Primis Financial Corp
For the period ended Sep 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.
Sep 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 2024-09-30; filed 2024-12-11.
0001558370-24-016161
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 99 current paragraphs.
47 unchanged; 24 reworded; 21 added; 5 removed; 0 previous and 7 current paragraphs rearranged.
Tables are not compared: 63 previous and 71 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 (21)
Current report
Three-Month Comparison. Net income available to common shareholders for the three months ended September 30, 2024 totaled $1.2 million, or $0.05 basic and diluted earnings per share, compared to a net loss of $6.0 million, or $0.24 basic and diluted earnings per share for the three months ended September 30, 2023. The increase in net income during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was driven primarily by $3.7 million higher net interest income, $6.0 million lower noninterest expense, partially offset by $0.4 million lower noninterest income, and $5.9 million higher provision for credit losses on loans. The net interest income increase was
Current report
driven by higher average interest earning balances and higher yields on those balances and the decrease in noninterest expenses was driven by the goodwill impairment charge in 2023 compared to the current year. Additional details of the changes in net income will be discussed in the remaining sections of this Results of Operations section.
Current report
Nine-Month Comparison. Net income available to common shareholders for the nine months ended September 30, 2024 totaled $7.1 million, or $0.29 basic and diluted earnings per share, compared to $0.3 million, or $0.01 basic and diluted earnings per share for the nine months ended September 30, 2023. The results reflect an increase in net interest income of $5.2 million, a decrease in noninterest expense of $6.1 million and noncontrolling interests of $5.6 million offset by a decline of $5.9 million in noninterest income and higher provision of $5.2 million. Net interest margin increases were driven by higher average loan balances and yields and the increase in noncontrolling interests were 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%. Noninterest income declines were driven by lower Consumer Program derivative income and noninterest expense decreases also included the goodwill impairment charge in the prior year compared to the current year as discussed above for the three months ended. Additional details of the changes in net income will be discussed in the remaining sections of this Results of Operations section.
Current report
Three-Month Comparison. Net interest income was $28.0 million for the three months ended September 30, 2024, compared to $24.3 million for the three months ended September 30, 2023. Our net interest margin for the three months ended September 30, 2024 was 2.97%, compared to 2.70% for the three months ended September 30, 2023. Margin increased by 27 basis points as a result of growth in yield on interest earning assets outpacing the growth in rates paid on interest bearing liabilities by 24 basis points, partially offset by growth in average interest earning assets. Net interest income grew $3.7 million, driven by $9.1 million in interest income growth primarily as a result of loan growth at higher rates compared to the prior year. The higher lending rates were fueled by an increase in benchmark rates since 2022 resulting in new loans at higher rates replacing maturing and paid off loans at lower rates. The cost of interest bearing liabilities increased primarily due to benchmark interest rate increases in all deposits and growth of $78 million in average deposits and growth of $119 million in average borrowings that were utilized for funding of the average loan growth that outpaced deposit growth in the quarter.
Current report
Nine-Month Comparison. Net interest income was $78.1 million for the nine months ended September 30, 2024, compared to $73.0 million for the nine months ended September 30, 2023. Our net interest margin for the nine months ended September 30, 2024 was 2.85%, compared to 2.61% for the nine months ended September 30, 2023. Our interest margin increased by 24 basis points as a result of yields on interest earning assets outpacing rates on interest bearing liabilities by 18 basis points and less average assets during the year compared to the same period last year. This resulted in a $5.2 million increase in net interest income driven by a $24.3 million increase in interest income on loans in the current year compared to last year, partially offset by $11.6 million more interest costs on deposits and $9.7 million less income on other earning assets. Higher lending rates fueled by an increase in benchmark rates and the redeployment of excess cash into higher yielding assets drove interest income. 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 1% decrease in average interest-bearing liabilities. The interest on other earning assets declined alongside a decline in average other interest bearing assets as a result of our decision to sweep excess cash off balance sheet beginning at the end of second quarter of 2023. We had raised approximately $1.0 billion in interest bearing deposits in our digital platform during
Current report
the first six months of 2023 and that amount earned interest for six of the nine months ended September 30, 2023, but most of that cash was swept off of our balance sheet during the nine months ended September 30, 2024 or redeployed to other earning assets such as investment securities and loans.
Current report
The Company recorded a provision for credit losses for the three months ended September 30, 2024 and 2023, of $7.5 million and $1.6 million, respectively. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $4.0 million and $2.1 million during the three months ended September 30, 2024 and 2023, respectively. Our provision for credit losses during the three months ended September 30, 2024 was driven by provisions related to two loans evaluated individually for credit losses during the quarter and resulting in $3.1 million of specific reserves. We also had $4.0 million of provisions related to the Consumer Program loan portfolio calculated as part of our normal reserve process primarily due to credit losses on loans originated from the third quarter of 2022 through the first quarter of 2023 that have continued to show credit weaknesses.
Current report
The provisions were driven in part by net charge-offs during the periods which were $18.2 million and $9.9 million during the nine months ended September 30, 2024 and 2023, respectively. During nine months ended September 30, 2024 and 2023, $15.4 million and $5.4 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 as previously discussed. Excluding the Consumer Program loan charge-offs we had net charge-offs of $2.8 million and $4.5 million during the nine months ended September 30, 2024 and 2023, respectively.
Current report
Noninterest income decreased 5% to $9.3 million for the three months ended September 30, 2024, compared to $9.7 million for the three months ended September 30, 2023. The decrease in noninterest income was primarily related to $2.0 million of lower Consumer Program derivative income and $0.4 million of lower income from bank-owned life insurance, partially offset by an increase in mortgage banking 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 September 30, 2024 we realized $5.5 million on sale gains compared to $1.9 million during the three months ended September 30, 2023 as a result of higher sales volumes. The gains were partially offset by fair value losses on mortgage derivative assets and various loan sale costs driven by higher volumes. The decrease in income on bank-owned life insurance was driven by one-time death benefit gains during the prior year quarter of $0.4 million. The Consumer Program derivative income declined primarily due to fair value loss adjustments on the derivative asset of $2.8 million during the three months ended September 30, 2024 compared to fair value gains of $9 thousand during the three months ended September 30, 2023. Offsetting the fair value loss adjustments during the three months ended September 30, 2024 and 2023 was $2.9 million and $2.0 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 16% to $30.4 million for the nine months ended September 30, 2024, compared to $36.3 million for the nine months ended September 30, 2023. The decrease in noninterest income was primarily driven by declines in Consumer Program derivative income, partially offset by $4.3 million of higher mortgage banking income. The Consumer Program derivative income declined primarily due to fair value loss adjustments on the derivative asset of $3.7 million during the nine months ended September 30, 2024 compared to fair value gains of $11.1 million during the nine months ended September 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 nine months of 2023, the value of the derivative and related gains were primarily driven by $62.1 million of loans with a no-
Current report
interest promotional period originated in the last quarter of 2022 and the first nine months of 2023. Comparatively, during the nine 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 nine months ended September 30, 2024 and adding to the gains in 2023 was $7.1 million and $4.1 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 nine months ended September 30, 2024 we realized $12.0 million on sale gains compared to $7.0 million during the nine months ended September 30, 2023 as a result of higher sales volumes. The gains on sale were partially offset with higher sales costs due to the higher volume. The decrease in noninterest income was also partially offset by an increase in income on account maintenance and deposit fees due to higher volume of accounts and transactions in 2024 as a result of the deposit growth since 2023.
Current report
Noninterest expenses declined 16% to $31.0 million during the three months ended September 30, 2024, compared to $36.9 million during the three months ended September 30, 2023. The decline was primarily driven by the goodwill impairment of $11.2 million recognized during the three months ended September 30, 2023. The decrease was partially offset by higher salaries and benefits expenses, professional fees, and miscellaneous lending expenses in 2024. The higher salaries and benefits expense was driven by growth in the mortgage line of business and the Panacea division. The increase in professional fees was related to the SEC pre-clearance and restatement process. The higher miscellaneous lending expenses was driven by increased servicing costs paid to the third-party that services the Consumer Program loan portfolio for us.
Current report
Noninterest expenses declined 6% to $88.3 million during the three months ended September 30, 2024, compared to $94.3 million during the three months ended September 30, 2023. Decreases in expenses were seen across almost all expense categories but the decline was primarily driven by goodwill impairment and fraud losses (recoveries). Our decline in expenses was partially offset by increases in salaries and benefits and professional fees. The fraud losses during the nine months ended September 30, 2023 was primarily related to a substantial increase in deposit account fraud, which was also seen across the industry during that time. Other notable declines in expenses were seen in occupancy expenses, Virginia franchise tax, and FDIC insurance costs. The latter two categories were a result of a decline in average deposits and capital from the prior year. The occupancy expense decline is primarily related to the nine months of 2024 not including branch costs related to our branch restructuring in fourth quarter of 2023, while the nine months ended September 30, 2023 included these costs. The partially offsetting expense increases during the nine months ended September 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 September 30, 2024 compared to 2023.
Current report
Gross loans held for investment were $3.0 billion and $3.2 billion as of September 30, 2024 and December 31, 2023, respectively. As disclosed in “Note 1 - Accounting Policies” in this Form 10-Q, we entered into an agreement to sell approximately $370 million of LPF loans and the amount of those loans that were already funded as of September 30, 2024 have been reclassified to “loans held for sale, at lower of cost or market” as of September 30, 2024, which is the entire increase in that balance sheet category since year end and represents a large portion of the decrease in “net loans” since year end.
Current report
FHLB advances of $165.0 million with excess liquidity from the LPF loan sale. This increased our available FHLB lines of credit by a similar amount following repayment.
Current report
Primis Bank’s capital position is consistent with being well-capitalized under the regulatory framework for PCA.
Current report
have been no changes to the significant accounting policies during the first nine months of 2024. Notwithstanding, we are providing an update to the Goodwill discussion from our Form 10-K to describe the results of our annual impairment testing performed during the quarter.
Current report
Goodwill
Current report
As discussed in our Form 10-K for the year ended December 31, 2023, we are required to test goodwill for impairment at least annually and that test is performed as of September 30 of each year. Our goodwill is allocated to our two reporting units, Primis Bank and Primis Mortgage, and as of September 30, 2024, $90.7 million of goodwill is allocated to the Primis Bank reporting unit and $2.7 million is allocated to the Primis Mortgage reporting unit. As of September 30, 2024, we elected to forgo a qualitative assessment allowed under U.S. GAAP and performed a quantitative assessment to test goodwill for impairment. As part of our impairment assessment, the fair value of each reporting unit was estimated using a combination of a market and income approach. The income approach is a valuation technique under which we estimate future cash flows using the financial forecast from the perspective of an unrelated market participant and a terminal value was then applied to the projected cash flow stream. Future estimated cash flows were discounted to their present value to calculate the estimated fair value. The market valuation approach evaluated transactions of comparable banks and considered market pricing ratios of public bank peers. As of September 30, 2024, the estimated fair value significantly exceeded the carrying value of the Primis Mortgage reporting unit and no goodwill impairment was required.
Current report
As of September 30, 2024, the estimated fair value of the Primis Bank reporting unit was 111% of the carrying value of the reporting unit, and no goodwill impairment was required. Fair value determinations utilized in the quantitative goodwill impairment test for the Primis Bank reporting unit required considerable judgment and is sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of thereporting unit requires us to make assumptions and estimates regarding future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates at September 30 included estimated future annual interest income and interest expense, lending and deposit interest rates, Fed borrowing rates, discount rates, growth rates of the bank and its loan and deposit portfolio, credit losses on the loan portfolio, and other market factors. We also make assumptions in certain testing methodologies about the composition of our peers and market acquisition transactions related to banks that we believe are similar to us. If current expectations of future growth rates, interest rates, provision for credit losses, and margins are not met, if market factors outside of our control, such as discount rates, Fed borrowing rates, or inflation, change, or if management’s expectations or plans otherwise change, including updates to long-term operating plans, then the fair value of the reporting unit may decline below its carrying value and result in goodwill impairment in the future.
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 nine months ended September 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 nine months ended September 30, 2024 compared to the three and nine months ended September 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 September 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
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
Reserve (the “Fed”) raised interest rates 500 bps from May of 2022 through July 2023, a pace that has not been experienced in more than 40 years. However, during the third quarter of 2024 the Fed lowered interest rates by 50 basis points, easing monetary policy for the first time in four years and bringing the target range to 4.75% to 5.00% as of September 30, 2024. Inflation, while beginning to show signs of moderating, fell to 2.4% in September 2024 but still 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 continue to 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
Despite the current quarter rate cut, we continue to operate in a high rate environment that is continuing to put strong margin pressure on us and all banks. The cost of deposits has increased alongside the Fed rate increases since 2022 and will continue to remain above historical low loan rates that borrowers locked-in during the years prior to the rate hikes noted above. Loan growth in the current rate environment will benefit from the continued higher rates and should assist in partially offsetting growth in deposit costs that have accumulated. Margin pressures for us, and the industry as a whole, is likely to remain until multiple future rate cuts occur.
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 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
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 $8.0 million and $4.3 million during the three months ended September 30, 2024 and 2023, respectively. During the three months ended September 30, 2024 and 2023, $6.7 million and $2.1 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 $1.3 million and $2.2 million during the three months ended September 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 the nine months ended September 30, 2024 and 2023, of $17.1 million and $11.2 million, respectively. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $12.6 million and $8.2 million during the nine months ended September 30, 2024 and 2023, respectively. Our provision for credit losses related to the Consumer Program loan portfolio were primarily driven by charge-offs centered around loans originated from the third quarter of 2022 through the first quarter of 2023 as previously noted. Excluding the provision amounts related to the Consumer Program portfolio, we recorded a provision for credit losses of $4.5 million and $3.1 million for the nine months ended September 30, 2024 and 2023, respectively. The higher provision in the nine months ended September 30, 2024 was driven by the previously mentioned specific reserves on two loans during the quarter.
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
As of September 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 gross loans held for investment portfolio declined 8% from year end, which was driven by the reclassified LPF loans to held for sale at September 30. When considering the LPF held for sale loans, our gross loans grew 4% in 2024. Our decline in gross loans held for investment as of September 30 was driven by decline in Consumer and Commercial loans driven by the LPF transfer and declines in the construction and land development portfolio due to paydows of loans in that portfolio. The declines were partially offset by growth in multi-family residential and non-owner and owner occupied commercial real estate. The majority of this growth was concentrated in loan growth in the Panacea division with loans that are diversified geographically and are spread across the nation.
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 September 30, 2024, $13.6 million of loans paid off during the no interest promo period and $11.7 million of loans ended their no interest promo period and began to amortize. During the nine months ended September 30, 2024, $22.9 million of loans paid off during the no interest promo period and $19.2 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
Nonperforming assets were up during the nine months of 2024, driven by an increase in nonaccrual loans of $5.3 million to $14.4 million. The increase was driven primarily by two commercial real estate loans totalling $4.2 million, one commercial loan totalling $0.7 million, one 1-4 family junior lien secured loan totalling $0.2 million and one home equity line of credit loan totalling $0.2 million added to nonaccrual during the year. All of these additions during the year are secured by collateral and portions of the balances that remain from year end have partial SBA guarantees. Despite the increase in nonaccrual loans, our levels of nonaccruals to total loans and nonaccruals to total assets is still under 0.50% for both. We will generally place a loan on nonaccrual status when it becomes 90 days past due, with the exception of most consumer loans which are charged off at 120 days past due and Consumer Program loans which are charged off once they reach 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 September 30, 2024, the principal balance outstanding was $179.7 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 $19.5 million as of September 30, 2024 and represented 44% of our total allowance for credit losses. Net charge-offs on this portfolio were $4.0 million and $12.6 million during the three and nine months ended September 30, 2024, respectively, and represented approximately 50% and 69%, 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 approximately 38% of the portfolio as of September 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.
Previous wording
Debt investment securities that we have the positive intent and ability to hold to maturity are classified as held-to-maturity and 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 held-to-maturity and 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
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 $252.3 million as of September 30, 2024, an increase of 5.1% 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 nine months. We recognized no credit impairment charges related to credit losses on our held-to-maturity investment securities during the three and nine months ended September 30, 2024 and an immaterial amount of credit impairment charges were taken during the three and nine months ended September 30, 2023.
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 September 30, 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 12% from $783.8 million as of December 31, 2023 to $873.8 million as of September 30, 2024. Money market accounts increased 5% from $794.5 million as of December 31, 2023 to $835.1 million as of September 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 $820.4 million, or 25% of total deposits, as of September 30, 2024.
Previous 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 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 September 30, 2024 and December 31, 2023, total FHLB borrowings were $165.0 million and $30.0 million, respectively. As of September 30, 2024, we had $300.9 million of unused and available FHLB lines of credit. Subsequent to September 30, 2024, we repaid all of our outstanding
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 September 30, 2024 and December 31, 2023 was $3.7 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 $17.5 million and $20.4 million as of September 30, 2024 and December 31, 2023, respectively, related to loan transfers to other financial institutions during 2023 and the first nine 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 nine months ended September 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 September 30, 2024. Additionally, during the three and nine months ended September 30, 2024, we voluntarily repurchased $3.5 million of the loans included in the original failed loan sales from one of the other institutions which drove the decline in our balance of secured borrowers and the loans held for investment collateralizing secured borrowings. 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
Capital management consists of providing equity to support both current and future operations. Primis Financial Corp. and its subsidiary, Primis Bank, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (“PCA”), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. As of March 31, 2024 and December 31, 2023, the most recent regulatory notifications categorized the Bank as well capitalized under regulatory framework for PCA. Federal banking agencies do not provide a similar well capitalized threshold for bank holding companies.
Current wording
discretionary - actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (“PCA”), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. As of September 30, 2024 and December 31, 2023, the most recent regulatory notifications categorized the Bank as well capitalized under regulatory framework for PCA. Federal banking agencies do not provide a similar well capitalized threshold for bank holding companies.
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 September 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 3.63% as of September 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
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
U.S. economic growth accelerated in 2024, with Real Gross Domestic Product growing by an annualized 1.6% in the first quarter, 3% in the second quarter and another 2.8% in the third quarter. According to the U.S. Bureau of Labor and Statistics, the rate of unemployment has increased from 3.7% at 2023 year end to 4.1% in in September 2024. The Federal
Current report — wording carried from elsewhere
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:
Current report — wording carried from elsewhere
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 report — wording carried from elsewhere
The following table presents the major categories of noninterest income for the nine months ended September 30, 2024 and 2023:
Current report — wording carried from elsewhere
The following table presents the major categories of noninterest expense for the nine months ended September 30, 2024 and 2023:
Current report — wording carried from elsewhere
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 report — wording carried from elsewhere
Capital management consists of providing equity to support both current and future operations. Primis Financial Corp. and its subsidiary, Primis Bank, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional