Primis Financial 10Q 2024 Q2 Quarterly report

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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, 2024

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)

1676 International Drive, Suite 900

McLean, Virginia 22102

(Address of principal executive offices) (zip code)

(703) 893-7400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading symbol	Name of each exchange on which registered:
Common Stock, par value $0.01 per share	FRST	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b–2 of the Exchange Act:


Large accelerated filer ☐	Accelerated filer ☒	Smaller reporting company ☐

Non-accelerated filer ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of November 29, 2024, there were 24,722,734 shares of common stock, $0.01 par value, outstanding.

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PRIMIS FINANCIAL CORP.

FORM 10-Q

June 30, 2024

TABLE OF CONTENTS		PAGE
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023		2
Condensed Consolidated Statements of Income and Comprehensive income for the three and six months ended June 30, 2024 and 2023		3
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023		4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023		6
Notes to Unaudited Condensed Consolidated Financial Statements		7

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		38

Item 3 – Quantitative and Qualitative Disclosures about Market Risk		55

Item 4 – Controls and Procedures		56

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings		57

Item 1A – Risk Factors		57

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		57

Item 3 – Defaults Upon Senior Securities		57

Item 4 – Mine Safety Disclosures		57

Item 5 – Other Information		57

Item 6 - Exhibits		58

Signatures		60

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PRIMIS FINANCIAL CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)


	June 30,		December 31,
	2024		2023
	(unaudited)
ASSETS
Cash and cash equivalents:
Cash and due from financial institutions	$	5,305	$	1,863
Interest-bearing deposits in other financial institutions		61,275		75,690
Total cash and cash equivalents		66,580		77,553

Securities available-for-sale, at fair value (amortized cost of $262,076 and $255,891, respectively)		232,867		228,420

Securities held-to-maturity, at amortized cost (fair value of $9,692 and $10,839, respectively)		10,649		11,650

Loans held for sale, at fair value		94,644		57,691

Loans held for investment, collateralizing secured borrowings		21,174		20,505
Loans held for investment		3,279,388		3,198,909
Less: allowance for credit losses		(51,574)		(52,209)
Net loans		3,248,988		3,167,205

Stock in Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB)		16,837		14,246
Bank premises and equipment, net		19,946		20,611
Assets held for sale		5,136		6,735
Operating lease right-of-use assets		10,293		10,646
Cloud computing arrangement assets, net		9,206		10,699
Goodwill		93,459		93,459
Intangible assets, net		1,309		1,958
Bank-owned life insurance		66,319		67,588
Deferred tax assets, net		25,232		22,395
Consumer Program derivative		9,929		10,806
Other assets		54,624		54,884
Total assets	$	3,966,018	$	3,856,546

LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits	$	420,241	$	472,941
Interest-bearing deposits:
NOW accounts		793,608		773,028
Money market accounts		831,834		794,530
Savings accounts		866,279		783,758
Time deposits		423,501		445,898
Total interest-bearing deposits		2,915,222		2,797,214
Total deposits		3,335,463		3,270,155

Securities sold under agreements to repurchase		3,273		3,044
Secured borrowings		21,069		20,393
FHLB advances		80,000		30,000
Junior subordinated debt		9,855		9,830
Senior subordinated notes		85,882		85,765
Operating lease liabilities		11,488		11,686
Other liabilities		24,777		28,080
Total liabilities		3,571,807		3,458,953

Commitments and contingencies (See Note 8)

Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 5,000,000 shares; no shares issued and outstanding		—		—
Common stock, $0.01 par value. Authorized 45,000,000 shares; 24,708,234 and 24,693,172 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		247		247
Additional paid in capital		313,852		313,548
Retained earnings		85,099		84,143
Accumulated other comprehensive loss		(23,151)		(21,777)
Total Primis stockholders' equity		376,047		376,161
Noncontrolling interests		18,164		21,432
Total stockholders' equity		394,211		397,593
Total liabilities and stockholders' equity	$	3,966,018	$	3,856,546

See accompanying notes to unaudited condensed consolidated financial statements.

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PRIMIS FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(dollars in thousands, except per share amounts) (Unaudited)



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Interest and dividend income:
Interest and fees on loans	$	49,553	$	41,491	$	97,285	$	79,941
Interest and dividends on taxable securities		1,705		1,449		3,320		2,932
Interest and dividends on tax exempt securities		100		102		200		203
Interest and dividends on other earning assets		841		7,158		1,739		11,382
Total interest and dividend income		52,199		50,200		102,544		94,458
Interest expense:
Interest on deposits		24,622		24,783		47,636		39,827
Interest on other borrowings		2,724		2,083		4,786		5,975
Total interest expense		27,346		26,866		52,422		45,802
Net interest income		24,853		23,334		50,122		48,656
Provision for credit losses		3,119		4,352		9,627		9,615
Net interest income after provision for credit losses		21,734		18,982		40,495		39,041

Noninterest income:
Account maintenance and deposit service fees		1,861		1,457		3,254		2,681
Income from bank-owned life insurance		981		394		1,544		814
Mortgage banking income		6,402		5,198		11,976		9,513
Gain (loss) on sale of loans		(29)		—		307		51
Consumer Program derivative		1,272		1,758		3,313		13,201
Other noninterest income		365		130		764		347
Total noninterest income		10,852		8,937		21,158		26,607

Noninterest expenses:
Salaries and benefits		16,088		15,283		31,822		30,311
Occupancy expenses		1,250		1,593		2,740		3,038
Furniture and equipment expenses		1,849		1,852		3,465		3,429
Amortization of intangible assets		317		318		634		635
Virginia franchise tax expense		632		848		1,263		1,697
FDIC insurance assessment		589		1,070		1,199		1,434
Data processing expense		2,347		2,828		4,578		5,079
Marketing expense		499		521		958		1,090
Telephone and communication expense		341		416		687		793
Professional fees		2,976		1,075		4,341		1,937
Fraud losses (recoveries)		17		1,997		(1)		2,452
Miscellaneous lending expenses		285		568		737		1,453
Other operating expenses		2,596		2,070		4,900		4,045
Total noninterest expenses		29,786		30,439		57,323		57,393
Income (loss) before income taxes		2,800		(2,520)		4,330		8,255
Income tax expense (benefit)		1,265		(526)		1,983		1,887
Net income (loss)		1,535		(1,994)		2,347		6,368
Net loss attributable to noncontrolling interests		1,901		—		3,555		—
Net income (loss) attributable to Primis' common stockholders	$	3,436	$	(1,994)	$	5,902	$	6,368

Other comprehensive income (loss):
Unrealized loss on available-for-sale securities	$	589	$	(3,299)		(1,738)		(293)
Tax expense (benefit)		125		(693)		(364)		(62)
Other comprehensive income (loss)		464		(2,606)		(1,374)		(231)
Comprehensive income (loss)	$	3,900	$	(4,600)	$	4,528	$	6,137
Earnings (loss) per share, basic	$	0.14	$	(0.08)	$	0.24	$	0.26
Earnings (loss) per share, diluted	$	0.14	$	(0.08)	$	0.24	$	0.26

See accompanying notes to unaudited condensed consolidated financial statements.

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PRIMIS FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(dollars in thousands, except per share amounts) (Unaudited)


	For the Three Months Ended June 30, 2024
									Accumulated
					Additional				Other
	Common Stock				Paid in		Retained		Comprehensive		Noncontrolling
	Shares		Amount		Capital		Earnings		Income (Loss)		Interests		Total
Balance - March 31, 2024		24,696,672	$	247	$	313,812	$	84,133	$	(23,615)	$	20,022	$	394,599
Issuance of Panacea Financial Holdings stock, net of costs		—		—		—		—		—		43		43
Dividends on common stock ($0.10 per share)		—		—		—		(2,470)		—		—		(2,470)
Stock option exercises		11,916		—		—		—		—		—		—
Repurchase of restricted stock		(354)		—		(4)		—		—		—		(4)
Stock-based compensation expense		—		—		44		—		—		—		44
Net income (loss)		—		—		—		3,436		—		(1,901)		1,535
Other comprehensive income		—		—		—		—		464		—		464
Balance - June 30, 2024		24,708,234	$	247	$	313,852	$	85,099	$	(23,151)	$	18,164	$	394,211

		For the Three Months Ended June 30, 2023
									Accumulated
					Additional				Other
	Common Stock				Paid in		Retained		Comprehensive		Noncontrolling
	Shares		Amount		Capital		Earnings		Loss		Interests		Total
Balance - March 31, 2023		24,685,064	$	246	$	312,903	$	107,744	$	(23,475)	$	—	$	397,418
Dividends on common stock ($0.10 per share)		—		—		—		(2,469)		—		—		(2,469)
Restricted stock granted		5,000		—		—		—		—		—		—
Stock-based compensation expense		—		—		73		—		—		—		73
Net loss		—		—		—		(1,994)		—		—		(1,994)
Other comprehensive loss		—		—		—		—		(2,606)		—		(2,606)
Balance - June 30, 2023		24,690,064	$	246	$	312,976	$	103,281	$	(26,081)	$	—	$	390,422

See accompanying notes to unaudited condensed consolidated financial statements.

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			For the Six Months Ended June 30, 2024
									Accumulated
					Additional				Other
	Common Stock				Paid in		Retained		Comprehensive		Noncontrolling
	Shares		Amount		Capital		Earnings		Loss		Interests		Total
Balance - December 31, 2023		24,693,172	$	247	$	313,548	$	84,143	$	(21,777)	$	21,432	$	397,593
Issuance of Panacea Financial Holdings stock, net of costs		—		—		—		—		—		287		287
Dividends on common stock ($0.20 per share)		—		—		—		(4,946)		—		—		(4,946)
Stock option exercises		15,416		—		37		—		—		—		37
Repurchase of restricted stock		(354)		—		(4)		—		—		—		(4)
Stock-based compensation expense		—		—		271		—		—		—		271
Net income (loss)		—		—		—		5,902		—		(3,555)		2,347
Other comprehensive loss		—		—		—		—		(1,374)		—		(1,374)
Balance - June 30, 2024		24,708,234	$	247	$	313,852	$	85,099	$	(23,151)	$	18,164	$	394,211

		For the Six Months Ended June 30, 2023
									Accumulated
					Additional				Other
	Common Stock				Paid in		Retained		Comprehensive		Noncontrolling
	Shares		Amount		Capital		Earnings		Loss		Interests		Total
Balance - December 31, 2022		24,680,097	$	246	$	312,722	$	101,850	$	(25,850)	$	—	$	388,968
Dividends on common stock ($0.20 per share)		—		—		—		(4,937)		—		—		(4,937)
Shares retired to unallocated		(1,033)		—		—		—		—		—		—
Stock option exercises		8,000		—		85		—		—		—		85
Restricted stock granted		5,000		—		—		—		—		—		—
Restricted stock forfeited		(2,000)		—		—		—		—		—		—
Repurchase of restricted stock		—		—		(12)		—		—		—		(12)
Stock-based compensation expense		—		—		181		—		—		—		181
Net income		—		—		—		6,368		—		—		6,368
Other comprehensive loss		—		—		—		—		(231)		—		(231)
Balance - June 30, 2023		24,690,064	$	246	$	312,976	$	103,281	$	(26,081)	$	—	$	390,422

See accompanying notes to unaudited condensed consolidated financial statements.

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PRIMIS FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(dollars in thousands, except per share amounts) (Unaudited)


	For the Six Months Ended June 30,
	2024		2023
Operating activities:
Net income	$	2,347	$	6,368
Adjustments to reconcile net income to net cash and cash equivalents (used in) provided by operating activities:
Depreciation and amortization		4,523		4,547
Net accretion of discounts		(113)		(635)
Provision for credit losses		9,627		9,615
Proceeds from sales of loans		76,194		—
Net change in mortgage loans held for sale		(14,802)		(30,309)
Net gains on mortgage banking		(11,976)		(9,513)
Net gains on sale of loans		(307)		(51)
Earnings on bank-owned life insurance		(841)		(784)
Gain on bank-owned life insurance death benefit		(703)		(30)
Stock-based compensation expense		271		181
Gains (losses) on other investments		(342)		36
Deferred income tax benefit		(2,472)		(2,704)
Net change in fair value of loan derivative		877		(11,100)
Net increase in other assets		(9,086)		(5,575)
Net increase (decrease) in other liabilities		(3,623)		4,266
Net cash and cash equivalents (used in) provided by operating activities		49,574		(35,688)
Investing activities:
Purchases of securities available-for-sale		(18,223)		(5,000)
Proceeds from paydowns, maturities and calls of securities available-for-sale		11,679		17,373
Proceeds from paydowns, maturities and calls of securities held-to-maturity		990		1,124
Net (increase) decrease in FRB and FHLB stock		(2,591)		13,732
Net change in loans held for investment		(166,815)		(250,736)
Proceeds from bank-owned life insurance death benefit		918		873
Proceeds from sales of bank premise and equipment and assets held for sale		1,723		—
Purchases of bank premises and equipment, net		—		(1,405)
Purchases of other investments		185		—
Net cash and cash equivalents used in investing activities		(172,134)		(224,039)
Financing activities:
Net increase in deposits		65,308		594,529
Cash dividends paid on common stock		(4,946)		(4,937)
Proceeds from exercised stock options		37		85
Proceeds from secured borrowings, net of repayments		676		20,595
Repurchase of restricted stock		(4)		(12)
Proceeds from short-term FHLB advances		50,000		—
Repayment of short-term borrowings		—		(325,000)
Increase (decrease) in securities sold under agreements to repurchase		229		(2,524)
Issuance of Panacea Financial Holdings stock, net of costs		287		—
Net cash and cash equivalents provided by financing activities		111,587		282,736
Net change in cash and cash equivalents		(10,973)		23,009
Cash and cash equivalents at beginning of period		77,553		77,859
Cash and cash equivalents at end of period	$	66,580	$	100,868
Supplemental disclosure of cash flow information
Cash payments for:
Interest	$	51,697	$	41,605
Income taxes	$	42	$	3,908
Supplemental schedule of noncash investing and financing activities:
Initial recognition of operating lease right-of-use assets	$	—	$	5,372

See accompanying notes to unaudited condensed consolidated financial statements.

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PRIMIS FINANCIAL CORP.

Notes to Unaudited Condensed Consolidated Financial Statements

1. ACCOUNTING POLICIES

As of June 30, 2024, Primis Bank had twenty-four full-service branches in Virginia and Maryland and also provided services to customers through certain online and mobile applications. The Company is headquartered in McLean, Virginia and has an administrative office in Glen Allen, Virginia and an operations center in Atlee, Virginia. Primis Mortgage Company (“PMC”), a residential mortgage lender headquartered in Wilmington, North Carolina, is a consolidated subsidiary of Primis Bank. Panacea Financial Holdings, Inc. (“PFH”), headquartered in Little Rock, Arkansas, is consolidated into the Company. PFH owns the rights to the Panacea Financial brand and its intellectual property and partners with the Bank to offer a suite of financial products and services for doctors, their practices, and ultimately the broader healthcare industry.

The accounting policies and practices of Primis and its subsidiaries conform to U.S. generally accepted accounting principles (“U.S. GAAP”) and to general practice within the banking industry. A discussion of the Company’s material accounting policies are located in our 2023 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

Principles of Consolidation

The consolidated financial statements include the accounts of Primis and its subsidiaries Primis Bank, PMC and PFH. Significant inter-company accounts and transactions have been eliminated in consolidation. Primis consolidates subsidiaries in which it holds, directly or indirectly, more than 50 percent of the voting rights or where it exercises control. Entities where Primis holds 20 to 50 percent of the voting rights, or has the ability to exercise significant influence, or both, are accounted for under the equity method. Primis owns EVB Statutory Trust I (the “Trust”) which is an unconsolidated subsidiary and the junior subordinated debt owed to the Trust is reported as a liability of Primis. Primis consolidates PFH, as a result of the determination that it has a controlling financial interest over the entity as further described below.

We determine whether we have a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (“VIE”) under U.S. GAAP. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. We consolidate voting interest entities in which we have all, or at least a majority of, the voting interest. As defined in U.S. GAAP, VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. The Company has investments in VIE’s for which we are not the primary beneficiary and, as such, are not included in our consolidated financial statements. The Company also has an investment in a VIE for which we are the primary beneficiary.

On December 21, 2023, PFH completed a $24.5 million Series B financing round led by a global venture capital firm. As part of the financing round, Primis acquired approximately 19% of PFH’s common stock for an immaterial purchase price due to previous operating losses in the Bank’s Panacea Financial Division. The Company performed an analysis and determined that PFH is a VIE because it lacks one or more of the characteristics of a voting interest entity. The Company’s

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analysis further determined that it has a controlling financial interest in PFH due to the substantial historical activities between PFH and the Bank’s Panacea Financial Division coupled with the limited activities of PFH outside of its relationship with Primis as of December 31, 2023. Further, there are employees of Primis that have historically carried out substantially all of the activities of PFH. Accordingly, the Company determined it is the primary beneficiary of PFH and consolidated it as of December 31, 2023 and no circumstances have changed during the three or six months ended June 30, 2024 that changed this prior determination.

Operating Segments

The Company, through its Bank subsidiary, provides a broad range of financial services. While the Company’s chief operating decision maker monitors the revenue streams of the various financial products and services, operations are managed and financial performance is evaluated on an organization-wide basis. Management has determined that the Company has two reportable operating segments: Primis Mortgage and Primis Bank, as discussed in Note 11 – Segment Information.

Basis of Presentation

The unaudited condensed consolidated financial statements and notes thereto have been prepared in accordance with U.S. GAAP for interim financial information and instructions for Form 10-Q and follow general practice within the banking industry. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the 2023 Form 10-K.

Reclassifications

In certain instances, amounts reported in the prior year annual audited consolidated financial statements or the interim condensed consolidated financial statements have been reclassified to conform to the current financial statement presentation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Estimates that are particularly susceptible to change in the near term include: the determination of the allowance for credit losses, the fair value of investment securities, the credit impairment of investment securities, the mortgage banking derivatives, interest rate swap derivatives, Consumer Program derivative, the valuation of goodwill, and deferred tax assets. Management monitors and continually reassess these at each reporting period.

Interest Rate Swaps

The Company is subject to interest rate risk exposure in the normal course of business through its core lending operations. Primarily to help mitigate interest rate risk associated with its loan portfolio, the Company entered into interest rate swaps in May and August 2023 with a large U.S. financial institution as the counterparty. Interest rate swaps are contractual agreements whereby one party pays a floating interest rate on a notional principal amount and receives a fixed-rate payment on the same notional principal, or vice versa, for a fixed period of time. Interest rate swaps change in value with movements in benchmark interest rates, such as Prime or the Secured Overnight Financing Rate (“SOFR”). Interest rate swaps subject the Company to market risk associated with changes in interest rates, changes in interest rate volatility,

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as well as the credit risk that the counterparty will fail to perform. The Company’s interest rate swaps are pay-fixed and receive-floating whereby the Company receives a variable rate of interest based on SOFR.

The Company’s interest rate swaps meet the definition of derivative instruments under ASC 815, Derivatives and Hedging, and are accounted for both initially and subsequently at their fair value. The Company assessed the derivative instruments at inception and determined they met the requirements under ASC 815 to be accounted for as fair value hedges. Fair value hedge relationships mitigate exposure to the change in fair value of the hedged risk in an asset, liability or firm commitment. The Company’s interest rate swaps are fair value hedges that are accounted for using the portfolio layer method, which allows the Company to hedge the interest rate risk of prepayable loans by designating as the hedged item a stated amount of two separate and distinct closed portfolios of consumer and commercial loans that are expected to be outstanding for the designated hedge periods. Under the fair value hedging model, gains or losses attributable to the change in fair value of the derivative instruments, as well as the gains and losses attributable to the change in fair value of the hedged items, are recognized in interest income in the same income statement line item with the hedged item in the period in which the change in fair value occurs. The corresponding adjustment to the hedged asset or liability are included in the basis of the hedged items, while the corresponding change in the fair value of the derivative instruments are recorded as an adjustment to other assets or other liabilities, as applicable. The Company presents interest rate swaps on the balance sheets on a net basis when a right of offset exists, based on transactions with a single counterparty and any cash collateral paid to and/or received from that counterparty are subject to legally enforceable master netting arrangements. As of June 30, 2024, the gross amounts of interest rate swap derivative assets and liabilities were $3.1 million and $0, respectively, and are recorded in other assets in the consolidated balance sheet.

The following table represents the carrying value of the portfolio layer method hedged assets and the cumulative fair value hedging adjustments included in the carrying value of the hedged assets as of June 30, 2024 and December 31, 2023:


	June 30, 2024						December 31, 2023
(dollars in thousands)		Amortized Cost Basis		Hedged Asset		Basis Adjustment		Amortized Cost Basis		Hedged Asset		Basis Adjustment
Fixed rate assets	$	869,722	$	246,820	$	(3,180)	$	946,185	$	248,906	$	(1,094)

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU expands current disclosure requirements primarily through enhanced disclosures about significant segment expenses. Specifically, the ASU (i) requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), (ii) requires disclosure of an amount for other segment items by reportable segment and a description of its composition, (iii) requires providing in each interim period all current annual disclosures of a reportable segment’s profit or loss and assets, and (iv) allows an entity to provide additional measures of profit or loss used by the CODM in assessing performance and deciding how to allocate resources in addition to providing the measure for this that is most consistent with GAAP, (v) requires disclosure of the title and position of the CODM and an explanation of how the CODM uses reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (vi) requires an entity that has a single reportable segment to provide all disclosures required by this ASU and Topic 280. This ASU is effective for the Company’s annual disclosures beginning for the year ended December 31, 2024 and its interim disclosures thereafter, with early adoption permitted. The Company is currently evaluating the impact of this ASU to its consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires annual disclosure of certain information relating to the rate reconciliation, income taxes paid by jurisdiction, income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The ASU also eliminates certain requirements relating to unrecognized tax benefits and certain deferred tax disclosure relating to subsidiaries and corporate joint ventures. This ASU is effective for the Company’s annual disclosures beginning for the year ended December 31, 2025. The Company is currently evaluating the impact of this ASU to its financial statement disclosures.

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In March 2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. This ASU adds an illustrative example to clarify how an entity should determine whether a profits interest or similar award is within the scope of ASC 718. The amendments in this standard will be effective for the Company on January 1, 2025. The Company does not believe this standard will have a material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires more disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses, but does not change the requirements for the presentation of expenses on the face of the income statement. The amendments in this standard will be effective for the Company on January 1, 2027, and is required to be applied prospectively, with early adoption permitted. The Company does not believe this standard will have a material impact on its consolidated financial statements.

2. INVESTMENT SECURITIES

The amortized cost and fair value of available-for-sale investment securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows (in thousands):


	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
June 30, 2024
Residential government-sponsored mortgage-backed securities	$	105,433	$	13	$	(14,684)	$	90,762
Obligations of states and political subdivisions		33,650		2		(3,959)		29,693
Corporate securities		16,000		—		(2,274)		13,726
Collateralized loan obligations		5,017		—		(9)		5,008
Residential government-sponsored collateralized mortgage obligations		50,685		48		(1,879)		48,854
Government-sponsored agency securities		16,292		—		(2,624)		13,668
Agency commercial mortgage-backed securities		31,117		—		(3,806)		27,311
SBA pool securities		3,882		9		(46)		3,845
Total	$	262,076	$	72	$	(29,281)	$	232,867


	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
December 31, 2023
Residential government-sponsored mortgage-backed securities	$	110,562	$	72	$	(13,826)	$	96,808
Obligations of states and political subdivisions		33,801		12		(3,733)		30,080
Corporate securities		16,000		—		(1,952)		14,048
Collateralized loan obligations		5,018		—		(36)		4,982
Residential government-sponsored collateralized mortgage obligations		35,927		175		(1,631)		34,471
Government-sponsored agency securities		16,267		—		(2,556)		13,711
Agency commercial mortgage-backed securities		34,059		—		(3,949)		30,110
SBA pool securities		4,257		6		(53)		4,210
Total	$	255,891	$	265	$	(27,736)	$	228,420

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The amortized cost, gross unrecognized gains and losses, allowance for credit losses and fair value of investment securities held-to-maturity were as follows (in thousands):


	Amortized		Gross Unrecognized				Allowance for		Fair
	Cost		Gains		Losses		Credit Losses		Value
June 30, 2024
Residential government-sponsored mortgage-backed securities	$	8,392	$	—	$	(854)	$	—	$	7,538
Obligations of states and political subdivisions		2,069		—		(90)		—		1,979
Residential government-sponsored collateralized mortgage obligations		188		—		(13)		—		175
Total	$	10,649	$	—	$	(957)	$	—	$	9,692


	Amortized		Gross Unrecognized				Allowance for		Fair
	Cost		Gains		Losses		Credit Losses		Value
December 31, 2023
Residential government-sponsored mortgage-backed securities	$	9,040	$	—	$	(754)	$	—	$	8,286
Obligations of states and political subdivisions		2,391		—		(42)		—		2,349
Residential government-sponsored collateralized mortgage obligations		219		—		(15)		—		204
Total	$	11,650	$	—	$	(811)	$	—	$	10,839

Available-for-sale investment securities of $9.4 million and $18.2 million were purchased during the three and six months ended June 30, 2024, respectively, and $5.0 million were purchased during the three and six months ended June 30, 2023. No held-to-maturity investments were purchased during the three months and six ended June 30, 2024 and 2023. No investment securities were sold during the three months and six ended June 30, 2024 and 2023.

The amortized cost and fair value of available-for-sale and held-to-maturity investment securities as of June 30, 2024, by contractual maturity, were as follows (in thousands). Investment securities not due at a single maturity date are shown separately.


	Available-for-Sale				Held-to-Maturity
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Due within one year	$	245	$	242	$	550	$	549
Due in one to five years		9,791		9,124		795		759
Due in five to ten years		37,256		31,938		724		671
Due after ten years		23,667		20,791		—		—
Residential government-sponsored mortgage-backed securities		105,433		90,762		8,392		7,538
Residential government-sponsored collateralized mortgage obligations		50,685		48,854		188		175
Agency commercial mortgage-backed securities		31,117		27,311		—		—
SBA pool securities		3,882		3,845		—		—
Total	$	262,076	$	232,867	$	10,649	$	9,692

Investment securities with a carrying amount of approximately $153.2 million and $200.2 million at June 30, 2024, 2024 and December 31, 2023, respectively, were pledged to secure public deposits, certain other deposits, a line of credit for advances from the FHLB of Atlanta, and repurchase agreements.

Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to U.S. Treasury and residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost basis of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by states and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make

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timely principal and interest payments under the contractual terms of the securities and (iv) internal forecasts. As of June 30, 2024, Primis did not have a material allowance for credit losses on held-to-maturity securities.

As of June 30, 2024, there were 143 investment securities available-for-sale that were in an unrealized loss position. The unrealized losses related to investment securities available-for-sale as of June 30, 2024 and December 31, 2023, relate to changes in interest rates relative to when the investment securities were purchased, and do not indicate credit-related impairment. Primis performs quantitative analysis and if needed, a qualitative analysis in this determination. As a result of the Company’s analysis, none of the securities were deemed to require an allowance for credit losses. Primis has the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses.

The following tables present information regarding investment securities available-for-sale and held-to-maturity in a continuous unrealized loss position as of June 30, 2024 and December 31, 2023 by duration of time in a loss position (in thousands):


	Less than 12 months				12 Months or More				Total
June 30, 2024	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-Sale	value		Losses		value		Losses		value		Losses
Residential government-sponsored mortgage-backed securities	$	131	$	—	$	87,857	$	(14,684)	$	87,988	$	(14,684)
Obligations of states and political subdivisions		2,077		(24)		26,614		(3,935)		28,691		(3,959)
Corporate securities		—		—		13,726		(2,274)		13,726		(2,274)
Collateralized loan obligations		—		—		5,008		(9)		5,008		(9)
Residential government-sponsored collateralized mortgage obligations		25,998		(207)		15,982		(1,672)		41,980		(1,879)
Government-sponsored agency securities		—		—		13,668		(2,624)		13,668		(2,624)
Agency commercial mortgage-backed securities		—		—		27,311		(3,806)		27,311		(3,806)
SBA pool securities		150		—		2,679		(46)		2,829		(46)
Total	$	28,356	$	(231)	$	192,845	$	(29,050)	$	221,201	$	(29,281)


	Less than 12 months				12 Months or More				Total
June 30, 2024	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
Held-to-Maturity	value		Losses		value		Losses		value		Losses
Residential government-sponsored mortgage-backed securities	$	—	$	—	$	7,467	$	(854)	$	7,467	$	(854)
Obligations of states and political subdivisions		566		(14)		1,413		(76)		1,979		(90)
Residential government-sponsored collateralized mortgage obligations		—		—		175		(13)		175		(13)
Total	$	566	$	(14)	$	9,055	$	(943)	$	9,621	$	(957)


	Less than 12 months				12 Months or More				Total
December 31, 2023	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-Sale	value		Losses		value		Losses		value		Losses
Residential government-sponsored mortgage-backed securities	$	—	$	—	$	93,782	$	(13,826)	$	93,782	$	(13,826)
Obligations of states and political subdivisions		3,945		(19)		23,002		(3,714)		26,947		(3,733)
Corporate securities		939		(61)		13,109		(1,891)		14,048		(1,952)
Collateralized loan obligations		—		—		4,982		(36)		4,982		(36)
Residential government-sponsored collateralized mortgage obligations		—		—		17,306		(1,631)		17,306		(1,631)
Government-sponsored agency securities		—		—		13,711		(2,556)		13,711		(2,556)
Agency commercial mortgage-backed securities		—		—		30,110		(3,949)		30,110		(3,949)
SBA pool securities		301		(1)		2,693		(52)		2,994		(53)
Total	$	5,185	$	(81)	$	198,695	$	(27,655)	$	203,880	$	(27,736)

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	Less than 12 months				12 Months or More				Total
December 31, 2023	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
Held-to-Maturity	value		Losses		value		Losses		value		Losses
Residential government-sponsored mortgage-backed securities	$	—	$	—	$	8,286	$	(754)	$	8,286	$	(754)
Obligations of states and political subdivisions		1,373		(4)		396		(38)		1,769		(42)
Residential government-sponsored collateralized mortgage obligations		—		—		204		(15)		204		(15)
Total	$	1,373	$	(4)	$	8,886	$	(807)	$	10,259	$	(811)

3. LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following table summarizes the composition of our loan portfolio as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024		December 31, 2023
Loans held for sale, at fair value	$	94,644	$	57,691

Loans held for investment
Loans secured by real estate:
Commercial real estate - owner occupied ⁽¹⁾	$	463,328	$	455,397
Commercial real estate - non-owner occupied		612,428		578,600
Secured by farmland		4,758		5,044
Construction and land development		104,886		164,742
Residential 1-4 family		608,035		606,226
Multi-family residential		171,512		127,857
Home equity lines of credit		62,152		59,670
Total real estate loans		2,027,099		1,997,536

Commercial loans ⁽²⁾		619,365		602,623
Paycheck Protection Program loans		1,969		2,023
Consumer loans		646,590		611,583
Total Non-PCD loans		3,295,023		3,213,765
PCD loans		5,539		5,649
Total loans held for investment	$	3,300,562	$	3,219,414

(1)	Includes $8.2 million and $7.7 million related to loans collateralizing secured borrowings as of June 30, 2024 and December 31, 2023, respectively.

(2)	Includes $13.0 million and $12.8 million related to loans collateralizing secured borrowings as of June 30, 2024 and December 31, 2023, respectively.

The accounting policy related to the allowance for credit losses is considered a critical policy given the level of estimation, judgment, and uncertainty in the levels of the allowance required to account for the expected losses in the loan portfolio and the material effect such estimation, judgment, and uncertainty can have on the consolidated financial results.

Consumer Program Loans

The Company has $194.2 million and $199.3 million of loans outstanding in the Consumer Program as of June 30, 2024 and December 31, 2023, respectively, or 6% of our total gross loan portfolio as of each date. Loans in the Consumer Program are included within the Consumer Loans category disclosures in this footnote. As of June 30, 2024, 42% of the loans were in a promotional period requiring no payment of interest on their loans with 77% of these promotional loan periods ending in the second half of 2024 through the second quarter of 2025. As of December 31, 2023, 45% of the loans

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were in a promotional period requiring no payment of interest on their loans with 70% of these promotional loan periods ending in the second half of 2024 through the first quarter of 2025. During the three and six months ended June 30, 2024, $3.7 million and $9.3 million, respectively, of promotional loans paid off prior to the end of their promotional periods while $2.7 million and $7.5 million, respectively, of promotional loans reached the end of the promotional period and began amortizing.

Accrued Interest Receivable

Accrued interest receivable on loans totaled $20.5 million and $20.1 million at June 30, 2024 and December 31, 2023, respectively, and is included in other assets in the consolidated balance sheets.

Nonaccrual and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, we consider the borrower’s debt service capacity through the analysis of current financial information, if available, and/or current information with regards to our collateral position. Regulatory provisions would typically require the placement of a loan on nonaccrual status if (i) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or (ii) full payment of principal and interest is not expected. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period (at least six months) of repayment performance by the borrower.

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The following tables present the aging of the recorded investment in past due loans by class of loans held for investment as of June 30, 2024 and December 31, 2023 (in thousands):


	30 - 59		60 - 89		90
	Days		Days		Days		Total		Loans Not		Total
June 30, 2024	Past Due		Past Due		or More		Past Due		Past Due		Loans
Commercial real estate - owner occupied	$	47	$	—	$	210	$	257	$	463,071	$	463,328
Commercial real estate - non-owner occupied		—		—		—		—		612,428		612,428
Secured by farmland		—		—		—		—		4,758		4,758
Construction and land development		1,620		15		955		2,590		102,296		104,886
Residential 1-4 family		1,808		771		1,598		4,177		603,858		608,035
Multi- family residential		—		—		—		—		171,512		171,512
Home equity lines of credit		977		—		660		1,637		60,515		62,152
Commercial loans		4,349		65		2,068		6,482		612,883		619,365
Paycheck Protection Program loans		—		—		1,897		1,897		72		1,969
Consumer loans		3,121		3,077		188		6,386		640,204		646,590
Total Non-PCD loans		11,922		3,928		7,576		23,426		3,271,597		3,295,023
PCD loans		—		875		1,241		2,116		3,423		5,539
Total	$	11,922	$	4,803	$	8,817	$	25,542	$	3,275,020	$	3,300,562


	30 - 59		60 - 89		90
	Days		Days		Days		Total		Loans Not		Total
December 31, 2023	Past Due		Past Due		or More		Past Due		Past Due		Loans
Commercial real estate - owner occupied	$	75	$	—	$	219	$	294	$	455,103	$	455,397
Commercial real estate - non-owner occupied		1,155		—		—		1,155		577,445		578,600
Secured by farmland		—		—		—		—		5,044		5,044
Construction and land development		26		143		—		169		164,573		164,742
Residential 1-4 family		1,850		838		1,376		4,064		602,162		606,226
Multi- family residential		—		—		—		—		127,857		127,857
Home equity lines of credit		416		378		556		1,350		58,320		59,670
Commercial loans		40		588		1,203		1,831		600,792		602,623
Paycheck Protection Program loans		18		—		1,714		1,732		291		2,023
Consumer loans		3,805		2,093		310		6,208		605,375		611,583
Total Non-PCD loans		7,385		4,040		5,378		16,803		3,196,962		3,213,765
PCD loans		2,061		128		1,241		3,430		2,219		5,649
Total	$	9,446	$	4,168	$	6,619	$	20,233	$	3,199,181	$	3,219,414

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The amortized cost, by class, of loans and leases on nonaccrual status as of June 30, 2024 and December 31, 2023, were as follows (in thousands):


	90 Days			Less Than	Total		Nonaccrual With
	Past Due			90 Days	Nonaccrual		No Credit
June 30, 2024	or More			Past Due	Loans		Loss Allowance
Commercial real estate - owner occupied	$	210	$	451	$	661	$	661
Secured by farmland		—		429		429		429
Construction and land development		955		140		1,095		1,095
Residential 1-4 family		1,598		1,796		3,394		3,394
Home equity lines of credit		660		692		1,352		1,352
Commercial loans		2,068		22		2,090		54
Consumer loans		188		718		906		906
Total Non-PCD loans		5,679		4,248		9,927		7,891
PCD loans		1,241		121		1,362		1,362
Total	$	6,920	$	4,369	$	11,289	$	9,253

	90 Days			Less Than	Total		Nonaccrual With
	Past Due			90 Days	Nonaccrual		No Credit
December 31, 2023	or More			Past Due	Loans		Loss Allowance
Commercial real estate - owner occupied	$	219	$	469	$	688	$	688
Secured by farmland		—		480		480		480
Construction and land development		—		23		23		23
Residential 1-4 family		1,376		1,437		2,813		2,813
Home equity lines of credit		556		571		1,127		1,127
Commercial loans		1,203		576		1,779		207
Consumer loans		310		634		944		944
Total Non-PCD loans		3,664		4,190		7,854		6,282
PCD loans		1,241		—		1,241		1,241
Total	$	4,905	$	4,190	$	9,095	$	7,523

There were $1.9 million and $1.7 million of Paycheck Protection Program (“PPP”) loans greater than 90 days past due and still accruing as of both June 30, 2024 and December 31, 2023, respectively.

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The following table presents nonaccrual loans as of June 30, 2024 by class and year of origination (in thousands):


															Revolving
															Loans
													Revolving		Converted
	2024		2023		2022		2021		2020		Prior		Loans		To Term		Total
Commercial real estate - owner occupied	$	—	$	—	$	—	$	210	$	—	$	451	$	—	$	—	$	661
Secured by farmland		—		—		—		—		—		429		—		—		429
Construction and land development		—		—		—		—		—		1,095		—		—		1,095
Residential 1-4 family		—		263		564		—		16		1,956		—		595		3,394
Home equity lines of credit		—		—		—		—		—		69		1,268		15		1,352
Commercial loans		—		615		—		383		—		1,092		—		—		2,090
Consumer loans		—		40		491		375		—		—				—		906
Total non-PCD nonaccruals		—		918		1,055		968		16		5,092		1,268		610		9,927
PCD loans		—		—		—		—		—		1,362		—		—		1,362
Total nonaccrual loans	$	—	$	918	$	1,055	$	968	$	16	$	6,454	$	1,268	$	610	$	11,289

Interest received on nonaccrual loans was zero and $0.2 million for the three and six months ended June 30, 2024, respectively, and zero and $0.01 million for the three and six months ended June 30, 2023, respectively.

Modifications Provided to Borrowers Experiencing Financial Difficulty

The Bank determines that a borrower may be experiencing financial difficulty if the borrower is currently delinquent on any of its debt, or if the Bank is concerned that the borrower may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty, particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk and borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current market rates for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Bank also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Bank for the restructured terms, or if the revised terms are consistent with those currently being offered to new loan customers.

The assessments of whether a borrower is experiencing financial difficulty at the time a concession has been granted is subjective in nature and management’s judgment is required when determining whether the concession results in a modification that is accounted for as a new loan or a continuation of the existing loan under U.S. GAAP.

Although each occurrence is unique to the borrower and is evaluated separately, for all portfolio segments, loans modified as a result of borrowers experiencing financial difficulty are typically modified through reductions in interest rates, reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity.

For the quarter-ended June 30, 2024, one loan with an amortized cost basis of $109 thousand was modified to a borrower experiencing financial difficulty, representing 0.02% of the secured by first liens loan segment. This loan was modified to reduce the interest rate to 6.68% from 7.98% through its 6/16/2042 maturity. Additionally, during the quarter, one loan with an amortized cost of $846 thousand, assigned to secured by first liens and constituting 0.14% of this portfolio was no longer designated as a financial difficulty modification. This loan, recognized as an FDM in February 22, 2023, resumed contractual payments in August 2023 and has had 15 consecutive months of satisfactory performance.

Table of Contents

Two existing, other consumer loan modifications, with a total $45 thousand in amortized cost and representing 0.01% of this segment, have had no payment delinquencies in the quarter. Of these two modifications, one loan with $15 thousand in amortized cost, was modified to interest only payments for eleven months, with a return to principal and interest payments in August 2024. Total contractual payments for this loan prior to modification would have been $549. The other existing consumer loan, with $30 thousand in amortized cost was modified to interest only payments for nine months, with principal and interest payments to resume June 2024. Total contractual payments, prior to modification, for this quarter would have been $645.

Another existing, revolving 1-4 family modification with a $32 thousand amortized cost and amounting to 0.05% of its assigned loan pool, has paid as agreed in the quarter. This loan was modified from its original 8.5% rate to a fixed 6.00% for a 5 year term. Total contractual payments, prior to modification, for this quarter would have been $714.

The following table depicts the amortized cost basis as of June 30, 2024, of the performance of loans that have been modified to borrowers experiencing financial difficulty in the last 12 months and returned to contractual payments ($ in thousands):


	Payment Status

	Current		30-59 days past due		60-89 days past due		90 days or more
Commercial real estate - owner occupied	$	412	$	—	$	—	$	—
Residential 1-4 family		—		89		—		—
Consumer loans		52		—		158		—
Total	$	464	$	89	$	158	$	—

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies certain loans by providing principal forgiveness. When principal forgiveness is provided, the amortized cost basis of the loan is written off against the allowance. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

If it is determined that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. At that time, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

Credit Quality Indicators

Through its system of internal controls, Primis evaluates and segments loan portfolio credit quality using regulatory definitions for Special Mention, Substandard and Doubtful. Special Mention loans are considered to be criticized. Substandard and Doubtful loans are considered to be classified.

Special Mention loans are loans that have a potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position.

Substandard loans may be inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

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Doubtful loans have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable or improbable. Primis had no loans classified as Doubtful as of June 30, 2024 or December 31, 2023.

In monitoring credit quality trends in the context of assessing the appropriate level of the allowance for credit losses on loans, we monitor portfolio credit quality by the weighted-average risk grade of each class of loan.

Table of Contents

The following table presents weighted-average risk grades for all loans, by class and year of origination/renewal as of June 30, 2024 (in thousands):


															Revolving
															Loans
														Revolving	Converted
	2024		2023		2022		2021		2020		Prior		Loans		To Term		Total
Commercial real estate - owner occupied
Pass	$	28,131	$	52,372	$	80,481	$	61,561	$	14,866	$	203,335	$	3,518	$	8,421	$	452,685
Special Mention		—		—		—		—		—		7,789		—		—		7,789
Substandard		—		—		—		210		—		2,644		—		—		2,854
Doubtful		—		—		—		—		—		—		—		—		—
	$	28,131	$	52,372	$	80,481	$	61,771	$	14,866	$	213,768	$	3,518	$	8,421	$	463,328
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.49		3.50		3.41		3.43		3.18		3.45		3.59		3.74		3.45
Commercial real estate - nonowner occupied
Pass	$	13,963	$	32,986	$	60,504	$	118,135	$	46,188	$	303,284	$	2,688	$	3,732	$	581,480
Special Mention		—		—		—		28,364		—		2,584		—		—		30,948
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
	$	13,963	$	32,986	$	60,504	$	146,499	$	46,188	$	305,868	$	2,688	$	3,732	$	612,428
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.98		3.49		3.16		3.93		3.84		3.67		3.19		2.79		3.69
Secured by farmland
Pass	$	566	$	336	$	—	$	7	$	97	$	2,905	$	286	$	132	$	4,329
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		429		—		—		429
Doubtful		—		—		—		—		—		—		—		—		—
	$	566	$	336	$	—	$	7	$	97	$	3,334	$	286	$	132	$	4,758
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		4.00		—		N/A		4.00		—		4.09		3.96		3.08		4.02
Construction and land development
Pass	$	10,377	$	31,439	$	37,412	$	12,611	$	491	$	10,539	$	922	$	—	$	103,791
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		1,095		—		—		1,095
Doubtful		—		—		—		—		—		—		—		—		—
	$	10,377	$	31,439	$	37,412	$	12,611	$	491	$	11,634	$	922	$	—	$	104,886
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.04		3.60		3.64		3.11		3.37		3.66		3.33		N/A		3.50
Residential 1-4 family
Pass	$	18,584	$	37,419	$	169,035	$	141,208	$	39,141	$	189,131	$	5,460	$	3,582	$	603,560
Special Mention		—		—		—		—		—		503		—		—		503
Substandard		—		263		564		—		16		2,534		—		595		3,972
Doubtful		—		—		—		—		—		—		—		—		—
	$	18,584	$	37,682	$	169,599	$	141,208	$	39,157	$	192,168	$	5,460	$	4,177	$	608,035
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		2.56		3.10		3.08		3.04		3.07		3.19		3.72		3.80		3.10
Multi- family residential
Pass	$	—	$	456	$	21,775	$	32,568	$	17,439	$	73,029	$	4,765	$	594	$	150,626
Special Mention		—		—		—		20,000		—		—		—		—		20,000
Substandard		—		—		—		—		—		603		—		283		886
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	456	$	21,775	$	52,568	$	17,439	$	73,632	$	4,765	$	877	$	171,512
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		N/A		3.00		3.17		3.76		3.91		3.32		3.98		4.64		3.52
Home equity lines of credit
Pass	$	77	$	476	$	348	$	426	$	46	$	3,085	$	55,424	$	829	$	60,711
Special Mention		—		—		—		—		—		(1)		32		—		31
Substandard		—		—		—		—		—		69		1,326		15		1,410
Doubtful		—		—		—		—		—		—		—		—		—
	$	77	$	476	$	348	$	426	$	46	$	3,153	$	56,782	$	844	$	62,152
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.00		3.00		3.00		3.00		3.00		3.93		3.11		3.93		3.16
Commercial loans
Pass	$	60,493	$	133,387	$	225,933	$	46,750	$	5,078	$	24,047	$	87,541	$	6,915	$	590,144
Special Mention		—		—		22,273		—		—		87		4,256		111		26,727
Substandard		—		615		—		383		189		1,307		—		—		2,494
Doubtful		—		—		—		—		—		—		—		—		—
	$	60,493	$	134,002	$	248,206	$	47,133	$	5,267	$	25,441	$	91,797	$	7,026	$	619,365
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	346	$	—	$	—	$	346
Weighted average risk grade		2.90		2.90		3.13		3.37		3.37		3.45		3.43		3.70		3.14

Table of Contents

															Revolving
															Loans
														Revolving	Converted
	2024		2023		2022		2021		2020		Prior		Loans		To Term		Total
Paycheck Protection Program loans
Pass	$	—	$	—	$	—	$	1,064	$	905	$	—	$	—	$	—	$	1,969
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	—	$	—	$	1,064	$	905	$	—	$	—	$	—	$	1,969
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		N/A		N/A		N/A		2.17		2.00		N/A		N/A		N/A		2.09
Consumer loans
Pass	$	216,016	$	102,503	$	293,063	$	22,759	$	699	$	3,376	$	6,679	$	451	$	645,546
Special Mention		—		4		45		—		—		52		—		—		101
Substandard		—		40		520		382		—		1		—		—		943
Doubtful		—		—		—		—		—		—		—		—		—
	$	216,016	$	102,547	$	293,628	$	23,141	$	699	$	3,429	$	6,679	$	451	$	646,590
Current period gross charge offs	$	366	$	4,707	$	5,630	$	572	$	—	$	21	$	—	$	—	$	11,296
Weighted average risk grade		3.86		2.26		2.51		3.45		4.00		4.01		2.59		—		2.97
PCD
Pass	$	—	$	—	$	—	$	—	$	—	$	2,766	$	—	$	—	$	2,766
Special Mention		—		—		—		—		—		1,271		—		—		1,271
Substandard		—		—		—		—		—		1,502		—		—		1,502
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	—	$	—	$	—	$	—	$	5,539	$	—	$	—	$	5,539
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		N/A		N/A		N/A		N/A		N/A		5.11		N/A		N/A		5.11
Total	$	348,207	$	392,296	$	911,953	$	486,428	$	125,155	$	837,966	$	172,897	$	25,660	$	3,300,562
Current period gross charge offs	$	366	$	4,707	$	5,630	$	572	$	—	$	367	$	—	$	—	$	11,642
Weighted average risk grade		3.57		2.94		2.97		3.49		3.49		3.48		3.32		3.64		3.28

Table of Contents

The following table presents weighted-average risk grades for all loans, by class and year of origination/renewal as of December 31, 2023 (in thousands):



															Revolving
															Loans
														Revolving	Converted
	2023		2022		2021		2020		2019		Prior		Loans		To Term		Total
Commercial real estate - owner occupied
Pass	$	42,262	$	97,259	$	61,316	$	17,914	$	23,675	$	191,674	$	4,054	$	6,503	$	444,657
Special Mention		—		—		—		—		—		5,368		—		—		5,368
Substandard		—		—		219		—		95		5,058		—		—		5,372
Doubtful		—		—		—		—		—		—		—		—		—
	$	42,262	$	97,259	$	61,535	$	17,914	$	23,770	$	202,100	$	4,054	$	6,503	$	455,397
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.52		3.35		3.44		3.38		3.37		3.54		3.46		3.97		3.48
Commercial real estate - nonowner occupied
Pass	$	19,474	$	65,355	$	119,065	$	42,781	$	37,446	$	282,497	$	1,847	$	5,856	$	574,321
Special Mention		—		—		—		1,529		—		2,750		—		—		4,279
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
	$	19,474	$	65,355	$	119,065	$	44,310	$	37,446	$	285,247	$	1,847	$	5,856	$	578,600
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	1,170	$	—	$	—	$	1,170
Weighted average risk grade		3.09		3.35		3.08		3.83		3.95		3.64		3.44		2.86		3.50
Secured by farmland
Pass	$	361	$	—	$	10	$	98	$	—	$	3,333	$	607	$	155	$	4,564
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		480		—		—		480
Doubtful		—		—		—		—		—		—		—		—		—
	$	361	$	—	$	10	$	98	$	—	$	3,813	$	607	$	155	$	5,044
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$		$	—	$	—	$	—
Weighted average risk grade		3.81		N/A		4.00		4.00		N/A		4.04		4.00		3.11		3.99
Construction and land development
Pass	$	32,496	$	41,304	$	72,337	$	512	$	2,478	$	13,912	$	727	$	1	$	163,767
Special Mention		—		—		—		—		—		952		—		—		952
Substandard		—		—		—		—		—		23		—		—		23
Doubtful		—		—		—		—		—		—		—		—		—
	$	32,496	$	41,304	$	72,337	$	512	$	2,478	$	14,887	$	727	$	1	$	164,742
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	2	$	—	$	—	$	2
Weighted average risk grade		3.44		3.06		3.40		3.37		3.29		3.44		3.41		4.00		3.33
Residential 1-4 family
Pass	$	37,097	$	163,464	$	148,845	$	40,697	$	56,117	$	148,066	$	3,293	$	2,499	$	600,078
Special Mention		—		1,036		—		—		—		511		—		—		1,547
Substandard		—		585		—		40		160		3,328		—		488		4,601
Doubtful		—		—		—		—		—		—		—		—		—
	$	37,097	$	165,085	$	148,845	$	40,737	$	56,277	$	151,905	$	3,293	$	2,987	$	606,226
Current period gross charge offs	$	—	$	—	$	—	$	—	$	572	$	198	$	—	$	—	$	770
Weighted average risk grade		3.10		3.10		3.04		3.07		3.08		3.25		3.62		3.50		3.12
Multi- family residential
Pass	$	544	$	8,105	$	21,404	$	17,738	$	6,925	$	68,238	$	3,360	$	619	$	126,933
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		637		—		287		924
Doubtful		—		—		—		—		—		—		—		—		—
	$	544	$	8,105	$	21,404	$	17,738	$	6,925	$	68,875	$	3,360	$	906	$	127,857
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.00		3.70		3.00		3.91		3.00		3.35		3.97		4.63		3.40
Home equity lines of credit
Pass	$	521	$	487	$	417	$	48	$	72	$	3,012	$	52,923	$	856	$	58,336
Special Mention		—		—		—		—		—		—		111		—		111
Substandard		—		—		—		—		—		75		1,131		17		1,223
Doubtful		—		—		—		—		—		—		—		—		—
	$	521	$	487	$	417	$	48	$	72	$	3,087	$	54,165	$	873	$	59,670
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	32	$	—	$	32
Weighted average risk grade		3.01		3.00		3.00		3.00		3.00		3.95		3.10		3.93		3.15
Commercial loans
Pass	$	155,238	$	269,011	$	50,804	$	5,683	$	2,370	$	30,240	$	78,984	$	7,104	$	599,434
Special Mention		—		—		—		21		114		—		1,180		—		1,315
Substandard		—		—		383		212		56		1,223		—		—		1,874
Doubtful		—		—		—		—		—		—		—		—		—
	$	155,238	$	269,011	$	51,187	$	5,916	$	2,540	$	31,463	$	80,164	$	7,104	$	602,623
Current period gross charge offs	$	—	$	—	$	—	$	17	$	—	$	1,240	$	1,597	$	—	$	2,854
Weighted average risk grade		2.97		3.10		3.35		3.41		4.02		3.50		3.26		3.70		3.14

Table of Contents


															Revolving
															Loans
														Revolving	Converted
	2023		2022		2021		2020		2019		Prior		Loans		To Term		Total
Paycheck Protection Program loans
Pass	$	—	$	—	$	1,087	$	936	$	—	$	—	$	—	$	—	$	2,023
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	—	$	1,087	$	936	$	—	$	—	$	—	$	—	$	2,023
Current period gross charge offs	$	—	$	—	$	—	$		$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		N/A		N/A		2.00		2.00		N/A		N/A		N/A		N/A		2.00
Consumer loans
Pass	$	294,825	$	277,640	$	25,695	$	916	$	89	$	3,661	$	6,998	$	368	$	610,192
Special Mention		—		—		—		—		—		63		—		—		63
Substandard		8		831		479		—		9		1		—		—		1,328
Doubtful		—		—		—		—		—		—		—		—		—
	$	294,833	$	278,471	$	26,174	$	916	$	98	$	3,725	$	6,998	$	368	$	611,583
Current period gross charge offs	$	2,379	$	7,910	$	621	$	3	$	—	$	944	$	9	$		$	11,866
Weighted average risk grade		3.43		2.59		3.55		4.00		4.13		5.81		2.80		N/A		3.06
PCD
Pass	$	—	$	—	$	—	$	—	$	—	$	2,842	$	—	$	—	$	2,842
Special Mention		—		—		—		—		—		1,295		—		—		1,295
Substandard		—		—		—		—		—		1,512		—		—		1,512
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	—	$	—	$	—	$	—	$	5,649	$	—	$	—	$	5,649
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		N/A		N/A		N/A		N/A		N/A		4.66		N/A		N/A		4.66
Total	$	582,826	$	925,077	$	502,061	$	129,125	$	129,606	$	770,751	$	155,215	$	24,753	$	3,219,414
Current period gross charge offs	$	2,379	$	7,910	$	621	$	20	$	572	$	3,554	$	1,638	$	—	$	16,694
Weighted average risk grade		3.28		3.00		3.20		3.50		3.40		3.52		3.22		3.59		3.26

Revolving loans that converted to term during the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):


	For the three months ended June 30, 2024		For the six months ended June 30, 2024
Residential 1-4 family	$	1,532	$	1,532
Commercial loans		507		575
Consumer loans		90		100
Total loans	$	2,129	$	2,207

There were no foreclosed residential real estate property held as of both June 30, 2024 and December 31, 2023. The recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure was $0.2 million and $0.8 million as of June 30, 2024 and December 31, 2023, respectively.

Allowance For Credit Losses – Loans

The allowance for credit losses on loans is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans' contractual terms, adjusted for expected prepayments when appropriate.

In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles. For allowance modeling purposes, our loan pools include but are not limited to (i) commercial real estate - owner occupied, (ii) commercial real estate - non-owner occupied, (iii) construction and land development, (iv) commercial, (v) agricultural loans, (vi) residential 1-4 family and (vii) consumer loans. We periodically reassess each pool to ensure the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary. For each loan pool, we measure expected credit losses over the life of each loan utilizing

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a combination of inputs: (i) probability of default, (ii) probability of attrition, (iii) loss given default and (iv) exposure at default. Internal data is supplemented by, but not replaced by, peer data when required, primarily to determine the probability of default input. The various pool-specific inputs may be adjusted for current macroeconomic assumptions. Significant macroeconomic variables utilized in our allowance models include, among other things, (i) Virginia Gross Domestic Product, (ii) Virginia House Price Index, and (iii) Virginia unemployment rates.

Management qualitatively adjusts allowance model results for risk factors that are not considered within our quantitative modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. Qualitative factor (“Q-Factor”) adjustments are driven by key risk indicators that management tracks on a pool-by-pool basis.

In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation.

The following tables present details of the allowance for credit losses on loans segregated by loan portfolio segment as of June 30, 2024 and December 31, 2023, calculated in accordance with ASC 326 (in thousands).


	Commercial		Commercial										Home
	Real Estate		Real Estate				Construction						Equity
	Owner		Non-owner		Secured by		and Land		1-4 Family		Multi-Family		Lines Of		Commercial		Consumer		PCD
June 30, 2024	Occupied		Occupied		Farmland		Development		Residential		Residential		Credit		Loans		Loans		Loans		Total
Modeled expected credit losses	$	4,595	$	4,762	$	1	$	745	$	5,506	$	1,439	$	332	$	4,206	$	19,476	$	—	$	41,062
Q-factor and other qualitative adjustments		297		697		25		145		420		596		32		872		—		—		3,084
Specific allocations		—		—		—		—		—		—		—		1,046		5,775		607		7,428
Total	$	4,892	$	5,459	$	26	$	890	$	5,926	$	2,035	$	364	$	6,124	$	25,251	$	607	$	51,574

	Commercial		Commercial										Home
	Real Estate		Real Estate				Construction						Equity
	Owner		Non-owner		Secured by		and Land		1-4 Family		Multi-Family		Lines Of		Commercial		Consumer		PCD
December 31, 2023	Occupied		Occupied		Farmland		Development		Residential		Residential		Credit		Loans		Loans		Loans		Total
Modeled expected credit losses	$	3,981	$	5,024	$	2	$	745	$	4,559	$	1,144	$	332	$	4,493	$	20,098	$	—	$	40,378
Q-factor and other qualitative adjustments		274		798		29		384		379		446		32		1,246		—		—		3,588
Specific allocations		—		—		—		—		—		—		—		581		5,990		1,672		8,243
Total	$	4,255	$	5,822	$	31	$	1,129	$	4,938	$	1,590	$	364	$	6,320	$	26,088	$	1,672	$	52,209

No allowance for credit losses has been recognized for PPP loans as such loans are fully guaranteed by the SBA.

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Activity in the allowance for credit losses by class of loan for the three and six months ended June 30, 2024 and 2023 is summarized below (in thousands):


	Commercial		Commercial
	Real Estate		Real Estate				Construction						Home Equity
	Owner		Non-owner		Secured by		and Land		1-4 Family		Multi-Family		Lines Of		Commercial		Consumer		PCD
Three Months Ended June 30, 2024	Occupied		Occupied		Farmland		Development		Residential		Residential		Credit		Loans		Loans		Loans		Total
Allowance for credit losses:
Beginning balance	$	4,563	$	5,664	$	26	$	1,196	$	5,107	$	1,541	$	348	$	6,926	$	26,421	$	1,664	$	53,456
Provision (recovery)		329		(205)		—		(306)		817		494		16		(805)		3,836		(1,057)		3,119
Charge offs		—		—		—		—		—		—		—		1		(6,264)		—		(6,263)
Recoveries		—		—		—		—		2		—		—		2		1,258		—		1,262
Ending balance	$	4,892	$	5,459	$	26	$	890	$	5,926	$	2,035	$	364	$	6,124	$	25,251	$	607	$	51,574

Three Months Ended June 30, 2023
Allowance for credit losses:
Beginning balance	$	5,304	$	7,161	$	21	$	1,280	$	4,343	$	2,087	$	350	$	6,510	$	6,802	$	1,945	$	35,803
Provision (recovery)		(237)		2,278		11		6		203		(94)		(19)		497		1,720		(13)		4,352
Charge offs		—		—		—		—		(94)		—		(7)		(10)		(1,629)		—		(1,740)
Recoveries		—		—		—		—		—		—		2		1		123		—		126
Ending balance	$	5,067	$	9,439	$	32	$	1,286	$	4,452	$	1,993	$	326	$	6,998	$	7,016	$	1,932	$	38,541


	Commercial		Commercial
	Real Estate		Real Estate				Construction						Home Equity
	Owner		Non-owner		Secured by		and Land		1-4 Family		Multi-Family		Lines Of		Commercial		Consumer		PCD
Six Months Ended June 30, 2024	Occupied		Occupied		Farmland		Development		Residential		Residential		Credit		Loans		Loans		Loans		Total
Allowance for credit losses:
Beginning balance	$	4,255	$	5,822	$	31	$	1,129	$	4,938	$	1,590	$	364	$	6,320	$	26,088	$	1,672	$	52,209
Provision (recovery)		637		(363)		(5)		(239)		986		445		(2)		148		9,085		(1,065)		9,627
Charge offs		—		—		—		—		—		—		—		(346)		(11,296)		—		(11,642)
Recoveries		—		—		—		—		2		—		2		2		1,374		—		1,380
Ending balance	$	4,892	$	5,459	$	26	$	890	$	5,926	$	2,035	$	364	$	6,124	$	25,251	$	607	$	51,574

Six Months Ended June 30, 2023
Allowance for credit losses:
Beginning balance	$	5,558	$	7,147	$	25	$	1,373	$	4,091	$	2,201	$	329	$	7,853	$	3,895	$	2,072	$	34,544
Provision (recovery)		(491)		2,292		7		(199)		469		(208)		2		920		6,963		(140)		9,615
Charge offs		—		—		—		—		(269)		—		(7)		(1,776)		(4,112)		—		(6,164)
Recoveries		—		—		—		112		161		—		2		1		270		—		546
Ending balance	$	5,067	$	9,439	$	32	$	1,286	$	4,452	$	1,993	$	326	$	6,998	$	7,016	$	1,932	$	38,541

Generally, a commercial loan, or a portion thereof, is charged-off when it is determined, through the analysis of any available current financial information with regards to the borrower, that the borrower is incapable of servicing unsecured debt, there is little or no prospect for near term improvement and no realistic strengthening action of significance is pending or, in the case of secured debt, when it is determined, through analysis of current information with regards to our collateral position, that amounts due from the borrower are in excess of the calculated current fair value of the collateral. Losses on installment loans are recognized in accordance with regulatory guidelines. All other consumer loan losses are recognized when delinquency exceeds 120 cumulative days with the exception of the Consumer Program loans that are charged-off once they become 90 days past due.

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The following table presents loans that were evaluated for expected credit losses on an individual basis and the related specific allocations, by loan portfolio segment as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024				December 31, 2023
	Loan		Specific		Loan		Specific
	Balance		Allocations		Balance		Allocations
Commercial real estate - owner occupied	$	2,505	$	—	$	5,404	$	—
Secured by farmland		399		—		480		—
Construction and land development		955		—		—		—
Residential 1-4 family		2,039		—		2,695		—
Multi- family residential		885		—		923		—
Home equity lines of credit		280		—		290		—
Commercial loans		2,024		1,046		2,930		581
Consumer loans		5,775		5,775		6,002		5,990
Total non-PCD loans		14,862		6,821		18,724		6,571
PCD loans		5,539		607		5,649		1,672
Total loans	$	20,401	$	7,428	$	24,373	$	8,243

The following table presents a breakdown between loans that were evaluated on an individual basis and identified as collateral dependent loans and non-collateral dependent loans, by loan portfolio segment and their collateral value as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024				December 31, 2023
			Non				Non
	Collateral		Collateral		Collateral		Collateral
	Dependent		Dependent		Dependent		Dependent
	Assets ⁽¹⁾		Assets ⁽¹⁾		Assets ⁽¹⁾		Assets ⁽¹⁾
Commercial real estate - owner occupied	$	3,385	$	—	$	5,986	$	—
Commercial real estate - non-owner occupied		1,324		—		1,365		—
Secured by farmland		1,305		—		1,338		—
Construction and land development		1,017		—		65		—
Residential 1-4 family		2,844		—		3,512		—
Multi- family residential		887		—		925		—
Home equity lines of credit		279		—		289		—
Commercial loans		1,750		615		2,097		—
Consumer loans		—		—		—		393
Total loans	$	12,791	$	615	$	15,577	$	393

Collateral value	$	28,602	$	—	$	30,907	$	12
(1) loan balances are presented net of SBA guarantees

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4. DERIVATIVES

Consumer Program Derivative

The Company has a derivative instrument in connection with its agreement with a third-party that originates loans that are held on the Company’s balance sheet. The third-party provides credit support and reimbursement for lost interest under the agreement and the Company provides performance fees to the third-party on performing loans. Specifically, a portion of the originated loans are originated with a promotional period where interest accrues on the loans but is not owed to the Company unless and until the loan begins to amortize. If the borrower prepays the principal on the loan prior to the end of the promotional period the accrued interest is waived, but becomes due to the Company from the third-party under the agreement. This expected payment of waived interest to the Company along with performance fees due to the third-party comprise the value of the derivative. The fair value of the derivative instrument was an asset of $9.9 million and $10.8 million as of June 30, 2024 and December 31, 2023, respectively. The underlying cash flows were $10.9 million and $12.4 million as of June 30, 2024 and December 31, 2023, respectively. The Company calculates the fair value of this derivative using a discounted cash flow model using inputs that are inherently judgmental and reflect management’s best estimates of the assumptions a market participant would use to calculate the fair value. The most significant inputs and assumptions in determining the value of the derivative are noted below ($ in thousands).


	June 30, 2024
					Weighted
	Low		High		Total
Remaining cumulative charge-offs	$	33,580	$	39,899		n/a
Remaining cumulative promotional prepayments	$	39,625	$	72,418	$	49,447
Average life (years)		n/a		n/a		0.6
Discount rate		5.09%		15.21%		15.21%

	December 31, 2023
					Weighted
	Low		High		Average
Remaining cumulative charge-offs	$	25,661	$	35,334		n/a
Remaining cumulative promotional prepayments	$	41,085	$	75,086	$	49,716
Average life (years)		n/a		n/a		1.0
Discount rate		4.63%		14.64%		14.64%

Mortgage Banking Derivatives and Financial Instruments

The Company enters into IRLCs (“interest rate lock commitments”) to originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time (generally between 30 and 90 days), with borrowers who have applied for a loan and have met certain credit and underwriting criteria. The IRLCs are adjusted for estimated costs to originate the loan as well as the probability that the mortgage loan will fund within the terms of the IRLC (the pullthrough rate). Estimated costs to originate include loan officer commissions and overrides. The pullthrough rate is estimated on changes in market conditions, loan stage, and actual borrower behavior using a historical analysis of IRLC closing rates. The Company obtains an analysis from a third party on a monthly basis to support the reasonableness of the pullthrough estimate.

Best efforts and mandatory forward loan sale commitments are commitments to sell individual mortgage loans using both best efforts and mandatory delivery at a fixed price to an investor at a future date. Forward loan sale commitments that are mandatory delivery are accounted for as derivatives and carried at fair value, determined as the amount that would be necessary to settle the derivative financial instrument at the balance sheet date. Forward loan sale commitments that are best efforts are not derivatives but can be and have been accounted for at fair value, determined in a similar manner to

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those that are mandatory delivery. Forward loan sale commitments are recorded on the balance sheet as derivative assets and derivative liabilities with changes in their fair values recorded in mortgage banking income in the statement of operations.

The key unobservable inputs used in determining the fair value of IRLCs are as follows as of June 30, 2024 and December 31, 2023:


	June 30, 2024			December 31, 2023
Average pullthrough rates		90.20	%		77.20	%
Average costs to originate		1.31	%		1.36	%

The following summarizes derivative and non-derivative financial instruments as of June 30, 2024 and December 31, 2023:


	June 30, 2024
	Fair		Notional
Derivative financial instruments:	Value		Amount
Derivative assets ⁽¹⁾	$	1,237	$	52,802
Derivative liabilities	$	—	$	—
⁽¹⁾Pullthrough rate adjusted
	June 30, 2024
	Fair		Notional
Non-derivative financial instruments:	Value		Amount
Best efforts assets	$	198	$	11,502

	December 31, 2023
	Fair		Notional
Derivative financial instruments:	Value		Amount
Derivative assets ⁽¹⁾	$	611	$	23,077
Derivative liabilities	$	200	$	62,250
⁽¹⁾Pullthrough rate adjusted
	December 31, 2023
	Fair		Notional
Non-derivative financial instruments:	Value		Amount
Best efforts assets	$	91	$	4,677

The notional amounts of mortgage loans held for sale not committed to investors was $44.6 million and $46.2 million as of June 30, 2024 and December 31, 2023, respectively.

The Company has exposure to credit loss in the event of contractual non-performance by its trading counterparties in derivative instruments that the Company uses in its rate risk management activities. The Company manages this credit risk by selecting only counterparties that the Company believes to be financially strong, spreading the risk among multiple counterparties, by placing contractual limits on the amount of unsecured credit extended to any single counterparty and by entering into netting agreements with counterparties, as appropriate.

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5. FAIR VALUE

ASC 820 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability

Assets and liabilities measured at fair value on a recurring basis are summarized below:


			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Total at		Identical Assets		Inputs		Inputs
(dollars in thousands)	June 30, 2024		(Level 1)		(Level 2)		(Level 3)
Assets:
Available-for-sale securities
Residential government-sponsored mortgage-backed securities	$	90,762	$	—	$	90,762	$	—
Obligations of states and political subdivisions		29,693		—		29,693		—
Corporate securities		13,726		—		13,726		—
Collateralized loan obligations		5,008		—		5,008		—
Residential government-sponsored collateralized mortgage obligations		48,854		—		48,854		—
Government-sponsored agency securities		13,668		—		13,668		—
Agency commercial mortgage-backed securities		27,311		—		27,311		—
SBA pool securities		3,845		—		3,845		—
		232,867		—		232,867		—
Loans held for investment		246,820		—		246,820		—
Loans held for sale		94,644		—		94,644		—
Consumer Program derivative		9,929		—		—		9,929
Mortgage banking financial assets		198		—		—		198
Mortgage banking derivative assets		1,237		—		—		1,237
Interest rate swaps, net		3,119		—		3,119		—
Total assets	$	588,814	$	—	$	577,450	$	11,364

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			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Total at		Identical Assets		Inputs		Inputs
(dollars in thousands)	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
Assets:
Available-for-sale securities
Residential government-sponsored mortgage-backed securities	$	96,808	$	—	$	96,808	$	—
Obligations of states and political subdivisions		30,080		—		30,080		—
Corporate securities		14,048		—		14,048		—
Collateralized loan obligations		4,982		—		4,982		—
Residential government-sponsored collateralized mortgage obligations		34,471		—		34,471		—
Government-sponsored agency securities		13,711		—		13,711		—
Agency commercial mortgage-backed securities		30,110		—		30,110		—
SBA pool securities		4,210		—		4,210		—
		228,420		—		228,420		—
Loans held for investment		248,906		—		248,906		—
Loans held for sale		57,691		—		57,691		—
Consumer Program derivative		10,806		—		—		10,806
Mortgage banking financial assets		91		—		—		91
Mortgage banking derivative assets		611		—		—		611
Interest rate swaps, net		1,068		—		1,068		—
Total assets	$	547,593	$	—	$	536,085	$	11,508

Liabilities:
Mortgage banking derivative liabilities		200	$	—	$	—	$	200
Total liabilities	$	200	$	—	$	—	$	200

Assets measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements Using

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Total at

Identical Assets

Inputs

(dollars in thousands)

June 30, 2024

(Level 1)

(Level 2)

(Level 3)

Collateral dependent loans

12,791

—

12,791

Assets held for sale

5,136

—

5,136

Fair Value Measurements Using

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Total at

Identical Assets

Inputs

(dollars in thousands)

December 31, 2023

(Level 1)

(Level 2)

(Level 3)

Collateral dependent loans

15,577

—

15,577

Assets held for sale

6,735

—

6,735

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Fair Value of Financial Instruments

The carrying amount, estimated fair values and fair value hierarchy levels of financial instruments were as follows (in thousands) for the periods indicated:


		June 30, 2024				December 31, 2023
	Fair Value	Carrying		Fair		Carrying		Fair
	Hierarchy Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	66,580	$	66,580	$	77,553	$	77,553
Securities available-for-sale	Level 2		232,867		232,867		228,420		228,420
Securities held-to-maturity	Level 2		10,649		9,692		11,650		10,839
Stock in Federal Reserve Bank and Federal Home Loan Bank	Level 2		16,837		16,837		14,246		14,246
Preferred investment in mortgage company	Level 2		3,005		3,005		3,005		3,005
Net loans	Level 2 and 3		3,248,988		3,095,683		3,167,205		3,068,663
Loans held for sale	Level 2		94,644		94,644		57,691		57,691
Consumer Program derivative	Level 3		9,929		9,929		10,806		10,806
Mortgage banking financial assets	Level 3		198		198		91		91
Mortgage banking derivative assets	Level 3		1,237		1,237		611		611
Interest rate swaps, net	Level 2		3,119		3,119		1,068		1,068
Financial liabilities:
Demand deposits and NOW accounts	Level 2	$	1,213,849	$	1,213,849	$	1,245,969	$	1,245,969
Money market and savings accounts	Level 2		1,698,113		1,698,113		1,578,288		1,578,288
Time deposits	Level 3		423,501		420,559		445,898		443,765
Securities sold under agreements to repurchase	Level 1		3,273		3,273		3,044		3,044
FHLB advances	Level 1		80,000		80,000		30,000		30,000
Junior subordinated debt	Level 2		9,855		8,981		9,830		9,039
Senior subordinated notes	Level 2		85,882		84,688		85,765		84,513
Secured borrowings	Level 3		21,069		21,069		20,393		20,393
Mortgage banking derivative liabilities	Level 3		—		—		200		200

Carrying amount is the estimated fair value for cash and cash equivalents, loans held for sale, mortgage banking financial assets and liabilities, mortgage banking derivative assets and liabilities, Consumer Program derivative, interest rate swaps, demand deposits, savings accounts, money market accounts, FHLB advances, secured borrowings and securities sold under agreements to repurchase.

Fair value of junior subordinated debt and senior subordinated notes are based on current rates for similar financing. Carrying amount of Federal Reserve Bank and FHLB stock is a reasonable estimate of fair value as these securities are not readily marketable and are based on the ultimate recoverability of the par value. The fair value of off-balance-sheet items is not considered material. Fair value of net loans, time deposits, junior subordinated debt, and senior subordinated notes are measured using the exit-price notion. The net loans that use level 2 inputs are related to the portfolio of loans underlying our interest rate swaps as previously discussed in “Note 1 – Accounting Policies”.

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6. LEASES

The Company leases certain premises under operating leases. In recognizing lease right-of-use assets and related liabilities, we account for lease and non-lease components (such as taxes, insurance, and common area maintenance costs) separately as such amounts are generally readily determinable under our lease contracts. As of June 30, 2024 and December 31, 2023, the Company had operating lease liabilities totaling $11.5 million and $11.7 million, respectively, and right-of-use assets totaling $10.3 million and $10.6 million, respectively, reflected in our condensed consolidated balance sheets related to these leases. We do not currently have any financing leases. For the three months ended June 30, 2024 and 2023, our net operating lease costs were $0.5 million and $0.6 million, respectively, and for the six months ended June 30, 2024 and 2023, our net operating lease costs were $1.1 million and $1.2 million, respectively. These net operating lease costs are reflected in occupancy expenses on our condensed consolidated statements of income (loss) and comprehensive income (loss).

The following table presents other information related to our operating leases:


	For the Six Months Ended
	June 30, 2024			June 30, 2023
Other information:
Weighted-average remaining lease term - operating leases, in years		6.8			7.5
Weighted-average discount rate - operating leases		4.0	%		3.8	%

The following table summarizes the maturity of remaining lease liabilities:



	As of
(dollars in thousands)	June 30, 2024
Lease payments due:
2024	$	976
2025		2,081
2026		2,051
2027		2,041
2028		1,972
Thereafter		4,121
Total lease payments		13,242
Less: imputed interest		(1,754)
Lease liabilities	$	11,488

As of June 30, 2024, the Company did not have any operating lease that has not yet commenced that will create additional lease liabilities and right-of-use assets for the Company.

7. DEBT AND OTHER BORROWINGS

Other borrowings can consist of FHLB convertible advances, FHLB of Atlanta overnight advances, FHLB advances maturing within one year, federal funds purchased, Federal Reserve Board Discount Window, secured borrowings and securities sold under agreements to repurchase (“repo”) that mature within one year, which are secured transactions with customers. The balance in repo accounts at both June 30, 2024 and December 31, 2023 was $3.3 million and $3.0 million, respectively.

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At both June 30, 2024 and December 31, 2023, we had pledged callable agency securities, residential government-sponsored mortgage-backed securities and collateralized mortgage obligations with a carrying value of $6.7 million and $6.8 million, respectively, to customers who require collateral for overnight repurchase agreements and deposits.

As of June 30, 2024, Primis Bank had lendable collateral value in the form of residential 1-4 family mortgages, HELOCs, commercial mortgage loans, and investment securities supporting borrowing capacity of approximately $597.6 million from the FHLB, of which the Company has used $80.0 million.

In June 2023, the Bank began participating in the Federal Reserve discount window borrowing program. As of June 30, 2024, the Bank had borrowing capacity of $714.1 million within the program and has not borrowed under the program.

In 2017, the Company assumed $10.3 million of trust preferred securities that were issued on September 17, 2003 and placed through a trust in a pooled underwriting totaling approximately $650 million. At June 30, 2024 and December 31, 2023, there was $10.3 million outstanding, net of approximately $0.5 million of debt issuance costs. As of June 30, 2024 and December 31, 2023, the interest rate payable on the trust preferred securities was 8.56% and 8.59%, respectively. As of June 30, 2024, all of the trust preferred securities qualified as Tier 1 capital.

On January 20, 2017, Primis completed the sale of $27.0 million of its fixed-to-floating rate senior Subordinated Notes due 2027. Interest is currently payable at an annual floating rate equal to three-month CME Term SOFR plus a tenor spread adjustment of 0.26% until maturity or early redemption. As of June 30, 2024, 40% of these Notes qualified as Tier 2 capital.

On August 25, 2020, Primis completed the sale of $60.0 million of its fixed-to-floating rate Subordinated Notes due 2030. Interest is payable at an initial annual fixed rate of 5.40% and after September 1, 2025, at a floating rate equal to a benchmark rate, which is expected to be Three-Month Term SOFR, plus a spread of 531 basis points. As of June 30, 2024, all of these notes qualified as Tier 2 capital.

As of both June 30, 2024 and December 31, 2023, the remaining unamortized debt issuance costs related to the senior Subordinated Notes totaled $1.1 million.

Secured Borrowings

The Company transferred $23.4 million in principal balance of loans to another financial institution in 2023 that were accounted for as secured borrowings and transferred another $1.1 million under the same agreement during the three months ended March 31, 2024. The balance of secured borrowings was $21.1 million and $20.4 million as of June 30, 2024 and December 31, 2023, respectively, and the remaining amortized cost balance of the underlying loans was $21.2 million and $20.5 million, respectively. None of the loans underlying the secured borrowings were past due 30 days or greater or on nonaccrual as of June 30, 2024 and December 31, 2023 and were all internally rated as “pass” loans as presented in our “credit quality indicators” section of “Note 3 – Loans and Allowance for Credit Losses”. The loans were included in our allowance for credit losses process and an allowance was calculated on the loans as part of their inclusion in a pool with other loans with similar credit risk characteristics. There were no charge-offs of the loans underlying the secured borrowings during the three months ended June 30, 2024. The underlying loans collateralize the borrowings and cannot be sold or pledged by the Company.

8. STOCK-BASED COMPENSATION

The 2017 Equity Compensation Plan (the “2017 Plan”) has a maximum number of 750,000 shares reserved for issuance. The purpose of the 2017 Plan is to promote the success of the Company by providing greater incentives to employees, non-employee directors, consultants and advisors to associate their personal financial interests with the long-term financial success of the Company, including its subsidiaries, and with growth in stockholder value, consistent with the Company’s risk management practices.

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A summary of stock option activity for the six months ended June 30, 2024 follows:


				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
		Exercise		Contractual	Value
	Shares	Price		Term	(in thousands)
Options outstanding, beginning of period	54,800	$	11.49	1.7	$	64
Exercised	(3,500)		10.47
Options outstanding, end of period	51,300	$	11.56	1.3		70

Exercisable at end of period	51,300	$	11.56	1.3	$	70

There was no stock-based compensation expense associated with stock options for the three and six months ended June 30, 2024 and 2023. As of June 30, 2024, we do not have any unrecognized compensation expense associated with the stock options.

A summary of time vested restricted stock awards for the six months ended June 30, 2024 follows:


		Weighted		Weighted
		Average		Average
		Grant-Date		Remaining
		Fair Value		Contractual
	Shares	Per Share		Term
Unvested restricted stock outstanding, beginning of period	40,300	$	13.59	2.3
Granted	—
Vested	(15,800)		14.73
Forfeited	—
Unvested restricted stock outstanding, end of period	24,500	$	12.85	2.3

Stock-based compensation expense for time vested restricted stock awards totaled $0.1 million for the three months ended both June 30, 2024 and 2023 and $0.3 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, unrecognized compensation expense associated with restricted stock awards was $0.2 million, which is expected to be recognized over a weighted average period of 2.3 years.

A summary of performance-based restricted stock units (the “Units”) for the six months ended June 30, 2024 follows:


			Weighted	Weighted
			Average	Average
			Grant-Date	Remaining
			Fair Value	Contractual
	Shares		Per Share	Term
Unvested Units outstanding, beginning of period	244,710	$	11.77	3.1
Vested	(11,916)		12.24
Forfeited	(9,334)		10.67
Unvested Units outstanding, end of period	223,460		11.79	2.6

These Units are subject to service and performance conditions. These Units vest based on the achievement of both conditions. Achievement of the performance condition will be determined at the end of the five-year performance period (the “Performance Period”) by evaluating the: 1) Company’s adjusted earnings per share compound annual growth

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measured for the Performance Period and 2) performance factor achieved. Payouts between performance levels will be determined based on straight line interpolation.

The Company recognized no stock-based compensation expense during the three and six months ended June 30, 2024 and 2023 as a result of the probability of a portion of the Units vesting because it is not probable that these Units will vest. The potential unrecognized compensation expense associated with these Units was $4.2 million and $3.0 million as of June 30, 2024 and 2023, respectively.

9. COMMITMENTS AND CONTINGENCIES

Financial Instruments with Off-Balance Sheet Risk

Primis is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and guarantees of credit card accounts. These instruments involve elements of credit and funding risk in excess of the amount recognized in the consolidated balance sheets. Letters of credit are written conditional commitments issued by Primis to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company had letters of credit outstanding totaling $10.1 million and $9.6 million as of June 30, 2024 and December 31, 2023, respectively.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and letters of credit is based on the contractual amount of these instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. Unless noted otherwise, we do not require collateral or other security to support financial instruments with credit risk.

Allowance For Credit Losses - Off-Balance-Sheet Credit Exposures

The allowance for credit losses on off-balance sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which we are exposed to credit risk resulting from a contractual obligation to extend credit. No allowance is recognized if we have the unconditional right to cancel the obligation. Off-balance sheet credit exposures primarily consist of amounts available under outstanding lines of credit and letters of credit detailed above. For the period of exposure, the estimate of expected credit losses considers both the likelihood that funding will occur and the amount expected to be funded over the estimated remaining life of the commitment or other off-balance sheet exposure. The likelihood and expected amount of funding are based on historical utilization rates. The amount of the allowance represents management's best estimate of expected credit losses on commitments expected to be funded over the contractual life of the commitment. Estimating credit losses on amounts expected to be funded uses the same methodology as described for loans in Note 3 - Loans and Allowance for Credit Losses, as if such commitments were funded. The allowance for credit losses on off-balance-sheet credit exposures is reflected in other liabilities in our consolidated balance sheets.

The following table details activity in the allowance for credit losses on off-balance-sheet credit exposures:


	2024		2023

Balance as of January 1	$	1,579	$	1,416
Credit loss expense		(548)		(134)
Balance as of June 30	$	1,031	$	1,282

Commitments

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments are made predominately for adjustable rate loans, and generally have fixed

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expiration dates of up to three months or other termination clauses and usually require payment of a fee. Since many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis.

We had $105.8 million of loan commitments outstanding as of June 30, 2024, all of which contractually expire within thirty years.

As of June 30, 2024 and December 31, 2023, we had unfunded lines of credit and undisbursed construction loan funds totaling $387.7 million and $473.1 million, respectively, not all of which will ultimately be drawn. Almost all of our unfunded lines of credit and undisbursed construction loan funds are variable rate. The amount of certificate of deposit accounts maturing in less than one year was $380.5 million as of June 30, 2024, including $75.0 million of brokered CDs. Management anticipates that funding requirements for these commitments can be met in the normal course of business.

Primis also had commitments on the subscription agreements entered into for investments in non-marketable equity securities of $1.0 million and $1.6 million as of June 30, 2024 and December 31, 2023, respectively.

10. EARNINGS PER SHARE

The following is a reconciliation of the denominators of the basic and diluted earnings per share (“EPS”) computations (amounts in thousands, except per share data):


			Weighted
			Average
	Income		Shares	Per Share
	(Numerator)		(Denominator)	Amount
For the three months ended June 30, 2024
Basic EPS	$	3,436	24,683	$	0.14
Effect of dilutive stock options and unvested restricted stock		—	25		—
Diluted EPS	$	3,436	24,708	$	0.14

For the three months ended June 30, 2023
Basic EPS	$	(1,994)	24,639	$	(0.08)
Effect of dilutive stock options and unvested restricted stock		—	—		—
Diluted EPS	$	(1,994)	24,639	$	(0.08)

For the six months ended June 30, 2024
Basic EPS	$	5,902	24,677	$	0.24
Effect of dilutive stock options and unvested restricted stock		—	29		—
Diluted EPS	$	5,902	24,706	$	0.24

For the six months ended June 30, 2023
Basic EPS	$	6,368	24,632	$	0.26
Effect of dilutive stock options and unvested restricted stock		—	53		—
Diluted EPS	$	6,368	24,685	$	0.26

The Company had no anti-dilutive options as of June 30, 2024 and 81,800 anti-dilutive options as of June 30, 2023.

11. SEGMENT INFORMATION

The Company's management reporting process measures the performance of its operating segment based on internal operating structure, which is subject to change from time to time. As of June 30, 2024, the Company operates two reportable segments for management reporting purposes as discussed below:

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Primis Bank. This segment specializes in providing financing services to businesses in various industries and deposit-related services to businesses, consumers and other customers. The primary source of revenue for this segment is net interest income from the origination of loans.

Primis Mortgage. This segment specializes in originating mortgages in a majority of the U.S. The primary source of revenue for this segment is noninterest income and the origination and sale of mortgage loans.

The following table provides financial information for the Company's reportable segments. The information provided under the caption “Primis Bank” includes operations not considered to be reportable segments and/or general operating expenses of the Company, and includes the parent company (which includes PFH) and elimination adjustments to reconcile the results of the operating segment to the consolidated financial statements prepared in conformity with GAAP.


	As of and for the three months ended June 30, 2024						As of and for the six months ended June 30, 2024
	Primis Mortgage		Primis Bank		Consolidated		Primis Mortgage		Primis Bank		Consolidated Company
($ in thousands)
Interest income	$	1,522	$	50,677	$	52,199	$	2,429	$	100,115	$	102,544
Interest expense		—		27,346		27,346		—		52,422		52,422
Net interest income		1,522		23,331		24,853		2,429		47,693		50,122
Provision for credit losses		—		3,119		3,119		—		9,627		9,627
Noninterest income		6,584		4,267		10,852		12,158		9,000		21,158
Noninterest expense		6,084		23,701		29,786		11,206		46,117		57,323
Income before income taxes		2,022		778		2,800		3,381		949		4,330
Income tax expense		487		778		1,265		811		1,172		1,983
Net income	$	1,535	$	—	$	1,535	$	2,570	$	(223)	$	2,347
Total assets	$	107,623	$	3,858,395	$	3,966,018	$	107,623	$	3,858,395	$	3,966,018

	As of and for the three months ended June 30, 2023						As of and for the six months ended June 30, 2023
	Primis Mortgage		Primis Bank		Consolidated		Primis Mortgage		Primis Bank		Consolidated Company
($ in thousands)
Interest income	$	701	$	49,499	$	50,200	$	1,097	$	93,361	$	94,458
Interest expense		—		26,866		26,866		—		45,802		45,802
Net interest income		701		22,633		23,334		1,097		47,559		48,656
Provision for credit losses		—		4,352		4,352		—		9,615		9,615
Noninterest income		5,217		3,720		8,937		9,532		17,075		26,607
Noninterest expense		5,271		25,168		30,439		10,259		47,134		57,393
Income (loss) before income taxes		647		(3,167)		(2,520)		370		7,885		8,255
Income tax expense (benefit)		162		(688)		(526)		96		1,791		1,887
Net income (loss)	$	485	$	(2,479)	$	(1,994)	$	274	$	6,094	$	6,368
Total assets	$	63,563	$	3,802,649	$	3,866,212	$	63,563	$	3,802,649	$	3,866,212

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12. SUBSEQUENT EVENT

On October 24, 2024, the Company entered into a purchase and assumption agreement with EverBank, N.A. (“EverBank”) for sale of the Conpany’s Life Premium Finance division (“LPF”). EverBank will acquire LPF from the Company, except for a subset of mostly fixed rate and rate-capped loans that will be retained by the Bank. All of the LPF operations, including its employees, will be assumed by EverBank as part of the transaction that is expected to result in a pre-tax gain of $4.5 million for the Company, net of advisory and legal fees, at the initial closing in the fourth quarter of 2024. EverBank will acquire approximately $370 million of loans from the division with the Bank providing interim servicing until the transition of the business at the final closing which is expected on January 31, 2025. Between the first and second closings, EverBank will purchase loans generated by the division in ordinary course at par. After the second closing, EverBank will service the Bank’s retained portfolio for the duration of the portfolio. As of June 30, 2024, the Company had not made the decision to sell LPF and had not identified specific loans that it might sell, therefore the amortized cost balance of the loans remains in “loans held for investment” on the condensed consolidated balance sheets and an analysis whether LPF should be presented as discontinued operations under U.S. GAAP as of and for the three and six months ended June 30, 2024 was not deemed to be necessary.

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Primis. This discussion and analysis should be read with the condensed consolidated financial statements, the footnotes thereto, and the other financial data included in this report and in our Annual Report on Form 10-K for the year ended December 31, 2023. Results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of results that may be attained for any other period. The emphasis of this discussion will be on the three and six months ended June 30, 2024 compared to the three months and six ended June 30, 2023 for the consolidated statements of income (loss) and comprehensive income (loss). For the consolidated balance sheets, the emphasis of this discussion will be the balances as of June 30, 2024 compared to December 31, 2023. This discussion and analysis contains statements that may be considered “forward-looking statements” as defined in, and subject to the protections of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. See the following section for additional information regarding forward-looking statements.

FORWARD-LOOKING STATEMENTS

Statements and financial discussion and analysis contained in this Quarterly Report on Form 10-Q that are not statements of historical fact constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. The words “believe,” “may,” “forecast,” “should,” “anticipate,” “contemplate,” “estimate,” “expect,” “project,” “predict,” “intend,” “continue,” “would,” “could,” “hope,” “might,” “assume,” “objective,” “seek,” “plan,” “strive” or similar words, or the negatives of these words, identify forward-looking statements.

Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements. In addition to the Risk Factors contained in this Quarterly Report on Form 10-Q, as well as the Risk Factors previously disclosed in our Annual Report

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on Form 10-K for the year ended December 31, 2023, and the other reports we file with the Securities and Exchange Commission, factors that could contribute to those differences include, but are not limited to:

●

the effects of future economic, business and market conditions and disruptions in the credit and financial markets, domestic and foreign;

●

potential increases in the provision for credit losses and other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services;

●

fraudulent and negligent acts by loan applicants, mortgage brokers and our employees;

●

our ability to recover certain losses related to fraudulent loans under the Company's insurance policies and to successfully complete the claims process and minimize the financial impact of these loans;

●

our ability to implement our various strategic and growth initiatives, including our Panacea Financial and Life Premium Finance Divisions, new digital banking platform, V1BE fulfillment service and Primis Mortgage Company as well as our cost saving project to reduce administrative and branch expenses;

●

adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions;

●

changes in the local economies in our market areas which adversely affect our customers and their ability to transact profitable business with us, including the ability of our borrowers to repay their loans according to their terms or a change in the value of the related collateral;

●

changes in interest rates, inflation, loan demand, real estate values, or competition, as well as labor shortages, supply chain disruptions, the threat of recession and volatile equity capital markets;

●

changes in the availability of funds resulting in increased costs or reduced liquidity, as well as the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs;

●

a deterioration or downgrade in the credit quality and credit agency ratings of the investment securities in our investment securities portfolio;

●

impairment concerns and risks related to our investment securities portfolio of collateralized mortgage obligations, agency mortgage-backed securities and obligations of states and political subdivisions;

●

the incurrence and impairment of goodwill associated with current or future acquisitions and adverse short-term effects on our results of operations;

●

increased credit risk in our assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of our total loan portfolio, including as a result of rising or elevated interest rates, inflation and recessionary concerns;

●

the concentration of our loan portfolio in loans collateralized by real estate;

●

our level of construction and land development and commercial real estate loans;

●

risk related to a third-party’s ability to satisfy its contractual obligation to reimburse us for waived interest on loans with promotional features that pay off early;

●

our ability to identify and address potential cybersecurity risks on our systems and/or third party vendors and service providers on which we rely, heightened by the developments in generative artificial intelligence and increased use of our virtual private network platform, including data security breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;

●

changes in the levels of loan prepayments and the resulting effects on the value of our loan portfolio;

●

the failure of assumptions and estimates underlying the establishment of and provisions made to the allowance for credit losses;

●

our ability to expand and grow our business and operations, including the acquisition of additional banks, and our ability to realize the cost savings and revenue enhancements we expect from such activities;

●

government intervention in the U.S. financial system, including the effects of legislative, tax, accounting and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted by the federal banking authorities, and the Tax Cuts and Jobs Act of 2017, as well as the possibility that the U.S. could default on its debt obligations and the risk of inflation and interest rate increases resulting from monetary and fiscal stimulus response, which may have unanticipated adverse effects on our customers, and our financial condition and results of operations;

●

increased competition for deposits and loans adversely affecting rates and terms;

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●

the continued service of key management personnel;

●

the potential payment of interest on demand deposit accounts to effectively compete for customers;

●

potential environmental liability risk associated with properties that we assume upon foreclosure;

●

increased asset levels and changes in the composition of assets and the resulting impact on our capital levels and regulatory capital ratios;

●

risks of current or future mergers, acquisitions and dispositions, including the related time and cost of implementing transactions and the potential failure to achieve expected gains, revenue growth or expense savings;

●

increases in regulatory capital requirements for banking organizations generally, which may adversely affect our ability to expand our business or could cause us to shrink our business;

●

acts of God or of war or other conflicts, including the current conflicts in Ukraine/Russia and the Middle East, acts of terrorism, pandemics or other catastrophic events that may affect general economic conditions;

●

changes in accounting policies, rules and practices and applications or determinations made thereunder;

●

any inability or failure to implement and maintain effective internal control over financial reporting and/or disclosure control or inability to remediate our existing material weaknesses in our internal controls deemed ineffective;

●

failure to maintain effective internal controls and procedures, including the ability to remediate identified material weaknesses in internal control over financial reporting expediently;

●

the risk that our deferred tax assets could be reduced if future taxable income is less than currently estimated, if corporate tax rates in the future are less than current rates, or if sales of our capital stock trigger limitations on the amount of net operating loss carryforwards that we may utilize for income tax purposes;

●

our ability to attract and retain qualified employees, including as a result of heightened labor shortages;

●

risks related to environmental, social and governance strategies and initiatives, the scope and pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations;

●

our ability to de-consolidate Panacea Financial Holdings, Inc. (“PFH”) and recognize gains on our investment in PFH common stock as a result of de-consolidation;

●

negative publicity and the impact on our reputation;

●

our ability to realize the value of derivative assets that are recorded at fair value due to changes in fair value driven by actual results being materially different than our assumptions; and

●

other factors and risks described under “Risk Factors” herein and in any of the reports that we file with the Securities and Exchange Commission (the “Commission” or “SEC”) under the Exchange Act.

Forward-looking statements are not guarantees of performance or results and should not be relied upon as representing management’s views as of any subsequent date. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe we have chosen these assumptions or bases in good faith and that they are reasonable. We caution you, however, that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. When considering forward-looking statements, you should refer to the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q and in our periodic and current reports filed with the SEC for specific factors that could cause our actual results to be different from those expressed or implied by our forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q (or an earlier date to the extent applicable). Except as required by applicable law, we undertake no obligation to update publicly these statements in light of new information or future events.

OVERVIEW

Primis Financial Corp. (“Primis,” “we,” “us,” “our” or the “Company”) is the bank holding company for Primis Bank (“Primis Bank” or the “Bank”), a Virginia state-chartered bank which commenced operations on April 14, 2005. Primis Bank provides a range of financial services to individuals and small and medium-sized businesses. As of June 30, 2024, Primis Bank had twenty-four full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications. Twenty-two full-service retail branches are in Virginia and two full-service retail branches are in Maryland. The Company is headquartered in McLean, Virginia and has an administrative office in Glen Allen, Virginia and an operations center in Atlee, Virginia. Primis Mortgage Company, a residential mortgage lender headquartered in Wilmington, North Carolina, is a consolidated subsidiary of Primis Bank. PFH is a consolidated subsidiary of Primis and owns the rights to the Panacea Financial brand and its intellectual property and partners with the

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Bank to offer a suite of financial products and services for doctors, their practices, and ultimately the broader healthcare industry.

While Primis Bank offers a wide range of commercial banking services, it focuses on making loans secured primarily by commercial real estate and other types of secured and unsecured commercial loans to small and medium-sized businesses in a number of industries, as well as loans to individuals for a variety of purposes. Primis Bank invests in real estate-related securities, including collateralized mortgage obligations and agency mortgage backed securities. Primis Bank’s principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings. Primis Bank offers a broad range of deposit products, including checking (NOW), savings, money market accounts and certificates of deposit. Primis Bank actively pursues business relationships by utilizing the business contacts of its senior management, other bank officers and its directors, thereby capitalizing on its knowledge of its local market areas.

Current Economic Environment

U.S. economic growth accelerated in the first half of 2024, with Real Gross Domestic Product growing by an annualized 1.6% in the first quarter and another 3% in the second quarter. According to the U.S. Bureau of Labor and Statistics, the rate of unemployment has increased from year end to 4.1% in June 2024. The Federal Reserve (the “Fed”) raised interest rates 500 bps from May of 2022 through 2023, a pace that has not been experienced in more than 40 years, and sits at a range of 5.25% to 5.50% as of June 30, 2024. Inflation, while beginning to show signs of moderating, remains higher than the Fed’s long term target rate of 2.0% and the Fed appears committed to maintaining high rates until inflation is back at their target rate. The Fed has indicated that future rate adjustments will be data-dependent.

This higher rate environment is continuing to put strong margin pressure on all banks, including Primis, as the cost of deposits has increased alongside the Fed rate increases while many loans in banks’ portfolios are fixed due to borrowers locking in historic low rates in the past few years prior to the rate hikes noted above. However, loan growth in the current environment will benefit from the higher rates and should assist in partially offsetting growth in deposit costs.

FINANCIAL HIGHLIGHTS

●

Net income available to common shareholders for the three months ended June 30, 2024 totaled $3.4 million, or $0.14 basic and diluted earnings per share, compared to a net loss of $2.0 million, or ($0.08) basic and diluted loss per share for the three months ended June 30, 2023.

●

Net income to common shareholders for the six months ended June 30, 2024 totaled $5.9 million, or $0.24 basic and diluted earnings per share, compared to $6.4 million, or $0.26 basic and diluted earnings per share for the six months ended June 30, 2023.

●

Total assets as of June 30, 2024 were $4.0 billion, an increase of 2.8% compared to December 31, 2023.

●

Total loans as of June 30, 2024 were $3.3 billion, an increase of $81.1 million, or 2.5%, from December 31, 2023.

●

Total deposits were $3.3 billion at June 30, 2024, an increase of 2.0% compared to December 31, 2023.

●

Non-time deposits increased to $2.9 billion as of June 30, 2024, an increase of $87.7 million, or 3.1%, compared to December 31, 2023.

●

The ratio of gross loans (excluding loans held for sale) to deposits stayed steady at 98% at June 30, 2024, compared to December 31, 2023.

●

Net interest margin of 2.72% in the second quarter of 2024 was up from 2.36% in the second quarter of 2023 and down from 2.84% in the first quarter of 2024.

●

Net interest income increased during both the three and six months ended June 30, 2024 compared to the same periods in 2023 and noninterest expenses were down during the three and six months ended June 30, 2024 compared to the same periods in 2023.

●

Allowance for credit losses to total loans was 1.56% at June 30, 2024, compared to 1.62% at December 31, 2023.

●

Asset quality remained relatively stable from year end with nonperforming assets as a percent of total assets (excluding SBA guarantees) at 0.25% as of June 30, 2024 compared to 0.20% at December 31, 2023.

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RESULTS OF OPERATIONS

Net Income

Three-Month Comparison. Net income available to common shareholders for the three months ended June 30, 2024 totaled $3.4 million, or $0.14 basic and diluted earnings per share, compared to a net loss of $2.0 million, or $(0.08) basic and diluted earnings per share for the three months ended June 30, 2023. The increase in net income during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was driven primarily by $1.5 million higher net interest income, $1.9 million higher noninterest income, $0.7 million lower noninterest expense, and $1.2 million less provision for credit losses on loans. Additional details of each of these will be discussed in the remaining sections of this Results of Operations discussion.

Six-Month Comparison. Net income available to common shareholders for the six months ended June 30, 2024 totaled $5.9 million, or $0.24 basic and diluted earnings per share, compared to $6.4 million, or $0.26 basic and diluted earnings per share for the six months ended June 30, 2023. The results between the two periods were relatively unchanged due to an increase in net interest income of $1.5 million and noncontrolling interests of $3.6 million offset by a decline of $5.4 million in noninterest income. Noncontrolling interests related to losses attributable to other stockholders of an entity that we are required to consolidated under U.S. GAAP in which we own approximately 19%. Details of the other key areas comprising our net income during the six months will be discussed in the remaining sections of this Results of Operations discussion.

Net Interest Income

Our operating results depend primarily on our net interest income, which is the difference between interest and dividend income on interest-earning assets such as loans and investments, and interest expense on interest-bearing liabilities such as deposits and borrowings.

Three-Month Comparison. Net interest income was $24.9 million for the three months ended June 30, 2024, compared to $23.3 million for the three months ended June 30, 2023. Our net interest margin for the three months ended June 30, 2024 was 2.72%, compared to 2.36% for the three months ended June 30, 2023. Margin increased by 36 basis points as a result of net interest income growing by $1.5 million while average interest earning assets decreased from the prior year. The growth in income was due to interest earning asset yield growth of 65 basis points outpacing interest bearing liability rate growth of 37 basis points. Higher lending rates fueled by an increase in benchmark rates year-over-year and the redeployment of excess cash into higher yielding assets drove interest income. Average interest bearing assets declined as a result of our decision on June 30, 2023 to begin sweeping excess cash off the balance sheet that had accumulated as a result of the increase in deposits from growth of our digital deposit platform during the three months ended June 30, 2023. The cost of interest bearing liabilities increased primarily due to benchmark interest rate increases in all deposits and higher average borrowings, partially offset by a decline in average interest-bearing deposits as a result of the aforementioned sweep activity since June 30, 2023.

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The following table details average balances of interest-earning assets and interest-bearing liabilities, the amount of interest earned/paid on such assets and liabilities, and the yield/rate for the periods indicated:


	Average Balance Sheets and Net Interest Margin
	Analysis For the Three Months Ended
	June 30, 2024						June 30, 2023
			Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate

	(Dollar amounts in thousands)

Assets
Interest-earning assets:
Loans held for sale	$	84,389	$	1,521	7.25	%	$	48,698	$	700	5.77	%
Loans, net of deferred fees ^{(1) (2)}		3,266,651		48,032	5.91	%		3,112,280		40,791	5.26	%
Investment securities		244,308		1,805	2.97	%		240,700		1,551	2.58	%
Other earning assets		73,697		841	4.59	%		568,251		7,158	5.05	%
Total earning assets		3,669,045		52,199	5.72	%		3,969,929		50,200	5.07	%
Allowance for credit losses		(51,723)						(35,770)
Total non-earning assets		294,919						297,474
Total assets	$	3,912,241					$	4,231,633

Liabilities and stockholders' equity
Interest-bearing liabilities:
NOW and other demand accounts	$	778,458	$	4,827	2.49	%	$	826,598	$	4,343	2.11	%
Money market accounts		823,156		6,788	3.32	%		858,532		6,231	2.91	%
Savings accounts		866,652		8,912	4.14	%		1,026,159		10,406	4.07	%
Time deposits		423,107		4,095	3.89	%		495,721		3,803	3.08	%
Total interest-bearing deposits		2,891,373		24,622	3.42	%		3,207,010		24,783	3.10	%
Borrowings		158,919		2,724	6.89	%		114,893		2,083	7.27	%
Total interest-bearing liabilities		3,050,292		27,346	3.61	%		3,321,903		26,866	3.24	%
Noninterest-bearing liabilities:
Demand deposits		433,315						473,319
Other liabilities		34,495						38,408
Total liabilities		3,518,102						3,833,630
Primis common stockholders' equity		374,731						398,003
Noncontrolling interest		19,409						—
Total stockholders' equity		394,140						398,003
Total liabilities and stockholders' equity	$	3,912,241	$	24,853			$	4,231,633	$	23,334
Interest rate spread					2.11	%					1.83	%
Net interest margin					2.72	%					2.36	%

(1)	Includes loan fees in both interest income and the calculation of the yield on loans.

(2)	Calculations include non-accruing loans in average loan amounts outstanding.

Six-Month Comparison. Net interest income was $50.1 million for the six months ended June 30, 2024, compared to $48.7 million for the six months ended June 30, 2023. Our net interest margin for the six months ended June 30, 2024 was 2.78%, compared to 2.57% for the six months ended June 30, 2023. Margin increased by 21 basis points as a result of net interest income growing by $1.5 million while average interest earning assets decreased from the prior year. The growth in income was due to interest earning asset yield growth of 69 basis points outpacing interest bearing liability rate growth of 56 basis points. Higher lending rates fueled by an increase in benchmark rates year-over-year and the redeployment of excess cash into higher yielding assets drove interest income. Average interest bearing assets declined as a result of our decision to sweep excess cash off of the balance sheet as described in the three-month comparison. The cost of interest bearing liabilities increased primarily due to increases in rates on all interest-bearing liabilities as a result of benchmark interest rate increases, partially offset by a 4% decrease in average interest-bearing liabilities.

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	Average Balance Sheets and Net Interest Margin
	Analysis For the Six Months Ended
	June 30, 2024						June 30, 2023
			Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate

	(Dollar amounts in thousands)
Assets
Interest-earning assets:
Loans held for sale	$	71,643	$	2,428	6.82	%	$	37,086	$	1,091	5.93	%
Loans, net of deferred fees ^{(3) (4)}		3,236,769		94,857	5.89	%		3,051,441		78,850	5.21	%
Investment securities		242,743		3,520	2.92	%		243,536		3,135	2.60	%
Other earning assets		75,382		1,739	4.64	%		478,786		11,382	4.79	%
Total earning assets		3,626,537		102,544	5.69	%		3,810,849		94,458	5.00	%
Allowance for credit losses		(51,416)						(34,940)
Total non-earning assets		297,057						290,943
Total assets	$	3,872,178					$	4,066,852

Liabilities and stockholders' equity
Interest-bearing liabilities:
NOW and other demand accounts	$	776,201	$	9,294	2.41	%	$	774,878	$	6,610	1.72	%
Money market accounts		818,651		13,300	3.27	%		841,630		11,032	2.64	%
Savings accounts		833,490		16,957	4.09	%		811,221		15,156	3.77	%
Time deposits		427,224		8,085	3.81	%		492,412		7,029	2.88	%
Total interest-bearing deposits		2,855,566		47,636	3.35	%		2,920,141		39,827	2.75	%
Borrowings		139,553		4,786	6.90	%		199,533		5,975	6.04	%
Total interest-bearing liabilities		2,995,119		52,422	3.52	%		3,119,674		45,802	2.96	%
Noninterest-bearing liabilities:
Demand deposits		446,905						514,677
Other liabilities		34,708						33,505
Total liabilities		3,476,732						3,667,856
Primis common stockholders' equity		375,265						398,996
Noncontrolling interest		20,181						—
Total stockholders' equity		395,446						398,996
Total liabilities and stockholders' equity	$	3,872,178					$	4,066,852
Net interest income			$	50,122					$	48,656
Interest rate spread					2.17	%					2.04	%
Net interest margin					2.78	%					2.57	%

(3)	Includes loan fees in both interest income and the calculation of the yield on loans.

(4)	Calculations include non-accruing loans in average loan amounts outstanding.

Provision for Credit Losses

The provision for credit losses is a current charge to earnings made in order to adjust the allowance for credit losses for current expected losses in the loan portfolio based on an evaluation of the loan portfolio characteristics, current economic conditions, changes in the nature and volume of lending, historical loan experience and other known internal and external factors affecting loan collectability, and assessment of reasonable and supportable forecasts of future economic conditions that would impact collectability of the loans. Our allowance for credit losses is calculated by segmenting the loan portfolio by loan type and applying risk factors to each segment. The risk factors are determined by considering historical loss data, peer data, as well as applying management’s judgment.

The Company recorded a provision for credit losses for the three months ended June 30, 2024 and 2023, of $3.1 million and $4.4 million, respectively. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $3.6 million and $1.3 million during the three months ended June 30, 2024 and 2023,

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respectively. Our provision for credit losses was driven by provisions related to the Consumer Program loan portfolio primarily centered around loans originated from the third quarter of 2022 through the first quarter of 2023. Excluding the provision amounts related to the Consumer Program portfolio, we recorded a benefit for credit losses of $0.5 million and a provision of $3.1 million for the three months ended June 30, 2024 and 2023, respectively.

The provisions were driven in part by net charge-offs during the periods which were $5.0 million and $1.6 million during the three months ended June 30, 2024 and 2023, respectively. During the three months ended June 30, 2024 and 2023, $4.3 million and $1.4 million, respectively, of net charge-offs were related to the Consumer Program loans. These charge-offs were primarily related to loans originated from the third quarter of 2022 to the first quarter of 2023. Excluding the Consumer Program loan charge-offs we had net charge-offs of $0.7 million and $0.3 million during the three months ended June 30, 2024 and 2023, respectively.

The Company recorded a provision for credit losses for both the six months ended June 30, 2024 and 2023, of $9.6 million. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $8.6 million and $6.1 million during the six months ended June 30, 2024 and 2023, respectively. Our provision for credit losses was driven by provisions related to the Consumer Program loan portfolio primarily centered around loans originated from the third quarter of 2022 through the first quarter of 2023. Excluding the provision amounts related to the Consumer Program portfolio, we recorded a provision for credit losses of $1.0 million and $3.6 million for the six months ended June 30, 2024 and 2023, respectively.

The provisions were driven in part by net charge-offs during the periods which were $10.3 million and $5.6 million during the six months ended June 30, 2024 and 2023, respectively. During six months ended June 30, 2024 and 2023, $8.7 million and $3.3 million, respectively, of net charge-offs were related to the Consumer Program loans. These charge-offs were primarily related to loans originated from the third quarter of 2022 to the first quarter of 2023. Excluding the Consumer Program loan charge-offs we had net charge-offs of $1.6 million and $2.3 million during the six months ended June 30, 2024 and 2023, respectively

The Financial Condition section of this MD&A provides information on our loan portfolio, past due loans, nonperforming assets and the allowance for credit losses.

Noninterest Income

The following table presents the major categories of noninterest income for the three months ended June 30, 2024 and 2023:


	For the Three Months Ended
	June 30,
(dollars in thousands)	2024		2023		Change
Account maintenance and deposit service fees	$	1,861	$	1,457	$	404
Income from bank-owned life insurance		981		394		587
Mortgage banking income		6,402		5,198		1,204
Gain on sale of loans		(29)		—		(29)
Consumer Program derivative		1,272		1,758		(486)
Other noninterest income		365		130		235
Total noninterest income	$	10,852	$	8,937	$	1,915

Noninterest income increased 21% to $10.9 million for the three months ended June 30, 2024, compared to $8.9 million for the three months ended June 30, 2023. The increase in noninterest income was primarily related to $1.2 million of higher mortgage banking income and $0.6 million of higher income from bank-owned life insurance, partially offset by a decline in Consumer Program derivative income. The increase in Mortgage banking income was a result of the continued growth of the mortgage business in 2024 compared to 2023. During the three months ended June 30, 2024 we realized $3.7 million on sale gains compared to $2.8 million during the three months ended June 30, 2023 as a result of higher sales volumes. The increase in income on bank-owned life insurance was driven by one-time death benefit gains during the

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quarter of $0.6 million. The Consumer Program derivative income declined primarily due to fair value loss adjustments on the derivative asset of $0.8 million during the three months ended June 30, 2024 compared to fair value gains of $0.6 million during the three months ended June 30, 2023. Offsetting the fair value loss adjustments during the three months ended June 30, 2024 and 2023 was $2.1 million and $1.2 million, respectively, of realized gains as a result of borrowers paying off their promotional period loans before the end of the promotional period which triggers payment from the derivative counterparty of the interest accrued during the promotional period along with other income due to us under the agreement.

The following table presents the major categories of noninterest income for the six months ended June 30, 2024 and 2023:


	For the Six Months Ended
	June 30,
(dollars in thousands)	2024		2023		Change
Account maintenance and deposit service fees	$	3,254	$	2,681	$	573
Income from bank-owned life insurance		1,544		814		730
Mortgage banking income		11,976		9,513		2,463
Gain on sale of loans		307		51		256
Consumer Program derivative		3,313		13,201		(9,888)
Other noninterest income		764		347		417
Total noninterest income	$	21,158	$	26,607	$	(5,449)

Noninterest income decreased 20% to $21.2 million for the six months ended June 30, 2024, compared to $26.6 million for the six months ended June 30, 2023. The decrease in noninterest income was primarily driven by declines in Consumer Program derivative income, partially offset by $2.5 million of higher mortgage banking income and $0.7 million of higher income from bank-owned life insurance. The Consumer Program derivative income declined primarily due to fair value loss adjustments on the derivative asset of $0.9 million during the six months ended June 30, 2024 compared to fair value gains of $11.1 million during the six months ended June 30, 2023. The derivative asset and related gains are driven by anticipated cash payments due to us from the third-party when borrowers prepay their loans in a no-interest promotional period. During the first six months of 2023, the value of the derivative and related gains were driven by $52.3 million of loans with a no-interest promotional period originated during the first six months. Comparatively, during the first six months of 2024 a nominal amount of no-interest promotional loans was originated and the existing ones were beginning to exit their promo period. Offsetting the fair value loss adjustments during the six months ended June 30, 2024 and adding to the gains in 2023 was $4.2 million and $2.1 million, respectively, of realized gains as a result of borrowers paying off their promotional period loans before the end of the promotional period which triggers payment from the derivative counterparty of the interest accrued during the promotional period, along with other income due to us under the agreement.

The increase in Mortgage banking income was a result of the continued growth of the mortgage business in 2024 compared to 2023. During the six months ended June 30, 2024 we realized $6.5 million on sale gains compared to $5.1 million during the six months ended June 30, 2023 as a result of higher sales volumes. The increase in income on bank-owned life insurance was driven by one-time death benefit gains during the six months of $0.7 million.

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Noninterest Expense

The following table presents the major categories of noninterest expense for the three months ended June 30, 2024 and 2023:


	For the Three Months Ended
	June 30,
(dollars in thousands)	2024		2023		Change
Salaries and benefits	$	16,088	$	15,283	$	805
Occupancy expenses		1,250		1,593		(343)
Furniture and equipment expenses		1,849		1,852		(3)
Amortization of core deposit intangible		317		318		(1)
Virginia franchise tax expense		632		848		(216)
FDIC insurance assessment		589		1,070		(481)
Data processing expense		2,347		2,828		(481)
Marketing expense		499		521		(22)
Telephone and communication expense		341		416		(75)
Professional fees		2,976		1,075		1,901
Fraud losses		17		1,997		(1,980)
Miscellaneous lending expenses		285		568		(283)
Other operating expenses		2,596		2,070		526
Total noninterest expenses	$	29,786	$	30,439	$	(653)

Noninterest expenses declined 2% to $29.8 million during the three months ended June 30, 2024, compared to $30.4 million during the three months ended June 30, 2023. The decline was driven by higher fraud losses, FDIC insurance assessments and data processing costs in the prior year, partially offset by higher professional fees and salaries and benefits in 2024. The fraud losses during the three months ended June 30, 2023 was primarily related to a substantial increase in deposit account fraud, which was also seen across the industry during that time. The FDIC insurance costs were higher during the three months ended June 30, 2023 as a result of the higher deposit base driven by the growth of the digital platform compared to the same period in 2024, less growth in deposits, and excess deposit cash sweeps being utilized during the quarter. The data processing expenses were higher during the three months ended June 30, 2023 driven by substantially higher application volume on the digital deposit platform as a result of a savings account rate promotion offered during 2023 that did not re-occur in 2024. During the three months ended June 30, 2024 these declines in noninterest expenses were offset by higher professional fees related to the SEC pre-clearance and restatement process. The higher salaries and benefits expense was driven by growth in the mortgage line of business and Panacea division.

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The following table presents the major categories of noninterest expense for the six months ended June 30, 2024 and 2023:


	For the Six Months Ended
	June 30,
(dollars in thousands)	2024		2023		Change
Salaries and benefits	$	31,822	$	30,311	$	1,511
Occupancy expenses		2,740		3,038		(298)
Furniture and equipment expenses		3,465		3,429		36
Amortization of core deposit intangible		634		635		(1)
Virginia franchise tax expense		1,263		1,697		(434)
FDIC insurance assessment		1,199		1,434		(235)
Data processing expense		4,578		5,079		(501)
Marketing expense		958		1,090		(132)
Telephone and communication expense		687		793		(106)
Professional fees		4,341		1,937		2,404
Fraud losses (recoveries)		(1)		2,452		(2,453)
Miscellaneous lending expenses		737		1,453		(716)
Other operating expenses		4,900		4,045		855
Total noninterest expenses	$	57,323	$	57,393	$	(70)

Noninterest expenses were essentially flat when comparing the six months ended June 30, 2024 to 2023. Decreases in expenses were driven by fraud losses (recoveries), miscellaneous lending expenses, and data processing and were offset by increases in professional fees and salaries and benefits. The decreases in noninterest expenses in fraud losses (recoveries) and data processing was primarily for the same reasons as discussed above for the three months ended June 30, 2024 compared to 2023. The decrease in miscellaneous lending expenses during the six months ended June 30, 2024 compared to 2023 was primarily related to a decline in the calculated credit loss reserve for unfunded commitments. The offsetting increases in noninterest expenses during the six months ended June 30, 2024 compared to 2023 in professional fees and salaries and benefits was primarily for the same reasons as discussed above for the three months ended June 30, 2024 compared to 2023.

FINANCIAL CONDITION

The following illustrates key balance sheet categories as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30,		December 31,
	2024		2023		Change

Total cash and cash equivalents	$	66,580	$	77,553	$	(10,973)
Securities available-for-sale		232,867		228,420		4,447
Securities held-to-maturity		10,649		11,650		(1,001)
Loans held for sale		94,644		57,691		36,953
Net loans		3,248,988		3,167,205		81,783
Other assets		312,290		314,027		(1,737)
Total assets	$	3,966,018	$	3,856,546	$	109,472

Total deposits	$	3,335,463	$	3,270,155	$	65,308
Borrowings		200,079		149,032		51,047
Other liabilities		36,265		39,766		(3,501)
Total liabilities		3,571,807		3,458,953		112,854
Total equity		394,211		397,593		(3,382)
Total liabilities and equity	$	3,966,018	$	3,856,546	$	109,472

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Loans

Gross loans were $3.3 billion and $3.2 billion as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024 and December 31, 2023, a majority of our loans were to customers located in Virginia and Maryland. We are not dependent on any single customer or group of customers whose insolvency would have a material adverse effect on our operations. Our loan portfolio grew 2.5% in the first six months of 2024 which was driven by growth in multi-family residential, non-owner occupied commercial real estate, and consumer loans. The majority of this growth was concentrated in loan growth in the Panacea and Life Premium Finance divisions that are diversified geographically and are spread across the nation. The overall loan portfolio growth was partially offset by a reduction in our construction and land development portfolio due to paydows of loans in that portfolio.

On October 24, 2024, the Company entered into a purchase and assumption agreement with EverBank for sale of the Conpany’s LPF division. EverBank will acquire LPF from the Company, except for a subset of mostly fixed rate and rate-capped loans that will be retained by the Bank. All of the LPF operations, including its employees, will be assumed by EverBank as part of the transaction that is expected to result in a pre-tax gain of $4.5 million for the Company, net of advisory and legal fees, at the initial closing in the fourth quarter of 2024. EverBank will acquire approximately $370 million of loans from the division with the Bank providing interim servicing until the transition of the business at the final closing which is expected on January 31, 2025. Between the first and second closings, EverBank will purchase loans generated by the division in ordinary course at par. After the second closing, EverBank will service the Bank’s retained portfolio for the duration of the portfolio. As of June 30, 2024, the Company had not made the decision to sell LPF and had not identified specific loans that it might sell, therefore the amortized cost balance of the loans remains in “loans held for investment” on the condensed consolidated balance sheets in Item 1 in this Form 10-Q and where loans held for investment are disclosed in this MD&A.

The composition of our loans held for investment portfolio consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024				December 31, 2023
	Amount		Percent		Amount		Percent
Loans secured by real estate:
Commercial real estate - owner occupied	$	463,328	14.0	%	$	455,397	14.1	%
Commercial real estate - non-owner occupied		612,428	18.6	%		578,600	18.0	%
Secured by farmland		4,758	0.1	%		5,044	0.2	%
Construction and land development		104,886	3.2	%		164,742	5.1	%
Residential 1-4 family		608,035	18.4	%		606,226	18.8	%
Multi- family residential		171,512	5.2	%		127,857	4.0	%
Home equity lines of credit		62,152	1.9	%		59,670	1.9	%
Total real estate loans		2,027,099	61.4	%		1,997,536	62.0	%

Commercial loans		619,365	18.8	%		602,623	18.7	%
Paycheck protection program loans		1,969	0.1	%		2,023	0.1	%
Consumer loans		646,590	19.6	%		611,583	19.0	%
Total Non-PCD loans		3,295,023	99.8	%		3,213,765	99.8	%
PCD loans		5,539	0.2	%		5,649	0.2	%
Total loans	$	3,300,562	100.0	%	$	3,219,414	100.0	%

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The following table sets forth the contractual maturity ranges of our loans held for investment portfolio and the amount of those loans with fixed and floating interest rates in each maturity range as of June 30, 2024 (in thousands):


			After 1 Year				After 5 Years
			Through 5 Years				Through 15 Years				After 15 Years
	One Year		Fixed		Floating		Fixed		Floating		Fixed		Floating
	or Less		Rate		Rate		Rate		Rate		Rate		Rate		Total
Loans secured by real estate:
Commercial real estate - owner occupied	$	20,796	$	87,424	$	25,272	$	134,902	$	135,575	$	1,715	$	57,644	$	463,328
Commercial real estate - non-owner occupied		75,347		215,880		30,229		53,373		73,238		9,633		154,728		612,428
Secured by farmland		1,365		1,157		78		117		797		—		1,244		4,758
Construction and land development		67,729		1,833		16,525		3,870		12,686		665		1,578		104,886
Residential 1-4 family		22,665		43,092		12,390		24,774		52,239		69,489		383,386		608,035
Multi- family residential		16,096		97,767		3,480		—		28,048		—		26,121		171,512
Home equity lines of credit		4,720		3,250		7,466		46		3,037		17		43,616		62,152
Total real estate loans		208,718		450,403		95,440		217,082		305,620		81,519		668,317		2,027,099
Commercial loans		100,375		112,461		121,397		225,733		55,651		1,102		2,646		619,365
Paycheck protection program loans		905		880		—		184		—		—		—		1,969
Consumer loans		3,954		284,831		170,795		80,048		104,943		2,013		6		646,590
Total Non-PCD loans		313,952		848,575		387,632		523,047		466,214		84,634		670,969		3,295,023
PCD loans		2,572		1,348		37		—		1,194		388		—		5,539
Total loans	$	316,524	$	849,923	$	387,669	$	523,047	$	467,408	$	85,022	$	670,969	$	3,300,562

The following table sets forth the contractual maturity ranges of our Consumer Program loan portfolio as of June 30, 2024, which is only originated at fixed rates (in thousands):


	One Year or Less		After One Year to Five Years		After Five Through Ten Years		After Ten Years		Total
Consumer Program Loans	$	1,447	$	128,335	$	45,770	$	18,665	$	194,217

The following table describes the period over which our Consumer Program loans that are currently in a no interest promotional period will exit that promotional period and begin to amortize. All of these promotional loans amortize over four years from the date they exit the promotional period if not prepaid before the end of the promotional period (in thousands):


	Amount ending		Amount ending
	No Interest		No Interest		Total Interest
	Promo Period in		Promo Period in		Promo
	next 12 months		next 13-24 months		as of 6/30/24
Consumer Program Loans	$	63,280	$	19,111	$	82,391

During the three months ended June 30, 2024, $3.7 million of loans paid off during the no interest promo period and $2.7 million of loans ended their no interest promo period and began to amortize. During the six months ended June 30, 2024, $9.3 million of loans paid off during the no interest promo period and $7.5 million of loans ended their no interest promo period and began to amortize.

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Asset Quality; Past Due Loans and Nonperforming Assets

The following table presents a comparison of nonperforming assets as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30,			December 31,
	2024			2023
Nonaccrual loans	$	11,289		$	9,095
Loans past due 90 days and accruing interest		1,897			1,714
Total nonperforming assets		13,186			10,809

SBA guaranteed amounts included in nonperforming loans	$	3,268		$	3,115

Allowance for credit losses to total loans		1.56	%		1.62	%
Allowance for credit losses to nonaccrual loans		456.88	%		574.06	%
Allowance for credit losses to nonperforming loans		391.14	%		483.04	%
Nonaccrual to total loans		0.34	%		0.28	%
Nonperforming assets excluding SBA guaranteed loans to total assets		0.25	%		0.20	%

Asset quality remained relatively stable during the first six months of 2024 with nonperforming assets up $2.4 million to $13.2 million primarily as a result of an increase in nonaccrual loans. The increase was driven by one commercial real estate loan, three commercial loans, and five consumer loans added to nonaccrual during the year. Two of the commercial loans have partial SBA guarantees and all but one of these loans is secured by collateral. We will generally place a loan on nonaccrual status when it becomes 90 days past due. Loans will also be placed on nonaccrual status in cases where we are uncertain whether the borrower can satisfy the contractual terms of the loan agreement. Cash payments received while a loan is categorized as nonaccrual will be recorded as a reduction of principal as long as doubt exists as to future collections.

We maintain appraisals on loans secured by real estate, particularly those categorized as nonperforming loans and potential problem loans. In instances where appraisals reflect reduced collateral values, we make an evaluation of the borrower’s overall financial condition to determine the need, if any, for impairment or write-down to their fair values. If foreclosure occurs, we record OREO at the lower of our recorded investment in the loan or fair value less our estimated costs to sell.

Our loan portfolio losses and delinquencies have been primarily limited by our underwriting standards and portfolio management practices. Whether losses and delinquencies in our portfolio will increase significantly depends upon the value of the real estate securing the loans and economic factors, such as the overall economy, rising or elevated interest rates, historically high or persistent inflation, and recessionary concerns.

We originate a portion of our consumer loans (the Consumer Program) using a third party that sources and subsequently manages the portfolio of loans. As of June 30, 2024, the principal balance outstanding was $194.2 million. These loans are accounted for similar to our other consumer loans and are not placed on nonaccrual because they are charged off when they become 90 days past due. The allowance on this portfolio of loans was $22.3 million as of June 30, 2024 and represented 43% of our total allowance for credit losses. Net charge-offs on this portfolio were $4.3 million and $8.7 million during the three and six months ended June 30, 2024, respectively, and represented approximately 87% and 85%, respectively, of net charge-offs recorded during the periods.

The Company tightened its origination criteria in regard to this portfolio in April of 2023 and from that point forward we generally originated loans to consumer borrowers being managed by the third party with FICO scores over 720, whereas prior periods loan production included approximately 40% of loans to borrowers with weaker credit scores. This older vintage, lower credit score portion of the portfolio has driven the uptick in related charge-offs during 2023 which continued into the first six months of 2024 and necessitated the update of the Company’s expected loss rates on this portfolio for purposes of determining the allowance for credit losses as discussed in our Annual Report on Form 10-K for 2023. This updated loss rate has been a driver in the increase of the allowance on the portfolio. The newer production represented

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approximately 33% of the portfolio as of June 30, 2024 and is expected to improve the quality mix of the portfolio and result in lower realized net charge-offs and provisions for credit losses in future periods.

Investment Securities

The following table sets forth a summary of the investment securities portfolio as of the dates indicated. Available-for-sale investment securities are reported at fair value, and held-to-maturity investment securities are reported at amortized cost (in thousands).


	June 30,		December 31,
	2024		2023
Available-for-sale investment securities:
Residential government-sponsored mortgage-backed securities	$	90,762	$	96,808
Obligations of states and political subdivisions		29,693		30,080
Corporate securities		13,726		14,048
Collateralized loan obligations		5,008		4,982
Residential government-sponsored collateralized mortgage obligations		48,854		34,471
Government-sponsored agency securities		13,668		13,711
Agency commercial mortgage-backed securities		27,311		30,110
SBA pool securities		3,845		4,210
Total	$	232,867	$	228,420

Held-to-maturity investment securities:
Residential government-sponsored mortgage-backed securities	$	8,392	$	9,040
Obligations of states and political subdivisions		2,069		2,391
Residential government-sponsored collateralized mortgage obligations		188		219
Total	$	10,649	$	11,650

Debt investment securities that we have the positive intent and ability to hold to maturity are classified as held-to-maturity and carried at amortized cost. Investment securities classified as available-for-sale are those debt securities that may be sold in response to changes in interest rates, liquidity needs or other similar factors. Investment securities available-for-sale are carried at fair value, with unrealized gains or losses net of deferred taxes, included in accumulated other comprehensive income (loss) in stockholders’ equity. Our portfolio of available-for-sale securities currently contains a material amount of unrealized mark-to-market adjustments due to increases in market interest rates since the original purchase of many of these securities. We intend to hold these securities until maturity or recovery of the value and do not anticipate realizing any losses on the investments.

Investment securities, available-for-sale and held-to-maturity, totaled $243.5 million as of June 30, 2024, an increase of 1.4% from $240.1 million as of December 31, 2023, primarily due to purchases of available-for-sale securities, partially offset by paydowns, maturities, and calls of the investments over the past six months. We recognized no credit impairment charges related to credit losses on our held-to-maturity investment securities during the three and six months ended June 30, 2024 and an immaterial amount of credit impairment charges were taken during the three and six months ended June 30, 2023.

For additional information regarding investment securities refer to “Note 2 - Investment Securities” in this Form 10-Q.

Deposits and Other Borrowings

Deposits

The market for deposits is competitive. We offer a line of traditional deposit products that currently include noninterest-bearing and interest-bearing checking (or NOW accounts), commercial checking, money market accounts, savings

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accounts and certificates of deposit. We compete for deposits through our banking branches with competitive pricing, as well as nationally through advertising and online banking. We use deposits as a principal source of funding for our lending, purchasing of investment securities and for other business purposes.

The variety of deposit accounts we offer allows us to be competitive in obtaining funds and in responding to the threat of disintermediation (the flow of funds away from depository institutions such as banking institutions into direct investment vehicles such as government and corporate securities). Our ability to attract and maintain deposits, and the effect of such retention on our cost of funds, has been, and will continue to be, significantly affected by the general economy and market rates of interest.

Total deposits were $3.3 billion as of June 30, 2024, a 2% increase from December 31, 2023. The increase in deposits from year end was primarily driven by growth in money market and savings accounts due to our competitive rates on these products. Savings accounts increased 11% from $783.8 million as of December 31, 2023 to $866.3 million as of June 30, 2024. Money market accounts increased 5% from $794.5 million as of December 31, 2023 to $831.8 million as of June 30, 2024. Our deposits are diversified in type and by underlying customer and lack significant concentrations to any type of customer (i.e. commercial, consumer, government) or industry.

Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Total uninsured deposits as calculated per regulatory guidance were $849.3 million, or 25% of total deposits, as of June 30, 2024.

Other Borrowings

We use other borrowed funds to support our liquidity needs and to temporarily satisfy our funding needs from increased loan demand and for other shorter term purposes. We are a member of the FHLB and are authorized to obtain advances from the FHLB from time to time as needed. The FHLB has a credit program for members with different maturities and interest rates, which may be fixed or variable. We are required to collateralize our borrowings from the FHLB with purchases of FHLB stock and other collateral acceptable to the FHLB. As of June 30, 2024 and December 31, 2023, total FHLB borrowings were $80.0 million and $30.0 million, respectively. As of June 30, 2024, we had $517.6 million of unused and available FHLB lines of credit.

Other borrowings can consist of federal funds purchased, secured borrowings due to failed loan sales, and securities sold under agreements to repurchase (“repo”) that mature within one year, which are secured transactions with customers. The balance in repo accounts at both June 30, 2024 and December 31, 2023 was $3.3 million and $3.0 million, respectively.

We had secured borrowings of $21.1 million and $20.4 million as of June 30, 2024 and December 31, 2023, respectively, related to loan transfers to another financial institution during 2023 and the first six months of 2024 that did not meet the criteria to be treated as a sale under relevant accounting guidance. These borrowings reflect the cash received for transferring the loans to the other financial institution and any unamortized sale premium and are secured by approximately the same amount of loans held for investment that are recorded in our balance sheet. We retained the servicing of the loans that were transferred and accordingly receive principal and interest from the borrower as contractually required and transfer the interest to the other financial institution net of our contractually agreed upon servicing fee. The loans transferred have an average maturity of approximately ten years which will be the time over which the principal balance of the loans in our balance sheet and secured borrowings will pay down, absent borrower prepayments. During the three and six months ended June 30, 2024, additional advances were made to borrowers under the loans previously transferred in 2023 and were accordingly treated as additional secured borrowings as of June 30, 2024. For additional information on secured borrowings refer to “Note 7 –Debt and Other Borrowings” in this Form 10-Q.

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Junior Subordinated Debt and Senior Subordinated Notes

For information about junior subordinated debt and senior subordinated notes and their anticipated principal repayments refer to “Note 7 –Debt and Other Borrowings.”

Liquidity and Funds Management

The objective of our liquidity management is to ensure the ability to meet our financial obligations. These obligations include the payment of deposits on demand or at maturity, the repayment of borrowings at maturity and the ability to fund commitments and other new business opportunities. We obtain funding from a variety of sources, including customer deposit accounts, customer certificates of deposit and payments on our loans and investments. If our level of core deposits are not sufficient to fully fund our lending activities, we have access to funding from additional sources, including but not limited to borrowing from the Federal Home Loan Bank of Atlanta and institutional certificates of deposits. In addition, we maintain federal funds lines of credit with two correspondent banks, totaling $75 million, and utilize securities sold under agreements to repurchase and reverse repurchase agreement borrowings from approved securities dealers as needed. For additional information about borrowings and anticipated principal repayments refer to “Note 7 –Debt and Other Borrowings, and Note 9 – Commitments and Contingencies.”

We prepare a cash flow forecast on a 30, 60 and 90 day basis along with a one and two year basis. These projections incorporate expected cash flows on loans, investment securities, and deposits based on data used to prepare our interest rate risk analyses. As of June 30, 2024, Primis was not aware of any known trends, events or uncertainties that have or are reasonably likely to have a material impact on our liquidity. As of June 30, 2024, Primis has no material commitments or long-term debt for capital expenditures.

Capital Resources

Capital management consists of providing equity to support both current and future operations. Primis Financial Corp. and its subsidiary, Primis Bank, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (“PCA”), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. As of June 30, 2024 and December 31, 2023, the most recent regulatory notifications categorized the Bank as well capitalized under regulatory framework for PCA. Federal banking agencies do not provide a similar well capitalized threshold for bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require Primis to maintain minimum amounts and ratios of Total and Tier I capital (as defined in the regulations) to average assets (as defined). Management believes, as of June 30, 2024, that Primis meets all capital adequacy requirements to which it is subject.

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The following table provides a comparison of the leverage and risk-weighted capital ratios of Primis Financial Corp. and Primis Bank at the periods indicated to the minimum and well-capitalized required regulatory standards:


	Minimum
	Required for
	Capital		To Be		Actual Ratio at
	Adequacy		Categorized as		June 30,		December 31,
	Purposes		Well Capitalized⁽¹⁾		2024		2023
Primis Financial Corp.
Leverage ratio	4.00	%	n/a		8.25	%	8.37	%
Common equity tier 1 capital ratio	4.50	%	n/a		8.85	%	8.96	%
Tier 1 risk-based capital ratio	6.00	%	n/a		9.14	%	9.25	%
Total risk-based capital ratio	8.00	%	n/a		12.45	%	13.44	%

Primis Bank
Leverage ratio	4.00	%	5.00	%	9.86	%	9.80	%
Common equity tier 1 capital ratio	7.00	%	6.50	%	11.05	%	10.88	%
Tier 1 risk-based capital ratio	8.50	%	8.00	%	11.05	%	10.88	%
Total risk-based capital ratio	10.50	%	10.00	%	12.30	%	12.12	%

(1)	Prompt corrective action provisions are not applicable at the bank holding company level.

Bank regulatory agencies have approved regulatory capital guidelines (“Basel III”) aimed at strengthening existing capital requirements for banking organizations. The Basel III Capital Rules require Primis Financial Corp. and Primis Bank to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer”, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer, (iii) a minimum ratio of Total capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer and (iv) a minimum leverage ratio of 4.0%. Failure to meet minimum capital requirements may result in certain actions by regulators which could have a direct material effect on the consolidated financial statements.

Primis Financial Corp. and Primis Bank remain well-capitalized under Basel III capital requirements. Primis Bank had a capital conservation buffer of 4.30% as of June 30, 2024, which exceeded the 2.50% minimum requirement below which the regulators may impose limits on distributions.

Primis Bank’s capital position is consistent with being well-capitalized under the regulatory framework for PCA.

CRITICAL ACCOUNTING POLICIES

The critical accounting policies are discussed in MD&A in our Annual Report on Form 10-K for the year ended December 31, 2023. Significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in “Note 1 - Organization and Significant Accounting Policies” in the Form 10-K for the year ended December 31, 2023. Disclosures regarding changes in our significant accounting policies since year end and the effects of new accounting pronouncements are included in “Note 1 - Accounting Policies” in this Form 10-Q. There have been no changes to the significant accounting policies during the first six months of 2024.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are engaged primarily in the business of investing funds obtained from deposits and borrowings into interest-earning loans and investments. Consequently, our earnings depend to a significant extent on our net interest income, which is the difference between the interest income on loans and other investments and the interest expense on deposits and borrowings. To the extent that our interest-bearing liabilities do not reprice or mature at the same time as our interest-earning assets, we are subject to interest rate risk and corresponding fluctuations in net interest income. Our Asset-Liability Committee (“ALCO”) meets regularly and is responsible for reviewing our interest rate sensitivity position and establishing policies to monitor and limit exposure to interest rate risk. The policies established by the ALCO are reviewed

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and approved by our Board of Directors. We have employed asset/liability management policies that seek to manage our net interest income, without having to incur unacceptable levels of credit or investment risk.

We use simulation modeling to manage our interest rate risk, and review quarterly interest sensitivity. This approach uses a model which generates estimates of the change in our economic value of equity (“EVE”) over a range of interest rate scenarios. EVE is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts using assumptions including estimated loan prepayment rates, reinvestment rates and deposit decay rates.

Based on an analysis of our interest rate risk as measured by the estimated change in EVE resulting from instantaneous and sustained parallel shifts in the yield curve (plus 400 basis points or minus 400 basis points, measured in 100 basis point increments) as of June 30, 2024 and December 31, 2023, all changes are within our Asset/Liability Risk Management Policy guidelines.

Our interest rate sensitivity is also monitored by management through the use of a model that generates estimates of the change in the net interest income (“NII”) over a range of interest rate scenarios. NII depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. In this regard, the model assumes that the composition of our interest sensitive assets and liabilities existing as of June 30, 2024 and December 31, 2023 remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. All changes are within our ALM Policy guidelines as of June 30, 2024 and December 31, 2023.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE and NII sensitivity requires the making of certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. Accordingly, although the EVE tables and NII tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net worth and NII. Sensitivity of EVE and NII are modeled using different assumptions and approaches.

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this quarterly report on Form 10-Q, under the supervision and with the participation of management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -15(e) under the Securities Exchange Act of 1934) utilizing the framework established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are not effective as of the end of the period covered by this Quarterly Report on Form 10-Q. This conclusion was reached as a result of the continued remediation of previously identified material weaknesses in its internal controls over financial reporting as further described in Item 9A in the 2023 Annual Report on Form 10-K.

Notwithstanding the material weaknesses that have not been fully remediated, the Company’s management, including the CEO and CFO, has concluded that the condensed consolidated financial statements, included in this Form 10-Q, as of and for the three and six months ended June 30, 2024, fairly present, in all material respects, the Company's financial condition, results of operations and cash-flows for the periods presented in conformity with generally accepted accounting principles for interim financial statements.

(b) Changes in Internal Control over Financial Reporting. There were no changes in our internal controls over financial reporting that occurred during the six months ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. During the six months ended June 30, 2024, the

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Company continued to remediate the material weaknesses in its internal control over financial reporting as previously identified and disclosed in Item 9A. in the 2023 Annual Report on Form 10-K. While management believes it has put effective controls in place to remediate the previously identified material weaknesses, the controls have not been operating for a sufficient amount of time to conclude that the material weakness has been fully remediated. The Company will continue to operate and test the new controls until it believes they have been operating effectively for a sufficient amount of time. The Company anticipates the material weaknesses to be fully remediated as soon as possible.

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

Primis and Primis Bank are from time to time a party, as both plaintiff and defendant, to various claims and proceedings arising in the ordinary course of the Bank’s business, including administrative and/or legal proceedings that may include employment-related claims, as well as claims of lender liability, breach of contract, and other similar lending-related claims. While the ultimate resolution of these matters cannot be determined at this time, the Bank’s management presently believes that such matters, individually and in the aggregate, will not have a material adverse effect on the Bank’s financial condition or results of operations. There are no proceedings pending, or to management’s knowledge, threatened, that represent a significant risk against Primis or Primis Bank as of June 30, 2024.

ITEM 1A – RISK FACTORS

In addition to the other information set forth in this Report, in evaluating an investment in the Company’s securities, investors should consider carefully, among other things, the risk factors previously disclosed in Part I, Item 1A of our 2023 Form 10-K, which could materially affect the Company's business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.

There are no material changes during the period covered by this Report to the risk factors previously disclosed in our 2023 Form 10-K.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Not applicable.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

Pursuant to Item 408(a) of Regulation S-K, none of the Company's directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three and six months ended June 30, 2024.

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ITEM 6 - EXHIBITS

(a) Exhibits.


Exhibit No.		Description

3.1		Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to Primis Financial Corp.’s (formerly Southern National’s) Registration Statement on Form S-1 (Registration No. 333-136285) filed August 4, 2006)

3.2		Certificate of Amendment to the Articles of Incorporation dated January 31, 2005 (incorporated herein by reference to Exhibit 3.2 to Primis Financial Corp.’s (formerly Southern National’s) Registration Statement on Form S-1 (Registration No. 333-136285) filed on August 4, 2006)

3.3		Certificate of Amendment to the Articles of Incorporation dated April 13, 2006 (incorporated herein by reference to Exhibit 3.3 to Primis Financial Corp.’s (formerly Southern National’s) Registration Statement on Form S-1 (Registration No. 333-136285) filed on August 4, 2006)

3.4		Articles of Amendment to the Articles of Incorporation dated June 30, 2021 (incorporated herein by reference to Exhibit 3.1 to Primis Financial Corp.’s Current Report on Form 8-K filed on June 30, 2021)

3.5		Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to Primis Financial Corp.’s Current Report on Form 8-K filed on June 30, 2021)

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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101		The following materials from Primis Financial Corp. Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in Inline XBRL (Extensible Business Reporting Language), filed herewith: (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (unaudited), (iii) Consolidated Statement of Changes in Stockholders’ Equity (unaudited), (iv) Consolidated Statements of Cash Flows (unaudited), and (v) Notes to Consolidated Financial Statements (unaudited).

104		The cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document).

+ Management contract or compensatory plan or arrangement

* Filed with this Quarterly Report on Form 10-Q

** Furnished with this Quarterly Report on Form 10-Q

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Primis Financial Corp.
			(Registrant)


December 11, 2024			/s/ Dennis J. Zember, Jr.
(Date)			Dennis J. Zember, Jr.
			President and Chief Executive Officer



December 11, 2024			/s/ Matthew Switzer
(Date)			Matthew Switzer
			Executive Vice President and Chief Financial Officer

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Primis Financial (FRST) 10-Q2024 Q2 Quarterly report

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