# Primis Financial Corp.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Primis Financial Corp.](/companies/frst.md) (CIK 1325670)
- Form: 10-Q
- Filed: 2024-10-25
- Accepted by EDGAR: Oct 25, 2024, 17:05 ET
- Period: 2024-03-31
- Accession: 0001558370-24-013697
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1325670/000155837024013697/frst-20240331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1325670/000155837024013697/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $25.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $718.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $2.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.10 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.10 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 24,707,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$965.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $2.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-03-31 | $88.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-03-31 | $3.89bn | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $3.50bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $374.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 56,849 characters.

Management’s discussion and analysis 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 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, 2023. Results of operations for the three months ended March 31, 2024 are not necessarily indicative of results that may be attained for any other period. The emphasis of this discussion will be on the three months ended March 31, 2024 compared to the three months ended March 31, 2023 for the consolidated statements of income and comprehensive income. For the condensed consolidated balance sheets, the emphasis of this discussion will be the balances as of March 31, 2024 compared to December 31, 2023. This discussion and analysis contains 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.

### 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 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 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 contained in this Quarterly Report on Form 10-Q, as well as the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, 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;
- fraudulent and negligent acts by loan applicants, mortgage brokers and our employees;
- our ability to recover certain losses related to fraudulent loans under the Company's insurance policies and to successfully complete the claims process and minimize the financial impact of these loans;
- our ability to implement our various strategic and growth initiatives, including our Panacea Financial and Life Premium Finance Divisions, new digital banking platform, V1BE fulfillment service and Primis Mortgage Company as well as our cost saving project to reduce 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, 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 to the allowance 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 Wall Street Reform and Consumer Protection Act (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 and the CARES 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;
- 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;
- 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, including the current conflicts in Ukraine/Russia and the Middle East, 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 remediate our existing material weaknesses in our internal controls deemed ineffective;
- failure to maintain effective internal controls and procedures, including the ability to remediate identified material weaknesses in internal control over financial reporting expediently;
- 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 environmental, social and governance strategies and initiatives, the scope and pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations;
- our ability to de-consolidate Panacea Financial Holdings, Inc. (“PFH”) and recognize gains on our investment in PFH common stock as a result of de-consolidation;
- 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; and
- other factors and risks described under “Risk Factors” herein and in any of the reports that we file with the Securities and Exchange Commission (the “Commission” or “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 update publicly these statements in light of new information or future events.

### OVERVIEW

Primis Financial Corp. (“Primis,” “we,” “us,” “our” or the “Company”) is the bank holding company for Primis Bank (“Primis Bank” or the “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 March 31, 2024, Primis Bank had twenty-four 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. Primis Mortgage Company, a residential mortgage lender headquartered in Wilmington, North Carolina, is a consolidated subsidiary of Primis Bank. PFH is a consolidated subsidiary of Primis and 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.

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 (NOW), 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.

### Current Economic Environment

U.S. economic growth accelerated in the first quarter of 2024, with Real Gross Domestic Product growing by an annualized 1.6%. According to the U.S. Bureau of Labor and Statistics, the rate of unemployment was 3.8% in March 2024 and nonfarm payrolls grew at a robust pace. The Federal Reserve (the “Fed”) raised interest rates 500 bps from May of 2022 through July of 2023, a pace that has not been experienced in more than 40 years, and sits at a range of 5.25% to 5.50% as of March 31, 2024. Inflation, while beginning to show signs of moderating, remains higher than the Fed’s long term target rate of 2.0% and the Fed appears committed to maintaining high rates until inflation is back at their target rate. The Fed has indicated that future rate adjustments will be data-dependent.

This higher rate environment is continuing to put strong margin pressure on all banks, including Primis, as the cost of deposits has increased alongside the Fed rate increases while many loans in banks’ portfolios are fixed due to borrowers locking in historic low rates in the past few years. However, loan growth in the current environment will benefit from the higher rates and should assist in partially offsetting growth in deposit costs.

### FINANCIAL HIGHLIGHTS

- Net income available to our common shareholders for the three months ended March 31, 2024 totaled $2.5 million, or $0.10 basic and diluted earnings per share, compared to net income of $8.4 million, or $0.34 basic and diluted earnings per share for the three months ended March 31, 2023.
- Total assets as of March 31, 2024 were $3.9 billion, an increase of 1% compared to December 31, 2023.
- Total loans as of March 31, 2024, were $3.2 billion, generally flat compared to December 31, 2023.
- Total deposits were $3.3 billion at March 31, 2024, an increase of 1% compared to December 31, 2023.
- Non-time deposits increased to $2.9 billion at March 31, 2024, an increase of $67.9 million, or 2%, compared to December 31, 2023.
- The ratio of gross loans to deposits declined to 95.8% at March 31, 2024, from 96.9% at December 31, 2023.
- Net interest margin of 2.84% in the first quarter of 2024 was up from 2.81% in the first quarter of 2023 and down from 2.86% in the fourth quarter of 2023.
- Allowance for credit losses to total loans was 1.66% at March 31, 2024, compared to 1.62% at December 31, 2023.
- Noninterest expense of $27.5 million in the first quarter of 2024 was up $0.6 million compared to the first quarter of 2023 but declined $0.7 million from the fourth quarter of 2023.
- Asset quality remained steady from year end with nonperforming assets as a percent of total assets (excluding SBA guarantees) at 0.23% at March 31, 2024 compared to 0.20% at December 31, 2023.

### RESULTS OF OPERATIONS

### Net Income

Net income for the three months ended March 31, 2024 totaled $2.5 million, or $0.10 basic and diluted earnings per share, compared to net income of $8.4 million, or $0.34 basic and diluted earnings per share for the three months ended March 31, 2023. The 71% decrease in net income during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was driven primarily by a decrease in derivative gains of $9.4 million, an increase in credit loss provisions of $1.2 million, and personnel expenses of $0.7 million, partially offset by an increase in mortgage banking income of $1.3 million, increases in all other noninterest income categories of $2.0 million, and a decrease in income tax provision of $1.7 million.

### Net Interest Income

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.

Net interest income remained steady at $25.3 million for the three months ended March 31, 2024 and 2023. Primis’ net interest margin for the three months ended March 31, 2024 was 2.84%, compared to 2.81% for the three months ended March 31, 2023. Total income on interest-earning assets was $50.3 million and $44.3 million for the three months ended March 31, 2024 and 2023, respectively. The yield on average interest-earning assets was 5.65% and 4.92% for the three months ended March 31, 2024 and 2023, respectively. Increase in yield on average interest-earnings assets was driven by a 71 basis point increase on loans in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The cost of average interest-bearing deposits increased 96 basis points to 3.28% for the three months ended March 31, 2024, compared to 2.32% for the three months ended March 31, 2023, as average interest-bearing liabilities grew approximately $0.2 billion and the rates paid on these liabilities grew significantly due to the consistent increases in benchmark interest rates during 2023. The increase was driven by higher costs in every interest-bearing deposit category with the largest driver being an increase in average savings deposits of $206.4 million with an average increase in cost of those deposits of 80 basis points. This increase was primarily a result of the growth of the digital deposit platform during 2023 and increase in benchmark interest rates. Average loans during the three months ended March 31, 2024 were $3.2 billion, compared to $3.0 billion during the three months ended March 31, 2023. The $0.2 billion increase in average loans combined with the 71 basis point increase in yield on the loan portfolio drove the $9.3 million increase in income on loans.

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)*

| ​ ​ ​ ​ ​ ​ ​ ​ ​ Assets Interest-earning assets: | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ Average Balance Sheets and Net Interest Margin Analysis For the Three Months Ended March 31, 2024 ​ ​ Average Balance ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ ​ ​ | ​ ​ March 31, 2023 ​ ​ Average Balance ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Loans held for sale | ​ | $58,896 | ​ | $907 | ​ | 6.19% | $25,346 | ​ | $391 | ​ | 6.26% |
| Loans, net of deferred fees (1) (2) | ​ | ​ 3,206,888 | ​ | ​ 46,825 | ​ | 5.87% | ​ 2,989,925 | ​ | ​ 38,059 | ​ | 5.16% |
| Investment securities | ​ | ​ 241,179 | ​ | ​ 1,715 | ​ | 2.86% | ​ 246,402 | ​ | ​ 1,584 | ​ | 2.61% |
| Other earning assets | ​ | ​ 77,067 | ​ | ​ 898 | ​ | 4.69% | ​ 388,327 | ​ | ​ 4,224 | ​ | 4.41% |
| **Total earning assets** | ​ | ​ 3,584,030 | ​ | ​ 50,345 | ​ | 5.65% | ​ 3,650,000 | ​ | ​ 44,258 | ​ | 4.92% |
| Allowance for credit losses | ​ | ​ (51,110) | ​ | ​ ​ | ​ | ​ ​ | ​ (34,099) | ​ | ​ ​ | ​ | ​ ​ |
| Total non-earning assets | ​ | ​ 299,192 | ​ | ​ ​ | ​ | ​ ​ | ​ 284,339 | ​ | ​ ​ | ​ | ​ ​ |
| **Total assets** | ​ | $3,832,112 | ​ | ​ ​ | ​ | ​ ​ | $3,900,240 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Liabilities and stockholders' equity** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing liabilities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| NOW and other demand accounts | ​ | $773,943 | ​ | $4,467 | ​ | 2.32% | $722,583 | ​ | $2,267 | ​ | 1.27% |
| Money market accounts | ​ | ​ 814,147 | ​ | ​ 6,512 | ​ | 3.22% | ​ 824,541 | ​ | ​ 4,801 | ​ | 2.36% |
| Savings accounts | ​ | ​ 800,328 | ​ | ​ 8,045 | ​ | 4.04% | ​ 593,896 | ​ | ​ 4,750 | ​ | 3.24% |
| Time deposits | ​ | ​ 431,340 | ​ | ​ 3,990 | ​ | 3.72% | ​ 489,066 | ​ | ​ 3,226 | ​ | 2.68% |
| **Total interest-bearing deposits** | ​ | ​ 2,819,758 | ​ | ​ 23,014 | ​ | 3.28% | ​ 2,630,086 | ​ | ​ 15,044 | ​ | 2.32% |
| Borrowings | ​ | ​ 120,188 | ​ | ​ 2,062 | ​ | 6.90% | ​ 285,113 | ​ | ​ 3,892 | ​ | 5.54% |
| **Total interest-bearing liabilities** | ​ | ​ 2,939,946 | ​ | ​ 25,076 | ​ | 3.43% | ​ 2,915,199 | ​ | ​ 18,936 | ​ | 2.63% |
| Noninterest-bearing liabilities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Demand deposits | ​ | ​ 458,306 | ​ | ​ ​ | ​ | ​ ​ | ​ 556,495 | ​ | ​ ​ | ​ | ​ ​ |
| Other liabilities | ​ | ​ 34,900 | ​ | ​ ​ | ​ | ​ ​ | ​ 28,544 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities** | ​ | ​ 3,433,152 | ​ | ​ ​ | ​ | ​ ​ | ​ 3,500,238 | ​ | ​ ​ | ​ | ​ ​ |
| Primis common stockholders' equity | ​ | ​ 378,008 | ​ | ​ ​ | ​ | ​ ​ | ​ 400,002 | ​ | ​ ​ | ​ | ​ ​ |
| Noncontrolling interest | ​ | ​ 20,952 | ​ | ​ ​ | ​ | ​ ​ | ​ — | ​ | ​ ​ | ​ | ​ ​ |
| **Total stockholders' equity** | ​ | ​ 398,960 | ​ | ​ ​ | ​ | ​ ​ | ​ 400,002 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities and stockholders' equity** | ​ | $3,832,112 | ​ | ​ ​ | ​ | ​ ​ | $3,900,240 | ​ | ​ ​ | ​ | ​ ​ |
| Net interest income | ​ | ​ ​ | ​ | $25,269 | ​ | ​ ​ | ​ ​ | ​ | $25,322 | ​ | ​ ​ |
| Interest rate spread | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.22% | ​ ​ | ​ | ​ ​ | ​ | 2.28% |
| Net interest margin | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.84% | ​ ​ | ​ | ​ ​ | ​ | 2.81% |

39

(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.

### Provision for Credit Losses

The provision for 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.

The Company recorded a provision for credit losses for the three months ended March 31, 2024 and 2023, of $6.5 million and $5.3 million, respectively. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $4.9 million and $4.7 million during the three months ended March 31, 2024 and 2023, respectively. Our provision for credit losses was driven by provisions related to the Consumer Program loan portfolio primarily centered around loans originated from the third quarter of 2022 through the first quarter of 2023. Excluding the provision amounts related to the Consumer Program portfolio, we recorded a provision for credit losses of $1.6 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively.

We had net charge-offs totaling $5.3 million and $4.0 million during the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, $4.3 million and $1.9 million, respectively, of net charge-offs were related to the Consumer Program loans. These charge-offs were primarily related to loans originated from the third quarter of 2022 to the first quarter of 2023. Excluding the Consumer Program loan charge-offs we had net charge-offs of $1.0 million and $2.1 million during the three months ended March 31, 2024 and 2023, respectively.

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

The following table presents the major categories of noninterest income for the three months ended March 31, 2024 and 2023:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Three Months Ended March 31, 2024 | ​ | ​ ​ 2023 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | --- |
| Account maintenance and deposit service fees | ​ | $1,393 | ​ | $1,224 |  | $169 |
| Income from bank-owned life insurance | ​ | 564 | ​ | 420 |  | ​ 144 |
| Mortgage banking income | ​ | 5,574 | ​ | 4,315 |  | ​ 1,259 |
| Gain on sale of loans | ​ | ​ 336 | ​ | ​ 51 | ​ | ​ 285 |
| Gain (loss) on other investments | ​ | ​ 206 | ​ | ​ (39) | ​ | ​ 245 |
| Consumer Program derivative | ​ | ​ 2,041 | ​ | ​ 11,443 | ​ | ​ (9,402) |
| Other noninterest income | ​ | 193 | ​ | 256 |  | ​ (63) |
| **Total noninterest income** | ​ | $10,307 | ​ | $17,670 | ​ | $(7,363) |

Noninterest income decreased 42% to $10.3 million for the three months ended March 31, 2024, compared to $17.7 million for the three months ended March 31, 2023. The decrease in noninterest income was primarily related to a decline in the Consumer Program derivative income of $9.4 million during the three months ended March 31, 2024. This decline was driven by $10.5 million of fair value gains on the derivative in the prior year compared to a $0.1 million loss in the current year, partially offset by $1.0 million of additional income under the Consumer Program agreement in the current year compared to the prior year. The fair value gain in the prior year was driven primarily by higher expected cash flows related to a significant increase in promotional interest loans in the Consumer Program portfolio and higher credit losses in the same portfolio resulting in less expected payments owed by us to the counterparty, which did not re-occur in the current year. The decrease in noninterest income driven by the Consumer Program derivative was partially offset by $1.3 million of higher mortgage banking income due to growth in the mortgage banking business.

### Noninterest Expense

The following table presents the major categories of noninterest expense for the three months ended March 31, 2024 and 2023:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Three Months Ended March 31, 2024 | ​ | ​ ​ 2023 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Salaries and benefits | ​ | $15,735 | ​ | $15,028 | ​ | $707 |
| Occupancy expenses | ​ | 1,490 | ​ | 1,445 | ​ | 45 |
| Furniture and equipment expenses | ​ | 1,616 | ​ | 1,577 | ​ | 39 |
| Amortization of core deposit intangible | ​ | 317 | ​ | 317 | ​ | — |
| Virginia franchise tax expense | ​ | 631 | ​ | 849 | ​ | (218) |
| FDIC insurance assessment | ​ | ​ 610 | ​ | ​ 364 | ​ | ​ 246 |
| Data processing expense | ​ | 2,231 | ​ | 2,251 | ​ | (20) |
| Marketing expense | ​ | ​ 459 | ​ | ​ 569 | ​ | ​ (110) |
| Telephone and communication expense | ​ | 346 | ​ | 377 | ​ | (31) |
| Professional fees | ​ | 1,365 | ​ | 862 | ​ | 503 |
| Miscellaneous lending expenses | ​ | ​ 451 | ​ | ​ 885 | ​ | ​ (434) |
| Other operating expenses | ​ | 2,287 | ​ | 2,430 | ​ | (143) |
| **Total noninterest expenses** | ​ | $27,538 | ​ | $26,954 | ​ | $584 |

Noninterest expenses were $27.5 million during the three months ended March 31, 2024, compared to $27.0 million during the three months ended March 31, 2023. The 2% increase in noninterest expenses was primarily related to a $0.7 million increase in employee compensation and benefits expense and $0.5 million increase in professional fees. The increase in salaries and benefits expense related to increased head count at the Bank that was driven by the Panacea Financial division and Primis Mortgage during the to the first quarter of 2024 compared to the first quarter of 2023. The increase in professional fees expense was driven by higher attorney costs and expenses related to our annual financial audit. The noninterest expense increase was partially offset by decreases in miscellaneous lending expenses and lower franchise tax expense. The miscellaneous lending expense decline was driven by lower collection expenses due to improving credit quality in the loan portfolio and also due to less servicing expenses on the Consumer Program portfolio. The franchise tax declined as a result of a lower assessment base in the current year compared to the prior year.

### FINANCIAL CONDITION

The following illustrates key balance sheet categories as of March 31, 2024 and December 31, 2023 (in thousands):

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ March 31, 2024 ​ ​ | ​ ​ ​ | ​ ​ December 31, 2023 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Change ​ ​ |
| --- | --- | ---: | --- | --- | --- | --- |
| Total cash and cash equivalents | ​ | $88,717 | ​ | $77,553 | ​ | $11,164 |
| Securities available-for-sale | ​ | 230,617 | ​ | 228,420 | ​ | 2,197 |
| Securities held-to-maturity | ​ | 10,992 | ​ | ​ 11,650 | ​ | ​ (658) |
| Loans held for sale | ​ | 72,217 | ​ | ​ 57,691 | ​ | ​ 14,526 |
| Net loans | ​ | 3,174,209 | ​ | ​ 3,167,205 | ​ | ​ 7,004 |
| Other assets | ​ | 313,227 | ​ | ​ 314,027 | ​ | ​ (800) |
| **Total assets** | ​ | $3,889,979 | ​ | $3,856,546 | ​ | $33,433 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Total deposits | ​ | $3,314,923 | ​ | $3,270,155 | ​ | $44,768 |
| Borrowings | ​ | ​ 145,002 | ​ | ​ 149,032 | ​ | ​ (4,030) |
| Other liabilities | ​ | ​ 35,455 | ​ | ​ 39,766 | ​ | ​ (4,311) |
| Total liabilities | ​ | ​ 3,495,380 | ​ | ​ 3,458,953 | ​ | ​ 36,427 |
| Total equity | ​ | ​ 394,599 | ​ | ​ 397,593 | ​ | ​ (2,994) |
| **Total liabilities and equity** | ​ | $3,889,979 | ​ | $3,856,546 | ​ | $33,433 |

### Loans

Total loans were $3.2 billion as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, 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. Our loan portfolio grew 0.1% in the first quarter of 2024 which included declines in real estate secured loans and increases in commercial and consumer loans. The consumer loan growth was primarily driven by the increase in life insurance premium finance loans followed by originations in the Consumer Program portfolio during the first quarter of 2024. The increase in commercial loans was driven primarily by commercial loan growth in our Panacea Financial division, which are diversified geographically and are spread across the nation.

The composition of our loans held for investment portfolio consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

| ​ ​ ​ Loans secured by real estate: | ​ ​ | ​ ​ March 31, 2024 Amount ​ | ​ | ​ ​ ​ Percent | ​ ​ December 31, 2023 Amount ​ | ​ | ​ ​ ​ Percent |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Commercial real estate - owner occupied | ​ | $458,026 |  | 14.2% | $455,397 |  | 14.1% |
| Commercial real estate - non-owner occupied | ​ | 577,752 |  | 17.9% | 578,600 |  | 18.0% |
| Secured by farmland | ​ | 4,341 |  | 0.1% | 5,044 |  | 0.2% |
| Construction and land development | ​ | 146,908 |  | 4.6% | 164,742 |  | 5.1% |
| Residential 1-4 family | ​ | 602,124 |  | 18.7% | 606,226 |  | 18.8% |
| Multi- family residential | ​ | 128,599 |  | 4.0% | 127,857 |  | 4.0% |
| Home equity lines of credit | ​ | 57,765 |  | 1.8% | 59,670 |  | 1.9% |
| Total real estate loans | ​ | 1,975,515 |  | 61.2% | 1,997,536 |  | 62.0% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Commercial loans | ​ | 623,804 |  | 19.3% | 602,623 |  | 18.7% |
| Paycheck protection program loans | ​ | ​ 2,003 | ​ | 0.1% | ​ 2,023 | ​ | 0.1% |
| Consumer loans | ​ | 620,745 |  | 19.2% | 611,583 |  | 19.0% |
| Total Non-PCD loans | ​ | 3,222,067 |  | 99.8% | 3,213,765 |  | 99.8% |
| PCD loans | ​ | ​ 5,598 | ​ | 0.2% | ​ 5,649 | ​ | 0.2% |
| Total loans | ​ | $3,227,665 | ​ | 100.0% | $3,219,414 | ​ | 100.0% |
| ​ | ​ | ​ |  | ​ ​ | ​ |  | ​ |

42

The following table sets forth the contractual maturity ranges of our loans held for investment portfolio and the amount of those loans with fixed and floating interest rates in each maturity range as of March 31, 2024 (in thousands):

| ​ ​ ​ ​ ​ Loans secured by real estate: | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ One Year or Less ​ ​ | ​ ​ ​ ​ ​ | ​ ​ After 1 Year Through 5 Years Fixed Rate ​ ​ | ​ ​ ​ | ​ ​ Floating Rate ​ ​ | ​ ​ ​ ​ ​ | ​ ​ After 5 Years Through 15 Years Fixed Rate ​ ​ | ​ ​ ​ | ​ ​ Floating Rate ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ After 15 Years Fixed Rate ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Floating Rate ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Total ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Commercial real estate - owner occupied | ​ | $28,367 | ​ | $98,008 | ​ | $21,025 | ​ | $125,452 | ​ | $124,009 | ​ | $2,248 | ​ | $58,917 | ​ | $458,026 |
| Commercial real estate - non-owner occupied | ​ | ​ 43,616 | ​ | ​ 209,772 | ​ | ​ 28,511 | ​ | ​ 53,674 | ​ | ​ 65,594 | ​ | ​ 11,051 | ​ | ​ 165,534 | ​ | ​ 577,752 |
| Secured by farmland | ​ | ​ 1,224 | ​ | ​ 762 | ​ | ​ 154 | ​ | ​ 114 | ​ | ​ 812 | ​ | ​ — | ​ | ​ 1,275 | ​ | ​ 4,341 |
| Construction and land development | ​ | ​ 91,883 | ​ | ​ 19,780 | ​ | ​ 20,302 | ​ | ​ 2,604 | ​ | ​ 6,289 | ​ | ​ 669 | ​ | ​ 5,381 | ​ | ​ 146,908 |
| Residential 1-4 family | ​ | ​ 20,207 | ​ | ​ 41,321 | ​ | ​ 8,599 | ​ | ​ 26,364 | ​ | ​ 53,003 | ​ | ​ 70,286 | ​ | ​ 382,344 | ​ | ​ 602,124 |
| Multi- family residential | ​ | ​ 9,167 | ​ | ​ 68,731 | ​ | ​ 6,240 | ​ | ​ — | ​ | ​ 18,127 | ​ | ​ — | ​ | ​ 26,334 | ​ | ​ 128,599 |
| Home equity lines of credit | ​ | **​** 5,111 | ​ | ​ 3,263 | ​ | ​ 8,184 | ​ | ​ 64 | ​ | ​ 1,728 | ​ | ​ 11 | ​ | ​ 39,404 | ​ | ​ 57,765 |
| Total real estate loans | ​ | ​ 199,575 | ​ | ​ 441,637 | ​ | ​ 93,015 | ​ | ​ 208,272 | ​ | ​ 269,562 | ​ | ​ 84,265 | ​ | ​ 679,189 | ​ | ​ 1,975,515 |
| Commercial loans | ​ | ​ 89,009 | ​ | 131,231 | ​ | ​ 113,597 | ​ | ​ 237,189 | ​ | ​ 49,018 | ​ | ​ 1,102 | ​ | ​ 2,658 | ​ | ​ 623,804 |
| Paycheck protection program loans | ​ | ​ 25 | ​ | ​ 1,790 | ​ | ​ — | ​ | ​ 188 | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ 2,003 |
| Consumer loans | ​ | **​** 3,491 | ​ | ​ 288,857 | ​ | ​ 143,276 | ​ | ​ 82,444 | ​ | ​ 100,602 | ​ | ​ 2,069 | ​ | ​ 6 | ​ | ​ 620,745 |
| Total Non-PCD loans | ​ | ​ 292,100 | ​ | ​ 863,515 | ​ | ​ 349,888 | ​ | ​ 528,093 | ​ | ​ 419,182 | ​ | ​ 87,436 | ​ | ​ 681,853 | ​ | ​ 3,222,067 |
| PCD loans | ​ | 2,730 | ​ | ​ 1,222 | ​ | ​ 42 | ​ | ​ — | ​ | ​ 1,214 | ​ | ​ 390 | ​ | ​ — | ​ | 5,598 |
| Total loans | ​ | $294,830 | ​ | $864,737 | ​ | $349,930 | ​ | $528,093 | ​ | $420,396 | ​ | $87,826 | ​ | $681,853 | ​ | $3,227,665 |

The following table sets forth the contractual maturity ranges of our Consumer Program loan portfolio as of March 31, 2024, which is only originated at fixed rates (in thousands):

| ​ ​ ​ | ​ ​ ​ | ​ ​ ​ One Year or Less | ​ ​ ​ | ​ ​ ​ After One Year to Five Years | ​ ​ ​ | ​ ​ ​ After Five Through Ten Years | ​ ​ ​ | ​ ​ ​ After Ten Years | ​ ​ ​ | ​ ​ ​ Total |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Consumer Program Loans | ​ | $10 | ​ | $141,367 | ​ | $49,678 | ​ | $14,030 | ​ | $205,085 |

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 of these promotional loans amortize over four years from the date they exit the promotional period if not prepaid before the end of the promotional period (in thousands):

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Amount ending No Interest Promo Period in next 12 months | ​ ​ ​ ​ | ​ ​ Amount ending No Interest Promo Period in next 13-24 months | ​ ​ ​ ​ | ​ ​ ​ Total Interest Promo as of 3/31/24 |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Consumer Program Loans | ​ | $68,371 | ​ | $22,461 | ​ | $90,832 |

During the three months ended March 31, 2024, $5.6 million of loans paid off during the no interest promo period and $4.8 million of loans ended their no interest promo period and began to amortize.

### Asset Quality; Past Due Loans and Nonperforming Assets

The following table presents a comparison of nonperforming assets as of March 31, 2024 and December 31, 2023 (in thousands):

| ​ ​ ​ | ​ ​ | ​ ​ ​ March 31, ​ 2024 | ​ ​ ​ December 31, ​ 2023 |
| --- | --- | ---: | ---: |
| Nonaccrual loans | ​ | $10,139 ​ | $9,095 ​ |
| Loans past due 90 days and accruing interest | ​ | 1,714 ​ | 1,714 ​ |
| Total nonperforming assets | ​ | 11,853 ​ | 10,809 ​ |
| **​** | ​ | ​ ​ ​ | ​ ​ ​ |
| SBA guaranteed amounts included in nonperforming loans | ​ | $3,095 ​ | $3,115 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Allowance for credit losses to total loans | ​ | 1.66% | 1.62% |
| Allowance for credit losses to nonaccrual loans | ​ | 527.22% | 574.06% |
| Allowance for credit losses to nonperforming loans | ​ | 451.00% | 483.04% |
| Nonaccrual to total loans | ​ | 0.32% | 0.28% |
| Nonperforming assets excluding SBA guaranteed loans to total assets | ​ | 0.23% | 0.20% |

Asset quality remained relatively stable during the first quarter of 2024 as noted in the table above. We will generally place a loan on nonaccrual status when it becomes 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.

We originate a portion of our consumer loans (the Consumer Program) using a third party that sources and subsequently manages the portfolio of loans. As of March 31, 2024, the principal balance outstanding was $205.1 million. These loans are accounted for similar to 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 of loans was $23.0 million as of March 31, 2024 and represented 43% of our total allowance for credit losses. Net charge-offs on this portfolio were $4.3 million and $1.9 million during the three months ended March 31, 2024 and 2023, respectively, and represented approximately 82% and 47%, respectively, of net charge-offs recorded during the periods.

The Company tightened its origination criteria in regard to this portfolio in April of 2023 and from that point forward we generally originated loans to consumer borrowers being managed by the third party with FICO scores over 720, whereas prior periods loan production included approximately 40% of loans to borrowers with weaker credit scores. This older vintage lower credit score portion of the portfolio has driven the uptick in related charge-offs during 2023 which continued into the first quarter of 2024 and necessitated the update of the Company’s expected loss rates on this portfolio for purposes of determining the allowance for credit losses as discussed in the Provision for Credit Losses section of this MD&A. The newer production represented approximately 29% of the portfolio at March 31, 2024 and is expected to improve the quality mix of the portfolio and result in lower realized net charge-offs in future periods.

### Investment Securities

The following table sets forth a summary of the investment securities portfolio as of the dates indicated. Available-for-sale investment securities are reported at fair value, and held-to-maturity investment securities are reported at amortized cost (in thousands).

| ​ ​ ​ Available-for-sale investment securities: | ​ ​ | ​ ​ March 31, 2024 ​ | ​ ​ | ​ ​ December 31, 2023 ​ |
| --- | --- | ---: | --- | ---: |
| Residential government-sponsored mortgage-backed securities | ​ | $93,319 | ​ | $96,808 |
| Obligations of states and political subdivisions | ​ | 29,869 | ​ | 30,080 |
| Corporate securities | ​ | 13,643 | ​ | 14,048 |
| Collateralized loan obligations | ​ | 5,008 | ​ | 4,982 |
| Residential government-sponsored collateralized mortgage obligations | ​ | 41,497 | ​ | 34,471 |
| Government-sponsored agency securities | ​ | 13,625 | ​ | 13,711 |
| Agency commercial mortgage-backed securities | ​ | 29,647 | ​ | 30,110 |
| SBA pool securities | ​ | 4,009 | ​ | 4,210 |
| Total | ​ | $230,617 | ​ | $228,420 |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Held-to-maturity investment securities: | ​ |  | ​ |  |
| Residential government-sponsored mortgage-backed securities | ​ | $8,714 | ​ | $9,040 |
| Obligations of states and political subdivisions | ​ | 2,067 | ​ | 2,391 |
| Residential government-sponsored collateralized mortgage obligations | ​ | 211 | ​ | 219 |
| Total | ​ | $10,992 | ​ | $11,650 |

Debt investment securities that we have the positive intent and ability to hold to maturity are classified as held-to-maturity and carried at amortized cost. Investment securities classified as available-for-sale are those debt securities that may be sold in response to changes in interest rates, liquidity needs or other similar factors. Investment securities available-for-sale 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 available-for-sale 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.

Investment securities, available-for-sale and held-to-maturity, totaled $241.6 million as of March 31, 2024, an increase of 0.6% from $240.1 million as of December 31, 2023, primarily due to purchases of available-for-sale securities, partially offset by paydowns, maturities, and calls of the investments over the past three months. We recognized an immaterial amount of credit impairment charges related to credit losses on our held-to-maturity investment securities during the three months ended March 31, 2023. No credit impairment charges were taken during the three months ended March 31, 2024.

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.

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 were $3.3 billion as of March 31, 2024, a 1% increase from December 31, 2023. The increase in deposits from year end was primarily driven by growth in money market and savings accounts due to our competitive rates on these products. Savings accounts increased 5% from $783.8 million as of December 31, 2023 to $823.3 million as of March 31, 2024. Money market accounts also increased 5% from $794.5 million as of December 31, 2023 to $834.5 million as of March 31, 2024. Our deposits are diversified in type and by underlying customer and lack significant concentrations to any type of customer (i.e. commercial, consumer, government) or industry.

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 account 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 $1.1 billion, or 34% of total deposits, at March 31, 2024.

#### 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 March 31, 2024 and December 31, 2023, total FHLB borrowings were $25.0 million and $30.0 million, respectively. The decrease in FHLB borrowings was a result of the deposit growth during the first quarter of 2024 that primarily funded our loan growth and supported other funding needs. As of March 31, 2024, we had $478.5 million of unused and available FHLB lines of credit.

Other borrowings can consist of federal funds purchased, secured borrowings due to failed loan sales, and securities sold under agreements to repurchase (“repo”) that mature within one year, which are secured transactions with customers. The balance in repo accounts at both March 31, 2024 and December 31, 2023 was $3.0 million.

We had secured borrowings of $21.3 million and $20.4 million as of March 31, 2024 and December 31, 2023, respectively, related to loan transfers to another financial institution during 2023 that did not meet the criteria to be treated as a sale under relevant 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. During the three months ended March 31, 2024, additional advances were made to borrowers under the loans previously transferred in 2023 and were accordingly treated as additional secured borrowings as of March 31, 2024. For additional information on secured borrowings refer to “Note 1 –Accounting Policies” 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” in this Form 10-Q.

### 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 are not sufficient to fully fund our lending activities, we have access to funding from additional sources, including but not limited to borrowing from the Federal Home Loan Bank of Atlanta 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” in this Form 10-Q.

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 March 31, 2024, Primis was 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 March 31, 2024, Primis has no material commitments or long-term debt for capital expenditures.

### 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 March 31, 2024 and December 31, 2023, 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). Management believes, as of March 31, 2024, that Primis meets all capital adequacy requirements to which it is 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:

| ​ ​ ​ ​ ​ ​ Primis Financial Corp. | ​ ​ ​ ​ ​ | ​ ​ Minimum ​ Required for ​ Capital ​ Adequacy ​ Purposes | ​ ​ ​ ​ ​ ​ To Be ​ Categorized as ​ Well Capitalized (1) | ​ ​ ​ ​ ​ ​ Actual Ratio at March 31, ​ 2024 ​ | ​ ​ ​ ​ December 31, ​ 2023 ​ |
| --- | --- | ---: | --- | ---: | ---: |
| Leverage ratio |  | 4.00% | n/a | 8.38% | 8.37% |
| Common equity tier 1 capital ratio |  | 4.50% | n/a | 8.98% | 8.96% |
| Tier 1 risk-based capital ratio |  | 6.00% | n/a | 9.27% | 9.25% |
| Total risk-based capital ratio |  | 8.00% | n/a | 12.62% | 13.44% |
| ​ | ​ | ​ ​ | ​ ​ | ​ ​ | ​ ​ |
| **Primis Bank** |  | ​ | ​ ​ | ​ ​ | ​ ​ |
| Leverage ratio |  | 4.00% | 5.00% | 9.91% | 9.80% |
| Common equity tier 1 capital ratio |  | 7.00% | 6.50% | 11.09% | 10.88% |
| Tier 1 risk-based capital ratio |  | 8.50% | 8.00% | 11.09% | 10.88% |
| Total risk-based capital ratio |  | 10.50% | 10.00% | 12.35% | 12.12% |

(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 4.35% as of March 31, 2024, which exceeded the 2.50% minimum requirement below which the regulators may impose limits on distributions.

### CRITICAL ACCOUNTING POLICIES

The critical accounting policies are discussed in MD&A in our Annual Report on Form 10-K for the year ended December 31, 2023. 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, 2023. 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 first three months of 2024.

## Market risk

As filed, 3,419 characters.

We are engaged primarily in the business of investing funds obtained from deposits and borrowings into interest-earning loans and investments. Consequently, our earnings depend to a significant extent 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 Asset-Liability Committee (“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 economic value of equity (“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.

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 100 basis points, measured in 100 basis point increments) as of March 31, 2024 and December 31, 2023, all changes are within our Asset/Liability Risk Management Policy guidelines.

Our interest rate sensitivity is also monitored by management through the use of a model that generates estimates of the change in the net interest income (“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, the model assumes that the composition of our interest sensitive assets and liabilities existing as of March 31, 2024 and December 31, 2023 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. All changes are within our ALM Policy guidelines as of March 31, 2024 and December 31, 2023.

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 modeling of EVE and NII 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. Sensitivity of EVE and NII are modeled using different assumptions and approaches.

## Controls and procedures

As filed, 2,577 characters.

*Evaluation of Disclosure Controls and Procedures. (a)* 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 and chief financial officer, 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) utilizing the framework established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer 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 2023 Annual Report on Form 10-K.

*(b) Changes in Internal Control over Financial Reporting*. There were no changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. During the three months ended March 31, 2024, 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 2023 Annual Report on Form 10-K. While management believes it has put effective controls in place to remediate the previously identified material weaknesses, the controls have not been operating for a sufficient amount of time to conclude that the material weakness has been fully remediated. The Company will continue to operate and test the new controls until it believes they have been operating effectively for a sufficient amount of time. The Company anticipates the material weaknesses to be fully remediated as soon as possible.

## Risk factors

As filed, 846 characters.

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 2023 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 2023 Form 10-K.

Filed Oct 25, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-013697. Last ingested by Listed: Oct 24, 2026, 15:09 ET. No prices; not investment advice.