Core Viewpoint - Primis Financial Corp. has signed a non-binding term sheet to sell a portion of its ownership in Panacea Financial Holdings, expected to generate approximately $22 million in proceeds and an additional pre-tax gain of $6.5 to $7.0 million due to the sales price exceeding the carrying value as of March 31, 2025 [1][2]. Financial Performance - As of March 31, 2025, Primis Financial Corp. reported total assets of $3.7 billion, total loans held for investment of $2.9 billion, and total deposits of $3.2 billion [3]. Strategic Implications - The CEO emphasized that realizing the gain from the sale will enable the company to pursue more aggressive strategies, such as share repurchase programs and accelerating growth initiatives [2]. - The company believes that the incremental margins in its core banking operations are currently better than they have been in several years, with minimal operating expense increases [2]. Commitment to Panacea - Despite the sale, the company maintains its confidence in Panacea's long-term potential and continues to support its mission of providing tech-enabled financial solutions to healthcare professionals [2].

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) Presents Q1 2025 unaudited financial statements, management's discussion, market risk, and internal controls [Item 1 - Financial Statements](index=3&type=section&id=Item%201%20-%20Financial%20Statements) Presents Q1 2025 unaudited consolidated financial statements, including balance sheets, income, equity, cash flows, and notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of March 31, 2025, shows a slight asset increase, reclassification of loans, and higher stockholders' equity | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | | Total assets | $3,697,310 | $3,690,115 | $7,195 | | Total loans held for sale | $74,439 | $247,108 | $(172,669) | | Net loans | $2,999,327 | $2,833,723 | $165,604 | | Investment in Panacea Financial Holdings, Inc. common stock | $21,227 | $— | $21,227 | | Total liabilities | $3,321,747 | $3,325,133 | $(3,386) | | Total stockholders' equity | $375,563 | $364,982 | $10,581 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Q1 2025 net income significantly increased due to Panacea deconsolidation gain, improved net interest income, and lower credit loss provision | Metric | For the Three Months Ended March 31, 2025 (in thousands) | For the Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net income attributable to Primis' common stockholders | $22,636 | $2,466 | $20,170 | | Earnings per share, diluted | $0.92 | $0.10 | $0.82 | | Gain on deconsolidation of Panacea Financial Holdings, Inc. | $24,578 | $— | $24,578 | | Net interest income | $26,364 | $25,269 | $1,095 | | Provision for credit losses | $1,596 | $6,508 | $(4,912) | | Total noninterest income | $32,335 | $10,307 | $22,028 | | Total noninterest expenses | $32,516 | $27,538 | $4,978 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total equity increased from net income and comprehensive income, partially offset by dividends and Panacea deconsolidation impact | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | | Total stockholders' equity | $375,563 | $364,982 | $10,581 | | Net income | $22,636 | $19,034 (Q1 2025) | $3,602 | | Other comprehensive income | $3,612 | $(1,838) (Q1 2024) | $5,450 | | Panacea Financial Holdings, Inc. deconsolidation (Noncontrolling Interests) | $(9,624) | $13,226 (Dec 31, 2024) | $(22,850) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow improved, investing activities used cash, and financing activities shifted to cash usage, leading to a net cash decrease | Metric | For the Three Months Ended March 31, 2025 (in thousands) | For the Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net cash provided by (used in) operating activities | $34,393 | $(965) | $35,358 | | Net cash used in investing activities | $(27,307) | $(26,343) | $(964) | | Net cash provided (used in) by financing activities | $(14,547) | $38,472 | $(53,019) | | Net change in cash and cash equivalents | $(7,461) | $11,164 | $(18,625) | | Loans held for sale transferred to held for investment | $152,092 | $— | $152,092 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed accounting policies, significant events, and specific financial instrument information for the condensed consolidated statements [1. Accounting Policies](index=9&type=section&id=1.%20Accounting%20Policies) Outlines Primis Financial Corp.'s business, subsidiaries, Panacea deconsolidation accounting, Life Premium Finance disposition, and key accounting practices - Primis Bank operates **24 full-service branches** in Virginia and Maryland, offering a range of financial services[16](index=16&type=chunk) - Panacea Financial Holdings, Inc. (PFH) was deconsolidated on March 31, 2025, due to changes in the relationship and control, resulting in a **$24.6 million gain** for Primis[16](index=16&type=chunk)[23](index=23&type=chunk)[25](index=25&type=chunk) - The company now accounts for its **19% common stock investment** in PFH at fair value under ASC 825, with a retained interest of **$21.2 million** at deconsolidation[24](index=24&type=chunk)[25](index=25&type=chunk) - The disposition of the Life Premium Finance (LPF) division was completed by January 31, 2025, with approximately **$64 million** of additional loans sold to EverBank[29](index=29&type=chunk) - The company has two reportable operating segments: Primis Mortgage and Primis Bank[30](index=30&type=chunk) [2. Investment Securities](index=16&type=section&id=2.%20Investment%20Securities) Details available-for-sale and held-to-maturity investment securities, their fair values, and unrealized gains/losses, noting no credit impairment | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Total available-for-sale securities | $241,638 | $235,903 | | Total held-to-maturity securities | $9,153 | $9,448 | | Gross unrealized losses on available-for-sale securities | $(22,782) | $(26,966) | - No allowance for credit losses has been recorded for held-to-maturity securities, as they are backed by the U.S. government or deemed low risk[43](index=43&type=chunk) - As of March 31, 2025, **155 available-for-sale investment securities** were in an unrealized loss position, primarily due to changes in interest rates, not credit-related impairment[44](index=44&type=chunk) [3. Loans and Allowance for Credit Losses](index=21&type=section&id=3.%20Loans%20and%20Allowance%20for%20Credit%20Losses) Covers loan portfolio composition, reclassification of Consumer Program loans, nonaccrual loans, credit quality, and allowance for credit losses activity | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Total loans held for investment | $3,043,348 | $2,887,447 | | Total loans held for sale | $74,439 | $247,108 | | Total nonaccrual loans | $12,950 | $15,026 | | Allowance for credit losses | $44,021 | $53,724 | | Provision for credit losses (Q1) | $1,596 | $6,508 | - Approximately **$101.6 million** of Consumer Program loans were transferred from held for sale back to the consumer loans category within loans held for investment as of March 31, 2025[49](index=49&type=chunk) - During Q1 2025, **667 Consumer Program loans** with an amortized cost of **$5.7 million** were modified, primarily through settlements or term extensions, to enhance collections and mitigate charge-offs[72](index=72&type=chunk) - Net charge-offs for the three months ended March 31, 2025, totaled **$14.3 million**, with **$10.8 million** attributed to the Consumer Program portfolio[80](index=80&type=chunk)[177](index=177&type=chunk) [4. Derivatives](index=38&type=section&id=4.%20Derivatives) Describes derivative instruments, including Consumer Program and mortgage banking derivatives, their fair values, and key valuation inputs | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Consumer Program derivative asset | $1,597 | $4,511 | | Mortgage banking derivative assets | $1,415 | $1,000 | | Input for IRLCs | March 31, 2025 | December 31, 2024 | | :---------------------- | :------------- | :---------------- | | Average pullthrough rates | 82.95 % | 89.19 % | | Average costs to originate | 1.35 % | 1.31 % | [5. Fair Value](index=41&type=section&id=5.%20Fair%20Value) Presents assets and liabilities measured at fair value, categorized by hierarchy, highlighting significant unobservable inputs for specific assets | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Total assets measured at fair value (recurring) | $590,449 | $573,962 | | Investment in Panacea Financial Holdings, Inc. common stock (Level 3) | $21,227 | $— | | Consumer Program derivative (Level 3) | $1,597 | $4,511 | - The fair value of net loans, time deposits, junior subordinated debt, and senior subordinated notes are measured using the exit-price notion[103](index=103&type=chunk) [6. Leases](index=44&type=section&id=6.%20Leases) Details operating leases, including right-of-use assets, lease liabilities, weighted-average term, discount rate, and maturity analysis | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Operating lease liabilities | $11,639 | $11,566 | | Operating lease right-of-use assets | $10,352 | $10,279 | | Metric | March 31, 2025 | | :--------------------------------------- | :------------- | | Weighted-average remaining lease term (years) | 5.9 | | Weighted-average discount rate | 4.0 % | [7. Debt and Other Borrowings](index=44&type=section&id=7.%20Debt%20and%20Other%20Borrowings) Outlines various debt instruments, borrowing capacity from FHLB and Federal Reserve, and the nature of secured borrowings | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Securities sold under agreements to repurchase | $4,019 | $3,918 | | Junior subordinated debt | $9,892 | $9,880 | | Senior subordinated notes | $86,057 | $85,998 | | Secured borrowings | $16,729 | $17,195 | - Primis Bank had **$541.3 million** in lendable collateral value from the FHLB and **$550.5 million** in borrowing capacity from the Federal Reserve discount window as of March 31, 2025, with no current borrowings under these programs[108](index=108&type=chunk) [8. Stock-Based Compensation](index=45&type=section&id=8.%20Stock-Based%20Compensation) Summarizes stock-based compensation plans, including activity, recognized expense, and unrecognized expense for various award types | Metric | For the Three Months Ended March 31, 2025 (in thousands) | For the Three Months Ended March 31, 2024 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Stock-based compensation expense (time vested restricted stock) | $31 | $200 | - Unrecognized compensation expense for time-vested restricted stock awards was **$0.1 million**, expected to be recognized over a weighted average period of **2.5 years**[118](index=118&type=chunk) - Unrecognized compensation expense for performance-based restricted stock units was **$4.2 million** as of March 31, 2025, but no expense was recognized during the quarter due to the low probability of vesting[120](index=120&type=chunk)[121](index=121&type=chunk) [9. Commitments and Contingencies](index=49&type=section&id=9.%20Commitments%20and%20Contingencies) Describes off-balance sheet risks, such as credit commitments and letters of credit, and the allowance for credit losses on these exposures | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Letters of credit outstanding | $17,700 | $9,900 | | Unfunded lines of credit and undisbursed construction loan funds | $403,500 | $459,200 | | Metric | March 31, 2025 (in thousands) | January 1, 2025 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Allowance for credit losses on off-balance-sheet credit exposures | $1,134 | $1,121 | [10. Earnings Per Share](index=51&type=section&id=10.%20Earnings%20Per%20Share) Reconciles denominators for basic and diluted earnings per share computations for the three months ended March 31, 2025 and 2024 | Metric | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Basic EPS | $0.92 | $0.10 | | Diluted EPS | $0.92 | $0.10 | [11. Segment Information](index=51&type=section&id=11.%20Segment%20Information) Identifies Primis Bank and Primis Mortgage as reportable segments, providing a breakdown of their financial performance - The company's two reportable operating segments are Primis Bank and Primis Mortgage[131](index=131&type=chunk) | Segment | Net Income Attributable to Primis' Common Stockholders (Q1 2025, in thousands) | Net Income Attributable to Primis' Common Stockholders (Q1 2024, in thousands) | | :---------------- | :---------------------------------------------------------------- | :---------------------------------------------------------------- | | Primis Bank | $4,267 | $3,411 | | Primis Mortgage | $772 | $1,032 | [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion of financial condition and results for Q1 2025, covering business overview, highlights, and detailed financial analysis [Forward-Looking Statements](index=53&type=section&id=FORWARD-LOOKING%20STATEMENTS) Cautionary statement on forward-looking statements, highlighting inherent risks and uncertainties that could affect actual results - Forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict and beyond the company's control[139](index=139&type=chunk) - Key risk factors include economic conditions, credit and financial market disruptions, geopolitical events, fraudulent acts, ability to implement strategic initiatives, litigation, changes in interest rates, and regulatory actions[141](index=141&type=chunk) [Overview](index=59&type=section&id=OVERVIEW) Introduces Primis Financial Corp. and Primis Bank operations, branch network, Panacea deconsolidation, and commercial lending focus - Primis Bank operates **24 full-service branches** in Virginia and Maryland, providing financial services to individuals and small/medium-sized businesses[145](index=145&type=chunk) - Panacea Financial Holdings, Inc. (PFH) was deconsolidated on March 31, 2025, but will continue to partner with the Panacea Division of the Bank for loan origination[145](index=145&type=chunk) - Primis Bank's core business focuses on commercial real estate and other secured/unsecured commercial loans, funded primarily by deposits[146](index=146&type=chunk) [Operational Highlights](index=59&type=section&id=OPERATIONAL%20HIGHLIGHTS) Q1 2025 operational successes across core banking, mortgage warehouse, Panacea, and Primis Mortgage, including loan growth and improved earnings - Core bank loan pipeline increased to **$228 million** as of March 31, 2025, from **$119 million** as of December 31, 2024[147](index=147&type=chunk) - Core bank's cost of deposits was **1.83%** in Q1 2025, supported by almost **20% noninterest-bearing deposits**[147](index=147&type=chunk) - Mortgage warehouse outstanding loan balances grew **80% to $115 million** as of March 31, 2025, from **$64 million** as of December 31, 2024[147](index=147&type=chunk) - Panacea Financial Division's outstanding loan balances grew **$40 million (9% unannualized)** in Q1 2025, from **$433.8 million** as of December 31, 2024[150](index=150&type=chunk) - Primis Mortgage earned approximately **$0.8 million pre-tax** in Q1 2025, up from **$0.4 million** in Q4 2024, with locked loan volume increasing **27% QoQ to $257 million**[150](index=150&type=chunk) [Financial Highlights](index=61&type=section&id=FINANCIAL%20HIGHLIGHTS) Q1 2025 financial performance, including increased net income from PFH deconsolidation, stable assets, improved net interest margin, and strengthened capital | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------- | :--------------------- | :-------------------- | | Net income available to common shareholders | $22,600 | $2,500 | $20,100 | | Total loans held for investment | $3,000,000 | $2,800,000 | $200,000 | | Net interest margin | 3.15% | 2.84% | 0.31% | | Allowance for credit losses to total loans | 1.45% | 1.86% | (0.41%) | | Common Equity Tier 1 capital ratio | 9.35% | 8.74% | 0.61% | - Net income was primarily driven by a **$24.6 million gain** on the deconsolidation of Panacea Financial Holdings, Inc[151](index=151&type=chunk) - Total loans held for investment increased by **$0.2 billion (5.4%)** due to growth in Panacea and mortgage warehouse lending, and the transfer of **$0.1 billion** of Consumer Program loans back from held for sale[151](index=151&type=chunk) - Noninterest expense increased by **$5.0 million** due to personnel costs, professional fees, and data processing costs, with expected annual savings of **$6-8 million** from core system consolidation by early to mid-2026[151](index=151&type=chunk) [Results of Operations](index=63&type=section&id=RESULTS%20OF%20OPERATIONS) Detailed analysis of net income, net interest income, provision for credit losses, noninterest income, and expenses for Q1 2025 [Net Income](index=63&type=section&id=Net%20Income) Significant increase in Q1 2025 net income, driven by Panacea deconsolidation gain, higher net interest income, and lower credit loss provision | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------- | :--------------------- | :-------------------- | | Net income available to common shareholders | $22,636 | $2,466 | $20,170 | - The increase in net income was driven by a **$24.6 million gain** on the deconsolidation of PFH, a **$1.1 million increase** in net interest income, and a **$4.9 million decrease** in provision for credit losses[152](index=152&type=chunk) [Net Interest Income](index=63&type=section&id=Net%20Interest%20Income) Net interest income increased in Q1 2025 due to improved net interest margin, lower liability costs, and despite reduced interest-earning assets | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------- | :--------------------- | :-------------------- | | Net interest income | $26,364 | $25,269 | $1,095 | | Net interest margin | 3.15% | 2.84% | 0.31% | - Average interest-bearing liabilities declined by **$139 million**, with rates paid on these liabilities decreasing by **34 basis points**, largely due to a **100 basis point decline** in the fed funds borrowing rate[154](index=154&type=chunk) - Average earning asset balances decreased by **$184 million**, primarily due to a **$309 million decline** in average loan balances from the sale of the Life Premium Finance portfolio, partially offset by growth in Panacea and Mortgage Warehouse loan portfolios[155](index=155&type=chunk) [Provision for Credit Losses](index=65&type=section&id=Provision%20for%20Credit%20Losses) Significant decrease in Q1 2025 provision for credit losses, mainly due to lower provisioning for Consumer Program loans after prior charge-offs | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------- | :--------------------- | :-------------------- | | Provision for credit losses | $1,596 | $6,508 | $(4,912) | | Provision for Consumer Program loans | $1,900 | $4,900 | $(3,000) | - Excluding the Consumer Program, the company recorded a benefit for expected losses of **$0.3 million** in Q1 2025, compared to a provision of **$1.6 million** in Q1 2024[161](index=161&type=chunk) [Noninterest Income](index=67&type=section&id=Noninterest%20Income) Substantial increase in Q1 2025 noninterest income, primarily from the Panacea deconsolidation gain, partially offset by lower derivative income | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------- | :--------------------- | :-------------------- | | Total noninterest income | $32,335 | $10,307 | $22,028 | | Gain on deconsolidation of Panacea Financial Holdings, Inc. | $24,578 | $— | $24,578 | | Consumer Program derivative (loss) income | $(292) | $2,041 | $(2,333) | - The decline in Consumer Program derivative income was primarily due to fair value loss adjustments of **$2.9 million** in Q1 2025, as **$21.1 million** of loans exited their no-interest promotional period[163](index=163&type=chunk) [Noninterest Expense](index=69&type=section&id=Noninterest%20Expense) Increased noninterest expenses in Q1 2025, driven by higher salaries, professional fees, and data processing costs, with future savings expected from system consolidation | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------- | :--------------------- | :-------------------- | | Total noninterest expenses | $32,516 | $27,538 | $4,978 | | Salaries and benefits | $17,941 | $15,735 | $2,206 | | Professional fees | $2,225 | $1,365 | $860 | | Data processing expense | $2,849 | $2,231 | $618 | - The increase in salaries and benefits was due to growth in the mortgage line of business and expenses from PFH prior to deconsolidation[166](index=166&type=chunk) - The company expects annual savings of approximately **$6 million to $8 million** from consolidating its core operational systems, with an anticipated impact beginning early to mid-2026[166](index=166&type=chunk) [Financial Condition](index=70&type=section&id=FINANCIAL%20CONDITION) Details changes in loans, asset quality, allowance for credit losses, investment securities, deposits, and borrowings, highlighting portfolio trends [Loans Held for Sale](index=70&type=section&id=Loans%20Held%20for%20Sale) Significant decline in Q1 2025 loans held for sale due to LPF loan sales and reclassification of Consumer Program loans | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | :-------------------- | | Total loans held for sale | $74,439 | $247,108 | $(172,669) | - The decline was driven by the sale of **$50.7 million** of LPF loans and the transfer of **$101.7 million** of Consumer Program loans back to held for investment[168](index=168&type=chunk) [Loans](index=70&type=section&id=Loans) Gross loans held for investment increased in Q1 2025 due to Consumer Program loan transfers and growth in mortgage warehouse and Panacea divisions | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Gross loans held for investment | $3,043,348 | $2,887,447 | | Loan Type (March 31, 2025) | Amount (in thousands) | Percent of Total Loans | | :--------------------------------------- | :-------------------- | :--------------------- | | Total real estate loans | $1,980,749 | 65.1% | | Commercial loans | $698,097 | 22.9% | | Consumer loans | $357,652 | 11.7% | [Asset Quality; Past Due Loans and Nonperforming Assets](index=73&type=section&id=Asset%20Quality%3B%20Past%20Due%20Loans%20and%20Nonperforming%20Assets) Asset quality remained stable in Q1 2025, with a decrease in nonperforming assets driven by lower nonaccrual loans | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Total nonperforming assets | $14,663 | $16,739 | | Nonaccrual loans | $12,950 | $15,026 | | Nonperforming assets excluding SBA guaranteed loans to total assets | 0.28% | 0.29% | - The decrease in nonaccrual loans was primarily due to **$2.5 million** of paydowns on one relationship, partially offset by new nonaccrual placements[173](index=173&type=chunk) [Allowance for Credit Losses](index=74&type=section&id=Allowance%20for%20Credit%20Losses) Allowance for credit losses decreased in Q1 2025 due to net charge-offs, primarily from Consumer Program, and improved credit quality | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Allowance for credit losses | $44,000 | $53,700 | | Net charge-offs (Q1 2025) | $11,300 | N/A | | Allowance for credit losses to total loans | 1.45% | 1.86% | - Net charge-offs of **$11.3 million** in Q1 2025 were primarily related to **$10.8 million** in the Consumer Program portfolio[177](index=177&type=chunk) - The allowance for the Consumer Program loan portfolio was **$7.5 million** as of March 31, 2025, representing **17% of the total allowance**, with **128% coverage** of non-current principal balances[178](index=178&type=chunk) [Investment Securities](index=75&type=section&id=Investment%20Securities) Total investment securities slightly increased in Q1 2025, with unrealized losses on available-for-sale securities due to interest rates, not credit impairment | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Total investment securities | $250,800 | $245,400 | - Available-for-sale securities are carried at fair value, with unrealized gains or losses included in accumulated other comprehensive income (loss)[180](index=180&type=chunk) - No credit impairment charges were recognized related to credit losses on held-to-maturity investment securities during Q1 2025[181](index=181&type=chunk) [Deposits and Other Borrowings](index=75&type=section&id=Deposits%20and%20Other%20Borrowings) Details funding sources, including stable deposits with a shift to lower-cost accounts, and utilization of FHLB and Federal Reserve borrowing capacities [Deposits](index=75&type=section&id=Deposits) Total deposits remained stable in Q1 2025, with a favorable shift towards lower-cost demand and NOW deposit balances | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Total deposits | $3,200,000 | $3,200,000 | - Lower-cost demand and NOW deposit balances increased by **$9.2 million**, offsetting a decline in money market deposit accounts[186](index=186&type=chunk) - Uninsured deposits totaled **$623.5 million**, representing **20% of total deposits** as of March 31, 2025[187](index=187&type=chunk) [Other Borrowings](index=77&type=section&id=Other%20Borrowings) Utilizes various borrowed funds for liquidity, maintaining significant unused borrowing capacity with FHLB and Federal Reserve | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------ | :------------------------------- | | Securities sold under agreements to repurchase | $4,000 | $3,900 | | Secured borrowings | $16,700 | $17,200 | - The company had **$366.3 million** of unused FHLB lines of credit and **$550.5 million** of available credit with the Federal Reserve Bank as of March 31, 2025, with no FHLB borrowings outstanding[188](index=188&type=chunk) [Junior Subordinated Debt and Senior Subordinated Notes](index=77&type=section&id=Junior%20Subordinated%20Debt%20and%20Senior%20Subordinated%20Notes) Refers to Note 7 for detailed information on the company's junior subordinated debt and senior subordinated notes [Liquidity and Funds Management](index=77&type=section&id=Liquidity%20and%20Funds%20Management) Manages liquidity to meet obligations through diverse funding sources and regular cash flow forecasts - Funding sources include customer deposits, payments on loans and investments, FHLB borrowings, and federal funds lines of credit[193](index=193&type=chunk) - Cash flow forecasts are prepared on a **30, 60, and 90-day basis**, as well as **one and two-year bases**, incorporating expected cash flows on loans, investment securities, and deposits[193](index=193&type=chunk) [Capital Resources](index=79&type=section&id=Capital%20Resources) Company and Primis Bank maintain capital levels well above regulatory minimums, with Primis Bank categorized as 'well capitalized' - Primis Financial Corp. and Primis Bank are subject to various regulatory capital requirements and maintain capital amounts and ratios above minimums[194](index=194&type=chunk)[195](index=195&type=chunk) - Primis Bank was categorized as **'well capitalized'** under the regulatory framework for Prompt Corrective Action as of March 31, 2025[194](index=194&type=chunk) | Capital Ratio | Primis Financial Corp. (Mar 31, 2025) | Primis Bank (Mar 31, 2025) | | :--------------------------------------- | :------------------------------------ | :------------------------- | | Leverage ratio | 8.71% | 9.72% | | Common equity tier 1 capital ratio | 9.35% | 10.96% | | Tier 1 risk-based capital ratio | 9.66% | 10.96% | | Total risk-based capital ratio | 12.96% | 12.22% | - Primis Bank's capital conservation buffer was **4.22%** as of March 31, 2025, exceeding the **2.50% minimum requirement**[200](index=200&type=chunk) [Item 3 – Quantitative and Qualitative Disclosures about Market Risk](index=82&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Addresses interest rate risk management through ALCO and simulation modeling, presenting sensitivity of EVE and NII to rate shifts - The company manages interest rate risk through its Asset-Liability Committee (ALCO) and quarterly interest sensitivity reviews using simulation modeling[202](index=202&type=chunk)[203](index=203&type=chunk) | Interest Rate Shock (Basis Points) | EVE $ Change from Base (Mar 31, 2025, in thousands) | EVE % Change From Base (Mar 31, 2025) | | :--------------------------------- | :------------------------------------------ | :------------------------------------ | | Up 400 | $(143,548) | (26.93)% | | Up 300 | $(106,831) | (20.04)% | | Up 200 | $(72,051) | (13.52)% | | Up 100 | $(24,884) | (4.67)% | | Down 100 | $9,269 | 1.74% | | Down 200 | $(4,928) | (0.92)% | | Down 300 | $(33,826) | (6.35)% | | Down 400 | $(89,118) | (16.72)% | | Interest Rate Shock (Basis Points) | Adjusted NII $ Change From Base (Mar 31, 2025, in thousands) | | :--------------------------------- | :----------------------------------------------------------- | | Up 400 | $(2,166) | | Up 300 | $(1,880) | | Up 200 | $(1,604) | | Up 100 | $85 | | Down 100 | $(223) | | Down 200 | $(1,807) | | Down 300 | $(3,578) | | Down 400 | $(5,047) | [Item 4 – Controls and Procedures](index=85&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Disclosure controls were ineffective due to ongoing material weakness remediation, yet financial statements fairly present Q1 2025 results - Disclosure controls and procedures were not effective as of March 31, 2025, due to continued remediation of previously identified material weaknesses in internal controls over financial reporting[210](index=210&type=chunk) - Despite the material weaknesses, management concluded that the condensed consolidated financial statements for Q1 2025 fairly present the company's financial condition, results of operations, and cash flows[211](index=211&type=chunk) - There were no material changes in internal controls over financial reporting during the three months ended March 31, 2025[212](index=212&type=chunk) [PART II - OTHER INFORMATION](index=85&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) Provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and exhibits [Item 1 – Legal Proceedings](index=85&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) Company is involved in ordinary course legal claims, but management expects no material adverse effect on financial condition or operations - No proceedings are pending or, to management's knowledge, threatened that represent a significant risk against Primis or Primis Bank as of March 31, 2025[213](index=213&type=chunk) [Item 1A – Risk Factors](index=85&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) Refers to previously disclosed risk factors in the 2024 Form 10-K, confirming no material changes during the current reporting period - There are no material changes during the period covered by this Report to the risk factors previously disclosed in the 2024 Form 10-K[215](index=215&type=chunk) [Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the reporting period [Item 3 – Defaults Upon Senior Securities](index=87&type=section&id=Item%203%20%E2%80%93%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the reporting period [Item 4 – Mine Safety Disclosures](index=87&type=section&id=Item%204%20%E2%80%93%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period [Item 5 – Other Information](index=87&type=section&id=Item%205%20%E2%80%93%20Other%20Information) Confirms no directors or executive officers adopted, terminated, or modified trading arrangements during Q1 2025 - No directors or executive officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[220](index=220&type=chunk) [Item 6 - Exhibits](index=88&type=section&id=Item%206%20-%20Exhibits) Lists all exhibits filed with the Form 10-Q, including certifications and financial statements in Inline XBRL format - Exhibits include Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[223](index=223&type=chunk) - The financial statements for the quarter ended March 31, 2025, are filed in Inline XBRL format[224](index=224&type=chunk)

Core Viewpoint - Primis Financial Corp. has deconsolidated Panacea Financial Holdings, resulting in a pre-tax gain of approximately $24.6 million and an expected after-tax gain of about $20.0 million, or $0.81 per share [1][2]. Financial Impact - The fair market value of the Company's investment in PFH was evaluated at $21.2 million as of March 31, 2025 [2]. - The Company anticipates recouping consolidated operating losses totaling $3.4 million, with portions being non-taxable [2]. - Following the deconsolidation, the Company's return on assets (ROA) is expected to improve by ten basis points, and the operating efficiency ratio will decrease by approximately 14 points [3]. Company Overview - As of March 31, 2025, Primis Financial Corp. reported total assets of $3.7 billion, total loans held for investment of $3.0 billion, and total deposits of $3.2 billion [4]. - Primis Bank offers a variety of financial services to individuals and small- to medium-sized businesses through 24 full-service branches in Virginia and Maryland, as well as online and mobile applications [4].

Financial Data and Key Metrics Changes - The company reported a pretax net income of $4,500,000 for the first quarter, with adjustments leading to a pretax net income of $7,500,000 or $5,900,000 after tax, equating to a 66 basis point ROA [18][19] - Net interest margin increased to 3.15%, up from 2.90% in the previous quarter, benefiting from reduced deposit costs [19][20] - Core bank cost of deposits remained attractive at 183 basis points, with new loans yielding over 7% [20][21] Business Line Data and Key Metrics Changes - The core community bank's loan pipeline has tripled compared to a year ago, with a $25,000,000 increase in loans as of April [6][7] - The mortgage division closed $800,000,000 in loans in 2024, with a significant increase in production capacity due to new team additions [9][10] - Non-interest income for the quarter was $7,800,000, down from $8,500,000 in the previous quarter, primarily due to a negative swing in fee income related to the consumer program [20] Market Data and Key Metrics Changes - The company expects about $100,000,000 growth from the core bank, $150,000,000 from warehouse, and $125,000,000 from Panacea [8] - The digital platform is projected to fund around $500,000,000 in excess lending for Panacea by the end of the year, with a 1.5% after-tax ROI [12][13] Company Strategy and Development Direction - The company is focused on three strategies to drive higher ROAs, including growth in earning assets, expansion of the mortgage division, and consolidation of core processing contracts [5][8][11] - The digital platform is crucial for funding excess lending and supporting the community bank, reducing pressure on credit decisions [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving higher profitability in the second quarter, with no significant pressures on operating expenses [25][27] - The company anticipates a strong performance in mortgage volumes due to seasonal trends and recent team recruitments [30][32] Other Important Information - The company is working towards deconsolidating Panacea, which could improve operating results significantly [15][60] - The consumer loan portfolio has been moved back to held for investment, with a focus on reducing volatility and risk [16][19] Q&A Session Summary Question: Any potential issues for Q2 profitability? - Management noted an increase in earning assets and expected strong mortgage performance, with no significant pressures on operating expenses [25][27] Question: Resolution timeline for consumer loans? - Management indicated that a significant portion of promotional loans is expected to pay off within the year, with a focus on managing the remaining standard consumer loans [34][35] Question: Margin outlook for Q2 and the year? - Management projected a 5-10 basis points margin expansion in Q2, with a potential increase of 10-20 basis points by year-end [41][42] Question: Expectations for charge-offs going forward? - Management expects high charge-offs but believes they have sufficient reserves to absorb them as the portfolio runs off [52][53] Question: Timing for Panacea deconsolidation? - Management indicated that if deconsolidation is determined, it would be effective March 31, with a substantial gain expected from fair value treatment [59][60]

Financial Data and Key Metrics Changes - The company reported a pre-tax net income of $4.5 million in the first quarter, with adjustments leading to a pre-tax net income of $7.5 million or $5.9 million after tax, equating to a 66 basis point ROA [19] - The net interest margin increased to 3.15%, up from 2.90% in the previous quarter, benefiting from reduced deposit costs [20] - Core bank cost of deposits remained attractive at 183 basis points, with new loans booked at yields over 7% [20][21] Business Line Data and Key Metrics Changes - The core community bank's loan pipeline has increased to about three times the level from a year ago, with a $25 million increase in loans as of April [6] - The mortgage division closed $800 million in loans in 2024, with a pretax income per closed volume 50% higher than all of 2024 [10] - Non-interest income was $7.8 million in the quarter, down from $8.5 million in the previous quarter, primarily due to a negative swing in fee income related to the consumer program [21] Market Data and Key Metrics Changes - The company expects about $100 million growth from the core bank, $150 million from warehouse, and $125 million from Panacea [9] - The digital platform is projected to fund around $500 million in excess lending for Panacea by the end of the year, with an expected 1.5% after-tax ROI [13] Company Strategy and Development Direction - The company is focused on three strategies to drive higher ROAs, including growth in earning assets, expansion of the mortgage division, and consolidation of core processing contracts [5][9][12] - The digital platform is crucial for funding excess lending and supporting the community bank, reducing pressure on credit decisions [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving higher profitability in Q2, with no significant pressures on operating expenses [26][28] - The company anticipates a strong performance in mortgage volumes due to seasonal trends and recent recruitment efforts [31][32] Other Important Information - The consumer loan portfolio has been moved back to a held-for-investment status, with a significant reduction in promotional loans from $90 million to $17 million [17] - The company is working towards deconsolidating Panacea, which could lead to a substantial gain in future financial statements [16][62] Q&A Session Summary Question: Any potential issues in Q2 affecting profitability? - Management noted an increase in earning assets and expected strong performance in mortgage warehouse, with no pressures on operating expenses [26][28] Question: Resolution timeline for consumer loans? - Management indicated that over half of the promotional loans are scheduled to pay off before the promo period ends, with expectations to reduce the promotional book to $4-5 million by year-end [36][37] Question: Margin outlook for Q2 and the year? - Management expects a 5-10 basis point margin expansion in Q2, with a potential increase of 10-20 basis points by year-end [43][45] Question: Charge-off expectations moving forward? - Management anticipates continued high charge-offs but believes reserves are sufficient to absorb them as the portfolio runs off [55][57] Question: Timing and impact of Panacea deconsolidation? - Management stated that if deconsolidation is confirmed, it would be effective March 31, with a potential substantial gain from fair value adjustments [61][62]

Financial Data and Key Metrics Changes - The company reported a pre-tax net income of $4.5 million for the first quarter, with adjustments leading to a post-tax income of $5.9 million, equating to a 66 basis point ROA [19] - Net interest margin improved to 3.15%, up from 2.90% in the previous quarter, driven by reduced deposit costs [20] - Core bank cost of deposits remained attractive at 183 basis points, with new loans yielding over 7% [20] Business Line Data and Key Metrics Changes - The core community bank's loan pipeline has increased to approximately three times the level from a year ago, with a $25 million increase in loans as of April [5] - The mortgage division closed $800 million in loans in 2024, with a significant increase in profitability compared to the previous year [9] - Non-interest income for the quarter was $7.8 million, down from $8.5 million in the previous quarter, primarily due to a negative swing in fee income related to the consumer program [21] Market Data and Key Metrics Changes - The company expects to see a seasonal increase in mortgage warehouse balances, which were up 80% in the quarter [32] - The average balance of earning assets increased by $60 million from the first quarter to the current period [26] Company Strategy and Development Direction - The company is focused on three strategies to drive higher ROAs, including growth in earning assets, expansion of the mortgage division, and consolidation of core processing contracts [4][6] - The digital platform is expected to support growth in excess lending and mortgage warehouse, enhancing profitability without increasing operating expenses [12][13] - The company is working towards deconsolidating Panacea Holdings, which could improve operating results significantly [15][61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving growth in mortgage volumes and profitability, particularly as the busy season approaches [31] - The company anticipates a reduction in operating expenses due to the deconsolidation of Panacea and the consolidation of core contracts [29][49] - Management expects to exceed the 1% ROA goal set for the year, driven by growth in earning assets and improved margins [23] Other Important Information - The company has made significant progress in managing its consumer loan portfolio, reducing volatility and risk [17] - The digital platform is expected to earn the bank around a 1.5% after-tax ROI, supporting overall profitability [12] Q&A Session Summary Question: Are there any potential issues that could affect profitability in Q2? - Management indicated that they are currently seeing an increase in earning assets and expect strong performance in mortgage volumes, with no significant pressures on operating expenses [26][28] Question: What is the expected timeline for resolving consumer loans? - Management expects that a significant portion of promotional loans will pay off within the year, with the remaining standard consumer loans amortizing over time [36][39] Question: How do you foresee the margin outlook for Q2 and the rest of the year? - Management anticipates a margin expansion of 5 to 10 basis points in Q2, with a potential increase of 10 to 20 basis points by year-end [43][44] Question: What is the status of Panacea deconsolidation? - Management confirmed that operational changes have been made, and they are evaluating the accounting requirements for deconsolidation, which could be reflected in the upcoming 10-Q filing [61][62]

Financial Performance - Primis Financial Corp. reported net income of $2.7 million, or $0.11 earnings per share, for Q1 2025, a significant recovery from a net loss of $23.3 million in Q4 2024[2]. - Net income attributable to Primis' common shareholders for Q1 2025 was $2,675,000, a significant recovery from a loss of $23,335,000 in Q4 2024[46]. - Adjusted net income attributable to common shareholders, accounting for nonrecurring items, was $3,572,000 in Q1 2025 compared to a loss of $24,148,000 in Q4 2024[46]. - Earnings per common share - Basic for Q1 2025 was $0.11, compared to a loss of $(0.94) in Q4 2024[37]. - Return on average assets improved to 0.30% in Q1 2025, up from a negative 2.43% in Q4 2024[46]. - Operating return on average common equity for Q1 2025 was 4.14%, up from (25.13%) in Q4 2024[37]. - Pre-tax pre-provision operating earnings increased to $6,364,000 in Q1 2025 from $3,188,000 in Q4 2024[46]. Asset Quality - The allowance for credit losses was 1.45% of loans held for investment at the end of Q1 2025, down from 1.66% in the same quarter of 2024[22]. - Non-performing assets as a percent of total assets decreased to 0.28% in Q1 2025 from 0.29% in Q4 2024[37]. - Non-performing assets decreased to $14,669 thousand in Q1 2025 from $16,739 thousand in Q4 2024, a reduction of 12.4%[42]. - The provision for credit losses was $(1,596) thousand in Q1 2025, a substantial decrease from $(33,483) thousand in Q4 2024, indicating improved credit quality[42]. - Net charge-offs as a percent of average loans (annualized) decreased to 1.47% in Q1 2025 from 3.83% in Q4 2024, reflecting improved credit quality[47]. Deposits and Funding - Total deposits decreased slightly to $3.16 billion as of March 31, 2025, from $3.17 billion at December 31, 2024, with $152 million swept off balance sheet[24]. - Noninterest bearing demand deposits increased to $446 million at March 31, 2025, up from $439 million at December 31, 2024[24]. - The Company emphasizes driving up low-cost deposit balances and has no wholesale funding, being 100% funded with customer deposits[24]. - The digital platform ended Q1 2025 with over $1 billion in deposits, and a new affinity brand was launched to drive growth in deposit products[10]. - Total deposits decreased to $3,120,452 thousand in Q1 2025 from $3,217,099 thousand in Q4 2024, a decrease of 3.0%[44]. Loans and Lending Activities - Total loans receivable increased to $3,043,348 thousand in Q1 2025, up from $2,887,447 thousand in Q4 2024, representing a growth of 5.4%[42]. - Commercial loans increased to $698,097 thousand in Q1 2025, up from $608,595 thousand in Q4 2024, reflecting a growth of 14.7%[42]. - Consumer loans surged to $357,652 thousand in Q1 2025, compared to $270,063 thousand in Q4 2024, marking a significant increase of 32.4%[42]. - Loans held for sale dropped significantly to $74,439 thousand in Q1 2025 from $247,108 thousand in Q4 2024, a decrease of about 69.9%[39]. - Mortgage warehouse lending activity saw outstanding loan balances increase to $115 million, up 80% from $64 million at the end of 2024[9]. Capital and Equity - Common shareholders' equity was $356 million, or 9.67% of total assets, at March 31, 2025[26]. - Book value per common share increased to $14.38 as of March 31, 2025, an increase of $0.15 from December 31, 2024[26]. - Tangible book value per common share rose to $10.59, an increase of $0.17 from December 31, 2024[26]. - Total Primis common stockholders' equity rose to $355,602,000 in Q1 2025, compared to $351,756,000 in Q4 2024[47]. - Common equity to assets ratio was 9.67% in Q1 2025, slightly up from 9.53% in Q4 2024[47]. Income and Expenses - Net interest income increased to $26,364 thousand in Q1 2025, compared to $26,077 thousand in Q4 2024, reflecting a growth of 1.1%[39]. - Noninterest income decreased to $7.8 million in Q1 2025 from $13.2 million in Q4 2024, impacted by the sale of the Life Premium Finance division[16]. - Total funding costs decreased to $21,359 thousand in Q1 2025 from $25,261 thousand in Q4 2024, a decrease of 15.0%[44]. - Cost of funds decreased to 2.68% in Q1 2025 from 2.97% in Q4 2024[37]. - The cost of interest-bearing deposits was 2.93% in Q1 2025, down from 3.25% in Q4 2024, a reduction of 32 basis points[45]. Dividends and Shareholder Returns - The Board of Directors declared a dividend of $0.10 per share payable on May 28, 2025[27].

Core Financial Performance - The company reported net income available to common shareholders of $2.7 million, or $0.11 earnings per share, for Q1 2025, a significant recovery from a net loss of $23.3 million in Q4 2024 [1] - Excluding nonrecurring costs, the company earned $5.1 million, resulting in a normalized return on assets of 0.56% for Q1 2025 [2] Strategic Repositioning - The company has focused on its core banking operations, with 24 banking offices in Virginia and Maryland and $2.2 billion in low-cost customer deposits [4] - The cost of deposits was 1.83%, lower than most larger regional bank competitors [4] - The loan portfolio was stable, with a loan pipeline of $228 million as of March 31, 2025, compared to $119 million at the end of 2024 [5] Mortgage Operations - Primis Mortgage generated approximately $0.8 million pre-tax from retail mortgage activities in Q1 2025, a recovery from a loss of $0.4 million in Q4 2024 [6] - Locked loans totaled $257 million in Q1 2025, up 27% from the previous quarter [6] - The company successfully recruited teams in key markets, with a production potential of approximately $500 million [7] National Strategies and Digital Platform - Mortgage warehouse lending activity increased significantly, with outstanding loan balances at $115 million, up 80% from the previous quarter [8] - The digital platform ended Q1 2025 with over $1 billion in deposits, with a cost of deposits comparable to Fed Funds [9] Panacea Financial Division - Panacea's loans outstanding increased by $40 million, or 9% unannualized, from Q4 2024, with a goal of reaching 10,000 customers by the end of 2025 [10] Outlook and Future Growth - The company expects to rebuild earning assets to levels seen prior to the sale of the Life Premium Finance business, which is anticipated to add 21 basis points to the return on assets [11] - Management expects low expense growth in 2025, which will enhance the impact of growth in earning assets [12] - A significant reduction in technology spending is expected as the company consolidates its core systems, potentially saving $6 million to $7 million annually [13] Financial Ratios and Metrics - The net interest margin improved to 3.15% in Q1 2025, compared to 2.90% in Q4 2024 [14] - Noninterest income was $7.8 million in Q1 2025, down from $13.2 million in Q4 2024, primarily due to a prior gain from the sale of the Life Premium Finance division [16] - Noninterest expense decreased to $32.5 million in Q1 2025 from $37.8 million in Q4 2024, with core operating expenses projected to be between $20 million and $21 million per quarter for the remainder of 2025 [18] Asset Quality and Loan Portfolio - Loans held for investment increased to $3.04 billion as of March 31, 2025, largely due to the reclassification of consumer loans [19] - Nonperforming assets were 0.28% of total assets, a slight decrease from 0.29% at the end of 2024 [20] - The company recorded a provision for loan losses of $1.6 million for Q1 2025, down from $6.5 million in the same quarter in 2024 [21] Deposits and Funding - Total deposits slightly decreased to $3.16 billion as of March 31, 2025, with noninterest-bearing demand deposits increasing to $446 million [23] - The company is fully funded by customer deposits, with no reliance on wholesale funding [23] Shareholders' Equity - Book value per common share increased to $14.38 as of March 31, 2025, with tangible book value per common share at $10.59 [24] - The Board declared a dividend of $0.10 per share, marking the fifty-fourth consecutive quarterly dividend [25]

Part I [Business](index=7&type=section&id=Item%201.%20Business) Primis Financial Corp. is a bank holding company providing banking services through 24 branches and digital platforms, focusing on specialized lending and strategic digital expansion Key Financial Metrics and Branch Network | Metric | Value (as of Dec 31, 2024) | | :--- | :--- | | Total Assets | $3.7 billion | | Total Loans Held for Investment | $2.9 billion | | Total Deposits | $3.2 billion | | Total Stockholders' Equity | $365.0 million | | Full-Service Branches | 24 (22 in VA, 2 in MD) | - The company's strategy focuses on three core areas: maintaining a strong community bank, growing specialized business lines with above-average returns (like Panacea Financial and Primis Mortgage), and expanding digital offerings to attract deposits at scale[26](index=26&type=chunk)[27](index=27&type=chunk) - In a strategic shift, the company sold its Life Premium Finance (LPF) division to EverBank, with the transaction closing on January 31, 2025. A majority of the LPF loans were sold by year-end 2024[50](index=50&type=chunk) - As of December 31, 2024, the company employed **592** people, with approximately **63%** being female and **20%** identifying as minorities[63](index=63&type=chunk) [Lending Activities](index=11&type=section&id=Item%201.%20Business%20-%20Lending%20Activities) The company diversifies lending across commercial real estate, SBA, and specialized healthcare, while strategically exiting its Life Premium Finance and a third-party unsecured personal loan program - The company is a Small Business Administration (SBA) Preferred Lending Partner (PLP), enabling it to offer SBA 7(a) and 504 loans nationwide[30](index=30&type=chunk)[38](index=38&type=chunk) - The Panacea Financial division provides specialized financing for medical, dental, and veterinary practices, covering acquisitions, start-ups, real estate, and equipment[39](index=39&type=chunk) - A strategic decision was made in 2024 to sell the majority of the Life Premium Finance loan portfolio and to cease offering these loans as of January 31, 2025[43](index=43&type=chunk) - The company is also discontinuing a third-party program for sourcing and originating unsecured personal loans, effective January 31, 2025, and is seeking to sell the existing portfolio[44](index=44&type=chunk) [Lines of Business and Digital Banking](index=15&type=section&id=Item%201.%20Business%20-%20Lines%20of%20Business%20and%20Digital%20Banking) The company's Panacea Financial and Primis Mortgage lines exhibit strong growth, with its digital platform successfully attracting nearly $1.0 billion in deposits Key Business Line Performance and Digital Banking Metrics | Business Line / Platform | 2024 Performance Metric | 2023 Performance Metric | | :--- | :--- | :--- | | **Panacea Financial Loans** | $433.8 million | $322.8 million | | **Panacea Financial Deposits** | $92.3 million | $56.1 million | | **Primis Mortgage Origination** | ~$800 million | ~$600 million | | **Digital Platform Deposits** | $985.5 million | $909.4 million | - The Life Premium Financing division was sold to EverBank, N.A., with the transaction closing on January 31, 2025. As of year-end 2024, **$50.7 million** in loans were classified as held for sale pending the final close[50](index=50&type=chunk) - The V1BE service, a bank delivery app for on-demand branch services, now covers the majority of the company's footprint, including the greater Washington, D.C. region[53](index=53&type=chunk) [Supervision and Regulation](index=21&type=section&id=Item%201.%20Business%20-%20Supervision%20and%20Regulation) Primis and Primis Bank are extensively regulated, maintaining "well-capitalized" and "well-managed" status under Basel III capital requirements and various consumer protection rules - To maintain its status as a financial holding company, Primis and Primis Bank must remain "well-capitalized" and "well-managed," and the Bank must have at least a "Satisfactory" Community Reinvestment Act (CRA) rating[77](index=77&type=chunk) - Both Primis and the Bank's regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer as of December 31, 2024[101](index=101&type=chunk) - The company is subject to the Community Reinvestment Act (CRA), and new rules issued in October 2023 (currently under a legal injunction) are expected to make it more challenging and/or costly to maintain a satisfactory rating[124](index=124&type=chunk)[127](index=127&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks, including credit concentrations, interest rate fluctuations, operational and cybersecurity threats, and financial reporting issues due to internal control weaknesses - **Credit Risk:** The company has significant exposure to real estate, with real estate lending constituting approximately **69.3%** of the total loan portfolio as of December 31, 2024. This includes **$1.09 billion** in commercial real estate loans and **$101.2 million** in construction and land development loans[138](index=138&type=chunk)[143](index=143&type=chunk)[150](index=150&type=chunk) - **Third-Party Consumer Loan Risk:** A portion of the consumer loan portfolio (**$152.1 million**) is originated and serviced by a third party. The company is exposed to the credit risk of this third party for reimbursement of waived interest on promotional loans and for a credit enhancement that may not be fully realizable, especially since new originations will cease on January 31, 2025[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - **Market Risk:** Profitability is highly dependent on local economic conditions in its primary markets. The business is also subject to significant interest rate risk, as changes in rates can impact net interest income and the valuation of assets and liabilities[162](index=162&type=chunk)[164](index=164&type=chunk) - **Operational & Cybersecurity Risk:** The company relies on third-party vendors for key infrastructure and faces significant cyber threats, including e-fraud and data breaches. The increasing use of remote work and AI technologies introduces additional operational and security challenges[188](index=188&type=chunk)[194](index=194&type=chunk)[199](index=199&type=chunk) - **Financial Reporting Risk:** Management identified material weaknesses in internal controls over financial reporting for FY 2023 related to accounting for loan transfers and a third-party consumer loan program. While remediation is in progress, the controls have not operated long enough to be considered fully remediated[238](index=238&type=chunk) [Unresolved Staff Comments](index=72&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) Primis Financial Corp. reports no unresolved staff comments from the Securities and Exchange Commission (SEC) for the year ended December 31, 2024 - The company has no unresolved staff comments from the SEC as of the report date[239](index=239&type=chunk) [Cybersecurity](index=72&type=section&id=Item%201C.%20Cybersecurity) The company's cybersecurity program, overseen by the ERM Committee, employs threat intelligence, 24/7 monitoring, and an incident response plan to protect information assets - The Enterprise Risk Management (ERM) Committee of the Board has primary oversight of the cybersecurity program, with the Chief Information Officer (CIO) managing the program and reporting to the committee quarterly[247](index=247&type=chunk)[248](index=248&type=chunk) - The company utilizes a variety of security tools and processes, including active monitoring by its Network Team and a third-party managed security service provider for 24/7 coverage[241](index=241&type=chunk)[242](index=242&type=chunk) - A formal Cyber Incident Response Plan is in place, which is regularly tested through exercises like tabletop simulations to ensure readiness for potential security incidents[244](index=244&type=chunk) - To date, the Bank has not experienced a cybersecurity incident that has materially impacted its business strategy, financial condition, or results of operation[246](index=246&type=chunk) [Properties](index=76&type=section&id=Item%202.%20Properties) Primis Financial Corp. operates from its main offices and 24 full-service branches across Virginia and Maryland, utilizing 32 owned and 20 leased properties deemed adequate for operations - The company owns **32** properties and leases **20** properties, which house its branch network and operational units[251](index=251&type=chunk) - As of December 31, 2024, Primis Bank operated twenty-four full-service branches: twenty-two in Virginia and two in Maryland[251](index=251&type=chunk) [Legal Proceedings](index=76&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal proceedings, which management believes will not materially affect its financial condition or operations, with no significant pending risks - Management believes that current legal proceedings will not have a material adverse effect on the company's financial condition or results of operations[253](index=253&type=chunk) [Mine Safety Disclosures](index=76&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Primis Financial Corp - Not applicable[254](index=254&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=76&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Primis common stock trades on Nasdaq, with 24.7 million shares outstanding; a repurchase program is authorized, but no shares were bought back in 2024, and the stock has underperformed key indices - The company's common stock (FRST) is traded on the Nasdaq Global Market. As of April 15, 2025, there were **24,722,734** shares outstanding[256](index=256&type=chunk) - A stock repurchase program authorized on December 19, 2024, allows for the repurchase of up to **740,600** shares. No shares were repurchased under this or previous programs during 2024[260](index=260&type=chunk)[262](index=262&type=chunk) Five-Year Cumulative Total Return Performance | Year | Primis Financial Corp. | Russell 2000 Index | NASDAQ Bank Index | | :--- | :--- | :--- | :--- | | 2019 | 100.00 | 100.00 | 100.00 | | 2020 | 76.87 | 119.96 | 89.37 | | 2021 | 98.12 | 137.74 | 124.84 | | 2022 | 79.61 | 109.59 | 101.92 | | 2023 | 88.81 | 128.14 | 95.12 | | 2024 | 84.65 | 142.93 | 111.03 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=80&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For FY2024, Primis reported a $16.2 million net loss, primarily due to a $50.6 million provision for credit losses, despite increased net interest income and an improved net interest margin Key Financial Performance Highlights | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net Loss Attributable to Common Shareholders | ($16.2 million) | ($7.8 million) | | Loss Per Share (basic & diluted) | ($0.66) | ($0.32) | | Net Interest Income | $104.2 million | $98.7 million | | Net Interest Margin | 2.86% | 2.68% | | Provision for Credit Losses | $50.6 million | $32.5 million | - The provision for credit losses was significantly impacted by the Consumer Program portfolio, which accounted for **$40.0 million** of the total **$50.6 million** provision in 2024. This included a **$20.0 million** write-down related to transferring a portion of this portfolio to held for sale[296](index=296&type=chunk)[288](index=288&type=chunk) - The company sold a majority of its Life Premium Finance (LPF) loan portfolio, realizing a **$4.7 million** gain, which is included in noninterest income[296](index=296&type=chunk) - Total assets decreased to **$3.7 billion**, and loans held for investment decreased by **$332.0 million**, or **10.3%**, from year-end 2023[294](index=294&type=chunk) [Critical Accounting Estimates and Policies](index=80&type=section&id=Item%207.%20MD%26A%20-%20Critical%20Accounting%20Estimates%20and%20Policies) Critical accounting estimates include the allowance for credit losses, goodwill valuation, and the complex third-party consumer loan portfolio accounting, which saw a significant Q4 2024 write-down - The allowance for credit losses (ACL) is a critical estimate based on the CECL methodology, using historical data, economic forecasts (from Moody's), and management judgment[272](index=272&type=chunk)[274](index=274&type=chunk) - Goodwill impairment testing as of September 30, 2024, for both the Primis Bank and Primis Mortgage reporting units resulted in no impairment, as the estimated fair values exceeded their carrying values[277](index=277&type=chunk)[279](index=279&type=chunk) - The third-party Consumer Program is accounted for as multiple units: the loans themselves and a separate derivative asset representing expected reimbursements and performance fees. This derivative is marked to fair value each period[282](index=282&type=chunk)[285](index=285&type=chunk) - In Q4 2024, the company ceased new originations in the Consumer Program (effective Jan 31, 2025) and transferred **$133.2 million** of these loans to held for sale, recording a **$20.0 million** write-down to fair market value[288](index=288&type=chunk) [Financial Condition](index=98&type=section&id=Item%207.%20MD%26A%20-%20Financial%20Condition) As of December 31, 2024, total assets decreased to $3.7 billion, with a 10% reduction in loans, increased nonperforming assets and ACL, yet the company remained well-capitalized Consolidated Balance Sheet Highlights | Balance Sheet Item | Dec 31, 2024 | Dec 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $3,690.1M | $3,856.5M | (4.3%) | | Net Loans | $2,833.7M | $3,167.2M | (10.5%) | | Total Deposits | $3,171.0M | $3,270.2M | (3.0%) | | Total Equity | $365.0M | $397.6M | (8.2%) | - Nonperforming assets rose to **$16.7 million** from **$10.8 million** in the prior year, primarily due to an increase in nonaccrual commercial and commercial real estate loans[325](index=325&type=chunk) - The allowance for credit losses to total loans increased to **1.86%**. Excluding the high-risk Consumer Program loan portfolio, the ratio was **1.29%**[296](index=296&type=chunk) - The company's investment securities portfolio increased slightly to **$245.4 million**. The portfolio contains a material amount of unrealized mark-to-market losses due to higher interest rates, but the company intends to hold these securities and does not anticipate realizing losses[353](index=353&type=chunk)[354](index=354&type=chunk) - Both Primis Financial Corp. and Primis Bank exceeded all regulatory capital requirements to be categorized as well-capitalized as of December 31, 2024[381](index=381&type=chunk)[383](index=383&type=chunk) [Financial Statements and Supplementary Data](index=126&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents FY2024 audited consolidated financial statements, with an unqualified opinion on financials but an adverse opinion on internal controls due to material weaknesses, and detailed accounting notes - The independent auditor, Crowe LLP, issued an adverse opinion on the company's internal control over financial reporting as of December 31, 2024, due to three material weaknesses[393](index=393&type=chunk)[405](index=405&type=chunk) - The auditor identified two critical audit matters: the Goodwill Impairment Evaluation for the Bank reporting unit and the economic variable forecasts used in the Allowance for Credit Losses on loans[397](index=397&type=chunk)[399](index=399&type=chunk) - The company changed its independent registered public accounting firm, engaging Crowe LLP for the 2024 fiscal year audit after Forvis Mazars, LLP declined to stand for re-appointment[855](index=855&type=chunk) [Notes to Consolidated Financial Statements](index=141&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data%20-%20Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial results, covering Panacea Financial consolidation, LPF division sale, and the complex third-party Consumer Program accounting, including a Q4 2024 write-down and reclassification - The company consolidates Panacea Financial Holdings, Inc. (PFH) as a Variable Interest Entity (VIE) for which it is the primary beneficiary[433](index=433&type=chunk)[438](index=438&type=chunk) - The sale of the Life Premium Finance (LPF) division to EverBank resulted in the sale of approximately **$400 million** in loans and a pre-tax gain of **$4.7 million** in 2024[439](index=439&type=chunk) - The third-party Consumer Program loan portfolio, which had an outstanding balance of **$152.1 million** at year-end, was subject to a **$20.0 million** write-down when a portion was moved to held for sale. The allowance for credit losses on the remaining held-for-investment portion (**$38.9 million**) was **$16.3 million**[476](index=476&type=chunk)[477](index=477&type=chunk) - Subsequent to year-end, in March 2025, the company decided to reclassify the **$113.2 million** of Consumer Program loans from held for sale back to held for investment[695](index=695&type=chunk) [Controls and Procedures](index=234&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of December 31, 2024, due to three material weaknesses in internal control, including un-remediated prior issues and a new deposit processing weakness, with remediation plans underway - Management concluded that internal control over financial reporting was not effective as of December 31, 2024[700](index=700&type=chunk) - Three material weaknesses were identified: (1) ineffective controls over accounting for loan transfers, (2) ineffective controls over evaluating credit losses on the third-party consumer loan portfolio, and (3) improper segregation of duties and review controls for deposit account processing[701](index=701&type=chunk)[706](index=706&type=chunk) - The material weakness in the third-party consumer loan allowance resulted in a **$6.5 million** understatement of the allowance for credit losses and provision for credit losses before correction[706](index=706&type=chunk) - Management has implemented and is continuing to enhance remediation plans for all identified weaknesses, including refining controls, enhancing reviews, and adding access restrictions[704](index=704&type=chunk)[705](index=705&type=chunk)[716](index=716&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=238&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The ten-member Board includes an independent Audit Committee with a financial expert, and the company maintains a Code of Ethics, though a director's Section 16 filing was reported as delinquent - The Board of Directors consists of ten members, with John F. Biagas serving as Chairman and W. Rand Cook as Vice-Chairman[713](index=713&type=chunk)[719](index=719&type=chunk) - The Audit Committee is composed entirely of independent directors, with John Eggemeyer designated as the audit committee financial expert[738](index=738&type=chunk) - A Form 4 filing for director Deborah Diaz was not timely filed for purchase transactions on October 15, 2024, but was subsequently filed on March 15, 2025[745](index=745&type=chunk) [Executive Compensation](index=250&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation saw discretionary reductions in 2024 short-term incentives for NEOs due to net loss and untimely filings, with no new long-term equity awards granted, and a CEO to median employee pay ratio of 13.6 to 1 - Due to the company's 2024 net loss and untimely financial filings, the Compensation Committee used its discretion to eliminate the CEO's short-term incentive payment and substantially reduce payments for other NEOs[767](index=767&type=chunk) - No long-term equity incentive awards (performance-based restricted stock units) were granted to executive officers in 2024[768](index=768&type=chunk)[799](index=799&type=chunk) 2024 Named Executive Officer Compensation | Name | Position | 2024 Total Compensation | | :--- | :--- | :--- | | Dennis J. Zember, Jr. | President and CEO | $788,439 | | Matthew A. Switzer | EVP and CFO | $411,310 | | Rickey A. Fulk | EVP and President of Primis Bank | $385,640 | | Marie T. Leibson | EVP and CCO | $373,516 | | Ann-Stanton C. Gore | EVP and CMO | $321,095 | - The ratio of the CEO's annual total compensation (**$788,439**) to the median employee's compensation (**$57,831**) was **13.6 to 1** for 2024[833](index=833&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=278&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of April 28, 2025, three entities beneficially own 5% or more of the common stock, while all directors and executive officers collectively own 10.96% of outstanding shares - As of April 28, 2025, there are three beneficial owners of **5%** or more of the company's common stock: BlackRock, Inc. (**8.11%**), Castle Creek Capital Partners VII, LP (**7.62%**), and The Banc Funds Company, L.L.C. (**6.92%**)[837](index=837&type=chunk) - All directors and executive officers as a group beneficially own **2,712,783** shares, representing **10.96%** of the class[837](index=837&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=282&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company discloses related party transactions, including employment of executive officers' relatives and loans to affiliates, with the Board affirming the independence of all directors except the CEO - The daughter of CCO Marie T. Leibson and the nephew of CEO Dennis J. Zember, Jr. are employed by the Bank[840](index=840&type=chunk)[841](index=841&type=chunk) - Loans to directors and executive officers are made in the ordinary course of business and on terms comparable to those for unaffiliated persons. As of December 31, 2024, these loans totaled **$17.6 million**[842](index=842&type=chunk) - All directors are considered independent, except for CEO Dennis J. Zember, Jr[849](index=849&type=chunk) [Principal Accounting Fees and Services](index=284&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) For FY2024, Crowe LLP served as the independent auditor, replacing Forvis Mazars, LLP, with fees detailed for both firms, noting the prior auditor's non-reappointment without disagreements, despite material weaknesses Independent Auditor Fees | Fee Type | 2024 Fees (Crowe) | 2024 Fees (Forvis Mazars) | 2023 Fees (Forvis Mazars) | | :--- | :--- | :--- | :--- | | Audit Fees | $1,608,198 | $171,042 | $2,570,396 | | Audit-Related Fees | $52,500 | $0 | $92,292 | | Tax Fees | $0 | $0 | $153,300 | | All Other Fees | $0 | $0 | $0 | - On September 19, 2024, the Audit Committee approved the engagement of Crowe LLP as the new independent registered public accounting firm for the fiscal year ending December 31, 2024[858](index=858&type=chunk) - The previous auditor, Forvis Mazars, LLP, declined to stand for re-appointment. There were no disagreements with Forvis Mazars on accounting principles or practices[855](index=855&type=chunk)[857](index=857&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=289&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all Form 10-K documents, including consolidated financial statements and the auditor's report, with omitted schedules and a detailed exhibit index covering corporate and compensation documents - The consolidated financial statements and auditor's reports are filed under Part II, Item 8[865](index=865&type=chunk) - All financial statement schedules have been omitted because they are not required or the information is presented elsewhere in the report[866](index=866&type=chunk) - The exhibit list includes key corporate documents, debt agreements, employment agreements, and required certifications under the Sarbanes-Oxley Act[868](index=868&type=chunk)[869](index=869&type=chunk)[870](index=870&type=chunk) [Form 10-K Summary](index=293&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable, and no summary is provided - None[871](index=871&type=chunk)

Company Announcement - Primis Financial Corp. will release its first quarter 2025 results after market close on April 29, 2025 [1] - A conference call and audio webcast for analysts and investors will take place on April 30, 2025, at 10:00 a.m. Eastern Time [1] - The earnings call can be accessed via a specific link and participants are encouraged to join 15 minutes early [1] Financial Overview - As of December 31, 2024, Primis Financial Corp. reported total assets of $3.7 billion, total loans held for investment of $2.9 billion, and total deposits of $3.2 billion [2] - Primis Bank, the banking subsidiary, offers a variety of financial services to individuals and small- and medium-sized businesses through 24 full-service branches in Virginia and Maryland, as well as online and mobile applications [2]