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): October 26, 2023 |
|---|
Primis Financial Corp.
(Exact name of Registrant as Specified in Its Charter)
| Virginia | 001-33037 | 20-1417448 |
|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission File Number) | (IRS Employer<br>Identification No.) |
| 1676 International Drive, Suite 900 | ||
| McLean, Virginia | 22101 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
| Registrant’s Telephone Number, Including Area Code: 703 893-7400 | ||
| --- |
(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<br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| COMMON STOCK | FRST | The Nasdaq Global Market |
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 October 26, 2023, Primis Financial Corp. (“Primis” or the “Company”) issued a press release announcing its financial results for the three months ended September 30, 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 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 October 26, 2023, Primis issued a press release announcing the declaration of a dividend payable on November 24, 2023 to shareholders of record as of November 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 October 26, 2023 |
|---|---|
| 99.2 | Primis Financial Corp. Third Quarter 2023 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, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Primis Financial Corp. | |||
|---|---|---|---|
| Date: | October 26, 2023 | By: | /s/ Matthew A. Switzer |
| Matthew A. Switzer | |||
| Chief Financial Officer |
Exhibit 99.1
Primis Financial Corp. Reports 55% Increase in Diluted Earnings per Share for the Third Quarter of 2023
Declares Quarterly Cash Dividend of $0.10 Per Share
MCLEAN, Va., Oct. 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 of $7.6 million for the quarter ended September 30, 2023, compared to net income of $5.0 million for the quarter ended September 30, 2022. Diluted earnings per share ("EPS") for the three months ended September 30, 2023 was $0.31, up 55% from $0.20 per diluted share reported in the third quarter of 2022. For the year-to-date period in 2023, the Company reported earnings and diluted earnings per share of $13.3 million and $0.54, respectively, compared to $14.5 million and $0.59, respectively, in the same period in 2022.
The results of the third quarter of 2023 reflected material improvement in operating results across several fronts. Notably, the Company:
- Achieved a return on average assets of 79 basis points, up 18 basis points from a year ago. Operating return on average assets^(1)^ was 81 basis points, up from 9 basis points in the second quarter and 64 basis points a year ago.
- Generated a margin of 3.02%, up from 2.65% linked quarter due to sweeping off excess funds and tightly managing the balance sheet to maximize incremental spreads.
- Sold approximately $15 million of loans for a gain of approximately $400 thousand and participated out another $10 million to manage balance sheet capacity.
- Reduced noninterest expense to $25.9 million for the third quarter of 2023, compared to $30.6 million for the second quarter of 2023. Excluding nonrecurring, mortgage and unfunded reserve expenses, noninterest expense was $20.9 million in the third quarter, down from $24.0 million in the second quarter of 2023 on a comparable basis.
- Maintained peer-group leading liquidity with no FHLB borrowings, only $75 million of brokered CDs and $228.7 million of off-balance sheet funds swept off at September 30, 2023.
- 21% reduction in nonperforming assets, excluding SBA guarantees, linked-quarter to $19.6 million. Subsequent to quarter end, additional resolution occurred that results in the following pro forma credit metrics:
- Nonperforming assets to total assets of 0.17%
- Loan loss reserve as a percentage of nonperforming assets of 550%.
- Grew all capital ratios including TCE/TA. Leverage ratio increased to 8.80%.
- Opened 2,404 new deposit account relationships totaling $72.7 million with a weighted average cost of only 1.80%.
Commenting on the quarterly results, Dennis J. Zember Jr., President and CEO stated, "We are excited about the improvement in our results and believe we are positioned very well for the current environment. The Bank experienced a great quarter with an improved margin, substantial new deposit account openings at low rates and downward trends on operating expenses ahead of the planned consolidation of eight retail banking offices in late October 2023. There is building momentum at the community bank with our technology and convenience factors, resulting in us seeing material deposit opportunities that otherwise would not be available to the Bank.
As far as our positioning in the current environment, we have existing liquidity levels that are substantial with deposit growth strategies that are very incremental. As of this press release, we have only 0.17% of non-performing assets with no concentrations of credit in areas of concern to investors. Lastly, we have strong capital levels that we expect to build further during the upcoming periods and believe position us to have all the strategic options we need."
Net Interest Income
Net interest income increased approximately $1.0 million to $27.1 million during the quarter compared to the second quarter of 2023 as higher earning asset yields offset increased funding costs. For the third quarter of 2023, the Company reported a net interest margin of 3.02% versus 2.65% for the second quarter of 2023. The second quarter included substantial excess cash which lowered margin prior to the sweep program implementation on June 30, 2023. Adjusting for excess cash, net interest margin in the second quarter would have been 3.00%.
Commenting on net interest margin trends, Mr. Zember said, "On a comparable basis, when you exclude the excess liquidity and deposits, our margin improved linked-quarter. Further, it was higher in the month of September at 3.05%. To be recording increasing margins in this environment is notable, but to do this alongside the substantial growth in deposit levels our bank is experiencing is remarkable. Our deposit growth engine, with unique technology and convenience factors combined with the sales intensity at our community bank is fueling this success. For the third quarter, we opened new deposit accounts totaling $73 million with a weighted average cost of 1.80%. We funded new loans in the Bank totaling $104 million with a weighted average yield of 7.95%, producing incremental spreads of 5.18% on new business in the quarter. This kind of incremental momentum is critical right now as the industry grapples with rising deposit costs and clearly gives us an advantage over our peers."
Interest income on earning assets decreased during the third quarter of 2023 to $50.5 million compared to $52.7 million during the second quarter of 2023 due to lower interest on excess cash balances. Yield on earning assets and loans held for investment were 5.63% and 5.86%, respectively, up 29 basis points and 26 basis points, respectively, from the second quarter of 2023.
Interest expense declined $3.2 million in the third quarter of 2023 from the second quarter of 2023 as a result of excess deposits swept off of the balance sheet beginning June 30, 2023. Cost of deposits declined 10 basis points to 2.60% in the third quarter from 2.70% in the second quarter of 2023 as higher cost deposits entered the sweep program. Management continues to leverage the strong liquidity generated by the Bank's digital platform to conservatively manage the cost of deposits in the core bank. As highlighted by the table below, core bank deposit costs increased 11 basis points in the third quarter while the cost of wholesale funding options, using three month FHLB advance rates as a proxy, increased 23 basis points in the quarter.
| 3Q23 | 2Q23 | 1Q23 | 4Q22 | 3Q22 | |
|---|---|---|---|---|---|
| Core Bank IntExp | $ 12,380 | $ 11,823 | $ 9,343 | $ 5,183 | $ 3,287 |
| Digital Platform IntExp | $ 9,196 | $ 12,960 | $ 5,701 | $ 127 | $ 0 |
| Core Bank Avg. Noninterest-bearing | $ 471,813 | $ 472,416 | $ 555,771 | $ 648,051 | $ 665,000 |
| Core Bank Avg. Interest-bearing deposits (IBD) | $2,099,617 | $2,155,212 | $2,149,650 | $2,027,211 | $2,027,332 |
| Digital Platform AvgIBD | $ 723,145 | $1,052,603 | $ 481,072 | $ 14,691 | $ 89 |
| Core Bank Cost of IBD | 2.34 % | 2.20 % | 1.76 % | 1.01 % | 0.64 % |
| Core Bank Cost of Deposits | 1.91 % | 1.80 % | 1.40 % | 0.77 % | 0.48 % |
| Digital Platform Cost of IBD | 5.05 % | 4.94 % | 4.81 % | 3.42 % | 0.55 % |
| Avg. 3M FHLB Rate | 5.54 % | 5.31 % | 4.96 % | 4.40 % | 2.93 % |
Noninterest Income
Noninterest income increased during the third quarter to $9.9 million when compared to $8.5 million in the second quarter of 2023. Excluding credit enhancement income from a third-party managed portfolio, noninterest income increased $0.6 million to $7.9 million in the third quarter of 2023, largely due to increased gain on sale income and increased BOLI income.
During the third quarter of 2023, the Bank realized $0.4 million of gains associated with the sale of $15 million of Panacea commercial and consumer loans. Another $9 million of Panacea loans was classified as held for sale at September 30, 2023 and is expected to be sold early in the fourth quarter. Management sees continued interest in the division's consumer and commercial loans and believes fourth quarter loan sales will exceed third quarter amounts.
Noninterest Expense
Noninterest expense was $25.9 million for the third quarter of 2023, compared to $30.6 million for the second quarter of 2023. Noninterest expense for the third quarter of 2023 and the second quarter of 2023 included $337 thousand and $515 thousand, respectively, of servicing and other expenses for a third-party managed loan portfolio. The third quarter of 2023 also included $0.2 million of nonrecurring expenses while the second quarter included $1.5 million of branch consolidation costs. Noninterest expense adjusted for third-party portfolio expenses, branch consolidation costs, other nonrecurring costs and unfunded commitment reserve impacts was $25.6 million and $28.8 million for the third and second quarter of 2023, respectively. Included in noninterest expense was $5.1 million in expenses related to Primis Mortgage in the third quarter of 2023 versus $5.3 million in the second quarter of 2023 with decreased mortgage-related expenses driven by slightly lower activity.
Excluding mortgage, nonrecurring expenses, unfunded reserve expenses and the third party expenses described above, noninterest expense for the third quarter of 2023 was $20.5 million versus $23.5 million in the second quarter. Compensation and benefits excluding mortgage was $9.7 million in the third quarter of 2023, down from $10.8 million during the second quarter of 2023, primarily due to administrative cost saves announced last quarter and attrition. FDIC insurance costs decreased $0.25 million in the third quarter of 2023 due to lower balances as excess deposits were swept to other banks. Data processing costs were lower by $0.6 million due to low account opening activity in the third quarter of 2023. Other operating expenses declined $2.0 million from the second quarter due to generally tighter expense controls and lower customer fraud losses.
The Company continues to pursue efficiencies to enhance operating leverage. As previously disclosed, eight branch locations will be consolidated in the fourth quarter of 2023 which will positively impact noninterest expense going forward.
Loan Portfolio and Asset Quality
Loans held for investment decreased to $3.15 billion at September 30, 2023, compared to $3.17 billion at June 30, 2023. The Company sold or participated out approximately $25 million of loans in the third quarter and moved another $9 million to loans held for sale at September 30, 2023. Adjusting for these activities, loans would have increased slightly in the third quarter of 2023 versus the second quarter of 2023.
Nonperforming assets, excluding portions guaranteed by the SBA, were $19.6 million at September 30, 2023, compared to $24.7 million at June 30, 2023, while loans rated substandard or doubtful decreased to $28.8 million in the third quarter of 2023 from $33.7 million in the second quarter of 2023. Included in those balances is one remaining assisted living problem credit outstanding at September 30, 2023 related to the relationship discussed in previous quarters and with a book balance of $13.1 million. This credit was resolved in early October 2023 bringing pro forma nonperforming assets to $6.5 million as of September 30, 2023. The Bank had no other real estate owned at the end of the third quarter of 2023.
The Company recorded a provision for loan losses of $1.6 million for the third quarter of 2023 versus $4.3 million for the second quarter of 2023. Of this provision, $2.1 million was due to charge-offs 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, the recovery for loan losses would have been $0.5 million for the third quarter of 2023 due to lower loan balances and lowered modeled losses on certain portfolios, particularly Panacea and Life Premium Finance. As a percentage of loans, excluding PPP balances, the allowance for credit losses was 1.14% and 1.21% at the end of the third and second quarter of 2023, respectively.
Net charge-offs were $4.3 million for the third quarter of 2023, up from $1.6 million for the second quarter of 2023. Excluding the losses that are covered by a third-party, the third quarter of 2023 would have experienced $2.2 million of net charge-offs versus $0.2 million of net charge-offs in the second quarter of 2023. Over half of the core charge-offs were related to the partial resolution of the assisted living relationship detailed previously that had been reserved for in prior quarters.
Deposits and Funding
Total deposits on the balance sheet at September 30, 2023 decreased to $3.29 billion from $3.32 billion at June 30, 2023 with excess deposits and associated cash balances swept off the balance sheet to optimize liquidity. Swept deposits receive full FDIC coverage, bringing the Bank's percentage of uninsured or unsecured deposits down to 20%. Liquidity sources represent almost 185% of uninsured or unsecured deposits, up substantially from December 31, 2022.
Deposit growth in the community bank continues to benefit from better technology and unique convenience factors. During the third quarter, the community bank attracted $50 million in new deposit relationships with a weighted average cost of 0.39%. V1BE, the Bank's proprietary delivery tool increased total users by 21% during the quarter, from 838 at the end of the second quarter of 2023 to 1,013 at the end of the third quarter of 2023.
During the third quarter, the Bank opened 1,369 new deposit account relationships on the digital platform with a weighted average cost of 4.9%. This new customer growth is a direct result of referrals made to us by existing customers with no marketing costs incurred. At quarter end, the Bank had 13,740 digital accounts with $998.4 million in total deposits, average balances of $72,600 per account and an average age of 49.
The Bank has $75 million of brokered CDs that mature later in 2023. The Bank has no other wholesale funding and has $228.7 million of deposits currently sweeping to other banks. The cost of the swept deposits is materially cheaper than wholesale funding and available to fund further balance sheet growth as needed.
Digital Lines of Business
Panacea continues to experience substantial growth alongside the development of its nationally-recognized brand. Panacea finished the third quarter of 2023 with approximately $299 million in outstanding loans, an increase of $8 million from June 30, 2023. As highlighted above, Panacea sold approximately $15 million of loans in the third quarter of 2023 for a pre-tax gain of $0.4 million. Panacea has $9 million of loans categorized as held for sale at September 30, 2023 in advance of a near-term loan sale and expects further loan sales throughout the fourth quarter.
Panacea-related deposits increased to $53.3 million at September 30, 2023, up 15% from June 30, 2023 and a substantially higher growth rate than the growth in loans for the third quarter of 2023. Coupled with its loan sale strategy, Panacea expects to continue increasing the amount it self-funds its balance sheet.
The Life Premium Finance ("LPF") division, launched in late 2021, ended the third quarter of 2023 with outstanding balances, net of deferred fees, of $360.7 million, compared to $346.2 million at the end of the second quarter of 2023, or an increase of 4%. LPF also participated out approximately $10 million of loans in the third quarter.
Primis Mortgage was profitable for the third quarter of 2023 with pre-tax income of $697 thousand. The locked pipeline ended the third quarter of 2023 down 7% from June 30, 2023 while loans funded decreased to $169 million in the third quarter of 2023 from $184 million in the second quarter of 2023. Primis Mortgage continues to aggressively manage costs to preserve profitability in a lower volume environment.
Shareholders' Equity
Book value per share as of September 30, 2023 was $15.96, an increase of $0.03 from June 30, 2023. Tangible book value per share^(1)^ at the end of the third quarter of 2023 was $11.63, an increase of $0.05 from June 30, 2023. Shareholders' equity was $394.0 million, or 10.3% of total assets, at September 30, 2023. Tangible common equity^(1)^ at September 30, 2023 was $287.1 million, or 7.72% of tangible assets^(1)^. Unrealized losses on the Company's available-for-sale securities portfolio increased by $4.6 million to $30.5 million due to increases in market interest rates during the third quarter of 2023. The Company has the intent and ability 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 November 24, 2023 to shareholders of record on November 10, 2023. This is Primis' forty-eighth consecutive quarterly dividend.
About Primis Financial Corp.
As of September 30, 2023, Primis had $3.8 billion in total assets, $3.1 billion in total loans and $3.3 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 | 1676 International Drive, Suite 900 |
| Phone: (703) 893-7400 | McLean, VA 22102 |
| Primis Financial Corp., NASDAQ Symbol FRST | |
| Website: www.primisbank.com |
Conference Call
The Company's management will host a conference call to discuss its third quarter results on Friday, October 27, 2023 at 10:00 a.m. (ET). A live Webcast of the conference call is available at the following website: https://events.q4inc.com/attendee/503221631. 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 adjusted for nonrecurring income and expenses; pre-tax pre-provision operating earnings; operating return on average assets; pre-tax pre-provision operating return on average assets; operating return on average equity; operating return on average tangible equity; operating efficiency ratio; operating earnings per share – basic; operating earnings per share – 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; potential impacts of the recent adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; 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, 2022, 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. | ||||||||||||
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| Primis Financial Corp | |||||||||||||
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| Financial Highlights (unaudited) | |||||||||||||
| (Dollars in thousands, except per share data) | For Three Months Ended: | Variance - 3Q 2023 vs | For Nine Months Ended: | Variance | |||||||||
| Selected Performance Ratios: | 3Q 2023 | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 2Q 2023 | 3Q 2022 | 3Q 2023 | 3Q 2022 | YTD | |||
| Return on average assets | 0.79 % | (0.02 %) | 0.62 % | 0.35 % | 0.61 % | 80 | bps | 18 | bps | 0.45 % | 0.59 % | (14) | |
| Operating return on average assets^(1)^ | 0.81 % | 0.09 % | 0.62 % | 0.08 % | 0.64 % | 72 | 18 | 0.49 % | 0.63 % | (13) | |||
| Pre-tax pre-provision return on average assets^(1)^ | 1.13 % | 0.37 % | 1.31 % | 1.32 % | 1.16 % | 76 | (3) | 0.92 % | 0.91 % | 1 | |||
| Pre-tax pre-provision operating return on average assets^(1)^ | 1.15 % | 0.51 % | 1.31 % | 0.98 % | 1.20 % | 64 | (5) | 0.97 % | 0.96 % | 2 | |||
| Return on average equity | 7.59 % | (0.19 %) | 5.98 % | 3.04 % | 4.98 % | 778 | 262 | 4.46 % | 4.77 % | (31) | |||
| Operating return on average equity^(1)^ | 7.75 % | 0.98 % | 5.98 % | 0.71 % | 5.22 % | 677 | 253 | 4.91 % | 5.22 % | (31) | |||
| Operating return on average tangible equity^(1)^ | 10.61 % | 1.33 % | 8.14 % | 0.98 % | 7.15 % | 928 | 346 | 6.71 % | 7.09 % | (38) | |||
| Cost of funds | 2.73 % | 2.81 % | 2.19 % | 1.19 % | 0.71 % | (8) | 202 | 2.59 % | 0.59 % | 200 | |||
| Net interest margin | 3.02 % | 2.65 % | 3.15 % | 3.67 % | 3.57 % | 37 | (54) | 2.93 % | 3.28 % | (35) | |||
| Core net interest margin^(1)^ | 3.02 % | 2.65 % | 3.16 % | 3.68 % | 3.58 % | 36 | (57) | 2.93 % | 3.30 % | (36) | |||
| Gross loans to deposits | 95.52 % | 95.68 % | 82.92 % | 108.24 % | 100.98 % | (0) | pts | (5) | pts | 95.52 % | 100.98 % | (5) | |
| Efficiency ratio | 69.93 % | 81.34 % | 68.69 % | 71.82 % | 71.93 % | (11) | (200) | 75.16 % | 74.29 % | 86 | |||
| Operating efficiency ratio^(1)^ | 69.39 % | 77.06 % | 68.69 % | 76.78 % | 70.99 % | (8) | (161) | 73.64 % | 72.27 % | 138 | |||
| Per Share Data: | |||||||||||||
| Earnings per share - Basic | $ 0.31 | $ (0.01) | $ 0.24 | $ 0.12 | $ 0.21 | (4,124.12) | % | 43.50 | % | $ 0.54 | $ 0.60 | (9.85) | |
| Operating earnings per share - Basic^(1)^ | $ 0.32 | $ 0.04 | $ 0.24 | $ 0.03 | $ 0.21 | NM | 51.24 | $ 0.60 | $ 0.63 | (4.73) | |||
| Earnings per share - Diluted | $ 0.31 | $ (0.01) | $ 0.24 | $ 0.12 | $ 0.20 | (4,124.12) | 51.20 | $ 0.54 | $ 0.59 | (7.86) | |||
| Operating earnings per share - Diluted^(1)^ | $ 0.32 | $ 0.04 | $ 0.24 | $ 0.03 | $ 0.21 | NM | 51.93 | $ 0.60 | $ 0.62 | (4.25) | |||
| Book value per share | $ 15.96 | $ 15.93 | $ 16.14 | $ 15.90 | $ 15.82 | 0.22 | 0.91 | $ 15.96 | $ 15.82 | 0.91 | |||
| Tangible book value per share^(1)^ | $ 11.63 | $ 11.58 | $ 11.78 | $ 11.53 | $ 11.43 | 0.41 | 1.77 | $ 11.63 | $ 11.43 | 1.77 | |||
| Cash dividend per share | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | - | - | $ 0.30 | $ 0.30 | - | |||
| Weighted average shares outstanding - Basic | 24,641,981 | 24,638,505 | 24,625,943 | 24,601,108 | 24,576,887 | 0.01 | 0.26 | 24,635,535 | 24,548,129 | 0.36 | |||
| Weighted average shares outstanding - Diluted | 24,641,981 | 24,638,505 | 24,685,206 | 24,685,663 | 24,688,422 | 0.01 | (0.19) | 24,635,535 | 24,674,014 | (0.16) | |||
| Shares outstanding at end of period | 24,686,764 | 24,690,064 | 24,685,064 | 24,680,097 | 24,650,239 | (0.01) | % | 0.15 | % | 24,686,764 | 24,650,239 | 0.15 | |
| Asset Quality Ratios: | |||||||||||||
| Non-performing assets as a percent of total assets, excluding SBA guarantees | 0.51 % | 0.64 % | 0.78 % | 0.98 % | 1.11 % | (13) | bps | (60) | bps | 0.51 % | 1.11 % | (60) | |
| Net charge-offs (recoveries) as a percent of average loans (annualized) | 0.53 % | 0.20 % | 0.53 % | 0.74 % | 0.17 % | 33 | 36 | 0.42 % | 0.02 % | 40 | |||
| Core net charge-offs (recoveries) as a percent of average loans (annualized)^(2)^ | 0.27 % | 0.02 % | 0.28 % | 0.53 % | 0.17 % | 25 | 10 | 0.14 % | 0.02 % | 12 | |||
| Allowance for credit losses to total loans | 1.14 % | 1.21 % | 1.17 % | 1.17 % | 1.17 % | (7) | (3) | 1.14 % | 1.17 % | (3) | |||
| Capital Ratios: | |||||||||||||
| Equity to assets | 10.30 % | 10.22 % | 9.48 % | 10.99 % | 11.62 % | 8 | bps | (132) | bps | ||||
| Tangible common equity to tangible assets^(1)^ | 7.72 % | 7.64 % | 7.10 % | 8.22 % | 8.68 % | 8 | (95) | ||||||
| Leverage ratio^(3)^ | 8.80 % | 8.14 % | 8.59 % | 9.48 % | 10.11 % | 66 | (131) | ||||||
| Common equity tier 1 capital ratio^(3)^ | 9.76 % | 9.38 % | 10.04 % | 10.54 % | 11.17 % | 38 | (141) | ||||||
| Tier 1 risk-based capital ratio^(3)^ | 10.07 % | 9.68 % | 10.36 % | 10.88 % | 11.53 % | 39 | (146) | ||||||
| Total risk-based capital ratio^(3)^ | 13.54 % | 13.16 % | 14.20 % | 14.80 % | 15.71 % | 38 | (217) | ||||||
| ^(1)^See Reconciliation of Non-GAAP financial measures. | |||||||||||||
| --- | |||||||||||||
| ^(2)^ Excludes third-party charge-offs. | |||||||||||||
| ^(3)^ September 30, 2023 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 - 3Q 2023 vs | |||||||||||
| Condensed Consolidated Balance Sheets (unaudited) | 3Q 2023 | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 2Q 2023 | 3Q 2022 | ||||||
| Assets | |||||||||||||
| Cash and cash equivalents | $ 93,865 | $ 100,868 | $ 607,125 | $ 77,859 | $ 97,738 | (6.94) | % | (3.96) | % | ||||
| Investment securities-available for sale | 216,875 | 223,087 | 231,468 | 236,315 | 238,891 | (2.78) | (9.22) | ||||||
| Investment securities-held to maturity | 11,975 | 12,378 | 13,115 | 13,520 | 14,391 | (3.26) | (16.79) | ||||||
| Loans held for sale | 66,266 | 57,704 | 42,011 | 27,626 | 13,388 | 14.84 | NM | ||||||
| Loans receivable, net of deferred fees | 3,145,867 | 3,173,638 | 3,041,533 | 2,946,637 | 2,734,887 | (0.88) | 15.03 | ||||||
| Allowance for credit losses | (35,767) | (38,414) | (35,727) | (34,544) | (31,956) | (6.89) | 11.93 | ||||||
| Net loans | 3,110,100 | 3,135,224 | 3,005,806 | 2,912,093 | 2,702,931 | (0.80) | 15.06 | ||||||
| Stock in Federal Reserve Bank and Federal Home Loan Bank | 12,796 | 12,083 | 12,083 | 25,815 | 16,689 | 5.90 | (23.33) | ||||||
| Bank premises and equipment, net | 24,878 | 25,298 | 25,136 | 25,257 | 25,534 | (1.66) | (2.57) | ||||||
| Operating lease right-of-use assets | 11,402 | 10,707 | 9,352 | 5,335 | 5,511 | 6.49 | 106.90 | ||||||
| Goodwill and other intangible assets | 106,891 | 107,215 | 107,539 | 107,863 | 108,170 | (0.30) | (1.18) | ||||||
| Assets held for sale, net | 3,115 | 3,115 | 3,115 | 3,115 | 3,127 | - | (0.38) | ||||||
| Bank-owned life insurance | 67,176 | 67,985 | 67,591 | 67,201 | 67,519 | (1.19) | (0.51) | ||||||
| Other real estate owned | - | - | - | - | 1,041 | - | (100.00) | ||||||
| Deferred tax assets, net | 22,456 | 20,391 | 18,825 | 18,289 | 17,892 | 10.13 | 25.51 | ||||||
| Other assets | 77,130 | 72,438 | 60,161 | 49,211 | 42,428 | 6.48 | 81.79 | ||||||
| Total assets | $ 3,824,925 | $ 3,848,493 | $ 4,203,327 | $ 3,569,499 | $ 3,355,250 | (0.61) | % | 14.00 | % | ||||
| Liabilities and stockholders' equity | |||||||||||||
| Demand deposits | $ 490,719 | $ 480,832 | $ 497,531 | $ 582,556 | $ 687,272 | 2.06 | % | (28.60) | % | ||||
| NOW accounts | 803,276 | 817,725 | 835,348 | 617,687 | 637,786 | (1.77) | 25.95 | ||||||
| Money market accounts | 800,951 | 850,359 | 865,115 | 811,365 | 803,050 | (5.81) | (0.26) | ||||||
| Savings accounts | 746,608 | 696,750 | 971,439 | 245,713 | 217,220 | 7.16 | 243.71 | ||||||
| Time deposits | 451,850 | 471,330 | 498,564 | 465,057 | 362,992 | (4.13) | 24.48 | ||||||
| Total deposits | 3,293,404 | 3,316,996 | 3,667,997 | 2,722,378 | 2,708,320 | (0.71) | 21.60 | ||||||
| Securities sold under agreements to repurchase - short term | 3,838 | 3,921 | 4,346 | 6,445 | 9,886 | (2.12) | (61.18) | ||||||
| Federal Home Loan Bank advances | - | - | - | 325,000 | 125,000 | - | (100.00) | ||||||
| Subordinated debt and notes | 95,524 | 95,453 | 95,382 | 95,312 | 95,241 | 0.07 | 0.30 | ||||||
| Operating lease liabilities | 12,347 | 11,546 | 9,799 | 5,767 | 6,044 | 6.94 | 104.29 | ||||||
| Other liabilities | 25,796 | 27,361 | 27,397 | 22,232 | 20,863 | (5.72) | 23.64 | ||||||
| Total liabilities | 3,430,909 | 3,455,277 | 3,804,921 | 3,177,134 | 2,965,354 | (0.71) | 15.70 | ||||||
| Stockholders' equity | 394,016 | 393,216 | 398,406 | 392,365 | 389,896 | 0.20 | 1.06 | ||||||
| Total liabilities and stockholders' equity | $ 3,824,925 | $ 3,848,493 | $ 4,203,327 | $ 3,569,499 | $ 3,355,250 | (0.61) | % | 14.00 | % | ||||
| Tangible common equity^(1)^ | $ 287,125 | $ 286,001 | $ 290,867 | $ 284,502 | $ 281,726 | 0.39 | % | 1.92 | % | ||||
| 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 - 3Q 2023 vs | For Nine Months Ended: | Variance | |||||||||
| Condensed Consolidated Statement of Operations (unaudited) | 3Q 2023 | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 2Q 2023 | 3Q 2022 | 3Q 2023 | 3Q 2022 | YTD | |||
| Interest and dividend income | $ 50,486 | $ 52,679 | $ 47,114 | $ 38,595 | $ 32,561 | (4.16) | % | 55.05 | % | $ 150,279 | $ 87,350 | 72.04 | |
| Interest expense | 23,361 | 26,522 | 18,749 | 9,058 | 5,146 | (11.92) | NM | 68,632 | 12,529 | NM | |||
| Net interest income | 27,125 | 26,157 | 28,365 | 29,537 | 27,415 | 3.70 | (1.06) | 81,647 | 74,821 | 9.12 | |||
| Provision for credit losses | 1,648 | 4,301 | 5,187 | 7,860 | 2,890 | (61.68) | NM | 11,136 | 3,411 | 226.47 | |||
| Net interest income after provision for credit losses | 25,477 | 21,856 | 23,178 | 21,677 | 24,525 | 16.57 | 3.88 | 70,511 | 71,410 | (1.26) | |||
| Account maintenance and deposit service fees | 1,503 | 1,430 | 1,216 | 1,427 | 1,525 | 5.10 | (1.44) | 4,149 | 4,318 | (3.91) | |||
| Income from bank-owned life insurance | 787 | 394 | 420 | 847 | 394 | 99.75 | 99.75 | 1,601 | 1,147 | 39.58 | |||
| Mortgage banking income | 4,922 | 5,198 | 4,315 | 2,264 | 2,197 | (5.31) | 124.03 | 14,435 | 2,790 | NM | |||
| Gain on sale of loans | 451 | 182 | 478 | - | - | 148.00 | - | 1,111 | - | 100.00 | |||
| Credit enhancement income | 2,047 | 1,152 | 4,886 | 1,822 | 1,220 | 77.69 | 67.79 | 8,085 | 1,220 | 100.00 | |||
| Gain on sale of other investment | - | - | - | 4,411 | - | - | - | - | - | - | |||
| Other | 232 | 130 | 217 | 217 | 284 | 78.46 | (18.31) | 579 | 865 | (33.06) | |||
| Noninterest income | 9,942 | 8,486 | 11,532 | 10,988 | 5,620 | 17.16 | 76.91 | 29,960 | 10,340 | 189.75 | |||
| Employee compensation and benefits | 13,809 | 15,283 | 15,028 | 16,213 | 12,594 | (9.64) | 9.65 | 44,120 | 32,792 | 34.55 | |||
| Occupancy and equipment expenses | 3,170 | 3,445 | 3,022 | 2,899 | 2,857 | (7.98) | 10.96 | 9,637 | 7,960 | 21.07 | |||
| Amortization of intangible assets | 317 | 318 | 317 | 317 | 326 | (0.31) | (2.76) | 952 | 1,008 | (5.56) | |||
| Virginia franchise tax expense | 849 | 848 | 849 | 814 | 813 | 0.12 | 4.43 | 2,546 | 2,440 | 4.34 | |||
| Data processing expense | 2,250 | 2,828 | 2,251 | 1,702 | 1,528 | (20.44) | 47.25 | 7,329 | 4,311 | 70.01 | |||
| Marketing expense | 377 | 521 | 569 | 933 | 938 | (27.64) | (59.81) | 1,467 | 2,134 | (31.26) | |||
| Telecommunication and communication expense | 356 | 416 | 377 | 343 | 342 | (14.42) | 4.09 | 1,149 | 1,090 | 5.41 | |||
| Net (gain) loss on other real estate owned | - | - | - | 131 | - | - | - | - | (59) | (100.00) | |||
| Loss (gain) on bank premises and equipment | (2) | - | - | - | 64 | - | (103.13) | (2) | 684 | (100.29) | |||
| Professional fees | 1,118 | 1,075 | 862 | 1,605 | 1,261 | 4.00 | (11.34) | 3,055 | 3,182 | (3.99) | |||
| Credit enhancement costs | 337 | 515 | 873 | 1,369 | - | (34.56) | - | 1,725 | - | 100.00 | |||
| Other expenses | 3,343 | 5,303 | 3,256 | 2,780 | 3,038 | (36.96) | 10.04 | 11,902 | 7,728 | 54.01 | |||
| Noninterest expense | 25,924 | 30,552 | 27,404 | 29,106 | 23,761 | (15.15) | 9.10 | 83,880 | 63,270 | 32.57 | |||
| Income before income taxes | 9,495 | (210) | 7,306 | 3,559 | 6,384 | (4,612.55) | 48.74 | 16,591 | 18,480 | (10.23) | |||
| Income tax expense | 1,912 | (22) | 1,353 | 519 | 1,359 | (8,790.91) | 40.69 | 3,243 | 3,971 | (18.33) | |||
| Net Income | $ 7,583 | $ (188) | $ 5,953 | $ 3,040 | $ 5,025 | (4,124.69) | 50.92 | 13,348 | 14,509 | (8.00) | |||
| ^(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: | ||||||||||||
| Loan Portfolio Composition | 3Q 2023 | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 3Q 2022 | |||||||
| Loans held for sale | $ 66,266 | $ 57,704 | $ 42,011 | $ 27,626 | 13,388 | % | NM | % | |||||
| Loans secured by real estate: | |||||||||||||
| Commercial real estate - owner occupied | 433,039 | 448,624 | 460,245 | 461,126 | 437,636 | (1.05) | |||||||
| Commercial real estate - non-owner occupied | 578,261 | 597,254 | 577,481 | 581,168 | 573,732 | 0.79 | |||||||
| Secured by farmland | 6,381 | 6,577 | 6,258 | 7,290 | 7,706 | (17.19) | |||||||
| Construction and land development | 172,071 | 175,141 | 151,950 | 148,762 | 138,371 | 24.35 | |||||||
| Residential 1-4 family | 601,198 | 592,756 | 607,118 | 610,919 | 616,764 | (2.52) | |||||||
| Multi-family residential | 129,586 | 133,754 | 139,978 | 140,321 | 137,253 | (5.59) | |||||||
| Home equity lines of credit | 59,996 | 62,808 | 64,606 | 65,152 | 65,852 | (8.89) | |||||||
| Total real estate loans | 1,980,532 | 2,016,914 | 2,007,636 | 2,014,738 | 1,977,314 | 0.16 | |||||||
| Commercial loans | 593,767 | 585,442 | 546,042 | 522,057 | 469,881 | 26.37 | |||||||
| Paycheck Protection Program loans | 2,105 | 2,143 | 2,603 | 4,564 | 8,014 | (73.73) | |||||||
| Consumer loans | 569,463 | 569,139 | 485,252 | 405,278 | 279,678 | 103.61 | |||||||
| Loans receivable, net of deferred fees | $ 3,145,867 | $ 3,173,638 | $ 3,041,533 | $ 2,946,637 | 2,734,887 | % | 15.03 | % | |||||
| Loans by Risk Grade: | |||||||||||||
| Pass, not graded | $ - | $ - | $ - | $ - | - | % | - | % | |||||
| Pass Grade 1 - Highest Quality | 851 | 743 | 607 | 600 | 616 | 38.15 | |||||||
| Pass Grade 2 - Good Quality | 383,306 | 367,950 | 253,665 | 209,605 | 149,389 | 156.58 | |||||||
| Pass Grade 3 - Satisfactory Quality | 1,609,924 | 1,624,626 | 1,596,091 | 1,590,765 | 1,519,765 | 5.93 | |||||||
| Pass Grade 4 - Pass | 1,089,675 | 1,114,218 | 1,123,393 | 1,072,352 | 982,412 | 10.92 | |||||||
| Pass Grade 5 - Special Mention | 33,299 | 32,383 | 28,273 | 32,278 | 35,410 | (5.96) | |||||||
| Grade 6 - Substandard | 28,812 | 33,718 | 39,504 | 41,037 | 47,295 | (39.08) | |||||||
| Grade 7 - Doubtful | - | - | - | - | - | - | |||||||
| Grade 8 - Loss | - | - | - | - | - | - | |||||||
| Total loans | $ 3,145,867 | $ 3,173,638 | $ 3,041,533 | $ 2,946,637 | 2,734,887 | % | 15.03 | % | |||||
| (Dollars in thousands) | As Of or For Three Months Ended: | ||||||||||||
| Asset Quality Information | 3Q 2023 | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | ||||||||
| Allowance for Credit Losses: | |||||||||||||
| Balance at beginning of period | $ (38,414) | $ (35,727) | $ (34,544) | $ (31,956) | (30,209) | ||||||||
| Provision for for credit losses | (1,648) | (4,301) | (5,187) | (7,860) | (2,890) | ||||||||
| Net charge-offs | 4,295 | 1,614 | 4,004 | 5,272 | 1,143 | ||||||||
| Ending balance | $ (35,767) | $ (38,414) | $ (35,727) | $ (34,544) | (31,956) | ||||||||
| Reserve for Unfunded Commitments: | |||||||||||||
| Balance at beginning of period | $ (1,273) | $ (1,507) | $ (1,416) | $ (1,380) | (1,069) | ||||||||
| (Expense for) / recovery of unfunded loan commitment reserve | 249 | 234 | (91) | (36) | (311) | ||||||||
| Total Reserve for Unfunded Commitments | $ (1,024) | $ (1,273) | $ (1,507) | $ (1,416) | (1,380) | ||||||||
| As Of: | |||||||||||||
| Non-Performing Assets: | 3Q 2023 | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 3Q 2022 | |||||||
| Nonaccrual loans | $ 20,171 | $ 25,290 | $ 33,397 | $ 35,484 | 36,851 | % | (45.26) | % | |||||
| Accruing loans delinquent 90 days or more | 1,714 | 1,714 | 1,625 | 3,361 | 1,855 | (7.60) | |||||||
| Total non-performing loans | 21,885 | 27,004 | 35,022 | 38,845 | 38,706 | (43.46) | |||||||
| Other real estate owned | - | - | - | - | 1,041 | (100.00) | |||||||
| Total non-performing assets | $ 21,885 | $ 27,004 | $ 35,022 | $ 38,845 | 39,747 | (44.94) | |||||||
| SBA guaranteed portion of non-performing loans | $ 2,290 | $ 2,331 | $ 2,206 | $ 3,969 | 2,573 | (11.00) |
All values are in US Dollars.
| Primis Financial Corp | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | For Three Months Ended: | Variance - 2Q 2021 vs | For Nine Months Ended: | Variance | ||||||||||
| Average Balance Sheet | 3Q 2023 | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 2Q 2023 | 3Q 2022 | 3Q 2023 | 3Q 2022 | YTD | ||||
| Assets | ||||||||||||||
| Loans held for sale | $ 55,775 | $ 48,698 | $ 25,346 | $ 22,413 | $ 21,199 | 14.53 | % | 163.10 | % | $ 43,384 | $ 9,456 | NM | % | |
| Loans, net of deferred fees | 3,175,454 | 3,101,946 | 2,989,766 | 2,822,693 | 2,667,406 | 2.37 | 19.05 | 3,089,010 | 2,512,388 | 22.95 | ||||
| Investment securities | 234,601 | 240,700 | 246,402 | 253,345 | 269,780 | (2.53) | (13.04) | 240,525 | 286,525 | (16.05) | ||||
| Other earning assets | 93,159 | 568,251 | 388,327 | 92,604 | 90,268 | (83.61) | 3.20 | 348,831 | 237,299 | 47.00 | ||||
| Total earning assets | 3,558,989 | 3,959,595 | 3,649,841 | 3,191,055 | 3,048,653 | (10.12) | 16.74 | 3,721,750 | 3,045,668 | 22.20 | ||||
| Other assets | 268,537 | 259,048 | 254,124 | 246,754 | 234,642 | 3.66 | 14.45 | 260,738 | 230,186 | 13.27 | ||||
| Total assets | $ 3,827,526 | $ 4,218,643 | $ 3,903,965 | $ 3,437,809 | $ 3,283,295 | (9.27) | % | 16.58 | % | $ 3,982,488 | $ 3,275,854 | 21.57 | % | |
| Liabilities and stockholders' equity | ||||||||||||||
| Demand deposits | $ 472,485 | $ 473,295 | $ 556,479 | $ 648,151 | $ 665,020 | (0.17) | % | (28.95) | % | $ 500,456 | $ 602,872 | (16.99) | % | |
| Interest-bearing liabilities: | ||||||||||||||
| NOW and other demand accounts | 806,339 | 826,598 | 722,584 | 624,868 | 660,387 | (2.45) | 22.10 | 785,480 | 723,857 | 8.51 | ||||
| Money market accounts | 850,892 | 858,532 | 824,541 | 805,303 | 803,860 | (0.89) | 5.85 | 844,752 | 808,013 | 4.55 | ||||
| Savings accounts | 703,809 | 1,026,085 | 593,823 | 232,543 | 219,167 | (31.41) | 221.13 | 775,024 | 222,032 | 249.06 | ||||
| Time deposits | 460,961 | 495,721 | 489,066 | 379,088 | 343,986 | (7.01) | 34.01 | 481,813 | 341,160 | 41.23 | ||||
| Total Deposits | 3,294,486 | 3,680,231 | 3,186,493 | 2,689,953 | 2,692,420 | (10.48) | 22.36 | 3,387,525 | 2,697,934 | 25.56 | ||||
| Borrowings | 99,104 | 99,794 | 284,946 | 325,100 | 166,621 | (0.69) | (40.52) | 160,601 | 148,549 | 8.11 | ||||
| Total Funding | 3,393,590 | 3,780,025 | 3,471,439 | 3,015,053 | 2,859,041 | (10.22) | 18.70 | 3,548,126 | 2,846,483 | 24.65 | ||||
| Other Liabilities | 37,741 | 37,265 | 28,592 | 26,318 | 23,832 | 1.28 | 58.36 | 34,589 | 22,985 | 50.49 | ||||
| Stockholders' equity | 396,195 | 401,353 | 403,934 | 396,438 | 400,422 | (1.29) | (1.06) | 399,773 | 406,386 | (1.63) | ||||
| Total liabilities and stockholders' equity | $ 3,827,526 | $ 4,218,643 | $ 3,903,965 | $ 3,437,809 | $ 3,283,295 | (9.27) | % | 16.58 | % | $ 3,982,488 | $ 3,275,854 | 21.57 | % | |
| Memo: Average PPP loans | $ 2,126 | $ 2,407 | $ 3,001 | $ 5,926 | $ 11,868 | (11.67) | % | (82.09) | % | $ 2,508 | $ 28,958 | (91.34) | % | |
| Net Interest Income | ||||||||||||||
| Loans held for sale | $ 873 | $ 700 | $ 391 | $ 349 | $ 263 | 24.71 | % | 231.94 | % | $ 1,964 | $ 356 | NM | % | |
| Loans | 46,898 | 43,270 | 40,915 | 35,841 | 30,225 | 8.39 | 55.16 | 131,083 | 81,192 | 61.45 | ||||
| Investment securities | 1,593 | 1,551 | 1,584 | 1,571 | 1,518 | 2.71 | 4.94 | 4,728 | 4,393 | 7.63 | ||||
| Other earning assets | 1,122 | 7,158 | 4,224 | 834 | 555 | (84.33) | 102.16 | 12,504 | 1,409 | NM | ||||
| Total Earning Assets | 50,486 | 52,679 | 47,114 | 38,595 | 32,561 | (4.16) | 55.05 | 150,279 | 87,350 | 72.04 | ||||
| Non-interest bearing DDA | - | - | - | - | - | - | - | - | - | - | ||||
| NOW and other interest-bearing demand accounts | 4,460 | 4,343 | 2,267 | 544 | 536 | 2.69 | NM | 11,070 | 1,758 | NM | ||||
| Money market accounts | 6,555 | 6,231 | 4,801 | 2,894 | 1,667 | 5.20 | 293.22 | 17,587 | 3,464 | NM | ||||
| Savings accounts | 6,760 | 10,405 | 4,750 | 305 | 141 | (35.03) | NM | 21,915 | 432 | NM | ||||
| Time deposits | 3,801 | 3,804 | 3,226 | 1,567 | 943 | (0.08) | NM | 10,831 | 2,317 | NM | ||||
| Total Deposit Costs | 21,576 | 24,783 | 15,044 | 5,310 | 3,287 | (12.94) | NM | 61,403 | 7,971 | NM | ||||
| Borrowings | 1,785 | 1,739 | 3,705 | 3,748 | 1,859 | 2.65 | (3.98) | 7,229 | 4,558 | 58.60 | ||||
| Total Funding Costs | 23,361 | 26,522 | 18,749 | 9,058 | 5,146 | (11.92) | NM | 68,632 | 12,529 | NM | ||||
| Net Interest Income | $ 27,125 | $ 26,157 | $ 28,365 | $ 29,537 | $ 27,415 | 3.70 | % | (1.06) | % | $ 81,647 | $ 74,821 | 9.12 | % | |
| Memo: SBA PPP loan interest and fee income | $ 5 | $ 6 | $ 3 | $ 14 | $ 28 | (16.67) | % | (82.14) | % | $ 14 | $ 522 | (97.32) | % | |
| Memo: SBA PPP loan funding costs | $ 2 | $ 2 | $ 3 | $ 5 | $ 10 | - | % | (80.00) | % | $ 7 | $ 75 | (90.67) | % | |
| Net Interest Margin | ||||||||||||||
| Loans held for sale | 6.21 % | 5.77 % | 6.26 % | 6.18 % | 4.92 % | 44 | bps | 129 | bps | 6.05 % | 5.03 % | 102 | bps | |
| Loans | 5.86 % | 5.60 % | 5.55 % | 5.04 % | 4.50 % | 26 | 136 | 5.67 % | 4.32 % | 135 | ||||
| Investments | 2.69 % | 2.58 % | 2.61 % | 2.46 % | 2.23 % | 11 | 46 | 2.63 % | 2.05 % | 58 | ||||
| Other Earning Assets | 4.78 % | 5.05 % | 4.41 % | 3.57 % | 2.44 % | (27) | 234 | 4.79 % | 0.79 % | 400 | ||||
| Total Earning Assets | 5.63 % | 5.34 % | 5.24 % | 4.80 % | 4.24 % | 29 | 139 | 5.40 % | 3.83 % | 156 | ||||
| NOW | 2.19 % | 2.11 % | 1.27 % | 0.35 % | 0.32 % | 8 | 187 | 1.88 % | 0.32 % | 156 | ||||
| MMDA | 3.06 % | 2.91 % | 2.36 % | 1.43 % | 0.82 % | 15 | 224 | 2.78 % | 0.57 % | 221 | ||||
| Savings | 3.81 % | 4.07 % | 3.24 % | 0.52 % | 0.26 % | (26) | 355 | 3.78 % | 0.26 % | 352 | ||||
| CDs | 3.27 % | 3.08 % | 2.68 % | 1.64 % | 1.09 % | 19 | 218 | 3.01 % | 0.91 % | 210 | ||||
| Cost of Interest Bearing Deposits | 3.03 % | 3.10 % | 2.32 % | 1.03 % | 0.64 % | (7) | 239 | 2.84 % | 0.51 % | 233 | ||||
| Cost of Deposits | 2.60 % | 2.70 % | 1.91 % | 0.78 % | 0.48 % | (10) | 212 | 2.42 % | 0.40 % | 202 | ||||
| - | ||||||||||||||
| Other Funding | 7.15 % | 6.99 % | 5.27 % | 4.57 % | 4.43 % | 16 | 272 | 6.02 % | 4.10 % | 192 | ||||
| Total Cost of Funds | 2.73 % | 2.81 % | 2.19 % | 1.19 % | 0.71 % | (8) | 202 | 2.59 % | 0.59 % | 200 | ||||
| Net Interest Margin | 3.02 % | 2.65 % | 3.15 % | 3.67 % | 3.57 % | 37 | (54) | 2.93 % | 3.28 % | (35) | ||||
| Net Interest Spread | 2.46 % | 2.12 % | 2.63 % | 3.28 % | 3.31 % | 34 | (85) | 2.39 % | 3.09 % | (70) | ||||
| Memo: Excluding SBA PPP loans | ||||||||||||||
| Loans | 5.86 % | 5.60 % | 5.56 % | 5.05 % | 4.51 % | 26 | bps | 135 | bps | 5.68 % | 4.34 % | 133 | bps | |
| Total Earning Assets | 5.63 % | 5.34 % | 5.24 % | 4.81 % | 4.25 % | 29 | 138 | 5.40 % | 3.85 % | 155 | ||||
| Net Interest Margin* | 3.02 % | 2.65 % | 3.15 % | 3.68 % | 3.58 % | 36 | (56) | 2.93 % | 3.30 % | (36) | ||||
| *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 Nine Months Ended: | ||||||||||||
| Reconciliation of Non-GAAP items: | 3Q 2023 | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 3Q 2023 | 3Q 2022 | |||||||
| Net income | $ 7,583 | $ (188) | $ 5,953 | $ 3,040 | $ 5,025 | $ 13,348 | $ 14,509 | |||||||
| Non-GAAP adjustments to Net Income: | ||||||||||||||
| Branch Consolidation / Other restructuring | - | 1,488 | - | 1,175 | 308 | 1,488 | 1,209 | |||||||
| Gain on sale of Infinex investment | - | - | - | (4,144) | - | - | - | |||||||
| Loan officer fraud, operational losses | 200 | - | - | - | - | 200 | - | |||||||
| Income tax effect | (44) | (321) | - | 641 | (67) | (365) | (373) | |||||||
| Net income adjusted for nonrecurring income and expenses | $ 7,739 | $ 979 | $ 5,953 | $ 712 | $ 5,266 | $ 14,671 | $ 15,345 | |||||||
| Net income (loss) | $ 7,583 | $ (188) | $ 5,953 | $ 3,040 | $ 5,025 | $ 13,348 | $ 14,509 | |||||||
| Income tax expense (benefit) | 1,912 | (22) | 1,353 | 519 | 1,359 | 3,243 | 3,971 | |||||||
| Provision for credit losses (incl. unfunded commitment expense) | 1,399 | 4,067 | 5,278 | 7,896 | 3,201 | 10,744 | 3,814 | |||||||
| Pre-tax pre-provision earnings | $ 10,894 | $ 3,857 | $ 12,584 | $ 11,455 | $ 9,585 | $ 27,335 | $ 22,294 | |||||||
| Effect of adjustment for nonrecurring income and expenses | 200 | 1,488 | - | (2,969) | 308 | 1,688 | 1,209 | |||||||
| Pre-tax pre-provision operating earnings | $ 11,094 | $ 5,345 | $ 12,584 | $ 8,486 | $ 9,893 | $ 29,023 | $ 23,503 | |||||||
| Return on average assets | 0.79 % | (0.02 %) | 0.62 % | 0.35 % | 0.61 % | 0.45 % | 0.59 % | |||||||
| Effect of adjustment for nonrecurring income and expenses | 0.02 % | 0.11 % | 0.00 % | (0.27 %) | 0.03 % | 0.04 % | 0.03 % | |||||||
| Operating return on average assets | 0.81 % | 0.09 % | 0.62 % | 0.08 % | 0.64 % | 0.49 % | 0.63 % | |||||||
| Return on average assets | 0.79 % | (0.02 %) | 0.62 % | 0.35 % | 0.61 % | 0.45 % | 0.59 % | |||||||
| Effect of tax expense | 0.20 % | (0.00 %) | 0.14 % | 0.06 % | 0.16 % | 0.11 % | 0.16 % | |||||||
| Effect of provision for credit losses (incl. unfunded commitment expense) | 0.14 % | 0.39 % | 0.55 % | 0.91 % | 0.39 % | 0.35 % | 0.16 % | |||||||
| Pre-tax pre-provision return on average assets | 1.13 % | 0.37 % | 1.31 % | 1.32 % | 1.16 % | 0.92 % | 0.91 % | |||||||
| Effect of adjustment for nonrecurring income and expenses and expenses | 0.02 % | 0.14 % | 0.00 % | (0.34 %) | 0.04 % | 0.06 % | 0.05 % | |||||||
| Pre-tax pre-provision operating return on average assets | 1.15 % | 0.51 % | 1.31 % | 0.98 % | 1.20 % | 0.97 % | 0.96 % | |||||||
| Return on average equity | 7.59 % | (0.19 %) | 5.98 % | 3.04 % | 4.98 % | 4.46 % | 4.77 % | |||||||
| Effect of adjustment for nonrecurring income and expenses | 0.16 % | 1.17 % | 0.00 % | (2.33 %) | 0.24 % | 0.45 % | 0.45 % | |||||||
| Operating return on average equity | 7.75 % | 0.98 % | 5.98 % | 0.71 % | 5.22 % | 4.91 % | 5.22 % | |||||||
| Effect of goodwill and other intangible assets | 2.86 % | 0.36 % | 2.16 % | 0.27 % | 1.93 % | 1.80 % | 1.87 % | |||||||
| Operating return on average tangible equity | 10.61 % | 1.33 % | 8.14 % | 0.98 % | 7.15 % | 6.71 % | 7.09 % | |||||||
| Efficiency ratio | 69.93 % | 81.34 % | 68.69 % | 71.82 % | 71.93 % | 75.16 % | 74.29 % | |||||||
| Effect of adjustment for nonrecurring income and expenses | (0.54 %) | (4.28 %) | 0.00 % | 4.96 % | (0.94 %) | (1.51 %) | (2.02 %) | |||||||
| Operating efficiency ratio | 69.39 % | 77.06 % | 68.69 % | 76.78 % | 70.99 % | 73.64 % | 72.27 % | |||||||
| Earnings per share - Basic | $ 0.31 | $ (0.01) | $ 0.24 | $ 0.12 | $ 0.21 | $ 0.54 | $ 0.60 | |||||||
| Effect of adjustment for nonrecurring income and expenses | $ 0.01 | 0.05 | - | (0.09) | (0.00) | $ 0.06 | 0.02 | |||||||
| Operating earnings per share - Basic | $ 0.32 | $ 0.04 | $ 0.24 | $ 0.03 | $ 0.21 | $ 0.60 | $ 0.63 | |||||||
| Earnings per share - Diluted | $ 0.31 | $ (0.01) | $ 0.24 | $ 0.12 | $ 0.20 | $ 0.54 | $ 0.59 | |||||||
| Effect of adjustment for nonrecurring income and expenses | 0.01 | 0.05 | - | (0.09) | 0.01 | $ 0.06 | 0.03 | |||||||
| Operating earnings per share - Diluted | $ 0.32 | $ 0.04 | $ 0.24 | $ 0.03 | $ 0.21 | $ 0.60 | $ 0.62 | |||||||
| Book value per share | $ 15.96 | $ 15.93 | $ 16.14 | $ 15.90 | $ 15.82 | $ 15.96 | $ 15.82 | |||||||
| Effect of goodwill and other intangible assets | (4.33) | (4.35) | (4.36) | (4.37) | (4.39) | (4.33) | (4.39) | |||||||
| Tangible book value per share | $ 11.63 | $ 11.58 | $ 11.78 | $ 11.53 | $ 11.43 | $ 11.63 | $ 11.43 | |||||||
| Stockholders' equity | $ 394,016 | $ 393,216 | $ 398,406 | $ 392,365 | $ 389,896 | $ 394,016 | $ 389,896 | |||||||
| Less goodwill and other intangible assets | (106,891) | (107,215) | (107,539) | (107,863) | (108,147) | (106,891) | (108,170) | |||||||
| Tangible common equity | $ 287,125 | $ 286,001 | $ 290,867 | $ 284,502 | $ 281,749 | $ 287,125 | $ 281,726 | |||||||
| Equity to assets | 10.30 % | 10.22 % | 9.48 % | 10.99 % | 11.62 % | 10.30 % | 11.62 % | |||||||
| Effect of goodwill and other intangible assets | (2.58 %) | (2.58 %) | (2.38 %) | (2.77 %) | (2.94 %) | (2.58 %) | (2.94 %) | |||||||
| Tangible common equity to tangible assets | 7.72 % | 7.64 % | 7.10 % | 8.22 % | 8.68 % | 7.72 % | 8.68 % | |||||||
| Net interest margin | 3.02 % | 2.65 % | 3.15 % | 3.67 % | 3.57 % | 2.93 % | 3.28 % | |||||||
| Effect of adjustments for PPP associated balances* | 0.00 % | 0.00 % | 0.01 % | 0.01 % | 0.01 % | 0.00 % | 0.02 % | |||||||
| Core net interest margin | 3.02 % | 2.65 % | 3.16 % | 3.68 % | 3.58 % | 2.93 % | 3.30 % | |||||||
| *Net interest margin excluding the effect of PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods | ||||||||||||||
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Third Quarter 2023 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 Primis Financial Corp.’s (the “Company”) 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; potential impacts of the recent adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; 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, 2022, 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 adjusted for nonrecurring income and expenses; pre-tax pre-provision operating earnings; operating return on average assets; pre-tax pre-provision return on average assets; pre-tax pre-provision operating return on average assets; operating return on average equity; operating return on average tangible equity; operating efficiency ratio; operating earnings per share – basic; operating earnings per share – 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. Non-GAAP Measures
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: $191 million Price / Book Value per Share 0.48x Price / Tangible Book Value(1): 0.66x Price / 2023 Estimated EPS(2): 10.77x Price / 2024 Estimated EPS(2): 5.80x Dividend Yield(3): 5.18% Pricing as of October 25, 2023. Financial data as of or for the three months ended September 30, 2023. (1) See reconciliation of Non-GAAP financial measures on slide 22. (2) Mean analyst estimates per Bloomberg. (3) Assumes $0.40 annualized dividend.
Third Quarter Improvement Achieved an operating return on average assets of 81 basis points(1), up from 9 basis points in the second quarter and 64 basis points a year ago. Generated a margin of 3.02%, up from 2.65% linked quarter due to sweeping off excess funds and tightly managing the balance sheet to maximize incremental spreads. Sold approximately $15 million of loans for a gain of approximately $0.4 million and participated out another $10 million to manage balance sheet capacity. Reduced noninterest expense to $25.9 million in Q3 versus $30.6 million in Q2. Reduced noninterest expense, excluding nonrecurring, mortgage and unfunded reserve expenses, to $20.9 million in Q3 from $24.0 million in Q2. Maintained peer-group leading liquidity with no FHLB borrowings, only $75 million of brokered CDs and $228.7 million of off-balance sheet funds swept off at September 30, 2023. 21% reduction in nonperforming assets, excluding SBA guarantees, linked-quarter to $19.6 million. Additional resolution occurred in October that reduced pro forma nonperforming assets as a percentage of total assets to 0.17% and increased pro forma allowance for credit losses as a percentage of nonperforming assets to 550%. Grew all capital ratios including TCE/TA. Leverage ratio increased to 8.80%. Opened 2,404 new deposit account relationships totaling $72.7 million with a weighted average cost of only 1.80%. See reconciliation of Non-GAAP financial measures on slide 22
Organization Focused on Funding for Past Three Years Rolling out Technology and Consolidating Branches Attractive community bank deposit base with core bank cost of deposits of only 1.91% in Q3 Added new deposit customers in Q3 with $50 million of deposits at weighted average cost of 0.39% V1BE adoption/utilization continues to build with users up 21% in Q3, primarily due to addition of small-business customers Deposits per Branch(2) Dollars in Millions. (1) V1BE is a proprietary bank delivery app for on-demand ordering of branch services (2) Deposits per branch includes balances that were swept off. Pro forma includes branch consolidation. Map adjusted for pending branch closures. 1,013 Users with 175 added in Q3’23 ~$144 million Deposit balance of V1BE users 62% % of V1BE Users that are SMBs V1BE Update(1) 8,056 Q3 Transactions Branch V1BE Customer
Valuable and Reliable Funding Sources Core bank continues to provide highly attractive funding at levels generally better than peer and regional competition Alternative sources for funding alleviate pressure to reprice the core bank to raise liquidity and proves thesis of digital strategy Stable funding with essentially flat average NIB balances in Q3 while costs rose at a slower rate than wholesale Ability to leverage two funding channels provides meaningful flexibility and a competitive advantage Digital platform allows the Bank to fulfill funding requirements without consuming wholesale capacity and at lower rates Current cost of digital deposits improving quarterly against FHLB and Fed Funds. Current cost is approximately 30 bps less than target Fed Funds and moving towards Company goal of Fed Funds less 100 bps. 3Q23 2Q23 1Q23 4Q22 3Q22 Core Bank Int. Exp. $ 12,380 $ 11,823 $ 9,343 $ 5,183 $ 3,287 Digital Platform Int. Exp. $ 9,196 $ 12,960 $ 5,701 $ 127 $ 0 Core Bank Avg. NIB $ 471,813 $ 472,416 $ 555,771 $ 648,051 $ 665,000 Core Bank Avg. IBD $2,099,617 $2,155,212 $2,149,650 $2,027,211 $2,027,332 Digital Platform Avg. IBD $ 723,145 $1,052,603 $ 481,072 $ 14,691 $ 89 Core Bank Cost of IBD 2.34% 2.20% 1.76% 1.01% 0.64% Core Bank Cost of Deposits 1.91% 1.80% 1.40% 0.77% 0.48% Digital Platform Cost of IBD 5.05% 4.94% 4.81% 3.42% 0.55% Avg. 3M FHLB Advance Rate 5.54% 5.31% 4.96% 4.40% 2.93% NIB: Non-Interest Bearing, IBD: Interest-Bearing Deposits Dollars in thousands
Life-to-date loan originations of $407 mil. (committed bal.) Total deposits of $53.3 mil., up 15.1%+ un-annualized QoQ PTPP Income +142% QoQ., with PTPP ROA of 1.77% Sold $15.4 mil. of loans in Q3’23 with recognized gain of ~$400k Launched new student loan consultation services, driving future fee income. Laid foundation for first securitization in 1H24 Now banking 4,500+ doctors and >1% of all future doctors in the U.S. Panacea Financial Update Q3’23 Summary Q3’23 Loan Composition ($299.3 million) 2023 Outlook $150-200 mil. of total originations, $30-50 mil. of total deposit growth $20+ mil. of residential mortgage loan sales $50-$100 mil. of total loan sales under gain-on-sale strategy $5.5+ mil. of PTPP earnings improvement vs. 2022
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 28% 27 82 4 Average weekly submissions in Q3’23 SUBMISSIONS 5 4.1% Q3 Loan Balance Growth 8.12% yields on current pipeline $360.7 Million Loan Balances (Net of Fees)
Primis Mortgage Update Pre-tax earnings for Q3: $697K Aggressively managing costs to preserve profitability in lower volume environment Funded production of $169 million versus $184 million in Q2 Locked pipeline at September 30, 2023 down 7% from June 30, 2023 Now licensed in 43 states and D.C. Continue to add reliable performers using our culture and commitment to the industry versus signing bonuses and financial commitments.
Third Quarter Results
Dollars in millions. See reconciliation of Non-GAAP financial measures on slide 22. Balance Sheet Trends (1)
Built Diversification into Loan Book in just 3 Years Never Lunged at long-maturity low rate CRE Disciplined around Cash secured lending & Medical Professionals NOO CRE By Collateral Type(1) Hotel portfolio down to $201 million from almost $300 million in early 2020 Occupancy, RevPAR, and ADR exceeding 2019 performance Debt coverage over 1.50x Office non owner-occupied CRE was $148 million at September 30 with $100 million of that true office building exposure LTV across all office is 66% All fully guaranteed by very high net worth guarantors Significant maturities/rate resets don’t begin until 2026 Retail exposure of $93 million at September 30 Low weighted-average LTV of 60% Low average loan size of less than $2 million. Dollars in millions. Loan balances using Book Balance Non-Owner-Occupied CRE by Type Total Outstanding % of Portfolio Excl PPP Hotel $201 6.4% Office $148 4.7% Retail $93 2.9% Assisted Living $52 1.7% All other $59 1.4% Warehouse/Industrial $21 0.7% Mixed Use $20 0.6% Total Non-Owner Occupied CRE $595 18.9%
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 Core NCOs / Average Loans Criticized & Classified Loans / Total Loans (Ex. PPP) Nonperforming assets and classified loans decreased by $5.1 million and $4.9 million, respectively, from Q2’23 Large remaining NPL relationship closed in October Remaining NPLs roughly $6.5 million or 0.17% of assets at Q3 Net charge-offs of $4.3 million in Q3 Includes $2.1 million of net charge-offs covered by a third party (offset in noninterest income) Core net charge-offs of $2.2 million, majority of which related to large NPL relationship that was previously reserved for No OREO as of September 30, 2023
Allowance for Credit Losses ACL Walk Forward ACL / Gross Loans (Ex. PPP) Provision for credit losses of $1.6 million in Q3 versus provision of $4.3 million in Q2 Provision includes $2.1 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 1.14% at the end of Q3 Dollars in millions
Dollars in millions. (1) Core deposits exclude time deposits and includes deposits that were swept off at 9/30 Deposit Trends Deposit Composition – Q3’23 Core Deposit Growth(1) Total deposits were essentially flat compared to Q2’23 as the balance sheet was managed to minimize excess cash Uninsured/unsecured deposits make up approximately 20% of total deposits with 185% coverage of those balances from external liquidity sources $75 million remaining brokered deposits maturing in Q4’23 Cost of Deposits: 260 bps
Net Interest Income Progression Dollars in thousands. Core excludes impact of PPP balances Net Interest Income and Net Interest Margin Net interest margin expanded to 3.02% from adjusted margin of 3.00% in Q2 (excluding excess liquidity). Higher earning asset yield offset funding cost increases as deposit pressures moderated Net Interest Margin Trends
Q3 NIE, excluding unfunded commitment expense, includes the following: $0.3 million of expense due to third-party serviced loan portfolio, down from $0.5 million last quarter Mortgage expenses of $5.1 million, down from $5.3 million last quarter Nonrecurring costs of $0.2 million due to employee fraud investigation Excluding items above, Q3 NIE decreased to $20.5 million versus $23.5 million in Q2 Decline in compensation ($1.0MM) from attrition and administrative reductions Reduced operating costs in most areas due to cost control and reduced fraud costs Q3 included 2 months of administrative saves. 8 branches will consolidate late October 2023 Efficiency Ratio Dollars in thousands. (1) See reconciliation of Non-GAAP financial measures on slide 22. Non-Interest Expense and Efficiency Ratio Non-Interest Expense (Ex. Res. for Unfunded Com. Expense) (1)
Tangible Book Value Per Share Diluted Earnings Per Share and Adjusted Diluted EPS (1) See reconciliation of Non-GAAP financial measures on slide 22. Per Share Results Q3’23 diluted EPS of $0.31, up 55% versus same period in 2022 AOCI impact to TBV per share of $1.23 at September 30, 2023, expected to recover over time given our intent and wherewithal to hold until recovery or maturity. (1) (1)
Talented management team and board committed to building long-term shareholder value Attractive core-funded community bank with a complementary digital funding platform 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