Primis Financial Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are to December 31, 2023. Primis is a Virginia-based bank holding company operating Primis Bank, Primis Mortgage and Panacea Financial. The interim financial statements are unaudited.
Financial results and position
| Metric | Q1 2024 / March 31, 2024 | Comparable period / prior year-end |
|---|---|---|
| Net interest income | $25.3 million | $25.3 million in Q1 2023 |
| Net interest margin | 2.84% | 2.81% in Q1 2023; 2.86% in Q4 2023 |
| Net income attributable to Primis common shareholders | $2.5 million; $0.10 per diluted share | $8.4 million; $0.34 per diluted share in Q1 2023 |
| Consolidated net income | $0.8 million | $8.4 million in Q1 2023 |
| Total assets | $3.89 billion | $3.86 billion at December 31, 2023 |
| Loans held for investment | $3.23 billion gross; $3.17 billion net | $3.22 billion gross; $3.17 billion net at year-end |
| Total deposits | $3.31 billion | $3.27 billion at year-end |
| Cash and cash equivalents | $88.7 million | $77.6 million at year-end |
| Allowance for credit losses | $53.5 million; 1.66% of loans | $52.2 million; 1.62% at year-end |
| Total stockholders’ equity | $394.6 million | $397.6 million at year-end |
Interest and dividend income increased to $50.3 million from $44.3 million in Q1 2023, while interest expense rose to $25.1 million from $18.9 million. The filing reports no standalone operating margin measure. Q1 cash flows were $(1.0) million from operations, $(26.3) million from investing activities and $38.5 million from financing activities; cash increased by $11.2 million.
Borrowings totaled approximately $145.0 million, including $25.0 million of FHLB advances, $21.3 million of secured borrowings, $85.8 million of senior subordinated notes and $9.8 million of junior subordinated debt. The Bank reported $478.5 million of unused FHLB lines and $709.9 million of Federal Reserve discount-window capacity, with no discount-window borrowings. Primis Bank’s capital ratios exceeded stated regulatory minimums; its total risk-based capital ratio was 12.35%, and management described the Bank as well capitalized.
Material changes and operating trends
- Common-shareholder income fell 71% year over year. The main driver was a $9.4 million decline in Consumer Program derivative income; Q1 2023 included a large fair-value gain that did not recur. Higher credit-loss provision and personnel expense also weighed on results.
- Net interest income was essentially flat despite higher earning-asset yields: yield on average earning assets rose to 5.65% from 4.92%, while the cost of interest-bearing deposits increased to 3.28% from 2.32%. Management described ongoing margin pressure from deposit competition and higher funding costs.
- Mortgage banking income rose to $5.6 million from $4.3 million. Total noninterest income declined to $10.3 million from $17.7 million, primarily because of the Consumer Program derivative comparison.
- Provision for credit losses increased to $6.5 million from $5.3 million. Net charge-offs were $5.3 million, including $4.3 million from the Consumer Program; the comparable total in Q1 2023 was $4.0 million.
- Deposits grew 1% from year-end, mainly from money market and savings accounts. Non-time deposits increased by $67.9 million, and the gross-loans-to-deposits ratio declined to 95.8% from 96.9%.
- Real-estate-secured loans were 61.2% of the held-for-investment portfolio. Total loans were broadly flat, with growth in commercial and consumer lending offset by lower real-estate-secured balances.
Outlook, risks and unusual items
- The filing provides no specific earnings, margin or growth guidance. Management noted that high interest rates and deposit competition pressure bank margins, while loan growth at higher rates may partly offset rising funding costs. Rate decisions were described as data-dependent.
- The $205.1 million Consumer Program portfolio was 6% of gross loans. Its allowance was $23.0 million, or 43% of the total loan allowance. Management said older, lower-credit-score vintages drove elevated charge-offs; origination standards were tightened in April 2023, and newer production represented about 29% of the portfolio at quarter-end. Forty-four percent of program loans were in no-interest promotional periods.
- Nonaccrual loans rose to $10.1 million from $9.1 million. Total past-due loans increased to $41.8 million from $20.2 million; the filing identifies $26.5 million as 60–89 days past due. Nonperforming assets excluding SBA-guaranteed loans were 0.23% of assets, compared with 0.20% at year-end.
- Available-for-sale securities had $29.9 million of gross unrealized losses at quarter-end, which management attributed to interest-rate changes rather than credit impairment. Management stated it had the ability and intent to hold the securities until recovery or maturity.
- Uninsured deposits were $1.1 billion, or 34% of deposits. Other liquidity risks include deposit competition, commitment funding and interest-rate changes. The filing lists $434.2 million in unfunded lines and construction-loan funds, plus $88.5 million of mortgage-company loan commitments.
- Disclosure controls and procedures were deemed ineffective at quarter-end because previously identified material weaknesses in internal control over financial reporting had not yet been fully remediated. Management said remediation work continued, but the new controls had not operated long enough to conclude the weaknesses were resolved.
- Management reported no pending or threatened proceedings considered a significant risk and no material changes to the risk factors previously disclosed in the 2023 Form 10-K.
Important facts for investors to verify
- Whether the Consumer Program’s older-vintage losses and charge-offs continue, and whether tighter underwriting improves subsequent credit performance.
- Deposit pricing, uninsured-deposit trends, liquidity capacity and the effect of funding costs on net interest margin.
- Past-due and nonaccrual loan trends, allowance adequacy, and concentrations in real estate and consumer lending.
- Assumptions and valuation sensitivity for the Consumer Program derivative and the recovery timeline for unrealized securities losses.
- Progress and independent evidence of remediation of the disclosed material weaknesses. The filing’s cover page also appears to mark “No” for having filed all required reports in the preceding 12 months; verify that checkbox against the original filing.