Primis Financial Corp. Reports Diluted Earnings per Share of $0.42 for the Second Quarter of 2021

MCLEAN, Va., July 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 $10.3 million for the quarter ended June 30, 2021, compared to $9.4 million for the quarter ended March 31, 2021.  Earnings per share for the three months ended June 30, 2021 were $0.42 on a basic and diluted basis, compared to $0.39 basic and $0.38 diluted for the three months ended March 31, 2021.  

Earnings for the six months ended June 30, 2021 were $19.7 million compared to $4.7 million for the six months ended June 30, 2020. Earnings per share for the six months ended June 30, 2021 were $0.81 basic and $0.80 diluted, compared to $0.20 basic and $0.19 diluted for the six months ended June 30, 2020.

The Board of Directors also announced and declared a dividend of $0.10 per share payable on August 27, 2021 to shareholders of record on August 13, 2021.  This is Primis’ thirty-ninth consecutive quarterly dividend.  

Highlights for the three months ended June 30, 2021

  • Total assets at the end of the second quarter of 2021 were $3.4 billion, an increase of 10.5% versus the year ago period.
  • Gross loans were $2.3 billion at the end of the second quarter of 2021, down 9.0% and 4.4% from the year ago period and linked-quarter, respectively.  Excluding Paycheck Protection Program (“PPP”) balances, gross loans declined 6.1% and 0.21%, respectively, over the same time periods.
  • Total deposits increased $599.5 million year-over-year despite a $231.0 million decline in time deposits over the same time frame.  Non-time deposits comprised 85.9% of total deposits at June 30, 2021 versus 83.7% at March 31, 2021 and 71.2% at June 30, 2020.
  • Net income, pre-tax pre-provision earnings(1) and pre-tax pre-provision operating earnings(1) were $10.3 million, $9.1 million and $9.1 million, respectively, for the second quarter of 2021, versus $9.4 million, $11.3 million and $11.5 million, respectively, for the first quarter of 2021.
  • Return on average assets of 1.23% for the quarter ended June 30, 2021 versus 1.19% for the quarter ended March 31, 2021.
  • Operating return on average assets(1) of 1.23%  for the quarter ended June 30, 2021 versus 1.21% for the quarter ended March 31, 2021.
  • Pre-tax pre-provision return on average assets(1) and pre-tax pre-provision operating return on average assets(1) of 1.08% for the second quarter of 2021, compared to 1.43% and 1.45%, respectively, in the first quarter of 2021.
  • Loans on deferral were $26.0 million or 1.3% of gross loans excluding PPP balances. Approximately 55% of total deferrals were from the hotel portfolio.
  • Negative provision for credit losses of $4.2 million for the second quarter of 2021 versus a negative provision of $1.4 million for the first quarter of 2021.
  • Allowance for credit losses to total loans (excluding PPP balances) of 1.52% at June 30, 2021 versus 1.70% at March 31, 2021 and 1.09% at June 30, 2020.
  • Cost of deposits declined to 0.50% for the second quarter of 2021 compared to 0.60% for the first quarter of 2021 and 0.95% for the second quarter of 2020.
  • Book value per share of $16.59 and tangible book value per share(1) of $12.22 at June 30, 2021, representing an increase of $0.92 and $1.01, 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, Dennis J. Zember, Jr., President and Chief Executive Officer stated, “We are proud of our Bank’s efforts to deliver world-class service to our customers and are seeing the results of that effort in our rapidly improving funding mix.  We are laser-focused on enhancing our products and capabilities through our digital efforts and are excited by the technology we will have at our disposal when we launch our new digital bank late this year.  We are also continuing to invest in our management and organization to ensure we have the talent and resources to run a much larger bank.”

Net Interest Income

Net interest income decreased 12.6% to $21.8 million for the three months ended June 30, 2021 from $25.0 million for the three months ended March 31, 2021.  The Company’s reported net interest margin for the second quarter was 2.80% compared to 3.41% in the first quarter of 2021.  Net interest income and net interest margin were both impacted by lower levels of PPP fee income recognition in the second quarter of 2021.  Net PPP fee income recognized was $1.8 million for the three months ended June 30, 2021 versus $4.9 million for the prior quarter.  Net interest margin excluding the effects of PPP loans(1) was 2.77% in the second quarter of 2021, down 22 bps from 2.99% linked-quarter.  Net interest margin excluding the effects of PPP loans continues to be negatively impacted by unusually high cash balances at the Bank.  Average balances of cash and equivalents were $558.8 million in the second quarter of 2021, up from $319.1 million in the first quarter of 2021. 

Yield on loans for the second quarter of 2021 was 4.34%, or 4.46%(1) excluding the effect of PPP loans, compared to 4.82% or 4.47%, respectively in the first quarter of 2021.  The Company continues to pursue core deposits to improve the overall deposit mix while reducing funding costs.  As a result of these efforts and a general decline in market rates, the cost of total deposits declined to 0.50% in the second quarter of 2021 from 0.60% in the prior quarter. 

Noninterest Income

During the three months ended June 30, 2021, Primis had non-interest income of $4.5 million compared to $3.8 million for the three months ended March 31, 2021.  Gains on our investment in Southern Trust Mortgage (“STM”) increased to $1.9 million compared to $1.3 million in first quarter in 2021.  The second quarter at STM benefited from a gain related to the sale of mortgage servicing rights while STM’s first quarter was impacted by a management restructuring charge as previously discussed.  Recoveries related to acquisition-related previously charged-off loans and investment securities also increased $145 thousand from the first quarter of 2021. 

Noninterest Expense

Noninterest expense was $17.4 million for the three months ended June 30, 2021, compared to $18.2 million for the three months ended March 31, 2021.  The decrease in noninterest expense was largely driven by a decrease of $562 thousand in employee compensation and benefits and decrease of $561 thousand in reserve for unfunded commitments expense from the prior quarter, partially offset by an increase of $217 thousand in data processing expense for the same time frames.  Employee compensation in the second quarter of 2021 included $429 thousand in employee incentive payments tied to core deposits generated in the first quarter of 2021, down from $454 thousand of incentive expense recognized last quarter. 

Loan Portfolio and Asset Quality

Loans outstanding declined to $2.29 billion at June 30, 2021, compared to $2.39 billion at March 31, 2021 and $2.51 billion at June 30, 2020.  Excluding PPP loans, loans outstanding have decreased $134.5 million since June 30, 2020 and $4.30 million since March 31, 2021. The Company ended the second quarter of 2021 with $26.0 million of loans on deferral, or 1.3% of total loans excluding PPP loans, down from $112.8 million of loans on deferral at March 31, 2021. Hotels account for 55% of deferrals as of June 30, 2021 versus 59% at March 31, 2021.

Nonperforming assets, excluding portions guaranteed by the SBA, were 0.43% of total assets at June 30, 2021, compared to 0.41% at March 31, 2021.  Loans rated substandard or doubtful declined 7.3% in the second quarter versus the linked-quarter.  Doubtful loans were $1.53 million at June 30, 2021, up from $0 in the prior quarter, due to the downgrade of two SBA guaranteed relationships.  The credits have been on nonaccrual and in work-out for an extended period of time and have been downgraded while the Bank pursues the SBA guarantees.

The allowance for credit losses was $31.3 million at June 30, 2021, down 10% from $34.9 million at March 31, 2021 and up 32% from $23.6 million at June 30, 2020.  The Company recorded a negative provision of $4.22 million in the second quarter as loans on deferral and the economic impact of COVID-19 declined dramatically in the quarter.  As a percentage of loans (excluding PPP), the allowance was 1.52% at the end of the second quarter of 2021 versus 1.70% as of March 31, 2021.  Net charge-offs remain low with net recoveries of $587 thousand in the second quarter of 2021 versus net charge-offs of $80 thousand in the prior quarter.

Deposits

Total deposits increased to $2.75 billion at June 30, 2021, compared to $2.69 billion at March 31, 2021 and $2.15 billion at June 30, 2020.  The Company continues to aggressively pursue improvement in the funding mix with an emphasis on core deposits.  During the quarter, CDs declined by $49.8 million while core deposits (demand, NOW, money market and savings) increased $112.3 million linked-quarter. Time deposits represented approximately 14% of total deposits at June 30, 2021, down from 16% at March 31, 2021 and 29% at June 30, 2020.

Shareholders’ Equity

Book value per share as of June 30, 2021 was $16.59, an increase of $0.37 since March 31, 2021 and $0.92 since June 30, 2020.  Tangible book value per share(1) at the end of the second quarter of 2021 was $12.22, an increase of $0.38 since March 31, 2021 and $1.01 since June 30, 2020.  Shareholder’s equity was $406.9 million, or 12% of total assets at June 30, 2021.  Tangible common equity(1) at June 30, 2021 was $299.8 million, or 9.12% of tangible assets(1).  

Panacea Financial Division Update

The Bank’s Panacea Division (“Panacea”), which launched in November of 2020, focuses on national lending and deposit gathering with unique products and services for the medical community.  The division is seeing increasing traction within the medical community and the pipeline suggests rapid growth for the division in the second half of 2021.  To date, over 45% of its borrowers have established checking account relationships with Panacea. Additionally during the second quarter, Panacea hired an experienced healthcare banker from a super-regional bank to lead its new commercial division, Panacea Practice Solutions.  Panacea now offers personal, student debt refinance, commercial real estate and practice loans. Lastly, Panacea is launching an expansion on August 1 to target dentists with the same innovative products and services currently offered to the medical community.

About Primis Financial Corp.

As of June 30, 2021, Primis had $3.40 billion in total assets, $2.29 billion in total loans and $2.75 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


Conference Call

The Company’s management will host a conference call to discuss its second quarter results Friday, July 30, 2021 at 10:00 a.m. (ET). A live Webcast of the conference call is available at the following website: https://www.webcaster4.com/Webcast/Page/2742/41861.  Participants may also call 1-877-870-4263 and ask for the Primis Financial Corp. call.  A replay of the teleconference will be available through August 6, 2021 by calling 1-877-344-7529 and providing Replay Access Code 10157863.

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, inflation, 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 for more information and for a reconciliation to GAAP.

Primis Financial Corp.



Financial Highlights (unaudited)



(Dollars in thousands, except per share data)

For Three Months Ended:


Variance – 2Q 2021 vs.



For Six Months Ended:


Variance





















Selected Performance Ratios:

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020


1Q 2021


2Q 2020



2Q 2021

2Q 2020


YTD


Return on average assets

1.23%

1.19%

1.15%

1.19%

0.61%


4

bps

62

bps

1.21%

0.33%


87

bps

Operating return on average assets (1)

1.23%

1.21%

0.82%

1.19%

0.61%


2


62



1.21%

0.64%


57


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

1.08%

1.45%

1.56%

1.78%

2.28%


(37)


(120)



1.20%

1.81%


(61)


Return on average equity

10.28%

9.63%

9.16%

9.87%

4.92%


65


536



9.96%

2.49%


747


Operating return on average equity (1)

10.28%

9.79%

6.53%

9.87%

4.92%


49


536



9.96%

4.76%


520


Operating return on average tangible equity (1)

14.03%

13.45%

9.04%

13.72%

6.86%


58


717



13.64%

6.65%


699


Cost of funds


0.66%

0.78%

0.93%

0.83%

0.97%


(12)


(31)



0.72%

1.16%


(44)


Net interest margin

2.80%

3.41%

3.58%

3.18%

3.33%


(61)


(53)



3.10%

3.32%


(22)


Gross loans to deposits

83.11%

88.95%

100.32%

113.86%

116.73%


(6)

pts

(34)

pts


83.11%

116.73%


(34)

pts

Efficiency ratio


66.15%

63.17%

55.19%

52.22%

45.61%


3


2,054



64.59%

62.54%


205


Operating efficiency ratio(1)

66.15%

62.48%

43.11%

52.22%

45.61%


4


2,054



64.59%

52.63%


1,197





















Per Share Data:

















Earnings per share – Basic

$            0.42

$            0.39

$            0.37

$            0.40

$            0.19


8.99

%

121.05

%


$          0.81

$          0.20


 NM 

%

Earnings per share – Diluted

$            0.42

$            0.38

$            0.37

$            0.39

$            0.19


9.70


121.05



$          0.80

$          0.19


 NM 


Book value per share

$          16.59

$          16.22

$          16.03

$          15.96

$           15.67


2.26


5.87



$        16.59

$        15.77


5.20


Tangible book value per share(1)

$          12.22

$          11.84

$          11.60

$          11.53

$           11.21


3.18


9.01



$        12.22

$        11.21


9.01


Cash dividend per share

$            0.10

$            0.10

$            0.10

$            0.10

$            0.10


(0.21)




$          0.20

$          0.20



Weighted average shares outstanding – Basic

24,450,916

24,349,884

24,272,312

24,270,455

24,246,355


0.41


0.84



24,489,050

24,207,357


1.16


Weighted average shares outstanding – Diluted

24,616,824

24,509,052

24,401,037

24,375,383

24,352,708


0.44


1.08



24,562,719

24,349,153


0.88


Shares outstanding at end of period

24,537,269

24,532,795

24,368,612

24,368,853

24,361,603


0.02

%

0.72

%


24,537,269

24,361,603


0.72

%




















Asset Quality Ratios:

















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

0.43%

0.41%

0.47%

0.53%

0.57%


2

bps

(14)

bps

0.43%

0.57%


(14)

bps

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

(0.10%)

0.01%

0.13%

(0.02%)

0.00%


(11)


(10)



0.00%

0.00%



Allowance for credit losses to total loans

1.37%

1.46%

1.49%

1.02%

0.94%


(9)


43



1.37%

0.94%


43


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

1.52%

1.70%

1.71%

1.18%

1.09%


(17)


44



1.52%

1.08%


44





















Capital Ratios:


















Tangible common equity to tangible assets(1)

9.12%

9.01%

9.49%

9.22%

9.22%


10

bps

(10)

bps





Leverage ratio (2)


9.38%

9.61%

9.69%

9.28%

9.35%


(23)


3








Common equity tier 1 capital ratio (2)

13.77%

13.64%

13.05%

12.58%

11.23%


13


254








Tier 1 risk-based capital ratio (2)

14.23%

14.11%

13.52%

13.03%

11.65%


12


258








Total risk-based capital ratio(2)

19.52%

19.48%

19.58%

18.87%

14.59%


4


493









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

(2) June 30, 2021 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C.

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

Primis Financial Corp.   











(Dollars in thousands)

As Of :


Variance – 2Q 2021 vs.














Condensed Consolidated Balance Sheets (unaudited)

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020


1Q 2021


2Q 2020


Assets 












Cash and cash equivalents

$       620,839

$       480,280

$       196,185

$       149,272

$         82,586


29.27

%

 NM 

%

Investment securities-available for sale

201,977

170,216

153,233

157,896

160,979


18.66


25.47


Investment securities-held to maturity

28,669

33,180

40,721

49,323

53,958


(13.60)


(46.87)


Loans receivable, net of deferred fees

2,286,355

2,391,529

2,440,496

2,523,709

2,511,504


(4.40)


(8.96)


Allowance for credit losses

(31,265)

(34,893)

(36,345)

(25,779)

(23,627)


(10.40)


32.33


Net loans

2,255,090

2,356,636

2,404,151

2,497,930

2,487,877


(4.31)


(9.36)


Stock in Federal Reserve Bank and Federal Home Loan Bank

15,521

15,521

16,927

16,927

16,927



(8.31)


Equity method investment in mortgage affiliate

12,649

13,912

12,652

13,238

9,412


(9.08)


34.39


Preferred investment in mortgage affiliate

3,305

3,305

3,305

3,305

3,305




Bank premises and equipment, net

30,099

30,076

30,306

30,679

31,087


0.08


(3.18)


Operating lease right-of-use assets

6,386

6,947

7,511

7,033

7,111


(8.08)


(10.20)


Intangible assets


107,098

107,439

107,780

108,122

108,463


(0.32)


(1.26)


Bank-owned life insurance

65,949

65,569

65,409

65,015

64,622


0.58


2.05


Other real estate owned

1,274

2,255

3,078

5,388

6,006


(43.50)


(78.79)


Deferred tax assets, net

14,442

14,702

14,646

14,477

11,087


(1.77)


30.26


Accrued interest receivable

13,028

18,197

19,998

21,076

15,074


(28.41)


(13.57)


Other assets


18,825

12,235

12,771

14,892

13,677


53.86


37.64


Total assets

$    3,395,151

$    3,330,470

$    3,088,673

$    3,154,573

$    3,072,171


1.94

%

10.51

%














Liabilities and stockholders’ equity











Demand deposits

$       525,244

$       511,611

$       440,674

$       467,581

$       447,605


2.66

%

17.35

%

NOW accounts


912,666

821,746

714,752

472,553

424,096


11.06


115.20


Money market accounts

714,759

713,968

603,318

534,899

488,229


0.11


46.40


Savings accounts

209,441

202,488

183,814

179,756

171,681


3.43


21.99


Time deposits


388,954

438,773

490,048

561,685

619,918


(11.35)


(37.26)


Total deposits


2,751,064

2,688,586

2,432,606

2,216,474

2,151,529


2.32


27.87


Securities sold under agreements to repurchase – short term

12,521

16,445

16,065

16,181

16,412


(23.86)


(23.71)


Federal Home Loan Bank advances

100,000

100,000

100,000

100,000

100,000




PPPLF Advances

283,906

333,574



(100.00)


Subordinated notes

95,404

95,367

115,329

115,378

56,689


0.04


68.29


Operating lease liabilities

7,014

7,629

8,238

7,800

7,896


(8.06)


(11.17)


Other liabilities


22,208

24,457

25,881

25,851

24,402


(9.20)


(8.99)


Total liabilities

2,988,211

2,932,484

2,698,119

2,765,590

2,690,502


1.90


11.07


Stockholders’ equity

406,940

397,986

390,554

388,983

381,669


2.25


6.62


Total liabilities and stockholders’ equity

$    3,395,151

$    3,330,470

$    3,088,673

$    3,154,573

$    3,072,171


1.94

%

10.51

%














Tangible common equity(1)



$       299,842

$       290,547

$       282,774

$       280,861

$       273,206


3.20

%

9.75

%

Primis Financial Corp.   

















(Dollars in thousands)

For Three Months Ended:


Variance – 2Q 2021 vs.



For Six Months Ended:


Variance





















Condensed Consolidated Statement of Operations (unaudited)

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020


1Q 2021


2Q 2020



2Q 2021

2Q 2020


YTD


Interest and dividend income

$         26,631

$         30,308

$         31,919

$         28,707

$         28,672


(12.13)

%

(7.12)

%


$      56,939

$      57,153


(0.37)

%

Interest expense


4,831

5,353

6,265

5,709

6,199


(9.75)


(22.07)



10,184

14,165


(28.10)


Net interest income

21,800

24,955

25,654

22,998

22,473


(12.64)


(2.99)



46,755

42,988


8.76


Provision for (recovery of) credit losses

(4,215)

(1,372)

3,101

2,000

10,899


207.22


(138.67)



(5,587)

14,349


(138.94)


Net interest income after provision for (recovery of) credit losses

26,015

26,327

22,553

20,998

11,574


(1.19)


124.77



52,342

28,639


82.76


Account maintenance and deposit service fees

1,784

1,817

1,700

1,633

1,489


(1.82)


19.81



3,601

3,187


12.99


Income from bank-owned life insurance

379

386

394

394

385


(1.81)


(1.56)



765

771


(0.78)


Equity gain from mortgage affiliate

1,878

1,315

2,571

3,826

4,161


42.81


(54.87)



3,193

4,392


(27.30)


Realized losses on sales of investment securities

(620)







Recoveries on loans and securities charged-off prior to acquisition

224

79

3,793

288

2,235


183.54


(89.98)



303

2,419


(87.47)


Other 


229

220

129

130

123


4.09


86.18



449

444


1.13


Noninterest income

4,494

3,817

7,967

6,271

8,393


17.74


(46.46)



8,311

11,213


(25.88)


Employee compensation and benefits

8,810

9,372

9,211

7,817

7,338


(6.00)


20.06



18,182

19,647


(7.46)


Occupancy and equipment expenses

2,311

2,355

2,114

2,151

2,044


(1.87)


13.06



4,666

4,602


1.39


Amortization of core deposit intangible

341

341

341

341

341





682

682



Virginia franchise tax expense

759

675

613

615

659


12.44


15.17



1,434

1,229


16.68


Data processing expense

1,016

799

814

701

956


27.16


6.28



1,815

1,663


9.14


Telecommunication and communication expense

414

522

378

382

369


(20.69)


12.20



936

737


27.00


Net (gain) loss on other real estate owned

77

(60)

905

(16)


228.33




17

71


(76.06)


Professional fees


1,289

1,287

1,166

1,494

873


0.16


47.65



2,576

2,066


24.69


Other expenses


2,376

2,885

3,012

1,779

1,490


(17.64)


59.46



5,261

3,225


63.13


Noninterest expense

17,393

18,176

18,554

15,264

14,070


(4.31)


23.62



35,569

33,922


4.86


Income before income taxes

13,116

11,968

11,966

12,005

5,897


9.59


122.42



25,084

5,930


 NM 


Income tax expense 

2,841

2,585

3,003

2,417

1,188


9.90


139.14



5,426

1,194


 NM 


Net income 

$         10,275

$           9,383

$           8,963

$           9,588

$           4,709


9.51

%

118.20

%


$      19,658

$        4,736


 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.   











(Dollars in thousands)

As Of:


Variance – 2Q 2021 vs.















Loan Portfolio Composition

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020


1Q 2021


2Q 2020


Loans secured by real estate:











Commercial real estate – owner occupied

$       417,489

$       421,666

$       436,338

$       416,446

$       412,607


(0.99)

%

1.18

%

Commercial real estate – non-owner occupied

563,114

567,945

602,191

603,891

590,054


(0.85)


(4.57)


Secured by farmland

11,861

12,351

13,136

16,640

16,876


(3.97)


(29.72)


Construction and land development

109,719

104,661

103,401

120,108

122,105


4.83


(10.14)


Residential 1-4 family

516,475

515,518

559,299

581,949

612,941


0.19


(15.74)


Multi-family residential

130,221

136,914

107,130

107,529

100,567


(4.89)


29.49


Home equity lines of credit

80,262

85,160

91,857

97,870

101,355


(5.75)


(20.81)


Total real estate loans

1,829,141

1,844,215

1,913,352

1,944,433

1,956,505


(0.82)


(6.51)















Commercial loans

194,610

188,050

189,622

217,511

205,009


3.49


(5.07)


Paycheck Protection Program loans

234,315

335,210

314,982

338,473

325,014


(30.10)


(27.91)


Consumer loans


28,289

24,054

22,540

23,292

24,976


17.61


13.26


Loans receivable, net of deferred fees

$    2,286,355

$    2,391,529

$    2,440,496

$    2,523,709

$    2,511,504


(4.40)

%

(8.96)

%














Loans by Risk Grade:











  Pass, not graded

$                  –

$                  –

$       533,287

$       574,954

$       653,943


%

(100.00)

%

  Pass Grade 1 – Highest Quality

1,054

955

778

891

306


10.37


244.44


  Pass Grade 2 – Good Quality

247,664

348,836

332,251

375,861

323,512


(29.00)


(23.45)


  Pass Grade 3 – Satisfactory Quality

1,142,784

1,110,453

627,270

878,031

837,606


2.91


36.43


  Pass Grade 4 – Pass

823,866

853,234

872,604

660,630

662,534


(3.44)


24.35


  Pass Grade 5 – Special Mention

29,844

33,661

29,809

14,132

14,006


(11.34)


113.08


  Grade 6 – Substandard

39,613

44,390

44,497

19,210

19,597


(10.76)


102.14


  Grade 7 – Doubtful

1,530




  Grade 8 – Loss





Total loans


$    2,286,355

$    2,391,529

$    2,440,496

$    2,523,709

$    2,511,504


(4.40)

%

(8.96)

%

(Dollars in thousands)

As Of or For Three Months Ended:









Asset Quality Information

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020

Allowance for Credit Losses: 

Allowance for Credit Losses

Allowance for Loan losses

Balance at beginning of period

$        (34,893)

$        (36,345)

$        (25,779)

$        (23,627)

$        (12,722)

Adoption of CECL

(8,292)

(Provision for) recovery of loan losses

4,215

1,372

(3,101)

(2,000)

(10,899)

Net charge-offs


(587)

80

827

(152)

(6)

Ending balance


$        (31,265)

$        (34,893)

$        (36,345)

$        (25,779)

$        (23,627)









Reserve for Unfunded Commitments:

Allowance for Credit Losses

Allowance for Loan losses

Balance at beginning of period

$          (1,450)

$            (740)

$              (55)

$              (55)

$              (55)

Adoption of CECL

(305)

Unfunded loan commitment expense

(149)

(710)

(380)

Total Reserve for Unfunded Commitments

$          (1,599)

$          (1,450)

$            (740)

$              (55)

$              (55)




As Of:


Variance – 2Q 2021 vs.















Non-Performing Assets:

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020


1Q 2021


2Q 2020


Nonaccrual loans

$         14,604

$         14,251

$         14,462

$         15,270

$         14,930


2.48

%

(2.18)

%

Accruing loans delinquent 90 days or more




Total non-performing loans

14,604

14,251

14,462

15,270

14,930


2.48


(2.18)


Other real estate owned

1,274

2,255

3,078

5,388

6,006


(43.50)


(78.79)


Total non-performing assets

$         15,878

$         16,506

$         17,540

$         20,658

$         20,936


(3.80)


(24.16)


SBA guaranteed portion of non-performing loans

$           1,380

$           2,960

$           3,076

$           4,076

$           3,513


(53.38)


(60.72)















Troubled debt restructuring

$           2,766

$           2,804

$             987

$           1,629

$           1,667


(1.36)


65.9


Loans deferred under COVID-19 modifications

$         25,977

$       112,834

$       122,010

$       436,591

$       707,841


(76.98)

%

(96.33)

%

Primis Financial Corp.   

















(Dollars in thousands)

For Three Months Ended:


Variance – 2Q 2021 vs.



For Six Months Ended:


Variance





















Average Balance Sheet

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020


1Q 2021


2Q 2020



2Q 2021

2Q 2020


YTD


Assets


















Loans, net of deferred fees 

$    2,327,162

$    2,436,713

$    2,497,259

$    2,501,614

$    2,401,620


(4.50)

%

(3.10)

%


$  2,381,635

$  2,301,274


3.49

%

Investment securities

215,713

193,364

204,968

213,039

222,124


11.56


(2.89)



204,600

226,959


(9.85)


Other earning assets

577,939

339,480

147,014

163,159

91,230


70.24


 NM 



459,368

73,015


 NM 


Total earning assets

3,120,814

2,969,557

2,849,241

2,877,812

2,714,974


5.09


14.95



3,045,603

2,601,248


17.08


Other assets


239,564

240,737

252,231

256,284

250,897


(0.49)


(4.52)



240,147

251,798


(4.63)


Total assets


$    3,360,378

$    3,210,294

$    3,101,472

$    3,134,096

$    2,965,871


4.68

%

13.30

%


$  3,285,750

$  2,853,046


15.17

%




















Liabilities and stockholders’ equity

















Demand deposits

$       516,877

$       477,812

$       459,830

$       452,500

$       418,382


8.18

%

23.54

%


$    497,452

$    375,895


32.34

%

Interest-bearing liabilities:

















NOW and other demand accounts

867,499

773,768

688,125

451,583

404,700


12.11


114.36



820,892

392,115


109.35


Money market accounts

719,925

653,443

569,223

504,887

488,648


10.17


47.33



686,867

479,150


43.35


Savings accounts

206,507

192,252

182,434

176,305

163,574


7.41


26.25



199,419

155,635


28.13


Time deposits 


409,247

465,945

525,607

590,263

710,483


(12.17)


(42.40)



437,440

733,269


(40.34)


   Total Deposits

2,720,055

2,563,219

2,425,219

2,175,538

2,185,787


6.12


24.44



2,642,070

2,136,064


23.69


Borrowings


217,890

226,398

260,493

547,182

371,836


(3.76)


(41.40)



222,121

311,833


(28.77)


  Total Funding


2,937,945

2,789,617

2,685,712

2,722,720

2,557,623


5.32


14.87



2,864,191

2,447,897


17.01


Other Liabilities


21,628

25,539

26,588

25,869

24,495


(15.31)


(11.70)



23,572

23,139


1.87


Stockholders’ equity

400,805

395,138

389,172

385,507

383,753


1.43


4.44



397,987

382,010


4.18


Total liabilities and stockholders’ equity

$    3,360,378

$    3,210,294

$    3,101,472

$    3,134,096

$    2,965,871


4.68

%

13.30

%


$  3,285,750

$  2,853,046


15.17

%




















Memo:  Average PPP loans

$       294,019

$       333,145

$       332,080

$       335,653

$       192,751


(11.74)

%

52.54

%


$    313,474

$      96,375


225.26

%




















Net Interest Income

















Loans



$         25,182

$         28,957

$         30,596

$         27,266

$         27,044


(13.04)

%

(6.89)

%


$      54,139

$      53,785


0.66

%

Investment securities

1,073

1,042

993

1,129

1,247


2.98


(13.95)



2,115

2,608


(18.90)


Other earning assets

376

309

330

312

381


21.68


(1.31)



685

760


(9.87)


   Total Earning Assets

26,631

30,308

31,919

28,707

28,672


(12.13)


(7.12)



56,939

57,153


(0.37)





















Non-interest bearing DDA







NOW and other interest-bearing demand accounts

1,022

1,093

1,167

807

745


(6.50)


37.18



2,116

1,531


38.21


Money market accounts

1,153

1,085

984

800

830


6.27


38.92



2,238

2,404


(6.91)


Savings accounts

157

142

137

130

107


10.56


46.73



299

223


34.08


Time deposits 


1,057

1,496

2,038

2,620

3,464


(29.34)


(69.49)



2,552

7,491


(65.93)


  Total Deposit Costs

3,389

3,816

4,326

4,357

5,146


(11.19)


(34.14)



7,205

11,649


(38.15)





















Other Borrowings

1,442

1,537

1,939

1,352

1,053


(6.18)


36.94



2,979

2,516


18.40


  Total Funding Costs

4,831

5,353

6,265

5,709

6,199


(9.75)


(22.07)



10,184

14,165


(28.10)





















Net Interest Income

$         21,800

$         24,955

$         25,654

$         22,998

$         22,473


(12.64)

%

(2.99)

%


$      46,755

$      42,988


8.76

%




















Memo:  SBA PPP loan interest and fee income

$           2,559

$           5,778

$           5,725

$           2,233

$             512


(55.71)

%

 NM 

%


$        8,337

$           512


 NM 

%

Memo:  SBA PPP loan funding costs

$             257

$             288

$             498

$             174

$               82


(10.76)

%

213.41

%


$           544

$           147


270.07

%


























































Net Interest Margin

















Loans



4.34%

4.82%

4.87%

4.34%

4.53%


(48)

bps

(19)

bps

4.58%

4.70%


(12)

bps

Investments


2.00%

2.19%

1.93%

2.11%

2.26%


(19)


(26)



2.08%

2.31%


(23)


Other Earning Assets

0.26%

0.37%

0.89%

0.76%

1.68%


(11)


(142)



0.30%

2.09%


(179)


  Total Earning Assets

3.42%

4.14%

4.46%

3.97%

4.25%


(72)


(83)



3.77%

4.42%


(65)




















NOW



0.47%

0.57%

0.67%

0.71%

0.74%


(10)


(27)



0.52%

0.79%


(27)


MMDA


0.64%

0.67%

0.69%

0.63%

0.68%


(3)


(4)



0.66%

1.01%


(35)


Savings


0.30%

0.30%

0.30%

0.29%

0.26%



4



0.30%

0.29%


1


CDs 



1.04%

1.30%

1.54%

1.77%

1.96%


(26)


(92)



1.18%

2.05%


(87)


  Cost of Interest Bearing Deposits

0.62%

0.74%

0.88%

1.01%

1.17%


(12)


(55)



0.68%

1.33%


(65)


  Cost of Deposits

0.50%

0.60%

0.71%

0.80%

0.95%


(10)


(45)



0.55%

1.10%


(55)




















Other Funding


2.65%

2.75%

2.96%

0.98%

1.14%


(10)


151



2.70%

1.62%


108


  Total Cost of Funds

0.66%

0.78%

0.93%

0.83%

0.97%


(12)


(31)



0.72%

1.16%


(44)




















Net Interest Margin

2.80%

3.41%

3.58%

3.18%

3.33%


(61)


(53)



3.10%

3.32%


(22)


Net Interest Spread

2.76%

3.36%

3.53%

3.14%

3.27%


(60)


(51)



3.05%

3.25%


(20)





















Memo:  Excluding SBA PPP loans

















Loans

4.46%

4.47%

4.57%

4.60%

4.83%


(1)

bps

(37)

bps

4.47%

4.86%


(39)

bps

Total Earning Assets

3.42%

3.77%

4.14%

4.14%

4.49%


(36)


(107)



3.59%

4.55%


(96)


Net Interest Margin*

2.77%

2.99%

3.23%

3.28%

3.51%


(23)


(75)



2.88%

3.42%


(55)



*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:


For Six Months Ended:













Reconciliation of Non-GAAP items:

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020


2Q 2021

2Q 2020

Net income


$         10,275

$           9,383

$           8,963

$           9,588

$           4,709


$   19,658


$    4,736

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 Initative / 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

$         10,275

$           9,540

$           6,394

$           9,588

$           4,709


$   19,658


$    9,038













Net income


$         10,275

$           9,383

$           8,963

$           9,588

$           4,709


$   19,658


$    4,736

Income tax expense

2,841

2,585

3,003

2,417

1,188


5,426


1,194

Provision for credit losses (incl. unfunded commitment expense)

(4,066)

(661)

3,481

2,000

10,899


(5,587)


14,349

Pre-tax pre-provision earnings

$           9,050

$         11,307

$         15,447

$         14,005

$         16,796


$   19,497


$   20,279

Effect of adjustment for nonrecurring income and expenses

200

(3,298)



5,378

Pre-tax pre-provision operating earnings

$           9,050

$         11,507

$         12,149

$         14,005

$         16,796


$   19,497


$   25,657













Return on average assets

1.23%

1.19%

1.15%

1.19%

0.61%


1.21%


0.33%

Effect of adjustment for nonrecurring income and expenses

0.00%

0.02%

(0.33%)

0.00%

0.00%


0.00%


0.30%

Operating return on average assets

1.23%

1.21%

0.82%

1.19%

0.61%


1.21%


0.64%













Return on average assets

1.23%

1.19%

1.15%

1.19%

0.61%


1.21%


0.33%

Effect of tax expense

0.34%

0.33%

0.39%

0.33%

0.18%


0.33%


0.08%

Effect of provision for credit losses

(0.49%)

(0.08%)

0.45%

0.26%

1.49%


(0.34%)


1.01%

Pre-tax pre-provision return on average assets

1.08%

1.43%

1.98%

1.78%

2.28%


1.20%


1.43%

Effect of adjustment for nonrecurring income and expenses

0.00%

0.03%

(0.42%)

0.00%

0.00%


0.00%


0.38%

Pre-tax pre-provision operating return on average assets

1.08%

1.45%

1.56%

1.78%

2.28%


1.20%


1.81%













Return on average equity

10.28%

9.63%

9.16%

9.87%

4.92%


9.96%


2.49%

Effect of adjustment for nonrecurring income and expenses

0.00%

0.16%

(2.63%)

0.00%

0.00%


0.00%


2.26%

Operating return on average equity

10.28%

9.79%

6.53%

9.87%

4.92%


9.96%


4.76%

Effect of goodwill and other intangible assets

3.75%

3.66%

2.51%

3.85%

1.94%


3.68%


1.90%

Operating return on average tangible equity

14.03%

13.45%

9.04%

13.72%

6.86%


13.64%


6.65%













Efficiency ratio


66.15%

63.17%

55.19%

52.22%

45.61%


64.59%


62.54%

Effect of adjustment for nonrecurring income and expenses

0.00%

(0.70%)

(12.07%)

0.00%

0.00%


0.00%


(9.92%)

Operating efficiency ratio

66.15%

62.48%

43.11%

52.22%

45.61%


64.59%


52.63%













Book value per share

$           16.59

$           16.22

$           16.03

$           15.96

$           15.67


$    16.59


$    15.77

Effect of goodwill and other intangible assets

(4.37)

(4.38)

(4.43)

(4.43)

(4.46)


(4.36)


(4.45)

Tangible book value per share

$           12.22

$           11.84

$           11.60

$           11.53

$           11.21


$    12.22


$    11.21













Stockholders’ equity

$       406,940

$       397,986

$       390,554

$       388,983

$       381,669


$ 406,940


$ 381,669

Less goodwill and other intangible assets

(107,098)

(107,439)

(107,780)

(108,122)

(108,463)


(107,098)


(108,463)

Tangible common equity

$       299,842

$       290,547

$       282,774

$       280,861

$       273,206


$ 299,842


$ 273,206













Equity to assets


11.99%

11.95%

12.64%

12.33%

12.42%


11.99%


12.42%

Effect of goodwill and other intangible assets

(2.87%)

(2.94%)

(3.16%)

(3.11%)

(3.21%)


(2.87%)


(3.21%)

Tangible common equity to tangible assets

9.12%

9.01%

9.49%

9.22%

9.22%


9.12%


9.22%













Net interest margin

2.80%

3.41%

3.58%

3.18%

3.33%


3.10%


3.32%

Effect of adjustment for PPP associated balances*

(0.03%)

(0.42%)

(0.35%)

0.10%

0.18%


(0.22%)


0.10%

Net interest margin excluding PPP

2.77%

2.99%

3.23%

3.28%

3.51%


2.88%


3.42%


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

SOURCE Primis Financial Corp.

Related Links

http://www.primisbank.com/

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