Primis Financial Corp. (NASDAQ:FRST) Q4 2021 Earnings Conference Call January 28, 2022 10:00 AM ET Company Participants Dennis Zember – President & CEO Matt Switzer – CFO Conference Call Participants Casey Whitman – Piper Sandler Brody Preston – Stephens Inc. Operator Good day, and welcome to the Primis Financial Corp. Fourth Quarter Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instru ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2021 Commission File No. 001-33037 PRIMIS FINANCIAL CORP. (Exact name of registrant as specified in its charter) Virginia 20-1417448 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: | Title of each class: | Tradin ...

Primis Financial Corp. (NASDAQ:FRST) Q3 2021 Earnings Conference Call October 29, 2021 10:00 AM ET Company Participants Matt Switzer - CFO Dennis Zember - President & CEO Conference Call Participants Casey Whitman - Piper Sandler Brody Preston - Stephens Inc. Christopher Marinac - Janney Montgomery Scott Operator Good morning, and welcome to the Primis Financial Corp. Third Quarter 2021 Earnings Conference Call. All participants, will be in a listen-only mode. [Operator Instructions] After today's presentat ...

PART I - FINANCIAL INFORMATION [Item 1 - Financial Statements](index=4&type=section&id=Item%201%20-%20Financial%20Statements) Unaudited consolidated financial statements show **$3.40 billion** total assets and **$19.7 million** net income for H1 2021, driven by credit loss recovery [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The company's balance sheet shows total assets increased to **$3.395 billion** by June 30, 2021, with significant growth in cash and deposits - Total assets increased to **$3.395 billion** as of June 30, 2021, from **$3.089 billion** at December 31, 2020, primarily driven by a significant increase in cash and cash equivalents from **$196 million** to **$621 million**[10](index=10&type=chunk) - Net loans decreased from **$2.404 billion** at year-end 2020 to **$2.255 billion** at June 30, 2021, while total deposits grew from **$2.433 billion** to **$2.751 billion** over the same period[10](index=10&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$3,395,151** | **$3,088,673** | | Cash and cash equivalents | $620,839 | $196,185 | | Net loans | $2,255,090 | $2,404,151 | | Total deposits | $2,751,064 | $2,432,606 | | **Total Liabilities** | **$2,988,211** | **$2,698,119** | | **Total Stockholders' Equity** | **$406,940** | **$390,554** | [Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Net income for Q2 2021 more than doubled to **$10.3 million**, primarily due to a **$4.2 million** recovery of credit loss provisions - Net income for the second quarter of 2021 was **$10.3 million**, more than double the **$4.7 million** earned in the same period of 2020. For the six-month period, net income surged to **$19.7 million** in 2021 from **$4.7 million** in 2020[11](index=11&type=chunk) - A significant driver of the increased profitability was the reversal of credit loss provisions, with a recovery of **$4.2 million** in Q2 2021 compared to a provision of **$10.9 million** in Q2 2020[11](index=11&type=chunk) Key Income Statement Data (in thousands) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $21,800 | $22,473 | $46,755 | $42,988 | | (Recovery of) provision for credit losses | ($4,215) | $10,899 | ($5,587) | $14,349 | | Noninterest Income | $4,494 | $8,393 | $8,311 | $11,213 | | Noninterest Expenses | $17,393 | $14,070 | $35,569 | $33,922 | | **Net Income** | **$10,275** | **$4,709** | **$19,658** | **$4,736** | | **Diluted EPS** | **$0.42** | **$0.19** | **$0.80** | **$0.19** | [Consolidated Statement of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased to **$406.9 million** by June 30, 2021, primarily from **$19.7 million** in net income - Total stockholders' equity increased from **$390.6 million** at the end of 2020 to **$406.9 million** at June 30, 2021[13](index=13&type=chunk) - The growth in equity during the first six months of 2021 was primarily driven by net income of **$19.7 million**, partially offset by common stock dividends of **$4.9 million**[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents significantly increased by **$424.7 million** in H1 2021, driven by financing and investing activities - Cash and cash equivalents increased by **$424.7 million** during the first six months of 2021, compared to a **$50.7 million** increase in the same period of 2020[15](index=15&type=chunk) - The significant cash increase was fueled by net cash provided by financing activities of **$291.3 million** (primarily from a net increase in deposits) and net cash provided by investing activities of **$120.6 million** (primarily from a net decrease in loans)[15](index=15&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Key notes detail the company's name change, PPP loan portfolio, credit loss allowance, and subordinated note redemption - On March 31, 2021, the Company changed its name from Southern National Bancorp of Virginia, Inc. to Primis Financial Corp., and its bank subsidiary changed its name to Primis Bank[17](index=17&type=chunk) - As of June 30, 2021, the company had originated **6,257 Paycheck Protection Program (PPP) loans** totaling **$488.4 million**. The outstanding balance of PPP loans was **$234.3 million**[32](index=32&type=chunk)[52](index=52&type=chunk) - The allowance for credit losses on loans was **$31.3 million** at June 30, 2021, down from **$36.3 million** at December 31, 2020, reflecting improved economic forecasts[10](index=10&type=chunk)[89](index=89&type=chunk) - On February 1, 2021, the Company redeemed **$20.0 million** of its 6.50% Fixed-to-Floating Rate Subordinated Notes due 2025[123](index=123&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management highlights strong Q2 2021 performance with **10% asset growth** to **$3.4 billion** and **$10.3 million** net income, driven by credit loss recovery [Overview and Financial Highlights](index=53&type=section&id=Overview%20and%20Financial%20Highlights) Total assets reached **$3.4 billion** with **$10.3 million** net income for Q2 2021, driven by a negative provision for credit losses - Total assets reached **$3.4 billion** at the end of Q2 2021, a **10% increase** from December 31, 2020[137](index=137&type=chunk) - Net income was **$10.3 million** for Q2 2021, compared to **$4.7 million** for Q2 2020. Return on average assets was **1.23%** for Q2 2021, up from **0.61%** in Q2 2020[137](index=137&type=chunk) - The company recorded a negative provision for credit losses of **$4.2 million** for Q2 2021, compared to a provision of **$10.9 million** in Q2 2020[137](index=137&type=chunk) - Cost of deposits significantly decreased to **0.50%** for Q2 2021 from **0.95%** in Q2 2020[137](index=137&type=chunk) [Results of Operations](index=54&type=section&id=Results%20of%20Operations) Net income for Q2 2021 was **$10.3 million**, with net interest margin at **2.80%** and increased noninterest expenses Net Income Performance (in millions) | Period | Net Income | Basic EPS | Diluted EPS | | :--- | :--- | :--- | :--- | | **Q2 2021** | **$10.3** | **$0.42** | **$0.42** | | Q2 2020 | $4.7 | $0.19 | $0.19 | | **Six Months 2021** | **$19.7** | **$0.81** | **$0.80** | | Six Months 2020 | $4.7 | $0.20 | $0.19 | - Net interest margin for Q2 2021 was **2.80%**, down from **3.33%** in Q2 2020, impacted by lower PPP fee income and significantly higher cash balances[148](index=148&type=chunk) - Noninterest income decreased **46%** to **$4.5 million** in Q2 2021, primarily due to a **$2.3 million** decrease in equity gain from the mortgage affiliate (STM) and a **$2.0 million** decrease in recoveries on acquired charged-off loans[163](index=163&type=chunk) - Noninterest expense increased **24%** to **$17.4 million** in Q2 2021, driven by a **$1.5 million** increase in salaries and benefits related to management restructuring and higher incentive payments[167](index=167&type=chunk) [Financial Condition](index=65&type=section&id=Financial%20Condition) Total loans decreased by **6%** while deposits grew, and nonperforming assets improved, maintaining a well-capitalized status - Total loans decreased by **6%** to **$2.29 billion** at June 30, 2021, from **$2.44 billion** at year-end 2020. Excluding PPP loans, the portfolio decreased by **4%**[170](index=170&type=chunk) - Total deposits grew to **$2.75 billion** from **$2.43 billion** at year-end 2020[170](index=170&type=chunk) Nonperforming Assets (in thousands) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Nonaccrual loans | $14,604 | $14,462 | | Other real estate owned | $1,274 | $3,078 | | **Total nonperforming assets** | **$15,878** | **$17,540** | - The ratio of nonperforming assets (excluding SBA guaranteed loans) to total assets improved to **0.43%** at June 30, 2021, from **0.47%** at December 31, 2020[178](index=178&type=chunk) - The company and its bank subsidiary remained well-capitalized, with Primis Bank's Total risk-based capital ratio at **18.39%** as of June 30, 2021[193](index=193&type=chunk)[195](index=195&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=71&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk through simulation, projecting EVE and NII sensitivity to rate changes within policy limits Sensitivity of Economic Value of Equity (EVE) as of June 30, 2021 | Rate Shock (Basis Points) | EVE Amount (in thousands) | % Change From Base | | :--- | :--- | :--- | | Up 200 | $392,034 | 5.89% | | Up 100 | $386,958 | 4.52% | | Base | $370,219 | 0.00% | | Down 100 | $295,582 | -20.16% | Sensitivity of Net Interest Income (NII) as of June 30, 2021 (1-Year) | Rate Shock (Basis Points) | NII Amount (in thousands) | $ Change From Base (in thousands) | | :--- | :--- | :--- | | Up 200 | $82,796 | $2,686 | | Up 100 | $81,667 | $1,557 | | Base | $80,110 | $0 | | Down 100 | $77,341 | ($2,769) | [Controls and Procedures](index=74&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[206](index=206&type=chunk) - There were no changes in internal control over financial reporting during the quarter that had a material effect or are reasonably likely to have a material effect[208](index=208&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=74&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) The company is involved in ordinary course legal claims, which management believes will not materially affect financial condition - The company is party to various claims and proceedings arising in the ordinary course of business[209](index=209&type=chunk) - Management does not believe these matters will have a material adverse effect on the company's financial condition or operations[209](index=209&type=chunk) [Risk Factors](index=75&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) No material changes to risk factors from the 2020 10-K, with the COVID-19 pandemic's uncertain impact highlighted - The company refers to the risk factors disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020[210](index=210&type=chunk) - The ultimate impact of the COVID-19 pandemic is highlighted as highly uncertain and could heighten many of the previously described risks[211](index=211&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=75&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 current reporting period - Not applicable[212](index=212&type=chunk) [Defaults Upon Senior Securities](index=75&type=section&id=Item%203%20%E2%80%93%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the current reporting period - Not applicable[213](index=213&type=chunk) [Mine Safety Disclosures](index=75&type=section&id=Item%204%20%E2%80%93%20Mine%20Safety%20Disclosures) This item is not applicable for the current reporting period - Not applicable[214](index=214&type=chunk) [Other Information](index=75&type=section&id=Item%205%20%E2%80%93%20Other%20Information) This item is not applicable for the current reporting period - Not applicable[215](index=215&type=chunk) [Exhibits](index=76&type=section&id=Item%206%20-%20Exhibits) This section lists filed exhibits, including CEO/CFO certifications and Inline XBRL formatted financial statements - Lists exhibits filed with the report, including CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[218](index=218&type=chunk) - Includes financial statements formatted in Inline XBRL[219](index=219&type=chunk) [Signatures](index=78&type=section&id=Signatures) The report is duly signed by the President and CEO, and EVP and CFO on August 9, 2021 - The report was signed on August 9, 2021, by Dennis J. Zember, Jr. (President and CEO) and Matthew Switzer (EVP and CFO)[221](index=221&type=chunk)

Financial Data and Key Metrics Changes - Earnings for Q2 2021 were $10.3 million or $0.42 per share, a 10% increase from $9.4 million or $0.39 per share in the same quarter last year [7][20] - Total assets grew to approximately $3.4 billion, with total deposits reaching $2.8 billion, reflecting a significant increase in transaction accounts [8][20] - Non-interest income increased by $677,000, while non-interest expenses declined by $783,000 [28] Business Line Data and Key Metrics Changes - Gross loans decreased to $2.29 billion in Q2 from $2.39 billion in Q1, primarily due to a decline in PPP balances [20] - Non-interest bearing deposits accounted for over 19% of total deposits, while time deposits fell below 15% [21] - The company recognized $1.8 million of net PPPs in Q2 compared to $4.9 million in Q1, with $240 million of PPP loans remaining [23] Market Data and Key Metrics Changes - Credit quality remained stable, with non-accrual loans stable and OREO balances declining [24] - COVID-related loan deferrals decreased to $26 million from $113 million at the end of Q1, with expectations for all remaining loans to be off deferral by the end of Q3 [24] Company Strategy and Development Direction - The company is focused on launching a digital bank offering in Q4, targeting both commercial and consumer checking accounts [12][18] - The digital bank will complement the existing franchise rather than replace it, aiming to enhance future growth [15][18] - The company is exploring niche verticals and partnerships with fintech to leverage its existing capital and drive growth [59][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving loan growth in the second half of the year, projecting an annualized pace of 10% to 15% [35] - The company anticipates significant operating leverage as it deploys liquidity, with expectations for improved profitability as loan growth resumes [71] - Management acknowledged the challenges posed by high liquidity levels but remains optimistic about future growth opportunities [71][76] Other Important Information - The company closed one branch in April and plans to close another in August, while continuously evaluating its branch footprint [28][86] - The hospitality sector is showing signs of recovery, with a focus on managing exposure to hotels [83] Q&A Session Summary Question: What is the expected pace of loan growth for the second half of the year? - Management anticipates an annualized loan growth pace of around 10% to 15% [35] Question: What are the expectations for Panacea's contribution to growth? - Panacea is expected to become a meaningful contributor, especially with its recent move into commercial lending [37] Question: How will expenses be managed in relation to the digital bank launch? - Incremental expenses related to the digital bank are expected to begin in Q4, but overall expenses are projected to remain stable around $17.5 million [40] Question: What is the current status of the hotel portfolio? - The hotel portfolio has improved, with only 5% on deferral, and management does not plan to increase exposure in the short term [83] Question: Are there plans to close or relocate branches? - Management is not looking to leave any communities currently served but is evaluating the branch footprint [86]

Second Quarter 2021 NASDAQ: FRST Forward-Looking Statements This presentation and certain of our other filings with the Securities and Exchange Commission contain statements that constitute "forward-looking statements" within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Such statements can gene ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2021 Commission File No. 001-33037 PRIMIS FINANCIAL CORP. (Exact name of registrant as specified in its charter) Virginia 20-1417448 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 6830 Old Dominion Drive McLean, Virginia 22101 ( ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-33037 SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC. (Exact name of registrant as specified in its charter) Virginia (State or o ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2020 Commission File No. 001-33037 SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC. (Exact name of registrant as specified in its charter) Virginia 20-1417448 of incorporation or organization) (State or other jurisdiction (I.R.S. Employer Identification No.) 6830 Old Dominion Drive FORM 10-Q ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2020 Commission File No. 001-33037 SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC. (Exact name of registrant as specified in its charter) Virginia 20-1417448 of incorporation or organization) (State or other jurisdiction (I.R.S. Employer Identification No.) 6830 Old Dominion Drive McLe ...