Primis Financial Corp.
For the period ended Dec 31, 2024. Filed Apr 29, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Apr 29, 2025
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-K
Period ended 2023-12-31; filed 2024-10-15.
0001558370-24-013277
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-04-29.
0001558370-25-005861
Item 7. 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 140 previous paragraphs and 149 current paragraphs.
73 unchanged; 50 reworded; 22 added; 11 removed; 6 previous and 4 current paragraphs rearranged.
Tables are not compared: 57 previous and 60 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 (22)
Current report
Because of the decision made subsequent to September 30, 2024 to sell a majority of the Consumer Program loan portfolio, we performed a qualitative assessment as of December 31, 2024 to determine if this change to the business resulted in a change in the estimated fair value of the Primis Bank reporting unit. Based on our qualitative assessment, which included updating discounted cash flow analyses to consider the projected run-off of income from the Consumer Program, Primis determined that it was not more likely than not that the fair value of the Primis Bank reporting unit was less than its carrying value as of December 31, 2024.
Current report
During 2024, the TPOS requested the ability to finance its requirement to reimburse us for interest when a promotional loan pays off prior to the end of the promotional period as a result of the large volume of loans expected to end their promotional period in the second half of 2024 and first half of 2025. We agreed to provide financing in the form of a collateral secured term loan (the “TPOS Loan”) that was underwritten in accordance with our customary lending and
Current report
underwriting policies. The loan allows for a maximum borrowing capacity of $10 million, but any borrowing above $5 million requires the TPOS to provide documentation of additional capital infusion since the original loan underwriting and approval. The TPOS Loan requires quarterly interest payments that may be capitalized to the principal of the note and the principal is due at the note maturity date of September 30, 2030. As of December 31, 2024, the balance of the note is $2.7 million.
Current report
In the fourth quarter of 2024, we made the decision to cease originating new loans under the Consumer Program effective January 31, 2025 and moved a large portion of the portfolio, with an amortized cost of $133.2 million, to loans held for sale and marked them to fair market value. The adjustment to fair market value resulted in additional provision expense and charge-offs of $20.0 million in the fourth quarter of 2024. The remaining portion of the portfolio still classified as held for investment of approximately $38.9 million as of December 31, 2024 has an associated allowance for credit losses of $16.3 million and is expected to run off substantially in 2025.
Current report
As noted, we moved a large portion of the Consumer Portfolio to held for sale as of December 31, 2024, which included a $20 million adjustment to reflect it at the lower of cost or market. The charge was taken against our allowance for credit losses in accordance with applicable regulatory guidance. The basis for determining the market price of our portfolio of loans to be held for sale included third-party bid pricing on the portfolio as a result of a marketing effort in December 2024. We received a range of bid prices based on limited diligence having been performed as of December 31, 2024, by potential third-party buyers. Following the marketing and bid process, we entered into a non-binding agreement with one of the third-parties to agree to sell the portfolio at their bid price that was contingent on the party performing additional diligence. A sales contract with final terms and pricing if the party decides to purchase the loans would be prepared and executed after completion of diligence. We determined the fair value for the portfolio as of December 31, 2024 based on a combination of the purchase price indicated in the non-binding agreement and the other bids received in the marketing process. The non-binding price was not relied upon exclusively, although weighted more heavily in our analysis, because it was non-binding and the ultimate price the party is willing to pay could change after their diligence so we considered the other bids received in our analysis to form a more comprehensive determination of fair value on the portfolio.
Current report
Income Statement
Current report
Balance Sheet
Current report
Net Loss
Current report
ended December 31, 2023. The results reflect an increase in net interest income of $5.5 million and noncontrolling interests of $6.2 million, offset by higher credit loss provisions of $18.1 million, a decline of $2.1 million in noninterest income and an increase in noninterest expense of $3.0 million. Net interest income increases were driven by higher yields on loans outpacing higher costs on deposits 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, partially offset by higher mortgage banking income and a gain on sale of a majority of our LPF loan portfolio. Noninterest expense increases were related primarily to higher salaries and benefits and professional fees compared to 2023, offset by no goodwill impairment in the current year. Additional details of the net loss will be discussed in the remaining sections of this Results of Operations section.
Current report
Net interest income was $104.2 million for the year ended December 31, 2024, compared to $98.7 million for the year ended December 31, 2023. Our net interest margin for the year ended December 31, 2024 was 2.86%, compared to 2.68% for the year ended December 31, 2023. Our interest margin increased by 18 basis points as a result of yields on interest earning assets outpacing rates on interest bearing liabilities by 13 basis points along with average earning assets and liabilities both decreasing. This resulted in a $5.5 million increase in net interest income driven by a $27.2 million increase in interest income on loans in the current year compared to last year, partially offset by $12.0 million more interest costs on deposits and $9.6 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. Increase in loan interest income was driven by consumer, commercial, and commercial real estate loan 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 rates being higher during 2024 when compared to 2023, partially offset by a slight decrease in average interest-bearing liabilities during 2024. 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 the first six months of 2023 and that amount earned interest for half of the year in 2023, but a significant portion of that cash was swept off of our balance sheet during the second half of 2023. During the year ended December 31, 2024, that cash was redeployed to other earning assets such as investment securities and loans.
Current report
The $6.3 million increase in mortgage banking income partially offset the total decline in noninterest income and was a result of the continued growth of the mortgage business in 2024 compared to 2023. During the year ended December 31, 2024 our mortgage banking income was driven by $15.8 million of sale gains compared to $8.0 million during the year ended December 31, 2023 as a result of higher sales volumes. The increase in gains on sale were partially offset with higher sales costs due to the higher volume.
Current report
Also partially offsetting the decrease in noninterest income was the pre-tax gain of $4.7 million, net of broker fees, from the sale of a majority of the LPF lending division loans in the fourth quarter of 2024.
Current report
Noninterest expenses were $125.6 million during the year ended December 31, 2024, compared to $122.6 million during the year ended December 31, 2023. The 2.5% increase in noninterest expenses was primarily attributable to higher salaries and benefits expense, professional fees, data processing costs, and other operating expenses in 2024, partially offset by the goodwill impairment and higher fraud losses recognized during the year ended December 31, 2023. The higher salaries and benefits expense was driven by growth in the mortgage line of business and higher overall benefits costs for our entire workforce. The increase in professional fees was related to expenses in connection with the SEC pre-clearance and restatement process. Data processing expenses increased primarily as a result of higher transaction volume. The other operating expenses increased primarily due to PFH operating expenses as a result of a full year of PFH operations compared to having just commenced operations at the end of 2023. These expenses are included as a result of the requirement to consolidate PFH under U.S. GAAP accounting rules, but the portion of these losses attributable to other stockholders is added back to our results to arrive at net income to Primis common shareholders.
Current report
The increase in noninterest expenses was partially offset by $11.2 million of goodwill impairment recognized in the third quarter of 2023. We had fraud losses during the year ended December 31, 2023 primarily related to a substantial increase in deposit account fraud, which was also seen across the industry during that time. Our fraud losses in 2024 were primarily due to losses in the Consumer Program loan portfolio. Other notable declines in expenses were seen in occupancy expenses, Virginia franchise tax, and gain (loss) on bank premises and equipment and assets held for sale. The Virginia franchise tax and FDIC insurance costs were a result of a decline in average deposits and capital in the current year
Current report
compared to the prior year. The occupancy expense decline is primarily related to a decline in branch operating costs in 2024 as a result of our restructuring in 2023 that resulted in eight branch consolidations in the fourth quarter of 2023. Noninterest expense increases were also offset by gains on sales of premises and equipment in 2024 while in 2023 we incurred more losses due to disposal of assets and write-down of property to be sold as part of the branch consolidations.
Current report
Gross loans held for investment were $2.9 billion and $3.2 billion as of December 31, 2024 and 2023, respectively. Loans held for sale were $247.1 million and $57.7 million as of December 31, 2024 and 2023, respectively. Loans held for sale at fair value are loans originated by PMC which are held at fair value under a fair value option election. Loans held for sale at the lower of cost or market comprise LPF loans to be sold to EverBank by January 31, 2025 and Consumer Program loans that are currently being marketed for sale.
Current report
As disclosed in “Note 1 - Organization and Significant Accounting Policies” in Item 8. in this Form 10-K, we entered into an agreement to sell LPF loans and $50.7 million of loans to be sold under this agreement that were already funded as of December 31, 2024 have been reclassified to loans held for sale, at lower of cost or market as of December 31, 2024. The Company also made the decision as of December 31, 2024 to sell a majority of its Consumer Program loans. $133.2 million of these loans were transferred to held for sale as of December 31, 2024 and were marked-to-market based on third party bid prices received in its initial marketing efforts for the portfolio, resulting in a $20.0 million write-down through the allowance for credit losses in accordance with regulatory guidance.
Current report
As of December 31, 2024, we had $38.9 million of Consumer Program loans in a promotional period where interest is being deferred and will not be recognized by us until and if they exit the promotional period and the loan begins to amortize. Of this total, $0.7 million is included in held for investment and 64% end their promo period in 2025 while the remaining will end their promo period in 2026. The remaining $38.2 million of promo loans as of December 31, 2024 are included in held for sale and 87% of these end their promo period in 2025 and the remaining end in 2026.
Current report
Nonperforming assets increased as of December 31, 2024 compared to December 31, 2023, driven by an increase in nonaccrual loans of $5.9 million to $15.0 million. The increase was driven primarily by two commercial real estate loans totaling $4.2 million and one commercial loan totaling $0.7 million added to nonaccrual during the year. All of these additions during the year are secured by collateral and portions of the nonperforming asset balances at year end have partial SBA guarantees of $2.9 million.
Current report
The total allowance for credit losses increased by $1.5 million to $53.7 million as of December 31, 2024, compared to $52.2 million as of December 31, 2023. This increase was primarily driven by a continued elevated provision related to the Consumer Program loans, and to a lesser extent due to increases in allowance provisions for commercial real estate, residential 1-4 family, and commercial loans. The increases in the allowance was mostly offset by charge-offs in the Consumer Program loan portfolio. The Consumer Program loans had allowance provisions of $40.0 million during the
Current report
year ended December 31, 2024, accounting for 79% of the total credit loss provisions for the ended December 31, 2024. Offsetting the increases in these provisions were $46.0 million of net charge-offs of the Consumer Program loans, which included $20.0 million related to the decision to move a majority of the portfolio to held for sale as of December 31, 2024. Increases in the allowance were also a result of increased allowance provisions for commercial real estate loans due primarily to growth in the portfolio balances and changes in expected macroeconomic factors, increase in allowance for residential 1-4 family due to changes in prepayment and curtailment rates and expected macroeconomic factors impacting the portfolio, and an increase in allowance for commercial loans primarily driven by one relationship that was downgraded and specific reserves applied to the loans in conjunction with the downgrade.
Current report
Total deposits decreased 3.0% to $3.2 billion as of December 31, 2024 from $3.3 billion as of December 31, 2023. The decrease in deposits from 2023 year-end was primarily driven by a decrease in time deposits and noninterest-bearing deposits and increase in deposits swept off the balance sheet, partially offset by an increase in NOW accounts. Time deposits decreased 23.7% from $445.9 million as of December 31, 2023 to $340.2 as of December 31, 2024. Noninterest-bearing deposits decreased 7.2% from $472.9 million as of December 31, 2023 to $438.9 million as of December 31, 2024. NOW accounts increased 5.8% from $773.0 million as of December 31, 2023 to $817.7 million as of December 31, 2024. Our decline in non-interest bearing deposits was due to customers moving into higher interest earning deposit accounts, including NOW accounts, a general industry trend, and the decline in time deposits was driven by our repayment of $75.0 million of brokered deposits during the year. Year-end deposits are also net of excess amounts we sweep off balance sheet to manage liquidity. Deposits swept off balance sheet were $137 million as of December 31, 2024, compared to $113 million as of December 31, 2023.
Removed paragraphs (11)
Previous report
of their promotional periods while $4.8 million of promotional loans reached the end of the promotional period and entered amortization.
Previous report
Net Income (Loss)
Previous report
Net interest income was $98.7 million for the year ended December 31, 2023, compared to $101.7 million for the year ended December 31, 2022. Primis’ net interest margin for the year ended December 31, 2023 was 2.68%, compared to 3.30% for the year ended December 31, 2022. The combination in the industry of rapid increase in deposit account rates and consumer preferences shifting from non-interest bearing to higher rate products impacted interest expense and net interest income during 2023. Total income on interest-earning assets was $192.6 million and $123.3 million for the year ended December 31, 2023 and 2022, respectively, driven by average interest-earning asset growth of $607.5 million. The yield on average interest-earning assets was 5.22% and 4.00% for the year ended December 31, 2023 and 2022, respectively. Increase in yield on average interest-earnings assets was driven by higher rates on cash and loans in 2023 compared to 2022. Net interest margin was further affected by excess cash balances during the first half of the year that are part of average other earning assets but do not contribute meaningfully to net interest income. Beginning on June 30, 2023 we began to sweep that excess cash to other financial institutions by participating in a program that supports our deposit customers desire to obtain maximum insurance coverage on their cash deposits while also allowing us to manage cash balances and interest expense exposure. Average loans during the year ended December 31, 2023 were $3.1 billion, compared to $2.6 billion during the year ended December 31, 2022. The $0.5 billion increase in average loans combined with the 103 basis point increase in yield on the loan portfolio drove the $55.6 million increase in income on loans. The cost of average interest-bearing deposits increased 228 basis points to 2.92% for the year ended December 31, 2023,
Previous report
compared to 0.64% for the year ended December 31, 2022 as average interest-bearing liabilities grew approximately $751.9 million and the rates paid on these liabilities grew significantly due to the consistent increases in benchmark interest rates during the year. The increase was driven by higher costs in every interest-bearing category with the largest driver being an increase in average savings deposits of $552.5 million with an average increase in cost of those deposits of 3.50%. This increase was primarily a result of the aforementioned growth of the digital deposit platform and increase in benchmark interest rates.
Previous report
Noninterest expenses were $122.6 million during the year ended December 31, 2023, compared to $91.4 million during the year ended December 31, 2022. The 34.1% increase in noninterest expenses was primarily attributable to $11.2 million of goodwill impairment recognized in the third quarter of 2023 and a $9.8 million increase in employee compensation and benefits expense mainly related to increased head count at the Bank that was driven by the Panacea Financial division and Primis Mortgage during the year ended December 31, 2023 compared to 2022. The compensation expense was also higher in part due to expenses associated with the branch consolidations in 2023.
Previous report
The increase in noninterest expense during the year ended December 31, 2023 compared to 2022 was also due to a $3.5 million increase in data processing expense in 2023 driven by substantially higher application volume on the digital deposit platform as a result of a savings account rate promotion offered during 2023 that brought in approximately $1.0 billion of deposits. Increase in noninterest expenses was also attributable to $2.0 million of higher FDIC insurance costs in 2023 compared to 2022 attributable to our higher assessment base as a result of our growth from last year and a 2 basis point increase in the assessment rate by the FDIC starting in the first quarter of 2023. Furniture and equipment expenses increased $1.2 million due to growth in the Bank and Primis Mortgage, and also due to write-downs of assets related to the cost savings initiative and branch consolidations in 2023. Miscellaneous lending expenses was $1.3 million higher and was primarily driven by a $0.9 million increase in servicing costs we pay the third-party that manages the Consumer Program loans which grew from $134.4 million in principal balance of loans at the end of 2022 to $199.3 million at the end of 2023. Finally, we experienced $3.3 million in fraud losses in 2023 primarily related to a substantial increase in deposit account fraud that was not isolated to Primis, but was wide-spread across the industry during the year.
Previous report
Total loans were $3.2 billion and $2.9 billion as of December 31, 2023 and 2022, respectively. PPP loans totaled $2.0 million and $4.6 million at December 31, 2023 and 2022, respectively. Excluding PPP loans, loans outstanding increased $269.7 million, or 9.2%, since December 31, 2022.
Previous report
The following table describes the period over which our Consumer Program loans that are currently in a no interest promotional period will exit that promotional period and begin to amortize. All of these promotional loans amortize over four years from the date they exit the promotional period if not prepaid before the end of the promotional period (in thousands):
Previous report
Asset quality improved significantly during 2023 on the core loan portfolio excluding the Consumer Program, as we successfully resolved many of the prior year’s nonperforming assets primarily through the sale of collateral. A substantial portion of the Bank’s nonperforming assets in the prior year comprised of two relationships with a combined balance of approximately $27.0 million. A large residential property with a balance of approximately $8.0 million included in that total was sold in the second quarter of 2023 and the other relationship, primarily consisting of assisted living facilities with a book balance of $19.0 million, was sold at the end of a receiver-managed marketing process in the third quarter of 2023.
Previous report
Total calculated reserves increased by $17.7 million to $52.2 million as of December 31, 2023, primarily due to modeled reserves on the Consumer Program portfolio described above. Allowance for credit losses on the Consumer Program loans was $22.4 million and $1.4 million as of December 31, 2023 and 2022. Excluding the allowances each period on this portfolio, the allowance for credit losses would have declined $3.3 million, due to lower allowances on individually evaluated loans, lower default expectations observed in the models which resulted from our annual review and refinements to model, and improved economic forecasts, specifically in the House Price Index and Gross State Product factors, partially offset by the overall loan growth experienced in 2023.
Previous report
Total deposits increased 20.1% to $3.27 billion as of December 31, 2023 from $2.72 billion as of December 31, 2022. The increase in deposits from 2022 year-end was primarily driven by the substantial growth in the Bank’s digital deposit platform in 2023. The majority of the overall deposit growth was in savings accounts with the remainder primarily in NOW accounts (both largely coming from the digital platform). Savings accounts increased 219% from $245.8 million as of December 31, 2022 to $783.8 million as of December 31, 2023. NOW accounts increased 25.2% from $617.7 million as of December 31, 2022 to $773.0 million as of December 31, 2023. 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.
Reworded paragraphs (50)
Previous wording
Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years ended December 31, 2023 and 2022. Discussions of comparisons between 2022 and 2021 are not included in this Form10-K but can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our restated Annual Report on Form10-K/A for the year ended December 31, 2022 as filed with the SEC on October 4, 2024.
Current wording
Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years ended December 31, 2024 and 2023. Discussions of comparisons between 2023 and 2022 are not included in this Form10-K but can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on October 15, 2024.
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 consolidated financial statements, the footnotes thereto, and the other financial data included in this report.
Current wording
Management’s discussion and analysis (“MD&A”) is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Primis. This discussion and analysis should be read with the consolidated financial statements, the footnotes thereto, and the other financial data included in this report.
Previous wording
In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326. The allowance is reported as a component of other liabilities in our consolidated balance sheets. Adjustments to the allowance are reported in our income statement as a component of other expenses.
Current wording
In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326. The allowance is reported as a component of other liabilities in our consolidated balance sheets. Adjustments to the allowance are reported in our income statement as a component of noninterest expenses.
Previous wording
Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward
Current wording
Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets. Further, subsequent evaluations of the then-existing loan portfolio, in light of factors existing at the time of subsequent evaluation may result in significant changes to the allowance.
Previous wording
As required under U.S. GAAP, we test goodwill for impairment at least annually and more frequently if there are indications that goodwill could be impaired. Our annual goodwill impairment testing date is September 30 and accordingly, we performed testing as of September 30, 2023 of our two reporting units that include goodwill. For our assessment of goodwill as of September 30, 2023, we performed a step one quantitative assessment to determine if the fair value of the Primis Bank and the Primis Mortgage reporting units were less than their carrying amount. As part of the testing, we engaged an independent valuation firm to quantitatively estimate the fair value of each reporting unit so that it could be compared to the carrying value in assisting us in determining if impairment existed. The results of the quantitative assessment of the Primis Mortgage reporting unit indicated that its fair value was in excess of its carrying value, thus no goodwill impairment was necessary.
Current wording
As required under U.S. GAAP, we test goodwill for impairment at least annually and more frequently if there are indications that goodwill could be impaired. Our annual goodwill impairment testing date is September 30 and accordingly, we performed testing as of September 30, 2024 of our two reporting units that include goodwill. For our assessment of goodwill as of September 30, 2024, we performed a step one quantitative assessment to determine if the fair value of the Primis Bank and the Primis Mortgage reporting units were less than their carrying amount. As part of the testing, we engaged an independent valuation firm to quantitatively estimate the fair value of each reporting unit so that it could be compared to the carrying value in assisting us in determining if impairment existed.
Previous wording
Our assessment of the Primis Bank reporting unit included the use of three approaches, each receiving various weightings to determine an ultimate fair value estimate: (1) the comparable transactions method that is based on comparison to pricing ratios recently paid in the sale or merger of comparable banking institutions; (2) the public market peers control premium approach that is based on market pricing ratios of public banking companies adjusted for an industry based control premium, and (3) a discounted cash flow method (an income method), taking into consideration expectations of the Company’s growth and profitability going forward. The assessment included use of various assumptions and inputs into the modeling approaches, including creating a baseline and conservative scenarios that stressed certain assumptions such as projected cash flows and the discount rate. We considered the modeled results of each scenario and in light of the sustained depressed stock price in the months leading up to our impairment testing as of September 30, 2023 compared to our book value we determined it was reasonable to leverage the results of a scenario that utilized more stressed inputs and assumptions. Ultimately, in third quarter of 2023, the result of the quantitative assessment indicated the Primis Bank reporting unit’s book value was more than its estimated fair value. Accordingly, we took an impairment charge to Primis Bank’s goodwill of $11.2 million which is reflected in our noninterest expense for the year ended December 31, 2023.
Current wording
Our assessment of the reporting units includes the use of three or four approaches, each receiving various weightings to determine an ultimate fair value estimate: (1) the comparable transactions method that is based on comparison to pricing ratios recently paid in the sale or merger of comparable institutions; (2) the control premium approach that is based on the Company’s trading price, adjusted for holding company assets and an industry based control premium; (3) the public market peers control premium approach that is based on market pricing ratios of similar public companies adjusted for an industry based control premium, and (4) a discounted cash flow method (an income method), taking into consideration expectations of our growth and profitability going forward. The assessment included use of various assumptions and inputs into the modeling approaches, including creating a baseline and conservative scenarios that stressed certain assumptions such as projected cash flows and the discount rate.
Previous wording
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the goodwill impairment testing as of September 30, 2023 will prove to be an accurate prediction of the future. Changes in assumptions, market data (for market-based assessments), or the discount rate (for income based assessments) could produce different results that lead to higher or lower fair value determinations compared to the results of our annual impairment testing performed as of September 30, 2023. Further, because the use of inputs and assumptions are highly judgmental an analysis performed to assess the fair value of our reporting units by others may results in higher, lower, or the same fair value determination and goodwill impairment decision through the use of their judgment in application of similar inputs and assumptions as we used.
Current wording
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the goodwill impairment testing as of September 30, 2024 will prove to be an accurate prediction of the future. Changes in assumptions, market data (for market-based assessments), or the discount rate (for income based assessments) could produce different results that lead to higher or lower fair value determinations compared to the results of our annual impairment testing performed as of September 30, 2024. Further, because the use of inputs and assumptions are highly judgmental an analysis performed to assess the fair value of our reporting units by others may results in higher, lower, or the same fair value determination and goodwill impairment decision through the use of their judgment in application of similar inputs and assumptions as we used. As a result of our testing, we determined that the estimated fair value of both reporting units was higher than their respective carrying values, resulting in no goodwill impairment as of September 30, 2024.
Previous wording
The Consumer Program is governed by multiple interrelated agreements including the loan agreement between the Bank and the customer and agreements with the TPOS. The structure of the Consumer Program is intended to generate
Current wording
The Consumer Program is governed by multiple interrelated agreements including the loan agreement between the Bank and the customer and agreements with the TPOS. The structure of the Consumer Program is intended to generate loans that yield a targeted return to the Bank on a portfolio basis while also providing limited credit enhancement from the TPOS. Key characteristics of the combined arrangement include:
Previous wording
Under U.S. GAAP, agreements with multiple counterparties, such as the customer and TPOS, are generally required to be accounted for separately even if the agreements are highly interrelated. As a result, we account for the Consumer Program under multiple units of account with the following impacts:
Current wording
Under U.S. GAAP, agreements with multiple counterparties, such as the customer and TPOS, are generally required to be accounted for separately even if the agreements are highly interrelated. As a result, we account for the Consumer Program as multiple units of account with the following impacts:
Previous wording
We have $199.3 million of loans outstanding in the Consumer Program, or 6% of our total gross loan portfolio, as of December 31, 2023. As of December 31, 2023, 45% of the loans were in a promotional period requiring no payment of interest on their loans with 70% of these promotional loan periods ending in the second half of 2024 through the first quarter of 2025. During the year ended December 31, 2023, $10.1 million of promotional loans paid off prior to the end
Current wording
We had $152.1 million and $199.3 million of loans outstanding in the Consumer Program, or 5% and 6% of our total gross loan portfolio, as of December 31, 2024 and 2023, respectively. As of December 31, 2024, $113.2 million is included in loans held for sale at lower of cost or market as a result of our decision to pursue a sale of that portion of the portfolio. As of December 31, 2024 and 2023, $38.9 million and $199.3 million are included in loans held for investment. As of December 31, 2024, 22% of the principal balance of loans were in a promotional period requiring no payment of interest on their loans with 86% of these promotional loan periods ending during 2025.
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. At December 31, 2023, Primis Bank had twenty-four full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications. Twenty-two full-service retail branches are in Virginia and two full-service retail branches are in Maryland. The 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 December 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.
Previous wording
Net loss attributable to common shareholders for the year ended December 31, 2023 was $7.8 million, or $0.32 per basic and diluted share, compared to net income of $14.1 million, or $0.57 per basic and diluted share for the year ended December 31, 2022. The 155.3% decrease in the net income attributable to common shareholders during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily related to a $11.2 million goodwill impairment charge taken in the third quarter of 2023 and $20.9 million of provision for credit losses on the Consumer Program loan portfolio. The decrease was also driven by higher noninterest expenses from an increase in employee compensation and benefits expense due to the growth of Primis Mortgage and the Panacea Financial division of the Bank, higher data processing, and FDIC insurance assessment expense driven by the increase in customer accounts and related transactions on our digital deposit platform. These expenses were partially offset by higher interest income on our loan portfolio due to average loan growth of $600 million along with higher interest rates in 2023, mortgage banking income due to the growth of Primis Mortgage, an increase in interest earned on other earnings assets, and increased derivative gains primarily driven by the increase in the derivative asset related to the Consumer Program loan portfolio.
Current wording
Net loss attributable to common shareholders for the year ended December 31, 2024 was $16.2 million, or $0.66 loss per basic and diluted share, compared to net loss of $7.8 million, or $0.32 loss per basic and diluted share for the year
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
The Company recorded a provision for credit losses of $32.5 million and $11.3 million for the years ended December 31, 2023 and 2022, respectively. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $29.4 million and $3.0 million during the year ended December 31, 2023 and 2022, respectively. We had charge-offs totaling $16.7 million and $8.1 million during the year ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, $8.8 million of charge-offs were related to the Consumer Program and a majority of the remaining charge-offs were related to the resolution of the assisted living relationship that was originally placed on nonaccrual and reserved for in 2022 and which underwent a receiver-managed marketing process that ended in 2023. There were recoveries totaling $1.8 million and $2.2 million during year ended December 31, 2023 and 2022, respectively.
Current wording
The Company recorded a provision for credit losses of $50.6 million and $32.5 million for the years ended December 31, 2024 and 2023, respectively. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $40.0 million and $29.4 million during the year ended December 31, 2024 and 2023, respectively. We had charge-offs totaling $51.0 million and $16.7 million during the year ended December 31, 2024 and 2023, respectively. During the year ended December 31, 2024 and 2023, $47.6 million and $8.8 million of charge-offs were related to the Consumer Program, respectively. There were recoveries totaling $1.9 million and $1.8 million during year ended December 31, 2024 and 2023, respectively.
Previous wording
Our provision for credit losses during 2023 was driven by provisions related to the Consumer Program loan portfolio. This portfolio began to experience higher losses in 2023 compared to 2022, primarily centered around loans originated from the third quarter 2022 through the first quarter of 2023. Losses on these vintages in 2023 was $7.0 million, or 79% of total losses on the Consumer Program loan portfolio in 2023. Higher loss rates continued to be seen on these vintages during 2024 through the date we filed this Form 10-K. As a result, we updated the credit loss experience in our allowance models as of and for the year ended December 31, 2023, on this loan portfolio to incorporate the continued higher losses seen subsequent to year end which resulted in an additional $18.2 million in provision recorded during 2023.
Current wording
Our provision for credit losses during 2024 and 2023 was driven by provisions related to the Consumer Program loan portfolio. 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. Losses on these vintages in 2024 and 2023 were $16.9 million and $7.0 million, respectively, or 61% and 79%, respectively, of total losses on the Consumer Program loan portfolio in 2024 and 2023.
Previous wording
The Financial Condition Section of this Management’s Discussion and Analysis (“MD&A”) provides information on our loan portfolio, past due loans, nonperforming assets and the allowance for credit losses.
Current wording
TheFinancial Condition section of this MD&A provides information on our loan portfolio, past due loans, nonperforming assets and the allowance for credit losses.
Previous wording
Noninterest income increased 147% to $45.3 million for the year ended December 31, 2023, compared to $18.4 million for the year ended December 31, 2022. The increase in noninterest income was primarily related to $12.6 million of higher mortgage banking income and $18.1 million in income on the Consumer Program derivative during the year ended December 31, 2023. The increase in the mortgage banking income is related to a full year of Primis Mortgage’s results in 2023 compared to only seven months in 2022 (acquisition date of May 31, 2022), coupled with meaningful growth in the business since the purchase. Mortgage banking income includes fair value adjustments, origination income, and gains on sales of mortgage loans held for sale. Primis Mortgage originated and sold $572.2 million of loans in 2023, compared to only $169.2 million in the seven months of 2022 after the acquisition, which drove the increase in origination income and gains on sales in 2023. The Consumer Program derivative is comprised of $11.3 million of fair value adjustment gains on the derivative asset and $6.8 million of realized gains on the derivative in 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 2023, the value of the derivative and related gains were driven by the $52.3 million of loans with a no-interest promotional period originated early in the year. The majority of the loans originated with a promotional period will end their promotional period between the third quarter of 2024 and the second quarter of 2025. The realized gains are 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, which totaled $2.4 million. Also included in the realized income is $4.4 million of income related to the third party’s reimbursement under the agreement of credit losses incurred on the loans during the year Additional details of this derivative and the components of the realized income, including assumptions used to value the derivative, are described in the Critical Accounting Estimates and Policies section of this MD&A. The increase in noninterest income was partially offset by gains on the sale of an other equity investment in the prior year that did not reoccur in the current year.
Current wording
Noninterest income decreased 4.7% to $43.1 million for the year ended December 31, 2024, compared to $45.3 million for the year ended December 31, 2023. The decrease in noninterest income was primarily related to $13.8 million in lower income on the Consumer Program derivative. This decrease was partially offset by $6.3 million of higher mortgage banking income and a $4.7 million gain on sale of our LPF portfolio. The Consumer Program derivative income declined primarily due to fair value loss adjustments on the derivative asset of $6.3 million during the year ended December 31, 2024 compared to fair value gains of $11.3 million during the year months ended December 31, 2023. The derivative asset and related gains or losses 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 year ended 2023, the value of the derivative and related gains were primarily driven by $52.3 million of loans with a no-interest promotional period originated in the last quarter of 2022 and the first nine months of 2023 with a total of $89.4 million of loans within their promo period as of December 31, 2023. Comparatively, during the year ended 2024 a nominal amount of no-interest promotional loans were originated and $50.5 million ended their promo period, with $38.9 million of promo loans as of December 31, 2024. Offsetting the fair value loss adjustments during the year ended December 31, 2024 and adding to the gains in 2023 was $10.6 million and $6.8 million, respectively, of realized gains as a result of borrowers paying off their promotional period loans before the end of
Previous wording
As of December 31, 2023 and 2022, 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 9% in 2023 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 from the third party managed portfolio during 2023. The increase in commercial loans was driven primarily by $30.5 million of commercial loan growth in our Panacea Financial division. These loans are diversified geographically and are spread across the nation.
Current wording
As of December 31, 2024 and 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 declined by 10% in 2024, which was driven by a decline in Consumer loans primarily due to approximately $299.2 million of sales of LPF loans. The decline in Consumer loans was also driven by the transfer of $133.2 million of the Consumer Program loans into “Loans held for sale, at lower of cost or market” as of December 31, 2024 as a result of our decision to market the loans for sale. There was also a decline in the construction and land development loans due to a combination of paydowns and conversion to permanent financing. 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
The composition of our loans held for investment portfolio consisted of the following at December 31, 2023 and 2022 (in thousands):
Current wording
The composition of our loans held for investment portfolio consisted of the following as of December 31, 2024 and 2023 (in thousands):
Previous wording
During the year ended December 31, 2023, $6.0 million of loans ended their no interest promo period and began to amortize and $3.9 million of these loans charged-off during the year after beginning to amortize.
Current wording
During the year ended December 31, 2024, $31.1 million of loans ended their no interest promo period and began to amortize and $10.1 million of these loans charged-off during the year after beginning to amortize.
Previous wording
The following table presents a comparison of nonperforming assets for the years indicated (in thousands):
Current wording
The following table presents a comparison of nonperforming assets as of December 31, 2024 and 2023 (in thousands):
Previous wording
We identify potential problem loans based on loan portfolio credit quality. We define our potential problem loans as internally rated as substandard loans less total nonperforming assets noted above. At December 31, 2023, our potential problem loans totaled $6.4 million. As of December 31, 2023, our total substandard loans were $17.2 million, compared to $41.0 million at December 31, 2022, a 58% decline. Loans rated internally as special mention loans, which is one internal credit rating higher than substandard, totaled $14.9 million as of December 31, 2023 and $32.3 million as of December 31, 2022.
Current wording
We identify potential problem loans based on loan portfolio credit quality. We define our potential problem loans as internally rated as substandard loans less total nonperforming assets noted above. As of December 31, 2024, our potential problem loans totaled $54.9 million. As of December 31, 2024, our total substandard loans were $71.5 million, compared to $17.2 million as of December 31, 2023. Loans rated internally as special mention loans, which is one internal credit rating higher than substandard, totaled $30.3 million as of December 31, 2024 and $14.9 million as of December 31, 2023. Increase in substandard loans was driven primarily due to four relationships totaling $54.9 million and the increase in special mention loans was related to $20 million of downgrades in 2024.
Previous wording
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
Current wording
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 December 31, 2023, the principal balance outstanding was $199.3 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 $22.4 million as of December 31, 2023 and represented 43% of our total allowance for credit losses. Net charge-offs on this portfolio were $8.4 million in 2023 and represented approximately 57% of net charge-offs recorded for the year. 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 period 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 in 2023 which continued into 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 19% of the portfolio at December 31, 2023 and is expected to improve the quality mix of the portfolio and result in lower realized net charge-offs in future periods.
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 and 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 of December 31, 2024 and 2023. Additionally, we experienced continued elevated levels of charge-offs in the first quarter of 2025 concentrated in these older vintages and as a result we incorporated this credit loss experience into our reserve process on these loans for the year ended December 31, 2024. The combination of the updated loss rates along with elevated charge-offs in 2024 and the first three months of 2025 has been a driver in the increase of the allowance during the year ended December 31, 2024 on the portfolio as a percentage of the portfolio balance. The newer production represented approximately 50% of the held for investment portfolio as of December 31, 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
Primis Bank’s 2024 loan review program (the “Program”) was approved by the Audit Committee on January 25, 2024. The Program’s annual goal is to have an overall review penetration rate of 45.0% - 50.0% of the commercial loan portfolio outstanding as of December 31, 2023. The Program incorporates a robust risk-based approach review of the Bank’s loan portfolio that will include the loan origination process and targeted portfolio and full-scope loan reviews. The Program’s review goal remains well within regulatory standards and industry best practices. In accordance with Credit Policy, the Bank’s Program will utilize and incorporate both internal and third-party external resources in a complementary fashion to achieve the objectives of the Program.
Current wording
Our loan review program is administrated by the Chief Risk Officer and the Loan Review Manager who reports the results directly to the Audit Committee of the Board of Directors. Our 2024 loan review program (the “Program”) was approved by the Audit Committee on January 25, 2024. The Program’s annual goal is to have an overall review penetration rate of 45.0% - 50.0% of the commercial loan portfolio outstanding as of December 31, 2024. The Program incorporates a robust risk-based approach review of the Bank’s loan portfolio that will include the loan origination process and targeted portfolio and full-scope loan reviews. The Program’s review goal remains well within regulatory standards and industry best practices. In accordance with Credit Policy, the Bank’s Program will utilize and incorporate both internal and third-party external resources in a complementary fashion to achieve the objectives of the Program.
Previous wording
Our loan review program is administrated by the Chief Risk Officer and the Loan Review Manager who reports the results directly to the Audit Committee of the Board of Directors. In 2023, the loan review program resulted in reviews on loan balances totaling $936.1 million or 47.5% of the commercial loan portfolio outstanding as of December 31, 2022. Overall, the loan review program resulted in loan reviews performed on 30.0% of the commercial portfolio by our internal loan review function and 17.5% by an independent third party consultant. The loan review program also reviewed $96.0 million in unfunded commitments.
Current wording
In 2024, the loan review program resulted in reviews on commercial loan balances totaling $955.0 million or 49.6% of the commercial loan portfolio outstanding as of December 31, 2024. The loan reviews included 45.0% performed by our internal loan review function and 55.0% by an independent third party consultant. The loan review program also reviewed $90.5 million in unfunded commitments.
Previous wording
We are very focused on the asset quality of our loan portfolio, both before and after a loan is made. We have established underwriting standards that we believe are effective in maintaining high credit quality in our loan portfolio. We have experienced loan officers who take personal responsibility for the loans they originate, a skilled underwriting team and highly qualified credit officers that review each loan application carefully. We have designed a credit matrix, which requires dual authority to approve any credit over $5.0 million. We have two specialty Executive Credit Officers with extensive industry experience in medical practice and life premium credit financing with authority up to $7.5 million and
Current wording
We are focused on the asset quality of our loan portfolio, both before and after a loan is made. We have established underwriting standards that we believe are effective in maintaining high credit quality in our loan portfolio. We have experienced loan officers who take personal responsibility for the loans they originate, a skilled underwriting team and highly qualified credit officers that review each loan application carefully. We have designed a credit matrix, which requires dual authority to approve any credit over $5.0 million. We have a specialty Executive Credit Officer with extensive industry experience in medical practice financing with authority up to $7.5 million and joint authority with the Chief Credit Officer up to $10.0 million. All credit exposures over $10.0 million are reviewed and approved by Executive Loan Committee consisting of all named Credit Officers with concurrence from the Chief Executive Officer on any credit in excess of $25.0 million. Loans in excess of 60% of the Bank’s legal lending limit are approved by the full Board of Directors or two outside directors.
Previous wording
We believe that the allowance for credit losses at December 31, 2023 is sufficient to absorb future expected credit losses in our loan portfolio based on our assessment of all known factors affecting the collectability of our loan portfolio. Our assessment involves uncertainty and judgment; therefore, the adequacy of the allowance for credit losses cannot be determined with precision and may be subject to change in future periods. In addition, bank regulatory authorities, as part
Current wording
We believe that the allowance for credit losses as of December 31, 2024 is sufficient to absorb future expected credit losses in our loan portfolio based on our assessment of all known factors affecting the collectability of our loan portfolio. Our assessment involves uncertainty and judgment; therefore, the adequacy of the allowance for credit losses cannot be determined with precision and may be subject to change in future periods. In addition, bank regulatory authorities, as part of their periodic examination, may require additional charges to the provision for credit losses in future periods if the results of their reviews warrant additions to the allowance for credit losses.
Previous wording
Net charge-offs were $14.9 million for the year ended December 31, 2023, up from $5.8 million for the year ended December 31, 2022. Included in net charge-offs is $8.4 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively, related to the Consumer Program loan portfolio. Excluding these Consumer Program charge-offs we had an increase from the prior year of $2.2 million primarily related to disposition of certain nonperforming loans from December 31, 2022 that could not be collected.
Current wording
Net charge-offs were $49.1 million for the year ended December 31, 2024, up from $14.9 million for the year ended December 31, 2023. Included in net charge-offs is $46.0 million and $8.4 million for the years ended December 31, 2024 and 2023, respectively, related to the Consumer Program loan portfolio. Excluding these Consumer Program charge-offs we had a decrease in charge-offs from the prior year of $3.4 million.
Previous wording
As discussed previously, the increase in charge-offs on the Consumer Program loan portfolio have been driven by losses concentrated in loans originated between the third quarter of 2022 and the first quarter of 2023. Charge-offs from these vintages in 2023 were 79% of the total gross charge-offs in this portfolio of consumer loans. The charge-off percentage as compared with total loans originated in the third quarter of 2022, fourth quarter of 2022, and first quarter of 2023 was 6.9%, 4.3%, and 3.0%, respectively. We continued to see similar levels of losses on these vintages from year end through the time we filed this Form 10-K and as a result we updated our loss rates on the third-party portfolio as of and for the year ended December 31, 2023 which added an additional $18.2 million in provision and reserve during this period. The TPOS provides limited credit enhancement through certain direct payments and the release of funds from a reserve account. These amounts are recognized in our results of operations in the period in which they become available to us. During 2023, we recognized $4.4 million in our results of operations related to this credit enhancement. See additional discussion of the credit enhancement in Critical Accounting Estimates and Policies in this MD&A.
Current wording
As discussed previously, the increase in charge-offs on the Consumer Program loan portfolio have been driven by losses concentrated in loans originated between the third quarter of 2022 and the first quarter of 2023. Charge-offs from these vintages in 2024 were 61% of the total gross loan charge-offs, before the $20.0 million of charge-offs related to the transfer of Consumer Program loans to held for sale. During the year ended December 31, 2023 the charge-offs of Consumer Program loans in these vintages was 79% of total gross loan charge-offs. As of December 31, 2024, the amount of loans from these vintages in the held for investment loan portfolio was $19.1 million, or approximately 50% of the total $38.9 million held for investment balance. The TPOS provides limited credit enhancement through certain direct payments and the release of funds from a reserve account. These amounts are recognized in our results of operations in the period in which they become available to us. During 2024, we recognized $3.0 million in our results of operations related to this credit enhancement. See additional discussion of the credit enhancement in “Critical Accounting Estimates and Policies” in this MD&A.
Previous wording
Our investment securities portfolio is managed by our Treasurer, who has significant experience in this area, with the concurrence of our Asset/Liability Committee. In addition to our Treasurer (who is the chairman of the Asset/Liability Committee) and our Controller, this committee is comprised of outside directors and other senior officers of the Bank, including but not limited to our Chief Executive Officer and our Chief Financial Officer. Investment management is performed in accordance with our investment policy, which is approved annually by the Board of Directors. Our investment policy authorizes us to invest in:
Current wording
Our investment securities portfolio is managed by our Chief Financial Officer, who has significant experience in this area, with the concurrence of our Asset/Liability Committee. In addition to our Chief Financial Officer (who is the chairman of the Asset/Liability Committee) this committee is comprised of outside directors and other senior officers of the Bank, including but not limited to our Chief Executive Officer. Investment management is performed in accordance with our investment policy, which is approved annually by the Board of Directors. Our investment policy authorizes us to invest in:
Previous wording
pool can be structured to accommodate various desired bond repayment schedules, provided that the collateral cash flow is adequate to meet scheduled bond payments. This is accomplished by dividing the bonds into classes to which payments on the underlying mortgage pools are allocated. The bond’s cash flow, for example, can be dedicated to one class of bondholders at a time, thereby increasing call protection to bondholders. In private-label CMOs, losses on underlying mortgages are directed to the most junior of all classes and then to the classes above in order of increasing seniority, which means that the senior classes have enough credit protection to be given the highest credit rating by the rating agencies.
Current wording
Collateralized mortgage obligations (“CMOs”) are bonds that are backed by pools of mortgages. The pools can be GNMA, FNMA or FHLMC pools or they can be private-label pools. The CMOs are designed so that the mortgage collateral will generate a cash flow sufficient to provide for the timely repayment of the bonds. The mortgage collateral pool can be structured to accommodate various desired bond repayment schedules, provided that the collateral cash flow is adequate to meet scheduled bond payments. This is accomplished by dividing the bonds into classes to which payments on the underlying mortgage pools are allocated. The bond’s cash flow, for example, can be dedicated to one class of bondholders at a time, thereby increasing call protection to bondholders. In private-label CMOs, losses on underlying mortgages are directed to the most junior of all classes and then to the classes above in order of increasing seniority, which means that the senior classes have enough credit protection to be given the highest credit rating by the rating agencies.
Previous wording
We classify our investment securities as either held-to-maturity or available-for-sale. Debt investment securities that Primis has 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
We classify our investment securities as either held-to-maturity (“HTM”) or available-for-sale (“AFS”). Debt investment securities that Primis has the positive intent and ability to hold to maturity are classified as HTM and carried at amortized cost. Investment securities classified as AFS are those debt securities that may be sold in response to changes in interest rates, liquidity needs or other similar factors. Investment securities AFS are carried at fair value, with unrealized gains or losses net of deferred taxes, included in accumulated other comprehensive income (loss) in stockholders’ equity. Our portfolio of AFS securities currently contains a material amount of unrealized mark-to-market adjustments due to increases in market interest rates since the original purchase of many of these securities. We intend to hold these securities until maturity or recovery of the value and do not anticipate realizing any losses on the investments.
Previous wording
Investment securities, available-for-sale and held-to-maturity, totaled $240.1 million as of December 31, 2023, a decrease of 3.9% from $249.8 million as of December 31, 2022, primarily due to paydowns, maturities, and calls of the investments during the year.
Current wording
Investment securities, AFS and HTM, totaled $245.4 million as of December 31, 2024, an increase of 2.2% from $240.1 million as of December 31, 2023, primarily due to purchases of available-for-sale securities of $43.1 million, offset by paydowns, maturities, and calls of the investments during the year. We did not sell any AFS or HTM securities during 2024 or 2023.
Previous wording
We recognized an immaterial amount of credit impairment charges related to credit losses on our held-to-maturity investment securities during 2023 and no credit losses during 2022.
Current wording
We recognized no credit impairment charges related to credit losses on our HTM investment securities during 2024 and an immaterial amount in 2023.
Previous wording
The following table sets forth a summary of the investment securities portfolio as of the dates indicated. Available-for-sale investment securities are reported at fair value, and held-to-maturity investment securities are reported at amortized cost (in thousands).
Current wording
The following table sets forth a summary of the investment securities portfolio as of the dates indicated. AFS investment securities are reported at fair value, and HTM investment securities are reported at amortized cost (in thousands).
Previous wording
The following table sets forth the amortized cost, fair value, and weighted average yield of our investment securities by contractual maturity at December 31, 2023. Weighted average yield is calculated as the tax-equivalent yield on a pro rata basis for each security based on its relative amortized cost. Yields on tax-exempt securities have been computed on a tax-equivalent basis. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).
Current wording
The following table sets forth the amortized cost, fair value, and weighted average yield of our investment securities by contractual maturity as of December 31, 2024. Weighted average yield is calculated as the tax-equivalent yield on a pro rata basis for each security based on its relative amortized cost. Yields on tax-exempt securities have been computed on a tax-equivalent basis. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).
Previous wording
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
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. 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 $1.15 billion, or 34.8% of total deposits, at December 31, 2023.
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 $667.1 billion, or 20.8% of total deposits, as of December 31, 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. At December 31, 2023 and 2022, total FHLB borrowings were $30.0 million and $325.0 million, respectively. The decrease in FHLB borrowings was a result of the deposit growth during 2023 that primarily funded our loan growth and supported other funding needs. At December 31, 2023, we had $466.1 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. We had no FHLB borrowings as of December 31, 2024, compared to total FHLB borrowings of $30.0 million as of December 31, 2023. Utilization of FHLB advances was higher during 2024 than 2023 as earning asset growth outpaced funding growth. The decrease in FHLB borrowings at the end of 2024 was primarily a result of excess liquidity generated from the LPF loan sale. As of December 31, 2024, we had $564.0 million of unused and available FHLB lines of credit.
Showing the first 40 of 50 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
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 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 — wording carried from elsewhere
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 December 31, 2024, we had a book balance outstanding of $152.1 million which is comprised of $38.9 million in held for investment and $113.2 million of held for sale. 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 the held for investment loans balance of $38.9 million was $16.3 million as of December 31, 2024 and represented 30% of our total allowance for credit losses. Net charge-offs on this portfolio were $46.0 during the year ended December 31, 2024, and represented approximately 94% of net charge-offs recorded during the year.
Current report — wording carried from elsewhere
secured borrowings refer to “Item 8. Financial Statements and Supplementary Data, Note 1 –Organization and Significant Accounting Policies.”
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
classification of assets. Further, subsequent evaluations of the then-existing loan portfolio, in light of factors existing at the time of subsequent evaluation may result in significant changes to the allowance.
Previous report — wording carried elsewhere
loans that yield a targeted return to the Bank on a portfolio basis while also providing limited credit enhancement from the TPOS. Key characteristics of the combined arrangement include:
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
joint authority with the Chief Credit Officer up to $10.0 million. All credit exposures over $10.0 million are reviewed and approved by Executive Loan Committee consisting of all named Credit Officers with concurrence from the Chief Executive Officer on any credit in excess of $25.0 million. Loans in excess of 60% of the Bank’s legal lending limit are approved by the full Board of Directors or two outside directors.
Previous report — wording carried elsewhere
of their periodic examination, may require additional charges to the provision for credit losses in future periods if the results of their reviews warrant additions to the allowance for credit losses.
Previous report — wording carried elsewhere
Collateralized mortgage obligations (“CMOs”) are bonds that are backed by pools of mortgages. The pools can be GNMA, FNMA or FHLMC pools or they can be private-label pools. The CMOs are designed so that the mortgage collateral will generate a cash flow sufficient to provide for the timely repayment of the bonds. The mortgage collateral