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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years ended December 31, 2023 and 2022. Discussions of comparisons between 2022 and 2021 are not included in this Form10-K but can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our restated Annual Report on Form10-K/A for the year ended December 31, 2022 as filed with the SEC on October 4, 2024.

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 consolidated financial statements, the footnotes thereto, and the other financial data included in this report.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

We follow accounting and reporting policies that conform, in all material respects, to accounting principles generally accepted in the U.S. and to general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements.

Allowance for credit losses

Accounting policies related to the allowance for credit losses on financial instruments including loans and off-balance-sheet credit exposures are considered to be critical as these policies involve considerable subjective judgment and estimation by management. In the case of loans, the allowance for credit losses is a contra-asset valuation account, calculated in accordance with ASC 326, which is deducted from the amortized cost basis of loans to present the net amount expected to be collected.

In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326. The allowance is reported as a component of other liabilities in our consolidated balance sheets. Adjustments to the allowance are reported in our income statement as a component of other expenses.

The amount of each allowance account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. We consider a number of external economic variables in developing the allowance including the Virginia Unemployment Rate, Virginia House Price Index (“HPI”), Virginia Gross Domestic Product (“GDP”), and, National Unemployment and National Gross Domestic Product for pools of loans with borrowers outside of our local operating footprint. In determining forecasted expected losses, we use Moody’s economic variable forecasts and apply probability weights to the related economic scenarios.We also use internal factors including loan balances, credit quality, contractual life of loans, and historical loss experience. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors.

Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward

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classification of assets. Further, subsequent evaluations of the then-existing loan portfolio, in light of factors existing at the time of subsequent evaluation may result in significant changes to the allowance.

Goodwill

As required under U.S. GAAP, we test goodwill for impairment at least annually and more frequently if there are indications that goodwill could be impaired. Our annual goodwill impairment testing date is September 30 and accordingly, we performed testing as of September 30, 2023 of our two reporting units that include goodwill. For our assessment of goodwill as of September 30, 2023, we performed a step one quantitative assessment to determine if the fair value of the Primis Bank and the Primis Mortgage reporting units were less than their carrying amount. As part of the testing, we engaged an independent valuation firm to quantitatively estimate the fair value of each reporting unit so that it could be compared to the carrying value in assisting us in determining if impairment existed. The results of the quantitative assessment of the Primis Mortgage reporting unit indicated that its fair value was in excess of its carrying value, thus no goodwill impairment was necessary.

Our assessment of the Primis Bank reporting unit included the use of three approaches, each receiving various weightings to determine an ultimate fair value estimate: (1) the comparable transactions method that is based on comparison to pricing ratios recently paid in the sale or merger of comparable banking institutions; (2) the public market peers control premium approach that is based on market pricing ratios of public banking companies adjusted for an industry based control premium, and (3) a discounted cash flow method (an income method), taking into consideration expectations of the Company’s growth and profitability going forward. The assessment included use of various assumptions and inputs into the modeling approaches, including creating a baseline and conservative scenarios that stressed certain assumptions such as projected cash flows and the discount rate. We considered the modeled results of each scenario and in light of the sustained depressed stock price in the months leading up to our impairment testing as of September 30, 2023 compared to our book value we determined it was reasonable to leverage the results of a scenario that utilized more stressed inputs and assumptions. Ultimately, in third quarter of 2023, the result of the quantitative assessment indicated the Primis Bank reporting unit’s book value was more than its estimated fair value. Accordingly, we took an impairment charge to Primis Bank’s goodwill of $11.2 million which is reflected in our noninterest expense for the year ended December 31, 2023.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the goodwill impairment testing as of September 30, 2023 will prove to be an accurate prediction of the future. Changes in assumptions, market data (for market-based assessments), or the discount rate (for income based assessments) could produce different results that lead to higher or lower fair value determinations compared to the results of our annual impairment testing performed as of September 30, 2023. Further, because the use of inputs and assumptions are highly judgmental an analysis performed to assess the fair value of our reporting units by others may results in higher, lower, or the same fair value determination and goodwill impairment decision through the use of their judgment in application of similar inputs and assumptions as we used.

Third-party originated and serviced consumer loan portfolio

In the second half of 2021, we partnered with a third-party (the “Third Party Originator/Servicer” or “TPOS”) to originate and service unsecured consumer loans through their proprietary point-of-sale technology (the “Consumer Program”). Loan options under the Consumer Program include traditional fully-amortizing loans and promotional loans with no interest, or “same-as-cash”, features if the loan is fully repaid in the promotional window. The loans are originated at par in the Bank’s name and have a term of 5 to 12 years with a much shorter effective life due to amortization and pay downs.

The Consumer Program is governed by multiple interrelated agreements including the loan agreement between the Bank and the customer and agreements with the TPOS. The structure of the Consumer Program is intended to generate

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loans that yield a targeted return to the Bank on a portfolio basis while also providing limited credit enhancement from the TPOS. Key characteristics of the combined arrangement include:

Under U.S. GAAP, agreements with multiple counterparties, such as the customer and TPOS, are generally required to be accounted for separately even if the agreements are highly interrelated. As a result, we account for the Consumer Program under multiple units of account with the following impacts:

We have $199.3 million of loans outstanding in the Consumer Program, or 6% of our total gross loan portfolio, as of December 31, 2023. As of December 31, 2023, 45% of the loans 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 year ended December 31, 2023, $10.1 million of promotional loans paid off prior to the end

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of their promotional periods while $4.8 million of promotional loans reached the end of the promotional period and entered amortization.

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. At December 31, 2023, 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 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.

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FINANCIAL HIGHLIGHTS

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RESULTS OF OPERATIONS

Net Income (Loss)

Net loss attributable to common shareholders for the year ended December 31, 2023 was $7.8 million, or $0.32 per basic and diluted share, compared to net income of $14.1 million, or $0.57 per basic and diluted share for the year ended December 31, 2022. The 155.3% decrease in the net income attributable to common shareholders during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily related to a $11.2 million goodwill impairment charge taken in the third quarter of 2023 and $20.9 million of provision for credit losses on the Consumer Program loan portfolio. The decrease was also driven by higher noninterest expenses from an increase in employee compensation and benefits expense due to the growth of Primis Mortgage and the Panacea Financial division of the Bank, higher data processing, and FDIC insurance assessment expense driven by the increase in customer accounts and related transactions on our digital deposit platform. These expenses were partially offset by higher interest income on our loan portfolio due to average loan growth of $600 million along with higher interest rates in 2023, mortgage banking income due to the growth of Primis Mortgage, an increase in interest earned on other earnings assets, and increased derivative gains primarily driven by the increase in the derivative asset related to the Consumer Program loan portfolio.

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.

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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 Year Ended

​ ​ ​ ​ ​ Interest ​ ​ ​ ​ ​ ​ Interest ​ ​ ​

​ ​ Average ​ Income/ ​ Yield/ ​ Average ​ Income/ ​ Yield/ ​

​ Balance Expense Rate Balance Expense Rate

​ ​ (Dollar amounts in thousands)

Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Allowance for credit losses ​ ​ (35,382) ​ ​ ​ ​ ​ ​ ​ (30,236) ​ ​ ​ ​ ​ ​

Total non-earning assets ​ ​ 296,647 ​ ​ ​ ​ ​ ​ ​ 264,388 ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Liabilities and stockholders' equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Noninterest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Demand deposits ​ ​ 495,107 ​ ​ ​ ​ ​ ​ ​ 614,285 ​ ​ ​ ​ ​ ​

Other liabilities ​ ​ 35,494 ​ ​ ​ ​ ​ ​ ​ 24,285 ​ ​ ​ ​ ​ ​

Primis common stockholders' equity ​ ​ 393,302 ​ ​ ​ ​ ​ ​ ​ 403,167 ​ ​ ​ ​ ​ ​

Noncontrolling interest ​ ​ 587 ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​

Total stockholders' equity ​ ​ 393,889 ​ ​ ​ ​ ​ ​ ​ 403,167 ​ ​ ​ ​ ​ ​

Net interest income ​ ​ ​ ​ $ 98,711 ​ ​ ​ ​ ​ ​ $ 101,700 ​ ​ ​

Interest rate spread ​ ​ ​ ​ ​ ​ ​ 2.12 % ​ ​ ​ ​ ​ ​ 3.05 %

Net interest margin ​ ​ ​ ​ ​ ​ ​ 2.68 % ​ ​ ​ ​ ​ ​ 3.30 %

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

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Net interest income was $98.7 million for the year ended December 31, 2023, compared to $101.7 million for the year ended December 31, 2022. Primis’ net interest margin for the year ended December 31, 2023 was 2.68%, compared to 3.30% for the year ended December 31, 2022. The combination in the industry of rapid increase in deposit account rates and consumer preferences shifting from non-interest bearing to higher rate products impacted interest expense and net interest income during 2023. Total income on interest-earning assets was $192.6 million and $123.3 million for the year ended December 31, 2023 and 2022, respectively, driven by average interest-earning asset growth of $607.5 million. The yield on average interest-earning assets was 5.22% and 4.00% for the year ended December 31, 2023 and 2022, respectively. Increase in yield on average interest-earnings assets was driven by higher rates on cash and loans in 2023 compared to 2022. Net interest margin was further affected by excess cash balances during the first half of the year that are part of average other earning assets but do not contribute meaningfully to net interest income. Beginning on June 30, 2023 we began to sweep that excess cash to other financial institutions by participating in a program that supports our deposit customers desire to obtain maximum insurance coverage on their cash deposits while also allowing us to manage cash balances and interest expense exposure. Average loans during the year ended December 31, 2023 were $3.1 billion, compared to $2.6 billion during the year ended December 31, 2022. The $0.5 billion increase in average loans combined with the 103 basis point increase in yield on the loan portfolio drove the $55.6 million increase in income on loans. The cost of average interest-bearing deposits increased 228 basis points to 2.92% for the year ended December 31, 2023,

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compared to 0.64% for the year ended December 31, 2022 as average interest-bearing liabilities grew approximately $751.9 million and the rates paid on these liabilities grew significantly due to the consistent increases in benchmark interest rates during the year. The increase was driven by higher costs in every interest-bearing category with the largest driver being an increase in average savings deposits of $552.5 million with an average increase in cost of those deposits of 3.50%. This increase was primarily a result of the aforementioned growth of the digital deposit platform and increase in benchmark interest rates.

The following table summarizes changes in net interest income attributable to changes in the volume of interest-earning assets and interest-bearing liabilities compared to changes in interest rates. The change in interest, due to both rate and volume, has been proportionately allocated between rate and volume.

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended ​

​ ​ Increase (Decrease) ​

​ ​ Due to Change in: ​

​ ​ ​ ​ ​ ​ ​ ​ Net ​

​ Volume Rate Change

​ ​ (in thousands)

Interest-earning assets: ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest-bearing liabilities: ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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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 of $32.5 million and $11.3 million for the years ended December 31, 2023 and 2022, respectively. The provision included amounts calculated in our normal reserve process for the Consumer Program loans which totaled $29.4 million and $3.0 million during the year ended December 31, 2023 and 2022, respectively. We had charge-offs totaling $16.7 million and $8.1 million during the year ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, $8.8 million of charge-offs were related to the Consumer Program and a majority of the remaining charge-offs were related to the resolution of the assisted living relationship that was originally placed on nonaccrual and reserved for in 2022 and which underwent a receiver-managed marketing process that ended in 2023. There were recoveries totaling $1.8 million and $2.2 million during year ended December 31, 2023 and 2022, respectively.

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Our provision for credit losses during 2023 was driven by provisions related to the Consumer Program loan portfolio. This portfolio began to experience higher losses in 2023 compared to 2022, primarily centered around loans originated from the third quarter 2022 through the first quarter of 2023. Losses on these vintages in 2023 was $7.0 million, or 79% of total losses on the Consumer Program loan portfolio in 2023. Higher loss rates continued to be seen on these vintages during 2024 through the date we filed this Form 10-K. As a result, we updated the credit loss experience in our allowance models as of and for the year ended December 31, 2023, on this loan portfolio to incorporate the continued higher losses seen subsequent to year end which resulted in an additional $18.2 million in provision recorded during 2023.

The Financial Condition Section of this Management’s Discussion and Analysis (“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 categories of noninterest income for the years ended December 31, 2023 and 2022 (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ For the Year Ended

​ ​ December 31,

Account maintenance and deposit service fees ​ $ 5,733 ​ $ 5,745 $ (12)

Income from bank-owned life insurance ​ 2,021 ​ 1,994 ​ 27

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Noninterest income increased 147% to $45.3 million for the year ended December 31, 2023, compared to $18.4 million for the year ended December 31, 2022. The increase in noninterest income was primarily related to $12.6 million of higher mortgage banking income and $18.1 million in income on the Consumer Program derivative during the year ended December 31, 2023. The increase in the mortgage banking income is related to a full year of Primis Mortgage’s results in 2023 compared to only seven months in 2022 (acquisition date of May 31, 2022), coupled with meaningful growth in the business since the purchase. Mortgage banking income includes fair value adjustments, origination income, and gains on sales of mortgage loans held for sale. Primis Mortgage originated and sold $572.2 million of loans in 2023, compared to only $169.2 million in the seven months of 2022 after the acquisition, which drove the increase in origination income and gains on sales in 2023. The Consumer Program derivative is comprised of $11.3 million of fair value adjustment gains on the derivative asset and $6.8 million of realized gains on the derivative in 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 2023, the value of the derivative and related gains were driven by the $52.3 million of loans with a no-interest promotional period originated early in the year. The majority of the loans originated with a promotional period will end their promotional period between the third quarter of 2024 and the second quarter of 2025. The realized gains are 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, which totaled $2.4 million. Also included in the realized income is $4.4 million of income related to the third party’s reimbursement under the agreement of credit losses incurred on the loans during the year Additional details of this derivative and the components of the realized income, including assumptions used to value the derivative, are described in the Critical Accounting Estimates and Policies section of this MD&A. The increase in noninterest income was partially offset by gains on the sale of an other equity investment in the prior year that did not reoccur in the current year.

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Noninterest Expense

The following table present the major categories of noninterest expense for the years ended December 31, 2023 and 2022 (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ For the Year Ended

​ ​ December 31,

Amortization of core deposit intangible ​ 1,269 ​ 1,325 ​ (56)

Telephone and communication expense ​ 1,507 ​ 1,433 ​ 74

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Noninterest expenses were $122.6 million during the year ended December 31, 2023, compared to $91.4 million during the year ended December 31, 2022. The 34.1% increase in noninterest expenses was primarily attributable to $11.2 million of goodwill impairment recognized in the third quarter of 2023 and a $9.8 million increase in employee compensation and benefits expense mainly related to increased head count at the Bank that was driven by the Panacea Financial division and Primis Mortgage during the year ended December 31, 2023 compared to 2022. The compensation expense was also higher in part due to expenses associated with the branch consolidations in 2023.

The increase in noninterest expense during the year ended December 31, 2023 compared to 2022 was also due to a $3.5 million increase in data processing expense in 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 brought in approximately $1.0 billion of deposits. Increase in noninterest expenses was also attributable to $2.0 million of higher FDIC insurance costs in 2023 compared to 2022 attributable to our higher assessment base as a result of our growth from last year and a 2 basis point increase in the assessment rate by the FDIC starting in the first quarter of 2023. Furniture and equipment expenses increased $1.2 million due to growth in the Bank and Primis Mortgage, and also due to write-downs of assets related to the cost savings initiative and branch consolidations in 2023. Miscellaneous lending expenses was $1.3 million higher and was primarily driven by a $0.9 million increase in servicing costs we pay the third-party that manages the Consumer Program loans which grew from $134.4 million in principal balance of loans at the end of 2022 to $199.3 million at the end of 2023. Finally, we experienced $3.3 million in fraud losses in 2023 primarily related to a substantial increase in deposit account fraud that was not isolated to Primis, but was wide-spread across the industry during the year.

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FINANCIAL CONDITION

The following illustrates key balance sheet categories as of December 31, 2023 and 2022 (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ December 31, December 31, ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Loans

Total loans were $3.2 billion and $2.9 billion as of December 31, 2023 and 2022, respectively. PPP loans totaled $2.0 million and $4.6 million at December 31, 2023 and 2022, respectively. Excluding PPP loans, loans outstanding increased $269.7 million, or 9.2%, since December 31, 2022.

As of December 31, 2023 and 2022, 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 9% in 2023 which included declines in real estate secured loans and increases in commercial and consumer loans. The consumer loan growth was primarily driven by the increase in life insurance premium finance loans followed by originations fromthe third party managed portfolio during 2023. The increase in commercial loans was driven primarily by $30.5 million of commercial loan growth in our Panacea Financial division. These loans are diversified geographically and are spread across the nation.

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The composition of our loans held for investment portfolio consisted of the following at December 31, 2023 and 2022 (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Amount Percent Amount Percent

Loans secured by real estate: ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Paycheck protection program loans ​ ​ 2,023 ​ 0.1 % ​ 4,564 ​ 0.2 %

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The following table sets forth the contractual maturity ranges of our loan portfolio and the amount of those loans with fixed and floating interest rates in each maturity range as of December 31, 2023 (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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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The following table sets forth the contractual maturity ranges of our Consumer Program loan portfolio as of December 31, 2023, which is only originated at fixed rates (in thousands):

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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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):

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During the year ended December 31, 2023, $6.0 million of loans ended their no interest promo period and began to amortize and $3.9 million of these loans charged-off during the year after beginning to amortize.

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Asset Quality; Past Due Loans and Nonperforming Assets

The following table presents a comparison of nonperforming assets for the years indicated (in thousands):

​ ​ ​ ​ ​ ​ ​ ​

​ December 31, ​ December 31, ​

Loans past due 90 days and accruing interest ​ 1,714 ​ 3,361 ​

​ ​ ​ ​ ​ ​ ​ ​

SBA guaranteed amounts included in nonperforming loans ​ $ 3,115 ​ $ 3,969 ​

​ ​ ​ ​ ​ ​ ​ ​

Allowance for credit losses to total loans ​ 1.62 % 1.17 %

Allowance for credit losses to nonaccrual loans ​ 574.06 % 97.35 %

Allowance for credit losses to nonperforming loans ​ 483.04 % 88.93 %

Nonaccrual to total loans ​ 0.28 % 1.20 %

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Asset quality improved significantly during 2023 on the core loan portfolio excluding the Consumer Program, as we successfully resolved many of the prior year’s nonperforming assets primarily through the sale of collateral. A substantial portion of the Bank’s nonperforming assets in the prior year comprised of two relationships with a combined balance of approximately $27.0 million. A large residential property with a balance of approximately $8.0 million included in that total was sold in the second quarter of 2023 and the other relationship, primarily consisting of assisted living facilities with a book balance of $19.0 million, was sold at the end of a receiver-managed marketing process in the third quarter of 2023.

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We identify potential problem loans based on loan portfolio credit quality. We define our potential problem loans as internally rated as substandard loans less total nonperforming assets noted above. At December 31, 2023, our potential problem loans totaled $6.4 million. As of December 31, 2023, our total substandard loans were $17.2 million, compared to $41.0 million at December 31, 2022, a 58% decline. Loans rated internally as special mention loans, which is one internal credit rating higher than substandard, totaled $14.9 million as of December 31, 2023 and $32.3 million as of December 31, 2022.

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

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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 December 31, 2023, the principal balance outstanding was $199.3 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 $22.4 million as of December 31, 2023 and represented 43% of our total allowance for credit losses. Net charge-offs on this portfolio were $8.4 million in 2023 and represented approximately 57% of net charge-offs recorded for the year. 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 period 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 in 2023 which continued into 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 the Provision for Credit Losses section of this MD&A. The newer production represented approximately 19% of the portfolio at December 31, 2023 and is expected to improve the quality mix of the portfolio and result in lower realized net charge-offs in future periods.

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Loan Review

Our loan review program is administrated by the Chief Risk Officer and the Loan Review Manager who reports the results directly to the Audit Committee of the Board of Directors. In 2023, the loan review program resulted in reviews on loan balances totaling $936.1 million or 47.5% of the commercial loan portfolio outstanding as of December 31, 2022. Overall, the loan review program resulted in loan reviews performed on 30.0% of the commercial portfolio by our internal loan review function and 17.5% by an independent third party consultant. The loan review program also reviewed $96.0 million in unfunded commitments.

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Primis Bank’s 2024 loan review program (the “Program”) was approved by the Audit Committee on January 25, 2024. The Program’s annual goal is to have an overall review penetration rate of 45.0% - 50.0% of the commercial loan portfolio outstanding as of December 31, 2023. The Program incorporates a robust risk-based approach review of the Bank’s loan portfolio that will include the loan origination process and targeted portfolio and full-scope loan reviews. The Program’s review goal remains well within regulatory standards and industry best practices. In accordance with Credit Policy, the Bank’s Program will utilize and incorporate both internal and third-party external resources in a complementary fashion to achieve the objectives of the Program.

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Allowance for Credit Losses

We are very focused on the asset quality of our loan portfolio, both before and after a loan is made. We have established underwriting standards that we believe are effective in maintaining high credit quality in our loan portfolio. We have experienced loan officers who take personal responsibility for the loans they originate, a skilled underwriting team and highly qualified credit officers that review each loan application carefully. We have designed a credit matrix, which requires dual authority to approve any credit over $5.0 million. We have two specialty Executive Credit Officers with extensive industry experience in medical practice and life premium credit financing with authority up to $7.5 million and

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joint authority with the Chief Credit Officer up to $10.0 million. All credit exposures over $10.0 million are reviewed and approved by Executive Loan Committee consisting of all named Credit Officers with concurrence from the Chief Executive Officer on any credit in excess of $25.0 million. Loans in excess of 60% of the Bank’s legal lending limit are approved by the full Board of Directors or two outside directors.

Our allowance for credit losses is established through charges to earnings in the form of a provision for credit losses. Management evaluates the allowance at least quarterly. In addition, on a quarterly basis our board of directors reviews our loan portfolio, evaluates credit quality, reviews the loan loss provision and the allowance for credit losses and requests management to make changes as may be required. In evaluating the allowance, management and the board of directors consider the growth, composition and industry diversification of the loan portfolio, historical loan loss experience, current delinquency levels and all other known factors affecting loan collectability.

The allowance for credit losses is based on the CECL methodology and represents management’s estimate of an amount appropriate to provide for expected credit losses in the loan portfolio. This estimate is based on historical credit loss information adjusted for current conditions and reasonable and supportable forecasts applied to various loan types that compose our portfolio, including the effects of known factors such as the economic environment within our market area will have on net losses. The allowance is also subject to regulatory examinations and determination by the regulatory agencies as to the appropriate level of the allowance.

Total calculated reserves increased by $17.7 million to $52.2 million as of December 31, 2023, primarily due to modeled reserves on the Consumer Program portfolio described above. Allowance for credit losses on the Consumer Program loans was $22.4 million and $1.4 million as of December 31, 2023 and 2022. Excluding the allowances each period on this portfolio, the allowance for credit losses would have declined $3.3 million, due to lower allowances on individually evaluated loans, lower default expectations observed in the models which resulted from our annual review and refinements to model, and improved economic forecasts, specifically in the House Price Index and Gross State Product factors, partially offset by the overall loan growth experienced in 2023.

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The following table sets forth the allowance for credit losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ As of December 31,

​ ​ ​ ​ ​ Percent of ​ ​ ​ ​ Percent of ​

​ ​ Allowance ​ Loans by ​ Allowance ​ Loans by ​

​ ​ for Credit ​ Category to ​ for Loan ​ Category to ​

​ Losses Total Loans Losses Total Loans

Commercial real estate - owner occupied ​ $ 4,255 ​ 14.1 % $ 5,558 ​ 15.6 %

Commercial real estate - non-owner occupied ​ ​ 5,822 ​ 18.0 % ​ 7,147 ​ 19.7 %

Secured by farmland ​ ​ 31 ​ 0.2 % ​ 25 ​ 0.2 %

Construction and land development ​ ​ 1,129 ​ 5.1 % ​ 1,373 ​ 5.0 %

Home equity lines of credit ​ ​ 364 ​ 1.9 % ​ 329 ​ 2.2 %

Paycheck Protection Program loans ​ ​ — ​ 0.1 % ​ — ​ 0.2 %

​

The following table presents an analysis of the allowance for credit losses for the periods indicated (in thousands):

​ ​ ​ ​ ​ ​ ​ ​

​ ​ For the Years Ended December 31,

Balance, beginning of period ​ $ 34,544 ​ $ 29,105 ​

Provision charged to operations: ​ ​ ​ ​ ​ ​ ​

Recoveries credited to allowance: ​ ​ ​ ​ ​

Commercial real estate - non-owner occupied ​ ​ 110 ​ ​ 502 ​

Construction and land development ​ 112 ​ — ​

Home equity lines of credit ​ 5 ​ 3 ​

Commercial loans ​ ​ 948 ​ ​ 1,638 ​

Consumer loans ​ ​ 480 ​ ​ 35 ​

Loans charged off: ​ ​ ​

Commercial real estate - owner occupied ​ ​ — ​ ​ 14 ​

Commercial real estate - non-owner occupied ​ ​ 1,170 ​ ​ 5,027 ​

Construction and land development ​ 2 ​ — ​

Residential 1-4 family ​ 770 ​ — ​

Home equity lines of credit ​ 32 ​ 14 ​

​ ​ ​ ​ ​ ​ ​ ​

Net charge-offs to average loans, net of unearned income ​ 0.45 % 0.22 %

​

We believe that the allowance for credit losses at December 31, 2023 is sufficient to absorb future expected credit losses in our loan portfolio based on our assessment of all known factors affecting the collectability of our loan portfolio. Our assessment involves uncertainty and judgment; therefore, the adequacy of the allowance for credit losses cannot be determined with precision and may be subject to change in future periods. In addition, bank regulatory authorities, as part

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of their periodic examination, may require additional charges to the provision for credit losses in future periods if the results of their reviews warrant additions to the allowance for credit losses.

Net charge-offs were $14.9 million for the year ended December 31, 2023, up from $5.8 million for the year ended December 31, 2022. Included in net charge-offs is $8.4 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively, related to the Consumer Program loan portfolio. Excluding these Consumer Program charge-offs we had an increase from the prior year of $2.2 million primarily related to disposition of certain nonperforming loans from December 31, 2022 that could not be collected.

As discussed previously, the increase in charge-offs on the Consumer Program loan portfolio have been driven by losses concentrated in loans originated between the third quarter of 2022 and the first quarter of 2023. Charge-offs from these vintages in 2023 were 79% of the total gross charge-offs in this portfolio of consumer loans. The charge-off percentage as compared with total loans originated in the third quarter of 2022, fourth quarter of 2022, and first quarter of 2023 was 6.9%, 4.3%, and 3.0%, respectively. We continued to see similar levels of losses on these vintages from year end through the time we filed this Form 10-K and as a result we updated our loss rates on the third-party portfolio as of and for the year ended December 31, 2023 which added an additional $18.2 million in provision and reserve during this period. The TPOS provides limited credit enhancement through certain direct payments and the release of funds from a reserve account. These amounts are recognized in our results of operations in the period in which they become available to us. During 2023, we recognized $4.4 million in our results of operations related to this credit enhancement. See additional discussion of the credit enhancement in Critical Accounting Estimates and Policies in this MD&A.

Investment Securities

Our investment securities portfolio provides us with required liquidity and collateral to pledge to secure public deposits, certain other deposits, advances from the FHLB of Atlanta, and repurchase agreements.

Our investment securities portfolio is managed by our Treasurer, who has significant experience in this area, with the concurrence of our Asset/Liability Committee. In addition to our Treasurer (who is the chairman of the Asset/Liability Committee) and our Controller, this committee is comprised of outside directors and other senior officers of the Bank, including but not limited to our Chief Executive Officer and our Chief Financial Officer. Investment management is performed in accordance with our investment policy, which is approved annually by the Board of Directors. Our investment policy authorizes us to invest in:

● Collateralized mortgage obligations

● U.S. Treasury securities

● SBA guaranteed loan pools

● Agency securities

● Obligations of states and political subdivisions

● Corporate debt securities, with rated securities at investment grade

● Collateralized Loan Obligations (“CLOs”)

​

MBS are securities that have been developed by pooling a number of real estate mortgages and which are principally issued by agency/government-sponsored entities (“GSEs”) such as the GNMA, FNMA and FHLMC. These securities are deemed to have high credit ratings, and minimum regular monthly cash flows of principal and interest are guaranteed by the issuing agencies.

Collateralized mortgage obligations (“CMOs”) are bonds that are backed by pools of mortgages. The pools can be GNMA, FNMA or FHLMC pools or they can be private-label pools. The CMOs are designed so that the mortgage collateral will generate a cash flow sufficient to provide for the timely repayment of the bonds. The mortgage collateral

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pool can be structured to accommodate various desired bond repayment schedules, provided that the collateral cash flow is adequate to meet scheduled bond payments. This is accomplished by dividing the bonds into classes to which payments on the underlying mortgage pools are allocated. The bond’s cash flow, for example, can be dedicated to one class of bondholders at a time, thereby increasing call protection to bondholders. In private-label CMOs, losses on underlying mortgages are directed to the most junior of all classes and then to the classes above in order of increasing seniority, which means that the senior classes have enough credit protection to be given the highest credit rating by the rating agencies.

Obligations of states and political subdivisions (municipal securities) are purchased with consideration of the current tax position of the Bank. Both taxable and tax-exempt municipal bonds may be purchased, but only after careful assessment of the market risk of the security. Appropriate credit evaluation must be performed prior to purchasing municipal bonds.

Corporate bonds consist of senior and/or subordinated notes issued by banks. Bank subordinated debt, if rated, must be of investment grade and non-rated bonds are permissible if the credit-worthiness of the issuer has been properly analyzed.

CLOs are actively managed securitization vehicles formed for the purpose of acquiring and managing a diversified portfolio of senior secured corporate bank loans, otherwise known as “broadly syndicated loans”. The loan portfolio is transferred to bankruptcy-remote special-purpose vehicle, which finances the acquisition through the issuance of various classes of debt and equity securities with varying levels of senior claim on the underlying loan portfolio. CLOs must be rated AA or better at the time of purchase.

We classify our investment securities as either held-to-maturity or available-for-sale. Debt investment securities that Primis has 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 $240.1 million as of December 31, 2023, a decrease of 3.9% from $249.8 million as of December 31, 2022, primarily due to paydowns, maturities, and calls of the investments during the year.

We recognized an immaterial amount of credit impairment charges related to credit losses on our held-to-maturity investment securities during 2023 and no credit losses during 2022.

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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).

​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ December 31,

Available-for-sale investment securities: ​ ​

Obligations of states and political subdivisions ​ 30,080 ​ 29,178

Collateralized loan obligations ​ 4,982 ​ 4,876

Government-sponsored agency securities ​ 13,711 ​ 14,616

Agency commercial mortgage-backed securities ​ 30,110 ​ 37,417

​ ​ ​ ​ ​ ​ ​

Held-to-maturity investment securities: ​ ​

Residential government-sponsored mortgage-backed securities ​ $ 9,040 ​ $ 10,522

Obligations of states and political subdivisions ​ 2,391 ​ 2,721

Residential government-sponsored collateralized mortgage obligations ​ 219 ​ 277

​

​

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The following table sets forth the amortized cost, fair value, and weighted average yield of our investment securities by contractual maturity at December 31, 2023. Weighted average yield is calculated as the tax-equivalent yield on a pro rata basis for each security based on its relative amortized cost. Yields on tax-exempt securities have been computed on a tax-equivalent basis. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Investment Securities Available-for-Sale

​ ​ ​ ​ ​ ​ ​ Weighted

​ ​ Amortized ​ ​ ​ ​ Average

​ Cost Fair Value Yield

Obligations of states and political subdivisions ​ ​ ​

Due after one year through five years ​ $ 3,132 ​ $ 3,056 2.99 %

Collateralized loan obligations ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Corporate securities ​ ​ ​ ​

Due after five years through ten years ​ ​ 14,000 ​ ​ 12,672 ​ 4.50 %

Government-sponsored agency securities ​ ​ ​

Due less than one year ​ ​ — ​ ​ — ​ — %

Due after one year through five years ​ 6,898 ​ 6,305 1.31 %

Due after five years through ten years ​ ​ 4,879 ​ ​ 3,924 ​ 1.80 %

Residential government-sponsored mortgage-backed securities ​ ​ ​

Due after one year through five years ​ 2,009 ​ 1,947 2.40 %

Residential government-sponsored collateralized mortgage obligations ​ ​ ​

Due after one year through five years ​ ​ 1,368 ​ ​ 1,305 ​ 0.03 %

Due after five years through ten years ​ 5,580 ​ 5,508 4.49 %

Agency commercial mortgage-backed securities ​ ​ ​

Due after one year through five years ​ 2,003 ​ 1,928 2.58 %

SBA pool securities ​ ​ ​

Due after one year through five years ​ ​ 655 ​ ​ 638 ​ 4.79 %

Due after five years through ten years ​ 709 ​ 707 7.75 %

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Investment Securities Held-to-Maturity

​ ​ ​ ​ ​ ​ ​ Weighted

​ ​ Amortized ​ ​ ​ ​ Average

​ Cost Fair Value Yield

Obligations of states and political subdivisions ​ ​ ​

Due after one year through five years ​ $ 580 ​ $ 580 2.98 %

Due after five years through ten years ​ 939 ​ 899 2.40 %

Residential government-sponsored mortgage-backed securities ​ ​ ​ ​

Due after one year through five years ​ ​ 417 ​ ​ 402 ​ 2.18 %

Due after five years through ten years ​ 950 ​ 896 2.80 %

Residential government-sponsored collateralized mortgage obligations ​ ​ ​

​

For additional information regarding investment securities refer to “Item 8. Financial Statements and Supplementary Data, Note 3-Investment Securities.”

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​

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 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.

Total deposits increased 20.1% to $3.27 billion as of December 31, 2023 from $2.72 billion as of December 31, 2022. The increase in deposits from 2022 year-end was primarily driven by the substantial growth in the Bank’s digital deposit platform in 2023. The majority of the overall deposit growth was in savings accounts with the remainder primarily in NOW accounts (both largely coming from the digital platform). Savings accounts increased 219% from $245.8 million as of December 31, 2022 to $783.8 million as of December 31, 2023. NOW accounts increased 25.2% from $617.7 million as of December 31, 2022 to $773.0 million as of December 31, 2023. 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 $1.15 billion, or 34.8% of total deposits, at December 31, 2023.

The following table sets forth the average balance and average rate paid on each of the deposit categories for the years ended December 31, 2023 and 2022 (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Average Average Average Average

​ ​ Balance ​ Rate ​ Balance ​ Rate ​

Noninterest-bearing demand deposits ​ $ 495,107 ​ $ 614,285 ​

Interest-bearing deposits: ​ ​ ​

​

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.

The following table sets forth the maturities of certificates of deposit of $100 thousand and over as of December 31, 2023 (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

3 Months ​ Months ​ Months ​ Months ​ Total

​

​

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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. At December 31, 2023 and 2022, total FHLB borrowings were $30.0 million and $325.0 million, respectively. The decrease in FHLB borrowings was a result of the deposit growth during 2023 that primarily funded our loan growth and supported other funding needs. At December 31, 2023, we had $466.1 million of unused and available FHLB lines of credit.

Other borrowings can consist of FHLB convertible advances, FHLB overnight advances, other FHLB advances maturing within one year, 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 December 31, 2023 and 2022 was $3.0 million and $6.4 million, respectively.

Other borrowings consist of the following (in thousands):

​ ​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

FHLB convertible advances maturing 3/1/2030 ​ $ 30,000 ​ $ — ​

Short-term FHLB advances maturing 1/03/2023 ​ ​ — ​ ​ 50,000 ​

Short-term FHLB advances maturing 1/23/2023 ​ ​ — ​ ​ 50,000 ​

Securities sold under agreements to repurchase ​ 3,044 ​ 6,445 ​

​ ​ ​ ​ ​ ​ ​ ​

Weighted average interest rate at year end ​ 5.57 % 4.19 %

​ ​ ​ ​ ​ ​ ​ ​

For the periods ended December 31, 2023 and 2022: ​ ​ ​

Average outstanding balance ​ $ 49,792 ​ $ 97,795 ​

Average interest rate during the year ​ 4.32 % 2.72 %

​ ​ ​ ​ ​ ​ ​ ​

Maximum month-end outstanding balance ​ $ 33,044 ​ $ 331,445 ​

​

We had secured borrowings as of December 31, 2023 of $20.4 million related to loan transfers to another financial institution during 2023 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. There were no secured borrowings due to loan transfers as of and for the year ended December 31, 2022. For additional information on secured borrowings refer to “Item 8. Financial Statements and Supplementary Data, Note 1 –Organization and Significant Accounting Policies.”

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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 “Item 8. Financial Statements and Supplementary Data, Note 12 – Junior Subordinated Debt and Senior Subordinated Notes.”

Interest Rate Sensitivity and 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 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.

The following tables are 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 December 31, 2023 and 2022. All changes are within our Asset/Liability Risk Management Policy guidelines (amounts in thousands).

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Sensitivity of EVE

​ ​ EVE ​ EVE as a % of

Change in Interest Rates ​ ​ ​ ​ $ Change ​ % Change ​ Total ​ Equity

in Basis Points (Rate Shock) Amount From Base From Base Assets Book Value

​

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Sensitivity of EVE

​ ​ EVE ​ EVE as a % of

Change in Interest Rates ​ ​ ​ ​ $ Change ​ % Change ​ Total ​ Equity

in Basis Points (Rate Shock) Amount From Base From Base Assets Book Value

​

Our interest rate sensitivity is also monitored by management through the use of a model that generates estimates of the change in 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 at December 31, 2023 and 2022 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 at December 31, 2023 and 2022 (amounts in thousands).

​

​ ​ ​ ​ ​ ​ ​

​ ​ Sensitivity of NII

​ ​ Adjusted NII

Change in Interest Rates ​ ​ ​ ​ $ Change

in Basis Points (Rate Shock) Amount From Base

​

​

​ ​ ​ ​ ​ ​ ​

​ ​ Sensitivity of NII

​ ​ Adjusted NII

Change in Interest Rates ​ ​ ​ ​ $ Change

in Basis Points (Rate Shock) Amount From Base

​

Sensitivity of EVE and NII are modeled using different assumptions and approaches. 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.

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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 the discussion about Contractual Obligations below and “Item 8. Financial Statements and Supplementary Data, Note 11 – Securities Sold Under Agreements To Repurchase And Other Short-Term Borrowings, Note 12 – Junior Subordinated Debt and Senior Subordinated Notes, and Note 16 – Financial Instruments With Off-Balance-Sheet Risk.”

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 December 31, 2023, 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 December 31, 2023, 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 December 31, 2023 and 2022, 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 December 31, 2023, that Primis meets all capital adequacy requirements to which it is subject.

See “Item 1. Business, Supervision and Regulation—Capital Requirements” for more information.

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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. These ratios were not impacted by the goodwill impairment charge incurred during 2023 because goodwill is not a component of the calculations:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Minimum ​ ​ ​ ​ ​ ​

​ ​ Required for ​ ​ ​ ​ ​ ​

​ ​ Capital ​ To Be ​ Actual Ratio at

​ ​ Adequacy ​ Categorized as ​ December 31, ​ December 31, ​

Primis Financial Corp. ​ ​

Common equity tier 1 capital ratio 4.50 % n/a 8.96 % 10.07 %

Tier 1 risk-based capital ratio 6.00 % n/a 9.25 % 10.40 %

Total risk-based capital ratio 8.00 % n/a 13.44 % 14.33 %

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Primis Bank ​ ​ ​ ​ ​ ​ ​

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 4.12% at December 31, 2023, which exceeded the 2.50% minimum requirement below which the regulators may impose limits on distributions.

Impact of Inflation and Changing Prices

The financial statements and related financial data presented in this Annual Report on Form 10-K concerning Primis Financial Corp. have been prepared in accordance with U.S. GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, substantially all of the assets and liabilities of a financial institution are monetary in nature. As a result, changes in interest rates have a more significant impact on our performance than do the effects of changes in the general rate of inflation and changes in prices. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Many factors impact interest rates, including the decisions of the FRB, inflation, recession, changes in unemployment, the money supply, and international disorder and instability in domestic and foreign financial markets. Like most financial institutions, changes in interest rates can impact our net interest income which is the difference between interest earned from interest-earning assets, such as loans and investment securities, and interest paid on interest-bearing liabilities, such as deposits and borrowings, as well as the valuation of our assets and liabilities.

Our interest rate risk management is the responsibility of the Bank’s Asset/Liability Management Committee (the “Asset/Liability Committee”). The Asset/Liability Committee has established policies and limits for management to monitor, measure and coordinate our sources, uses and pricing of funds. The Asset/Liability Committee makes reports to the board of directors on a quarterly basis.

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Seasonality and Cycles

We do not consider our commercial banking business to be seasonal.

Off-Balance Sheet Arrangements

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. We had letters of credit outstanding totaling $9.6 million and $10.7 million as of December 31, 2023 and 2022, 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.

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 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.

For additional information about off-balance sheet arrangements, refer to the discussion “Item 8. Financial Statements and Supplementary Data, Note 16 – Financial Instruments With Off-Balance-Sheet 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 “Item 8. Financial Statements and Supplementary Data, Note 4 - Loans and Allowance for Credit Losses”, as if such commitments were funded.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

This information is incorporated herein by reference from “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.

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Item 8. Financial Statements and Supplementary Data

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Report of Independent Registered Public Accounting Firm

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To the Shareholders, Board of Directors, and Audit Committee

Primis Financial Corp.

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Primis Financial Corp. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income (loss) and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October 15, 2024, expressed an adverse opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts, and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as

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a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Allowance for Credit Losses

The Company’s allowance for credit losses (ACL) on loans held for investment was $52.2 million as of

December 31, 2023. The determination of the ACL has been identified by the Company as a critical accounting policy. The ACL is measured on a collective basis when similar loan risk characteristics exist, and by individually evaluating loans that do not share similar risk characteristics. As further described in Notes 1 and 4 to the consolidated financial statements, the Company measures the ACL using a combination of probability of default (PD), probability of attrition (PA), loss given default (LGD), and exposure at default (EAD), calculated based on the application of historical loss experience, and adjusted for a reasonable and supportable forecast. Estimates are qualitatively adjusted for risk factors that are not considered within the quantitative modeling process. Estimating an appropriate ACL requires management to make numerous assumptions about losses that will occur over the remaining contractual life of loans recorded as of the balance sheet date. The most significant judgments in the ACL as of December 31, 2023 included the determination of a reasonable and supportable forecast.

We identified the Company’s estimate of the ACL as a critical audit matter.The principal considerations for that determination were the degree of subjectivity and judgment required to audit management’s identification of reasonable and supportable forecasts. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s significant estimates and assumptions. Also, as described in the “Report of Independent Registered Public Accounting Firm” related to internal controls over financial reporting, a material weakness was identified in relation to the precision of management’s review of the adequacy of reserves for certain loan segments.

The primary procedures we performed to address this critical audit matter included the following:

o The determination of a reasonable and supportable forecast.

● We tested the mathematical accuracy of the ACL.

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Goodwill Impairment Assessment

The Company has $93.5 million of goodwill as of December 31, 2023. The Company also recorded a goodwill impairment charge of $11.2 million during 2023 related to the Primis Bank reporting unit. The determination of the annual goodwill impairment assessment has been identified by the Company as a critical accounting estimate. As further described in Notes 1 and 8 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level, occurring as of September 30th every year, or more frequently if events or circumstances warrant. The Company engaged a third-party valuation specialist in performing its quantitative impairment analysis, which included a combination of valuation approaches to determine the fair value of each of the reporting units. These valuation approaches required certain assumptions such as the discount rate, economic conditions, which impact assumptions related to interest and growth rates, the control premium associated with the reporting unit, and a relative weight given to the valuations derived by the valuation methods.

We identified the Company’s quantitative goodwill impairment assessment, as of September 30, 2023, as a critical audit matter. The principal considerations for that determination were the degree of subjectivity and judgment required to audit management’s goodwill impairment assessment. Specifically, evaluating the valuation approaches selected and key assumptions used by management in performing its assessment, such as the determination of the discount rate and cash flows utilized in the valuation approaches.

The primary procedures we performed to address this critical audit matter included the following:

Consumer Program Derivative

The Company has an agreement with a third-party to originate and service consumer loans that are included in the Company’s held for investment portfolio. As described in Note 1 to the consolidated financial statements, as part of the agreement, there are certain payments required between the Company and the third-party if certain events occur. The Company determined that this agreement meets the definition of a derivative financial instrument. The Company has recorded a $10.8 million derivative asset as of December 31, 2023 related to the master services agreement. The determination and valuation of the derivative asset has been identified by the Company as a critical accounting estimate. The Company engaged a third-party valuation specialist in calculating the derivative value, using a discounted cash flow model.

We identified the Company’s derivative asset as a critical audit matter. The principal considerations for that determination were the degree of subjectivity and judgment required to audit management’s determination that the agreement meets the definition of a derivative as well as the fair value of the derivative at the balance sheet date. This required a high degree of auditor judgment and increased extent of effort when performing audit procedures, specifically around management’s determination of the discount rate, including the evaluation of the counterparty credit risk. Additionally, a material weakness was identified by the Company related to the accounting of the Consumer Program, including the identification of the derivative asset.

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The primary procedures we performed to address this critical audit matter included the following:

/s/ Forvis Mazars, LLP

We served as the Company’s auditor from 2013 to 2024.

Tysons, Virginia

October 15, 2024

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Report of Independent Registered Public Accounting Firm

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To the Shareholders, Board of Directors, and Audit Committee

Primis Financial Corp.

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Opinion on the Internal Control over Financial Reporting

We have audited Primis Financial Corp.’s (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment.

The Company did not maintain effective controls over the design and operation of its accounting determinations for transfers of financial assets, including lack of a formally designed process and procedure for evaluation of loan transfers. The existing procedures did not outline the process to be taken and individuals to be involved in the assessment of the proper accounting for loan transfers and were not sufficient to facilitate a proper conclusion on loan transfer transactions.

The Company did not maintain effective controls over the design and operation for establishing the allowance for credit losses for a pool of third-party managed consumer loans that are originated and serviced by a third party, including evaluating recent loss history on the portfolio relative to previous model inputs. The existing process relies on publicly available peer data for historical credit loss characteristics to inform the Company’s allowance calculation because the portfolio is relatively new and did not have an extended credit loss history to serve as the primary source of credit loss history when constructing the model.

The Company did not maintain effective controls over their accounting evaluation for a complex agreement with a third-party that sources and manages a portfolio of consumer loans for the Company. The existing process did not appropriately facilitate a thorough evaluation of the entire transaction and did not include the involvement of individuals with the necessary expertise to enable identification of complex accounting matters in the agreement and to conclude on them.

These material weaknesses were considered in determining the nature, timing, and extent of auditing procedures applied in our audit of the Company’s consolidated financial statements, and this report does not affect our report dated October 15, 2024 on those consolidated financial statements.

In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2023 and 2022, and for each of the years in the three-year period ended December 31, 2023, and our report dated October 15, 2024 expressed an unqualified opinion on those consolidated financial statements.

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Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definitions and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Forvis Mazars, LLP

Tysons, Virginia

October 15, 2024

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PRIMIS FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)

​

​ ​ ​ ​ ​ ​ ​

​ December 31, December 31,

ASSETS ​ ​ ​ ​ ​

Cash and cash equivalents: ​ ​

Cash and due from financial institutions ​ $ 1,863 $ 6,868

Interest-bearing deposits in other financial institutions ​ 75,690 70,991

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Loans held for sale, at fair value ​ ​ 57,691 ​ ​ 27,626

​ ​ ​ ​ ​ ​ ​

Loans held for investment, collateralizing secured borrowings ​ ​ 20,505 ​ ​ —

Less: allowance for credit losses ​ (52,209) (34,544)

​ ​ ​ ​ ​ ​ ​

Operating lease right-of-use assets ​ ​ 10,646 ​ ​ 5,335

Cloud computing arrangement assets, net ​ ​ 10,699 ​ ​ 10,464

Consumer Program derivative asset ​ ​ 10,806 ​ ​ —

​ ​ ​ ​ ​ ​ ​

LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​

Interest-bearing deposits: ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Securities sold under agreements to repurchase ​ 3,044 6,445

Secured borrowings ​ ​ 20,393 ​ ​ —

Operating lease liabilities ​ ​ 11,686 ​ ​ 5,767

Consumer Program derivative liability ​ ​ — ​ ​ 473

​ ​ ​ ​ ​ ​ ​

Commitments and contingencies (See Note 15) ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Stockholders' equity: ​

Accumulated other comprehensive loss ​ (21,777) (25,850)

Noncontrolling interests ​ ​ 21,432 ​ ​ —

​

See accompanying notes to consolidated financial statements.

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PRIMIS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(dollars in thousands, except per share amounts)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ For the Years Ended December 31,

Interest and dividend income: ​ ​ ​ ​ ​ ​

Interest and dividends on taxable securities ​ ​ 5,966 ​ 5,552 ​ 3,977

Interest and dividends on tax exempt securities ​ ​ 407 ​ 412 ​ 463

Interest and dividends on other earning assets ​ ​ 13,457 ​ 2,243 ​ 1,782

Interest expense: ​ ​ ​ ​

Provision for (recovery of) credit losses ​ ​ 32,540 ​ 11,271 ​ (5,801)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Noninterest income: ​ ​ ​ ​

Account maintenance and deposit service fees ​ ​ 5,733 ​ 5,745 ​ 7,309