Part I Business Overview Primis Financial Corp. operates Primis Bank, a $3.57 billion asset bank with 32 branches in Virginia and Maryland, specializing in commercial and consumer lending, digital banking, and strategic acquisitions - The company's strategy is a seven-pronged approach focused on competitive products, robust business services, differentiable lines of business, pioneering electronic banking, a relationship-oriented approach, employee development, and community support2728 - Primis has expanded its services through specialized divisions, including Panacea Financial for healthcare professionals, a Life Premium Financing division for high net worth individuals, and Primis Mortgage Company for residential mortgages515253 - The company launched a new digital banking platform in 2022 and the V1BE service, a bank delivery app for on-demand branch services, enabling growth without a large branch presence5455 - As of December 31, 2022, the company had 565 employees, with approximately 66% being female and 21% minorities64 Company Snapshot as of December 31, 2022 | Metric | Value | | :--- | :--- | | Total Assets | $3.57 billion | | Total Loans | $2.95 billion | | Total Deposits | $2.72 billion | | Total Stockholders' Equity | $394.4 million | | Full-Service Branches | 32 (30 in VA, 2 in MD) | Risk Factors The company faces material risks including significant credit concentration in real estate loans, market sensitivity to economic conditions and interest rates, operational challenges from growth and cybersecurity, and liquidity and capital adequacy concerns - A significant portion of the loan portfolio is concentrated in real estate, with commercial real estate loans at $1.19 billion (40.3%) and total real estate lending at $2.01 billion (68.2%) as of December 31, 2022, making the company vulnerable to declines in real estate values144145 - Nonperforming assets increased by 135.8% to $38.8 million (1.32% of total loans and OREO) at year-end 2022 from $16.5 million at year-end 2021, which could adversely affect net income149 - The company faces significant operational risks from its reliance on third-party vendors for key business infrastructure, potential failures in integrating acquisitions, and the threat of cyber-attacks, which has increased with the expansion of remote work and digital banking channels193196200 - Liquidity risks are heightened by recent events in the financial services industry, such as the failures of Silicon Valley Bank and Signature Bank, which could impact customer confidence and deposit stability210212 Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission for the year ended December 31, 2022 - Primis Financial Corp. has no unresolved staff comments from the SEC as of the year ended December 31, 2022236 Properties The company operates 32 full-service branches and administrative offices across Virginia and Maryland, owning 32 properties and leasing 17, all in good operating condition - The company owns 32 properties and leases 17 properties, which include its 32 full-service branches in Virginia and Maryland, administrative offices, and operational units237 Legal Proceedings The company is involved in routine legal proceedings, with management assessing no material adverse effect on financial condition or operations, and no significant pending matters as of December 31, 2022 - Management does not believe that any ongoing legal proceedings will have a material adverse effect on the company's financial condition or results of operations239 Mine Safety Disclosures This item is not applicable to the company - Mine safety disclosures are not applicable to Primis Financial Corp240 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock, traded as "FRST" on Nasdaq, had 24,685,458 shares outstanding as of March 6, 2023, with consistent quarterly dividends subject to regulatory limits, and underperformed benchmark indices over the past five years - Primis' common stock is traded on the Nasdaq Global Market under the symbol "FRST". As of March 6, 2023, there were 24,685,458 shares outstanding243 - The company has declared a cash dividend on its common stock every quarter from February 2012 through 2022. Dividend payments are subject to FRB policy and the Bank's ability to distribute funds to the holding company247 5-Year Cumulative Total Shareholder Return Comparison | Year | Primis Financial Corp. | Russell 2000 Index | NASDAQ Bank Index | | :--- | :--- | :--- | :--- | | 2017 | $100.00 | $100.00 | $100.00 | | 2018 | $84.09 | $88.99 | $83.60 | | 2019 | $106.48 | $111.70 | $137.18 | | 2020 | $81.85 | $134.00 | $87.20 | | 2021 | $104.47 | $153.85 | $137.31 | | 2022 | $84.77 | $122.41 | $115.65 | Management's Discussion and Analysis of Financial Condition and Results of Operations Net income decreased to $17.7 million in 2022 due to higher expenses and a $11.3 million provision for credit losses, despite 4.8% asset growth to $3.57 billion and improved net interest margin, while asset quality saw an increase in nonperforming assets - The decrease in net income was primarily driven by higher noninterest expenses, particularly a $12.3 million increase in employee compensation, and a significant swing in the provision for credit losses due to robust loan growth269284 - Total loans, excluding PPP balances, grew by $681.6 million, or 30.1%, from December 31, 2021267 - Nonperforming assets increased to $38.8 million at year-end 2022 from $16.5 million in 2021, largely due to the downgrade of one relationship involving multiple assisted living facilities, which resulted in a $5.0 million provision in Q4 2022299301 - Stockholders' equity decreased by $27.0 million during 2022, primarily due to unrealized mark-to-market losses on the available-for-sale securities portfolio caused by rising interest rates288 Financial Highlights (2022 vs. 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Income | $17.7 million | $31.2 million | | Diluted EPS | $0.72 | $1.27 | | Total Assets | $3.57 billion | $3.40 billion | | Total Loans (ex-PPP) | $2.94 billion | $2.26 billion | | Total Deposits | $2.72 billion | $2.76 billion | | Net Interest Margin | 3.39% | 3.01% | | Provision for (Recovery of) Credit Losses | $11.3 million | ($5.8 million) | | ROAA (continuing operations) | 0.53% | 0.93% | Quantitative and Qualitative Disclosures about Market Risk This section incorporates market risk disclosures from Item 7, focusing on interest rate sensitivity analysis and its impact on Economic Value of Equity and Net Interest Income - Information regarding quantitative and qualitative disclosures about market risk is incorporated by reference from Item 7 of the Annual Report370 Financial Statements and Supplementary Data This section presents consolidated financial statements and FORVIS, LLP's unqualified audit opinion, highlighting Critical Audit Matters related to the Allowance for Credit Losses and Goodwill Impairment Assessment due to significant management judgment - The independent auditor, FORVIS, LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022373375389 - The auditor identified two Critical Audit Matters: the Allowance for Credit Losses (ACL) and the Goodwill Impairment Assessment. The audit of these areas was considered challenging due to the high degree of subjectivity and judgment required by management in determining forecasts and qualitative factors380381384385 - On May 31, 2022, Primis Bank acquired 100% of SeaTrust Mortgage Company (now Primis Mortgage Company) for an aggregate purchase price of $7.0 million in cash, resulting in $2.7 million of goodwill418496498 - The company adopted the CECL methodology for its allowance for credit losses, which stood at $34.5 million for loans as of December 31, 2022, up from $29.1 million in 2021450542 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants regarding accounting principles, financial disclosure, or auditing scope - There were no changes in or disagreements with accountants on accounting and financial disclosure640 Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with the recently acquired Primis Mortgage Company excluded from the internal control assessment scope during its ongoing integration - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report641643 - Management's assessment of internal control over financial reporting as of December 31, 2022, excluded the recently acquired Primis Mortgage Company, which represented 1% of consolidated total assets645 - The company is in the process of integrating Primis Mortgage into its internal control over financial reporting process647 Other Information No other information is reported under this item - No information was reported under Item 9B648 Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 definitive Proxy Statement - The required information for this item is incorporated by reference from the registrant's 2023 definitive proxy statement650 Executive Compensation Information on executive and director compensation is incorporated by reference from the 2023 definitive Proxy Statement - The required information for this item is incorporated by reference from the registrant's 2023 definitive proxy statement651 Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the 2023 definitive Proxy Statement and Part II, Item 5 of this report - The required information for this item is incorporated by reference from the registrant's 2023 definitive proxy statement and Part II, Item 5 of this report653654 Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related party transactions, and director independence is incorporated by reference from the 2023 definitive Proxy Statement - The required information for this item is incorporated by reference from the registrant's 2023 definitive proxy statement655 Principal Accounting Fees and Services Information on principal accounting fees and services provided by FORVIS, LLP is incorporated by reference from the 2023 definitive Proxy Statement - The required information for this item is incorporated by reference from the registrant's 2023 definitive proxy statement656 Part IV Exhibits and Financial Statement Schedules This section lists financial statements and exhibits filed with the Annual Report on Form 10-K, noting the omission of schedules and the inclusion of corporate governance documents and certifications - This item lists the consolidated financial statements filed in Part II, Item 8, and notes that all financial statement schedules have been omitted659660 - A comprehensive list of exhibits is provided, including corporate governance documents, material contracts, and required certifications661663666 Form 10-K Summary No Form 10-K summary is provided under this item - No summary is provided under this item670
Primis(FRST) - 2022 Q4 - Annual Report