# Primis Financial Corp.: Form 10-Q/A for the period ended Jun 30, 2023

- Company: [Primis Financial Corp.](/companies/frst.md) (CIK 1325670)
- Form: 10-Q/A
- Filed: 2024-11-01
- Accepted by EDGAR: Nov 1, 2024, 16:02 ET
- Period: 2023-06-30
- Accession: 0001558370-24-014136
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1325670/000155837024014136/frst-20230630x10qa.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1325670/000155837024014136/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $26.9m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-01-01 to 2023-06-30 | $45.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | −$526.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $1.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$2.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | $6.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.08 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | $0.26 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.08 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | $0.26 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 24,639,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 24,685,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | −$35.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $1.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2023-01-01 to 2023-06-30 | $4.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-06-30 | $100.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-06-30 | $3.87bn | us-gaap:Assets |
| Total liabilities | at 2023-06-30 | $3.48bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $390.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 73,763 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 consolidated financial statements, the footnotes thereto, and the other financial data included in this report and in our restated annual report on Form 10-K/A for the year ended December 31, 2022. Results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of results that may be attained for any other period. The emphasis of this discussion will be on the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 for the consolidated statements of income (loss) and comprehensive income (loss). For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 2023 compared to December 31, 2022. 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.

### Restatement and Revision of Previously Issued Financial Statements

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) has been amended and restated to give effect to the Restatement, as more fully described in the “*Restatement and Revision of Previously Issued Condensed Consolidated Financial Statements”* section of Note 1 – Accounting Policies to the Company's accompanying unaudited condensed consolidated financial statements contained elsewhere in this Amendment. For further detail regarding the Restatement, see “Explanatory Note” and Part I, Item 4, “Controls and Procedures” contained in this Amendment. We have also revised this MD&A, where applicable, for effects of the revisions discussed in the “*Retained Earnings Revisions”* and “*Restatement and Revision of Previously Issued Condensed Consolidated Financial Statements”* sections of Note 1 – Accounting Policies.

### FORWARD-LOOKING STATEMENTS (Restated)

Statements and financial discussion and analysis contained in this Quarterly Report on Form 10-Q/A 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/A, as well as the Risk Factors previously disclosed in our restated Annual Report on Form 10-K/A for the year ended December 31, 2022, 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;
- the ongoing impact of COVID-19 pandemic on our assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for credit losses; and other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services;
- 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;
- 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 possible impairment of goodwill associated with current or future acquisitions and possible 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 the financial impact of COVID-19, rising 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;
- our level of concentration in unsecured consumer 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;
- failure to prevent a breach to our Internet-based system and online commerce security;
- 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 establishment of additional branches and acquisition of additional branches and 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;
- uncertainty related to the transition away from the London Inter-bank Offered Rate (“LIBOR”);
- 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 Ukraine/Russia conflict, 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, including the impact of the adoption of the current expected credit losses (“CECL”) methodology;
- 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;
- fraudulent and negligent acts by loan applicants, mortgage brokers and our employees;
- failure to maintain effective internal controls and procedures;
- 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 ("ESG") strategies and initiatives, the scope and pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations;
- 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 our subsequent 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/A 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/A (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. At June 30, 2023, Primis Bank had thirty-two full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications. Thirty 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. Our deposits are insured, up to applicable limits, by the Federal Deposit Insurance Corporation (the “FDIC”). Primis Mortgage Company, a residential mortgage lender headquartered in Wilmington, North Carolina, is also a consolidated subsidiary of Primis Bank.

As part of a cost saving initiative, the Bank plans to consolidate eight branch locations, reducing total branches from thirty-two to twenty-four, with an expected effective date of October 31, 2023.

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

The U.S. economy expanded in the second quarter of 2023, with Real Gross Domestic Product growing by an annualized 2.4%. According to the U.S. Bureau of Labor and Statistics, the rate of unemployment was relatively stable compared to year end at 3.5% in July 2023. The Federal Reserve (the “Fed”) has now raised rates 525 bps in total since March of 2022, a pace that has not been experienced in more than 40 years. This rate level is continuing to put strong margin pressure on all banks, including Primis, as the cost of deposits is increasing while many loans are fixed due to borrowers locking in historic low rates in the past few years. Inflation, while beginning to show signs of moderating, remains higher than the Fed’s long term target rate. This has resulted in the Fed continuing to raise borrowing rates in an attempt to get inflation to its 2% target rate. The path of future rate hikes by the Fed is uncertain as it indicated their rate decisions going forward will be data-dependent, which could result in additional increases in the second half of 2023.

Further, on August 1, 2023, Fitch Ratings downgraded the United States of America's Long-Term Foreign-Currency Issuer Default Rating to 'AA+' from 'AAA', citing expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to 'AA' and 'AAA' rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions. The full extent of the impact of these factors is uncertain and may have a negative impact on the U.S. economy, including the possibility of an economic recession in the near or mid-term.

### FINANCIAL HIGHLIGHTS (Revised and Restated)

- Net loss for the three months ended June 30, 2023 totaled $2.0 million, or $0.08 basic and diluted loss per share, compared to net income of $4.6 million, or $0.19 basic and diluted earnings per share for the three months ended June 30, 2022. Net income for the six months ended June 30, 2023 totaled $6.4 million, or $0.26 basic and diluted earnings per share, compared to $9.1 million, or $0.37 basic and diluted earnings per share for the six months ended June 30, 2022.
- Total assets as of June 30, 2023 were $3.9 billion, an increase of 8.4% compared to December 31, 2022.
- Total cash and cash equivalents grew to $100.9 million, up from $77.9 million at December 31, 2022.
- Total loans, excluding Paycheck Protection Program (“PPP”) balances as of June 30, 2023, were $3.2 billion, an increase of $246.8 million, or 8.4%, from December 31, 2022.
- Total deposits were $3.3 billion at June 30, 2023, an increase of 21.8% compared to December 31, 2022.
- Non-time deposits increased to $2.85 billion at June 30, 2023, an increase of $588.3 million, or 26.0%, compared to December 31, 2022.
- The ratio of gross loans to deposits has declined to 95% as of June 30, 2023, from 108% at December 31, 2022.
- Net interest margin of 2.36% in the second quarter of 2023 was down from 3.32% in the second quarter of 2022.
- Allowance for credit losses to total loans was 1.21% at June 30, 2023, compared to 1.17% at December 31, 2022.
- Recently announced cost savings initiative and structural changes to branch and digital deposit gathering is expected to reduce costs by an estimated $9.4 million per year and is expected to be fully implemented by October 2023.
- Reduction in branch count will push total deposits per branch to approximately $153 million compared to approximately $85 million per branch at the end of 2022.
- During the second quarter of 2023, the Company discovered an employee loan fraud with total exposure of approximately $2.5 million. The Company evaluated the effect of the error, both qualitatively and quantitatively, and believes the impact to prior years is immaterial to each respective period assessed. Regardless, the Company has revised prior periods to reflect the fraud losses in the respective period incurred instead of recording in the current period when we discovered the fraud because the losses were projected to have a material impact to the expected 2023 annual results at the time of the original assessment. Additional details are included in the “Retained Earnings Revisions” section of Note 1 – Accounting Policies in this Form 10-Q/A.

### RESULTS OF OPERATIONS (Revised and Restated)

### Net Income

***Three-Month Comparison.*** Net loss for the three months ended June 30, 2023 totaled $2.0 million, or $0.08 basic and diluted loss per share, compared to net income of $4.6 million, or $0.19 basic and diluted earnings per share for the three months ended June 30, 2022. The 143% decrease in net income during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was driven by higher noninterest expenses mainly from an increase in employee compensation and benefits expense in the second quarter of 2023 related to increased head count at the Bank, Primis Mortgage and Panacea. The decrease in net income was also attributable to higher data processing expense driven by substantially higher application volume on the digital deposit platform as a result of a savings account rate promotion offered during 2023. We also experienced a $3.9 million increase in the provision for loan losses, a substantial amount of which was due to specific loans that are in the process of resolution and the remaining was driven by provisions on the Consumer Program portfolio. These decreases were partially offset by higher mortgage banking income and Consumer Program derivative income in the second quarter of 2023.

***Six-Month Comparison.*** Net income for the six months ended June 30, 2023 totaled $6.4 million, or $0.26 basic and diluted earnings per share, compared to $9.1 million, or $0.37 basic and diluted earnings per share for the six months ended June 30, 2022. The 30% decrease in net income during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily driven by higher noninterest expenses from an increase in employee compensation and benefits expense, higher data processing expense in the current year, and higher provision for credit losses. These expense increases were partially offset by higher mortgage banking and Consumer Program derivative income in 2023.

### 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.

***Three-Month Comparison.*** Net interest income was $23.3 million for the three months ended June 30, 2023, compared to $24.5 million for the three months ended June 30, 2022. Primis’ net interest margin for the three months ended June 30, 2023 was 2.36%, compared to 3.32% for the three months ended June 30, 2022. Net interest margin for three months ended June 30, 2023 was affected by excess cash balances that were not earning the higher rates of our loans combined with the climbing rates of our interest bearing deposits. Total income on interest-earning assets was $50.2 million and $28.2 million for the three months ended June 30, 2023 and 2022, respectively. The yield on average interest-earning assets was 5.07% and 3.82% for the three months ended June 30, 2023 and 2022, respectively. Increase in yield on average interest-earnings assets was driven by higher rates on cash and loans in the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The cost of average interest-bearing deposits increased 265 basis points to 3.10% for the three months ended June 30, 2023, compared to 0.45% for the three months ended June 30, 2022. Interest and fees on loans totaled $41.5 million and $26.3 million for the three months ended June 30, 2023 and 2022, respectively, while average loans during the three months ended June 30, 2023 were $3.2 billion, compared to $2.5 billion during the three months ended June 30, 2022.

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 June 30, 2023 ​ ​ Average Balance ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ ​ ​ | ​ ​ June 30, 2022 ​ ​ Average Balance ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: |
| Loans held for sale | ​ | $48,698 | ​ | $700 | ​ | 5.77% | $6,936 | ​ | $93 | ​ | 5.38% |
| Loans, net of deferred fees (1) (2) | ​ | ​ 3,112,280 | ​ | ​ 40,791 | ​ | 5.26% | ​ 2,507,825 | ​ | ​ 26,184 | ​ | 4.19% |
| Investment securities | ​ | ​ 240,700 | ​ | ​ 1,551 | ​ | 2.58% | ​ 287,722 | ​ | ​ 1,445 | ​ | 2.01% |
| Other earning assets | ​ | ​ 568,251 | ​ | ​ 7,158 | ​ | 5.05% | ​ 158,817 | ​ | ​ 448 | ​ | 1.13% |
| **Total earning assets** | ​ | ​ 3,969,929 | ​ | ​ 50,200 | ​ | 5.07% | ​ 2,961,300 | ​ | ​ 28,170 | ​ | 3.82% |
| Allowance for credit losses | ​ | ​ (35,770) | ​ | ​ ​ | ​ | ​ ​ | ​ (29,844) | ​ | ​ ​ | ​ | ​ ​ |
| Total non-earning assets | ​ | ​ 297,474 | ​ | ​ ​ | ​ | ​ ​ | ​ 259,184 | ​ | ​ ​ | ​ | ​ ​ |
| **Total assets** | ​ | $4,231,633 | ​ | ​ ​ | ​ | ​ ​ | $3,190,640 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Liabilities and stockholders' equity** | ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ |
| Interest-bearing liabilities: | ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ |
| NOW and other demand accounts | ​ | $826,598 | ​ | $4,343 | ​ | 2.11% | $695,481 | ​ | $556 | ​ | 0.32% |
| Money market accounts | ​ | ​ 858,532 | ​ | ​ 6,231 | ​ | 2.91% | ​ 810,781 | ​ | ​ 938 | ​ | 0.46% |
| Savings accounts | ​ | ​ 1,026,159 | ​ | ​ 10,406 | ​ | 4.07% | ​ 222,347 | ​ | ​ 143 | ​ | 0.26% |
| Time deposits | ​ | ​ 495,721 | ​ | ​ 3,803 | ​ | 3.08% | ​ 329,198 | ​ | ​ 674 | ​ | 0.82% |
| **Total interest-bearing deposits** | ​ | ​ 3,207,010 | ​ | ​ 24,783 | ​ | 3.10% | ​ 2,057,807 | ​ | ​ 2,311 | ​ | 0.45% |
| Borrowings | ​ | ​ 114,893 | ​ | ​ 2,083 | ​ | 7.27% | ​ 107,784 | ​ | ​ 1,353 | ​ | 5.04% |
| **Total interest-bearing liabilities** | ​ | ​ 3,321,903 | ​ | ​ 26,866 | ​ | 3.24% | ​ 2,165,591 | ​ | ​ 3,664 | ​ | 0.68% |
| Noninterest-bearing liabilities: | ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ |
| Demand deposits | ​ | ​ 473,319 | ​ | ​ ​ | ​ | ​ ​ | ​ 596,714 | ​ | ​ ​ | ​ | ​ ​ |
| Other liabilities | ​ | ​ 38,408 | ​ | ​ ​ | ​ | ​ ​ | ​ 22,235 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities** | ​ | ​ 3,833,630 | ​ | ​ ​ | ​ | ​ ​ | ​ 2,784,540 | ​ | ​ ​ | ​ | ​ ​ |
| Stockholders' equity | ​ | ​ 398,003 | ​ | ​ ​ | ​ | ​ ​ | ​ 406,100 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities and stockholders' equity** | ​ | $4,231,633 | ​ | ​ ​ | ​ | ​ ​ | $3,190,640 | ​ | ​ ​ | ​ | ​ ​ |
| Net interest income | ​ | ​ ​ | ​ | $23,334 | ​ | ​ ​ | ​ ​ | ​ | $24,506 | ​ | ​ ​ |
| Interest rate spread | ​ | ​ ​ | ​ | ​ ​ | ​ | 1.83% | ​ ​ | ​ | ​ ​ | ​ | 3.14% |
| Net interest margin | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.36% | ​ ​ | ​ | ​ ​ | ​ | 3.32% |

(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.

***Six-Month Comparison.*** Net interest income was $48.7 million for the six months ended June 30, 2023, compared to $47.3 million for the six months ended June 30, 2022. Primis’ net interest margin for the six months ended June 30, 2023 was 2.57%, compared to 3.13% for the six months ended June 30, 2022. Continued upward pressure on deposit account rates and consumer preferences shifting from non-interest bearing to higher rate products are impacting interest expense and net interest income for the Company and the industry as a whole. Net interest margin for the Company was further affected by excess cash balances, that are part of average other earning assets that earned lower rates compared to the rates earned by our loan portfolio. Total income on interest-earning assets was $94.4 million and $54.7 million for the six months ended June 30, 2023 and 2022, respectively. The yield on average interest-earning assets was 5.00% and 3.62% for the six months ended June 30, 2023 and 2022, respectively. Increase in yield on average interest-earnings assets was driven by higher rates on cash and loans in 2023 compared to 2022. The cost of average interest-bearing deposits increased 231 basis points to 2.75% for the six months ended June 30, 2023, compared to 0.44% for the six months ended June 30, 2022. Interest and fees on loans totaled $79.9 million and $51.0 million for the six months ended June 30, 2023 and 2022, respectively, while average loans during the six months ended June 30, 2023 were $3.1 billion, compared to $2.4 billion during the six months ended June 30, 2022.

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 Six Months Ended June 30, 2023 ​ ​ Average Balance ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ | ​ ​ June 30, 2022 ​ ​ Average Balance ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: |
| Loans held for sale | ​ | $37,086 | ​ | $1,091 | ​ | 5.93% | $3,487 | ​ | $93 | ​ | 5.38% |
| Loans, net of deferred fees (1) (2) | ​ | ​ 3,051,441 | ​ | ​ 78,850 | ​ | 5.21% | ​ 2,433,662 | ​ | ​ 50,885 | ​ | 4.22% |
| Investment securities | ​ | ​ 243,536 | ​ | ​ 3,135 | ​ | 2.60% | ​ 295,036 | ​ | ​ 2,875 | ​ | 1.96% |
| Other earning assets | ​ | ​ 478,786 | ​ | ​ 11,382 | ​ | 4.79% | ​ 312,033 | ​ | ​ 854 | ​ | 0.55% |
| **Total earning assets** | ​ | ​ 3,810,849 | ​ | ​ 94,458 | ​ | 5.00% | ​ 3,044,218 | ​ | ​ 54,707 | ​ | 3.62% |
| Allowance for credit losses | ​ | ​ (34,940) | ​ | ​ ​ | ​ | ​ ​ | ​ (29,543) | ​ | ​ ​ | ​ | ​ ​ |
| Total non-earning assets | ​ | ​ 290,943 | ​ | ​ ​ | ​ | ​ ​ | ​ 257,551 | ​ | ​ ​ | ​ | ​ ​ |
| **Total assets** | ​ | $4,066,852 | ​ | ​ ​ | ​ | ​ ​ | ​ 3,272,226 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Liabilities and stockholders' equity** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing liabilities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| NOW and other demand accounts | ​ | $774,878 | ​ | $6,610 | ​ | 1.72% | $756,118 | ​ | $1,222 | ​ | 0.33% |
| Money market accounts | ​ | ​ 841,630 | ​ | ​ 11,032 | ​ | 2.64% | ​ 810,124 | ​ | ​ 1,797 | ​ | 0.45% |
| Savings accounts | ​ | ​ 811,221 | ​ | ​ 15,156 | ​ | 3.77% | ​ 223,562 | ​ | ​ 291 | ​ | 0.26% |
| Time deposits | ​ | ​ 492,412 | ​ | ​ 7,029 | ​ | 2.88% | ​ 339,724 | ​ | ​ 1,374 | ​ | 0.82% |
| **Total interest-bearing deposits** | ​ | ​ 2,920,141 | ​ | ​ 39,827 | ​ | 2.75% | ​ 2,129,528 | ​ | ​ 4,684 | ​ | 0.44% |
| Borrowings | ​ | ​ 199,533 | ​ | ​ 5,975 | ​ | 6.04% | ​ 139,363 | ​ | ​ 2,724 | ​ | 3.94% |
| **Total interest-bearing liabilities** | ​ | ​ 3,119,674 | ​ | ​ 45,802 | ​ | 2.96% | ​ 2,268,891 | ​ | ​ 7,408 | ​ | 0.66% |
| Noninterest-bearing liabilities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Demand deposits | ​ | ​ 514,677 | ​ | ​ ​ | ​ | ​ ​ | ​ 571,264 | ​ | ​ ​ | ​ | ​ ​ |
| Other liabilities | ​ | ​ 33,505 | ​ | ​ ​ | ​ | ​ ​ | ​ 22,644 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities** | ​ | ​ 3,667,856 | ​ | ​ ​ | ​ | ​ ​ | ​ 2,862,799 | ​ | ​ ​ | ​ | ​ ​ |
| Stockholders' equity | ​ | ​ 398,996 | ​ | ​ ​ | ​ | ​ ​ | ​ 409,427 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities and stockholders' equity** | ​ | $4,066,852 | ​ | ​ ​ | ​ | ​ ​ | ​ 3,272,226 | ​ | ​ ​ | ​ | ​ ​ |
| Net interest income | ​ | ​ ​ | ​ | $48,656 | ​ | ​ ​ | ​ ​ | ​ | $47,299 | ​ | ​ ​ |
| Interest rate spread | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.04% | ​ ​ | ​ | ​ ​ | ​ | 2.97% |
| Net interest margin | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.57% | ​ ​ | ​ | ​ ​ | ​ | 3.13% |

(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, current economic conditions, changes in the nature and volume of lending, historical loan experience and other known internal and external factors affecting loan collectability. 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 and six months ended June 30, 2023 of $4.3 million and $9.6 million, respectively, compared to a provision for credit losses for the three and six months ended June 30, 2022 of $0.4 million and $0.5 million, respectively. For the three and six months ended June 30, 2023, $1.3 million and $6.1 million, respectively, were due to charge-offs and additional reserve calculated in our normal reserve process for the Consumer Program portfolio. Excluding this provision amount, the provision for credit losses would have been $3.1 million and $3.6 million for the three and six months ended June 30, 2023, respectively. We had charge-offs totaling $1.7 million and $0.1 million during the three months ended June 30, 2023 and 2022, respectively, and $6.2 million and $0.2 million during six months ended June 30, 2023 and 2022, respectively. There were recoveries totaling $0.1 million and $0.5 million during the three months ended June 30, 2023 and 2022, respectively, and $0.6 million and $0.7 million during six months ended June 30, 2023 and 2022, respectively. Consumer Program charge-offs were $1.5 million and $3.5 million during the three and six months ended June 30, 2023, respectively, and were $22 thousand and $122 thousand during the three and six months ended June 30, 2022, respectively. A majority of the remaining charge-offs during the three and six months ended 2023 were due to three specific borrowers in which we determined portions of their loans were uncollectible.

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 June 30, 2023 and 2022:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Three Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | --- |
| Account maintenance and deposit service fees | ​ | $1,457 | ​ | $1,442 |  | $15 |
| Income from bank-owned life insurance | ​ | 394 | ​ | 378 |  | ​ 16 |
| Mortgage banking income | ​ | 5,198 | ​ | 593 |  | ​ 4,605 |
| Consumer Program derivative | ​ | ​ 1,758 | ​ | ​ (238) | ​ | ​ 1,996 |
| Other noninterest income | ​ | 130 | ​ | 217 |  | ​ (87) |
| **Total noninterest income** | ​ | $8,937 | ​ | $2,392 | ​ | $6,545 |

Noninterest income increased 274% to $8.9 million for the three months ended June 30, 2023, compared to $2.4 million for the three months ended June 30, 2022. The increase in noninterest income was primarily related to $4.6 million of mortgage banking income and $2.0 million of Consumer Program derivative income in the second quarter of 2023.The mortgage banking income increase was due to a full quarter of activity in 2023 compared to only a month in the same period in 2022 after acquisition in May of 2022. The Consumer Program derivative income was comprised of $0.6 million of fair value adjustment gains and $1.2 million of income related to waived interest and credit loss reimbursements from the derivative counterparty under the Consumer Program agreement.

The following table presents the major categories of noninterest income for the six months ended June 30, 2023 and 2022:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | --- |
| Account maintenance and deposit service fees | ​ | $2,681 | ​ | $2,793 |  | $(112) |
| Income from bank-owned life insurance | ​ | 814 | ​ | 753 |  | ​ 61 |
| Mortgage banking income | ​ | 9,513 | ​ | 593 |  | ​ 8,920 |
| Gain on sale of loans | ​ | ​ 51 | ​ | ​ — | ​ | ​ 51 |
| Consumer Program derivative | ​ | ​ 13,201 | ​ | ​ (184) | ​ | ​ 13,385 |
| Other noninterest income | ​ | 347 | ​ | 581 |  | ​ (234) |
| **Total noninterest income** | ​ | $26,607 | ​ | $4,536 |  | $22,071 |
| **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |

49

Noninterest income increased 486% to $26.6 million for the six months ended June 30, 2023, compared to $4.5 million for the six months ended June 30, 2022. The increase in noninterest income was primarily related to $13.4 million of Consumer Program derivative income and $8.9 million of higher mortgage banking income during the six months ended June 30, 2023. The increase in the mortgage banking income is related to the purchase of Primis Mortgage in May 2022 coupled with meaningful growth in the year since the purchase. Mortgage banking income includes fair value adjustments, origination income, and gains on sales of mortgage loans held for sale. The increase in the Consumer Program derivative was driven by $11.1 million in fair value adjustment gains on the derivative asset and $2.2 million of income related to waived interest and credit loss reimbursements from the derivative counterparty under the Consumer Program agreement.

### Noninterest Expense

The following table presents the major categories of noninterest expense for the three months ended June 30, 2023 and 2022:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Three Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Salaries and benefits | ​ | $15,283 | ​ | $10,573 | ​ | $4,710 |
| Occupancy expenses | ​ | 1,593 | ​ | 1,418 | ​ | 175 |
| Furniture and equipment expenses | ​ | 1,852 | ​ | 1,128 | ​ | 724 |
| Amortization of core deposit intangible | ​ | 318 | ​ | 341 | ​ | (23) |
| Virginia franchise tax expense | ​ | 848 | ​ | 814 | ​ | 34 |
| Data processing expense | ​ | 2,828 | ​ | 1,293 | ​ | 1,535 |
| Marketing expense | ​ | ​ 521 | ​ | ​ 731 | ​ | ​ (210) |
| Telephone and communication expense | ​ | 416 | ​ | 366 | ​ | 50 |
| Net loss on bank premises and equipment | ​ | ​ — | ​ | ​ 620 | ​ | ​ (620) |
| Professional fees | ​ | 1,075 | ​ | 827 | ​ | 248 |
| Miscellaneous lending expenses | ​ | ​ 568 | ​ | ​ 104 | ​ | ​ 464 |
| Fraud losses | ​ | ​ 1,997 | ​ | ​ 57 | ​ | ​ 1,940 |
| Other operating expenses | ​ | 3,140 | ​ | 2,251 | ​ | 889 |
| **Total noninterest expenses** | ​ | $30,439 | ​ | $20,523 | ​ | $9,916 |

Noninterest expenses were $30.4 million during the three months ended June 30, 2023, compared to $20.5 million during the three months ended June 30, 2022. The 48% increase in noninterest expenses was primarily due to a $4.7 million increase in employee compensation in the second quarter of 2023 related to increased head count at the Bank, Primis Mortgage and Panacea compared to the second quarter of 2022, along with costs related to the cost savings initiative announced in the second quarter of 2023. The increase in noninterest expense during the three months ended June 30, 2023 was also attributable to a $1.5 million increase in data processing expense driven by substantially higher application volume on the digital deposit platform as a result of a savings account rate promotion offered during 2023. We also experienced an increase of $1.9 million in fraud losses during the second quarter of 2023 primarily related to a substantial increase in deposit account fraud, which was also seen across the industry during the quarter. Furniture and equipment expenses increased $0.7 million due in large part to write-downs of assets related to the cost savings initiative announced in the second quarter of 2023. A significant driver of the increase in other non-interest expenses were higher expenses related to Primis Mortgage in the second quarter of 2023. Other notable drivers of the increase in other operating expenses in the second quarter of 2023 included higher FDIC insurance costs due to the significant growth in deposits.

The following table presents the major categories of noninterest expense for the six months ended June 30, 2023 and 2022:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Salaries and benefits | ​ | $30,311 | ​ | $20,198 | ​ | $10,113 |
| Occupancy expenses | ​ | 3,038 | ​ | 2,875 | ​ | 163 |
| Furniture and equipment expenses | ​ | 3,429 | ​ | 2,228 | ​ | 1,201 |
| Amortization of core deposit intangible | ​ | 635 | ​ | 682 | ​ | (47) |
| Virginia franchise tax expense | ​ | 1,697 | ​ | 1,627 | ​ | 70 |
| Data processing expense | ​ | 5,079 | ​ | 2,783 | ​ | 2,296 |
| Marketing expense | ​ | ​ 1,090 | ​ | ​ 1,196 | ​ | ​ (106) |
| Telephone and communication expense | ​ | 793 | ​ | 748 | ​ | 45 |
| Net gain loss on other real estate owned | ​ | — | ​ | (59) | ​ | 59 |
| Net loss on bank premises and equipment | ​ | ​ — | ​ | ​ 620 | ​ | ​ (620) |
| Professional fees | ​ | 1,937 | ​ | 1,921 | ​ | 16 |
| Miscellaneous lending expenses | ​ | ​ 1,453 | ​ | ​ 494 | ​ | ​ 959 |
| Fraud losses | ​ | ​ 2,452 | ​ | ​ 110 | ​ | ​ 2,342 |
| Other operating expenses | ​ | 5,479 | ​ | 4,152 | ​ | 1,327 |
| **Total noninterest expenses** | ​ | $57,393 | ​ | $39,575 | ​ | $17,818 |
| **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |

Noninterest expenses were $57.4 million during the six months ended June 30, 2023, compared to $39.6 million during the six months ended June 30, 2022. The 45% increase in noninterest expenses was primarily attributable to a $10.1 million increase in employee compensation and benefits expense mainly related to increased head count at the Bank, Primis Mortgage and Panacea in the six months ended June 30, 2023 compared to 2022. The increase in noninterest expense during the six months ended June 30, 2023 was also driven by a $2.3 million increase in data processing expense in 2023 driven by substantially higher application volume on the digital deposit platform as a result of a savings account rate promotion offered during the first and second quarter of 2023. We also experienced an increase of $2.3 million in fraud losses during the six months ended June 30, 2023, primarily related to a substantial increase in deposit account fraud in the second quarter, which was also seen across the industry. Furniture and equipment expenses increased $1.2 million due to growth in the Bank, Primis Mortgage, and Panacea, and also due to write-downs of assets related to the cost savings initiative announced in the second quarter of 2023. Other expenses increased during the six months ended June 30, 2023 compared to the six months ended June 30, 2022, largely driven by higher expenses related to Primis Mortgage and higher FDIC insurance costs in 2023.

### FINANCIAL CONDITION (Revised and Restated)

### Balance Sheet Overview

Total assets were $3.9 billion as of June 30, 2023 and $3.6 billion as of December 31, 2022. Total cash and cash equivalents were $100.9 million as of June 30, 2023 and $77.9 million as of December 31, 2022. Investment securities decreased from $249.8 million as of December 31, 2022 to $235.5 million as of June 30, 2023. Total loans increased 8%, from $2.9 billion at December 31, 2022 to $3.2 billion at June 30, 2023. Total deposits were $3.3 billion at June 30, 2023, compared to $2.7 billion at December 31, 2022 and total equity was $390.4 million and $389.0 million at June 30, 2023 and December 31, 2022, respectively.

Stockholder’s equity increased $1.5 million from December 31, 2022 to June 30, 2023 as a result of an increase in retained earnings driven by net income during the year partially offset by payment of common stock dividends and an increase in unrealized mark-to-market adjustments on the Company’s available-for-sale securities portfolio due to increases in market interest rates during the six months ended June 30, 2023. The Company has the intention to hold these securities until maturity or recovery of the value and does not anticipate realizing any losses on the investments.

### Loans

Total loans were $3.2 billion and $2.9 billion at June 30, 2023 and December 31, 2022, respectively. PPP loans totaled $2.1 million at June 30, 2023 and $4.6 million at December 31, 2022, respectively. Excluding PPP loans, loans outstanding increased $248.8 million, or 8%, since December 31, 2022.

As of June 30, 2023 and December 31, 2022, 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 held for investment portfolio consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

| ​ ​ ​ Loans secured by real estate: | ​ ​ | ​ ​ June 30, 2023 Amount ​ | ​ | ​ ​ ​ Percent | ​ ​ December 31, 2022 Amount ​ | ​ | ​ ​ ​ Percent |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Commercial real estate - owner occupied | ​ | $454,067 |  | 14.2% | $459,866 |  | 15.6% |
| Commercial real estate - non-owner occupied | ​ | 595,805 |  | 18.7% | 579,733 |  | 19.7% |
| Secured by farmland | ​ | 5,271 |  | 0.2% | 5,970 |  | 0.2% |
| Construction and land development | ​ | 175,073 |  | 5.5% | 148,690 |  | 5.0% |
| Residential 1-4 family | ​ | 591,938 |  | 18.5% | 609,694 |  | 20.7% |
| Multi- family residential | ​ | 133,754 |  | 4.2% | 140,321 |  | 4.8% |
| Home equity lines of credit | ​ | 62,808 |  | 2.0% | 65,152 |  | 2.2% |
| Total real estate loans | ​ | 2,018,716 |  | 63.2% | 2,009,426 |  | 68.2% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Commercial loans | ​ | 598,305 |  | 18.7% | 520,741 |  | 17.7% |
| Paycheck protection program loans | ​ | ​ 2,143 | ​ | 0.1% | ​ 4,564 | ​ | 0.2% |
| Consumer loans | ​ | 567,755 |  | 17.8% | 405,278 |  | 13.8% |
| Total Non-PCD loans | ​ | 3,186,919 |  | 99.8% | 2,940,009 |  | 99.8% |
| PCD loans | ​ | ​ 6,049 | ​ | 0.2% | ​ 6,628 | ​ | 0.2% |
| Total loans | ​ | $3,192,968 | ​ | 100.0% | $2,946,637 | ​ | 100.0% |
| ​ | ​ | ​ |  | ​ ​ | ​ |  | ​ |

### Consumer Program Loans

The Company has $191.4 million and $134.4 million of loans outstanding in the Consumer Program as of June 30, 2023 and December 31, 2022, respectively, or 6% and 5% of our total gross loan portfolio as of each date. Loans in the Consumer Program are included within the Consumer loans category disclosures. As of June 30, 2023, 42% of the loans were in a promotional period requiring no payment of interest on their loans with 28% of these promotional loan periods ending in the next 12 months and the remaining ending within 24 months of June 30, 2023. As of December 31, 2022, 44% of the loans were in a promotional period requiring no payment of interest on their loans with 21% and 79% of these promotional loan periods ending in 2023 and 2024, respectively.

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 June 30, 2023 (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 | ​ | $31,468 | ​ | $120,778 | ​ | $17,039 | ​ | $110,132 | ​ | $107,189 | ​ | $2,315 | ​ | $65,146 | ​ | $454,067 |
| Commercial real estate - non-owner occupied | ​ | ​ 34,523 | ​ | ​ 192,115 | ​ | ​ 31,175 | ​ | ​ 60,317 | ​ | ​ 65,937 | ​ | ​ 1,384 | ​ | ​ 210,354 | ​ | ​ 595,805 |
| Secured by farmland | ​ | ​ 1,527 | ​ | ​ 891 | ​ | ​ 285 | ​ | ​ 221 | ​ | ​ 1,008 | ​ | ​ — | ​ | ​ 1,339 | ​ | ​ 5,271 |
| Construction and land development | ​ | ​ 122,162 | ​ | ​ 25,535 | ​ | ​ 19,291 | ​ | ​ 757 | ​ | ​ 5,013 | ​ | ​ 681 | ​ | ​ 1,634 | ​ | ​ 175,073 |
| Residential 1-4 family | ​ | ​ 15,602 | ​ | ​ 48,619 | ​ | ​ 8,306 | ​ | ​ 30,035 | ​ | ​ 54,093 | ​ | ​ 72,286 | ​ | ​ 362,997 | ​ | ​ 591,938 |
| Multi- family residential | ​ | ​ 5,677 | ​ | ​ 56,640 | ​ | ​ 18,783 | ​ | ​ 7,078 | ​ | ​ 18,562 | ​ | ​ — | ​ | ​ 27,014 | ​ | ​ 133,754 |
| Home equity lines of credit | ​ | **​** 9,468 | ​ | ​ 996 | ​ | ​ 11,142 | ​ | ​ 30 | ​ | ​ 3,002 | ​ | ​ 33 | ​ | ​ 38,137 | ​ | ​ 62,808 |
| Total real estate loans | ​ | ​ 220,427 | ​ | ​ 445,574 | ​ | ​ 106,021 | ​ | ​ 208,570 | ​ | ​ 254,804 | ​ | ​ 76,699 | ​ | ​ 706,621 | ​ | ​ 2,018,716 |
| Commercial loans | ​ | ​ 107,138 | ​ | 97,191 | ​ | ​ 153,771 | ​ | ​ 189,341 | ​ | ​ 46,927 | ​ | ​ 1,131 | ​ | ​ 2,806 | ​ | ​ 598,305 |
| Paycheck protection program loans | ​ | ​ 25 | ​ | ​ 1,918 | ​ | ​ — | ​ | ​ 200 | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ 2,143 |
| Consumer loans | ​ | **​** 2,410 | ​ | ​ 272,990 | ​ | ​ 105,150 | ​ | ​ 92,232 | ​ | ​ 92,553 | ​ | ​ 2,415 | ​ | ​ 5 | ​ | ​ 567,755 |
| Total Non-PCD loans | ​ | ​ 330,000 | ​ | ​ 817,673 | ​ | ​ 364,942 | ​ | ​ 490,343 | ​ | ​ 394,284 | ​ | ​ 80,245 | ​ | ​ 709,432 | ​ | ​ 3,186,919 |
| PCD loans | ​ | 3,060 | ​ | ​ 1,337 | ​ | ​ — | ​ | ​ — | ​ | ​ 1,114 | ​ | ​ 398 | ​ | ​ 140 | ​ | 6,049 |
| Total loans | ​ | $333,060 | ​ | $819,010 | ​ | $364,942 | ​ | $490,343 | ​ | $395,398 | ​ | $80,643 | ​ | $709,572 | ​ | $3,192,968 |

The following table sets forth the contractual maturity ranges of our Consumer Program loan portfolio as of June 30, 2023, 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 | ​ | $237 | ​ | $128,486 | ​ | $62,511 | ​ | $144 | ​ | $191,378 |

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 6/30/23 |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Consumer Program Loans | ​ | $22,216 | ​ | $58,545 | ​ | $80,761 |

During the three and six months ended June 30, 2023, $1.6 million and $2.2 million of promotional loans paid off prior to the end of their promotional periods while $1.0 million and $1.2 million of promotional loans reached the end of the promotional period and entered amortization.

### Asset Quality

While the impact of COVID-19 largely subsided in 2023, the residual effect of COVID-19 and its variants, as well as new risks emerging from geopolitical conflict, inflation, bank failures and the threat of a recession continue to cause economic instability. Despite this economic uncertainty, our asset quality remained strong during the first and second quarter of 2023. 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 in our market area, rising interest rates, historically high inflation, and recessionary concerns.

Total calculated reserves increased by $4.0 million to $38.5 million at the end of June 30, 2023 compared to $34.5 million at December 31, 2022, driven by growth in the Consumer Program loan portfolio and secondarily due to the $244.4 million in overall loan growth experienced in 2023.

The following table presents a comparison of nonperforming assets as of June 30, 2023 and December 31, 2022 (in thousands):

| ​ ​ ​ | ​ ​ | ​ ​ ​ June 30, ​ 2023 | ​ ​ ​ December 31, ​ 2022 |
| --- | --- | ---: | ---: |
| Nonaccrual loans | ​ | $25,290 ​ | $35,484 ​ |
| Loans past due 90 days and accruing interest | ​ | 1,714 ​ | 3,361 ​ |
| Total nonperforming assets | ​ | 27,004 ​ | 38,845 ​ |
| **​** | ​ | ​ ​ ​ | ​ ​ ​ |
| SBA guaranteed amounts included in nonperforming loans | ​ | $2,331 ​ | $3,969 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Allowance for credit losses to total loans | ​ | 1.21% | 1.17% |
| Allowance for credit losses to nonaccrual loans | ​ | 152.40% | 97.35% |
| Allowance for credit losses to nonperforming loans | ​ | 142.73% | 88.93% |
| Nonaccrual to total loans | ​ | 0.80% | 1.20% |
| Nonperforming assets excluding SBA guaranteed loans to total assets | ​ | 0.64% | 0.98% |

Nonaccrual loans decreased 29% to $25.3 million (excluding $0.6 million of loans fully covered by SBA guarantees) at June 30, 2023, compared to $35.5 million (excluding $0.6 million of loans fully covered by SBA guarantees) at December 31, 2022. A substantial portion of the Bank’s nonperforming assets in previous periods were comprised of two relationships with a combined balance of approximately $27.0 million. A large residential property with a balance of approximately $8.0 million included in that total was sold in the second quarter of 2023. The other relationship, primarily consisting of assisted living facilities, is currently at the end of a receiver-managed marketing process with all three facilities under contract to close in the third quarter of 2023. When including the receipt of funds and removal of these loans, the Bank would have had approximately $5.0 million of nonperforming loans at June 30, 2023, an 86% decrease from year end.

At June 30, 2023, our total substandard loans were $33.7 million compared to $41.0 million at December 31, 2022, an 18% decline. Included in the total substandard loans were SBA guarantees of $0.8 million in both periods. Special mention loans totaled $32.4 million at June 30, 2023 and $32.3 million at December 31, 2022.

For the quarter ended June 30, 2023, two loans from our owner occupied commercial real estate loan portfolio with an amortized cost basis of $0.4 million, were modified to a borrower experiencing financial difficulty. This modification resulted in reamortization of the balance of the notes over a 25 year period, while maintaining the original maturity date of February and July 2027. Contractual payments for both notes, prior to modification, for the three month period would have totaled $0.03 million. This newly originated financial difficulty modification had no payment delinquencies in the second quarter and represents 0.09% of our total owner occupied commercial real estate loans.

An existing modification performed in the first quarter of 2023, comprised of one loan with a $0.9 million amortized cost, which will resume contractual payments in August 2023. This existing modification has had no payment delinquencies since its modification and accounts for only 0.15% of our total 1-4 family residential loans.

### Investment Securities

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

We classify our investment securities as either held-to-maturity or available-for-sale. Debt investment securities that Primis has 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 have the intention 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 $235.5 million at June 30, 2023, a decrease of 6% from $249.8 million at December 31, 2022, primarily due to paydowns, maturities, and calls of the investments over the past six months.

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: | ​ ​ | ​ ​ June 30, 2023 ​ | ​ ​ | ​ ​ December 31, 2022 ​ |
| --- | --- | ---: | --- | ---: |
| Residential government-sponsored mortgage-backed securities | ​ | $98,014 | ​ | $102,881 |
| Obligations of states and political subdivisions | ​ | 29,673 | ​ | 29,178 |
| Corporate securities | ​ | 12,956 | ​ | 14,828 |
| Collateralized loan obligations | ​ | 4,901 | ​ | 4,876 |
| Residential government-sponsored collateralized mortgage obligations | ​ | 28,568 | ​ | 26,595 |
| Government-sponsored agency securities | ​ | 13,360 | ​ | 14,616 |
| Agency commercial mortgage-backed securities | ​ | 30,794 | ​ | 37,417 |
| SBA pool securities | ​ | 4,821 | ​ | 5,924 |
| Total | ​ | $223,087 | ​ | $236,315 |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Held-to-maturity investment securities: | ​ |  | ​ |  |
| Residential government-sponsored mortgage-backed securities | ​ | $9,753 | ​ | $10,522 |
| Obligations of states and political subdivisions | ​ | 2,388 | ​ | 2,721 |
| Residential government-sponsored collateralized mortgage obligations | ​ | 237 | ​ | 277 |
| Total | ​ | $12,378 | ​ | $13,520 |

We recognized an immaterial amount of credit impairment charges related to credit losses on our held-to-maturity investment securities during the three and six months ended June 30, 2023 and no credit losses during the three and six months ended June 30, 2022.

### 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.

Total deposits increased 22% to $3.3 billion at June 30, 2023 from $2.7 billion at December 31, 2022. The increase in deposits from year-end was primarily driven by the substantial growth in the Bank’s new digital deposit platform in the first and second quarter of 2023. The majority of the growth was in savings accounts with the remainder largely in NOW accounts. Savings accounts increased 184% from $245.7 million as of December 31, 2022 to $696.8 million at June 30, 2023. NOW accounts increased 32% from $617.7 million at December 31, 2022 to $817.7 million at June 30, 2023. 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 $1.2 billion, or 35% of total deposits, at June 30, 2023. As further discussed below in “Liquidity and Funds Management” we took steps during the first six months of 2023 to bolster our available sources of liquidity and as of June 30, 2023, our total available sources of liquidity exceeds total uninsured deposits by $100 million.

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.

For our deposit agreements with certain customers, we hold the collateral in a segregated custodial account. We are required to maintain adequate collateral levels. In the event the collateral fair value falls below stipulated levels, we will pledge additional securities. We closely monitor collateral levels to ensure adequate levels are maintained, while mitigating the potential risk of over-collateralization.

#### 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 June 30, 2023 and December 31, 2022, total FHLB borrowings were $0 and $325.0 million, respectively. The decrease in FHLB borrowings was a result of the deposit growth during the first quarter of 2023 that primarily funded our loan growth and supported other funding needs and allowing us to repay our FHLB advances. As of March 31, 2023, we had $580.8 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 was $3.9 million and $6.4 million at March 31, 2023 and December 31, 2022, respectively.

We had secured borrowings of $20.6 million as of June 30, 2023 related to loan transfers to another financial institution during the three and six months ended June 30, 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. For additional information on secured borrowings refer to “Note 1 –Accounting Policies” in this Form 10-Q/A.

### 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 $65 million, and utilize securities sold under agreements to repurchase (“repo”) and reverse repurchase agreement borrowings from approved securities dealers, as needed.

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.

At June 30, 2023, we had substantial liquidity on the balance sheet with cash and equivalents of $100.9 million versus $77.9 million at December 31, 2022 largely due to the growth in digital platform deposits described above.

At June 30, 2023 and December 31, 2022, we had pledged callable agency securities, residential government-sponsored mortgage-backed securities and collateralized mortgage obligations with a carrying value of $4.6 million and $14.2 million, respectively, to customers who require collateral for overnight repurchase agreements and deposits.

The balance in repo accounts at June 30, 2023 and December 31, 2022 was $3.9 million and $6.5 million, respectively.

We repaid our short-term FHLB advances of $325.0 million that were outstanding as of December 31, 2022 and matured in the first quarter of 2023. As a result, we have all of our FHLB capacity available for future liquidity needs. At June 30, 2023, Primis Bank had lendable collateral value in the form of residential 1-4 family mortgages, HELOCs, commercial mortgage loans, and investment securities supporting borrowing capacity of approximately $580.8 million from the FHLB.

In June 2023, the Bank began participating in the Federal Reserve discount window borrowing program. At June 30, 2023, the Bank had borrowing capacity of $489.6 million within the program.

In March 2023, the Federal Reserve established the Bank Term Funding Program (“BTFP”) in response to recent industry disruption, offering loans with up to one year in maturity to eligible depository institutions in exchange for pledged collateral in the form of U.S. Treasuries, agency debt and mortgage-backed securities and other qualifying assets. Borrowing capacity under the BTFP is based on the par value, not fair value, of the collateral. At June 30, 2023, we had securities available of $138.0 million for utilization with the BTFP, with no borrowings outstanding under the program at June 30, 2023.

The Bank also utilizes institutional and brokered certificates of deposit to supplement customer funding. At June 30, 2023, we had $75.0 million of brokered deposits outstanding. We had remaining brokered CD capacity under internal policy of approximately $321.0 million.

At June 30, 2023, we had $495.4 million of unfunded lines of credit and undisbursed construction loan funds, not all of which will ultimately be drawn. The amount of certificate of deposit accounts maturing in less than one year was $379.6 million as of June 30, 2023, including $75.0 million of brokered CDs. Management anticipates that funding requirements for these commitments can be met in the normal course.

As of June 30, 2023, 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 June 30, 2023, Primis has no material commitments for capital expenditures.

### Capital Resources

Capital management consists of providing equity to support both current and future operations. Primis Financial Corp. and its subsidiary 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. At June 30, 2023 and December 31, 2022, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for PCA.

Quantitative measures established by regulation to ensure capital adequacy require Primis 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 June 30, 2023, 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 June 30, ​ 2023 ​ | ​ ​ ​ ​ December 31, ​ 2022 ​ |
| --- | --- | ---: | --- | ---: | ---: |
| Leverage ratio |  | 4.00% | n/a | 7.74% | 9.52% |
| Common equity tier 1 capital ratio |  | 4.50% | n/a | 9.21% | 10.07% |
| Tier 1 risk-based capital ratio |  | 6.00% | n/a | 9.51% | 10.40% |
| Total risk-based capital ratio |  | 8.00% | n/a | 12.96% | 14.33% |
| ​ | ​ | ​ ​ | ​ ​ | ​ ​ | ​ ​ |
| **Primis Bank** |  | ​ | ​ ​ | ​ ​ | ​ ​ |
| Leverage ratio |  | 4.00% | 5.00% | 9.35% | 11.24% |
| Common equity tier 1 capital ratio |  | 7.00% | 6.50% | 11.51% | 12.40% |
| Tier 1 risk-based capital ratio |  | 8.50% | 8.00% | 11.51% | 12.40% |
| Total risk-based capital ratio |  | 10.50% | 10.00% | 12.71% | 13.59% |

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

Primis Financial Corp. and Primis Bank are required to meet minimum capital requirements set forth by regulatory authorities. 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 4.71% at June 30, 2023, 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.

### CRITICAL ACCOUNTING POLICIES (Restated)

The critical accounting policies are discussed in MD&A in our restated Annual Report on Form 10-K/A for the year ended December 31, 2022. 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/A for the year ended December 31, 2022. 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/A.

## Market risk

As filed, 6,447 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.

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 100 basis points, measured in 100 basis point increments) as of June 30, 2023 and December 31, 2022. All changes are within our Asset/Liability Risk Management Policy guidelines.

*(dollar amounts in thousands)*

| ​ ​ ​ ​ ​ Change in Interest Rates in Basis Points (Rate Shock) ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Sensitivity of Economic Value of Equity As of June 30, 2023 ​ ​ Economic Value of Equity ​ ​ Amount | ​ ​ ​ | ​ ​ ​ ​ $ Change From Base | ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ From Base | ​ ​ Economic Value of Equity as a % of Total ​ Assets | ​ ​ Equity Book Value |
| --- | --- | ---: | --- | ---: | ---: | ---: | ---: |
| Up 400 | ​ | $503,320 | ​ | $(57,915) | (10.32)% | 13.02% | 128.92% |
| Up 300 | ​ | 515,991 | ​ | (45,244) | (8.06)% | 13.35% | 132.16% |
| Up 200 | ​ | 527,895 | ​ | (33,340) | (5.94)% | 13.65% | 135.21% |
| Up 100 | ​ | 551,187 | ​ | (10,048) | (1.79)% | 14.26% | 141.18% |
| Base | ​ | 561,235 | ​ | — | —% | 14.52% | 143.75% |
| Down 100 | ​ | 556,910 | ​ | (4,325) | (0.77)% | 14.40% | 142.64% |
| Down 200 | ​ | 534,924 | ​ | (26,311) | (4.69)% | 13.84% | 137.01% |

*(dollar amounts in thousands)*

| ​ ​ ​ ​ ​ Change in Interest Rates in Basis Points (Rate Shock) ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Sensitivity of Economic Value of Equity As of December 31, 2022 ​ ​ Economic Value of Equity ​ ​ Amount | ​ ​ ​ | ​ ​ ​ ​ $ Change From Base | ​ ​ ​ | ​ ​ ​ ​ ​ % Change ​ From Base | ​ ​ Economic Value of Equity as a % of Total ​ Assets | ​ ​ Equity Book Value |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: | ---: |
| Up 400 | ​ | $481,135 | ​ | $(63,410) |  | (11.64)% | 13.49% | 123.70% |
| Up 300 | ​ | 496,136 | ​ | (48,409) |  | (8.89)% | 13.91% | 127.55% |
| Up 200 | ​ | 510,807 | ​ | (33,738) |  | (6.20)% | 14.32% | 131.32% |
| Up 100 | ​ | 534,163 | ​ | (10,382) |  | (1.91)% | 14.98% | 137.33% |
| Base | ​ | 544,545 | ​ | — |  | —% | 15.27% | 140.00% |
| Down 100 | ​ | 539,297 | ​ | (5,248) |  | (0.96)% | 15.12% | 138.65% |
| Down 200 | ​ | 513,948 | ​ | (30,597) |  | (5.62)% | 14.41% | 132.13% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ ​ |

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 at June 30, 2023 and December 31, 2022 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 at June 30, 2023 and December 31, 2022.

*(dollar amounts in thousands)*

| ​ ​ ​ ​ Change in Interest Rates in Basis Points (Rate Shock) ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Sensitivity of Net Interest Income As of June 30, 2023 Adjusted Net Interest Income ​ ​ Amount | ​ ​ | ​ ​ $ Change From Base |
| --- | --- | ---: | --- | ---: |
| Up 400 | ​ | $101,999 | ​ | $(13,566) |
| Up 300 | ​ | 104,695 | ​ | (10,870) |
| Up 200 | ​ | 107,389 | ​ | (8,176) |
| Up 100 | ​ | 112,004 | ​ | (3,561) |
| Base | ​ | 115,565 | ​ | — |
| Down 100 | ​ | 117,594 | ​ | 2,029 |
| Down 200 | ​ | 117,636 | ​ | 2,071 |

*(dollar amounts in thousands)*

| ​ ​ ​ ​ Change in Interest Rates in Basis Points (Rate Shock) ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Sensitivity of Net Interest Income As of December 31, 2022 Adjusted Net Interest Income ​ ​ Amount | ​ ​ | ​ ​ $ Change From Base |
| --- | --- | ---: | --- | ---: |
| Up 400 | ​ | $108,514 | ​ | $(12,447) |
| Up 300 | ​ | 111,127 | ​ | (9,834) |
| Up 200 | ​ | 113,730 | ​ | (7,231) |
| Up 100 | ​ | 117,811 | ​ | (3,150) |
| Base | ​ | 120,961 | ​ | — |
| Down 100 | ​ | 122,070 | ​ | 1,109 |
| Down 200 | ​ | 120,687 | ​ | (274) |

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

## Controls and procedures

As filed, 7,363 characters.

*(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/A, 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) 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 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/A. 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 restated 2022 Annual Report on Form 10-K/A related to complex accounting arrangements and also due to the identification of an additional material weakness related to the transfer of certain loans to another financial institution during the six months ended June 30, 2023.

Management identified the additional material weakness over the Company’s internal controls over financial reporting for the six months ended June 30, 2023 related to accounting determinations for transfers of financial assets including lack of a formally designed process and procedure for evaluation of loan transfers. The existing procedures did not outline the process to be taken and individuals to be involved in assessment of the proper accounting for loan transfers and were not sufficient enough to facilitate a proper conclusion on loan transfer transactions.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Amendment. The Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2023, at the reasonable assurance level, because of the material weakness in internal controls, which were disclosed in the Company's restated Annual Report on Form 10-K/A for the year ended December 31, 2022 (with respect to the Consumer Program) and Current Report on Form 8-K on March 1, 2024 (with respect to the loan transfers). Notwithstanding the material weaknesses, the Company’s management, including the CEO and CFO, has concluded that the condensed consolidated financial statements, included in the Form 10-Q/A, for the three and six months ended June 30, 2023, 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

### Remediation Plans

#### (i) Complex accounting arrangements

Management continues to review and make changes to the overall design of its internal control environment, including implementing additional internal controls over the identification of complex agreements the Company enters into and ensuring the appropriate level of review of these agreements by an individual with the requisite accounting expertise. The Company is adding additional internal controls to its financial close and reporting process to enhance the effectiveness of internal controls over financial reporting to require appropriate levels of accounting management review of new transactions. Additionally, the Company will seek appropriate third-party accounting expertise when it determines a transaction contains complex arrangements that management does not have sufficient expertise to assess and conclude upon. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period. The Company has made progress in the remediation efforts related to the material weakness and anticipates the control weakness to be remediated as soon as possible.

#### (ii) Loan transfers

Management continues to review and make changes to the overall design of its internal control environment, including implementing additional internal controls over the identification of loan transfer transactions and management review of the transactions. The Company has added additional internal controls to its financial close and reporting process to enhance the effectiveness of internal controls over financial reporting. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period. The Company has made progress in the remediation efforts related to the material weakness and anticipates the control weakness to be remediated as soon as possible.

The Company’s remediation efforts include:

- created a specific control in its quarterly financial close process to facilitate the identification of loan transfers and trigger an accounting review;
- created a process to assess loan transfers in accordance with applicable accounting guidance;
- established procedures to enable the accounting assessment in accordance with U.S. GAAP; and
- developed criteria that facilitates the decision process for use of outside legal counsel to assist in evaluating the legal isolation requirement.

The Company’s actions are subject to ongoing executive management review and are also subject to audit committee oversight. If the Company is unable to successfully remediate the material weakness, or if in the future, the Company identifies further material weaknesses in its internal control over financial reporting, the Company may not detect errors on a timely basis, and its condensed consolidated financial statements may be materially misstated. Management may determine that additional measures are required to address control deficiencies, strengthen internal control over financial reporting, or it may determine to modify the remediation measures described above.

*(b) Changes in Internal Control over Financial Reporting*. As a result of the acquisition of Primis Mortgage, the Company is continuously working to integrate Primis Mortgage into its internal control over financial reporting process. Except for the changes in connection with this integration of Primis Mortgage and the material weaknesses noted above, there were no changes in our internal controls over financial reporting that occurred during the three and six months ended June 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 2,448 characters.

There were no changes to the risk factors that were previously disclosed in our restated Annual Report on Form 10-K/A for the year ended December 31, 2022, except for the addition of the item below.

*Recent negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations.*

The recent bank failures and related negative media attention have generated significant market trading volatility among publicly traded bank holding companies and, in particular, regional, as well as community banks like the Company.

These developments have negatively impacted customer confidence in regional and community banks, which could prompt customers to maintain their deposits with larger financial institutions. Further, competition for deposits has increased in recent periods, and the cost of funding has similarly increased, putting pressure on our net interest margin. If we were required to sell a portion of our securities portfolio to address liquidity needs, we may incur losses, including as a result of the negative impact of rising interest rates on the value of our securities portfolio, which could negatively affect our earnings and our capital. If we were required to raise additional capital in the current environment, any such capital raise may be on unfavorable terms, thereby negatively impacting book value and profitability. While we have taken actions to improve our funding, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.

We also anticipate increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to Primis Bank, designed to address the recent negative developments in the banking industry, all of which may increase our costs of doing business and reduce our profitability. Among other things, there may be an increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, losses embedded in the held-to-maturity portion of our securities portfolio, contingent liquidity, CRE composition and concentration, capital position and our general oversight and internal control structures regarding the foregoing. As a result, Primis Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community.

Filed Nov 1, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-014136. Last ingested by Listed: Oct 24, 2026, 15:09 ET. No prices; not investment advice.