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Primis(FRST) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1 - Financial Statements The report presents unaudited condensed consolidated financial statements for the quarter ended March 31, 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $4,205,406 | $3,571,537 | | Net Loans | $3,008,005 | $2,914,292 | | Total Deposits | $3,667,997 | $2,722,378 | | Total Liabilities | $3,805,141 | $3,177,134 | | Total Stockholders' Equity | $400,265 | $394,403 | Condensed Consolidated Statements of Income Highlights (in thousands) | Account | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Interest Income | $28,410 | $22,854 | | Provision for Credit Losses | $5,187 | $99 | | Total Noninterest Income | $11,532 | $2,090 | | Total Noninterest Expenses | $27,397 | $18,987 | | Net Income | $5,775 | $4,593 | | Earnings Per Share, Diluted | $0.23 | $0.19 | Notes to Condensed Unaudited Consolidated Financial Statements These notes detail accounting policies, segment data, and key financial statement item breakdowns - The company operates through two reportable segments: Primis Bank (traditional banking) and Primis Mortgage (mortgage origination)1823105 - The company adopted ASU 2022-02 in Q1 2023, eliminating troubled debt restructuring (TDR) accounting guidance, with no material impact26 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2023 financial performance and condition compared to prior periods - Net income increased by 26% year-over-year to $5.8 million in Q1 2023, driven by higher interest income and new mortgage banking income120 - A $5.2 million provision for credit losses was recorded, with $4.8 million related to a specific loan portfolio being fully offset by a corresponding gain in noninterest income128129 Q1 2023 Financial Highlights | Metric | Q1 2023 | Change vs. Q4 2022 | | :--- | :--- | :--- | | Total Assets | $4.21 billion | +18% | | Total Deposits | $3.67 billion | +35% | | Net Interest Margin | 3.15% | N/A (vs. 2.96% in Q1 2022) | | Gross Loans to Deposits | 83% | from 108% | | Allowance for Credit Losses to Total Loans | 1.17% | Unchanged | Results of Operations Net income grew 26% year-over-year, driven by higher interest and noninterest income - Noninterest income surged 452% to $11.5 million, mainly from $4.9 million in credit enhancement income and $4.3 million from the mortgage banking business131 - Noninterest expenses increased by 44% to $27.4 million, primarily driven by a $5.4 million increase in salaries and benefits from higher headcount133 Net Interest Income and Margin Comparison | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Interest Income | $28.4 million | $22.9 million | | Net Interest Margin | 3.15% | 2.96% | | Yield on Avg. Earning Assets | 5.24% | 3.44% | | Cost of Avg. Interest-Bearing Deposits | 2.32% | 0.44% | Financial Condition Total assets grew 18% to $4.21 billion, fueled by a 35% surge in deposits from a new digital platform - Total deposits increased by $950 million (35%) from year-end 2022, primarily due to substantial growth in the Bank's new digital deposit platform155 - Uninsured and uncollateralized deposits were approximately 26% of total deposits, with available liquidity sources representing approximately 180% of these uninsured deposits157167 Nonperforming Assets (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Nonaccrual loans | $33,397 | $35,484 | | Loans past due 90+ days and accruing | $1,625 | $3,361 | | Total nonperforming assets | $35,022 | $38,845 | Liquidity and Capital Resources The company maintained a strong liquidity position and exceeded all regulatory capital requirements - The company has multiple liquidity sources, including $541.6 million in FHLB borrowing capacity and $165.0 million from the BTFP, with no outstanding borrowings163164 Primis Financial Corp. Capital Ratios | Ratio | March 31, 2023 | Minimum Requirement | | :--- | :--- | :--- | | Common equity tier 1 | 10.04% | 4.50% | | Tier 1 risk-based capital | 10.36% | 6.00% | | Total risk-based capital | 14.20% | 8.00% | | Leverage ratio | 8.59% | 4.00% | Item 3 – Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate risk, managed via simulation modeling Sensitivity of Economic Value of Equity (EVE) at March 31, 2023 | Rate Shock (Basis Points) | % Change From Base | | :--- | :--- | | +400 | (7.12)% | | +200 | (4.05)% | | +100 | (0.13)% | | Base | 0.00% | | -100 | (4.19)% | | -200 | (13.29)% | Item 4 – Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period187 - The company is in the process of integrating the recently acquired Primis Mortgage into its internal control over financial reporting framework189 PART II - OTHER INFORMATION Item 1 – Legal Proceedings Ordinary course legal matters are not expected to have a material adverse effect on the company - As of March 31, 2023, there are no pending or threatened legal proceedings that represent a significant risk to the company190 Item 1A – Risk Factors A new risk factor addresses potential impacts from recent negative developments in the banking industry - A new risk factor was added regarding recent bank failures and market volatility, which could negatively impact customer confidence and increase funding costs191192193 Item 6 - Exhibits This section lists all exhibits filed with the Form 10-Q, including required certifications