Primis Financial Corp.: Form 10-Q for the period ended Sep 30, 2025

Management’s discussion and analysis (“MD&A”) is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Primis. This discussion and analysis should be read in conjunction with the condensed consolidated financial statements, the footnotes thereto, and the other financial data included in this report and in our Annual Report on Form 10-K for the year ended December 31, 2024. Results of operations for the three and nine months ended September 30, 2025, are not necessarily indicative of results that may be achieved for any other period. The emphasis of this discussion will be on the three and nine months ended September 30, 2025, compared to the three and nine months ended September 30, 2024 for the consolidated income statements. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of September 30, 2025 compared to December 31, 2024. This discussion and analysis contain statements that may be considered “forward-looking statements” as defined in, and subject to the protections of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. See the following section for additional information regarding forward-looking statements.

NON-GAAP

In the following discussion and analysis, we provide certain financial information determined by methods other than in accordance with GAAP. These non-GAAP financial measures are intended to supplement, not replace, GAAP, which we use to prepare our financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, our non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. We use the non-GAAP financial measures discussed herein in our analysis of our performance. Management believes that these non-GAAP financial measures provide additional understanding of our ongoing operations, enhance the comparability of our results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in our underlying performance. Non-GAAP financial measures may be identified with the symbol (+) and may be labeled as adjusted. Refer to the “Non-GAAP Financial Measures” section within this Item 2 for more information about these non-GAAP financial measures, including a reconciliation of these measures to the most directly comparable GAAP financial measures.

FORWARD-LOOKING STATEMENTS

Statements and financial discussion and analysis contained in this Quarterly Report on Form 10-Q that are not statements of historical fact constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts and are instead based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are inherently subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. The words “believe,” “may,” “forecast,” “should,” “anticipate,” “contemplate,” “estimate,” “expect,” “project,” “predict,” “intend,” “continue,” “would,” “could,” “hope,” “might,” “assume,” “objective,” “seek,” “plan,” “strive” or similar words, or the negatives of these words, identify forward-looking statements.

Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements. In addition to the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, and the other reports we file with the Securities and Exchange Commission, factors that could contribute to those differences include, but are not limited to:

• the effects of future economic, business and market conditions and disruptions in the credit and financial markets, domestic and foreign;
• 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;
• uncertainties surrounding geopolitical events, trade policy, taxation policy, the impact of the federal government shutdown that began in October 2025 and monetary policy, which continue to impact the outlook for future economic growth (including an economic downturn or recession), including the U.S. imposition of tariffs on other countries and consideration of responsive actions by these nations or the expansion of import fees and tariffs among a larger group of nations, which is bringing greater ambiguity to the outlook for future economic growth;
• fraudulent and negligent acts by loan applicants, mortgage brokers and our employees;
• our ability to implement our various strategic and growth initiatives, including our Panacea Financial Division, digital banking platform, V1BE fulfillment service, Mortgage Warehouse lending, and Primis Mortgage Company, as well as our cost saving projects to reduce technology vendor expenses and administrative and branch expenses;
• adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions;
• changes in the local economies in our market areas which adversely affect our customers and their ability to transact profitable business with us, including the ability of our borrowers to repay their loans according to their terms or a change in the value of the related collateral;
• changes in interest rates, inflation, stagflation, loan demand, real estate values, or competition, as well as labor shortages, supply chain disruptions, the threat of recession and volatile equity capital markets;
• changes in the availability of funds resulting in increased costs or reduced liquidity, as well as the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs;
• a deterioration or downgrade in the credit quality and credit agency ratings of the investment securities in our investment securities portfolio;
• impairment concerns and risks related to our investment securities portfolio of collateralized mortgage obligations, agency mortgage-backed securities and obligations of states and political subdivisions;
• the incurrence and impairment of goodwill associated with current or future acquisitions and adverse short-term effects on our results of operations;
• increased credit risk in our assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of our total loan portfolio, including as a result of rising or elevated interest rates, inflation and recessionary concerns;
• the concentration of our loan portfolio in loans collateralized by real estate;
• our level of construction and land development and commercial real estate loans;
• risk related to a third-party’s ability to satisfy its contractual obligation to reimburse us for waived interest on loans with promotional features that pay off early;
• our ability to identify and address potential cybersecurity risks on our systems and/or third party vendors and service providers on which we rely, heightened by the developments in generative artificial intelligence and increased use of our virtual private network platform, including data security breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;
• changes in the levels of loan prepayments and the resulting effects on the value of our loan portfolio;
• the failure of assumptions and estimates underlying the establishment of and provisions made for credit losses;
• our ability to expand and grow our business and operations, including the acquisition of additional banks, and our ability to realize the cost savings and revenue enhancements we expect from such activities;
• government intervention in the U.S. financial system, including the effects of legislative, tax, accounting and regulatory actions and reforms, including the Dodd-Frank Act, the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted by the federal banking authorities, the Tax Cuts and Jobs Act of 2017, the CARES Act and the One Big Beautiful Bill Act, as well as the possibility that the U.S. could default on its debt obligations and the risk of inflation and interest rate increases resulting from monetary and fiscal stimulus response, which may have unanticipated adverse effects on our customers, and our financial condition and results of operations;
• the potential implementation of a regulatory reform agenda under the presidential administration that is significantly different than that of the prior administration, impacting rulemaking, supervision, examination and enforcement priorities of the federal banking agencies;
• increased competition for deposits and loans adversely affecting rates and terms;
• the continued service of key management personnel;
• the potential payment of interest on demand deposit accounts to effectively compete for customers;
• the potential environmental liability risk associated with properties that we assume upon foreclosure;
• increased asset levels and changes in the composition of assets and the resulting impact on our capital levels and regulatory capital ratios;
• risks of current or future mergers and acquisitions, including the related time and cost of implementing transactions and the potential failure to achieve expected gains, revenue growth or expense savings;
• increases in regulatory capital requirements for banking organizations generally, which may adversely affect our ability to expand our business or could cause us to shrink our business;
• acts of God or of war or other conflicts, civil unrest, acts of terrorism, pandemics or other catastrophic events that may affect general economic conditions;
• changes in accounting policies, rules and practices and applications or determinations made thereunder;
• any inability or failure to implement and maintain effective internal control over financial reporting and/or disclosure control or inability to expediently remediate our existing material weaknesses in our internal controls deemed ineffective;
• the risk that our deferred tax assets could be reduced if future taxable income is less than currently estimated, if corporate tax rates in the future are less than current rates, or if sales of our capital stock trigger limitations on the amount of net operating loss carryforwards that we may utilize for income tax purposes;
• our ability to attract and retain qualified employees, including as a result of heightened labor shortages;
• risks related to DEI and ESG strategies and initiatives, the scope and pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations or result in litigation in connection with anti-DEI and anti-ESG laws, rules or activism;
• negative publicity and the impact on our reputation;
• our ability to realize the value of derivative assets that are recorded at fair value due to changes in fair value driven by actual results being materially different than our assumptions;
• our ability to grow the mortgage warehouse business and achievement of certain margin results; and
• other factors and risks described under “Risk Factors” herein and in any of the reports that we file with the SEC under the Exchange Act.

Forward-looking statements are not guarantees of performance or results and should not be relied upon as representing management’s views as of any subsequent date. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe we have chosen these assumptions or bases in good faith and that they are reasonable. We caution you, however, that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. When considering forward-looking statements, you should refer to the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q and in our periodic and current reports filed with the SEC for specific factors that could cause our actual results to be different from those expressed or implied by our forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q (or an earlier date to the extent applicable). Except as required by applicable law, we undertake no obligation to publicly updated or revise these forward-looking statements in light of new information or future events.

OVERVIEW

Primis Financial Corp. (NASDAQ: FRST) is the bank holding company for Primis Bank, a Virginia state-chartered bank, which commenced operations on April 14, 2005. Primis Bank provides a range of financial services to individuals and small and medium-sized businesses. As of September 30, 2025, Primis Bank had 24 full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications. Twenty-two full-service retail branches are in Virginia and two full-service retail branches are in Maryland. The Company is headquartered in McLean, Virginia and has an administrative office in Glen Allen, Virginia and an operations center in Atlee, Virginia. PMC, a residential mortgage lender headquartered in Wilmington, North Carolina, is a consolidated subsidiary of Primis Bank. PFH owns the rights to the Panacea Financial brand and its intellectual property and partners with the Bank to offer a suite of financial products and services for doctors, their practices, and ultimately the broader healthcare industry through the Panacea Financial Division of the Bank. PFH was a consolidated subsidiary of Primis until March 31, 2025, when it was deconsolidated in accordance with applicable accounting guidance.

While Primis Bank offers a wide range of commercial banking services, it focuses on making loans secured primarily by commercial real estate and other types of secured and unsecured commercial loans to small and medium-sized businesses in a number of industries, as well as loans to individuals for a variety of purposes. Primis Bank invests in real estate-related securities, including collateralized mortgage obligations and agency mortgage-backed securities. Primis Bank’s principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings. Primis Bank offers a broad range of deposit products, including checking, savings, money market accounts and certificates of deposit. Primis Bank actively pursues business relationships by utilizing the business contacts of its senior management, other bank officers and its directors, thereby capitalizing on its knowledge of its local market areas.

OPERATIONAL HIGHLIGHTS

Executive Overview

In 2024, we focused on organizing the core bank and lines of business that we believe drive premium operating results. The third quarter of 2025 demonstrated progress in key areas that are expected to continue and build through the rest of the year and into 2026. Our strategy centers on growing earning assets back to previous levels after the sale of our Life Premium Finance division and achieving higher production and profitability in our retail mortgage business. We continued to execute successfully during the first nine months of 2025 on these strategies, which included the following:

Core Community Bank

• The core Bank’s loan portfolio was essentially flat at $2.1 billion at September 30, 2025, compared to $2.2 billion at December 31, 2024. The core Bank has low concentrations of investor commercial real estate loans.
• The core Bank’s cost of deposits was 1.73% in the third quarter of 2025, compared to 2.29% in the third quarter of 2024. Approximately 20% of the core Bank’s deposit base at September 30, 2025, are noninterest bearing deposits.
• The core Bank had zero brokered deposits and low utilization of FHLB borrowings at September 30, 2025.

Mortgage Warehouse

• Outstanding loan balances as of September 30, 2025 were $327 million, up 411% from $64 million as of December 31, 2024.
• Mortgage warehouse funded approximately 10% of its outstanding loans with associated customer noninterest bearing deposit balances, which totaled $34 million as of September 30, 2025.
• Committed facilities were up 187% to $1 billion as of September 30, 2025, compared to $349 million as of December 31, 2024.

Panacea Financial Division

• Outstanding loan balances grew 26% to $548 million during the nine months ended September 30, 2025 from $434 million as of December 31, 2024.
• Outstanding deposits were $133 million as of September 30, 2025, up 44% from December 31, 2024.

Primis Mortgage

• Funded loan volume was $308 million in the third quarter of 2025, up 34% from the third quarter of 2024.
• Earnings for PMC was $2 million and $4 million for the three and nine months ended September 30, 2025, respectively. The nine month period was impacted by approximately $1 million of personnel costs related to new production teams hired at the end of the first quarter of 2025. However, as these teams rebuild their pipeline, we expect income from their production to exceed the upfront costs incurred.

Changes in the relationship between PFH and Primis during the first quarter of 2025 resulted in a determination to deconsolidate PFH from Primis as of March 31, 2025. The deconsolidation resulted in recognition of a $25 million gain for Primis during the nine months ended September 30, 2025, as a result of recording the fair value of our retained interest in common stock of PFH. The deconsolidation resulted in us no longer including PFH’s financial results in our financial results after March 31, 2025. PFH continues to work with the Panacea Division of the Bank to originate loans, some of which the Bank will retain, and others will be sold to investors and other financial institutions.

On June 12, 2025, we signed a non-binding term sheet to sell a portion of our retained ownership in PFH common shares after the deconsolidation and the sale of the shares generated proceeds of $22 million. Following the sale of these shares, we continued to hold approximately 467 thousand shares in PFH as of September 30, 2025. For the nine months ended September 30, 2025, we recorded a gain of $7 million in the income statement in “Gain on Panacea Financial Holdings investment” within noninterest income related to the sale of PFH common shares and fair value adjustments on our remaining investment.

SUMMARY OF FINANCIAL RESULTS

Results of Operations Highlights

We experienced improved financial performance in both the three and nine months ended September 30, 2025 compared to the same periods in 2024. Net income available to common shareholders for the three months ended September 30, 2025 totaled $7 million, or $0.28 basic and diluted earnings per share, compared to net income of $1 million, or $0.05 basic and diluted earnings per share, for the three months ended September 30, 2024, resulting in an increase year-over-year of $6 million, or 600%. Net income available to common shareholders for the nine months ended September 30, 2025 totaled $32 million, or $1.29 basic and diluted earnings per share, compared to net income of $7 million, or $0.29 basic and diluted earnings per share, for the nine months ended September 30, 2024, resulting in an increase year-over-year of $25 million, or 357%. The key financial drivers of the improvement are noted in the following table with additional discussions following the table ($ in thousands).

• Net interest income increases were driven by declines in interest expenses in 2025 compared to 2024. The interest expense declines were driven by lower average deposit and borrowing balances combined with lower interest rates. Net interest income for the third quarter of 2025 included $1 million of interest reversals on loans that were moved to nonaccrual in the quarter. During the nine months ended September 30, 2025 we also had significant interest income reversals on the Consumer Program loans due to higher credit losses, while there were no reversals during the same period in 2024.
• Net interest margin increased to 3.18% for the three months ended September 30, 2025, compared to 2.97% for the three months ended September 30, 2024. Continued rebuilding of earning asset levels coupled with favorable deposit pricing was responsible for the improvement during the third quarter of 2025. Additionally, the effects of the Consumer Program loan portfolio were accretive in the third quarter due primarily to less credit losses resulting in less income reversals compared to prior periods.
• Net interest margin grew to 3.06% for the nine months ended September 30, 2025, compared to 2.85% for the nine months ended September 30, 2024. The significant driver of this increase was a meaningful decrease in our cost of funds that declined by 63 basis points. Higher credit losses on the Consumer Program loans in the earlier part of 2025 negatively impacted margin resulting in interest income reversals.
• The provision for loan losses decrease during the three months ended September 30, 2025 was driven by the changing mix of the Bank’s loan portfolio to loan categories with lower reserve requirements and the move of approximately $53 million of commercial loans to held for sale. Decreases were also driven during the nine month period by less reserves in the Consumer Program loan portfolio in 2025 due to higher reserves and charge-offs in 2024, higher expected credit quality of the remaining portfolio, and enhanced loss mitigation efforts in 2025, resulting in improved performance of the Consumer Program portfolio.
• Noninterest income increased during the three month period of 2025 compared to 2024 primarily due to higher income from mortgage banking activity during the nine months ended September 30, 2025 compared to the same period in 2024, primarily driven by the $32 million gain on our PFH investment, which was comprised of a gain on deconsolidation of PFH in the first quarter of 2025 and gain on sale of a portion of our ownership in PFH and

fair value adjustments to the remaining common share investment retained in the second and third quarter of 2025.

• Noninterest expense increases were primarily driven in both periods by higher personnel costs due to growth in PMC, Mortgage Warehouse, and the Panacea Division of the Bank.

Balance Sheet Highlights

• Total assets increased 7% as of September 30, 2025 when compared to December 31, 2024 primarily due to growth in PMC, Mortgage Warehouse, and the Panacea Division that drove growth in LHFI.
• Total LHFI as of September 30, 2025 were $3.2 billion, an increase of $315 million, or 11%, from December 31, 2024. The increase was led by growth in the Mortgage Warehouse loans of $264 million and Panacea Division loans of $114 million since December 31, 2024.
• Total deposits were $3.3 billion at September 30, 2025 compared to $3.2 million at December 31, 2024, with growth across all categories except for money market accounts and time deposits. Growth was partially driven by increased Mortgage Warehouse business and Panacea Division deposit account balances. Noninterest bearing demand deposits were $490 million at September 30, 2025, a growth rate of 12% compared to balances at December 31, 2024. We have no wholesale deposit funding at September 30, 2025.
• The ratio of gross loans (excluding loans held for sale) to deposits increased to 95.9% at September 30, 2025, from 91.1% at December 31, 2024.
• Allowance for credit losses to total loans was down 46 basis points to 1.40% as of September 30, 2025, compared to 1.86% as of December 31, 2024. The decline was driven by improved expected performance in the Consumer Program portfolio due to the significant decline in promotional loans that drove prior credit losses along with enhanced loss mitigation efforts during 2025, a changing mix of the Bank’s loan portfolio to loan categories with lower reserve requirements, and the $53 million of commercial loans moved to LHFS as of September 30, 2025 due to our intent to sell the loans.
• Asset quality declined from year end with nonperforming assets as a percentage of total assets (excluding SBA guarantees) at 2.07% as of September 30, 2025, compared to 0.29% as of December 31, 2024, a 178 basis point change. This decline was primarily driven by one commercial real estate loan and one commercial relationship comprised of two loans that were placed on nonaccrual since year end. We have individual reserves on these loans of approximately 20% and are actively working with the borrowers to facilitate a return to performing status.
• Book value and tangible book value(+) per common share increased by 128 and 129 basis points, respectively, as of September 30, 2025 compared to December 31, 2024, driven by the increase in equity as a result of net income.
• Our capital ratios continued to exceed requirements to be considered well capitalized as of September 30, 2025, with decreases in Common Equity Tier 1 and Tier 1 and total risk-based capital of 12, 14 and 51 basis points, respectively, compared to December 31, 2024.

RESULTS OF OPERATIONS

Net Income

Three-Month Comparison Net income available to common shareholders for the three months ended September 30, 2025 totaled $7 million, or $0.28 basic and diluted earnings per share, compared to $1 million, or $0.05 basic and diluted earnings per share, for the three months ended September 30, 2024. The results reflect a decrease in provision for credit losses of $7 million driven by less provision required on the Consumer Program portfolio, the changing mix of the Bank’s loan portfolio to loan categories with lower reserve requirements and the move of approximately $53 million of commercial loans to held for sale. The results also reflect an increase in noninterest income of $3 million primarily due to higher mortgage banking income in the third quarter driven by growth of PMC and higher loan sales and related gains and a $1 million increase in net interest income driven by lower interest expenses on deposits and borrowings. These are partially offset by an increase in noninterest expense of $1 million driven by personnel expenses due to growth in PMC and Mortgage Warehouse, a $2 million increase in our income tax provision and a decrease in noncontrolling interest income of $2 million. Additional details of the changes in net income will be discussed in the remaining sections of this Results of Operations section.

Nine-Month Comparison Net income available to common shareholders for the nine months ended September 30, 2025 totaled $32 million, or $1.29 basic and diluted earnings per share, compared to $7 million, or $0.29 basic and diluted earnings per share, for the nine months ended September 30, 2024. The results reflect an increase in noninterest income of $32 million, primarily due to a gain on the deconsolidation of PFH in the first quarter of 2025 and gains from the sale of a portion of our remaining investment in PFH common share investment in 2025. A $2 million increase in our net interest income was driven by lower interest expenses in the current year on both deposits and borrowings due to lower average balances and lower interest rates. These increases were partially offset by an increase in noninterest expense of $8 million driven primarily by higher personnel costs due to growth in PMC, Mortgage Warehouse, and the Panacea Division of the Bank and an increase in income tax provisions of $6 million from higher pre-tax earnings. Additional details of the changes in net income will be discussed in the remaining sections of this Results of Operations section.

Net Interest Income and Net Interest Margin

Our operating results depend primarily on our net interest income, which is the difference between interest and dividend income on interest-earning assets such as loans and investments, and interest expense on interest-bearing liabilities such as deposits and borrowings.

Three-Month Comparison

The following table details average balances of interest-earning assets and interest-bearing liabilities, the amount of interest earned/paid on such assets and liabilities, and the yield/rate for the periods indicated:

(Dollar amounts in thousands)

(1) Includes loan fees in both interest income and the calculation of the yield on loans.

(2) Calculations include non-accruing loans in average loan amounts outstanding.

Net interest income was $29 million for the three months ended September 30, 2025, compared to $28 million for the three months ended September 30, 2024. Net interest income increased as a result of interest-bearing liability costs declining more than the declines in interest-earning asset income. Net interest income for the third quarter of 2025 included $1 million of interest reversals on loans that were moved to nonaccrual in the quarter. Our net interest margin for the three months ended September 30, 2025 was 3.18%, compared to 2.97% for the three months ended September 30, 2024. Continued rebuilding of earning asset levels coupled with favorable deposit pricing was responsible for the improvement during the third quarter of 2025. Margin increased by 21 basis points primarily as a result of lower average interest-earning asset balances and slightly higher net interest income when comparing the three months ended September 30, 2025 to the three months ended September 30, 2024.

• Average earning assets decreased $127 million, or 3%, primarily due to a decline in average total loans of $149 million, or 4%, partially offset by growth in other earning assets of $18 million, or 21%, and an increase in average investment securities of $4 million, or 2%. Average earning asset balances were driven lower by a $181 million decline in average loan balances which was primarily a result of the sale of approximately $400 million of our life premium finance loan portfolio in the fourth quarter of 2024 and the decision to run-off the remaining retained life premium finance loans and a decline in average Consumer Program loans of $89 million, partially offset by an increase in average Mortgage Warehouse loans of $208 million and average Panacea loans of $99 million.
• Average interest-bearing liabilities declined by $183 million largely due to maturing time deposits driving average time deposit balances down by $101 million. We also experienced declines in average money market deposit accounts of $104 million, partially offset by growth in demand deposits of $87 million and savings balances of $56 million. The increase in demand deposits was driven by growth in the Panacea Division and Mortgage Warehouse business, each of which has been successful in growing deposits alongside their loan growth. Rates on average interest-bearing deposits declined 60 basis points in total, in large part due to a decline in the Fed Funds borrowing rate during the last twelve months of 75 basis points, which influences our deposit pricing. Interest paid on average borrowings decreased $2 million due to a decline of $121 million in average borrowings from the prior year.
• Yields on average interest earning assets decreased by 39 basis points comparing the three months ended September 30, 2025 to 2024. The decline was primarily driven by decreases in yields earned on loans which were down 8 basis points on LHFS and 41 basis points on LHFI. The decline in HFI was primarily driven by the sale of our life premium finance loans and charge-offs in the Consumer Program loan portfolio, both of which earned higher rates, and due to the drop in benchmark lending rates since the three months ended September 30, 2024. Yields on all of our interest-bearing liabilities declined by 64 basis points during the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily driven by the decline in benchmark borrowing rates by 75 basis points over that time.

Our net interest income and margin were positively impacted during the three months ended September 30, 2025 compared to the same period in 2024 by the Consumer Program loans. During the third quarter, we had lower charge-offs related to these loans, most of which had promotional interest features, which resulted in less reversal of interest income. The Company recognizes interest income on the promotional loans when promotional features expire and which generally includes a substantial amount of deferred interest accumulated to that date. If the loan subsequently defaults, that previously recognized interest is reversed against interest income. The Bank recognized substantial interest income on loans exiting their promotional periods beginning in the third quarter of 2024, with a roughly one quarter lag of subsequent reversals primarily due to high first payment defaults on full deferral promotional loans. The interest recognized on promotional loan expirations was insignificant in the third quarter of 2025, which is expected to lead to substantially lower interest income reversals going forward.

Nine-Month Comparison

The following table details average balances of interest-earning assets and interest-bearing liabilities, the amount of interest earned/paid on such assets and liabilities, and the yield/rate for the periods indicated:

(Dollar amounts in thousands)

(1) Includes loan fees in both interest income and the calculation of the yield on loans.

(2) Calculations include non-accruing loans in average loan amounts outstanding.

Net interest income was $80 million for the nine months ended September 30, 2025, compared to $78 million for the nine months ended September 30, 2024. Net interest income increased as a result of interest-bearing liability costs declining more than the declines in interest-earning asset income. Our net interest margin for the nine months ended September 30, 2024 was 3.06%, compared to 2.85% for the nine months ended September 30, 2024. Margin increased by 21 basis points primarily from higher net interest income on lower average interest-earning assets over those periods. Consumer Program loan income reversals had a significant impact on the nine months ended September 30, 2025 and no impact on the same period in 2024.

• Average earning assets decreased $149 million, or 4%, primarily due to a decline in average total loans of $171 million, or 5%, partially offset by growth in other earning assets of $17 million, or 22%, and a $5 million, or 2%, increase in average investment securities. Decline in average loan balances was driven primarily by the sale of approximately $400 million of our life premium finance loan portfolio in the fourth quarter of 2024 and the decision to run-off the remaining retained life premium finance loans and the decline in average balances of Consumer Program loans of $107 million. These average loan balance declines were partially offset by continued growth of average Panacea Division loans of $131 million and Mortgage Warehouse loan of $114 million during the nine months ended September 30, 2025 compared to the same period in 2024.
• Average interest-bearing liabilities declined by $154 million largely due to maturing time deposits driving average time deposit balances down by $97 million. We also experienced declines in average money market accounts of $64 million, partially offset by growth in demand deposits of $54 million and savings balances of $9 million. The increase in demand deposits was driven by growth in the Panacea Division and Mortgage Warehouse business, each of which has been successful in growing deposits alongside their loan growth. Rates on average interest-bearing deposits declined 48 basis points, in large part due to a decline in the Fed Funds borrowing rate during the last twelve months of 75 basis points, which influences our deposit pricing. Interest paid on average borrowings decreased $2 million due to a decline of $55 million in average borrowings from the prior year.
• Yields on average interest earning assets decreased 23 basis points driven by lower yields on LHFS and LHFI during the nine months ended September 30, 2025 compared to the same period in 2024. The sale of our life premium finance loans, which earned higher yields than our average loan portfolio yield, and the significant reversals of Consumer Program loan income due to charge-offs of promotional loans during the nine months ended September 30, 2025 drove the overall earning asset yield decline. The drop in benchmark lending rates since the nine months ended September 30, 2024 also impacted the decline as newer production was generally at lower rates in 2025 compared to 2024. Yields on all of our interest bearing liabilities declined by 50 basis points during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily driven by the decline in benchmark borrowing rates by 75 basis points over that time.

Provision for (Recovery of) Credit Losses

The provision for (recovery of) credit losses is a current charge to earnings made in order to adjust the allowance for credit losses for current expected losses in the loan portfolio based on an evaluation of the loan portfolio characteristics, current economic conditions, changes in the nature and volume of lending, historical loan experience and other known internal and external factors affecting loan collectability, and assessment of reasonable and supportable forecasts of future economic conditions that would impact collectability of the loans. Our allowance for credit losses is calculated by segmenting the loan portfolio by loan type and applying risk factors to each segment. The risk factors are determined by considering historical loss data, peer data, as well as applying management’s judgment.

For the three months ended September 30, 2025 and 2024, we had a recovery of credit losses of $49 thousand and provision for credit losses of $7 million, respectively. The recovery of credit losses during the three months ended September 30, 2025 was driven by the changing mix of the Bank’s loan portfolio to loan categories with lower reserve requirements and the move of approximately $53 million of commercial loans to held for sale and reversal of the allowance on these loans. Based on performance during the quarter, there was provision expense of $274 thousand associated with the Consumer Program in the third quarter of 2025 compared to $4 million during the three months ended September 30, 2024.

For the nine months ended September 30, 2025 and 2024, we had a provision for credit losses of $10 million and $17 million, respectively. Decline in provision for credit losses for the nine months ended September 30, 2025 compared to September 30, 2024 was driven by higher provisions in the 2024 periods primarily related to the Consumer Program loans. Credit losses were concentrated in the promotional portion of that portfolio that were largely originated between the third quarter of 2022 and first quarter of 2023. Due to the majority of these promotional loans ending their promotions in 2024 or the first quarter of 2025, coupled with our loss mitigation efforts in 2025, our provisioning for this portfolio was only $2 million during the nine months ended September 30, 2025, compared to $13 million during the nine months ended September 30, 2024.

The decline in provision during the nine months ended September 30, 2025 compared to the same period of 2024 was also driven by the lower provisioning for Consumer Program loans, the change in portfolio mix, and transfer to held for sale of commercial loans in the three months ended September 30, 2025. Partially offsetting the decline in provision during the nine months ended September 30, 2025 was $7 million of provisions on an individually evaluated commercial real estate loan that was placed on nonaccrual during the period, due to certain weaknesses in the credit. See additional discussion of this loan in the Asset Quality section of this MD&A.

The Financial Condition section of this MD&A provides information on our loan portfolio, past due loans, nonperforming assets and the allowance for credit losses.

Noninterest Income

Three-Month Comparison

(dollars in thousands)

Noninterest income increased 29% to $12 million for the three months ended September 30, 2025, compared to $9 million for the three months ended September 30, 2024. The increase was primarily driven by $2 million of higher income from mortgage banking activity during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The 31% increase in mortgage banking income was due to higher gain on sale income driven by an increase of $62 million, or 27%, in loan sales during the three months ended September 30, 2025 compared to 2024 as well as higher fair value gains in marking the mortgage HFS loan portfolio to fair value. The increase in noninterest income was also a result of $330 thousand of gains from returns on other investments and a $294 thousand gain due to fair value adjustments to the remaining common share investment retained in PFH.

Consumer Program related income was $264 thousand for the three months ended September 30, 2025, compared to $79 thousand for the three months ended September 30, 2024. While we recognized less income in the third quarter of 2025 from borrowers paying off their promotional loans before the end of the promotional period triggering payment of interest from the third-party, there were less negative fair value adjustments on the related derivative in the third quarter of 2025 compared to the same quarter in 2024. Noninterest income from the Consumer Program is expected to be increasingly immaterial going forward as promotional loans have declined to $7 million at the end of the third quarter of 2025 and the derivative value is immaterial at September 30, 2025.

Nine-Month Comparison

(dollars in thousands)

Noninterest income increased 105% to $62 million for the nine months ended September 30, 2025, compared to $30 million for the nine months ended September 30, 2024. The increase in noninterest income was primarily driven by the $32 million gain on our PFH investment, which comprised the gain on deconsolidation of PFH in the first quarter of 2025 and gain on the sale of a portion of our ownership in PFH and fair value adjustments to the remaining common share investment retained in the second and third quarter of 2025. The increase was also driven partially by $4 million of higher income from mortgage banking activity during 2025 compared to 2024. The increase in mortgage banking income was due to higher gain on sale income driven by $194 million, or 36%, higher loan sales during the nine months ended September 30, 2025 compared to 2024. The increases were partially offset by declines in Consumer Program derivative income and income from bank-owned life insurance held as a result of several one-time death benefit gains in 2024 that did not re-occur in 2025

The decline in Consumer Program related income included higher derivative fair value losses during the nine months ended September 30, 2025 compared to 2024 because the promotional loan population declined at a faster pace during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The fair value losses on the derivative were $443 thousand higher during the nine months ended September 30, 2025 compared to the same period in 2024. The remaining decline in the Consumer Program derivative income was a combination of less income earned from the third-party on origination of loans, which ended in January of 2025, and less reimbursement due to us when borrowers paid off their promotional loans before the end of the promotional period. These two items resulted in a combined decline of $2 million in income when comparing the nine months ended September 30, 2025 to the same period in 2024. Noninterest income from the Consumer Program is expected to be increasingly immaterial going forward as promotional loans have declined to only $7 million at the end of the third quarter of 2025 and the derivative value is immaterial at September 30, 2025.

Noninterest Expense

Three-Month Comparison

(dollars in thousands)

Noninterest expenses increased 4% to $32 million during the three months ended September 30, 2025, compared to $31 million during the three months ended September 30, 2024. The increase was primarily driven by higher salaries and benefits expenses, FDIC insurance expense, and occupancy expenses, partially offset by lower miscellaneous lending expenses, professional fees, and amortization of core deposit intangibles. Our core deposit intangible fully amortized in the second quarter of 2025.

Salaries and benefits expenses increased $2 million in the three months ended September 30, 2025, compared to the same period in 2024. PMC accounted for the growth in salaries and benefits while the remainder of the bank managed to reflect a small decline in total compensation costs. For the third quarter of 2025, PMC had $7 million in total salaries and benefits, an increase of $2 million or 35% compared to the same period in 2024. All other compensation costs were $11 million in the third quarter of 2025, down slightly from the $12 million reported in the third quarter of 2024.

FDIC insurance expense increased $454 thousand during the three months ended September 30, 2025, compared to the same period in 2024 primarily due to an increase in our assessment base as a result of the financial restatements in 2024 along with changes in asset quality in 2025. Occupancy expenses increased $327 thousand in the three months ended September 30, 2025, compared to the three months ended September 30, 2024, due to one-time expenses incurred in the third quarter of 2025 that did not occur in the third quarter of 2024.

Miscellaneous lending expenses decreased $867 thousand in the third quarter of 2025 compared to the third quarter of 2024 due to lower servicing fees paid to the third-party servicer of our Consumer Program loan portfolio which has reduced in size by 48% since January 1, 2024, less repurchase reserve provisions on PMC sold loans, and less provisions on unfunded Bank issued loan commitments during the current year quarter compared to the prior year quarter.

Professional fees decreased $405 thousand in the third quarter of 2025 compared to the third quarter of 2024. The primary driver of the decline was due to expenses during the three months ended September 30, 2024 related to the restatement of financial statements in 2024 that did not reoccur in the third quarter of 2025. Professional fees in the third quarter of 2025 included $1 million in legal fees associated with mortgage recruiting that management expects will subside in the coming quarters.

Nine-Month Comparison

(dollars in thousands)

Noninterest expenses increased 10% to $96 million during the nine months ended September 30, 2025, compared to $88 million during the nine months ended September 30, 2024. The increase was primarily driven by higher salaries and benefits expenses, data processing expense, and FDIC insurance expenses in 2025 compared to 2024. These increases were partially offset by less core deposit intangible amortization that fully amortized by June 30, 2025.

The higher salaries and benefits expense of $5 million for the nine months ended September 30, 2025 compared to the same period in 2024 was driven primarily due to additions of several lending teams at PMC, one of which is the top mortgage originator in the Nashville, TN market and the other is the fourth ranked VA lender in the country. These teams drove the salaries and benefits expense in 2025 due to salary draws while they rebuilt their portfolios. These teams are expected to generate production in 2025 that will exceed these initial salary draws, which should help to generate income that offsets the salary expenses in later periods. Increase in salaries and benefits was also from the growth in salaries and benefit expenses in the Panacea and Mortgage Warehouse lines of business, each increasing $1 million when comparing the year-to-date periods in 2025 to 2024.

FDIC insurance expense increased $1 million during the nine months ended September 30, 2025 compared to the same period in 2024 primarily due to an increase in our assessment base as a result of the financial restatements in 2024 and the changes in asset quality in 2025.

Data processing expense increased $1 million comparing the nine months ended September 30, 2025 to 2024, which was due to higher processing volume and was also a result of our continued use of two core operating systems. We have negotiated a new contract with our core data provider with contract terms that began to provide significant reductions in data processing expense in August of 2025.

FINANCIAL CONDITION

The following illustrates key balance sheet categories as of September 30, 2025 and December 31, 2024 ($ in thousands):

LOAN PORTFOLIO

Loans Held for Sale

LHFS declined $45 million from December 31, 2024 primarily due to the sale of $51 million of LPF loans, paydowns of Consumer Program LHFS, and the transfer back to net loans of $102 million of Consumer Program loans in 2025 after the decision to retain these for the foreseeable future or until maturity. These declines were partially offset by increased originations of PMC loans held for sale at fair value and the transfer to held for sale, at the lower of cost or market, of commercial loans in the Panacea Division that we intend to sell in the fourth quarter to another financial institution.

Loans Held for Investment

Gross LHFI were $3.2 billion and $2.9 billion as of September 30, 2025 and December 31, 2024, respectively. The increase in loans was driven by the transfer back from LHFS into the consumer loans category in LHFI of Consumer Program loans along with growth of mortgage warehouse loans and Panacea Division commercial loans, both of which were the primary driver of the $307 million increase in commercial loans seen below. The growth was partially offset by loan paydowns during the nine months ended September 30, 2025 of loans secured by real estate. As of September 30, 2025 and December 31, 2024, a majority of our loans were to customers located in Virginia and Maryland. We are not dependent on any single customer or group of customers whose insolvency would have a material adverse effect on our operations.

The composition of our loans HFI portfolio consisted of the following as of September 30, 2025 and December 31, 2024 ($ in thousands):

The following table sets forth the contractual maturity ranges of our LHFI portfolio and the amount of those loans with fixed and floating interest rates in each maturity range as of September 30, 2025 ($ in thousands):

Our highest concentration of credit by loan type is in commercial real estate. As of September 30, 2025, 38% of our loan portfolio was comprised of loans secured by commercial real estate, including multi-family residential loans and loans secured by farmland. Commercial real estate loans are generally viewed as having a higher risk of default than residential real estate loans and depend on cash flows from the owner’s business or the property’s tenants to service the debt. The borrower’s cash flows may be affected significantly by general economic conditions, a downturn in the local economy, or in occupancy rates in the market where the property is located, any of which could increase the likelihood of default.

We seek to mitigate risks attributable to our most highly concentrated portfolios and our portfolios that pose unique risks to our balance sheet through our credit underwriting and monitoring processes, including oversight by a centralized credit administration function, approval process, credit policy, and risk management committee, as well as through our seasoned bankers that focus on lending to borrowers with proven track records in markets with which we are familiar.

The following table presents the composition of the industry classification for commercial real estate non-owner occupied loans as a percentage of total loans for the periods ended September 30, 2025 and December 31, 2024 (dollars in thousands):

The following table presents the composition of office portfolio loans for commercial real estate non-owner occupied loans, their loan count and their weighted average loan-to-value percentage as of September 30, 2025 and December 31, 2024 (dollars in thousands):

(1) The office portfolio is a subset of our Commercial real estate non-owner occupied loans.

The shift to work-from-home and hybrid work environments has caused a decreased utilization of office space. As such, we have additional monitoring for our exposure to office space, within our non-owner occupied commercial real estate portfolio, including periodic credit risk assessment of expiring office leases for most of the office portfolio. We do not currently finance large, high-rise, or major metropolitan central business district office buildings, and the office portfolio is generally in suburban markets with strong occupancy levels.

Consumer Program Loans

The following table sets forth the contractual maturity ranges of our Consumer Program loan portfolio as of September 30, 2025, which is only originated at fixed rates ($ in thousands):

(1) Does not include $9 million of remaining fair market value adjustments related to the original $20 million write-down of the portfolio when transferred to LHFS as of December 31, 2024.

The following table describes the period over which our Consumer Program loans that are currently in a no interest promotional period will exit that promotional period and begin to amortize. All these promotional loans generally amortize over four years from the date they exit the promotional period if not prepaid before the end of the promotional period ($ in thousands):

During the three and nine months ended September 30, 2025, $8 million and $34 million, respectively, of Consumer Program loans either paid off during the no interest promotional period or converted to amortizing at the end of the promotional period.

ASSET QUALITY

Nonperforming Assets

The following table presents a comparison of nonperforming assets as of September 30, 2025 and December 31, 2024 ($ in thousands):

Nonperforming assets increased $70 million, or 418%, as of September 30, 2025 compared to December 31, 2024, which was driven by an increase in nonaccrual loans. The increase in nonaccrual was primarily due to the addition of one commercial real estate loans with a $40 million amortized cost balance that was past due over 30 days as of September 30, 2025 and one commercial relationship comprised of two loans totaling $24 million in amortized cost that was past due over 90 days as of September 30, 2025. Despite the commercial real estate loan only being 30-59 days past due, the credit has exhibited certain weaknesses that warranted placing it on nonaccrual, including a decline in occupancy of the underlying office building leading to reduced lease income. We have a lien on the underlying collateral which is

Class A office space in a desirable location in northern Virginia. The borrower is actively seeking new tenants for vacant office space in the building. We assess expected credit losses on this loan individually and have a $7 million individual reserve against the loan, or 18% of its amortized cost balance, as of September 30, 2025. The commercial loans past due over 90 days were utilized by the customer to support a business acquisition into an existing business. The merged companies have taken longer than anticipated to realize the anticipated reduction in operating costs and the stabilization of revenues. The company became profitable at the end of 2024 and has shown steady improvement during 2025 with anticipation of being able to provide full debt service coverage by the end of 2025 or early in 2026. We assess expected credit losses on this loan individually and have a $5 million individual reserve against the loan, or 20% of its amortized cost balance, as of September 30, 2025

We will generally place a loan on nonaccrual status when it becomes 90 days past due, with the exception of most consumer loans, which are charged off at 120 days past due and Consumer Program loans, which are charged off once they reach 90 days past due. Loans will also be placed on nonaccrual status in cases where we are uncertain whether the borrower can satisfy the contractual terms of the loan agreement. Cash payments received while a loan is categorized as nonaccrual will be recorded as a reduction of principal as long as doubt exists as to future collections.

We maintain appraisals on loans secured by real estate, particularly those categorized as nonperforming loans and potential problem loans. In instances where appraisals reflect reduced collateral values, we make an evaluation of the borrower’s overall financial condition to determine the need, if any, for impairment or write-down to their fair values. If foreclosure occurs, we record OREO at the lower of our recorded investment in the loan or fair value less our estimated costs to sell.

Our loan portfolio losses and delinquencies have been primarily limited by our underwriting standards and portfolio management practices. Whether losses and delinquencies in our portfolio will increase significantly depends upon the value of the real estate securing the loans and economic factors, such as the overall economy, rising or elevated interest rates, historically high or persistent inflation, and recessionary concerns.

Allowance for Credit Losses

We are focused on the asset quality of our loan portfolio, both before and after a loan is made. We have established underwriting standards that we believe are effective in maintaining high credit quality in our loan portfolio. We have experienced loan officers who take personal responsibility for the loans they originate, a skilled underwriting team and highly qualified credit officers that review each loan application carefully.

Our allowance for credit losses is established through charges to earnings in the form of a provision for credit losses. Management evaluates the allowance at least quarterly. In addition, on a quarterly basis, our Board of Directors reviews our loan portfolio, evaluates credit quality, reviews the loan loss provision and the allowance for credit losses and requests management to make changes as may be required. In evaluating the allowance, management and the Board of Directors consider the growth, composition and industry diversification of the loan portfolio, historical loan loss experience, current delinquency levels and all other known factors affecting loan collectability.

The allowance for credit losses is based on the CECL methodology and represents management’s estimate of an amount appropriate to provide for expected credit losses in the loan portfolio. This estimate is based on historical credit loss information adjusted for current conditions and reasonable and supportable forecasts applied to various loan types that compose our portfolio, including the effects of known factors such as the economic environment within our market area will have on net losses. The allowance is also subject to regulatory examinations and determination by the regulatory agencies as to the appropriate level of the allowance.

The following table sets forth the allowance for credit losses allocated by loan category and the percentage of loans in each category to total loans at the dates indicated ($ in thousands):

The following table presents an analysis of the allowance for credit losses for the periods indicated ($ in thousands):

We believe that the allowance for credit losses as of September 30, 2025 is sufficient to absorb future expected credit losses in our loan portfolio based on our assessment of all known factors affecting the collectability of our loan portfolio. Our assessment involves uncertainty and judgment; therefore, the adequacy of the allowance for credit losses cannot be determined with precision and may be subject to change in future periods. In addition, bank regulatory authorities, as part of their periodic examination, may require additional charges to the provision for credit losses in future periods if the results of their reviews warrant additions to the allowance for credit losses.

Our allowance for credit losses was $45 million as of September 30, 2025, compared to $54 million as of December 31, 2024. The $8 million decrease was driven by $19 million in net charge-offs during the nine months ended September 30, 2025, primarily a result of Consumer Program loans, and less provision for credit losses. Our provision for credit losses decreased $8 million and $7 million during the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively, primarily related to improved performance in the Consumer Program portfolio driven by the significant decline in promotional loans that drove prior credit losses, a changing mix of the Bank’s loan portfolio to loan categories with lower reserve requirements, and the $53 million of commercial loans moved to LHFS as of September 30, 2025 due to our intent to sell the loans. Partially offsetting these declines was specific provisions for expected credit losses of $7 million on the individually evaluated commercial real estate loan that was 30-59 days past due and proactively placed on nonaccrual during the nine months ended September 30, 2025.

Net charge-offs were primarily related to the Consumer Program portfolio during the three and nine months ended September 30, 2025 and 2024. During the three and nine months ended September 30, 2025, we charged-off $1 million and $17 million, respectively, net of recoveries, in the Consumer Program portfolio. Comparatively, during the three and nine months ended September 30, 2024, we charged-off $8 million and $18 million, respectively, net of recoveries. A majority of these charge-offs related to loans originated from the third quarter of 2022 through the first quarter of 2023 where we experienced significant credit weaknesses. When excluding the Consumer Program net charge-offs, we had net charge-offs of $300 thousand and $2 million during the three and nine months ended September 30, 2025, respectively, and net charge-offs of $4 million and $6 million during the three and nine months ended September 30, 2024, respectively.

Provision for the Consumer Program portfolio has subsided significantly since 2024 and was $274 thousand in the third quarter of 2025 and $2 million during the nine months ended September 30, 2025, because the earlier vintage promotional loans that have resulted in a majority of our previous credit losses have mostly converted to amortizing in 2024 or early 2025. We believe that any remaining loans in these older vintages, along with newer vintage promotional loans that end their promotional period over the next two quarters have been considered in our reserving methodology based on our loss experience from 2024 to the first quarter of 2025 with the earlier vintage promotional loans. Specifically, our methodology was updated to consider promotional loan maturity and amount of first payment defaults with eventual charge-off, which was a key driver to charge-offs of these loans in 2024 and the first quarter of 2025. We have also implemented loss mitigation efforts that include working with promotional loan borrowers both prior to the end of the promotional period and once a borrower defaults in order to maximize collectability. A combination of these factors, along with the remaining balance of promotional loans of only $7 million, resulted in our lower provisioning for the three and nine months ended September 30, 2025 and lower ending allowance balance at September 30, 2025.

As of September 30, 2025, the principal balance outstanding of Consumer Program loans was $110 million, excluding a $9 million discount as a result of our prior decision to market a majority of the portfolio for sale, which has since been moved back to LHFI and will be run-off over time. These loans are accounted for like our other consumer loans and are not placed on nonaccrual because they are charged off when they become 90 days past due. The allowance on this portfolio plus the discount resulted in a reduction of the outstanding principal balance of $11 million, or 10%. As of September 30, 2025, 93% of the outstanding principal balance was current, resulting in 135% coverage by the aggregate allowance and discount of the non-current principal balances.

INVESTMENT SECURITIES

Our investment securities portfolio provides us with required liquidity and collateral to pledge to secure public deposits, certain other deposits, advances from the FHLB of Atlanta, and repurchase agreements.

AFS and HTM investment securities totaled $243 million as of September 30, 2025, a decrease of 1% from $245 million as of December 31, 2024, primarily due to improvement in unrealized losses on AFS securities and paydowns, maturities, and calls of the AFS and HTM investments over the past nine months, partially offset by purchases of AFS securities during that time. We recognized no credit impairment charges related to credit losses on our HTM investment securities during the three and nine months ended September 30, 2025.

The following table sets forth a summary of the investment securities portfolio as of the dates indicated. AFS investment securities are reported at fair value, and HTM investment securities are reported at amortized cost ($ in thousands).

Debt investment securities that we have the positive intent and ability to hold to maturity are classified as HTM and are carried at amortized cost. Investment securities classified as AFS are those debt securities that may be sold in response to changes in interest rates, liquidity needs or other similar factors. Investment securities AFS are carried at fair value, with unrealized gains or losses net of deferred taxes, included in accumulated other comprehensive income (loss) in stockholders’ equity. Our portfolio of AFS securities currently contains a material amount of unrealized mark-to-market adjustments due to increases in market interest rates since the original purchase of many of these securities. We intend to hold these securities until maturity or recovery of the value and do not anticipate realizing any losses on the investments.

For additional information regarding investment securities refer to “Note 2 - Investment Securities” in this Form 10-Q.

DEPOSITS AND OTHER BORROWINGS

Deposits

The market for deposits is competitive. We offer a line of traditional deposit products that currently include noninterest-bearing and interest-bearing checking (or NOW accounts), commercial checking, money market accounts, savings accounts and certificates of deposit. We compete for deposits through our banking branches with competitive pricing, as well as nationally through advertising and online banking. We use deposits as a principal source of funding for our lending, purchasing of investment securities and for other business purposes. We seek to fund increased loan volumes by growing core deposits, but, subject to internal policy limits on the amount of funding we may maintain, we may use funding sources to fund shortfalls, if any, or to provide additional liquidity. We use purchased brokered deposits as part of our overall liquidity management strategy on an as needed basis, and we purchase such brokered deposits through nationally recognized networks.

The variety of deposit accounts we offer allows us to be competitive in obtaining funds and in responding to the threat of disintermediation (the flow of funds away from depository institutions such as banking institutions into direct investment vehicles such as government and corporate securities). Our ability to attract and maintain deposits, and the effect of such retention on our cost of funds, has been, and will continue to be, significantly affected by the general economy and market rates of interest.

Total deposits increased by $165 million to $3.3 billion as of September 30, 2025 from $3.2 billion at December 31, 2024. The mix of deposits changed during the nine months ended September 30, 2025, including an increase in lower-cost demand, NOW deposit balances and savings balances of $247 million, offset by a decline in money market and time deposit account balances of $82 million. The driver of the increase since year end has been due to growth of noninterest bearing and lower cost interest bearing deposit accounts generated by the Panacea and Mortgage Warehouse lines of business that have focused on this deposit growth to cost-effectively fund their loan growth. We have no wholesale deposit funding at September 30, 2025 or December 31, 2024.

Our deposits are diversified in type and by underlying customers and lack significant concentrations to any type of customer (i.e. commercial, consumer, government) or industry. Deposits are net of excess amounts we sweep off balance sheet to manage liquidity. Deposits swept off our balance sheet were zero as of September 30, 2025, compared to $137 million as of December 31, 2024. The decline since year end was driven by the growth in our loan portfolio, which required us to retain more deposits on our balance sheet.

Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit accounts that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Total uninsured deposits as calculated per regulatory guidance were $831 million, or 25% of total deposits at the Bank, as of September 30, 2025.

The following table sets forth the average balance and average rate paid on each of the deposit categories for the nine months ended September 30, 2025 and 2024 ($ in thousands):

Other Borrowings

We use other borrowed funds to support our liquidity needs and to temporarily satisfy our funding needs from increased loan demand and for other shorter-term purposes. We are a member of the FHLB and are authorized to obtain advances from the FHLB from time to time, as needed. The FHLB has a credit program for members with different maturities and interest rates, which may be fixed or variable. We are required to collateralize our borrowings from the FHLB with purchases of FHLB stock and other collateral acceptable to the FHLB. As of September 30, 2025 and December 31, 2024, we had $85 million and no FHLB borrowings, respectively. The FHLB borrowings at September 30, 2025 are short-term borrowings that were obtained in September 2025 primarily to fund increased loan growth experienced at the end of the quarter. As of September 30, 2025, we had $262 million of unused and available FHLB lines of credit as well as $595 million of available credit with the FRB, secured by excess collateral pledged to the FHLB and FRB in the form of loans and investment securities.

Other borrowings can consist of federal funds purchased, secured borrowings due to failed loan sales, and repo transactions that mature within one year, which are secured transactions with customers. The balance in repo accounts at both September 30, 2025 and December 31, 2024 was $4 million.

We had secured borrowings of $15 million and $17 million as of September 30, 2025 and December 31, 2024, respectively, related to loan transfers to other financial institutions during 2023 and 2024 that did not meet the criteria to be treated as a sale under applicable accounting guidance. These borrowings reflect the cash received for transferring the loans to the other financial institution and any unamortized sale premium and are secured by approximately the same amount of loans held for investment that are recorded in our balance sheet. We retained the servicing of the loans that were transferred and accordingly receive principal and interest from the borrower as contractually required and transfer the interest to the other financial institution net of our contractually agreed upon servicing fee. The loans transferred have an average maturity of approximately ten years, which will be the time over which the principal balance of the loans in our balance sheet and secured borrowings will pay down, absent borrower prepayments. For additional information on secured borrowings refer to “Note 7 –Debt and Other Borrowings” in this Form 10-Q.

JUNIOR SUBORDINATED DEBT AND SENIOR SUBORDINATED NOTES

For information about junior subordinated debt and senior subordinated notes and their anticipated principal repayments refer to “Note 7 –Debt and Other Borrowings.”

LIQUIDITY AND FUNDS MANAGEMENT

The objective of our liquidity management is to ensure the ability to meet our financial obligations. These obligations include the payment of deposits on demand or at maturity, the repayment of borrowings at maturity and the ability to fund commitments and other new business opportunities. We obtain funding from a variety of sources, including customer deposit accounts, customer certificates of deposit and payments on our loans and investments. If our level of core deposits is not sufficient to fully fund our lending activities, we have access to funding from additional sources, including but not limited to, borrowing from the FHLB and institutional certificates of deposits. In addition, we maintain federal funds lines of credit with two correspondent banks, totaling $75 million, and utilize securities sold under agreements to repurchase and reverse repurchase agreement borrowings from approved securities dealers as needed. For additional information about borrowings and anticipated principal repayments refer to “Note 7 –Debt and Other Borrowings” and “Note 9 – Commitments and Contingencies”.

We prepare a cash flow forecast on a 30, 60 and 90 day basis along with a one and two year basis. These projections incorporate expected cash flows on loans, investment securities, and deposits based on data used to prepare our interest rate risk analyses. As of September 30, 2025, we were not aware of any known trends, events or uncertainties that have or are reasonably likely to have a material impact on our liquidity. As of September 30, 2025, we had no material commitments or long-term debt for capital expenditures.

Impact of Inflation and Changing Prices

The financial statements and related financial data presented in Item 1 “Financial Statements” of this Quarterly Report have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, substantially all of the assets and liabilities of a financial institution are monetary in nature. As a result, changes in interest rates have a more significant impact on our performance than the effects of changes in the general rate of inflation and changes in prices do. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Many factors impact interest rates, including the decisions of the FRB, inflation, recession, changes in unemployment, the money supply, and international disorder and instability in domestic and foreign financial markets. Like most financial institutions, changes in interest rates can impact our net interest income, which is the difference between interest earned from interest-earning assets, such as loans and investment securities, and interest paid on interest-bearing liabilities, such as deposits and borrowings, as well as the valuation of our assets and liabilities.

CAPITAL RESOURCES

Capital management consists of providing equity to support both current and future operations. Primis Financial Corp. and its subsidiary, Primis Bank, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (“PCA”), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. As of September 30, 2025 and December 31, 2024, the most recent regulatory notifications categorized the Bank as well capitalized under regulatory framework for PCA. Federal banking agencies do not provide a similar well capitalized threshold for bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios of Total and Tier I capital (as defined in the regulations) to average assets (as defined in the regulations). Management believes, as of September 30, 2025, that we meet all capital adequacy requirements to which we are subject.

The following table provides a comparison of the leverage and risk-weighted capital ratios of Primis Financial Corp. and Primis Bank at the periods indicated to the minimum and well-capitalized required regulatory standards:

(1) Prompt corrective action provisions are not applicable at the bank holding company level.

Bank regulatory agencies have approved regulatory capital guidelines (“Basel III”) aimed at strengthening existing capital requirements for banking organizations. The Basel III Capital Rules require Primis Financial Corp. and Primis Bank to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer”, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer, (iii) a minimum ratio of Total capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer and (iv) a minimum leverage ratio of 4.0%. Failure to meet minimum capital requirements may result in certain actions by regulators which could have a direct material effect on the consolidated financial statements.

Primis Financial Corp. and Primis Bank remain well-capitalized under Basel III capital requirements. Primis Bank had a capital conservation buffer of 3.39% and 4.04% as of September 30, 2025 and December 31, 2024, respectively, which exceeded the 2.50% minimum requirement below which the regulators may impose limits on distributions.

Primis Bank’s capital position is consistent with being well-capitalized under the regulatory framework for PCA.

NON-GAAP FINANCIAL MEASURES

The following tables provide additional details and reconciliation of our non-GAAP metrics used in this Quarterly Report and a reconciliation to the most comparable GAAP metric ($ in thousands except per share data).

CRITICAL ACCOUNTING POLICIES

The critical accounting policies are discussed in the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2024. Significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in “Note 1 - Organization and Significant Accounting Policies” in the Form 10-K for the year ended December 31, 2024. Disclosures regarding changes in our significant accounting policies since year end and the effects of new accounting pronouncements are included in “Note 1 - Accounting Policies” in this Form 10-Q. There have been no changes to the significant accounting policies during the nine months ended September 30, 2025. Notwithstanding, we are providing an update to the Goodwill discussion from our Form 10-K to describe the results of our annual impairment testing performed during the quarter.

Goodwill

As discussed in our Form 10-K for the year ended December 31, 2024, we are required to test goodwill for impairment at least annually and that test is performed as of September 30 of each year. Our goodwill is allocated to our two reporting units, Primis Bank and Primis Mortgage, and as of September 30, 2025, $91 million of goodwill is allocated to the Primis Bank reporting unit and $3 million is allocated to the Primis Mortgage reporting unit. As of September 30, 2025, we elected to forgo a qualitative assessment allowed under U.S. GAAP and performed a quantitative assessment to test goodwill for impairment. As part of our impairment assessment, the fair value of each reporting unit was estimated using a combination of a market and income approach. The income approach is a valuation technique under which we estimate future cash flows using the financial forecast from the perspective of an unrelated market participant and a terminal value was then applied to the projected cash flow stream. Future estimated cash flows were discounted to their present value to calculate the estimated fair value. The market valuation approach evaluated transactions of comparable banks and considered market pricing ratios of public bank peers. As of September 30, 2025, the estimated fair value exceeded the carrying value of the Primis Mortgage reporting unit and no goodwill impairment was required.

As of September 30, 2025, the estimated fair value of the Primis Bank reporting unit was 118% of the carrying value of the reporting unit, and no goodwill impairment was required. Fair value determinations utilized in the quantitative goodwill impairment test for the Primis Bank reporting unit required considerable judgment and is sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of the reporting unit requires us to make assumptions and estimates regarding future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates at September 30 included estimated future annual interest income and interest expense, lending and deposit interest rates, Fed borrowing rates, discount rates, growth rates of the Bank and its loan and deposit portfolio, credit losses on the loan portfolio, and other market factors. We also make assumptions in certain testing methodologies about the composition of our peers and market acquisition transactions related to banks that we believe are similar to us. If current expectations of future growth rates, interest rates, provision for credit losses, and margins are not met, if market factors outside of our control, such as discount rates, Fed borrowing rates, or inflation, change, or if management’s expectations or plans otherwise change, including updates to long-term operating plans, then the fair value of the reporting unit may decline below its carrying value and result in goodwill impairment in the future.

We are engaged primarily in the business of investing funds obtained from deposits and borrowings into interest-earning loans and investments. Consequently, our earnings significantly depend on our net interest income, which is the difference between the interest income on loans and other investments and the interest expense on deposits and borrowings. To the extent that our interest-bearing liabilities do not reprice or mature at the same time as our interest-earning assets, we are subject to interest rate risk and corresponding fluctuations in net interest income. Our ALCO meets regularly and is responsible for reviewing our interest rate sensitivity position and establishing policies to monitor and limit exposure to interest rate risk. The policies established by the ALCO are reviewed and approved by our Board of Directors. We have employed asset/liability management policies that seek to manage our net interest income, without having to incur unacceptable levels of credit or investment risk.

We use simulation modeling to manage our interest rate risk and review quarterly interest sensitivity. This approach uses a model which generates estimates of the change in our EVE over a range of interest rate scenarios. EVE is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts using assumptions including estimated loan prepayment rates, reinvestment rates and deposit decay rates.

The following tables are based on an analysis of our interest rate risk as measured by the estimated change in EVE resulting from instantaneous and sustained parallel shifts in the yield curve (plus 400 basis points or minus 400 basis points, measured in 100 basis point increments) as of September 30, 2025 and December 31, 2024. All changes are within our Asset/Liability Risk Management Policy guidelines ($ amounts in thousands).

Our interest rate sensitivity is also monitored by management through the use of a model that generates estimates of the change in the NII over a range of interest rate scenarios. NII depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. In this regard, our model historically assumes that the composition of our interest sensitive assets and liabilities remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities.

During the nine months ended September 30, 2025, we implemented enhancements to our interest rate risk modeling framework, which impacted the NII sensitivity modeling results as of September 30, 2025 seen below. The enhancements include the adoption of non-linear beta and decay assumptions, which reflect industry best practices for modeling deposit behaviors and rate sensitivities. As a result of these changes, the Bank’s overall interest rate risk profile shifted toward a more neutral position. Additionally, the Bank has also steadily increased its portfolio of floating-rate mortgage warehouse loans during the nine months ended September 30, 2025, which when combined with the modeling enhancements increased our asset sensitivity compared to year end as seen in each of the shock scenarios as of September 30, 2025. The results below are within our ALM Policy guidelines as of September 30, 2025 and December 31, 2024 ($ in thousands).

Sensitivity of EVE and NII are modeled using different assumptions and approaches. Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE and NII sensitivity requires the making of certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. Accordingly, although the EVE tables and NII tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net worth and NII.

(a) Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this quarterly report on Form 10-Q, under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our CEO and CFO have concluded that these controls and procedures are not effective as of the end of the period covered by this Quarterly Report on Form 10-Q. This conclusion was reached as a result of the continued remediation of previously identified material weaknesses in its internal controls over financial reporting as further described in Item 9A in the 2024 Annual Report on Form 10-K.

Notwithstanding the material weaknesses that have not been fully remediated, the Company’s management, including the CEO and CFO, has concluded that the condensed consolidated financial statements, included in this Form 10-Q, as of and for the three and nine months ended September 30, 2025, fairly present, in all material respects, the Company's financial condition, results of operations and cash-flows for the periods presented in conformity with generally accepted accounting principles for interim financial statements.

(b) Changes in Internal Control over Financial Reporting. There were no changes in our internal controls over financial reporting that occurred during the nine months ended September 30, 2025 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. During the nine months ended September 30, 2025, the Company continued to remediate the material weaknesses in its internal control over financial reporting as previously identified and disclosed in Item 9A in the 2024 Annual Report on Form 10-K. Management continues to put controls in place to remediate the previously identified material weaknesses and the material weaknesses will not be remediated until the necessary controls are in place and operating effectively for a sufficient amount of time.

In addition to the other information set forth in this Report, in evaluating an investment in the Company’s securities, investors should consider carefully, among other things, the risk factors previously disclosed in Part I, Item 1A of our 2024 Form 10-K, which could materially affect the Company's business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.

There are no material changes during the period covered by this Report to the risk factors previously disclosed in our 2024 Form 10-K.