8-K
Primis Financial Corp. (FRST)
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, 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 12, 2023
PRIMIS FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
| Virginia | 001-33037 | 20-1417448 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 6830 Old Dominion Drive<br><br>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 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 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 26, 2023, Primis Financial Corp. (“Primis” or the “Company”) issued a press release announcing its financial results for the three months ended December 31, 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 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 26, 2023, Primis issued a press release announcing the declaration of a dividend payable on February 24, 2023 to shareholders of record as of February 10, 2023. 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
| 99.1 | Press Release dated January 26, 2023 |
|---|---|
| 99.2 | Primis Financial Corp. Fourth Quarter 2022 Investor Presentation |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Primis Financial Corp. | ||
|---|---|---|
| Date: January 26, 2023 | By: | /s/ Matthew A. Switzer |
| Matthew A. Switzer | ||
| Chief Financial Officer |
Exhibit 99.1
Primis Financial Corp. Reports Basic and Diluted Earnings per Share from Continuing Operations for the Fourth Quarter of 2022
Declares Quarterly Cash Dividend of $0.10 Per Share
MCLEAN, Va., Jan. 26, 2023 /PRNewswire/ -- Primis Financial Corp. (NASDAQ: FRST) ("Primis" or the "Company"), and its wholly-owned subsidiary, Primis Bank (the "Bank"), today reported net income from continuing operations of $3.1 million for the quarter ended December 31, 2022, compared to $5.1 million for the quarter ended September 30, 2022 and $7.7 million for the quarter ended December 31, 2021. Earnings per share ("EPS") from continuing operations for the three months ended December 31, 2022 were $0.13 on a basic and $0.12 on a diluted basis, compared to $0.21 on a basic and $0.20 on a diluted basis for the three months ended September 30, 2022 and $0.31 on both a basic and diluted basis for the three months ended December 31, 2021.
Dennis J. Zember, Jr., President and CEO commented about the year's results, saying, "We have exhausted ourselves over the last three years, and intensely in 2022, building growth and profitability engines that will deliver long-term results for shareholders. We have restored regulatory relationships, built two national lines of business focused on top quality borrowers and assets, restructured the community bank, diversified our revenue sources, rationalized our branch footprint and restored manageable levels of talent throughout the bank. I am excited and determined that these investments will separate us from our peers on operating ratios and earnings per share in 2023 and beyond."
Net income from continuing operations for the twelve months ended December 31, 2022 was $17.7 million, compared to $31.0 million for the twelve months ended December 31, 2021. EPS from continuing operations for the twelve months ended December 31, 2022 were $0.72 on a basic and diluted basis, compared to $1.28 on a basic and $1.26 on a diluted basis for the twelve months ended December 31, 2021.
Financial Highlights for the Period Ended December 31, 2022
- Return on average assets from continuing operations of 0.36% for the three months ended December 31, 2022 versus 0.61% for the three months ended September 30, 2022 and 0.88% for the three months ended December 31, 2021. Operating return on average assets from continuing operations^(1)^ of 0.09%, 0.64% and 0.83% for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.
- Pre-tax pre-provision return on average assets from continuing operations^(1)^ was 1.33% for the three months ended December 31, 2022, versus 1.16% for the three months ended September 30, 2022 and 0.98% for the three months ended December 31, 2021.
- Pre-tax pre-provision operating return on average assets from continuing operations^(1)^ was 0.78% for the three months ended December 31, 2022, versus 1.05% for the three months ended September 30, 2022 and 0.91% for the three months ended December 31, 2021. Excluding losses related to mortgage banking, this ratio would have been 1.10% for the fourth quarter of 2022 and 1.15% for the third quarter of 2022.
- Loans held for investment grew at a rate of 26.0% for 2022, or 30.1%, net of a decline in Paycheck Protection Program ("PPP") loan balances. Loans held for investment grew at an annualized rate of 31.5% in the fourth quarter compared to the linked-quarter, net of a decline in PPP balances.
- Total deposits grew an annualized 2.1% from the linked-quarter to $2.72 billion at December 31, 2022.
- Non-interest bearing checking deposits were $582.6 million, representing 21.4% of total deposits at December 31, 2022, compared to 25.4% at September 30, 2022 and 19.2% at December 31, 2021.
- Net interest margin of 3.67% in the fourth quarter of 2022 was up substantially from 3.00% in the same period last year and up 10 basis points from 3.57% in the third quarter of 2022. Core net interest margin^(1)^, which excludes the effects of PPP loans and revenue due to a third-party loan servicer (as described below), was 3.51% in the fourth quarter of 2022, down slightly from 3.58% in the third quarter of 2022 and up substantially from 2.79% in the fourth quarter of 2021.
- Allowance for credit losses to total loans was 1.17% at December 31, 2022, compared to 1.17% at September 30, 2022 and 1.24% at December 31, 2021. Allowance for credit losses to total loans (excluding PPP balances and loans held for sale) was 1.17% at December 31, 2022, compared to 1.17% at September 30, 2022 and 1.29% at December 31, 2021.
- Equity to assets was 11.04% at December 31, 2022. Tangible common equity to tangible assets of 8.27% is 68 basis points higher than peer^(2)^ median at December 31, 2022.
Operating Performance
Speaking about the items in the Company's quarterly performance, Mr. Zember said, "Our results in the fourth quarter were noisy, as we worked to finish any investing or restructuring that could have negatively affected 2023. When I normalize the quarter for several material factors, I believe our core profitability illustrates the run-rate of our earnings power going into 2023. Without the costs and one-time revenue boost, I believe we had our best quarter, buoyed by a strong net interest margin. Additionally, our results in 2022 included substantial provisioning for loan growth that will moderate in 2023 alongside two divisions (Primis Mortgage and Panacea) that will unquestionably produce meaningful boosts to our ratios in 2023 compared to their build-out style performance in 2022."
| Reported Pre-Tax Pre-Provision Earnings: | $11,511 |
|---|---|
| Plus: Mortgage pre-tax loss related to production buildout: | $2,743 |
| Plus: Severance and restructuring costs: | $1,175 |
| Plus: OREO Loss | $131 |
| Less: Noninterest income related to third-party credit enhanced portfolio | ($1,822) |
| Less: One time gain on sale of investment | ($4,144) |
| Management's Pre-tax Pre-Provision Run-Rate Earnings | $9,594 |
Net Interest Income
Net interest income increased to $29.6 million for the three months ended December 31, 2022 from $27.5 million for the three months ended September 30, 2022 and $24.2 million for the three months ended December 31, 2021. Included in fourth quarter net interest income is excess net revenue of $1.37 million attributable to a third-party serviced loan portfolio that is offset by the same amount recorded in noninterest expense. Excluding this revenue, net interest income increased to $28.2 million for the three months ended December 31, 2022 from $27.4 million for the three months ended September 30, 2022.
The Company's reported net interest margin for the fourth quarter of 2022 was 3.67%, compared to 3.57% in the third quarter of 2022. Core net interest margin, excluding the effects of PPP balances and the third-party net revenue described above, was 3.51% for the fourth quarter versus 3.58% in the third quarter of 2022. Yield on loans held for investment for the fourth quarter of 2022 was 5.04%, or 4.86% excluding the adjustments above, compared to 4.51% in the third quarter of 2022. Cost of deposits and cost of funds in the fourth quarter of 2022 were 0.78% and 1.19%, respectively, versus 0.48% and 0.71%, respectively, in the third quarter of 2022.
Noninterest Income
During the three months ended December 31, 2022, Primis had noninterest income of $11.0 million, compared to $5.6 million for the three months ended September 30, 2022, with a large driver of the increase due to a $4.1 million gain on the Company's investment in Infinex Financial Services which sold in the fourth quarter. Noninterest income includes gains of $1.8 million and $1.2 million for the fourth quarter and third quarter, respectively, for recovery of credit losses due to loan portfolio credit enhancement provided by a third party. Excluding these gains and the Infinex sale, noninterest income increased to $5.0 million in the fourth quarter of 2022 from $4.4 million in the third quarter of 2022.
Revenue due to mortgage activity was essentially flat at $2.3 million in the fourth quarter of 2022 versus $2.2 million in the linked quarter. The Company closed $86 million in loans in the quarter versus $63 million in the third quarter, or a 36% increase, in what is a seasonally slow quarter for the industry.
Noninterest Expense
Noninterest expense was $29.1 million for the fourth quarter of 2022, compared to $23.8 million for the third quarter of 2022. As noted in the net interest income discussion above, noninterest expense for the fourth quarter of 2022 included $1.37 million of servicing and other expenses for a third-party managed loan portfolio. Noninterest expense adjusted for these expenses, branch consolidation costs, other restructuring costs and unfunded commitment reserve impacts was $26.5 million for the fourth quarter of 2022 versus $23.1 million for the third quarter of 2022. A significant driver of the increased noninterest expense was an increase of $2.2 million in expenses related to Primis Mortgage to $5.4 million in the fourth quarter of 2022 versus $3.2 million in the third quarter of 2022. As noted last quarter, Primis Mortgage hired substantial production teams late in the third quarter of 2022, the full effects of which were felt in the fourth quarter. Certain members of these teams also had elevated salary draws for a limited period of time while pipelines were built, and which have now expired, totaling $0.9 million in the fourth quarter. Non-interest expense related to mortgage should more closely align with revenue generation going forward. Excluding mortgage, nonrecurring expenses and the third party expenses described above, noninterest expense for the fourth quarter of 2022 was $21.2 million versus $20.3 million linked-quarter.
The Company's efficiency ratio from continuing operations was 71.7% in the fourth quarter of 2022 versus 71.9% in the third quarter of 2022. The operating efficiency ratio from continuing operations^(1)^in the fourth quarter of 2022 was 79.9% compared to 73.6% in the third quarter of 2022. As noted above, the efficiency ratio was heavily impacted by Primis Mortgage in the fourth quarter. Excluding mortgage, the operating efficiency ratio was 69.2% for the fourth quarter of 2022 versus 69.0% for the third quarter of 2022.
Loan Portfolio
Loans held for investment increased to $2.95 billion at December 31, 2022, compared to $2.74 billion at September 30, 2022. Loans held for investment grew at an annualized rate of 26.0% for the twelve months of 2022 or 30.1%, net of a decline in PPP balances, and a substantially higher growth rate than management's expectations at the beginning of 2022. Loan growth was particularly strong in the Panacea and Life Premium Finance divisions in the fourth quarter, as discussed below.
Asset Quality
Asset quality metrics for the fourth quarter were negatively affected by one nonaccrual relationship discussed last quarter. As previously disclosed, this relationship is primarily secured by multiple assisted living facilities and a smaller tract of land. Management has a receiver appointed by the court ahead of an anticipated foreclosure and aggressively valued the properties for that sale. Provisions associated with this single borrower in the quarter were approximately $5.0 million.
Commented Mr. Zember, "Because our asset quality ratios are so materially affected by this one relationship, we valued the collateral very conservatively and are moving with haste to dispose of the property. Outside of this relationship, our total NPAs were $15.6 million at the end of the year including $8.0 million in a single family loan that is current with a less than 50% loan to value. While I am aggravated with the hassle of these assets and the associated charge-offs, I feel confident about our credit quality and currently do not see any weaknesses or trends that I believe will affect losses in 2023."
The Company recorded a provision for loan losses of $7.9 million for the fourth quarter of 2022 versus $2.9 million for the third quarter of 2022. Of this provision, $1.8 million was due to charge-offs and reserve build for the loan portfolio with a third-party credit enhancement described previously. This portion of the provision is fully offset by a gain recorded in noninterest income and has no effect on net income. Excluding this provision amount and the amounts related to the impairments described above, and net of recoveries experienced in the quarter, the allowance for credit losses would have increased $2.6 million in the fourth quarter. Of this amount, approximately $1.6 million was due to loan growth in the fourth quarter with the remainder due to increased loss rates from weakened economic forecasts. As a percentage of loans, excluding PPP balances, the allowance for credit losses was 1.17% at the end of the third and fourth quarters of 2022.
Net charge-offs were $5.3 million for the fourth quarter of 2022, up from $1.1 million in the third quarter of 2022. Excluding the losses tied to the impaired relationship described above and $1.5 million of charge-offs that are covered by a third-party, the fourth quarter would have experienced $1.3 million of net recoveries.
Nonperforming assets, excluding portions guaranteed by the SBA, were $34.9 million at December 31, 2022 compared to $37.2 million at September 30, 2022, while loans rated substandard or doubtful decreased to $41.0 million in the fourth quarter of 2022 from $47.3 million in the third quarter of 2022. Other real estate owned declined to zero from $1.0 million linked-quarter.
Deposits
Total deposits increased to $2.72 billion at December 31, 2022 from $2.71 billion at September 30, 2022 and decreased compared to $2.76 billion at December 31, 2021. Non-interest bearing demand deposits now represent 21.4% of total deposits and time deposits represent only 17.1% of total deposits at December 31, 2022. Non-interest bearing balances decreased 15.3% compared to the linked-quarter to $582.6 million. The Company has a single large depositor whose balance declined approximately $30 million in the fourth quarter of the year but is expected to fund back fully during the first and second quarters of 2023. Time deposits increased 28.1% compared to the linked-quarter to $465.1 million as the Bank extended maturities in the face of rising rates with approximately $100 million in CDs of varying maturities and rates. While newly launched, the Bank's new digital banking offering is beginning to see balance growth with $29.7 million of deposits on the new platform at year-end and almost $40 million at the time of this press release.
Lines of Business
The table below highlights revenue and expenses directly attributable to the Company's various business lines. Net interest income in the table below also includes an assumed cost of funds given to each business line for illustrative purposes, with offsetting benefit to net interest income included in the Bank column. The Bank column includes all activities not captured in the business lines, including parent company activities.
| (Dollars in thousands) | Bank | Panacea | LPF | Mortgage | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Consolidated Statement of Operations (unaudited) | Q4 '22 | Q3 '22 | Chg | Q4 '22 | Q3 '22 | Chg | Q4 '22 | Q3 '22 | Chg | Q4 '22 | Q3 '22 | Chg |
| Net Interest Income * | $ 25,482 | $ 25,284 | 0.8 % | $ 1,840 | $ 1,465 | 25.6 % | $ 659 | $ 530 | 24.4 % | $ 226 | $ 171 | 32.3 % |
| Noninterest Income | 2,750 | 2,195 | 25.3 % | 3 | 2 | 86.2 % | 5 | 5 | (9.4 %) | 2,264 | 2,197 | 3.1 % |
| Operating Noninterest Expense (excl. res. for unfunded) | 20,005 | 18,655 | 7.2 % | 1,093 | 1,242 | (12.0 %) | 91 | 70 | 30.8 % | 5,357 | 3,175 | 68.8 % |
| Pre-Tax Pre-Provision Net Income^(1)^ | 8,227 | 8,824 | (6.8 %) | 750 | 225 | 234.0 % | 573 | 466 | 23.1 % | (2,867) | (806) | N/A |
| Gross Loans (inc. HFS) | $ 2,506,632 | $ 2,403,460 | 4.3 % | $ 248,402 | $ 201,887 | 23.0 % | $ 193,803 | $ 129,031 | 50.2 % | $ 27,626 | $ 16,096 | 71.6 % |
| Total Deposits | 2,691,415 | 2,687,747 | 0.1 % | 22,912 | 13,595 | 68.5 % | 8,049 | 6,977 | 15.4 % | - | - | 0.0 % |
| * Net interest income assumes business line funding requirements are provided by the Company at its cost of funds plus 100 basis points. | ||||||||||||
| --- | ||||||||||||
| Net interest income, noninterest income and noninterest expense excludes $1.4 million, $1.8 million and $1.4 million, respectively, related to credit enhanced portfolio managed by a third party. |
Panacea continues to experience substantial growth as a result of its nationally-recognized brand. The division has banking relationships with over 3,000 doctor households across all 50 states. Panacea finished the fourth quarter of 2022 with approximately $248.4 million in outstanding loans, an increase of $46.5 million, or 23.0%, from September 30, 2022. At the end of the fourth quarter, Panacea's loan portfolio was 55% commercial, 24% consumer and 21% student loan refinance. As highlighted above, Panacea increased its profitability in the fourth quarter of 2022 on a funded basis by 234% from third quarter levels and expects significant continued improvements throughout 2023.
The Company's strategy with Panacea centers heavily on making it a very effective deposit player with its target customers, which began to bear fruit in the fourth quarter. Panacea-related deposits increased to $22.9 million at December 31, 2022, up 69% from September 30, 2022 and a substantially higher rate of growth than loan growth for the quarter. Lastly, Panacea is in the early stages of leveraging the Company's mortgage capabilities with Primis Mortgage to market residential mortgage products to its nationwide customer base.
The Life Premium Finance ("LPF") division, launched in late 2021, ended the fourth quarter of 2022 with outstanding balances, net of deferred fees, of $193.8 million, compared to $129.0 million at the end of the third quarter of 2022. The LPF division is already showing a healthy level of profitability (including assumed cost of funds) with a loan portfolio that is predominantly variable rate based (one year renewals) and cash secured.
As previously discussed, the Company took advantage of market disruption to expand Primis Mortgage with high quality producers in order to build production capacity for 2023. As a result, Primis Mortgage reduced pre-tax net income by $2.7 million in the fourth quarter. Higher expenses related to these team acquisitions ended at the end of the fourth quarter. The Company expects Primis Mortgage to be break-even in the first quarter of 2023 and to contribute $4 to $5 million to net income and 10 to 15 basis points to return on assets in 2023.
Shareholders' Equity
Book value per share as of December 31, 2022 was $15.98, an increase of $0.09 from September 30, 2022. Tangible book value per share^(1)^ at the end of the fourth quarter of 2022 was $11.61, an increase of $0.07 from September 30, 2022. Shareholders' equity was $394.4 million, or 11.04% of total assets, at December 31, 2022. Tangible common equity^(1)^ at December 31, 2022 was $286.5 million, or 8.27% of tangible assets^(1)^. Unrealized losses on the Company's available-for-sale securities portfolio declined by $1.6 million to $25.9 million due to marginal increases in market interest rates during the quarter. The Company has the wherewithal to hold these securities until maturity or recovery of the value and does not anticipate realizing any losses on the investments.
Additionally, the Board of Directors announced and declared a dividend of $0.10 per share payable on February 24, 2023 to shareholders of record on February 10, 2023. This is Primis' forty-fifth consecutive quarterly dividend.
About Primis Financial Corp.
As of December 31, 2022, Primis had $3.57 billion in total assets, $2.95 billion in total loans and $2.72 billion in total deposits. Primis Bank provides a range of financial services to individuals and small- and medium-sized businesses through thirty-two full-service branches in Virginia and Maryland and provides services to customers through certain online and mobile applications.
| Contacts: | Address: |
|---|---|
| Dennis J. Zember, Jr., 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 on Friday, January 27, 2022 at 10:00 a.m. (ET). A live Webcast of the conference call is available at the following website: https://events.q4inc.com/attendee/236726104. Participants may also call 1-888-330-3573 and ask for the Primis Financial Corp. call. A replay of the teleconference will be available for 7 days by calling 1-800-770-2030 and providing Replay Access Code 4440924.
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; operating earnings per share from continuing operations – basic; operating earnings per share from continuing operations – diluted; tangible book value per share; tangible common equity; tangible common equity to tangible assets; and core net interest margin 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; 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 banking platform, V1BE fulfillment service and Primis Mortgage Company; competitive pressures among financial institutions increasing significantly; changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices; 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, as well as labor shortages and supply chain disruptions; 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 ongoing 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; 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, 2021, 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.
| (1) | Non-GAAP financial measure. Please see "Reconciliation of Non-GAAP Items"in the financial tables for more information and for a reconciliation to GAAP. | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (2) | Per S&P Global. Includes publicly-traded banks with assets between $2 billion and $10 billion with reported ratios as of December 31, 2022. | |||||||||||||
| Primis Financial Corp. | ||||||||||||||
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| Financial Highlights (unaudited) | ||||||||||||||
| (Dollars in thousands, except per share data) | For Three Months Ended: | Variance - 4Q 2022 vs. | For Twelve Months Ended: | Variance | ||||||||||
| Selected Performance Ratios: | 4Q 2022 | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | 3Q 2022 | 4Q 2021 | 4Q 2022 | 4Q 2021 | YTD | ||||
| Return on average assets from continuing operations | 0.36 % | 0.61 % | 0.63 % | 0.55 % | 0.88 % | (25) | bps | (53) | bps | 0.53 % | 0.92 % | (39) | bps | |
| Operating return on average assets from continuing operations^(1)^ | 0.09 % | 0.64 % | 0.76 % | 0.57 % | 0.83 % | (55) | (74) | 0.51 % | 0.92 % | (41) | ||||
| Pre-tax pre-provision return on average assets from continuing operations^(1)^ | 1.33 % | 1.16 % | 0.83 % | 0.75 % | 0.98 % | 17 | 35 | 0.68 % | 1.02 % | (34) | ||||
| Pre-tax pre-provision operating return on average assets from continuing operations^(1)^ | 0.78 % | 1.05 % | 1.00 % | 0.77 % | 0.91 % | (28) | (14) | 0.55 % | 1.01 % | (46) | ||||
| Return on average equity from continuing operations | 3.07 % | 4.98 % | 4.92 % | 4.49 % | 7.37 % | (191) | (430) | 4.37 % | 7.67 % | (330) | ||||
| Operating return on average equity from continuing operations^(1)^ | 0.75 % | 5.22 % | 5.93 % | 4.58 % | 6.94 % | (447) | (618) | 4.13 % | 7.59 % | (346) | ||||
| Operating return on average tangible equity from continuing operations^(1)^ | 1.03 % | 7.14 % | 8.08 % | 6.16 % | 9.36 % | (611) | (832) | 5.62 % | 10.33 % | (471) | ||||
| Cost of funds | 1.19 % | 0.71 % | 0.53 % | 0.52 % | 0.56 % | 48 | 63 | 0.75 % | 0.65 % | 10 | ||||
| Net interest margin | 3.67 % | 3.57 % | 3.33 % | 2.96 % | 3.00 % | 10 | 67 | 3.39 % | 3.01 % | 38 | ||||
| Core net interest margin^(1)^ | 3.51 % | 3.58 % | 3.35 % | 2.96 % | 2.79 % | (7) | 72 | 3.35 % | 2.79 % | 56 | ||||
| Gross loans to deposits | 108.32 % | 101.06 % | 97.99 % | 89.11 % | 84.68 % | 7 | pts | 24 | pts | 108.32 % | 84.68 % | 24 | pts | |
| Efficiency ratio from continuing operations | 71.71 % | 71.85 % | 75.01 % | 76.11 % | 68.16 % | (0) | 355 | 73.34 % | 67.43 % | 590 | ||||
| Operating efficiency ratio from continuing operations^(1)^ | 79.89 % | 73.64 % | 70.23 % | 75.65 % | 69.63 % | 6 | 1,025 | 75.05 % | 67.61 % | 743 | ||||
| Per Share Data: | ||||||||||||||
| Earnings per share from continuing operations - Basic | $ 0.13 | $ 0.21 | $ 0.20 | $ 0.19 | $ 0.31 | (38.10) | % | (58.06) | % | $ 0.72 | $ 1.27 | (43.31) | % | |
| Earnings per share from discontinued operations - Basic | - | - | - | - | - | - | - | $ - | $ 0.01 | (100.00) | ||||
| Earnings per share - Basic | $ 0.13 | $ 0.21 | $ 0.20 | $ 0.19 | $ 0.31 | (38.10) | (58.06) | $ 0.72 | $ 1.28 | (43.75) | ||||
| Operating earnings per share from continuing operations - Basic^(1)^ | $ 0.03 | $ 0.22 | $ 0.25 | $ 0.19 | $ 0.29 | (85.71) | (89.54) | $ 0.68 | $ 1.26 | (45.71) | ||||
| Earnings per share from continuing operations - Diluted | $ 0.12 | $ 0.20 | $ 0.20 | $ 0.19 | $ 0.31 | (40.00) | (61.29) | $ 0.72 | $ 1.26 | (42.86) | ||||
| Earnings per share from discontinued operations - Diluted | - | - | - | - | - | - | - | - | 0.01 | (100.00) | ||||
| Earnings per share - Diluted | $ 0.12 | $ 0.20 | $ 0.20 | $ 0.19 | $ 0.31 | (40.00) | (61.29) | $ 0.72 | $ 1.27 | (43.31) | ||||
| Operating earnings per share from continuing operations - Diluted^(1)^ | $ 0.03 | $ 0.21 | $ 0.24 | $ 0.19 | $ 0.29 | (85.70) | (89.50) | $ 0.68 | $ 1.25 | (45.59) | ||||
| Book value per share | $ 15.98 | $ 15.89 | $ 16.17 | $ 16.42 | $ 16.76 | 0.57 | (4.65) | $ 15.98 | $ 16.76 | (4.65) | ||||
| Tangible book value per share^(1)^ | $ 11.61 | $ 11.54 | $ 11.77 | $ 12.11 | $ 12.43 | 0.61 | (6.60) | $ 11.61 | $ 12.43 | (6.60) | ||||
| Cash dividend per share | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | - | - | $ 0.40 | $ 0.40 | - | ||||
| Weighted average shares outstanding - Basic | 24,601,108 | 24,576,887 | 24,562,753 | 24,503,945 | 24,476,569 | 0.10 | 0.51 | 24,561,483 | 24,438,309 | 0.50 | ||||
| Weighted average shares outstanding - Diluted | 24,685,663 | 24,688,422 | 24,681,425 | 24,662,588 | 24,653,363 | (0.01) | 0.13 | 24,668,838 | 24,600,555 | 0.28 | ||||
| Shares outstanding at end of period | 24,680,097 | 24,650,239 | 24,650,239 | 24,622,739 | 24,574,619 | 0.12 | % | 0.43 | % | 24,680,097 | 24,574,619 | 0.43 | % | |
| Asset Quality Ratios: | ||||||||||||||
| Non-performing assets as a percent of total assets, excluding SBA guarantees | 0.98 % | 1.11 % | 0.61 % | 0.47 % | 0.44 % | (13) | bps | 53 | bps | 0.98 % | 0.44 % | 53 | bps | |
| Net charge-offs (recoveries) as a percent of average loans (annualized) | 0.74 % | 0.17 % | (0.07 %) | (0.03 %) | (0.00 %) | 57 | 74 | 0.23 % | 0.06 % | 17 | ||||
| Allowance for credit losses to total loans | 1.17 % | 1.17 % | 1.15 % | 1.23 % | 1.24 % | 0 | (7) | 1.17 % | 1.24 % | (7) | ||||
| Allowance for credit losses to total loans (excluding PPP loans) | 1.17 % | 1.17 % | 1.16 % | 1.24 % | 1.29 % | 0 | (11) | 1.17 % | 1.29 % | (11) | ||||
| Capital Ratios: | ||||||||||||||
| Equity to assets | 11.04 % | 11.67 % | 12.32 % | 12.55 % | 12.10 % | (63) | bps | (105) | bps | |||||
| Tangible common equity to tangible assets^(1)^ | 8.27 % | 8.73 % | 9.27 % | 9.57 % | 9.26 % | (46) | (99) | |||||||
| Leverage ratio ^(2)^ | 9.48 % | 10.11 % | 10.31 % | 9.77 % | 9.41 % | (63) | 7 | |||||||
| Common equity tier 1 capital ratio ^(2)^ | 10.54 % | 11.17 % | 11.59 % | 12.64 % | 13.09 % | (63) | (255) | |||||||
| Tier 1 risk-based capital ratio ^(2)^ | 10.88 % | 11.53 % | 11.97 % | 13.06 % | 13.52 % | (65) | (264) | |||||||
| Total risk-based capital ratio^(2)^ | 14.80 % | 15.71 % | 16.29 % | 17.66 % | 18.52 % | (91) | (372) | |||||||
| ^(1)^See Reconciliation of Non-GAAP financial measures. | ||||||||||||||
| ^(2)^ December 31, 2022 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 2022 vs. | ||||||||||||
| Condensed Consolidated Balance Sheets (unaudited) | 4Q 2022 | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | 3Q 2022 | 4Q 2021 | |||||||
| Assets | ||||||||||||||
| Cash and cash equivalents | $ 77,859 | $ 97,738 | $ 70,721 | $ 298,230 | $ 530,167 | (20.34) | % | (85.31) | % | |||||
| Investment securities-available for sale | 236,315 | 238,891 | 257,180 | 271,626 | 271,332 | (1.08) | (12.91) | |||||||
| Investment securities-held to maturity | 13,520 | 14,391 | 14,978 | 16,138 | 22,940 | (6.05) | (41.06) | |||||||
| Loans held for sale | 27,626 | 13,388 | 16,096 | - | - | 106.35 | - | |||||||
| Loans receivable, net of deferred fees | 2,948,836 | 2,737,086 | 2,628,797 | 2,393,669 | 2,339,986 | 7.74 | 26.02 | |||||||
| Allowance for credit losses | (34,544) | (31,956) | (30,209) | (29,379) | (29,105) | 8.10 | 18.69 | |||||||
| Net loans | 2,914,292 | 2,705,130 | 2,598,588 | 2,364,290 | 2,310,881 | 7.73 | 26.11 | |||||||
| Stock in Federal Reserve Bank and Federal Home Loan Bank | 25,815 | 16,689 | 12,940 | 11,927 | 15,521 | 54.68 | 66.32 | |||||||
| Bank premises and equipment, net | 25,257 | 25,534 | 26,113 | 29,872 | 30,410 | (1.08) | (16.95) | |||||||
| Operating lease right-of-use assets | 5,335 | 5,511 | 4,777 | 5,305 | 5,866 | (3.19) | (9.05) | |||||||
| Goodwill and other intangible assets | 107,863 | 108,170 | 108,524 | 106,075 | 106,416 | (0.28) | 1.36 | |||||||
| Assets held for sale, net | 3,115 | 3,127 | 3,127 | - | - | (0.38) | 100.00 | |||||||
| Bank-owned life insurance | 67,201 | 67,519 | 67,339 | 67,099 | 66,724 | (0.47) | 0.71 | |||||||
| Other real estate owned | - | 1,041 | 1,041 | 1,041 | 1,163 | (100.00) | (100.00) | |||||||
| Deferred tax assets, net | 18,289 | 17,892 | 14,658 | 12,380 | 9,571 | 2.22 | 91.09 | |||||||
| Other assets | 49,050 | 42,141 | 40,496 | 35,893 | 36,362 | 16.39 | 34.89 | |||||||
| Total assets | $ 3,571,537 | $ 3,357,162 | $ 3,236,578 | $ 3,219,876 | $ 3,407,353 | 6.39 | % | 4.82 | % | |||||
| Liabilities and stockholders' equity | ||||||||||||||
| Demand deposits | $ 582,556 | $ 687,272 | $ 653,181 | $ 559,682 | $ 530,282 | (15.24) | % | 9.86 | % | |||||
| NOW accounts | 617,687 | 637,786 | 677,237 | 730,235 | 849,738 | (3.15) | (27.31) | |||||||
| Money market accounts | 811,365 | 803,050 | 802,953 | 831,580 | 799,759 | 1.04 | 1.45 | |||||||
| Savings accounts | 245,713 | 217,220 | 220,211 | 225,291 | 222,862 | 13.12 | 10.25 | |||||||
| Time deposits | 465,057 | 362,992 | 329,223 | 339,456 | 360,575 | 28.12 | 28.98 | |||||||
| Total deposits | 2,722,378 | 2,708,320 | 2,682,805 | 2,686,244 | 2,763,216 | 0.52 | (1.48) | |||||||
| Securities sold under agreements to repurchase - short term | 6,445 | 9,886 | 10,020 | 11,231 | 9,962 | (34.81) | (35.30) | |||||||
| Federal Home Loan Bank advances | 325,000 | 125,000 | 25,000 | - | 100,000 | 160.00 | 225.00 | |||||||
| Subordinated debt and notes | 95,312 | 95,241 | 95,170 | 95,099 | 95,028 | 0.07 | 0.30 | |||||||
| Operating lease liabilities | 5,767 | 6,044 | 5,299 | 5,897 | 6,498 | (4.58) | (11.25) | |||||||
| Other liabilities | 22,232 | 20,863 | 19,647 | 17,210 | 20,768 | 6.56 | 7.05 | |||||||
| Total liabilities | 3,177,134 | 2,965,354 | 2,837,941 | 2,815,681 | 2,995,472 | 7.14 | 6.06 | |||||||
| Stockholders' equity | 394,403 | 391,808 | 398,637 | 404,195 | 411,881 | 0.66 | (4.24) | |||||||
| Total liabilities and stockholders' equity | $ 3,571,537 | $ 3,357,162 | $ 3,236,578 | $ 3,219,876 | $ 3,407,353 | 6.39 | % | 4.82 | % | |||||
| Tangible common equity^(1)^ | $ 286,540 | $ 283,638 | $ 290,113 | $ 298,120 | $ 305,465 | 1.02 | % | (6.20) | % | |||||
| Primis Financial Corp. | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars in thousands) | For Three Months Ended: | Variance - 4Q 2022 vs. | For Twelve Months Ended: | Variance | ||||||||||
| Condensed Consolidated Statement of Operations (unaudited) | 4Q 2022 | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | 3Q 2022 | 4Q 2021 | 4Q 2022 | 4Q 2021 | YTD | ||||
| Interest and dividend income | $ 38,635 | $ 32,596 | $ 28,258 | $ 26,585 | $ 28,503 | 18.53 | % | 35.55 | % | $ 126,074 | $ 113,243 | 11.33 | % | |
| Interest expense | 9,058 | 5,146 | 3,652 | 3,731 | 4,262 | 76.02 | 112.53 | 21,587 | 19,040 | 13.38 | ||||
| Net interest income | 29,577 | 27,450 | 24,606 | 22,854 | 24,241 | 7.75 | 22.01 | 104,487 | 94,203 | 10.92 | ||||
| Provision for (recovery of) credit losses | 7,860 | 2,890 | 422 | 99 | (1,299) | 171.97 | NM | 11,271 | (5,801) | (294.29) | ||||
| Net interest income after provision for (recovery of) credit losses | 21,717 | 24,560 | 24,184 | 22,755 | 25,540 | (11.58) | (14.97) | 93,216 | 100,004 | (6.79) | ||||
| Account maintenance and deposit service fees | 1,427 | 1,525 | 1,442 | 1,351 | 1,420 | (6.43) | 0.49 | 5,745 | 7,309 | (21.40) | ||||
| Income from bank-owned life insurance | 847 | 394 | 378 | 375 | 535 | 114.97 | 58.32 | 1,994 | 1,687 | 18.20 | ||||
| Gain on debt extinguishment | - | - | - | - | 573 | - | (100.00) | - | 573 | (100.00) | ||||
| Mortgage banking income | 2,264 | 2,197 | 593 | - | - | 3.05 | 100.00 | 5,054 | - | 100.00 | ||||
| Gain on sale of LLC investments | 4,411 | - | - | - | - | 100.00 | 100.00 | 4,710 | - | 100.00 | ||||
| Other | 2,039 | 1,504 | 217 | 364 | 359 | 35.57 | NM | 3,825 | 1,566 | 144.25 | ||||
| Noninterest income | 10,988 | 5,620 | 2,630 | 2,090 | 2,887 | 95.52 | 280.60 | 21,328 | 11,135 | 91.54 | ||||
| Employee compensation and benefits | 16,213 | 12,594 | 10,573 | 9,625 | 9,527 | 28.74 | 70.18 | 49,005 | 36,741 | 33.38 | ||||
| Occupancy and equipment expenses | 2,899 | 2,857 | 2,546 | 2,557 | 2,487 | 1.47 | 16.57 | 10,859 | 9,578 | 13.37 | ||||
| Amortization of core deposit intangible | 317 | 326 | 341 | 341 | 342 | (2.76) | (7.31) | 1,325 | 1,364 | (2.86) | ||||
| Virginia franchise tax expense | 814 | 813 | 814 | 813 | 733 | 0.12 | 11.05 | 3,254 | 2,899 | 12.25 | ||||
| Data processing expense | 1,702 | 1,528 | 1,293 | 1,197 | 934 | 11.39 | 82.23 | 6,013 | 3,850 | 56.18 | ||||
| Telecommunication and communication expense | 343 | 342 | 366 | 382 | 439 | 0.29 | (21.87) | 1,433 | 1,790 | (19.94) | ||||
| Net (gain) loss on other real estate owned | 131 | - | - | (59) | 70 | 100.00 | 87.14 | 72 | 87 | (17.24) | ||||
| Loss on bank premises and equipment | - | 64 | 620 | - | - | (100.00) | - | 684 | - | 100.00 | ||||
| Professional fees | 1,605 | 1,261 | 827 | 1,387 | 1,238 | 27.28 | 29.64 | 4,787 | 5,467 | (12.44) | ||||
| Other expenses | 5,066 | 3,976 | 3,050 | 2,744 | 2,722 | 27.41 | 86.11 | 14,836 | 9,624 | 54.16 | ||||
| Noninterest expense | 29,090 | 23,761 | 20,430 | 18,987 | 18,492 | 22.43 | 57.31 | 92,268 | 71,400 | 29.23 | ||||
| Income from continuing operations before income taxes | 3,615 | 6,419 | 6,384 | 5,858 | 9,935 | (43.68) | (63.61) | 22,276 | 39,739 | (43.94) | ||||
| Income tax expense | 530 | 1,365 | 1,375 | 1,265 | 2,284 | (61.17) | (76.80) | 4,535 | 8,721 | (48.00) | ||||
| Income from continuing operations | 3,085 | 5,054 | 5,009 | 4,593 | 7,651 | (38.96) | (59.68) | 17,741 | 31,018 | (42.80) | ||||
| Income (loss) from discontinued operations before income taxes | - | - | - | - | - | - | - | - | 294 | (100.00) | ||||
| Income tax expense (benefit) | - | - | - | - | - | - | - | - | 64 | (100.00) | ||||
| Income (loss) from discontinued operations | - | - | - | - | - | - | - | - | 230 | (100.00) | ||||
| Net income | $ 3,085 | $ 5,054 | $ 5,009 | $ 4,593 | $ 7,651 | (38.96) | % | (59.68) | % | $ 17,741 | $ 31,248 | (43.23) | % | |
| ^(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 2022 vs. | ||||||||||||
| Loan Portfolio Composition | 4Q 2022 | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | 3Q 2022 | 4Q 2021 | |||||||
| Loans held for sale | $ 27,626 | $ 13,388 | $ 16,096 | $ - | $ - | 106.35 | % | 100.00 | % | |||||
| Loans secured by real estate: | ||||||||||||||
| Commercial real estate - owner occupied | 461,126 | 437,636 | 433,840 | 406,285 | 389,109 | 5.37 | 18.51 | |||||||
| Commercial real estate - non-owner occupied | 581,168 | 573,732 | 600,436 | 615,682 | 590,523 | 1.30 | (1.58) | |||||||
| Secured by farmland | 8,436 | 8,852 | 9,305 | 8,896 | 10,003 | (4.70) | (15.67) | |||||||
| Construction and land development | 148,762 | 138,371 | 117,604 | 116,365 | 121,520 | 7.51 | 22.42 | |||||||
| Residential 1-4 family | 610,919 | 616,764 | 607,548 | 575,946 | 548,830 | (0.95) | 11.31 | |||||||
| Multi-family residential | 140,321 | 137,253 | 144,406 | 152,266 | 164,071 | 2.24 | (14.48) | |||||||
| Home equity lines of credit | 65,152 | 65,852 | 69,860 | 72,440 | 73,877 | (1.06) | (11.81) | |||||||
| Total real estate loans | 2,015,884 | 1,978,460 | 1,982,999 | 1,947,880 | 1,897,933 | 1.89 | 6.21 | |||||||
| Commercial loans | 523,110 | 470,934 | 448,582 | 336,961 | 303,697 | 11.08 | 72.25 | |||||||
| Paycheck Protection Program loans | 4,564 | 8,014 | 17,525 | 31,404 | 77,319 | (43.05) | (94.10) | |||||||
| Consumer loans | 405,278 | 279,678 | 179,691 | 77,424 | 61,037 | 44.91 | NM | |||||||
| Loans receivable, net of deferred fees | $ 2,948,836 | $ 2,737,086 | $ 2,628,797 | $ 2,393,669 | $ 2,339,986 | 7.74 | % | 26.02 | % | |||||
| Loans by Risk Grade: | ||||||||||||||
| Pass, not graded | $ - | $ - | $ - | $ - | $ - | - | % | - | % | |||||
| Pass Grade 1 - Highest Quality | 600 | 616 | 609 | 786 | 641 | (2.60) | (6.40) | |||||||
| Pass Grade 2 - Good Quality | 209,605 | 149,389 | 129,571 | 8,734 | 103,496 | 40.31 | 102.52 | |||||||
| Pass Grade 3 - Satisfactory Quality | 1,591,364 | 1,520,364 | 1,513,054 | 1,413,480 | 1,327,718 | 4.67 | 19.86 | |||||||
| Pass Grade 4 - Pass | 1,073,952 | 984,012 | 890,709 | 895,197 | 836,610 | 9.14 | 28.37 | |||||||
| Pass Grade 5 - Special Mention | 32,278 | 35,410 | 67,736 | 51,884 | 31,112 | (8.84) | 3.75 | |||||||
| Grade 6 - Substandard | 41,037 | 47,295 | 27,118 | 23,588 | 40,409 | (13.23) | 1.55 | |||||||
| Grade 7 - Doubtful | - | - | - | - | - | - | - | |||||||
| Grade 8 - Loss | - | - | - | - | - | - | - | |||||||
| Total loans | $ 2,948,836 | $ 2,737,086 | $ 2,628,797 | $ 2,393,669 | $ 2,339,986 | 7.74 | % | 26.02 | % | |||||
| (Dollars in thousands) | As Of or For Three Months Ended: | |||||||||||||
| --- | --- | --- | --- | --- | --- | |||||||||
| Asset Quality Information | 4Q 2022 | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | |||||||||
| Allowance for Credit Losses: | ||||||||||||||
| Balance at beginning of period | $ (31,956) | $ (30,209) | $ (29,379) | $ (29,105) | $ (30,386) | |||||||||
| (Provision for) / recovery of allowance for credit losses | (7,860) | (2,890) | (422) | (99) | 1,299 | |||||||||
| Net charge-offs | 5,272 | 1,143 | (408) | (175) | (18) | |||||||||
| Ending balance | $ (34,544) | $ (31,956) | $ (30,209) | $ (29,379) | $ (29,105) | |||||||||
| Reserve for Unfunded Commitments: | ||||||||||||||
| Balance at beginning of period | $ (1,380) | $ (1,069) | $ (1,237) | $ (977) | $ (1,129) | |||||||||
| (Expense for) / recovery of unfunded loan commitment reserve | (36) | (311) | 168 | (260) | 152 | |||||||||
| Total Reserve for Unfunded Commitments | $ (1,416) | $ (1,380) | $ (1,069) | $ (1,237) | $ (977) | |||||||||
| As Of: | Variance - 4Q 2022 vs. | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| Non-Performing Assets: | 4Q 2022 | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | 3Q 2022 | 4Q 2021 | |||||||
| Nonaccrual loans | $ 35,484 | $ 36,851 | $ 19,635 | $ 14,941 | $ 15,029 | (3.71) | % | 136.10 | % | |||||
| Accruing loans delinquent 90 days or more | 3,361 | 1,855 | 1,512 | 1,817 | 283 | 81.19 | NM | |||||||
| Total non-performing loans | 38,845 | 38,706 | 21,147 | 16,758 | 15,312 | 0.36 | 153.69 | |||||||
| Other real estate owned | - | 1,041 | 1,041 | 1,041 | 1,163 | (100.00) | (100.00) | |||||||
| Total non-performing assets | $ 38,845 | $ 39,747 | $ 22,188 | $ 17,799 | $ 16,475 | (2.27) | 135.78 | |||||||
| SBA guaranteed portion of non-performing loans | $ 3,969 | $ 2,573 | $ 2,319 | $ 2,651 | $ 1,388 | 54.26 | 185.95 | |||||||
| Troubled debt restructuring | $ 3,599 | $ 3,170 | $ 2,695 | $ 3,103 | $ 3,401 | 13.53 | 5.8 | |||||||
| The company defines "NM" as not meaningful for increases or decreases greater than 300 percent. | ||||||||||||||
| Primis Financial Corp. | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars in thousands) | For Three Months Ended: | Variance - 2Q 2021 vs. | For Twelve Months Ended: | Variance | ||||||||||
| Average Balance Sheet | 4Q 2022 | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | 3Q 2022 | 4Q 2021 | 4Q 2022 | 4Q 2021 | YTD | ||||
| Assets | ||||||||||||||
| Loans held for sale | $ 22,413 | $ 21,199 | $ 6,936 | $ - | $ - | 5.73 | % | 100.00 | % | $ 12,722 | $ - | 100.00 | % | |
| Loans, net of deferred fees | 2,824,892 | 2,669,605 | 2,509,978 | 2,360,782 | 2,317,260 | 5.82 | 21.91 | 2,592,801 | 2,342,802 | 10.67 | ||||
| Investment securities | 253,345 | 269,780 | 287,722 | 302,431 | 258,265 | (6.09) | (1.91) | 278,162 | 224,505 | 23.90 | ||||
| Other earning assets | 92,604 | 90,268 | 158,817 | 466,952 | 632,841 | 2.59 | (85.37) | 200,828 | 560,994 | (64.20) | ||||
| Total earning assets | 3,193,254 | 3,050,852 | 2,963,453 | 3,130,165 | 3,208,366 | 4.67 | (0.47) | 3,084,513 | 3,128,301 | (1.40) | ||||
| Investment in STM - Held for sale | — | — | — | — | 9,941 | - | (100.00) | — | 11,974 | (100.00) | ||||
| Other assets | 246,593 | 234,355 | 228,893 | 226,320 | 229,718 | 5.22 | 7.35 | 234,097 | 228,703 | 2.36 | ||||
| Total assets | $ 3,439,847 | $ 3,285,207 | $ 3,192,346 | $ 3,356,485 | $ 3,448,025 | 4.71 | % | (0.24) | % | $ 3,318,610 | $ 3,368,978 | (1.50) | % | |
| Liabilities and stockholders' equity | ||||||||||||||
| Demand deposits | $ 648,151 | $ 665,020 | $ 596,714 | $ 545,530 | $ 547,504 | (2.54) | % | 18.38 | % | $ 614,285 | $ 522,683 | 17.53 | % | |
| Interest-bearing liabilities: | ||||||||||||||
| NOW and other demand accounts | 624,868 | 660,387 | 695,481 | 817,430 | 878,652 | (5.38) | (28.88) | 698,907 | 860,482 | (18.78) | ||||
| Money market accounts | 805,303 | 803,860 | 810,781 | 809,460 | 784,942 | 0.18 | 2.59 | 807,330 | 726,059 | 11.19 | ||||
| Savings accounts | 232,543 | 219,167 | 222,274 | 224,716 | 219,823 | 6.10 | 5.79 | 224,682 | 208,202 | 7.92 | ||||
| Time deposits | 379,088 | 343,986 | 329,198 | 350,368 | 368,603 | 10.20 | 2.84 | 350,720 | 405,670 | (13.55) | ||||
| Total Deposits | 2,689,953 | 2,692,420 | 2,654,448 | 2,747,504 | 2,799,524 | (0.09) | (3.91) | 2,695,924 | 2,723,096 | (1.00) | ||||
| Borrowings | 325,100 | 166,621 | 107,784 | 171,293 | 209,215 | 95.11 | 55.39 | 193,050 | 218,955 | (11.83) | ||||
| Total Funding | 3,015,053 | 2,859,041 | 2,762,232 | 2,918,797 | 3,008,739 | 5.46 | 0.21 | 2,888,974 | 2,942,051 | (1.80) | ||||
| Other Liabilities | 26,318 | 23,832 | 22,095 | 23,057 | 27,407 | 10.43 | (3.97) | 23,825 | 22,358 | 6.56 | ||||
| Stockholders' equity | 398,476 | 402,334 | 408,019 | 414,631 | 411,879 | (0.96) | (3.25) | 405,811 | 404,569 | 0.31 | ||||
| Total liabilities and stockholders' equity | $ 3,439,847 | $ 3,285,207 | $ 3,192,346 | $ 3,356,485 | $ 3,448,025 | 4.71 | % | (0.24) | % | $ 3,318,610 | $ 3,368,978 | (1.50) | % | |
| Memo: Average PPP loans | $ 5,926 | $ 11,868 | $ 23,950 | $ 51,491 | $ 102,078 | (50.07) | % | (94.19) | % | $ 23,152 | $ 229,447 | (89.91) | % | |
| Net Interest Income | ||||||||||||||
| Loans held for sale | $ 349 | $ 263 | $ 93 | $ - | $ - | 32.70 | % | 100.00 | % | $ 705 | $ - | 100.00 | % | |
| Loans | 35,881 | 30,260 | 26,272 | 24,749 | 26,701 | 18.58 | 34.38 | 117,162 | 107,021 | 9.48 | ||||
| Investment securities | 1,571 | 1,518 | 1,445 | 1,430 | 1,242 | 3.49 | 26.49 | 5,964 | 4,440 | 34.32 | ||||
| Other earning assets | 834 | 555 | 448 | 406 | 560 | 50.27 | 48.93 | 2,243 | 1,782 | 25.87 | ||||
| Total Earning Assets | 38,635 | 32,596 | 28,258 | 26,585 | 28,503 | 18.53 | 35.55 | 126,074 | 113,243 | 11.33 | ||||
| Non-interest bearing DDA | - | - | - | - | - | - | - | - | - | - | ||||
| NOW and other interest-bearing demand accounts | 544 | 536 | 556 | 666 | 832 | 1.49 | (34.62) | 2,303 | 4,010 | (42.57) | ||||
| Money market accounts | 2,894 | 1,667 | 938 | 859 | 952 | 73.61 | 203.99 | 6,357 | 4,246 | 49.72 | ||||
| Savings accounts | 305 | 141 | 142 | 149 | 154 | 116.31 | 98.05 | 737 | 618 | 19.26 | ||||
| Time deposits | 1,567 | 943 | 674 | 700 | 809 | 66.17 | 93.70 | 3,884 | 4,238 | (8.35) | ||||
| Total Deposit Costs | 5,310 | 3,287 | 2,310 | 2,374 | 2,747 | 61.55 | 93.30 | 13,281 | 13,112 | 1.29 | ||||
| Borrowings | 3,748 | 1,859 | 1,342 | 1,357 | 1,515 | 101.61 | 147.39 | 8,306 | 5,928 | 40.11 | ||||
| Total Funding Costs | 9,058 | 5,146 | 3,652 | 3,731 | 4,262 | 76.02 | 112.53 | 21,587 | 19,040 | 13.38 | ||||
| Net Interest Income | $ 29,577 | $ 27,450 | $ 24,606 | $ 22,854 | $ 24,241 | 7.75 | % | 22.01 | % | $ 104,487 | $ 94,203 | 10.92 | % | |
| Memo: SBA PPP loan interest and fee income | $ 14 | $ 28 | $ 59 | $ 435 | $ 2,503 | (50.00) | % | (99.44) | % | $ 533 | $ 13,985 | (96.19) | % | |
| Memo: SBA PPP loan funding costs | $ 5 | $ 10 | $ 21 | $ 44 | $ 90 | (50.00) | % | (94.44) | % | $ 81 | $ 803 | (89.91) | % | |
| Memo: Revenue impact of third-party managed portfolio | $ 1,369 | $ - | $ - | $ - | $ - | 100.00 | % | 100.00 | % | $ 1,369 | $ - | 100.00 | % | |
| Net Interest Margin | ||||||||||||||
| Loans held for sale | 6.18 % | 4.92 % | 5.38 % | 0.00 % | 0.00 % | 126 | bps | 618 | bps | 5.54 % | 0.00 % | 554 | bps | |
| Loans | 5.04 % | 4.50 % | 4.20 % | 4.25 % | 4.57 % | 54 | 47 | 4.52 % | 4.57 % | (5) | ||||
| Investments | 2.46 % | 2.23 % | 2.01 % | 1.92 % | 1.91 % | 23 | 55 | 2.14 % | 1.98 % | 16 | ||||
| Other Earning Assets | 3.57 % | 2.44 % | 1.13 % | 0.35 % | 0.35 % | 113 | 322 | 1.12 % | 0.32 % | 80 | ||||
| Total Earning Assets | 4.80 % | 4.24 % | 3.82 % | 3.44 % | 3.52 % | 56 | 128 | 4.09 % | 3.62 % | 47 | ||||
| NOW | 0.35 % | 0.32 % | 0.32 % | 0.33 % | 0.38 % | 3 | (3) | 0.33 % | 0.47 % | (14) | ||||
| MMDA | 1.43 % | 0.82 % | 0.46 % | 0.43 % | 0.48 % | 61 | 95 | 0.79 % | 0.58 % | 21 | ||||
| Savings | 0.52 % | 0.26 % | 0.26 % | 0.27 % | 0.28 % | 26 | 24 | 0.33 % | 0.30 % | 3 | ||||
| CDs | 1.64 % | 1.09 % | 0.82 % | 0.81 % | 0.87 % | 55 | 77 | 1.11 % | 1.04 % | 7 | ||||
| Cost of Interest Bearing Deposits | 1.03 % | 0.64 % | 0.45 % | 0.44 % | 0.48 % | 39 | 55 | 0.64 % | 0.60 % | 4 | ||||
| Cost of Deposits | 0.78 % | 0.48 % | 0.35 % | 0.35 % | 0.39 % | 30 | 39 | 0.49 % | 0.48 % | 1 | ||||
| - | ||||||||||||||
| Other Funding | 4.57 % | 4.43 % | 4.99 % | 3.22 % | 2.87 % | 14 | 170 | 4.30 % | 2.71 % | 159 | ||||
| Total Cost of Funds | 1.19 % | 0.71 % | 0.53 % | 0.52 % | 0.56 % | 48 | 63 | 0.75 % | 0.65 % | 10 | ||||
| Net Interest Margin | 3.67 % | 3.57 % | 3.33 % | 2.96 % | 3.00 % | 10 | 67 | 3.39 % | 3.01 % | 38 | ||||
| Net Interest Spread | 3.28 % | 3.31 % | 3.15 % | 2.81 % | 2.96 % | (3) | 32 | 3.14 % | 2.97 % | 17 | ||||
| Memo: Excluding SBA PPP loans and revenue impact of third-party managed portfolio | ||||||||||||||
| Loans | 4.86 % | 4.51 % | 4.23 % | 4.27 % | 4.33 % | 34 | bps | 52 | bps | 4.49 % | 4.40 % | 8 | bps | |
| Total Earning Assets | 4.64 % | 4.25 % | 3.85 % | 3.44 % | 3.32 % | 39 | 132 | 4.06 % | 3.42 % | 63 | ||||
| Net Interest Margin* | 3.51 % | 3.58 % | 3.35 % | 2.96 % | 2.79 % | (7) | 72 | 3.35 % | 2.79 % | 56 | ||||
| *Net interest margin excluding the effect of SBA PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods | ||||||||||||||
| Primis Financial Corp. | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| (Dollars in thousands, except per share data) | For Three Months Ended: | For Twelve Months Ended: | ||||||||||||
| Reconciliation of Non-GAAP items: | 4Q 2022 | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | 4Q 2022 | 4Q 2021 | |||||||
| Net income from continuing operations | $ 3,085 | $ 5,054 | $ 5,009 | $ 4,593 | $ 7,651 | $ 17,741 | $ 31,018 | |||||||
| Non-GAAP adjustments to Net Income from continuing operations: | ||||||||||||||
| Branch Consolidation / Other restructuring | 1,175 | 308 | 901 | - | - | 2,384 | 200 | |||||||
| (Gain) on sale of Infinex investment | (4,144) | - | - | - | - | (4,144) | - | |||||||
| Merger expenses | - | - | 401 | 115 | - | 516 | - | |||||||
| (Gain) on debt extinguishment | - | - | - | - | (573) | - | (573) | |||||||
| Income tax effect | 641 | (67) | (281) | (25) | 124 | 269 | 81 | |||||||
| Net income from continuing operations adjusted for nonrecurring income and expenses | $ 757 | $ 5,295 | $ 6,030 | $ 4,683 | $ 7,202 | $ 16,766 | $ 30,726 | |||||||
| Net income from continuing operations | $ 3,085 | $ 5,054 | $ 5,009 | $ 4,593 | $ 7,651 | $ 17,741 | $ 31,018 | |||||||
| Income tax expense | 530 | 1,365 | 1,375 | 1,265 | 2,284 | 4,535 | 8,721 | |||||||
| Provision for credit losses (incl. unfunded commitment expense) | 7,896 | 3,201 | 254 | 359 | (1,451) | 172 | (5,563) | |||||||
| Pre-tax pre-provision earnings from continuing operations | $ 11,511 | $ 9,620 | $ 6,638 | $ 6,217 | $ 8,484 | $ 22,448 | $ 34,176 | |||||||
| Effect of adjustment for nonrecurring income and expenses and impact of third-party managed portfolio | (4,791) | (912) | 1,302 | 115 | (573) | (4,286) | (373) | |||||||
| Pre-tax pre-provision operating earnings from continuing operations | $ 6,720 | $ 8,708 | $ 7,940 | $ 6,332 | $ 7,911 | $ 18,162 | $ 33,803 | |||||||
| Return on average assets from continuing operations | 0.36 % | 0.61 % | 0.63 % | 0.55 % | 0.88 % | 0.53 % | 0.92 % | |||||||
| Effect of adjustment for nonrecurring income and expenses | (0.27 %) | 0.03 % | 0.13 % | 0.01 % | (0.05 %) | (0.03 %) | (0.01 %) | |||||||
| Operating return on average assets from continuing operations | 0.09 % | 0.64 % | 0.76 % | 0.57 % | 0.83 % | 0.51 % | 0.92 % | |||||||
| Return on average assets from continuing operations | 0.36 % | 0.61 % | 0.63 % | 0.55 % | 0.88 % | 0.53 % | 0.92 % | |||||||
| Effect of tax expense | 0.06 % | 0.16 % | 0.17 % | 0.15 % | 0.26 % | 0.14 % | 0.26 % | |||||||
| Effect of provision for credit losses (incl. unfunded commitment expense) | 0.91 % | 0.39 % | 0.03 % | 0.04 % | (0.17 %) | 0.01 % | (0.17 %) | |||||||
| Pre-tax pre-provision return on average assets from continuing operations | 1.33 % | 1.16 % | 0.83 % | 0.75 % | 0.98 % | 0.68 % | 1.02 % | |||||||
| Effect of adjustment for nonrecurring income and expenses and expenses and impact of third-party managed portfolio | (0.55 %) | (0.11 %) | 0.16 % | 0.01 % | (0.07 %) | (0.13 %) | (0.01 %) | |||||||
| Pre-tax pre-provision operating return on average assets from continuing operations | 0.78 % | 1.05 % | 1.00 % | 0.77 % | 0.91 % | 0.55 % | 1.01 % | |||||||
| Return on average equity from continuing operations | 3.07 % | 4.98 % | 4.92 % | 4.49 % | 7.37 % | 4.37 % | 7.67 % | |||||||
| Effect of adjustment for nonrecurring income and expenses | (2.32 %) | 0.24 % | 1.00 % | 0.09 % | (0.43 %) | (0.24 %) | (0.07 %) | |||||||
| Operating return on average equity from continuing operations | 0.75 % | 5.22 % | 5.93 % | 4.58 % | 6.94 % | 4.13 % | 7.59 % | |||||||
| Effect of goodwill and other intangible assets | 0.28 % | 1.92 % | 2.15 % | 1.58 % | 2.42 % | 1.48 % | 2.73 % | |||||||
| Operating return on average tangible equity from continuing operations | 1.03 % | 7.14 % | 8.08 % | 6.16 % | 9.36 % | 5.62 % | 10.33 % | |||||||
| Efficiency ratio from continuing operations | 71.71 % | 71.85 % | 75.01 % | 76.11 % | 68.16 % | 73.34 % | 67.43 % | |||||||
| Effect of adjustment for nonrecurring income and expenses and impact of third-party managed portfolio | 8.17 % | 1.79 % | (4.78 %) | (0.46 %) | 1.47 % | 1.71 % | 0.18 % | |||||||
| Operating efficiency ratio from continuing operations | 79.89 % | 73.64 % | 70.23 % | 75.65 % | 69.63 % | 75.05 % | 67.61 % | |||||||
| Earnings per share from continuing operations - Basic | $ 0.13 | $ 0.21 | $ 0.20 | $ 0.19 | $ 0.31 | $ 0.72 | $ 1.27 | |||||||
| Effect of adjustment for nonrecurring income and expenses | (0.10) | 0.01 | 0.05 | 0.00 | (0.02) | (0.04) | (0.01) | |||||||
| Operating earnings per share from continuing operations - Basic | $ 0.03 | $ 0.22 | $ 0.25 | $ 0.19 | $ 0.29 | $ 0.68 | $ 1.26 | |||||||
| Earnings per share from continuing operations - Diluted | $ 0.12 | $ 0.20 | $ 0.20 | $ 0.19 | $ 0.31 | $ 0.72 | $ 1.26 | |||||||
| Effect of adjustment for nonrecurring income and expenses | (0.09) | 0.01 | 0.04 | (0.00) | (0.02) | (0.04) | (0.01) | |||||||
| Operating earnings per share from continuing operations - Diluted | $ 0.03 | $ 0.21 | $ 0.24 | $ 0.19 | $ 0.29 | $ 0.68 | $ 1.25 | |||||||
| Book value per share | $ 15.98 | $ 15.89 | $ 16.17 | $ 16.42 | $ 16.76 | $ 15.98 | $ 16.76 | |||||||
| Effect of goodwill and other intangible assets | (4.37) | (4.39) | (4.40) | (4.31) | (4.34) | (4.37) | (4.33) | |||||||
| Tangible book value per share | $ 11.61 | $ 11.54 | $ 11.77 | $ 12.11 | $ 12.43 | $ 11.61 | $ 12.43 | |||||||
| Stockholders' equity | $ 394,403 | $ 391,808 | $ 398,637 | $ 404,195 | $ 411,881 | $ 394,403 | $ 411,881 | |||||||
| Less goodwill and other intangible assets | (107,863) | (108,147) | (108,524) | (106,075) | (106,416) | (107,863) | (106,416) | |||||||
| Tangible common equity | $ 286,540 | $ 283,661 | $ 290,113 | $ 298,120 | $ 305,465 | $ 286,540 | $ 305,465 | |||||||
| Equity to assets | 11.04 % | 11.67 % | 12.32 % | 12.55 % | 12.10 % | 11.04 % | 12.09 % | |||||||
| Effect of goodwill and other intangible assets | (2.77 %) | (2.94 %) | (3.04 %) | (2.98 %) | (2.84 %) | (2.77 %) | (2.83 %) | |||||||
| Tangible common equity to tangible assets | 8.27 % | 8.73 % | 9.27 % | 9.57 % | 9.26 % | 8.27 % | 9.26 % | |||||||
| Net interest margin | 3.67 % | 3.57 % | 3.33 % | 2.96 % | 3.00 % | 3.39 % | 3.01 % | |||||||
| Effect of adjustments for PPP associated balances and revenue impact of third-party managed portfolio* | (0.16 %) | 0.01 % | 0.02 % | (0.00 %) | (0.21 %) | (0.04 %) | (0.22 %) | |||||||
| Core net interest margin | 3.51 % | 3.58 % | 3.35 % | 2.96 % | 2.79 % | 3.35 % | 2.79 % | |||||||
| *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 2022 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; 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 banking platform, V1BE fulfillment service and Primis Mortgage Company; competitive pressures among financial institutions increasing significantly; changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices; 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, as well as labor shortages and supply chain disruptions; 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 ongoing 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; 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, 2021, 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
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 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; operating earnings per share from continuing operations – basic; operating earnings per share from continuing operations – diluted; tangible book value per share; tangible common equity; tangible common equity to tangible assets; and core net interest margin 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 Measure
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: 32 Ticker (NASDAQ): FRST Valuation Market Capitalization: $294 million Price / Book Value per Share 0.75x Price / Tangible Book Value: 1.03x Price / 2023 Estimated EPS(3): 9.47x Price / 2024 Estimated EPS(3): 8.28x Dividend Yield(4): 3.35% Pricing as of January 25, 2023. Financial data as of or for the three months ended December 31, 2022. (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.
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 Poised for outsized EPS growth versus peers Business line investing largely behind us 2023 expected to be materially more profitable than 2022 Significant valuation upside as strategic investments mature Why Invest Now?
Feb 2020 Immediately started building risk management teams and systems to repair strained regulatory relationships Jun 2020 Implemented the Company’s first objective incentive plan…all directed toward deposits Mar 2020 Ceased aggressive purchases of non-QM loans, hospitality lending and brokered CDs Feb 2020 New Management team and board restructure Jan 2021 Ceased paying subjective incentives to executives. Changed CEO comp to 65% performance based and no cash bonuses Nov 2020 Launched Panacea Financial – Nation’s first fintech platform directed to Doctors/Vets/Dentists Dec 2022 Finished acquiring, staffing, restructuring and investing in mortgage platform to support plans for 2023. Jun 2022 Acquired SeaTrust Mortgage platform for approx. $2 million with licenses, software and agency approvals but no meaningful volume Dec 2021 Launched Primis Life Premium Finance with three individuals with 45 years of experience in the business. Aug 2022 Finished work restoring regulatory relationship Sep 2022 Launched a new digital platform for Primis Bank initially focused on consumers but migrating to business accounts in 1Q2023 Oct 2021 Exited affiliate relationship with Southern Trust Mortgage Sep 2021 Launched V1BE…Nation’s first and only app-powered branch delivery service in Richmond and DC Apr 2022 Announced consolidation of 8 branches which doubled deposits/branch compared to Dec 2019 Jan 2023 Panacea agreement to sell our first loans on the new GOS model. Mar 2021 Rebranded the Company from Sonabank to Primis Financial with a tech forward image 3Q 2021 Experienced the Company’s first organic loan growth in 5 years. The Heavy Lifting Behind Us
Path to Enhanced Profitability Q4 Run Rate Earnings 2023 Potential PTPP Earnings Q4 earnings depressed by mortgage while other business lines (Panacea/Life Premium Finance) are hitting inflection points Mortgage will no longer be a drag beginning in Q1’23 (anticipated breakeven) with material contribution for the year from 2022 investments Both Panacea and Life Premium Finance have hit scale and should be meaningful contributors to earnings in 2023
High Performing Community Bank V1BE adoption/utilization continues to build with monthly transactions up 55% in Q4, primarily due to small-business activity Core market loan growth of 4.3% in Q4(2) Deposits per Branch (1) V1BE is a bank delivery app for on-demand ordering of branch services (2) Excludes PPP, Panacea, Life Premium Finance balances and loans held for sale Map Source: S&P Global. 4.88 V1BE App Rating ~$89 million Deposit balance of V1BE users 56% % of V1BE Users that are SMBs V1BE Update(1) V1BE Coverage ~48 Minutes Average Fulfillment Time 552,252 Total Minutes Saved by Customers 4,332 Q4 Transactions
Digital Platform Update Soft consumer launch July 25, 2022 with marketing efforts beginning late Q3’22 Total platform deposits of $29.7 million as of December 31, 2022 Almost 50% of all new deposit accounts are being opened online instead of in the branches (versus almost all accounts opened in the branch 3 years ago) Novel feature set differentiates us in the marketplace User-friendly mobile experience Significant debit card rewards Free overdraft Embedded V1BE functionality Significant system upgrade expected early Q1’23 with an enhanced small business / treasury offering
Primis Mortgage Update Significant expansion of mortgage footings in a short period of time (now licensed in 39 states and D.C.) 35% increase in originations in Q4 vs Q3 despite headwinds from increasing rates and seasonal low point On track for $1 billion of mortgage production in 2023, even in the current rate environment
$46.5 million growth in loan balances in Q4’22 Total 2022 loan originations of $229.8 mil. vs. original guidance of $125 - 150 mil. Now banking >1% of all new doctors in the U.S. Deposit growth of 69% unannualized in Q4’22 Opened >500 new checking and savings accounts in Q4’22 Cumulative NCOs since 11/1/2020 launch of 0.05% (Commercial NCOs of 0.00%) Panacea Financial Update Q4’22 Update Q4’22 Loan Composition ($248.4 million) Commercial Portfolio Statistics 2.9x Global DSC >$280,000 Annual Income 2023 Outlook $150 - $200 mil. of total loan originations Initiating gain on sale strategy to provide additional revenue opportunities. Agreement to sell $10 mil. of loans in January for approx. 3 – 4 point gain. Expect an additional $50-$100 mil. of loan sales in 2023. Consumer Portfolio Statistics(1) 787 FICO 752 FICO (1) In-Practice Consumer
4 Life Insurance Premium Finance Update Key Portfolio Metrics Key Performance Metrics 29 Average number of days from submission to loan closing ORIGINATION CYCLE TIME Average Actual Primis Processing Time is ~4 Days Placement Ratio Carrier Approvals Top-Tier Partners Facilitators 67% 26 47 6 Average weekly submissions in Q4’ 2022 SUBMISSIONS 5 50.2% Q4 Loan Balance Growth $791.8 Million Projected Balance at Maturity $193.8 Million Loan Balances (Net of Fees)
Fourth Quarter Results
Return on average assets from continuing operations of 0.36% for the three months ended December 31, 2022 versus 0.61% for the three months ended September 30, 2022 and 0.88% for the three months ended December 31, 2021. Operating return on average assets from continuing operations(1) of 0.09%, 0.64% and 0.83% for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively. Pre-tax pre-provision return on average assets from continuing operations(1) was 1.33% for the three months ended December 31, 2022, versus 1.16% for the three months ended September 30, 2022 and 0.98% for the three months ended December 31, 2021. Pre-tax pre-provision operating return on average assets from continuing operations(1) was 0.78% for the three months ended December 31, 2022, versus 1.05% for the three months ended September 30, 2022 and 0.91% for the three months ended December 31, 2021. Excluding losses related to mortgage banking, this ratio would have been 1.10% for the fourth quarter of 2022 and 1.15% for the third quarter of 2022. Loans held for investment grew at a rate of 26.0% for 2022 or 30.1%, net of a decline in Paycheck Protection Program (“PPP”) loan balances. Loans held for investment grew at an annualized rate of 31.5% in the fourth quarter compared to the linked-quarter, net of a decline in PPP balances. Total deposits grew an annualized 2.1% from the linked-quarter to $2.72 billion at December 31, 2022. Non-interest bearing checking deposits were $582.6 million, representing 21.4% of total deposits at December 31, 2022, compared to 25.4% at September 30, 2022 and 19.2% at December 31, 2021. Net interest margin of 3.67% in the fourth quarter of 2022 was up substantially from 3.00% in the same period last year and up 10 basis points from 3.57% in the third quarter of 2022. Core net interest margin(1), which excludes the effects of PPP loans and revenue due to a third-party loan servicer (as described below) was 3.51% in the fourth quarter of 2022, down slightly from 3.58% in the third quarter of 2022 and up substantially from 2.79% in the fourth quarter of 2021. Allowance for credit losses to total loans was 1.17% at December 31, 2022, compared to 1.17% at September 30, 2022 and 1.24% at December 31, 2021. Allowance for credit losses to total loans (excluding PPP balances and loans held for sale) was 1.17% at December 31, 2022, compared to 1.17% at September 30, 2022 and 1.29% at December 31, 2021. Equity to assets was 11.04% at December 31, 2022. Tangible common equity to tangible assets of 8.27% is 68 basis points higher than peer(2) median at December 31, 2022. Results for continuing operations. See reconciliation of Non-GAAP financial measures on slide 27. Per S&P Global. Includes publicly-traded banks with assets between $2 billion and $10 billion with reported ratios as of December 21, 2022. Fourth Quarter Highlights
Dollars in millions. (1) See reconciliation of Non-GAAP financial measures on slide 27. Balance Sheet Trends
Lines of Business Dollars in thousands. Net interest income, noninterest income and noninterest expense excludes $1.4 million, $1.8 million and $1.4 million, respectively, related to credit enhanced portfolio managed by a third party. (1) Net interest income assumes business line funding requirements are provided by the Company at its cost of funds plus 100 basis points for illustrative purposes. (2) See reconciliation of Non-GAAP financial measures on slide 27 Bank Panacea LPF Mortgage Q4 '22 Q3 '22 Chg Q4 '22 Q3 '22 Chg Q4 '22 Q3 '22 Chg Q4 '22 Q3 '22 Chg Net Interest Income * $25,482 $25,284 0.8% $1,840 $1,465 25.6% $659 $530 24.4% $226 $171 32.3% Noninterest Income ** 2,750 2,195 25.3% 3 2 86.2% 5 5 (9.4%) 2,264 2,197 3.1% Operating Noninterest Exp. (excl. res. for unfund.)(1) 20,005 18,655 7.2% 1,093 1,242 (12.0%) 91 70 30.8% 5,357 3,175 68.8% Pre-Tax Pre-Provision Net Income(1) $8,227 $8,824 (6.8%) $750 $225 234.0% $573 $466 23.1% ($2,867) ($806) N/A Gross Loans (inc. HFS) $2,506,632 $2,403,460 4.3% $248,402 $201,887 23.0% $193,803 $129,031 50.2% $27,626 $16,096 71.6% Total Deposits 2,691,415 2,687,747 0.1% 22,912 13,595 68.5% 8,049 6,977 15.4% 0 0 0.0%
Dollars in millions. Core excludes impact of PPP balances and net revenue impact of third-party managed portfolio. Loan Composition and Trends Loan Trends and Yields Q4’22 Loan Composition (Ex. PPP) Robust loan growth of 32% annualized, linked-quarter excluding PPP balances (30% annualized for 2022) Expect lower, but healthy, level of loan growth in 2023 versus 2022
Classified loans and NPAs exclude guaranteed portion of SBA loans. Core net charge-offs exclude losses covered by a third party. Asset Quality NPAs / Loans (Ex. PPP) + OREO NCOs / Average Loans Criticized & Classified Loans / Total Loans (Ex. PPP) Nonperforming assets and classified loans decreased by $2.3 million and $6.3 million, respectively, primarily due to impairment of one relationship Migrated from special mention in Q3 Largely comprised of multiple assisted living facilities Net charge-offs of $5.3 million in Q4 primarily for impairment of relationship detailed above Also includes $1.5 million of net charge-offs covered by a third party (offset in noninterest income) Excluding these items, Q4 would have seen $1.3 million of net recoveries OREO at $0 as of December 31, 2022
Allowance for Credit Losses ACL Walk Forward ACL / Gross Loans (Ex. PPP) Provision for credit losses of $7.9 million in Q4 versus provision of $2.9 million in Q3 Majority of provision due to impairment of one nonaccrual loan relationship that deteriorated in Q4 Provision also includes $1.8 million related to third-party managed portfolio with credit enhancement Provision offset by gain of equal amount recorded in noninterest income ACL coverage of gross loans flat at 1.17% Growth/Model Third-Party Covered Q4 Impairment, Net
Dollars in millions. (1) Core deposits exclude time deposits. Deposit Trends Deposit Composition – Q4’22 Core Deposit Growth(1) Total deposits were up marginally in Q4 while NIB declined to 21.4% of total deposits Time deposits increased to 17.1% as the Bank raised $100 million of CDs in the fourth quarter at various maturities Cost of Deposits: 78 bps
Net Interest Income Progression Dollars in thousands. Core excludes impact of PPP balances and net revenue impact of third-party managed portfolio. (1) See reconciliation of Non-GAAP financial measures on slide 27 Net Interest Income and Net Interest Margin Excluding PPP impacts, Q4’22 was the seventh consecutive quarter of increasing net interest income as earning asset growth and yields offset increased funding costs Net Interest Margin Trends
Q4 NIE, excluding unfunded commitment expense, impacted by the following: Restructuring and other nonrecurring expenses of $1.2 million Primis Mortgage expenses of $5.4 million due to full quarter impact of team hires in Q3 Includes $1.4 million of expense due to third-party serviced loan portfolio Excluding items above, Q4 NIE increased to $21.2 million versus $20.0 million in Q3 primarily driven by increased personnel costs and other inflationary pressures Mortgage profitability along with significant earnings contributions from lines of business expected to drive efficiency ratio in the 60s in 2023 Efficiency Ratio(1) 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 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 Return on Average Assets Pre-Tax Pre-Provision Operating Earnings (1) Excluding pre-tax loss in mortgage and impact of third-party managed loan portfolio, PTPP Operating ROAA would have been 1.10% for Q4’22, down slightly from 1.15% for Q3’22 Mortgage expected to add 10-15 basis points to ROAA in 2023 Adjusted for Mortgage Impact: 1.15% 1.10%
Tangible Book Value Per Share Diluted Earnings Per Share and Adjusted Diluted EPS(1) (1) See reconciliation of Non-GAAP financial measures on slide 27. Per Share Results (1) Tangible book value per share reduced by $1.05 at December 31, 2022 due to unrealized mark-to-market losses on the Company’s available-for-sale securities portfolio
Talented management team and board committed to building long-term shareholder value Attractive multi-pronged strategy for growth beginning to pay dividends Aggressive and early use of technology positioning the bank for superior performance as the industry evolves Significant valuation upside as strategic investments mature Summary
Appendix
*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