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

- Company: [Primis Financial Corp.](/companies/frst.md) (CIK 1325670)
- Form: 10-Q/A
- Filed: 2024-11-08
- Accepted by EDGAR: Nov 8, 2024, 16:01 ET
- Period: 2023-09-30
- Accession: 0001558370-24-015047
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1325670/000155837024015047/frst-20230930x10qa.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1325670/000155837024015047/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $23.7m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $69.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $1.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $3.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$6.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $339.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.24 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.24 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 24,642,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 24,636,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$36.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $1.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $7.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-09-30 | $93.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-09-30 | $3.84bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $3.46bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $377.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 80,543 characters.

Management’s discussion and analysis is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Primis. This discussion and analysis should be read with the condensed consolidated financial statements, the footnotes thereto, and the other financial data included in this report and in our restated annual report on Form 10-K/A for the year ended December 31, 2022. Results of operations for the three and nine months ended September 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 nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 for the consolidated statements of income (loss) and comprehensive loss. For the consolidated balance sheets, the emphasis of this discussion will be the balances as of September 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”* section 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;
- potential impacts of the adverse developments in the banking industry during 2023 highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto;
- 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;

- fraudulent and negligent acts by loan applicants, mortgage brokers and our employees;
- our ability to recover certain losses related to fraudulent loans under the Company's insurance policies and to successfully complete the claims process and minimize the financial impact of these loans;
- our ability to implement our various strategic and growth initiatives, including our Panacea Financial and Life Premium Finance Divisions, new digital banking platform, V1BE fulfillment service and Primis Mortgage Company as well as our cost saving project to reduce administrative and branch expenses;
- adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions;
- changes in the local economies in our market areas which adversely affect our customers and their ability to transact profitable business with us, including the ability of our borrowers to repay their loans according to their terms or a change in the value of the related collateral;
- changes in interest rates, inflation, loan demand, real estate values, or competition, as well as labor shortages, supply chain disruptions, the threat of recession and volatile equity capital markets;
- changes in the availability of funds resulting in increased costs or reduced liquidity, as well as the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs;
- a deterioration or downgrade in the credit quality and credit agency ratings of the investment securities in our investment securities portfolio;
- impairment concerns and risks related to our investment securities portfolio of collateralized mortgage obligations, agency mortgage-backed securities and obligations of states and political subdivisions;
- the incurrence and possible impairment of goodwill associated with current or future acquisitions and adverse short-term effects on our results of operations;
- increased credit risk in our assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of our total loan portfolio, including as a result of rising 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 ability to identify and address potential cybersecurity risks on our systems and/or third party vendors and service providers on which we rely, heightened by increased use of our virtual private network platform, including data security breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;
- 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; and
- 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. As of September 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 consolidated eight branch locations, reducing total branches from thirty-two to twenty-four, in late October 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

U.S. economic growth accelerated in the third quarter of 2023, with Real Gross Domestic Product growing by an annualized 4.9%. According to the U.S. Bureau of Labor and Statistics, the rate of unemployment was 3.8% in September 2023 and nonfarm payrolls grew at a robust pace. The Federal Reserve (the “Fed”) has raised interest rates 525 bps in total since March of 2022, a pace that has not been experienced in more than 40 years, and sits at a range of 5.25% to 5.50%. Inflation, while beginning to show signs of moderating, remains higher than the Fed’s long term target rate of 2.0% and the Fed appears committed to maintaining high rates until inflation is back at their target rate. The Fed has indicated that future rate adjustments will be data-dependent. Continued higher inflation, as well as strong employment numbers, could lead to at least one more rate increase in 2023 or early 2024.

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

### FINANCIAL HIGHLIGHTS (Revised and Restated)

- Net loss for the three months ended September 30, 2023 totaled $6.0 million, or $0.24 basic and diluted loss per share, compared to net income of $2.9 million, or $0.12 basic and diluted earnings per share for the three months ended September 30, 2022. Net income for the nine months ended September 30, 2023 totaled $0.3 million, or $0.01 basic and diluted earnings per share, compared to $12.1 million, or $0.49 basic diluted earnings per share for the nine months ended September 30, 2022.
- Total assets as of September 30, 2023 were $3.8 billion, an increase of 7.6% compared to December 31, 2022.
- Total loans, excluding Paycheck Protection Program (“PPP”) balances as of September 30, 2023, were $3.2 billion, an increase of $234.2 million, or 8%, from December 31, 2022.
- Total deposits were $3.3 billion at September 30, 2023, an increase of 21% compared to December 31, 2022.
- Non-time deposits increased to $2.84 billion at September 30, 2023, an increase of $584.1 million, or 26%, compared to December 31, 2022.
- The ratio of gross loans to deposits declined to 97% at September 30, 2023, from 108% at December 31, 2022.
- Net interest margin of 2.70% in the third quarter of 2023 was down from 3.53% in the third quarter of 2022 and up from 2.36% in the second quarter of 2023.
- Allowance for credit losses to total loans was 1.13% at September 30, 2023, compared to 1.17% at December 31, 2022.
- We began to realize costs savings from administrative reductions and other cost controls with noninterest expense, excluding the goodwill impairment charge, of $25.8 million in the third quarter of 2023 versus $30.4 million in the second quarter of 2023.
- Asset quality improved meaningfully from year end with nonperforming assets as a percent of total assets (excluding SBA guarantees) at 0.51% at September 30, 2023 compared to 0.98% at December 31, 2022.

### RESULTS OF OPERATIONS (Revised and Restated)

### Net Income (Loss)

***Three-Month Comparison.*** Net loss for the three months ended September 30, 2023 totaled $6.0 million, or $0.24 basic and diluted loss per share, compared to net income of $2.9 million, or $0.12 basic and diluted earnings per share for the three months ended September 30, 2022. The 307% decrease in net income (loss) during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was driven by a $11.2 million goodwill impairment charge in the third quarter.

***Nine-Month Comparison.*** Net income for the nine months ended September 30, 2023 totaled $0.3 million, or $0.01 basic and diluted earnings per share, compared to $12.1 million, or $0.49 basic and diluted earnings per share for the nine months ended September 30, 2022. The 97% decrease in net income during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily related to a $11.2 million goodwill impairment charge in the third quarter of 2023. The decrease was also driven by higher noninterest expenses from an increase in employee compensation and benefits expense due to the growth of Primis Mortgage, higher data processing expense driven by the increase in customer accounts and related transactions on our digital deposit platform, and an increase in provision for loan losses associated with several specific loan relationships in the current year, partially offset by higher mortgage banking income due to the growth of Primis Mortgage and an increase in Consumer Program derivative income due to higher origination volume during the year of Consumer Program loans with 0% promotional interest rates.

### 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 $24.3 million for the three months ended September 30, 2023, compared to $27.1 million for the three months ended September 30, 2022. Our net interest margin for the three months ended September 30, 2023 was 2.70%, compared to 3.53% for the three months ended September 30, 2022. Net interest margin for three months ended September 30, 2023 compared to the same period in 2022 was affected primarily by the interest spread being less, indicative of the cost of interest bearing liabilities increasing more than the yield on interest bearing assets. We also had interest-bearing liabilities grow, on average, quicker than interest-earning assets over the periods. Total income on interest-earning assets was $48.0 million and $32.3 million for the three months ended September 30, 2023 and 2022, respectively, as average interest-earning assets grew approximately $528 million. The yield on average interest-earning assets was 5.33% and 4.20% for the three months ended September 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 September 30, 2023 compared to the three months ended September 30, 2022. The cost of average interest-bearing deposits increased 239 basis points to 3.03% for the three months ended September 30, 2023, compared to 0.64% for the three months ended September 30, 2022, as average interest-bearing deposits grew approximately $795 million. The increase in interest expense was driven by higher costs in every interest-bearing category with the largest driver being an increase in average savings deposits of $485 million with an average increase in cost of these deposits of 355 basis points. This increase was primarily a result of the use of our digital deposit platform by new and existing customers which generated approximately $1.0 billion in new deposits during the first quarter of 2023.

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 September 30, 2023 ​ ​ Average Balance ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ ​ ​ | ​ ​ September 30, 2022 ​ ​ Average Balance ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: |
| Loans held for sale | ​ | $55,775 | ​ | $873 | ​ | 6.21% | $21,199 | ​ | $263 | ​ | 4.92% |
| Loans, net of deferred fees (1) (2) | ​ | ​ 3,193,236 | ​ | ​ 44,439 | ​ | 5.52% | ​ 2,667,406 | ​ | ​ 29,950 | ​ | 4.45% |
| Investment securities | ​ | ​ 234,601 | ​ | ​ 1,593 | ​ | 2.69% | ​ 269,780 | ​ | ​ 1,518 | ​ | 2.23% |
| Other earning assets | ​ | ​ 93,159 | ​ | ​ 1,122 | ​ | 4.78% | ​ 90,268 | ​ | ​ 555 | ​ | 2.44% |
| **Total earning assets** | ​ | ​ 3,576,771 | ​ | ​ 48,027 | ​ | 5.33% | ​ 3,048,653 | ​ | ​ 32,286 | ​ | 4.20% |
| Allowance for credit losses | ​ | ​ (37,262) | ​ | ​ ​ | ​ | ​ ​ | ​ (29,830) | ​ | ​ ​ | ​ | ​ ​ |
| Total non-earning assets | ​ | ​ 305,300 | ​ | ​ ​ | ​ | ​ ​ | ​ 264,564 | ​ | ​ ​ | ​ | ​ ​ |
| **Total assets** | ​ | $3,844,809 | ​ | ​ ​ | ​ | ​ ​ | $3,283,387 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Liabilities and stockholders' equity** | ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ |
| Interest-bearing liabilities: | ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ |
| NOW and other demand accounts | ​ | $806,339 | ​ | $4,460 | ​ | 2.19% | $660,387 | ​ | $536 | ​ | 0.32% |
| Money market accounts | ​ | ​ 850,892 | ​ | ​ 6,555 | ​ | 3.06% | ​ 803,860 | ​ | ​ 1,667 | ​ | 0.82% |
| Savings accounts | ​ | ​ 703,809 | ​ | ​ 6,760 | ​ | 3.81% | ​ 219,240 | ​ | ​ 141 | ​ | 0.26% |
| Time deposits | ​ | ​ 460,961 | ​ | ​ 3,801 | ​ | 3.27% | ​ 343,986 | ​ | ​ 943 | ​ | 1.09% |
| **Total interest-bearing deposits** | ​ | ​ 2,822,001 | ​ | ​ 21,576 | ​ | 3.03% | ​ 2,027,473 | ​ | ​ 3,287 | ​ | 0.64% |
| Borrowings | ​ | ​ 119,797 | ​ | ​ 2,121 | ​ | 7.02% | ​ 166,622 | ​ | ​ 1,870 | ​ | 4.45% |
| **Total interest-bearing liabilities** | ​ | ​ 2,941,798 | ​ | ​ 23,697 | ​ | 3.20% | ​ 2,194,095 | ​ | ​ 5,157 | ​ | 0.93% |
| Noninterest-bearing liabilities: | ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ |
| Demand deposits | ​ | ​ 472,485 | ​ | ​ ​ | ​ | ​ ​ | ​ 665,020 | ​ | ​ ​ | ​ | ​ ​ |
| Other liabilities | ​ | ​ 39,303 | ​ | ​ ​ | ​ | ​ ​ | ​ 24,266 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities** | ​ | ​ 3,453,586 | ​ | ​ ​ | ​ | ​ ​ | ​ 2,883,381 | ​ | ​ ​ | ​ | ​ ​ |
| Stockholders' equity | ​ | ​ 391,223 | ​ | ​ ​ | ​ | ​ ​ | ​ 400,006 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities and stockholders' equity** | ​ | $3,844,809 | ​ | ​ ​ | ​ | ​ ​ | $3,283,387 | ​ | ​ ​ | ​ | ​ ​ |
| Net interest income | ​ | ​ ​ | ​ | $24,330 | ​ | ​ ​ | ​ ​ | ​ | $27,129 | ​ | ​ ​ |
| Interest rate spread | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.13% | ​ ​ | ​ | ​ ​ | ​ | 3.27% |
| Net interest margin | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.70% | ​ ​ | ​ | ​ ​ | ​ | 3.53% |

(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.

***Nine-Month Comparison.*** Net interest income was $73.0 million for the nine months ended September 30, 2023, compared to $74.4 million for the nine months ended September 30, 2022. Our net interest margin for the nine months ended September 30, 2023 was 2.61%, compared to 3.27% for the nine months ended September 30, 2022. The combination in the industry of growth in deposit account rates and consumer preferences shifting from non-interest bearing to higher rate products impacted interest expense and net interest income during the period. Net interest margin was further affected by excess cash balances during the first half of the year, that are part of average other earning assets that earned lower rates compared to the rates earned by our loan portfolio and paid on the related deposits that brought the cash onto the balance sheet. Total income on interest-earning assets was $142.5 million and $87.0 million for the nine months ended September 30, 2023 and 2022, respectively, driven by average interest-earning asset growth of $686 million. The yield on average interest-earning assets was 5.10% and 3.82% for the nine months ended September 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 233 basis points to 2.84% for the nine months ended September 30, 2023, compared to 0.51% for the nine months ended September 30, 2022 as average interest-bearing deposits grew approximately $792 million. The increase was driven by higher costs in every deposit category with the largest driver being an increase in average savings deposits of $553 million with an average increase in cost of those deposits of 352 basis points. This increase was primarily a result of the aforementioned growth of the digital deposit platform. Average loans during the nine months ended September 30, 2023 were $3.1 billion, compared to $2.5 billion during the nine months ended September 30, 2022 and the yield on the loans grew by 102 basis points.

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 Nine Months Ended September 30, 2023 ​ ​ Average Balance ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ | ​ ​ September 30, 2022 ​ ​ Average Balance ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Income/ Expense ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Yield/ ​ Rate ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | ---: | --- | --- | --- | --- | ---: |
| Loans held for sale | ​ | $43,384 | ​ | $1,964 | ​ | 6.05% | $9,456 | ​ | $356 | ​ | 5.03% |
| Loans, net of deferred fees (1) (2) | ​ | ​ 3,099,224 | ​ | ​ 123,289 | ​ | 5.32% | ​ 2,512,433 | ​ | ​ 80,835 | ​ | 4.30% |
| Investment securities | ​ | ​ 240,525 | ​ | ​ 4,728 | ​ | 2.63% | ​ 286,525 | ​ | ​ 4,393 | ​ | 2.05% |
| Other earning assets | ​ | ​ 348,831 | ​ | ​ 12,504 | ​ | 4.79% | ​ 237,299 | ​ | ​ 1,409 | ​ | 0.79% |
| **Total earning assets** | ​ | ​ 3,731,964 | ​ | ​ 142,485 | ​ | 5.10% | ​ 3,045,713 | ​ | ​ 86,993 | ​ | 3.82% |
| Allowance for credit losses | ​ | ​ (35,722) | ​ | ​ ​ | ​ | ​ ​ | ​ (29,640) | ​ | ​ ​ | ​ | ​ ​ |
| Total non-earning assets | ​ | ​ 296,197 | ​ | ​ ​ | ​ | ​ ​ | ​ 259,914 | ​ | ​ ​ | ​ | ​ ​ |
| **Total assets** | ​ | $3,992,439 | ​ | ​ ​ | ​ | ​ ​ | $3,275,987 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Liabilities and stockholders' equity** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ |
| Interest-bearing liabilities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ |
| NOW and other demand accounts | ​ | $785,480 | ​ | $11,070 | ​ | 1.88% | $723,857 | ​ | $1,758 | ​ | 0.32% |
| Money market accounts | ​ | ​ 844,752 | ​ | ​ 17,587 | ​ | 2.78% | ​ 808,013 | ​ | ​ 3,464 | ​ | 0.57% |
| Savings accounts | ​ | ​ 775,024 | ​ | ​ 21,915 | ​ | 3.78% | ​ 222,105 | ​ | ​ 432 | ​ | 0.26% |
| Time deposits | ​ | ​ 481,813 | ​ | ​ 10,831 | ​ | 3.01% | ​ 341,160 | ​ | ​ 2,317 | ​ | 0.91% |
| **Total interest-bearing deposits** | ​ | ​ 2,887,069 | ​ | ​ 61,403 | ​ | 2.84% | ​ 2,095,135 | ​ | ​ 7,971 | ​ | 0.51% |
| Borrowings | ​ | ​ 172,662 | ​ | ​ 8,096 | ​ | 6.27% | ​ 148,549 | ​ | ​ 4,594 | ​ | 4.13% |
| **Total interest-bearing liabilities** | ​ | ​ 3,059,731 | ​ | ​ 69,499 | ​ | 3.04% | ​ 2,243,684 | ​ | ​ 12,565 | ​ | 0.75% |
| Noninterest-bearing liabilities: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ ​ |
| Demand deposits | ​ | ​ 500,459 | ​ | ​ ​ | ​ | ​ ​ | ​ 602,872 | ​ | ​ ​ | ​ | ​ ​ |
| Other liabilities | ​ | ​ 35,457 | ​ | ​ ​ | ​ | ​ ​ | ​ 23,179 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities** | ​ | ​ 3,595,647 | ​ | ​ ​ | ​ | ​ ​ | ​ 2,869,735 | ​ | ​ ​ | ​ | ​ ​ |
| Stockholders' equity | ​ | ​ 396,792 | ​ | ​ ​ | ​ | ​ ​ | ​ 406,252 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities and stockholders' equity** | ​ | $3,992,439 | ​ | ​ ​ | ​ | ​ ​ | $3,275,987 | ​ | ​ ​ | ​ | ​ ​ |
| Net interest income | ​ | ​ ​ | ​ | $72,986 | ​ | ​ ​ | ​ ​ | ​ | $74,428 | ​ | ​ ​ |
| Interest rate spread | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.07% | ​ ​ | ​ | ​ ​ | ​ | 3.07% |
| Net interest margin | ​ | ​ ​ | ​ | ​ ​ | ​ | 2.61% | ​ ​ | ​ | ​ ​ | ​ | 3.27% |

(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 nine months ended September 30, 2023 of $1.6 million and $11.2 million, respectively, compared to a provision for credit losses for the three and nine months ended

September 30, 2022 of $2.9 million and $3.4 million, respectively. For the three and nine months ended September 30, 2023, $2.1 million and $8.2 million, respectively, were due to charge-offs and additional reserve calculated in our normal reserve process for the Consumer Program portfolio. Excluding the provision amounts related to the Consumer Program, we would have recorded a recovery for credit losses of $0.5 million and a provision of $3.1 million for the three and nine months ended September 30, 2023, respectively.

We had charge-offs totaling $4.5 million and $1.2 million during the three months ended September 30, 2023 and 2022, respectively, and $10.7 million and $1.3 million during nine months ended September 30, 2023 and 2022, respectively. During the three and nine months ended September 30, 2023, the charge-offs included $2.2 million and $5.7 million, respectively, related to the Consumer Program and a majority of the remaining were related to the partial resolution of the assisted living relationship that had been reserved for in prior quarters. There were recoveries totaling $0.2 million and $10 thousand during the three months ended September 30, 2023 and 2022, respectively, and $0.8 million during both nine months ended September 30, 2023 and 2022.

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 September 30, 2023 and 2022:

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | --- |
| Account maintenance and deposit service fees | ​ | $1,534 | ​ | $1,525 |  | $9 |
| Income from bank-owned life insurance | ​ | 787 | ​ | 394 |  | ​ 393 |
| Mortgage banking income | ​ | 4,922 | ​ | 2,197 |  | ​ 2,725 |
| Gain on sale of loans | ​ | ​ 217 | ​ | ​ — | ​ | ​ 217 |
| Consumer Program derivative | ​ | ​ 2,033 | ​ | ​ (871) | ​ | ​ 2,904 |
| Other noninterest income | ​ | 231 | ​ | 283 |  | ​ (52) |
| **Total noninterest income** | ​ | $9,724 | ​ | $3,528 | ​ | $6,196 |

Noninterest income increased 176% to $9.7 million for the three months ended September 30, 2023, compared to $3.5 million for the three months ended September 30, 2022. The increase in noninterest income was primarily related to $2.9 million of higher Consumer Program derivative income and $2.7 million of higher mortgage banking income. The Consumer Program derivative was comprised of $9 thousand in fair value adjustment gains and $2.0 million of income related to waived interest and credit loss reimbursements from the derivative counterparty under the Consumer Program agreement. In comparison, during the three months ended September 30, 2022, the Consumer Program derivative losses were driven by $0.9 million of fair value loss adjustments as a result of a smaller portion of the loan portfolio being 0% promotional interest loans compared to the current year combined with less credit losses in the prior year which results in expected payments by us to the derivative counterparty. We purchased Primis Mortgage on May 31, 2022, and during the third quarter of 2022 it was continuing to grow its staffing levels and operations and by comparison by the third quarter of 2023 it had thirteen months growth behind it and therefore materially more loan origination and sales volume driving the income during the third quarter of 2023.

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

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | --- |
| Account maintenance and deposit service fees | ​ | $4,215 | ​ | $4,318 |  | $(103) |
| Income from bank-owned life insurance | ​ | 1,601 | ​ | 1,147 |  | ​ 454 |
| Mortgage banking income | ​ | 14,435 | ​ | 2,790 |  | ​ 11,645 |
| Gain on sale of loans | ​ | ​ 268 | ​ | ​ — | ​ | ​ 268 |
| Consumer Program derivative | ​ | ​ 15,233 | ​ | ​ (1,055) | ​ | ​ 16,288 |
| Other noninterest income | ​ | 578 | ​ | 864 |  | ​ (286) |
| **Total noninterest income** | ​ | $36,330 | ​ | $8,064 |  | $28,266 |
| **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |

Noninterest income increased 351% to $36.3 million for the nine months ended September 30, 2023, compared to $8.1 million for the nine months ended September 30, 2022. The increase in noninterest income was primarily related to $16.3 million in higher Consumer Program derivative income and $11.6 million of higher mortgage banking income during the nine months ended September 30, 2023. The increase in the mortgage banking income is related to the purchase of Primis Mortgage in May 2022, resulting in only four months of operations in the results of last year compared to a full nine months in 2023, coupled with meaningful growth in the business 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 $4.1 million of income related to waived interest and credit loss reimbursements from the derivative counterparty under the Consumer Program agreement. The fair value adjustment gains on the Consumer Program derivative was driven by substantial growth of the promotional interest portion of the Consumer Program loan portfolio coupled with the increased credit losses on the overall portfolio.

### Noninterest Expense

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

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Salaries and benefits | ​ | $13,809 | ​ | $12,594 | ​ | $1,215 |
| Occupancy expenses | ​ | 1,633 | ​ | 1,402 | ​ | 231 |
| Furniture and equipment expenses | ​ | 1,537 | ​ | 1,455 | ​ | 82 |
| Amortization of core deposit intangible | ​ | 317 | ​ | 326 | ​ | (9) |
| Virginia franchise tax expense | ​ | 849 | ​ | 813 | ​ | 36 |
| FDIC insurance assessment | ​ | ​ 820 | ​ | ​ 199 | ​ | ​ 621 |
| Data processing expense | ​ | 2,250 | ​ | 1,528 | ​ | 722 |
| Marketing expense | ​ | ​ 377 | ​ | ​ 938 | ​ | ​ (561) |
| Telephone and communication expense | ​ | 356 | ​ | 342 | ​ | 14 |
| Professional fees | ​ | 1,118 | ​ | 1,261 | ​ | (143) |
| Miscellaneous lending expenses | ​ | ​ 424 | ​ | ​ 701 | ​ | ​ (277) |
| Fraud losses | ​ | ​ 267 | ​ | ​ 263 | ​ | ​ 4 |
| Goodwill impairment | ​ | ​ 11,150 | ​ | ​ — | ​ | ​ 11,150 |
| Other operating expenses | ​ | 2,041 | ​ | 2,063 | ​ | (22) |
| **Total noninterest expenses** | ​ | $36,948 | ​ | $23,885 | ​ | $13,063 |

Noninterest expenses were $36.9 million during the three months ended September 30, 2023, compared to $23.9 million during the three months ended September 30, 2022. The 55% increase in noninterest expenses was primarily related to $11.2 million of goodwill impairment in the third quarter of 2023. Increase in noninterest expense was also driven by a $1.2 million increase in employee compensation in the third quarter of 2023 related to increased head count at the Bank, Primis Mortgage, and Panacea compared to the third quarter of 2022, along with personnel costs incurred related to the cost savings initiative announced at the end of the second quarter of 2023. The increase in noninterest expense during the three months ended September 30, 2023 was also attributable to a $0.7 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 and $0.7 million higher FDIC insurance costs due to the significant growth in deposits partially offset by a decline in marketing expense.

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

*(dollars in thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ For the Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Change |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Salaries and benefits | ​ | $44,120 | ​ | $32,792 | ​ | $11,328 |
| Occupancy expenses | ​ | 4,671 | ​ | 4,277 | ​ | 394 |
| Furniture and equipment expenses | ​ | 4,966 | ​ | 3,683 | ​ | 1,283 |
| Amortization of core deposit intangible | ​ | 952 | ​ | 1,008 | ​ | (56) |
| Virginia franchise tax expense | ​ | 2,546 | ​ | 2,440 | ​ | 106 |
| FDIC insurance assessment | ​ | ​ 2,254 | ​ | ​ 658 | ​ | ​ 1,596 |
| Data processing expense | ​ | 7,329 | ​ | 4,311 | ​ | 3,018 |
| Marketing expense | ​ | ​ 1,467 | ​ | ​ 2,134 | ​ | ​ (667) |
| Telephone and communication expense | ​ | 1,149 | ​ | 1,090 | ​ | 59 |
| Professional fees | ​ | 3,055 | ​ | 3,182 | ​ | (127) |
| Miscellaneous lending expenses | ​ | ​ 1,878 | ​ | ​ 1,074 | ​ | ​ 804 |
| Fraud losses | ​ | ​ 2,719 | ​ | ​ 373 | ​ | ​ 2,346 |
| Goodwill impairment | ​ | ​ 11,150 | ​ | ​ — | ​ | ​ 11,150 |
| Other operating expenses | ​ | 6,085 | ​ | 6,438 | ​ | (353) |
| **Total noninterest expenses** | ​ | $94,341 | ​ | $63,460 | ​ | $30,881 |
| **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |

Noninterest expenses were $94.3 million during the nine months ended September 30, 2023, compared to $63.5 million during the nine months ended September 30, 2022. The 49% increase in noninterest expenses was primarily attributable to a $11.2 million goodwill impairment charge in the third quarter of 2023 and a $11.3 million increase in employee compensation and benefits expense mainly related to increased head count at the Bank, Primis Mortgage and Panacea in the nine months ended September 30, 2023 compared to 2022 and also due to expenses associated with the branch consolidation announced in the second quarter of 2023. The increase in noninterest expense during the nine months ended September 30, 2023 was also driven by a $3.0 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 2023. The growth in deposits during the year, driven by the digital platform growth, also drove higher FDIC insurance costs of $1.6 million compared to the nine months ended September 30, 2022. Furniture and equipment expenses increased $1.3 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. We also experienced an increase of $2.3 million in fraud losses during the nine months ended September 30, 2023 primarily related to a substantial increase in deposit account fraud in the second quarter of 2023, which was also seen across the industry during that time. Miscellaneous lending expenses increased from prior year primarily driven by higher servicing costs paid to the Consumer Program counterparty that services the originated loans under the agreement, which increased significantly year-over-year.

### FINANCIAL CONDITION (Revised and Restated)

The following illustrates key balance sheet categories as of September 30, 2023 and December 31, 2022 (in thousands):

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ September 30, 2023 ​ ​ | ​ ​ ​ | ​ ​ December 31, 2022 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Change ​ ​ |
| --- | --- | ---: | --- | --- | --- | --- |
| Total cash and cash equivalents | ​ | $93,865 | ​ | $77,859 | ​ | $16,006 |
| Securities available-for-sale | ​ | 216,875 | ​ | 236,315 | ​ | (19,440) |
| Securities held-to-maturity | ​ | 11,975 | ​ | ​ 13,520 | ​ | ​ (1,545) |
| Loans held for sale | ​ | 66,266 | ​ | ​ 27,626 | ​ | ​ 38,640 |
| Net loans | ​ | 3,142,484 | ​ | ​ 2,912,093 | ​ | ​ 230,391 |
| Other assets | ​ | 307,394 | ​ | ​ 299,251 | ​ | ​ 8,143 |
| **Total assets** | ​ | $3,838,859 | ​ | $3,566,664 | ​ | $272,195 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Total deposits | ​ | $3,293,404 | ​ | $2,722,467 | ​ | $570,937 |
| Borrowings | ​ | ​ 129,011 | ​ | ​ 426,757 | ​ | ​ (297,746) |
| Other liabilities | ​ | ​ 38,834 | ​ | ​ 28,472 | ​ | ​ 10,362 |
| Total liabilities | ​ | ​ 3,461,249 | ​ | ​ 3,177,696 | ​ | ​ 283,553 |
| Total stockholders' equity | ​ | ​ 377,610 | ​ | ​ 388,968 | ​ | ​ (11,358) |
| **Total liabilities and stockholders' equity** | ​ | $3,838,859 | ​ | $3,566,664 | ​ | $272,195 |

### Loans

Total loans were $3.1 billion and $2.9 billion at September 30, 2023 and December 31, 2022, respectively, an 8% increase from year end. As of September 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 September 30, 2023 and December 31, 2022 (in thousands):

| ​ ​ ​ Loans secured by real estate: | ​ ​ | ​ ​ September 30, 2023 Amount ​ | ​ | ​ ​ ​ Percent | ​ ​ December 31, 2022 Amount ​ | ​ | ​ ​ ​ Percent |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Commercial real estate - owner occupied | ​ | $440,344 |  | 13.9% | $459,866 |  | 15.6% |
| Commercial real estate - non-owner occupied | ​ | 576,881 |  | 18.2% | 579,733 |  | 19.7% |
| Secured by farmland | ​ | 5,082 |  | 0.2% | 5,970 |  | 0.2% |
| Construction and land development | ​ | 172,005 |  | 5.4% | 148,690 |  | 5.0% |
| Residential 1-4 family | ​ | 600,389 |  | 18.9% | 609,694 |  | 20.7% |
| Multi- family residential | ​ | 129,586 |  | 4.1% | 140,321 |  | 4.8% |
| Home equity lines of credit | ​ | 59,996 |  | 1.9% | 65,152 |  | 2.2% |
| Total real estate loans | ​ | 1,984,283 |  | 62.4% | 2,009,426 |  | 68.2% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Commercial loans | ​ | 613,658 |  | 19.3% | 520,741 |  | 17.7% |
| Paycheck protection program loans | ​ | ​ 2,105 | ​ | 0.1% | ​ 4,564 | ​ | 0.2% |
| Consumer loans | ​ | 572,308 |  | 18.0% | 405,278 |  | 13.8% |
| Total Non-PCD loans | ​ | 3,172,354 |  | 99.8% | 2,940,009 |  | 99.8% |
| PCD loans | ​ | ​ 5,992 | ​ | 0.2% | ​ 6,628 | ​ | 0.2% |
| Total loans | ​ | $3,178,346 | ​ | 100.0% | $2,946,637 | ​ | 100.0% |
| ​ | ​ | ​ |  | ​ ​ | ​ |  | ​ |

### Consumer Program Loans

The Company has $186.8 million and $134.4 million of loans outstanding in the Consumer Program as of September 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 September 30, 2023, 44% of the loans were in a promotional period requiring no payment of interest on their loans with 47% of these promotional loan periods ending in the next 12 months and the remaining ending within 24 months of September 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 September 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 | ​ | $27,431 | ​ | $111,535 | ​ | $20,049 | ​ | $110,474 | ​ | $103,185 | ​ | $2,293 | ​ | $65,377 | ​ | $440,344 |
| Commercial real estate - non-owner occupied | ​ | ​ 17,328 | ​ | ​ 192,171 | ​ | ​ 39,581 | ​ | ​ 62,609 | ​ | ​ 67,710 | ​ | ​ 1,374 | ​ | ​ 196,108 | ​ | ​ 576,881 |
| Secured by farmland | ​ | ​ 1,544 | ​ | ​ 853 | ​ | ​ 288 | ​ | ​ 223 | ​ | ​ 864 | ​ | ​ — | ​ | ​ 1,310 | ​ | ​ 5,082 |
| Construction and land development | ​ | ​ 123,815 | ​ | ​ 24,637 | ​ | ​ 15,430 | ​ | ​ 748 | ​ | ​ 5,068 | ​ | ​ 677 | ​ | ​ 1,630 | ​ | ​ 172,005 |
| Residential 1-4 family | ​ | ​ 17,545 | ​ | ​ 44,730 | ​ | ​ 8,239 | ​ | ​ 28,556 | ​ | ​ 53,692 | ​ | ​ 71,436 | ​ | ​ 376,191 | ​ | ​ 600,389 |
| Multi- family residential | ​ | ​ 9,391 | ​ | ​ 61,921 | ​ | ​ 11,709 | ​ | ​ 1,351 | ​ | ​ 18,422 | ​ | ​ — | ​ | ​ 26,792 | ​ | ​ 129,586 |
| Home equity lines of credit | ​ | **​** 6,322 | ​ | ​ 3,294 | ​ | ​ 9,929 | ​ | ​ 49 | ​ | ​ 2,250 | ​ | ​ 30 | ​ | ​ 38,122 | ​ | ​ 59,996 |
| Total real estate loans | ​ | ​ 203,376 | ​ | ​ 439,141 | ​ | ​ 105,225 | ​ | ​ 204,010 | ​ | ​ 251,191 | ​ | ​ 75,810 | ​ | ​ 705,530 | ​ | ​ 1,984,283 |
| Commercial loans | ​ | ​ 110,201 | ​ | 114,604 | ​ | ​ 136,474 | ​ | ​ 198,879 | ​ | ​ 49,586 | ​ | ​ 1,120 | ​ | ​ 2,794 | ​ | ​ 613,658 |
| Paycheck protection program loans | ​ | ​ 24 | ​ | ​ 1,887 | ​ | ​ — | ​ | ​ 194 | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ 2,105 |
| Consumer loans | ​ | **​** 2,094 | ​ | ​ 268,515 | ​ | ​ 111,417 | ​ | ​ 88,586 | ​ | ​ 99,567 | ​ | ​ 2,106 | ​ | ​ 23 | ​ | ​ 572,308 |
| Total Non-PCD loans | ​ | ​ 315,695 | ​ | ​ 824,147 | ​ | ​ 353,116 | ​ | ​ 491,669 | ​ | ​ 400,344 | ​ | ​ 79,036 | ​ | ​ 708,347 | ​ | ​ 3,172,354 |
| PCD loans | ​ | 3,036 | ​ | ​ 1,320 | ​ | ​ — | ​ | ​ — | ​ | ​ 1,241 | ​ | ​ 395 | ​ | ​ - | ​ | 5,992 |
| Total loans | ​ | $318,731 | ​ | $825,467 | ​ | $353,116 | ​ | $491,669 | ​ | $401,585 | ​ | $79,431 | ​ | $708,347 | ​ | $3,178,346 |

The following table sets forth the contractual maturity ranges of our Consumer Program loan portfolio as of September 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 | ​ | $389 | ​ | $127,141 | ​ | $59,079 | ​ | $236 | ​ | $186,845 |

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 9/30/23 |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Consumer Program Loans | ​ | $38,067 | ​ | $43,439 | ​ | $81,506 |

During the three and nine months ended September 30, 2023, $3.7 million and $5.9 million of promotional loans paid off prior to the end of their promotional periods while $1.8 million and $3.0 million of promotional loans reached the end of the promotional period and entered amortization.

### Asset Quality

While the financial 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 2023 and improved from December 31, 2022. 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 $1.4 million to $35.9 million at the end of September 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 $231.7 million in overall loan growth experienced in 2023.

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

| ​ ​ ​ | ​ ​ | ​ ​ ​ September 30, ​ 2023 | ​ ​ ​ December 31, ​ 2022 |
| --- | --- | ---: | ---: |
| Nonaccrual loans | ​ | $20,171 ​ | $35,484 ​ |
| Loans past due 90 days and accruing interest | ​ | 1,714 ​ | 3,361 ​ |
| Total nonperforming assets | ​ | 21,885 ​ | 38,845 ​ |
| **​** | ​ | ​ ​ ​ | ​ ​ ​ |
| SBA guaranteed amounts included in nonperforming loans | ​ | $2,290 ​ | $3,969 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Allowance for credit losses to total loans | ​ | 1.13% | 1.17% |
| Allowance for credit losses to nonaccrual loans | ​ | 177.79% | 97.35% |
| Allowance for credit losses to nonperforming loans | ​ | 163.87% | 88.93% |
| Nonaccrual to total loans | ​ | 0.63% | 1.20% |
| Nonperforming assets excluding SBA guaranteed loans to total assets | ​ | 0.51% | 0.98% |

Nonaccrual loans decreased 43% to $20.2 million (excluding $0.6 million of loans fully covered by SBA guarantees) as of September 30, 2023, compared to $35.5 million (excluding $0.6 million of loans fully covered by SBA guarantees) as of December 31, 2022. Included in the Bank’s nonperforming assets is one remaining assisted living problem credit outstanding as of September 30, 2023 related to the relationship discussed in previous quarters and with a book balance of $13.1 million. This credit was resolved in early October 2023, bringing pro forma nonperforming assets to $6.5 million as of September 30, 2023.

As of September 30, 2023, our total substandard loans were $28.8 million, compared to $41.0 million at December 31, 2022, a 30% decline. Included in the total substandard loans were SBA guarantees of $0.8 million in both periods. Special mention loans totaled $33.3 million as of September 30, 2023 and $32.3 million as of December 31, 2022.

For the quarter ended September 30, 2023, on an amortized cost basis, three other consumer loans totaling $0.3 million were modified to borrowers experiencing financial difficulty. This represents 0.10% of the other consumer loan portfolio.

Two of the loans, totaling $0.2 million in amortized cost, were to one borrower and received payment deferrals for three months, with principal and interest payments resuming August 2023. Total contractual payments for these loans for the quarter, prior to modification, would have been approximately $11 thousand. Both loans are current on principal and interest following the deferral period.

The third other consumer loan modified to a borrower experiencing financial difficulty, had an amortized cost of $0.1 million and the Company reduced monthly payments on the loan for the remaining 84-month term with no change to the original rate or maturity. The contractual payments for the quarter would have totaled approximately $9 thousand if the modification had not been provided. The loan is paying as agreed following the modification.

An existing modification of a 1-4 family residential loan in the first quarter of 2023, with an amortized cost of $0.9 million, resumed contractual payments in August following its payment deferral period and has experienced no payment delinquencies since the deferral period ended. This modification is 0.14% of the 1-4 family residential loan portfolio.

Two loans modified in the second quarter of 2023 from our owner occupied commercial real estate portfolio with an amortized cost balance of $0.4 million are paying as agreed following the modifications. These loans represent 0.10% of the owner occupied commercial real estate portfolio.

### 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 $228.9 million as of September 30, 2023, a decrease of 8% from $249.8 million as of December 31, 2022, primarily due to paydowns, maturities, and calls of the investments over the past nine 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: | ​ ​ | ​ ​ September 30, 2023 ​ | ​ ​ | ​ ​ December 31, 2022 ​ |
| --- | --- | ---: | --- | ---: |
| Residential government-sponsored mortgage-backed securities | ​ | $93,865 | ​ | $102,881 |
| Obligations of states and political subdivisions | ​ | 28,312 | ​ | 29,178 |
| Corporate securities | ​ | 13,314 | ​ | 14,828 |
| Collateralized loan obligations | ​ | 4,955 | ​ | 4,876 |
| Residential government-sponsored collateralized mortgage obligations | ​ | 29,745 | ​ | 26,595 |
| Government-sponsored agency securities | ​ | 12,968 | ​ | 14,616 |
| Agency commercial mortgage-backed securities | ​ | 29,280 | ​ | 37,417 |
| SBA pool securities | ​ | 4,436 | ​ | 5,924 |
| Total | ​ | $216,875 | ​ | $236,315 |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Held-to-maturity investment securities: | ​ |  | ​ |  |
| Residential government-sponsored mortgage-backed securities | ​ | $9,357 | ​ | $10,522 |
| Obligations of states and political subdivisions | ​ | 2,390 | ​ | 2,721 |
| Residential government-sponsored collateralized mortgage obligations | ​ | 228 | ​ | 277 |
| Total | ​ | $11,975 | ​ | $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 nine months ended September 30, 2023 and no credit losses during the three and nine months ended September 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 21% to $3.3 billion as of September 30, 2023 from $2.7 billion as of December 31, 2022. The increase in deposits from year-end was primarily driven by the substantial growth in the Bank’s digital deposit platform in 2023. The majority of the overall deposit growth was in savings accounts with the remainder largely in NOW accounts

(both largely coming from the digital platform). Savings accounts increased 204% from $245.8 million as of December 31, 2022 to $746.6 million as of September 30, 2023. NOW accounts increased 30% from $617.7 million as of December 31, 2022 to $803.3 million as of September 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 $1.11 billion, or 34% of total deposits, at September 30, 2023. Liquidity sources represent almost 185% of uninsured or unsecured deposits, up substantially from December 31, 2022.

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 September 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 September 30, 2023, we had $558.9 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 $3.8 million and $6.4 million at September 30, 2023 and December 31, 2022, respectively.

We had secured borrowings of $29.6 million as of September 30, 2023 related to loan transfers to other financial institutions during the three and nine months ended September 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 institutions 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 institutions 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 $75 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.

As of September 30, 2023, we had substantial liquidity on the balance sheet with cash and equivalents of $93.9 million versus $77.9 million as of December 31, 2022 largely due to the growth in digital platform deposits described above.

As of September 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 $6.4 million and $14.2 million, respectively, to customers who require collateral for overnight repurchase agreements and deposits.

The balance in repo accounts as of September 30, 2023 and December 31, 2022 was $3.8 million and $6.4 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. As of September 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 $558.9 million from the FHLB.

In June 2023, the Bank began participating in the Federal Reserve discount window borrowing program. As of September 30, 2023, the Bank had borrowing capacity of $548.9 million within the program. Since we began participating we have not utilized any of our available capacity.

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. As of September 30, 2023, we had securities available of $133.8 million for utilization with the BTFP, with no borrowings outstanding under the program as of September 30, 2023.

The Bank also utilizes institutional and brokered certificates of deposit to supplement customer funding. As of September 30, 2023, we had $75.0 million of brokered deposits outstanding, which are schedule to mature in the fourth quarter of 2023. We had remaining brokered CD capacity under internal policy of approximately $321.0 million.

As of September 30, 2023, we had $467.3 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 $394.7 million as of September 30, 2023, including $75.0 million of brokered CDs as discussed above. Management anticipates that funding requirements for these commitments can be met in the normal course of our operations.

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

### Stockholder’s equity

Stockholder’s equity balances decreased $11.4 million from December 31, 2022 to September 30, 2023 as a result of 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 nine months ended September 30, 2023 and dividends on common stock exceeding earnings in the period, primarily as a result of the non-cash goodwill impairment charge during the three and nine months ended September 30, 2023. The Company has the intent and ability to hold the available-for-sale securities that are currently in an unrealized loss position until maturity or recovery of the value and does not anticipate realizing any losses on the investments.

### Capital Resources

Capital management consists of providing equity to support both current and future operations. Primis Financial Corp. and its subsidiary, Primis Bank, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (“PCA”), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. As of September 30, 2023 and December 31, 2022, the most recent regulatory notifications categorized the Bank as well capitalized under 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 September 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. These ratios were not impacted by the goodwill impairment charge incurred during the period because goodwill is not a component of the calculations:

| ​ ​ ​ ​ ​ ​ Primis Financial Corp. | ​ ​ ​ ​ ​ | ​ ​ Minimum ​ Required for ​ Capital ​ Adequacy ​ Purposes | ​ ​ ​ ​ ​ ​ To Be ​ Categorized as ​ Well Capitalized (1) | ​ ​ ​ ​ ​ ​ Actual Ratio at September 30, ​ 2023 ​ | ​ ​ ​ ​ December 31, ​ 2022 ​ |
| --- | --- | ---: | --- | ---: | ---: |
| Leverage ratio |  | 4.00% | n/a | 8.60% | 9.52% |
| Common equity tier 1 capital ratio |  | 4.50% | n/a | 9.36% | 10.07% |
| Tier 1 risk-based capital ratio |  | 6.00% | n/a | 9.66% | 10.40% |
| Total risk-based capital ratio |  | 8.00% | n/a | 13.05% | 14.33% |
| ​ | ​ | ​ ​ | ​ ​ | ​ ​ | ​ ​ |
| **Primis Bank** |  | ​ | ​ ​ | ​ ​ | ​ ​ |
| Leverage ratio |  | 4.00% | 5.00% | 10.49% | 11.24% |
| Common equity tier 1 capital ratio |  | 7.00% | 6.50% | 11.79% | 12.40% |
| Tier 1 risk-based capital ratio |  | 8.50% | 8.00% | 11.79% | 12.40% |
| Total risk-based capital ratio |  | 10.50% | 10.00% | 12.91% | 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 4.91% as of September 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.

As required under U.S. GAAP, we test goodwill for impairment at least annually and more frequently if there are indications that goodwill could be impaired. Our annual goodwill impairment testing date is September 30 and accordingly, we performed testing as of September 30, 2023 of our two reporting units that include goodwill. For our assessment of goodwill as of September 30, 2023, we performed a step one quantitative assessment to determine if the fair value of the Primis Bank reporting unit and the Primis Mortgage reporting units were less than their carrying amount. As part of the testing, we engaged an independent valuation firm to quantitatively estimate the fair value of each reporting unit so that it could be compared to the carrying value in assisting us in determining if impairment existed. The results of the quantitative assessment of the Primis Mortgage reporting unit indicated that its fair value was in excess of its carrying value, thus no goodwill impairment was necessary.

Our assessment of the Primis Bank reporting unit included the use of three approaches, each receiving various weightings to determine an ultimate fair value estimate: (1) the comparable transactions method that is based on comparison to pricing ratios recently paid in the sale or merger of comparable banking institutions; (2) the public market peers control premium approach that is based on market pricing ratios of public banking companies adjusted for an industry based control premium, and (3) a discounted cash flow method (an income method), taking into consideration expectations of the Company’s growth and profitability going forward. The assessment included use of various assumptions and inputs into the modeling approaches, including creating a baseline and conservative scenarios that stressed certain assumptions such as projected cash flows and the discount rate. We considered the modeled results of each scenario and in light of the sustained depressed stock price during the third quarter compared to our book value we determined it was reasonable to leverage the results of a scenario that utilized more stressed inputs and assumptions. Ultimately, the result of the quantitative assessment indicated the Primis Bank reporting unit’s book value was more than its estimated fair value. Accordingly, we took an impairment charge to Primis Bank’s goodwill of $11.2 million during the three and nine months ended September 30, 2023

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the goodwill impairment testing as of September 30, 2023 will prove to be an accurate prediction of the future. Changes in assumptions, market data (for market-based assessments), or the discount rate (for income based assessments) could produce different results that lead to higher or lower fair value determinations compared to the results of our annual impairment testing performed as of September 30, 2023. Further, because the use of inputs and assumptions are highly judgmental an analysis performed to assess the fair value of our reporting units by others may results in higher, lower, or the same fair value determination and goodwill impairment decision through the use of their judgment in application of similar inputs and assumptions as we used.

## Market risk

As filed, 6,397 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 September 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 September 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 | ​ | $520,349 | ​ | $(62,585) | (10.74)% | 13.55% | 137.80% |
| Up 300 | ​ | 532,343 | ​ | (50,591) | (8.68)% | 13.87% | 140.98% |
| Up 200 | ​ | 544,038 | ​ | (38,896) | (6.67)% | 14.17% | 144.07% |
| Up 100 | ​ | 570,057 | ​ | (12,877) | (2.21)% | 14.85% | 150.96% |
| Base | ​ | 582,934 | ​ | — | —% | 15.19% | 154.37% |
| Down 100 | ​ | 583,336 | ​ | 402 | 0.07% | 15.20% | 154.48% |
| Down 200 | ​ | 567,995 | ​ | (14,939) | (2.56)% | 14.80% | 150.42% |

*(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 as of September 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 as of September 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 September 30, 2023 Adjusted Net Interest Income ​ ​ Amount | ​ ​ | ​ ​ $ Change From Base |
| --- | --- | ---: | --- | ---: |
| Up 400 | ​ | $104,691 | ​ | $(14,577) |
| Up 300 | ​ | 107,573 | ​ | (11,695) |
| Up 200 | ​ | 110,454 | ​ | (8,814) |
| Up 100 | ​ | 115,369 | ​ | (3,899) |
| Base | ​ | 119,268 | ​ | — |
| Down 100 | ​ | 121,676 | ​ | 2,408 |
| Down 200 | ​ | 122,186 | ​ | 2,918 |

*(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, 7,391 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 nine months ended September 30, 2023.

Management identified the additional material weakness over the Company’s internal controls over financial reporting for the nine months ended September 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 September 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 weakness, 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 nine months ended September 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 nine months ended September 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 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-015047. Last ingested by Listed: Oct 24, 2026, 15:09 ET. No prices; not investment advice.