Primis Financial Corp. Reports Diluted Earnings per Share of $0.38 for the First Quarter of 2021

MCLEAN, Va., April 29, 2021 /PRNewswire/ — Primis Financial Corp. (NASDAQ: FRST) («Primis» or the «Company»), and its wholly-owned…

MCLEAN, Va., April 29, 2021 /PRNewswire/ — Primis Financial Corp. (NASDAQ: FRST) («Primis» or the «Company»), and its wholly-owned subsidiary Primis Bank (the «Bank»), today reported net income of $9.4 million for the quarter ended March 31, 2021, compared to $27 thousand for the quarter ended March 31, 2020.  Earnings per share for the three months ended March 31, 2021 were $0.39 on a basic and $0.38 on a diluted basis compared to $0.00 basic and diluted for the three months ended March 31, 2020.  

The Company also announced its new digital banking initiative expected to launch in the fourth quarter of this year.  As detailed below, the new digital bank will have unique technology-driven products and services and will initially be focused on consumer and small-business customers.

The Board of Directors also announced and declared a dividend of $0.10 per share payable on May 24, 2021 to shareholders of record on May 14, 2021.  This is Primis’ thirty-eighth consecutive quarterly dividend.  

Highlights for the three months ended March 31, 2021 versus three months ended March 31, 2020

  • Rebranding of the Corporation and the Bank from Southern National Bancorp of Virginia, Inc. and Sonabank, respectively, effective March 31, 2021.
  • Return on average assets of 1.19% versus 0.0% in the year-ago period.
  • Operating return on average assets(1) of 1.21% versus 0.63% in the year-ago period.
  • Net income was $9.4 million, pre-tax pre-provision earnings were $11.3 million and pre-tax pre-provision operating earnings(1) were $11.5 million for the first quarter of 2021, versus $27 thousand, $3.5 million and $8.9 million, respectively for the first quarter of 2020.
  • Pre-tax pre-provision return on average assets(1) of 1.43% and pre-tax pre-provision operating return on average assets(1) of 1.45% for the first quarter of 2021, compared to 0.52% and 1.30%, respectively, in the first quarter of 2020.
  • Total assets at the end of first quarter of 2021 were $3.33 billion, an increase of 20.6%.
  • Gross loans were $2.39 billion at the end of the first quarter of 2021, up 8.1% from the year ago period.  Excluding PPP balances, gross loans declined 7.1% over the same period.
  • Loans on deferral were $112.8 million or 5.5% of gross loans excluding PPP balances. Approximately 59% of total deferrals were from the hotel portfolio while restaurant deferrals were approximately 1%.
  • Total deposits increased $613 million year-over-year despite a $288 million decline in time deposits over the same time frame.  Non-time deposits comprised 83.7% of total deposits at March 31, 2021 versus 65.0% at March 31, 2020.
  • Cost of deposits declined to 0.60% for the first quarter of 2021 compared to 1.25% for the first quarter of 2020.
  • Mortgage income was $1.3 million for the first quarter of 2021 versus $231 thousand for the first quarter of 2020.
  • Allowance for credit losses to total loans (excluding PPP balances) of 1.70% at March 31, 2021 versus 0.57% at March 31, 2020.
  • Book value per share of $16.22 and tangible book value per share(1) of $11.84 at March 31, 2021, an increase of $0.63 and $0.73, respectively, from a year ago despite a significant build in the allowance for credit losses and $0.40 in dividends paid over the last twelve months.

Commenting on the quarter, President and CEO Dennis J. Zember, Jr. stated, «I am proud of the accomplishments our bank has made over this past quarter, including a wildly successful rebranding effort.  Launching a new brand and working to change perception in the marketplace is no easy task.  Our employees have embraced the challenge of making Primis stand for superior customer service enhanced by technology.  The feedback from customers has been tremendous so far.  As we detail below, our new digital banking effort is the next exciting step of the Primis evolution.»

Added Matthew A. Switzer, Executive Vice President and CFO, «Our liquidity continued to build in the quarter as cash and equivalents ended March at $480 million.  Part of this liquidity build was due to a deposit relationship with a mortgage company that has generated more funds than anticipated.  We anticipate normalization of this account in the second quarter which should reduce cash balances by approximately $100 million.  We continue to focus on building core deposits while anticipating a more robust lending environment in the latter half of 2021 as the economy continues to open.» 

Announcement of New Digital Banking Initiative

As noted above, the Company announced plans for a new digital bank offering with a launch date during the fourth quarter of 2021.  This venture will utilize a modern, cloud-based core platform provided by Finxact.  The Company has also partnered with nearly a dozen technology firms to provide the most robust and unique banking experience including Apiture (for digital customer-facing and mobile applications), Savana (customer and product management and servicing) and Levvel (third-party lead for development and implementation).  Key features enabled by this new technology include real-time processing and fully self-contained mobile applications, including in-app account opening, while utilizing the latest security protocols and robust consumer data protection.

The Company believes that this modern banking architecture is critical.  First, this architecture greatly compresses the time for creative thoughts and ideas to become a reality in the customer’s mobile application.  Today’s mobile applications are not functional or unique and severely limit the ability to incorporate banks’ new ideas to address customer needs.  Second, the Company’s creative abilities and unique features will remain the property of Primis alone.  The developers that breathe life into these new ideas will either be employed by or contracted to the Company and any distinguishing features will not be for sale or distribution by our core provider.  This drastically lengthens the period of time in which the Company can differentiate itself and invites substantial collaboration from industry experts, consumers and fintech partners who previously had no avenue or platform to roll out exclusive solutions.

The initial rollout will center on deposit solutions for retail and small business customers and will incorporate a variety of unique and proprietary features that the Company believes will be very attractive for customers.  Additionally, the Company’s products and services in the digital bank will feature rates, fee schedules and customer incentives that recognize the substantially lower infrastructure costs borne by the bank to provide services.  Management estimates that the capital outlay of developing a fully functional, modern core with unique and distinguishing characteristics will approximate the capital investment of two to three traditional branches in metropolitan-type markets.

The digital bank will operate in parallel with the Bank’s existing infrastructure currently powered by solutions from Fiserv.  Fiserv remains an important partner for the Company, and the Fiserv platform will continue to support the Bank’s growth for the foreseeable future.

Mr. Zember noted, «Our branches and employees are passionate about providing the highest quality service and leadership in our local communities. This high-touch model is important but at the same time, we are cognizant of how customer behavior and demands for more technology have changed over the last year. We launched a new brand with a vision of being unique in this industry, wanting to use technology to improve the customer experience. Our efforts here should create a competitive advantage and something noticeably unique in our communities.»

Panacea Financial Division Update

The Bank’s Panacea Division («Panacea»), which launched in November of 2020, has seen strong early success with physician household growth.  Panacea continues to actively pursue partnerships to support the physician community such as the recently announced partnership with the Student Osteopathic Medical Association, the largest independent organization of osteopathic medical students.  Additionally, Panacea closed its first medical school debt refinance loan in April which represents a new and potentially significant avenue for further loan growth. Lastly, the Panacea Financial Foundation closed its first round of grants to underrepresented ethnic and racial minority residents and fellow physicians in March and remains driven to help improve the minority representation within medicine.

Net Interest Income

Net interest income increased to $25.0 million for the three months ended March 31, 2021 from $20.5 million for the three months ended March 31, 2020.  PPP fee income was $4.95 million for the current quarter and was the primary factor contributing to the increase. The Company’s reported net interest margin for the first quarter was 3.41% compared to 3.58% in the fourth quarter of 2020 and 3.32% in the first quarter of 2020.  Net interest margin excluding the effects of PPP loans(1) was 2.99% in the first quarter of 2021, down 24 bps from 3.23% linked-quarter due to significantly higher cash balances.  Unrecognized net deferred fees related to PPP loans totaled $5.21 million versus $4.45 million at December 31, 2020.

Yield on loans for the first quarter was 4.82%, or 4.47%(1) excluding the effect of PPP loans, compared to 4.89% in the first quarter of 2020.  While lower rates also lowered funding costs, the Company aggressively pursued core deposits during the year to replace brokered time deposits and other sources of wholesale funding.  Despite actively pursuing core deposits and positively shifting the Company’s deposit mix, the cost of total deposits still declined to 0.60% in the first quarter of 2021 from 1.25% in the year-ago quarter.  The Company also paid off $20.0 million of subordinated debt with a floating-rate cost of three-month LIBOR plus 502 basis points in February of this year.

Noninterest Income

During the three months ended March 31, 2021, Primis had non-interest income of $3.8 million compared to $2.8 million for the three months ended March 31, 2020.  Income on account maintenance and deposit service fees increased $119 thousand from the year-ago period primarily in account service charges and non-sufficient fund fees. Gains on our investment in Southern Trust Mortgage («STM») increased to $1.3 million compared to $231 thousand in the same quarter in 2020, driven by higher margins on closed loans combined with a higher volume of mortgage activity. The gain on investment in STM was negatively impacted this quarter by an expense of approximately $1.2 million due to management restructuring at STM.

Noninterest Expense

Noninterest expense was $18.2 million for the three months ended March 31, 2021, compared to $19.9 million for the three months ended March 31, 2020.  As previously disclosed, the year ago period included $4.9 million of charges related to management restructuring.  Excluding these charges, total noninterest expense increased $3.22 million, largely driven by an increase of $1.96 million in employee compensation and benefits year-over-year.  In addition to generally higher staffing and compensation levels, employee compensation in the first quarter of 2021 was impacted by $200 thousand in recruitment payments as well as $454 thousand in employee incentive payments tied to core deposit generation in the fourth quarter of 2020.  Other expenses also increased in the first quarter versus the year ago period, largely driven by a $711 thousand increase in the reserve for unfunded commitments.

Loan Portfolio and Asset Quality

Loans outstanding grew to $2.39 billion at March 31, 2021, compared to $2.21 billion at March 31, 2020.  Excluding PPP loans, loans outstanding have decreased $156.2 million since March 31, 2020, largely driven by a $109.3 million decrease in 1-4 family residential balances. The Company ended the first quarter of 2021 with $112.8 million of loans on deferral, or 5.5% of total loans excluding PPP loans. Hotels account for 59% of all deferrals with approximately 25% of the hotel portfolio deferred at March 31, 2021.  Of the hotel deferrals, 55% are paying interest with the remainder deferring both interest and principal.

Nonperforming assets, excluding portions guaranteed by the SBA, were 0.41% of total assets at March 31, 2021, compared to 0.43% at March 31, 2020.  Loans rated substandard remained flat in the first quarter of 2021 from linked-quarter.

The allowance for credit losses was $34.9 million at March 31, 2021, up 174% from $12.7 million at March 31, 2020, due to pandemic-related provisioning and the adoption of the Current Expected Credit Loss («CECL») accounting standard.  The Company released $1.37 million of the allowance as economic outlook related to the pandemic improved in the quarter and unguaranteed loan balances declined.  As a percentage of loans (excluding PPP), the allowance was 1.70% at the end of the first quarter of 2021.  Annualized net charge-offs to average loans remained low at 1 basis points for the first quarter of 2021 versus 18 basis points in the year-ago period.

Deposits

Total deposits increased to $2.69 billion at March 31, 2021, compared to $2.43 billion at December 31, 2020 and $2.08 billion at March 31, 2020.  During the quarter, CDs declined by $51.3 million while core deposits (demand, NOW, money market and savings) increased $307.3 million linked-quarter. Time deposits represented approximately 16% of total deposits at March 31, 2021. The Company is aggressively building sales and incentive cultures focused on growing and managing core deposits, with the primary attention on commercial and consumer checking accounts.  Management expects continued improvement in the funding mix over the next several quarters with further reductions in total funding costs to occur in the last several quarters of 2021.

Stockholders’ Equity

Book value per share as of March 31, 2021 was $16.22, an increase of $0.63 since March 31, 2020.  Tangible book value per share(1) at the end of the first quarter of 2021 was $11.84, an increase of $0.73 since March 31, 2020.  Shareholder’s equity was $398.0 million, or 11.95% of total assets at March 31, 2021.  Tangible common equity(1) at March 31, 2021 was $290.5 million, or 9.01% of tangible assets(1).  

About Primis Financial Corp.

As of March 31, 2021, Primis had $3.33 billion in total assets, $2.39 billion in total loans and $2.69 billion in total deposits. Primis Bank, the Company’s banking subsidiary, provides a range of financial services to individuals and small- and medium-sized businesses through forty-one full-service branches in Virginia and Maryland and through certain internet and mobile applications.

Contacts:

Address:

Dennis J. Zember, Jr., President and CEO

Primis Financial Corp.

Matthew A. Switzer, EVP and CFO

6830 Old Dominion Drive

Phone: (703) 893-7400

McLean, VA 22101

Primis Financial Corp., NASDAQ Symbol FRST

Website: www.primisbank.com

Non-GAAP Measures

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables. Primis uses non-GAAP financial measures to analyze its performance. The measures entitled net income adjusted for nonrecurring income and expenses; pre-tax pre-provision operating earnings; operating return on average assets; pre-tax pre-provision operating return on average assets; operating return on average equity; operating return on average tangible equity; operating efficiency ratio; tangible book value per share; tangible common equity; tangible common equity to tangible assets; and net interest margin excluding PPP loans are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in the Reconciliation of Non-GAAP items table.

Management believes that these non-GAAP financial measures provide additional useful information about Primis that allows management and investors to evaluate the ongoing operating results, financial strength and performance of Primis and provide meaningful comparison to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider Primis’ performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of Primis.  Non-GAAP financial measures are not standardized and, therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names.

Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

This press release and certain of our other filings with the Securities and Exchange Commission contain statements that constitute «forward-looking statements» within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Such statements can generally be identified by such words as «may,» «plan,» «contemplate,» «anticipate,» «believe,» «intend,» «continue,» «expect,» «project,» «predict,» «estimate,» «could,» «should,» «would,» «will,» and other similar words or expressions of the future or otherwise regarding the outlook for the Company’s future business and financial performance and/or the performance of the banking industry and economy in general. These forward-looking statements include, but are not limited to, our expectations regarding our future operating and financial performance, including our outlook and long-term goals for future growth; our expectations regarding net interest margin; expectations on our growth strategy, expense management, capital management and future profitability; expectations on credit quality and performance; statements regarding the potential effects of the COVID-19 pandemic on our business and financial results and conditions; and the assumptions underlying our expectations.

Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: the Company’s ability to implement its various strategic and growth initiatives, including its announced new digital bank; competitive pressures among financial institutions increasing significantly; changes in economic or political conditions, either nationally or locally, particularly in areas in which the Company conducts operations; interest rate risk; changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to the COVID-19 pandemic; changes in management’s plans for the future; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values, or competition; changes in accounting principles, policies, or guidelines; adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic; the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services.

Forward-looking statements speak only as of the date on which such statements are made. These forward-looking statements are based upon information presently known to the Company’s management and are inherently subjective, uncertain and subject to change due to any number of risks and uncertainties, including, without limitation, the risks and other factors set forth in the Company’s filings with the Securities and Exchange Commission, the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, under the captions «Cautionary Note Regarding Forward-Looking Statements» and «Risk Factors,» and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements.

(1) Non-GAAP financial measure.  Please see «Reconciliation of Non-GAAP Items»in the financial tables.

 

Primis Financial Corp.   


Financial Highlights (unaudited)


(Dollars in thousands, except per share data)

For Three Months Ended:


Variance – 1Q 2021 vs.















Selected Performance Ratios:

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020


4Q 2020


1Q 2020


Return on average assets

1.19%

1.15%

1.19%

0.61%

0.00%


4

bps

119

bps

Operating return on average assets (1)

1.21%

0.82%

1.19%

0.61%

0.63%


39


58


Pre-tax pre-provision operating return on average assets(1)

1.45%

1.56%

1.78%

2.28%

1.30%


(10)


15


Return on average equity

9.63%

9.16%

9.87%

4.92%

0.03%


47


960


Operating return on average equity (1)

9.79%

6.53%

9.87%

4.92%

4.57%


326


522


Operating return on average tangible equity (1)

13.45%

9.04%

13.72%

6.86%

0.04%


441


1,341


Cost of funds


0.78%

0.93%

0.83%

0.97%

1.60%


(15)


(82)


Net interest margin

3.41%

3.58%

3.18%

3.33%

3.32%


(17)


9


Gross loans to deposits

89.0%

100.3%

113.9%

116.7%

106.6%


(11)

pts

(18)

pts

Efficiency ratio


63.2%

55.2%

52.2%

45.6%

84.9%


8


(2,170)


Operating efficiency ratio(1)

62.5%

43.1%

52.2%

45.6%

61.9%


19


60















Per Share Data:











Earnings per share – Basic

$            0.39

$             0.37

$             0.40

$             0.19

$                   –


4.15

%

%

Earnings per share – Diluted

$            0.38

$             0.37

$             0.39

$             0.19

$                   –


3.47



Book value per share

$          16.22

$           16.03

$           15.96

$           15.67

$           15.59


1.20


4.06


Tangible book value per share(1)

$          11.84

$           11.60

$           11.53

$           11.21

$           11.11


2.10


6.60


Cash dividend per share

$            0.10

$             0.10

$             0.10

$             0.10

$             0.10


0.21


0.21


Weighted average shares outstanding – Basic

24,349,884

24,272,312

24,270,455

24,246,355

24,168,359


0.32


0.75


Weighted average shares outstanding – Diluted

24,509,052

24,401,037

24,375,383

24,352,708

24,388,085


0.44


0.50


Shares outstanding at end of period

24,532,795

24,368,612

24,368,853

24,361,603

24,297,703


0.67

%

0.97

%














Asset Quality Ratios:











Non-performing assets as a percent of total assets, excluding SBA guarantees

0.41%

0.47%

0.53%

0.57%

0.43%


(6)

bps

(3)

bps

Net charge-offs as a percent of average loans (annualized)

0.01%

0.13%

(0.02%)

0.00%

0.18%


(12)


(17)


Allowance for credit losses to total loans

1.46%

1.49%

1.02%

0.94%

0.57%


(3)


88


Allowance for credit losses to total loans  (excluding PPP loans)

1.70%

1.71%

1.18%

1.09%

0.57%


(2)


112















Capital Ratios:












Tangible common equity to tangible assets(1)

9.01%

9.49%

9.22%

9.22%

10.17%


(47)

bps

(116)

bps

Leverage ratio (2)


9.35%

9.69%

9.28%

9.35%

10.46%


(34)


(111)


Common equity tier 1 capital ratio (2)

12.65%

13.05%

12.58%

11.23%

12.42%


(40)


23


Tier 1 risk-based capital ratio (2)

13.09%

13.52%

13.03%

11.65%

12.89%


(43)


20


Total risk-based capital ratio(2)

18.16%

19.58%

18.87%

14.59%

15.67%


(142)


249








(1) See Reconciliation of Non-GAAP financial measures.

(2)March 31, 2021 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C.

 












Primis Financial Corp.

As Of :


Variance – 1Q 2021 vs.


(Dollars in thousands)












Condensed Consolidated Balance Sheets (unaudited)

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020


4Q 2020


1Q 2020


Assets 












Cash and cash equivalents

$       480,280

$       196,185

$       149,272

$         82,586

$         55,865


144.81

%

 NM 

%

Investment securities-available for sale

170,216

153,233

157,896

160,979

168,520


11.08


1.01


Investment securities-held to maturity

33,180

40,721

49,323

53,958

59,234


(18.52)


(43.98)


Loans receivable, net of deferred fees

2,391,529

2,440,496

2,523,709

2,511,504

2,212,538


(2.01)


8.09


Allowance for credit losses

(34,893)

(36,345)

(25,779)

(23,627)

(12,722)


(4.00)


174.27



Net loans


2,356,636

2,404,151

2,497,930

2,487,877

2,199,816


(1.98)


7.13


Stock in Federal Reserve Bank and Federal Home Loan Bank

15,521

16,927

16,927

16,927

21,396


(8.31)


(27.46)


Equity method investment in mortgage affiliate

13,912

12,652

13,238

9,412

5,251


9.96


164.94


Preferred investment in mortgage affiliate

3,305

3,305

3,305

3,305

3,305




Bank premises and equipment, net

30,076

30,306

30,679

31,087

31,079


(0.76)


(3.23)


Operating lease right-of-use assets

6,947

7,511

7,033

7,111

7,664


(7.51)


(9.36)


Intangible assets


107,439

107,780

108,122

108,463

108,804


(0.32)


(1.25)


Bank-owned life insurance

65,569

65,409

65,015

64,622

64,236


0.24


2.08


Other real estate owned

2,255

3,078

5,388

6,006

5,876


(26.74)


(61.62)


Deferred tax assets, net

14,702

14,646

14,477

11,087

11,154


0.38


31.81


Accrued interest receivable

18,197

19,998

21,076

15,074

8,548


(9.01)


112.88


Other assets


12,235

12,771

14,892

13,677

11,815


(4.20)


3.55



Total assets

$    3,330,470

$    3,088,673

$    3,154,573

$    3,072,171

$    2,762,563


7.83

%

20.56

%














Liabilities and stockholders’ equity











Demand deposits

$       511,611

$       440,674

$       467,581

$       447,605

$       338,095


16.10

%

51.32

%

NOW accounts


821,746

714,752

472,553

424,096

380,977


14.97


115.69


Money market accounts

713,968

603,318

534,899

488,229

477,660


18.34


49.47


Savings accounts

202,488

183,814

179,756

171,681

151,406


10.16


33.74


Time deposits


438,773

490,048

561,685

619,918

727,216


(10.46)


(39.66)


    Total deposits


2,688,586

2,432,606

2,216,474

2,151,529

2,075,354


10.52


29.55


Securities sold under agreements to repurchase – short term

16,445

16,065

16,181

16,412

13,179


2.37


24.78


Federal Home Loan Bank advances

100,000

100,000

100,000

100,000

205,140



(51.25)


PPPLF Advances

283,906

333,574




Subordinated notes

95,367

115,329

115,378

56,689

56,686


(17.31)


68.24


Operating lease liabilities

7,629

8,238

7,800

7,896

8,509


(7.39)


(10.34)


Other liabilities


24,457

25,881

25,851

24,402

24,873


(5.50)


(1.67)



Total liabilities

2,932,484

2,698,119

2,765,590

2,690,502

2,383,741


8.69


23.02


Stockholders’ equity

397,986

390,554

388,983

381,669

378,822


1.90


5.06



Total liabilities and stockholders’ equity

$    3,330,470

$    3,088,673

$    3,154,573

$    3,072,171

$    2,762,563


7.83

%

20.56

%














Tangible common equity(1)

$       290,547

$       282,774

$       280,861

$       273,206

$       270,018


2.75

%

7.60

%

















































Primis Financial Corp.   

For Three Months Ended:


Variance – 1Q 2021 vs.



(Dollars in thousands)













Condensed Consolidated Statement of Operations (unaudited)

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020


4Q 2020


1Q 2020



Interest and dividend income

$         30,308

$         31,919

$         28,707

$         28,672

$         28,481


(5.05)

%

6.41

%


Interest expense


5,353

6,265

5,709

6,199

7,966


(14.56)


(32.80)




Net interest income

24,955

25,654

22,998

22,473

20,515


(2.72)


21.64



Provision for credit losses

(1,372)

3,101

2,000

10,899

3,450


(144.24)


(139.77)




Net interest income after provision for credit losses

26,327

22,553

20,998

11,574

17,065


16.73


54.27



Account maintenance and deposit service fees

1,817

1,700

1,633

1,489

1,698


6.88


7.01



Income from bank-owned life insurance

386

394

394

385

386


(2.03)




Equity gain from mortgage affiliate

1,315

2,571

3,826

4,161

231


(48.85)


 NM 



Realized losses on sales of investment securities

(620)


(100.00)




Recoveries on loans and securities charged-off prior to acquisition

79

3,793

288

2,235

184


(97.92)


(57.07)



Other 


220

129

130

123

321


 NM 


(31.46)




Noninterest income

3,817

7,967

6,271

8,393

2,820


(52.09)


35.35



Employee compensation and benefits

9,372

9,211

7,817

7,338

12,309


1.75


(23.86)



Occupancy and equipment expenses

2,355

2,114

2,151

2,044

2,558


11.40


(7.94)



Amortization of core deposit intangible

341

341

341

341

341





Virginia franchise tax expense

675

613

615

659

570


10.11


18.42



Data processing expense

799

814

701

956

707


(1.84)


13.01



Telecommunication and communication expense

522

378

382

369

368


38.10


41.85



Net (gain) loss on other real estate owned

(60)

905

(16)

71


 NM 


(184.51)



Professional fees


1,287

1,166

1,494

873

1,193


10.38


7.88



Other expenses


2,885

3,012

1,779

1,490

1,735


(4.22)


66.28




Noninterest expense

18,176

18,554

15,264

14,070

19,852


(2.04)


(8.44)




Income before income taxes

11,968

11,966

12,005

5,897

33


0.02


 NM 



Income tax expense 

2,585

3,003

2,417

1,188

6


(13.92)


 NM 




Net income 

$           9,383

$           8,963

$           9,588

$           4,709

$               27


4.69

%

 NM 

%


















(1) See Reconciliation of Non-GAAP financial measures.

The company defines «NM» as not meaningful for increases or decreases greater than 300 percent.

 












Primis Financial Corp.

As Of:


Variance – 1Q 2021 vs.


(Dollars in thousands)











Loan Portfolio Composition

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020


4Q 2020


1Q 2020


Loans secured by real estate:












Commercial real estate – owner occupied

$       421,666

$       436,338

$       416,446

$       412,607

$       409,443


(3.36)

%

2.99

%


Commercial real estate – non-owner occupied

567,945

602,191

603,891

590,054

598,769


(5.69)


(5.15)



Secured by farmland

12,351

13,136

16,640

16,876

16,633


(5.98)


(25.74)



Construction and land development

104,661

103,401

120,108

122,105

115,090


1.22


(9.06)



Residential 1-4 family

515,518

559,299

581,949

612,941

624,818


(7.83)


(17.49)



Multi-family residential

136,914

107,130

107,529

100,567

90,551


27.80


51.20



Home equity lines of credit

85,160

91,857

97,870

101,355

106,957


(7.29)


(20.38)



     Total real estate loans

1,844,215

1,913,352

1,944,433

1,956,505

1,962,261


(3.61)


(6.02)















Commercial loans

188,050

189,622

217,511

205,009

224,308


(0.83)


(16.16)


Paycheck Protection Program loans

335,210

314,982

338,473

325,014


6.42



Consumer loans


24,054

22,540

23,292

24,976

25,969


6.72


(7.37)



Loans receivable, net of deferred fees

$    2,391,529

$    2,440,496

$    2,523,709

$    2,511,504

$    2,212,538


(2.01)

%

8.09

%














Loans by Risk Grade:











  Pass, not graded

$                  –

$       533,287

$       574,954

$       653,943

$       630,827


(100.00)

%

(100.00)

%

  Pass Grade 1 – Highest Quality

955

778

891

306

538


22.75


77.51


  Pass Grade 2 – Good Quality

348,836

332,251

375,861

323,512

28,583


4.99


 NM 


  Pass Grade 3 – Satisfactory Quality

1,110,453

627,270

878,031

837,606

866,316


77.03


28.18


  Pass Grade 4 – Pass

853,234

872,604

660,630

662,534

664,124


(2.22)


28.48


  Pass Grade 5 – Special Mention

33,661

29,809

14,132

14,006

11,622


12.92


189.63


  Grade 6 – Substandard

44,390

44,497

19,210

19,597

10,528


(0.24)


 NM 


  Grade 7 – Doubtful




  Grade 8 – Loss





Total loans


$    2,391,529

$    2,440,496

$    2,523,709

$    2,511,504

$    2,212,538


(2.01)

%

8.09

%









































As Of or For Three Months Ended:






(Dollars in thousands)












Asset Quality Information

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020






Allowance for Credit Losses: 

Allowance for Credit Losses

Allowance for Loan losses






Balance at beginning of period

$        (36,345)

$        (25,779)

$        (23,627)

$        (12,722)

$        (10,261)






Adoption of CECL

(8,292)






Provision for loan losses

1,372

(3,101)

(2,000)

(10,899)

(3,450)






Net charge-offs


80

827

(152)

(6)

989






Ending balance


$        (34,893)

$        (36,345)

$        (25,779)

$        (23,627)

$        (12,722)



















Reserve for Unfunded Commitments:

Allowance for Credit Losses

Allowance for Loan losses






Balance at beginning of period

$            (740)

$              (55)

$              (55)

$              (55)

$              (55)






Adoption of CECL

(305)






Unfunded loan commitment expense

(711)

(380)






Total Reserve for Unfunded Commitments

$          (1,450)

$            (740)

$              (55)

$              (55)

$              (55)



































As Of:


Variance – 1Q 2021 vs.















Non-Performing Assets:

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020


4Q 2020


1Q 2020


Nonaccrual loans

$         14,251

$         14,462

$         15,270

$         14,930

$           8,941


(1.46)

%

59.39

%

Accruing loans delinquent 90 days or more




Total non-performing loans

14,251

14,462

15,270

14,930

8,941


(1.46)


59.39


Other real estate owned

2,255

3,078

5,388

6,006

5,876


(26.74)


(61.62)


Total non-performing assets

$         16,506

$         17,540

$         20,658

$         20,936

$         14,817


(5.90)


11.40


SBA guaranteed portion of non-performing loans

$           2,960

$           3,076

$           4,076

$           3,513

$           2,889


(3.77)


2.46















Troubled debt restructuring

$           2,804

$             987

$           1,629

$           1,667

$             694


184.09


 NM 


Loans deferred under COVID-19 modifications

$       112,834

$       122,010

$       436,591

$       707,841

$         24,308


(7.52)

%

364.18

%



























 The company defines «NM» as not meaningful for increases or decreases greater than 300 percent.






















Primis Financial Corp.   











(Dollars in thousands)

For Three Months Ended:


Variance – 1Q 2021 vs.















Average Balance Sheet

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020


4Q 2020


1Q 2020


Assets












Loans, net of deferred fees 

$    2,436,713

$    2,497,259

$    2,501,614

$    2,401,620

$    2,200,926


(2.42)

%

10.71

%

Investment securities

193,364

204,968

213,039

222,124

231,794


(5.66)


(16.58)


Other earning assets

339,480

147,014

163,159

91,230

54,800


130.92


 NM 


Total earning assets

2,969,557

2,849,241

2,877,812

2,714,974

2,487,520


4.22


19.38


Other assets


240,737

252,231

256,284

250,897

252,700


(4.56)


(4.73)


Total assets


$    3,210,294

$    3,101,472

$    3,134,096

$    2,965,871

$    2,740,220


3.51

%

17.15

%














Liabilities and stockholders’ equity











Demand deposits

$       477,812

$       459,830

$       452,500

$       418,382

$       333,408


3.91

%

43.31

%

Interest-bearing liabilities:











NOW and other demand accounts

773,768

688,125

451,583

404,700

379,531


12.45


103.87


Money market accounts

653,443

569,223

504,887

488,648

469,651


14.80


39.13


Savings accounts

192,252

182,434

176,305

163,574

147,697


5.38


30.17


Time deposits 


465,945

525,607

590,263

710,483

756,055


(11.35)


(38.37)


   Total Deposits

2,563,219

2,425,219

2,175,538

2,185,787

2,086,342


5.69


22.86


Borrowings


226,398

260,493

547,182

371,836

251,830


(13.09)


(10.10)


  Total Funding


2,789,617

2,685,712

2,722,720

2,557,623

2,338,172


3.87


19.31


Other Liabilities


25,539

26,588

25,869

24,495

21,781


(3.95)


17.25


Stockholders’ equity

395,138

389,172

385,507

383,753

380,267


1.53


3.91


Total liabilities and stockholders’ equity

$    3,210,294

$    3,101,472

$    3,134,096

$    2,965,871

$    2,740,220


3.51

%

17.15

%














Memo:  Average PPP loans

$       333,145

$       332,080

$       335,653

$       192,751

$                  –


0.32

%

%














Net Interest Income











Loans



$         28,957

$         30,596

$         27,266

$         27,044

$         26,741


(5.36)

%

8.29

%

Investment securities

1,042

993

1,129

1,247

1,361


4.93


(23.44)


Other earning assets

309

330

312

381

379


(6.36)


(18.47)


   Total Earning Assets

30,308

31,919

28,707

28,672

28,481


(5.05)


6.41















Non-interest bearing DDA




NOW and other interest-bearing demand accounts

1,093

1,167

807

745

786


(6.34)


39.06


Money market accounts

1,085

984

800

830

1,575


10.26


(31.11)


Savings accounts

142

137

130

107

116


3.65


22.41


Time deposits 


1,496

2,038

2,620

3,464

4,026


(26.59)


(62.84)


  Total Deposit Costs

3,816

4,326

4,357

5,146

6,503


(11.79)


(41.32)















Other Borrowings

1,537

1,939

1,352

1,053

1,463


(20.73)


5.06


  Total Funding Costs

5,353

6,265

5,709

6,199

7,966


(14.56)


(32.80)















Net Interest Income

$         24,955

$         25,654

$         22,998

$         22,473

$         20,515


(2.72)

%

21.64

%














Memo:  SBA PPP loan interest and fee income

$           5,778

$           5,725

$           2,233

$             512

$                  –


0.93

%

%

Memo:  SBA PPP loan funding costs

$             288

$             498

$             174

$               82

$                  –


%

 NM 

%








































Net Interest Margin











Loans



4.82%

4.87%

4.34%

4.53%

4.89%


(5)

bps

(7)

bps

Investments


2.19%

1.93%

2.11%

2.26%

2.36%


26


(17)


Other Earning Assets

0.37%

0.89%

0.76%

1.68%

2.78%


(52)


(241)


  Total Earning Assets

4.14%

4.46%

3.97%

4.25%

4.60%


(32)


(46)















NOW



0.57%

0.67%

0.71%

0.74%

0.83%


(10)


(26)


MMDA


0.67%

0.69%

0.63%

0.68%

1.35%


(2)


(68)


Savings


0.30%

0.30%

0.29%

0.26%

0.32%



(2)


CDs 



1.30%

1.54%

1.77%

1.96%

2.14%


(24)


(84)


  Cost of Interest Bearing Deposits

0.74%

0.88%

1.01%

1.17%

1.49%


(14)


(75)


  Cost of Deposits

0.60%

0.71%

0.80%

0.95%

1.25%


(11)


(65)















Other Funding


2.75%

2.96%

0.98%

1.14%

2.34%


(21)


41


  Total Cost of Funds

0.78%

0.93%

0.83%

0.97%

1.37%


(15)


(59)















Net Interest Margin

3.41%

3.58%

3.18%

3.33%

3.32%


(17)


9


Net Interest Spread

3.36%

3.53%

3.14%

3.27%

3.24%


(17)


12















Memo:  Excluding SBA PPP loans












Loans


4.47%

4.57%

4.60%

4.83%

4.89%


(10)

bps

(42)

bps


Total Earning Assets

3.77%

4.14%

4.14%

4.49%

4.60%


(37)


(83)



Net Interest Margin*

2.99%

3.23%

3.28%

3.51%

3.32%


(23)


(32)




*Net interest margin excluding the effect of SBA PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods

The company defines «NM» as not meaningful for increases or decreases greater than 300 percent.

 

Primis Financial Corp.   






(Dollars in thousands, except per share data)

For Three Months Ended:









Reconciliation of Non-GAAP items:

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020

Net income


$           9,383

$           8,963

$           9,588

$           4,709

$               27

Non-GAAP adjustments to Net Income:







Management Restructure / Recruiting

200

843

4,899


Branch Closures

479


(Gain or recovery) / loss on securities

(2,964)


Brand Initiative / Renaming

1,000


Extraordinary PPP income and expense

(2,177)


Other loss and related legal expenses


Income tax effect

(43)

729

(1,076)


 Net Income adjusted for nonrecurring income and expenses

$           9,540

$           6,394

$           9,588

$           4,709

$           4,329









Net income


$           9,383

$           8,963

$           9,588

$           4,709

$               27


Income tax expense

2,585

3,003

2,417

1,188

6


Provision for credit losses (incl. unfunded commitment expense)

(661)

3,481

2,000

10,899

3,450

Pre-tax pre-provision earnings

$         11,307

$         15,447

$         14,005

$         16,796

$           3,483


Effect of adjustment for nonrecurring income and expenses

200

(3,298)

5,378

Pre-tax pre-provision operating earnings

$         11,507

$         12,149

$         14,005

$         16,796

$           8,861









Return on average assets

1.19%

1.15%

1.19%

0.61%

0.00%


Effect of adjustment for nonrecurring income and expenses

0.02%

(0.33%)

0.00%

0.00%

0.63%

Operating return on average assets

1.21%

0.82%

1.19%

0.61%

0.63%









Return on average assets

1.19%

1.15%

1.19%

0.61%

0.00%


Effect of tax expense

0.33%

0.39%

0.33%

0.18%

0.00%


Effect of provision for credit losses

(0.08%)

0.45%

0.26%

1.49%

0.52%

Pre-tax pre-provision return on average assets

1.43%

1.98%

1.78%

2.28%

0.52%


Effect of adjustment for nonrecurring income and expenses

0.03%

(0.42%)

0.00%

0.00%

0.78%

Pre-tax pre-provision operating return on average assets

1.45%

1.56%

1.78%

2.28%

1.30%









Return on average equity

9.63%

9.16%

9.87%

4.92%

0.03%


Effect of adjustment for nonrecurring income and expenses

0.16%

(2.63%)

0.00%

0.00%

4.54%

Operating return on average equity

9.79%

6.53%

9.87%

4.92%

4.57%


Effect of goodwill and other intangible assets

3.66%

2.51%

3.85%

1.94%

(4.53%)

Operating return on average tangible equity

13.45%

9.04%

13.72%

6.86%

0.04%









Efficiency ratio


63.17%

55.19%

52.22%

45.61%

84.87%


Effect of adjustment for nonrecurring income and expenses

(0.70%)

(12.07%)

0.00%

0.00%

(22.99%)

Operating efficiency ratio

62.48%

43.11%

52.22%

45.61%

61.88%









Book value per share

$           16.22

$           16.03

$           15.96

$           15.67

$           15.59


Effect of goodwill and other intangible assets

(4.38)

(4.43)

(4.43)

(4.46)

(4.48)

Tangible book value per share

$           11.84

$           11.60

$           11.53

$           11.21

$           11.11









Stockholders’ equity

$       397,986

$       390,554

$       388,983

$       381,669

$       378,822


Less goodwill and other intangible assets

(107,439)

(107,780)

(108,122)

(108,463)

(108,804)

Tangible common equity

$       290,547

$       282,774

$       280,861

$       273,206

$       270,018









Equity to assets


11.95%

12.64%

12.33%

12.42%

13.71%


Effect of goodwill and other intangible assets

(2.94%)

(3.16%)

(3.11%)

(3.21%)

(3.54%)

Tangible common equity to tangible assets

9.01%

9.49%

9.22%

9.22%

10.17%









Net interest margin

3.41%

3.58%

3.18%

3.33%

3.32%


Effect of adjustment for PPP associated balances*

(0.42%)

(0.35%)

0.10%

0.18%

0.00%

Net interest margin excluding PPP

2.99%

3.23%

3.28%

3.51%

3.32%


*Net interest margin excluding the effect of PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods

 

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SOURCE Primis Financial Corp.