Primis Financial Corp. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; this is an annual filing, not a standalone fourth-quarter report. Primis is a Virginia-based bank holding company operating Primis Bank, with 40 branches in Virginia and Maryland and digital banking services. The bank serves consumers and small and midsize businesses, with lending concentrated in real estate and commercial loans.
Financial results and condition
| Metric | 2021 | 2020 comparison |
|---|---|---|
| Net income | $31.2 million; $1.28 basic and $1.27 diluted EPS | $23.3 million; $0.96 basic and diluted EPS |
| Continuing-operations income | $31.0 million; $1.27 basic and $1.26 diluted EPS | $14.9 million; $0.61 basic and diluted EPS |
| Net interest income | $94.2 million | $91.6 million |
| Net interest margin | 3.01%; 2.79% excluding PPP effects | 3.35%; 3.33% excluding PPP effects |
| Total assets | $3.41 billion | $3.09 billion |
| Total loans | $2.34 billion | $2.44 billion |
| Total deposits | $2.76 billion | $2.43 billion |
| Stockholders’ equity | $411.9 million | $390.6 million |
- Profit drivers: Continuing-operations income rose 108.4%, primarily because 2021 included a $5.8 million recovery of credit losses versus a $19.5 million provision in 2020. Net interest income increased, while noninterest income fell 24.1% to $11.1 million and noninterest expense rose 5.4% to $71.4 million.
- Cash flow and liquidity: Continuing-operations cash from operating activities was $27.7 million; investing activities provided $5.7 million and financing activities provided $296.2 million. Year-end cash and cash equivalents were $530.2 million, up from $196.2 million. Primis reported $763.2 million of available FHLB borrowing capacity.
- Credit quality: The allowance for credit losses was $29.1 million, down from $36.3 million; allowance-to-loans was 1.24% versus 1.52%. Nonperforming assets were $16.5 million, or 0.44% of assets excluding SBA-guaranteed loans. No loans were on COVID-related deferral at year-end, versus $122.0 million a year earlier.
- Debt and capital: Year-end borrowings included $100.0 million of FHLB advances, $10.0 million of repurchase agreements, $9.7 million of junior subordinated debt and $85.3 million of senior subordinated notes. Primis and the Bank exceeded regulatory well-capitalized thresholds; the Bank’s CET1 ratio was 16.18% and total risk-based capital ratio was 17.43%.
- Shareholder return: The company paid $0.40 per share in dividends during 2021. Book value per share was $16.76 at year-end.
Material changes and unusual items
- Loans declined year over year largely as PPP balances ran off; excluding PPP loans, loans increased $137.2 million. PPP loans were $77.3 million at year-end versus $315.0 million in 2020.
- Deposits increased 13.6%; noninterest-bearing demand deposits were $530.3 million, or 19.2% of deposits. Deposit cost declined to 0.48% for the year from 0.92%.
- Primis sold most of its Southern Trust Mortgage (STM) ownership on December 31, 2021 for $1.6 million cash and an $8.5 million promissory note. STM became a discontinued operation; the transaction included an approximately $2.9 million pretax impairment charge. Primis retained STM preferred stock and STM remains a bank borrower.
- New initiatives included the Panacea medical-professional lending business, a life-premium financing division and digital banking/V1BE service launches. Management reported Panacea loans of approximately $50.2 million and $12.9 million of outstanding life-premium finance balances at year-end.
- Available-for-sale securities increased to $271.3 million from $153.2 million. 2021 included a $3.2 million pretax unrealized loss on these securities, reflected in other comprehensive income.
Outlook, risks and contingencies
Management said economic activity improved during 2021 but remained below pre-pandemic levels in some markets, with COVID variants, labor shortages, supply-chain disruption and inflation still creating uncertainty. It expected the Federal Reserve to raise rates more than once over the following 12 months; this is management’s expectation, not formal earnings guidance. The filing does not provide specific numerical earnings or growth guidance.
- Key exposures include real-estate concentration (80.8% of loans), commercial real estate (49.1%), local economic conditions, interest-rate sensitivity, credit-loss estimation and liquidity/funding competition.
- Management’s year-end interest-rate model estimated net interest income would increase $2.3 million under an immediate +400-basis-point shock and decrease $3.5 million under a -100-basis-point shock; the filing cautions that model assumptions limit predictive precision.
- Cybersecurity, third-party technology providers, regulatory compliance, LIBOR transition, acquisition execution and the effects of COVID-19 remain material risks.
- On January 27, 2022, the Board approved seven branch consolidations and three branch closures during 2022; the company said the financial impact could not be estimated.
- Management reported no pending or threatened legal proceeding representing significant risk and believed ordinary-course claims would not materially affect results. The independent auditor gave unqualified opinions on the financial statements and internal controls.
Investor facts to verify
- Reconcile reported total net income and EPS with continuing-operations results, including the STM discontinued-operation charge and prior-year STM earnings.
- Assess how PPP runoff, high cash balances and lower net interest margin affect recurring net interest income and loan growth.
- Review CRE and broader real-estate concentration, criticized/substandard loans, nonperforming assets and the assumptions underlying the $29.1 million credit allowance.
- Monitor deposit growth and mix, the cost and availability of wholesale funding, and refinancing or repricing of subordinated debt and FHLB advances.
- Track execution and returns from Panacea, life-premium finance, digital banking and the announced branch actions; the filing provides no quantified impact for the branch plan.
- Confirm the filing’s differing presentations of ex-PPP loan growth (the stated dollar increase is $137.2 million; percentage figures vary by section) and the reported noninterest-bearing deposit comparison.