of this Results of Operations discussion.
Current report
Three-Month Comparison. Net interest income was $24.9 million for the three months ended June 30, 2024, compared to $23.3 million for the three months ended June 30, 2023. Our net interest margin for the three months ended June 30, 2024 was 2.72%, compared to 2.36% for the three months ended June 30, 2023. Margin increased by 36 basis points as a result of net interest income growing by $1.5 million while average interest earning assets decreased from the prior year. The growth in income was due to interest earning asset yield growth of 65 basis points outpacing interest bearing liability rate growth of 37 basis points. Higher lending rates fueled by an increase in benchmark rates year-over-year and the redeployment of excess cash into higher yielding assets drove interest income. Average interest bearing assets declined as a result of our decision on June 30, 2023 to begin sweeping excess cash off the balance sheet that had accumulated as a result of the increase in deposits from growth of our digital deposit platform during the three months ended June 30, 2023. The cost of interest bearing liabilities increased primarily due to benchmark interest rate increases in all deposits and higher average borrowings, partially offset by a decline in average interest-bearing deposits as a result of the aforementioned sweep activity since June 30, 2023.
Current report
Six-Month Comparison. Net interest income was $50.1 million for the six months ended June 30, 2024, compared to $48.7 million for the six months ended June 30, 2023. Our net interest margin for the six months ended June 30, 2024 was 2.78%, compared to 2.57% for the six months ended June 30, 2023. Margin increased by 21 basis points as a result of net interest income growing by $1.5 million while average interest earning assets decreased from the prior year. The growth in income was due to interest earning asset yield growth of 69 basis points outpacing interest bearing liability rate growth of 56 basis points. Higher lending rates fueled by an increase in benchmark rates year-over-year and the redeployment of excess cash into higher yielding assets drove interest income. Average interest bearing assets declined as a result of our decision to sweep excess cash off of the balance sheet as described in the three-month comparison. The cost of interest bearing liabilities increased primarily due to increases in rates on all interest-bearing liabilities as a result of benchmark interest rate increases, partially offset by a 4% decrease in average interest-bearing liabilities.
Current report
The provisions were driven in part by net charge-offs during the periods which were $10.3 million and $5.6 million during the six months ended June 30, 2024 and 2023, respectively. During six months ended June 30, 2024 and 2023, $8.7 million and $3.3 million, respectively, of net charge-offs were related to the Consumer Program loans. These charge-offs were primarily related to loans originated from the third quarter of 2022 to the first quarter of 2023. Excluding the Consumer Program loan charge-offs we had net charge-offs of $1.6 million and $2.3 million during the six months ended June 30, 2024 and 2023, respectively
Current report
Noninterest income increased 21% to $10.9 million for the three months ended June 30, 2024, compared to $8.9 million for the three months ended June 30, 2023. The increase in noninterest income was primarily related to $1.2 million of higher mortgage banking income and $0.6 million of higher income from bank-owned life insurance, partially offset by a decline in Consumer Program derivative income. The increase in Mortgage banking income was a result of the continued growth of the mortgage business in 2024 compared to 2023. During the three months ended June 30, 2024 we realized $3.7 million on sale gains compared to $2.8 million during the three months ended June 30, 2023 as a result of higher sales volumes. The increase in income on bank-owned life insurance was driven by one-time death benefit gains during the
Current report
quarter of $0.6 million. The Consumer Program derivative income declined primarily due to fair value loss adjustments on the derivative asset of $0.8 million during the three months ended June 30, 2024 compared to fair value gains of $0.6 million during the three months ended June 30, 2023. Offsetting the fair value loss adjustments during the three months ended June 30, 2024 and 2023 was $2.1 million and $1.2 million, respectively, of realized gains as a result of borrowers paying off their promotional period loans before the end of the promotional period which triggers payment from the derivative counterparty of the interest accrued during the promotional period along with other income due to us under the agreement.
Current report
Noninterest income decreased 20% to $21.2 million for the six months ended June 30, 2024, compared to $26.6 million for the six months ended June 30, 2023. The decrease in noninterest income was primarily driven by declines in Consumer Program derivative income, partially offset by $2.5 million of higher mortgage banking income and $0.7 million of higher income from bank-owned life insurance. The Consumer Program derivative income declined primarily due to fair value loss adjustments on the derivative asset of $0.9 million during the six months ended June 30, 2024 compared to fair value gains of $11.1 million during the six months ended June 30, 2023. The derivative asset and related gains are driven by anticipated cash payments due to us from the third-party when borrowers prepay their loans in a no-interest promotional period. During the first six months of 2023, the value of the derivative and related gains were driven by $52.3 million of loans with a no-interest promotional period originated during the first six months. Comparatively, during the first six months of 2024 a nominal amount of no-interest promotional loans was originated and the existing ones were beginning to exit their promo period. Offsetting the fair value loss adjustments during the six months ended June 30, 2024 and adding to the gains in 2023 was $4.2 million and $2.1 million, respectively, of realized gains as a result of borrowers paying off their promotional period loans before the end of the promotional period which triggers payment from the derivative counterparty of the interest accrued during the promotional period, along with other income due to us under the agreement.
Current report
The increase in Mortgage banking income was a result of the continued growth of the mortgage business in 2024 compared to 2023. During the six months ended June 30, 2024 we realized $6.5 million on sale gains compared to $5.1 million during the six months ended June 30, 2023 as a result of higher sales volumes. The increase in income on bank-owned life insurance was driven by one-time death benefit gains during the six months of $0.7 million.
Current report
Noninterest expenses declined 2% to $29.8 million during the three months ended June 30, 2024, compared to $30.4 million during the three months ended June 30, 2023. The decline was driven by higher fraud losses, FDIC insurance assessments and data processing costs in the prior year, partially offset by higher professional fees and salaries and benefits in 2024. The fraud losses during the three months ended June 30, 2023 was primarily related to a substantial increase in deposit account fraud, which was also seen across the industry during that time. The FDIC insurance costs were higher during the three months ended June 30, 2023 as a result of the higher deposit base driven by the growth of the digital platform compared to the same period in 2024, less growth in deposits, and excess deposit cash sweeps being utilized during the quarter. The data processing expenses were higher during the three months ended June 30, 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 did not re-occur in 2024. During the three months ended June 30, 2024 these declines in noninterest expenses were offset by higher professional fees related to the SEC pre-clearance and restatement process. The higher salaries and benefits expense was driven by growth in the mortgage line of business and Panacea division.
Current report
Noninterest expenses were essentially flat when comparing the six months ended June 30, 2024 to 2023. Decreases in expenses were driven by fraud losses (recoveries), miscellaneous lending expenses, and data processing and were offset by increases in professional fees and salaries and benefits. The decreases in noninterest expenses in fraud losses (recoveries) and data processing was primarily for the same reasons as discussed above for the three months ended June 30, 2024 compared to 2023. The decrease in miscellaneous lending expenses during the six months ended June 30, 2024 compared to 2023 was primarily related to a decline in the calculated credit loss reserve for unfunded commitments. The offsetting increases in noninterest expenses during the six months ended June 30, 2024 compared to 2023 in professional fees and salaries and benefits was primarily for the same reasons as discussed above for the three months ended June 30, 2024 compared to 2023.
Current report
On October 24, 2024, the Company entered into a purchase and assumption agreement with EverBank for sale of the Conpany’s LPF division. EverBank will acquire LPF from the Company, except for a subset of mostly fixed rate and rate-capped loans that will be retained by the Bank. All of the LPF operations, including its employees, will be assumed by EverBank as part of the transaction that is expected to result in a pre-tax gain of $4.5 million for the Company, net of advisory and legal fees, at the initial closing in the fourth quarter of 2024. EverBank will acquire approximately $370 million of loans from the division with the Bank providing interim servicing until the transition of the business at the final closing which is expected on January 31, 2025. Between the first and second closings, EverBank will purchase loans generated by the division in ordinary course at par. After the second closing, EverBank will service the Bank’s retained portfolio for the duration of the portfolio. As of June 30, 2024, the Company had not made the decision to sell LPF and had not identified specific loans that it might sell, therefore the amortized cost balance of the loans remains in “loans held for investment” on the condensed consolidated balance sheets in Item 1 in this Form 10-Q and where loans held for investment are disclosed in this MD&A.
Current report
Primis Bank’s capital position is consistent with being well-capitalized under the regulatory framework for PCA.
Removed paragraphs (5)
Previous report
Net income for the three months ended March 31, 2024 totaled $2.5 million, or $0.10 basic and diluted earnings per share, compared to net income of $8.4 million, or $0.34 basic and diluted earnings per share for the three months ended March 31, 2023. The 71% decrease in net income during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was driven primarily by a decrease in derivative gains of $9.4 million, an increase in credit loss provisions of $1.2 million, and personnel expenses of $0.7 million, partially offset by an increase in mortgage banking income of $1.3 million, increases in all other noninterest income categories of $2.0 million, and a decrease in income tax provision of $1.7 million.
Previous report
Net interest income remained steady at $25.3 million for the three months ended March 31, 2024 and 2023. Primis’ net interest margin for the three months ended March 31, 2024 was 2.84%, compared to 2.81% for the three months ended March 31, 2023. Total income on interest-earning assets was $50.3 million and $44.3 million for the three months ended March 31, 2024 and 2023, respectively. The yield on average interest-earning assets was 5.65% and 4.92% for the three months ended March 31, 2024 and 2023, respectively. Increase in yield on average interest-earnings assets was driven by a 71 basis point increase on loans in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The cost of average interest-bearing deposits increased 96 basis points to 3.28% for the three months ended March 31, 2024, compared to 2.32% for the three months ended March 31, 2023, as average interest-bearing liabilities grew approximately $0.2 billion and the rates paid on these liabilities grew significantly due to the consistent increases in benchmark interest rates during 2023. The increase was driven by higher costs in every interest-bearing deposit category with the largest driver being an increase in average savings deposits of $206.4 million with an average increase in cost of those deposits of 80 basis points. This increase was primarily a result of the growth of the digital deposit platform during 2023 and increase in benchmark interest rates. Average loans during the three months ended March 31, 2024 were $3.2 billion, compared to $3.0 billion during the three months ended March 31, 2023. The $0.2 billion increase in average loans combined with the 71 basis point increase in yield on the loan portfolio drove the $9.3 million increase in income on loans.
Previous report
Noninterest income decreased 42% to $10.3 million for the three months ended March 31, 2024, compared to $17.7 million for the three months ended March 31, 2023. The decrease in noninterest income was primarily related to a decline in the Consumer Program derivative income of $9.4 million during the three months ended March 31, 2024. This decline was driven by $10.5 million of fair value gains on the derivative in the prior year compared to a $0.1 million loss in the current year, partially offset by $1.0 million of additional income under the Consumer Program agreement in the current
Previous report
year compared to the prior year. The fair value gain in the prior year was driven primarily by higher expected cash flows related to a significant increase in promotional interest loans in the Consumer Program portfolio and higher credit losses in the same portfolio resulting in less expected payments owed by us to the counterparty, which did not re-occur in the current year. The decrease in noninterest income driven by the Consumer Program derivative was partially offset by $1.3 million of higher mortgage banking income due to growth in the mortgage banking business.
Previous report
Noninterest expenses were $27.5 million during the three months ended March 31, 2024, compared to $27.0 million during the three months ended March 31, 2023. The 2% increase in noninterest expenses was primarily related to a $0.7 million increase in employee compensation and benefits expense and $0.5 million increase in professional fees. The increase in salaries and benefits expense related to increased head count at the Bank that was driven by the Panacea Financial division and Primis Mortgage during the to the first quarter of 2024 compared to the first quarter of 2023. The increase in professional fees expense was driven by higher attorney costs and expenses related to our annual financial audit. The noninterest expense increase was partially offset by decreases in miscellaneous lending expenses and lower franchise tax expense. The miscellaneous lending expense decline was driven by lower collection expenses due to improving credit quality in the loan portfolio and also due to less servicing expenses on the Consumer Program portfolio. The franchise tax declined as a result of a lower assessment base in the current year compared to the prior year.
Reworded paragraphs (24)
Previous wording
Management’s discussion and analysis 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 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, 2023. Results of operations for the three months ended March 31, 2024 are not necessarily indicative of results that may be attained for any other period. The emphasis of this discussion will be on the three months ended March 31, 2024 compared to the three months ended March 31, 2023 for the consolidated statements of income and comprehensive income. For the condensed consolidated balance sheets, the emphasis of this discussion will be the balances as of March 31, 2024 compared to December 31, 2023. 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 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 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, 2023. Results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of results that may be attained for any other period. The emphasis of this discussion will be on the three and six months ended June 30, 2024 compared to the three months and six ended June 30, 2023 for the consolidated statements of income (loss) and comprehensive income (loss). For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 2024 compared to December 31, 2023. 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.
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, 2023, 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 contained in this Quarterly Report on Form 10-Q, as well as the Risk Factors previously disclosed in our Annual Report
Previous wording
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. As of March 31, 2024, 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 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. 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.
Current wording
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. As of June 30, 2024, 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 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. PFH is a consolidated subsidiary of Primis and owns the rights to the Panacea Financial brand and its intellectual property and partners with the
Previous wording
U.S. economic growth accelerated in the first quarter of 2024, with Real Gross Domestic Product growing by an annualized 1.6%. According to the U.S. Bureau of Labor and Statistics, the rate of unemployment was 3.8% in March 2024 and nonfarm payrolls grew at a robust pace. The Federal Reserve (the “Fed”) raised interest rates 500 bps from May of 2022 through July of 2023, a pace that has not been experienced in more than 40 years, and sits at a range of 5.25% to 5.50% as of March 31, 2024. Inflation, while beginning to show signs of moderating, remains higher than the Fed’s long term target rate of 2.0% and the Fed appears committed to maintaining high rates until inflation is back at their target rate. The Fed has indicated that future rate adjustments will be data-dependent.
Current wording
U.S. economic growth accelerated in the first half of 2024, with Real Gross Domestic Product growing by an annualized 1.6% in the first quarter and another 3% in the second quarter. According to the U.S. Bureau of Labor and Statistics, the rate of unemployment has increased from year end to 4.1% in June 2024. The Federal Reserve (the “Fed”) raised interest rates 500 bps from May of 2022 through 2023, a pace that has not been experienced in more than 40 years, and sits at a range of 5.25% to 5.50% as of June 30, 2024. Inflation, while beginning to show signs of moderating, remains higher than the Fed’s long term target rate of 2.0% and the Fed appears committed to maintaining high rates until inflation is back at their target rate. The Fed has indicated that future rate adjustments will be data-dependent.
Previous wording
This higher rate environment is continuing to put strong margin pressure on all banks, including Primis, as the cost of deposits has increased alongside the Fed rate increases while many loans in banks’ portfolios are fixed due to borrowers locking in historic low rates in the past few years. However, loan growth in the current environment will benefit from the higher rates and should assist in partially offsetting growth in deposit costs.
Current wording
This higher rate environment is continuing to put strong margin pressure on all banks, including Primis, as the cost of deposits has increased alongside the Fed rate increases while many loans in banks’ portfolios are fixed due to borrowers locking in historic low rates in the past few years prior to the rate hikes noted above. However, loan growth in the current environment will benefit from the higher rates and should assist in partially offsetting growth in deposit costs.
Previous wording
We had net charge-offs totaling $5.3 million and $4.0 million during the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, $4.3 million and $1.9 million, respectively, of net charge-offs were related to the Consumer Program loans. These charge-offs were primarily related to loans originated from the third quarter of 2022 to the first quarter of 2023. Excluding the Consumer Program loan charge-offs we had net charge-offs of $1.0 million and $2.1 million during the three months ended March 31, 2024 and 2023, respectively.
Current wording
The provisions were driven in part by net charge-offs during the periods which were $5.0 million and $1.6 million during the three months ended June 30, 2024 and 2023, respectively. During the three months ended June 30, 2024 and 2023, $4.3 million and $1.4 million, respectively, of net charge-offs were related to the Consumer Program loans. These charge-offs were primarily related to loans originated from the third quarter of 2022 to the first quarter of 2023. Excluding the Consumer Program loan charge-offs we had net charge-offs of $0.7 million and $0.3 million during the three months ended June 30, 2024 and 2023, respectively.
Previous wording
The Company recorded a provision for credit losses for the three months ended March 31, 2024 and 2023, of $6.5 million and $5.3 million, respectively. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $4.9 million and $4.7 million during the three months ended March 31, 2024 and 2023, respectively. Our provision for credit losses was driven by provisions related to the Consumer Program loan portfolio primarily centered around loans originated from the third quarter of 2022 through the first quarter of 2023. Excluding the provision amounts related to the Consumer Program portfolio, we recorded a provision for credit losses of $1.6 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
The Company recorded a provision for credit losses for both the six months ended June 30, 2024 and 2023, of $9.6 million. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $8.6 million and $6.1 million during the six months ended June 30, 2024 and 2023, respectively. Our provision for credit losses was driven by provisions related to the Consumer Program loan portfolio primarily centered around loans originated from the third quarter of 2022 through the first quarter of 2023. Excluding the provision amounts related to the Consumer Program portfolio, we recorded a provision for credit losses of $1.0 million and $3.6 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Total loans were $3.2 billion as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, 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. Our loan portfolio grew 0.1% in the first quarter of 2024 which included declines in real estate secured loans and increases in commercial and consumer loans. The consumer loan growth was primarily driven by the increase in life insurance premium finance loans followed by originations in the Consumer Program portfolio during the first quarter of 2024. The increase in commercial loans was driven primarily by commercial loan growth in our Panacea Financial division, which are diversified geographically and are spread across the nation.
Current wording
Gross loans were $3.3 billion and $3.2 billion as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024 and December 31, 2023, 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. Our loan portfolio grew 2.5% in the first six months of 2024 which was driven by growth in multi-family residential, non-owner occupied commercial real estate, and consumer loans. The majority of this growth was concentrated in loan growth in the Panacea and Life Premium Finance divisions that are diversified geographically and are spread across the nation. The overall loan portfolio growth was partially offset by a reduction in our construction and land development portfolio due to paydows of loans in that portfolio.
Previous wording
During the three months ended March 31, 2024, $5.6 million of loans paid off during the no interest promo period and $4.8 million of loans ended their no interest promo period and began to amortize.
Current wording
During the three months ended June 30, 2024, $3.7 million of loans paid off during the no interest promo period and $2.7 million of loans ended their no interest promo period and began to amortize. During the six months ended June 30, 2024, $9.3 million of loans paid off during the no interest promo period and $7.5 million of loans ended their no interest promo period and began to amortize.
Previous wording
Asset quality remained relatively stable during the first quarter of 2024 as noted in the table above. We will generally place a loan on nonaccrual status when it becomes 90 days past due. 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 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.
Current wording
Asset quality remained relatively stable during the first six months of 2024 with nonperforming assets up $2.4 million to $13.2 million primarily as a result of an increase in nonaccrual loans. The increase was driven by one commercial real estate loan, three commercial loans, and five consumer loans added to nonaccrual during the year. Two of the commercial loans have partial SBA guarantees and all but one of these loans is secured by collateral. We will generally place a loan on nonaccrual status when it becomes 90 days past due. 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 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.
Previous wording
We originate a portion of our consumer loans (the Consumer Program) using a third party that sources and subsequently manages the portfolio of loans. As of March 31, 2024, the principal balance outstanding was $205.1 million. These loans are accounted for similar to 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 of loans was $23.0 million as of March 31, 2024 and represented 43% of our total allowance for credit losses. Net charge-offs on this portfolio were $4.3 million and $1.9 million during the three months ended March 31, 2024 and 2023, respectively, and represented approximately 82% and 47%, respectively, of net charge-offs recorded during the periods.
Current wording
We originate a portion of our consumer loans (the Consumer Program) using a third party that sources and subsequently manages the portfolio of loans. As of June 30, 2024, the principal balance outstanding was $194.2 million. These loans are accounted for similar to 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 of loans was $22.3 million as of June 30, 2024 and represented 43% of our total allowance for credit losses. Net charge-offs on this portfolio were $4.3 million and $8.7 million during the three and six months ended June 30, 2024, respectively, and represented approximately 87% and 85%, respectively, of net charge-offs recorded during the periods.
Previous wording
The Company tightened its origination criteria in regard to this portfolio in April of 2023 and from that point forward we generally originated loans to consumer borrowers being managed by the third party with FICO scores over 720, whereas prior periods loan production included approximately 40% of loans to borrowers with weaker credit scores. This older vintage lower credit score portion of the portfolio has driven the uptick in related charge-offs during 2023 which continued into the first quarter of 2024 and necessitated the update of the Company’s expected loss rates on this portfolio for purposes of determining the allowance for credit losses as discussed in the Provision for Credit Losses section of this MD&A. The newer production represented approximately 29% of the portfolio at March 31, 2024 and is expected to improve the quality mix of the portfolio and result in lower realized net charge-offs in future periods.
Current wording
The Company tightened its origination criteria in regard to this portfolio in April of 2023 and from that point forward we generally originated loans to consumer borrowers being managed by the third party with FICO scores over 720, whereas prior periods loan production included approximately 40% of loans to borrowers with weaker credit scores. This older vintage, lower credit score portion of the portfolio has driven the uptick in related charge-offs during 2023 which continued into the first six months of 2024 and necessitated the update of the Company’s expected loss rates on this portfolio for purposes of determining the allowance for credit losses as discussed in our Annual Report on Form 10-K for 2023. This updated loss rate has been a driver in the increase of the allowance on the portfolio. The newer production represented
Previous wording
Investment securities, available-for-sale and held-to-maturity, totaled $241.6 million as of March 31, 2024, an increase of 0.6% from $240.1 million as of December 31, 2023, primarily due to purchases of available-for-sale securities, partially offset by paydowns, maturities, and calls of the investments over the past three months. We recognized an immaterial amount of credit impairment charges related to credit losses on our held-to-maturity investment securities during the three months ended March 31, 2023. No credit impairment charges were taken during the three months ended March 31, 2024.
Current wording
Investment securities, available-for-sale and held-to-maturity, totaled $243.5 million as of June 30, 2024, an increase of 1.4% from $240.1 million as of December 31, 2023, primarily due to 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, 2024 and an immaterial amount of credit impairment charges were taken during the three and six months ended June 30, 2023.
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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. 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.
Current wording
accounts and certificates of deposit. 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.
Previous wording
Total deposits were $3.3 billion as of March 31, 2024, a 1% increase from December 31, 2023. The increase in deposits from year end was primarily driven by growth in money market and savings accounts due to our competitive rates on these products. Savings accounts increased 5% from $783.8 million as of December 31, 2023 to $823.3 million as of March 31, 2024. Money market accounts also increased 5% from $794.5 million as of December 31, 2023 to $834.5 million as of March 31, 2024. Our deposits are diversified in type and by underlying customer and lack significant concentrations to any type of customer (i.e. commercial, consumer, government) or industry.
Current wording
Total deposits were $3.3 billion as of June 30, 2024, a 2% increase from December 31, 2023. The increase in deposits from year end was primarily driven by growth in money market and savings accounts due to our competitive rates on these products. Savings accounts increased 11% from $783.8 million as of December 31, 2023 to $866.3 million as of June 30, 2024. Money market accounts increased 5% from $794.5 million as of December 31, 2023 to $831.8 million as of June 30, 2024. Our deposits are diversified in type and by underlying customer and lack significant concentrations to any type of customer (i.e. commercial, consumer, government) or industry.
Previous wording
Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Total uninsured deposits as calculated per regulatory guidance were $1.1 billion, or 34% of total deposits, at March 31, 2024.
Current wording
Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Total uninsured deposits as calculated per regulatory guidance were $849.3 million, or 25% of total deposits, as of June 30, 2024.
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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. We are a member of the FHLB and are authorized to obtain advances from the FHLB from time to time as needed. The FHLB has a credit program for members with different maturities and interest rates, which may be fixed or variable. We are required to collateralize our borrowings from the FHLB with purchases of FHLB stock and other collateral acceptable to the FHLB. As of March 31, 2024 and December 31, 2023, total FHLB borrowings were $25.0 million and $30.0 million, respectively. The decrease in FHLB borrowings was a result of the deposit growth during the first quarter of 2024 that primarily funded our loan growth and supported other funding needs. As of March 31, 2024, we had $478.5 million of unused and available FHLB lines of credit.
Current wording
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. We are a member of the FHLB and are authorized to obtain advances from the FHLB from time to time as needed. The FHLB has a credit program for members with different maturities and interest rates, which may be fixed or variable. We are required to collateralize our borrowings from the FHLB with purchases of FHLB stock and other collateral acceptable to the FHLB. As of June 30, 2024 and December 31, 2023, total FHLB borrowings were $80.0 million and $30.0 million, respectively. As of June 30, 2024, we had $517.6 million of unused and available FHLB lines of credit.
Previous wording
Other borrowings can consist of 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. The balance in repo accounts at both March 31, 2024 and December 31, 2023 was $3.0 million.
Current wording
Other borrowings can consist of 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. The balance in repo accounts at both June 30, 2024 and December 31, 2023 was $3.3 million and $3.0 million, respectively.
Previous wording
We had secured borrowings of $21.3 million and $20.4 million as of March 31, 2024 and December 31, 2023, respectively, 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. These borrowings reflect the cash received for transferring the loans to the other financial institution and any unamortized sale premium and are secured by approximately the same amount of loans held for investment that are recorded in our balance sheet. We retained the servicing of the loans that were transferred and accordingly receive principal and interest from the borrower as contractually required and transfer the interest to the other financial institution net of our contractually agreed upon servicing fee. The loans transferred have an average maturity of approximately ten years which will be the time over which the principal balance of the loans in our balance sheet and secured borrowings will pay down, absent borrower prepayments. During the three months ended March 31, 2024, additional advances were made to borrowers under the loans previously transferred in 2023 and were accordingly treated as additional secured borrowings as of March 31, 2024. For additional information on secured borrowings refer to “Note 1 –Accounting Policies” in this Form 10-Q.
Current wording
We had secured borrowings of $21.1 million and $20.4 million as of June 30, 2024 and December 31, 2023, respectively, related to loan transfers to another financial institution during 2023 and the first six months of 2024 that did not meet the criteria to be treated as a sale under relevant accounting guidance. These borrowings reflect the cash received for transferring the loans to the other financial institution and any unamortized sale premium and are secured by approximately the same amount of loans held for investment that are recorded in our balance sheet. We retained the servicing of the loans that were transferred and accordingly receive principal and interest from the borrower as contractually required and transfer the interest to the other financial institution net of our contractually agreed upon servicing fee. The loans transferred have an average maturity of approximately ten years which will be the time over which the principal balance of the loans in our balance sheet and secured borrowings will pay down, absent borrower prepayments. During the three and six months ended June 30, 2024, additional advances were made to borrowers under the loans previously transferred in 2023 and were accordingly treated as additional secured borrowings as of June 30, 2024. For additional information on secured borrowings refer to “Note 7 –Debt and Other Borrowings” in this Form 10-Q.
Previous wording
For information about junior subordinated debt and senior subordinated notes and their anticipated principal repayments refer to “Note 7 –Debt and Other Borrowings” in this Form 10-Q.
Current wording
For information about junior subordinated debt and senior subordinated notes and their anticipated principal repayments refer to “Note 7 –Debt and Other Borrowings.”
Previous wording
The objective of our liquidity management is to ensure the ability to meet our financial obligations. These obligations include the payment of deposits on demand or at maturity, the repayment of borrowings at maturity and the ability to fund commitments and other new business opportunities. We obtain funding from a variety of sources, including customer deposit accounts, customer certificates of deposit and payments on our loans and investments. 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. 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 “Note 7 –Debt and Other Borrowings” and “Note 9 – Commitments and Contingencies” in this Form 10-Q.
Current wording
The objective of our liquidity management is to ensure the ability to meet our financial obligations. These obligations include the payment of deposits on demand or at maturity, the repayment of borrowings at maturity and the ability to fund commitments and other new business opportunities. We obtain funding from a variety of sources, including customer deposit accounts, customer certificates of deposit and payments on our loans and investments. 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. 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 “Note 7 –Debt and Other Borrowings, and Note 9 – Commitments and Contingencies.”
Previous wording
Quantitative measures established by regulation to ensure capital adequacy require us 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 March 31, 2024, that Primis meets all capital adequacy requirements to which it is subject.
Current wording
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 June 30, 2024, that Primis meets all capital adequacy requirements to which it is subject.
Previous wording
Primis Financial Corp. and Primis Bank remain well-capitalized under Basel III capital requirements. Primis Bank had a capital conservation buffer of 4.35% as of March 31, 2024, which exceeded the 2.50% minimum requirement below which the regulators may impose limits on distributions.
Current wording
Primis Financial Corp. and Primis Bank remain well-capitalized under Basel III capital requirements. Primis Bank had a capital conservation buffer of 4.30% as of June 30, 2024, which exceeded the 2.50% minimum requirement below which the regulators may impose limits on distributions.
Previous wording
The critical accounting policies are discussed in MD&A in our Annual Report on Form 10-K for the year ended December 31, 2023. Significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in “Note 1 - Organization and Significant Accounting Policies” in the Form 10-K for the year ended December 31, 2023. Disclosures regarding changes in our significant accounting policies since year end and the effects of new accounting pronouncements are included in “Note 1 - Accounting Policies” in this Form 10-Q. There have been no changes to the significant accounting policies during the first three months of 2024.
Current wording
The critical accounting policies are discussed in MD&A in our Annual Report on Form 10-K for the year ended December 31, 2023. Significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in “Note 1 - Organization and Significant Accounting Policies” in the Form 10-K for the year ended December 31, 2023. Disclosures regarding changes in our significant accounting policies since year end and the effects of new accounting pronouncements are included in “Note 1 - Accounting Policies” in this Form 10-Q. There have been no changes to the significant accounting policies during the first six months of 2024.
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on Form 10-K for the year ended December 31, 2023, 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:
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Bank to offer a suite of financial products and services for doctors, their practices, and ultimately the broader healthcare industry.
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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:
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The Company recorded a provision for credit losses for the three months ended June 30, 2024 and 2023, of $3.1 million and $4.4 million, respectively. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $3.6 million and $1.3 million during the three months ended June 30, 2024 and 2023,
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respectively. Our provision for credit losses was driven by provisions related to the Consumer Program loan portfolio primarily centered around loans originated from the third quarter of 2022 through the first quarter of 2023. Excluding the provision amounts related to the Consumer Program portfolio, we recorded a benefit for credit losses of $0.5 million and a provision of $3.1 million for the three months ended June 30, 2024 and 2023, respectively.
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The following table presents the major categories of noninterest income for the six months ended June 30, 2024 and 2023:
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The following table presents the major categories of noninterest expense for the six months ended June 30, 2024 and 2023:
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approximately 33% of the portfolio as of June 30, 2024 and is expected to improve the quality mix of the portfolio and result in lower realized net charge-offs and provisions for credit losses in future periods.
Current report — wording carried from elsewhere
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