8-K
Primis Financial Corp. (FRST)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): October 27, 2022
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) | (I.R.S. Employer Identification Number) |
6830 Old Dominion Drive, McLean, Virginia 22101
(Address of Principal Executive Offices) (Zip Code)
(703) 893-7400
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange 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 October 27, 2022, Primis Financial Corp. (“Primis” or the “Company”) issued a press release announcing its financial results for the three months ended September 30, 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 October 27, 2022, Primis issued a press release announcing the declaration of a dividend payable on November 28, 2022 to shareholders of record as of November 14, 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.
On October 27, 2022, the Board of Directors of the Company authorized a stock repurchase program, under which the Company may repurchase up to 739,500 shares of its common stock, or approximately 3% of its outstanding shares, over a one year period. Repurchases under this program may be made from time to time through open market purchases, privately negotiated transactions or such other manners as will comply with applicable laws and regulations. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The stock repurchase program does not obligate the Company to purchase any particular number of shares and there is no guarantee as to the exact number of shares that will be repurchased by the Company. The stock repurchase program may be suspended, modified or terminated by the Company at any time and for any reason, without prior notice. 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.
| Exhibit | Description |
|---|---|
| No. | |
| 99.1 | Press Release dated October 27, 2022 |
| 99.2 | Primis Financial Corp. Third Quarter 2022 Investor Presentation |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Primis Financial Corp. | ||
|---|---|---|
| Date: October 27, 2022 | 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 Third Quarter of 2022
Adoption of Stock Repurchase Program
Declares Quarterly Cash Dividend of $0.10 Per Share
MCLEAN, Va., Oct. 27, 2022 /PRNewswire/ -- Primis Financial Corp. (NASDAQ: FRST) ("Primis" or the "Company"), and its wholly-owned subsidiary, Primis Bank (the "Bank"), today reported net income from continuing operations of $5.1 million for the quarter ended September 30, 2022, compared to $5.0 million for the quarter ended June 30, 2022 and $6.2 million for the quarter ended September 30, 2021. Earnings per share ("EPS") from continuing operations for the three months ended September 30, 2022 were $0.21 on a basic and $0.20 on diluted basis, compared to $0.20 on a basic and diluted basis for the three months ended June 30, 2022.
Net income from continuing operations adjusted for nonrecurring income and expenses^(1)^ was $5.3 million for the three months ended September 30, 2022 versus $6.0 million for the three months ended June 30, 2022. Operating earnings per share from continuing operations^(1)^ adjusted for branch closure expenses were $0.22 on a basic and $0.21 on a diluted basis for the three months ended September 30, 2022, compared to $0.25 on a basic and $0.24 on a diluted basis for the three months ended June 30, 2022.
Net income from continuing operations for the nine months ended September 30, 2022 was $14.7 million, compared to $23.4 million for the nine months ended September 30, 2021. Earnings per share from continuing operations for the nine months ended September 30, 2022 were $0.60 on a basic and $0.59 on a diluted basis, compared to $0.96 basic and $0.95 diluted for the nine months ended September 30, 2021.
Financial Highlights for the Period Ended September 30, 2022
- Pre-tax pre-provision return on average assets from continuing operations^(1)^ was 1.16% for the three months ended September 30, 2022, versus 0.83% for the three months ended June 30, 2022.
- Pre-tax pre-provision operating return on average assets from continuing operations^(1)^ was 1.20% for the three months ended September 30, 2022, up from 1.00% for the three months ended June 30, 2022. Excluding the loss in the mortgage group related to acquiring two substantial teams, this ratio would have been 1.30% for the third quarter, representing a material increase in core profitability.
- Total deposits grew an annualized 3.8% compared to the linked-quarter illustrating successful strategies that can outrun the industry's tightening liquidity position.
- Deposit mix continued to improve with non-interest bearing checking deposits of $687.3 million, representing 25.4% of total deposits at September 30, 2022, compared to 19.1% at September 30, 2021.
- Total revenue of $33.0 million in the current quarter of 2022, up 29.4% from the same period in 2021.
- Tangible common equity to tangible assets and leverage ratio of 8.73% and 9.96%, respectively, are 114 basis points and 15 basis points higher than peers^(2)^, respectively, at September 30, 2022.
- Loans held for investment grew at an annualized rate of 22.6% for the nine months of 2022 or 27.5% net of a decline in Paycheck Protection Program ("PPP") loan balances. Loans held for investment grew at an annualized rate of 18.0% compared to the linked-quarter net of a decline in PPP balances.
- Net interest margin of 3.57% in the third quarter of 2022 was up substantially from 2.87% in the same period last year and up 24 basis points from 3.33% in the second quarter of 2022.
- Margin improvements driven by industry low deposit beta of 4% through the cycle.
- Positive move in loan yields to 4.51%, excluding PPP, in the third quarter of 2022, compared to 4.35% in the same quarter of 2021.
- Allowance for credit losses to total loans was 1.17% at September 30, 2022, compared to 1.15% at June 30, 2022. Allowance for credit losses to total loans (excluding PPP balances and loans held for sale) was 1.17% at September 30, 2022, compared to 1.16% at June 30, 2022.
Operating Performance
The Company reported strong earning asset growth rates and a robust net interest margin for the third quarter of 2022. Speaking about the Company's performance, Mr. Zember, President and CEO of the Company, said, "We made significant headway on several strategies this quarter that is very encouraging. First, our margin benefitted from an industry low deposit beta and a nice move in earning asset yields. Secondly, we capitalized on the chaos in the national mortgage scene and recruited two teams with annual production of approximately $700 million. And lastly, we introduced the digital bank into our existing markets, combining it with our unique V1BE delivery service and an interchange cash back feature that averages about 5% of the account balance. The functionality and innovative features position us very favorably in the industry where liquidity is becoming a real limiter in growth and profitability."
The Company's operating return on average assets from continuing operations^(1)^ for the quarter was 0.64%, compared to 0.72% for the same period in 2021. Mr. Zember commented on the Company's progress with operating ratios and said, "I believe our pathway to higher operating returns is right around the corner. Our mortgage results center on signing bonuses for two substantial teams. I know the payback is very fast on these investments, and we will combine that with full run rates on staff reductions and restructures, branch closings, renegotiation of our core system contract and more normal levels of fraud expenses. With our trends and momentum on revenue, these expense containment strategies will produce the higher returns that we expect in the coming quarters."
Net Interest Income
Net interest income increased 18.3% to $27.5 million for the three months ended September 30, 2022 from $23.2 million for the three months ended September 30, 2021. The Company's reported net interest margin for the third quarter of 2022 was 3.57%, compared to 2.87% in the third quarter of 2021. Net interest income, excluding the effect of PPP fees, was $27.4 million in the third quarter of 2022, compared to $20.0 million in the third quarter of 2021, an increase of $7.4 million, or 36.7%. Also excluding the effects of PPP, the Company's net interest margin expanded to 3.58% in the third quarter of 2022, compared to 2.66% in the same quarter of 2021.
The Company's loan growth over the past several quarters and the improved asset mix has been the driver of positive movements in both margins and net interest income. Loans held for investment represented 87.5% of total average interest earning assets in the third quarter of 2022, compared to 71.4% in the same quarter of 2021. Yield on loans for the third quarter of 2022 was 4.50%, compared to 4.53% in the third quarter of 2021. Loan yields in the third quarter, excluding the effect of PPP, were 4.51%, up 16 basis points from 4.35% in the same quarter of 2021.
Total cost of funds in the third quarter of 2022 was 0.71%, up from 0.60% in the same quarter of 2021. Total demand deposits and total non-time deposits at the end of the third quarter of 2022 were 25.4% and 86.6%, respectively, compared 19.1% and 86.6%, respectively, in the third quarter of 2021.
Non-interest Income
During the three months ended September 30, 2022, Primis had non-interest income of $5.6 million, compared to $2.6 million for the three months ended June 30, 2022, with a large driver of the increase due to revenues from Primis Mortgage. The Company closed $63.0 million in loans in the quarter with gain on sale revenue of $2.2 million versus $0.6 in the second quarter which included only one month of mortgage operations.
Non-interest Expense
Non-interest expense was $23.8 million for the third quarter of 2022, compared to $20.4 million in the second quarter of 2022 and $16.6 million for the third quarter of 2021. The non-interest expense adjusted for branch closure costs and unfunded commitment reserve impacts were $23.1 million for the third quarter of 2022, $19.3 million for the second quarter of 2022 and $17.0 million for third quarter of 2021. A significant driver of the increased non-interest expenses were $2.4 million of higher expenses related to Primis Mortgage versus the second quarter of 2022. Other notable drivers of the increase include reduction in deferred costs in the quarter due to lower commercial loan volumes, increase in marketing and advertising tied to the digital bank launch and V1BE adoption campaigns, increase in legal fees for initiatives and increase in fraud related expenses.
The Company's operating efficiency ratio from continuing operations^(1)^in the third quarter of 2022 was 70.9% compared to 70.2% in the second quarter of 2022. The Bank consolidated two branch locations in the third quarter of 2022. Additionally, management successfully renegotiated the Bank's core processing contract in the third quarter and expects savings of approximately $0.5 million quarterly beginning in the fourth quarter of 2022. Combined with operating performance improvements at the Company's lines of business and other efficiency improvements, management believes the operating efficiency ratio should moderate to below 65% by year end.
Loan Portfolio and Asset Quality
Loans held for investment increased to $2.74 billion at September 30, 2022, compared to $2.34 billion at December 31, 2021. Loans held for investment grew at an annualized rate of 22.6% for the nine months of 2022 or 27.5%, net of a decline in PPP balances. The Company believes loan growth will continue at a similar pace for the rest of the year.
Nonperforming assets, excluding portions guaranteed by the SBA, were $37.2 million at September 30, 2022 compared to $19.9 million at June 30, 2022, while loans rated substandard or doubtful increased to $47.3 million in the third quarter of 2022 from $27.1 million at the end of the second quarter of 2022. These increases were driven largely by one relationship that was criticized in the second quarter and was subsequently downgraded further in the third quarter and placed on nonaccrual. The primary businesses in the relationship are multiple assisted living facilities. Recent appraisals have been completed with no impairment required at this time.
The allowance for credit losses was $32.0 million at September 30, 2022, up $1.8 million from $30.2 million at June 30, 2022. The Company recorded a provision for credit losses of $2.9 million compared to $0.4 million in the second quarter of 2022. The increase in provision from the second quarter was due to loan growth in the quarter of approximately $0.8 million, weakness in the economic forecasts used to model expected losses of approximately $1.7 million and a net addition to specific reserves for a nonaccrual loan that required impairment of approximately $0.4 million. As a percentage of loans, excluding PPP balances, the allowance increased marginally to 1.17% at the end of the third quarter of 2022, compared to 1.16% at the end of the second quarter of 2022. The Company recorded $1.1 million in net charge-offs in the third quarter of 2022 compared to net recoveries of $0.4 million in the second quarter of 2022. Net charge-offs in the third quarter were primarily tied to one relationship that was resolved in the quarter and for which specific reserves had been established in previous periods.
Deposits
Total deposits increased to $2.71 billion at September 30, 2022 from $2.68 billion at June 30, 2022 and decreased compared to $2.76 billion at December 31, 2021. Non-interest bearing demand deposits now represent 25.4% of total deposits and time deposits represent only 13.4% of total deposits at September 30, 2022. Non-interest bearing balances increased 5.2% compared to the linked-quarter to $687.3 million. Time deposits increased 10.3% compared to the linked-quarter to $363.0 million as the Bank extended funding maturities in the face of rising rates. While newly launched, the Bank's new digital banking offering is expected to be a key contributor to funding in the near future.
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) | Q3'22 | Q2 '22 | Chg | Q3 '22 | Q2'22 | Chg | Q3'22 | Q2 '22 | Chg | Q3 '22 | Q2'22 | Chg |
| Net Interest Income<br>* | $ 25,284 | $ 23,341 | 8.3 % | $ 1,465 | $ 905 | 61.9 % | $ 530 | $ 294 | 80.0 % | $ 171 | $ 65 | N/A |
| Noninterest Income | 3,415 | 2,029 | 68.3 % | 2 | 2 | (24.1) % | 5 | 5 | 0.0 % | 2,197 | 593 | N/A |
| Operating Noninterest Expense (excl. res. for unfunded) | 18,655 | 17,774 | 5.0 % | 1,242 | 799 | 55.4 % | 70 | (37) | N/A | 3,175 | 759 | N/A |
| Pre-Tax Pre-Provision Net Income(1) | 10,044 | 7,596 | 32.2 % | 225 | 108 | 108.1 % | 466 | 337 | 38.3 % | (806) | (102) | N/A |
| Gross Loans (inc. HFS) | $ 2,406,168 | $ 2,386,452 | 0.8 % | $ 201,887 | $ 142,670 | 41.5 % | $ 129,031 | $ 99,675 | 29.5 % | $ 13,388 | $ 16,096 | N/A |
| Total Deposits | 2,687,747 | 2,669,309 | 0.7 % | 13,595 | 10,778 | 26.1 % | 6,977 | 2,717 | - | - | ||
| * Net interest income assumes business line funding requirements are provided by the Company at its cost of funds plus 100 basis points. |
Panacea continues to expand its nationally-recognized brand and now has 14 national and state association partnerships. The division has banking relationships with approximately 2,600 doctor households across all 50 states. Panacea finished the third quarter of 2022 with approximately $201.9 million in outstanding loans, an increase of $59.2 million, or 41.5%, from June 30, 2022. At the end of the third quarter, Panacea's loan portfolio was 50% commercial, 26% consumer and 24% student loan refinance. As highlighted above, Panacea increased its profitability in 3Q22 on a funded basis by 108% from second quarter levels and expects significant continued improvements in the fourth quarter and throughout 2023.
The Company's strategy with Panacea centers heavily on making it a very effective deposit player with its target customers consisting of medical professionals. In 2023, the Company will transition the medical fintech onto its digital platform and offer these professionals a digital deposit opportunity that should be more progressive and effective.
The Life Premium Finance ("LPF") division, launched in late 2021, ended the third quarter of 2022 with outstanding balances, net of deferred fees, of $129.0 million, compared to $99.7 million at the end of the second quarter of 2022. The Life Premium Finance 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 return on assets by approximately 7 bps in the third quarter with expectations for meaningful contributions to profitability next year.
Shareholders' Equity
Book value per share as of September 30, 2022 was $15.89, a decrease of $0.28 since June 30, 2022. Tangible book value per share^(1)^ at the end of the third quarter of 2022 was $11.54, a decrease of $0.23 since June 30, 2022. Shareholders' equity was $391.8 million, or 11.7% of total assets, at September 30, 2022. Tangible common equity^(1)^ at September 30, 2022 was $283.7 million, or 8.73% of tangible assets^(1)^. Equity balances decreased from June 30, 2022 to September 30, 2022 because of an additional $9.5 million of unrealized losses on the Company's available-for-sale securities portfolio due to continued 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 November 28, 2022 to shareholders of record on November 14, 2022. This is Primis' forty-fourth consecutive quarterly dividend.
Subsequent Event
On October 3, 2022, Infinex Financial Services was acquired by Advisor Group for a mix of cash and contingent consideration. Primis was an investor in Infinex through an investment in a predecessor company. As a result of the acquisition, Primis expects to record a pre-tax gain of $4.1 million in the fourth quarter of 2022.
Adoption of Stock Repurchase Program
On October 27, 2022, the Board of Directors of the Company authorized a stock repurchase program, under which the Company may repurchase up to 739,500 shares of its common stock, or approximately 3% of its outstanding shares, over a one year period. Repurchases under this program may be made from time to time through open market purchases, privately negotiated transactions or such other manners as will comply with applicable laws and regulations. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The stock repurchase program does not obligate the Company to purchase any particular number of shares and there is no guarantee as to the exact number of shares that will be repurchased by the Company. The stock repurchase program may be suspended, modified or terminated by the Company at any time and for any reason, without prior notice.
About Primis Financial Corp.
As of September 30, 2022, Primis had $3.36 billion in total assets, $2.74 billion in total loans and $2.71 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 third quarter results on Friday, October 28, 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/554050747. 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 net interest margin excluding PPP loans are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. We use the term "operating" to describe a financial measure that excludes income or expense considered to be non-recurring in nature. Items identified as non-operating are those that, when excluded from a reported financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in our business. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in the Reconciliation of Non-GAAP items table.
Management believes that these non-GAAP financial measures provide additional useful information about Primis that allows management and investors to evaluate the ongoing operating results, financial strength and performance of Primis and provide meaningful comparison to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider Primis' performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of Primis. Non-GAAP financial measures are not standardized and, therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names.
Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.
| (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. |
|---|
Forward-Looking Statements
This press release and certain of our other filings with the Securities and Exchange Commission contain statements that constitute "forward-looking statements" within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Such statements can generally be identified by such words as "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and other similar words or expressions of the future or otherwise regarding the outlook for the Company's future business and financial performance and/or the performance of the banking industry and economy in general. These forward-looking statements include, but are not limited to, our expectations regarding our future operating and financial performance, including our outlook and long-term goals for future growth and new offerings and services; our expectations regarding net interest margin; expectations on our growth strategy, expense management, capital management and future profitability; expectations on credit quality and performance; statements regarding the effects of the ongoing COVID-19 pandemic and related variants on our business and financial results and conditions; and the assumptions underlying our expectations.
Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: the Company's ability to implement its various strategic and growth initiatives, including its recently established Panacea Financial and Life Premium Finance Divisions, new digital bank and V1BE fulfillment service and recent acquisition of SeaTrust 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.
| Primis Financial Corp. | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FinancialHighlights (unaudited) | ||||||||||||||
| (Dollars in thousands, except per share data) | For Three Months Ended: | Variance - 3Q 2022 vs. | For Nine Months Ended: | Variance | ||||||||||
| Selected Performance Ratios: | 3Q2022 | 2Q 2022 | 1Q2022 | 4Q 2021 | 3Q2021 | 2Q 2022 | 3Q 2021 | 3Q 2022 | 3Q 2021 | YTD | ||||
| Return on average assets from continuing operations | 0.61 % | 0.63 % | 0.55 % | 0.88 % | 0.72 % | (2) | bps | (11) | bps | 0.60 % | 0.94 % | (34) | bps | |
| Operating return on average assets from continuing operations^(1)^ | 0.64 % | 0.76 % | 0.57 % | 0.83 % | 0.72 % | (12) | (8) | 0.65 % | 0.94 % | (29) | ||||
| Pre-tax pre-provision return on average assets from continuing operations^(1)^ | 1.16 % | 0.83 % | 0.75 % | 0.98 % | 0.98 % | 33 | 18 | 0.91 % | 1.03 % | (12) | ||||
| Pre-tax pre-provision operating return on average assets from continuing operations^(1)^ | 1.20 % | 1.00 % | 0.77 % | 0.91 % | 0.98 % | 20 | 22 | 0.98 % | 1.04 % | (6) | ||||
| Return on average equity from continuing operations | 4.98 % | 4.92 % | 4.49 % | 7.37 % | 6.01 % | 6 | (102) | 4.80 % | 7.77 % | (297) | ||||
| Operating return on average equity from continuing operations^(1)^ | 5.22 % | 5.93 % | 4.58 % | 6.94 % | 6.01 % | (71) | (79) | 5.24 % | 7.82 % | (258) | ||||
| Operating return on average tangible equity from continuing operations^(1)^ | 7.14 % | 8.08 % | 6.16 % | 9.36 % | 8.12 % | (93) | (98) | 7.11 % | 10.67 % | (356) | ||||
| Cost of funds | 0.71 % | 0.53 % | 0.52 % | 0.56 % | 0.57 % | 18 | 14 | 0.59 % | 0.68 % | (9) | ||||
| Net interest margin | 3.57 % | 3.33 % | 2.96 % | 3.00 % | 2.87 % | 24 | 70 | 3.29 % | 3.02 % | 27 | ||||
| Gross loans to deposits | 101.06 % | 97.99 % | 89.11 % | 84.68 % | 82.46 % | 3 | pts | 19 | pts | 101.06 % | 82.46 % | 19 | pts | |
| Efficiency ratio from continuing operations | 71.85 % | 75.01 % | 76.11 % | 68.16 % | 64.80 % | (3) | 706 | 74.11 % | 67.18 % | 693 | ||||
| Operating efficiency ratio from continuing operations^(1)^ | 70.92 % | 70.23 % | 75.65 % | 69.63 % | 64.80 % | 1 | 612 | 72.09 % | 66.92 % | 517 | ||||
| Per Share Data: | ||||||||||||||
| Earnings per share from continuing operations - Basic | $ 0.21 | $ 0.20 | $ 0.19 | $ 0.31 | $ 0.25 | 5.00 | % | (16.00) | % | $ 0.60 | $ 0.96 | (37.50) | % | |
| Earnings per share from discontinued operations - Basic | - | - | - | - | (0.09) | - | (100.00) | $ - | $ 0.01 | (100.00) | ||||
| Earnings per share - Basic | $ 0.21 | $ 0.20 | $ 0.19 | $ 0.31 | $ 0.16 | 5.00 | 31.25 | $ 0.60 | $ 0.97 | (38.14) | ||||
| Operating earnings per share from continuing operations - Basic^(1)^ | $ 0.22 | $ 0.25 | $ 0.19 | $ 0.29 | $ 0.25 | - | - | $ 0.65 | $ 0.96 | - | ||||
| Earnings per share from continuing operations - Diluted | $ 0.20 | $ 0.20 | $ 0.19 | $ 0.31 | $ 0.25 | - | (20.00) | $ 0.59 | $ 0.95 | (37.89) | ||||
| Earnings per share from discontinued operations - Diluted | - | - | - | - | (0.09) | - | (100.00) | - | 0.01 | (100.00) | ||||
| Earnings per share - Diluted | $ 0.20 | $ 0.20 | $ 0.19 | $ 0.31 | $ 0.16 | - | 25.00 | $ 0.59 | $ 0.96 | (38.54) | ||||
| Operating earnings per share from continuing operations - Diluted^(1)^ | $ 0.21 | $ 0.24 | $ 0.19 | $ 0.29 | $ 0.25 | - | - | $ 0.65 | $ 0.96 | - | ||||
| Book value per share | $ 15.89 | $ 16.17 | $ 16.42 | $ 16.76 | $ 16.63 | (1.73) | (4.45) | $ 15.89 | $ 16.63 | (4.45) | ||||
| Tangible book value per share^(1)^ | $ 11.54 | $ 11.77 | $ 12.11 | $ 12.43 | $ 12.28 | (1.95) | (6.03) | $ 11.54 | $ 12.28 | (6.03) | ||||
| Cash dividend per share | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | - | - | $ 0.30 | $ 0.30 | - | ||||
| Weighted average shares outstanding - Basic | 24,576,887 | 24,562,753 | 24,503,945 | 24,476,569 | 24,474,104 | 0.06 | 0.42 | 24,548,129 | 24,425,416 | 0.50 | ||||
| Weighted average shares outstanding - Diluted | 24,688,422 | 24,681,425 | 24,662,588 | 24,653,363 | 24,634,384 | 0.03 | 0.22 | 24,674,014 | 24,582,680 | 0.37 | ||||
| Shares outstanding at end of period | 24,650,239 | 24,650,239 | 24,622,739 | 24,574,619 | 24,574,619 | - | % | 0.31 | % | 24,650,239 | 24,574,619 | 0.31 | % | |
| Asset Quality Ratios: | ||||||||||||||
| Non-performing assets as a percent of total assets, excluding SBA guarantees | 1.11 % | 0.61 % | 0.47 % | 0.44 % | 0.47 % | 49 | bps | 64 | bps | 1.11 % | 0.47 % | 64 | bps | |
| Net charge-offs (recoveries) as a percent of average loans (annualized) | 0.17 % | (0.07 %) | (0.03 %) | (0.00 %) | 0.34 % | 23 | (17) | 0.02 % | (0.06 %) | 8 | ||||
| Allowance for credit losses to total loans | 1.17 % | 1.15 % | 1.23 % | 1.24 % | 1.31 % | 2 | (15) | 1.17 % | 1.31 % | (15) | ||||
| Allowance for credit losses to total loans (excluding PPP loans) | 1.17 % | 1.16 % | 1.24 % | 1.29 % | 1.40 % | 1 | (23) | 1.17 % | 1.40 % | (23) | ||||
| Capital Ratios: | ||||||||||||||
| Equity to assets | 11.67 % | 12.32 % | 12.55 % | 12.10 % | 11.84 % | (65) | bps | (16) | bps | |||||
| Tangible common equity to tangible assets^(1)^ | 8.73 % | 9.27 % | 9.57 % | 9.26 % | 9.02 % | (54) | (29) | |||||||
| Leverage ratio ^(2)^ | 9.96 % | 10.31 % | 9.77 % | 9.41 % | 9.15 % | (35) | 81 | |||||||
| Common equity tier 1 capital ratio ^(2)^ | 11.29 % | 11.59 % | 12.64 % | 13.09 % | 13.85 % | (30) | (256) | |||||||
| Tier 1 risk-based capital ratio ^(2)^ | 11.65 % | 11.97 % | 13.06 % | 13.52 % | 14.31 % | (32) | (266) | |||||||
| Total risk-based capital ratio^(2)^ | 15.77 % | 16.29 % | 17.66 % | 18.52 % | 19.60 % | (52) | (383) | |||||||
| ^(1)^See Reconciliation of Non-GAAP financial measures. | ||||||||||||||
| ^(2)^ September 30, 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 - 3Q 2022 vs. | ||||||||||||
| Condensed Consolidated Balance Sheets (unaudited) | 3Q2022 | 2Q 2022 | 1Q2022 | 4Q 2021 | 3Q2021 | 2Q 2022 | 3Q 2021 | |||||||
| Assets | ||||||||||||||
| Cash and cash equivalents | $ 97,738 | $ 70,721 | $ 298,230 | $ 530,167 | $ 650,746 | 38.20 | % | (84.98) | % | |||||
| Investment securities-available for sale | 238,891 | 257,180 | 271,626 | 271,332 | 206,821 | (7.11) | 15.51 | |||||||
| Investment securities-held to maturity | 14,391 | 14,978 | 16,138 | 22,940 | 26,412 | (3.92) | (45.51) | |||||||
| Loans held for sale | 13,388 | 16,096 | - | - | - | (16.82) | - | |||||||
| Loans receivable, net of deferred fees | 2,737,086 | 2,628,797 | 2,393,669 | 2,339,986 | 2,314,584 | 4.12 | 18.25 | |||||||
| Allowance for credit losses | (31,956) | (30,209) | (29,379) | (29,105) | (30,386) | 5.78 | 5.17 | |||||||
| Net loans | 2,705,130 | 2,598,588 | 2,364,290 | 2,310,881 | 2,284,198 | 4.10 | 18.43 | |||||||
| Stock in Federal Reserve Bank and Federal Home Loan Bank | 16,689 | 12,940 | 11,927 | 15,521 | 15,521 | 28.97 | 7.53 | |||||||
| Investments in mortgage affiliate - held for sale | - | - | - | - | 10,050 | - | (100.00) | |||||||
| Bank premises and equipment, net | 25,534 | 26,113 | 29,872 | 30,410 | 30,686 | (2.22) | (16.79) | |||||||
| Operating lease right-of-use assets | 5,511 | 4,777 | 5,305 | 5,866 | 6,331 | 15.37 | (12.95) | |||||||
| Goodwill and other intangible assets | 108,147 | 108,524 | 106,075 | 106,416 | 106,757 | (0.35) | 1.30 | |||||||
| Assets held for sale, net | 3,127 | 3,127 | - | - | - | - | - | |||||||
| Bank-owned life insurance | 67,519 | 67,339 | 67,099 | 66,724 | 66,336 | 0.27 | 1.78 | |||||||
| Other real estate owned | 1,041 | 1,041 | 1,041 | 1,163 | 1,312 | - | (20.66) | |||||||
| Deferred tax assets, net | 17,892 | 14,658 | 12,380 | 9,571 | 13,571 | 22.06 | 31.84 | |||||||
| Other assets | 41,975 | 40,496 | 35,893 | 36,362 | 33,676 | 3.65 | 24.64 | |||||||
| Total assets | $ 3,356,973 | $ 3,236,578 | $ 3,219,876 | $ 3,407,353 | $ 3,452,417 | 3.72 | % | (2.76) | % | |||||
| Liabilities and stockholders' equity | ||||||||||||||
| Demand deposits | $ 687,272 | $ 653,181 | $ 559,682 | $ 530,282 | $ 535,706 | 5.22 | % | 28.29 | % | |||||
| NOW accounts | 637,786 | 677,237 | 730,235 | 849,738 | 921,667 | (5.83) | (30.80) | |||||||
| Money market accounts | 803,050 | 802,953 | 831,580 | 799,759 | 758,259 | 0.01 | 5.91 | |||||||
| Savings accounts | 217,220 | 220,211 | 225,291 | 222,862 | 216,470 | (1.36) | 0.35 | |||||||
| Time deposits | 362,992 | 329,223 | 339,456 | 360,575 | 374,965 | 10.26 | (3.19) | |||||||
| Total deposits | 2,708,320 | 2,682,805 | 2,686,244 | 2,763,216 | 2,807,067 | 0.95 | (3.52) | |||||||
| Securities sold under agreements to repurchase - short term | 9,886 | 10,020 | 11,231 | 9,962 | 13,348 | (1.34) | (25.94) | |||||||
| Federal Home Loan Bank advances | 125,000 | 25,000 | - | 100,000 | 100,000 | NM | 25.00 | |||||||
| Subordinated debt and notes | 95,241 | 95,170 | 95,099 | 95,028 | 95,442 | 0.07 | (0.21) | |||||||
| Operating lease liabilities | 6,044 | 5,299 | 5,897 | 6,498 | 7,000 | 14.06 | (13.66) | |||||||
| Other liabilities | 20,674 | 19,647 | 17,210 | 20,768 | 20,931 | 5.23 | (1.23) | |||||||
| Total liabilities | 2,965,165 | 2,837,941 | 2,815,681 | 2,995,472 | 3,043,788 | 4.48 | (2.58) | |||||||
| Stockholders' equity | 391,808 | 398,637 | 404,195 | 411,881 | 408,629 | (1.71) | (4.12) | |||||||
| Total liabilities and stockholders' equity | $ 3,356,973 | $ 3,236,578 | $ 3,219,876 | $ 3,407,353 | $ 3,452,417 | 3.72 | % | (2.76) | % | |||||
| Tangible common equity^(1)^ | $ 283,661 | $ 290,113 | $ 298,120 | $ 305,465 | $ 301,872 | (2.22) | % | (6.03) | % | |||||
| The company defines "NM" as not meaningful for increases or decreases greater than 300 percent. | ||||||||||||||
| Primis Financial Corp. | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars in thousands) | For Three MonthsEnded: | Variance - 3Q 2022 vs. | For Nine Months Ended: | Variance | ||||||||||
| Condensed Consolidated Statement of Operations (unaudited) | 3Q2022 | 2Q 2022 | 1Q2022 | 4Q 2021 | 3Q2021 | 2Q 2022 | 3Q 2021 | 3Q 2022 | 3Q 2021 | YTD | ||||
| Interest and dividend income | $ 32,596 | $ 28,258 | $ 26,585 | $ 28,503 | $ 27,801 | 15.35 | % | 17.25 | % | $ 87,439 | $ 84,740 | 3.19 | % | |
| Interest expense | 5,146 | 3,652 | 3,731 | 4,262 | 4,594 | 40.91 | 12.02 | 12,529 | 14,778 | (15.22) | ||||
| Net interest income | 27,450 | 24,606 | 22,854 | 24,241 | 23,207 | 11.56 | 18.28 | 74,910 | 69,962 | 7.07 | ||||
| Provision for (recovery of) credit losses | 2,890 | 422 | 99 | (1,299) | 1,085 | NM | 166.36 | 3,411 | (4,502) | (175.77) | ||||
| Net interest income after provision for (recovery of) credit losses | 24,560 | 24,184 | 22,755 | 25,540 | 22,122 | 1.55 | 11.02 | 71,499 | 74,464 | (3.98) | ||||
| Account maintenance and deposit service fees | 1,525 | 1,442 | 1,351 | 1,420 | 1,509 | 5.76 | 1.06 | 4,318 | 4,759 | (9.27) | ||||
| Income from bank-owned life insurance | 394 | 378 | 375 | 535 | 387 | 4.23 | 1.81 | 1,147 | 1,152 | (0.43) | ||||
| Gain on debt extinguishment | - | - | - | 573 | - | - | - | - | - | - | ||||
| Gain (loss) on sale of mortgage loans | 2,197 | 593 | - | - | - | 270.49 | - | 2,790 | - | - | ||||
| Other | 1,504 | 217 | 364 | 359 | 455 | NM | 230.55 | 2,085 | 1,207 | 72.74 | ||||
| Noninterest income | 5,620 | 2,630 | 2,090 | 2,887 | 2,351 | 113.69 | 139.05 | 10,340 | 7,118 | 45.27 | ||||
| Employee compensation and benefits | 12,594 | 10,573 | 9,625 | 9,527 | 9,032 | 19.11 | 39.44 | 32,792 | 27,214 | 20.50 | ||||
| Occupancy and equipment expenses | 2,857 | 2,546 | 2,557 | 2,487 | 2,523 | 12.22 | 13.24 | 7,960 | 7,189 | 10.72 | ||||
| Amortization of core deposit intangible | 326 | 341 | 341 | 342 | 341 | (4.40) | (4.40) | 1,008 | 1,023 | (1.47) | ||||
| Virginia franchise tax expense | 813 | 814 | 813 | 733 | 732 | (0.12) | 11.07 | 2,440 | 2,166 | 12.65 | ||||
| Data processing expense | 1,528 | 1,293 | 1,197 | 934 | 1,003 | 18.17 | 52.34 | 4,311 | 2,818 | 52.98 | ||||
| Telecommunication and communication expense | 342 | 366 | 382 | 439 | 415 | (6.56) | (17.59) | 1,090 | 1,351 | (19.32) | ||||
| Net (gain) loss on other real estate owned | - | - | (59) | 70 | - | - | - | (59) | 17 | NM | ||||
| Loss on bank premises and equipment | 64 | 620 | - | - | - | (89.68) | - | 684 | - | - | ||||
| Professional fees | 1,261 | 827 | 1,387 | 1,238 | 874 | 52.48 | 44.28 | 3,182 | 3,099 | 2.68 | ||||
| Other expenses | 3,976 | 3,050 | 2,744 | 2,722 | 1,640 | 30.36 | 142.44 | 9,770 | 6,901 | 41.57 | ||||
| Noninterest expense | 23,761 | 20,430 | 18,987 | 18,492 | 16,560 | 16.30 | 43.48 | 63,178 | 51,778 | 22.02 | ||||
| Income from continuing operations before income taxes | 6,419 | 6,384 | 5,858 | 9,935 | 7,913 | 0.55 | (18.88) | 18,661 | 29,804 | (37.39) | ||||
| Income tax expense | 1,365 | 1,375 | 1,265 | 2,284 | 1,702 | (0.73) | (19.80) | 4,005 | 6,438 | (37.79) | ||||
| Income from continuing operations | 5,054 | 5,009 | 4,593 | 7,651 | 6,211 | 0.90 | (18.63) | 14,656 | 23,366 | (37.28) | ||||
| Income (loss) from discontinued operations before income taxes | - | - | - | - | (2,899) | - | (100.00) | - | 294 | (100.00) | ||||
| Income tax expense (benefit) | - | - | - | - | (627) | - | (100.00) | - | 63 | (100.00) | ||||
| Income (loss) from discontinued operations | - | - | - | - | (2,272) | - | (100.00) | - | 231 | (100.00) | ||||
| Net income | $ 5,054 | $ 5,009 | $ 4,593 | $ 7,651 | $ 3,939 | 0.90 | % | 28.31 | % | $ 14,656 | $ 23,597 | (37.89) | % | |
| ^(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 - 3Q 2022 vs. | ||||||||||||
| Loan Portfolio Composition | 3Q2022 | 2Q 2022 | 1Q2022 | 4Q 2021 | 3Q2021 | 2Q 2022 | 3Q 2021 | |||||||
| Loans held for sale | $ 13,388 | $ 16,096 | $ - | $ - | $ - | - | % | - | % | |||||
| Loans secured by real estate: | ||||||||||||||
| Commercial real estate - owner occupied | $ 437,636 | 433,840 | 406,285 | 389,109 | 421,940 | 0.87 | 3.72 | |||||||
| Commercial real estate - non-owner occupied | 573,732 | 600,436 | 615,682 | 590,523 | 631,423 | (4.45) | (9.14) | |||||||
| Secured by farmland | 8,852 | 9,305 | 8,896 | 10,003 | 10,721 | (4.87) | (17.43) | |||||||
| Construction and land development | 138,371 | 117,604 | 116,365 | 121,520 | 109,763 | 17.66 | 26.06 | |||||||
| Residential 1-4 family | 616,764 | 607,548 | 575,946 | 548,830 | 531,556 | 1.52 | 16.03 | |||||||
| Multi-family residential | 137,253 | 144,406 | 152,266 | 164,071 | 153,310 | (4.95) | (10.47) | |||||||
| Home equity lines of credit | 65,852 | 69,860 | 72,440 | 73,877 | 75,775 | (5.74) | (13.10) | |||||||
| Total real estate loans | 1,978,460 | 1,982,999 | 1,947,880 | 1,897,933 | 1,934,488 | (0.23) | 2.27 | |||||||
| Commercial loans | 470,934 | 448,582 | 336,961 | 303,697 | 203,243 | 4.98 | 131.71 | |||||||
| Paycheck Protection Program loans | 8,014 | 17,525 | 31,404 | 77,319 | 140,465 | (54.27) | (94.29) | |||||||
| Consumer loans | 279,678 | 179,691 | 77,424 | 61,037 | 36,388 | 55.64 | NM | |||||||
| Loans receivable, net of deferred fees | $ 2,737,086 | $ 2,628,797 | $ 2,393,669 | $ 2,339,986 | $ 2,314,584 | 4.12 | % | 18.25 | % | |||||
| Loans by Risk Grade: | ||||||||||||||
| Pass, not graded | $ - | $ - | $ - | $ - | $ - | - | % | - | % | |||||
| Pass Grade 1 - Highest Quality | 616 | 609 | 786 | 641 | 789 | 1.15 | (21.93) | |||||||
| Pass Grade 2 - Good Quality | 149,389 | 129,571 | 8,734 | 103,496 | 153,834 | 15.30 | (2.89) | |||||||
| Pass Grade 3 - Satisfactory Quality | 1,520,364 | 1,513,054 | 1,413,480 | 1,327,718 | 1,248,233 | 0.48 | 21.80 | |||||||
| Pass Grade 4 - Pass | 984,012 | 890,709 | 895,197 | 836,610 | 841,451 | 10.48 | 16.94 | |||||||
| Pass Grade 5 - Special Mention | 35,410 | 67,736 | 51,884 | 31,112 | 25,008 | (47.72) | 41.59 | |||||||
| Grade 6 - Substandard | 47,295 | 27,118 | 23,588 | 40,409 | 45,269 | 74.40 | 4.48 | |||||||
| Grade 7 - Doubtful | - | - | - | - | - | - | - | |||||||
| Grade 8 - Loss | - | - | - | - | - | - | - | |||||||
| Total loans | $ 2,737,086 | $ 2,628,797 | $ 2,393,669 | $ 2,339,986 | $ 2,314,584 | 4.12 | % | 18.25 | % | |||||
| (Dollars in thousands) | As Of or For Three MonthsEnded: | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| Asset Quality Information | 3Q2022 | 2Q 2022 | 1Q2022 | 4Q 2021 | 3Q<br>2021 | |||||||||
| Allowance for Credit Losses: | ||||||||||||||
| Balance at beginning of period | $ (30,209) | $ (29,379) | $ (29,105) | $ (30,386) | (31,265) | |||||||||
| (Provision for) / recovery of allowance for credit losses | (2,890) | (422) | (99) | 1,299 | (1,085) | |||||||||
| Net charge-offs | 1,143 | (408) | (175) | (18) | 1,964 | |||||||||
| Ending balance | $ (31,956) | $ (30,209) | $ (29,379) | $ (29,105) | (30,386) | |||||||||
| Reserve for Unfunded Commitments: | ||||||||||||||
| Balance at beginning of period | $ (1,069) | $ (1,237) | $ (977) | $ (1,129) | (1,599) | |||||||||
| (Expense for) / recovery of unfunded loan commitment reserve | (311) | 168 | (260) | 152 | 470 | |||||||||
| Total Reserve for Unfunded Commitments | $ (1,380) | $ (1,069) | $ (1,237) | $ (977) | (1,129) | |||||||||
| As Of: | ||||||||||||||
| Non-Performing Assets: | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | 3Q 2021 | 3Q 2021 | ||||||||
| Nonaccrual loans | $ 36,851 | $ 19,635 | $ 14,941 | $ 15,029 | 18,352 | % | 100.80 | % | ||||||
| Accruing loans delinquent 90 days or more | 1,855 | 1,512 | 1,817 | 283 | - | - | ||||||||
| Total non-performing loans | 38,706 | 21,147 | 16,758 | 15,312 | 18,352 | 110.91 | ||||||||
| Other real estate owned | 1,041 | 1,041 | 1,041 | 1,163 | 1,312 | (20.66) | ||||||||
| Total non-performing assets | $ 39,747 | $ 22,188 | $ 17,799 | $ 16,475 | 19,664 | 102.13 | ||||||||
| SBA guaranteed portion of non-performing loans | $ 2,573 | $ 2,319 | $ 2,651 | $ 1,388 | 3,361 | (23.45) | ||||||||
| Troubled debt restructuring | $ 3,170 | $ 2,695 | $ 3,103 | $ 3,401 | 3,710 | (14.6) | ||||||||
| Loans deferred under COVID-19 modifications | $ - | $ - | $ - | $ - | 6,985 | % | (100.00) | % | ||||||
| The company defines "NM" as not meaningful for increases or decreases greater than 300 percent. |
All values are in US Dollars.
| Primis Financial Corp. | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | For Three MonthsEnded: | Variance - 2Q 2021 vs. | For Nine Months Ended: | Variance | ||||||||||
| Average Balance Sheet | 3Q2022 | 2Q 2022 | 1Q2022 | 4Q 2021 | 3Q2021 | 2Q 2022 | 3Q 2021 | 3Q 2022 | 3Q 2021 | YTD | ||||
| Assets | ||||||||||||||
| Loans held for sale | $ 21,199 | $ 6,936 | $ - | $ <br>- | $ - | 205.64 | % | - | % | $ 9,456 | $ - | - | % | |
| Loans, net of deferred fees | 2,669,605 | 2,509,978 | 2,360,782 | 2,317,260 | 2,291,945 | 6.36 | 16.48 | 2,514,587 | 2,351,410 | 6.94 | ||||
| Investment securities | 269,780 | 287,722 | 302,431 | 258,265 | 229,906 | (6.24) | 17.34 | 286,525 | 213,128 | 34.44 | ||||
| Other earning assets | 90,268 | 158,817 | 466,952 | 632,841 | 689,084 | (43.16) | (86.90) | 237,299 | 536,781 | (55.79) | ||||
| Total earning assets | 3,050,852 | 2,963,453 | 3,130,165 | 3,208,366 | 3,210,935 | 2.95 | (4.99) | 3,047,867 | 3,101,319 | (1.72) | ||||
| Investment in STM - Held for sale | — | — | - | 9,941 | 12,621 | - | (100.00) | — | 12,659 | (100.00) | ||||
| Other assets | 234,355 | 228,893 | 226,320 | 229,718 | 230,116 | 2.39 | 1.84 | 229,885 | 228,361 | 0.67 | ||||
| Total assets | $ 3,285,207 | $ 3,192,346 | $ 3,356,485 | $ 3,448,025 | $ 3,453,672 | 2.91 | % | (4.88) | % | $ 3,277,752 | $ 3,342,339 | (1.93) | % | |
| Liabilities and stockholders' equity | ||||||||||||||
| Demand deposits | $ 665,020 | $ 596,714 | $ 545,530 | $ 547,504 | $ 547,500 | 11.45 | % | 21.46 | % | $ 602,872 | $ 514,318 | 17.22 | % | |
| Interest-bearing liabilities: | ||||||||||||||
| NOW and other demand accounts | 660,387 | 695,481 | 817,430 | 878,652 | 920,203 | (5.05) | (28.23) | 723,857 | 854,360 | (15.27) | ||||
| Money market accounts | 803,860 | 810,781 | 809,460 | 784,942 | 744,280 | (0.85) | 8.01 | 808,013 | 706,215 | 14.41 | ||||
| Savings accounts | 219,167 | 222,274 | 224,716 | 219,823 | 213,859 | (1.40) | 2.48 | 222,032 | 204,286 | 8.69 | ||||
| Time deposits | 343,986 | 329,198 | 350,368 | 368,603 | 380,233 | 4.49 | (9.53) | 341,160 | 418,161 | (18.41) | ||||
| Total Deposits | 2,692,420 | 2,654,448 | 2,747,504 | 2,799,524 | 2,806,075 | 1.43 | (4.05) | 2,697,934 | 2,697,340 | 0.02 | ||||
| Borrowings | 166,621 | 107,784 | 171,293 | 209,215 | 208,689 | 54.59 | (20.16) | 148,549 | 219,947 | (32.46) | ||||
| Total Funding | 2,859,041 | 2,762,232 | 2,918,797 | 3,008,739 | 3,014,764 | 3.50 | (5.17) | 2,846,483 | 2,917,287 | (2.43) | ||||
| Other Liabilities | 23,832 | 22,095 | 23,057 | 27,407 | 28,699 | 7.86 | (16.96) | 22,985 | 22,947 | 0.17 | ||||
| Stockholders' equity | 402,334 | 408,019 | 414,631 | 411,879 | 410,209 | (1.39) | (1.92) | 408,284 | 402,105 | 1.54 | ||||
| Total liabilities and stockholders' equity | $ 3,285,207 | $ 3,192,346 | $ 3,356,485 | $ 3,448,025 | $ 3,453,672 | 2.91 | % | (4.88) | % | $ 3,277,752 | $ 3,342,339 | (1.93) | % | |
| Memo: Average PPP loans | $ 11,868 | $ 23,950 | $ 51,491 | $ 102,078 | $ 191,504 | (50.45) | % | (93.80) | % | $ 28,958 | $ 272,371 | (89.37) | % | |
| Net Interest Income | ||||||||||||||
| Loans held for sale | $ 263 | $ 93 | $ - | $ - | $ - | 182.80 | % | - | % | $ 356 | $ - | - | % | |
| Loans | 30,260 | 26,272 | 24,749 | 26,701 | 26,181 | 15.18 | 15.58 | 81,281 | 80,320 | 1.20 | ||||
| Investment securities | 1,518 | 1,445 | 1,430 | 1,242 | 1,083 | 5.05 | 40.17 | 4,393 | 3,198 | 37.37 | ||||
| Other earning assets | 555 | 448 | 406 | 560 | 537 | 23.88 | 3.35 | 1,409 | 1,222 | 15.30 | ||||
| Total Earning Assets | 32,596 | 28,258 | 26,585 | 28,503 | 27,801 | 15.35 | 17.25 | 87,439 | 84,740 | 3.19 | ||||
| Non-interest bearing DDA | - | - | - | - | - | - | - | - | - | - | ||||
| NOW and other interest-bearing demand accounts | 536 | 556 | 666 | 832 | 1,062 | (3.60) | (49.53) | 1,758 | 3,178 | (44.68) | ||||
| Money market accounts | 1,667 | 938 | 859 | 952 | 1,056 | 77.72 | 57.86 | 3,464 | 3,294 | 5.16 | ||||
| Savings accounts | 141 | 142 | 149 | 154 | 165 | (0.70) | (14.55) | 432 | 464 | (6.90) | ||||
| Time deposits | 943 | 674 | 700 | 809 | 877 | 39.91 | 7.53 | 2,317 | 3,429 | (32.43) | ||||
| Total Deposit Costs | 3,287 | 2,310 | 2,374 | 2,747 | 3,160 | 42.29 | 4.02 | 7,971 | 10,365 | (23.10) | ||||
| Borrowings | 1,859 | 1,342 | 1,357 | 1,515 | 1,434 | 38.52 | 29.64 | 4,558 | 4,413 | 3.29 | ||||
| Total Funding Costs | 5,146 | 3,652 | 3,731 | 4,262 | 4,594 | 40.91 | 12.02 | 12,529 | 14,778 | (15.22) | ||||
| Net Interest Income | $ 27,450 | $ 24,606 | $ 22,854 | $ 24,241 | $ 23,207 | 11.56 | % | 18.28 | % | $ 74,910 | $ 69,962 | 7.07 | % | |
| Memo: SBA PPP loan interest and fee income | $ 28 | $ 59 | $ 435 | $ <br>2,503 | $ 3,146 | (52.54) | % | (99.11) | % | $ 519 | $ 11,483 | (95.48) | % | |
| Memo: SBA PPP loan funding costs | $ 10 | $ 21 | $ 44 | $ 90 | $ 169 | (52.38) | % | (94.08) | % | $ 76 | $ 713 | (89.34) | % | |
| Net Interest Margin | ||||||||||||||
| Loans held for sale | 4.92 % | 5.38 % | 0.00 % | 0.00 % | 0.00 % | (46) | bps | 492 | bps | 5.03 % | 0.00 % | 503 | bps | |
| Loans | 4.50 % | 4.20 % | 4.25 % | 4.57 % | 4.53 % | 30 | (3) | 4.32 % | 4.57 % | (25) | ||||
| Investments | 2.23 % | 2.01 % | 1.92 % | 1.91 % | 1.87 % | 22 | 36 | 2.05 % | 2.01 % | 4 | ||||
| Other Earning Assets | 2.44 % | 1.13 % | 0.35 % | 0.35 % | 0.31 % | 131 | 213 | 0.79 % | 0.30 % | 49 | ||||
| Total Earning Assets | 4.24 % | 3.82 % | 3.44 % | 3.52 % | 3.44 % | 42 | 80 | 3.84 % | 3.65 % | 19 | ||||
| NOW | 0.32 % | 0.32 % | 0.33 % | 0.38 % | 0.46 % | - | (14) | 0.32 % | 0.50 % | (18) | ||||
| MMDA | 0.82 % | 0.46 % | 0.43 % | 0.48 % | 0.56 % | 36 | 26 | 0.57 % | 0.62 % | (5) | ||||
| Savings | 0.26 % | 0.26 % | 0.27 % | 0.28 % | 0.31 % | - | (5) | 0.26 % | 0.30 % | (4) | ||||
| CDs | 1.09 % | 0.82 % | 0.81 % | 0.87 % | 0.92 % | 27 | 17 | 0.91 % | 1.10 % | (19) | ||||
| Cost of Interest Bearing Deposits | 0.64 % | 0.45 % | 0.44 % | 0.48 % | 0.56 % | 19 | 8 | 0.51 % | 0.63 % | (12) | ||||
| Cost of Deposits | 0.48 % | 0.35 % | 0.35 % | 0.39 % | 0.45 % | 13 | 3 | 0.40 % | 0.51 % | (11) | ||||
| - | ||||||||||||||
| Other Funding | 4.43 % | 4.99 % | 3.22 % | 2.87 % | 2.73 % | (56) | 170 | 4.10 % | 2.68 % | 142 | ||||
| Total Cost of Funds | 0.71 % | 0.53 % | 0.52 % | 0.56 % | 0.60 % | 18 | 11 | 0.59 % | 0.68 % | (9) | ||||
| Net Interest Margin | 3.57 % | 3.33 % | 2.96 % | 3.00 % | 2.87 % | 24 | 70 | 3.29 % | 3.02 % | 27 | ||||
| Net Interest Spread | 3.31 % | 3.15 % | 2.81 % | 2.96 % | 2.70 % | 16 | 61 | 3.09 % | 2.83 % | 26 | ||||
| Memo: Excluding SBA PPP loans | ||||||||||||||
| Loans | 4.51 % | 4.23 % | 4.27 % | 4.33 % | 4.35 % | 28 | bps | 16 | bps | 4.34 % | 4.43 % | (8) | bps | |
| Total Earning Assets | 4.25 % | 3.85 % | 3.44 % | 3.32 % | 3.24 % | 40 | 101 | 3.85 % | 3.46 % | 39 | ||||
| Net Interest Margin* | 3.58 % | 3.35 % | 2.96 % | 2.79 % | 2.66 % | 23 | 92 | 3.30 % | 2.80 % | 50 | ||||
| *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 MonthsEnded: | For Nine Months Ended: | ||||||||||||
| Reconciliation of Non-GAAP items: | 3Q 2022 | 2Q 2022 | 1Q 2022 | 4Q 2021 | 3Q 2021 | 3Q 2022 | 3Q 2021 | |||||||
| Net income from continuing operations | $ 5,054 | $ 5,009 | $ 4,593 | $ 7,651 | $ 6,211 | $ 14,656 | $ 23,366 | |||||||
| Non-GAAP adjustments to Net Income from continuing operations: | ||||||||||||||
| Management Restructure / Recruiting | - | - | - | - | - | - | 200 | |||||||
| Branch Closures/ Consolidations | 308 | 901 | - | - | - | 1,209 | - | |||||||
| Merger expenses | - | 401 | 115 | - | - | 516 | - | |||||||
| (Gain) on debt extinguishment | - | - | - | (573) | - | - | - | |||||||
| Income tax effect | (67) | (281) | (25) | 124 | - | (373) | (43) | |||||||
| Net income from continuing operations adjusted for nonrecurring income and expenses | $ 5,295 | $ 6,030 | $ 4,683 | $ 7,202 | $ 6,211 | $ 16,008 | $ 23,523 | |||||||
| Net income from continuing operations | $ 5,054 | $ 5,009 | $ 4,593 | $ 7,651 | $ 6,211 | $ 14,656 | $ 23,366 | |||||||
| Income tax expense | 1,365 | 1,375 | 1,265 | 2,284 | 1,702 | 4,005 | 6,438 | |||||||
| Provision for credit losses (incl. unfunded commitment expense) | 3,201 | 254 | 359 | (1,451) | 615 | 3,722 | (4,112) | |||||||
| Pre-tax pre-provision earnings from continuing operations | $ 9,620 | $ 6,638 | $ 6,217 | $ 8,484 | $ 8,528 | $ 22,383 | $ 25,692 | |||||||
| Effect of adjustment for nonrecurring income and expenses | 308 | 1,302 | 115 | (573) | - | 1,725 | 200 | |||||||
| Pre-tax pre-provision operating earnings from continuing operations | $ 9,928 | $ 7,940 | $ 6,332 | $ 7,911 | $ 8,528 | $ 24,108 | $ 25,892 | |||||||
| Return on average assets from continuing operations | 0.61 % | 0.63 % | 0.55 % | 0.88 % | 0.72 % | 0.60 % | 0.94 % | |||||||
| Effect of adjustment for nonrecurring income and expenses | 0.03 % | 0.13 % | 0.01 % | (0.05 %) | 0.00 % | 0.06 % | 0.01 % | |||||||
| Operating return on average assets from continuing operations | 0.64 % | 0.76 % | 0.57 % | 0.83 % | 0.72 % | 0.65 % | 0.94 % | |||||||
| Return on average assets from continuing operations | 0.61 % | 0.63 % | 0.55 % | 0.88 % | 0.72 % | 0.60 % | 0.94 % | |||||||
| Effect of tax expense | 0.16 % | 0.17 % | 0.15 % | 0.26 % | 0.20 % | 0.16 % | 0.26 % | |||||||
| Effect of provision for credit losses | 0.39 % | 0.03 % | 0.04 % | (0.17 %) | 0.07 % | 0.15 % | (0.17 %) | |||||||
| Pre-tax pre-provision return on average assets from continuing operations | 1.16 % | 0.83 % | 0.75 % | 0.98 % | 0.98 % | 0.91 % | 1.03 % | |||||||
| Effect of adjustment for nonrecurring income and expenses | 0.04 % | 0.16 % | 0.01 % | (0.07 %) | 0.00 % | 0.07 % | 0.01 % | |||||||
| Pre-tax pre-provision operating return on average assets from continuing operations | 1.20 % | 1.00 % | 0.77 % | 0.91 % | 0.98 % | 0.98 % | 1.04 % | |||||||
| Return on average equity from continuing operations | 4.98 % | 4.92 % | 4.49 % | 7.37 % | 6.01 % | 4.80 % | 7.77 % | |||||||
| Effect of adjustment for nonrecurring income and expenses | 0.24 % | 1.00 % | 0.09 % | (0.43 %) | 0.00 % | 0.44 % | 0.05 % | |||||||
| Operating return on average equity from continuing operations | 5.22 % | 5.93 % | 4.58 % | 6.94 % | 6.01 % | 5.24 % | 7.82 % | |||||||
| Effect of goodwill and other intangible assets | 1.92 % | 2.15 % | 1.58 % | 2.42 % | 2.12 % | 1.87 % | 2.85 % | |||||||
| Operating return on average tangible equity from continuing operations | 7.14 % | 8.08 % | 6.16 % | 9.36 % | 8.12 % | 7.11 % | 10.67 % | |||||||
| Efficiency ratio from continuing operations | 71.85 % | 75.01 % | 76.11 % | 68.16 % | 64.80 % | 74.11 % | 67.18 % | |||||||
| Effect of adjustment for nonrecurring income and expenses | (0.93 %) | (4.78 %) | (0.46 %) | 1.47 % | 0.00 % | (2.02 %) | (0.26 %) | |||||||
| Operating efficiency ratio from continuing operations | 70.92 % | 70.23 % | 75.65 % | 69.63 % | 64.80 % | 72.09 % | 66.92 % | |||||||
| Earnings per share from continuing operations - Basic | $ 0.21 | $ 0.20 | $ 0.19 | $ 0.31 | $ 0.25 | $ 0.60 | $ 0.96 | |||||||
| Effect of adjustment for nonrecurring income and expenses | 0.01 | 0.05 | 0.00 | (0.02) | 0.00 | 0.05 | 0.00 | |||||||
| Operating earnings per share from continuing operations - Basic | $ 0.22 | $ 0.25 | $ 0.19 | $ 0.29 | $ 0.25 | $ 0.65 | $ 0.96 | |||||||
| Earnings per share from continuing operations - Diluted | $ 0.20 | $ 0.20 | $ 0.19 | $ 0.31 | $ 0.25 | $ 0.59 | $ 0.95 | |||||||
| Effect of adjustment for nonrecurring income and expenses | 0.01 | 0.04 | (0.00) | (0.02) | 0.00 | 0.06 | 0.01 | |||||||
| Operating earnings per share from continuing operations - Diluted | $ 0.21 | $ 0.24 | $ 0.19 | $ 0.29 | $ 0.25 | $ 0.65 | $ 0.96 | |||||||
| Book value per share | $ 15.89 | $ 16.17 | $ 16.42 | $ 16.76 | $ 16.63 | $ 15.89 | $ 16.63 | |||||||
| Effect of goodwill and other intangible assets | (4.39) | (4.40) | (4.31) | (4.34) | (4.35) | (4.39) | (4.34) | |||||||
| Tangible book value per share | $ 11.54 | $ 11.77 | $ 12.11 | $ <br>12.43 | $ 12.28 | $ 11.54 | $ 12.28 | |||||||
| Stockholders' equity | $ 391,808 | $ 398,637 | $ 404,195 | $ 411,881 | $ 408,629 | $ 391,808 | $ 408,629 | |||||||
| Less goodwill and other intangible assets | (108,147) | (108,524) | (106,075) | (106,416) | (106,757) | (108,147) | (106,757) | |||||||
| Tangible common equity | $ 283,661 | $ 290,113 | $ 298,120 | $ 305,465 | $ 301,872 | $ 283,661 | $ 301,872 | |||||||
| Equity to assets | 11.67 % | 12.32 % | 12.55 % | 12.10 % | 11.84 % | 11.67 % | 11.84 % | |||||||
| Effect of goodwill and other intangible assets | (2.94 %) | (3.04 %) | (2.98 %) | (2.84 %) | (2.81 %) | (2.94 %) | (2.81 %) | |||||||
| Tangible common equity to tangible assets | 8.73 % | 9.27 % | 9.57 % | 9.26 % | 9.02 % | 8.73 % | 9.02 % | |||||||
| Net interest margin | 3.57 % | 3.33 % | 2.96 % | 3.00 % | 2.87 % | 3.29 % | 3.02 % | |||||||
| Effect of adjustment for PPP associated balances* | 0.01 % | 0.02 % | (0.00 %) | (0.21 %) | (0.21 %) | 0.01 % | (0.22 %) | |||||||
| Net interest margin excluding PPP | 3.58 % | 3.35 % | 2.96 % | 2.79 % | 2.66 % | 3.30 % | 2.80 % | |||||||
| *Net interest margin excluding the effect of PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods |
Third 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; statements regarding the effects of the ongoing COVID-19 pandemic and related variants on our business and financial results and conditions; and the assumptions underlying our expectations. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: the Company’s ability to implement its various strategic and growth initiatives, including its recently established Panacea Financial and Life Premium Finance Divisions, new digital bank and V1BE fulfillment service and recent acquisition of SeaTrust 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 2
Statements included in this presentation include non-GAAP financial measures and should be read along with the accompanying tables. Primis uses non-GAAP financial measures to analyze its performance. The measures entitled pre-tax pre-provision operating earnings from continuing operations; pre-tax pre-provision operating return on average assets from continuing operations; operating earnings per share from continuing operations –diluted; tangible common equity; tangible common equity to tangible assets; tangible book value per share; and net interest margin excluding PPP loans are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in the Reconciliation of Non-GAAP items table. Management believes that these non-GAAP financial measures provide additional useful information about Primis that allows management and investors to evaluate the ongoing operating results, financial strength and performance of Primis and provide meaningful comparison to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider Primis’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of Primis. Non-GAAP financial measures are not standardized and, therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP. Non-GAAP Measure 3
A pioneering bank, committed to imagining a faster and more convenient way to serve you. WELCOME TO PRIMIS Corp. Headquarters: McLean, VA Bank Headquarters: Glen Allen, VA Branches: 32 Ticker (NASDAQ): FRST Valuation Market Capitalization: $312 million Price / Book Value per Share 0.80x Price / Tangible Book Value: 1.10x Price / 2022 Estimated EPS(3): 12.78x Price / 2023 Estimated EPS(3): 10.28x Dividend Yield(4): 3.16% 4 Pricing as of October 25, 2022. Financial data as of or for the three months ended September 30, 2022. (1) See reconciliation of Non-GAAP financial measures on slide 24. (2) Results from continuing operations (3) Mean analyst estimates per S&P Global. (4) Assumes $0.40 annualized dividend.
High Performing Community Bank 5 V1BE adoption/utilization continues to build with monthly transactions crossing 1,000 in Q3
Core market loan growth of 3.3% annualized in Q3(2)
2 branches consolidated in Q3’22, bringing total to 8 for the year 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.
4.9 V1BE App Rating ~$9 thousand Average V1BE Transaction 57% % of V1BE Users that are SMBs V1BE Update(1) V1BE Coverage ~49 Minutes Average Fulfillment Time 305,497 Total Minutes Saved by Customers 2,799 Q2 Transactions
Digital Bank Update 6 Initial consumer launch – July 25, 2022
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
Digital bank is expected to be a significant portion of our deposit growth in the coming quarters Initial Launch
Primis Mortgage Update 7 Significant expansion of mortgage footings in a short period of time (now licensed in 36 states and D.C.)
2 substantial teams hired in the third quarter will contribute an additional $700 million to annualized production
On track for $1 billion of mortgage production in 2023, even in the current rate environment
8 Panacea Financial Update Q3’22 Update Q3’22 Loan Composition ($201.9 million) # of New Closed Loans $59.2 million growth in loan balances in Q3’22 Q3’22 originations of $68.8 million
On a direct basis, PPNR increased 110% q/q to $225k
Now banking ~2,600 doctor households across all 50 states
Opened ~500 new checking and savings accounts in Q3’22
Practice Solutions division realizing success in achieving full relationship, with 99% deposit and 93% TM penetration
14 national and state association partnerships
Cumulative NCOs since 11/1/2020 launch of 0.05%
Launching doctor mortgage product on 1/1/2023 which should drive improved fee income, with effectively no incremental expense.
Maintaining 2022 loan growth expectation of $175-$200 mil.
4 9 Life Insurance Premium Finance Update Key Portfolio Metrics Key Performance Metrics Average Actual Primis Processing Time is ~4 Days Placement Ratio Carrier Approvals Top-Tier Partners Facilitators 67% 26 46 5 Percentage of portfolio that is currently in default 0.0% Loans in Default
Third Quarter Results
Net income from continuing operations of $5.1 million or $0.21 per basic and $0.20 diluted share
Adjusted net income of $5.3 million(1) or $0.22 per basic share and $0.21 per diluted share
Pre-tax pre-provision return on average assets from continuing operations(1) was 1.16% for the three months ended September 30, 2022, up 33 basis points from 0.83% for the three months ended June 30, 2022.
Pre-tax pre-provision operating return on average assets from continuing operations(1) was 1.20% for the three months ended September 30, 2022, up 20 basis points from 1.00% for the three months ended June 30, 2022. Excluding the loss in the mortgage group related to acquiring two substantial teams, this ratio would have been 1.30% for the third quarter, representing a material increase in core profitability.
Total deposits grew an annualized 3.8% compared to the linked-quarter illustrating successful strategies that can outrun the industry’s tightening liquidity position.
Deposit mix continued to improve with non-interest bearing checking deposits of $687.3 million, representing 25.4% of total deposits at September 30, 2022, compared to 19.1% at September 30, 2021.
Total revenue of $33.0 million in the current quarter of 2022, up 47.4% from the same period in 2021.
Tangible common equity to tangible assets and leverage ratio of 8.73% and 9.96%, respectively, are 114 basis points and 15 basis points higher than peers(2), respectively, at September 30, 2022.
Loans held for investment grew at an annualized rate of 22.6% for the nine months of 2022 or 27.5% net of a decline in Paycheck Protection Program (“PPP”) loan balances. Loans held for investment grew at an annualized rate of 18.0% compared to the linked-quarter net of a decline in PPP balances.
Net interest margin of 3.57% in the third quarter of 2022 was up substantially from 2.87% in the same period last year and up 24 basis points from 3.33% in the second quarter of 2022.
Margin improvements driven by industry low deposit beta of 4% through the cycle.
Positive move in earning asset yields to 4.51%, excluding PPP, in the third quarter of 2022, compared to 4.35% in the same quarter of 2021.
Results for continuing operations. See reconciliation of Non-GAAP financial measures on slide 24. Per S&P Global. Includes publicly-traded banks with assets between $2 billion and $10 billion with reported ratios as of October 21, 2022. Third Quarter Highlights 11
Dollars in millions. (1) See reconciliation of Non-GAAP financial measures on slide 24. Balance Sheet Trends 12
Lines of Business Dollars in thousands. (1) Net interest income assumes business line funding requirements are provided by the Company at its cost of funds plus 100 basis points. (2) See reconciliation of Non-GAAP financial measures on slide 24 13
Dollars in millions. Loan Composition and Trends 14 Loan Trends and Yields Q3’22 Loan Composition (Ex. PPP) Robust loan growth of 18.0% annualized, linked-quarter excluding PPP balances (27.5% annualized YTD)
Expect healthy loan growth to continue in Q4 ‘22
Classified loans and NPAs exclude guaranteed portion of SBA loans. Asset Quality 15 NPAs / Loans (Ex. PPP) + OREO NCOs / Average Loans Criticized & Classified Loans / Total Loans (Ex. PPP) Nonaccrual and classified loans increased by $17.2 million and $20.2 million, respectively, largely due to one relationship Migrated from special mention in Q3 Largely comprised of multiple assisted living facilities All credits in the relationship are well-secured based on recent appraisals
Net charge-offs of $1.14 million in Q3 primarily for one relationship with specific reserves established in previous quarters
OREO flat at $1.04 million in Q3
Classified loans exclude guaranteed portion of SBA loans. Allowance for Credit Losses 16 ACL / Gross Loans (Ex. PPP) ACL / Classified Loans Provision for credit losses of $2.89 million in Q3 versus provision of $0.4 million in Q2 Increase driven by loan growth that contributed approximately $0.8 million, economic forecast weakness by $1.7 million and net increase in specific impairments for a nonaccrual loan by $0.4 million ACL coverage of gross loans increased slightly to 1.17% from 1.16% in Q2
Dollars in millions. (1) Core deposits exclude time deposits. Deposit Trends 17 Deposit Composition – Q3’22 Core Deposit Growth(1) Total deposits were up marginally in Q3 while NIB increased to 25.4% of total deposits
Focus remains on building customer relationships and continuing to grow core deposits Cost of Deposits: 48 bps
Margin Progression
Dollars in millions. (1) See reconciliation of Non-GAAP financial measures on slide 24
Net Interest Income and Net Interest Margin 18 Excluding PPP impacts, Q3’22 was the sixth consecutive quarter of increasing net interest income and fifth consecutive quarter of margin expansion as robust loan growth improves the Bank’s earning asset mix
Expectation is for continued NII growth and stable margin in Q4‘22 Net Interest Margin Trends
Q3 NIE, excluding unfunded commitment expense, impacted by the following: Branch closure-related expenses of $308K Primis Mortgage expenses of $3.2 million versus one-month impact of $759K in Q2 tied to recent team expansions
Excluding nonrecurring items and impact of mortgage, Q3 NIE increased to $20.0 million versus $18.5 million in Q2 driven by: Reduction in deferred costs due to lower commercial loan volumes Increased marketing/advertising for the digital bank and V1BE adoption campaigns Increased legal/consulting fees Increased fraud related expenses
2 additional branches consolidated in Q3’22, bringing total for the year to 8
Increased operating leverage, particularly with lines of business, along with expense initiatives, including approximately $0.5 million data contract savings, should moderate efficiency ratio below 65% by year end Efficiency Ratio(1) Dollars in thousands. (1) Results from continuing operations. (2) See reconciliation of Non-GAAP financial measures on slide 24.
Non-Interest Expense and Efficiency Ratio 19 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 24.
Profitability 20 Return on Average Assets Pre-Tax Pre-Provision Operating Earnings (1) PTPP Operating ROAA highest since Q3’20 excluding PPP fee income
Excluding pre-tax loss in mortgage, PTPP Operating ROAA would have been 1.30% for Q3’22
Tangible Book Value Per Share Diluted Earnings Per Share and Adjusted Diluted EPS
(1) See reconciliation of Non-GAAP financial measures on slide 24. Per Share Results 21 (1) Tangible book value per share adversely impacted by $9.5 million change in unrealized mark-to-market adjustments 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 22
Appendix 23
Non-GAAP Reconciliation 24 Primis Financial Corp. (Dollars in thousands, except per share data) For Three Months Ended: For Nine Months Ended: Reconciliation of Non-GAAP items: 3Q 2022 2Q 2022 1Q 2022 4Q 2021 3Q 2021 3Q 2022 3Q 2021 Net income from continuing operations $ 5,054 $ 5,009 $ 4,593 $ 7,651 $ 6,211 $ 14,656 $ 23,366 Non-GAAP adjustments to Net Income from continuing operations: Management Restructure / Recruiting - - - - - - 200 Branch Closures/ Consolidations 308 901 - - - 1,209 - Merger expenses - 401 115 - - 516 - (Gain) on debt extinguishment - - - (573) - - - Income tax effect (67) (281) (25) 124 - (373) (43) Net income from continuing operations adjusted for nonrecurring income and expenses $ 5,295 $ 6,030 $ 4,683 $ 7,202 $ 6,211 $ 16,008 $ 23,523 Net income from continuing operations $ 5,054 $ 5,009 $ 4,593 $ 7,651 $ 6,211 $ 14,656 $ 23,366 Income tax expense 1,365 1,375 1,265 2,284 1,702 4,005 6,438 Provision for credit losses (incl. unfunded commitment expense) 3,201 254 359 (1,451) 615 3,722 (4,112) Pre-tax pre-provision earnings from continuing operations $ 9,620 $ 6,638 $ 6,217 $ 8,484 $ 8,528 $ 22,383 $ 25,692 Effect of adjustment for nonrecurring income and expenses 308 1,302 115 (573) - 1,725 200 Pre-tax pre-provision operating earnings from continuing operations $ 9,928 $ 7,940 $ 6,332 $ 7,911 $ 8,528 $ 24,108 $ 25,892 Return on average assets from continuing operations 0.61% 0.63% 0.55% 0.88% 0.72% 0.60% 0.94% Effect of adjustment for nonrecurring income and expenses 0.03% 0.13% 0.01% (0.05%) 0.00% 0.06% 0.01% Operating return on average assets from continuing operations 0.64% 0.76% 0.57% 0.83% 0.72% 0.65% 0.94% Return on average assets from continuing operations 0.61% 0.63% 0.55% 0.88% 0.72% 0.60% 0.94% Effect of tax expense 0.16% 0.17% 0.15% 0.26% 0.20% 0.16% 0.26% Effect of provision for credit losses 0.39% 0.03% 0.04% (0.17%) 0.07% 0.15% (0.17%) Pre-tax pre-provision return on average assets from continuing operations 1.16% 0.83% 0.75% 0.98% 0.98% 0.91% 1.03% Effect of adjustment for nonrecurring income and expenses 0.04% 0.16% 0.01% (0.07%) 0.00% 0.07% 0.01% Pre-tax pre-provision operating return on average assets from continuing operations 1.20% 1.00% 0.77% 0.91% 0.98% 0.98% 1.04% Return on average equity from continuing operations 4.98% 4.92% 4.49% 7.37% 6.01% 4.80% 7.77% Effect of adjustment for nonrecurring income and expenses 0.24% 1.00% 0.09% (0.43%) 0.00% 0.44% 0.05% Operating return on average equity from continuing operations 5.22% 5.93% 4.58% 6.94% 6.01% 5.24% 7.82% Effect of goodwill and other intangible assets 1.92% 2.15% 1.58% 2.42% 2.12% 1.87% 2.85% Operating return on average tangible equity from continuing operations 7.14% 8.08% 6.16% 9.36% 8.12% 7.11% 10.67% Efficiency ratio from continuing operations 71.85% 75.01% 76.11% 68.16% 64.80% 74.11% 67.18% Effect of adjustment for nonrecurring income and expenses (0.93%) (4.78%) (0.46%) 1.47% 0.00% (2.02%) (0.26%) Operating efficiency ratio from continuing operations 70.92% 70.23% 75.65% 69.63% 64.80% 72.09% 66.92% Earnings per share from continuing operations - Basic $ 0.21 $ 0.20 $ 0.19 $ 0.31 $ 0.25 $ 0.60 $ 0.96 Effect of adjustment for nonrecurring income and expenses 0.01 0.05 0.00 (0.02) 0.00 0.05 0.00 Operating earnings per share from continuing operations - Basic $ 0.22 $ 0.25 $ 0.19 $ 0.29 $ 0.25 $ 0.65 $ 0.96 Earnings per share from continuing operations - Diluted $ 0.20 $ 0.20 $ 0.19 $ 0.31 $ 0.25 $ 0.59 $ 0.95 Effect of adjustment for nonrecurring income and expenses 0.01 0.04 (0.00) (0.02) 0.00 0.06 0.01 Operating earnings per share from continuing operations - Diluted $ 0.21 $ 0.24 $ 0.19 $ 0.29 $ 0.25 $ 0.65 $ 0.96 Book value per share $ 15.89 $ 16.17 $ 16.42 $ 16.76 $ 16.63 $ 15.89 $ 16.63 Effect of goodwill and other intangible assets (4.39) (4.40) (4.31) (4.34) (4.35) (4.39) (4.34) Tangible book value per share $ 11.54 $ 11.77 $ 12.11 $ 12.43 $ 12.28 $ 11.54 $ 12.28 Stockholders' equity $ 391,808 $ 398,637 $ 404,195 $ 411,881 $ 408,629 $ 391,808 $ 408,629 Less goodwill and other intangible assets (108,147) (108,524) (106,075) (106,416) (106,757) (108,147) (106,757) Tangible common equity $ 283,661 $ 290,113 $ 298,120 $ 305,465 $ 301,872 $ 283,661 $ 301,872 Equity to assets 11.67% 12.32% 12.55% 12.10% 11.84% 11.67% 11.84% Effect of goodwill and other intangible assets (2.94%) (3.04%) (2.98%) (2.84%) (2.81%) (2.94%) (2.81%) Tangible common equity to tangible assets 8.73% 9.27% 9.57% 9.26% 9.02% 8.73% 9.02% Net interest margin 3.57% 3.33% 2.96% 3.00% 2.87% 3.29% 3.02% Effect of adjustment for PPP associated balances* 0.01% 0.02% (0.00%) (0.21%) (0.21%) 0.01% (0.22%) Net interest margin excluding PPP 3.58% 3.35% 2.96% 2.79% 2.66% 3.30% 2.80% *Net interest margin excluding the effect of PPP loans assumes a funding cost of 35 bps on average PPP balances in all applicable periods.