8-K
Primis Financial Corp. (FRST)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): January 27, 2022
Primis Financial Corp.
(Exact Name of Registrant as Specified in Charter)
| Virginia | 001-33037 | 20-1417448 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
6830 Old Dominion Drive, McLean, Virginia 22101
(Address of Principal Executive Offices) (Zip Code)
(703) 893-7400
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchanged on which registered |
|---|---|---|
| COMMON STOCK | FRST | NASDAQ |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On January 27, 2022, Primis Financial Corp. (“Primis” or the “Company”) issued a press release announcing its financial results for the three months and full year ended December 31, 2021. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
The Company has prepared presentation materials (the “Investor Presentation”) that management intends to use from time to time hereafter in presentations about the Company’s operations and performance. The Company may use the Investor Presentation, possibly with modifications, in presentations to current and potential investors, analysts, lenders, business partners, acquisition candidates, customers, employees and others with an interest in the Company and its business.
A copy of the Investor Presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference. The Investor Presentation is also available on the Company's website at www.primisbank.com. Materials on the Company’s website are not part of or incorporated by reference into this report.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 8.01. Other Events.
On January 27, 2022, Primis issued a press release announcing the declaration of a dividend payable on February 25, 2022 to shareholders of record as of February 11, 2022. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated January 27, 2022 |
| 99.2 | Primis Financial Corp. Fourth Quarter 2021 Investor Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Primis Financial Corp. | ||
|---|---|---|
| Date: January 27, 2022 | By: | /s/ Matthew A. Switzer |
| Matthew A. Switzer | ||
| Chief Financial Officer |
Exhibit 99.1
Reports Diluted Earnings per Share from Continuing Operations of $0.31 for the Fourth Quarter of 2021
Declares Quarterly Cash Dividend of $0.10 Per Share
MCLEAN, Va., Jan. 27, 2022 /PRNewswire/ -- Primis Financial Corp. (NASDAQ: FRST) ("Primis" or the "Company"), and its wholly-owned subsidiary, Primis Bank (the "Bank"), today reported net income of $7.7 million for the quarter ended December 31, 2021, compared to $3.9 million for the quarter ended September 30, 2021. Earnings per share for the three months ended December 31, 2021 were $0.31 on a basic and diluted basis, compared to $0.16 basic and diluted for the three months ended September 30, 2021.
Earnings for the twelve months ended December 31, 2021 were $31.2 million compared to $23.3 million for the twelve months ended December 31, 2020, an increase of 34.2%. Earnings per share for the twelve months ended December 31, 2021 were $1.28 basic and $1.27 diluted, compared to $0.96 basic and diluted for the twelve months ended December 31, 2020.
As disclosed in the third quarter, Primis Bank entered into an agreement with Southern Trust Mortgage ("STM"), whereby STM agreed to purchase all of the Bank's common membership interests and a portion of the Bank's preferred interests in STM for a combination of cash and a promissory note. The transaction closed in the fourth quarter of 2021. After closing, STM continues to be a borrower of the Bank, but the Bank is no longer a minority owner of STM. As previously disclosed, the Company recorded a pre-tax charge of approximately $2.9 million related to the transaction in the third quarter of 2021 and the historical investment in STM will be presented as a discontinued operation in prior period financial information.
In the fourth quarter, Primis Bank successfully launched its new digital bank offering to friends and family of the Bank. The platform includes an all-new mobile banking application that provides for a quick and seamless account opening process all from within the app. Final build out of the digital banking feature set is in testing and the Bank anticipates a full launch to the public in March.
Also in the fourth quarter, Primis Bank launched its new V1BE service – the first mobile application for on-demand ordering of branch services delivered straight to the customer. Services provided include cash deposits and withdrawals, change orders, cashier checks, and instant issue of replacement debit cards. The Bank has been testing the service on a limited basis in the Richmond market since the fall. Customer feedback has been consistently positive with the heaviest users of the service reducing their utilization of branch services by 49% on average. Based on the positive results in Richmond, the Bank is currently expanding availability of the service to Northern Virginia. With V1BE, Primis is able to support any market and grow customer relationships without the need for a large branch presence.
The Board of Directors also announced and declared a dividend of $0.10 per share payable on February 25, 2022 to shareholders of record on February 11, 2022. This is Primis' forty-first consecutive quarterly dividend.
Highlights for the three months ended December 31, 2021
- Net income from continuing operations totaled $7.7 million, or $0.31 per basic and diluted share, compared to $6.2 million, or $0.25 per basic and diluted share in the third quarter of 2021.
- Total assets at the end of the fourth quarter of 2021 were $3.40 billion, an increase of 10.2% versus the year ago period.
- Gross loans, excluding PPP balances, grew an annualized 16% during the fourth quarter of 2021. Total loans, excluding PPP balances, ended the year at $2.26 billion, an increase of $211 million or 10.3% from their lows at June 30, 2021.
- Total deposits were $2.76 billion at December 31, 2021, an increase of 13.6% compared to the same period in 2020.
- Non-time deposits increased to $2.40 billion at December 31, 2021, an increase of $1.1 billion over the past two years for a compounded annual growth rate of 33.8%.
- Non-interest bearing demand deposits increased to $530 million or 19.2% of total deposits while time deposits decreased to 13.0% of total deposits at December 31, 2021.
- Cost of deposits declined to 0.39% for the fourth quarter of 2021 compared to 0.45% for the third quarter of 2021 and 0.71% for the fourth quarter of 2020.
- Pre-tax pre-provision earnings from continuing operations^(1)^ and pre-tax pre-provision operating earnings from continuing operations^(1)^ were $8.5 million and $7.9 million, respectively, for the fourth quarter of 2021, versus $8.5 million and $8.5 million, respectively, for the third quarter of 2021.
- Return on average assets from continuing operations totaled 0.88% for the quarter ended December 31, 2021 versus 0.72% for the quarter ended September 30, 2021.
- Operating return on average assets from continuing operations^(1)^ totaled 0.83% for the quarter ended December 31, 2021 versus 0.72% for the quarter ended September 30, 2021.
- Pre-tax, pre-provision return on average assets from continuing operations^(1)^ and pre-tax, pre-provision operating return on average assets from continuing operations^(1)^ totaled 0.91% for the fourth quarter of 2021, compared to 0.98% for the third quarter of 2021.
- Recovery of credit losses were $1.3 million for the fourth quarter of 2021 versus provision for credit losses of $1.1 million for the third quarter of 2021.
- Allowance for credit losses to total loans (excluding PPP balances) were 1.29% at December 31, 2021 versus 1.40% at September 30, 2021 and 1.71% at December 31, 2020.
- Book value per share of $16.76 and tangible book value per share^(1)^ was $12.43 at December 31, 2021, representing an increase of $0.73 and $0.83, respectively, from December 31, 2020 and after $0.40 in dividends paid over the last twelve months.
- Panacea loan growth of $29.9 million in the fourth quarter.
- Officially launched our new Life Premium Finance Division.
- Initial Friends and Family launch of Primis' new digital bank offering.
- Successfully launched and tested the new V1BE fulfillment service.
Dennis J. Zember, Jr., President and Chief Executive Officer of the Company commented, "Our efforts for a couple years now have been centered on building momentum in certain strategies that can grow both sides of our balance sheet with a noticeable bent towards quality customers and asset classes. Our current position with our core lending teams and our lines of business give us substantial confidence in future growth of earning assets. Our digital bank and its unique offerings will augment the deposit side of our balance sheet and the combination of these strategies should produce industry-oriented spreads with faster growth rates. Ending the year with two quarters of outsized growth in loans and a successful "friends and family" launch of the digital bank gives us confidence that our vision is taking shape and close to producing the results we expected."
Net Interest Income
Net interest income increased 4.5% to $24.2 million for the three months ended December 31, 2021 from $23.2 million for the three months ended September 30, 2021. The Company's reported net interest margin for the fourth quarter was 3.00% compared to 2.87% in the third quarter of 2021. Net PPP fee income recognized was $2.2 million for the three months ended December 31, 2021 versus $2.7 million for the prior quarter. Excluding net PPP fees, net interest income was $22.0 million for the fourth quarter of 2021 versus $20.5 million in the third quarter of 2021, an increase of 7.0%. Net interest margin excluding the effects of PPP loans^(1)^ was 2.79% in the fourth quarter of 2021, up 13 basis points from 2.66% linked-quarter. Net interest margin, excluding the effects of PPP loans, continues to be negatively impacted by unusually high cash balances at the Bank. Average balances of cash and equivalents were $619.3 million in the fourth quarter of 2021, down from $675.6 million in the third quarter of 2021.
Yield on loans for the fourth quarter of 2021 was 4.57% compared to 4.53% in the third quarter of 2021. Excluding the effect of PPP loans, yield on loans was 4.33%^(1)^ in the fourth quarter of 2021 compared to 4.35% in the third quarter of 2021. Efforts to improve the momentum on loan production and core loan growth has resulted in better results with very little impact to overall loan yields. Management believes it can continue to achieve its robust loan growth goals without substantial dilution to overall portfolio yields and without subjecting the Company to increased interest rate risk.
The Company's efforts on deposit sales and growth continue to focus on growth in lower cost deposit types. Management has continued to adjust deposit rates lower throughout the current interest rate environment and believes some small additional savings can be achieved. Management believes additional savings can be achieved in the overall cost of funds but wants to remain marginally ahead of its peers and continue driving outsized increases in total deposits, believing that the momentum on loan growth and lending strategies will use the liquidity in short order.
Noninterest Income
During the three months ended December 31, 2021, Primis had noninterest income of $3.33 million, compared to $2.69 million for the three months ended September 30, 2021. Excluding a gain on debt extinguishment of $573 thousand, non-interest income for the fourth quarter would have been $2.76 million. For the year-to-date period, the Company recorded total noninterest income of $11.1 million or $10.6 million excluding the gain on debt extinguishment. Noninterest income no longer includes the contribution of Southern Trust Mortgage which is included in discontinued operations. Inclusive of the loss on disposition, noninterest income contribution from STM would have been $0.3 million in 2021 versus $10.8 million in 2020.
Addressing the decision to exit the minority investment in STM, Mr. Zember said, "It is very important for our Company to have a more material presence in the residential mortgage market and to capitalize on the Company's in-house knowledge and expertise in this industry. The STM relationship has been fruitful but, long-term, the scalability and profit contribution as a minority shareholder was not sufficient to drive us meaningfully toward our goals on ROA or compel us to invest as heavily in teams and new markets as we wished. We expect to find a wholly-owned solution shortly and believe that as little as $1 billion in mortgage production would be sufficient to add between 20 and 25 basis points to our ROA and over 200 basis points to our ROTCE."
Service charges on deposit accounts stayed mostly flat each quarter of 2021 at approximately $1.8 million while deposit balances continued to increase. The Company's current banking offerings have noticeably lower fee schedules relative to our peers that recognize the industry's current trends and posture on fees. These early decisions by the Bank should position the Company to have the outsized growth in core deposits and transaction accounts that management believes will be necessary to fund expected growth in loans in the future.
Noninterest Expense
Noninterest expense was $18.9 million for the three months ended December 31, 2021, compared to $16.9 million for the three months ended September 30, 2021. Included in noninterest expense is unfunded commitment reserve recovery in the fourth quarter of 2021 of $152 thousand and $470 thousand in the third quarter of 2021. Excluding these items, noninterest expense for the three months ended December 31, 2021 was $19.1 million, an increase of $1.7 million from the third quarter of 2021.
Noninterest expense was up in the quarter largely due to increased employee compensation and benefits, professional fees and other expenses. Employee compensation and benefits increased $495 thousand linked-quarter partially due to higher staffing levels across the bank, including our Panacea and Life Premium Finance Divisions. Also included in this increase was $273 thousand in signing bonuses for new hires at Panacea and Life Premium Finance. Professional fees increased $475 thousand linked-quarter and included approximately $200 thousand in expenses related to the V1BE service described above. Increased consulting fees and increased legal expenses each contributed $90 thousand to the increase in professional fees for the quarter, largely related to the STM transaction and build out of the Life Premium Finance Division. Total professional fees included $241 thousand in recruiter fees for management and Life Premium Finance hires in the fourth quarter. Excluding unfunded commitment reserve recoveries, other expenses increased $764 thousand in the fourth quarter. The largest contributor to this increase was an increase of $486 thousand in marketing and advertising expense related to general promotional activities as well as marketing tied to the new V1BE service.
As the Company progresses into 2022, management believes there will be much less build in leadership roles and administration leading to a lower level of recruiter payments and signing bonuses as experienced in the fourth quarter of 2021. In addition, now that the V1BE service and Life Premium Finance Division are launched, legal expenses and excess marketing-related expenses should moderate from fourth quarter levels. On a combined basis, direct expenses attributed to Panacea, Life Premium Finance and V1BE should increase approximately $700 thousand per quarter in 2022 from fourth quarter 2021 levels. Primis will also have higher software amortization expense related to internally developed software and incur increased processing costs in 2022, both related to the build out of the digital bank in 2021 that entered service late in the year. These costs are expected to increase approximately $525 thousand per quarter in 2022 over fourth quarter 2021 levels.
The investments outlined above, particularly the capabilities associated with the new digital offering and new V1BE service, will allow Primis to consolidate branches in 2022 without a reduction in service levels to customers. The Company anticipates branch consolidation throughout 2022 and estimates $3.0 million of run-rate expense reductions as a result with approximately $1.5 million of expense reductions realized in 2022, excluding branch consolidation costs.
As discussed above, repositioning some existing positions, consolidating branch infrastructure and several other strategies are anticipated to offset some of the known increases in noninterest expense and hold the overall increase to a mid-single digits growth rate over 2021 levels, excluding branch consolidation costs, in 2022.
Loan Portfolio and Asset Quality
Loans outstanding increased to $2.34 billion at December 31, 2021, compared to $2.31 billion at September 30, 2021 and decreased from $2.44 billion at December 31, 2020. Excluding PPP loans, loans outstanding increased $89 million from September 30, 2021, a growth rate of 4.1% or approximately 16.3% annualized. An intense focus on building credit relationships, increased traction with new loan officers that joined early this year and increasing momentum from our Panacea Division and Life Premium Finance Division all contributed to growth this quarter. The Company believes these factors will continue to drive loan growth at mid-teens or higher rates through the end of 2022.
The Company ended the fourth quarter of 2021 with no loans on deferral down from $7.0 million of loans on deferral at September 30, 2021. Nonperforming assets, excluding portions guaranteed by the SBA, were 0.44% of total assets at December 31, 2021, compared to 0.47% of total assets at September 30, 2021. Loans rated substandard or doubtful decreased $4.9 million linked-quarter.
The allowance for credit losses was $29.1 million at December 31, 2021, down $1.3 million from $30.4 million at September 30, 2021 and down $7.2 million from $36.3 million at December 31, 2020. The Company recorded a recovery of credit loss expense of $1.3 million in the fourth quarter, primarily as a result of an improving economic outlook. As a percentage of loans, excluding PPP balances, the allowance declined to 1.29% at the end of the fourth quarter of 2021 versus 1.40% as of September 30, 2021. The Company recorded $18 thousand in net recoveries in the fourth quarter of 2021, or 0.0% of average loans, versus annualized net charge-offs as a percentage of average loans of 34 basis points in the prior quarter.
Lines of Business
The Company's efforts to develop or incubate new lines of business have started to produce early-stage results. Long –term the Bank believes these lines of business and the outsized growth associated with them are key to delivering higher levels of earnings per share growth than its peers or the industry as a whole.
Panacea finished the year with approximately $50.2 million in outstanding loans, the majority of which were originated in the second half of 2021. The division has successfully built a nationally-recognized brand and finished 2021 with a growing team of industry-leading commercial bankers experienced in providing financial services to the medical community across the United States. The Company believes that the momentum that the organization has built along with its brand, its partner associations and its experienced team leads will result in continued and substantial growth in 2022.
The Company launched a division in the fourth quarter of 2021 aimed at financing life insurance premiums for high net worth individuals across the nation. The Life Premium Finance Division originated and closed five loans in just 45 days of operation before the end of 2021 with committed balances totaling $69.4 million and outstanding balances, net of deferred fees, of $12.9 million at year-end. Outstanding balances on these loans grow over three to five years so the Company is expecting a sustainable growth rate in the division with each new loan originated. Notably, the Company's focus on technology and speed of underwriting and closing has brought the average time to close a loan for an agency or broker down to less than 30 days compared to the industry standard of 120 days or more.
Deposits
Total deposits decreased to $2.76 billion at December 31, 2021, compared to $2.81 billion at September 30, 2021 and $2.43 billion at December 31, 2020. The Company continues to aggressively pursue improvement in the funding mix with an emphasis on core deposits. During the quarter, time deposits declined by $14.4 million while core deposits (demand, NOW, money market and savings) decreased $29.5 million linked-quarter. The decrease in non-time deposits was driven by an approximately $125 million seasonal reduction in deposits tied to mortgage escrows. Absent this seasonal reduction, non-time deposits would have continued to show strong growth in the quarter. Time deposits represented approximately 13.0% of total deposits at December 31, 2021, down from 13.4% at September 30, 2021 and 20.1% at December 31, 2020.
Shareholders' Equity
Book value per share as of December 31, 2021 was $16.76, an increase of $0.13 since September 30, 2021 and $0.73 since December 31, 2020. Tangible book value per share^(1)^ at the end of the fourth quarter of 2021 was $12.43, an increase of $0.15 since September 30, 2021 and $0.83 since December 31, 2020. Shareholder's equity was $411.9 million, or 12.1% of total assets, at December 31, 2021. Tangible common equity^(1)^ at December 31, 2021 was $305.5 million, or 9.3% of tangible assets^(1)^.
About Primis Financial Corp.
As of December 31, 2021, Primis had $3.40 billion in total assets, $2.34 billion in total loans and $2.76 billion in total deposits. Primis Bank, the Company's banking subsidiary, provides a range of financial services to individuals and small- and medium-sized businesses through forty full-service branches in Virginia and Maryland and through certain internet and mobile applications.
| Contacts: | Address: |
|---|---|
| Dennis J. Zember, Jr.,<br>President and CEO | Primis Financial Corp. |
| Matthew A. Switzer, EVP and CFO | 6830 Old Dominion Drive |
| Phone: (703) 893-7400 | McLean, VA 22101 |
| Primis Financial Corp., NASDAQ Symbol FRST | |
| Website: www.primisbank.com |
Conference Call
The Company's management will host a conference call to discuss its fourth quarter results Friday, January 28, 2022 at 10:00 a.m. (ET). A live Webcast of the conference call is available at the following website: https://www.webcaster4.com/Webcast/Page/2742/44220. Participants may also call 1-888-346-2613 and ask for the Primis Financial Corp. call. A replay of the teleconference will be available through February 4, 2022 by calling 1-877-344-7529 and providing Replay Access Code 6050089.
Non-GAAP Measures
Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables. Primis uses non-GAAP financial measures to analyze its performance. The measures entitled net income from continuing operations adjusted for nonrecurring income and expenses; pre-tax pre-provision operating earnings from continuing operations; operating return on average assets from continuing operations; pre-tax pre-provision operating return on average assets from continuing operations; operating return on average equity from continuing operations; operating return on average tangible equity from continuing operations; operating efficiency ratio from continuing operations; tangible book value per share; tangible common equity; tangible common equity to tangible assets; and net interest margin excluding PPP loans are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. We use the term "operating" to describe a financial measure that excludes income or expense considered to be non-recurring in nature. Items identified as non-operating are those that, when excluded from a reported financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in our business. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in the Reconciliation of Non-GAAP items table.
Management believes that these non-GAAP financial measures provide additional useful information about Primis that allows management and investors to evaluate the ongoing operating results, financial strength and performance of Primis and provide meaningful comparison to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider Primis' performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of Primis. Non-GAAP financial measures are not standardized and, therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names.
Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.
Forward-Looking Statements
This press release and certain of our other filings with the Securities and Exchange Commission contain statements that constitute "forward-looking statements" within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Such statements can generally be identified by such words as "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and other similar words or expressions of the future or otherwise regarding the outlook for the Company's future business and financial performance and/or the performance of the banking industry and economy in general. These forward-looking statements include, but are not limited to, our expectations regarding our future operating and financial performance, including our outlook and long-term goals for future growth and new offerings and services; our expectations regarding net interest margin; expectations on our growth strategy, expense management, capital management and future profitability; expectations on credit quality and performance; statements regarding the effects of the COVID-19 pandemic and related variants on our business and financial results and conditions; and the assumptions underlying our expectations.
Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: the Company's ability to implement its various strategic and growth initiatives, including its recently established Panacea Financial and Life Premium Finance Divisions, new digital bank and V1BE fulfillment service; competitive pressures among financial institutions increasing significantly; changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to the COVID-19 pandemic; changes in management's plans for the future; credit risk associated with our lending activities; changes in interest rates, inflation, loan demand, real estate values, or competition; changes in accounting principles, policies, or guidelines; adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company's participation in and execution of government programs related to the COVID-19 pandemic; the impact of the COVID-19 pandemic on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for credit losses resulting from the economic impact of the COVID-19 pandemic; and other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services.
Forward-looking statements speak only as of the date on which such statements are made. These forward-looking statements are based upon information presently known to the Company's management and are inherently subjective, uncertain and subject to change due to any number of risks and uncertainties, including, without limitation, the risks and other factors set forth in the Company's filings with the Securities and Exchange Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2020, under the captions "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors," and in the Company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements.
| Primis Financial Corp. | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Financial Highlights (unaudited) | |||||||||||||
| (Dollars in thousands, except per share data) | For Three MonthsEnded: | Variance - 4Q 2021 vs. | For Twelve Months Ended: | Variance | |||||||||
| Selected Performance Ratios: | 4Q 2021 | 3Q 2021 | 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2021 | 4Q 2020 | 4Q 2021 | 4Q 2020 | YTD | |||
| Return on average assets from continuing operations | 0.88% | 0.72% | 1.05% | 1.06% | 0.91% | 17 | bps | (2) | bps | 0.92% | 0.50% | 42 | bps |
| Operating return on average assets from continuing operations^(1)^ | 0.83% | 0.72% | 1.05% | 1.08% | 0.58% | 11 | 26 | 0.92% | 0.56% | 36 | |||
| Pre-tax pre-provision operating return on average assets from continuing operations^(1)^ | 0.91% | 0.98% | 0.86% | 1.30% | 1.23% | (7) | (32) | 1.00% | 1.37% | (37) | |||
| Return on average equity from continuing operations | 7.37% | 6.01% | 8.81% | 8.60% | 7.19% | 136 | 18 | 7.67% | 3.87% | 380 | |||
| Operating return on average equity from continuing operations^(1)^ | 6.94% | 6.01% | 8.81% | 8.76% | 4.57% | 93 | 237 | 7.59% | 4.32% | 328 | |||
| Operating return on average tangible equity from continuing operations^(1)^ | 9.36% | 8.12% | 12.03% | 12.00% | 6.32% | 123 | 304 | 10.33% | 6.02% | 431 | |||
| Cost of funds | 0.56% | 0.57% | 0.66% | 0.78% | 0.93% | (1) | (37) | 0.65% | 1.01% | (36) | |||
| Net interest margin | 3.00% | 2.87% | 2.80% | 3.41% | 3.58% | 13 | (58) | 3.01% | 3.35% | (34) | |||
| Gross loans to deposits | 84.68% | 82.46% | 83.11% | 88.95% | 100.32% | 2 | pts | (16) | pts | 84.68% | 100.32% | (16) | pts |
| Efficiency ratio from continuing operations | 68.68% | 65.25% | 71.24% | 66.20% | 59.75% | 3 | 893 | 67.78% | 63.72% | 406 | |||
| Operating efficiency ratio from continuing operations^(1)^ | 70.14% | 65.25% | 71.24% | 65.47% | 64.50% | 5 | 564 | 67.96% | 59.82% | 814 | |||
| Per Share Data: | |||||||||||||
| Earnings per share from continuing operations - Basic | $ <br>0.31 | $ 0.25 | $ <br> 0.36 | $ 0.35 | $ 0.29 | 24.00 | % | 6.92 | % | $ 1.27 | $ <br> 0.61 | 108.20 | % |
| Earnings per share from discontinued operations - Basic | $ <br>- | $ (0.09) | $ 0.06 | $ 0.04 | $ 0.08 | (100.00) | % | (100.00) | $ 0.01 | $ <br> 0.35 | (97.14) | ||
| Earnings per share - Basic | $ <br>0.31 | $ 0.16 | $ 0.42 | $ 0.40 | $ 0.37 | 93.75 | % | (16.05) | $ 1.28 | $<br> 0.96 | 33.33 | ||
| Earnings per share from continuing operations - Diluted | $ <br> 0.31 | $ 0.25 | $ 0.36 | $ 0.34 | $ 0.29 | 24.00 | 7.49 | $ 1.26 | $ <br> 0.61 | 106.56 | |||
| Earnings per share from discontinued operations - Diluted | $ <br> - | $ (0.09) | $ 0.06 | $ 0.04 | $ 0.08 | (100.00) | (100.00) | $ 0.01 | $ <br> 0.35 | (97.14) | |||
| Earnings per share - Diluted | $ <br> 0.31 | $ 0.16 | $ 0.42 | $ 0.38 | $ 0.37 | 93.75 | % | (15.61) | $ 1.27 | $ <br> 0.96 | 32.29 | ||
| Book value per share | $ 16.76 | $ 16.63 | $ <br> 16.59 | $ 16.22 | $ 16.03 | 0.78 | 4.55 | $ 16.76 | $ <br> 16.03 | 4.55 | |||
| Tangible book value per share^(1)^ | $ <br> 12.43 | $ 12.28 | $ 12.22 | $ 11.84 | $ 11.60 | 1.22 | 7.16 | $ 12.43 | $ <br> 11.60 | 7.16 | |||
| Cash dividend per share | $ 0.10 | $ 0.10 | $ <br>0.10 | $ 0.10 | $ <br> 0.10 | - | - | $ 0.40 | $ <br> 0.40 | - | |||
| Weighted average shares outstanding - Basic | 24,476,569 | 24,474,104 | 24,450,916 | 24,349,884 | 24,272,312 | 0.01 | 0.84 | 24,438,309 | 24,239,481 | 0.82 | |||
| Weighted average shares outstanding - Diluted | 24,653,363 | 24,634,384 | 24,616,824 | 24,509,052 | 24,401,037 | 0.08 | 1.03 | 24,600,555 | 24,362,665 | 0.98 | |||
| Shares outstanding at end of period | 24,574,619 | 24,574,619 | 24,537,269 | 24,532,795 | 24,368,612 | - | % | 0.85 | % | 24,574,619 | 24,368,612 | 0.85 | % |
| Asset Quality Ratios: | |||||||||||||
| Non-performing assets as a percent of total assets, excluding SBA guarantees | 0.44% | 0.47% | 0.43% | 0.41% | 0.47% | (3) | bps | (3) | bps | 0.44% | 0.47% | (3) | bps |
| Net charge-offs (recoveries) as a percent of average loans (annualized) | (0.00%) | 0.34% | (0.10%) | 0.01% | 0.13% | (35) | (14) | 0.06% | 0.07% | (1) | |||
| Allowance for credit losses to total loans | 1.24% | 1.31% | 1.37% | 1.46% | 1.49% | (7) | (25) | 1.24% | 1.49% | (25) | |||
| Allowance for credit losses to total loans (excluding PPP loans) | 1.29% | 1.40% | 1.52% | 1.70% | 1.71% | (11) | (43) | 1.29% | 1.71% | (42) | |||
| Capital Ratios: | |||||||||||||
| Tangible common equity to tangible assets^(1)^ | 9.26% | 9.02% | 9.12% | 9.01% | 9.49% | 24 | bps | (22) | bps | ||||
| Leverage ratio ^(2)^ | 9.44% | 9.15% | 9.38% | 9.61% | 9.69% | 29 | (25) | ||||||
| Common equity tier 1 capital ratio ^(2)^ | 13.89% | 13.85% | 13.77% | 13.64% | 13.05% | 4 | 84 | ||||||
| Tier 1 risk-based capital ratio ^(2)^ | 14.35% | 14.31% | 14.23% | 14.11% | 13.52% | 4 | 83 | ||||||
| Total risk-based capital ratio^(2)^ | 19.57% | 19.60% | 19.52% | 19.48% | 19.58% | (3) | (1) | ||||||
| ^(1)^See Reconciliation of Non-GAAP financial measures. | |||||||||||||
| ^(2)^December 31, 2021 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C. | |||||||||||||
| Primis Financial Corp. | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| (Dollars in thousands) | As Of : | Variance - 4Q 2021 vs. | |||||||||||
| Condensed Consolidated Balance Sheets (unaudited) | 4Q2021 | 3Q 2021 | 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2021 | 4Q 2020 | ||||||
| Assets | |||||||||||||
| Cash and cash equivalents | $ 530,167 | $ 650,746 | $ 620,839 | $ 480,280 | $ <br>196,185 | (18.53) | % | 170.24 | % | ||||
| Investment securities-available for sale | 271,332 | 206,821 | 201,977 | 170,216 | 153,233 | 31.19 | 77.07 | ||||||
| Investment securities-held to maturity | 22,940 | 26,412 | 28,669 | 33,180 | 40,721 | (13.15) | (43.67) | ||||||
| Loans receivable, net of deferred fees | 2,339,986 | 2,314,584 | 2,286,355 | 2,391,529 | 2,440,496 | 1.10 | (4.12) | ||||||
| Allowance for credit losses | (29,105) | (30,386) | (31,265) | (34,893) | (36,345) | (4.22) | (19.92) | ||||||
| Net loans | 2,310,881 | 2,284,198 | 2,255,090 | 2,356,636 | 2,404,151 | 1.17 | (3.88) | ||||||
| Stock in Federal Reserve Bank and Federal Home Loan Bank | 15,521 | 15,521 | 15,521 | 15,521 | 16,927 | - | (8.31) | ||||||
| Investments in mortgage affiliate - held for sale | - | 10,050 | 12,949 | 14,212 | 12,952 | (100.00) | (100.00) | ||||||
| Preferred investment in mortgage affiliate | 3,005 | 3,005 | 3,005 | 3,005 | 3,005 | - | - | ||||||
| Bank premises and equipment, net | 36,166 | 30,686 | 30,099 | 30,076 | 30,306 | 17.86 | 19.34 | ||||||
| Operating lease right-of-use assets | 5,866 | 6,331 | 6,386 | 6,947 | 7,511 | (7.34) | (21.90) | ||||||
| Intangible assets | 106,416 | 106,757 | 107,098 | 107,439 | 107,780 | (0.32) | (1.27) | ||||||
| Bank-owned life insurance | 66,724 | 66,336 | 65,949 | 65,569 | 65,409 | 0.58 | 2.01 | ||||||
| Other real estate owned | 1,163 | 1,312 | 1,274 | 2,255 | 3,078 | (11.36) | (62.22) | ||||||
| Deferred tax assets, net | 9,571 | 13,571 | 14,442 | 14,702 | 14,646 | (29.47) | (34.65) | ||||||
| Accrued interest receivable | 11,882 | 13,643 | 13,028 | 18,197 | 19,998 | (12.91) | (40.58) | ||||||
| Other assets | 13,071 | 17,028 | 18,825 | 12,235 | 12,771 | (23.24) | 2.35 | ||||||
| Total assets | $ 3,404,705 | $ 3,452,417 | $ 3,395,151 | $ 3,330,470 | $ 3,088,673 | (1.38) | % | 10.23 | % | ||||
| Liabilities and stockholders' equity | |||||||||||||
| Demand deposits | $ 530,282 | $ 535,706 | $ 525,244 | $ 511,611 | $ <br>440,674 | (1.01) | % | 20.33 | % | ||||
| NOW accounts | 849,738 | 921,667 | 912,666 | 821,746 | 714,752 | (7.80) | 18.89 | ||||||
| Money market accounts | 799,759 | 758,259 | 714,759 | 713,968 | 603,318 | 5.47 | 32.56 | ||||||
| Savings accounts | 222,862 | 216,470 | 209,441 | 202,488 | 183,814 | 2.95 | 21.24 | ||||||
| Time deposits | 360,575 | 374,965 | 388,954 | 438,773 | 490,048 | (3.84) | (26.42) | ||||||
| Total deposits | 2,763,216 | 2,807,067 | 2,751,064 | 2,688,586 | 2,432,606 | (1.56) | 13.59 | ||||||
| Securities sold under agreements to repurchase - short term | 9,962 | 13,348 | 12,521 | 16,445 | 16,065 | (25.37) | (37.99) | ||||||
| Federal Home Loan Bank advances | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | - | - | ||||||
| Subordinated notes | 95,028 | 95,442 | 95,404 | 95,367 | 115,329 | (0.43) | (17.60) | ||||||
| Operating lease liabilities | 6,498 | 7,000 | 7,014 | 7,629 | 8,238 | (7.17) | (21.12) | ||||||
| Other liabilities | 18,120 | 20,931 | 22,208 | 24,457 | 25,881 | (13.43) | (29.99) | ||||||
| Total liabilities | 2,992,824 | 3,043,788 | 2,988,211 | 2,932,484 | 2,698,119 | (1.67) | 10.92 | ||||||
| Stockholders' equity | 411,881 | 408,629 | 406,940 | 397,986 | 390,554 | 0.80 | 5.46 | ||||||
| Total liabilities and stockholders' equity | $ 3,404,705 | $ 3,452,417 | $ 3,395,151 | $ 3,330,470 | $ 3,088,673 | (1.38) | % | 10.23 | % | ||||
| Tangible common equity^(1)^ | $ <br>305,465 | $ 301,872 | $ 299,842 | $ 290,547 | $ 282,774 | 1.19 | % | 8.02 | % | ||||
| Primis Financial Corp. | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars in thousands) | For Three Months Ended: | Variance - 4Q 2021 vs. | For Twelve Months Ended: | Variance | |||||||||
| Condensed Consolidated Statement of Operations (unaudited) | 4Q2021 | 3Q 2021 | 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2021 | 4Q 2020 | 4Q 2021 | 4Q 2020 | YTD | |||
| Interest and dividend income | $ <br>28,503 | $ 27,801 | $ 26,631 | $ 30,308 | $ 31,919 | 2.53 | % | (10.70) | % | $ 113,243 | $ <br> 117,779 | (3.85) | % |
| Interest expense | 4,262 | 4,594 | 4,831 | 5,353 | 6,265 | (7.23) | (31.97) | 19,040 | 26,139 | (27.16) | |||
| Net interest income | 24,241 | 23,207 | 21,800 | 24,955 | 25,654 | 4.46 | (5.51) | 94,203 | 91,640 | 2.80 | |||
| Provision for (recovery of) credit losses | (1,299) | 1,085 | (4,215) | (1,372) | 3,101 | (219.72) | (141.89) | (5,801) | 19,450 | (129.83) | |||
| Net interest income after provision for (recovery of) credit losses | 25,540 | 22,122 | 26,015 | 26,327 | 22,553 | 15.45 | 13.24 | 100,004 | 72,190 | 38.53 | |||
| Account maintenance and deposit service fees | 1,865 | 1,843 | 1,784 | 1,817 | 1,700 | 1.19 | 9.71 | 7,309 | 6,520 | 12.10 | |||
| Income from bank-owned life insurance | 535 | 387 | 379 | 386 | 394 | 38.24 | 35.79 | 1,687 | 1,559 | 8.21 | |||
| Gain on debt extinguishment | 573 | - | - | - | - | - | - | 573 | - | - | |||
| Realized losses on sales of investment securities | - | - | - | - | (620) | - | (100.00) | - | (620) | (100.00) | |||
| Recoveries on loans and securities charged-off prior to acquisition | 52 | 481 | 224 | 79 | 3,793 | (89.19) | (98.63) | 836 | 6,500 | (87.14) | |||
| Other | 307 | (26) | 229 | 220 | 129 | NM | 137.98 | 730 | 703 | 3.84 | |||
| Noninterest income | 3,332 | 2,685 | 2,616 | 2,502 | 5,396 | 24.10 | (38.25) | 11,135 | 14,662 | (24.06) | |||
| Employee compensation and benefits | 9,527 | 9,032 | 8,810 | 9,372 | 9,211 | 5.48 | 3.43 | 36,741 | 36,675 | 0.18 | |||
| Occupancy and equipment expenses | 2,487 | 2,523 | 2,311 | 2,355 | 2,114 | (1.43) | 17.64 | 9,676 | 8,867 | 9.12 | |||
| Amortization of core deposit intangible | 342 | 341 | 341 | 341 | 341 | 0.29 | 0.29 | 1,365 | 1,364 | 0.07 | |||
| Virginia franchise tax expense | 733 | 732 | 759 | 675 | 613 | 0.14 | 19.58 | 2,899 | 2,457 | 17.99 | |||
| Data processing expense | 934 | 1,003 | 1,016 | 799 | 814 | (6.88) | 14.74 | 3,752 | 3,178 | 18.06 | |||
| Telecommunication and communication expense | 439 | 415 | 414 | 522 | 378 | 5.78 | 16.14 | 1,790 | 1,497 | 19.57 | |||
| Net (gain) loss on other real estate owned | 70 | - | 77 | (60) | 905 | - | (92.27) | 87 | 960 | (90.94) | |||
| Professional fees | 1,683 | 1,208 | 1,289 | 1,287 | 1,166 | 39.32 | 44.34 | 5,467 | 4,726 | 15.68 | |||
| Other expenses | 2,722 | 1,640 | 2,376 | 2,885 | 3,012 | 65.98 | (9.63) | 9,623 | 8,016 | 20.05 | |||
| Noninterest expense | 18,937 | 16,894 | 17,393 | 18,176 | 18,554 | 12.09 | 2.06 | 71,400 | 67,740 | 5.40 | |||
| Income from continuing operations before income taxes | 9,935 | 7,913 | 11,238 | 10,653 | 9,395 | 25.55 | 5.75 | 39,739 | 19,112 | 107.93 | |||
| Income tax expense | 2,284 | 1,702 | 2,434 | 2,301 | 2,358 | 34.20 | (3.13) | 8,721 | 4,228 | 106.27 | |||
| Income from continuing operations | 7,651 | 6,211 | 8,804 | 8,352 | 7,037 | 23.18 | 8.72 | 31,018 | 14,884 | 108.40 | |||
| Income (loss) from discontinued operations before income taxes | - | (2,899) | 1,878 | 1,315 | 2,571 | (100.00) | (100.00) | 294 | 10,789 | (97.28) | |||
| Income tax expense (benefit) | - | (627) | 407 | 284 | 645 | (100.00) | (100.00) | 64 | 2,386 | (97.32) | |||
| Income (loss) from discontinued operations | - | (2,272) | 1,471 | 1,031 | 1,926 | (100.00) | (100.00) | 230 | 8,403 | (97.26) | |||
| Net income | $ 7,651 | $ 3,939 | $ 10,275 | $ 9,383 | $ 8,963 | 94.24 | % | (14.64) | % | $ 31,248 | $<br> 23,287 | 34.19 | % |
| ^(1)^See Reconciliation of Non-GAAP financial measures. | |||||||||||||
| The company defines "NM" as not meaningful for increases or decreases greater than 300 percent. | |||||||||||||
| Primis Financial Corp. | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| (Dollars in thousands) | As Of: | Variance - 4Q 2021 vs. | |||||||||||
| Loan Portfolio Composition | 4Q 2021 | 3Q 2021 | 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2021 | 4Q 2020 | ||||||
| Loans secured by real estate: | |||||||||||||
| Commercial real estate - owner occupied | $ 389,109 | $ 421,940 | $ 417,489 | $ 421,666 | $ 436,338 | (7.78) | % | (10.82) | % | ||||
| Commercial real estate - non-owner occupied | 590,523 | 631,423 | 563,114 | 567,945 | 602,191 | (6.48) | (1.94) | ||||||
| Secured by farmland | 10,003 | 10,721 | 11,861 | 12,351 | 13,136 | (6.70) | (23.85) | ||||||
| Construction and land development | 121,520 | 109,763 | 109,719 | 104,661 | 103,401 | 10.71 | 17.52 | ||||||
| Residential 1-4 family | 548,830 | 531,556 | 516,475 | 515,518 | 559,299 | 3.25 | (1.87) | ||||||
| Multi-family residential | 164,071 | 153,310 | 130,221 | 136,914 | 107,130 | 7.02 | 53.15 | ||||||
| Home equity lines of credit | 73,877 | 75,775 | 80,262 | 85,160 | 91,857 | (2.50) | (19.57) | ||||||
| Total real estate loans | 1,897,933 | 1,934,488 | 1,829,141 | 1,844,215 | 1,913,352 | (1.89) | (0.81) | ||||||
| Commercial loans | 303,697 | 203,243 | 194,610 | 188,050 | 189,622 | 49.43 | 60.16 | ||||||
| Paycheck Protection Program loans | 77,319 | 140,465 | 234,315 | 335,210 | 314,982 | (44.95) | (75.45) | ||||||
| Consumer loans | 61,037 | 36,388 | 28,289 | 24,054 | 22,540 | 67.74 | 170.79 | ||||||
| Loans receivable, net of deferred fees | $ 2,339,986 | $ 2,314,584 | $ <br> 2,286,355 | $ 2,391,529 | $ 2,440,496 | 1.10 | % | (4.12) | % | ||||
| Loans by Risk Grade: | |||||||||||||
| Pass, not graded | $ <br> - | $ - | $ - | $ - | $ 533,287 | - | % | (100.00) | % | ||||
| Pass Grade 1 - Highest Quality | 641 | 789 | 1,054 | 955 | 778 | (18.76) | (17.61) | ||||||
| Pass Grade 2 - Good Quality | 103,496 | 153,834 | 247,664 | 348,836 | 332,251 | (32.72) | (68.85) | ||||||
| Pass Grade 3 - Satisfactory Quality | 1,327,718 | 1,248,233 | 1,142,784 | 1,110,453 | 627,270 | 6.37 | 111.67 | ||||||
| Pass Grade 4 - Pass | 836,610 | 841,451 | 823,866 | 853,234 | 872,604 | (0.58) | (4.12) | ||||||
| Pass Grade 5 - Special Mention | 31,112 | 25,008 | 29,844 | 33,661 | 29,809 | 24.41 | 4.37 | ||||||
| Grade 6 - Substandard | 40,409 | 45,269 | 39,613 | 44,390 | 44,497 | (10.74) | (9.19) | ||||||
| Grade 7 - Doubtful | - | - | 1,530 | - | - | - | - | ||||||
| Grade 8 - Loss | - | - | - | - | - | - | - | ||||||
| Total loans | $ 2,339,986 | $ 2,314,584 | $ 2,286,355 | $ 2,391,529 | $ 2,440,496 | 1.10 | % | (4.12) | % | ||||
| (Dollars in thousands) | As Of or For Three MonthsEnded: | ||||||||||||
| --- | --- | --- | --- | --- | --- | ||||||||
| Asset Quality Information | 4Q 2021 | 3Q 2021 | 2Q 2021 | 1Q 2021 | 4Q 2020 | ||||||||
| Allowance for Credit Losses: | |||||||||||||
| Balance at beginning of period | $ (30,386) | $ (31,265) | $ (34,893) | $ (36,345) | $ <br> (25,779) | ||||||||
| Adoption of CECL | - | - | - | - | (8,292) | ||||||||
| (Provision for) / recovery of allowance for credit losses | 1,299 | (1,085) | 4,215 | 1,372 | (3,101) | ||||||||
| Net charge-offs | (18) | 1,964 | (587) | 80 | 827 | ||||||||
| Ending balance | $ (29,105) | $ (30,386) | $ (31,265) | $ (34,893) | $ (36,345) | ||||||||
| Reserve for Unfunded Commitments: | |||||||||||||
| Balance at beginning of period | $ (1,129) | $ (1,599) | $ <br> (1,450) | $ (740) | $ (55) | ||||||||
| Adoption of CECL | - | - | - | - | (305) | ||||||||
| (Expense for) / recovery of unfunded loan commitment reserve | 152 | 470 | (149) | (710) | (380) | ||||||||
| Total Reserve for Unfunded Commitments | $ (977) | $ (1,129) | $ (1,599) | $ (1,450) | $ <br> (740) | ||||||||
| As Of: | Variance - 4Q 2021 vs. | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| Non-Performing Assets: | 4Q 2021 | 3Q 2021 | 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2021 | 4Q 2020 | ||||||
| Nonaccrual loans | $ 15,029 | $ 18,352 | $ 14,604 | $ 14,251 | $ <br>14,462 | (18.11) | % | 3.92 | % | ||||
| Accruing loans delinquent 90 days or more | 283 | - | - | - | - | - | - | ||||||
| Total non-performing loans | 15,312 | 18,352 | 14,604 | 14,251 | 14,462 | (16.56) | 5.88 | ||||||
| Other real estate owned | 1,163 | 1,312 | 1,274 | 2,255 | 3,078 | (11.36) | (62.22) | ||||||
| Total non-performing assets | $ 16,475 | $ 19,664 | $ 15,878 | $ 16,506 | $ 17,540 | (16.22) | (6.07) | ||||||
| SBA guaranteed portion of non-performing loans | $ <br>1,388 | $ 3,361 | $ 1,380 | $ 2,960 | $ 3,076 | (58.70) | (54.88) | ||||||
| Troubled debt restructuring | $ 3,401 | $ 3,710 | $ <br> 2,766 | $ 2,804 | $ 987 | (8.33) | 244.6 | ||||||
| Loans deferred under COVID-19 modifications | $ <br>- | $ 6,985 | $ <br> 25,977 | $ 112,834 | $ 122,010 | (100.00) | % | (100.00) | % | ||||
| Primis Financial Corp. | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars in thousands) | For Three Months Ended: | Variance - 2Q 2021 vs. | For Twelve Months Ended: | Variance | |||||||||
| Average Balance Sheet | 4Q 2021 | 3Q 2021 | 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2021 | 4Q 2020 | 4Q 2021 | 4Q 2020 | YTD | |||
| Assets | |||||||||||||
| Loans, net of deferred fees | $ 2,317,260 | $ 2,291,945 | $ 2,327,162 | $ 2,436,713 | $ 2,497,259 | 1.10 | % | (7.21) | % | $ 2,342,802 | $ 2,400,896 | (2.42) | % |
| Investment securities | 258,265 | 229,906 | 215,713 | 193,364 | 204,968 | 12.34 | 26.00 | 224,505 | 217,932 | 3.02 | |||
| Other earning assets | 632,841 | 689,084 | 577,939 | 339,480 | 147,014 | (8.16) | NM | 560,994 | 114,275 | NM | |||
| Total earning assets | 3,208,366 | 3,210,935 | 3,120,814 | 2,969,557 | 2,849,241 | (0.08) | 12.60 | 3,128,301 | 2,733,103 | 14.46 | |||
| Investment in STM - Held for sale | 9,941 | 12,621 | 12,728 | 12,629 | 12,168 | 11,974 | 12,168 | ||||||
| Other assets | 229,718 | 230,116 | 226,836 | 228,108 | 240,063 | (0.17) | (4.31) | 228,703 | 240,867 | (5.05) | |||
| Total assets | $ 3,448,025 | $ <br> 3,453,672 | $ 3,360,378 | $ 3,210,294 | $ 3,101,472 | (0.16) | % | 11.17 | % | $ 3,368,978 | $ 2,986,138 | 12.82 | % |
| Liabilities and stockholders' equity | |||||||||||||
| Demand deposits | $ 547,504 | $ 547,500 | $ 516,877 | $ 477,812 | $ 459,830 | 0.00 | % | 19.07 | % | $ 522,683 | $ 416,249 | 25.57 | % |
| Interest-bearing liabilities: | |||||||||||||
| NOW and other demand accounts | 878,652 | 920,203 | 867,499 | 773,768 | 688,125 | (4.52) | 27.69 | 860,482 | 481,470 | 78.72 | |||
| Money market accounts | 784,942 | 744,280 | 719,925 | 653,443 | 569,223 | 5.46 | 37.90 | 726,059 | 508,260 | 42.85 | |||
| Savings accounts | 219,823 | 213,859 | 206,507 | 192,252 | 182,434 | 2.79 | 20.49 | 208,202 | 167,567 | 24.25 | |||
| Time deposits | 368,603 | 380,233 | 409,247 | 465,945 | 525,607 | (3.06) | (29.87) | 405,670 | 645,123 | (37.12) | |||
| Total Deposits | 2,799,524 | 2,806,075 | 2,720,055 | 2,563,219 | 2,425,219 | (0.23) | 15.43 | 2,723,096 | 2,218,669 | 22.74 | |||
| Borrowings | 216,010 | 215,670 | 217,890 | 226,398 | 260,493 | 0.16 | (17.08) | 218,955 | 358,087 | (38.85) | |||
| Total Funding | 3,015,534 | 3,021,745 | 2,937,945 | 2,789,617 | 2,685,712 | (0.21) | 12.28 | 2,942,051 | 2,576,756 | 14.18 | |||
| Other Liabilities | 20,612 | 21,718 | 21,628 | 25,539 | 26,588 | (5.09) | (22.48) | 22,358 | 24,693 | (9.46) | |||
| Stockholders' equity | 411,879 | 410,209 | 400,805 | 395,138 | 389,172 | 0.41 | 5.83 | 404,569 | 384,689 | 5.17 | |||
| Total liabilities and stockholders' equity | $ <br> 3,448,025 | $ 3,453,672 | $ 3,360,378 | $ 3,210,294 | $ 3,101,472 | (0.16) | % | 11.17 | % | $ 3,368,978 | $<br> 2,986,138 | 12.82 | % |
| Memo: Average PPP loans | $ 102,078 | $ 191,504 | $ 294,019 | $ 333,145 | $ 332,080 | (46.70) | % | (69.26) | % | $ 229,447 | $ <br>215,770 | 6.34 | % |
| Net Interest Income | |||||||||||||
| Loans | $ 26,701 | $ <br>26,181 | $ 25,182 | $ <br>28,957 | $ 30,596 | 1.99 | % | (12.73) | % | $ 107,021 | $ 111,647 | (4.14) | % |
| Investment securities | 1,242 | 1,083 | 1,073 | 1,042 | 993 | 14.68 | 25.08 | 4,440 | 4,730 | (6.13) | |||
| Other earning assets | 560 | 537 | 376 | 309 | 330 | 4.28 | 69.70 | 1,782 | 1,402 | 27.10 | |||
| Total Earning Assets | 28,503 | 27,801 | 26,631 | 30,308 | 31,919 | 2.53 | (10.70) | 113,243 | 117,779 | (3.85) | |||
| Non-interest bearing DDA | - | - | - | - | - | - | - | - | - | - | |||
| NOW and other interest-bearing demand accounts | 832 | 1,062 | 1,022 | 1,093 | 1,167 | (21.66) | (28.71) | 4,010 | 3,505 | 14.41 | |||
| Money market accounts | 952 | 1,056 | 1,153 | 1,085 | 984 | (9.85) | (3.25) | 4,246 | 4,188 | 1.38 | |||
| Savings accounts | 154 | 165 | 157 | 142 | 137 | (6.67) | 12.41 | 618 | 490 | 26.12 | |||
| Time deposits | 809 | 877 | 1,057 | 1,496 | 2,038 | (7.75) | (60.30) | 4,238 | 12,149 | (65.12) | |||
| Total Deposit Costs | 2,747 | 3,160 | 3,389 | 3,816 | 4,326 | (13.07) | (36.50) | 13,112 | 20,332 | (35.51) | |||
| Other Borrowings | 1,515 | 1,434 | 1,442 | 1,537 | 1,939 | 5.65 | (21.87) | 5,928 | 5,807 | 2.08 | |||
| Total Funding Costs | 4,262 | 4,594 | 4,831 | 5,353 | 6,265 | (7.23) | (31.97) | 19,040 | 26,139 | (27.16) | |||
| Net Interest Income | $ 24,241 | $ 23,207 | $ <br> 21,800 | $ 24,955 | $ 25,654 | 4.46 | % | (5.51) | % | $ 94,203 | $ <br> 91,640 | 2.80 | % |
| Memo: SBA PPP loan interest and fee income | $ 2,503 | $ 3,146 | $ <br>2,559 | $ 5,778 | $ <br> 5,725 | (20.44) | % | (56.28) | % | $ 13,985 | $ <br> 8,470 | 65.11 | % |
| Memo: SBA PPP loan funding costs | $ 90 | $ 169 | $ <br> 257 | $ 288 | $ 498 | (46.75) | % | (81.93) | % | $ 803 | $ <br> 756 | 6.22 | % |
| Net Interest Margin | |||||||||||||
| Loans | 4.57% | 4.53% | 4.34% | 4.82% | 4.87% | 4 | bps | (30) | bps | 4.57% | 4.65% | (8) | bps |
| Investments | 1.91% | 1.87% | 2.00% | 2.19% | 1.93% | 4 | (2) | 1.98% | 2.17% | (19) | |||
| Other Earning Assets | 0.35% | 0.31% | 0.26% | 0.37% | 0.89% | 4 | (54) | 0.32% | 1.23% | (91) | |||
| Total Earning Assets | 3.52% | 3.44% | 3.42% | 4.14% | 4.46% | 8 | (94) | 3.62% | 4.31% | (69) | |||
| - | |||||||||||||
| NOW | 0.38% | 0.46% | 0.47% | 0.57% | 0.67% | (8) | (29) | 0.47% | 0.73% | (26) | |||
| MMDA | 0.48% | 0.56% | 0.64% | 0.67% | 0.69% | (8) | (21) | 0.58% | 0.82% | (24) | |||
| Savings | 0.28% | 0.31% | 0.30% | 0.30% | 0.30% | (3) | (2) | 0.30% | 0.29% | 1 | |||
| CDs | 0.87% | 0.92% | 1.04% | 1.30% | 1.54% | (5) | (67) | 1.04% | 1.88% | (84) | |||
| Cost of Interest Bearing Deposits | 0.48% | 0.56% | 0.62% | 0.74% | 0.88% | (8) | (40) | 0.60% | 1.13% | (53) | |||
| Cost of Deposits | 0.39% | 0.45% | 0.50% | 0.60% | 0.71% | (6) | (32) | 0.48% | 0.92% | (44) | |||
| - | |||||||||||||
| Other Funding | 2.78% | 2.64% | 2.65% | 2.75% | 2.96% | 14 | (18) | 2.71% | 1.62% | 109 | |||
| Total Cost of Funds | 0.56% | 0.57% | 0.66% | 0.78% | 0.93% | (1) | (37) | 0.65% | 1.01% | (36) | |||
| Net Interest Margin | 3.00% | 2.87% | 2.80% | 3.41% | 3.58% | 13 | (58) | 3.01% | 3.35% | (34) | |||
| Net Interest Spread | 2.96% | 2.83% | 2.76% | 3.36% | 3.53% | 13 | (57) | 2.97% | 3.29% | (32) | |||
| Memo: Excluding SBA PPP loans | |||||||||||||
| Loans | 4.33% | 4.35% | 4.46% | 4.47% | 4.57% | (2) | bps | (24) | bps | 4.40% | 4.72% | (32) | bps |
| Total Earning Assets | 3.32% | 3.24% | 3.42% | 3.77% | 4.14% | 8 | (82) | 3.42% | 4.34% | (92) | |||
| Net Interest Margin* | 2.79% | 2.66% | 2.77% | 2.99% | 3.23% | 13 | (44) | 2.79% | 3.33% | (54) | |||
| *Net interest margin excluding the effect of SBA PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods | |||||||||||||
| The company defines "NM" as not meaningful for increases or decreases greater than 300 percent. | |||||||||||||
| Primis Financial Corp. | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| (Dollars in thousands, except per share data) | For Three Months Ended: | For Twelve Months Ended: | |||||||||||
| Reconciliation of Non-GAAP items: | 4Q 2021 | 3Q 2021 | 2Q 2021 | 1Q 2021 | 4Q 2020 | 4Q 2021 | 4Q 2020 | ||||||
| Net income from continuing operations | $ 7,651 | $ 6,211 | $ 8,804 | $ 8,352 | $ 7,037 | $ 31,018 | $ 14,884 | ||||||
| Non-GAAP adjustments to Net Income from continuing operations: | |||||||||||||
| Management Restructure / Recruiting | - | - | - | 200 | 843 | 200 | 5,742 | ||||||
| Branch Closures | - | - | - | - | - | - | 479 | ||||||
| (Gain or recovery) / loss on securities | - | - | - | - | (2,964) | - | (2,964) | ||||||
| Brand Initative / Renaming | - | - | - | - | 1,000 | - | 1,000 | ||||||
| Extraordinary PPP income and expense | - | - | - | - | (2,177) | - | (2,177) | ||||||
| (Gain) on debt extinguishment | (573) | - | - | - | - | (573) | - | ||||||
| Income tax effect | 124 | - | - | (43) | 729 | 81 | (347) | ||||||
| Net Income from continuing operations adjusted for nonrecurring income and expenses | $ <br> 7,202 | $ 6,211 | $ 8,804 | $ 8,509 | $ 4,468 | $ 30,726 | $ 16,617 | ||||||
| Net income from continuing operations | $ 7,651 | $ 6,211 | $ <br>8,804 | $ 8,352 | $ <br> 7,037 | $ 31,018 | $ 14,884 | ||||||
| Income tax expense | 2,284 | 1,702 | 2,434 | 2,301 | 2,358 | 8,721 | 4,228 | ||||||
| Provision for credit losses (incl. unfunded commitment expense) | (1,451) | 615 | (4,066) | (661) | 3,481 | (5,801) | 19,450 | ||||||
| Pre-tax pre-provision earnings from continuing operations | $ 8,484 | $ <br>8,528 | $ 7,172 | $ <br> 9,992 | $ 12,876 | $ 33,938 | $ 38,562 | ||||||
| Effect of adjustment for nonrecurring income and expenses | (573) | - | - | 200 | (3,298) | (373) | 2,080 | ||||||
| Pre-tax pre-provision operating earnings from continuing operations | $ 7,911 | $ <br> 8,528 | $ 7,172 | $ 10,192 | $ 9,578 | $ 33,565 | $ 40,642 | ||||||
| Return on average assets from continuing operations | 0.88% | 0.72% | 1.05% | 1.06% | 0.91% | 0.92% | 0.50% | ||||||
| Effect of adjustment for nonrecurring income and expenses | (0.05%) | 0.00% | 0.00% | 0.02% | (0.33%) | (0.01%) | 0.06% | ||||||
| Operating return on average assets from continuing operations | 0.83% | 0.72% | 1.05% | 1.08% | 0.58% | 0.92% | 0.56% | ||||||
| Return on average assets from continuing operations | 0.88% | 0.72% | 1.05% | 1.06% | 0.91% | 0.92% | 0.50% | ||||||
| Effect of tax expense | 0.26% | 0.20% | 0.29% | 0.29% | 0.30% | 0.26% | 0.14% | ||||||
| Effect of provision for credit losses | (0.17%) | 0.07% | (0.49%) | (0.08%) | 0.45% | (0.17%) | 0.65% | ||||||
| Pre-tax pre-provision return on average assets from continuing operations | 0.98% | 0.98% | 0.86% | 1.27% | 1.66% | 1.01% | 1.30% | ||||||
| Effect of adjustment for nonrecurring income and expenses | (0.07%) | 0.00% | 0.00% | 0.03% | (0.42%) | (0.01%) | 0.07% | ||||||
| Pre-tax pre-provision operating return on average assets from continuing operations | 0.91% | 0.98% | 0.86% | 1.30% | 1.23% | 1.00% | 1.37% | ||||||
| Return on average equity from continuing operations | 7.37% | 6.01% | 8.81% | 8.60% | 7.19% | 7.67% | 3.87% | ||||||
| Effect of adjustment for nonrecurring income and expenses | (0.43%) | 0.00% | 0.00% | 0.16% | (2.63%) | (0.07%) | 0.45% | ||||||
| Operating return on average equity from continuing operations | 6.94% | 6.01% | 8.81% | 8.76% | 4.57% | 7.59% | 4.32% | ||||||
| Effect of goodwill and other intangible assets | 2.42% | 2.11% | 3.22% | 3.24% | 1.75% | 2.73% | 1.70% | ||||||
| Operating return on average tangible equity from continuing operations | 9.36% | 8.12% | 12.03% | 12.00% | 6.32% | 10.33% | 6.02% | ||||||
| Efficiency ratio from continuing operations | 68.68% | 65.25% | 71.24% | 66.20% | 59.75% | 67.78% | 63.72% | ||||||
| Effect of adjustment for nonrecurring income and expenses | 1.46% | 0.00% | 0.00% | (0.73%) | 4.74% | 0.18% | (3.90%) | ||||||
| Operating efficiency ratio from continuing operations | 70.14% | 65.25% | 71.24% | 65.47% | 64.50% | 67.96% | 59.82% | ||||||
| Book value per share | $ 16.76 | $ 16.63 | $ 16.59 | $ 16.22 | $ <br>16.03 | $ 16.76 | $ 16.03 | ||||||
| Effect of goodwill and other intangible assets | (4.34) | (4.35) | (4.37) | (4.38) | (4.43) | (4.33) | (4.42) | ||||||
| Tangible book value per share | $ 12.43 | $ <br>12.28 | $ 12.22 | $ 11.84 | $ 11.60 | $ 12.43 | $ 11.60 | ||||||
| Stockholders' equity | $ 411,881 | $ 408,629 | $ <br>406,940 | $ 397,986 | $ 390,554 | $ 411,881 | $ 390,554 | ||||||
| Less goodwill and other intangible assets | (106,416) | (106,757) | (107,098) | (107,439) | (107,780) | (106,416) | (107,780) | ||||||
| Tangible common equity | $ 305,465 | $ <br>301,872 | $ 299,842 | $ 290,547 | $ 282,774 | $ 305,465 | $ 282,774 | ||||||
| Equity to assets | 12.10% | 11.84% | 11.99% | 11.95% | 12.64% | 12.10% | 12.64% | ||||||
| Effect of goodwill and other intangible assets | (2.84%) | (2.81%) | (2.87%) | (2.94%) | (3.16%) | (2.84%) | (3.16%) | ||||||
| Tangible common equity to tangible assets | 9.26% | 9.02% | 9.12% | 9.01% | 9.49% | 9.26% | 9.49% | ||||||
| Net interest margin | 3.00% | 2.87% | 2.80% | 3.41% | 3.58% | 3.01% | 3.35% | ||||||
| Effect of adjustment for PPP associated balances* | (0.21%) | (0.21%) | (0.03%) | (0.42%) | (0.35%) | (0.22%) | (0.02%) | ||||||
| Net interest margin excluding PPP | 2.79% | 2.66% | 2.77% | 2.99% | 3.23% | 2.79% | 3.33% | ||||||
| *Net interest margin excluding the effect of PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods |
Fourth Quarter 2021 NASDAQ: FRST Exhibit 99.2
This presentation and certain of our other filings with the Securities and Exchange Commission contain statements that constitute “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Such statements can generally be identified by such words as "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and other similar words or expressions of the future or otherwise regarding the outlook for the Company’s future business and financial performance and/or the performance of the banking industry and economy in general. These forward-looking statements include, but are not limited to, our expectations regarding our future operating and financial performance, including our outlook and long-term goals for future growth and new offerings and services; our expectations regarding net interest margin; expectations on our growth strategy, expense management, capital management and future profitability; expectations on credit quality and performance; statements regarding the effects of the COVID-19 pandemic and related variants on our business and financial results and conditions; and the assumptions underlying our expectations. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: the Company’s ability to implement its various strategic and growth initiatives, including its recently established Panacea Financial and Life Premium Finance Divisions, new digital bank and V1BE fulfillment service; competitive pressures among financial institutions increasing significantly; changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to the COVID-19 pandemic; changes in management’s plans for the future; credit risk associated with our lending activities; changes in interest rates, inflation, loan demand, real estate values, or competition; changes in accounting principles, policies, or guidelines; adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic; the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for credit losses resulting from the economic impact of the COVID-19 pandemic; and other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. Forward-looking statements speak only as of the date on which such statements are made. These forward-looking statements are based upon information presently known to the Company’s management and are inherently subjective, uncertain and subject to change due to any number of risks and uncertainties, including, without limitation, the risks and other factors set forth in the Company’s filings with the Securities and Exchange Commission, the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, under the captions “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors,” and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements. Forward-Looking Statements 2
Statements included in this presentation include non-GAAP financial measures and should be read along with the accompanying tables. Primis uses non-GAAP financial measures to analyze its performance. The measures entitled pre-tax pre-provision operating earnings from continuing operations; pre-tax pre-provision operating return on average assets from continuing operations; tangible common equity; tangible common equity to tangible assets; tangible book value per share; and net interest margin excluding PPP loans are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in the Reconciliation of Non-GAAP items table. Management believes that these non-GAAP financial measures provide additional useful information about Primis that allows management and investors to evaluate the ongoing operating results, financial strength and performance of Primis and provide meaningful comparison to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider Primis’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of Primis. Non-GAAP financial measures are not standardized and, therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP. Non-GAAP Measure 3
A pioneering bank, committed to imagining a faster and more convenient way to serve you. WELCOME TO PRIMIS Corp. Headquarters: McLean, VA Bank Headquarters: Glen Allen, VA Branches: 40 Ticker (NASDAQ): FRST Valuation Market Capitalization: $374 million Price / Book Value per Share 0.91x Price / Tangible Book Value: 1.22x Price / 2022 Estimated EPS(3): 13.96x Price / 2023 Estimated EPS(3): 11.62x Dividend Yield(4): 2.63% 4 Pricing as of January 26, 2022. Financial data as of or for the three months ended December 31, 2021. (1) See reconciliation of Non-GAAP financial measures on slide 27. (2) Results from continuing operations (3) Mean analyst estimates per S&P Global. (4) Assumes $0.40 annualized dividend.
In 2020 We Embarked on a Strategic Shift Traditional Community Bank High Performing Community Bank Strategic Business Lines Digital Bank With Modern Technology 5
High Performing Community Bank Strategic Business Lines Digital Bank With Modern Technology 2021 Delivered Meaningful Progress on Our Strategy Increased NIB to 19.2% of deposits Reduced cost of deposits from 71 bps to 39 bps (Q4‘20 vs. Q4‘21) 2021 loan growth ex PPP of 6.5%, primarily in 2H’21 Initial testing of V1BE service in select markets Launched Primis Works – our single mother apprenticeship program to support our communities “Friends and Family” testing of digital bank launched in late November Full public launch by end of Q1 Beginning work on next phase of feature development Positioning with potential partners to use as a BaaS platform Build out of Panacea Financial Division Launch of Primis Life Premium Finance Division Restructured STM minority-ownership to allow for wholly-owned mortgage solution Built out mortgage warehouse capabilities 6
High Performing Community Bank 7 Valuable franchise in great markets
Continued focus on improving deposit mix and lowering cost of deposits
Solid loan growth in our core markets – approx. 5% in 2021 and 16% in 2H’21 annualized* versus limited growth the prior 3 years
Consolidated 2 branches in 2021 Cost of Deposits: 39 bps Cost of Deposits: 71 bps Total Population - 2022 Deposit Composition – Q4’21 vs. Q4’20
\* Excludes PPP, 1-4 residential, Panacea and Life Premium Finance balances Source: S&P Global.
High Performing Community Bank (Cont.) 8 ~800 Downloads of the V1BE App ~$20 Million Amt. of Deposits from Accts. Due to V1BE 64 No. of Accounts Due to V1BE ~$175,000 Average Deposit Balance of V1BE Users Pilot Results V1BE is the first app-based self-directed bank fulfillment service
All of the services that required a branch visit now delivered, including: Receive/deposit cash or conduct a change order Order a cashier’s check Replace a debit card (instant issue)
Allows for the efficient servicing of a market area without the need for heavy branch investment
Limited Richmond market pilot since September, currently expanding to Northern Virginia
Most frequent users in the pilot reduced their transactions in the branch by an average of 49% 2022 Expectations Anticipate consolidating branches over the course of 2022 Estimate $3.0 million in run-rate savings Approximately $1.5 million realized in 2022 (excluding potential branch consolidation costs)
Continued expansion of V1BE to new and existing customers Direct expense of $1.0 million in 2022 versus $0.2 million in Q4’21
Digital Bank Update 9 We have spent 15 months building the foundational technology to power the next generation of Primis From…..
Older technology Difficult to customize Batch processed ….To
Cloud-based API-driven Fully customizable Real-time processing Significantly faster account opening
Digital Bank Update (Cont.) 10 Launched Friends and Family testing in late November 2021 Currently have 43 checking accounts actively using the new mobile app
Final software configuration expected to be complete for a Mid-Q1 public launch
Initial products will include consumer and business deposit accounts with novel features Significant debit card rewards Free overdraft with dynamic limits Embedded V1BE functionality Build out small-business offerings, including lending
Leverage platform to power BaaS offering
Incorporate blockchain-powered payments Deposit growth of $100 million strictly in the digital stack Comprised mostly of checking and low-cost accounts
Direct expenses of $2.8 million in 2022 for amortization of internally developed software and processing/maintenance expense $0.3 million in 2021 with over half in Q4 (launched late in the year) 2022 Expectations Initial Launch Near Term Plans
11 Full suite of banking products and services built uniquely for doctors and doctors-in-training
Lending solutions include: PRN Personal Loans – unsecured consumer loans (launched late 2020) Student Loan Refinance – private refinancing of medical, dental, or veterinary school debt (launched Summer 2021) Practice Solutions – commercial financing to help doctors start, build and grow their practice (launched Summer 2021)
Formed Panacea Financial Foundation (Spring 2021) to provide scholarships and grants to underrepresented ethnic minority medical students and residents $50,000 in grants & scholarships awarded to underrepresented medical students and residents Opened ~1,000 household & business loan/deposit accounts across 44 states Received >2,000 consumer loan/deposit applications 6 national and state medical association partnerships 2021 Accomplishments Panacea Financial Update
12 Accelerating loan growth and pipeline through the second half of 2021
Build out of credit function largely complete
5.28% average yield on loan portfolio
51% of consumer borrowers and 100% of commercial borrowers have a DDA account with Panacea
Direct expense of $1.9 million in 2021, with $0.68 million in Q4’21 Loan growth of $125 - $150 million Plan includes additional commercial banker hires Assumes student loan refinance activity accelerates after payment deferrals end (May ‘22)
Direct expenses of $3.6 million in 2022
Anticipate pre-provision break-even 2H’22
Substantial earnings that is accretive to ROA, efficiency ratio and credit quality in 2023 Panacea Financial Update 2022 Expectations 12/31/21 Loan Portfolio ($50.2 Million) Accomplishments
Life Insurance Premium Finance Update 13 2022 Expectations Overview Launched in November 2021 with three key hires
Product expertise in a niche market to provide concierge customer service to the high net worth marketplace
Reinventing the Customer Digital Experience on modern technology with unparalleled transparency
Goal is to close loans in 30 days or less using process innovation and automation (versus industry standard of 120+days)
In a short period of time, closed $13.6 million of loans with $684 thousand of deferred fees (effective yield of 3.50% including fees) Q4’21 Accomplishments (45 Days of Operation) 5 Loans 13.6 MM Balance 19 Day Avg. Cycle Time Launch technology platform used in the end-to-end sales process
Launch next phase of the reinvented Customer Digital Experience
2022 loan growth expectations of $100-125 million
Direct expense of $1.8 million in 2022
Anticipate pre-provision break-even profitability in 1H’22 Q4’22 Projected 100 Loans 125 MM Balance <30 Day Avg. Cycle Time
Fourth Quarter Results
Net income from continuing operations of $7.7 million or $0.31 per basic and diluted share
Pre-tax, pre-provision operating return on average assets(1) of 0.91% compared to 0.98% in the third quarter
Net interest margin, excluding the effects of PPP, of 2.79% versus 2.66% in the third quarter Aided by improved earning asset mix as average cash and equivalent balance decreased $56.3 million in the quarter to $619 million
Gross loans, excluding PPP balances, grew approx. 16% annualized with solid business line contribution Panacea and Life Premium Finance combined to contribute almost half of net growth for the quarter, excluding PPP
Total deposits declined slightly in Q4 to $2.76 billion but were up 13.6% for the year Non-interest bearing demand deposits at 19.2% of deposits versus 18.1% at the end of 2020 Time deposits declined to 13.0% of total deposits
(1) Results for continuing operations. See reconciliation of Non-GAAP financial measures on slide 27. Fourth Quarter Highlights 15
Dollars in millions. (1) See reconciliation of Non-GAAP financial measures on slide 27. Balance Sheet Trends 16
Dollars in millions. Loan Composition and Trends 17 Loan Trends and Yields Loan Composition (Ex. PPP) Robust loan growth of 4.1%, or 16.3% annualized, linked-quarter excluding PPP balances
Anticipate mid- to high-teens loan growth in 2022, excluding PPP balances
Classified loans and NPAs exclude guaranteed portion of SBA loans. Asset Quality 18 NPAs / Loans (Ex. PPP) + OREO NCOs / Average Loans Criticized & Classified Loans / Total Loans (Ex. PPP) Criticized assets continue to remain at moderate levels with substandard and nonperforming loans declining in Q4
OREO declined to $1.16 million in Q4 from $1.31 million in Q3
Net recoveries of $17K in Q4 with full-year net charge-offs of 6 bps of average loans
Classified loans exclude guaranteed portion of SBA loans. Allowance for Credit Losses 19 ACL / Gross Loans (Ex. PPP) ACL / Classified Loans Recovery of credit loss expense of $1.3 million in Q4 as credit environment and economic forecasts improve
ACL coverage of gross loans declined to 1.29% from 1.40% in Q3
Dollars in millions. (1) Core deposits exclude time deposits. Deposit Trends 20 CAGR ’17-’21: 120% ’19-’21: 134% Deposit Composition – Q4’21 Core Deposit Growth (1) Total deposits declined slightly in Q4, largely due to $125 million seasonal decrease in balances associated with mortgage escrows
Focus is still on building customer relationships and continuing to grow core deposits Cost of Deposits: 39 bps
Waterfall
Dollars in millions. (1) See reconciliation of Non-GAAP financial measures on slide 27
Net Interest Margin 21 Margin benefited from a reduction of excess liquidity as average cash and equivalent balances decreased $56.3 million in Q4 to $619 million
$285 million of time deposits mature in 2022 with a weighted-average cost of 75 bps Net Interest Margin Trends
Q4 NIE impacted by a number of initiatives including continued Panacea build, Life Premium Finance launch, V1BE launch and STM exit, including: $514K recruiting/signing bonuses paid in the quarter $90K increase in legal expense $486K increase in marketing and promotional expense
Expenses related to growth initiatives expected to be higher in 2022 on a quarterly basis versus Q4’21 levels: Panacea/Life Premium Finance/V1BE up $700K Digital bank software amortization and processing up $525K
Anticipate branch consolidation throughout 2022 Estimate $3.0 million in run-rate savings Approximately $1.5 million realized in 2022 (excluding potential branch consolidation costs)
Noninterest expense expected to grow at a mid-single digit rate in 2022 versus 2021, excluding potential branch consolidation costs Efficiency Ratio Dollars in thousands. (1) Results from continuing operations. (2) See reconciliation of Non-GAAP financial measures on slide 27.
Non-Interest Expense and Efficiency Ratio 22 (1) Non-Interest Expense (Ex. Res. for Unfunded Com. Expense)
Dollars in millions. (1) Results from continuing operations. (2) See reconciliation of Non-GAAP financial measures on slide 27.
Profitability 23 Return on Average Assets Pre-Tax Pre-Provision Earnings (1) Operating leverage expected to drive improving profitability as excess liquidity is deployed in higher-yielding assets and strategic business lines become profitable
Tangible Book Value Per Share Diluted Earnings Per Share from Continuing Operations
(1) See reconciliation of Non-GAAP financial measures on slide 27. Per Share Results 24 (1)
Talented management team and board committed to building long-term shareholder value
Attractive multi-pronged strategy for growth
Aggressive and early use of technology positioning the bank for superior performance as the industry evolves
Significant valuation upside as strategic investments mature
Summary 25
Appendix 26
*Net interest margin excluding the effect of PPP loans assumes a funding cost of 35 bps on average PPP balances in all applicable periods. Non-GAAP Reconciliation 27